(ICON)
Cash
Accumulation
Trust
Liquid Assets Fund
ANNUAL
REPORT
Sept. 30, 1998
(LOGO)
<PAGE>
Cash Accumulation Trust
Liquid Assets Fund
Performance At A Glance.
Yields on money market securities declined sharply in the
final weeks of the
reporting period that ended on September 30, 1998. Investors
pushed yields
lower in anticipation of a reduction in the federal funds
rate, which is the
rate that banks charge each other to borrow money overnight.
The Federal
Reserve lowered the key short-term rate in late September
amid concerns that
depressed global financial markets threatened the U.S.
economic expansion. We
enhanced the returns of your Liquid Assets Fund by taking
advantage of
attractive buying opportunities that occurred earlier in the
period when
yields were considerably higher.
Fund Facts
As of 9/30/98
<TABLE>
<CAPTION>
7-Day Net Asset
Weighted Avg. Net Assets
Current Yld. Value (NAV)
Mat. (WAM) (Millions)
<S> <C> <C>
<C> <C>
Liquid Assets Fund 5.43% $1.00
41 Days $441.9
IBC Financial Data
Money Fund Avg.
(General Purpose*) 4.97% $1.00
53 Days N/A
</TABLE>
Note: Yields will fluctuate from time to time and past
performance is not
indicative of future results. An investment in the Fund is
not insured or
guaranteed by the Federal Deposit Insurance Corporation or
any other
government agency. Although the Fund seeks to preserve the
value of your
investment at $1.00 per share, it is possible to lose money
by investing in
the Fund.
* IBC Financial Data reports a seven-day current yield, NAV,
and WAM on
Tuesdays. This is the data of all funds in the International
Business
Communications (IBC) Financial Data Money Fund Average
(General Purpose)
category as of September 29, 1998.
Money Market Fund Yield Comparison.
(GRAPH)
How Investments Compared.
(As of 9/30/98)
(GRAPH)
Source: Lipper Analytical Services.
Financial markets change, so a mutual fund's past
performance should never be
used to predict future results. The risks to each of the
investments listed
above are different -- we provide 12-month total return
averages for several
Lipper mutual fund categories to show you that reaching for
higher returns
means tolerating more risk. The greater the risk, the larger
the potential
reward or loss. In addition, we've included historical 20-
year average annual
returns. These returns assume the reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal. Investors
have received higher
historical total returns from stocks than from most other
investments. Smaller
capitalization stocks offer greater potential for long-term
growth but may be
more volatile than larger capitalization stocks.
General Bond Funds provide more income than stock funds,
which can help smooth
out their total returns year by year. But their prices still
fluctuate
(sometimes significantly) and their returns have been
historically lower than
those of stock funds. Unlike bond funds, bonds, if held to
maturity, generally
offer a fixed rate of return and fixed principal value.
General Municipal Debt Funds invest in bonds issued by state
governments,
state agencies and/or municipalities. This investment
provides income that is
usually exempt from federal and state income taxes.
U.S. Taxable Money Funds attempt to preserve a constant
share value; they
don't fluctuate much in price but, historically, their
returns have been
generally among the lowest of the major investment
categories.
<PAGE>
Michelle Errico Gonnella, Fund Manager
Portfolio
Manager's Report
(PHOTO)
Liquid Assets Fund, one of two series of Cash Accumulation
Trust, seeks
current income to the extent consistent with preservation of
capital and
liquidity. The Fund is a diversified portfolio of high-
quality, U.S. dollar-
denominated money market securities issued by the U.S.
government and its
agencies, major corporations and commercial banks in the
United States and
foreign countries. Maturities can range from one day to 13
months. We purchase
securities rated in one of the two highest rating categories
by at least two
major, independent rating agencies or, if not rated, deemed
to be of
equivalent quality by our credit research staff. There can
be no assurance
that the Fund will achieve its investment objective.
Back-to-Back Rate Cuts.
The Federal Reserve lowered the federal funds rate twice in
less than three
weeks. The first reduction occurred on September 29
following a meeting of Fed
policy makers. The second took place on October 15, shortly
after the
reporting period ended. This second cut marked the first
time in four and a
half years that the central bank had changed monetary policy
between regularly
scheduled meetings. On both occasions, the federal funds
rate was reduced by a
quarter percentage point. As of October 15, the key rate
stands at 5.00%.
Strategy Session.
U.S. Economy Rebounds.
The U.S. economy, the world's largest, proved quite
resilient in the face of a
spreading global financial crisis. During the first three
months of 1998, the
economy raced ahead, powered by strong consumer and
corporate spending. U.S.
economic growth slowed markedly in the spring, however, as
financial problems
in Asia hurt overseas demand for American-made goods. But
this lull was
followed by a moderate resurgence in growth during the
summer as U.S.
companies built up their inventories.
Although the U.S. economy rebounded nicely, there were (and
for that matter
still are) widespread concerns about the viability of the
economic expansion.
August was a particularly challenging month for the
financial markets. The
devaluation of the Russian ruble in August was quickly
followed by the default
on some ruble-denominated Russian government bonds.
Concerned that Russia's
woes were spreading to other emerging market economies,
investors sold stocks
and riskier bonds and purchased "safe haven" investments,
including select
money market securities. This flight to quality intensified
price movements
for certain types of securities, which in turn discouraged
active
participation by the growing ranks of risk-averse investors.
Not surprisingly,
fresh doubts arose about the U.S. economy since declining
asset prices have
hurt consumer confidence, which could lead to a sharp drop
in consumer
spending.
Among the doubters were Federal Reserve policy makers, who
cut the federal
funds rate by a quarter percentage point to 5.25% on
September 29 to prevent
the global financial crisis from derailing the U.S. economic
expansion. This
was the first rate cut in more than two and a half years. A
second reduction
left the key short-term rate at 5.00% shortly after the
reporting period
ended.
<PAGE>
What Went Well.
"Fire-Sale" Prices.
Good buying opportunities often occur in the money markets
at the end of a
calendar quarter when concurrent factors briefly push short-
term interest
rates higher. The past two quarters were no exception. For
example, some
companies borrowed cash at quarter end to make their balance
sheets look
healthier. This demand temporarily drove up the cost of
borrowing so that
money market securities provided very attractive yields. As
yields climbed
around the end of March and June, selective purchases at
"fire-sale" prices
lengthened the Fund's weighted average maturity (WAM) until
it was either
longer or in line with the average comparable fund as
measured by IBC
Financial Data.
And Not So Well.
We Hesitated.
The Federal Reserve's bias in favor of higher short-term
rates and the
resilience of the U.S. economy made us reluctant to extend
the Fund's WAM by
purchasing longer-term money market securities. Why buy
these securities if
rates were headed higher, or so we thought. Then in early
September, Fed
Chairman Alan Greenspan hinted that a federal funds rate cut
might be
necessary. As a result, investors began pushing interest
rates lower. The 12-
month London Interbank Offered Rate (LIBOR), a widely used
base rate for many
one-year securities, fell from approximately 5.50% to below
five percent in
late September. In hindsight, we should have locked in
yields on longer-term
money market securities in July and August before yields
began to tumble.
Employing this strategy would have boosted the Fund's
returns and positioned
its WAM more advantageously heading into the fourth quarter.
Weighted Average Maturity Compared
To The Average Money Market Fund.
(GRAPH)
Looking Ahead.
In recent weeks, belief that the U.S. economic expansion
will stay on track has
dispelled much of the gloom hanging over Wall Street.
Investor confidence also
rose after the world's seven major economic powers announced
a new plan to
alleviate global financial problems and to avoid
recurrences. But because
financial markets remain volatile, we are still reluctant to
extend the Fund's
WAM by purchasing longer-term money market securities.
Instead, we plan to
cautiously position the Fund versus its competition as 1998
draws to a close.
- ------------------------------------------------------------
- -------------------
1
<PAGE>
President's Letter
November 9, 1998
(PHOTO)
Guarding Against Uncertainty.
Dear Shareholder:
As we enter the final months of the year, the news from the
financial markets
is decidedly mixed. After setting record highs earlier,
stocks, as measured by
the Dow Jones Industrial Average, experienced a series of
steep sell-offs in
late summer. The market rebounded in early fall, helped by
two interest rate
cuts by the Federal Reserve.
During this uncertainty there was also good news to report.
Bonds appreciated
as investors fled troubled Asian and other emerging markets
for the safe haven
of U.S. debt securities - especially Treasuries. The U.S.
economy remains
strong, with steady growth and low inflation.
Guarding against uncertainty in the current market
environment can be
challenging. That's why it is important to manage your
expectations and
diversify your portfolio.
Keep A Good Perspective.
Experienced mutual fund investors understand that financial
markets will
always rise and fall - that's what markets do. Although past
performance may
not be indicative of future results, stocks and bonds have,
over time,
consistently produced attractive returns that have kept
ahead of inflation.
In fact, investors who remained focused on the long term and
did not sell
during the recent market volatility were rewarded. Stock
prices, as measured
by the Standard & Poor's 500 Index, have rebounded nearly
25% since their
August Lows -- setting a new record high on November 23,
1998.
Diversify. Diversify. Diversify.
Because asset classes seldom move in lockstep, owning a mix
of stock, bond,
and money market mutual funds can help lessen the effects of
a market downturn
over time. In fact, a well-diversified portfolio may retain
or perhaps even
gain in value during times of uncertainty.
We're Here To Help.
How diversified is your portfolio? Your Prudential
professional will be glad
to review your current allocations. He or she will recommend
adjustments based
upon your goals, market conditions, risk tolerance, and
potential investment
opportunities.
