CASH ACCUMULATION TRUST, 485APOS, 1997-11-07

CASH ACCUMULATION TRUST
485APOS, 1997-11-07

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As filed with the Securities and Exchange Commission on November 7, 1997

Securities Act Registration Statement No. 2-91889
Investment Company Act Registration No. 811-4060
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 22 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 23 /X/
(Check appropriate box or boxes)
-------------------
CASH ACCUMULATION TRUST
(Exact name of registrant as specified in charter)

840 NEWPORT CENTER DRIVE
NEWPORT BEACH, CA 92660
(Address of Principal Executive Offices) (Zip Code)
-------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 760-4867

NEWTON B. SCHOTT, JR., ESQ.
2187 ATLANTIC STREET
STAMFORD, CONNECTICUT 06902

(NAME AND ADDRESS OF AGENT FOR SERVICE OF PROCESS)

COPIES TO:

J.B. KITTREDGE, ESQ. S. JANE ROSE, ESQ.
ROPES & GRAY GATEWAY CENTER THREE
ONE INTERNATIONAL PLACE 100 MULBERRY STREET
BOSTON, MASSACHUSETTS 02110 NEWARK, NEW JERSEY 07102-4077

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE
DATE OF THE REGISTRATION STATEMENT.

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
(CHECK APPROPRIATE BOX):

/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/X/ 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:
/ / this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.

Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
previously registered an indefinite number of shares of beneficial interest, par
value $.0.00001 per share. The Registrant filed a notice under such Rule for its
fiscal year ended September 30, 1996 on November 27, 1996.

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CROSS REFERENCE SHEET
(as required by Rule 495)

N-1A ITEM NO. LOCATION IN EACH PROSPECTUS
- ------------- ---------------------------

PART A
Item 1. Cover Page. . . . . . . . . . . . . . Cover Page
Item 2. Synopsis. . . . . . . . . . . . . . . Fund Expenses; Trust
Highlights
Item 3. Condensed Financial Information . . . Fund Expenses; Financial
Highlights (National Money
Market Fund Only); Calculation
of Yield
Item 4. General Description of Registrant . . Cover Page; Trust Highlights;
How the Fund Invests; General
Information
Item 5. Management of the Fund. . . . . . . . Fund Expenses; Financial
Highlights (National Money
Market Fund Only); How the
Fund is Managed; General
Information
Item 5A. Management's Discussion of Fund
Performance . . . . . . . . . . . . . Not Applicable
Item 6. Capital Stock and Other Securities. . Taxes, Dividends and
Distributions; General
Information
Item 7. Purchase of Securities Being
Offered . . . . . . . . . . . . . . . Shareholder Guide; How the
Fund Values its Shares
Item 8. Redemption or Repurchase. . . . . . . Shareholder Guide; How the
Fund Values its Shares;
General Information
Item 9. Pending Legal Proceedings . . . . . . Not Applicable

PART B LOCATION IN COMBINED STATEMENT
OF ADDITIONAL INFORMATION
------------------------------
Item 10. Cover Page. . . . . . . . . . . . . . Cover Page
Item 11. Table of Contents . . . . . . . . . . Table of Contents
Item 12. General Information and History . . . General Information
Item 13. Investment Objectives and Policies. . Investment Objective and
Policies; Investment
Restrictions
Item 14. Management of the Fund. . . . . . . . Trustees and Officers;
Manager; Distributor
Item 15. Control Persons and Principal
Holders of Securities . . . . . . . . Trustees and Officers
Item 16. Investment Advisory and Other
Services. . . . . . . . . . . . . . . Manager; Distributor;
Custodian, Transfer and
Shareholder Servicing Agent
and Independent Accountants
Item 17. Brokerage Allocation and Other
Practices . . . . . . . . . . . . . . Portfolio Transactions
Item 18. Capital Stock and Other Securities. . Not Applicable
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered . . . . . Net Asset Value; Purchase of
Shares
Item 20. Tax Status. . . . . . . . . . . . . . Taxes
Item 21. Underwriters. . . . . . . . . . . . . Distributor
Item 22. Calculation of Performance Data . . . Calculation of Yield
Item 23. Financial Statements. . . . . . . . . Financial Statements

PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Post-Effective Amendment to the
Registration Statement.
<PAGE>

CASH ACCUMULATION TRUST

National Money Market Fund
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Prospectus dated December 22, 1997
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The National Money Market Fund (the Fund) is one of two series of the Cash
Accumulation Trust (the Trust), an open-end, diversified, management investment
company, or mutual fund. The Fund offers investors an efficient and economical
means of investing in a professionally managed portfolio of high quality money
market instruments. The investment objective of the Fund is current income to
the extent consistent with preservation of capital and liquidity. There can be
no assurance that the Fund's investment objective will be achieved. See "How the
Fund Invests--Investment Objective and Policies."

AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE. SEE "HOW THE FUND VALUES ITS
SHARES."

The Trust's address is Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077, and its telephone number is (800) 225-1852.

This Prospectus sets forth concisely the information about the Trust and the
Fund that a prospective investor ought to know before investing. Additional
information about the Trust and the Fund has been filed with the Securities and
Exchange Commission in a Statement of Additional Information, dated December 22,
1997, which information is incorporated herein by reference (is legally
considered a part of this Prospectus) and is available without charge upon
request to the Trust at the address or telephone number noted above.

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INVESTORS ARE ADVISED TO READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE
REFERENCE.
- --------------------------------------------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<PAGE>

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TRUST HIGHLIGHTS
- --------------------------------------------------------------------------------

The following summary is intended to highlight certain information
contained in this Prospectus and is qualified in its entirety by the more
detailed information appearing elsewhere herein.

WHAT IS THE CASH ACCUMULATION TRUST?

The Cash Accumulation Trust (the Trust) is a mutual fund whose shares are
offered in two series, each of which operates as a separate fund. A mutual fund
pools the resources of investors by selling its shares to the public and
investing the proceeds of such sale in a portfolio of securities designed to
achieve its investment objective. Technically, the Trust is an open-end,
diversified, management investment company. Only shares of the National Money
Market Fund (the Fund) are offered through this Prospectus.

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is current income to the extent consistent
with preservation of capital and liquidity. The Fund invests primarily in a
portfolio of U.S. Government obligations, financial institution obligations and
other high quality money market instruments maturing in thirteen months or less.
There can be no assurance that the Fund's investment objective will be achieved.
See "How the Fund Invests--Investment Objective and Policies" at page __.

WHAT ARE THE FUND'S RISK FACTORS AND SPECIAL CHARACTERISTICS?

It is anticipated that the net asset value of the Fund will remain constant
at $1.00 per share, although this cannot be assured. In order to maintain such
constant net asset value, the Fund will value its portfolio securities at
amortized cost. While this method provides certainty in valuation, it may result
in periods during which the value of a security in the Fund's portfolio, as
determined by amortized cost, is higher or lower than the price the Fund would
receive if it sold such security. See "How the Fund Values its Shares" at page
__.

The Fund may invest in foreign securities without limit. Investing in
securities of foreign companies and countries involves certain considerations
and risks not typically associated with investing in securities of domestic
companies. See "How the Fund Invests--Investment Objective and Policies--Risks
of Investing in Foreign Securities" at page __.

WHO MANAGES THE FUND?

Prudential Investments Fund Management LLC (PIFM or the Manager) is the
Manager of the Fund and is compensated for its services 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. As of
November 30, 1997, PIFM served as manager or administrator to __ investment
companies, including __ mutual funds, with aggregate assets of approximately
$____ billion. The Prudential Investment Corporation (PIC), doing business as
Prudential Investments (PI, the Subadviser or the investment adviser), furnishes
investment advisory services in connection with the management of the Fund under
a Subadvisory Agreement with PIFM. See "How the Fund is Managed--Manager" at
page __.

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WHO DISTRIBUTES THE FUND'S SHARES?

Prudential Securities Incorporated (Prudential Securities), a major
securities underwriter and securities and commodities broker, acts as the
Distributor of the Fund's shares. The Trust reimburses Prudential Securities for
expenses related to the distribution of the Fund's shares at an annual rate of
up to .10 of 1% of the average daily net assets of the shares of the Fund. See
"How the Fund is Managed--Distributor" at page __.

WHAT IS THE MINIMUM INVESTMENT?

There are no minimum investment requirements. See "Shareholder Guide--How
to Buy Shares of the Fund" at page__ and "Shareholder Guide--Shareholder
Services" at page__.

HOW DO I PURCHASE SHARES?

Shares of the Fund are offered to investment advisory clients of Prudential
Securities that participate in any of the following managed account programs
sponsored by Prudential Securities: Gibraltar Advisors, Prudential Securities
Portfolio Management (PSPM), Quantum Portfolio Management (Quantum), Managed
Assets Consulting Services (MACS), Managed Assets Consulting Services--Custom
Services (MACS--CS) and Prudential Securities Investment Supervisory Group.
Prudential Securities will purchase shares on behalf of these clients each
business day pursuant to automatic purchase procedures. See "Shareholder
Guide--How to Buy Shares of the Fund" at page __.

HOW DO I SELL MY SHARES?

Prudential Securities will redeem shares on behalf of participating clients
each business day at the current net asset value (NAV) next determined pursuant
to automatic redemption procedures. In addition, you may redeem shares of the
fund at any time at the nav next determined by instructing your Prudential
Securities financial adviser. See "Shareholder Guide--How to Sell Your
Shares" at page __.

HOW ARE DIVIDENDS AND DISTRIBUTIONS PAID?

The Fund expects to declare daily and pay monthly dividends of net
investment income and short-term capital gains, if any. Dividends and
distributions will be automatically reinvested in additional shares of the Fund
at net asset value unless Prudential Securities has requested on your behalf
that they be paid to you in cash. See "Taxes, Dividends and Distributions" at
page __.

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FUND EXPENSES
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SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Load Imposed on Purchases. . . . . . . . . . . None
Maximum Sales Load Imposed on Reinvested Dividends . . . . . None
Maximum Deferred Sales Load. . . . . . . . . . . . . . . . . None
Redemption Fees. . . . . . . . . . . . . . . . . . . . . . . None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . None

ANNUAL FUND OPERATING EXPENSES*
(as a percentage of average net assets)

Management Fees. . . . . . . . . . . . . . . . . . . . . . . .39%
12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . . . . .10
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . .13
---
Total Fund Operating Expenses. . . . . . . . . . . . . . . . .62%
---
---
EXAMPLE

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end
of each time period: $6 $20 $35 $77
</TABLE>

The above example is restated based on expenses expected to have been incurred
if PIFM, PI and PMFS had served as Manager, Subadviser and Transfer Agent,
respectively, during the fiscal year ended September 30, 1997. THE EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

The purpose of the table is to assist an investor in understanding the various
costs and expenses that an investor in the Fund will bear, whether directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "How the Fund is Managed." "Other Expenses" includes operating expenses of
the Fund, such as Trustees' and professional fees, registration fees, reports to
shareholders, transfer agency and custodian fees.

- ------------------------------------
* Actual expenses for the fiscal year ended September 30, 1997 were .65% of 1%,
including a management fee payable to the predecessor investment adviser of .42
of 1%, 12b-1 fees payable to the predecessor distributor of .10 of 1% and other
expenses of .13 of 1% of the average net assets of the Fund.

-4-

<PAGE>

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FINANCIAL HIGHLIGHTS
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(FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH OF THE INDICATED
YEARS)

[FINANCIAL HIGHLIGHTS TO BE COMPLETED IN A RULE 485(b)(I)(iii) FILING AS
PERMITTED BY RULE 485(d)(2)]

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<PAGE>

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CALCULATION OF YIELD
- --------------------------------------------------------------------------------

THE FUND CALCULATES ITS "CURRENT YIELD" based on the net change, exclusive
of realized and unrealized capital gains or losses, in the value of a
hypothetical account over a seven calendar day base period. THE FUND ALSO
CALCULATES ITS "EFFECTIVE ANNUAL YIELD" assuming weekly compounding. The
following is an example of the current and effective annual yield calculations
as of September 30, 1997:

Value of hypothetical account at end of period . . . . $
-----------
Value of hypothetical account at beginning of period . 1.000000000
Base period return . . . . . . . . . . . . . . . . . . $
-----------
-----------
CURRENT YIELD (._________ x (365/7)) . . . . . . . . . %
----
EFFECTIVE ANNUAL YIELD, assuming weekly compounding. . %
----
THE YIELD WILL FLUCTUATE FROM TIME TO TIME AND DOES NOT INDICATE FUTURE
PERFORMANCE.

The weighted average life to maturity of the Fund on September 30, 1997 was
__ days.

Yield is computed in accordance with a standardized formula described in
the Statement of Additional Information. In addition, comparative performance
information may be used from time to time in advertising or marketing the shares
of the Fund, including data from Lipper Analytical Services, Inc., Morningstar
Publications, Inc., IBC Financial Data, Inc., The Bank Rate Monitor, other
industry publications, business periodicals and market indices.

- --------------------------------------------------------------------------------
HOW THE FUND INVESTS
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

THE INVESTMENT OBJECTIVE OF THE FUND IS CURRENT INCOME TO THE EXTENT
CONSISTENT WITH PRESERVATION OF CAPITAL AND LIQUIDITY. THE FUND PURSUES ITS
INVESTMENT OBJECTIVE THROUGH THE INVESTMENT POLICIES DESCRIBED BELOW. THERE CAN
BE NO ASSURANCE THAT THIS OBJECTIVE WILL BE ACHIEVED.

THE FUND'S INVESTMENT OBJECTIVE IS A FUNDAMENTAL POLICY AND, THEREFORE, MAY
NOT BE CHANGED WITHOUT THE APPROVAL OF THE HOLDERS OF A MAJORITY OF THE FUND'S
OUTSTANDING VOTING SECURITIES, AS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940,
AS AMENDED (THE INVESTMENT COMPANY ACT). THE FUND'S POLICIES THAT ARE NOT
FUNDAMENTAL MAY BE MODIFIED BY THE BOARD OF TRUSTEES.

THE ASSETS OF THE FUND WILL BE INVESTED IN HIGH QUALITY MONEY MARKET
INSTRUMENTS MATURING IN THIRTEEN MONTHS OR LESS, AND THE DOLLAR-WEIGHTED AVERAGE
MATURITY OF THE PORTFOLIO OF THE FUND WILL BE 90 DAYS OR LESS. The Fund also may
hold cash reserves as the investment adviser deems necessary for temporary
defensive purposes.

In selecting portfolio securities for investment by the Fund, the
investment adviser considers ratings assigned by major rating services,
information concerning the financial history and condition of the issuer and its
revenue and expense prospects. The Board of Trustees monitors the credit quality
of securities purchased for the Fund's portfolio. If a portfolio security held
by the Fund is assigned a lower rating or ceases to be rated, the investment
adviser under the supervision of the Board of Trustees will promptly reassess
whether that security presents minimal credit risks and whether the Fund should
continue to hold the security in its portfolio. If a portfolio security no
longer presents minimal credit risks or is in default, the Fund will dispose of
the security as soon as reasonably practicable unless the Board of Trustees
determines that to do so is not in the best interest of the Fund and its
shareholders.

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<PAGE>

The Fund utilizes the amortized cost method of valuation in accordance with
regulations of the Securities and Exchange Commission (SEC). See "How the Fund
Values its Shares." Accordingly, the Fund will limit its portfolio investments
to those instruments which present minimal credit risks and which are of
"eligible quality," as determined by the Fund's investment adviser under the
supervision of the Board of Trustees. "Eligible quality," for this purpose,
means (i) a security rated in one of the two highest rating categories by at
least two nationally recognized statistical rating organizations assigning a
rating to the security or issuer (or, if only one such rating organization
assigned a rating, that rating organization) or (ii) an unrated security deemed
of comparable quality by the Fund's investment adviser under the supervision of
the Board of Trustees.

As long as the Fund utilizes the amortized cost method of valuation, it
will also comply with certain diversification requirements and will invest no
more than 5% of its total assets in "second-tier securities," with no more than
1% of the Fund's assets in any one issuer of a second-tier security. A
"second-tier security," for this purpose, is a security of "eligible quality"
that does not have the highest rating from at least two rating organizations
assigning a rating to that security or issuer (or, if only one rating
organization assigned a rating, that rating organization) or an unrated security
that is deemed of comparable quality by the Fund's investment adviser under the
supervision of the Trust's Board of Trustees.

UNDER NORMAL MARKET CONDITIONS, THE FUND WILL INVEST ITS ASSETS IN HIGH
QUALITY U.S. DOLLAR-DENOMINATED MONEY MARKET OBLIGATIONS OF DOMESTIC AND FOREIGN
ISSUERS AND U.S. GOVERNMENT AND FINANCIAL INSTITUTION OBLIGATIONS DESCRIBED
BELOW. There is no limitation on the percentage of the Fund's assets that may be
invested in each of these categories. In addition, the Fund may utilize the
investment techniques described below under "Other Investments and Policies."

U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in obligations issued or
guaranteed as to principal and interest by the U.S. Government or its agencies
or instrumentalities.

U.S. TREASURY OBLIGATIONS. The Fund may invest in U.S. Treasury
obligations, including bills, notes, bonds and other debt obligations issued by
the U.S. Treasury. These instruments are direct obligations of the U.S.
Government and, as such, are backed by the "full faith and credit" of the United
States. They differ primarily in their interest rates, the lengths of their
maturities and the dates of their issuances.

OBLIGATIONS ISSUED OR GUARANTEED BY U.S. GOVERNMENT AGENCIES AND
INSTRUMENTALITIES. The Fund may also invest in obligations issued by agencies of
the U.S. Government or instrumentalities established or sponsored by the U.S.
Government. These obligations, including those which are guaranteed by federal
agencies or instrumentalities, may or may not be backed by the full faith and
credit of the United States. Obligations of the Government National Mortgage
Association (GNMA), the Farmers Home Administration and the Small Business
Administration are backed by the full faith and credit of the United States. In
the case of obligations not backed by the full faith and credit of the United
States, the Fund must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment and may not be able to assert a claim against
the United States if the agency or instrumentality does not meet its
commitments. Instruments in which the Fund may invest which are not backed by
the full faith and credit of the United States include obligations issued by the
Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation (FHLMC), the
Federal National Mortgage Association (FNMA), the Resolution Funding
Corporation, the Student Loan Marketing Association, the Tennessee Valley
Authority and the Bank for Cooperatives, each of which has the right to borrow
under certain circumstances from the U.S. Treasury to meet its obligations, and
obligations of the Farm Credit System, the obligations of which may be satisfied
only by the individual credit of the issuing agency.

The Fund may invest in component parts of U.S. Treasury notes or bonds,
namely, either the corpus (principal) of such Treasury obligations or one of the
interest payments scheduled to be paid on such obligations. See "Investment
Objectives and Policies--Obligations Issued or Guaranteed by the U.S.
Government, its Agencies and Instrumentalities" in the Statement of Additional
Information.

-7-

<PAGE>

FINANCIAL INSTITUTION OBLIGATIONS. The Fund may invest in obligations
(including certificates of deposit and bankers' acceptances) of (a) banks
organized under the laws of the United States or any state thereof (including
foreign branches of such banks) or (b) U.S. branches of foreign banks or (c)
foreign banks and foreign branches thereof; provided that such banks have, at
the time of acquisition by the Fund of such obligations, total assets of not
less than $1 billion or its equivalent. The term "certificates of deposit"
includes both Eurodollar certificates of deposit, for which there is generally a
market, and Eurodollar time deposits, for which there is generally not a market.
Eurodollars are U.S. dollars deposited in branches of banks outside the United
States.

ASSET-BACKED SECURITIES. The Fund may invest in asset-backed securities.
Asset-backed securities include interests in pools of mortgages, loans,
receivables, or other assets. Payment of principal and interest may be largely
dependent upon the cash flows generated by assets backing the securities.

OTHER MONEY MARKET INSTRUMENTS. The Fund may invest in commercial paper,
variable amount demand master notes, funding agreements, bills, notes and other
obligations issued by a U.S. company, a foreign company or foreign governments,
their agencies and instrumentalities, maturing in thirteen months or less,
denominated in U.S. dollars, which, at the date of investment, are of "eligible
quality." If such obligations are guaranteed or supported by a letter of credit
issued by a bank, such bank (including a foreign bank) must meet the
requirements set forth above under "Financial Institution Obligations." If such
obligations are guaranteed or insured by an insurance company or other non-bank
entity, such insurance company or other non-bank entity must represent a credit
of comparable quality, as determined by the Fund's investment adviser under the
supervision of the Trust's Board of Trustees. In the case of instruments issued
by foreign companies or governments, the Fund will only invest in instruments
which are not currently subject to foreign withholding taxes.

RISKS OF INVESTING IN FOREIGN SECURITIES. There is no limitation on the
percentage of the Fund's assets that may be invested in foreign securities.
Since the portfolio of the Fund may contain obligations of foreign issuers, an
investment in the Fund involves certain risks. These risks include future
political and economic developments in the country of the issuer, the possible
imposition of withholding taxes on interest income payable on such obligations
held by the Fund, the possible seizure or nationalization of foreign deposits
and the possible establishment of exchange controls or other foreign
governmental laws or restrictions which might affect adversely the payment of
principal and interest on such obligations held by the Fund. In addition, there
may be less publicly available information about a foreign issuer than about a
domestic issuer, and such issuers may not be subject to the same accounting,
auditing and financial recordkeeping standards and requirements as domestic
issuers. Securities issued by foreign issuers may be subject to greater
fluctuations in price than securities issued by U.S. entities. Finally, in the
event of a default with respect to any such foreign debt obligations, it may be
more difficult for the Trust to obtain or to enforce a judgment against the
issuers of such securities.

GENERAL POLICIES

FLOATING RATE AND VARIABLE RATE SECURITIES
The Fund may purchase "floating rate" and "variable rate" obligations. The
interest rates on such obligations fluctuate generally with changes in market
interest rates, and in some cases, the Trust is able to demand repayment of the
principal amount of such obligations at par plus accrued interest. For
additional information concerning variable rate and floating rate obligations,
see "Investment Objective and Policies" in the Statement of Additional
Information.

FIRM COMMITMENTS (WHEN ISSUED AND DELAYED DELIVERY SECURITIES)
The Fund may purchase securities through firm commitment arrangements with
domestic commercial banks and registered broker-dealers. The Fund will only
enter into firm commitment arrangements with banks and broker-dealers which the
Fund's Manager determines present minimal credit risks. See "Firm Commitments"
in the Statement of Additional Information.

-8-

<PAGE>

PLEDGING OF ASSETS AND BORROWING
The Fund may borrow (including through entering into reverse repurchase
agreements) up to and including 10% of the value of its total assets taken at
cost for temporary or emergency purposes. The Fund may pledge up to and
including 10% of its net assets to secure such borrowings. The Fund will not
purchase portfolio securities if its borrowings (other than permissible
securities loans) exceed 5% of its total assets.

REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may purchase securities and concurrently enter into "repurchase
agreements" with the seller, whereby the seller agrees to repurchase such
securities at a specified price within a specified time (generally seven days or
less). The repurchase agreements provide that the Fund will sell the underlying
instruments back to the dealer or the bank at the specified price and at a fixed
time in the future, usually not more than seven days from the date of purchase.
The difference between the purchase price and the resale price represents the
interest earned by the Fund, which is unrelated to the coupon rate or maturity
of the purchased security. Repurchase agreements will at all times be fully
collateralized in an amount at least equal to the resale price. Such collateral
will be held by the Trust's Custodian, either physically or in a book-entry
account.

The Fund will enter into repurchase transactions only with parties which
meet creditworthiness standards approved by the Trust's Board of Trustees. The
Fund's investment adviser monitors the creditworthiness of such parties under
the general supervision of the Board of Trustees. In the event of a default or
bankruptcy by a seller, the Fund will promptly seek to liquidate the collateral.
To the extent that the proceeds from any sale of such collateral upon a default
in the obligation to repurchase are less than the resale price, the Fund will
suffer a loss. If the financial institution that is a party to the repurchase
agreement petitions for bankruptcy or becomes subject to the U.S. Bankruptcy
Code, the law regarding the rights of the Trust is unsettled. As a result,
under these extreme circumstances, there may be a restriction on the Fund's
ability to sell the collateral, and the Fund could suffer a loss.

Reverse repurchase agreements have the characteristics of borrowing and
involve the sale of securities held by the Fund with an agreement to repurchase
the securities at a specified price, date and interest payment. The Fund
intends only to use the reverse repurchase technique when it will be to its
advantage to do so. These transactions are only advantageous if the Fund has an
opportunity to earn a greater rate of interest on the cash derived from the
transaction than the interest cost of obtaining that cash. The Fund may be
unable to realize earnings from the use of the proceeds equal to or greater than
the interest required to be paid. The use of reverse repurchase agreements may
exaggerate any increase or decrease in the value of the Fund's portfolio. The
Trust's Custodian will maintain in a segregated account cash, or other liquid
assets, maturing not later than the expiration of the reverse repurchase
agreements and having a value equal to or greater than such commitments.

ILLIQUID SECURITIES
The Fund may hold up to 10% of its total assets in illiquid securities,
including securities with legal or contractual restrictions on resale
(restricted securities), securities that are not readily marketable in
securities markets either within or outside of the United States, privately
placed commercial paper and repurchase agreements which have a maturity of
longer than seven days. Restricted securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, as amended (the Securities Act), and
privately placed commercial paper that have a readily available market are not
considered illiquid for purposes of this limitation. Investing in Rule 144A
securities could, however, have the effect of increasing illiquidity to the
extent that qualified institutional buyers become, for a limited time,
uninterested in purchasing these securities. The investment adviser will monitor
the liquidity of such restricted securities under the supervision of the Board
of Trustees. Repurchase agreements subject to demand are deemed to have a
maturity equal to the applicable notice period.

-9-

<PAGE>

SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of other money market funds
registered under the Investment Company Act. See "Investment Objective and
Policies--Securities of Other Investment Companies" in the Statement of
Additional Information.

LOANS OF PORTFOLIO SECURITIES
The Fund may lend its portfolio securities to broker-dealers under
contracts calling for collateral in U.S. Government Securities or cash equal to
at least 100% of the market value of the securities loaned. The Fund will
continue to benefit from interest on the securities loaned and will also receive
either interest, through investment of cash collateral in the Fund's permissible
investments, or lending fees, if the collateral is U.S. Government Securities.
The Fund would normally pay lending fees to the lending broker-dealer. Any
voting rights, or rights to consent, relating to securities loaned pass to the
borrower. However, if a material event affecting the investment occurs, such
loans will be called so that the securities may be voted by the Fund.

INVESTMENT RESTRICTIONS

The Fund is subject to certain investment restrictions, which, like its
investment objective, constitute fundamental policies. Fundamental policies
cannot be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities, as defined in the Investment Company Act.
See "Investment Restrictions" in the Statement of Additional Information.

- --------------------------------------------------------------------------------
HOW THE FUND IS MANAGED
- --------------------------------------------------------------------------------

THE TRUST HAS A BOARD OF TRUSTEES WHICH, IN ADDITION TO OVERSEEING THE
ACTIONS OF THE FUND'S MANAGER AND SUBADVISER AND THE TRUST'S DISTRIBUTOR, AS SET
FORTH BELOW, DECIDES UPON MATTERS OF GENERAL POLICY. THE TRUST'S OFFICERS
CONDUCT AND SUPERVISE THE DAILY BUSINESS OPERATIONS OF THE TRUST. THE FUND'S
SUBADVISER FURNISHES DAILY INVESTMENT ADVISORY SERVICES.

Certain changes in the management and operation of the Fund became
effective in December 1997, including, among other things, the appointment of
the Manager, the Subadviser, the Distributor, the Transfer Agent, and the
Custodian, as well as their related agreements.

For the fiscal year ended September 30, 1997, total expenses for the Fund's
shares as a percentage of average net assets were .65 of 1%. For the same
period, total expenses would have been .62 of 1% had the current management,
distribution and subadvisory contacts been in effect. See "Financial
Highlights."

MANAGER

PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC (PIFM OR THE MANAGER), GATEWAY
CENTER THREE, 100 MULBERRY STREET, NEWARK, NEW JERSEY 07102-4077, IS THE MANAGER
OF THE FUND AND IS COMPENSATED FOR ITS SERVICES 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. PIFM is organized
in New York as a limited liability company. It is the successor of Prudential
Mutual Fund Management, Inc., which transferred its assets to PIFM in September
1996. For the fiscal year ended September 30, 1997, the Fund would have paid
management fees to PIFM of .39% of its average daily net assets had the current
Management Agreement been in effect. See "Manager" in the Statement of
Additional Information.

As of September 30, 1997, PIFM served as the manager to 41 open-end
investment companies, constituting all of the Prudential Mutual Funds, and as
manager or administrator to 22 closed-end investment companies with aggregate
assets of approximately $59.9 billion.

-10-

<PAGE>

UNDER THE MANAGEMENT AGREEMENT WITH THE TRUST, PIFM MANAGES THE INVESTMENT
OPERATIONS OF THE FUND AND ALSO ADMINISTERS THE TRUST'S BUSINESS AFFAIRS. See
"Manager" in the Statement of Additional Information.

UNDER A SUBADVISORY AGREEMENT BETWEEN PIFM AND THE PRUDENTIAL INVESTMENT
CORPORATION (PIC), DOING BUSINESS AS PRUDENTIAL INVESTMENTS (PI, THE SUBADVISER
OR THE INVESTMENT ADVISER), PI FURNISHES INVESTMENT ADVISORY SERVICES IN
CONNECTION WITH THE MANAGEMENT OF THE TRUST AND IS REIMBURSED BY PIFM FOR ITS
REASONABLE COSTS AND EXPENSES INCURRED IN PROVIDING SUCH SERVICES. Under the
Management Agreement, PIFM continues to have responsibility for all investment
advisory services and supervises PIC's performance of such services.

PIFM and PIC are wholly-owned subsidiaries of The Prudential Insurance
Company of America (Prudential), a major diversified insurance and financial
services company.

DISTRIBUTOR

PRUDENTIAL SECURITIES INCORPORATED (PRUDENTIAL SECURITIES OR THE
DISTRIBUTOR), ONE SEAPORT PLAZA, NEW YORK, NEW YORK 10292, IS A CORPORATION
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE AND SERVES AS THE TRUST'S
DISTRIBUTOR. IT IS AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF PRUDENTIAL.

UNDER A DISTRIBUTION PLAN (THE PLAN) ADOPTED BY THE TRUST UNDER RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT AND A DISTRIBUTION AND SERVICE AGREEMENT (THE
DISTRIBUTION AGREEMENT), THE DISTRIBUTOR INCURS THE EXPENSES OF DISTRIBUTING THE
FUND'S SHARES. These expenses include account servicing fees paid to, or on
account of, financial advisers of Prudential Securities and representatives of
Pruco Securities Corporation (Prusec), an affiliated broker-dealer, account
servicing fees paid to, or on account of, other broker-dealers or financial
institutions (other than national banks) which have entered into agreements with
the Distributor, advertising expenses, the cost of printing and mailing
prospectuses to potential investors and indirect and overhead costs of
Prudential Securities and Prusec associated with the sale of Fund shares,
including lease, utility, communications and sales promotion expenses.

