<PAGE>
As filed with the Securities and Exchange Commission on November 30, 2000
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. 28 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 29 /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) 367-3028
ROBERT C. ROSSELOT, 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):
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 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, par
value .00001 per share.
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<PAGE>
PROSPECTUS NOVEMBER 30, 2000
CASH ACCUMULATION TRUST/
NATIONAL MONEY MARKET FUND
FUND TYPE Money Market
OBJECTIVE Current income to the extent consistent with preservation of
capital and liquidity
Build on the Rock
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's shares, nor has the SEC determined that this
prospectus is complete or accurate. It is a criminal offense to state otherwise.
[PRUDENTIAL LOGO]
<PAGE>
TABLE OF CONTENTS
-------------------------------------
<TABLE>
<S> <C>
1 RISK/RETURN SUMMARY
1 Investment Objective and Principal Strategies
1 Principal Risks
2 Evaluating Performance
4 Fees and Expenses
5 HOW THE FUND INVESTS
5 Investment Objective and Policies
7 Other Investments and Strategies
9 Investment Risks
11 HOW THE FUND IS MANAGED
11 Board of Trustees
11 Manager
11 Investment Adviser
12 Distributor
13 FUND DISTRIBUTIONS AND TAX ISSUES
13 Distributions
13 Tax Issues
15 HOW TO BUY AND SELL SHARES OF THE FUND
15 How to Buy Shares
17 How to Sell Your Shares
19 FINANCIAL HIGHLIGHTS
20 THE PRUDENTIAL MUTUAL FUND FAMILY
FOR MORE INFORMATION (Back Cover)
</TABLE>
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NATIONAL MONEY MARKET FUND [LOGO] (800) 225-1852
<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
PRESERVATION OF CAPITAL AND LIQUIDITY. This means we look for investments that
we think will provide a high level of current income. To achieve our objective,
we invest in short-term money market instruments such as obligations issued by
the U.S. Government, commercial paper, asset-backed securities, funding
agreements, variable rate demand notes, bills, notes and other obligations
issued by banks, corporations and other companies, and obligations issued by
foreign banks, companies or foreign governments. The Fund will invest only in
instruments with remaining maturities of thirteen months or less and which are
denominated in U.S. dollars. The Fund may invest in longer-term securities that
are accompanied by demand features, which will shorten the effective maturity of
the securities to thirteen months or less. While we make every effort to achieve
our objective and maintain a share value, which we refer to as "net asset
value," or NAV, of $1 per share, we can't guarantee success.
PRINCIPAL RISKS
Although we try to invest wisely, all investments involve risk. Since the Fund
invests in debt obligations, there is the risk that the value of a particular
obligation could go down. Debt obligations are generally subject to CREDIT
RISK--the risk that the issuer of a particular security may be unable to make
principal and interest payments when they are due, and MARKET RISK--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.
With respect to the Fund's investments in asset-backed securities, there is a
risk of prepayment, which means that if the underlying obligations are
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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.
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1
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
paid before they are due, the security may discontinue paying an attractive rate
of interest.
The Fund's investment in foreign securities involves 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 foreign securities. In all cases, however, we invest only in
U.S. dollar denominated-securities.
There is also a risk that we will sell a security for a price that is higher
or lower than the value attributed to the security through the amortized cost
valuation procedures we follow. Such an event could affect our ability to
maintain a net asset value of $1 per share.
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 an investment at
$1 per share, it is possible to lose money by investing in the Fund.
EVALUATING PERFORMANCE
A number of factors--including risk--affect how the Fund performs. The following
bar chart shows the Fund's performance for each full calendar year of operation.
The bar chart and tables demonstrate the risk of investing in the Fund by
showing how returns can change. Previous periods during which the Fund was
advised by another investment adviser are not shown. The Fund's past performance
is not necessarily an indication that the Fund will achieve similar results in
the future. For current yield information, you can call us at (800) 225-1852.
ANNUAL RETURNS (AS OF 12/31/99)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1998 5.07%
1999 4.68%
</TABLE>
BEST QUARTER: 1.33% (4th quarter of 1999) WORST QUARTER: 1.03% (1st quarter of
1999)
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2 NATIONAL MONEY MARKET FUND [LOGO] (800) 225-1852
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
AVERAGE ANNUAL RETURNS (AS OF 12-31-99)
<TABLE>
<CAPTION>
1 YR SINCE INCEPTION
<S> <C> <C>
5.69%
Fund Shares(1) 4.68% (since 12-22-97)
Lipper Average(2) 4.49% N/A
</TABLE>
7-DAY YIELD(1) (AS OF 12/31/99)
<TABLE>
<S> <C> <C>
Fund Shares 5.28%
iMoneyNet MFR Average(3) 5.15%
</TABLE>
<TABLE>
<S> <C>
1 THE FUND'S RETURNS ARE AFTER DEDUCTION OF EXPENSES. THE
TOTAL RETURN OF THE FUND'S SHARES FROM 1-1-00 TO 9-30-00 WAS
4.29%.
2 THE LIPPER AVERAGE IS BASED UPON THE AVERAGE RETURN OF ALL
MUTUAL FUNDS IN THE LIPPER U.S. TAXABLE MONEY MARKET FUNDS
CATEGORY.
3 THE IMONEYNET, INC. MONEY FUND REPORT AVERAGE-TM- (IMONEYNET
MFR AVERAGE) AVERAGE IS BASED UPON THE AVERAGE YIELD OF ALL
MUTUAL FUNDS IN THE IMONEYNET MFR ALL TAXABLE MONEY MARKET
FUND CATEGORY. IMONEYNET, INC. WAS FORMERLY KNOWN AS IBC
FINANCIAL DATA, INC.
</TABLE>
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3
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
FEES AND EXPENSES
These tables show the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<S> <C>
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
<TABLE>
<S> <C>
Management fees .39%
+ Distribution (12b-1) fees .10%
+ Other expenses .19%
= TOTAL ANNUAL FUND OPERATING EXPENSES .68%
</TABLE>
EXAMPLE
This example will 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 YR 3 YRS 5 YRS 10 YRS
<S> <C> <C> <C> <C>
Fund shares $69 $218 $379 $847
</TABLE>
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4 NATIONAL MONEY MARKET FUND [LOGO] (800) 225-1852
<PAGE>
HOW THE FUND INVESTS
-------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is CURRENT INCOME to the extent CONSISTENT WITH
PRESERVATION OF CAPITAL AND LIQUIDITY. This means we seek investments that will
provide a high level of current income. While we make every effort to achieve
our objective, we can't guarantee success. Our investment objective is a
fundamental investment policy, which means that it cannot be changed without
shareholder approval.
We invest in a diversified portfolio of short-term debt obligations which
include, but are not limited to, obligations issued by the U.S. Government, its
agencies and instrumentalities, as well as commercial paper, asset-backed
securities, funding agreements, variable rate demand notes, bills, notes and
other obligations issued by banks, corporations and other companies (including
trust structures), obligations issued by foreign banks, companies or foreign
governments, and municipal notes.
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. This means that we manage its portfolio to comply
with the requirements of Rule 2a-7 under the Investment Company Act. As such, we
will not acquire any security with a remaining maturity exceeding thirteen
months, and we will maintain a dollar-weighted average portfolio of 90 days or
less. In addition, we will comply with the diversification, quality and other
requirements of Rule 2a-7. This means, generally, that the instruments we
purchase present "minimal credit risk" and are "eligible securities." An
"eligible security" for this purpose means a security: (i) rated in one of the
two highest short-term rating categories by at least two nationally recognized
statistical rating organizations (NRSROs) or, if only one NRSRO has rated the
security, so rated by that NRSRO; (ii) rated in one of the three highest
long-term rating categories by at least two NRSROs or, if only one NRSRO has
rated the security, so rated by that NRSRO; or (iii) if unrated, of comparable
quality as determined by the Fund's investment adviser. 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
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5
<PAGE>
HOW THE FUND INVESTS
------------------------------------------------
mortgages, loans and credit card receivables. CERTIFICATES OF DEPOSIT, TIME
DEPOSITS, BANKERS' ACCEPTANCES and BANK NOTES 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. FUNDING AGREEMENTS are contracts issued by insurance companies
that guarantee a return of principal, plus some amount of interest. When
purchased by money market funds, funding agreements will typically be short-term
and provide an adjustable rate of interest.