Thank you for your confidence in Prudential mutual funds.
We'll continue to do
our part in keeping you informed.
Sincerely,
Brian M. Storms
President
- ------------------------------------------------------------
- -------------------
2
<PAGE>
CASH
ACCUMULATION TRUST
Portfolio of Investments as of September 30, 1998
LIQUID ASSETS FUND
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Bank Notes--6.3%
Comerica Bank
$10,000 5.46%, 10/19/98(b) $
9,995,291
Corestates Bank
2,000 5.540%, 10/16/98(b)
2,000,000
FCC National Bank
2,000 5.19%, 1/15/99
2,000,000
First National Bank
3,000 5.19%, 1/14/99
3,000,000
First Union National Bank
5,000 5.57%, 10/15/98
4,999,919
Key Bank N.A.
4,000 5.60%, 10/1/98(b)
3,998,933
1,000 5.62%, 10/1/98(b)
999,825
1,000 5.678%, 10/13/98(b)
1,000,159
--------
- ----
27,994,127
- ------------------------------------------------------------
Bankers Acceptance - Yankee--0.4%
Wachovia Bank, N.A.
2,000 5.40%, 10/29/98
1,991,600
- ------------------------------------------------------------
Certificates Of Deposit - Domestic--0.9%
First Tennessee Bank N.A.
1,000 5.45%, 11/16/98
1,000,081
1,000 5.46%, 11/24/98
1,000,119
1,000 5.40%, 12/16/98
1,000,298
Nationsbank, N.A.
1,000 5.84%, 12/28/98
1,000,536
--------
- ----
4,001,034
- ------------------------------------------------------------
Certificates Of Deposit - Eurodollar--1.8%
Abbey National Treasury Services PLC
2,000 5.52%, 1/22/99
1,997,937
2,000 5.75%, 3/5/99
2,000,000
Bank of Scotland
2,000 5.34%, 12/29/98
2,000,049
Bayerische Hypotheken Und Weschel
Bank
1,000 5.93%, 11/25/98
1,000,049
Bayerische Vereinsbank Ag
$1,000 5.60%, 2/2/99 $
999,165
--------
- ----
7,997,200
- ------------------------------------------------------------
Certificates Of Deposit - Yankee--14.9%
Barclays Bank PLC
9,000 5.510%, 10/2/98(b)
8,995,245
10,000 5.53%, 2/23/99
9,997,713
Bayerische Landesbank Girozentrale
5,000 5.24%, 10/30/98(b)
4,997,019
Bayerische Vereinsbank
1,000 5.58%, 10/9/98
999,993
Canadian Imperial Bank of Commerce
6,000 5.55%, 2/10/99
5,998,959
Credit Agricole Indosuez
3,000 5.74%, 4/26/99
2,999,023
Credit Communal De Belgique S.A.
6,000 5.65%, 10/21/98
6,000,000
Deutsche Bank
5,000 5.57%, 2/26/99
4,999,028
3,000 5.62%, 2/26/99
2,999,417
3,000 5.63%, 2/26/99
2,998,951
3,000 5.66%, 3/3/99
2,999,397
Rabobank Nederland N.V.
4,000 5.50%, 2/9/99
3,998,898
Royal Bank of Canada
7,000 5.624%, 10/6/98(b)
6,995,970
Societe Generale
705 5.56%, 1/19/99
704,453
--------
- ----
65,684,066
- ------------------------------------------------------------
Commercial Paper--56.0%
Aetna Services, Inc.
20,000 5.55%, 10/16/98
19,953,750
Aristar, Inc.
3,000 5.61%, 10/16/98
2,992,988
Associates Corp. of North America
3,912 5.51%, 11/10/98
3,888,050
Bank of New York Co., Inc.
2,700 5.52%, 10/8/98
2,697,102
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 3
<PAGE>
CASH
ACCUMULATION TRUST
Portfolio of Investments as of September 30, 1998
LIQUID ASSETS FUND
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Commercial Paper (cont'd.)
BCI Funding Corp.
$1,000 5.25%, 10/30/98 $
995,771
Bl North America
4,000 5.54%, 10/13/98
3,992,613
5,000 5.53%, 10/19/98
4,986,175
5,000 5.515%, 10/28/98
4,979,319
Bradford & Bingley Building Society
1,000 5.26%, 12/29/98
986,996
Chrysler Financial Corp.
10,000 5.52%, 10/14/98
9,980,067
CIT Group Holdings, Inc.
3,000 5.24%, 12/23/98
2,963,757
Coca-Cola Enterprises, Inc.
1,000 5.56%, 10/14/98
997,992
5,000 5.57%, 11/4/98
4,973,697
Commerzbank U.S. Finance, Inc.
9,000 5.52%, 10/21/98
8,972,400
Countrywide Home Loan, Inc.
3,000 5.60%, 10/19/98
2,991,600
1,000 5.33%, 11/20/98
992,597
1,000 5.32%, 11/27/98
991,577
Den Denske Corp.
6,000 5.26%, 12/2/98
5,970,193
Duke Capital Corp.
4,000 5.56%, 10/16/98
3,990,733
Falcon Asset Securitization Corp.
2,000 5.26%, 12/3/98
1,981,590
General Electric Capital Corp.
13,000 5.27%, 10/27/98
12,950,521
130 5.51%, 11/19/98
129,025
1,500 5.19%, 12/11/98
1,484,646
General Motors Acceptance Corp.
7,800 5.53%, 10/19/98
7,778,433
General Motors Corp.
3,000 5.54%, 10/16/98
2,993,075
GTE Funding, Inc.
8,414 5.28%, 10/27/98
8,381,915
Halliburton Corp.
1,000 5.52%, 10/15/98
997,853
Internationale Nederland en U.S.
Funding Corp.
$2,000 5.26%, 12/28/98 $
1,974,284
1,000 5.25%, 12/29/98
987,021
Johnson Controls, Inc.
1,000 5.60%, 10/29/98
995,644
1,000 5.59%, 10/30/98
995,497
Merrill Lynch & Co., Inc.
10,000 5.42%, 11/13/98
9,935,261
Mont Blanc Capital Corp.
17,784 5.57%, 10/21/98
17,728,968
Monte Rosa Capital Corp.
4,846 5.60%, 10/15/98
4,835,447
2,424 5.54%, 10/27/98
2,414,301
Morgan (J.P.) & Co., Inc.
9,000 5.50%, 10/19/98
8,975,250
National Australia Funding, Inc.
5,000 5.51%, 10/22/98
4,983,929
NationsBank Corp.
800 5.60%, 10/8/98
799,129
3,000 5.50%, 2/12/99
2,938,583
Nationwide Building Society
2,000 5.51%, 10/14/98
1,996,021
Old Line Funding Corp.
2,000 5.55%, 10/16/98
1,995,375
3,428 5.55%, 10/23/98
3,416,373
3,000 5.57%, 10/28/98
2,987,468
1,000 5.52%, 11/5/98
994,633
Safeco Corp.
5,000 5.54%, 10/13/98
4,990,767
8,000 5.54%, 10/27/98
7,967,991
Skandinaviska Enskilda Banken
2,000 5.27%, 10/1/98
1,991,509
10,882 5.80%, 10/1/98
10,882,000
Sonoco Products Co.
1,500 5.80%, 10/1/98
1,500,000
Special Purpose Accounts Recreation
Cooperative Corp.
3,000 5.55%, 10/22/98
2,990,288
The Travelers, Inc.
2,000 5.53%, 10/14/98
1,996,006
Thunder Bay Funding, Inc.
4,000 5.60%, 10/15/98
3,991,289
1,000 5.60%, 10/26/98
996,111
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 4
<PAGE>
CASH
ACCUMULATION TRUST
Portfolio of Investments as of September 30, 1998
LIQUID ASSETS FUND
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Commercial Paper (cont'd.)
Windmill Funding Corp.
$2,731 5.85%, 10/1/98 $
2,731,000
138 5.53%, 10/6/98
137,894
4,000 5.50%, 10/9/98
3,995,111
Wood Street Funding Corp.
4,950 5.55%, 10/16/98
4,938,553
4,315 5.55%, 11/2/98
4,293,713
--------
- ----
247,349,851
- ------------------------------------------------------------
Other Corporate Obligations--22.5%
Abbey National Treasury Services PLC
7,331 5.50%, 2/5/99(b)
7,329,021
2,000 5.72%, 6/11/99
1,998,938
Ford Motor Credit Co.
22,000 5.40%, 1/14/99
21,916,000
General Electric Capital Corp.
7,000 5.50%, 10/5/98(b)
6,994,376
General Motors Acceptance Corp.
13,000 5.668%, 11/2/98(b)
12,998,717
International Business Machines
6,000 5.529%, 10/1/98(b)
5,997,090
Lehman Brothers Holdings, Inc.
8,000 5.593%, 10/1/98(b)
8,000,000
Liquid Asset Backed Securities Trust
2,188 5.527%, 2/26/99(b)
2,187,606
Restructured Asset Securities
10,000 5.64%, 10/2/98(b)
10,000,000
1,000 5.375%, 10/30/98(b)(c)
1,000,000
Strategic Money Market Trust, Series
1998-B
15,000 5.625%, 10/5/98(b)
15,000,000
Strats Trust
6,000 5.593%, 10/19/98(b)(c)
6,000,000
--------
- ----
99,421,748
- ------------------------------------------------------------
U.S. Government Agency Obligations-Discount--2.7%
Federal Home Loan Mortgage Corp.
9,000 4.95%, 2/24/99
8,819,325
1,000 5.25%, 12/3/98
990,812
Federal National Mortgage Assoc.