UNDER THE PLAN, THE FUND REIMBURSES THE DISTRIBUTOR FOR ITS
DISTRIBUTION-RELATED EXPENSES AT A MAXIMUM ANNUAL RATE OF .10 OF 1% OF THE
AVERAGE DAILY NET ASSETS OF THE FUND'S SHARES. Account servicing fees are paid
based on the average balance of the Fund's shares held in the accounts of the
customers of financial advisers. The entire distribution fee may be used to pay
account servicing fees.

The Plan provides that it shall continue in effect from year to year
provided that each such continuance is approved annually by a majority vote of
the Board of Trustees of the Trust, including a majority of the Trustees who are
not interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan. The
Board of Trustees is provided with and reviews quarterly reports of expenditures
under the Plan.

In addition to distribution and service fees paid by the Fund under the
Plan, the Manager (or one of its affiliates) may make payments out of its own
resources to dealers (including Prudential Securities) and other persons who
distribute shares of the Fund. Such payments may be calculated by reference to
the net asset value of shares sold by such persons or otherwise.

-11-

<PAGE>

PORTFOLIO TRANSACTIONS

Prudential Securities may also act as a broker for the Fund, provided that
the commissions, fees or other remuneration it receives are fair and reasonable.
See "Portfolio Transactions" in the Statement of Additional Information.

CUSTODIAN AND TRANSFER AND SHAREHOLDER SERVICING AGENT

State Street Bank and Trust Company (State Street), One Heritage Drive,
North Quincy, Massachusetts 02171, serves as Custodian for the Fund's portfolio
securities and cash and, in that capacity, maintains certain financial and
accounting books and records pursuant to an agreement with the Trust. Its
mailing address is P.O. Box 1713, Boston, Massachusetts 02105.

Prudential Mutual Fund Services LLC (PMFS or the Transfer Agent), Raritan
Plaza One, Edison, New Jersey 08837, serves as Transfer Agent and as Shareholder
Servicing Agent and in those capacities maintains certain books and records for
the Trust. PMFS is a wholly-owned subsidiary of PIFM. Its mailing address is
P.O. Box 15005, New Brunswick, New Jersey 08906-5005.

- --------------------------------------------------------------------------------
HOW THE FUND VALUES ITS SHARES
- --------------------------------------------------------------------------------

THE FUND'S NET ASSET VALUE PER SHARE OR NAV IS DETERMINED BY SUBTRACTING
ITS LIABILITIES FROM THE VALUE OF ITS ASSETS AND DIVIDING THE REMAINDER BY THE
NUMBER OF OUTSTANDING SHARES. THE BOARD OF TRUSTEES HAS FIXED THE SPECIFIC TIME
OF DAY FOR THE COMPUTATION OF THE NAV TO BE 4:30 P.M., NEW YORK TIME, ON EACH
DAY THE FUND IS OPEN FOR BUSINESS. The Fund is open for business each day that
the New York Stock Exchange is open for trading. The Fund will compute its NAV
once daily on each of its business days, except days on which no orders to
purchase, sell or redeem Fund shares have been received or days on which changes
in the value of the Fund's portfolio securities do not materially affect the net
asset value.

The Fund determines the value of its portfolio securities by the amortized
cost method. This method involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the instrument.
During these periods, the yield to an existing shareholder may differ somewhat
from that which could be obtained from a similar fund which marks its portfolio
securities to market each day. For example, during periods of declining
interest rates, if the use of the amortized cost method resulted in a lower
value of the Fund's portfolio on a given day, a prospective investor in the Fund
would be able to obtain a somewhat higher yield and existing shareholders would
receive correspondingly less income. The converse would apply during periods of
rising interest rates. The Board of Trustees has established procedures
designed to stabilize, to the extent reasonably possible, the net asset value of
the shares of the Fund at $1.00 per share. See "Net Asset Value" in the
Statement of Additional Information.

-12-

<PAGE>

- --------------------------------------------------------------------------------
TAXES, DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------

TAXATION OF THE FUND

The Fund has elected to qualify and intends to remain qualified as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the Internal Revenue Code). Accordingly, the Fund will not be subject to
federal income taxes on its net investment income and net capital gains, if any,
that it distributes to its shareholders provided that it distributes to
shareholders each year at least 90% of such income. If the Fund defers until the
subsequent calendar year the distribution of more than a minimal amount of
income, it will be subject to a 4% nondeductible excise tax on the deferred
distribution. The Fund intends to make timely and complete distributions in
order to avoid any such taxes.

TAXATION OF SHAREHOLDERS

All dividends out of net investment income, together with distributions of
net short-term gains (I.E., the excess of net short-term capital gains over net
long-term capital losses), will be taxable to shareholders as ordinary income
whether or not reinvested. The Fund does not anticipate realizing long-term
capital gains. However, to the extent the Fund does recognize long-term capital
gains, the Fund intends to declare capital gains distributions to the extent of
its net capital gains (I.E., the excess of net long-term capital gains over net
short-term capital losses). Capital gains distributions, if any, are taxable to
shareholders as net long-term capital gains, regardless of the length of time a
shareholder has owned his or her shares.

It is anticipated that the net asset value per share of the Fund will
remain constant. However, if the net asset value per share fluctuates, a
shareholder may realize gain or loss upon the disposition of a share. Any gain
or loss realized upon a sale or redemption of shares by a shareholder who is not
a dealer in securities will be treated as long-term capital gain or loss if the
shares have been held more than one year and otherwise as short-term capital
gain or loss. Any such loss, however, although otherwise treated as a short-term
capital loss, will be treated as long-term capital loss to the extent of any
capital gain distributions received by the shareholder, if the shares have been
held for six months or less.

Dividends and distributions may be subject to state and local taxes.
Shareholders are advised to consult their own tax advisers regarding specific
questions as to federal, state or local taxes.

WITHHOLDING TAXES

Under the Internal Revenue Code, the Fund is required to withhold and remit
to the U.S. Treasury 31% of dividends, capital gain income and redemption
proceeds on the accounts of those shareholders who fail to furnish their tax
identification numbers on IRS Form W-9 (or IRS Form W-8 in the case of certain
foreign shareholders) with the required certifications regarding the
shareholder's status under the federal income tax law. However, dividends of net
investment income (and net short-term capital gains) paid to a foreign
shareholder will generally be subject to U.S. withholding tax at the rate of 30%
(or lower treaty rate).

DIVIDENDS AND DISTRIBUTIONS

NET INVESTMENT INCOME AND NET REALIZED SHORT-TERM CAPITAL GAINS, IF ANY, OF
THE FUND WILL BE DECLARED AS A DIVIDEND DAILY IMMEDIATELY PRIOR TO THE
CALCULATION OF THE FUND'S NET ASSET VALUE AS OF 4:30 P.M., NEW YORK TIME. Net
investment income of the Fund (from the time of the immediately preceding
declaration) consists of interest accrued or discount earned (including both
original issue and market discount) on the obligations in the Fund, less
amortization of premium and the estimated expenses of the Fund applicable to
that dividend period. The Fund does not expect to realize long-term capital
gains or losses.

-13-

<PAGE>

The net investment income of the Fund for dividend purposes is determined
on a daily basis. Each such dividend will be payable to shareholders of record
at the time of its declaration (including for this purpose holders of shares
purchased, but excluding holders of shares redeemed as of 4:30 P.M., New York
time on that day). Dividends declared are accrued throughout the month and are
distributed in the form of full and fractional shares. Shareholders may receive
cash payments from the Fund equal to the dividends earned during the month by
notifying PMFS at least five business days prior to the payable date. Cash
distributions are paid by check within five business days after the dividend
payment date. Dividends are reinvested at the net asset value determined as of
4:30 P.M., New York time, on the day of payment. If the entire amount in an
account is redeemed at any time during a month, all dividends accrued with
respect to that account during that month are paid to the investor at the NAV as
of 4:30 P.M., New York time, on the date of redemption.

The calculation of net investment income for dividend purposes is made
immediately prior to the calculation of net asset value at 4:30 P.M., New York
time. In the case of a purchase order that occurs as of 4:30 P.M., New York time
(the funds are received that day), a shareholder begins to earn dividends
declared on that day.

The Fund will not accept purchase and redemption orders after 4:30 P.M.,
New York time. If a redemption request is received prior to 4:30 P.M., New York
time, the shareholder does not earn a dividend on that day but the redemption
proceeds are wired on that day.

Net income earned on Saturdays, Sundays and holidays is accrued in
calculating the dividend on the previous business day. Accordingly, an investor
who places a purchase order prior to 4:30 P.M., New York time, on a Friday
begins earning dividends that day. A shareholder which redeems its shares prior
to 4:30 P.M., New York time, on a Friday does not earn a dividend which reflects
the income earned by the Fund on the Friday, or the following Saturday and
Sunday.

Should the Fund incur or anticipate any unusual expense or loss or
depreciation which would adversely affect its net asset value per share or
income for a particular period, the Board of Trustees would at that time
consider whether to adhere to the present dividend policy described above or to
revise it in light of the then prevailing circumstances. For example, if the net
asset value per share of the Fund is reduced, or is anticipated to be reduced,
below $1.00, the Board of Trustees may suspend further dividend payments of the
Fund until net asset value is returned to $1.00 per share. Thus, such expenses
or losses or depreciation could result in shareholders receiving no dividends
for the period during which they held their shares and in their receiving upon
redemption a price per share lower than that which they paid.

- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------

DESCRIPTION OF SHARES

THE TRUST WAS ORGANIZED ON APRIL 27, 1984 AS A MASSACHUSETTS BUSINESS TRUST
AND IS A DIVERSIFIED OPEN-ENDED MANAGEMENT INVESTMENT COMPANY. THE TRUST HAS AN
UNLIMITED NUMBER OF AUTHORIZED SHARES OF BENEFICIAL INTEREST WHICH MAY BE
DIVIDED INTO AN UNLIMITED NUMBER OF SERIES OF SUCH SHARES AND WHICH PRESENTLY
CONSIST OF TWO SERIES, INCLUDING THE FUND.

The Trust does not intend to issue share certificates unless requested.
Shares of the Trust, when issued, are fully paid, nonassessable, fully
transferable and redeemable at the option of the holder. Shares are also
redeemable at the option of Prudential Securities under certain circumstances as
described under "Shareholder Guide--How to Sell Your Shares." All shares of the
Fund are equal as to earnings, assets and voting privileges. There are no
conversion, preemptive or other subscription rights. In the event of
liquidation, each share of the Fund is entitled to its portion of all of the
Fund's assets after all debts and expenses of the Fund have been paid. The
Trust's shares do not have cumulative voting rights for the election of
Trustees. Pursuant to the Trust's Declaration of Trust, the Board of Trustees
may, without

-14-

<PAGE>

shareholder approval, authorize the creation of additional series, with such
preferences, privileges, limitations and voting and dividend rights as the Board
may determine or, also without shareholder approval, terminate any series and
distribute such series' assets to its shareholders.

THE TRUST DOES NOT INTEND TO HOLD ANNUAL SHAREHOLDER MEETINGS UNLESS
REQUIRED BY LAW. THE TRUST WILL NOT BE REQUIRED TO HOLD ANNUAL MEETINGS OF
SHAREHOLDERS UNLESS, FOR EXAMPLE, THE ELECTION OF TRUSTEES IS REQUIRED TO BE
ACTED ON BY SHAREHOLDERS UNDER THE INVESTMENT COMPANY ACT. SHAREHOLDERS HAVE
CERTAIN RIGHTS, INCLUDING THE RIGHT TO CALL A MEETING UPON A VOTE OF 10% OF THE
TRUST'S OUTSTANDING SHARES FOR THE PURPOSE OF VOTING ON THE REMOVAL OF ONE OR
MORE TRUSTEES OR TO TRANSACT ANY OTHER BUSINESS.

The Declaration of Trust and the By-Laws of the Trust are designed to make
the Trust similar in certain respects to a Massachusetts business corporation.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
Trust if the assets of the Trust are insufficient to satisfy its obligations,
which is not the case with a corporation. The Declaration of Trust of the Trust
provides that shareholders shall not be subject to any personal liability for
the acts or obligations of the Trust, that the shareholders may not be assessed
by the Trust for any obligation that they have not agreed to pay and that every
written obligation, contract, instrument or undertaking made by the Trust shall
contain a provision to the effect that the shareholders are not individually
bound thereunder.

ADDITIONAL INFORMATION

This Prospectus, including the Statement of Additional Information which
has been incorporated by reference herein, does not contain all the information
set forth in the Registration Statement filed by the Trust with the SEC under
the Securities Act of 1933. Copies of the Registration Statement may be obtained
at a reasonable charge from the SEC or may be examined, without charge, at the
office of the SEC in Washington, D.C.

- --------------------------------------------------------------------------------
SHAREHOLDER GUIDE
- --------------------------------------------------------------------------------

HOW TO BUY SHARES OF THE FUND

PURCHASES THROUGH PRUDENTIAL SECURITIES

Prudential Securities has advised the Fund that it has automatic investment
procedures (Autosweep) for Fund investors pursuant to which it will make
automatic investments of free credit cash balances held in a client's account in
shares of the Fund, if the Fund is the client's primary money sweep fund. If
you are a client of Prudential Securities participating in one of the programs
listed above, you may designate the Fund as your primary money sweep fund. If
you are such a client of Prudential Securities and do not designate a primary
money sweep fund, the Fund will be your primary money sweep fund. Shares of
the Fund can only be purchased through the automatic investment procedures
described herein; no manual purchase orders will be accepted for the Fund. You
have the option to change your primary money sweep fund at any time by notifying
your Prudential Securities financial adviser.

-15-

<PAGE>

On the business day following confirmation that a free credit balance
(I.E., immediately available funds) exists in your account, Prudential
Securities will effect a purchase order for shares of the Fund in an amount
up to such balance at the NAV determined on that day. Such funds begin
earning dividends on that business day.

Shares of the Fund purchased by Prudential Securities on behalf of its
clients will be held by Prudential Securities as record holder. Prudential
Securities will therefore receive statements and dividends directly from the
Trust and will in turn provide investors with Prudential Securities account
statements reflecting purchases, redemptions and dividend payments. Although
Prudential Securities clients who purchase shares of the Fund through Prudential
Securities may not redeem shares of the Fund by check, Prudential Securities
provides its clients with alternative forms of immediate access to monies
invested in shares of the Fund.

Prudential Securities clients wishing additional information concerning
investment in Fund shares made through Prudential Securities should call their
Prudential Securities financial adviser.

AUTOMATIC PURCHASE PROCEDURES. Prudential Securities will purchase shares
of the Fund on behalf of participating clients each business day at current net
asset value pursuant to the automatic purchase procedures described below. There
is no sales charge. There are no minimum investment requirements. The Trust does
not intend to issue share certificates unless requested. The Fund reserves the
right to reject any purchase order or to suspend or modify the continuous
offering of its shares.

Free credit cash balances of $1.00 or more held in the account of a
participating client will automatically be invested in shares of the Fund
(Autosweep) as described below. Specifically, an order to purchase shares of the
Fund is placed (i) in the case of a free credit cash balance resulting from the
proceeds of a securities sale, on the settlement date of the securities sale,
and (ii) in the case of a free credit cash balance resulting from a non-trade
related credit (E.G., receipt of a dividend or interest payment, maturity of a
bond or a cash payment by the client into the client's account), on the business
day of receipt by Prudential Securities of the non-trade related credit. Each
time an order is placed under these procedures resulting from the settlement of
a securities sale, any non-trade related credit in the client's account will
also be automatically invested.

All shares purchased pursuant to these automatic purchase procedures will
begin earning dividends on the business day on which the order is placed.
Prudential Securities will arrange for investment in shares of the Fund at 4:30
P.M., New York time, on the business day the order is placed and cause payment
to be made in federal funds for the shares invested prior to 4:30 P.M., New York
time, on the next business day.

HOW TO SELL YOUR SHARES

Shares will be redeemed each business day at NAV next determined in
accordance with the procedures described below.

REDEMPTION OF SHARES PURCHASED THROUGH PRUDENTIAL SECURITIES

Prudential Securities clients for whom Prudential Securities has purchased
shares of the Fund may have these shares redeemed only through Prudential
Securities. Please contact your Prudential Securities financial adviser.

Prudential Securities has advised the Fund that it has established
procedures pursuant to which shares of the Fund held by a Prudential Securities
client having a deficiency in his or her Prudential Securities account will be
redeemed automatically to the extent of that deficiency to the nearest highest
dollar, unless the client notifies Prudential Securities to the contrary. The
amount of the redemption will be the lesser of (a) the total net asset value of
Fund shares held in the client's Prudential Securities account or (b) the
deficiency in the client's Prudential Securities account at the close of
business on the date such deficiency

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<PAGE>

is due. Accordingly, a Prudential Securities client utilizing this automatic
redemption procedure and who wishes to pay for a securities transaction or
satisfy any other debit balance in his or her account other than through such
automatic redemption procedure must do so not later than the day of settlement
for such securities transaction or the date the debit balance is incurred.
Prudential Securities clients who have elected to utilize Autosweep will not be
entitled to dividends declared on the date of redemption.

AUTOMATIC REDEMPTION. Redemptions will be automatically effected by
Prudential Securities on each business day at the NAV next determined to satisfy
debit balances arising from securities transactions in an account to the nearest
highest dollar or to satisfy redemption requests made on behalf of a
participating client. Each participating client's account will be automatically
scanned for debits each business day as of the close of business on that day and
after application of any free credit cash balances in the account to such
debits, a sufficient number of shares of the Fund will be redeemed as of that
business day to satisfy any remaining debits in the account. In the event of an
automatic redemption of shares, the client will be entitled to dividends
declared on the redeemed shares through the business day preceding the day on
which the redemption is effective. Dividends declared on the date of redemption
will be retained by Prudential Securities which has advanced monies to satisfy
debits in the participating client's account.

REDEMPTION IN KIND. If the Board of Trustees determines that it would be
detrimental to the best interests of the remaining shareholders of the Fund to
make payment wholly or partly in cash, the Fund may pay the redemption price in
whole or in part by a distribution in kind of securities from the investment
portfolio of the Fund, in lieu of cash, in conformity with applicable rules of
the SEC. Securities will be readily marketable and will be valued in the same
manner as in a regular redemption. See "How the Fund Values its Shares." If your
shares are redeemed in kind, you would incur transaction costs in converting the
assets into cash. The Trust, however, has elected to be governed by Rule 18f-1
under the Investment Company Act pursuant to which the Fund is obligated to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset
value of the Fund during any 90-day period for any one shareholder.

The Trust may suspend the right of redemption or postpone the date of
payment for a period of up to seven days. Suspensions or postponements may not
exceed seven days except (1) for any period (a) during which the New York Stock
Exchange is closed other than customary weekend and holiday closings or (b)
during which trading on the New York Stock Exchange is restricted; (2) for any
period during which an emergency exists as a result of which (a) disposal by the
Fund of securities owned by it is not reasonably practicable or (b) it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets; or (3) for such other periods as the SEC may by order permit for the
protection of shareholders of the Fund. The SEC by rules and regulations
determines the conditions under which (i) trading shall be deemed to be
restricted and (ii) an emergency is deemed to exist within the meaning of clause
(2) above.

Prudential Securities has the right to terminate an account for any reason.
In such event, all shares held in a shareholder's account will be redeemed.

INVOLUNTARY REDEMPTION. Because of the relatively high cost to the Trust
of maintaining an account, the Trust reserves the right to redeem, upon 60 days'
written notice, an account which is reduced by you to an NAV of $500 or less due
to redemption. You may avoid such redemption by increasing the NAV of your
account to an amount in excess of $500.

SHAREHOLDER SERVICES

As a shareholder in the Fund, you can take advantage of the following
additional services and privileges:

-17-

<PAGE>

have subsequent dividends and/or distributions sent in cash rather than
reinvested. if you hold shares through Prudential Securities, you should
contact your financial adviser.

- REPORTS TO SHAREHOLDERS. THE TRUST WILL SEND YOU ANNUAL AND SEMI-ANNUAL
REPORTS. THE FINANCIAL STATEMENTS APPEARING IN THE ANNUAL REPORTS ARE AUDITED BY
INDEPENDENT ACCOUNTANTS. IN ORDER TO REDUCE DUPLICATE MAILING AND PRINTING
EXPENSES, THE TRUST WILL PROVIDE ONE ANNUAL AND SEMI-ANNUAL SHAREHOLDER REPORT
AND ANNUAL PROSPECTUS PER HOUSEHOLD. YOU MAY REQUEST ADDITIONAL COPIES OF SUCH
REPORTS BY CALLING (800) 225-1852 OR BY WRITING TO THE TRUST AT GATEWAY CENTER
THREE, 100 MULBERRY STREET, NEWARK, NEW JERSEY 07102-4077.

- EXCHANGE PRIVILEGE. The Trust does not currently offer an exchange
privilege for shares of the Fund.

- SHAREHOLDER INQUIRIES. Shareholder inquiries should be addressed to the
Trust at Gateway Center Three, 100 Mulberry Street, Newark, New Jersey
07102-4077, or by telephone, at (800) 225-1852 (toll-free), or from outside the
U.S.A. at (908) 417-7555 (collect).

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<PAGE>

- --------------------------------------------------------------------------------
DESCRIPTION OF SECURITY RATINGS
- --------------------------------------------------------------------------------

MOODY'S INVESTORS SERVICE

BOND RATINGS

Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than Aaa bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

SHORT-TERM DEBT RATINGS

Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations which have an original maturity not
exceeding one year.

Prime-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.

Prime-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations.

SHORT-TERM RATINGS

VMIG-1: Variable rate short-term indebtedness rated "VMIG-1" is of the best
quality. There is present strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.

STANDARD & POOR'S RATINGS GROUP

BOND RATINGS

AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.

COMMERCIAL PAPER RATINGS

An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.

A-1: This highest category indicates that the degree of safety regarding
timely payment is strong.

A-1

<PAGE>

A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

DUFF & PHELPS CREDIT RATING CO.

LONG-TERM DEBT RATINGS

AAA: Bonds rated AAA are considered to be of the highest credit quality.
The risk factors are negligible, being only slightly more than for risk-free
U.S. Treasury debt.

AA: Bonds rated AA are considered to be of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.

SHORT-TERM DEBT RATINGS

D-1+: Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations.

D-1: Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.

D-1-: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.

D-2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.

FITCH INVESTORS SERVICES, L.P.

BOND RATINGS

AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.

AA: Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated 'AAA'. Because bonds rated
in the 'AAA' and 'AA' categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated 'F-1+'.

SHORT-TERM DEBT RATINGS

F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
'F-1+'.

F-2: Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as the 'F-1+' and 'F-1' categories.

A-2

<PAGE>

- --------------------------------------------------------------------------------
THE PRUDENTIAL MUTUAL FUND FAMILY
- --------------------------------------------------------------------------------

Prudential Investments Fund Management offers a broad range of mutual funds
designed to meet your individual needs. We welcome you to review the investment
options available through our family of funds. For more information on the
Prudential Mutual Funds, including charges and expenses, contact your Prudential
Securities financial adviser or Prusec representative or telephone the Fund at
(800) 225-1852 for a free prospectus. Read the prospectus carefully before you
invest or send money.

TAXABLE BOND FUNDS
Prudential Diversified Bond Fund, Inc.
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential Mortgage Income Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
The BlackRock Government Income Trust

TAX-EXEMPT BOND FUNDS
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Intermediate Series
Prudential Municipal Series Fund
Florida Series
Maryland Series
Massachusetts Series
Michigan Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.

GLOBAL FUNDS
Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Limited Maturity Fund, Inc.
Limited Maturity Portfolio
Prudential Intermediate Global Income Fund, Inc.
Prudential International Bond Fund, Inc.
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Global Series
International Stock Series
Global Utility Fund, Inc.
The Global Total Return Fund, Inc.

EQUITY FUNDS
Prudential Balanced Fund
Prudential Distressed Securities Fund, Inc.
Prudential Dryden Fund
Prudential Active Balanced Fund
Prudential Bond Market Index Fund
Prudential Europe Index Fund
Prudential Pacific Index Fund
Prudential Small-Cap Index Fund
Prudential Stock Index Fund
Prudential Emerging Growth Fund, Inc.
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Jennison Series Fund, Inc.
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Multi-Sector Fund, Inc.
Prudential Small-Cap Quantum Fund, Inc.
Prudential Small Company Value Fund, Inc.
Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund

MONEY MARKET FUNDS
- - TAXABLE MONEY MARKET FUNDS
Cash Accumulation Trust
National Money Market Fund
Liquid Assets Fund
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund, Inc.
Money Market Series
Prudential MoneyMart Assets, Inc.
Cash Accumulation Trust
National Money Market Fund
Liquid Assets Fund

- - TAX-FREE MONEY MARKET FUNDS
Prudential Tax-Free Money Fund, Inc.
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series

- - COMMAND FUNDS
Command Money Fund
Command Government Fund
Command Tax-Free Fund

- - INSTITUTIONAL MONEY MARKET FUNDS
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series

B-1

<PAGE>

No dealer, sales representative or any other person has been authorized to give
any information or to make any representations, other than those contained in
this Prospectus, in connection with the offer contained herein, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Trust or the Distributor. This Prospectus does not
constitute an offer by the Trust or by the Distributor to sell or a solicitation
of any offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such offer in such jurisdiction.

- -------------------------------------------------------------------------

TABLE OF CONTENTS
Page
----
TRUST HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . 2
What are the Fund's Risk Factors and
Special Characteristics? . . . . . . . . . . . . . . . . . 2
FUND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . 4
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . 5
CALCULATION OF YIELD . . . . . . . . . . . . . . . . . . . . . . 6
HOW THE FUND INVESTS . . . . . . . . . . . . . . . . . . . . . . 6
Investment Objective and Policies . . . . . . . . . . . . . . 6
General Policies. . . . . . . . . . . . . . . . . . . . . . . 8
Investment Restrictions . . . . . . . . . . . . . . . . . . . 10
HOW THE FUND IS MANAGED. . . . . . . . . . . . . . . . . . . . . 10
Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Distributor . . . . . . . . . . . . . . . . . . . . . . . . . 11
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . 12
Custodian and Transfer and
Shareholder Servicing Agent. . . . . . . . . . . . . . . . 12
HOW THE FUND VALUES ITS SHARES . . . . . . . . . . . . . . . . . 12
TAXES, DIVIDENDS AND
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . 13
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 14
Description of Shares . . . . . . . . . . . . . . . . . . . . 14
Additional Information. . . . . . . . . . . . . . . . . . . . 15
SHAREHOLDER GUIDE. . . . . . . . . . . . . . . . . . . . . . . . 15
How to Buy Shares of the Fund . . . . . . . . . . . . . . . . 15
How to Sell Your Shares . . . . . . . . . . . . . . . . . . . 16
Shareholder Services. . . . . . . . . . . . . . . . . . . . . 17
DESCRIPTION OF SECURITY RATINGS. . . . . . . . . . . . . . . . . A-1
THE PRUDENTIAL MUTUAL FUND FAMILY. . . . . . . . . . . . . . . . B-1
- -------------------------------------------------------------------------

CUSIP No.:

CASH
ACCUMULATION
TRUST
- --------------------------------
National Money
Market Fund

P R O S P E C T U S
DECEMBER 22, 1997

[LOGO]PRUDENTIAL
INVESTMENTS
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 7, 1997

[LOGO]
LIQUID ASSETS FUND

- ----------------------------------------------------------------

PROSPECTUS DATED DECEMBER , 1997

- ----------------------------------------------------------------

The Liquid Assets Fund (the Fund) is one of two series of the Cash Accumulation
Trust (the Trust), an open-end, diversified, management investment company, or
mutual fund. The Fund offers investors an efficient and economical means of
investing in a professionally managed portfolio of high quality money market
instruments. The investment objective of the Fund is current income to the
extent consistent with preservation of capital and liquidity. There can be no
assurance that the Fund's investment objective will be achieved. See "How the
Fund Invests--Investment Objective and Policies." The Fund is commencing the
offering of its shares on the date of this Prospectus. Only shares of the Fund
are being offered through this Prospectus. Shares of the Fund are offered to
investment advisory clients of Prudential Securities Incorporated (Prudential
Securities) that (a) participate in any of the following managed account
programs sponsored by Prudential Securities: Gibraltar Advisors, Prudential
Securities Portfolio Management (PSPM), Quantum Portfolio Management (Quantum),
Managed Assets Consulting Services (MACS) and Prudential Securities Investment
Supervisory Group and (b) are "Eligible Benefit Plans." "Eligible Benefit Plans"
include (i) employee benefit plans as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 (ERISA) other than governmental plans as
defined in Section 3(32) of ERISA and church plans as defined in Section 3(33)
of ERISA, (ii) pension, profit-sharing or other employee benefit plans qualified
under Section 401 of the Internal Revenue Code of 1986, as amended (the Internal
Revenue Code), (iii) deferred compensation and annuity plans under Section 457
or 403(b)(7) of the Internal Revenue Code, and (iv) Individual Retirement
Accounts (IRAs) as defined in Section 408(a) of the Internal Revenue Code.

An investment in the Fund is neither insured nor guaranteed by the U.S.
Government and there can be no assurance that the Fund will be able to maintain
a stable net asset value of $1.00 per share. See "How the Fund Values its
Shares."

The Trust's address is Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077, and its telephone number is (800) 225-1852.

This Prospectus sets forth concisely the information about the Trust and the
Fund that a prospective investor ought to know before investing. Additional
information about the Trust and the Fund has been filed with the Securities and
Exchange Commission in a Statement of Additional Information, dated December ,
1997, which information is incorporated herein by reference (is legally
considered a part of this Prospectus) and is available without charge upon
request to the Trust at the address or telephone number noted above.

- --------------------------------------------------------------------------------

INVESTORS ARE ADVISED TO READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE
REFERENCE.

- --------------------------------------------------------------------------------
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TRUST HIGHLIGHTS

The following summary is intended to highlight certain information contained
in this Prospectus and is qualified in its entirety by the more detailed
information appearing elsewhere herein.

WHAT IS THE CASH ACCUMULATION TRUST?

The Cash Accumulation Trust (the Trust) is a mutual fund whose shares are
offered in two series, each of which operates as a separate fund. A mutual
fund pools the resources of investors by selling its shares to the public
and investing the proceeds of such sale in a portfolio of securities
designed to achieve its investment objective. Technically, the Trust is an
open-end, diversified, management investment company. Only shares of the
Liquid Assets Fund (the Fund) are offered through this Prospectus.

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is current income to the extent consistent
with preservation of capital and liquidity. The Fund invests primarily in a
portfolio of U.S. Government obligations, financial institution obligations
and other high quality money market instruments maturing in thirteen months
or less. There can be no assurance that the Fund's investment objective will
be achieved. See "How the Fund Invests--Investment Objective and Policies"
at page 5.