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 longer-term securities can be purchased
because we can demand repayment of the obligation at an agreed price within a
relatively short period of time. This procedure follows the rules applicable to
money market mutual funds.
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 securities.
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
money market mutual funds.
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. These rights are referred to as "PUTS" and are acquired by the Fund to
protect against a possible decline in the market value of the securities to
which the puts relate in the event of interest rate fluctuations, to shorten the
effective maturity of the security and to provide the Fund with liquidity to
meet shareholder redemption requests. We will not purchase a put separately from
the security to which it relates.
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6 NATIONAL MONEY MARKET FUND [LOGO] (800) 225-1852
<PAGE>
HOW THE FUND INVESTS
------------------------------------------------
The Fund's investment objective is a fundamental policy that cannot be
changed without shareholder approval. The Board of Trustees of Cash Accumulation
Trust can change investment policies that are not fundamental. For more
information see the Statement of Additional Information, "Description of the
Funds, their Investments and Risks" and "Investment Restrictions." The Statement
of Additional Information--which we refer to as the SAI--contains more
information about the Fund.
OTHER INVESTMENTS AND STRATEGIES
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.
The U.S. Treasury sometimes "strips" 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.
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7
<PAGE>
HOW THE FUND INVESTS
------------------------------------------------
The Fund may also use REPURCHASE AGREEMENTS, where a party agrees to sell a
security to the Fund and then repurchase it at an agreed-upon price at a stated
time. This creates a fixed return for the Fund.
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 at a stated 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 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 can
borrow up to 10% of the value of its total assets); LENDS ITS SECURITIES to
others (the Fund may lend up to 33 1/3% of the value of its total assets,
including collateral received in the transaction); and holds ILLIQUID SECURITIES
(the Fund may hold up to 10% of its net assets in illiquid securities, including
securities with legal or contractual restrictions, 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.
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8 NATIONAL MONEY MARKET FUND [LOGO] (800) 225-1852
<PAGE>
HOW THE FUND INVESTS
------------------------------------------------
INVESTMENT RISKS
As noted, all investments involve risk, and investing in the Fund is no
exception.
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 ability of issuers in general to pay back debt. To limit
these risks, we invest only in high-quality securities with maturities or
effective maturities of no more than 13 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 securities.
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9
<PAGE>
HOW THE FUND INVESTS
------------------------------------------------
This chart outlines the key risks and potential rewards of the Fund's
principal investments. See, too, "Description of the Funds, their Investments
and Risks" in the SAI.
INVESTMENT TYPE
<TABLE>
<CAPTION>
% OF FUND'S TOTAL ASSETS RISKS POTENTIAL REWARDS
<S> <C> <C>
-----------------------------------------------------------------------------------
HIGH-QUALITY MONEY -- Credit risk--the risk -- A source of regular
MARKET OBLIGATIONS that default of an interest income
issuer would leave -- May be more secure
UP TO 100% the Fund with unpaid than stock and other
interest or principal equity securities
-- Market risk--the risk since corporate
that the obligations issuers must pay
may lose value their debts before
because interest they pay dividends
rates change or there
is a lack of
confidence in a group
of borrowers or in an
industry
-----------------------------------------------------------------------------------
MONEY MARKET -- Foreign markets, -- Investors may realize
OBLIGATIONS OF economies and higher returns based
FOREIGN ISSUERS political systems may upon higher interest
(U.S. DOLLAR- not be as stable as rates paid on foreign
DENOMINATED) those of the U.S. investments
-- Differences in foreign -- Increased
UP TO 100% laws, accounting diversification by
standards, public expanding the
information and allowable choices of
custody and high-quality money
settlement practices market obligations
-----------------------------------------------------------------------------------
ILLIQUID SECURITIES -- May be difficult to -- May offer a more
value attractive yield than
UP TO 10% OF NET ASSETS -- May be difficult to more widely traded
sell at the time or securities
price desired
-----------------------------------------------------------------------------------
</TABLE>
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10 NATIONAL MONEY MARKET FUND [LOGO] (800) 225-1852
<PAGE>
HOW THE FUND IS MANAGED
-------------------------------------
BOARD OF TRUSTEES
The Fund's Board of Trustees oversees the actions of the Manager, investment
adviser and Distributor and decides on general policies for the Fund. The Board
also oversees the Fund's officers who conduct and supervise the daily business
operations of the Fund.
MANAGER
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC (PIFM)
GATEWAY CENTER THREE, 100 MULBERRY STREET
NEWARK, NJ 07102-4077
Under a management agreement with the Fund, PIFM manages the Fund's
investment operations and administers its business affairs. PIFM is also
responsible for supervising the Fund's Investment Adviser. For the fiscal year
ended September 30, 2000, the Fund paid PIFM and PIMCO Advisors L.P., as
predecessor manager, management fees of .39% of the Fund's average net assets.
As of August 31, 2000, PIFM served as the Manager to all 38 of the
Prudential Mutual Funds, and as Manager or administrator to 22 closed-end
investment companies, with aggregate assets of approximately $76.4 billion.
INVESTMENT ADVISER
The Prudential Investment Corporation, called Prudential Investments, is the
Fund's investment adviser and has served as an investment adviser to investment
companies since 1984. Its address is Prudential Plaza, 751 Broad Street, Newark,
NJ 07102. PIFM has responsibility for all investment advisory services,
supervises Prudential Investments and pays Prudential Investments for its
services.
The Fund is a money market mutual fund managed by a portfolio manager
employed by Prudential Investments, and supported by Prudential Investments
Fixed Income Group, which is organized into teams of research analysts that
specialize by sector. The Fixed Income Investment Policy Committee, which is
comprised of senior investment staff from each sector team, provides guidance to
the teams regarding duration risk, asset allocations and general risk
parameters. Portfolio managers contribute bottom up security selection within
those guidelines.
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11
<PAGE>
HOW THE FUND IS MANAGED
------------------------------------------------
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
reimburses PIMS for its distribution services. These fees--known as 12b-1
fees--are shown in the "Fees and Expenses" tables.
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12 NATIONAL MONEY MARKET FUND [LOGO] (800) 225-1852
<PAGE>
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 federal 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 realized net 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 wire the distribution to your bank account instead of purchasing
more shares of the Fund. Either way, the distributions are subject to taxes,
unless your shares are held in a qualified or tax-deferred plan or account. For
more information about automatic reinvestment and other shareholder services,
see "Step 3: Additional Shareholder Services" in the next section.
TAX ISSUES
FORM 1099
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 or 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 or tax-deferred
plan or account.
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13
<PAGE>
FUND DISTRIBUTIONS
AND TAX ISSUES
------------------------------------------------
Fund distributions are generally taxable to you in the year they are
received, except when we declare certain dividends in October, November or
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 tax law requires you to provide the Fund with your tax identification
number and certifications as to your tax status, and if you fail to do this, we
will withhold and pay to the U.S. Treasury 31% of your distributions and sale
proceeds. 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.
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14 NATIONAL MONEY MARKET FUND [LOGO] (800) 225-1852
<PAGE>
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 (Prudential Securities) that participate in any of the following
managed account programs:
-- Prudential Investments Individually Managed Accounts
-- 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 to participate in any of these programs is within the discretion
of Prudential Securities. You should contact a Prudential Securities Financial
Advisor 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
Advisor.
When your 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 the existence of a credit
balance. 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).
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
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15
<PAGE>
HOW TO BUY AND
SELL SHARES OF THE FUND
------------------------------------------------
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.
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.
STEP 2: UNDERSTANDING THE PRICE YOU'LL PAY
When you invest in a mutual fund, you buy shares of that fund. Shares of a money
market fund, like the Fund, are priced differently than shares of common stock
and other securities.
The share value of a mutual fund--known as the NET ASSET VALUE or NAV--is
determined by a simple calculation: it's 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.
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 Fund shares, 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 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
-------------------------------------------------------------------
16 NATIONAL MONEY MARKET FUND [LOGO] (800) 225-1852
<PAGE>
HOW TO BUY AND
SELL SHARES OF THE FUND
------------------------------------------------
application, or notify your Prudential Securities Financial Advisor at least
five 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. To reduce Fund expenses, we will send one
annual shareholder report, one semi-annual shareholder report and one annual
prospectus per household, unless you instruct us otherwise.
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 your 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 sell 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--Sale of Shares."
REDEMPTION IN KIND
If the sales of Fund shares you make during any 90-day period reach 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.
