<PAGE>
As filed with the Securities and Exchange Commission on December 1, 1998
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. 25 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 26 /X/
(Check appropriate box or boxes)
------------------------
CASH ACCUMULATION TRUST
(Exact name of registrant as specified in charter)
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
(Address of Principal Executive Offices) (Zip Code)
------------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (973) 367-7530
S. JANE ROSE, ESQ.
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
(Name and Address of Agent for Service of Process)
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)
/X/ 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 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.
Titles of Securities Being Registered ....... Shares of beneficial interest,
without par value.
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<PAGE>
TYPE OF FUND
Money market
INVESTMENT OBJECTIVE
Current income to the extent consistent
with preservation of capital and
liquidity
CASH ACCUMULATION TRUST
National Money Market Fund
PROSPECTUS
JANUARY __, 1999
As with all mutual funds, filing this prospectus with the Securities and
Exchange Commission does not mean that the SEC has approved the Fund shares,
nor has the SEC determined that this Prospectus is complete or
accurate. It is a criminal offense to state otherwise.
[LOGO]
PRUDENTIAL
INVESTMENTS
<PAGE>
TABLE OF CONTENTS
1 RISK/RETURN SUMMARY
1 Investment Objective and Principal Strategies
1 Principal Risks
2 Evaluating Performance
3 Shareholder Fees and Expenses
4 HOW THE FUND INVESTS
4 Investment Objective and Policies
5 Other Investments
6 Additional Strategies
7 Investment Risks
8 HOW THE FUND IS MANAGED
8 Manager
8 Investment Adviser
8 Distributor
8 Year 2000
10 FUND DISTRIBUTIONS AND TAX ISSUES
10 Distributions
10 Tax Issues
12 HOW TO BUY AND SELL SHARES OF THE FUND
12 How to Buy Shares
14 How to Sell Your Shares
16 FINANCIAL HIGHLIGHTS
17 THE PRUDENTIAL MUTUAL FUND FAMILY
FOR MORE INFORMATION (BACK COVER)
<PAGE>
RISK/RETURN SUMMARY
This section highlights key information about the NATIONAL MONEY MARKET FUND,
which we refer to as "the Fund." Additional information follows this summary.
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is CURRENT INCOME to the extent CONSISTENT WITH THE
PRESERVATION OF CAPITAL AND LIQUIDITY. To achieve this objective, we invest
primarily in commercial paper, asset-backed securities, obligations of
financial institutions and other high-quality money market instruments that
mature in thirteen months or less. While we make every effort to achieve our
investment objective and maintain a net asset value of $1 per share, we can't
guarantee success. To date, the Fund's net asset value has never deviated
from $1 per share.
SIDE BAR
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MONEY MARKET FUNDS
Money market funds--which hold high-quality short-term debt obligations--provide
investors with a lower risk, highly liquid investment option. These funds
attempt to maintain a net asset value of $1 per share, although there can be no
guarantee that they will always be able to do so.
- --------------------------------------------------------------------------------
PRINCIPAL RISKS
Although we try to invest wisely, all investments involve risk. The money
market securities in which the Fund invests are generally subject to the risk
that the issuer may be unable to make principal and interest payments when
they are due. There is also the risk that the securities could lose value
because interest rates change or investors lose confidence in the ability of
issuers in general to pay back their debt. The Fund's investments in foreign
securities involve certain additional risks. For example, foreign banks and
companies generally are not subject to regulatory requirements comparable to
those applicable to U.S. banks and companies. In addition, political
developments and changes in currency rates may adversely affect the value of
the Fund's foreign securities. In all cases, however, we invest only in
U.S. dollar-denominated securities. Although investments in mutual funds
involve risk, investing in money market portfolios like the Fund is generally
less risky than investing in other types of funds. This is because the Fund
invests only in high-quality securities, limits the average maturity of the
portfolio to 90 days or less, and limits the maturity of any security to no more
than thirteen months. To satisfy the average maturity and maximum maturity
requirements, securities with demand features, described elsewhere, are treated
as maturing on the date that the Fund can demand repayment of the security.
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Although the Fund seeks to preserve the value of your investment at $1 per
share, it is possible to lose money by investing in the Fund.
<PAGE>
EVALUATING PERFORMANCE
A number of factors - including risk - can affect how the Fund performs. The
following bar chart and table show the Fund's performance over the last 10 years
and provide some indication of the risks of investing in the Fund by
demonstrating how returns can change from year to year. Past performance
does not mean that the Fund will achieve similar results in the future. For
current yield information, you can call us at (800) 225-1852 (toll-free).
- -------------------------------------------------------------------------------
ANNUAL RETURNS
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10%
- -----------------------------------------------------------------------------------------
8%
- -----------------------------------------------------------------------------------------
6%
- -----------------------------------------------------------------------------------------
4%
- -----------------------------------------------------------------------------------------
2%
- -----------------------------------------------------------------------------------------
0%
- -----------------------------------------------------------------------------------------
</TABLE>
BEST QUARTER: WORST QUARTER:
- -------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS as of 12-31-97
<TABLE>
<CAPTION>
1 YR 5 YRS 10 YRS SINCE
INCEPTION
<S> <C> <C> <C> <C>
FUND SHARES
------ ------- -------- -------
LIPPER ANALYTICAL SERVICES
U.S. TAXABLE MONEY MARKET
FUNDS (1)
------ ------- -------- -------
</TABLE>
7-DAY YIELD (AS OF DECEMBER 31, 1997)(2)
National Money Market Fund %
---
(1) The Lipper Analytical Services U.S. Taxable Money Market Funds average is
based upon the average return of all mutual funds in the U.S. Taxable Money
Market Funds category.
(2) The Fund's yield is after deduction of expenses.
<PAGE>
SHAREHOLDER FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
SHAREHOLDER FEES (paid directly from your investment)
Maximum sales charge (load)
imposed on purchases (as a percentage of
offering price) . . . . . . . . . . . . . . . . . . . . . . .None
Maximum deferred sales charge (load) (as a percentage
of the lower of original purchase price or
sale proceeds) . . . . . . . . . . . . . . . . . . . . . . .None
Maximum sales charge (load)
imposed on reinvested dividends
and other distributions. . . . . . . . . . . . . . . . .None
Redemption fees. . . . . . . . . . . . . . . . . . . . . . . . . .None
Exchange fee . . . . . . . . . . . . . . . . . . . . . . . . . . .None
ANNUAL FUND OPERATING EXPENSES
(DEDUCTED FROM FUND ASSETS)
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . .39%
+Distribution (12b-1) fees . . . . . . . . . . . . . . . . . . . .10%
+Other expenses. . . . . . . . . . . . . . . . . . . . . . . . . .13%
-----
=TOTAL ANNUAL FUND OPERATING EXPENSES. . . . . . . . . . . . . . .62%
-----
-----
EXAMPLE
This example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
sell all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------- ------- --------
<S> <C> <C> <C> <C>
$ $ $ $
------ ------ ------ -------
</TABLE>
<PAGE>
HOW THE FUND INVESTS
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is CURRENT INCOME to the extent CONSISTENT
WITH THE PRESERVATION OF CAPITAL AND LIQUIDITY. While we make every effort
to achieve our objective, we can't guarantee success.
The Fund invests in high-quality money market instruments to try to provide
investors with current income while maintaining a stable net asset value of
$1 per share. We manage the Fund to comply with specific rules designed for
money market mutual funds. We will purchase obligations such as, but not
limited to, commercial paper, asset-backed securities, certificates of
deposit, time deposits of banks, bankers' acceptances, bank notes, funding
agreements, and other obligations of both banks and corporations. These
obligations must be rated in one of the two highest rating categories by at
least two nationally recognized statistical rating organizations (NRSROs),
such as Moody's Investors Service (rated at least Prime-2) and Standard &
Poor's Ratings Group (rated at least A-2) or, if unrated, of comparable
quality. We may also purchase securities of the U.S. Government and its
agencies. All securities that we purchase will be denominated in U.S.
dollars.
COMMERCIAL PAPER is short-term debt obligations of banks, corporations and other
borrowers. The obligations are usually issued by financially strong businesses
and often include a line of credit to protect purchasers of the obligations. An
ASSET-BACKED SECURITY is a loan or note that pays interest based upon the cash
flow of a pool of assets, such as mortgages, loans and credit card receivables.
CERTIFICATES OF DEPOSIT, TIME DEPOSITS and BANKERS' ACCEPTANCES are obligations
issued by or through a bank. These instruments depend upon the strength of the
bank involved in the borrowing to give investors comfort that the borrowing will
be repaid when promised.
DEBT OBLIGATIONS in general, including those listed above and any others that
we may purchase, are basically written promises to repay a debt. Among the
various types of debt securities we may purchase, the terms of repayment may
vary, as may the commitment of other parties to honor the obligations of the
issuer of the security. We may purchase securities that include DEMAND
FEATURES, which allow us to demand repayment of a debt obligation before the
obligation is due or "matures". This means that we can purchase longer-term
securities because of the expectation that we can demand repayment of the
obligation at an agreed-upon price within a relatively short period of time.
This procedure follows the rules applicable to money market funds. We will
not purchase an instrument that allow us to resell a security, known as a
"put", separately from the longer term security to which it relates.
The securities that we may purchase may change over time as new types of
money market instruments are developed. We will purchase these new
instruments, however, only if their characteristics and features follow the
rules governing the operation of money market mutual funds.
<PAGE>
The Fund's investment objective is a fundamental policy that cannot be
changed without shareholder approval. The Board of Cash Accumulation Trust
can change investment policies that are not fundamental.
OTHER INVESTMENTS
The Fund may also invest in DEBT OBLIGATIONS ISSUED BY THE U.S. TREASURY.
Treasury securities have varying interest rates and maturities, but they are
all backed by the full faith and credit of the U.S Government.
Brokerage firms sometimes "strip" Treasury debt; obligations into their
component parts: the Treasury's obligation to make periodic interest payments
and its obligation to repay the amount borrowed. These STRIPPED SECURITIES are
sold to investors separately. Stripped securities do not make periodic interest
payments. They are usually sold at a discount and then redeemed for their
face value on their maturity dates. These securities increase in value when
interest rates fall and lose value when interest rates rise. However, the value
of stripped securities generally fluctuates more in response to interest rate
movements than the value of traditional bonds. The Fund may try to earn money
by buying stripped securities at a discount and either selling them after they
increase in value or holding them until they mature.
The Fund may also invest in other DEBT OBLIGATIONS ISSUED OR GUARANTEED BY THE
U.S. GOVERNMENT and government-related entities. Some of these debt securities
are backed by the full faith and credit of the U.S. Government, like obligations
of the Government National Mortgage Association (GNMA or "Ginnie Mae"). Debt
securities issued by other government entities, like obligations of the Federal
National Mortgage Association (FNMA or "Fannie Mae") and the Student Loan
Marketing Association (SLMA or "Sallie Mae"), are not backed by the full faith
and credit of the U.S. Government. However, these issuers have the right to
borrow from the U.S. Treasury to meet their obligations. In contrast, the debt
securities of other issuers, like the Farm Credit System, depend entirely upon
their own resources to repay their debt.
ADDITIONAL STRATEGIES
We may use a number of investment strategies to try to improve the Fund's
returns or protect its assets.
The Fund may use REPURCHASE AGREEMENTS, where a party agrees to sell a security
to the Fund and then repurchase it at an agreed-upon price and time, which
creates a fixed return for the Fund. The Fund will only enter into these
repurchase agreements with parties whom we believe can honor their obligations
in the transactions.
The Fund may use REVERSE REPURCHASE AGREEMENTS where we borrow money on a
temporary basis by selling a security with an obligation to repurchase it at an
agreed-upon price and time.
The Fund may also purchase money market obligations under a FIRM COMMITMENT
AGREEMENT. When the Fund makes this type of purchase, the price and interest
rate are
<PAGE>
fixed at the time of purchase, but delivery and payment for the obligations take
place at a later time. The Fund does not earn interest income until the date
the obligations are delivered.
The Fund may purchase FLOATING RATE and VARIABLE RATE securities. These
securities pay interest at rates that change periodically to reflect changes
in market interest rates. Because these securities adjust the interest they
pay, they may be beneficial when interest rates are rising because of the
additional return the Fund will receive, and they may be detrimental when
interest rates are falling because of the reduction in interest payments to
the Fund.
The Fund also follows certain policies when it: BORROWS MONEY (the Fund may
borrow up to 10% of the value of its total assets); LENDS ITS SECURITIES to
others; and holds ILLIQUID SECURITIES (the Fund may hold up to 10% of its net
assets in securities, including restricted securities, those without a
readily available market and repurchase agreements with maturities longer
than seven days). The Fund is subject to certain investment restrictions that
are fundamental policies, which means they cannot be changed without
shareholder approval. For more information about these restrictions, see the
SAI.
INVESTMENT RISKS
The Fund's investments in money market instruments involve both CREDIT RISK --
the possibility that the issuer will default, and MARKET RISK -- the risk that
an instrument will lose value because interest rates change or investors lose
confidence in the issuer's ability to pay back the debt. To limit these risks,
we invest only in high-quality securities with short maturities (no more than
thirteen months).
Foreign securities and foreign markets involve additional risk. Foreign laws
and accounting standards typically are not as strict as they are in the U.S.
Foreign fixed income and currency markets may be less stable than U.S. markets.
Changes in the exchange rates of foreign currencies can affect the value of
foreign assets. There is a risk that foreign companies and governments, just as
is the case in the U.S., will not be prepared to handle issues that will arise
when we reach the year 2000 if their computer systems cannot differentiate the
year 2000 from the year 1900.
<PAGE>
This chart outlines the key risks and potential rewards of the Fund's
principal investments.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INVESTMENT TYPE
% OF FUND'S TOTAL ASSETS RISKS POTENTIAL REWARDS
- ---------------------------- ----------------------- ------------------------
<S> <C> <C>
HIGH-QUALITY MONEY MARKET - Credit risk-the risk - Regular interest
OBLIGATIONS OF ALL that the borrower income
TYPES can't pay back the
------------------------ money borrowed or make
interest payments
Up to 100% - Market risk - the - May be more secure
risk that the than stock and
obligations may lose equity securities
value because since companies
interest rates must pay their
change or there is a debts before
lack of confidence they pay dividends
in the borrower
- --------------------------------------------------------------------------------
MONEY MARKET OBLIGATIONS - Foreign markets, - Investors may
OF FOREIGN ISSUERS economies and realize higher
(DOLLAR- political systems returns based upon
DENOMINATED) may not be as stable higher interest
------------------------ as those in the U.S. rates paid on
Up to 100% - May be less public foreign investments
information about
foreign issuers
- --------------------------------------------------------------------------------
ILLIQUID - May be difficult to - May offer a more
SECURITIES value and sell attractive yield
------------------------ - Could result in than more liquid
Up to 10% of net assets losses securities
- --------------------------------------------------------------------------------
</TABLE>
HOW THE FUND IS MANAGED
MANAGER
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC (PIFM)
GATEWAY CENTER THREE, 100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
Under a management agreement with the Fund, PIFM manages the Fund's investment
operations and administers its business affairs. For the fiscal year ended
September 30, 1998, the Fund paid PIFM management fees of [__%] of the Fund's
average net assets.
<PAGE>
As of October 31, 1998, PIFM served as the Manager to all __ of the Prudential
Mutual Funds, and as Manager or administrator to __ closed-end investment
companies, with aggregate assets of approximately $__ billion.
INVESTMENT ADVISER
The Prudential Investment Corporation, known as Prudential Investments, is the
Fund's investment adviser. Its address is Prudential Plaza, 751 Broad Street,
Newark, New Jersey 07102. PIFM has responsibility for all investment advisory
services, supervises Prudential Investments and reimburses Prudential
Investments for its reasonable costs and expenses.
DISTRIBUTOR
Prudential Investment Management Services LLC (PIMS) distributes the Fund's
shares under a Distribution Agreement with the Fund. The Fund has a
Distribution and Service Plan under Rule 12b-1 of the Investment Company Act.
Under the Plan and the Distribution Agreement, PIMS pays the expenses of
distributing the Fund's shares and provides certain shareholder support
services. The Fund pays distribution and other fees to PIMS as compensation
for its services. These fees - known as 12b-1 fees - are shown in the
SHAREHOLDER FEES AND EXPENSES table.
YEAR 2000
Many computer systems used today cannot tell the year 2000 from the year 1900
because of the way dates are encoded. This could be a problem when the year
2000 arrives and could affect securities trades, interest and dividend payments,
pricing and account services. Although we can't guarantee that this won't be a
problem, the Fund's service providers have been working on adapting their
computer systems. They expect that their systems, and the systems of their
service providers, will be ready for the new millennium.
FUND DISTRIBUTIONS AND TAX ISSUES
Investors who buy shares of the Fund should be aware of some important tax
issues. For example, the Fund distributes DIVIDENDS and CAPITAL GAINS, if any,
to shareholders. These distributions are subject to taxes, unless you hold your
shares in a 401(k) plan, an Individual Retirement Account (IRA), or some other
qualified tax-deferred plan or account.
The following briefly discusses some of the important tax issues you should be
aware of, but is not meant to be tax advice. For tax advice, please speak with
your tax adviser.
DISTRIBUTIONS
The Fund distributes DIVIDENDS of any net investment income to shareholders
every month. The dividends you receive from the Fund will be taxed as ORDINARY
INCOME, whether or not they are reinvested in the Fund.
<PAGE>
Although the Fund is not likely to realize capital gains because of the types of
securities we purchase, any CAPITAL GAINS will be paid to shareholders
(typically once a year). CAPITAL GAINS are generated when the Fund sells its
assets for a profit.
For your convenience, Fund distributions of dividends and capital gains are
AUTOMATICALLY REINVESTED in the Fund. If you ask us to pay the distributions in
cash, we will send you a check instead of purchasing more shares of the Fund.
Either way, the distributions are subject to taxes, unless your shares are
held in a qualified tax-deferred plan or account. For more information about
automatic reinvestment and other shareholder services, see Step 3: Additional
shareholder services.