$2,000 5.25%, 12/23/98 $
1,975,792
--------
- ----
11,785,929
Total Investments--105.5%
(amortized cost $466,225,555(a))
466,225,555
Liabilities in excess of other
assets--(5.5%)
(24,281,067)
--------
- ----
Net Assets--100%
$441,944,488
--------
- ----
--------
- ----
</TABLE>
(a) The cost of securities for federal income tax purposes
is substantially the
same as for financial reporting purposes.
(b) Variable rate instrument. The maturity date presented
for these instruments
is the later of the next date on which the security can
be redeemed at par
or the next date on which the rate of interest is
adjusted.
(c) Private placement restricted as to resale and does not
have a readily
available market; the aggregate cost of such securities
is $7,000,000. The
aggregate value ($7,000,000) is approximately 2.7% of
net assets.
The industry classification of portfolio holdings and
liabilities in excess of
other assets shown as a percentage of net assets as of
September 30, 1998 was as
follows:
<TABLE>
<S> <C>
Commercial Banks....................................
46.6%
Asset Backed Securities............................. 13.8
Motor Vehicles...................................... 9.7
Securities Brokers & Dealers........................ 6.1
Business Credit (Finance)........................... 5.6
Life Insurance...................................... 4.5
Fire Insurance...................................... 3.4
Mortgage Banks...................................... 3.2
Bank Holding Companies.............................. 2.9
U.S. Gov't Agency................................... 2.7
Telephone & Communications.......................... 1.9
Personal Credit Institutions........................ 1.6
Office Machines..................................... 1.4
Electrical Services................................. 0.9
Regulating Controls................................. 0.5
Paper Board Mills................................... 0.3
Beverages........................................... 0.2
Construction........................................ 0.2
-----
105.5
Liabilities in excess of other assets
(5.5)
-----
100.0%
-----
-----
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 5
<PAGE>
CASH
ACCUMULATION TRUST
Statement of Assets and Liabilities LIQUID
ASSETS FUND
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
December 22,
1997(a)
Through
Assets
March 31, 1998
<S>
<C>
Investments, at amortized cost which approximates market
value.......................................... $
466,225,555
Cash........................................................
............................................
739
Receivable for Fund shares
sold........................................................
................. 9,888,416
Interest
receivable..................................................
................................... 2,591,843
Prepaid expenses and other
assets......................................................
................. 3,644
- -----------------
Total
assets......................................................
................................... 478,710,197
- -----------------
Liabilities
Payable for investments
purchased...................................................
.................... 23,877,703
Payable for Fund shares
reacquired..................................................
.................... 12,192,892
Dividends
payable.....................................................
.................................. 461,512
Accrued
expenses....................................................
.................................... 131,822
Management fee
payable.....................................................
............................. 101,780
- -----------------
Total
liabilities.................................................
................................... 36,765,709
- -----------------
Net
Assets......................................................
........................................ $
441,944,488
- -----------------
Net assets were comprised of:
Shares of beneficial interest, at
par.........................................................
....... $ 4,419
Paid-in capital in excess of
par.........................................................
............ 441,940,069
- -----------------
Net assets, September 30,
1998........................................................
.................. $ 441,944,488
- -----------------
- -----------------
Net asset value, offering and redemption price per share
($441,944,488 / 441,944,488 shares of beneficial interest
issued and outstanding)....................
$1.00
- -----------------
- -----------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 6
<PAGE>
CASH ACCUMULATION TRUST
LIQUID ASSETS FUND
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
December
22,
1997(a)
Through
September
30,
Net Investment Income 1998
<S> <C>
Income
Interest.................................... $
16,647,803
----------
- ---
Expenses
Management fee..............................
190,000
Registration fees...........................
163,000
Transfer agent's fees and expenses..........
93,000
Custodian's fees and expenses...............
61,000
Legal fees and expenses.....................
41,000
Audit fee and expenses......................
27,000
Reports to shareholders.....................
20,000
Trustees' fees and expenses.................
9,000
Miscellaneous...............................
7,150
----------
- ---
Total expenses...........................
611,150
----------
- ---
Net investment income..........................
16,036,653
----------
- ---
Realized Gain on Investments
Net realized gain on investment transactions...
7,050
----------
- ---
Net Increase in Net Assets
Resulting from Operations...................... $
16,043,703
----------
- ---
----------
- ---
</TABLE>
- ---------------
(a) Commencement of investment operations.
CASH ACCUMULATION TRUST
LIQUID ASSETS FUND
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
December
22,
1997(a)
Through
Increase (Decrease) September
30,
in Net Assets 1998
<S> <C>
Operations
Net investment income...................... $
16,036,653
Net realized gain on investment
transactions............................
7,050
------------
- ---
Net increase in net assets resulting from
operations..............................
16,043,703
------------
- ---
Dividends and distributions (Note 1)..........
(16,043,703)
------------
- ---
Fund share transactions
Net proceeds from shares sold..............
3,011,683,905(b)
Net asset value of shares issued in
reinvestment of dividends and
distributions...........................
15,377,615
Cost of shares reacquired..................
(2,585,117,032)
------------
- ---
Net increase in net assets from Fund share
transactions............................
441,944,488
------------
- ---
Total increase.............................
441,944,488
Net Assets
Beginning of period...........................
- --
------------
- ---
End of period................................. $
441,944,488
------------
- ---
------------
- ---
- ---------------
(b) Includes $295,683,132 that was transferred from the
National Money Market Fund. (See Note 4)
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 7
<PAGE>
CASH
ACCUMULATION TRUST
Notes to Financial Statements
LIQUID ASSETS FUND
- ------------------------------------------------------------
- --------------------
Cash Accumulation Trust (the 'Trust') is registered under
the Investment Company
Act of 1940 as an open-end, diversified management
investment company. The Trust
consists of two series - the National Money Market Fund and
the Liquid Assets
Fund (the 'Fund'). The Fund commenced investment operations
on December 22,
1997, when $295,683,132 was transferred from the National
Money Market Fund to
the Fund. The investment objective of the Fund is current
income to the extent
consistent with the preservation of capital and liquidity.
The Fund invests
primarily in a portfolio of U.S. Government obligations,
financial institution
obligations and other high quality money market instruments
maturing in thirteen
months or less whose ratings are within the two highest
ratings categories by a
nationally recognized statistical rating organization or, if
not rated, are of
comparable quality. The ability of the issuers of the
securities held by the
Fund to meet its obligations may be affected by economic
developments in a
specific industry or region.
- ------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting
policies followed by the
Trust and the Fund in the preparation of its financial
statements.
Securities Valuations: Portfolio securities are valued at
amortized cost, which
approximates market value. The amortized cost method
involves valuing a security
at its cost on the date of purchase and thereafter assuming
a constant
amortization to maturity of any discount or premium.
Securities Transactions and Net Investment Income:
Securities transactions are
recorded on the trade date. Realized gains and losses on
sales of investments
are calculated on the identified cost basis. Interest income
is recorded on the
accrual basis. Expenses are recorded on the accrual basis
which may require the
use of certain estimates by management.
Federal Income Taxes: For Federal income tax purposes, each
fund in the Trust is
treated as a separate tax paying entity. It is the intent of
the Fund to meet
the requirements of the Internal Revenue Code applicable to
regulated investment
companies and to distribute all of its taxable net income to
its shareholders.
Therefore, no federal income tax provision is required.
Dividends and Distributions: The Fund declares all of its
net investment income
and net realized short-term capital gains or losses, if any,
as dividends daily
to its shareholders of record at the time of such
declaration. Net investment
income for dividend purposes includes interest accrued or
discount earned less
amortization of premium and the estimated expenses
applicable to the dividend
period. Payment of dividends is made monthly. The Fund does
not expect to
realize long-term capital gains or losses.
Nore 2. Agreements
The Trust has a management agreement with Prudential
Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has
responsibility for all
investment advisory services and supervises the subadviser's
performance of such
services. PIFM has entered into a subadvisory agreement with
The Prudential
Investment Corporation ('PIC'), doing business as Prudential
Investments ('PI',
the Subadviser or the investment adviser). PI furnishes
investment advisory
services in connection with the management of the Trust.
PIFM pays for the cost
of the subadviser's services, the compensation of officers
of the Trust,
occupancy and certain clerical and bookkeeping costs of the
Trust. The Trust
bears all other costs and expenses.
Under the management agreement, PIFM is reimbursed by the
Fund for its direct
administrative costs and expenses, excluding overhead and
profit incurred in
providing services to the Fund up to a maximum of .39% of
the average daily net
assets.
The Trust had a distribution agreement with Prudential
Securities Incorporated
('PSI') which acted as the distributor of the shares of the
Trust through May
31, 1998. Prudential Investment Management Services LLC
('PIMS') became the
distributor of the Trust effective June 1, 1998 and is
serving the Trust under
the same terms and conditions as under the arrangement with
PSI. No distribution
or service fees are paid to PIMS as distributor of the Fund.
PIFM, PIC and PIMS are wholly owned subsidiaries of The
Prudential Insurance
Company of America.
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned
subsidiary of PIFM,
serves as the Fund's transfer agent. Transfer agent fees and
expenses in the
Statement of Operations include certain out-of-pocket
expenses paid to
nonaffiliates.
- ------------------------------------------------------------
Note 4. Capital
On December 22, 1997, $295,683,132 was transferred from the
National Money
Market Fund to the Fund. The transfer established the Liquid
Assets Fund as the
primary money sweep fund for certain investment advisory
clients of Prudential
Securities enrolled in Prudential Securities' automatic
investment procedures
(Autosweep) program.