--------------------------------------------------------------------------------
17
<PAGE>
HOW TO BUY AND
SELL SHARES OF THE FUND
------------------------------------------------
AUTOMATIC REDEMPTION FOR AUTOSWEEP
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 want to pay for a securities transaction
in your account other than through this procedure, you must deposit sufficient
cash in your securities account BEFORE THE SETTLEMENT DATE. If you want to pay
any other deficit in your securities account other than through this procedure,
you must deposit sufficient cash in your securities account BEFORE YOU INCUR THE
DEFICIT.
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 dividend 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.
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18 NATIONAL MONEY MARKET FUND [LOGO] (800) 225-1852
<PAGE>
FINANCIAL HIGHLIGHTS
-------------------------------------
The financial highlights below are intended to help you evaluate the Fund's
financial performance for the past 5 years. 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.
Review this chart with the financial statements and report of independent
accountants which appear in the annual report and the SAI and are available upon
request. Additional performance information is contained in the annual report,
which you can receive at no charge as described on the back cover of this
prospectus.
The financial highlights for the four fiscal years ended September 30, 2000
were audited by PricewaterhouseCoopers LLP, independent accountants, and the
financial highlights for the one year ended September 30, 1996 were audited by
other independent auditors. Their reports were unqualified.
NATIONAL MONEY MARKET FUND (FISCAL YEARS ENDED 9-30)
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .06 .05 .05 .05 .05
Dividends and distributions to
shareholders (.06) (.05) (.05) (.05) (.05)
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN(1) 5.7% 4.6% 5.2% 5.0% 5.0%
---------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA 2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000) $381,836 $403,566 $507,288 $702,003 $652,327
RATIOS TO AVERAGE NET ASSETS:
Net investment income 5.55% 4.56% 5.05% 4.89% 4.86%
Expenses, including distribution and
service (12b-1) fees .68% .68% .62% .65% .69%
Expenses, excluding distribution and
service (12b-1) fees .58% .58% .52% .55% .59%
</TABLE>
<TABLE>
<S> <C>
1 TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS AND
DISTRIBUTIONS. IT IS CALCULATED ASSUMING SHARES ARE
PURCHASED ON THE FIRST DAY AND SOLD ON THE LAST DAY OF EACH
YEAR REPORTED.
</TABLE>
--------------------------------------------------------------------------------
19
<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 financial adviser or call
us at (800) 225-1852. Read the prospectus carefully before you invest or send
money.
STOCK FUNDS
PRUDENTIAL EMERGING GROWTH FUND, INC.
PRUDENTIAL EQUITY FUND, INC.
PRUDENTIAL INDEX SERIES FUND
PRUDENTIAL STOCK INDEX FUND
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
PRUDENTIAL JENNISON GROWTH FUND
PRUDENTIAL JENNISON EQUITY OPPORTUNITY FUND
PRUDENTIAL REAL ESTATE SECURITIES FUND
PRUDENTIAL SECTOR FUNDS, INC.
PRUDENTIAL FINANCIAL SERVICES FUND
PRUDENTIAL HEALTH SCIENCES FUND
PRUDENTIAL TECHNOLOGY FUND
PRUDENTIAL UTILITY FUND
PRUDENTIAL SMALL COMPANY FUND, INC.
PRUDENTIAL TAX-MANAGED FUNDS
PRUDENTIAL TAX-MANAGED EQUITY FUND
PRUDENTIAL TAX-MANAGED SMALL-CAP FUND, INC.
PRUDENTIAL 20/20 FOCUS FUND
PRUDENTIAL VALUE FUND
NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY FUND
TARGET FUNDS
LARGE CAPITALIZATION GROWTH FUND
LARGE CAPITALIZATION VALUE FUND
SMALL CAPITALIZATION GROWTH FUND
SMALL CAPITALIZATION VALUE FUND
ASSET ALLOCATION/BALANCED FUNDS
PRUDENTIAL DIVERSIFIED FUNDS
CONSERVATIVE GROWTH FUND
MODERATE GROWTH FUND
HIGH GROWTH FUND
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
PRUDENTIAL ACTIVE BALANCED FUND
GLOBAL FUNDS
GLOBAL STOCK FUNDS
PRUDENTIAL EUROPE GROWTH FUND, INC.
PRUDENTIAL NATURAL RESOURCES FUND, INC.
PRUDENTIAL PACIFIC GROWTH FUND, INC.
PRUDENTIAL WORLD FUND, INC.
PRUDENTIAL GLOBAL GROWTH FUND
PRUDENTIAL INTERNATIONAL VALUE FUND
PRUDENTIAL JENNISON INTERNATIONAL GROWTH FUND
GLOBAL UTILITY FUND, INC.
TARGET FUNDS
INTERNATIONAL EQUITY FUND
GLOBAL BOND FUNDS
PRUDENTIAL GLOBAL TOTAL RETURN FUND, INC.
PRUDENTIAL INTERNATIONAL BOND FUND, INC.
-------------------------------------------------------------------
20 NATIONAL MONEY MARKET FUND [LOGO] (800) 225-1852
<PAGE>
-------------------------------------
BOND FUNDS
TAXABLE BOND FUNDS
PRUDENTIAL GOVERNMENT INCOME FUND, INC.
PRUDENTIAL GOVERNMENT SECURITIES TRUST
SHORT-INTERMEDIATE TERM SERIES
PRUDENTIAL HIGH YIELD FUND, INC.
PRUDENTIAL HIGH YIELD TOTAL RETURN FUND, INC.
PRUDENTIAL SHORT-TERM CORPORATE BOND FUND, INC.
INCOME PORTFOLIO
PRUDENTIAL TOTAL RETURN BOND FUND, INC.
TARGET FUNDS
TOTAL RETURN BOND FUND
TAX-EXEMPT BOND FUNDS
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
CALIFORNIA INCOME SERIES
PRUDENTIAL MUNICIPAL BOND FUND
HIGH INCOME SERIES
INSURED SERIES
PRUDENTIAL MUNICIPAL SERIES FUND
FLORIDA SERIES
MASSACHUSETTS SERIES
NEW JERSEY SERIES
NEW YORK SERIES
NORTH CAROLINA SERIES
OHIO SERIES
PENNSYLVANIA SERIES
PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
MONEY MARKET FUNDS
TAXABLE MONEY MARKET FUNDS
CASH ACCUMULATION TRUST
LIQUID ASSETS FUND
NATIONAL MONEY MARKET FUND
PRUDENTIAL GOVERNMENT SECURITIES TRUST
MONEY MARKET SERIES
U.S. TREASURY MONEY MARKET SERIES
PRUDENTIAL SPECIAL MONEY MARKET FUND, INC.
MONEY MARKET SERIES
PRUDENTIAL MONEYMART ASSETS, INC.
TAX-FREE MONEY MARKET FUNDS
PRUDENTIAL TAX-FREE MONEY FUND, INC.
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA MONEY MARKET SERIES
PRUDENTIAL MUNICIPAL SERIES FUND
CONNECTICUT MONEY MARKET SERIES
MASSACHUSETTS MONEY MARKET SERIES
NEW JERSEY MONEY MARKET SERIES
NEW YORK MONEY MARKET SERIES
COMMAND FUNDS
COMMAND MONEY FUND
COMMAND GOVERNMENT FUND
COMMAND TAX-FREE FUND
INSTITUTIONAL MONEY MARKET FUNDS
PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.
INSTITUTIONAL MONEY MARKET SERIES
--------------------------------------------------------------------------------
21
<PAGE>
FOR MORE INFORMATION
Please read this prospectus before you invest in the Fund and keep it for future
reference. For information or shareholder questions contact
PRUDENTIAL MUTUAL FUND SERVICES LLC
P.O. BOX 8098
PHILADELPHIA, PA 19101
(800) 225-1852
(732) 482-7555 (Calling from outside the U.S.)
Outside Brokers should contact
PRUDENTIAL MUTUAL FUND
SERVICES LLC
P.O. BOX 8310
PHILADELPHIA, PA 19101
(800) 778-8769
Visit Prudential's website at
http://www.prudential.com
Additional information about the Fund can
be obtained without charge and can be
found in the following documents
STATEMENT OF ADDITIONAL INFORMATION (SAI)
(incorporated by reference into this prospectus)
ANNUAL REPORT
SEMI-ANNUAL REPORT
You can also obtain copies of Fund documents from the Securities and Exchange
Commission as follows
BY MAIL
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-0102
BY ELECTRONIC REQUEST
[email protected]
(The SEC charges a fee to copy
documents.)