TAX ISSUES
FORM 1099
During the tax season every year, you will receive a FORM 1099, which reports
the amount of dividends and capital gains we distributed to you during the prior
year. If you own shares of the Fund as part of a qualified tax-deferred plan or
account, your taxes are deferred, so you will not receive a Form 1099. However,
you will receive a Form 1099 when you take any distributions from your qualified
tax-deferred plan or account.
Fund distributions are generally taxable to you in the year they are
received, except when we declare certain dividends in December of a calendar
year, and actually pay them in January of the following year. In such cases,
the dividends are treated as if they were paid on December 31 of the prior
year.
WITHHOLDING TAXES
If federal law requires you to provide the Fund with your tax identification
number and certifications as to your tax status, and you fail to do this, we
will withhold and pay to the U.S. Treasury 31% of your distributions. If you
are subject to backup withholding, we will withhold and pay to the U.S. Treasury
31% of your distributions. Dividends of net investment income and short-term
capital gains paid to a nonresident foreign shareholder generally will be
subject to a U.S. withholding tax of 30%. This rate may be lower, depending on
any tax treaty the U.S. may have with the shareholder's country.
HOW TO BUY AND SELL SHARES OF THE FUND
HOW TO BUY SHARES
STEP 1: OPEN AN ACCOUNT
Shares of the Fund are available only to clients of Prudential Securities
Incorporated that participate in any of the following managed account
programs:
<PAGE>
- Gibraltar Advisors
- Prudential Securities Portfolio Management (PSPM)
- Quantum Portfolio Management (Quantum)
- Managed Assets Consulting Services (MACS)
- Managed Assets Consulting Services--Custom Services (MACS--CS)
- Prudential Securities Investment Supervisory Group
Eligibility for any of these programs is within the discretion of
Prudential Securities. You should contact a Prudential Securities financial
adviser for more information. We have the right to reject any purchase
order or suspend or modify the sale of Fund shares.
AUTOMATIC PURCHASE (AUTOSWEEP). Shares of the Fund can only be purchased
through automatic investment procedures (the Autosweep program). The Autosweep
program allows you to designate a money market fund as your primary money sweep
fund. If you do not designate a primary money sweep fund, the Fund will
automatically be your primary money sweep fund. You have the option to change
your primary money sweep fund at any time by notifying your Prudential
Securities financial adviser.
When your Prudential Securities account has a credit balance (that is,
immediately available funds), Prudential Securities will purchase shares of the
Fund equal to that amount. This will occur on the business day following
confirmation that a credit balance exists. Prudential Securities may use and
retain the benefit of credit balances in your account until Fund shares are
purchased (that is, until the next business day).
Your investment in the Fund will be held in the name of Prudential Securities.
Prudential Securities will receive all statements and dividends from the Fund
and will, in turn, send you account statements showing your purchases, sales and
dividends.
AUTOMATIC PURCHASE PROCEDURES. Prudential Securities will purchase shares of
the Fund on behalf of participating clients each business day at the current NAV
as described below.
Credit balances of $1 or more in your account will automatically be invested
in shares of the Fund. Where your credit balance results from a sale of
securities, the available cash will be invested in the Fund on settlement
date. Where your credit balance results from any other transaction (that is,
receipt of a dividend or interest payment, maturity of a bond or your own
cash payment to your securities account), the available cash will be invested
in the Fund on the first business day after it is received by Prudential
Securities. All available cash in your account, regardless of its source,
will automatically be invested.
You will begin earning dividends on your shares purchased through Autosweep on
the day the order is placed. Prudential Securities will purchase shares of the
Fund at 4:30 p.m. New York Time on the business day the order is placed and
payment for the shares will be made by 4:30 p.m. New York Time on the next
business day.
<PAGE>
STEP 2: UNDERSTANDING THE PRICE YOU'LL PAY
When you invest in a mutual fund, you buy shares of the Fund. Shares of a money
market mutual fund, like the Fund, are priced differently than shares of common
stock and other securities.
The share price of a mutual fund--known as the Net Asset Value or NAV per
share--is determined by a simple calculation; the total value of the fund
(assets minus liabilities) divided by the total number of shares outstanding.
In determining NAV, the Fund values its securities using the amortized cost
method. The Fund seeks to maintain an NAV of $1 per share at all times.
We determine the NAV of our shares once each business day at 4:30 p.m. New
York Time on days that the New York Stock Exchange is open for trading. We
do not determine NAV on days when we have not received any orders to purchase
or sell or when changes in the value of the Fund's portfolio do not materially
affect the NAV.
STEP 3: ADDITIONAL SHAREHOLDER SERVICES
As a Fund shareholder, you can take advantage of the following services and
privileges:
AUTOMATIC REINVESTMENT. As we explained in the Fund Distributions and Tax
Issues section, the Fund pays out--or distributes--its net investment income and
any capital gains to all shareholders. For your convenience, we will
automatically reinvest your distributions in the Fund at NAV. If you want your
distributions paid in cash, you can indicate this preference on your
application, or notify your Prudential Securities financial adviser not less
than five full business days before the date we determine who receives
dividends.
REPORTS TO SHAREHOLDERS. Every year we will send you an annual report (along
with an updated prospectus) and a semi-annual report, which contain important
financial information about the Fund. If there are multiple shareholders in the
same household, you will receive only one copy of each of these per household.
HOW TO SELL YOUR SHARES
You can sell your shares of the Fund for cash (in the form of a check) at any
time, subject to certain restrictions.
When you sell shares of the Fund - also known as redeeming shares - the
price you will receive will be the NAV next determined after the we receive your
order to sell. Prudential Securities must receive your order to sell by 4:30
p.m. New York Time to process the sale on that day.
Generally, we will pay you for the shares that you sold within seven days after
we receive your sell order.
<PAGE>
RESTRICTIONS ON SALES
There are certain times when you may not be able to sell shares of the Fund
or when we may delay paying you the proceeds from a sale. This may happen
during unusual market conditions or emergencies when the Fund can't determine
the value of its assets or sell its holdings. For more information, see the
SAI, "Purchase and Redemption of Fund Shares."
REDEMPTION IN KIND
If the sales of Fund shares you make during any 90-day period reaches the
lesser of $250,000 or 1% of the value of the Fund's net assets, we can then
give you securities from the Fund's portfolio instead of cash. If you want
to sell the securities for cash, you would have to pay the costs charged by a
broker. See the SAI, "Purchase and Redemption of Fund Shares."
AUTOMATIC REDEMPTION FOR AUTOSWEEP
Because you participate in the Autosweep program, your Fund shares will be
automatically redeemed to cover any deficiency in your Prudential Securities
account. The amount redeemed will be the nearest dollar amount necessary to
cover the deficiency.
The amount of the redemption will be the lesser of the total value of Fund
shares held in your Prudential Securities account or the deficit in your
Prudential Securities account. If you use this automatic redemption procedure
and want to pay for a securities transaction in your account other than through
this procedure, you must deposit cash in your securities account before the
settlement date. If you use this automatic redemption procedure and want to pay
any other deficit in your securities account other than through this procedure,
you must deposit cash in your securities account before you incur the deficit.
AUTOMATIC REDEMPTION
Redemptions are automatically made by Prudential Securities, to the nearest
dollar, on each day to satisfy deficits from securities transactions or to
honor your redemption requests. Your account will be automatically scanned
for deficits each day and, if there is insufficient cash in your account, we
will redeem an appropriate number of shares of the Fund at the next
determined NAV to satisfy any remaining deficit. You are entitled to any
dividends declared on the redeemed shares through the day before the
redemption is made. Dividends declared on the redemption date will be
retained by Prudential Securities, which has advanced monies to satisfy
deficits in your account.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights will help you evaluate the Fund's financial
performance. The TOTAL RETURN in the chart represents the rate that a
shareholder earned on an investment in the Fund, assuming reinvestment of all
dividends and other distributions. The information is for shares of the Fund
for the periods indicated. The financial statements and audit reports are
available upon request.
Review this chart with the financial statements, which appear in the SAI.
Additional performance information is contained in the annual report, which
you can receive at no charge.
The financial highlights for the two fiscal years ended September 30, 1998
were audited by , and the financial highlights for
the three years ended September 30, 1996 were audited by other independent
auditors, whose reports were unqualified.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period . . . . . . . . . . . . . . . . . $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment
operations-net investment
income . . . . . . . . . . . . . . . . . .05 .05 .05 .03 .02 .04 .06 .08 .09
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Dividends to shareholders. . . . . . . . . . ( ) .05 .05 .05 .03 .02 .04 .06 .08 .09
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period . . . . . . . $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL RETURN: . . . . . . . . . . . . . . . % 5.0% 5.0% 5.2% 3.2% 2.3% 3.7% 6.2% 7.8% 8.6%
-----
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of period
(000) . . . . . . . . . . . . . . . . . $ $702 $652 $685 $823 $652 $2.286 $2.523 $2.217 $2.438
-----
Ratios to average net assets
Net investment income. . . . . . . . . % 4.89% 4.86% 5.16% 3.20% 2.26% 3.70% 6.17% 7.75% 8.64%
-----
Expenses . . . . . . . . . . . . . . . . % .65% .69% .69% .61% .71% .74% .74% .73% .71%
-----
</TABLE>
<PAGE>
THE PRUDENTIAL MUTUAL FUND FAMILY
Prudential offers a broad range of mutual funds designed to meet your
individual needs. For information about these funds, contact your dealer or
Prudential professional or call us at (800) 225-1852.
STOCK FUNDS GLOBAL FUNDS
Prudential Balanced Fund Prudential Developing Markets Fund
Prudential Distressed Securities Fund, Prudential Developing Markets Equity
Inc. Fund
Prudential Emerging Growth Fund, Inc. Prudential Latin America Equity Fund
Prudential Equity Fund, Inc. Prudential Europe Growth Fund, Inc.
Prudential Equity Income Fund Prudential Global Genesis Fund, Inc.
Prudential Index Series Fund Prudential Global Limited Maturity
Prudential Bond Market Index Fund Fund, Inc.
Prudential Europe Index Fund Limited Maturity Portfolio
Prudential Pacific Index Fund Prudential Intermediate Global Income
Prudential Small-Cap Index Fund Fund, Inc.
Prudential Stock Index Fund Prudential International Bond Fund,
The Prudential Investment Portfolios, Inc.
Inc. Prudential Natural Resources Fund,
Prudential Active Balanced Fund Inc.
Prudential Jennison Growth Fund, Prudential Pacific Growth Fund, Inc.
Prudential Jennison Growth & Income Prudential World Fund, Inc.
Fund Global Series
Prudential Mid-Cap Value Fund International Stock Series
Prudential Real Estate Securities Fund The Global Total Return Fund, Inc.
Prudential Small-Cap Quantum Fund, Global Utility Fund, Inc.
Inc.
Prudential Small Company Value Fund, MONEY MARKET FUNDS
Inc. TAXABLE MONEY MARKET FUNDS
Prudential 20/20 Focus Fund Cash Accumulation Trust
Prudential Utility Fund, Inc. Liquid Assets Fund
Nicholas-Applegate Fund, Inc. National Money Market Fund
Nicholas-Applegate Growth Equity Fund Prudential Government Securities Trust
Money Market Series
TAXABLE BOND FUNDS U.S. Treasury Money Market Series
Prudential Diversified Bond Fund, Inc. Prudential Special Money Market Fund,
Prudential Government Income Fund, Inc.
Inc. Money Market Series
Prudential Government Securities Trust Prudential MoneyMart Assets, Inc.
Short-Intermediate Term Series
Prudential High Yield Fund, Inc. Tax-Free Money Market Funds
Prudential Mortgage Income Fund, Inc. Prudential Tax-Free Money Fund, Inc.
Prudential Structured Maturity Fund, Prudential California Municipal Fund
Inc. California Money Market Series
Income Portfolio Prudential Municipal Series Fund
Connecticut Money Market Series
TAX-EXEMPT BOND FUNDS Massachusetts Money Market Series
Prudential California Municipal Fund New Jersey Money Market Series
California Series New York Money Market Series
California Income Series COMMAND FUNDS
Prudential Municipal Bond Fund Command Money Fund
High Income Series Command Government Fund
Insured Series Command Tax-Free Fund
Intermediate Series Institutional Money Market Funds
Prudential Municipal Series Fund Prudential Institutional Liquidity
Florida Series Portfolio, Inc.
Maryland Series Institutional Money Market Series
Massachusetts Series
Michigan Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund,
Inc. <PAGE>
FOR MORE INFORMATION
Please read this prospectus before you invest in the Fund and keep it for future
reference. You can get additional information about the Fund in the following
documents:
STATEMENT OF ADDITIONAL INFORMATION
(incorporated by reference into this Prospectus)
ANNUAL REPORT
(contains a discussion of the market conditions and investment
strategies that significantly affect the Fund's performance)
SEMI-ANNUAL REPORT
To get this information free of charge or for shareholder questions, contact
your dealer, the Distributor, or Prudential at:
PRUDENTIAL MUTUAL FUND SERVICES LLC
P.O. BOX 15005
NEW BRUNSWICK, NEW JERSEY 08906-5005
(800) 225-1852
(908) 417-7555 (if calling from outside the U.S.)
Dealers should contact:
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
P.O. BOX 15035
NEW BRUNSWICK, NEW JERSEY 08906-1852
(800) 225-1852
Visit Prudential's web site at HTTP://WWW.PRUDENTIAL.COM
You can also obtain copies of Fund documents from the Securities and Exchange
Commission as follows:
BY MAIL: IN PERSON:
SECURITIES AND EXCHANGE COMMISSION PUBLIC REFERENCE ROOM IN WASHINGTON
PUBLIC REFERENCE SECTION D.C.
WASHINGTON, D.C. 20549-6009 (For hours of operation, call 1-800-
(The SEC charges a fee to copy any SEC-0330)
documents)
THE FUND'S CUSIP NUMBER IS: VIA THE INTERNET:
147541106 HTTP://WWW.SEC.GOV
Investment Company Act File No: 811-4060
<PAGE>
TYPE OF FUND
Money market
INVESTMENT OBJECTIVE
Current income to the extent consistent
with preservation of capital and
liquidity
CASH ACCUMULATION TRUST
Liquid Assets Fund
PROSPECTUS
JANUARY __, 1999
As with all mutual funds, filing this prospectus with the Securities and
Exchange Commission does not mean that the SEC has approved the Fund shares,
nor has the SEC determined that this Prospectus is complete or accurate.
It is a criminal offense to state otherwise.
[LOGO]
PRUDENTIAL
INVESTMENTS
<PAGE>
TABLE OF CONTENTS
1 RISK/RETURN SUMMARY
1 Investment Objective and Principal Strategies
1 Principal Risks
2 Evaluating Performance
2 Shareholder Fees and Expenses
4 HOW THE FUND INVESTS
4 Investment Objective and Policies
5 Other Investments
6 Additional Strategies
6 Investment Risks
8 HOW THE FUND IS MANAGED
8 Manager
8 Investment Adviser
8 Distributor
8 Year 2000
9 FUND DISTRIBUTIONS AND TAX ISSUES
9 Distributions
9 Tax Issues
11 HOW TO BUY AND SELL SHARES OF THE FUND
11 How to Buy Shares
13 How to Sell Your Shares
15 FINANCIAL HIGHLIGHTS
16 THE PRUDENTIAL MUTUAL FUND FAMILY
FOR MORE INFORMATION (BACK COVER)
<PAGE>
RISK/RETURN SUMMARY
This section highlights key information about the LIQUID ASSETS FUND, which
we refer to as "the Fund." Additional information follows this summary.
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is CURRENT INCOME to the extent CONSISTENT WITH THE
PRESERVATION OF CAPITAL AND LIQUIDITY. To achieve this objective, we invest
primarily in commercial paper, asset-backed securities, obligations of
financial institutions and other high-quality money market instruments that
mature in thirteen months or less. While we make every effort to achieve our
investment objective and maintain a net asset value of $1 per share, we can't
guarantee success. To date, the Fund's net asset value has never deviated
from $1 per share.
SIDE BAR
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
Money market funds--which hold high-quality short-term debt obligations--
provide investors with a lower risk, highly liquid investment option. These
funds attempt to maintain a net asset value of $1 per share, although there can
be no guarantee that they will always be able to do so.
- --------------------------------------------------------------------------------
PRINCIPAL RISKS
Although we try to invest wisely, all investments involve risk. The money
market securities in which the Fund invests are generally subject to the risk
that the issuer may be unable to make principal and interest payments when they
are due. There is also risk that the securities could lose value because
interest rates change or investors lose confidence in the ability of issuers
in general to pay back their debt. The Fund's investments in foreign securities
involve certain additional risks. For example, foreign banks and companies
generally are not subject to regulatory requirements comparable to those
applicable to U.S. banks and companies. In addition, political developments and
changes in currency rates may adversely affect the value of the Fund's foreign
securities. In all cases, however, we invest only in U.S. dollar-denominated
securities. Although investments in mutual funds involve risk, investing in
money market portfolios like the Fund is generally less risky than investing
in other types of funds. This is because the Fund invests only in high-quality
securities, limits the average maturity of the portfolio to 90 days or less,
and limits the maturity of any security to no more than thirteen months.
<PAGE>
To satisfy the average maturity and maximum maturity requirements, securities
with demand features, described elsewhere, are treated as maturing on the
date that the Fund can demand repayment of the security.
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Although the Fund seeks to preserve the value of your investment at $1 per
share, it is possible to lose money by investing in the Fund.
<PAGE>
EVALUATING PERFORMANCE
A number of factors - including risk - can affect how the Fund performs. The
Fund has not operated for a full calendar year, so there is no annual
performance to report. For information about the Fund's performance since
inception, see "Financial Highlights." Past performance does not mean that the
Fund will achieve similar results in the future. For current yield
information, you can call us at (800) 225-1852 (toll free).