- ------------------------------------------------------------
- --------------------
8
<PAGE>
CASH
ACCUMULATION TRUST
Financial Highlights (Unaudited)
LIQUID ASSETS FUND
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
December 22,
1997(a)
Through
September 30,
1998
- -------------
<S>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................................................
..................... $ 1.00
- -------------
Net investment income and net realized
gains.......................................................
............ .04
Dividends and distributions to
shareholders................................................
.................... (.04)
- -------------
Net asset value, end of
period......................................................
........................... $ 1.00
- -------------
- -------------
TOTAL
RETURN(b):..................................................
.............................................
4.52%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).......................................................
......................... $ 441,944
Average net assets
(000).......................................................
................................ $ 374,141
Ratios to average net assets:
Expenses....................................................
................................................
.21%(c)
Net investment
income......................................................
................................. 5.53%(c)
</TABLE>
- ---------------
(a) Commencement of investment operations.
(b) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each period reported and
includes reinvestment
of dividends and distributions. Total returns for less
than a full year are
not annualized.
(c) Annualized.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 9
<PAGE>
CASH
ACCUMULATION TRUST
Report of Independent Accountants
LIQUID ASSETS FUND
- ------------------------------------------------------------
- --------------------
To the Shareholders and Board of Trustees of
Cash Accumulation Trust--Liquid Assets Fund
In our opinion, the accompanying statement of assets and
liabilities, including
the portfolio of investments, and the related statements of
operations and of
changes in net assets and the financial highlights present
fairly, in all
material respects, the financial position of Cash
Accumulation Trust--Liquid
Assets Fund (the 'Fund' one of the portfolios constituting
Cash Accumulation
Trust) at September 30, 1998, and the results of its
operations, the changes in
its net assets and the financial highlights for the period
December 22, 1997
(commencement of operations) through September 30, 1998, in
conformity with
generally accepted accounting principles. These financial
statements and
financial highlights (hereafter referred to as 'financial
statements') are the
responsibility of the Fund's management; our responsibility
is to express an
opinion on these financial statements based on our audit. We
conducted our audit
of these financial statements in accordance with generally
accepted auditing
standards which require that we plan and perform the audit
to obtain reasonable
assurance about whether the financial statements are free of
material
misstatement. An audit includes examining, on a test basis,
evidence supporting
the amounts and disclosures in the financial statements,
assessing the
accounting principles used and significant estimates made by
management, and
evaluating the overall financial statement presentation. We
believe that our
audit, which included confirmation of securities at
September 30, 1998 by
correspondence with the custodian and brokers, provides a
reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
November 20, 1998
- ------------------------------------------------------------
- --------------------
10
<PAGE>
Getting The Most From Your Prudential Mutual Fund.
How many times have you read these letters -- or other
financial materials --
and stumbled across a word that you don't understand?
Many shareholders have run into the same problem. We'd like
to help. So we'll
use this space from time to time to explain some of the
words you might have
read, but not understood. And if you have a favorite word
that no one can
explain to your satisfaction, please write to us.
Basis Point: 1/100th of 1%. For example, one-half of one
percent is 50 basis
points.
Call Option: A contract giving the holder a right to buy
stocks or bonds at a
predetermined price (called the strike price) before a
predetermined
expiration date. A buyer of a call option generally expects
to benefit from a
rise in the price of the stock or bond.
Collateralized Mortgage Obligations (CMOs): Pools of
mortgage-backed
securities sliced in maturity ranges that bear differing
interest rates. These
instruments are sensitive to changes in interest rates and
homeowner
refinancing activity. They are subject to prepayment and
maturity extension
risk.
Derivatives: Securities that derive their value from other
securities. The
rate of return of these financial products rises and falls -
- - sometimes very
suddenly -- in response to changes in some specific interest
rate, currency,
stock, or other variable.
Discount Rate: The interest rate charged by the Federal
Reserve on loans to
member banks.
Federal Funds Rate: The interest rate charged by one bank to
another on
overnight loans.
Futures Contract: An agreement to purchase or sell a
specific amount of a
commodity or financial instrument at a set price at a
specified date in the
future.
Leverage: The use of borrowed assets to enhance return on
equity. The
expectation is that the interest rate charged on borrowed
funds will be lower
than the return on the investment. While leverage can
increase profits, it can
also magnify losses.
Liquidity: The ease with which a financial instrument (or
mutual fund) can be
bought or sold (converted into cash) in the financial
markets.
Price/Earnings Ratio: The price of a share of stock divided
by the earnings
per share for a 12-month period.
Option: An agreement to purchase or sell something, such as
shares of stock,
by a certain time for a specified price. An option need not
be exercised.
Spread: The difference between two values; often used to
describe the
difference between "bid" and "asked for" prices of a
security.
Yankee Bond: A bond sold by a foreign company or government
in the U.S. market
and denominated in U.S. dollars.
<PAGE>
Getting The Most From Your Prudential Mutual Fund.
Some mutual fund shareholders won't ever read this -- they
don't read annual
and semi-annual reports. It's quite understandable. These
annual and semi-
annual reports are prepared to comply with Federal
regulations. They are often
written in language that is difficult to understand. So when
most people run
into those particularly daunting sections of these reports,
they don't read
them.
We think that's a mistake.
At Prudential Mutual Funds, we've made some changes to our
report to make it
easier to understand and more pleasant to read, in hopes
you'll find it
profitable to spend a few minutes familiarizing yourself
with your investment.
Here's what you'll find in the report:
At A Glance
Since an investment's performance is often a shareholder's
primary concern, we
present performance information in two different formats.
You'll find it first
on the "At A Glance" page where we compare the Fund and the
comparable average
calculated by Lipper Analytical Services, a nationally
recognized mutual fund
rating agency. We report both the cumulative total returns
and the average
annual total returns. The cumulative total return is the
total amount of
income and appreciation the Fund has achieved in various
time periods. The
average annual total return is an annualized representation
of the Fund's
performance -- it generally smoothes out returns and gives
you an idea how
much the Fund has earned in an average year, for a given
time period. Under
the performance box, you'll see legends that explain the
performance
information, whether fees and sales charges have been
included in returns, and
the inception dates for the Fund's share classes.
See the performance comparison charts at the back of the
report for more
performance information. And keep in mind that past
performance is not
indicative of future results.
Portfolio Manager's Report
The portfolio manager who invests your money for you reports
onsuccessful --
and not-so-successful -- strategies in this section of your
report. Look for
recent purchases and sales here, as well as information
about the sectors the
portfolio manager favors and any changes that are on the
drawing board.
Portfolio Of Investments
This is where the report begins to look technical, but it's
really just a
listing of each security held at the end of the reporting
period, along with
valuations and other information. Please note that sometimes
we discuss a
security in the Portfolio Manager's Report that doesn't
appear in this listing
because it was sold before the close of the reporting
period.
<PAGE>
Statement Of Assets And Liabilities
The balance sheet shows the assets (the value of the Fund's
holdings),
liabilities (how much the Fund owes) and net assets (the
Fund's equity, or
holdings after the Fund pays its debts) as of the end of the
reporting period.
It also shows how we calculate the net asset value per share
for each class of
shares. The net asset value is reduced by payment of your
dividend, capital
gain, or other distribution, but remember that the money or
new shares are
being paid or issued to you. The net asset value fluctuates
daily along with
the value of every security in the portfolio.
Statement Of Operations
This is the income statement, which details income (mostly
interest and
dividends earned) and expenses (including what you pay us to
manage your
money). You'll also see capital gains here -- both realized
and unrealized.
Statement Of Changes In Net Assets
This schedule shows how income and expenses translate into
changes in net
assets. The Fund is required to pay out the bulk of its
income to shareholders
every year, and this statement shows you how we do it --
through dividends and
distributions -- and how that affects the net assets. This
statement also
shows how money from investors flowed into and out of the
Fund.
Notes To Financial Statements
This is the kind of technical material that can intimidate
readers, but it
does contain useful information. The Notes provide a brief
history and
explanation of your Fund's objectives. In addition, they
also outline how
Prudential Mutual Funds prices securities. The Notes also
explain who manages
and distributes the Fund's shares, and more importantly, how
much they are
paid for doing so. Finally, the Notes explain how many
shares are outstanding
and the number issued and redeemed over the period.
Financial Highlights
This information contains many elements from prior pages,
but on a per share
basis. It is designed to help you understand how the Fund
performed and to
compare this year's performance and expenses to those of
prior years.
Independent Auditor's Report
Once a year, an outside auditor looks over our books and
certifies that the
information is fairly presented and complies with generally
accepted
accounting principles.
Tax Information
This is information which we report annually about how much
of your total
return is taxable. Should you have any questions, you may
want to consult a
tax advisor.
Performance Comparison
These charts are included in the annual report and are
required by the
Securities Exchange Commission. Performance is presented
here as a
hypothetical $10,000 investment in the Fund since its
inception or for 10
years (whichever is shorter). To help you put that return in
context, we are
required to include the performance of an unmanaged, broad
based securities
index, as well. The index does not reflect the cost of
buying the securities
it contains or the cost of managing a mutual fund. Of
course, the index
holdings do not mirror those of the fund -- the index is a
broadly based
reference point commonly used by investors to measure how
well they are doing.
A definition of the selected index is also provided.
Investors generally
cannot invest directly in an index.
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Trustees
Edward D. Beach
Stephen C. Eyre
Delayne Dedrick Gold
Robert F. Gunia
Don G. Hoff
Robert E. LaBlanc
Mendel A. Melzer, CFA
Robin B. Smith
Stephen Stoneburn
Nancy H. Teeters
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Robert C. Rosselot, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
The views expressed in this report and information about the
Fund's portfolio
holdings are for the period covered by this report and are
subject to change
thereafter.