IN PERSON
Public Reference Room in Washington, DC
(For hours of operation, call
1-202-942-8090)
VIA THE INTERNET
on the EDGAR Database at
http://www.sec.gov
CUSIP Number NASDAQ Symbol
147541106 NMMXX
Investment Company Act File No. 811-4060
MF178A
[RECYCLED LOGO]
Printed on Recycled Paper
<PAGE>
PROSPECTUS NOVEMBER 30, 2000
CASH ACCUMULATION TRUST/
LIQUID ASSETS FUND
FUND TYPE Money Market
OBJECTIVE Current income to the extent consistent with preservation of
capital and liquidity
Build on the Rock
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's shares, nor has the SEC determined that this
prospectus is complete or accurate. It is a criminal offense to state otherwise.
[PRUDENTIAL LOGO]
<PAGE>
TABLE OF CONTENTS
-------------------------------------
<TABLE>
<S> <C>
1 RISK/RETURN SUMMARY
1 Investment Objective and Principal Strategies
1 Principal Risks
2 Evaluating Performance
4 Fees and Expenses
5 HOW THE FUND INVESTS
5 Investment Objective and Policies
7 Other Investments and Strategies
8 Investment Risks
10 HOW THE FUND IS MANAGED
10 Board of Trustees
10 Manager
10 Investment Adviser
10 Distributor
11 FUND DISTRIBUTIONS AND TAX ISSUES
11 Distributions
11 Tax Issues
13 HOW TO BUY AND SELL SHARES OF THE FUND
13 How to Buy Shares
15 How to Sell Your Shares
17 FINANCIAL HIGHLIGHTS
20 THE PRUDENTIAL MUTUAL FUND FAMILY
FOR MORE INFORMATION (Back Cover)
</TABLE>
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LIQUID ASSETS FUND [LOGO] (800) 225-1852
<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
PRESERVATION OF CAPITAL AND LIQUIDITY. This means we look for investments that
we think will provide a high level of current income. To achieve our objective,
we invest in short-term money market instruments such as obligations issued by
the U.S. Government, commercial paper, asset-backed securities, funding
agreements, variable rate demand notes, bills, notes and other obligations
issued by banks, corporations and other companies, and obligations issued by
foreign banks, companies or foreign governments. The Fund will invest only in
instruments with remaining maturities of thirteen months or less and which are
denominated in U.S. dollars. The Fund may invest in longer-term securities that
are accompanied by demand features, which will shorten the effective maturity of
the securities to thirteen months or less. While we make every effort to achieve
our objective and maintain a share value, which we refer to as "net asset
value," or NAV, of $1 per share, we can't guarantee success.
PRINCIPAL RISKS
Although we try to invest wisely, all investments involve risk. Since the Fund
invests in debt obligations, there is the risk that the value of a particular
obligation could go down. Debt obligations are generally subject to CREDIT
RISK -- the risk that the issuer of a particular security may be unable to make
principal and interest payments when they are due, and MARKET RISK -- 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.
With respect to the Fund's investments in asset-backed securities, there is a
risk of prepayment, which means that if the underlying obligations are paid
before they are due, the security may discontinue
-------------------------------------------------------------------
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.
-------------------------------------------------------------------
--------------------------------------------------------------------------------
1
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
paying an attractive rate of interest.
The Fund's investment in foreign securities involves 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 foreign securities. In all cases, however, we invest only in
U.S. dollar denominated-securities.
There is also a risk that we will sell a security for a price that is higher
or lower than the value attributed to the security through the amortized cost
valuation procedures we follow. Such an event could affect our ability to
maintain a net asset value of $1 per share.
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 an investment at $1 per
share, it is possible to lose money by investing in the Fund.
EVALUATING PERFORMANCE
A number of factors--including risk--affect how the Fund performs. The following
bar chart shows the Fund's performance for each full calendar year of operation.
The bar chart and tables demonstrate the risk of investing in the Fund by
showing how returns can change. Previous periods during which the Fund was
advised by another investment adviser are not shown. The Fund's past performance
is not necessarily an indication that the Fund will achieve similar results in
the future. For current yield information, you can call us at (800) 225-1852.
ANNUAL RETURNS (AS OF 12/31/99)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1998 5.52%
1999 5.10%
</TABLE>
BEST QUARTER: 1.46% (4th quarter of 1999) WORST QUARTER: 1.12% (1st quarter of
1999)
-------------------------------------------------------------------
2 LIQUID ASSETS FUND [LOGO] (800) 225-1852
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
AVERAGE ANNUAL RETURNS (AS OF 12-31-99)
<TABLE>
<CAPTION>
1 YR SINCE INCEPTION
<S> <C> <C>
Fund Shares(1) 5.10% 5.33% (since 12-22-97)
Lipper Average(2) 4.49% N/A
</TABLE>
7-DAY YIELD(1) (AS OF 12/31/99)
<TABLE>
<S> <C> <C>
Fund Shares 5.80%
IBC Average(3) 5.15%
</TABLE>
1 THE FUND'S RETURNS ARE AFTER DEDUCTION OF EXPENSES. THE TOTAL RETURN OF THE
FUND'S SHARES FROM 1-1-00 TO 9-30-00 WAS 5.10%.
2 THE LIPPER AVERAGE IS BASED UPON THE AVERAGE RETURN OF ALL MUTUAL FUNDS IN
THE LIPPER U.S. TAXABLE MONEY MARKET FUNDS CATEGORY.
3 THE IMONEYNET, INC. MONEY FUND REPORT AVERAGE-TM- (IMONEYNET MFR AVERAGE)
AVERAGE IS BASED UPON THE AVERAGE YIELD OF ALL MUTUAL FUNDS IN THE
IMONEYNET MFR ALL TAXABLE MONEY MARKET FUND CATEGORY. IMONEYNET, INC. WAS
FORMERLY KNOWN AS IBC FINANCIAL DATA, INC.
--------------------------------------------------------------------------------
3
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
FEES AND EXPENSES
These tables show the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<S> <C>
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
<TABLE>
<S> <C>
Management fees .07%(1)
+ Distribution and service (12b-1) fees None
+ Other expenses .17%
= Total annual Fund operating expenses .24%(1)
</TABLE>
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, 2000.
EXAMPLE
This example will 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 YR 3 YRS 5 YRS 10 YRS
<S> <C> <C> <C> <C>
Fund shares $25 $77 $135 $306
</TABLE>
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4 LIQUID ASSETS FUND [LOGO] (800) 225-1852
<PAGE>
HOW THE FUND INVESTS
-------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is CURRENT INCOME to the extent CONSISTENT WITH
PRESERVATION OF CAPITAL AND LIQUIDITY. This means we seek investments that will
provide a high level of current income. While we make every effort to achieve
our objective, we can't guarantee success. Our investment objective is a
fundamental investment policy, which means that it cannot be changed without
shareholder approval.
We invest in a diversified portfolio of short-term debt obligations which
include, but are not limited to, obligations issued by the U.S. Government, its
agencies and instrumentalities, as well as commercial paper, asset-backed
securities, funding agreements, variable rate demand notes, bills, notes and
other obligations issued by banks, corporations and other companies (including
trust structures), obligations issued by foreign banks, companies or foreign
governments, and municipal notes.
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. This means that we manage its portfolio to comply
with the requirements of Rule 2a-7 under the Investment Company Act. As such, we
will not acquire any security with a remaining maturity exceeding thirteen
months, and we will maintain a dollar-weighted average portfolio of 90 days or
less. In addition, we will comply with the diversification, quality and other
requirements of Rule 2a-7. This means, generally, that the instruments we
purchase present "minimal credit risk" and are "eligible securities." An
"eligible security" for this purpose means a security: (i) rated in one of the
two highest short-term rating categories by at least two nationally recognized
statistical rating organizations (NRSROs) or, if only one NRSRO has rated the
security, so rated by that NRSRO; (ii) rated in one of the three highest
long-term rating categories by at least two NRSROs or, if only one NRSRO has
rated the security, so rated by that NRSRO; or (iii) if unrated, of comparable
quality as determined by the Fund's investment adviser. 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
--------------------------------------------------------------------------------
5
<PAGE>
HOW THE FUND INVESTS
------------------------------------------------
credit card receivables. CERTIFICATES OF DEPOSIT, TIME DEPOSITS, BANKERS'
ACCEPTANCES and BANK NOTES 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. FUNDING
AGREEMENTS are contracts issued by insurance companies that guarantee a return
of principal, plus some amount of interest. When purchased by money market
funds, funding agreements will typically be short-term and provide an adjustable
rate of interest.