SHAREHOLDER FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES (paid directly from your investment)
Maximum sales charge (load) imposed on purchases (as a percentage
of offering price) . . . . . . . . . . . . . . . . . . . . . . . . . . None
Maximum deferred sales charge (load) (as a percentage of the lower of
original price or sale proceeds) . . . . . . . . . . . . . . . . . . . None
Maximum sales charge (load) imposed on reinvested dividends and
other distributions. . . . . . . . . . . . . . . . . . . . . . . . . . None
Redemption fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Exchange fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . .09%
+ Distribution and service (12b-1) fees. . . . . . . . . . . . . . . . .None
+ Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .13%
----
= TOTAL ANNUAL FUND OPERATING EXPENSES . . . . . . . . . . . . . . . . .22%(1)
----
----
(1) The fees paid by the Fund to the Manager and the Fund's other affiliated
service providers are limited to reimbursement for direct costs, excluding
any profit or overhead, pursuant to agreements with the Fund. Management
fees and Total annual Fund operating expenses reflect these fees for the
Fund's fiscal year ended September 30, 1998.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the Fund for the time periods indicated and then sell
all of your shares at the end of those periods. The example also assumes that
your investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
$ $ $ $
---- ---- ---- ----
</TABLE>
<PAGE>
HOW THE FUND INVESTS
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is CURRENT INCOME to the extent CONSISTENT
WITH THE PRESERVATION OF CAPITAL AND LIQUIDITY. While we make every effort
to achieve our objective, we can't guarantee success.
The Fund invests in high-quality money market instruments to try to provide
investors with current income while maintaining a stable net asset value of
$1 per share. We manage the Fund to comply with specific rules designed for
money market mutual funds. We will purchase obligations such as, but not
limited to, commercial paper, asset-backed securities, certificates of
deposit, time deposits of banks, bankers' acceptances, bank notes, funding
agreements and other obligations of both banks and corporations. These
obligations must be rated in one of the two highest rating categories by at
least two nationally recognized statistical rating organizations (NRSROs),
such as Moody's Investors Service (rated at least Prime-2) and Standard &
Poor's Ratings Group (rated at least A-2), or, if unrated, of comparable
quality. We may also purchase securities of the U.S. Government and its
agencies. All securities that we purchase will be denominated in U.S.
dollars.
COMMERCIAL PAPER is short-term debt obligations of banks, corporations and other
borrowers. The obligations are usually issued by financially strong businesses
and often include a line of credit to protect purchasers of the obligations. An
ASSET-BACKED SECURITY is a loan or note that pays interest based upon the cash
flow of a pool of assets, such as mortgages, loans and credit card receivables.
CERTIFICATES OF DEPOSIT, TIME DEPOSITS and BANKERS' ACCEPTANCES are obligations
issued by or through a bank. These instruments depend upon the strength of the
bank involved in the borrowing to give investors comfort that the borrowing will
be repaid when promised.
DEBT OBLIGATIONS in general, including those listed above and any others that
we may purchase, are basically written promises to repay a debt. Among the
various types of debt securities we may purchase, the terms of repayment may
vary, as may the commitment of other parties to honor the obligations of the
issuer of the security. We may purchase securities that include DEMAND
FEATURES, which allow us to demand repayment of a debt obligation before the
obligation is due or "matures". This means that we can purchase longer-term
securities because of the expectation that we can demand repayment of the
obligation at an agreed-upon price within a relatively short period of time.
This procedure follows the rules applicable to money market funds.
The securities that we may purchase may change over time as new types of money
market instruments are developed. We will purchase these new instruments,
however, only if their characteristics and features follow the rules governing
the operation of money market mutual funds.
<PAGE>
Any of the money market instruments that the Fund may purchase may be
accompanied with the right to resell the instrument prior to the instrument's
maturity. In addition, we may separately purchase rights to resell these
instruments. These rights are referred to as "PUTS." The purchase of
instruments with puts allows the Fund to sell the security when the investment
adviser believes it is appropriate to do so to honor redemption requests or to
buy more attractive securities.
OTHER INVESTMENTS
The Fund may also invest in DEBT OBLIGATIONS ISSUED BY THE U.S. TREASURY.
Treasury securities have varying interest rates and maturities, but they are
all backed by the full faith and credit of the U.S. Government.
Brokerage firms sometimes "strip" Treasury debt obligations into their
component parts: the Treasury's obligation to make periodic interest payments
and its obligation to repay the amount borrowed. These STRIPPED SECURITIES
are sold to investors separately. Stripped securities do not make periodic
interest payments. They are usually sold at a discount and then redeemed for
their face value on their maturity dates. These securities increase in value
when interest rates fall and lose value when interest rates rise. However,
the value of stripped securities generally fluctuates more in response to
interest rate movements than the value of traditional bonds. The Fund may
try to earn money by buying stripped securities at a discount and either
selling them after they increase in value or holding them until they mature.
The Fund may also invest in other DEBT OBLIGATIONS ISSUED OR GUARANTEED BY THE
U.S. GOVERNMENT and government-related entities. Some of these debt securities
are backed by the full faith and credit of the U.S. Government, like obligations
of the Government National Mortgage Association (GNMA or "Ginnie Mae"). Debt
securities issued by other government entities, like obligations of the Federal
National Mortgage Association (FNMA or "Fannie Mae") and the Student Loan
Marketing Association (SLMA or "Sallie Mae"), are not backed by the full faith
and credit of the U.S. Government. However, these issuers have the right to
borrow from the U.S. Treasury to meet their obligations. In contrast, the debt
securities of other issuers, like the Farm Credit System, depend entirely upon
their own resources to repay their debt.
ADDITIONAL STRATEGIES
We may use a number of investment strategies to try to improve the Fund's
returns or protect its assets.
The Fund may use REPURCHASE AGREEMENTS, where a party agrees to sell a security
to the Fund and then repurchase it at an agreed-upon price and time, which
creates a fixed return for the Fund. The Fund will only enter into these
repurchase agreements with parties whom we believe can honor their obligations
in the transactions.
<PAGE>
The Fund may use REVERSE REPURCHASE AGREEMENTS where we borrow money on a
temporary basis by selling a security with an obligation to repurchase it at an
agreed-upon price and time.
The Fund may also purchase money market obligations on a "WHEN-ISSUED" or
"DELAYED-DELIVERY" basis. When the Fund makes this type of purchase, the price
and interest rate are fixed at the time of purchase, but delivery and payment
for the obligations take place at a later time. The Fund does not earn interest
income until the date the obligations are delivered.
The Fund may purchase FLOATING RATE and VARIABLE RATE securities. These
securities pay interest at rates that change periodically to reflect changes in
market interest rates. Because these securities adjust the interest they pay,
they may be beneficial when interest rates are rising because of the additional
return the Fund will receive, and they may be detrimental when interest rates
are falling because of the reduction in interest payments to the Fund.
The Fund also follows certain policies when it: BORROWS MONEY (the Fund may
borrow up to 10% of the value of its total assets); LENDS ITS SECURITIES to
others; and holds ILLIQUID SECURITIES (the Fund may hold up to 10% of its net
assets in securities, including restricted securities, those without a
readily available market and repurchase agreements with maturities longer
than seven days). The Fund is subject to certain investment restrictions
that are fundamental policies, which means they cannot be changed without
shareholder approval. For more information about these restrictions, see the
SAI.
INVESTMENT RISKS
The Fund's investments in money market instruments involve both CREDIT RISK --
the possibility that the issuer will default, and MARKET RISK -- the risk that
an instrument will lose value because interest rates change or investors lose
confidence in the issuer's ability to pay back the debt. To limit these risks,
we invest only in high-quality securities with short maturities (no more than
thirteen months).
Foreign securities and foreign markets involve additional risk. Foreign laws
and accounting standards typically are not as strict as they are in the U.S.
Foreign fixed income and currency markets may be less stable than U.S. markets.
Changes in the exchange rates of foreign currencies can affect the value of
foreign assets. There is a risk that foreign companies and governments, just as
is the case in the U.S., will not be prepared to handle issues that will arise
when we reach the year 2000 if their computer systems cannot differentiate the
year 2000 from the year 1900.
<PAGE>
This chart outlines the key risks and potential rewards of
the Fund's principal investments.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INVESTMENT TYPE
% OF FUND'S TOTAL ASSETS RISKS POTENTIAL REWARDS
------------------------- ------------------------- ----------------------
<S> <C> <C>
HIGH-QUALITY MONEY MARKET - Credit risk-the risk - Regular interest
OBLIGATIONS OF ALL that the borrower income
TYPES can't pay back the
money borrowed or
make interest
------------------------ payments
Up to 100% - Market risk - the - May be more secure
risk that the than stock and
obligations may lose equity securities
value because since companies
interest rates must pay their debts
change or there is a before they pay their
lack of confidence dividends
in the borrower
- --------------------------------------------------------------------------------
MONEY MARKET OBLIGATIONS - Foreign markets, - Investors may
OF FOREIGN ISSUERS economies and realize higher
(DOLLAR- political systems returns based upon
DENOMINATED) may not be as stable higher interest
------------------------ as those in the U.S. rates paid on
foreign investments
Up to 100% - May be less public
information about
foreign issuers
- --------------------------------------------------------------------------------
ILLIQUID - May be difficult to - May offer a more
SECURITIES value and sell attractive yield
than more liquid
------------------------ - Could result in securities
Up to 10% of net assets losses
- --------------------------------------------------------------------------------
</TABLE>
HOW THE FUND IS MANAGED
MANAGER
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC (PIFM)
GATEWAY CENTER THREE, 100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
Under a management agreement with the Fund, PIFM manages the Fund's investment
operations and administers its business affairs. For the fiscal year ended
September 30, 1998, the Fund paid PIFM management fees of [__%] of the Fund's
average net assets.
<PAGE>
As of October 31, 1998, PIFM served as the Manager to all __ of the Prudential
Mutual Funds, and as Manager or administrator to __ closed-end investment
companies, with aggregate assets of approximately $__ billion.
INVESTMENT ADVISER
The Prudential Investment Corporation, known as Prudential Investments, is the
Fund's investment adviser. Its address is Prudential Plaza, 751 Broad Street,
Newark, New Jersey 07102. PIFM has responsibility for all investment advisory
services, supervises Prudential Investments and reimburses Prudential
Investments for its reasonable costs and expenses.
DISTRIBUTOR
Prudential Investment Management Services LLC (PIMS) distributes the Fund's
shares under a Distribution Agreement with the Fund. PIMS does not receive any
compensation from the Fund for distributing its shares.
YEAR 2000
Many computer systems used today cannot tell the year 2000 from the year 1900
because of the way dates are encoded. This could be a problem when the year
2000 arrives and could affect securities trades, interest and dividend payments,
pricing and account services. Although we can't guarantee that this won't be a
problem, the Fund's service providers have been working on adapting their
computer systems. They expect that their systems, and the systems of their
service providers, will be ready for the new millennium.
DISTRIBUTIONS AND TAX ISSUES
Investors who buy shares of the Fund should be aware of some important tax
issues. For example, the Fund distributes DIVIDENDS and CAPITAL GAINS, if any,
to shareholders. These distributions are subject to taxes, unless you hold your
shares in a 401(k) plan, an Individual Retirement Account (IRA), or some other
qualified tax-deferred plan or account.
The following briefly discusses some of the important tax issues you should be
aware of, but is not meant to be tax advice. For tax advice, please speak with
your tax adviser.
DISTRIBUTIONS
The Fund distributes DIVIDENDS of any net investment income to shareholders
every month. The dividends you receive from the Fund will be taxed as ORDINARY
INCOME, whether or not they are reinvested in the Fund.
Although the Fund is not likely to realize capital gains because of the types of
securities we purchase, any CAPITAL GAINS will be paid to shareholders
(typically once a year). CAPITAL GAINS are generated when the Fund sells its
assets for a profit.
<PAGE>
For your convenience, Fund distributions of dividends and capital gains are
AUTOMATICALLY REINVESTED in the Fund. If you ask us to pay the distributions in
cash, we will send you a check instead of purchasing more shares of the Fund.
Either way, the distributions are subject to taxes, unless your shares are
held in a qualified tax-deferred plan or account. For more information about
automatic reinvestment and other shareholder services, see Step 3: Additional
shareholder services.
TAX ISSUES
FORM 1099
During the tax season every year, you will recieve a FORM 1099, which reports
the amount of dividends and capital gains we distributed to you during the
prior year. If you own shares of the Fund as part of a qualified
tax-deferred plan or account, your taxes are deferred, so you will not
receive a Form 1099. However, you will receive a Form 1099 when you take any
distributions from your qualified tax-deferred plan or account.
Fund distributions are generally taxable to you in the year they are
received, except when we declare certain dividends in December of a calendar
year, and actually pay them in January of the following year. In such cases,
the dividends are treated as if they were paid on December 31 of the prior
year.
WITHHOLDING TAXES
If federal law requires you to provide the Fund with your tax identification
number and certifications as to your tax status, and you fail to do this, we
will withhold and pay to the U.S. Treasury 31% of your distributions. If you
are subject to backup withholding, we will withhold and pay to the U.S. Treasury
31% of your distributions. Dividends of net investment income and short-term
capital gains paid to a nonresident foreign shareholder generally will be
subject to a U.S. withholding tax of 30%. This rate may be lower, depending on
any tax treaty the U.S. may have with the shareholder's country.
HOW TO BUY AND SELL SHARES OF THE FUND
HOW TO BUY SHARES
STEP 1: OPEN AN ACCOUNT
Shares are available only to clients of Prudential Securities Incorporated
that participate in any of the following managed account programs:
- Gibraltar Advisors
- Prudential Securities Portfolio Management (PSPM)
- Quantum Portfolio Management (Quantum)
- Managed Assets Consulting Services (MACS)
- Managed Assets Consulting Services - Custom Services (MACS-CS)
<PAGE>
- Prudential Securities Investment Supervisor Group
To invest in the Fund, you must participate in any one of these programs, and
you must be an Eligible Benefit Plan. Eligible Benefit Plans are:
- employee benefit plans as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 (ERISA) other than government
plans as defined in 3(32) of ERISA and church plans as defined in
Section 3(33) of ERISA;
- 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);
- deferred compensation and annuity plans under Section 457 or 403(b)(7)
of the Internal Revenue Code; and
- Individual Retirement Accounts (IRAs) as defined in Section 408(a) of
the Internal Revenue Code
Eligibility for in any of these programs is within the discretion of
Prudential Securities. You should contact a Prudential Securities financial
adviser for more information. We have the right to reject any purchase
order or suspend or modify the sale of Fund shares.
AUTOMATIC PURCHASE (AUTOSWEEP). Shares of the Fund can only be purchased
through automatic investment procedures (the Autosweep program). The Autosweep
program allows you to designate a market money fund as your primary money sweep
fund. If you do not designate a primary money sweep fund, the Fund will
automatically be your primary money sweep fund. You have the option to change
your primary money sweep fund at any time by notifying your Prudential
Securities financial adviser.
When your Prudential Securities account has a credit balance (that is,
immediately available funds), Prudential Securities will purchase shares of the
Fund equal to that amount. This will occur on the business day following
confirmation that a credit balance exists. Prudential Securities may use and
retain the benefit of credit balances in your account until Fund shares are
purchased (that is, until the next business day).
Your investment in the Fund will be held in the name of Prudential Securities.
Prudential Securities will receive all statements and dividends from the Fund
and will, in turn, send you account statements showing your purchases, sales and
dividends.
AUTOMATIC PURCHASE PROCEDURES. Prudential Securities will purchase shares of
the Fund on behalf of participating clients each business day at the current
NAV as described below. Credit balances of $1 or more in your account will
automatically be invested in shares of the Fund. Where your credit balance
results from a sale of securities, the available cash will be reinvested in
the Fund on settlement date. Where your credit balance results from
<PAGE>
any other transaction (that is, receipt of a dividend or interest payment,
maturity of a bond or your own cash payment to your securities account), the
available cash will be invested in the Fund on the first business day after
it is received by Prudential Securities. All available cash in your account,
regardless of its source, will automatically be invested.
You will begin earning dividends on your shares purchased through Autosweep on
the day the order is placed. Prudential Securities will purchase shares of the
Fund at 4:30 p.m. New York Time on the business day the order is placed and
payment for the shares will be made by 4:30 p.m. New York Time on the next
business day.
STEP 2: UNDERSTANDING THE PRICE YOU'LL PAY
When you invest in a mutual fund, you buy shares of the Fund. Shares of a money
market mutual fund, like the Fund, are priced differently than shares of common
stock and other securities.
The share price of a mutual fund--known as the Net Asset Value or NAV per
share--is determined by a simple calculation; the total value of the fund
(assets minus liabilities) divided by the total number of shares outstanding.
In determining NAV, the Fund values its securities using the amortized cost
method. The Fund seeks to maintain a NAV of $1 per share at all times.
We determine the NAV of our shares once each business day at 4:30 p.m. New
York Time on days that the New York Stock Exchange is open for trading. We
do not determine NAV on days when we have not received any orders to purchase
or sell or when changes in the value of the Fund's portfolio do not
materially affect the NAV.
STEP 3: ADDITIONAL SHAREHOLDER SERVICES
As a Fund shareholder, you can take advantage of the following services and
privileges:
AUTOMATIC REINVESTMENT. As we explained in the FUND DISTRIBUTIONS AND TAX
ISSUES section, the Fund pays out--or distributes--its net investment income and
any capital gains to all shareholders. For your convenience, we will
automatically reinvest your distributions in the Fund at NAV. If you want your
distributions paid in cash, you can indicate this preference on your
application, or notify your Prudential Securities financial adviser not less
than five full business days before the date we determine who receives dividend.
REPORTS TO SHAREHOLDERS. Every year we will send you an annual report (along
with an updated prospectus) and a semi-annual report, which contain important
financial information about the Fund. If there are multiple shareholders in the
same household, you will receive only one copy of each of these per household.