WHAT ARE THE FUND'S RISK FACTORS AND SPECIAL CHARACTERISTICS?

It is anticipated that the net asset value of the Fund will remain
constant at $1.00 per share, although this cannot be assured. In order to
maintain such constant net asset value, the Fund will value its portfolio
securities at amortized cost. While this method provides certainty in
valuation, it may result in periods during which the value of a security in
the Fund's portfolio, as determined by amortized cost, is higher or lower
than the price the Fund would receive if it sold such security. See "How the
Fund Values its Shares" at page 11.

The Fund may invest in foreign securities without limit. Investing in
securities of foreign companies and countries involves certain
considerations and risks not typically associated with investing in
securities of domestic companies. See "How the Fund Invests--Investment
Objective and Policies--Risks of Investing in Foreign Securities" at page 7.

WHO MANAGES THE FUND?

Prudential Investments Fund Management LLC (PIFM or the Manager) is the
Manager of the Fund and is reimbursed by the Fund for direct costs,
excluding profit and overhead, up to a maximum annual rate of .39% of the
average daily net assets of the Fund. As of September, 30, 1997, PIFM served
as manager or administrator to 63 investment companies, including 41 mutual
funds, with aggregate assets of approximately $59.9 billion. The Prudential
Investment Corporation (PIC), doing business as Prudential Investments (PI,
the investment adviser or the Subadviser), furnishes investment advisory
services in connection with the management of the Fund under a Subadvisory
Agreement with PIFM. PIC will be reimbursed by the Fund for its direct
costs, excluding profit and overhead. See "How the Fund is Managed--Manager"
at page 10.

WHO DISTRIBUTES THE FUND'S SHARES?

Prudential Securities Incorporated (Prudential Securities), a major
securities underwriter and securities and commodities broker, acts as the
Distributor of the Fund's shares pursuant to a distribution agreement with
the Trust and serves without compensation from the Fund. See "How the Fund
is Managed--Distributor" at page 11.

2
<PAGE>
WHAT IS THE MINIMUM INVESTMENT?

There are no minimum investment requirements. See "Shareholder Guide--How
to Buy Shares of the Fund" at page 14 and "Shareholder Guide--Shareholder
Services" at page 16.

HOW DO I PURCHASE SHARES?

Shares of the Fund are offered to investment advisory clients of
Prudential Securities that (a) participate in any of the following managed
account programs sponsored by Prudential Securities: Gibraltar Advisors,
Prudential Securities Portfolio Management (PSPM), Quantum Portfolio
Management (Quantum), Managed Assets Consulting Services (MACS) and
Prudential Securities Investment Supervisory Group and (b) are "Eligible
Benefit Plans." "Eligible Benefit Plans" include (i) employee benefit plans
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974 (ERISA) other than governmental plans as defined in Section 3(32) of
ERISA and church plans as defined in Section 3(33) of ERISA, (ii) pension,
profit-sharing or other employee benefit plans qualified under Section 401
of the Internal Revenue Code of 1986, as amended (Internal Revenue Code),
(iii) deferred compensation and annuity plans under Section 457 or 403(b)(7)
of the Internal Revenue Code, and (iv) Individual Retirement Accounts (IRAs)
as defined in Section 408(a) of the Internal Revenue Code. Prudential
Securities will purchase shares on behalf of these clients each business day
pursuant to automatic purchase procedures. See "Shareholder Guide--How to
Buy Shares of the Fund" at page 14.

HOW DO I SELL MY SHARES?

Prudential Securities will redeem shares on behalf of participating
clients each business day at the current net asset value (NAV) next
determined pursuant to automatic redemption procedures. In addition, you may
redeem shares of the Fund at any time at the NAV next determined by
instructing your Prudential Securities financial adviser. See "Shareholder
Guide--How to Sell Your Shares" at page 15.

HOW ARE DIVIDENDS AND DISTRIBUTIONS PAID?

The Fund expects to declare daily and pay monthly dividends of net
investment income and short-term capital gains, if any. Dividends and
distributions will be automatically reinvested in additional shares of the
Fund at net asset value unless Prudential Securities has requested on your
behalf that they be paid to you in cash. See "Taxes, Dividends and
Distributions" at page 12.

3
<PAGE>
FUND EXPENSES

<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases............... None
Maximum Sales Load Imposed
on Reinvested Dividends.... None
Maximum Deferred Sales
Load....................... None
Redemption Fees............. None
Exchange Fee................ None
</TABLE>

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
<S> <C>
(as a percentage of average net assets)
Management Fees..................... .09%
12b-1 Fees.......................... None
Other Expenses...................... .15
---
Total Fund Operating Expenses....... .24%
---
---
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
EXAMPLE
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at
the end of each time period:.......... $ 2 $ 8
</TABLE>

The above example is based on estimated direct expenses, excluding any
profit or overhead for PIFM, PIC and their affiliates, for the Fund's
first year of operations. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN.

The purpose of the table is to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear, whether
directly or indirectly. For more complete descriptions of the various
costs and expenses, see "How the Fund is Managed." "Other Expenses"
includes estimated operating expenses of the Fund, such as Trustees" and
professional fees, registration fees, reports to shareholders, transfer
agency, custodian fees and certain administrative costs for the current
fiscal year ending September 30, 1998.

The Fund is commencing the offering of its shares pursuant to this
Prospectus and, thus, no financial highlights information is available.

- ---------------

* Shares of the Fund are offered to investment advisory clients of Prudential
Securities that (a) participate in certain managed account programs
sponsored by Prudential Securities described herein and (b) are "Eligible
Benefit Plans" as defined herein. See "Shareholder Guide--How to Buy
Shares of the Fund." The Fund reimburses the Manager for, among other
things, its direct costs and expenses incurred in managing the Fund's
portfolio, which are included in "Management Fees" above, and reimburses
the transfer agent, an affiliate of the Manager, for its direct costs,
which are included in "Other Expenses" above. See "How the Fund is
Managed--Manager" and "--Custodian, Transfer and Shareholder Servicing
Agent and Independent Accountants."

4
<PAGE>
CALCULATION OF YIELD

THE FUND CALCULATES ITS "CURRENT YIELD" based on the net change, exclusive of
realized and unrealized capital gains or losses, in the value of a hypothetical
account over a seven calendar day base period. THE FUND WILL ALSO CALCULATE ITS
"EFFECTIVE ANNUAL YIELD" assuming weekly compounding.

THE YIELD WILL FLUCTUATE FROM TIME TO TIME AND DOES NOT INDICATE FUTURE
PERFORMANCE.

Yield is computed in accordance with a standardized formula described in the
Statement of Additional Information. In addition, comparative performance
information may be used from time to time in advertising or marketing the shares
of the Fund, including data from Lipper Analytical Services, Inc., Morningstar
Publications, Inc., IBC Financial Data, Inc., The Bank Rate Monitor, other
industry publications, business periodicals and market indices.

HOW THE FUND INVESTS

INVESTMENT OBJECTIVE AND POLICIES

THE INVESTMENT OBJECTIVE OF THE FUND IS CURRENT INCOME TO THE EXTENT
CONSISTENT WITH THE PRESERVATION OF CAPITAL AND LIQUIDITY. THE FUND PURSUES ITS
INVESTMENT OBJECTIVE THROUGH THE INVESTMENT POLICIES DESCRIBED BELOW. THERE CAN
BE NO ASSURANCE THAT THIS OBJECTIVE WILL BE ACHIEVED.

In selecting portfolio securities for investment by the Fund, the investment
adviser considers ratings assigned by major rating services, information
concerning the financial history and condition of the issuer and its revenue and
expense prospects. The Board of Trustees monitors the credit quality of
securities purchased for the Fund's portfolio. If a portfolio security held by
the Fund is assigned a lower rating or ceases to be rated, the investment
adviser under the supervision of the Board of Trustees will promptly reassess
whether that security presents minimal credit risks and whether the Fund should
continue to hold the security in its portfolio. If a portfolio security no
longer presents minimal credit risks or is in default, the Fund will dispose of
the security as soon as reasonably practicable unless the Board of Trustees
determines that to do so is not in the best interest of the Fund and its
shareholders.

5
<PAGE>
As long as the Fund utilizes the amortized cost method of valuation, it will
also comply with certain diversification requirements and will invest no more
than 5% of its total assets in "second-tier securities," with no more than 1% of
the Fund's assets in any one issuer of a second-tier security. A "second-tier
security," for this purpose, is a security of "eligible quality" that does not
have the highest rating from at least two rating organizations assigning a
rating to that security or issuer (or, if only one rating organization assigned
a rating, that rating organization) or an unrated security that is deemed of
comparable quality by the Fund's investment adviser under the supervision of the
Trust's Board of Trustees.

U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in obligations issued or
guaranteed as to principal and interest by the U.S. Government or its agencies
or instrumentalities.

U.S. TREASURY OBLIGATIONS. The Fund may invest in U.S. Treasury obligations,
including bills, notes, bonds and other debt obligations issued by the U.S.
Treasury. These instruments are direct obligations of the U.S. Government and,
as such, are backed by the "full faith and credit" of the United States. They
differ primarily in their interest rates, the lengths of their maturities and
the dates of their issuances.

The Fund may invest in component parts of U.S. Treasury notes or bonds,
namely, either the corpus (principal) of such Treasury obligations or one of the
interest payments scheduled to be paid on such obligations. See "Investment
Objectives and Policies-- Obligations Issued or Guaranteed by the U.S.
Government, its Agencies and Instrumentalities" in the Statement of Additional
Information.

6
<PAGE>
ASSET-BACKED SECURITIES. The Fund may invest in asset-backed securities.
Asset-backed securities include interests in pools of mortgages, loans,
receivables, or other assets. Payment of principal and interest may be largely
dependent upon the cash flows generated by assets backing the securities.

OTHER INVESTMENTS AND POLICIES

PUTS

The Fund may purchase instruments of the types described above together with
the right to resell the instruments to brokers, dealers or financial
institutions at an agreed-upon price or yield within a specified period prior to
the maturity date of the instruments. Such a right to resell is commonly known
as a "put," and the aggregate price that the Fund pays for instruments with a
put may be higher than the price that otherwise would be paid for the
instruments. Puts may be exercised prior to the expiration date in order to fund
obligations to purchase other securities or meet redemption requests. Puts may
also be used as credit enhancements or to shorten the maturity of a debt
obligation.

Since the value of the put is dependent on the ability of the put writer to
meet its obligation to repurchase, the Fund's policy is to enter into put
transactions only with such brokers, dealers or financial institutions which
present minimal credit risks. There is a credit risk associated with the
purchase of puts in that the broker, dealer or financial institution might
default on its obligation to repurchase an underlying security. Changes in the
credit quality of these institutions could cause losses to the Fund and affect
its share price. In the event such a default should occur, the Trust is unable
to predict whether all or any portion of any loss sustained could subsequently
be recovered from the broker, dealer or financial institution.

7
<PAGE>
FLOATING RATE AND VARIABLE RATE SECURITIES

The Fund may purchase "floating rate" and "variable rate" obligations. The
interest rates on such obligations fluctuate generally with changes in market
interest rates, and in some cases, the Fund is able to demand repayment of the
principal amount of such obligations at par plus accrued interest. For
additional information concerning variable rate and floating rate obligations,
see "Investment Objective and Policies" in the Statement of Additional
Information.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

The Fund may purchase securities on a "when-issued" or delayed delivery basis.
When-issued or delayed delivery transactions arise when securities are purchased
or sold by the Fund with payment and delivery taking place in the future in
order to secure what is considered to be an advantageous price and yield to the
Fund at the time of entering into the transaction. The Fund will limit such
purchases to those in which the date for delivery and payment falls within 90
days of the date of the commitment. The Fund will make commitments for such
when-issued transactions only with the intention of actually acquiring the
securities. The Trust's Custodian will maintain, in a segregated account of the
Fund, cash or other liquid assets having a value equal to or greater than the
Fund's purchase commitments. If the Fund chooses to dispose of the right to
acquire a when-issued security prior to its acquisition, it could, as with the
disposition of any other portfolio security, incur a gain or loss due to market
fluctuations. The securities so purchased are subject to market fluctuation and
no interest accrues to the purchaser during the period between purchase and
settlement.

PLEDGING OF ASSETS AND BORROWING

The Fund may borrow (including through entering into reverse repurchase
agreements) up to 33 1/3% of the value of its total assets (computed at the time
the loan is made) from banks for temporary, extraordinary or emergency purposes.
The Fund may pledge up to 33 1/3% of its total assets to secure such borrowings.
The Fund will not purchase portfolio securities if its borrowings exceed 5% of
its net assets.

REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS

The Fund may purchase securities and concurrently enter into "repurchase
agreements" with the seller, whereby the seller agrees to repurchase such
securities at a specified price within a specified time (generally seven days or
less). The repurchase agreements provide that the Fund will sell the underlying
instruments back to the dealer or the bank at the specified price and at a fixed
time in the future, usually not more than seven days from the date of purchase.
The difference between the purchase price and the resale price represents the
interest earned by the Fund, which is unrelated to the coupon rate or maturity
of the purchased security. Repurchase agreements will at all times be fully
collateralized in an amount at least equal to the resale price. Such collateral
will be held by the Trust's Custodian, either physically or in a book-entry
account.

The Fund participates in a joint repurchase account with other investment
companies managed by Prudential Investments Fund Management LLC pursuant to an
order of the SEC. See "Investment Objective and Policies--Repurchase Agreements"
in the Statement of Additional Information.

The Fund will enter into repurchase transactions only with parties which meet
creditworthiness standards approved by the Trust's Board of Trustees. The Fund's
investment adviser monitors the creditworthiness of such parties under the
general supervision of the Board of Trustees. In the event of a default or
bankruptcy by a seller, the Fund will promptly seek to liquidate the collateral.
To the extent that the proceeds from any sale of such collateral upon a default
in the obligation to repurchase are less than the resale price, the Fund will
suffer a loss. If the financial institution that is a party to the repurchase
agreement petitions for bankruptcy or becomes subject to the U.S. Bankruptcy
Code, the law regarding the rights of the Trust is unsettled. As a result, under
these extreme circumstances, there may be a restriction on the Fund's ability to
sell the collateral, and the Fund could suffer a loss.

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Reverse repurchase agreements have the characteristics of borrowing and
involve the sale of securities held by the Fund with an agreement to repurchase
the securities at a specified price, date and interest payment. The Fund intends
only to use the reverse repurchase technique when it will be to its advantage to
do so. These transactions are only advantageous if the Fund has an opportunity
to earn a greater rate of interest on the cash derived from the transaction than
the interest cost of obtaining that cash. The Fund may be unable to realize
earnings from the use of the proceeds equal to or greater than the interest
required to be paid. The use of reverse repurchase agreements may exaggerate any
increase or decrease in the value of the Fund's portfolio. The Trust's Custodian
will maintain in a segregated account cash, or other liquid assets, maturing not
later than the expiration of the reverse repurchase agreements and having a
value equal to or greater than such commitments.

SECURITIES LENDING

The Fund may lend its portfolio securities to brokers or dealers, banks or
other recognized institutional borrowers of securities, provided that the
borrower at all times maintains cash or U.S. government securities as collateral
in an amount equal to a least 100% of the market value of the securities loaned.
During the time the portfolio securities are on loan, the borrower will pay the
Fund an amount equivalent to any interest paid on such securities and the Fund
may invest the cash collateral and earn additional income.

ILLIQUID SECURITIES

The Fund may hold up to 10% of its net assets in illiquid securities,
including securities with legal or contractual restrictions on resale
(restricted securities), securities that are not readily marketable in
securities markets either within or outside of the United States, privately
placed commercial paper and repurchase agreements which have a maturity of
longer than seven days. Restricted securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, as amended (the Securities Act), and
privately placed commercial paper that have a readily available market are not
considered illiquid for purposes of this limitation. Investing in Rule 144A
securities could, however, have the effect of increasing illiquidity to the
extent that qualified institutional buyers become, for a limited time,
uninterested in purchasing these securities. The investment adviser will monitor
the liquidity of such restricted securities under the supervision of the Board
of Trustees. Repurchase agreements subject to demand are deemed to have a
maturity equal to the applicable notice period.

SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest in the securities of other money market funds registered
under the Investment Company Act. See "Securities of Other Investment Companies"
in the Statement of Additional Information.

INVESTMENT RESTRICTIONS

HOW THE FUND IS MANAGED

THE TRUST HAS A BOARD OF TRUSTEES WHICH, IN ADDITION TO OVERSEEING THE ACTIONS
OF THE FUND'S MANAGER AND SUBADVISER AND THE TRUST'S DISTRIBUTOR, AS SET FORTH
BELOW, DECIDES UPON MATTERS OF GENERAL POLICY. THE TRUST'S OFFICERS CONDUCT AND
SUPERVISE THE DAILY BUSINESS OPERATIONS OF THE TRUST. THE FUND'S SUBADVISER
FURNISHES DAILY INVESTMENT ADVISORY SERVICES.

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The Fund is responsible for the payment of certain fees and expenses
including, among others, the following: (i) certain administrative costs and
expenses of the Manager; (ii) the fees of unaffiliated Trustees; (iii) the fees
of the Trust's Custodian and Transfer and Shareholder Servicing Agent; (iv) the
fees of the Trust's legal counsel and independent accountants; (v) brokerage
commissions, if any, incurred in connection with portfolio transactions; (vi)
all taxes and charges of governmental agencies; and (vii) expenses related to
shareholder communications including all expenses of shareholders' and Board of
Trustees' meetings and of preparing, printing and mailing reports, proxy
statements and prospectuses to shareholders.

MANAGER

PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC (PIFM OR THE MANAGER), GATEWAY
CENTER THREE, 100 MULBERRY STREET, NEWARK, NEW JERSEY 07102-4077, IS THE MANAGER
OF THE FUND AND IS REIMBURSED FOR ITS DIRECT COSTS IN CONNECTION WITH THE
SERVICES IT PROVIDES TO THE FUND. PIFM is organized as a New York limited
liability company. It is the successor of Prudential Mutual Fund Management,
Inc., which transferred its assets to PIFM in September 1996. For the expenses
PIFM assumes pursuant to the Management Agreement, PIFM will be reimbursed its
direct costs, exclusive of any profit or overhead, not to exceed .39 of 1% of
the Fund's average daily net assets. PIFM has advised the Fund that it expects
this amount will be approximately .09 of 1% of the average daily net assets of
LAF for the fiscal year ending September 30, 1998. See "Manager" in the
Statement of Additional Information.

As of September 30, 1997, PIFM served as the manager to 41 open-end investment
companies, constituting all of the Prudential Mutual Funds, and as manager or
administrator to 22 closed-end investment companies with aggregate assets of
approximately $59.9 billion.

UNDER THE MANAGEMENT AGREEMENT (THE MANAGEMENT AGREEMENT) WITH THE TRUST, PIFM
MANAGES THE INVESTMENT OPERATIONS OF THE FUND AND ALSO ADMINISTERS THE TRUST'S
BUSINESS AFFAIRS. See "Manager" in the Statement of Additional Information. PIFM
is reimbursed by the Fund for its direct administrative costs and expenses,
excluding overhead and profit, incurred in providing services to the Fund. These
costs include the following: (i) paying the salaries and expenses of the Trust's
officers and other personnel engaged in administering the Trust's business; (ii)
monitoring financial and shareholder accounting services provided by State
Street Bank and Trust Company and Prudential Mutual Fund Services LLC,
respectively; (iii) responding to shareholder inquiries and disseminating
information to shareholders; (iv) monitoring compliance with the Fund's
registration statements and other operating documents, with federal and state
securities laws and rules thereunder and with the Internal Revenue Code; (v)
preparing semi-annual and annual reports to shareholders; (vi) preparing filings
required by the SEC; (vii) preparing federal, state and local tax returns;
(viii) paying notice filing fees under state securities laws; (ix) preparing
information required by the Board of Trustees for ongoing review, approval and
action; (x) organizing meetings of the Board of Trustees and annual and special
meetings of the Fund's shareholders; and (xi) paying the costs and expenses
incurred in managing the portfolio of the Fund. See "Manager" in the Statement
of Additional Information.

UNDER A SUBADVISORY AGREEMENT BETWEEN PIFM AND THE PRUDENTIAL INVESTMENT
CORPORATION (PIC), DOING BUSINESS AS PRUDENTIAL INVESTMENTS (PI, THE INVESTMENT
ADVISER OR THE SUBADVISER), PI FURNISHES INVESTMENT ADVISORY SERVICES IN
CONNECTION WITH THE MANAGEMENT OF THE TRUST AND IS REIMBURSED BY PIFM FOR ITS
REASONABLE COSTS AND EXPENSES INCURRED IN PROVIDING SUCH SERVICES. Under the
Management Agreement, PIFM continues to have responsibility for all investment
advisory services and supervises PIC's performance of such services.

PIFM and PIC are wholly-owned subsidiaries of The Prudential Insurance Company
of America (Prudential), a major diversified insurance and financial services
company.

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DISTRIBUTOR

PRUDENTIAL SECURITIES INCORPORATED (PRUDENTIAL SECURITIES OR THE DISTRIBUTOR),
ONE SEAPORT PLAZA, NEW YORK, NEW YORK 10292, IS A CORPORATION ORGANIZED UNDER
THE LAWS OF THE STATE OF DELAWARE AND SERVES WITHOUT COMPENSATION FROM THE FUND
AS THE TRUST'S DISTRIBUTOR PURSUANT TO A DISTRIBUTION AGREEMENT. IT IS AN
INDIRECT, WHOLLY-OWNED SUBSIDIARY OF PRUDENTIAL.

The Manager (or one of its affiliates) may make payments out of its own
resources to dealers (including Prudential Securities) and other persons who
distribute shares of the Fund. Such payments may be calculated by reference to
the net asset value of shares sold by such persons or otherwise.

PORTFOLIO TRANSACTIONS

Prudential Securities may also act as a broker for the Fund, provided that the
commissions, fees or other remuneration it receives are fair and reasonable. See
"Portfolio Transactions" in the Statement of Additional Information.

CUSTODIAN AND TRANSFER AND SHAREHOLDER SERVICING AGENT

State Street Bank and Trust Company (State Street), One Heritage Drive, North
Quincy, Massachusetts 02171, serves as Custodian for the Fund's portfolio
securities and cash and, in that capacity, maintains certain financial and
accounting books and records pursuant to an agreement with the Trust. Its
mailing address is P.O. Box 1713, Boston, Massachusetts 02105.

HOW THE FUND VALUES ITS SHARES

THE FUND'S NET ASSET VALUE PER SHARE OR NAV IS DETERMINED BY SUBTRACTING ITS
LIABILITIES FROM THE VALUE OF ITS ASSETS AND DIVIDING THE REMAINDER BY THE
NUMBER OF OUTSTANDING SHARES. THE BOARD OF TRUSTEES HAS FIXED THE SPECIFIC TIME
OF DAY FOR THE COMPUTATION OF THE NAV TO BE 4:30 P.M., NEW YORK TIME, ON EACH
DAY THE FUND IS OPEN FOR BUSINESS. The Fund is open for business each day that
the New York Stock Exchange is open for trading. The Fund will compute its NAV
once daily on each of its business days, except days on which no orders to
purchase, sell or redeem Fund shares have been received or days on which changes
in the value of the Fund's portfolio securities do not materially affect the net
asset value.

The Fund determines the value of its portfolio securities by the amortized
cost method. This method involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the instrument.
During these periods, the yield to an existing shareholder may differ somewhat
from that which could be obtained from a similar fund which marks its portfolio
securities to market each day. For example, during periods of declining interest
rates, if the use of the amortized cost method resulted in a lower value of the
Fund's portfolio on a given day, a prospective investor in the Fund would be
able to obtain a somewhat higher yield and existing shareholders would receive
correspondingly less income. The converse would apply during periods of rising
interest rates. The Board of Trustees has established procedures designed to
stabilize, to the extent reasonably possible, the net asset value of the shares
of the Fund at $1.00 per share. See "Net Asset Value" in the Statement of
Additional Information.

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TAXES, DIVIDENDS AND DISTRIBUTIONS

TAXATION OF THE FUND

THE FUND INTENDS TO ELECT TO QUALIFY AND TO REMAIN QUALIFIED AS A REGULATED
INVESTMENT COMPANY UNDER THE INTERNAL REVENUE CODE. ACCORDINGLY, THE FUND WILL
NOT BE SUBJECT TO FEDERAL INCOME TAXES ON ITS NET INVESTMENT INCOME AND NET
CAPITAL GAINS, IF ANY, THAT IT DISTRIBUTES TO ITS SHAREHOLDERS PROVIDED THAT IT
DISTRIBUTES TO SHAREHOLDERS EACH YEAR AT LEAST 90% OF SUCH INCOME. If the Fund
defers until the subsequent calendar year the distribution of more than a
minimal amount of income, it will be subject to a 4% nondeductible excise tax on
the deferred distribution. The Fund intends to make timely and complete
distributions in order to avoid any such taxes.

TAXATION OF SHAREHOLDERS

All dividends out of net investment income, together with distributions of net
short-term gains (I.E., the excess of net short-term capital gains over net
long-term capital losses), will be taxable to shareholders as ordinary income
whether or not reinvested. The Fund does not anticipate realizing long-term
capital gains. However, to the extent the Fund does recognize long-term capital
gains, the Fund intends to declare capital gains distributions to the extent of
its net capital gains (I.E., the excess of net long-term capital gains over net
short-term capital losses). Capital gains distributions, if any, are taxable to
shareholders as net long-term capital gains, regardless of the length of time a
shareholder has owned his or her shares.

It is anticipated that the net asset value per share of the Fund will remain
constant. However, if the net asset value per share fluctuates, a shareholder
may realize gain or loss upon the disposition of a share. Any gain or loss
realized upon a sale or redemption of shares by a shareholder who is not a
dealer in securities will be treated as long-term capital gain or loss if the
shares have been held more than one year and otherwise as short-term capital
gain or loss. Any such loss, however, although otherwise treated as a short-term
capital loss, will be treated as long-term capital loss to the extent of any
capital gain distributions received by the shareholder, if the shares have been
held for six months or less.

Dividends and distributions may be subject to state and local taxes. Some
types of Eligible Benefit Plans are exempt from federal income tax. Shareholders
are advised to consult their own tax advisers regarding specific questions as to
federal, state or local taxes.

WITHHOLDING TAXES

Under the Internal Revenue Code, the Fund is required to withhold and remit to
the U.S. Treasury 31% of dividends, capital gain income and redemption proceeds
on the accounts of those shareholders who fail to furnish their tax
identification numbers on IRS Form W-9 (or IRS Form W-8 in the case of certain
foreign shareholders) with the required certifications regarding the
shareholder's status under the federal income tax law. However, dividends of net
investment income (and net short-term capital gains) paid to a foreign
shareholder will generally be subject to U.S. withholding tax at the rate of 30%
(or lower treaty rate).

DIVIDENDS AND DISTRIBUTIONS

Net investment income and net realized short-term capital gains, if any, of
the Fund will be declared as a dividend daily immediately prior to the
calculation of the Fund's net asset value as of 4:30 P.M., New York time. Net
investment income of the Fund (from the time of the immediately preceding
declaration) consists of interest accrued or discount earned (including both
original issue and market discount) on the obligations in the Fund, less
amortization of premium and the estimated expenses of the Fund applicable to
that dividend period. The Fund does not expect to realize long-term capital
gains or losses.

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The net investment income of the Fund for dividend purposes is determined on a
daily basis. Each such dividend will be payable to shareholders of record at the
time of its declaration (including for this purpose holders of shares purchased,
but excluding holders of shares redeemed as of 4:30 P.M., New York time on that
day). Dividends declared are accrued throughout the month and are distributed in
the form of full and fractional shares. Shareholders may receive cash payments
from the Fund equal to the dividends earned during the month by notifying PMFS
at least five business days prior to the payable date. Cash distributions are
paid by check within five business days after the dividend payment date.
Dividends are reinvested at the net asset value determined as of 4:30 P.M., New
York time, on the day of payment. If the entire amount in an account is redeemed
at any time during a month, all dividends accrued with respect to that account
during that month are paid to the investor at the NAV as of 4:30 P.M., New York
time, on the date of redemption.

The Fund will not accept purchase and redemption orders after 4:30 P.M., New
York time. If a redemption request is received prior to 4:30 P.M., New York
time, the shareholder does not earn a dividend on that day but the redemption
proceeds are wired on that day.

Net income earned on Saturdays, Sundays and holidays is accrued in calculating
the dividend on the previous business day. Accordingly, an investor who places a
purchase order prior to 4:30 P.M., New York time, on a Friday begins earning
dividends that day. A shareholder which redeems its shares prior to 4:30 P.M.,
New York time, on a Friday does not earn a dividend which reflects the income
earned by the Fund on the Friday, or the following Saturday and Sunday.

GENERAL INFORMATION

DESCRIPTION OF SHARES

THE TRUST WAS ORGANIZED ON APRIL 27, 1984 AS A MASSACHUSETTS BUSINESS TRUST
AND IS A DIVERSIFIED OPEN-ENDED MANAGEMENT INVESTMENT COMPANY. THE TRUST HAS AN
UNLIMITED NUMBER OF AUTHORIZED SHARES OF BENEFICIAL INTEREST WHICH MAY BE
DIVIDED INTO AN UNLIMITED NUMBER OF SERIES OF SUCH SHARES. ON OCTOBER 22, 1997,
THE BOARD OF TRUSTEES CREATED THE FUND WHOSE SHARES ARE FIRST BEING OFFERED
PURSUANT TO THIS PROSPECTUS. CURRENTLY, THE TRUST CONSISTS OF TWO SERIES,
INCLUDING THE FUND.

The Trust does not intend to issue share certificates unless requested. Shares
of the Trust, when issued, are fully paid, nonassessable, fully transferable and
redeemable at the option of the holder. Shares are also redeemable at the option
of Prudential Securities under certain circumstances as described under
"Shareholder Guide--How to Sell Your Shares." All shares of the Fund are equal
as to earnings, assets and voting privileges. There are no conversion,
preemptive or other subscription rights. In the event of liquidation, each share
of the Fund is entitled to its portion of all of the Fund's assets after all
debts and expenses of the Fund have been paid. The Trust's shares do not have
cumulative voting rights for the election of Trustees. Pursuant

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to the Trust's Declaration of Trust, the Board of Trustees may authorize the
creation of additional series, with such preferences, privileges, limitations
and voting and dividend rights as the Board may determine or, also without
shareholder approval, terminate any series and distribute such series" assets to
its shareholders.