This report is not authorized for distribution to
prospective investors unless
preceded or accompanied by a current prospectus.
147541502 MF175E
(ICON)
Cash
Accumulation
Trust
National Money
Market Fund
ANNUAL
REPORT
Sept. 30, 1998
<PAGE>
Cash Accumulation Trust
National Money Market Fund
Performance At A Glance.
Yields on money market securities declined sharply in the
final weeks of the
reporting period that ended on September 30, 1998. Investors
pushed yields
lower in anticipation of a reduction in the federal funds
rate, which is the
rate that banks charge each other to borrow money overnight.
The Federal
Reserve lowered the key short-term rate in late September
amid concerns that
depressed global financial markets threatened the U.S.
economic expansion. We
enhanced the returns of your National Money Market Fund by
taking advantage of
attractive buying opportunities that occurred earlier in the
period when
yields were considerably higher.
Fund Facts As of 9/30/98
<TABLE>
<CAPTION>
7-Day Net Asset
Weighted Avg. Net Assets
Current Yld. Value (NAV)
Mat. (WAM) (Millions)
<S> <C> <C>
<C> <C>
Nat'l Money Market Fund 4.83% $1.00
52 Days $507.3
IBC Financial Data
Money Fund Avg.
(General Purpose*) 4.97% $1.00
53 Days N/A
</TABLE>
Note: Yields will fluctuate from time to time and past
performance is not
indicative of future results. An investment in the Fund is
not insured or
guaranteed by the Federal Deposit Insurance Corporation or
any other government
agency. Although the Fund seeks to preserve the value of
your investment at
$1.00 per share, it is possible to lose money by investing
in the Fund.
* IBC Financial Data reports a seven-day current yield, NAV,
and WAM on
Tuesdays. This is the data of all funds in the International
Business
Communications (IBC) Financial Data Money Fund Average
(General Purpose)
category as of September 29, 1998.
Money Market Fund Yield Comparison
(CHART)
Cash Accumulation Trust - Market Fund is not included in the
Average for the
weeks of December 22 and 29, 1997.
How Investments Compared.
(As of 9/30/98)
(CHART)
Source: Lipper Analytical Services. Financial markets
change, so a mutual
fund's past performance should never be used to predict
future results. The
risks to each of the investments listed above are different
- -- we provide
12-month total return averages for several Lipper mutual
fund categories to
show you that reaching for higher returns means tolerating
more risk. The
greater the risk, the larger the potential reward or loss.
In addition, we've
included historical 20-year average annual returns. These
returns assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal. Investors
have received higher
historical total returns from stocks than from most other
investments. Smaller
capitalization stocks offer greater potential for long-term
growth but may be
more volatile than larger capitalization stocks.
General Bond Funds provide more income than stock funds,
which can help smooth
out their total returns year by year. But their prices still
fluctuate
(sometimes significantly) and their returns have been
historically lower than
those of stock funds. Unlike bond funds, bonds, if held to
maturity, generally
offer a fixed rate of return and fixed principal value.
General Municipal Debt Funds invest in bonds issued by state
governments,
state agencies and/or municipalities. This investment
provides income that is
usually exempt from federal and state income taxes.
U.S. Taxable Money Funds attempt to preserve a constant
share value; they
don't fluctuate much in price but, historically, their
returns have been
generally among the lowest of the major investment
categories.
<PAGE>
Robert Browne, Fund Manager (PHOTO)
Portfolio
Manager's Report
National Money Market Fund, one of two series of Cash
Accumulation Trust, seeks
current income to the extent consistent with preservation of
capital and
liquidity. The Fund is a diversified portfolio of high-
quality, U.S.
dollar-denominated money market securities issued by the
U.S. government and
its agencies, major corporations and commercial banks in the
United States and
foreign countries. Maturities can range from one day to 13
months. We purchase
securities rated in one of the two highest rating categories
by at least two
major, independent rating agencies or, if not rated, deemed
to be of equivalent
quality by our credit research staff. There can be no
assurance that the Fund
will achieve its investment objective.
Back-to-Back
Rate Cuts.
The Federal Reserve lowered the federal funds rate twice in
less than three
weeks. The first reduction occurred on September 29
following a meeting of Fed
policy makers. The second took place on October 15, shortly
after the reporting
period ended. This second cut marked the first time in four
and a half years
that the central bank had changed monetary policy between
regularly scheduled
meetings. On both occasions, the federal funds rate was
reduced by a quarter
percentage point. As of October 15, the key rate stands at
5.00%.
Strategy Session.
- ------------------------------------------------------------
- -------------------
U.S. Economy Rebounds.
The U.S. economy, the world's largest, proved quite
resilient in the face of a
spreading global financial crisis. During the first three
months of 1998, the
economy raced ahead, powered by strong consumer and
corporate spending. U.S.
economic growth slowed markedly in the spring, however, as
financial problems
in Asia hurt overseas demand for American-made goods. But
this lull was
followed by a moderate resurgence in growth during the
summer as U.S. companies
built up their inventories.
Although the U.S. economy rebounded nicely, there were (and
for that matter
still are) widespread concerns about the viability of the
economic expansion.
August was a particularly challenging month for the
financial markets. The
devaluation of the Russian ruble in August was quickly
followed by the default
on some ruble-denominated Russian government bonds.
Concerned that Russia's
woes were spreading to other emerging market economies,
investors sold stocks
and riskier bonds and purchased "safe haven" investments,
including select
money market securities. This flight to quality intensified
price movements for
certain types of securities, which in turn discouraged
active participation by
the growing ranks of risk-averse investors. Not
surprisingly, fresh doubts
arose about the U.S. economy since declining asset prices
have hurt consumer
confidence, which could lead to a sharp drop in consumer
spending.
Among the doubters were Federal Reserve policy makers, who
cut the federal
funds rate by a quarter percentage point to 5.25% on
September 29 to prevent
the global financial crisis from derailing the U.S. economic
expansion. This
was the first rate cut in more than two and a half years. A
second reduction
left the key short-term rate at 5.00% shortly after the
reporting period
ended.
<PAGE>
What Went Well.
"Fire-Sale" Prices.
Good buying opportunities often occur in the money markets
at the end of a
calendar quarter when concurrent factors briefly push short-
term interest
rates higher. The past two quarters were no exception. For
example, some
companies borrowed cash at quarter end to make their balance
sheets look
healthier. This demand temporarily drove up the cost of
borrowing so that
money market securities provided very attractive yields. As
yields climbed
around the end of March and June, we pursued a strategy that
involved
purchasing three-month and one-year securities at "fire-
sale" prices. These
purchases lengthened the Fund's weighted average maturity
(WAM) until it was
significantly longer than that of the average comparable
fund as measured by
IBC Financial Data.
And Not So Well.
We Hesitated.
The Federal Reserve's bias in favor of higher short-term
rates and the
resilience of the U.S. economy made us reluctant to extend
the Fund's WAM by
purchasing longer-term money market securities. Why buy
these securities if
rates were headed higher, or so we thought. Then in early
September, Fed
Chairman Alan Greenspan hinted that a federal funds rate cut
might be
necessary. As a result, investors began pushing interest
rates lower. The
12-month London Interbank Offered Rate (LIBOR), a widely
used base rate for
many one-year securities, fell from approximately 5.50% to
below five percent
in late September. In hindsight, we should have locked in
yields on longer-term
money market securities in July and August before yields
began to tumble.
Employing this strategy would have boosted the Fund's
returns and positioned
its WAM more advantageously heading into the fourth quarter.
Looking Ahead.
In recent weeks, belief that the U.S. economic expansion
will stay on track has
dispelled much of the gloom hanging over Wall Street.
Investor confidence also
rose after the world's seven major economic powers announced
a new plan to
alleviate global financial problems and to avoid
recurrences. But because
financial markets remain volatile, we are still reluctant to
extend the Fund's
WAM by purchasing longer-term money market securities.
Instead, we plan to
cautiously position the Fund versus its competition as 1998
draws to a close.
Weighted Average Maturity Compared
To The Average Money Market Fund
(CHART)
Cash Accumulation Trust - Market Fund is not included in the
Average for the
weeks of December 22 and 29, 1997.
1
<PAGE>
President's Letter
November 9, 1998
- ------------------------------------------------------------
- -------------------
(PHOTO)
Guarding Against Uncertainty.
Dear Shareholder:
As we enter the final months of the year, the news from the
financial markets
is decidedly mixed. After setting record highs earlier,
stocks, as measured by
the Dow Jones Industrial Average, experienced a series of
steep sell-offs in
late summer. The market rebounded in early fall, helped by
two interest rate
cuts by the Federal Reserve.
During this uncertainty there was also good news to report.
Bonds appreciated
as investors fled troubled Asian and other emerging markets
for the safe haven
of U.S. debt securities -- especially Treasuries. The U.S.
economy remains
strong, with steady growth and low inflation.
Guarding against uncertainty in the current market
environment can be
challenging. That's why it is important to manage your
expectations and
diversify your portfolio.
Keep A Good Perspective.
Experienced mutual fund investors understand that financial
markets will always
rise and fall -- that's what markets do. Although past
performance may not be
indicative of future results, stocks and bonds have, over
time, consistently
produced attractive returns that have kept ahead of
inflation. In fact,
investors who remained focused on the long term and did not
sell during the
recent market volatility were rewarded. Stock prices, as
measured by the
Standard & Poor's 500 Index, have rebounded nearly 25% since
their August
Lows -- setting a new record high on November 23, 1998.