HOW TO SELL YOUR SHARES
You can sell your shares of the Fund for cash (in the form of a check) at any
time, subject to certain restrictions.
<PAGE>
When you sell shares of the Fund--also known as redeeming shares--the price you
will receive will be the NAV next determined after we receive your order to
sell. Prudential Securities must receive your order to sell by 4:30 p.m. New
York Time to process the sale on that day.
Generally, we will pay you for the shares that you sold within seven days after
we receive your sell order.
RESTRICTIONS ON SALES
There are certain times when you may not be able to sell
shares of the Fund or when we may delay paying you the proceeds from a sale.
This may happen during unusual market conditions or emergencies when the Fund
can't determine the value of its assets or sell its holdings. For more
information, see the SAI, "Purchase and Redemption of Fund Shares."
REDEMPTION IN KIND
If the sales of Fund shares you make during any 90-day period reaches the
lesser of $250,000 or 1% of the value of the Fund's net assets, we can then
give you securities from the Fund's portfolio instead of cash. If you want
to sell the securities for cash, you would have to pay the costs charged by a
broker. See the SAI, "Purchase and Redemption of Fund Shares."
AUTOMATIC REDEMPTION FOR AUTOSWEEP
Because you participate in the Autosweep program, your Fund shares will be
automatically redeemed to cover any deficit in your Prudential Securities
account. The amount redeemed will be the nearest dollar amount necessary to
cover the deficit.
The amount of the redemption will be the lesser of the total value of Fund
shares held in your Prudential Securities account or the deficit in your
Prudential Securities account. If you use this automatic redemption procedure
and want to pay for a securities transaction in your account other than through
this procedure, you must deposit cash in your securities account before the
settlement date. If you use this automatic redemption procedure and want to pay
any other deficit in your securities account other than through this procedure,
you must deposit cash in your securities account before you incur the deficit.
AUTOMATIC REDEMPTION
Redemptions are automatically made by Prudential Securities, to the nearest
dollar, on each day to satisfy deficits from securities transactions or to
honor your redemption requests. Your account will be automatically scanned
for deficits each day and, if there is insufficient cash in your account, we
will redeem an appropriate number of shares of the Fund at the next
determined NAV to satisfy any remaining deficit. You are entitled to any
dividends declared on the redeemed shares through the day before the
redemption is made. Dividends declared on the redemption date will be
retained by Prudential Securities, which has advanced monies to satisfy
deficits in your account.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights will help you evaluate the Fund's financial
performance. The TOTAL RETURN in the chart represents the rate that a
shareholder earned on an investment in the Fund, assuming reinvestment of all
dividends and other distributions. The information is for shares of the Fund
for the periods indicated. The financial statements and audit reports are
available upon request.
Review this chart with the financial statements which appear in the SAI.
Additional performance information is contained in the annual report, which you
can receive at no charge.
The financial highlights for the period from December 12, 1997 to
September 30, 1998 were audited by , whose report
was unqualified.
<TABLE>
<CAPTION>
----
1998
----
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period. . . . . . . . . . . . . . . . . . . $1.00
-----
Income from investment operations--net investment income. . . . . . . . .
-----
Dividends to shareholders . . . . . . . . . . . . . . . . . . . . . . . . ( )
Net asset value, end of period. . . . . . . . . . . . . . . . . . . . . . $1.00
-----
-----
TOTAL RETURN: %
-----
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (500) . . . . . . . . . . . . . . . . . . . . . $
-----
Ratios to average net assets:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . %
-----
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . %
-----
</TABLE>
<PAGE>
THE PRUDENTIAL MUTUAL FUND FAMILY
Prudential offers a broad range of mutual funds designed to meet your
individual needs. For information about these funds, contact your dealer or
Prudential professional or call us at (800) 225-1852.
STOCK FUNDS GLOBAL FUNDS
Prudential Balanced Fund Prudential Developing Markets Fund
Prudential Distressed Securities Fund, Prudential Developing Markets Equity
Inc. Fund
Prudential Emerging Growth Fund, Inc. Prudential Latin America Equity Fund
Prudential Equity Fund, Inc. Prudential Europe Growth Fund, Inc.
Prudential Equity Income Fund Prudential Global Genesis Fund, Inc.
Prudential Index Series Fund Prudential Global Limited Maturity
Prudential Bond Market Index Fund Fund, Inc.
Prudential Europe Index Fund Limited Maturity Portfolio
Prudential Pacific Index Fund Prudential Intermediate Global Income
Prudential Small-Cap Index Fund Fund, Inc.
Prudential Stock Index Fund Prudential International Bond Fund,
The Prudential Investment Portfolios, Inc.
Inc. Prudential Natural Resources Fund,
Prudential Active Balanced Fund Inc.
Prudential Jennison Growth Fund, Prudential Pacific Growth Fund, Inc.
Prudential Jennison Growth & Income Prudential World Fund, Inc.
Fund Global Series
Prudential Mid-Cap Value Fund International Stock Series
Prudential Real Estate Securities Fund The Global Total Return Fund, Inc.
Prudential Small-Cap Quantum Fund, Global Utility Fund, Inc.
Inc.
Prudential Small Company Value Fund, MONEY MARKET FUNDS
Inc. TAXABLE MONEY MARKET FUNDS
Prudential 20/20 Focus Fund Cash Accumulation Trust
Prudential Utility Fund, Inc. Liquid Assets Fund
Nicholas-Applegate Fund, Inc. National Money Market Fund
Nicholas-Applegate Growth Equity Fund Prudential Government Securities Trust
Money Market Series
TAXABLE BOND FUNDS U.S. Treasury Money Market Series
Prudential Diversified Bond Fund, Inc. Prudential Special Money Market Fund,
Prudential Government Income Fund, Inc.
Inc. Money Market Series
Prudential Government Securities Trust Prudential MoneyMart Assets, Inc.
Short-Intermediate Term Series
Prudential High Yield Fund, Inc. TAX-FREE MONEY MARKET FUNDS
Prudential Mortgage Income Fund, Inc. Prudential Tax-Free Money Fund, Inc.
Prudential Structured Maturity Fund, Prudential California Municipal Fund
Inc. California Money Market Series
Income Portfolio Prudential Municipal Series Fund
Connecticut Money Market Series
TAX-EXEMPT BOND FUNDS Massachusetts Money Market Series
Prudential California Municipal Fund New Jersey Money Market Series
California Series New York Money Market Series
California Income Series Command Funds
Prudential Municipal Bond Fund Command Money Fund
High Income Series Command Government Fund
Insured Series Command Tax-Free Fund
Intermediate Series Institutional Money Market Funds
Prudential Municipal Series Fund Prudential Institutional Liquidity
Florida Series Portfolio, Inc.
Maryland Series Institutional Money Market Series
Massachusetts Series
Michigan Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund,
Inc.
<PAGE>
[BACK COVER PAGE]
FOR MORE INFORMATION ABOUT THE FUND
Please read this prospectus before you invest in the Fund and keep it for future
reference. You can get additional information about the Fund in the following
documents:
STATEMENT OF ADDITIONAL INFORMATION
(incorporated by reference into this Prospectus)
ANNUAL REPORT
(contains a discussion of the market conditions and investment strategies
that significnatly affect the Fund's performance)
SEMI-ANNUAL REPORT
To get this information free of charge or for shareholder questions, contact
your dealer, the Distributor, or Prudential at:
PRUDENTIAL MUTUAL FUND SERVICES LLC
P.O. BOX 15005
NEW BRUNSWICK, NEW JERSEY 08906-5005
(800) 225-1852
(908) 417-7555 (if calling from outside the U.S.)
Dealers should contact:
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
P.O. BOX 15035
NEW BRUNSWICK, NEW JERSEY 08906-1852
(800) 225-1852
Visit Prudential's web site at HTTP://WWW.PRUDENTIAL.COM
You can also obtain copies of Fund documents from the Securities and Exchange
Commission as follows:
BY MAIL: IN PERSON:
SECURITIES AND EXCHANGE COMMISSION PUBLIC REFERENCE ROOM IN WASHINGTON
PUBLIC REFERENCE SECTION D.C.
WASHINGTON, D.C. 20549-6009 (For hours of operation, call 1-800-
(The SEC charges a fee to copy any SEC-0330)
documents)
THE FUND'S CUSIP NUMBER IS: VIA THE INTERNET:
147541502 HTTP://WWW.SEC.GOV
Investment Company Act File No: 811-4060
<PAGE>
CASH ACCUMULATION TRUST
STATEMENT OF ADDITIONAL INFORMATION
DATED JANUARY __, 1999
Cash Accumulation Trust (the Trust), an open-end, diversified, management
investment company is offered in two series: National Money Market Fund (NMMF)
and Liquid Assets Fund (LAF) (each a Fund and collectively, the Funds). 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 "How the Fund Invests" in the
applicable Prospectus and "Description of the Funds, their Investments and
Risks."
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 January __, 1999, copies of which may be obtained from the Trust
upon request.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE CROSS-REFERENCE CROSS-REFERENCE
---- TO PAGE IN TO PAGE IN
THE NMMF THE LAF
PROSPECTUS PROSPECTUS
---------- ----------
<S> <C> <C> <C>
Trust History. . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
Description of the Funds, their Investments and Risks. . . . . . . . . B-2
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . B-5
Management of the Trust . . . . . . . . . . . . . . . . . . . . . . . B-8
Control Persons and Principal Holders of Securities . . . . . . . . . B-11
Investment Advisory and Other Services . . . . . . . . . . . . . . . . B-12
Brokerage Allocation and Other Practices . . . . . . . . . . . . . . . B-14
Securities and Organization . . . . . . . . . . . . . . . . . . . . . B-15
Purchase and Redemption of Fund shares . . . . . . . . . . . . . . . . B-16
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17
Taxes, Dividends and Distributions . . . . . . . . . . . . . . . . . . B-17
Calculation of Yield . . . . . . . . . . . . . . . . . . . . . . . . . B-18 - -
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . B-19 - -
Reports of Independent Accountants . . . . . . . . . . . . . . . . . .
Appendix I-Description of Security Ratings . . . . . . . . . . . . . . I-1 - -
Appendix II-Historical Performance Data . . . . . . . . . . . . . . . II-1 - -
Appendix III-General Investment Information . . . . . . . . . . . . . III-1 - -
Appendix IV-Information Relating to Prudential . . . . . . . . . . . . IV-1 - -
</TABLE>
B-1
<PAGE>
TRUST HISTORY
The Trust was organized under the laws of Massachusetts on April 27, 1984
as an unincorporated business trust, a form of organization that is commonly
referred to as a Massachusetts business trust.
DESCRIPTION OF THE FUNDS, THEIR INVESTMENTS AND RISKS
(a) CLASSIFICATION. The Trust is a diversified open-end management
investment company.
(b) INVESTMENT STRATEGIES AND RISKS.
Each Fund's investment objective is current income to the extent
consistent with preservation of capital and liquidity. While the principal
investment policies and strategies for seeking to achieve this objective are
described in each Fund's Prospectus, a Fund may from time to time also utilize
the securities, instruments, policies and strategies described below in seeking
to achieve its objective. A Fund may not be successful in achieving its
objective and you can lose money.
OBLIGATIONS ISSUED OR GUARANTEED BY THE U.S. GOVERNMENT, ITS AGENCIES AND
INSTRUMENTALITIES
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.
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.
DEMAND FEATURES AND GUARANTEES
LAF may purchase demand features and guarantees. A demand feature
supporting a money market fund instrument can be relied upon in a number of
respects. First, the demand feature can be relied upon to SHORTEN THE
MATURITY of the underlying instrument. Second, the demand feature, if
unconditional, can be used to EVALUATE THE CREDIT QUALITY of the underlying
security. This means that the credit quality of the underlying security can
be based solely on the credit quality of the unconditional demand feature
supporting that security.
A GUARANTEE is a form of unconditional credit support that may include bond
insurance, a letter of credit, and an unconditional demand feature. A money
market fund holding a security subject to a guarantee may determine the credit
quality of the underlying security solely on the basis of the credit quality of
the supporting guarantee.
LAF can only invest 10% of its total assets in securities directly issued
by, or supported by, a demand feature provider or guarantor. Investment Company
Act Rule 2a-7 provides a more stringent limit on demand features and guarantees
that are "second tier securities" under the Rule; that is, those securities that
are rated in the second highest category by a specified number of rating
organizations. Specifically, Rule 2a-7 provides that a money market fund cannot
invest more than 5% of its total assets in securities directly issued by, or
supported by, second tier demand features or guarantees that are issued by the
same entity.
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 each Fund do not exceed in the aggregate 33 1/3% of the value of its
respective 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. Any voting
rights, or rights to
B-2
<PAGE>
consent relating to the securities loaned pass to the borrower. However, if a
material event affecting the investment occurs, such loans will be called so
securities may be voted by the Fund (or Funds).
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.
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.
ILLIQUID SECURITIES
Each Fund may not hold more than 10% of its respective net 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 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.
B-3
<PAGE>
BORROWING
NMMF may borrow from banks (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. NMMF may pledge up to and
including 10% of its net assets to secure such borrowings. LAF may borrow
(including through entering 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. LAF may pledge up to
33 1/3% of its total assets to secure such borrowings. A Fund will not purchase
portfolio securities if its borrowings (other than permissible securities loans)
exceed 5% of its total assets.
REPURCHASE AGREEMENTS
Each 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.
A 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 limit 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 circumstances, there may be a restriction on the Fund's ability to sell
the collateral, and the Fund could suffer a loss.
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 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.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements have the characteristics of borrowing and
involve the sale of securities held by a Fund with an agreement to repurchase
the securities at a specified price, date and interest payment. Each 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. A 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.
FIRM COMMITMENT AGREEMENTS
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
B-4
<PAGE>
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.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
LAF 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 LAF 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. LAF will limit such purchases to
those which the date of delivery and payment falls within 90 days of the date of
the commitment. LAF will make commitments for such when issued transactions only
with the intention of actually acquiring the securities. The Trust's Custodian
will segregate cash or other liquid assets having a value equal to or greater
than LAF's purchase commitments. If LAF 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.
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.
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.
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 and this Statement of Additional Information under
the caption "Description of the Funds, their Investments and
Risks-Lending of
B-5
<PAGE>
Securites."
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.)
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.
Although Restriction 3 states that it does not apply to bank obligations,
federal regulations applicable to the Fund currently limit bank obligations to
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.
Although Restriction 14 states that the Fund may invest no more than 10%
of its total assets in illiquid securities, the Fund intends to invest no more
than 10% of its net assets in such securities, in compliance with current
interpretations of the staff of the Securities and Exhange Commission.
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.
B-6
<PAGE>
For purposes of the foregoing restrictions, U.S. Government Securities
refer to obligations of the U.S. Treasury and obligations issued by agencies of
the U.S. Government or instrumentalities established or sponsored by the U.S.
Government.
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.
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 33 1/3% 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 not 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.
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 33 1/3% 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.
B-7
<PAGE>
Although Restriction 4 limits the Fund's investments in the securities of a
single issuer to 5% of the value of 75% of the value of the Fund's total assets,
federal regulations applicable to the Fund currently prohibit the Fund from
making any investment that would result in more than 5% of the Fund's total
assets being invested in securities of a single 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. However, in the event that the Fund's
asset coverage for borrowings falls below 300%, the Fund will take prompt action
to reduce its borrowing, as required by applicable law.
MANAGEMENT OF THE FUND
(a) TRUSTEES
The Trust has Trustees who, in addition to overseeing the actions of
each Fund's Manager, Subadviser, and Distributor, decide upon matters of
general policy.
The Trustees also review the actions of the officers of the Trust, who
conduct and supervise the daily business operations of the Trust.
(b) MANAGEMENT INFORMATION-TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
POSITION AND OTHER AFFILIATIONS
NAME, ADDRESS AND AGE(1) WITH THE TRUST FOR THE LAST FIVE YEARS
----------------------- -------------- ----------------------
<S> <C> <C>
Edward D. Beach(73) Trustee President and Director of BMC
Fund, Inc., a closed-end
investment company; previously
Vice Chairman of Broyhill
Furniture Industries, Inc.,
Certified Public Accountant;
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.
Delayne Dedrick Gold(59) Trustee Marketing and Management
Consultant; Director of The High
Yield Income Fund, Inc.
*Robert F. Gunia(51) Trustee Vice President of Prudential
Investments (since September
1997); Executive Vice President
and Treasurer (since
December 1996) of Prudential
Investments Fund Management LLC
(PIFM); Senior Vice President
(since March 1987) of Prudential
Securities Incorporated
(Prudential Securities);
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); Vice
President and Director (since
May 1989) of The Asia Pacific
Fund, Inc.; Director of The High
Yield Income Fund, Inc.
Don G. Hoff (62) Trustee Chairman and Chief Executive
Officer (since 1980) of
Intertec, Inc. (investments);
Chairman and Chief Executive
Officer of The Lamaur
Corporation, Inc.; 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 (since 1981) of
Robert E. LaBlanc
Associates, Inc.
(telecommunications); formerly
B-8
<PAGE>
General Partner at Salomon
Brothers; and Vice-Chairman of
Continental Telecom; Director of
Storage Technology Corporation,
Titan Corporation, Salient 3
Communications, Inc. and Tribune
Company; and Trustee of
Manhattan College.
*Mendel A. Melzer, Trustee Chief Investment Officer (since
CFA(37) October 1996) of Prudential
751 Broad Street Mutual Funds; formerly Chief
Newark, NJ 07102 Financial Officer (November 1995
- September 1996) of Prudential
Investments; Senior Vice
President and Chief Financial
Officer of Prudential Preferred
Financial Services (April 1993 -
November 1995); Managing
Director of Prudential
Investment Advisors (April 1991
- April 1993) and Senior Vice
President of Prudential Capital
Corporation (July 1989-April
1991); 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 1988-
August 1996) and President and
Chief Operating Officer
(September 1981-December 1988)
of Publishers Clearing House;
Director of BellSouth
Corporation, Texaco Inc.,
Springs 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; Senior Vice
President (January 1991 - 1992)
and Publishing Vice President
(May 1989-December 1990) of
Gralla Publications (a division
of United Newspapers, U.K.); and
Senior Vice President of
Fairchild Publications, Inc.