THE TRUST DOES NOT INTEND TO HOLD ANNUAL SHAREHOLDER MEETINGS UNLESS REQUIRED
BY LAW. THE TRUST WILL NOT BE REQUIRED TO HOLD ANNUAL MEETINGS OF SHAREHOLDERS
UNLESS, FOR EXAMPLE, THE ELECTION OF TRUSTEES IS REQUIRED TO BE ACTED ON BY
SHAREHOLDERS UNDER THE INVESTMENT COMPANY ACT. SHAREHOLDERS HAVE CERTAIN RIGHTS,
INCLUDING THE RIGHT TO CALL A MEETING UPON A VOTE OF 10% OF THE TRUST'S
OUTSTANDING SHARES FOR THE PURPOSE OF VOTING ON THE REMOVAL OF ONE OR MORE
TRUSTEES OR TO TRANSACT ANY OTHER BUSINESS.

The Declaration of Trust and the By-Laws of the Trust are designed to make the
Trust similar in certain respects to a Massachusetts business corporation. Under
Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
Trust if the assets of the Trust are insufficient to satisfy its obligations,
which is not the case with a corporation. The Declaration of Trust of the Trust
provides that shareholders shall not be subject to any personal liability for
the acts or obligations of the Trust, that the shareholders may not be assessed
by the Trust for any obligation that they have not agreed to pay and that every
written obligation, contract, instrument or undertaking made by the Trust shall
contain a provision to the effect that the shareholders are not individually
bound thereunder.

ADDITIONAL INFORMATION

This Prospectus, including the Statement of Additional Information which has
been incorporated by reference herein, does not contain all the information set
forth in the Registration Statement filed by the Trust with the SEC under the
Securities Act of 1933. Copies of the Registration Statement may be obtained at
a reasonable charge from the SEC or may be examined, without charge, at the
office of the SEC in Washington, D.C.

SHAREHOLDER GUIDE

HOW TO BUY SHARES OF THE FUND

SHARES OF THE FUND ARE OFFERED TO INVESTMENT ADVISORY CLIENTS OF PRUDENTIAL
SECURITIES THAT (A) PARTICIPATE IN ANY OF THE FOLLOWING MANAGED ACCOUNT PROGRAMS
SPONSORED BY PRUDENTIAL SECURITIES: GIBRALTAR ADVISORS, PRUDENTIAL SECURITIES
PORTFOLIO MANAGEMENT (PSPM), QUANTUM PORTFOLIO MANAGEMENT (QUANTUM), MANAGED
ASSETS CONSULTING SERVICES (MACS) AND PRUDENTIAL SECURITIES INVESTMENT
SUPERVISORY GROUP AND (B) ARE "ELIGIBLE BENEFIT PLANS." "ELIGIBLE BENEFIT PLANS"
INCLUDE (I) EMPLOYEE BENEFIT PLANS AS DEFINED IN SECTION 3(3) OF ERISA OTHER
THAN GOVERNMENTAL PLANS AS DEFINED IN SECTION 3(32) OF ERISA AND CHURCH PLANS AS
DEFINED IN SECTION 3(33) OF ERISA, (II) PENSION, PROFIT-SHARING OR OTHER
EMPLOYEE BENEFIT PLANS QUALIFIED UNDER SECTION 401 OF THE INTERNAL REVENUE CODE,
(III) DEFERRED COMPENSATION AND ANNUITY PLANS UNDER SECTION 457 OR 403(B)(7) OF
THE INTERNAL REVENUE CODE, AND (IV) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) AS
DEFINED IN SECTION 408(A) OF THE INTERNAL REVENUE CODE. ELIGIBILITY OF
PARTICIPANTS IS WITHIN THE DISCRETION OF PRUDENTIAL SECURITIES.

PURCHASES THROUGH PRUDENTIAL SECURITIES

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Fund can only be purchased through the automatic investment procedures described
herein; no manual purchase orders will be accepted for the Fund. You have the
option to change your primary money sweep fund at any time by notifying your
Prudential Securities financial adviser.

On the business day following confirmation that a free credit balance (I.E.,
immediately available funds) exists in your account, Prudential Securities will
effect a purchase order for shares of the Fund in an amount up to such balance
at the NAV determined on that day. Such funds begin earning dividends on that
business day.

Shares of the Fund purchased by Prudential Securities on behalf of its clients
will be held by Prudential Securities as record holder. Prudential Securities
will therefore receive statements and dividends directly from the Trust and will
in turn provide investors with Prudential Securities account statements
reflecting purchases, redemptions and dividend payments. Although Prudential
Securities clients who purchase shares of the Fund through Prudential Securities
may not redeem shares of the Fund by check, Prudential Securities provides its
clients with alternative forms of immediate access to monies invested in shares
of the Fund.

Prudential Securities clients wishing additional information concerning
investment in Fund shares made through Prudential Securities should call their
Prudential Securities financial adviser.

AUTOMATIC PURCHASE PROCEDURES. Prudential Securities will purchase shares of
the Fund on behalf of participating clients each business day at current net
asset value pursuant to the automatic purchase procedures described below. There
is no sales charge. There are no minimum investment requirements. The Trust does
not intend to issue share certificates unless requested. The Fund reserves the
right to reject any purchase order or to suspend or modify the continuous
offering of its shares.

HOW TO SELL YOUR SHARES

Shares will be redeemed each business day at NAV next determined in accordance
with the procedures described below.

REDEMPTION OF SHARES PURCHASED THROUGH PRUDENTIAL SECURITIES

Prudential Securities has advised the Fund that it has established procedures
pursuant to which shares of the Fund held by a Prudential Securities client
having a deficiency in his or her Prudential Securities account will be redeemed
automatically to the extent of that deficiency to the nearest highest dollar,
unless the client notifies Prudential Securities to the contrary. The amount of
the redemption will be the lesser of (a) the total net asset value of Fund
shares held in the client's Prudential Securities account or (b) the deficiency
in the client's Prudential Securities account at the close of business on the
date such deficiency is due.

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<PAGE>
Accordingly, a Prudential Securities client utilizing this automatic redemption
procedure and who wishes to pay for a securities transaction or satisfy any
other debit balance in his or her account other than through such automatic
redemption procedure must do so not later than the day of settlement for such
securities transaction or the date the debit balance is incurred. Prudential
Securities clients who have elected to utilize Autosweep will not be entitled to
dividends declared on the date of redemption.

AUTOMATIC REDEMPTION. Redemptions will be automatically effected by Prudential
Securities on each business day at the NAV next determined to satisfy debit
balances arising from securities transactions in an account to the nearest
highest dollar or to satisfy redemption requests made on behalf of a
participating client. Each participating client's account will be automatically
scanned for debits each business day as of the close of business on that day and
after application of any free credit cash balances in the account to such
debits, a sufficient number of shares of the Fund will be redeemed as of that
business day to satisfy any remaining debits in the account. In the event of an
automatic redemption of shares, the client will be entitled to dividends
declared on the redeemed shares through the business day preceding the day on
which the redemption is effective. Dividends declared on the date of redemption
will be retained by Prudential Securities which has advanced monies to satisfy
debits in the participating client's account.

The Trust may suspend the right of redemption or postpone the date of payment
for a period of up to seven days. Suspensions or postponements may not exceed
seven days except (1) for any period (a) during which the New York Stock
Exchange is closed other than customary weekend and holiday closings or (b)
during which trading on the New York Stock Exchange is restricted; (2) for any
period during which an emergency exists as a result of which (a) disposal by the
Fund of securities owned by it is not reasonably practicable or (b) it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets; or (3) for such other periods as the SEC may by order permit for the
protection of shareholders of the Fund. The SEC by rules and regulations
determines the conditions under which (i) trading shall be deemed to be
restricted and (ii) an emergency is deemed to exist within the meaning of clause
(2) above.

Prudential Securities has the right to terminate an account for any reason. In
such event, all shares held in a shareholder's account will be redeemed.

INVOLUNTARY REDEMPTION. Because of the relatively high cost to the Trust of
maintaining an account, the Trust reserves the right to redeem, upon 60 days'
written notice, an account which is reduced by you to an NAV of $500 or less due
to redemption. You may avoid such redemption by increasing the NAV of your
account to an amount in excess of $500.

SHAREHOLDER SERVICES

As a shareholder in the Fund, you can take advantage of the following
additional services and privileges:

- AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR DISTRIBUTIONS. For your
convenience, all dividends and distributions are automatically reinvested in
full and fractional shares of the Fund at NAV. You may direct Prudential
Securities not less than five full business days prior to the record date to
have subsequent dividends and/or distributions sent in cash rather than
reinvested. If you hold shares through Prudential Securities, you should contact
your financial adviser.

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- REPORTS TO SHAREHOLDERS. The Trust will send you annual and semi-annual
reports. The financial statements appearing in the annual reports are audited by
independent accountants. In order to reduce duplicate mailing and printing
expenses, the Trust will provide one annual and semi-annual shareholder report
per household. You may request additional copies of such reports by calling
(800) 225-1852 or by writing to the Trust at Gateway Center Three, 100 Mulberry
Street, Newark, New Jersey 07102-4077.

- EXCHANGE PRIVILEGE. The Trust does not currently offer an exchange privilege
for shares of the Fund.

- SHAREHOLDER INQUIRIES. Shareholder inquiries should be addressed to the
Trust at Gateway Center Three, 100 Mulberry Street, Newark, New Jersey
07102-4077, or by telephone, at (800) 225-1852 (toll-free) or from outside the
U.S.A. at (908) 417-7555 (collect).

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DESCRIPTION OF SECURITY RATINGS

MOODY'S INVESTORS SERVICE

BOND RATINGS

SHORT-TERM DEBT RATINGS

Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations which have an original maturity not
exceeding one year.

Prime-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.

Prime-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations.

SHORT-TERM RATINGS

STANDARD & POOR'S RATINGS GROUP

BOND RATINGS

AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.

COMMERCIAL PAPER RATINGS

An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.

A-1: This highest category indicates that the degree of safety regarding
timely payment is strong.

A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

A-1
<PAGE>
DUFF & PHELPS CREDIT RATING CO.

LONG-TERM DEBT RATINGS

AAA: Bonds rated AAA are considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.

AA: Bonds rated AA are considered to be of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.

SHORT-TERM DEBT RATINGS

D-1: Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.

D-1-: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.

FITCH INVESTORS SERVICES, L.P.

BOND RATINGS

AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA". Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".

SHORT-TERM DEBT RATINGS

F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".

F-2: Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as the "F-1+" and "F-1" categories.

A-2
<PAGE>
THE PRUDENTIAL MUTUAL FUND FAMILY

TAXABLE BOND FUNDS
--------------------------

Prudential Diversified Bond Fund, Inc.
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential Mortgage Income Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
The BlackRock Government Income Trust

TAX-EXEMPT BOND FUNDS
-----------------------------

Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Intermediate Series
Prudential Municipal Series Fund
Florida Series
Maryland Series
Massachusetts Series
Michigan Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.

GLOBAL FUNDS
--------------------

Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Limited Maturity Fund, Inc.
Limited Maturity Portfolio
Prudential Intermediate Global Income Fund, Inc.
Prudential International Bond Fund, Inc.
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Global Series
International Stock Series
Global Utility Fund, Inc.
The Global Total Return Fund, Inc.

EQUITY FUNDS
--------------------

Prudential Balanced Fund
Prudential Distressed Securities Fund, Inc.
Prudential Dryden Fund
Prudential Active Balanced Fund
Prudential Bond Market Index Fund
Prudential Europe Index Fund
Prudential Pacific Index Fund
Prudential Small-Cap Index Fund
Prudential Stock Index Fund
Prudential Emerging Growth Fund, Inc.
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Jennison Series Fund, Inc.
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Multi-Sector Fund, Inc.
Prudential Small-Cap Quantum Fund, Inc.
Prudential Small Company Value Fund, Inc.
Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund

MONEY MARKET FUNDS
--------------------------

- - TAXABLE MONEY MARKET FUNDS
Cash Accumulation Trust
National Money Market Fund
Liquid Assets Fund
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund, Inc.
Money Market Series
Prudential MoneyMart Assets, Inc.
- - TAX-FREE MONEY MARKET FUNDS
Prudential Tax-Free Money Fund, Inc.
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
- - COMMAND FUNDS
Command Money Fund
Command Government Fund
Command Tax-Free Fund
- - INSTITUTIONAL MONEY MARKET FUNDS
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series

B-1
<PAGE>
No dealer, sales representative or any other person has been authorized to give
any information or to make any representations, other than those contained in
this Prospectus, in connection with the offer contained herein, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Trust or the Distributor. This Prospectus does not
constitute an offer by the Trust or by the Distributor to sell or a solicitation
of any offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such offer in such jurisdiction.

-------------------------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---
<S> <C>
TRUST HIGHLIGHTS................................ 2
What are the Fund's Risk Factors and Special
Characteristics?............................. 2
FUND EXPENSES................................... 4
CALCULATION OF YIELD............................ 5
HOW THE FUND INVESTS............................ 5
Investment Objective and Policies............. 5
Other Investments and Policies................ 7
Investment Restrictions....................... 9
HOW THE FUND IS MANAGED......................... 9
Manager....................................... 10
Distributor................................... 11
Portfolio Transactions........................ 11
Custodian and Transfer and Shareholder
Servicing Agent.............................. 11
HOW THE FUND VALUES ITS SHARES.................. 11
TAXES, DIVIDENDS AND DISTRIBUTIONS.............. 12
GENERAL INFORMATION............................. 13
Description of Shares......................... 13
Additional Information........................ 14
SHAREHOLDER GUIDE............................... 14
How to Buy Shares of the Fund................. 14
How to Sell Your Shares....................... 15
Shareholder Services.......................... 16
DESCRIPTION OF SECURITY RATINGS................. A-1
THE PRUDENTIAL MUTUAL FUND FAMILY............... B-1
</TABLE>

- -------------------------------------------

MF175A

CUSIP No.:

CASH
ACCUMULATION
TRUST
LIQUID ASSETS FUND
----------------------------------------

PROSPECTUS
December , 1997
www.prudential.com

[LOGO] Prudential
Investments
<PAGE>

SUBJECT TO COMPLETION, DATED NOVEMBER 7, 1997

CASH ACCUMULATION TRUST

Statement of Additional Information
dated December __, 1997

Cash Accumulation Trust (the Trust), an open-end, diversified, management
investment company is offered in two series: the National Money Market Fund
(NMMF) and the Liquid Assets Fund (LAF). Each series operates as a separate fund
with identical investment objectives and similar policies designed to meet its
investment goals. The investment objective of each of NMMF and LAF is current
income to the extent consistent with preservation of capital and liquidity.
There can be no assurance that either Fund's investment objective will be
achieved. See "Investment Objective and Policies."

The Trust's address is Gateway Center Three, 100 Mulberry Street, Newark,
New Jersey 07102-4077 and its telephone number is (800) 225-1852.

This Statement of Additional Information sets forth information about each
of the Funds. This Statement of Additional Information is not a prospectus and
should be read in conjunction with the NMMF Prospectus or the LAF Prospectus,
each dated December __, 1997, copies of which may be obtained from the Trust
upon request.

TABLE OF CONTENTS

CROSS-REFERENCE CROSS-REFERENCE
TO PAGE IN TO PAGE IN
THE NMMF THE LAF
PAGE PROSPECTUS PROSPECTUS
---- --------------- ---------------
<S> <C> <C> <C>
Investment Objective and Policies. . . . . . . B-2
Investment Restrictions. . . . . . . . . . . . B-5
Trustees and Officers . . . . . . . . . . . . B-9
Manager. . . . . . . . . . . . . . . . . . . . B-14
Distributor. . . . . . . . . . . . . . . . . . B-16
Purchase of Shares . . . . . . . . . . . . . . B-17
Net Asset Value. . . . . . . . . . . . . . . . B-18
Portfolio Transactions . . . . . . . . . . . . B-18
Taxes. . . . . . . . . . . . . . . . . . . . . B-19
Calculation of Yield . . . . . . . . . . . . . B-20
Custodian, Transfer and Shareholder Servicing
Agent and Independent Accountants . . . . . . B-21
General Information. . . . . . . . . . . . . . B-21
Financial Statements . . . . . . . . . . . . . B-23 -- --
Report of Independent Accountants. . . . . . . B-23 -- --
Appendix A--Historical Performance Data. . . . A-1 -- --
Appendix B--General Investment Information . . B-1 -- --
Appendix C--Information Relating to Prudential C-1 -- --

- ----------------------------------------------------------------------------------------------------

</TABLE>

- --------------------------------------------------------------------------------
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
- --------------------------------------------------------------------------------

B-1
<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The National Money Market Fund (NMMF) and the Liquid Assets Fund (LAF)
operate as separate funds with identical investment objectives and similar
policies. The investment objective of each of NMMF and LAF is current income to
the extent consistent with preservation of capital and liquidity. For a further
description of the investment objective and policies for each Fund, see "How the
Fund Invests" in its respective Prospectus. In order to achieve their
objectives, NMMF and LAF (each, a Fund and collectively, the Funds), each acting
independently, may, to the extent set forth below, invest in the types of
instruments and employ certain strategies described below.

OBLIGATIONS ISSUED OR GUARANTEED BY THE U.S. GOVERNMENT, ITS AGENCIES AND
INSTRUMENTALITIES

Each Fund may invest in component parts of U.S. Treasury notes or bonds,
namely, either the corpus (principal) of such Treasury obligations or one of the
interest payments scheduled to be paid on such obligations. These obligations
may take the form of (i) Treasury obligations from which the interest coupons
have been stripped, (ii) the interest coupons that are stripped, (iii)
book-entries at a Federal Reserve member bank representing ownership of Treasury
obligation components, or (iv) receipts evidencing the component parts (corpus
or coupons) of Treasury obligations that have not actually been stripped. Such
receipts evidence ownership of component parts of Treasury obligations (corpus
or coupons) purchased by a third party (typically an investment banking firm)
and held on behalf of the third party in physical or book-entry form by a major
commercial bank or trust company pursuant to a custody agreement with the third
party. Treasury obligations, including those underlying such receipts, are
backed by the full faith and credit of the U.S. Government.

Obligations issued or guaranteed as to principal and interest by the U.S.
Government may be acquired by a Fund in the form of custodial receipts that
evidence ownership of future interest payments, principal payments or both on
certain United States Treasury notes or bonds. Such notes and bonds are held in
custody by a bank on behalf of the owners. These custodial receipts are known by
various names, including "Treasury Receipts," "Treasury Investment Growth
Receipts" (TIGRs) and "Certificates of Accrual on Treasury Securities" (CATS).
Neither Fund intends to purchase TIGRs or CATS during the coming year.

LENDING OF SECURITIES

Consistent with applicable regulatory requirements, NMMF may lend its
portfolio securities to broker-dealers and LAF may lend its portfolio to
brokers, dealers and financial institutions, provided that outstanding loans for
LAF do not exceed in the aggregate 15% of the value of LAF's total assets and,
provided that such loans are callable at any time by either Fund and are at all
times secured by cash or U.S. Government securities that is equal to at least
the market value, determined daily, of the loaned securities. The advantage of
such loans is that the Fund continues to receive payments in lieu of the
interest on the loaned securities, while at the same time earning interest
either directly from the borrower or on the collateral which will be invested in
short-term obligations.

A loan may be terminated by the borrower on one business day's notice or by
a Fund at any time. If the borrower fails to maintain the requisite amount of
collateral, the loan automatically terminates, and the Fund could use the
collateral to replace the securities while holding the borrower liable for any
excess of replacement cost over collateral. As with any extensions of credit,
there are risks of delay in recovery and in some cases loss of rights in the
collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms determined to be
creditworthy pursuant to procedures approved by the Board of Trustees of the
Trust. On termination of the loan, the borrower is required to return the
securities to the Fund, and any gain or loss in the market price during the loan
would inure to that Fund.

B-2
<PAGE>

Each Fund will pay reasonable finders', administrative and custodial fees
in connection with a loan of its securities or may share the interest earned on
collateral with the borrower.

Neither Fund intends to lend its securities during the coming year.

PUTS

LAF may purchase instruments of the types described in its Prospectus under
"How the Fund Invests--Investment Objective and Policies" together with the
right to resell the instruments at an agreed-upon price or yield within a
specified period prior to the maturity date of the instruments. Such a right to
resell is commonly known as a "put," and the aggregate price which LAF pays for
instruments with puts may be higher than the price which otherwise would be paid
for the instruments. Consistent with LAF's investment objective and applicable
rules issued by the Securities and Exchange Commission (SEC) and subject to the
supervision of the Board of Trustees, the purpose of this practice is to permit
LAF to be fully invested while preserving the necessary liquidity to meet
unusually large redemptions and to purchase at a later date securities other
than those subject to the put. LAF may choose to exercise puts during periods in
which proceeds from sales of its shares and from recent sales of portfolio
securities are insufficient to meet redemption requests, or when the funds
available are otherwise allocated for investment, as credit enhancements or to
shorten the maturity of an instrument. In determining whether to exercise puts
prior to their expiration date and in selecting which puts to exercise in such
circumstances, the investment adviser considers, among other things, the amount
of cash available to LAF, the expiration dates of the available puts, any future
commitments for securities purchases, the yield, quality and maturity dates of
the underlying securities, alternative investment opportunities and the
desirability of retaining the underlying securities in LAF's portfolio.

LAF values instruments which are subject to puts at amortized cost; no
value is assigned to the put. The cost of the put, if any, is carried as an
unrealized loss from the time of purchase until it is exercised or it expires.

LAF will invest no more than 5% of its total assets in securities issued by
or subject to puts from the same institution. For purposes of this limitation,
unconditional puts or guarantees with respect to a security will not be deemed
to be issued by the institution providing the guarantee or put if the value of
all securities held by LAF and issued or guaranteed by the issuer providing the
guarantee or put are limited to 10% of LAF's total assets.

FLOATING RATE AND VARIABLE RATE SECURITIES

Each Fund may purchase "floating rate" and "variable rate" securities.
Investments in floating or variable rate securities normally will involve
securities which provide that the rate is set as a spread to a designated base
rate, such as rates on Treasury bills, and, in some cases, that the purchaser
can demand payment of the obligation at specified intervals or after a specified
notice period (in each case a period of less than thirteen months) at par plus
accrued interest, which amount may be more or less than the amount paid for
them. Variable rate securities provide for a specified periodic adjustment in
the interest rate, while floating rate securities have an interest rate which
changes whenever there is a change in the designated base interest rate.

ILLIQUID SECURITIES

LAF may not hold more than 10% of its net assets and NMMF may not hold more
than 10% of its total assets in illiquid securities, including securities that
are illiquid by virtue of the absence of a readily available market or legal or
contractual restrictions on resale and repurchase agreements which have a
maturity of longer than seven days. Historically, illiquid securities have
included securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act of 1933, as
amended (Securities Act), securities which are otherwise not readily marketable
and repurchase

B-3
<PAGE>

agreements having a maturity of longer than seven days. Securities which have
not been registered under the Securities Act are referred to as private
placements or restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. Limitations on resale may
have an adverse effect on the marketability of portfolio securities and a mutual
fund might be unable to dispose of restricted or other illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days. A mutual fund might also have to
register such restricted securities in order to dispose of them, resulting in
additional expense and delay. Adverse market conditions could impede such a
public offering of securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
securities.

Rule 144A of the Securities Act allows for a broader institutional trading
market for securities otherwise subject to restriction on resale to the general
public. Rule 144A establishes a "safe harbor" from the registration requirements
of the Securities Act for resales of certain securities to qualified
institutional buyers. The investment adviser anticipates that the market for
certain restricted securities such as institutional commercial paper and foreign
securities will expand further as a result of this regulation and the
development of automated systems for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc.

Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act and commercial paper for which there is a readily available
market will not be deemed to be illiquid. The investment adviser will monitor
the liquidity of such restricted securities subject to the supervision of the
Board of Trustees. In reaching liquidity decisions, the investment adviser will
consider, INTER ALIA, the following factors: (1) the frequency of trades and
quotes for the security; (2) the number of dealers wishing to purchase or sell
the security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the security; and (4) the nature of the
security and the nature of the marketplace trades (E.G., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer). In addition, in order for commercial paper that is issued in
reliance on Section 4(2) of the Securities Act to be considered liquid, (i) it
must be rated in one of the two highest rating categories by at least two
nationally recognized statistical rating organizations (NRSRO), or if only one
NRSRO rates the securities, by that NRSRO, or, if unrated, be of comparable
quality in the view of the investment adviser; and (ii) it must not be "traded
flat" (I.E., without accrued interest) or in default as to principal or
interest. Repurchase agreements subject to demand are deemed to have a maturity
equal to the notice period.

SECURITIES OF OTHER INVESTMENT COMPANIES

Each Fund may invest up to 10% of its total assets in securities of other
money market funds registered under the Investment Company Act. Generally, each
Fund does not intend to invest more than 5% of its total assets in such
securities. To the extent that a Fund invests in securities of other registered
investment companies, shareholders of the Fund may be subject to duplicate
management and advisory fees.

REPURCHASE AGREEMENTS

LAF participates in a joint repurchase account with other investment
companies managed by Prudential Investments Fund Management LLC (PIFM or the
Manager) pursuant to an order of the Securities and Exchange Commission. On a
daily basis, any uninvested cash balances of LAF may be aggregated with

B-4
<PAGE>

those of such other investment companies and invested in one or more repurchase
agreements. LAF participates in the income earned or accrued in the joint
account based on the percentage of its investment. In connection with
transactions in repurchase agreements with U.S. financial institutions, it is
the Trust's policy that its custodian or designated subcustodians, as the case
may be, under triparty repurchase agreements, take possession of the underlying
collateral securities, the value of which equals or exceeds the resale price of
the agreement. If the seller defaults and the value of the collateral declines
or if bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by the Trust may be delayed or limited.

NMMF does not currently participate in the joint repurchase account.

FIRM COMMITMENT AGREEMENTS

As described in the NMMF Prospectus, NMMF may enter into firm commitment
agreements with banks or broker-dealers for the purchase of securities at an
agreed-upon price on a specified future date. Such agreements might be entered
into, for example, when NMMF anticipates a decline in the yield of securities of
a given issuer and is able to obtain a more advantageous yield by committing
currently to purchase securities to be issued later. Entry into firm commitment
agreements with broker-dealers requires the creation and maintenance of a
segregated account. The underlying securities subject to a firm commitment
agreement are subject to fluctuation in market value and, therefore, to the
extent that NMMF remains fully invested at the same time that it has entered
into firm commitment agreements, there will be a greater possibility that the
net asset value of NMMF shares will vary from $1.00.

Pending delivery of securities purchased under firm commitment agreements,
the amount of the purchase price will be held in liquid assets such as cash or
high-quality debt obligations. Such obligations will be maintained in a
separate account with NMMF's custodian in an amount equal on a daily basis to
the amount of NMMF's firm commitments. When the time comes to pay for
securities subject to firm commitment agreements, NMMF will meet its obligations
from then-available cash flow or the sale of securities.

INVESTMENT RESTRICTIONS

The following restrictions are fundamental policies. Fundamental policies
are those which cannot be changed without the approval of the holders of a
majority of the outstanding voting securities of a Fund. A "majority of the
outstanding voting securities," when used in this Statement of Additional
Information, means the lesser of (i) 67% of the voting shares represented at a
meeting at which more than 50% of the outstanding voting shares are present in
person or represented by proxy or (ii) more than 50% of the outstanding voting
shares. With respect to the submission of a change in fundamental policy or
investment objective to a particular Fund, such matters shall be deemed to have
been effectively acted upon with respect to such Fund if a majority of the
outstanding voting securities of the particular Fund votes for the approval of
such matters as provided above, notwithstanding (1) that such matter has not
been approved by a majority of the outstanding voting securities of the other
Fund affected by such matter and (2) that such matter has not been approved by a
majority of the outstanding voting securities of the Trust.

NATIONAL MONEY MARKET FUND

The following investment restrictions are fundamental policies of NMMF and
may not be changed except as described above.

B-5
<PAGE>

NMMF may not:

1. Purchase any security if, as a result, more than 5% of its total
assets (based on current value) would then be invested in the securities of a
single issuer, except that the Fund may invest up to 15% of its total net assets
(based on current value) in the obligations of any one bank. This limitation
does not apply to U.S. Government Securities (as defined in the NMMF
Prospectus).

2. Purchase voting securities or make investments for the purpose of
exercising control or management.

3. Invest more than 25% of its total assets in any one industry. This
restriction does not apply to U.S. Government Securities or to bank obligations.
For purposes of this restriction, telephone, gas and electric public utilities
are each regarded as separate industries and finance companies whose financing
activities are related primarily to the activities of their parent companies are
classified in the industry of their parents.

4. Participate on a joint or joint and several basis in any trading
account in securities. (The "bunching" of orders for the purchase or sale of
portfolio securities with other accounts managed by the Manager or the
Sub-advisor to reduce acquisition costs, to average prices among them, or to
facilitate such transactions, is not considered participating in a trading
account in securities.)

5. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Fund may obtain short-term credits as
necessary for the clearance of security transactions.

6. Borrow money except for temporary or emergency purposes and then only
in an amount not exceeding 10% of its total assets taken at cost; provided,
however, that the Fund may loan its securities as described in the Prospectus
under the caption"How the Fund Invests--Securities Lending." However, the Fund
will not borrow if the value of the Fund's assets would be less than 300% of its
borrowing obligations. In addition, when borrowings (other than permissible
securities loans) exceed 5% of its total assets, the Fund will not purchase
additional portfolio securities. Permissible borrowings will be entered into
solely for the purpose of facilitating the orderly sale of portfolio securities
to accommodate redemption requests.

7. Make loans, except that the Fund may purchase or hold debt instruments
in accordance with its investment objective and policies. This restriction does
not apply to repurchase agreements or loans of portfolio securities.

8. Pledge, mortgage or hypothecate more than 10% of its net assets taken
at cost at the time of the incurrence of such borrowings.

9. Act as an underwriter of securities of other issuers except that, in
the disposition of portfolio securities, it may be deemed to be an underwriter
under the federal securities laws.

10. Invest in securities of other investment companies, except by
purchases in the open market involving only customary brokers' commissions, or
in connection with a merger, consolidation, reorganization or similar
transactions. For the purposes of this restriction, foreign banks or their
agents or subsidiaries are not considered investment companies. (Under the
Investment Company Act of 1940 (the "Investment Company Act") no registered
investment company may (a) invest more than 10% of its total assets (taken at
current value) in securities of other investment companies, (b) own securities
of any one investment company having a value in excess of 5% of its total assets
(taken at current value), or (c) own more than 3% of the outstanding voting
stock of any one investment company.)

B-6
<PAGE>

11. Purchase or retain securities of an issuer if, to the knowledge of the
Trust, any officers, trustees and directors of the Trust or any investment
adviser of the Trust, who individually own beneficially more than 1/2 of 1% of
the shares or securities of that issuer, own in the aggregate more than 5% of
such shares or securities.

12. Purchase securities of any company which has (with predecessor
businesses and entities) a record of less than three years' continuous operation
or purchase securities whose source of repayment if based, directly or
indirectly, on the credit of such a company if as a result more than 5% of the
total assets of the Fund (taken at current value) would be invested in such
securities; provided, however, that the Fund may purchase U.S. Government
Securities without regard to this limitation.