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 longer-term securities can be purchased
because we can demand repayment of the obligation at an agreed price within a
relatively short period of time. This procedure follows the rules applicable to
money market mutual funds.
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 securities.
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
money market mutual funds.
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" and are acquired by the Fund
to protect against a possible decline in the market value of the securities to
which the puts relate in the event of interest rate fluctuations, to shorten the
effective maturity of a security and to provide the Fund with liquidity to meet
shareholder redemption requests.
-------------------------------------------------------------------
6 LIQUID ASSETS FUND [LOGO] (800) 225-1852
<PAGE>
HOW THE FUND INVESTS
------------------------------------------------
The Fund's investment objective is a fundamental policy that cannot be
changed without shareholder approval. The Board of Trustees of Cash Accumulation
Trust can change investment policies that are not fundamental. For more
information see the Statement of Additional Information, "Description of the
Funds, their Investments and Risks" and "Investment Restrictions." The Statement
of Additional Information--which we refer to as the SAI--contains more
information about the Fund.
OTHER INVESTMENTS AND STRATEGIES
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.
The U.S. Treasury sometimes "strips" 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.
The Fund may also use REPURCHASE AGREEMENTS, where a party agrees to sell a
security to the Fund and then repurchase it at an agreed-upon price at a stated
time. This creates a fixed return for the Fund.
--------------------------------------------------------------------------------
7
<PAGE>
HOW THE FUND INVESTS
------------------------------------------------
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 at a stated 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 can
borrow up to 33 1/3% of the value of its total assets); LENDS ITS SECURITIES to
others (the Fund may lend up to 33 1/3% of the value of its total assets,
including collateral received in the transaction); and holds ILLIQUID SECURITIES
(the Fund may hold up to 10% of its net assets in illiquid securities, including
securities with legal or contractual restrictions, 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
As noted, all investments involve risk, and investing in the Fund is no
exception.
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 ability of issuers in general to pay back debt. To limit
these risks, we invest only in high-quality securities with maturities or
effective maturities of no more than 13 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
-------------------------------------------------------------------
8 LIQUID ASSETS FUND [LOGO] (800) 225-1852
<PAGE>
HOW THE FUND INVESTS
------------------------------------------------
U.S. markets. Changes in the exchange rates of foreign currencies can affect the
value of foreign securities.
This chart outlines the key risks and potential rewards of the Fund's
principal investments. See, too, "Description of the Funds, their Investments
and Risks" in the SAI.
INVESTMENT TYPE
<TABLE>
<CAPTION>
% OF FUND'S TOTAL ASSETS RISKS POTENTIAL REWARDS
<S> <C> <C>
---------------------------------------------------------------------------------
HIGH-QUALITY MONEY -- Credit risk--the risk -- A source of regular
MARKET OBLIGATIONS that default of an interest income
issuer would leave -- May be more secure
UP TO 100% the Fund with unpaid than stock and other
interest or equity securities
principal since corporate
-- Market risk--the risk issuers must pay
that the obligations their debts before
may lose value they pay dividends
because interest
rates change or
there is a lack of
confidence in a
group of borrowers
or in an industry
---------------------------------------------------------------------------------
MONEY MARKET -- Foreign markets, -- Investors may realize
OBLIGATIONS OF economies and higher returns based
FOREIGN ISSUERS political systems upon higher interest
(DOLLAR-DENOMINATED) may not be as stable rates paid on
as those of the U.S. foreign investments
UP TO 100% -- Differences in -- Increased
foreign laws, diversification by
accounting expanding the
standards, public allowable choices of
information and high-quality money
custody and market obligations
settlement practices
---------------------------------------------------------------------------------
ILLIQUID SECURITIES -- May be difficult to -- May offer a more
value attractive yield
UP TO 10% OF NET ASSETS -- May be difficult to than more widely
sell at the time or traded securities
price desired
---------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
9
<PAGE>
HOW THE FUND IS MANAGED
-------------------------------------
BOARD OF TRUSTEES
The Fund's Board of Trustees oversees the actions of the Manager, investment
adviser and Distributor and decides on general policies for the Fund. The Board
also oversees the Fund's officers who conduct and supervise the daily business
operations of the Fund.
MANAGER
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC (PIFM)
GATEWAY CENTER THREE, 100 MULBERRY STREET
NEWARK, NJ 07102-4077
Under a management agreement with the Fund, PIFM manages the Fund's
investment operations and administers its business affairs. PIFM is also
responsible for supervising the Fund's Investment Adviser. For the fiscal period
ended September 30, 2000, the Fund paid PIFM management fees of .07% of the
Fund's average net assets.
As of August 31, 2000, PIFM served as the Manager to all 38 of the
Prudential Mutual Funds, and as Manager or administrator to 22 closed-end
investment companies, with aggregate assets of approximately $76.4 billion.
INVESTMENT ADVISER
The Prudential Investment Corporation, called Prudential Investments, is the
Fund's investment adviser and has served as an investment adviser to investment
companies since 1984. Its address is Prudential Plaza, 751 Broad Street, Newark,
NJ 07102. PIFM has responsibility for all investment advisory services,
supervises Prudential Investments and pays Prudential Investments for its
services.
The Fund is a money market mutual fund managed by a portfolio manager
employed by Prudential Investments, and supported by Prudential Investments
Fixed Income Group, which is organized into teams of research analysts that
specialize by sector. The Fixed Income Investment Policy Committee, which is
comprised of senior investment staff from each sector team, provides guidance to
the teams regarding duration risk, asset allocations and general risk
parameters. Portfolio managers contribute bottom up security selection within
those guidelines.
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.
-------------------------------------------------------------------
10 LIQUID ASSETS FUND [LOGO] (800) 225-1852
<PAGE>
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 federal 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 realized net 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 wire the distribution to your bank account instead of purchasing
more shares of the Fund. Either way, the distributions are subject to taxes,
again unless your shares are held in a qualified or tax-deferred plan or
account. For more information about automatic reinvestment and other shareholder
services, see "Step 3: Additional Shareholder Services" in the next section.
TAX ISSUES
FORM 1099
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 or 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 or tax-deferred
plan or account.
Fund distributions are generally taxable in the year they are received,
except when we declare certain dividends in October, November or 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.
--------------------------------------------------------------------------------
11
<PAGE>
FUND DISTRIBUTIONS
AND TAX ISSUES
------------------------------------------------
WITHHOLDING TAXES
If federal tax law requires you to provide the Fund with your tax identification
number and certifications as to your tax status, and if you fail to do this, we
will withhold and pay to the U.S. Treasury 31% of your distributions and sale
proceeds. 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.
-------------------------------------------------------------------
12 LIQUID ASSETS FUND [LOGO] (800) 225-1852
<PAGE>
HOW TO BUY AND
SELL SHARES OF THE FUND
-------------------------------------
HOW TO BUY SHARES
STEP 1: OPEN AN ACCOUNT
Shares of the Fund are available to investment advisory clients of Prudential
Securities Incorporated (Prudential Securities) that participate in any of the
following managed account programs:
-- Prudential Investments Individually Managed Accounts
-- 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
To participate in any of these programs, 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 Section 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 to participate in any of these programs is within the discretion
of Prudential Securities. You should contact a Prudential Securities Financial
Advisor 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
--------------------------------------------------------------------------------
13
<PAGE>
HOW TO BUY AND
SELL SHARES OF THE FUND
------------------------------------------------
sweep fund. You have the option to change your primary money sweep fund at any
time by notifying your Prudential Securities Financial Advisor.
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 the
existence of a credit balance. 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).
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.
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.
STEP 2: UNDERSTANDING THE PRICE YOU'LL PAY
When you invest in a mutual fund, you buy shares of that fund. Shares of a money
market fund, like the Fund, are priced differently than shares of common stock
and other securities.
The share value of a mutual fund--known as the NET ASSET VALUE or NAV--is
determined by a simple calculation: it's 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.
-------------------------------------------------------------------
14 LIQUID ASSETS FUND [LOGO] (800) 225-1852
<PAGE>
HOW TO BUY AND
SELL SHARES OF THE FUND
------------------------------------------------
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 Fund shares, 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 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 Advisor at least
five 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. To reduce Fund expenses, we will send one
annual shareholder report, one semi-annual shareholder report and one annual
prospectus per household, unless you instruct us otherwise.