Diversify. Diversify. Diversify.
Because asset classes seldom move in lockstep, owning a mix
of stock, bond,
and money market mutual funds can help lessen the effects of
a market downturn
over time. In fact, a well-diversified portfolio may retain
or perhaps even
gain in value during times of uncertainty.
We're Here To Help.
How diversified is your portfolio? Your Prudential
professional will be glad to
review your current allocations. He or she will recommend
adjustments based
upon your goals, market conditions, risk tolerance, and
potential investment
opportunities.
Thank you for your confidence in Prudential mutual funds.
We'll continue to do
our part in keeping you informed.
Sincerely,
Brian M. Storms
President
2
<PAGE>
CASH
ACCUMULATION TRUST
Portfolio of Investments as of September 30, 1998
NATIONAL MONEY MARKET FUND
- ------------------------------------------------------------
- -------------------
- ------------------------------------------------------------
- -------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Bank Notes--8.2%
Bank of America National Trust &
Savings
Association
$8,1002 5.55%, 10/21/98 $
8,100,000
Corestates Bank N.A.
4,000 5.53984%, 10/16/98(b)
4,000,000
FCC National Bank
3,000 5.19%, 1/15/99
3,000,000
First National Bank of Chicago
3,000 5.19%, 1/14/99
3,000,000
First Union National Bank
6,000 5.57%, 10/15/98
5,999,903
Keybank N.A.
7,000 5.60%, 10/1/98(b)
6,998,133
1,000 5.6775%, 10/13/98(b)
1,000,159
Nationsbank N.A.
1,500 5.62%, 10/1/98(b)
1,500,541
US Bank N.A.
8,000 5.565%, 10/8/98
7,998,398
--------
- ----
41,597,134
- ------------------------------------------------------------
Certificates of Deposit - Domestic--0.4%
First Tennessee Bank N.A.
1,000 5.45%, 11/16/98
1,000,080
1,000 5.46%, 11/24/98
1,000,119
--------
- ----
2,000,199
- ------------------------------------------------------------
Certificates of Deposit - Eurodollar--0.4%
Bank of Scotland
2,000 5.34%, 12/29/98
2,000,049
- ------------------------------------------------------------
Certificates of Deposit - Yankee--22.5%
Bank of Montreal
10,000 5.30%, 10/30/98
10,000,000
Barclays Bank PLC
12,000 5.510%, 10/2/98(b)
11,993,660
Bayerische Landesbank Girozentrale
10,000 5.24%, 10/30/98(b)
9,994,038
Certificates of Deposit - Yankee (cont'd.)
Bayerishe Hypotheken Und Wechsel
Bank
$2,000 5.675%, 3/3/99 $
1,999,639
Canadian Imperial Bank of Commerce
24,000 5.55%, 2/10/99
23,995,836
Deutsche Bank
5,000 5.62%, 2/26/99
4,999,028
3,000 5.63%, 2/26/99
2,998,951
6,000 5.66%, 3/3/99
5,998,795
ING Bank N.V.
5,000 5.585%, 11/12/98
5,001,765
Rabobank Nederland N.V.
9,000 5.50%, 2/9/99
8,997,520
Royal Bank of Canada
7,000 5.624%, 10/6/98(b)
6,995,970
10,000 5.460%, 10/15/98(b)
9,993,481
Swiss Bank Corp.
11,000 5.74%, 6/11/99
10,995,619
--------
- ----
113,964,302
- ------------------------------------------------------------
Commercial Paper--52.1%
Aetna Services, Inc.
4,000 5.56%, 10/23/98
3,986,409
Aon Corp.
4,000 5.55%, 10/19/98
3,988,900
Aristar, Inc.
2,000 5.61%, 10/16/98
1,995,325
Associates First Capital Corp.
5,000 5.55%, 10/19/98
4,986,125
Baker Hughes, Inc.
1,000 5.80%, 10/1/98
1,000,000
Bank One Corp
10,537 5.90%, 10/1/98
10,537,000
BBL North America Funding, Inc.
2,000 5.54%, 10/13/98
1,996,307
7,000 5.31%, 12/31/98
6,906,042
Bradford & Bingley Building Society
1,000 5.26%, 12/29/98
986,996
Caisse Des Depots Et Consignations
25,100 5.75%, 10/1/98
25,100,000
Centric Capital Corp.
7,000 5.60%, 10/2/98
6,998,911
11,500 5.23%, 11/30/98
11,399,758
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 3
<PAGE>
CASH
ACCUMULATION TRUST
Portfolio of Investments as of September 30, 1998
NATIONAL MONEY MARKET FUND
- ------------------------------------------------------------
- -------------------
- ------------------------------------------------------------
- -------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Commercial Paper (cont'd.)
CIT Group Holdings, Inc.
$3,000 5.24%, 12/22/98 $
2,964,193
1,000 5.24%, 12/23/98
987,919
Coca-Cola Enterprises, Inc.
6,196 5.35%, 12/2/98
6,138,911
Commercial Credit Co.
2,000 5.35%, 10/16/98
1,995,542
Cooper Industries, Inc.
4,000 5.80%, 10/1/98
4,000,000
Countrywide Home Loan, Inc.
1,000 5.60%, 10/19/98
997,200
4,000 5.32%, 11/27/98
3,966,307
Den Danske Corp.
9,000 5.19%, 12/2/98
8,920,852
Falcon Asset Securitization Corp.
3,200 5.26%, 11/20/98
3,176,622
2,000 5.26%, 12/3/98
1,981,590
Finova Capital Corp.
2,000 5.35%, 11/13/98
1,987,219
Ford Motor Credit Co.
5,000 5.25%, 11/20/98
4,963,542
7,000 5.3975%, 1/14/99
7,000,000
General Electric Capital Corp.
3,100 5.47%, 11/19/98
3,076,920
Internationale Nederlanden U.S.
Funding Corp.
2,000 5.26%, 12/28/98
1,974,284
2,000 5.25%, 12/29/98
1,974,042
Martin Marietta Material
5,000 5.55%, 10/28/98
4,979,187
5,000 5.65%, 10/29/98
4,978,028
Merrill Lynch & Co., Inc.
12,000 5.42%, 11/13/98
11,922,313
Monte Rosa Capital Corp.
7,000 5.60%, 10/15/98
6,984,756
National Bank of Canada
9,000 5.17%, 12/30/98
8,883,675
NationsBank Corp.
6,000 5.56%, 10/19/98
5,983,320
Nationwide Building Society
7,000 5.40%, 12/10/98
6,926,500
Nordbanken North America, Inc.
$5,000 5.38%, 12/18/98 $
4,941,717
Norwest Financial, Inc.
3,000 5.25%, 12/18/98
2,965,875
Old Line Funding Corp.
9,000 5.55%, 10/23/98
8,969,475
San Paolo U.S. Financial Co.
8,500 6.00%, 10/1/98
8,500,000
Sony Capital Corp.
17,000 5.36%, 11/24/98
16,863,320
Special Purpose Accounts Recreation
Cooperative Corp.
3,000 5.51%, 11/13/98
2,980,256
Thunder Bay Funding Inc.
6,000 5.57%, 10/29/98
5,974,007
Windmill Funding Corp.
4,300 5.40%, 10/20/98
4,287,745
Wood Street Funding Corp.
2,885 5.65%, 10/16/98
2,878,208
5,685 5.55%, 11/2/98
5,656,954
13,936 5.55%, 11/16/98
13,837,171
--------
- ----
264,499,423
- ------------------------------------------------------------
Loan Participations--1.4%
Baker Hughes, Inc.
7,000 5.80%, 10/1/98
7,000,000
- ------------------------------------------------------------
Other Corporate Obligations--20.6%
Abbey National Treasury Services PLC
21,000 5.50%, 2/5/99
20,994,330
Chase Manhattan Corp.
3,000 5.6875%, 10/15/98(b)
3,000,045
Chrysler Financial Corp.
10,000 5.56703%, 10/21/98(b)
10,000,637
General Electric Capital Corp.
5,000 5.50%, 10/5/98(b)
4,995,983
General Motors Acceptance Corp.
5,000 5.6275%, 11/12/98(b)
4,999,731
5,000 5.6075%, 11/24/98(b)
4,999,527
1,000 7.75%, 1/15/99
1,005,970
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 4
<PAGE>
CASH
ACCUMULATION TRUST
Portfolio of Investments as of September 30, 1998
NATIONAL MONEY MARKET FUND
- ------------------------------------------------------------
- -------------------
- ------------------------------------------------------------
- -------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Other Corporate Obligations (cont'd.)
International Lease Finance Corp.
$2,400 8.35%, 10/1/98 $
2,400,000
2,235 6.625%, 4/1/99
2,243,708
Liquid Asset Backed Securities
Trust,
Ser. 1997-7
5,237 5.58594%, 10/22/98(a)(b)
(cost $5,236,779; purchased
12/19/97)
5,236,779
Ser. 1998-1
3,646 5.52734%, 10/26/98(a)(b)
(cost $3,646,009; purchased
2/26/98)
3,646,009
Restructured Asset Securities,
11,000 5.64234%, 10/2/98(b)
11,000,000
1,000 5.375%, 10/30/98(a)(b)
(cost $1,000,000; purchased
4/2/98)
1,000,000
Strategic Money Market Trust,
Ser. 1997-A
21,000 5.50%, 12/16/98(b)
21,000,000
Ser. 1998-B
5,000 5.625%, 10/5/98(b)
5,000,000
UBS Finance (Delaware) Inc.