13. Buy or sell oil, gas or other mineral leases, rights or royalty
contracts, commodities or commodity contracts or real estate. This restriction
does not prevent the Fund from purchasing securities of companies investing in
real estate or of companies which are not principally engaged in the business of
buying or selling such leases, rights or contracts nor does it prevent the Fund
from purchasing securities secured by real estate or interests therein.

14. Purchase any illiquid security, including any securities whose
disposition is restricted under federal securities laws and securities that are
not readily marketable, if, as a result, more than 10% of the Fund's total
assets (based on current value) would then be invested in such securities. The
staff of the Securities and Exchange Commission is presently of the view that
repurchase agreements maturing in more than seven days are subject to this
restriction. Until that position is revised, modified or rescinded, the Fund
will conduct its operations in a manner consistent with this view.

15. Write or purchase puts, calls, warrants, straddles, spreads or
combinations thereof except that, as described above under "Firm Commitment
Agreements," the Fund may enter into firm commitment agreements with respect to
securities otherwise eligible for purchase by the Fund.

Restriction 1 applies to securities subject to repurchase agreements but
not to the repurchase agreements themselves provided that the obligation of the
seller to repurchase the securities from the Fund is "collateralized fully" as
defined in Rule 2a-7 under the Investment Company Act. Although Restriction 1
permits the Fund to invest up to 15% of its total assets in the obligations of
any one bank, federal regulations applicable to the Fund currently prohibit the
Fund (with limited exceptions) from making any investment that would result in
more than 5% of the Fund's assets being invested in obligations of a single
issuer.

The limitation on investment in illiquid securities set forth in
Restriction 14 does not apply to certain restricted securities, including
securities issued pursuant to Rule 144A under the Securities Act of 1933 and
certain commercial paper, that the Manager or Sub-adviser has determined to be
liquid under procedures approved by the Board of Trustees.

LIQUID ASSETS FUND

The following investment restrictions are fundamental policies of LAF and
may not be changed except as described above.

LAF may not:

1. Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions); provided that
the deposit or payment by the Fund of initial or maintenance margin in
connection with options or futures contracts is not considered the purchase of a
security on margin.

2. Make short sales of securities or maintain a short position.

B-7
<PAGE>

3. Issue senior securities, borrow money (including through the entry
into reverse repurchase agreement transactions) or pledge its assets, except
that the Fund may borrow up to 331/3% of the value of its total assets
(calculated when the loan is made) from banks for temporary, extraordinary or
emergency purposes or for the clearance of transactions and may pledge up to 33
1/3% of the value of the Fund's total assets to secure such borrowings. The Fund
will purchase portfolio securities if its borrowings exceed 5% of the Fund's net
assets. The purchase or sale of securities on a "when-issued" or delayed
delivery basis, the entry into reverse repurchase agreements, the purchase and
sale of financial futures contracts and collateral arrangements with respect
thereto and with respect to the writing of options and obligations of the Trust
to Trustees pursuant to deferred compensation arrangements are not deemed to be
a pledge of assets and such arrangements are not deemed to be the issuance of a
senior security.

4. Purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result, with respect to 75% of the
value of the Fund's total assets, more than 5% of the value of the Fund's total
assets would be invested in the securities of a single issuer.

5. Purchase any securities (other than obligations of the U.S.
Government, its agencies and instrumentalities) if, as a result, 25% or more of
the value of the Fund's total assets (determined at the time of investment)
would be invested in the securities of one or more issuers conducting their
principal business activities in the same industry, provided that there is no
limitation with respect to money market instruments of domestic banks. For
purposes of this exception, domestic banks shall include all banks which are
organized under the laws of the United States or a state (as defined in the
Investment Company Act), U.S. branches of foreign banks that are subject to the
same regulations as U.S. banks and foreign branches of domestic banks.

6. Buy or sell real estate or interests in real estate, except that the
Fund may purchase and sell securities which are secured by real estate,
securities of companies which invest or deal in real estate and publicly traded
securities of real estate investment trusts. The Fund may not purchase interests
in real estate limited partnerships which are not readily marketable.

7. Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter under
certain federal securities laws.

8. Make investments for the purpose of exercising control or management.

9. Invest in securities of other non-affiliated investment companies,
except by purchases in the open market involving only customary brokerage
commissions and as a result of which the Fund will not hold more than 3% of the
outstanding voting securities of any one investment company, will not have
invested more than 5% of its total assets in any one investment company and will
not have invested more than 10% of its total assets (determined at the time of
investment) in such securities of one or more investment companies, or except as
part of a merger, consolidation or other acquisition.

10. Make loans, except through (i) repurchase agreements and (ii) loans of
portfolio securities (limited to 331/3% of the value of the Fund's total
assets).

11. Buy or sell commodities or commodity contracts, except that the Fund
may purchase and sell futures contracts and options thereon.

12. Purchase more than 10% of the outstanding voting securities of any one
issuer.

Whenever any fundamental investment policy or investment restriction states
a maximum percentage of a Fund's assets, it is intended that if the percentage
limitation is met at the time the investment is made, a later change in
percentage resulting from changing total or net asset values will not be
considered a violation of such policy.

B-8
<PAGE>

TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>

POSITION PRINCIPAL OCCUPATIONS AND
NAME, ADDRESS AND AGE(1) WITH THE TRUST OTHER AFFILIATIONS
- ------------------------ -------------- -------------------------
<S> <C> <C>

Edward D. Beach (72) Trustee 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; and Director of The High
Yield Income Fund, Inc.

Stephen C. Eyre (74) Trustee Executive Director of The John A.
Hartford Foundation, Inc.
(charitable foundation) (since May
1985); Director of Faircom, Inc.;
and Trustee Emeritus of Pace
University.

Delayne Dedrick Gold (59) Trustee Marketing and Management Consultant and
Director of The High Yield Income
Fund, Inc.

*Robert F. Gunia (50) Trustee 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); and
Director of The High Yield Income
Fund, Inc.

Don G. Hoff (61) Trustee 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.; and
Chairman and Director of The Asia
Pacific Fund, Inc.

Robert E. LaBlanc (63) Trustee 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; and Trustee of Manhattan
College.
</TABLE>

B-9
<PAGE>

POSITION PRINCIPAL OCCUPATIONS AND
NAME, ADDRESS AND AGE(1) WITH THE TRUST OTHER AFFILIATIONS
- ------------------------ -------------- -------------------------
<S> <C> <C>

*Mendel A. Melzer, CFA (36) Trustee Chief Investment Officer (since October
751 Broad Street 1996) of Prudential Mutual Funds
Newark, NJ 07102 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); and 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.

Robin B. Smith (58) Trustee 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., and Kmart Corporation.

Stephen Stoneburn (54) Trustee President and Chief Executive Officer
(since June 1996) of Quadrant Media
Corp. (a publishing company).
Formerly, President (June 1995-June
1996) of Argus Integrated Media,
Inc.; Senior Vice President and
Managing Director (January
1993-1995) of Cowles Business
Media; and Senior Vice President
(January 1991-1992) of Gralla
Publications (a division of United
Newspapers, U.K.).

Nancy H. Teeters (67) Trustee Economist. Formerly, Vice President and
Chief Economist (March 1986-June
1990) of International Business
Machines Corporation. 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 of The High
Yield Income Fund, Inc.
</TABLE>

B-10
<PAGE>
<TABLE>
<CAPTION>

POSITION PRINCIPAL OCCUPATIONS AND
NAME, ADDRESS AND AGE(1) WITH THE TRUST OTHER AFFILIATIONS
- ------------------------ -------------- -------------------------
<S> <C> <C>

*Richard A. Redeker (54) President Employee of Prudential Investments.
751 Broad Street Formerly President, Chief Executive
Newark, NJ 07102 Officer and Director (October 1993-
September 1996) of PMF, Executive
Vice President, Director and Member
of the Operating Committee (October
1993-September 1996) of Prudential
Securities, Director (October
1993-September 1996) of Prudential
Securities Group, Inc., Executive
Vice President (July 1994-September
1996) of The Prudential Investment
Corporation, Director (January
1994-September 1996) of Prudential
Mutual Fund Distributors, Inc. and
Prudential Mutual Fund Services,
Inc. and Senior Executive Vice
President and Director (September
1978-September 1993) of Kemper
Financial Services, Inc.

Thomas A. Early (42) Vice President Vice President and General Counsel
(since March 1997), PMF&A;
Executive Vice President, Secretary
and General Counsel (since December
1996), PIFM. Formerly Vice
President and General Counsel
(March 1994-March 1997), Prudential
Retirement Services and Associate
General Counsel and Chief Financial
Services Officer (1988-1994), Frank
Russell Company.

S. Jane Rose (51) Secretary Senior Vice President (since December
1996) of PIFM; Senior Vice
President and Senior Counsel (since
July 1992) of Prudential
Securities. Formerly Senior Vice
President (January 1991-September
1996) and Senior Counsel (June
1987-September 1996) of PMF.

Grace C. Torres (38) Treasurer and First Vice President (since December
Principal 1996) of PIFM; First Vice President
Financial and (since March 1994) of Prudential
Accounting Securities. Formerly First Vice
Officer President (March 1994-September
1996), PMF and Vice President (July
1989-March 1994) of Bankers Trust.

Stephen M. Ungerman (43) Assistant Tax Director (since March 1996) of
Treasurer Prudential Investments and the
Private Asset Group of The
Prudential Insurance Company of
America. Formerly First Vice
President (February 1993-September
1996) of PMF and prior thereto,
Senior Tax Manager (1981-January
1993) of Price Waterhouse LLP.

Robert C. Rosselot (37) Assistant Assistant General Counsel (since
Secretary September 1997) of PIFM. Formerly,
partner with the firm of Howard &
Howard, Bloomfield Hills, Michigan
(since December 1995) and, prior
thereto, Corporate Counsel,
Federated Investors (1990-1995).
- ----------------------
</TABLE>

B-11
<PAGE>

(1) Unless otherwise noted, the address for each of the above persons is c/o
Prudential Investments Fund Management LLC, Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102-4077.

* "Interested" Trustee of the Fund, as defined in the Investment Company Act
of 1940 (the Investment Company Act).

Trustees and officers of the Trust are also trustees, directors and
officers of some or all of the other investment companies distributed by
Prudential Securities.

The officers conduct and supervise the daily business operations of the
Trust, while the Trustees, in addition to their functions set forth under
"Manager" and "Distributor," review such actions and decide on general policy.

The Trustees have adopted a retirement policy which calls for the
retirement of Trustees on December 31 of the year in which they reach the age of
72, except that retirement is being phased in for Trustees who were age 68 or
older as of December 31, 1993. Under this phase-in provision, Messrs. Beach and
Eyre are scheduled to retire on December 31, 1999 and December 31, 1998,
respectively.

Pursuant to the terms of the Management Agreements with the Trust, the
Manager pays all compensation of officers of the Trust as well as the fees and
expenses of all Trustees of the Trust who are affiliated persons of the Manager.

The Trust pays each of its Trustees who is not an affiliated person of PIFM
or Prudential Investments (PI) annual compensation of $3,000, in addition to
certain out-of-pocket expenses. The amount of annual compensation paid to each
Trustee may change as a result of the introduction of additional funds on the
board of which the Trustee will be asked to serve.

Trustees may receive their Trustee's fees pursuant to a deferred fee
agreement with the Trust. Under the terms of the agreement, the Trust accrues
daily the amount of such Trustee's fees in installments which accrue interest at
a rate equivalent to the prevailing rate applicable to 90-day U.S. Treasury
Bills at the beginning of each calendar quarter or, at the daily rate of return
of the Trust. Payment of the interest so accrued is also deferred and accruals
become payable at the option of the Trustee. A Fund's obligation to make
payments of deferred Trustees' fees, together with interest thereon, is a
general obligation of the Fund.

The following table sets forth the aggregate compensation paid by the Fund
to the Trustees who are not affiliated with the Manager for the fiscal year
ended September 30, 1997 and the aggregate compensation paid to such Trustees
for service on the Trust's Board and that of all other funds managed by PIFM
(Fund Complex) for the calendar year ended December 31, 1996. In October 1997,
PIFM recommended to the Board of Trustees, and the Board approved, certain
changes in the Trust's management and operations, subject to shareholder
approval, whereby substantially similar services would be furnished, but with
lower expenses. Accordingly, on December 11, 1997, the shareholders elected a
new Board of Trustees, approved a management agreement between the Trust and
PIFM and approved a subadvisory agreement between PIFM and The Prudential
Investment Corporation. These new agreements became effective at the close of
business on December 12, 1997. Below is listed all Trustees who have served the
Trust during its most recent fiscal year, as well as the new Trustees who took
office after the shareholder meeting in December.

B-12
<PAGE>

COMPENSATION TABLE

PENSION OR APPROXIMATE
RETIREMENT COMPENSATION
BENEFITS ESTIMATED FROM TRUST
AGGREGATE ACCRUED AS PART ANNUAL AND PRUDENTIAL FUND
COMPENSATION OF TRUST BENEFITS UPON COMPLEX PAID
NAME AND POSITION FROM TRUST EXPENSES RETIREMENT TO TRUSTEES(2)
----------------- ------------ --------------- ------------- -------------------
<S> <C> <C> <C> <C>
Edward D. Beach--Trustee . . . . . . . . . $ None N/A $ 166,000(21/39)*
E. Philip Cannon--Former Trustee . . . . . $[_____] [_____] [_____] **
Donald P. Carter--Former Trustee . . . . . $[_____] [_____] [_____] **
Gary A. Childress--Former Trustee. . . . . $[_____] [_____] [_____] **
William D. Cvengros--Former Trustee. . . . $[_____] [_____] [_____] **
Stephen C. Eyre--Trustee . . . . . . . . . $ None N/A $ 34,250( 4/ 5)*
Delayne D. Gold--Trustee . . . . . . . . . $ None N/A $ 175,308(21/42)*
Robert D. Gunia(1)--Trustee. . . . . . . . -- None N/A --
Don G. Hoff--Trustee . . . . . . . . . . . $ None N/A $ 50,042( 5/ 7)*
Robert F. LaBlanc--Trustee . . . . . . . . $ None N/A $ 34,542( 4/ 6)*
Gary L. Light--Former Trustee. . . . . . . $[_____] [_____] [_____] **
Mendel A. Melzer(1)--Trustee . . . . . . . -- None N/A --
Richard L. Nelson--Former Trustee. . . . . $[_____] [_____] [_____] **
Lyman W. Porter--Former Trustee. . . . . . $[_____] [_____] [_____] **
Robert A. Prindiville--Former Trustee. . . $[_____] [_____] [_____] **
Alan Richards--Former Trustee. . . . . . . $[_____] [_____] [_____] **
Joel Segall--Former Trustee. . . . . . . . $[_____] [_____] [_____] **
Robin B. Smith--Trustee. . . . . . . . . . $ None N/A $ 89,957(11/20)*
Stephen Stoneburn--Trustee . . . . . . . . $ None N/A $ 30,375( 4/ 6)*
W. Bryant Stooks--Former Trustee . . . . . $[_____] [_____] [_____] **
Nancy H. Teeters--Trustee. . . . . . . . . $ None N/A $ 103,583(11/28)*
Gerald M. Thorne--Former Trustee . . . . . $[_____] [_____] [_____] **
Stephen J. Treadway--Former Trustee. . . . $[_____] [_____] [_____] **

- ------------------------
</TABLE>

* Indicates number of funds/portfolios in Prudential Fund Complex
(including the Trust) to which aggregate compensation relates.

** Former Trustees receive no compensation from any fund in the
Prudential Fund Complex, other than the Trust as shown in the first
column.

(1) Robert F. Gunia and Mendel A. Melzer, who are interested Trustees, do
not receive compensation from the Trust or any fund in the Fund
Complex.

(2) Total compensation from all the funds in the Prudential Fund Complex
for the calendar year ended December 31, 1996, including amounts
deferred at the election of Trustees under the funds' Deferred
Compensation Plans. Including accrued interest, total deferred
compensation amounted to $109,294 for Trustee 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 Trust.

As of October 20, 1997, the Trustees and officers of the Trust, as a
group, owned less than 1% of the outstanding shares of beneficial interest
of each of the Funds and of the Trust as a whole.

As of October 20, 1997, Prudential Securities Incorporated, One
Seaport Plaza, New York, New York 10292 was the record owner of 667,817,842
shares (or 99.9% of the shares) of NMMF.

B-13
<PAGE>

MANAGER

The manager of the Trust is Prudential Investments Fund Management LLC,
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077 (PIFM
or the Manager). PIFM serves as manager to all of the other investment companies
that, together with the Trust, comprise the Prudential Mutual Funds. See "How
the Fund is Managed" in each Prospectus. As of November __, 1997, PIFM managed
and/or administered open-end and closed-end management investment companies with
assets of approximately $____ billion. According to the Investment Company
Institute, as of June 30, 1997, the Prudential Mutual Funds were the 16th
largest family of mutual funds in the United States.

PIFM is a subsidiary of Prudential Securities Incorporated. Prudential
Mutual Fund Services LLC (PMFS or the Transfer Agent), a wholly-owned subsidiary
of PIFM, serves as the transfer agent for the Prudential Mutual Funds and, in
addition, provides customer service, recordkeeping and management and
administration services to qualified plans.

Pursuant to the Management Agreement for NMMF (the NMMF Management
Agreement) and the Management Agreement for LAF (the LAF Management Agreement
and, together with the NMMF Management Agreement, the Management Agreements),
both of which become effective on December 12, 1997, PIFM, subject to the
supervision of the Trust's Board of Trustees and in conformity with the stated
policies of the Funds, manages both the investment operations of each Fund and
the composition of each 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 Trust. PIFM also administers the
Trust's business affairs and, in connection therewith, furnishes the Trust with
office facilities, together with those ordinary clerical and bookkeeping
services which are not being furnished by State Street Bank and Trust Company,
the Trust's custodian, and PMFS, the Trust's transfer and shareholder servicing
agent. The management services of PIFM for the Trust are not exclusive under the
terms of the Management Agreements and PIFM is free to, and does, render
management services to others.

For its services, PIFM receives, pursuant to the NMMF Management Agreement,
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. The fee is computed daily and payable monthly. PIFM has
agreed, to the extent NMMF's total expenses exceed .62 of 1% of the average
daily net assets of NMMF for the fiscal year ending September 30, 1998, to
reimburse NMMF 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%. For the
expenses PIFM assumes pursuant to the LAF Management Agreement, PIFM will be
reimbursed for its direct costs, exclusive of any profit or overhead, not to
exceed .39% of the LAF's average daily net assets. It is expected that this
amount will be approximately .09 of 1% of the average daily net assets of LAF
for the fiscal year ending September 30, 1998.

In connection with its management of the business affairs of the Trust
pursuant to the Management Agreements, PIFM bears the following expenses:

(a) the salaries and expenses of all personnel of the Trust and the
Manager, except the fees and expenses of Trustees who are not affiliated
persons of PIFM or the Trust's investment adviser;

(b) all expenses incurred by PIFM or by the Trust in connection with
managing the ordinary course of the Trust's business, other than those
assumed by the Trust, as described below; and

(c) the costs and expenses payable to The Prudential Investment
Corporation, doing business as Prudential Investments (PI or the
Subadviser), pursuant to subadvisory agreements on behalf of the Funds
between PIFM and PI (the Subadvisory Agreements).

B-14
<PAGE>

Under the terms of the Management Agreements, the Trust is responsible for
the payment of the following expenses, including (a) the fees or reimbursements
payable to the Manager, (b) the fees and expenses of Trustees who are not
affiliated with the Manager or the Trust's investment adviser, (c) the fees and
certain expenses of the Trust's Custodian and Transfer and Dividend Disbursing
Agent, including the cost of providing records to the Manager in connection with
its obligation of maintaining required records of the Trust and of pricing the
Trust's shares, (d) the charges and expenses of the Trust's legal counsel and
independent accountants, (e) brokerage commissions, if any, and any issue or
transfer taxes chargeable to the Trust in connection with its securities
transactions, (f) all taxes and trust fees payable by the Trust to governmental
agencies, (g) the fees of any trade association of which the Trust is a member,
(h) the cost of share certificates, if any, representing, and/or non-negotiable
share deposit receipts evidencing, shares of the Trust, (i) the cost of fidelity
and liability insurance, (j) the fees and expenses involved in registering and
maintaining registration of the Trust and of its shares with the SEC, including
the preparation and printing of the Trust'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 shareholders, (l) litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Trust's business and (m) any expenses assumed by the
Fund pursuant to a distribution plan adopted under Rule 12b-1 of the
Investment Company Act.

Each 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 Management Agreements relate except a loss resulting from
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
Each Management Agreement provides that it will terminate automatically if
assigned (as defined in the Investment Company Act), and that it may be
terminated without penalty by either party upon not more than 60 days' nor less
than 30 days' written notice. The Management Agreements provide that each said
agreement 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 Investment Company Act.

For the fiscal year ended September 30, 1997 and the prior fiscal years,
PIMCO Advisors L.P. (PALP), served as manager for NMMF. Pursuant to a
management contract between PALP and NMMF, which contract was terminated by a
vote of the former Trustees on October 22, 1997, effective at the close of
business on December 12, 1997, the Fund paid PALP a monthly fee as follows:
.425% of the first $500 million of the average net assets of NMMF, .400% of the
next $500 million, .375% of the next $500 million, .350% of the next $500
million and .325% of amounts in excess of $2 billion. For the fiscal years
ended September 30, 1995, 1996 and 1997, NMMF paid PALP $2,915,606, $2,560,734
and $2,886,449, respectively, for its services under its management contract.
NMMF's total operating expenses for the fiscal year ended September 30, 1997
were .65%, of which .42% were management fees, .10% were 12b-1 fees and .13%
represented all other expenses.

PIFM has entered into Subadvisory Agreements with PIC, doing business as PI
(the Subadviser), a wholly-owned subsidiary of Prudential, on behalf of each of
NMMF and LAF. The Subadvisory Agreements provide that PI furnish investment
advisory services in connection with the investment management of the Funds. In
connection therewith, PI is obligated to keep certain books and records of the
Funds. PIFM continues to have responsibility for all investment advisory
services pursuant to the Management Agreements and supervises PI's performance
of such services. In connection with NMMF, PI is reimbursed by PIFM for the
reasonable costs and expenses incurred by PI in furnishing services to PIFM. In
connection with LAF, PI is reimbursed by PIFM for its direct costs, excluding
profit and overhead, incurred by PI in furnishing services to PIFM.

The Subadviser maintains a corporate credit unit which provides credit
analysis and research on taxable fixed-income securities including money market
instruments. The portfolio manager consults routinely with the credit unit in
managing the Funds' portfolios. The credit unit, with a staff including 7 credit

B-15

<PAGE>

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 Funds may invest.

The Subadvisory Agreements provide that each will terminate in the event of
its assignment (as defined in the Investment Company Act) or upon the
termination of the Management Agreements. The Subadvisory Agreements may be
terminated by the Trust, PIFM or PI upon not more than 60 days' nor less than 30
days' written notice. The Subadvisory Agreements provide that they will continue
in effect for a period of more than two years from their execution only so long
as such continuance is specifically approved at least annually in accordance
with the requirements of the Investment Company Act.

DISTRIBUTOR

Prudential Securities Incorporated (Prudential Securities, PSI or the
Distributor), One Seaport Plaza, New York, New York 10292, acts as the
distributor of the Trust's shares. In November 1997, more than 99% of the
outstanding voting shares of NMMF were owned by clients of PSI.

Prudential Securities is engaged in the securities underwriting and
securities and commodities brokerage business and is a member of the New York
Stock Exchange, other major securities and commodities exchanges and the
National Association of Securities Dealers, Inc. (NASD). Prudential Securities
is also engaged in the investment advisory business. Prudential Securities is a
wholly-owned subsidiary of Prudential Securities Group, Inc., which is an
indirect, wholly-owned subsidiary of Prudential. The services it provides to the
Trust are discussed in each Fund's Prospectus. See "How the Fund is
Managed--Distributor."

Pursuant to the Distribution Agreement, the Trust has agreed to indemnify
the Distributor to the extent permitted by applicable law against certain
liabilities under the federal securities laws.

DISTRIBUTION PLAN

Under the NMMF Distribution Plan (the Plan) and the Trust's Distribution
Agreement dated December 12, 1997, NMMF pays the Distributor a distribution fee
of up to 0.10% of the average daily net assets of the shares of NMMF, computed
daily and payable monthly which is designed to reimburse the Distributor, in
whole or in part, for its services. Prudential Securities incurs the expenses of
distributing LAF shares, none of which are reimbursed by or paid for by LAF.
See "How the Fund is Managed-- Distributor" in each Prospectus.

For the fiscal year ended September 30, 1997, PIMCO Funds Distribution
Company (PIMCO Funds) served as distributor of shares of the Trust. Pursuant to
a distribution agreement which was terminated on December 12, 1997, NMMF paid a
distribution fee of up to .175% of the average daily net assets of NMMF, which
was designed to reimburse PIMCO Funds for its services and expenses in
connection with the distribution of NMMF's shares. For the fiscal year ended
September 30, 1997, NMMF paid PIMCO Funds a distribution fee of $__________,
which was used as follows: sales commissions and other compensation to sales
personnel, $_____; and preparing, printing and distributing sales material and
advertising and preparing, printing and distributing prospectuses to non-
shareholders and other expenses (including data processing, legal and
operations), $______.

The Board of Trustees has determined that, in its judgment, there is a
reasonable likelihood that the Plan will benefit NMMF and its shareholders.

B-16

<PAGE>

Pursuant to the Plan, the Trustees will be provided with, and will review,
at least quarterly, a written report of the distribution expenses incurred on
behalf of the Trust by the Distributor. The report will include an itemization
of the distribution expenses and the purpose of such expenditures.

The Plan may not be amended to increase materially the amount to be spent
for the services described therein with respect to NMMF without approval of the
shareholders of NMMF, and all material amendments of the Plan must also be
approved by the Trustees in the manner described above. The Plan may be
terminated at any time, by vote of a majority of the Trustees who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan (the
Rule 12b-1 Trustees) or by a vote of a majority of the outstanding voting
securities of the shares of the Fund (as defined in the Investment Company Act).
The Trust's Distribution Agreement provides that it will terminate automatically
if assigned and that it may be terminated, without payment of any penalty, by a
majority of the Rule 12b-1 Trustees or by vote of a majority of the outstanding
voting securities of the Trust, or by the Distributor, on 60 days' written
notice to the other party.

NASD MAXIMUM SALES CHARGE RULE. Pursuant to rules of the NASD, the
Distributor is required to limit aggregate initial sales charges, deferred sales
charges and asset-based sales charges to 6.25% of total gross sales of NMMF
shares. Interest charges on unreimbursed distribution expenses equal to the
prime rate plus one percent per annum may be added to the 6.25% limitation.
Sales from the reinvestment of dividends and distributions are not included in
the calculation of the 6.25% limitation. The annual asset-based sales charge on
shares of NMMF may not exceed .75 of 1% per class. The 6.25% limitation applies
to NMMF rather than on a per shareholder basis. If aggregate sales charges were
to exceed 6.25% of the total gross sales of NMMF, all sales charges on shares of
NMMF would be suspended.

PURCHASE OF SHARES
NATIONAL MONEY MARKET FUND

Shares of the Fund are offered to investment advisory clients of Prudential
Securities that participate in any of the following managed account programs
sponsored by Prudential Securities: Gibraltar Advisors, Prudential Securities
Portfolio Management (PSPM), Quantum Portfolio Management (Quantum), Managed
Assets Consulting Services (MACS), Managed Assets Consulting Services -- Custom
Services (MACS-CS) and Prudential Securities Investment Supervisory Group. See
"Shareholder Guide--How to Purchase Shares of the Fund" in the NMMF
Prospectus. A Prudential Securities client who applies to participate in
these managed account programs will be eligible to purchase shares of NMMF
during the period between submission to and acceptance of the application by
Prudential Securities. Eligibility of participants is within the discretion of
Prudential Securities.

LIQUID ASSETS FUND

Shares of LAF are offered to investment advisory clients of Prudential
Securities Incorporated (Prudential Securities) that (a) participate in any of
the following managed account programs sponsored by Prudential Securities:
Gibraltar Advisors, Prudential Securities Portfolio Management (PSPM), Quantum
Portfolio Management (Quantum), Managed Assets Consulting Services (MACS) and
Prudential Securities Investment Supervisory Group and (b) are "Eligible Benefit
Plans." "Eligible Benefit Plans" include (i) employee benefit plans as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974 (ERISA)
other than governmental plans as defined in Section 3(32) of ERISA and church
plans as defined in Section 3(33) of ERISA, (ii) pension, profit-sharing or
other employee benefit plans qualified under Section 401 of the Internal Revenue
Code, (iii) deferred compensation and annuity plans under Section 457 or
403(b)(7) of the Internal Revenue Code, and (iv) Individual Retirement Accounts
(IRAs) as defined in Section 408(a) of the Internal Revenue Code. See
"Shareholder Guide--How to Purchase Shares of the Fund" in the LAF Prospectus.
A Prudential Securities client who applies to participate in these managed
account programs will be eligible to purchase shares of LAF during the period
between submission to and acceptance of the application by Prudential
Securities. Investment advisory clients of Prudential Securities which
receive Managed Assets Consulting Services Custom Services are not eligible to
purchase shares of LAF. Eligibility of participants is within the discretion of
Prudential Securities. Unless notice was given to the contrary by the
Prudential Securities client that satisfied the eligibility requirements set
forth in (a) and (b) above, at the close of business on December 19, 1997,
all NMMF shares held in such account were redeemed, and shares of
LAF were purchased in their stead. LAF then became the primary money sweep
fund for such account.

B-17

<PAGE>

NET ASSET VALUE

Each Fund uses the amortized cost method of valuation to determine the
value of its portfolio securities. In that regard, the Trust's Board of Trustees
has determined to maintain a dollar-weighted average portfolio maturity of 90
days or less, to purchase only instruments having remaining maturities of
thirteen months or less, and to invest only in securities determined by the
investment adviser under the supervision of the Board of Trustees to be of
minimal credit risk and to be of "eligible quality" in accordance with
regulations of the SEC. The remaining maturity of an instrument held by the
Trust that is subject to a put is deemed to be the period remaining until the
principal amount can be recovered through demand or, in the case of a variable
rate instrument, the next interest reset date, if longer. The value assigned to
the put is zero. The Board of Trustees also has established procedures designed
to stabilize, to the extent reasonably possible, a Fund's price per share as
computed for the purpose of sales and redemptions at $1.00. Such procedures will
include review of a Fund's portfolio holdings by the Board, at such intervals as
deemed appropriate, to determine whether a Fund's net asset value calculated by
using available market quotations deviates from $1.00 per share based on
amortized cost. The extent of any deviation will be examined by the Board, and
if such deviation exceeds 1/2 of 1%, the Board will promptly consider what
action, if any, will be initiated. In the event the Board of Trustees determines
that a deviation exists which may result in material dilution or other unfair
results to investors or existing shareholders, the Board will take such
corrective action as it regards necessary and appropriate, including the sale of
portfolio instruments prior to maturity to realize gains or losses, the
shortening of average portfolio maturity, the withholding of dividends or the
establishment of net asset value per share by using available market quotations.