Nancy H. Teeters(67) Trustee Economist; Director of Inland
Steel Industries; formerly, Vice
President and Chief Economist of
International Business Machines;
Member of the Board of Governors
of the Federal Reserve System;
Governor of the Horace H.
Rackham School of Graduate
Studies of the University of
Michigan; Assistant Director of
the Committee on the Budget of
the US House of Representatives;
Senior Fellow at the Library of
Congress; Senior Fellow at the
Brookings Institution; staff at
Office of Management and Budget,
Council of Economic Advisors and
the Federal Reserve Board.
Brian M. Storms(44) President President, Prudential
Investments, (October 1998-
Present), President, Prudential
Mutual Funds, Annuities, and
Investment Management Services,
(September 1996-October 1998).
Managing Director, Fidelity
Investments Institutional
Services Company, Inc.
(July 1991-September 1996)
President, J.K. Schofield
(October 1989-September 1991)
Senior Vice President, INVEST
Financial Corporation, (September
1982-October 1989)
B-9
<PAGE>
S. Jane Rose(52) 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.
Robert C. Rosselot(38) Assistant Secretary Assistant General Counsel (since
September 1997) of PIFM;
formerly, partner with the firm
of Howard & Howard, Bloomfield
Hills, Michigan ( December 1995-
September 1997) and Corporate
Counsel, Federated Investors
(1990 - 1995).
Grace C. Torres(39) Treasurer and First Vice President (since
Principal Financial December 1996) of PIFM; First
and Accounting Vice President (since
Officer March 1994) of Prudential
Securities; formerly First Vice
President (March 1994 -
September 1996), Prudential
Mutual Fund Management, Inc. and
Vice President (July 1989 -
March 1994) of Bankers
Trust Corporation.
Stephen M. Ungerman(44) Assistant Treasurer Vice President and Tax Director
(since March 1996) of Prudential
Investments; formerly First Vice
President of Prudential Mutual
Fund Management, Inc. (February
1993-September 1996).
</TABLE>
- -------
(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 or Prudential Investment Management Services LLC.
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 (the Fund Rate). 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, 1998 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, 1998. 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.
B-10
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
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
E. Philip Cannon - Former $5,325 None N/A **
Trustee
Donald P. Carter - Former $6,150 None N/A **
Trustee
Gary A. Childress - Former $5,325 None N/A **
Trustee
William D. Cvengros - Former $0 None N/A **
Trustee
Stephen C. Eyre - Trustee None N/A
Delayne D. Gold - Trustee None N/A
Robert F. Gunia(1) - Trustee _ None N/A _
Don G. Hoff - Trustee None N/A
Robert E. LaBlanc - Trustee None N/A
Gary L. Light - Former Trustee $5,475 None N/A **
Mendel A. Melzer(1) - Trustee _ None N/A _
Richard L. Nelson - Former $4,300 None N/A **
Trustee
Lyman W. Porter - Former $4,150 None N/A **
Trustee
Robert A. Prindiville - Former $0 None N/A **
Trustee
Alan Richards - Former Trustee $4,525 None N/A **
Joel Segall - Former Trustee $5,225 None N/A **
Robin B. Smith - Trustee None N/A
Stephen Stoneburn - Trustee $0 None N/A
W. Bryant Stooks - Former $5,325 None N/A **
Trustee
Nancy H. Teeters - Trustee None N/A
Gerald M. Thorne - Former $5,325 None N/A **
Trustee
Stephen J. Treadway - Former $0 None N/A **
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.
<PAGE>
(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, 1998, including amounts deferred at
the election of Trustees under the funds' deferred compensation plans.
Including accrued interest, total deferred compensation amounted to
$________ 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 Fund Rate.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of ____________, 1998, 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 ___________, 1998, Prudential Securities Incorporated, One Seaport
Plaza, New York, New York 10292 was the record owner of ____________ shares (or
____% of the shares) of NMMF and _____________shares (or _____% of the shares)
of LAF. In the event of any meetings of shareholders, Prudential Securities will
forward, or cause the forwarding of, proxy material to the beneficial owners
for which it is the record holder.
B-11
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
(a) INVESTMENT ADVISERS
The manager of the Trust is Prudential Investments Fund Management LLC,
(PIFM or the Manager), 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 30, 1998, 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 _______________, 1998, the
Prudential Mutual Funds were the __th 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 became 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, 1999.
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).
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 Commission,
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
B-12
<PAGE>
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, 1998, PIFM received management fees
from NMMF and LAF of $_______ and $_________, respectively.
For the fiscal year ended September 30, 1997 and the prior fiscal years,
PIMCO Advisors L.P. (PALP), served as manager for NMMF. PALP did not serve as
manager of LAF. 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, 1996 and 1997, NMMF paid PALP $2,560,734
and $2,886,449, respectively, for its services under its management contract.
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
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.
The Management Agreement between the Trust and PIFM and the Subadvisory
Agreements between PIFM and PIC were last approved by the Board of Trustees,
including a majority of the Trustees who are not parties to the contracts or
interested persons of any such parties, as defined in the Investment Company
Act, on May 13, 1998. Shareholders of NMMF and LAF last approved the Management
Agreement and the Subadvisory Agreements on December 12, 1997.
(b) PRINCIPAL UNDERWRITER, DISTRIBUTOR AND RULE 12b-1 PLAN
Prudential Investment Management Services LLC (PIMS or the Distributor),
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, acts
as the distributor of the shares of the Trust. Prior to July 1, 1998,
Prudential Securities Incorporated (Prudential Securities, also referred to as
the Distributor), One Seaport Plaza, New York, New York 10292, served as the
distributor of the Trust's shares. In November 1998, more than __% of the
outstanding voting shares of NMMF and more than __% of the outstanding voting
securities of LAF were owned by clients of Prudential Securities.
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.
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<PAGE>
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. The Distributor incurs the expenses of
distributing LAF shares, none of which are reimbursed by or paid for by LAF.
For the fiscal year ended September 30, 1998, the Distributor received
payments of $__________ under the Plan. This amount was primarily expended for
payment of account servicing fees to financial advisers and other persons who
sell shares of NMMF.
The Board of Trustees has determined that, in its judgment, there is a
reasonable likelihood that the Plan will benefit NMMF and its shareholders.
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.
(c) OTHER SERVICE PROVIDERS
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. 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.
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036, serves as the Trust's independent public accountants.
PricewaterhouseCoopers LLP provides audit services, accounting assistance, and
consultation in connection with Securities and Exchange Commission filings. The
financial information for NMMF and LAF provided under "Financial Statements" for
the fiscal year ended September 30, 1998 has been audited by
PricewaterhouseCoopers LLP, whose report is also included under "Financial
Statements."
BROKERAGE ALLOCATION AND OTHER PRACTICES
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
B-14
<PAGE>
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 the Distributor, or an
affiliate (including Prudential Securities), 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
the Distributor 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 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, as an affiliate
of the Trust, 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, 1996, 1997 and 1998, the Trust
paid no brokerage commissions.
SECURITIES AND ORGANIZATION
The Trust is authorized to issue an unlimited number of full and fractional
shares of beneficial interest, which may be divided into an unlimited number of
series 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 or 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 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.
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<PAGE>
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.
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.
<PAGE>
PURCHASE AND REDEMPTION OF FUND SHARES
PURCHASE OF SHARES
Shares of the NMMF 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
"How to Buy and Sell 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. In the event a
client of Prudential Securities leaves a managed account program, the client may
continue to hold shares of NMMF.
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 "How to
Buy and Sell 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. In the event
a client of Prudential Securities leaves a managed account program, the client
may continue to hold shares of LAF.
If the Board of Trustees determines that it would be detrimental to the
best interests of the remaining shareholders of a 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
B-16
<PAGE>
marketable and will be valued in the same manner as in a regular
redemption. 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 each
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 a
Fund of securities owned by it is not reasonably practicable or (b) it is not
reasonably practicable for a 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 a 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.
NET ASSET VALUE
Each Fund's net asset value per share is determined by subtracting its
liabilities from the value of its assets and dividing the remainder by the
number of outstanding shares.
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. In the event
the New York Stock Exchange closes early on any business day, the net asset
value of a Fund's shares shall be determined at a time between such closing and
4:30 PM New York time. 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.
TAXES, DIVIDENDS AND DISTRIBUTIONS
NMMF and LAF have elected 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) a fund must 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
(c) the fund must 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.
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<PAGE>
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.
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, 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 generally be treated as long-term capital gain or
loss if the shares have been held for more than one year and otherwise as
short-term capital gain or loss. Any such loss, however, although otherwise
treated as 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. Futhermore, certain rules may
apply which would limit the ability of the shareholder to recognize any 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.
365/7
Effective yield = [(base period return+1) ]-1
The yield and effective yield for NMMF based on the 7 days ended September
30, 1998 were _____% and ____%, respectively. The yield and effective yield
for LAF based on 7 days ended September 30, 1998 were ___% and ____%,
respectively.
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-18
<PAGE>
[FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT
ACCOUNTANTS]
B-19
<PAGE>
APPENDIX I - DESCRIPTION OF RATINGS
BOND RATINGS
MOODY'S INVESTORS SERVICE - 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. 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 the best 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 Aaa securities. Bonds
which are rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future. Moody's
applies numerical modifiers "1", "2" and "3" in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier "1" indicates that the company ranks in the higher end of its generic
rating category; the modifier "2" indicates a mid-range ranking; and the
modifier "3" indicates that the company ranks in the lower end of its generic
rating category.
STANDARD & POOR'S RATINGS GROUP - Debt rated AAA has the highest rating
assigned by S&P. Capacity to pay interest and repay principal is extremely
strong. 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. Debt
rated A has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories.
DUFF AND PHELPS CREDIT RATING CO. - The following summarizes the ratings
used by Duff & Phelps for long-term debt:
"AAA": Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury
debt.
"AA+", "AA" or "AA-": High credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
"A+", "A" or "A-": Protection factors are average but adequate.
However, risk factors are more variable and greater in periods of
economic stress.
COMMERCIAL PAPER 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. Issuers rated "Prime-1" (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations. Issuers
rated "Prime-2" (or supporting institutions) have a strong ability for repayment
of senior short-term debt obligations. Issuers rated "Prime-3" (or supporting
institutions) have an acceptable ability for repayment of senior short-term
obligations.
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. The
designation A-1 indicates that the degree of safety regarding timely payment is
strong. A "+" designation is applied to those issues rated A-1 which possess
extremely strong safety characteristics. Capacity for timely payment on issues
with the designation A-2 is satisfactory. However, the relative degree of safety
is not as high as for issues designated A-1. Issues carrying the designation A-3
have adequate capacity for timely payment. They are however, somewhat more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations.
The following summarizes the ratings used by Duff & Phelps for short-term
debt, which apply to all obligations with maturities of under one year,
including commercial paper.
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.
I-1
<PAGE>
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.
D-3: Satisfactory liquidity and other protection factors qualify issue as
to investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
I-2
<PAGE>
APPENDIX II - 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.
EACH INVESTMENT PROVIDES A DIFFERENT OPPORTUNITY
Source: Stocks, Bonds, Bills and Inflation 1997 Yearbook, Ibbotson Associates,
Chicago, Illinois (annually updates work by Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. 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 reinvestment of
distributions. Bond returns are attributable mainly to reinvestment of 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 500 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).
II-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 1997. 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 Fund or of any sector in which the
Fund 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 "Fund 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
<TABLE>
<CAPTION>
'87 '88 '89 '90 '91 '92 '93 '94 '95 '96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT 2.0% 7.0% 14.4% 8.5% 15.3% 7.2% 10.7% (3.4)% 18.4% 2.7%
TREASURY
BONDS(1)
U.S. Government 4.3% 8.7% 15.4% 10.7% 15.7% 7.0% 6.8% (1.6)% 16.8% 5.4%
Mortgage
Securities(2)
U.S. Investment 2.6% 9.2% 14.1% 7.1% 18.5% 8.7% 12.2% (3.9)% 22.3% 3.3%
Grade
Corporate
Bonds(3)
U.S. 5.0% 12.5% 0.8% (9.6)% 46.2% 15.8% 17.1% (1.0)% 19.2% 11.4%
High Yield
Corporate
Bonds(4)
World 35.2% 2.3% (3.4)% 15.3% 16.2% 4.8% 15.1% 6.0% 18.6% 4.1%
Government
Bonds(5)
Difference between 33.2 10.2 18.8 24.9 30.9 11.0 10.3 9.9 5.5 8.7
highest
and lowest return
percent
</TABLE>
(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.
II-2
<PAGE>
(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.
II-3
<PAGE>
This chart illustrates the performance of major world stock markets for the
period from December 31, 1985 through December 31, 1997. It does not represent
the performance of any Prudential Mutual Fund.
AVERAGE ANNUAL TOTAL RETURNS OF MAJOR WORLD STOCK MARKETS (DECEMBER 31,
1985-DECEMBERR 31, 1997)(IN U.S. DOLLARS)
Source: Morgan Stanley Capital International (MSCI) based on data retrieved from
Lipper Analytical New Application (LANA) as of
September 30, 1997. 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.
Source: Stocks, Bonds, Bills, and Inflation 1998 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.
II-4
<PAGE>
WORLD STOCK MARKET CAPITALIZATION BY REGION
WORLD TOTAL: $12.5 TRILLION
Source: Morgan Stanley Capital International, December 31, 1997. 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 1577 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.
This chart below shows the historical volatility of general interest rates
as measured by the long U.S. Treasury Bond.
Source: Stocks, Bonds, Bills, and Inflation 1998 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 1926-1997. 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.
II-5
<PAGE>
APPENDIX III- 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.
STANDARD DEVIATION
Standard deviation is an absolute (non-relative) measure of volatility
which, for a mutual fund, depicts how widely the returns varied over a certain
period of time. When a fund has a high standard deviation, its range of
performance has been very wide, implying greater volatility potential. Standard
deviation is only one of several measures of a fund's volatility.
III-1
<PAGE>
APPENDIX IV - 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 "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 79,000 persons
worldwide, and maintains a sales force of approximately 10,100 agents and nearly
6,500 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 40 million people worldwide.
Long one of the largest issuers of individual life insurance, the Prudential has
25 million life insurance policies and group certificates in force today with a
face value of almost $1 trillion. Prudential has the largest capital base ($12.3
billion) of any life insurance company in the United States. Prudential provides
auto insurance for approximately 1.5 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, 1997, Prudential had more than $370 billion in assets under
management. Prudential Investments, a business group of Prudential (of which
Prudential Mutual Funds is a key part) manages over $211 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 4.9
million Americans receive healthcare from a Prudential managed care membership.
FINANCIAL SERVICES. The Prudential Bank, a wholly-owned subsidiary of
Prudential, has over $4 billion in assets and serves nearly 1.5 million
customers across 50 states.
INFORMATION ABOUT THE PRUDENTIAL MUTUAL FUNDS
As of December 31, 1997, Prudential Investments Fund Management LLC is the
eighteenth 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
IV-1
<PAGE>
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
approximately 200 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) Noninvestment 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.
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 6,000 financial advisors. It offers to its
clients a wide range of products, including Prudential Mutual Funds and
annuities. As of December 31, 1997, assets held by Prudential Securities for its
clients approximated $235 billion.
During 1997, approximately 29,000 new customer accounts were opened each
month at Prudential Securities. (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+).
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)
IV-2
<PAGE>
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, 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.
Standard & Poor's rates Prudential Securities Incorporated BBB+, with a
"stable outlook."
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.
- --------------
(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 subadviser to Global Utility Fund, Inc., Nicholas-Applegate
Capital Management as the subadviser to Nicholas-Applegate Fund, Inc.,
Jennison Associates LLC as one of the subadvisers to The Prudential
Investment Portfolios, Inc. and Mercator Assets Management LP, as the
subadviser to International Stock Series, a portfolio of Prudential World
Fund, Inc. There are multiple subadvisers for The Target Portfolio Trust.
(2) As of December 31, 1996.
(3) As of December 31, 1995. The number of bonds and the size of the Fund
are subject to change.
(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, 1997.
(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.
IV-3
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) (i) Agreement and Declaration of Trust of the Trust dated April 27, 1984
and Amendment No. 1 dated June 19, 1984.*
(ii) Amendment No. 2 to Agreement and Declaration of Trust of the Trust
dated August 9, 1984.*
(iii) Amendment No. 3 to Agreement and Declaration of Trust of the Trust
dated September 11, 1984.*
(b) (i) By-Laws of the Trust incorporated by reference to Exhibit 2(a) to
Post-Effective Amendment No. 22 to the Registration Statement on Form
N-1A (2-91889) filed via EDGAR on November 7, 1997.
(ii) Amendment to By-Laws of the Trust dated July 25, 1990 incorporated
by reference to Exhibit 2(b) to Post-Effective Amendment No. 22 to the
Registration Statement on Form N-1A (2-91889) filed via EDGAR on November
7, 1997.
(iii) Amendment to By-Laws of the Trust dated May 24, 1991 incorporated
by reference to Exhibit 2(c) to Post-Effective Amendment No. 22 to the
Registration Statement on Form N-1A (2-91889) filed via EDGAR on November
7, 1997.
(iv) Amendment to By-Laws of the Trust dated October 22, 1997
incorporated by reference to Exhibit 2(d) to Post-Effective Amendment No.
22 to the Registration Statement on Form N-1A (2-91889) filed via EDGAR
on November 7, 1997.
(c) (i) Specimen Share Certificates of the National Money Market Fund.*
(ii) Specimen Share Certificate for the Liquid Assets Fund incorporated
by reference to Exhibit (c)(ii) to Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A (2-91889) filed via EDGAR on October
1, 1998.