3,200 6.20%, 10/1/98
3,200,000
--------
- ----
104,722,719
- ------------------------------------------------------------
Time Deposit - Eurodollar--0.6%
Suntrust Bank, Atlanta
2,961 5.875%, 10/1/98
2,961,000
- ------------------------------------------------------------
U.S. Government Agency & Instrumentality
Obligations - Discount--0.6%
Federal National Mortgage Assoc.
2,000 5.25%, 12/23/98
1,975,792
Federal Home Loan Mortgage Corp.
1,000 5.25%, 12/3/98
990,812
--------
- ----
2,966,604
Total Investments--106.8%
(amortized cost $541,711,430(c))
$541,711,430
Liabilities in excess of other
assets--(6.8%)
(34,423,630)
--------
- ----
Net Assets--100%
$507,287,800
--------
- ----
--------
- ----
</TABLE>
- ---------------
(a) Indicates a restricted security; the aggregate cost and
value of such
securities are both $9,882,788. The aggregate value is
approximately 1.9% of
net assets.
(b) Variable rate instrument. The maturity date presented
for these instruments
is the later of the next date on which the security can
be redeemed at par
or the next date on which the rate of interest is
adjusted.
(c) The cost for federal income tax purposes is
substantially the same as for
financial reporting purposes.
The industry classification of portfolio holdings and other
assets in excess of
liabilities shown as a percentage of net assets as of
September 30, 1998 was as
follows:
<TABLE>
<S> <C>
Commercial Banks 56.3%
Asset Backed Securities 14.8
Short-Term Business Credit 7.7
Motor Vehicle Parts 6.5
Bank Holding Companies-Domestic 3.8
Phono, Records, Tape, Disk 3.3
Security Brokers & Dealers 2.4
Personal Credit Institutions 2.3
Mining 2.0
Oil Construction Equipment 1.6
Accident & Health Insurance 1.6
Beverages 1.2
Mortgage Banks 1.0
Equipment Rental & Leasing 0.9
Miscellaneous Electrical Equipment & Supplies 0.8
Federal Credit Agencies 0.6
-----
106.8%
Liabilities in excess of other assets (6.8)
-----
100.0%
-----
-----
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 5
<PAGE>
CASH
ACCUMULATION TRUST
Statement of Assets and Liabilities NATIONAL
MONEY MARKET FUND
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Assets
September 30, 1998
<S>
<C>
Investments, at amortized cost which approximates market
value.........................................
$541,711,430
Receivable for Fund shares
sold........................................................
................ 17,193,466
Interest
receivable..................................................
.................................. 3,583,962
Prepaid expenses and other
assets......................................................
................ 141,768
- ------------------
Total
assets......................................................
.................................. 562,630,626
- ------------------
Liabilities
Payable for investments
purchased...................................................
................... 32,845,077
Payable for Fund shares
reacquired..................................................
................... 21,531,356
Dividends
payable.....................................................
................................. 463,761
Accrued expenses and other
liabilities.................................................
................ 295,571
Management fee
payable.....................................................
............................ 164,804
Distribution fee
payable.....................................................
.......................... 42,257
- ------------------
Total
liabilities.................................................
.................................. 55,342,826
- ------------------
Net
Assets......................................................
....................................... $507,287,800
- ------------------
- ------------------
Net assets were comprised of:
Shares of beneficial interest, at $.00001 par
value.................................................
$ 5,073
Paid-in capital in excess of
par.........................................................
........... 507,282,727
- ------------------
Net assets, September 30,
1998........................................................
................. $507,287,800
- ------------------
- ------------------
Net asset value, offering price and redemption price per
share
($507,287,800 / 507,287,800 shares of beneficial interest
issued and outstanding)...................
$1.00
- ------------------
- ------------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 6
<PAGE>
CASH ACCUMULATION TRUST
NATIONAL MONEY MARKET FUND
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income September 30,
1998
<S> <C>
Income
Interest.............................. $ 31,153,367
----------------
- --
Expenses
Management fee........................ 2,098,187
Distribution fee...................... 549,801
Transfer agent's fees and expenses.... 335,000
Registration fees..................... 130,000
Reports to shareholders............... 100,000
Custodian's fees and expenses......... 88,000
Audit fees and expenses............... 27,000
Legal fees and expenses............... 30,000
Trustees' fees........................ 12,500
Miscellaneous......................... 13,426
----------------
- --
Total expenses..................... 3,383,914
----------------
- --
Net Investment Income and Net Increase in
Net Assets
Resulting from Operations................ $ 27,769,453
----------------
- --
----------------
- --
</TABLE>
CASH ACCUMULATION TRUST
NATIONAL MONEY MARKET FUND
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Decrease in Year Ended September
30,
Net Assets 1998 1997
<S> <C> <C>
Operations
Net investment income and
net increase in net
assets resulting from
operations............... $ 27,769,453 $
33,771,657
-------------- ---------
- -----
Dividends and distributions to
shareholders (Note 1)....... (27,769,453)
(33,771,657)
-------------- ---------
- -----
Fund share transactions (at $1
per share)
Net proceeds from shares
sold..................... 5,056,612,846
6,248,712,913
Net asset value of shares
issued in reinvestment of
dividends and
distributions............... 24,443,399
32,440,525
Cost of shares reacquired...... (5,275,771,195)(a)
(6,231,478,119)
-------------- ---------
- -----
Net increase (decrease) in net
assets from Fund share
transactions................ (194,714,950)
49,675,319
-------------- ---------
- -----
Total increase (decrease)...... (194,714,950)
49,675,319
Net Assets
Beginning of year.............. 702,002,750
652,327,431
-------------- ---------
- -----
End of year.................... $ 507,287,800 $
702,002,750
-------------- ---------
- -----
-------------- ---------
- -----
- ---------------
(a) Includes $295,683,132 that was transferred into Liquid
Assets
Fund. (see Note 4.)
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 7
<PAGE>
CASH
ACCUMULATION TRUST
Notes to Financial Statements NATIONAL
MONEY MARKET FUND
- ------------------------------------------------------------
- --------------------
Cash Accumulation Trust (the 'Trust') is registered under
the Investment Company
Act of 1940 as an open-end, diversified management
investment company. The Trust
consists of two series--the National Money Market Fund (the
'Fund') and the
Liquid Assets Fund. The investment objective of the Fund is
current income to
the extent consistent with the preservation of capital and
liquidity. The Fund
invests primarily in a portfolio of U.S. Government
obligations, financial
institution obligations and other high quality money market
instruments maturing
in thirteen months or less whose ratings are within the two
highest ratings
categories by a nationally recognized statistical rating
organization or, if not
rated, are of comparable quality. The ability of the issuers
of the securities
held by the Fund to meet its obligations may be affected by
economic
developments in a specific industry or region.
- ------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting
policies followed by the
Trust and the Fund in the preparation of its financial
statements.
Securities Valuations: Portfolio securities are valued at
amortized cost, which
approximates market value. The amortized cost method
involves valuing a security
at its cost on the date of purchase and thereafter assuming
a constant
amortization to maturity of any discount or premium.
Securities Transactions and Net Investment Income:
Securities transactions are
recorded on the trade date. Realized gains and losses on
sales of investments
are calculated on the identified cost basis. Interest income
is recorded on the
accrual basis. Expenses are recorded on the accrual basis,
which may require the
use of certain estimates by management.
Federal Income Taxes: For federal income tax purposes, each
fund in the Trust is
treated as a separate taxpaying entity. It is the intent of
the Fund to continue
to meet the requirements of the Internal Revenue Code
applicable to regulated
investment companies and to distribute all of its taxable
net income to its
shareholders. Therefore, no federal income tax provision is
required.
Dividends and Distributions: The Fund declares all of its
net investment income
and net realized short-term capital gains or losses, if any,
as dividends daily
to its shareholders of record at the time of such
declaration. Net investment
income for dividend purposes includes interest accrued or
discount earned less
amortization of premium and the estimated expenses
applicable to the dividend
period. The Fund does not expect to realize long-term
capital gains or losses.
Note 2. Agreements
The Trust has a management agreement with Prudential
Investments Fund Management
LLC ('PIFM') as of December 12, 1997. (Prior to December 12,
1997, the Fund had
a management agreement with PIMCO Advisors L.P. ('PIMCO').
PIMCO had a
subadvisory agreement with Columbus Circle Investors.)
Pursuant to this
agreement, PIFM has responsibility for all investment
advisory services and
supervises the subadviser's performance of such services.
PIFM has entered into
a subadvisory agreement with The Prudential Investment
Corporation ('PIC'); PIC
furnishes investment advisory services in connection with
the management of the
Trust. PIFM pays for the cost of the subadviser's services,
the compensation of
officers of the Trust, occupancy and certain clerical and
bookkeeping costs of
the Fund. The Trust bears all other costs and expenses.
Beginning December 22, 1997, the management fee paid PIFM is
computed daily and
payable monthly, at an annual rate of .39% of the Fund's
average daily net
assets up to and including $1 billion, .375% of the next
$500 million, .35% of
the next $500 million and .325% of the Fund's average daily
net assets in excess
of $2 billion. The management fee paid to PIMCO through
December 11, 1997 was
computed daily and payable monthly at an annual rate of
.425% of the Fund's
average daily net assets up to and including $500 million,
.400% of the next
$500 million, .375% of the next $500 million, .350% of the
next $500 million and
.325% of the Fund's average daily net assets in excess of $2
billion.