Each Fund computes its net asset value at 4:30 PM New York time, on each
day the New York Stock Exchange (the Exchange) is open for trading. The Exchange
is closed on the following holidays: New Year's Day, Martin Luther King Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.

PORTFOLIO TRANSACTIONS

The Manager is responsible for decisions to buy and sell securities for the
Trust, the selection of brokers and dealers to effect the transactions and the
negotiation of brokerage commissions, if any. (For purposes of this section, the
term "Manager" includes the Subadviser.) The Trust does not normally incur any
brokerage commission expense on such transactions. In the market for money
market instruments, securities are generally traded on a "net" basis, with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's concession or discount. On occasion, certain money market
instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Portfolio securities may not be purchased
from any underwriting or selling syndicate of which Prudential Securities, or an
affiliate, during the existence of the syndicate, is a principal underwriter (as
defined in the Investment Company Act), except in accordance with rules of the
SEC. The Trust will not deal with Prudential Securities or its affiliates on a
principal basis.

In placing orders for portfolio securities of the Trust, the Manager is
required to give primary consideration to obtaining the most favorable price and
efficient execution. This means that the Manager will seek to execute each
transaction at a price and commission, if any, which provide the most favorable
total cost or proceeds reasonably attainable under the circumstances. While the
Manager generally seeks reasonably competitive spreads or commissions, the Trust
will not necessarily be paying the lowest spread or commission available. Within
the framework of this policy, the Manager may consider research and investment
services provided by brokers or dealers who effect or are parties to portfolio
transactions of the Trust, the Manager or the Manager's other clients. Such
research and investment services are those which brokerage houses customarily
provide to institutional investors and include statistical and economic data and
research reports on particular companies and industries. Such services are used
by the Manager in connection with all of its investment activities, and some of
such services obtained in connection with the

B-18

<PAGE>

execution of transactions for the Trust may be used in managing other investment
accounts. Conversely, brokers furnishing such services may be selected for the
execution of transactions for such other accounts, whose aggregate assets are
far larger than the Trust's, and the services furnished by such brokers may be
used by the Manager in providing investment management for the Trust. While such
services are useful and important in supplementing its own research and
facilities, the Manager believes that the value of such services is not
determinable and does not significantly reduce expenses. The Trust does not
reduce the advisory fee it pays to the Manager by any amount that may be
attributed to the value of such services.

Subject to the above considerations, Prudential Securities may act as a
securities broker (or futures commission merchant) for the Trust. In order for
Prudential Securities to effect any portfolio transactions for the Trust, the
commissions, fees or other remuneration received by Prudential Securities must
be reasonable and fair compared to the commissions, fees or other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold during a comparable period of time.
This standard would allow Prudential Securities to receive no more than the
remuneration which would be expected to be received by an unaffiliated broker in
a commensurate arm's-length transaction. Furthermore, the Board of Trustees of
the Trust, including a majority of the Trustees who are not "interested"
persons, has adopted procedures which are reasonably designed to provide that
any commissions, fees or other remuneration paid to Prudential Securities are
consistent with the foregoing standard. Brokerage transactions with Prudential
Securities are also subject to such fiduciary standards as may be imposed by
applicable law.

During the fiscal years ended September 30, 1995, 1996 and 1997, the Trust
paid no brokerage commissions.

TAXES

NMMF has elected, and LAF will elect, to qualify, and each Fund intends to
remain qualified, as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended. This relieves a Fund (but not its
shareholders) from paying federal income tax on income which is distributed to
shareholders, and, if a Fund did realize long-term capital gains, permits net
capital gains of the Fund (I.E., the excess of net long-term capital gains over
net short-term capital losses) to be treated as long-term capital gains of the
shareholders, regardless of how long shareholders have held their shares in that
Fund.

Qualification as a regulated investment company requires, among other
things, that (a) at least 90% of a Fund's annual gross income (without reduction
for losses from the sale or other disposition of securities or foreign
currencies) be derived from interest, dividends, payments with respect to
securities loans, and gains from the sale or other disposition of securities or
options thereon, or other income (including, but not limited to, gains from
options) derived with respect to its business of investing in such securities;
(b) for tax years beginning on or before August 5, 1997, a Fund may derive less
than 30% of its annual gross income from gains (without reduction for losses)
from the sale or other disposition of securities, options thereon, held for less
than three months; (c) a Fund may diversify its holdings so that, at the end of
each quarter of the taxable year, (i) at least 50% of the market value of a
Fund's assets is represented by cash, U.S. Government obligations and other
securities limited in respect of any one issuer to an amount not greater than 5%
of the market value of the Fund's assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than U.S. Government
obligations) and (d) the Fund may distribute to its shareholders at least 90% of
its net investment income and net short-term gains (I.E., the excess of net
short-term capital gains over net long-term capital losses) in each year.

Gains or losses on sales of securities by a Fund will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year. The Funds do not anticipate realizing long-term capital
gains. Other gains or losses on the sale of securities will be short-term
capital gains or losses. In addition, debt securities acquired by a Fund may be
subject to original issue discount and market discount rules.

B-19

<PAGE>

Each Fund is required to distribute 98% of its ordinary income in the same
calendar year in which it is earned. Each Fund is also required to distribute
during the calendar year 98% of the capital gain net income it earned during the
twelve months ending on October 31 of such calendar year, as well as all
undistributed ordinary income and undistributed capital gain net income from the
prior year or the twelve-month period ending on October 31 of such prior year,
respectively. To the extent it does not meet these distribution requirements, a
Fund will be subject to a non-deductible 4% excise tax on the undistributed
amount. For purposes of this excise tax, income on which a Fund pays income tax
is treated as distributed. The Fund intends to make timely distributions in
order to avoid this excise tax. For this purpose, dividends declared in October,
November and December payable to shareholders of record on a specified date in
October, November and December and paid in the following January will be treated
as having been received by shareholders on December 31 of the calendar year in
which declared. Under this rule, therefore, a shareholder may be taxed in the
prior year on dividends or distributions actually received in January of the
following year.

It is anticipated that the net asset value per share of each Fund will
remain constant. However, if the net asset value per share fluctuates and a loss
is realized on a sale, redemption or exchange of shares of a Fund by a
shareholder, certain rules may apply which would limit the ability of the
shareholder to recognize such loss if, for example, the shareholder replaced
the shares within 30 days of the disposition of the shares.

Dividends and distributions may also be subject to state and local taxes.

The Trust under which the Funds are created is organized as a Massachusetts
business trust. Under current law, so long as the Funds qualify for federal
income tax treatment as described above, it is believed that neither the Trust
nor the Funds should be liable for any income or franchise tax in The
Commonwealth of Massachusetts.

CALCULATION OF YIELD

Each Fund will prepare a current quotation of yield daily. The yield quoted
will be the simple annualized yield for an identified seven calendar day period.
The yield calculation will be based on a hypothetical account having a balance
of exactly one share at the beginning of the seven-day period. The base period
return will be the change in the value of the hypothetical account during the
seven-day period, including dividends declared on any shares purchased with
dividends on the shares, but excluding any capital changes, divided by the value
of the account at the beginning of the base period. The yield will vary as
interest rates and other conditions affecting money market instruments change.
Yield also depends on the quality, length of maturity and type of instruments in
a Fund's portfolio, and its operating expenses. Each Fund also may prepare an
effective annual yield computed by compounding the unannualized seven-day period
return as follows: by adding 1 to the unannualized seven-day period return,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the
result.

Effective yield = [(base period return+1)365/7]-1

Comparative performance information may be used from time to time in
advertising or marketing the Funds' shares, including data from Lipper
Analytical Services, Inc., Morningstar Publications, Inc., IBC Financial Data,
Inc., The Bank Rate Monitor, other industry publications, business periodicals
and market indices.

Each Fund's yield fluctuates, and an annualized yield quotation is not a
representation by the Fund as to what an investment in the Fund will actually
yield for any given period. Actual yields will depend upon not only changes in
interest rates generally during the period in which the investment in a Fund is
held, but also on changes in the Fund's expenses. Yield does not take into
account any federal or state income taxes.

B-20

<PAGE>

CUSTODIAN, TRANSFER AND SHAREHOLDER SERVICING AGENT
AND INDEPENDENT ACCOUNTANTS

State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Trust's portfolio securities,
and in that capacity maintains cash and certain financial and accounting books
and records pursuant to an agreement with the Trust.

Prudential Mutual Fund Services LLC (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as the Transfer and Shareholder Servicing Agent of the
Trust. It is a wholly-owned subsidiary of PIFM. PMFS provides customary transfer
agency services to the Trust, including the handling of shareholder
communications, the processing of shareholder transactions, the maintenance of
shareholder account records, payment of dividends and distributions and related
functions. For these services, PMFS receives a monthly fee plus its
out-of-pocket expenses, including but not limited to postage, stationery,
printing, allocable communications and other costs.

PMFS provides customary transfer agency services to the Trust, including
the handling of shareholder communications, the processing of shareholder
transactions, the maintenance of shareholder account records, payment of
dividends and distributions and related functions. In connection with services
rendered to NMMF, PMFS receives an annual fee ($9.50) per shareholder account, a
new account set up fee ($2.00) for each manually-established account and a
monthly inactive zero balance account fee ($0.20) per shareholder account plus
its out-of-pocket expenses, including but not limited to postage, stationery,
printing, allocable communications and other costs. In connection with the
transfer agency services rendered by PMFS to LAF, PMFS will be reimbursed for
its direct costs, excluding profit and overhead.

Price Waterhouse LLP, serves as the Trust's independent public accountants.
Price Waterhouse LLP provides audit services, accounting assistance, and
consultation in connection with Securities and Exchange Commission filings. The
financial information for NMMF provided under "Financial Statements" for the
fiscal year ended September 30, 1997 has been audited by Price Waterhouse LLP,
whose report is also included under "Financial Statements." Coopers & Lybrand
L.L.P., 1301 Avenue of the Americas, New York, New York 10019, served as
independent public accountants for NMMF through the fiscal year ended
September 30, 1996. The financial information for NMMF provided under "Financial
Statements" for the fiscal year ended September 30, 1996 has been audited by
Coopers & Lybrand L.L.P., whose report is also included under "Financial
Statements."

GENERAL INFORMATION

The Trust was organized on April 27, 1984 as a Massachusetts business
trust. The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest, which may be
divided into an unlimited number of shares of such shares, and which presently
consist of NMMF and LAF. Each share of a series represents an equal
proportionate interest in that series with each other share of that series and
is entitled to a proportionate interest in the dividends and distributions from
that series. Upon termination of a series, whether pursuant to liquidation of
the series of otherwise, shareholders of that series are entitled to share pro
rata in the net assets of the series then available for distribution to such
shareholders. Shareholders have no preemptive rights.

A copy of the Agreement and Declaration of Trust (the "Declaration of
Trust") establishing the Trust is on file with the Secretary of State of The
Commonwealth of Massachusetts. The Declaration of Trust provides for the
perpetual existence of the Trust. The Trust or a series, however, may be
terminated at any time by vote of at least two-thirds of the outstanding shares
of an affected series or by the Trustees upon written notice to the
shareholders. Upon termination of the Trust or of a series, after paying or
otherwise providing for all charges, taxes, expenses and liabilities, whether
due or accrued or anticipated, of the Trust or of the series as may be
determined by the Trustees, the series shall, in accordance with such procedures
as the Trustees consider appropriate, reduce the remaining assets to
distributable form in cash or shares or other securities, or any combination
thereof, and distribute the proceeds to the shareholders of the series

B-21

<PAGE>

involved, ratably according to the number of shares of such series held by the
several shareholders of the series on the date of termination.

The assets received by the Trust for the issue or sale of shares of a
series and all income, earnings, profits, losses and proceeds therefrom, subject
only to the rights of creditors, are allocated to that series, and constitute
the underlying assets of that series. The underlying assets of a series are
segregated and are charged with the expenses, including the organizational
expenses, in respect of that series and with a share of the general expenses of
the Trust. While the expenses of the Trust are allocated to the separate books
of account of the series, if more than one series has shares outstanding,
certain expenses may be legally chargeable against the assets of all series.

Under Massachusetts law, shareholders could, under certain circumstances,
be held liable for the obligations of the Trust. However, the Declaration of
Trust disclaims shareholder liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Trust or the Trustees. The
Declaration of Trust provides for indemnification out of the property of a
series for all loss and expense of any shareholder of that series held liable on
account of being or having been a shareholder. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the series of which he was a shareholder would be unable
to meet its obligations.

The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office. The Declaration of Trust provides for indemnification by the Trust
of the Trustees and the officers of the Trust except with respect to any matter
as to which any such person did not act in good faith in the reasonable belief
that his action was in or not opposed to the best interests of the Trust. Such
person may not be indemnified against any liability to the Trust or the Trust
shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.

As described in the Prospectuses, the Trust will not normally hold annual
shareholders' meetings. At such time as less than a majority of the Trustees
have been elected by the shareholders, the Trustees then in office will call a
shareholders' meeting for the election of Trustees. In addition, Trustees may be
removed from office by a written consent signed by the holders of two-thirds of
the outstanding shares and filed with the Trust's custodian or by a vote of the
holders of two-thirds of the outstanding shares at a meeting duly called for the
purpose, which meeting shall be held upon written request of the holders of not
less than 10% of the outstanding shares. Upon written request by ten or more
shareholders, who have been such for at least six months and who hold shares
constituting 1% of the outstanding shares, stating that such shareholders wish
to communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a Trustee, the
Trust has undertaken to provide a list of shareholders or to disseminate
appropriate materials (at the expense of the requesting shareholders).

Except as otherwise disclosed in the Prospectuses and in this Statement of
Additional Information, the Trustees shall continue to hold office and may
appoint their successors.

B-22

<PAGE>

[FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT
ACCOUNTANTS FOR NMMF TO BE COMPLETED IN A RULE 485(b)(1)(iii)
FILING AS PERMITTED BY RULE 485 (d)(2)]

B-23
<PAGE>

APPENDIX A--HISTORICAL PERFORMANCE DATA

The historical performance data contained in this Appendix relies on data
obtained from statistical services, reports and other services believed by the
Manager to be reliable. The information has not been independently verified by
the Manager.

This chart shows the long-term performance of various asset classes and the
rate of inflation.

(CHART)

Source: Stocks, Bonds, Bills and Information 1996 Yearbook, Ibbotson Associates,
Chicago, Illinois. Used with permission. All rights reserved. (Annually updates
both by Roger G. Ibbotson and Rex A. Sinquefield.) This chart is for
illustrative purposes only and is not indicative of the past, present, or future
performance of any asset class or any Prudential Mutual Fund.

Generally, stock returns are due to capital appreciation and reinvesting any
gains. Bond returns are due mainly to reinvesting interest. Also, stock prices
are usually more volatile than bond prices over the long-term. Small stock
returns for 1926-1980 are those of stocks comprising the 5th quintile of the New
York Stock Exchange. Thereafter, returns are those of the Dimensional Fund
Advisors (DFA) Small Company Fund. Common stock returns are based on the S&P
Composite Index, a market-weighted, unmanaged index of 500 stocks (currently) in
a variety of industries. It is often used as a broad measure of stock market
performance.

Long-term government bond returns are measured using a constant one-bond
portfolio with a maturity of roughly 20 years. Treasury bill returns are for a
one-month bill. Treasuries are guaranteed by the government as to the timely
payment of principal and interest; equities are not. Inflation is measured by
the consumer price index (CPI).

App. A-1

<PAGE>

Set forth below is historical performance data relating to various sectors
of the fixed-income securities markets. The chart shows the historical total
returns of U.S. Treasury bonds, U.S. mortgage securities, U.S. corporate bonds,
U.S. high yield bonds and world government bonds on an annual basis from 1987
through 1996. The total returns of the indices include accrued interest, plus
the price changes (gains or losses) of the underlying securities during the
period mentioned. The data is provided to illustrate the varying historical
total returns and investors should not consider this performance data as an
indication of the future performance of the Trust or of any sector in which the
Trust invests.

All information relies on data obtained from statistical services, reports
and other services believed by the Manager to be reliable. Such information has
not been verified. The figures do not reflect the operating expenses and fees of
a mutual fund. See "Trust Expenses" in the prospectus. The net effect of the
deduction of the operating expenses of a mutual fund on these historical total
returns, including the compounded effect over time, could be substantial.

HISTORICAL TOTAL RETURNS OF DIFFERENT BOND MARKET SECTORS

(CHART)

(1) LEHMAN BROTHERS TREASURY BOND INDEX is an unmanaged index made up of over
150 public issues of the U.S. Treasury having maturities of at least one year.

(2) LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX is an unmanaged index
that includes over 600 15- and 30-year fixed-rate mortgage-backed securities
of the Government National Mortgage Association (GNMA), Federal National
Mortgage Association (FNMA), and the Federal Home Loan Mortgage Corporation
(FHLMC).

(3) LEHMAN BROTHERS CORPORATE BOND INDEX includes over 3,000 public
fixed-rate, nonconvertible investment-grade bonds. All bonds are U.S.
dollar-denominated issues and include debt issued or guaranteed by foreign
sovereign governments, municipalities, governmental agencies or international
agencies. All bonds in the index have maturities of at least one year.

(4) LEHMAN BROTHERS HIGH YIELD BOND INDEX is an unmanaged index comprising
over 750 public, fixed-rate, nonconvertible bonds that are rated Ba1 or lower
by Moody's Investors Service (or rated BB+ or lower by Standard & Poor's or
Fitch Investors Service). All bonds in the index have maturities of at least
one year.

(5) SALOMON BROTHERS WORLD GOVERNMENT INDEX (NON U.S.) includes over 800
bonds issued by various foreign governments or agencies, excluding those in
the U.S., but including those in Japan, Germany, France, the U.K., Canada,
Italy, Australia, Belgium, Denmark, the Netherlands, Spain, Sweden, and
Austria. All bonds in the index have maturities of at least one year.

App. A-2

<PAGE>

This chart illustrates the performance of major world stock markets for the
period from 1986 through 1996. It does not represent the performance of any
Prudential Mutual Fund.

AVERAGE ANNUAL TOTAL RETURNS
OF MAJOR WORLD STOCK MARKETS
(1986-1996) (IN U.S. DOLLARS)

(CHART)

Source: Morgan Stanley Capital International (MSCI). Used with permission.
Morgan Stanley Country indices are unmanaged indices which include those stocks
making up the largest two-thirds of each country's total stock market
capitalization. Returns reflect the reinvestment of all distributions. This
chart is for illustrative purposes only and is not indicative of the past,
present or future performance of any specific investment. Investors cannot
invest directly in stock indices.

This chart shows the growth of a hypothetical $10,000 investment made in the
stocks representing the S&P 500 stock index with and without reinvested
dividends.

(CHART)

Source: Stocks, Bonds, Bills, and Inflation 1996 Yearbook, Ibbotson Associates,
Chicago (annually updates work by Roger G. Ibbotson and Rex A. Sinquefield).
Used with permission. All rights reserved. This chart is used for illustrative
purposes only and is not intended to represent the past, present or future
performance of any Prudential Mutual Fund. Common stock total return is based on
the Standard & Poor's 500 Stock Index, a market-value-weighted index made up of
500 of the largest stocks in the U.S. based upon their stock market value.
Investors cannot invest directly in indices.

(CHART)

Source: Morgan Stanley Capital International, December 1996. Used with
permission. This chart represents the capitalization of major world stock
markets as measured by the Morgan Stanley Capital International (MSCI) World
Index. The total market capitalization is based on the value of 1579 companies
in 22 countries (representing approximately 60% of the aggregate market value of
the stock exchanges). This chart is for illustrative purposes only and does not
represent the allocation of any Prudential Mutual Fund.

App. A-3

<PAGE>

The chart below shows the historical volatility of general interest rates
as measured by the long U.S. Treasury Bond.

LONG U.S. TREASURY BOND YIELD IN PERCENT (1926-1996)

(PASTE-UP CHART)

- -------------
Source: Stocks, Bonds, Bills, and Inflation 1996 Yearbook, Ibbotson Associates,
Chicago (annually updates work by Roger G. Ibbotson and Rex A. Sinquefield).
Used with permission. All rights reserved. The chart illustrates the historical
yield of the long-term U.S. Treasury Bond from 1926-1996. Yields represent that
of an annually renewed one-bond portfolio with a remaining maturity of
approximately 20 years. This chart is for illustrative purposes and should not
be construed to represent the yields of any Prudential Mutual Fund.

App. A-4

<PAGE>

APPENDIX B--GENERAL INVESTMENT INFORMATION

The following terms are used in mutual fund investing.

ASSET ALLOCATION

Asset allocation is a technique for reducing risk, providing balance. Asset
allocation among different types of securities within an overall investment
portfolio helps to reduce risk and to potentially provide stable returns, while
enabling investors to work toward their financial goal(s). Asset allocation is
also a strategy to gain exposure to better performing asset classes while
maintaining investment in other asset classes.

DIVERSIFICATION

Diversification is a time-honored technique for reducing risk, providing
"balance" to an overall portfolio and potentially achieving more stable returns.
Owning a portfolio of securities mitigates the individual risks (and returns) of
any one security. Additionally, diversification among types of securities
reduces the risks (and general returns) of any one type of security.

DURATION

Debt securities have varying levels of sensitivity to interest rates. As
interest rates fluctuate, the value of a bond (or a bond portfolio) will
increase or decrease. Longer term bonds are generally more sensitive to changes
in interest rates. When interest rates fall, bond prices generally rise.
Conversely, when interest rates rise, bond prices generally fall.

Duration is an approximation of the price sensitivity of a bond (or a bond
portfolio) to interest rate changes. It measures the weighted average maturity
of a bond's (or a bond portfolio's) cash flows, I.E., principal and interest
payments. Duration is expressed as a measure of time in years--the longer the
duration of a bond (or a bond portfolio), the greater the impact of interest
rate changes on the bond's (or the bond portfolio's) price. Duration differs
from effective maturity in that duration takes into account call provisions,
coupon rates and other factors. Duration measures interest rate risk only and
not other risks, such as credit risk and, in the case of non-U.S. dollar
denominated securities, currency risk. Effective maturity measures the final
maturity dates of a bond (or a bond portfolio).

MARKET TIMING

Market timing--buying securities when prices are low and selling them when
prices are relatively higher--may not work for many investors because it is
impossible to predict with certainty how the price of a security will fluctuate.
However, owning a security for a long period of time may help investors offset
short-term price volatility and realize positive returns.

POWER OF COMPOUNDING

Over time, the compounding of returns can significantly impact investment
returns. Compounding is the effect of continuous investment on long-term
investment results, by which the proceeds of capital appreciation (and income
distributions, if elected) are reinvested to contribute to the overall growth of
assets. The long-term investment results of compounding may be greater than that
of an equivalent initial investment in which the proceeds of capital
appreciation and income distributions are taken in cash.

App. B-1
<PAGE>

APPENDIX C--INFORMATION RELATING TO PRUDENTIAL

Set forth below is information relating to The Prudential Insurance Company
of America (Prudential) and its subsidiaries as well as information relating to
the Prudential Mutual Funds. See "Management of the Fund--Manager" in the
Prospectus. The data will be used in sales materials relating to the Prudential
Mutual Funds. Unless otherwise indicated, the information is as of December 31,
1995 and is subject to change thereafter. All information relies on data
provided by The Prudential Investment Corporation (PIC) or from other sources
believed by the Manager to be reliable. Such information has not been verified
by the Fund.

INFORMATION ABOUT PRUDENTIAL

The Manager and PIC(1) are subsidiaries of Prudential, which is one of the
largest diversified financial services institutions in the world and, based on
total assets, the largest insurance company in North America as of December 31,
1996. Principal products and services include life and health insurance, other
healthcare products, property and casualty insurance, securities brokerage,
asset management, investment advisory services and real estate brokerage.
Prudential (together with its subsidiaries) employs almost 81,000 persons
worldwide, and maintains a sales force of approximately 11,500 agents and nearly
6,400 financial advisors. Prudential is a major issuer of annuities, including
variable annuities. Prudential seeks to develop innovative products and services
to meet consumer needs in each of its business areas. Prudential uses the rock
of Gibraltar as its symbol. The Prudential rock is a recognized brand name
throughout the world.

INSURANCE. Prudential has been engaged in the insurance business since
1875. It insures or provides financial services to nearly 50 million people
worldwide. Long one of the largest issuers of individual life insurance, the
Prudential has 22 million life insurance policies in force today with a face
value of $1 trillion. Prudential has the largest capital base ($12.1 billion) of
any life insurance company in the United States. Prudential provides auto
insurance for approximately 1.6 million cars and insures approximately 1.2
million homes.

MONEY MANAGEMENT. Prudential is one of the largest pension fund managers
in the country, providing pension services to 1 in 3 Fortune 500 firms. It
manages $36 billion of individual retirement plan assets, such as 401(k) plans.
As of December 31, 1996, Prudential had more than $332 billion in assets under
management. Prudential Investments, a business group of Prudential (of which
Prudential Mutual Funds is a key part) manages over $190 billion in assets of
institutions and individuals. In PENSIONS & INVESTMENTS, May 12, 1997,
Prudential was ranked third in terms of total assets under management.

REAL ESTATE. Prudential Real Estate Affiliates, the fourth largest real
estate brokerage network in the United States, has more than 37,000 brokers and
agents across the United States.(2)

HEALTHCARE. Over two decades ago, Prudential introduced the first
federally-funded, for-profit HMO in the country. Today, approximately 4.6
million Americans receive healthcare from a Prudential managed care membership.

- -------------------------------
(1) Prudential Investments, a business group of PIC, serves as the Subadviser
to substantially all of the Prudential Mutual Funds. Wellington Management
Company serves as the subadviser to Global Utility Fund, Inc., Nicholas-
Applegate Capital Management as the subadviser to Nicholas-Applegate Fund,
Inc., Jennison Associates Capital Corp. as the subadviser to Prudential
Jennison Series Fund, Inc. and Prudential Active Balanced Fund, a portfolio
of Prudential Dryden Fund, Mercator Assets Management LP, as the subadviser
to International Stock Series, a portfolio of Prudential World Fund, Inc.
and BlackRock Financial Management, Inc. as the subadviser to The BlackRock
Government Income Trust. There are multiple subadvisers for The Target
Portfolio Trust.

(2) As of December 31, 1996.

App. C-1

<PAGE>

FINANCIAL SERVICES. The Prudential Bank, a wholly-owned subsidiary of
Prudential, has over $1 billion in assets and serves nearly 1.5 million
customers across 50 states.

INFORMATION ABOUT THE PRUDENTIAL MUTUAL FUNDS

As of June 30, 1997, Prudential Investments Fund Management is the
fifteenth largest mutual fund company in the country, with over 2.5 million
shareholders invested in more than 50 mutual fund portfolios and variable
annuities with more than 3.7 million shareholder accounts.

The Prudential Mutual Funds have over 30 portfolio managers who manage over
$55 billion in mutual fund and variable annuity assets. Some of Prudential's
portfolio managers have over 20 years of experience managing investment
portfolios.

From time to time, there may be media coverage of portfolio managers and
other investment professionals associated with the Manager and the Subadviser in
national and regional publications, on television and in other media.
Additionally, individual mutual fund portfolios are frequently cited in surveys
conducted by national and regional publications and media organizations such as
THE WALL STREET JOURNAL, THE NEW YORK TIMES, BARRON'S and USA TODAY.

EQUITY FUNDS. FORBES magazine listed Prudential Equity Fund among twenty
mutual funds on its Honor Roll in its mutual fund issue of August 28, 1995.
Honorees are chosen annually among mutual funds (excluding sector funds) which
are open to new investors and have had the same management for at least five
years. Forbes considers, among other criteria, the total return of a mutual fund
in both bull and bear markets as well as a fund's risk profile. Prudential
Equity Fund is managed with a "value" investment style by PIC. In 1995,
Prudential Securities introduced Prudential Jennison Fund, a growth-style equity
fund managed by Jennison Associates Capital Corp., a premier institutional
equity manager and a subsidiary of Prudential.

HIGH YIELD FUNDS. Investing in high yield bonds is a complex and research
intensive pursuit. A separate team of high yield bond analysts monitor the 167
issues held in the Prudential High Yield Fund (currently the largest fund of its
kind in the country) along with 100 or so other high yield bonds, which may be
considered for purchase.(3) Non-investment grade bonds, also known as junk
bonds or high yield bonds, are subject to a greater risk of loss of principal
and interest including default risk than higher-rated bonds. Prudential high
yield portfolio managers and analysts meet face-to-face with almost every bond
issuer in the High Yield Fund's portfolio annually, and have additional
telephone contact throughout the year.

Prudential's portfolio managers are supported by a large and sophisticated
research organization. Fourteen investment grade bond analysts monitor the
financial viability of approximately 1,750 different bond issuers in the
investment grade corporate and municipal bond markets--from IBM to small
municipalities, such as Rockaway Township, New Jersey. These analysts consider
among other things sinking fund provisions and interest coverage ratios.

Prudential's portfolio managers and analysts receive research services from
almost 200 brokers and market service vendors. They also receive nearly 100
trade publications and newspapers--from PULP AND PAPER FORECASTER to WOMEN'S
WEAR DAILY--to keep them informed of the industries they follow.

Prudential Mutual Funds' traders scan over 100 computer monitors to collect
detailed information on which to trade. From natural gas prices in the Rocky
Mountains to the results of local municipal elections, a Prudential portfolio
manager or trader is able to monitor it if it's important to a Prudential mutual
fund.

- -----------------------------------
(3) As of December 31, 1995. The number of bonds and the size of the Fund are
subject to change.

App. C-2

<PAGE>

Prudential Mutual Funds trade approximately $31 billion in U.S. and foreign
government securities a year. PIC seeks information from government policy
makers. In 1995, Prudential's portfolio managers met with several senior U.S.
and foreign government officials, on issues ranging from economic conditions in
foreign countries to the viability of index-linked securities in the United
States.

Prudential Mutual Funds' portfolio managers and analysts met with over
1,200 companies in 1995, often with the Chief Executive Officer (CEO) or Chief
Financial Officer (CFO). They also attended over 250 industry conferences.

Prudential Mutual Fund global equity managers conducted many of their
visits overseas, often holding private meetings with a company in a foreign
language (our global equity managers speak 7 different languages, including
Mandarin Chinese).