(d) (i) Management Agreement between the Registrant, on behalf of the
National Money Market Fund, and Prudential Investments Fund Management
LLC incorporated by reference to Exhibit d(i) to Post-Effective Amendment
No. 24 to the Registration Statement on Form N-1A (2-91889) filed via
EDGAR on October 1, 1998.
(ii) Subadvisory Agreement, with respect to the National Money Market
Fund, between Prudential Investments Fund Management LLC and The
Prudential Investment Corporation incorporated by reference to Exhibit
(d)(ii) to Post-Effective Amendment No. 24 to the Registration Statement
on Form N-1A (2-91889) filed via EDGAR on October 1, 1998.
(iii) Management Agreement between the Registrant, on behalf of the
Liquid Assets Fund, and Prudential Investments Fund Management LLC
incorporated by reference to Exhibit (d)(iii) to Post-Effective Amendment
No. 24 to the Registration Statement on Form N-1A (2-91889) filed via
EDGAR on October 1, 1998.
(iv) Subadvisory Agreement, with respect to the Liquid Assets Fund,
between Prudential Investments Fund Management LLC and the Prudential
Investment Corporation incorporated by reference to Exhibit (d)(iv) to
Post-Effective Amendment No. 24 to the Registration Statement on Form
N-1A (2-91889) filed via EDGAR on October 1, 1998.
(e) (i) Distribution Agreement between the Registrant and Prudential
Securities Inc incorporated by reference to Exhibit (e)(i) to
Post-Effective Amendment No. 24 to the Registration Statement on Form
N-1A (2-91889) filed via EDGAR on October 1, 1998.
(ii) Distribution Agreement between the Registrant and Prudential
Investment Management Services LLC incorporated by reference to Exhibit
(e)(ii) to Post-Effective Amendment No. 24 to the Registration Statement
on Form N-1A (2-91889) filed via EDGAR on October 1, 1998.
(iii) Form of Dealer Agreement incorporated by reference to Exhibit
(e)(iii) to Post-Effective Amendment No. 24 to the Registration Statement
on Form N-1A (2-91889) filed via EDGAR on October 1, 1998.
C-1
<PAGE>
(g) Custodian Contract between the Registrant and State Street Bank and
Trust Company incorporated by reference to Exhibit (g) to Post-Effective
Amendment No. 24 to the Registration Statement on Form N-1A (2-91889)
filed via EDGAR on October 1, 1998.
(h) Transfer Agency and Service Agreement between the Registrant and
Prudential Mutual Fund Services incorporated by reference to Exhibit (h)
to Post-Effective Amendment No. 24 to the Registration Statement on Form
N-1A (2-91889) filed via EDGAR on October 1, 1998.
(i) Opinion of Counsel, incorporated by reference to Exhibit 10 to
Pre-Effective Amendment No. 1 to the Registration Statement filed on
September 12, 1984.
(m) (i) Amended Distribution Plan of the Trust, as revised through October
22, 1997 incorporated by reference to
Exhibit 15 to Post-Effective Amendment No. 22 to the Registration
Statement on Form N-1A (2-91889) filed via EDGAR on November 7, 1997.
(ii) Amended and Restated Distribution and Service Plan, with respect to
National Money Market Fund incorporated by reference to Exhibit (m)(ii)
to Post-Effective Amendment No. 24 to the Registration Statement on Form
N-1A (2-91889) filed via EDGAR on October 1, 1998.
(n) Financial Data Schedule for the fiscal year ended September 30, 1997.*
- ------------------------
* Filed herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
As permitted by Section 17(h) and (i) of the Investment Company Act of 1940,
as amended (the 1940 Act) and pursuant to Article V of the Fund's Declaration of
Trust (Exhibit 1 to the Registration Statement) with respect to trustees,
officers, employees and agents thereof and Article VII of the Fund's By-Laws
(Exhibit 2 to the Registration Statement), trustees, officers, employees and
agents of the Fund may be indemnified against certain liabilities in connection
with the Trust. As permitted by Section 17(i) of the 1940 Act, pursuant to
Section 10 of the Distribution Agreement (Exhibit (e)(ii) to the Registration
Statement), the Distributor of the Registrant may be indemnified against
liabilities which it may incur, except liabilities arising from bad faith, gross
negligence, willful misfeasance or reckless disregard of duties. Such Article V
of the Declaration of Trust, Article VII of the By-Laws and Section 10 of the
Distribution Agreement are hereby incorporated by reference in their entirety.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the Securities Act) may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing provisions
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the 1940 Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in connection with the successful defense
of any action, suit or proceeding) is asserted against the Registrant by such
director, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the 1940 Act and will be governed by the final
adjudication of such issue.
The Registrant intends to purchase an insurance policy insuring its officers
and directors against liabilities, and certain costs of defending claims against
such officers and directors, to the extent such officers and directors are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers and directors under certain circumstances.
Section 9 of the Management Agreement (Exhibits (d)(i) and (iii) to the
Registration Statement) and Section 4 of the Subadvisory Agreement (Exhibits
(d)(ii) and (iv) to the Registration Statement) limit the liability of
Prudential Investments Fund Management LLC (PIFM) and The Prudential Investment
Corporation (PIC), respectively, to liabilities arising from willful
misfeasance, bad faith or gross negligence in the performance of their
respective duties or from reckless disregard by them of their respective
obligations and duties under the agreements.
C-2
<PAGE>
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws and each Distribution Agreement in a manner consistent
with Release No. 11330 of the Securities and Exchange Commission under the 1940
Act so long as the interpretation of Sections 17(h) and 17(i) of such Act
remains in effect and is consistently applied.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
(i) Prudential Investments Fund Management LLC (PIFM).
See "How the Fund is Managed--Manager" in the Prospectus constituting Part A
of this Post-Effective Amendment to the Registration Statement and "Investment
Advisory and Other Services--Investment Advisers" in the Statement of Additional
Information constituting Part B of this Post-Effective Amendment to the
Registration Statement.
The business and other connections of the officers of PIFM are listed in
Schedules A and D of Form ADV of PIFM as currently on file with the Securities
and Exchange Commission, the text of which is hereby incorporated by reference
(File No. 801-31104).
The business and other connections of PIFM's directors and principal
executive officers are set forth below. Except as otherwise indicated, the
address of each person is Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIFM PRINCIPAL OCCUPATIONS
- --------------------- ---------------------------- --------------------------------------------------------------
<S> <C> <C>
Frank W. Giordano Executive Vice President, Executive Vice President, Secretary and General Counsel, PIFM;
Secretary and General Senior Vice President, Prudential Securities Incorporated
Counsel (Prudential Securities)
Robert F. Gunia Executive Vice President and Vice President, Prudential Investments; Executive Vice
Treasurer President and Treasurer, PIFM; Senior Vice President,
Prudential Securities
Neil A. McGuinness Executive Vice President Executive Vice President and Director of Marketing, Prudential
Mutual Fund and Annuities (PMF&A); Executive Vice President,
PIFM
Brian Storms Officer-in-Charge, President, PMF&A; Officer-in-Charge, President, Chief
President, Chief Executive Executive Officer and Chief Operating Officer, PIFM
Officer and Chief Operating
Officer
Robert J. Sullivan Executive Vice President Executive Vice President, PMF&A; Executive Vice President,
PIFM
</TABLE>
(ii) The Prudential Investment Corporation (PIC)
See "How the Fund is Managed--Manager" in the Prospectus constituting Part A
of this Post-Effective Amendment to the Registration Statement and "Investment
Advisory and Other Services--Investment Advisers" in the Statement of Additional
Information constituting Part B of this Post-Effective Amendment to the
Registration Statement.
The business and other connections of PIC's directors and executive officers
are as set forth below. The address of each person is Prudential Plaza, Newark,
New Jersey 07102-4077.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATIONS
- ---------------------- ------------------------- ----------------------------------------------------------------
<S> <C> <C>
E. Michael Caulfield Chairman of the Board, Chief Executive Officer of Prudential Investments of The
President and Chief Prudential Insurance Company of America (Prudential)
Executive Officer and
Director
Jonathan M. Greene Senior Vice President and President--Investment Management of Prudential Investments of
Director Prudential
John R. Strangfeld Vice President and President of Private Asset Management Group of Prudential;
Director Senior Vice President of Prudential
</TABLE>
C-3
<PAGE>
ITEM 27. PRINCIPAL UNDERWRITER.
(a) Prudential Investment Management Services LLC is distributor for Cash
Accumulation Trust, COMMAND Government Fund, COMMAND Money Fund, COMMAND
Tax-Free Fund, Prudential Government Securities Trust (Intermediate Term Series,
Money Market Series and U.S. Treasury Money Market Series). Prudential MoneyMart
Assets, Inc., Prudential Institutional Liquidity Portfolio, Inc., Prudential
Special Money Market Fund, Inc., Prudential Tax-Free Money Fund, Inc.,
Prudential Distressed Securities Fund, Inc., The Prudential Investment
Portfolios, Inc., Prudential Index Series Fund, Prudential Emerging Growth Fund,
Inc., Target Portfolio Trust, Prudential Balanced Fund, Prudential California
Municipal Fund, Prudential Developing Markets Fund, Prudential Diversified Bond
Fund, Inc., Prudential Equity Fund, Inc., Prudential Equity Income Fund,
Prudential Europe Growth Fund Inc., Prudential Global Genesis Fund, Inc.,
Prudential Global Limited Maturity Fund, Inc., Prudential High Yield Total
Return Fund, Inc., Prudential Natural Resources Fund, Inc., Prudential Real
Estate Securities Fund, Prudential Government Income Fund, Inc., Prudential
Small-Cap Quantum Fund, Inc., Prudential Small Company Value Fund, Inc.,
Prudential High Yield Fund, Prudential Intermediate Global Income Fund, Inc.,
Prudential Mid-Cap Value Fund, Prudential Mortgage Income Fund, Inc., Prudential
Municipal Bond Fund, Prudential Municipal Series Fund, Prudential National
Municipals Fund, Inc., Prudential Pacific Growth Fund, Inc., Prudential
Structured Maturity Fund, Inc., Prudential Utility Fund, Inc., Prudential World
Fund, Inc., Prudential International Bond Fund, Inc., The Global Total Return
Fund, Inc., Global Utility Fund, Inc., Nicholas-Applegate Fund, Inc.
(Nicholas-Applegate Growth Equity Fund) and Prudential 20/20 Focus Fund.
(b) Information concerning the Directors and officers of Prudential
Investment Management Services LLC is set forth below:
<TABLE>
<CAPTION>
POSITIONS AND
POSITIONS AND OFFICES OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---------------------------------------- ----------------------------------------------------- ------------------
<S> <C> <C>
E. Michael Caulfield.................... President None
Mark R. Fetting......................... Executive Vice President None
Jonathan M. Greene...................... Executive Vice President None
Jean D. Hamilton........................ Executive Vice President None
Ronald P. Joelson....................... Executive Vice President None
Brian M. Storms......................... Executive Vice President None
John R. Strangfeld...................... Executive Vice President None
Mario A. Mosse.......................... Senior Vice President and Chief Operating Officer None
Scott S. Wallner........................ Vice President, Secretary and Chief Legal Officer None
Michael G. Williamson................... Vice President, Comptroller and Chief Financial None
Officer
C. Edward Chaplin....................... Treasurer None
</TABLE>
(c) Registrant has no principal underwriter who is not an affiliated person
of the Registrant.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules thereunder are maintained at the offices of
State Street Bank and Trust Company, 1776 Heritage Drive, North Quincy,
Massachusetts, The Prudential Investment Corporation, Prudential Plaza, 751
Broad Street, Newark, New Jersey, the Registrant, Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102-4077, and Prudential Mutual Fund
Services LLC, Raritan Plaza One, Edison, New Jersey 08837. Documents required by
Rules 31a-1(b)(4), (5), (6), (7), (9), (10) and (11) and 31a-1(d) and (f) will
be kept at Gateway Center Three, Newark, New Jersey 07102-4077, and the
remaining accounts, books and other documents required by such other pertinent
provisions of Section 31(a) and the Rules promulgated thereunder will be kept by
State Street Bank and Trust Company and Prudential Mutual Fund Services LLC.
ITEM 29. MANAGEMENT SERVICES
Other than as set forth under the captions "How the Fund is
Managed--Manager" and "How the Fund is Managed-- Distributor" in the Prospectus
and the captions "Investment Advisory and Other Services--Investment Advisers"
and "Investment Advisory and Other Services--Principal Underwriter, Distributor
and Rule 12b-1 Plan" in the Statement of Additional Information, constituting
Parts A and B, respectively, of this Post-Effective Amendment to the
Registration Statement, Registrant is not a party to any management-related
service contract.
ITEM 30. UNDERTAKINGS
None.
C-4
<PAGE>
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, thereunto duly authorized, in the City of Newark, and
State of New Jersey, on the 1st day of December, 1998
CASH ACCUMULATION TRUST
By: /s/ BRIAN M. STORMS
----------------------------------------
(Brian M. Storms, 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 dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ---------------------------------------- ---------------------
<C> <S> <C>
/s/ EDWARD D. BEACH
------------------------------------------- Trustee December 1, 1998
Edward D. Beach
/s/ DELAYNE D. GOLD
------------------------------------------- Trustee December 1, 1998
Delayne D. Gold
/s/ ROBERT F. GUNIA
------------------------------------------- Trustee December 1, 1998
Robert F. Gunia
/s/ DON G. HOFF
------------------------------------------- Trustee December 1, 1998
Don G. Hoff
/s/ ROBERT E. LABLANC
------------------------------------------- Trustee December 1, 1998
Robert E. LaBlanc
/s/ MENDEL A. MELZER
------------------------------------------- Trustee December 1, 1998
Mendel A. Melzer
/s/ ROBIN B. SMITH
------------------------------------------- Trustee December 1, 1998
Robin B. Smith
/s/ STEPHEN STONEBURN
------------------------------------------- Trustee December 1, 1998
Stephen Stoneburn
/s/ NANCY H. TEETERS
------------------------------------------- Trustee December 1, 1998
Nancy H. Teeters
/s/ GRACE C. TORRES
------------------------------------------- Treasurer and Principal Financial and December 1, 1998
Grace C. Torres Accounting Officer
</TABLE>
<PAGE>
EXHIBIT INDEX
(a) (i) Agreement and Declaration of Trust of the Trust dated April 27, 1984
and Amendment No. 1 dated June 19, 1984.*
(ii) Amendment No. 2 to Agreement and Declaration of Trust of the Trust
dated August 9, 1984.*
(iii) Amendment No. 3 to Agreement and Declaration of Trust of the Trust
dated September 11, 1984.*
(b) (i) By-Laws of the Trust incorporated by reference to Exhibit 2(a) to
Post-Effective Amendment No. 22 to the Registration Statement on Form
N-1A (2-91889) filed via EDGAR on November 7, 1997.
(ii) Amendment to By-Laws of the Trust dated July 25, 1990 incorporated
by reference to Exhibit 2(b) to Post-Effective Amendment No. 22 to the
Registration Statement on Form N-1A (2-91889) filed via EDGAR on November
7, 1997.
(iii) Amendment to By-Laws of the Trust dated May 24, 1991 incorporated
by reference to Exhibit 2(c) to Post-Effective Amendment No. 22 to the
Registration Statement on Form N-1A (2-91889) filed via EDGAR on November
7, 1997.
(iv) Amendment to By-Laws of the Trust dated October 22, 1997
incorporated by reference to Exhibit 2(d) to Post-Effective Amendment No.
22 to the Registration Statement on Form N-1A (2-91889) filed via EDGAR
on November 7, 1997.
(c) (i) Specimen Share Certificates of the National Money Market Fund.*
(ii) Specimen Share Certificate for the Liquid Assets Fund incorporated
by reference to Exhibit (c)(ii) to Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A (2-91889) filed via EDGAR on October
1, 1998.
(d) (i) Management Agreement between the Registrant, on behalf of the
National Money Market Fund, and Prudential Investments Fund Management
LLC incorporated by reference to Exhibit (d)(i) to Post-Effective
Amendment No. 24 to the Registration Statement on Form N-1A (2-91889)
filed via EDGAR on October 1, 1998.
(ii) Subadvisory Agreement, with respect to the National Money Market
Fund, between Prudential Investments Fund Management LLC and The
Prudential Investment Corporation incorporated by reference to Exhibit
(d)(ii) to Post-Effective Amendment No. 24 to the Registration Statement
on Form N-1A (2-91889) filed via EDGAR on October 1, 1998.
(iii) Management Agreement between the Registrant, on behalf of the
Liquid Assets Fund, and Prudential Investments Fund Management LLC
incorporated by reference to Exhibit (d)(iii) to Post-Effective Amendment
No. 24 to the Registration Statement on Form N-1A (2-91889) filed via
EDGAR on October 1, 1998.
(iv) Subadvisory Agreement, with respect to the Liquid Assets Fund,
between Prudential Investments Fund Management LLC and the Prudential
Investment Corporation incorporated by reference to Exhibit (d)(iv) to
Post-Effective Amendment No. 24 to the Registration Statement on Form
N-1A (2-91889) filed via EDGAR on October 1, 1998.
(e) (i) Distribution Agreement between the Registrant and Prudential
Securities Inc incorporated by reference to Exhibit (e)(i) to
Post-Effective Amendment No. 24 to the Registration Statement on Form
N-1A (2-91889) filed via EDGAR on October 1, 1998.
(ii) Distribution Agreement between the Registrant and Prudential
Investment Management Services LLC incorporated by reference to Exhibit
(e)(ii) to Post-Effective Amendment No. 24 to the Registration Statement
on Form N-1A (2-91889) filed via EDGAR on October 1, 1998.
(iii) Form of Dealer Agreement incorporated by reference to Exhibit
(e)(iii) to Post-Effective Amendment No. 24 to the Registration Statement
on Form N-1A (2-91889) filed via EDGAR on October 1, 1998.
(g) Custodian Contract between the Registrant and State Street Bank and
Trust Company incorporated by reference to Exhibit (g) to Post-Effective
Amendment No. 24 to the Registration Statement on Form N-1A (2-91889)
filed via EDGAR on October 1, 1998.