The Trust had a distribution agreement with Prudential
Securities Incorporated
('PSI') which acted as the distributor of the shares of the
Trust from December
12, 1998 through May 31, 1998. Prudential Investment
Management Services LLC
('PIMS') became the distributor of the Trust effective June
1, 1998 and is
serving the Trust under the same terms and conditions as
under the arrangement
with PSI. The Fund compensated PSI and PIMS for distributing
and servicing the
Fund's shares pursuant to the plan of distribution at an
annual rate of .10 of
1% of the average daily net assets of the shares, regardless
of expenses
actually incurred by them. The distribution fees are accrued
daily and payable
monthly. Prior to December 12, 1997, PIMCO Funds
Distribution Company served as
the Trust's distributor and was compensated at the same
rate.
PSI, PIFM, PIC and PIMS are indirect, wholly owned
subsidiaries of The
Prudential Insurance Company of America.
- ------------------------------------------------------------
- --------------------
8
<PAGE>
CASH
ACCUMULATION TRUST
Notes to Financial Statements NATIONAL
MONEY MARKET FUND
- ------------------------------------------------------------
- --------------------
Note 3. Other Transactions with Affiliates
On December 12, 1997, Prudential Mutual Fund Services LLC
('PMFS'), a wholly
owned subsidiary of PIFM, began serving as the Fund's
transfer agent. Prior to
December 12, 1997, Shareholder Services, Inc. ('SSI') served
as the Fund's
transfer agent. During the period December 12, 1997 through
September 30, 1998,
the Fund incurred fees of approximately $210,200 for the
services of PMFS. As of
September 30, 1998, $20,800 of such fees were due to PMFS.
Transfer agent fees
and expenses in the Statement of Operations include fees
paid to SSI and certain
out-of-pocket expenses paid to nonaffiliates.
- ------------------------------------------------------------
Note 4. Capital
On December 22, 1997, $295,683,132 was transferred from the
Fund to the Liquid
Assets Fund. The transfer established the Liquid Assets Fund
as the primary
money sweep fund for certain investment advisory clients of
Prudential
Securities enrolled in Prudential Securities' automatic
investment procedures
(Autosweep) program.
- ------------------------------------------------------------
Note 5. Change in Custodian and Accounting Agent
As of December 12, 1997, the custodian and accounting agent
is State Street Bank
and Trust Company. Prior to December 12, 1997, Oppenheimer
Funds, Inc. served as
the Fund's accounting agent and The Bank of New York served
as the custodian.
- ------------------------------------------------------------
- --------------------
9
<PAGE>
CASH
ACCUMULATION TRUST
Financial Highlights NATIONAL MONEY
MARKET FUND
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Year Ended September 30,
- ------------------------------------------------------------
1998 1997 1996 1995 1994
- -------- -------- -------- -------- --------
<S>
<C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year........................... $ 1.00 $ 1.00
$ 1.00 $ 1.00 $ 1.00
Net investment
income........................................ 0.05
0.05 0.05 0.05 0.03
Dividends and distributions to
shareholders.................. (0.05) (0.05)
(0.05) (0.05) (0.03)
- -------- -------- -------- -------- --------
Net asset value, end of
year................................. $ 1.00 $
1.00 $ 1.00 $ 1.00 $ 1.00
- -------- -------- -------- -------- --------
- -------- -------- -------- -------- --------
TOTAL
RETURN(a):.............................................
5.2% 5.0% 5.0% 5.2% 3.2%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).............................. $507,288 $702,003
$652,327 $685,228 $823,343
Ratios to average net assets:
Expenses, including distribution
fee...................... 0.62% 0.65%
0.69% 0.69% 0.61%
Expenses, excluding distribution
fee...................... 0.52% 0.55%
0.59% 0.59% 0.51%
Net investment
income..................................... 5.05%
4.89% 4.86% 5.15% 3.20%
</TABLE>
- ------------------------------
(a) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each period reported and
includes reinvestment
of dividends and distributions.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 10
<PAGE>
CASH
ACCUMULATION TRUST
Report of Independent Accountants NATIONAL
MONEY MARKET FUND
- ------------------------------------------------------------
- --------------------
To the Shareholders and Board of Trustees of
Cash Accumulation Trust
National Money Market Fund
In our opinion, the accompanying statement of assets and
liabilities, including
the portfolio of investments, and the related statements of
operations and of
changes in net assets and the financial highlights present
fairly, in all
material respects, the financial position of Cash
Accumulation Trust--National
Money Market Fund (the 'Fund', one of the portfolios
constituting Cash
Accumulation Trust) at September 30, 1998, the results of
its operations for the
year then ended, and the changes in its net assets and the
financial highlights
for each of the two years in the period then ended, in
conformity with generally
accepted accounting principles. These financial statements
and financial
highlights (hereafter referred to as 'financial statements')
are the
responsibility of the Fund's management; our responsibility
is to express an
opinion on these financial statements based on our audits.
We conducted our
audits of these financial statements in accordance with
generally accepted
auditing standards which require that we plan and perform
the audit to obtain
reasonable assurance about whether the financial statements
are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting
the amounts and disclosures in the financial statements,
assessing the
accounting principles used and significant estimates made by
management, and
evaluating the overall financial statement presentation. We
believe that our
audits, which included confirmation of securities at
September 30, 1998 by
correspondence with the custodian and brokers, provide a
reasonable basis for
the opinion expressed above. The accompanying financial
highlights for each of
the three years in the period ended September 30, 1996 were
audited by other
independent accountants, whose opinion dated October 23,
1996 was unqualified.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
November 20, 1998
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11
<PAGE>
Getting The Most From Your Prudential Mutual Fund.
When you invest through Prudential Mutual Funds, you receive
financial advice
through a Prudential Securities financial advisor or
Prudential/Pruco
Securities registered representative. Your advisor or
representative can
provide you with the following services:
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- -------------------
There's No Reward Without Risk; But Is This Risk Worth It?
Your financial advisor or registered representative can help
you match the
reward you seek with the risk you can tolerate. And risk can
be difficult to
gauge -- sometimes even the simplest investments bear
surprising risks. The
educated investor knows that markets seldom move in just one
direction -- there
are times when a market sector or asset class will lose
value or provide little
in the way of total return. Managing your own expectations
is easier with help
from someone who understands the markets and who knows you!
- ------------------------------------------------------------
- -------------------
Keeping Up With The Joneses.
A financial advisor or registered representative can help
you wade through the
numerous mutual funds available to find the ones that fit
your own individual
investment profile and risk tolerance. While the newspapers
and popular
magazines are full of advice about investing, they are aimed
at generic groups
of people or representative individuals, not at you
personally. Your financial
advisor or registered representative will review your
investment objectives
with you. This means you can make financial decisions based
on the assets and
liabilities in your current portfolio and your risk
tolerance -- not just
based on the current investment fad.
- ------------------------------------------------------------
- -------------------
Buy Low, Sell High.
Buying at the top of a market cycle and selling at the
bottom are among the
most common investor mistakes. But sometimes it's difficult
to hold on to an
investment when it's losing value every month. Your
financial advisor or
registered representative can answer questions when you're
confused or worried
about your investment, and remind you that you're investing
for the long haul.
<PAGE>
Getting The Most From Your Prudential Mutual Fund.
How many times have you read these letters -- or other
financial materials --
and stumbled across a word that you don't understand?
Many shareholders have run into the same problem. We'd like
to help. So we'll
use this space from time to time to explain some of the
words you might have
read, but not understood. And if you have a favorite word
that no one can
explain to your satisfaction, please write to us.
Basis Point: 1/100th of 1%. For example, one-half of one
percent is 50 basis
points.
Call Option: A contract giving the holder a right to buy
stocks or bonds at a
predetermined price (called the strike price) before a
predetermined expiration
date. A buyer of a call option generally expects to benefit
from a rise in the
price of the stock or bond.
Collateralized Mortgage Obligations (CMOs): Pools of
mortgage-backed securities
sliced in maturity ranges that bear differing interest
rates. These instruments
are sensitive to changes in interest rates and homeowner
refinancing activity.
They are subject to prepayment and maturity extension risk.
Derivatives: Securities that derive their value from other
securities. The rate
of return of these financial products rises and falls --
sometimes very
suddenly -- in response to changes in some specific interest
rate, currency,
stock, or other variable.
Discount Rate: The interest rate charged by the Federal
Reserve on loans to
member banks.
Federal Funds Rate: The interest rate charged by one bank to
another on
overnight loans.
Futures Contract: An agreement to purchase or sell a
specific amount of a
commodity or financial instrument at a set price at a
specified date in the
future.
Leverage: The use of borrowed assets to enhance return on
equity. The
expectation is that the interest rate charged on borrowed
funds will be lower
than the return on the investment. While leverage can
increase profits, it can
also magnify losses.
Liquidity: The ease with which a financial instrument (or
mutual fund) can be
bought or sold (converted into cash) in the financial
markets.
Price/Earnings Ratio: The price of a share of stock divided
by the earnings per
share for a 12-month period.
Option: An agreement to purchase or sell something, such as
shares of stock, by
a certain time for a specified price. An option need not be
exercised.
Spread: The difference between two values; often used to
describe the
difference between "bid" and "asked for" prices of a
security.
Yankee Bond: A bond sold by a foreign company or government
in the U.S. market
and denominated in U.S. dollars.
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Trustees
Edward D. Beach
Stephen C. Eyre
Delayne Dedrick Gold
Robert F. Gunia
Don G. Hoff
Robert E. LaBlanc
Mendel A. Melzer, CFA
Robin B. Smith
Stephen Stoneburn
Nancy H. Teeters
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Robert C. Rosselot, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
The views expressed in this report and information about the
Fund's portfolio
holdings are for the period covered by this report and are
subject to change
thereafter.
This report is not authorized for distribution to
prospective investors unless
preceded or accompanied by a current prospectus.
147541502 MF178E