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 your 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 sell within seven days
after we receive your sell order.
--------------------------------------------------------------------------------
15
<PAGE>
HOW TO BUY AND
SELL SHARES OF THE FUND
------------------------------------------------
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--Sale of Shares."
REDEMPTION IN KIND
If the sales of Fund shares you make during any 90-day period reach 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.
AUTOMATIC REDEMPTION FOR AUTOSWEEP
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 want to pay for a securities transaction
in your account other than through this procedure, you must deposit sufficient
cash in your securities account BEFORE THE SETTLEMENT DATE. If you want to pay
any other deficit in your securities account other than through this procedure,
you must deposit sufficient cash in your securities account BEFORE YOU INCUR THE
DEFICIT.
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 dividend 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.
-------------------------------------------------------------------
16 LIQUID ASSETS FUND [LOGO] (800) 225-1852
<PAGE>
FINANCIAL HIGHLIGHTS
-------------------------------------
The financial highlights below are intended to 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.
Review this chart with the financial statements and report of independent
accountants which appear in the annual report and the SAI and are available upon
request. Additional performance information is contained in the annual report,
which you can receive at no charge as described on the back cover of this
prospectus.
The financial highlights for the three fiscal years ended September 30, 2000
were audited by PricewaterhouseCoopers LLP, independent accountants. Their
reports were unqualified.
LIQUID ASSETS FUND (FISCAL YEARS ENDED 9-30)
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE 2000 1999 1998(1)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income and net
realized gains .06 .05 .04
Dividends and distributions to
shareholders (.06) (.05) (.04)
Net asset value, end of period $1.00 $1.00 $1.00
TOTAL RETURN(2) 6.15% 5.05% 4.52%
---------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA 2000 1999 1998
------------------------------------------------
NET ASSETS, END OF PERIOD (000) $488,807 $394,612 $441,944
AVERAGE NET ASSETS (000) $417,161 $386,144 $374,141
RATIOS TO AVERAGE NET ASSETS:
Net investment income 6.03% 4.94% 5.53%(3)
Expenses .24% .27% .21%(3)
</TABLE>
1. INFORMATION SHOWN IS FOR THE PERIOD 12-22-97 (WHEN SHARES WERE FIRST
OFFERED) THROUGH 9-30-98.
2. TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. IT IS
CALCULATED ASSUMING SHARES ARE PURCHASED ON THE FIRST DAY AND SOLD ON THE
LAST DAY OF EACH PERIOD REPORTED. TOTAL RETURN FOR PERIODS OF LESS THAN A
FULL YEAR ARE NOT ANNUALIZED.
3. ANNUALIZED.
--------------------------------------------------------------------------------
17
<PAGE>
Notes
-------------------------------------------------------------------
18 LIQUID ASSETS FUND [LOGO] (800) 225-1852
<PAGE>
Notes
--------------------------------------------------------------------------------
19
<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 financial adviser or call
us at (800) 225-1852. Read the prospectus carefully before you invest or send
money.
STOCK FUNDS
PRUDENTIAL EMERGING GROWTH FUND, INC.
PRUDENTIAL EQUITY FUND, INC.
PRUDENTIAL INDEX SERIES FUND
PRUDENTIAL STOCK INDEX FUND
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
PRUDENTIAL JENNISON GROWTH FUND
PRUDENTIAL JENNISON EQUITY OPPORTUNITY FUND
PRUDENTIAL REAL ESTATE SECURITIES FUND
PRUDENTIAL SECTOR FUNDS, INC.
PRUDENTIAL FINANCIAL SERVICES FUND
PRUDENTIAL HEALTH SCIENCES FUND
PRUDENTIAL TECHNOLOGY FUND
PRUDENTIAL UTILITY FUND
PRUDENTIAL SMALL COMPANY FUND, INC.
PRUDENTIAL TAX-MANAGED FUNDS
PRUDENTIAL TAX-MANAGED EQUITY FUND
PRUDENTIAL TAX-MANAGED SMALL-CAP FUND, INC.
PRUDENTIAL 20/20 FOCUS FUND
PRUDENTIAL VALUE FUND
NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY FUND
TARGET FUNDS
LARGE CAPITALIZATION GROWTH FUND
LARGE CAPITALIZATION VALUE FUND
SMALL CAPITALIZATION GROWTH FUND
SMALL CAPITALIZATION VALUE FUND
ASSET ALLOCATION/BALANCED FUNDS
PRUDENTIAL DIVERSIFIED FUNDS
CONSERVATIVE GROWTH FUND
MODERATE GROWTH FUND
HIGH GROWTH FUND
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
PRUDENTIAL ACTIVE BALANCED FUND
GLOBAL FUNDS
GLOBAL STOCK FUNDS
PRUDENTIAL EUROPE GROWTH FUND, INC.
PRUDENTIAL NATURAL RESOURCES FUND, INC.
PRUDENTIAL PACIFIC GROWTH FUND, INC.
PRUDENTIAL WORLD FUND, INC.
PRUDENTIAL GLOBAL GROWTH FUND
PRUDENTIAL INTERNATIONAL VALUE FUND
PRUDENTIAL JENNISON INTERNATIONAL GROWTH FUND
GLOBAL UTILITY FUND, INC.
TARGET FUNDS
INTERNATIONAL EQUITY FUND
GLOBAL BOND FUNDS
PRUDENTIAL GLOBAL TOTAL RETURN FUND, INC.
PRUDENTIAL INTERNATIONAL BOND FUND, INC.
-------------------------------------------------------------------
20 LIQUID ASSETS FUND [LOGO] (800) 225-1852
<PAGE>
-------------------------------------
BOND FUNDS
TAXABLE BOND FUNDS
PRUDENTIAL GOVERNMENT INCOME FUND, INC.
PRUDENTIAL GOVERNMENT SECURITIES TRUST
SHORT-INTERMEDIATE TERM SERIES
PRUDENTIAL HIGH YIELD FUND, INC.
PRUDENTIAL HIGH YIELD TOTAL RETURN FUND, INC.
PRUDENTIAL SHORT-TERM CORPORATE BOND FUND, INC.
INCOME PORTFOLIO
PRUDENTIAL TOTAL RETURN BOND FUND, INC.
TARGET FUNDS
TOTAL RETURN BOND FUND
TAX-EXEMPT BOND FUNDS
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
CALIFORNIA INCOME SERIES
PRUDENTIAL MUNICIPAL BOND FUND
HIGH INCOME SERIES
INSURED SERIES
PRUDENTIAL MUNICIPAL SERIES FUND
FLORIDA SERIES
MASSACHUSETTS SERIES
NEW JERSEY SERIES
NEW YORK SERIES
NORTH CAROLINA SERIES
OHIO SERIES
PENNSYLVANIA SERIES
PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
MONEY MARKET FUNDS
TAXABLE MONEY MARKET FUNDS
CASH ACCUMULATION TRUST
LIQUID ASSETS FUND
NATIONAL MONEY MARKET FUND
PRUDENTIAL GOVERNMENT SECURITIES TRUST
MONEY MARKET SERIES
U.S. TREASURY MONEY MARKET SERIES
PRUDENTIAL SPECIAL MONEY MARKET FUND, INC.
MONEY MARKET SERIES
PRUDENTIAL MONEYMART ASSETS, INC.
TAX-FREE MONEY MARKET FUNDS
PRUDENTIAL TAX-FREE MONEY FUND, INC.
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA MONEY MARKET SERIES
PRUDENTIAL MUNICIPAL SERIES FUND
CONNECTICUT MONEY MARKET SERIES
MASSACHUSETTS MONEY MARKET SERIES
NEW JERSEY MONEY MARKET SERIES
NEW YORK MONEY MARKET SERIES
COMMAND FUNDS
COMMAND MONEY FUND
COMMAND GOVERNMENT FUND
COMMAND TAX-FREE FUND
INSTITUTIONAL MONEY MARKET FUNDS
PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.
INSTITUTIONAL MONEY MARKET SERIES
--------------------------------------------------------------------------------
21
<PAGE>
FOR MORE INFORMATION
Please read this prospectus before you invest in the Fund and keep it for future
reference. For information or shareholder questions contact
PRUDENTIAL MUTUAL FUND SERVICES LLC
P.O. BOX 8098
PHILADELPHIA, PA 19101
(800) 225-1852
(732) 482-7555 (Calling from outside the U.S.)