TRADING DATA.(4) On an average day, Prudential Mutual Funds' U.S. and
foreign equity trading desks traded $77 million in securities representing over
3.8 million shares with nearly 200 different firms. Prudential Mutual Funds'
bond trading desks traded $157 million in government and corporate bonds on an
average day. That represents more in daily trading than most bond funds tracked
by Lipper even have in assets.(5) Prudential Mutual Funds' money market desk
traded $3.2 billion in money market securities on an average day, or over $800
billion a year. They made a trade every 3 minutes of every trading day. In 1994,
the Prudential Mutual Funds effected more than 40,000 trades in money market
securities and held on average $20 billion of money market securities.(6)

Based on complex-wide data, on an average day, over 7,250 shareholders
telephoned Prudential Mutual Fund Services, Inc., the Transfer Agent of the
Prudential Mutual Funds, on the Prudential Mutual Funds' toll-free number. On an
annual basis, that represents approximately 1.8 million telephone calls
answered.

INFORMATION ABOUT PRUDENTIAL SECURITIES

Prudential Securities is the fifth largest retail brokerage firm in the
United States with approximately 5,600 financial advisors. It offers to its
clients a wide range of products, including Prudential Mutual Funds and
annuities. As of December 31, 1995, assets held by Prudential Securities for its
clients approximated $168 billion. During 1994, over 28,000 new customer
accounts were opened each month at PSI.(7)

Prudential Securities has a two-year Financial Advisor training program
plus advanced education programs, including Prudential Securities "university,"
which provides advanced education in a wide array of investment areas.
Prudential Securities is the only Wall Street firm to have its own in-house
Certified Financial Planner (CFP) program. In the December 1995 issue of
REGISTERED REP, an industry publication, Prudential Securities Financial Advisor
training programs received a grade of A- (compared to an industry average of
B+).

- --------------------------------------
(4) Trading data represents average daily transactions for portfolios of the
Prudential Mutual Funds for which PIC serves as the subadviser, portfolios
of the Prudential Series Fund and institutional and non-US accounts managed
by Prudential Mutual Fund Investment Management, a division of PIC, for the
year ended December 31, 1995.

(5) Based on 669 funds in Lipper Analytical Services categories of Short U.S.
Treasury, Short U.S. Government, Intermediate U.S. Treasury, Intermediate
U.S. Government, Short Investment Grade Debt, Intermediate Investment Grade
Debt, General U.S. Treasury, General U.S. Government and Mortgage funds.

(6) As of December 31, 1994.

(7) As of December 31, 1994.

App. C-3

<PAGE>

In 1995, Prudential Securities' equity research team ranked 8th in
INSTITUTIONAL INVESTOR magazine's 1995 "All America Research Team" survey. Five
Prudential Securities analysts were ranked as first-team finishers.(8)

In addition to training, Prudential Securities provides its financial
advisors with access to firm economists and market analysts. It has also
developed proprietary tools for use by financial advisors, including the
Financial Architect-SM-, a state-of-the-art asset allocation software program
which helps Financial Advisors to evaluate a client's objectives and overall
financial plan, and a comprehensive mutual fund information and analysis system
that compares different mutual funds.

For more complete information about any of the Prudential Mutual Funds,
including charges and expenses, call your Prudential Securities financial
advisor or Pruco/Prudential representative for a free prospectus. Read it
carefully before you invest or send money.

- --------------------------------------
(8) On an annual basis, INSTITUTIONAL INVESTOR magazine surveys more than 700
institutional money managers, chief investment officers and research
directors, asking them to evaluate analysts in 76 industry sectors. Scores
are produced by taking the number of votes awarded to an individual analyst
and weighting them based on the size of the voting institution. In total,
the magazine sends its survey to approximately 2,000 institutions and a
group of European and Asian institutions.

App. C-4

<PAGE>

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) FINANCIAL STATEMENTS:

(1) Financial statements included in the Prospectuses constituting
Part A of this Registration Statement:
Financial Highlights for Institutional Money Market Fund

(2) Financial statements included in the Statement of Additional
Information constituting Part B of this Registration Statement:

Portfolio of Investments at __________, 1997 for National Money
Market Fund
Statement of Assets and Liabilities at __________, 1997 for
National Money Market Fund
Statement of Operations for the Year Ended __________, 1997
for National Money Market Fund
Statement of Changes in Net Assets for the Years Ended
__________, 1997 and 1996 for
National Money Market Fund
Notes to Financial Statements for National Money Market
Fund
Financial Highlights for National Money Market Fund
Report of Independent Accountants.

(b) EXHIBITS:

1. (a) Agreement and Declaration of Trust of the Trust dated
April 27, 1984 and Amendment No. 1 dated June 19, 1984
incorporated by reference to Exhibit 1 to Registration
Statement on Form N-1A (No. 2-91889) filed on June 26, 1984
(the "Registration Statement").
(b) Amendment No. 2 to Agreement and Declaration of Trust of
the Trust dated August 9, 1984 incorporated by reference to
Exhibit 1 to Pre-Effective Amendment No. 1 to the
Registration Statement filed on September 12, 1984.
(c) Amendment No. 3 to Agreement and Declaration of Trust of
the Trust dated September 11, 1984 incorporated by
reference to Exhibit 2 to Post-Effective Amendment No. 1 to
the Registration Statement filed on February 1, 1985.
2. (a) By-Laws of the Trust.*
(b) Amendment to By-Laws of the Trust dated July 25, 1990.*
(c) Amendment to By-Laws of the Trust dated May 24, 1991.*
(d) Amendment to By-Laws of the Trust dated October 22, 1997.*
4. (a) Specimen Share Certificates of the National Money Market
Fund incorporated by reference to Exhibit 4 to
Pre-Effective Amendment No. 1 to the Registration Statement
filed on September 12, 1984.
(b) Specimen Share Certificate for the Liquid Assets Fund**
5. (a) Form of Management Agreement between the Registrant, on
behalf of the National Money Market Fund, and Prudential
Investments Fund Management LLC.**
(b) Form of Subadvisory Agreement, with respect to the National
Money Market Fund, between Prudential Investments Fund
Management LLC and The Prudential Investment Corporation.**
(c) Form of Management Agreement between the Registrant, on
behalf of the Liquid Assets Fund, and Prudential
Investments Fund Management LLC.**

C-1

<PAGE>

(d) Form of Subadvisory Agreement, with respect to the Liquid
Assets Fund, between Prudential Investments Fund Management
LLC and the Prudential Investment Corporation.**
6. Form of Distribution Agreement between the Registrant and
Prudential Securities Inc.**
8. Form of Custodian Contract between the Registrant and State Street
Bank and Trust Company.**
9. Form of Transfer Agency and Service Agreement between the
Registrant and Prudential Mutual Fund Services.**
10. Opinion of Counsel, incorporated by reference to Exhibit 10 to
Pre-Effective Amendment No. 1 to the Registration Statement filed
on September 12, 1984.
15. Amended Distribution Plan of the Trust, as revised through
October 22, 1997.*
16. Schedule for calculation of performance information incorporated
by reference to Post-Effective Amendment No. 10 to the
Registration Statement filed on December 3, 1990.
17. Financial Data Schedule for the fiscal year ended September 30,
1997.**
19. Powers of Attorney for E. Philip Cannon, Donald P. Carter, Gary A.
Childress, William D. Cvengros, Gary L. Light, Robert A.
Prindiville, Joel Segall, W. Bryant Stooks, Gerald M. Thorne,
Richard L. Nelson, Lyman W. Porter, Alan Richards and John P.
Hardaway. *

- -------------
* Filed herewith.
** To be filed by Post-Effective Amendment.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

None.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

As of October 20, 1997 there were 32,702 record holders of shares of NMMF
and no recordholders of shares of LAF nor of the Active Short-Term Fund.

ITEM 27. INDEMNIFICATION.

Item 27 of the Trust's Registration Statement, filed with the Commission
on June 26, 1984 is incorporated herein by reference.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

(a) PIMCO Advisors L.P.(referred to herein as either the "Manager" or
PIMCO Advisors L.P.) was organized as a limited partnership under Delaware law
in 1987 and is registered as an investment adviser under the Investment Advisers
Act of 1940. The Manager advises one mutual fund complex other than the Trust,
PIMCO Funds: Multi-Manager Series ("PFMMS"). The Manager also has various
subsidiary partnerships which advise and manage mutual funds, individual
accounts, profit sharing and pension funds and institutional accounts and act as
sub-advisers to certain mutual funds.

PIMCO Partners, G.P. ("PIMCO GP"), the Manager's general partner, is a
general partnership with two partners: (i) an indirect wholly-owned subsidiary
of Pacific Life Insurance Company; and (ii) PIMCO Partners, L.L.C. ("LLC"), 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 Manager to an Equity Board and an Operating Board of the Manager.
The activities of the Manager are controlled by

C-2

<PAGE>

its Operating Board except that certain non-routine or extraordinary actions may
not be effected by the Operating Board without the approval of the 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. The Operating
Board is composed of twelve members, of which seven (including the chairman) are
designated by Pacific Investment Management Company, a subsidiary general
partnership of the Manager. The Equity Board is composed of twelve members
including the chief executive officer of the Manager, three members designated
by Pacific Financial Asset Management Company, the chairman of the Operating
Board, two members designated by LLC, two members designated by holders of
Series B Preferred Stock of Thomson Advisory Group Inc., the former general
partner of the Manager, and three independent members. 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 Manager, although Pacific Investment Management Company and the
Managing Directors disclaim such authority.

Set forth below are the substantial business engagements during at least
the two past fiscal years of each director or officer of the Manager and of each
member of the Manager's Operating and Equity Boards:

NAME AND POSITION WITH MANAGER BUSINESS AND OTHER CONNECTIONS
- ------------------------------ ------------------------------

William D. Cvengros Trustee of the Trust; Trustee and Chairman,
President, Chief Executive PFMMS; Director, PIMCO Funds Distribution
Officer, Member of Equity Company ("PFDCO"); Director, Furon
and Operating Boards and Corporation. Formerly, Trustee, PIMCO
Operating Advisors Funds ("PAF"), Vice Chairman,
Committee Chief Investment Officer and Director,
Pacific Mutual Life Insurance Company,
Director and Chairman, Pacific Financial
Asset Management Company, Director, Mutual
Service Corporation, Director, Pacific
Equities Network, Director, PFAMCo UK
Limited, Non-Executive Director, Blairlogie
Capital Management Limited, Trustee and
Vice President, PFAMCo Funds, Chairman and
Director, Parametric Portfolio Associates,
Inc., President, Chairman, Chief Executive
Officer, Director and Trustee of various
realty group trusts, and PMRealty Advisors,
Inc., President, Chief Executive Officer
and Director, NFJ Investment Group, Inc.,
Vice President and Trustee, Pacific Select
Fund, Director, Cadence Capital Management
Corporation

Irwin F. Smith Managing Director and Chief Investment
Member of Operating and Officer, Columbus Circle Investors ("CCI")
Equity Boards and Operating and Chairman, Columbus Circle Investors
Committee Management, Inc.; Formerly, Chairman and
Chief Executive Officer of CCI; Chairman of
Thomson Advisory Group L.P. ("TAGLP") and
of the Columbus Circle Investors Division
of TAGLP, Director and Chairman, Thomson
Advisory Group Inc. ("TAG Inc.")

Donald K. Miller Chairman, Greylock Financial Inc.; Director
Member of Equity Board of Huffy Corporation, RPM, Inc. and
Christensen Boyles Corporation; Director,
President and Chief Executive Officer, TAG
Inc. Formerly, Vice Chairman, TAGLP,
Director and Vice Chairman of PFDCO,
Trustee of the Trust and PAF

C-3

<PAGE>

NAME AND POSITION WITH MANAGER BUSINESS AND OTHER CONNECTIONS
- ------------------------------ ------------------------------

Robert M. Fitzgerald Chief Financial Officer, Senior Vice
Senior Vice President - President - Finance and Controller, PFDCO;
Finance, Chief Financial Senior Vice President - Finance and
Officer and Controller Controller, CCI and Columbus Circle
Investors Management Inc.; Assistant
Treasurer, Cadence Capital Management;
Treasurer, Cadence Capital Management Inc.,
NFJ Investment Group, NFJ Management Inc.,
Parametric Portfolio Associates, Parametric
Management Inc., Pacific Investment
Management Company, PIMCO Management Inc.
and StocksPLUS Management Inc. Formerly,
Chief Financial Officer, TPM Financial,
Vice President, Mechanics National Bank,
and Partner, Price Waterhouse

Donald A. Chiboucas Managing Director, CCI; Director and
Member of Operating Board President, Columbus Circle Investors
Management Inc. Formerly, President of CCI;
Senior Executive Vice President, TAGLP,
President, Columbus Circle Investors
Division, TAGLP, Senior Executive Vice
President, TAG Inc.

Christopher B. Burnham Managing Director, President and Chief
Member of Operating Board Executive Officer of CCI. Formerly,
Treasurer, State of Connecticut and Vice
President, Corporate Finance of Advest Inc.

Walter E. Auch, Sr. Management Consultant; Director of Fort
Member of Equity Board Dearborn Fund, Shearson VIP Fund, Shearson
Advisors Fund, Shearson TRAK Fund, Banyan
Land Trust, Banyan Land Fund II, Banyan
Mortgage Fund, Allied Healthcare Products,
Inc., First Western Inc., DHR Group and
Geotech Industries. Formerly, Director,
TAG Inc.

Donald R. Kurtz Formerly, Vice President of International
Member of Equity Board Asset Management, General Motors Investment
Management Corp. and Director, TAG Inc.

Kenneth M. Poovey Partner, Latham & Watkins
Executive Vice President,
General Counsel and Board
Secretary

James F. McIntosh Executive Director, Allen Matkins, Leck,
Member of Equity Board Gamble & Mallory. Formerly, Director of
Pacific Investment Management Company

David B. Breed Director, Managing Director and Chief
Member of Operating Board Executive Officer, Cadence Capital
Management Inc.; Managing Director and
Chief Executive Officer, Cadence Capital
Management

Walter B. Gerken Director, Mullin Consulting Inc.; Director,
Chairperson and Member of Executive Services Corp. of Southern
Equity Board California. Formerly, Director, Pacific
Investment Management Company, Chairman,
Director, Chairman of Executive Committee
and Chief Executive officer, Pacific Mutual
Life Insurance Company

C-4

<PAGE>

NAME AND POSITION WITH MANAGER BUSINESS AND OTHER CONNECTIONS
- ------------------------------ ------------------------------

William H. Gross Director and Managing Director, PIMCO
Member of Equity Board and Management Inc.; Managing Director, Pacific
Operating Board Investment Management Company; Senior Vice
President, PIMCO Funds; Director and Vice
President, StocksPLUS Management, Inc.;
Member of PIMCO Partners LLC

John L. Hague Director and Managing Director, PIMCO
Member of Operating Board Management Inc.; Managing Director, Pacific
Investment Management Company

Brent R. Harris Director and Managing Director, PIMCO
Member of Operating Board Management Inc.; Managing Director, Pacific
Investment Management Company; Director and
Vice President, StocksPLUS Management,
Inc.; Chairman of the Board and Trustee,
PIMCO Funds and PIMCO Commercial Mortgage
Securities Trust, Inc.; Member of PIMCO
Partners LLC

James F. Muzzy Director and Managing Director, PIMCO
Member of Operating Board Management Inc.; Managing Director, Pacific
Investment Management Company; Vice
President, PIMCO Funds; Director and Vice
President, StocksPLUS Management, Inc.;
Member of PIMCO Partners LLC

William F. Podlich III Director and Managing Director, PIMCO
Member of Equity Board and Management Inc.; Managing Director, Pacific
Operating Board Investment Management Company; Vice
President, PIMCO Commercial Mortgage
Securities Trust, Inc.; Member of PIMCO
Partners LLC

Glenn S. Schafer President and Director, Pacific Life
Member of Equity Board Insurance Company; Chairman and Director,
Mutual Service Corporation, United Planners
Group, Inc., Pacific Equities Network and
Pacific Financial Holding Company

Thomas C. Sutton Chairman, Chief Executive Officer and
Member of Equity Board Director, Pacific Life Insurance Company;
Chairman, Trustee and President, Pacific
Select Fund; Director, United Planners
Group, Inc., Pacific Equities Network,
Mutual Services Corporation and Pacific
Financial Holding Company

William S. Thompson, Jr. Director, Managing Director and Chief
Member of Equity Board; Executive Officer, PIMCO Management Inc.;
Chairman and Member of Chief Executive Officer and Managing
Operating Board; Member of Director, Pacific Investment Management
Operating Committee Company; Director and President, StocksPLUS
Management, Inc.; Vice President, PIMCO
Funds and PIMCO Commercial Mortgage
Securities Trust, Inc.

Benjamin L. Trosky Director and Managing Director, PIMCO
Member of the Operating Management Inc.; Managing Director, Pacific
Board Investment Management Company

Stephen J. Treadway Director, Chairman and President, PFDCO;
Executive Vice President Trustee and President of the Trust; Trustee
and President, PFMMS. Formerly, Executive
Vice President, Smith Barney Inc.

C-5

<PAGE>

NAME AND POSITION WITH MANAGER BUSINESS AND OTHER CONNECTIONS
- ------------------------------ ------------------------------

James Ward None
Senior Vice President,
Director of Human Resources

Richard M. Weil Assistant Secretary, CCI, Columbus Circle
Senior Vice President, Legal Investors Inc., Cadence Capital Management,
Counsel Cadence Capital Management Inc., NFJ
Management Inc., Parametric Management
Inc., Pacific Investment Management
Company, PIMCO Management Inc. and PFDCO;
Secretary, NFJ Investment Group, Parametric
Portfolio Associates, and StocksPLUS
Management, Inc.

The principal business address of the Manager is 800 Newport Center
Drive, Suite 100, Newport Beach, CA 92660. The address of PFDCO is 2187
Atlantic Street, Stamford, CT 06902. The address of CCI and Columbus Circle
Investors Management Inc. is One Station Place, Stamford, CT 06902. The address
of Cadence Capital Management and Cadence Capital Management Inc. is Exchange
Place, 53 State Street, Boston, MA 02109. The address of NFJ Investment Group
and NFJ Management Inc. is 2121 San Jacinto, Suite 1840, Dallas, TX 75201. The
address of Parametric Portfolio Associates and Parametric Management Inc. is
7310 Columbia Center, 701 Fifth Avenue, Seattle, WA 98104. The address of
Pacific Financial Holding Company, Pacific Equities Network, Pacific Mutual Life
Insurance Company and Pacific Select Fund is 700 Newport Center Drive, Newport
Beach, CA 92660. The address of PIMCO Funds, PFMMS, Pacific Investment
Management Company, PIMCO Management Inc., PIMCO Commercial Mortgage Securities
Trust, Inc. and StocksPLUS Management, Inc. is 840 Newport Center Drive, Newport
Beach, CA 92660. The address of Mutual Service Corporation is 7108 Fairway
Drive, Palm Beach Gardens, FL 33418. The address of United Planners Group, Inc.
is 7333 East Double Tree Ranch Road, Scottsdale, AZ 85258.

(b) CCI is a general partnership formed on September 9, 1994 which is
registered as an investment adviser under the Investment Advisers Act of 1940.
The Manager and Columbus Circle Investors Management Inc. ("CCI Inc.") , a
wholly-owned subsidiary of the Manager, are the general partners of CCI. CCI
consists of the personnel of the former Columbus Circle Investors Division of
TAGLP and the investment personnel of the former Mutual Funds Division of TAGLP.
CCI acts as sub-adviser to other mutual funds and also advises and manages
individual accounts, profit sharing and pension funds and institutional
accounts.

Set forth below are the substantial business engagements during at least
the two past fiscal years of each director or officer of CCI:

NAME AND POSITION WITH CCI BUSINESS AND OTHER CONNECTIONS
- -------------------------- ------------------------------

Christopher B. Burnham Treasurer, State of Connecticut
Managing Director,
President and Chief
Executive Officer

Irwin F. Smith Member of Equity and Operating Boards and
Managing Director Operating Committee, PIMCO Advisors L.P.;
Director and Chairman, CCI Inc. Formerly,
Chairman and CEO of CCI

Donald A. Chiboucas Member of Operating Board, PIMCO Advisors
Managing Director L.P.; Director and President, CCI Inc.
Formerly, President of CCI.

C-6

<PAGE>

NAME AND POSITION WITH CCI BUSINESS AND OTHER CONNECTIONS
- -------------------------- ------------------------------

Louis P. Celentano Director and Vice President, CCI Inc.,
Managing Director Chairman, Columbus Circle Trust Company
(CCTC)

Robert W. Fehrman Director, CCI Inc.
Managing Director

Marc Felman None
Managing Director

Mark Fishman None
Senior Vice President

Clifford G. Fox Director, CCI Inc.
Managing Director

Amy M. Hogan Director, CCI Inc.
Managing Director

Anthony Rizza Director, CCI Inc.
Managing Director

C. Paul Tyborowski Director, CCI Inc., President, CCTC
Managing Director

Winthrop S. Headley None
Senior Vice President

Michele Montano None
Senior Vice President

Jacob Navon None
Senior Vice President

Harold R. Snedcof None
Vice President

Sharon S. Weslow None
Vice President

Cecelia Pastore None
Vice President

Paul A. Pantalena None
Vice President

Paul Meeks None
Vice President

Anne Maloney None
Vice President

Nathaniel J. Belknap None
Vice President

Taegan D. Goddard Assistant State Treasurer, State of
Senior Vice President Connecticut

C-7

<PAGE>

NAME AND POSITION WITH CCI BUSINESS AND OTHER CONNECTIONS
- -------------------------- ------------------------------

Vinh T. Nguyen Vice President, Controller, PIMCO Advisors
Vice President, Controller L.P.

Andrew Jacobson None
Vice President - Portfolio
Manager

Karen Kruger None
Vice President - Portfolio
Manager

Robert M. Fitzgerald Senior Vice President - Finance, Chief
Chief Financial Officer, Financial Officer and Controller, PIMCO
Treasurer Advisors L.P.; Chief Financial Officer,
Senior Vice President - Finance and
Controller, PFDCO; Senior Vice President-
Finance and Controller, CCI and Columbus
Circle Investors Management Inc.; Assistant
Treasurer, Cadence Capital Management;
Treasurer, Cadence Capital Management Inc.,
NFJ Investment Group, NFJ Management Inc.,
Parametric Portfolio Associates, Parametric
Management Inc., Pacific Investment
Management Company, PIMCO Management Inc. and
StocksPLUS Management Inc. Formerly, Chief
Financial Officer, TPM Financial, Vice
President, Mechanics National Bank, and
Partner, Price Waterhouse

Newton B. Schott, Jr. Vice President and Clerk of the Trust; Vice
Chief Legal Officer, President and Secretary of PFMMS; Director,
Secretary 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

Richard M. Weil Assistant Secretary, CCI Inc., Cadence
Assistant Secretary Capital Management Inc., NFJ Management Inc.,
Parametric Management Inc., PIMCO Management
Inc. and PFDCO; Secretary, NFJ Investment
Group, Parametric Portfolio Associates and
StocksPLUS Management, Inc.; Senior Vice
President, Legal Counsel, PIMCO Advisors L.P.

The address of CCI and CCI Inc. is One Station Place, Stamford, CT 06902.

ITEM 29. PRINCIPAL UNDERWRITERS.

(a) PFDCO, the Registrant's principal underwriter, also serves as
underwriter for PIMCO Funds and PFMMS. PFDCO is a wholly-owned subsidiary of
PIMCO Advisors L.P.

C-8

<PAGE>

(b) Information with respect to directors and officers of PFDCO is as
follows:

NAMES AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESSES PRINCIPAL UNDERWRITER WITH REGISTRANT
- ------------------- -------------------------- -----------------------

William D. Cvengros Director Trustee

Stephen H. Treadway Director, Chairman and Trustee and President
President

Newton B. Schott, Jr. Director, Executive Vice Vice President; Clerk
President, Chief
Administrative Officer and
Secretary

Jeffrey L. Booth Vice President None

Deborah P. Brennan Vice President None

James D. Bosch Regional Vice President None

Timothy R. Claric Senior Vice President None

Jonathan R. Fessel Vice President None

Robert M. Fitzgerald Chief Financial Officer None
and Treasurer

Michael J. Gallagher Vice President None

David S. Goldsmith Vice President None

Ronald H. Gray Vice President None

John B. Hussey Vice President None

Edward W. Janeczek Senior Vice President None

Stephen R. Jobe Vice President None

Johnathan C. Jones Vice President None

William E. Lynch Senior Vice President None

Jacqueline A. McCarthy Vice President None

Andrew J. Meyers Executive Vice President None

Fiora Moyer Regional Vice President None

Vinh T. Nguyen Vice President and None
Controller

Philip J. Neugebauer Vice President None

Joffrey H. Pearlman Regional Vice President None

Glynne Pisapia Regional Vice President None

Matthew M. Russell Vice President None

C-9

<PAGE>

NAMES AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESSES PRINCIPAL UNDERWRITER WITH REGISTRANT
- ------------------- -------------------------- -----------------------

Robert M. Smith Vice President None

Ellen Z. Spear Vice President None

David P. Stone Regional Vice President None

Daniel W. Sullivan Vice President None

William H. Thomas, Jr. Regional Vice President None

Paul H. Troyer Senior Vice President None

Brian F. Trumbore Executive Vice President None

Richard M. Weil Assistant Secretary None

Glenn A. Zimmerman Vice President None

The principal business address of each such individual is 2187 Atlantic
Street, Stamford, CT 06902, except for Messrs. Cvengros, Fitzgerald, Nguyen and
Weil for whom it is 800 Newport Center Drive, Suite 100, Newport Beach,
CA 92660.

(c) The Registrant has no principal underwriter that is not an
affiliated person of the Registrant or an affiliated person of such an
affiliated person.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

Persons maintaining physical possession of accounts, books and other
documents required to be maintained by Section 31(a) of the Investment Company
Act of 1940 and the Rules promulgated thereunder include Registrant's Clerk,
Newton B. Schott, Jr.; Registrant's Manager, PIMCO Advisors L.P., and
Sub-Adviser, CCI; Registrant's Custodian, The Bank of New York; and Registrant's
Transfer Agent and Shareholder Servicing Agent, Shareholder Services, Inc. The
address of PIMCO Advisors L.P. is 800 Newport Center Drive, Suite 100, Newport
Beach, CA 92660; the address of the Clerk is 2187 Atlantic Street, Stamford, CT
06902; the address of CCI is One Station Place, Stamford, CT 06902; the address
of the Custodian is 110 Washington Street, New York, NY 10286; and the address
of the Transfer Agent and Shareholder Servicing Agent is 3410 South Galena
Street, Denver, CO 80231.

ITEM 31. MANAGEMENT SERVICES.

None.

ITEM 32. UNDERTAKINGS.

The Registrant hereby undertakes to file a post-effective amendment,
using financial statements which need not be certified, within four to six
months from the effective date of this Post-Effective Amendment to the
Registration Statement relating to the Liquid Assets Fund.

C-10

<PAGE>

NOTICE

A copy of the Agreement and Declaration of Trust of Cash Accumulation
Trust is on file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this instrument is executed on
behalf of the Registrant by an officer of the Registrant in his capacity as an
officer and not individually and that the obligations of or arising out of this
instrument are not binding upon any of the Trustees or shareholders of the Trust
individually but are binding only upon the assets and property of the
Registrant.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized in the City of Stamford, and
the State of Connecticut on the 7th day of November, 1997.

CASH ACCUMULATION TRUST

By: /s/ Stephen J. Treadway
------------------------------------
Stephen J. Treadway,
President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ Stephen J. Treadway Trustee and President
- ----------------------------------- (principal executive officer)
Stephen J. Treadway

/s/ E. Philip Cannon * Trustee
- -----------------------------------
E. Philip Cannon

/s/ Donald P. Carter * Trustee
- -----------------------------------
Donald P. Carter

/s/ Gary A. Childress * Trustee
- -----------------------------------
Gary A. Childress

/s/ William D. Cvengros * Trustee
- -----------------------------------
William D. Cvengros

/s/ John P. Hardaway * Treasurer (principal
- ----------------------------------- financial and principal
John P. Hardaway accounting officer)

/s/ Gary L. Light * Trustee
- -----------------------------------
Gary L. Light

/s/ Richard L. Nelson * Trustee
- -----------------------------------
Richard L. Nelson

/s/ Lyman W. Porter * Trustee
- -----------------------------------
Lyman W. Porter

/s/ Robert A. Prindiville * Trustee
- -----------------------------------
Robert A. Prindiville

C-11
<PAGE>

/s/ Alan Richards * Trustee
- -----------------------------------
Alan Richards

/s/ Joel Segall * Trustee
- -----------------------------------
Joel Segall

/s/ W. Bryant Stooks * Trustee
- -----------------------------------
W. Bryant Stooks

/s/ Gerald M. Thorne * Trustee
- -----------------------------------
Gerald M. Thorne

*By: /s/ Stephen J. Treadway
-----------------------------------
Stephen J. Treadway
Attorney-In-Fact
Date: November 7, 1997

C-12

<PAGE>

EXHIBIT INDEX

2. (a) By-Laws of the Trust.
(b) Amendment to By-Laws of the Trust dated July 25, 1990.
(c) Amendment to By-Laws of the Trust dated May 24, 1991.
(d) Amendment to By-Laws of the Trust dated October 22, 1997.
15. Amended Distribution Plan of the Trust, as revised through
October 22, 1997.
19. Powers of Attorney for E. Philip Cannon, Donald P. Carter, Gary A.
Childress, William D. Cvengros, Gary L. Light, Robert A.
Prindiville, Joel Segall, W. Bryant Stooks, Gerald M. Thorne,
Richard L. Nelson, Lyman W. Porter, Alan Richards and John P.
Hardaway.

C-13

<PAGE>

BYLAWS
OF
CASH ACCUMULATION TRUST

ARTICLE 1
Agreement and Declaration of Trust and Principal Office

1.1 AGREEMENT AND DECLARATION OF TRUST. These Bylaws shall be subject
to the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of Cash Accumulation Trust, the Massachusetts business
trust established by the Declaration of Trust (the "Trust").

1.2 PRINCIPAL OFFICE OF THE TRUST. A principal office of the Trust
shall be located in Boston, Massachusetts. The Trust may have such other
offices within or without Massachusetts as the Trustees may determine or as they
may authorize.

ARTICLE 2
Meetings of Trustees

2.1 REGULAR MEETINGS. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees. A regular
meeting of the Trustees may be held without call or notice immediately after and
at the same place as the annual meeting of the shareholders.

2.2 SPECIAL MEETINGS. Special meetings of the Trustees may be held at
any time and at any place designated in the call of the meeting when called by
the Chairman of the Trustees, the President or the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the Clerk or
an Assistant Clerk or by the officer or the Trustees calling the meeting.

2.3 NOTICE. It shall be sufficient notice to the Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram, telex
or telecopy or other electronic facsimile transmission method at least twenty-
four hours before the meeting addressed to the Trustee at his or her usual or
last known business or residence address

<PAGE>

or to give notice to him or her in person or by telephone at least twenty-four
hours before the meeting. Notice of a meeting need not be given to any Trustee
if a written waiver of notice, executed by him or her before the meeting, is
filed with the records of the meeting, or to any Trustee who attends the meeting
without protesting prior thereto or at its commencement the lack of notice to
him or her. Neither notice of a meeting nor a waiver of a notice need specify
the purposes of the meeting.