(h) Transfer Agency and Service Agreement between the Registrant and
Prudential Mutual Fund Services incorporated by reference to Exhibit (h)
to Post-Effective Amendment No. 24 to the Registration Statement on Form
N-1A (2-91889) filed via EDGAR on October 1, 1998.
<PAGE>
(i) Opinion of Counsel, incorporated by reference to Exhibit 10 to
Pre-Effective Amendment No. 1 to the Registration Statement filed on
September 12, 1984.
(m) (i) Amended Distribution Plan of the Trust, as revised through October
22, 1997 incorporated by reference to Exhibit 15 to Post-Effective
Amendment No. 22 to the Registration Statement on Form N-1A (2-91889)
filed via EDGAR on November 7, 1997.
(ii) Amended and Restated Distribution and Service Plan with respect to
National Money Market Fund incorporated by reference to Exhibit (m)(ii)
to Post-Effective Amendment No. 24 to the Registration Statement on Form
N-1A (2-91889) filed via EDGAR on October 1, 1998.
(n) Financial Data Schedule for the fiscal year ended September 30, 1997.*
<PAGE>
Exhibit
a(i)
AMENDMENT NO. 1
TO THE
AGREEMENT AND DECLARATION OF TRUST
OF
THOMSON MCKINNON MONEY MARKET SERIES TRUST
WHEREAS Section 7 of Article IX of the Agreement and Declaration of Trust
dated April 27, 1984 of Thomson McKinnon Money Market Series Trust, a copy of
which is on file in the office of the Secretary of The Commonwealth of
Massachusetts, authorizes the Trustees of the Trust to amend said Agreement and
Declaration of Trust to change the name of the Trust without authorization by
vote of Shareholders of the Trust thereon,
I, THE UNDERSIGNED, being the sole trustee of Thomson McKinnon Money Market
Series Trust, do hereby certify that the undersigned has determined to conduct
the business of the Trust under the name "Cash Accumulation Trust" and has
authorized the following amendment to said Agreement and Declaration of Trust:
Section 1 of Article I is hereby amended to read in its entirety as
follows:
Section 1. This Trust shall be known as "Cash Accumulation Trust",
and the Trustees shall conduct the business of the Trust under that
name or any other name as they may from time to time determine.
The foregoing Amendment shall become effective as of the close of business
on June 19, 1984.
IN WITNESS WHEREOF, I have hereunto set my hand and seal, for myself and
for my successors and assigns.
/s/ Michael P. Devine
---------------------------------
Michael P. Devine
<PAGE>
THOMSON MCKINNON MONEY MARKET SERIES TRUST
---------------------------
AGREEMENT AND DECLARATION OF TRUST
---------------------------
AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts, this 27th
day of April, 1984, by the Trustees hereunder, and by the holders of shares of
beneficial interest to be issued hereunder as hereinafter provided.
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the business of an
investment company; and
WHEREAS, the Trustees have agreed to manage all property coming into their
hands as trustees of a Massachusetts voluntary association with transferable
shares in accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets, which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the pro rata benefit of the holders from
time to time of Shares in this Trust as hereinafter set forth.
<PAGE>
ARTICLE I
Name and Definitions
NAME
Section 1. This Trust shall be known as "Thomson McKinnon Money Market
Series Trust", and the Trustees shall conduct the business of the Trust under
that name or any other name as they may from time to time determine.
DEFINITIONS
Section 2. Whenever used herein, unless otherwise required by the context
or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust established
by this Agreement and Declaration of Trust, as amended from time to time;
(b) "Trustees" refers to the Trustees of the Trust named herein or
elected in accordance with Article IV;
(c) "Shares" means the equal proportionate transferable units of
interest into which the beneficial interest in the Trust shall be divided
from time to time or, if more than one series of Shares is authorized by
the Trustees, the equal proportionate transferable units into which each
series of Shares shall be divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940 and
the Rules and Regulations thereunder, all as amended from time to time;
(f) The terms "Affiliated Person", "Assignment", "Commission",
"Interested Person", "Principal Underwriter" and "Majority Shareholder
Vote" (the 67% or 50% requirement of the third sentence of Section 2(a)(42)
of the 1940 Act, whichever may be applicable) shall have the meanings
given them in the 1940 Act;
(g) "Declaration of Trust" shall mean this Agreement and Declaration
of Trust as amended or restated from time to time; and
(h) "Bylaws" shall mean the Bylaws of the Trust as amended from time
to time.
-2-
<PAGE>
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a managed investment
primarily in securities and debt instruments and to carry on such other business
as the Trustees may from time to time determine pursuant to their authority
under this Declaration of Trust.
ARTICLE III
Shares
DIVISION OF BENEFICIAL INTEREST
Section 1. The Shares of the Trust shall be issued in one or more series as
the Trustees may, without shareholder approval, authorize. Each series shall be
preferred over all other series in respect of the assets allocated to that
series. The beneficial interest in each series shall at all times be divided
into Shares, without par value, each of which shall represent an equal
proportionate interest in the series with each other Share of the same series,
none having priority or preference over another. The number of Shares authorized
shall be unlimited. The Trustees may from time to time divide or combine the
Shares into a greater or lesser number without thereby changing the
proportionate beneficial interests in the series.
OWNERSHIP OF SHARES
Section 2. The ownership of Shares shall be recorded on the books of the
Trust or a transfer or similar agent. No certificates certifying the ownership
of Shares shall be issued except as the Trustees may otherwise determine from
time to time. The Trustees may make such rules as they consider appropriate for
the issuance of Share certificates, the transfer of Shares and similar matters.
The record books of the Trust as kept by the Trust or any transfer or similar
agent, as the case may be, shall be conclusive as to who are the Shareholders of
each series and as to the number of Shares of each series held from time to time
by each Shareholder.
INVESTMENT IN THE TRUST
Section 3. The Trustees shall accept investments in the Trust from such
persons and on such terms and for such consideration, which may consist of cash
or tangible or intangible property or a combination thereof, as they from time
to time authorize.
-3-
<PAGE>
All consideration received by the Trust for the issue or sale of Shares of
each series, together with all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation thereof,
and any funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to the series of Shares
with respect to which the same were received by the Trust for all purposes,
subject only to the rights of creditors, and shall be so handled upon the books
of account of the Trust and are herein referred to as "assets of" such series.
NO PREEMPTIVE RIGHTS
Section 4. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust.
STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY
Section 5. Shares shall be deemed to be personal property giving only the
rights provided in this instrument. Every Shareholder by virtue of having become
a Shareholder shall be held to have expressly assented and agreed to the terms
hereof and to have become a party hereto. The death of a Shareholder during the
continuance of the Trust shall not operate to terminate the same nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Trust. Ownership of Shares shall not entitle
the Shareholder to any title in or to the whole or any part of the Trust
property or right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any officer, employee or agent
of the Trust shall have any power to bind personally any Shareholder, nor except
as specifically provided herein to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder may
at any time personally agree to pay.
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ARTICLE IV
The Trustees
ELECTION
Section 1. There shall initially be a single Trustee who shall be Michael
P. Devine. The number of Trustees shall be as provided in the Bylaws or as fixed
from to time by the Trustees. The shareholders may elect Trustees at any meeting
of Shareholders called by the Trustees for that purpose. Each Trustee shall
serve during the continued lifetime of the Trust until he dies, resigns or is
removed, or, if sooner, until the next meeting of Shareholders called for the
purpose of electing Trustees and the election and qualification of his
successor. Any Trustee may resign at any time by written instrument signed by
him and delivered to any officer of the Trust, to each other Trustee 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 Trustee resigning and no
Trustee removed shall have any right to any compensation for any period
following his resignation or removal, or any right to damages on account of such
removal.
EFFECT OF DEATH, RESIGNATION, ETC., OF A TRUSTEE
Section 2. The death, declination, resignation, retirement, removal or
incapacity of the Trustees, or any one of them, shall not operate to annul the
Trust or to revoke any existing agency created pursuant to the terms of
this Declaration of Trust.
POWERS
Section 3. Subject to the provisions of this Declaration of Trust, the
business of the Trust shall be managed by the Trustees, and they shall have all
powers necessary or convenient to carry out that responsibility. Without
limiting the foregoing, the Trustees may adopt Bylaws not inconsistent with this
Declaration of Trust providing for the conduct of the business of the Trust and
may amend and repeal them to the extent that such Bylaws do not reserve that
right to the Shareholders; they may enlarge or reduce their number, may fill
vacancies in their number, including vacancies caused by enlargement of their
number, and may remove Trustees with or without cause; they may elect and
remove, with or without cause, such officers and appoint and terminate such
agents as they consider appropriate; they may appoint from their own number, and
terminate, any one or more committees consisting of two or more Trustees,
including an executive committee which may, when the Trustees are not in
session, exercise some or all
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of the power and authority of the Trustees as the Trustees may determine; they
may employ one or more custodians of the assets of the Trust and may authorize
such custodians to employ subcustodians and to deposit all or any part of such
assets in a system or systems for the central handling of securities, retain a
transfer agent or a Shareholder servicing agent, or both, provide for the
distribution of Shares by the Trust, through one or more principal underwriters
or otherwise, set record dates for the determination of Shareholders with
respect to various matters, and in general delegate such authority as they
consider desirable to any officer of the Trust, to any committee of the Trustees
and to any agent or employee of the Trust or to any such custodian or
underwriter.
Without limiting the foregoing, the Trustees shall have power and
authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, write
options on and lease any or all of the assets of the Trust;
(c) To act as a distributor of shares and as underwriter of, or broker
or dealer in, securities or other property;
(d) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such power
and discretion with relation to securities or property as the Trustees
shall deem proper;
(e) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities;
(f) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in the
name of the Trustees or of the Trust or in the name of a custodian,
subcustodian or other depositary or a nominee or nominees or otherwise;
(g) To allocate assets, liabilities and expenses of the Trust to a
particular series of Shares or to apportion the same among two or more
series, provided that any liabilities or expenses incurred by a
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particular series of Shares shall be payable solely out of the assets of
that series.
(h) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security of which
is or was held in the Trust; to consent to any contract, lease, mortgage,
purchase or sale of property by such corporation or issuer, and to pay
calls or subscriptions with respect to any security held in the Trust;
(i) To join with other security holders in acting through a committee
depositary, voting trustee or otherwise, and in that connection to deposit
any security with, or transfer any security to, any such committee,
depositary or trustee, and to delegate to them such power and authority
with relation to any security (whether or not so deposited or transferred)
as the Trustees shall deem proper, and to agree to pay, and to pay, such
portion of the expenses and compensation of such committee, depositary or
trustee as the Trustees shall deem proper;
(j) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not limited
to claims for taxes;
(k) To enter into joint ventures, general or limited partnerships and
any other combination or associations;
(l) To borrow funds;
(m) To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof; and to mortgage and pledge
the Trust property or any part thereof to secure any of or all such
obligations;
(n) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of the
business, including without limitation, insurance policies insuring the
assets of the Trust and payment of distributions and principal on its
portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers or managers,
principal underwriters, or independent contractors of the Trust
individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or
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position, or by reason of any action alleged to have been taken or omitted
by any such person as Shareholder, Trustee, officer, employee, agent,
investment adviser or manager, principal underwriter, or independent
contractor, including any action taken or omitted that may be determined to
constitute negligence, whether or not the Trust would have the power to
indemnify such person against such liability;
(o) To pay pensions for faithful service, as deemed appropriate by the
Trustees, and to adopt, establish and carry out pension, profit-sharing,
share bonus, share purchase, savings, thrift and other retirement,
incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing
such retirement and other benefits, for any or all of the Trustees,
officers, employees and agents of the Trust; and
(p) To engage in any other lawful act or activity in which
corporations organized under the Massachusetts Business Corporation Law may
engage.
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by trustees.
Except as otherwise provided herein or from time to time in the Bylaws, any
action to be taken by the Trustees may be taken by a majority of the Trustees
present at a meeting of Trustees (a quorum being present), within or without
Massachusetts, including any meeting held 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, or by written consents of a
majority of the Trustees then in office.
PAYMENT OF EXPENSES BY TRUST
Section 4. The Trustees are authorized to pay or to cause to be paid out of
the principal or income of the Trust, or partly out of principal and partly out
of income, as they deem fair, all expenses, fees, charges, taxes and liabilities
incurred or arising in connection with the Trust, in connection with the
management thereof, or in connection with the financing of the sale of Shares,
including, but not limited to, the Trustees' compensation and such expenses and
charges for the services of the Trust's officers, employees, any investment
adviser, manager, or sub-adviser, principal underwriter, auditor,
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counsel, custodian, transfer agent, shareholder servicing agent, and such other
agents or independent contractors and such other expenses and charges as the
Trustees may deem necessary or proper to incur, provided, however, that all
expenses, fees, charges, taxes and liabilities incurred or arising in connection
with a particular series of Shares as determined by the Trustees, shall be
payable solely out of the assets of that series.
OWNERSHIP OF ASSETS OF THE TRUST
Section 5. Title to all of the assets of each series of Shares and of the
Trust shall at all times be considered as vested in the Trustees.
ADVISORY, MANAGEMENT AND DISTRIBUTION
Section 6. The Trustees may, at any time and from time to time, contract
for exclusive or nonexclusive advisory and/or management services with any
corporation, trust, association or other organization (the "Manager"), every
such contract to comply with such requirements and restrictions as may be set
forth in the Bylaws; and any such contract may provide for one or more
Sub-advisers who shall perform all or part of the obligations of the Manager
under such Contract and may contain such other terms interpretive of or in
addition to said requirements and restrictions as the Trustees may determine,
including, without limitation, authority to determine from time to time what
investments shall be purchased, held, sold or exchanged and what portion, if
any, of the assets of the Trust shall be held uninvested and to make changes in
the Trust's investments. The Trustees may also, at any time and from time to
time, contract with the Manager or any other corporation, trust, association or
other organization, appointing it exclusive or nonexclusive distributor or
principal underwriter for the Shares, every such contract to comply with such
requirements and restrictions as may be set forth in the Bylaws; and any such
contract may contain such other terms interpretive of or in addition to said
requirements and restrictions as the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
corporation, trust, association, or other organization, or of or for any
parent or affiliate of any organization, with which an advisory or
management contract, or principal underwriter's or distributor's contract,
or transfer, shareholder servicing or other
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agency contract may have been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a Shareholder or has
an interest in the Trust, or that
(ii) any corporation, trust, association or other organization with
which an advisory or management contract or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or other agency
contract may have been or may hereafter be made also has an advisory or
management contract, or principal underwriter's or distributor's contract,
or transfer, Shareholder servicing or other agency contract with one or
more other corporations, trusts, associations, or other organizations, or
has other business or interests
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Shareholders shall have such power to vote as is provided for in, and may
hold meetings and take actions pursuant to the provisions of the Bylaws.
ARTICLE VI
Distributions, Redemptions and Repurchases
DISTRIBUTIONS
Section 1. The Trustees may each year, or more frequently if they so
determine, distribute to the Shareholders of each series such income and capital
gains, accrued or realized, as the Trustees may determine, after providing for
actual and accrued expenses and liabilities (including such reserves as the
Trustees may establish) determined in accordance with good accounting practices.
The Trustees shall have full discretion to determine which items shall be
treated as income and which items as capital and their determination shall be
binding upon the Shareholders. Distributions of each year's income of each
series shall be distributed pro rata to Shareholders in proportion to the number
of Shares of each series held by each of them. Such distributions shall be made
in cash or Shares or a combination thereof as determined by the Trustees. Any
such distribution paid in Shares will be paid
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at the net asset value thereof as determined in accordance with the Bylaws.
REDEMPTIONS AND REPURCHASES
Section 2. The Trust shall purchase such Shares as are offered by any
Shareholder for redemption, upon the presentation of any certificate for the
Shares to be purchased, a proper instrument of transfer and a request directed
to the Trust or a person designated by the Trust that the Trust purchase such
Shares, or in accordance with such other procedures for redemption as the
Trustees may from time to time authorize; and the Trust will pay therefor the
net asset value thereof, as next determined in accordance with the Bylaws, less
such redemption charge or fee as the Trustees may determine from time to time.
Payment for said Shares shall be made by the Trust to the Shareholder within
seven days after the date on which the request is made. The obligation set forth
in this Section 2 is subject to the provision that in the event that any time
the New York Stock Exchange is closed for other than customary weekends or
holidays, or, if permitted by rules of the Commission, during periods when
trading on the Exchange is restricted or during any emergency which makes it
impractical for the Trust to dispose of its investments or to determine fairly
the value of its net assets, or during any other period permitted by order of
the Commission for the protection of investors, such obligation may be suspended
or postponed by the Trustees. The Trust may also purchase or repurchase Shares
at a price not exceeding the net asset value of such Shares in effect when the
purchase or repurchase or any contract to purchase or repurchase is made.
REDEMPTIONS AT THE OPTION OF THE TRUST
Section 3. The Trust shall have the right at its option and at any time to
redeem Shares of any Shareholder at the net asset value thereof as determined in
accordance with the Bylaws: (i) if at such time such Shareholder owns fewer
Shares than, or Shares having an aggregate net asset value of less than, an
amount determined from time to time by the Trustees; or (ii) to the extent that
such Shareholder owns Shares of a particular series of Shares equal to or in
excess of a percentage of the outstanding Shares of that series determined from
time to time by the Trustees; or (iii) to the extent that such Shareholder owns
Shares of the Trust representing a percentage equal to or in excess of such
percentage of the aggregate number of outstanding Shares of the Trust or the
aggregate net asset value of the Trust determined from time to time by the
Trustees.
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DIVIDENDS, DISTRIBUTIONS, REDEMPTIONS AND REPURCHASES
Section 4. No dividend or distribution (including, without limitation, any
distribution paid upon termination of the Trust or of any series) with respect
to, nor any redemption or repurchase of, the Shares of any series shall be
effected by the Trust other than from the assets of such series.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
COMPENSATION
Section 1. The Trustees as such shall be entitled to reasonable
compensation from the Trust; they may fix the amount of their compensation.