Outside Brokers should contact
PRUDENTIAL MUTUAL FUND
SERVICES LLC
P.O. BOX 8310
PHILADELPHIA, PA 19101
(800) 778-8769
Visit Prudential's website at
http://www.prudential.com
Additional information about the Fund can
be obtained without charge and can be
found in the following documents
STATEMENT OF ADDITIONAL INFORMATION (SAI)
(incorporated by reference into this prospectus)
ANNUAL REPORT
SEMI-ANNUAL REPORT
You can also obtain copies of Fund documents from the Securities and Exchange
Commission as follows
BY MAIL
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-0102
BY ELECTRONIC REQUEST
[email protected]
(The SEC charges a fee to copy documents.)
IN PERSON
Public Reference Room in Washington, DC
(For hours of operation, call
1-202-942-8090)
VIA THE INTERNET
on the EDGAR Database at
http://www.sec.gov
CUSIP Number NASDAQ Symbol
147541502 CLAMF
Investment Company Act File No. 811-4060
MF175A
[RECYCLED LOGO]
Printed on Recycled Paper
<PAGE>
CASH ACCUMULATION TRUST
STATEMENT OF ADDITIONAL INFORMATION
DATED NOVEMBER 30, 2000
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" in this Statement of Additional Information.
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 November 30, 2000, copies of which may be obtained from the Trust
upon request.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Trust History............................................... B-2
Description of the Funds, their Investments and Risks....... B-2
Investment Restrictions..................................... B-5
Management of the Trust..................................... B-9
Control Persons and Principal Holders of Securities......... B-11
Investment Advisory and Other Services...................... B-11
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-18
Calculation of Yield........................................ B-19
Financial Statements of NMMF................................ B-21
Report of Independent Accountants for NMMF.................. B-34
Financial Statements of LAF................................. B-35
Report of Independent Accountants for LAF................... B-48
Appendix I-Description of Ratings........................... I-1
</TABLE>
--------------------------------------------------------------------------------
MF175B
<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 an open-end diversified 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 a rate that 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. Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "Investment Company Act")
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 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 of
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
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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 cash collateral which will
be invested in short-term obligations. Any voting rights, or rights to consent,
relating to the securities loaned pass to the borrower. However, if a material
event affecting the securities which are the subject of the loan occurs, such
loans will be called so that the 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 the value of the 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 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. If a Fund
were to exceed this limit, the investment adviser would take prompt action to
reduce the Fund's holdings in illiquid securities to no more than 10% of its net
assets, as required by applicable law. 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 under 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.
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 under procedures established by the
Board of Trustees. 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
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rating organizations (NRSRO), or if only one NRSRO rates the securities, by that
NRSRO, or, if unrated, be of comparable quality as determined by 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 a
demand right 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.
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, pursuant to which 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 State Street Bank & Trust Company, the Trust's
Custodian, either directly or through a sub-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 upon sale of such collateral upon a default in
the obligation to repurchase are less than the repurchase 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 because 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 intends to participate 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
(the SEC or the 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
sub-custodians, 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 to use the reverse
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repurchase technique only 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 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 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 the Trust'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 to purchase such when issued
securities 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 when-issued security prior to its receipt of, and payment for, the
security, 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 Funds' investment objectives and 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.
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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
Securities". 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.
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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. In addition, in accordance with Restriction 3, it is our policy
not to concentrate 25% or more of total assets in a single industry.
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 Exchange 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 investment adviser has determined to be liquid under
procedures approved by the Board of Trustees.
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.
As a non-fundamental policy that may be changed without shareholder
approval, NMMF will not 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) 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.
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.
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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.
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 of a
Fund states a maximum percentage of the 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.
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MANAGEMENT OF THE TRUST
(a) TRUSTEES
The Trust has Trustees who, in addition to overseeing the actions of each
Fund's Manager, Investment Adviser 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>
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PRINCIPAL OCCUPATIONS
POSITION WITH AND OTHER AFFILIATIONS FOR
NAME, ADDRESS AND AGE (1) THE TRUST THE LAST FIVE YEARS
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<S> <C> <C>
Delayne D. Gold (61) Trustee Marketing and Management Consultant.
*Robert F. Gunia (53) Trustee and Vice Executive Vice President and Chief Administrative
President Officer (since June 1999) of Prudential Investments;
Corporate Vice President (since September 1997) of the
Prudential Insurance Company of America (Prudential);
Executive Vice President and Treasurer (since December
1996) of Prudential Investments Fund Management LLC
(PIFM); President (since April 1999) of Prudential
Investment Management Services LLC (PIMS); formerly
Senior Vice President (March 1987-May 1999) of
Prudential Securities Incorporated (Prudential
Securities); formerly Chief Administrative Officer
(July 1989-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).
Robert E. LaBlanc (65) Trustee President (since 1981) of Robert E. LaBlanc
Associates, Inc. (telecommunications); formerly
General Partner at Salomon Brothers; and Vice-Chairman
of Continental Telecom; Director of Storage Technology
Corporation (since 1979), Titan Corporation (since
1995), Salient 3 Communications, Inc., Chartered
Semiconductor Manufacturing Ltd. (since 1998) and
Tribune Company (since 1981); and Trustee of Manhattan
College.
*David R. Odenath, Jr. Trustee and President Officer in Charge, President, Chief Executive Officer
(42) and Chief Operating Officer (since June 1999) of PIFM;
Senior Vice President (since June 1999) of Prudential;
Senior Vice President (August 1993-May 1999) of
PaineWebber Group, Inc.
Robin B. Smith (60) 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 (since 1994), Texaco Inc. (since 1992),
Springs Industries Inc. (since 1993), and Kmart
Corporation since 1996.
Stephen Stoneburn (56) 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.
</TABLE>
B-9
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
POSITION WITH AND OTHER AFFILIATIONS FOR
NAME, ADDRESS AND AGE (1) THE TRUST THE LAST FIVE YEARS
------------------------- ------------- --------------------------
<S> <C> <C>
Nancy H. Teeters (70) Trustee Economist; formerly Director of Inland Steel Industries
(July 1989-1999); formerly, Vice President and Chief
Economist of International Business Machines
(July 1984-July 1990); formerly, Governor of the
Federal Reserve System (1978-1984).
Clay T. Whitehead (61) Trustee President (since May 1983) of National Exchange Inc.
(new business development firm).
Robert C. Rosselot (40) Secretary Assistant General Counsel (since September 1997) of
PIFM; formerly, partner with the law firm of Howard &
Howard, Bloomfield Hills, Michigan
(December 1995-September 1997) and Corporate Counsel
(September 1990-December 1995) of Federated Investors.
Grace C. Torres (41) Treasurer and Principal First Vice President (since December 1996) of PIFM;
Financial and First Vice President (since March 1994) of Prudential
Accounting Officer Securities; formerly First Vice President
(March 1994-September 1996), Prudential Mutual Fund
Management, Inc.
</TABLE>
------------
(1) 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 Trust, 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 PIMS.
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 75.
Pursuant to the Management Agreements with the Trust, the Manager pays all
compensation of officers and employees 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
annual compensation of $4,600, in addition to certain out-of-pocket expenses.
Trustees who serve on Fund committees may receive additional compensation. The
amount of annual compensation paid to each Trustee may change as a result of the
introduction of additional funds on which boards the Trustee may 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, pursuant to an SEC order at
the daily rate of return of the Trust (the Fund Rate). 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 Trust
to the Trustees who are not affiliated with the Manager for the fiscal year
ended September 30, 2000 and the aggregate compensation paid to such Trustees
for service on the Trust's Board and that of all other funds managed by PIFM (
the Fund Complex) for the calendar year ended December 31, 1999.
B-10
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
APPROXIMATE TOTAL
COMPENSATION
FROM TRUST
AGGREGATE AND PRUDENTIAL FUND
COMPENSATION COMPLEX PAID
NAME AND POSITION FROM TRUST TO TRUSTEES(2)
-------------------------------------------------- ------------ -------------------
<S> <C> <C>
Edward D. Beach--Former Trustee $ 400 $142,500 (43/70)*
Delayne D. Gold--Trustee $2,700 $144,500 (43/70)*
Robert F. Gunia(1)--Trustee -- --
Don G. Hoff--Former Trustee -- $ 22,500 (20/39)*
Robert E. LaBlanc--Trustee $3,550 $ 61,250 (20/39)*
David R. Odenath, Jr.(1)--Trustee -- --
Robin B. Smith--Trustee $3,750 $ 96,000 (32/44)*
Stephen Stoneburn--Trustee $3,550 $ 61,250 (20/39)*
John R. Strangfeld, Jr.(1)--Former Trustee -- --
Nancy H. Teeters--Trustee $4,050 $ 97,000 (25/43)*
Clay T. Whitehead--Trustee $3,550 $ 77,000 (38/66)*
</TABLE>
------------
* Indicates number of funds/portfolios in the Fund Complex (including the
Trust) to which aggregate compensation relates.