2.4 QUORUM. At any meeting of the Trustees a majority of the Trustees
then in office shall constitute a quorum. Any meeting may be adjourned from
time to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.

ARTICLE 3
Officers

3.1 ENUMERATION: QUALIFICATION. The officers of the Trust shall be a
President, a Treasurer, a Clerk, and such other officers including a Chairman of
the Trustees, if any, as the Trustees from time to time may in their discretion
elect. The Trust may also have such agents as the Trustees from time to time
may in their discretion appoint. The Chairman of the Trustees, if one is
elected, shall be a Trustee and may but need not be a shareholder; and any other
officer may but not need be a Trustee or a shareholder. Any two or more offices
may be held by the same person.

3.2 ELECTION. The President, the Treasurer, and the Clerk shall be
elected annually by the Trustees. Other officers, if any, may be elected or
appointed by the Trustees at said meeting or at any other time. Vacancies in
any office may be filled at any time.

3.3 TENURE. The Chairman of the Trustees, if one is elected, the
President, the Treasurer and the Clerk shall hold office until their respective
successors are chosen and qualified, or in each case until he or she sooner
dies, resigns, is removed or becomes disqualified. Each other officer shall
hold office and each agent shall retain authority at the pleasure of the
Trustees.

3.4 POWERS. Subject to the other provisions of these

-2-
<PAGE>

Bylaws, each officer shall have, in addition to the duties and powers herein and
in the Declaration of Trust set forth, such duties and powers as are commonly
incident to the office occupied by him or her as if the Trust were organized as
a Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.

3.5 CHAIRMAN; PRESIDENT. Unless the Trustees otherwise provide, the
Chairman of the Trustees or, if there is none or in the absence of the Chairman,
the President shall preside at all meetings of the shareholders and of the
Trustees. The President shall be the chief executive officer.

3.6 TREASURER. The Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the provisions of the
Declaration of Trust and to any arrangement made by the Trustees with a
custodian, investment adviser or manager, or transfer, shareholder servicing or
similar agent, be in charge of the valuable papers, books of account and
accounting records of the Trust, and shall have such other duties and powers as
may be designated from time to time by the Trustees or by the President.

3.7 CLERK. The Clerk shall record all proceedings of the shareholders
and the Trustees in books to be kept therefor, which books or a copy thereof
shall be kept at the principal office of the Trust. In the absence of the Clerk
from any meeting of the shareholders or Trustees, an assistant clerk, or if
there be none or if he or she is absent, a temporary clerk chosen at such
meeting shall record the proceedings thereof in the aforesaid books.

3.8 RESIGNATIONS. Any officer may resign at any time by written
instrument signed by him or her and delivered to the Chairman, the President or
the Clerk or to a meeting of the Trustees. Such resignation shall be effective
upon receipt unless specified to be effective at some other time. Except to the
extent expressly provided in a written agreement with the Trust, no officer
resigning and no officer removed shall have any right to any compensation for
any period following his or her resignation or removal, or any right to damages
on account of such removal.

-3-
<PAGE>

ARTICLE 4
Committees

4.1 QUORUM; VOTING. A majority of the members of any Committee of the
Trustees shall constitute a quorum for the transaction of business, and any
action of such a Committee may be taken at a meeting by a vote of a majority of
the members present (a quorum being present) or evidenced by one or more
writings signed by such a majority. Members of a Committee may participate in a
meeting of such Committee by means of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting.

ARTICLE 5
Reports

5.1 GENERAL. The Trustees and officers shall render reports at the time
and in the manner required by the Declaration of Trust or any applicable law.
Officers and Committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.

ARTICLE 6
Fiscal Year

6.1 GENERAL. Except as from time to time otherwise provided by the
Trustees, the initial fiscal year of the Trust shall end on such date as is
determined in advance or in arrears by the Treasurer, and subsequent fiscal
years shall end on such date in subsequent years.

ARTICLE 7
Seal

7.1 GENERAL. The seal of the Trust shall consist of a flat-faced die
with the word "Massachusetts", together with the name of the Trust and the year
of its organization cut or engraved thereon but, unless otherwise required by
the Trustees, the seal shall not be necessary to be placed on, and its absence
shall not impair the validity of, any

-4-
<PAGE>

document, instrument or other paper executed and delivered by or on behalf of
the Trust.

ARTICLE 8
Execution of Papers

8.1 GENERAL. Except as the Trustees may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President or by the Treasurer and need not bear the seal of the Trust.

ARTICLE 9
Issuance of Share Certificates

9.1 SHARE CERTIFICATES. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.

The Trustees may at any time authorize the issuance of share certificates.
In that event, each shareholder shall be entitled to a certificate stating the
number of shares owned by him, in such form as shall be prescribed from time to
time by the Trustees. Such certificates shall be signed by the president or
vice-president and by the treasurer or assistant treasurer. Such signatures may
be facsimile if the certificate is signed by a transfer agent, or by a
registrar, other than a Trustee, officer or employee of the Trust. In case any
officer who has signed or whose facsimile signature has been placed on such
certificate shall cease to be such officer before such certificate is issued, it
may be issued by the Trust with the same effect as if he were such officer at
the time of its issue.

9.2 LOSS OF CERTIFICATES. In case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.

-5-
<PAGE>

9.3 ISSUANCE OF NEW CERTIFICATES TO PLEDGEE. A pledgee of shares
transferred as collateral security shall be entitled to a new certificate if the
instrument of transfer substantially describes the debt or duty that is intended
to be secured thereby. Such new certificates shall express on its face that it
is held as collateral security, and the name of the pledgor shall be stated
thereon, who alone shall be liable as a shareholder and entitled to vote
thereon.

9.4 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not effect the
ownership of shares in the Trust.

ARTICLE 10
Provisions Relating to the Conduct of the Trust's Business

10.1 CERTAIN DEFINITIONS. When used herein the following words shall
have the following meanings: "Distributor" shall mean any one or more
corporations, firms or associations which have distributor's or principal
underwriter's contracts in effect with the Trust providing that redeemable
shares issued by the Trust shall be offered and sold by such Distributor.
"Manager" shall mean any corporation, firm or association which may at the
time have an advisory or management contract with the Trust and any
corporation, firm or association which may at any time have a sub-advisory
contract relating to the Trust with any such Manager.

10.2 LIMITATION ON HOLDINGS BY THE TRUST OF CERTAIN SECURITIES AND ON
DEALINGS WITH OFFICERS OR TRUSTEES. The Trust may not purchase or retain shares
or securities issued by an issuer if one or more of the holders of the shares or
securities issued by an issuer or one or more of the officers or directors of
such issuer is an officer or Trustee of the Trust or officer or director of the
Manager and if one or more of such officers, Trustees or directors owns
beneficially more than 1/2 of 1% of the shares or securities, or both, of such
issuer and such officers, Trustees and directors owning more than 1/2 of 1% of
such shares or securities together own beneficially more 5% of such shares or
securities. Each officer and Trustee of the

-6-
<PAGE>

Trust shall keep the Treasurer of the Trust informed of the names of all issuers
shares or securities of which are held in the portfolio of the Trust in which
such officer or Trustee owns as much as 1/2 of 1% of the outstanding shares or
securities.

The Trust will not lend any of its assets to the Distributor or Manager or
to any officer or director of the Distributor or Manager or any officer or
Trustee of the Trust, and shall not permit any officer or Trustee or any officer
or director of the Distributor or Manager to deal for or on behalf of the Trust
with himself or herself as principal or agent, or with any partnership,
association or corporation in which he or she has a financial interest; provided
that the foregoing provisions shall not prevent (a) officers and Trustees of the
Trust or officers and directors of the Distributor or Manager from buying,
holding or selling shares in the Trust or from being partners, officers or
directors of or otherwise financially interested in the Distributor or the
Manager; (b) purchases or sales of securities or other property if such
transaction is permitted by or is exempt or exempted from the provisions of the
Investment Company Act of 1940 or any Rule or Regulation thereunder; (c)
employment of legal counsel, registrar, transfer agent, shareholder servicing
agent, dividend disbursing agent or custodian who is, or has a partner,
shareholder, officer or director who is, an officer or Trustee of the Trust or
an officer or director of the Distributor or Manager; (d) sharing statistical,
research, legal and management expenses and office hire and expenses with any
other investment company in which an officer or Trustee of the Trust or an
officer or director of the Distributor or Manager is an officer or director or
otherwise financially interested.

10.3 LIMITATION ON DEALING IN SECURITIES OF THE TRUST BY CERTAIN
OFFICERS, TRUSTEES, DISTRIBUTOR OR MANAGER. Neither the Distributor nor
Manager, nor any officer or Trustee of the Trust or officer or director of the
Distributor or Manager shall take long or short positions in securities issued
by the Trust; provided, however, that:

(a) the Distributor may purchase from the Trust and otherwise deal
in shares issued by the Trust pursuant to the terms of its contract with
the Trust;

(b) any officer or Trustee of the Trust or

-7-
<PAGE>

officer or director of the Distributor or Manager or any trustee or
fiduciary for the benefit of any of them may at any time, or from time to
time, purchase from the Trust or from the Distributor shares issued by the
Trust at the price available to the public or to such officer, Trustee,
director, trustee or fiduciary, no such purchase to be in contravention of
any applicable state or federal requirement; and

(c) the Distributor or the Manager may at any time, or from time
to time, purchase for investment shares issued by the Trust.

10.4 SECURITIES AND CASH OF THE TRUST TO BE HELD BY CUSTODIAN SUBJECT TO
CERTAIN TERMS AND CONDITIONS.

(a) All securities and cash owned by this Trust shall be held by
or deposited with one or more banks or trust companies having (according to
its last published report) not less than $5,000,000 aggregate capital,
surplus and undivided profits (any such bank or trust company being hereby
designated as "Custodian"), provided such a Custodian can be found ready
and willing to act; subject to such rules, regulations and orders, if any,
as the Securities and Exchange Commission may adopt, this Trust may, or may
permit any Custodian to, deposit all or any part of the Securities owned by
this Trust in a system for the central handling of securities pursuant to
which all securities of any particular class or series of any issue
deposited within the system may be transferred or pledged by bookkeeping
entry, without physical delivery. The Custodian may appoint, subject to
the approval of the Trustees, one or more subcustodians.

(b) The Trust shall enter into a written contract with each
Custodian regarding the powers, duties and compensation of such Custodian
with respect to the cash and securities of the Trust held by such
Custodian. Said contract and all amendments thereto shall be approved by
the Trustees.

(i) in case of such resignation or inability

-8-
<PAGE>

to serve, use its best efforts to obtain a successor Custodian;

(ii) require that the cash and securities owned by the Trust be
delivered directly to the successor Custodian; and

(iii) in the event that no successor Custodian can be found,
submit to the shareholders before permitting delivery of the cash
and securities owned by the Trust otherwise than to a successor
Custodian, the question whether the Trust shall be liquidated or
shall function without a Custodian.

10.5 REQUIREMENTS AND RESTRICTIONS REGARDING THE MANAGEMENT CONTRACT.
Every advisory or management contract entered into by the Trust shall provide
that in the event that the total expenses of any series of shares of the Trust
for any fiscal year should exceed the limits imposed on investment company
expenses imposed by any statute or regulatory authority of any jurisdiction in
which shares of the Trust are offered for sale, the compensation due the Manager
for such fiscal year shall be reduced by the amount of such excess by a
reduction or refund thereof.

10.6 REPORTS TO SHAREHOLDERS: DISTRIBUTIONS FROM REALIZED GAINS. The
Trust shall send to each shareholder of record at least semi-annually a
statement of the condition of the Trust and of the results of its operations,
containing all information required by applicable laws or regulations.

10.7 DETERMINATION OF NET ASSET VALUE PER SHARE. Net asset value per
share of each series of shares of the Trust shall mean: (i) the value of all the
assets of such series; (ii) less total liabilities of such series; (iii) divided
by the number of shares of such series outstanding, in each case at the time of
each determination. The net asset value per share of each series shall be
determined as of the normal close of trading on the New York Stock Exchange on
each day on which such Exchange is open. As of any time other than the normal
close of trading on such Exchange, the Trustees may cause the net asset value
per share last determined to be determined again in a similar manner or adjusted
to reflect changes in market values of securities in the portfolio, such
adjustment to be made on the basis of changes in selected security prices
determined by the

-9-
<PAGE>

Trustees to be relevant to the portfolio of such series or in averages or in
other standard and readily ascertainable market data, and the Trustees may fix
the time when such redetermined or adjusted net asset value per share of each
series shall become effective.

In valuing the portfolio investments of any series for determination of net
asset value per share of such series, securities for which market quotations are
readily available shall be valued at prices which, in the opinion of the
Trustees or the person designated by the Trustees to make the determination,
most nearly represent the market value of such securities, and other securities
and assets shall be valued at their fair value as determined by or pursuant to
the direction of the Trustees, which in the case of short-term debt obligations,
commercial paper and repurchase agreements may, but need not, be on the basis of
quoted yields for securities of comparable maturity, quality and type, or on the
basis of amortized cost. Expenses and liabilities of the Trust shall be accrued
each day. Liabilities may include such reserves for taxes, estimated accrued
expenses and contingencies as the Trustees or their designates may in their sole
discretion deem fair and reasonable under the circumstances. No accruals shall
be made in respect of taxes on unrealized appreciation of securities owned
unless the Trustees shall otherwise determine. Dividends payable by the Trust
shall be deducted as at the time of but immediately prior to the determination
of net asset value per share on the record date therefor.

ARTICLE 11
Shareholders' Voting Powers and Meetings

11.1 VOTING POWERS. The Shareholders shall have power to vote only (i)
for the election of Trustees as provided in Article IV, Section I of the
Declaration of Trust, PROVIDED, HOWEVER, that no meeting of Shareholders is
require to be called for the purpose of electing Trustees unless and until such
time as less than a majority of the Trustees have been elected by the
Shareholders, (ii) with respect to any Manager or Sub-Adviser as provided in
Article IV, Section 6 of the Declaration of Trust to the extent required by the
Investment Company Act of 1940 and the rules and regulations thereunder,
(iii) with respect to any termination of this Trust to the extent and as
provided in Article IX, Section 4 of the Declaration of Trust, (iv) with respect
to any amendment of the Declaration of Trust to the extent and as

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<PAGE>

provided in Article IX, Section 7 of the Declaration of Trust, (v) to the same
extent as the stockholders of a Massachusetts business corporation as to whether
or not a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders, and (vi) with respect to such additional matters relating to the
Trust as may be required by law, the Declaration of Trust, these Bylaws or any
registration of the Trust with the Commission (or any successor agency) or any
state, or as the Trustees may consider necessary or desirable. Each whole Share
shall be entitled to one vote as to any matter on which it is entitled to vote
and each fractional Share shall be entitled to a proportionate fractional vote.
On any matter submitted to a vote of Shareholders all Shares of the Trust then
entitled to vote shall be voted by individual series, except (i) when required
by the 1940 Act, Shares shall be voted in the aggregate and not by individual
series and (ii) when the Trustees have determined that the matter affects only
the interests of one or more series, then only Shareholders of such series shall
be entitled to vote thereon. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them.
A proxy purporting to be executed by or on behalf of a Shareholder shall be
deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, the Declaration of Trust or these Bylaws to be taken by
shareholders.

11.2 VOTING POWER AND MEETINGS. Meetings of the Shareholders may be
called by the Trustees for the purpose of electing Trustees as provided in
Article IV, Section 1 of the Declaration of Trust and for such other purposes as
may be prescribed by law, by the Declaration of Trust or by these Bylaws.
Meetings of the Shareholders may also be called by the Trustees from time to
time for the purpose of taking action upon any other matter deemed by the
Trustees to be necessary or desirable. A meeting of Shareholders may be held at
any place designated by the Trustees. Written notice of any meeting of
Shareholders shall be given or caused to be given by the Trustees by mailing
such notice at

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<PAGE>

least seven days before such meeting, postage prepaid, time and place of the
meeting, to each at the Shareholder's address as it appears on the records of
the Trust. Whenever notice of a meeting is required to be given to a
Shareholder under the Declaration of Trust or these Bylaws, a written waiver
thereof, executed before or after the meeting by such Shareholder or his
attorney thereunto authorized and filed with the records of the meeting, shall
be deemed equivalent to such notice.

11.3 QUORUM AND REQUIRED VOTE. A majority of Shares entitled to vote
shall be a quorum for the transaction of business at a Shareholders' meeting,
except that where any provision of law or of the Declaration of Trust or these
Bylaws permits or requires that holders of any series shall vote as a series,
then a majority of the aggregate number of Shares of that series entitled to
vote shall be necessary to constitute a quorum for the transaction of business
by that series. Any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting, without the necessity of further notice.
Except when a larger vote is required by any provision of law or the Declaration
of Trust or these Bylaws, a majority of the Shares voted shall decide any
questions and a plurality shall elect a Trustee, provided that where any
provision of law or of the Declaration of Trust or these Bylaws permits or
requires that the holders of any series shall vote as a series, then a majority
of the Shares of that series voted on the matter (or a plurality with respect to
the election of a Trustee) shall decide that matter insofar as that series is
concerned.

11.4 ACTION BY WRITTEN CONSENT. Any action taken by Shareholders may be
taken without a meeting if a majority of Shareholders entitled to vote on the
matter (or such larger proportion thereof as shall be required by any express
provision of law or the Declaration of Trust or these Bylaws) consent to the
action in writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.

11.5 RECORD DATES. For the purpose of determining the shareholders who
are entitled to vote or act at any meeting or any adjournment thereof, or who
are entitled to receive payment of any dividend or of any other distribution,
the

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<PAGE>

Trustees may from time to time fix a time, which shall be not more than 60 days
before the date of any meeting of shareholders or the date for the payment of
any dividend or of any other distribution, as the record date for determining
the shareholders having the right to notice of and to vote at such meeting and
any adjournment thereof or the right to receive such dividend or distribution,
and in such case only shareholders of record on such record date shall have such
right notwithstanding any transfer of shares on the books of the Trust after the
record date; or without fixing such record date the Trustees may for any of such
purposes close the register or transfer books for all or any part of such
period.

ARTICLE 12
Amendments to the Bylaws

12.1 GENERAL. These Bylaws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.

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<PAGE>

CASH ACCUMULATION TRUST
BY-LAW AMENDMENT
dated JULY 25, 1990

VOTED: That Section 11.5 of the By-laws of the Trust be and is hereby amended
by deleting the words "not more than 60 days" and replacing them with
the words "not more than 90 days."

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<PAGE>

CASH ACCUMULATION TRUST
BY-LAW AMENDMENT
dated MAY 24, 1991

VOTED: That the By-Laws of the Trust be, and they hereby are, amended by
adding to Section 11.1 thereof, immediately prior to the penultimate
sentence of such Section 11.1, the following:

"The placing of a shareholder's name on a proxy pursuant to telephonic
or electronically transmitted instructions obtained pursuant to
procedures reasonably designed to verify that such instructions have
been authorized by such shareholder shall constitute execution of such
proxy by or on behalf of such shareholder."

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<PAGE>

CASH ACCUMULATION TRUST
BY-LAW AMENDMENT
dated OCTOBER 22, 1997

VOTED: That the Trust's By-Laws be and hereby are amended to delete Section
10.5, which is set forth below (and to renumber current Sections 10.6
and 10.7 as new Sections 10.5 and 10.6, respectively):

"10.5 REQUIREMENTS AND RESTRICTIONS REGARDING THE MANAGEMENT
CONTRACT. Every advisory or management contract entered into by the
Trust shall provide that in the event that the total expenses of any
series of shares of the Trust for any fiscal year should exceed the
limits imposed on investment company expenses imposed by any statute
or regulatory authority of any jurisdiction in which shares of the
Trust are offered for sale, the compensation due the Manager for such
fiscal year shall be reduced by the amount of such excess by a
reduction or refund thereof."

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<PAGE>

CASH ACCUMULATION TRUST

Distribution Plan

effective October 26, 1989

I. INTRODUCTION

Rule 12b-1 under the Investment Company Act of 1940 (such Act,
together with the rules and regulations thereunder as from time to time in
effect, the "1940 Act") prohibits a mutual fund from engaging directly or
indirectly in financing any activity primarily intended to result in the
sale of its shares unless such financing is pursuant to a written plan
describing all material aspects of such financing. This document
constitutes such a plan (the "Plan"). The Board of Trustees of Cash
Accumulation Trust (the "Fund"), in considering whether the Fund should
implement this Plan has requested and evaluated such information deemed
necessary to an informed determination of whether this Plan should be
implemented. Such information was requested of and provided by the
principal underwriter of the shares of the Fund (the "Principal
Underwriter") and certain broker-dealers which anticipate selling Fund
shares and also anticipate being parties to certain agreements relating to
the Plan. The Board of Trustees of the Fund has considered all such
information and given appropriate weight to all pertinent factors as it
determined necessary to form the basis for the decision to use assets of
the Fund for the purposes set forth in this Plan.

In voting to approve the implementation of this Plan, the Trustees
have concluded, in the exercise of their reasonable business judgment and
in light of their respective fiduciary duties, that there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders. The
Plan has been approved by a vote of the Board of Trustees and of the
Trustees who are not

<PAGE>

interested persons of the Fund as defined in the 1940 Act and who have no
direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan ("Disinterested Trustees").

II. EXPENSES ELIGIBLE FOR REIMBURSEMENT

Subject to the limitations hereinafter provided, the Fund shall make
payments to the Principal Underwriter, as reimbursement for expenses of
the Principal Underwriter primarily intended to result in the sale of Fund
Shares ("Eligible Expenses"), including, but not limited to:

A. the incremental printing cost incurred as a result of producing, for
persons other than current shareholders of the Fund, reports,
Prospectuses, notices and similar materials that are prepared by the
Fund for current shareholders, and of distributing the same to other
than current shareholders of the Fund;

B. the cost of registering Fund shares under state and foreign laws and
other costs involved in complying with such laws in the distribution
of Fund shares;

C. advertising;

D. the costs of preparing, printing and distributing any literature not
covered in Paragraph A above and used in connection with the offering
of Fund shares;

E. expenses incurred in the promotion and sale of Fund shares
(including, without limitation, travel and communication expenses,
expenses for compensation and benefits of sales personnel, including
commissions or fees paid or allowed to account executives, and
overhead expenses with respect to any of the foregoing); and

F. payments made by the Principal Underwriter

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<PAGE>

("distribution assistance payments") to any securities dealer,
financial institution or any other organization (a "Recipient") which
has rendered assistance in the distribution of Fund shares and with
which the Principal Underwriter has entered into a written agreement
for this purpose (a "Related Agreement"). Each Related Agreement
shall include such provisions setting forth the types of services to
be performed and the responsibilities to be assumed by the Recipient
as the principal Underwriter, may require but shall at least provide
for the following:

1. the purpose of the distribution assistance payments shall be to
reimburse the Recipient for its administrative and sales related
costs in rendering distribution assistance;

2. distribution assistance payments shall accrue daily and be paid
monthly at an annual rate not to exceed 0.175 of 1% of the net
asset value of the Fund's shares owned beneficially or of record
by the Recipient or by customers of the Recipient and held in
accounts maintained by the Recipient PROVIDED, HOWEVER, that no
such monthly payment shall exceed such Recipient's total cost
during the month (including reasonable allocations of overhead)
in rendering distribution assistance;

3. each Recipient shall annually certify in writing to the
Principal Underwriter and the Fund that the aggregate
distribution payments during that year do not exceed the
Recipient's administrative and sales related costs in rendering
distribution assistance; the Recipient shall provide to the
Principal Underwriter and the Fund a reasonably detailed
description of its administrative and sales related costs,
including its method of allocating overhead, and the Recipient

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<PAGE>

shall permit reasonable verification of the computation of such
administrative and sales related costs by representatives of the
Fund or the Principal Underwriter;

4. each Related Agreement shall immediately terminate without the
payment of any Penalty if the Fund terminates the Plan, or if a
majority of the Disinterested Trustees or a majority of the
outstanding voting securities of the Fund vote to terminate the
Related Agreement;

5. each Recipient will permit representatives of the Fund and the
Principal Underwriter reasonable access to its personnel and its
records to enable them to monitor the quality of services being
provided by the Recipient pursuant to the Related Agreement;
each Recipient shall promptly deliver to the Board of Trustees
of the Fund such information as is reasonably necessary to
permit the Board of Trustees to make an informed determination
of whether to continue this Plan or any Related Agreement; and

6. each Related Agreement shall continue in effect for a period of
more than one year from the date of its execution or adoption
only so long as such continuance is specifically approved at
least annually by a vote of the Board of Trustees of the Fund
and a majority vote of the Disinterested Trustees cast in person
at a meeting called for the purpose of voting on such Related
Agreement and shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).

The reimbursement payments by the Fund to the Principal Underwriter
provided for this Section II shall be paid monthly in an amount equal to
the

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<PAGE>

lesser of (1) the annual rate of 0.175 of 1% of the Fund's average total
net assets for the month, and (2) the sum of (a) Eligible Expenses for
that month plus (b) any Eligible Expenses for previous months as to which
the Principal Underwriter has received no reimbursement under this Plan.
Such reimbursement payments shall be allocated among the existing classes
of the Fund's shares in proportion to the respective total net assets
belonging to such classes.

III. RELATED AGREEMENTS

No Related Agreement shall be entered into, and no distribution
assistance payments shall be made pursuant to any Related Agreement,
unless such Related Agreement is in writing and has first been delivered
to and approved by a vote of the Board of Trustees of the Fund, and a
majority vote of the Disinterested Trustees cast in person at a meeting
called for the purpose of voting on such Agreement.

IV. REPORTS

The Treasurer of the Fund shall provide, and the Board of Trustees of
the Fund shall review at least quarterly, a written report of all amounts
expended pursuant to the Plan and the purposes for which such expenditures
were made. The Principal Underwriter shall provide such information as
the Board of Trustees may require to review the continuing appropriateness
of the Plan and the Related Agreements.

V. EFFECTIVE DATE AND DURATION OF THE PLAN

This Plan shall become effective immediately upon approval by the
vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of each series of the Fund and by a vote of the Board of
Trustees of the Fund and by a vote of a majority of the Disinterested
Trustees, cast in person at a meeting called for the purpose of

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<PAGE>

voting on the approval of the Plan. This Plan shall continue in effect
for a period of one year from its effective date unless terminated
pursuant to its terms. Thereafter, it shall continue from year to year,
provided that such continuance is approved at least annually be a vote of
the Board of Trustees of the Fund and a majority vote of the Disinterested
Trustees, cast in person at a meeting called for the purpose of voting on
such continuance. This Plan may be terminated at any time, without
penalty, by the vote of a majority of the Disinterested Trustees or by the
vote of a majority of the outstanding voting securities of the Fund.

VI. SELECTION OF DISINTERESTED DIRECTORS

During the period in which this Plan is effective, the selection and
nomination of those Trustees of the Fund who are not "interested persons"
of the Fund shall be committed to the discretion of the Trustees then in
office who are not "interested persons" of the Fund. Nothing contained
herein shall prevent the participation of other persons in such selection
and nomination provided that a final decision on any such selection and
nomination is within the discretion of and is approved by a majority of
the Trustees then in office who are not "interested persons" of the Fund.

VII. AMENDMENTS

This Plan may not be amended to increase materially the amount to be
spent hereunder without the approval of a majority of the outstanding
voting securities of the Fund and all material amendments of this Plan
shall be in writing and shall be approved by a vote of the Board of
Trustees of the Fund, including a majority of the Disinterested Trustees,
cast in person at a meeting called for the purpose of voting on such
amendment.

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<PAGE>

CASH ACCUMULATION TRUST

Distribution Plan Amendment

dated October 22, 1997

VOTED: That, effective as soon as practical after the date upon which
shareholders of the National Money Market Fund approve a Management
Agreement with Prudential Investments Fund Management LLC, the
Trust's Distribution Plan adopted pursuant to Rule 12b-1 be and
hereby is amended (i) to apply to the National Money Market Fund
only, rather than the Trust as a whole; (ii) to reduce the maximum
amount of accrual for reimbursements by substituting "0.10 of 1%" for
"0.175 of 1%" in Article II, Section F.2. of the Plan; and (iii) to
reduce the amount of reimbursement payments made pursuant to the
Plan's Article II, Section 6 by amending the second paragraph thereof
to read in its entirety as follows:

"The reimbursement payments by NMMF to the Principal Underwriter
provided for in this Section II shall be paid monthly at a
maximum annual rate of 0.10% of the average net assets of NMMF".

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<PAGE>

POWER OF ATTORNEY

We, the undersigned Trustees and/or officers of PIMCO Funds:
Multi-Manager Series and Cash Accumulation Trust, hereby severally constitute
and appoint William D. Cvengros, Stephen J. Treadway, Newton B. Schott, Jr.,
R. Wesley Burns, Henrik Larsen and Joseph B. Kittredge, Jr., our true and
lawful attorneys, with full power to each of them to sign for us, and in our
name and in the capacities indicated below, any and all amendments (including
post-effective amendments) to the Registration Statements of PIMCO Funds:
Multi-Manager Series and Cash Accumulation Trust on Form N-1A and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each of said
attorneys full power and authority to do and perform each and every act and
thing requisite or necessary to be done in the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney lawfully could do or cause to be done by
virtue hereof.

Name: Capacity: Date:
- ----- -------- -----

/s/ Stephen J. Treadway Trustee, President 9/4/97
- -------------------------- -------
Stephen J. Treadway

/s/ E. Philip Cannon Trustee 9/4/97
- -------------------------- -------
E. Philip Cannon

/s/ Donald P. Carter Trustee 9/4/97
- -------------------------- -------
Donald P. Carter

/s/ Gary A. Childress Trustee 9/4/97
- -------------------------- -------
Gary A. Childress

/s/ William D. Cvengros Trustee 9/4/97
- -------------------------- -------
William D. Cvengros

/s/ Gary L. Light Trustee 9/4/97
- -------------------------- -------
Gary L. Light

/s/ Robert A. Prindiville Trustee 9/4/97
- -------------------------- -------
Robert A. Prindiville

/s/ Joel Segall Trustee 9/4/97
- -------------------------- -------
Joel Segall
<PAGE>

Name: Capacity: Date:
- ----- -------- -----

/s/ W. Bryant Stooks Trustee 9/4/97
- -------------------------- -------
W. Bryant Stooks

/s/ Gerald M. Thorne Trustee 9/4/97
- -------------------------- -------
Gerald M. Thorne

/s/ Richard L. Nelson Trustee 9/4/97
- -------------------------- -------
Richard L. Nelson

/s/ Lyman W. Porter Trustee 9/4/97
- -------------------------- -------
Lyman W. Porter

/s/ Alan Richards Trustee 9/4/97
- -------------------------- -------
Alan Richards

/s/ John P. Hardaway Treasurer 9/4/97
- -------------------------- -------
John P. Hardaway

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