Nothing herein shall in any way prevent the employment of any Trustee for
advisory, management, legal, accounting, investment banking, underwriting,
brokerage, or investment dealer or other services and payment for the same by
the Trust.
LIMITATION OF LIABILITY
Section 2. The Trustees shall not be responsible or liable in any event for
any neglect or wrongdoing of any officer, agent, employee, manager or principal
underwriter of the Trust, nor shall any Trustee be responsible for the act or
omission of any other Trustee, but nothing herein contained shall protect any
Trustee against any liability to which he or she would otherwise be subject by
reason of wilful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or with respect to
their or his or her capacity as Trustees or Trustee, and such Trustees or
Trustee shall not be personally liable thereon.
ARTICLE VIII
Indemnification
TRUSTEES, OFFICERS, ETC.
Section 1. The Trust shall indemnify each of its Trustees and officers
(including persons who serve at the
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Trust's request as directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or otherwise)
(hereinafter referred to as a "Covered Person") against all liabilities and
expenses, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and counsel fees reasonably
incurred by any Covered Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which such Covered Person may be
or may have been involved as a party or otherwise or with which such Covered
Person may be or may have been threatened, while in office or thereafter, by
reason of being or having been such a Covered Person except with respect to any
matter as to which such Covered Person shall have been finally adjudicated in
any such action, suit or other proceeding (a) not to have acted in good faith in
the reasonable belief that such Covered Person's action was in the best
interests of the Trust or (b) to be liable to the Trust or its Shareholders by
reason of wilful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person's office. Expenses,
including counsel fees so incurred by any such Covered Person (but excluding
amounts paid in satisfaction of judgments, in compromise or as fines or
penalties), shall be paid from time to time by the Trust in advance of the final
disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to repay amounts so paid to
the Trust if it is ultimately determined that indemnification of such expenses
is not authorized under this Article, provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Trust shall be insured against losses arising from any such advance
payments or (c) either a majority of the disinterested Trustees acting on the
matter (provided that a majority of the disinterested Trustees then in office
act on the matter), or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts (as opposed to a
full trial type inquiry) that there is reason to believe that such Covered
Person will be found entitled to indemnification under this Article.
COMPROMISE PAYMENT
Section 2. As to any matter disposed of (whether by a compromise payment,
pursuant to a consent decree or otherwise) without an adjudication by a court,
or by any other body before which the proceeding was brought, that such Covered
Person either (a) did not act in good faith in the reasonable belief that his
action was in the best
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interests of the Trust or (b) is liable to the Trust or its Shareholders by
reason of wilful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office, indemnification
shall be provided if (a) approved as in the best interests of the Trust, after
notice that it involves such indemnification, by at least a majority of the
disinterested Trustees acting on the matter (provided that a majority of the
disinterested Trustees then in office act on the matter) upon a determination,
based upon a review of readily available facts (as opposed to a full trial type
inquiry) that such Covered Person acted in good faith in the reasonable belief
that his action was in the best interests of the Trust and is not liable to the
Trust or its Shareholders by reasons of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office, or (b) there has been obtained an opinion in writing of independent
legal counsel, based upon a review of readily available facts (as opposed to a
full trial type inquiry) to the effect that such Covered Person appears to have
acted in good faith in the reasonable belief that his action was in the best
interests of the Trust and that such indemnification would not protect such
Person against any liability to the Trust to which he would otherwise be
subject by reason of wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office. Any approval
pursuant to this Section shall not prevent the recovery from any Covered Person
of any amount paid to such Covered Person in accordance with this Section as
indemnification if such Covered Person is subsequently adjudicated by a court of
competent jurisdiction not to have acted in good faith in the reasonable belief
that such Covered Person's action was in the best interests of the Trust or to
have been liable to the Trust or its Shareholders by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office.
INDEMNIFICATION NOT EXCLUSIVE
Section 3. The right of indemnification hereby provided shall not be
exclusive of or affect any other rights to which such Covered Person may be
entitled. As used in this Article VIII, the term "Covered Person" shall include
such person's heirs, executors and administrators and a "disinterested Trustee"
is a Trustee who is not an "interested person" of the Trust as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as amended, (or who has
been exempted from being an "interested person" by any rule, regulation or order
of the Commission) and against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on
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the same or similar grounds is then or has been pending. Nothing contained in
this Article shall affect any rights to indemnification to which personnel of
the Trust, other than Trustees or officers, and other persons may be entitled by
contract or otherwise under law, not the power of the Trust to purchase and
maintain liability insurance on behalf of any such person; provided, however,
that the Trust shall not purchase or maintain any such liability insurance in
contravention of applicable law, including without limitation the Investment
Company Act of 1940, as amended, and the rules and regulations thereunder.
SHAREHOLDERS
Section 4. In case any Shareholder or former Shareholder shall be held to
be personally liable solely by reason of his or her being or having been a
Shareholder and not because of his or her acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled to be
held harmless from and indemnified against all loss and expense arising from
such liability, but only out of the assets of the particular series of Shares of
which he or she is or was a Shareholder.
ARTICLE IX
Miscellaneous
TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE
Section 1. All persons extending credit to, contracting with or having any
claim against the Trust or a particular series of Shares shall look only to the
assets of the Trust or the assets of that particular series of Shares for
payment under such credit, contract or claim; and neither the Shareholders nor
the Trustees, nor any of the Trust's officers, employees or agents, whether
past, present or future, shall be personally liable therefor. Nothing in this
Declaration of Trust shall protect any Trustee against any liability to which
such Trustee would otherwise be subject by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officer or officers shall give notice that this
Declaration of Trust is on file with the Secretary of The Commonwealth of
Massachusetts and shall recite that the same was executed or made by or on
behalf of the Trust or by them as Trustee or
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Trustees or as officers or officer and not individually and that the obligations
of such instrument are not binding upon any of them or the Shareholders
individually but are binding only upon the assets and property of the Trust, and
may contain such further recital as he or she or they may deem appropriate, but
the omission thereof shall not operate to bind any Trustee or Trustees or
officer or officers or Shareholder or Shareholders individually.
TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY
Section 2. The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. A Trustee shall be liable
for his or her own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee, and
for nothing else, and shall not be liable for errors of judgment or mistakes of
fact or law. The Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust, and shall be
under no liability for any act or omission in accordance with such advice or for
failing to follow such advice. The Trustees shall not be required to give any
bond as such, nor any surety if a bond is required.
LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES
Section 3. No person dealing with the Trustees shall be bound to make any
inquiry concerning the validity of any transaction made or to be made by the
Trustees or to see to the application of any payments made or property
transferred to the Trust or upon its order.
DURATION AND TERMINATION OF TRUST
Section 4. Unless terminated as provided herein, the Trust shall continue
without limitation of time. The Trust may be terminated at any time by the vote
of Shareholders holding at least a majority of the Shares of each series
entitled to vote or by the Trustees by written notice to the Shareholders. Any
series of Shares may be terminated at any time by vote of Shareholders holding
at least a majority of the Shares of such series entitled to vote or by the
Trustees by written notice to the Shareholders of such series.
Upon termination of the Trust or of any one or more series of Shares, after
paying or otherwise providing for all charges, taxes, expenses and liabilities,
whether due or accrued or anticipated, of the Trust or of the particular series
as may be determined by the Trustees, the Trust shall
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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 involved, ratably according to the number of Shares
of such series held by the several Shareholders of such series on the date of
termination.
FILING OF COPIES, REFERENCES, HEADINGS
Section 5. The original or a copy of this instrument and of each amendment
hereto shall be kept at the office of the Trust where it may be inspected by any
Shareholder. A copy of this instrument and of each amendment hereto shall be
filed by the Trust with the Secretary of The Commonwealth of Massachusetts and
with the Boston City Clerk, as well as any other governmental office where such
filing may from time to time be required. Anyone dealing with the Trust may
rely on a certificate by an officer of the Trust as to whether or not any such
amendments have been made and as to any matters in connection with the Trust
hereunder, and, with the same effect as if it were the original, may rely on a
copy certified by an officer of the Trust to be a copy of this instrument or of
any such amendments. In this instrument and in any such amendment, references
to this instrument, and all expressions like "herein", "hereof" and "hereunder"
shall be deemed to refer to this instrument as amended or affected by any such
amendments. Headings are placed herein for convenience of reference only and
shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this instrument. This instrument may be executed in
any number of counterparts each of which shall be deemed an original.
APPLICABLE LAW
Section 6. This Declaration of Trust is made in The Commonwealth of
Massachusetts, and it is created under and is to be governed by and construed
and administered according to the laws of said Commonwealth. The Trust shall be
of the type commonly called a Massachusetts business trust, and without limiting
the provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
AMENDMENTS
Section 7. This Declaration of Trust may be amended at any time by an
instrument in writing signed by a majority of the then Trustees when authorized
to do so by vote of Shareholders holding a majority of the Shares of each series
entitled to vote, except that an amendment which shall affect the holders of one
or more series of Shares but not
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the holders of all outstanding series shall be authorized by vote of the
Shareholders holding a majority of the Shares entitled to vote of each series
affected and no vote of Shareholders of a series not affected shall be required.
Amendments having the purpose of changing the name of the Trust or of supplying
any omission, curing any ambiguity or curing, correcting or supplementing any
defective or inconsistent provision contained herein shall not require
authorization by Shareholder vote.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal in
the City of Boston, Massachusetts for himself and his assigns, as of the day and
year first above written.
/s/ Michael P. Devine
------------------------------
Michael P. Devine
THE COMMONWEALTH OF MASSACHUSETTS
Boston, April 27, 1984
Suffolk, ss.
Then personally appeared the above-named Michael P. Devine and acknowledged
the foregoing instrument to be his free act and deed, before me,
/s/ Arthur C. Alexander
--------------------------------
Notary Public
My commission expires:
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Exhibit
a(ii)
AMENDMENT NO. 2
to the
AGREEMENT AND DECLARATION OF TRUST
of
CASH ACCUMULATION TRUST
We, the undersigned, being all of the Trustees of Cash Accumulation
Trust (the "Trust"), hereby consent to and adopt the following vote as and for
the action of the Trustees of the Trust, pursuant to Article IV, Section 3 of
the Trust's Agreement and Declaration of Trust:
VOTED: That the last sentence of Section 7 of Article IX of the Trust's
Agreement and Declaration of Trust is hereby amended and restated in
its entirety as follows:
"Amendments having the purpose of changing the name of the Trust,
of establishing, changing, or eliminating the par value of the Shares
or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any defective or inconsistent provision
contained herein, shall not require authorization by Shareholder
vote."
This consent shall be filed with the minutes of the meetings of Trustees,
and shall for all purposes be treated as action taken at a meeting.
IN WITNESS WHEREOF, the undersigned have hereunto set their respective
hands and seals in the City of New York, New York, for themselves and their
assigns, as of this 9th day of August, 1984.
/s/ Newton B. Schott, Jr. /s/ Robert A. Prindiville
- ---------------------------------- ---------------------------------
Newton B. Schott, Jr., Esq. Robert A. Prindiville
<PAGE>
STATE OF NEW YORK
New York County New York, August 9, 1984
Then personally appeared the above-named Newton B. Schott, Jr. and Robert
A. Prindeville and acknowledged the foregoing instrument to be their free act
and deed, before me,
/s/ Katherine Cogliandro
------------------------------
Notary Public
My Commission expires:
KATHERINE COGLIANDRO
Notary Public, State of New York
No. 24-4718984
Qualified in Kings County
Commission Expires March 30, 1986
-2-
<PAGE>
Exhibit a(iii)
AMENDMENT NO. 3
to the
AGREEMENT AND DECLARATION OF TRUST
of
CASH ACCUMULATION TRUST
We, the undersigned, being a majority of the Trustees of Cash
Accumulation Trust (the "Trust"), hereby consent to and adopt the following
vote as and for the action of the Trustees of the Trust, pursuant to Article
IV, Section 3 of the Trust's Agreement and Declaration of Trust:
VOTED: That the third sentence of Section 1 of Article III of the Trust's
Agreement and Declaration of Trust is hereby amended and restated in
its entirety as follows:
"The beneficial interest in each series shall be divided into Shares,
with a par value of $0.00001, each of which shall represent an equal
proportionate interest in the series with each other Share of the
same series, none having priority or preference over another."
This consent shall be filed with the minutes of the meetings of
Trustees, and shall for all purposes be treated as action taken at a meeting.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals in New York, New York, as of this 11th day of September, 1984.
/s/ Donald R. Caldwell /s/ Gary Light
- ---------------------------- ---------------------------
Donald R. Caldwell Gary Light
/s/ Donald P. Carter /s/ John J. Maloney
- ---------------------------- ---------------------------
Donald P. Carter John J. Maloney
/s/ Emmet Cashin, Jr. /s/ J. Ronald Morgan
- ---------------------------- ---------------------------
Emmet Cashin, Jr. J. Ronald Morgan
/s/ Robert A. Prindiville
- ---------------------------- ---------------------------
Timothy S. Healy, S.J. Robert A. Prindiville
/s/ Joel Segall
- ---------------------------- ---------------------------
Joel Segall Newton B. Schott
/s/ William G. Christensen
- ----------------------------
William G. Christensen
<PAGE>
ACKNOWLEDGMENT
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
Then personally appeared the above-named Joel Segall, Donald P. Carter,
William G. Christensen, Emmet Cashin, Jr., Gary Light, Donald R. Caldwell,
John J. Maloney, J. Ronald Morgan and Robert A. Prindiville each of whom
acknowledged the foregoing instrument to be his free act and deed, before me,
/s/ Elizabeth A. Mc Lellan
--------------------------
Notary Public
My Commission expires:
ELIZABETH A. MC LELLAN
Notary Public, State of New York
No. 31-4606890
Qualified in New York County
Commission Expires March 30, 1986
<PAGE>
CUSIP
NUMBER SHARES
ESTABLISHED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
CASH ACCUMULATION TRUST
NATIONAL MONEY MARKET FUND
THIS CERTIFIES THAT SEE REVERSE FOR
CERTAIN DEFINITIONS
PROOF
is the holder of 8/7/84 shares
of beneficial interest in CASH ACCUMULATION TRUST--NATIONAL MONEY MARKET FUND,
fully paid and nonassessable, which shares have been issued and are held under
and subject to terms and provisions of the Agreement and Declaration of Trust
dated April 27, 1984, establishing Cash Accumulation Trust, and all amendments
thereto, heretofore or hereafter made, copies of which are on file with the
Secretary of the Commonwealth of Massachusetts.
No transfer hereof will be of any effect as regards the Trustees of CASH
ACCUMULATION TRUST until this certificate, properly endorsed or assigned, has
been surrendered and the transfer recorded upon the books of said Trustees.
This certificate is executed on behalf of the Trustees as Trustees and not
individually and the obligations hereof are not binding upon any of the Trustees
or shareholders individually but are binding only upon the assets and property
of the Fund.
IN WITNESS WHEREOF the Trustees under said Agreement and
Declaration of Trust have caused the following facsimile
signatures to be affixed to this certificate and a facsimile of
their common seal to be hereto affixed by SHAREHOLDER SERVICES,
INC., Transfer Agent.
Dated
[SEAL] SHAREHOLDER SERVICES, INC.
CASH ACCUMULATION TRUST Transfer Agent
1984
MASSACHUSETTS
/s/ Robert A. Prindiville
-----------------------------------
)
President) FOR THE TRUSTEES
)
/s/ Joseph F. Morris
----------------------------------- -------------------------
Authorized Signatory Authorized Signatory
<PAGE>
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the certificate, in every particular, without
alteration or enlargement, or any change whatever.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM --as tenants in common
TEN ENT --as tenants by the entireties
JT TEN --as joint tenants with right of survivorship and
not as tenants in common
UNIF GIFT MIN ACT--______________Custodian________________under Uniform
(Cust) (Minor)
Gifts to Minors Act__________________.
(State)
Additional abbreviations may also be used though not in the above list.
For value received,__________________________________hereby sell, assign and
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
transfer unto _________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_________________________________________________________________________shares
of beneficial interest represented by the within certificate, and hereby
irrevocably constitute and appoint
_______________________________________________________________________attorney
to transfer the said shares on the books of the within mentioned Trust with full
power of substitution in the premises.
Dated
---------------------------
- -------------------------------------------------------------------------------
Signature guaranteed:
- -------------------------------------------------------------------------------
SIGNATURE MUST BE GUARANTEED BY A NATIONAL BANK, OR TRUST COMPANY, OR BY A
COMMERCIAL BANK WHICH IS A MEMBER OF THE FEDERAL RESERVE SYSTEM OR OF THE
FEDERAL DEPOSIT INSURANCE CORPORATION, OR BY A MEMBER FIRM OF THE NEW YORK,
BOSTON, AMERICAN, MIDWEST OR PACIFIC COAST STOCK EXCHANGE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Cash Accumulation Trust annual report dated September 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> NATIONAL MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 671864968
<INVESTMENTS-AT-VALUE> 671864968
<RECEIVABLES> 57317059
<ASSETS-OTHER> 124240
<OTHER-ITEMS-ASSETS> 31543
<TOTAL-ASSETS> 729337810
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27335060
<TOTAL-LIABILITIES> 27335060
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 702002750
<SHARES-COMMON-STOCK> 702002750
<SHARES-COMMON-PRIOR> 652327431
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 702002750
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 38267809
<OTHER-INCOME> 0
<EXPENSES-NET> 4496152
<NET-INVESTMENT-INCOME> 33771657
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 33771657
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 33771657
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6248712913
<NUMBER-OF-SHARES-REDEEMED> 6231478119
<SHARES-REINVESTED> 32440525
<NET-CHANGE-IN-ASSETS> 49675319
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2886449
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4496152
<AVERAGE-NET-ASSETS> 690855000
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>