(1) Trustees who are "interested" do not receive compensation from the Trust or
any fund in the Fund Complex.
(2) Total compensation from all the funds in the Fund Complex for the calendar
year ended December 31, 1999, including amounts deferred at the election of
Trustees under the funds' deferred compensation plans. Including accrued
interest, total deferred compensation amounted to $156,478 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 November 17, 2000, 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 and there were beneficial owners of
greater than 5% of the outstanding shares of the Trust as listed below.
<TABLE>
<CAPTION>
NAME ADDRESS CLASS NO. SHARES/%
---- ------- ----- ------------
<S> <C> <C> <C>
7 RUE FRANCOIS-DUSSAUD
MONTRES ROLEX SA CH-1211 GENEVA 24
ROLEX HOLDING SWITZERLAND NMMF 62,294,519/13.5
</TABLE>
As of November 17, 2000, Prudential Securities was record holder of
453,053,985 shares (or 99.9%) and 2,210,054 shares or (.5%) of the outstanding
shares of LAF and NMMF, respectively. In the event of any meetings of
shareholders, Prudential Securities will forward, or cause the forwarding of,
proxy materials to the beneficial owners for which it is the record holder.
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 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 August 31, 2000, PIFM
managed and/or administered open-end and closed-end management investment
companies with assets of approximately $76.4 billion. According to the
Investment Company Institute, as of September 30, 1999, the Prudential Mutual
Funds were the 20th largest family of mutual funds in the United States.
Prudential Mutual Fund Services LLC (PMFS or the Transfer Agent), an
affiliate of PIFM, serves as the transfer agent and dividend distribution agent
for the Prudential Mutual Funds and, in addition, provides customer service,
recordkeeping and management and administrative services to qualified plans.
B-11
<PAGE>
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 and other assets. In connection therewith,
PIFM is obligated to keep certain books and records of the Trust. PIFM has hired
The Prudential Investment Corporation, doing business as Prudential Investments
(PI, the Investment Advisor or the Subadvisor), to provide subadvisory services
to the Fund. PIFM also administers the Fund's corporate affairs and, in
connection therewith, furnishes the Fund with office facilities, together with
those ordinary clerical and bookkeeping services which are not being furnished
by State Street, the fund's custodian (the Custodian), and PMFS. The management
services of PIFM for the Fund are not exclusive under the terms of the
Management Agreement 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, 2000, 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 .07 of 1% of the average daily net assets of LAF
for the fiscal year ending September 30, 2000.
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 Investment Advisor, pursuant to
subadvisory agreements on behalf of the Funds between PIFM and the
Investment Advisor (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 PIFM 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 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 NMMF
pursuant to a distribution plan adopted pursuant to Rule 12b-1 under 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
B-12
<PAGE>
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 years ended September 30, 2000, 1999 and 1998, PIFM received
management fees from NMMF and LAF of $1,532,983, $1,608,899 and $1,477,776, and
$285,000, $285,000 and $190,000, respectively.
PIFM has entered into Subadvisory Agreements with PI. 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 compensated by PIFM in the amount of .195% of the Fund's daily net
assets. 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 reviews on an ongoing basis
commercial paper issuers, commercial banks, non-bank financial institutions and
issuers of other taxable fixed-income obligations. The 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 23, 2000. 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. PIFM and PI, which are affiliated
persons of the Trust, are affiliates of PIMS.
Pursuant to the Distribution Agreement, the Trust has agreed to indemnify
the Distributor to the extent permitted by applicable law against certain
liabilities under the federal securities laws.
DISTRIBUTION PLAN
Under the NMMF Distribution Plan (the Plan) and the Trust's Distribution
Agreement dated December 12, 1997, NMMF pays the Distributor a distribution fee
of up to 0.10% of the average daily net assets of the shares of NMMF, computed
daily and payable monthly which is designed to reimburse the Distributor, in
whole or in part, for its services. 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, 2000, the Distributor received
payments of $393,073 under the Plan. These amounts were 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.
B-13
<PAGE>
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), 194 Wood Avenue South, Iselin,
New Jersey 08853, serves as the Transfer 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 accountants and in that capacity audits
each Fund's annual financial statements.
(d) CODE OF ETHICS
The Board of Trustees has adopted a Code of Ethics, in addition, the
Manager, Subadviser and Distributor have each adopted a Code of Ethics
(collectively, the Codes). The Codes permit personnel subject to the Codes to
invest in securities including securities that may be purchased or held by the
Fund. However, the protective provisions of the Codes prohibit certain
investments and limit such personnel from making investments during periods when
the Fund is making such investments. The Codes are on public file with, and are
available from, the Commission.
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 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
B-14
<PAGE>
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 (as defined in the
Investment Company Act), 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, 2000, 1999 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
B-15
<PAGE>
that series. The underlying assets of a series are segregated and are charged
with the expenses, including the organizational expenses, in respect of that
series and with a share of the general expenses of the Trust. While the expenses
of the Trust are allocated to the separate books of account of the series, if
more than one series has shares outstanding, certain expenses may be legally
chargeable against the assets of all series.
Under Massachusetts law, shareholders could, under certain circumstances, be
held liable for the obligations of the Trust. However, the Declaration of Trust
disclaims shareholder liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Trust or the Trustees. The
Declaration of Trust provides for indemnification out of the property of a
series for all loss and expense of any shareholder of that series held liable on
account of being or having been a shareholder. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the series of which he was a shareholder would be unable
to meet its obligations.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office. The Declaration of Trust provides for indemnification by the Trust
of the Trustees and the officers of the Trust except with respect to any matter
as to which any such person did not act in good faith in the reasonable belief
that his action was in or not opposed to the best interests of the Trust. Such
person may not be indemnified against any liability to the Trust or the Trust
shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
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.
The Fund is required to disclose its holdings of securities of its regular
brokers and dealers (as defined under Rule 10b-1 of the Investment Company Act)
and their parents during their most recent fiscal year. As of September 30,
2000, the Fund held securities of Goldman, Sachs & Co. ($21,000,000), Morgan
(J.P.) & Company, Inc. ($19,300,000), Morgan Stanley Dean Witter & Co.
($17,000,000), Bank of America ($12,700,000), Banc One Financial Corp.
($14,600,058), and Salomon Smith Barney Inc. ($6,975,986).
PURCHASE AND REDEMPTION OF FUND SHARES
PURCHASE OF SHARES
Shares of the NMMF are offered to investment advisory clients of Prudential
Securities Incorporated (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.
B-16
<PAGE>
Shares of LAF are offered to investment advisory clients of Prudential
Securities that (a) participate in any of the following managed account programs
sponsored by Prudential Securities: Gibraltar Advisors, Prudential Securities
Portfolio Management (PSPM), Quantum Portfolio Management (Quantum), Managed
Assets Consulting Services (MACS) and Prudential Securities Investment
Supervisory Group and (b) are "Eligible Benefit Plans." "Eligible Benefit Plans"
include (i) employee benefit plans as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 (ERISA) other than governmental plans as
defined in Section 3(32) of ERISA and church plans as defined in Section 3(33)
of ERISA, (ii) pension, profit-sharing or other employee benefit plans qualified
under Section 401 of the Internal Revenue Code, (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.
SALE OF SHARES
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 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.
B-17
<PAGE>
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
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 and qualified, 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.
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 or losses. 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.
Distributions of net investment income and net short-term gains will be taxable
to the shareholder at ordinary income rates regardless of whether the
shareholder receives such distributions in additional shares or cash. 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, including shares purchased
pursuant to dividend reinvestment within 30 days of the disposition of the
shares. In such cases the basis of the shares acquired will be readjusted to
reflect the disallowed loss. Because none of the Fund's net income is
anticipated to arise from dividends on common or preferred stock, none of its
distributions to shareholders will be eligible for the dividends received
deduction generally allowed to U.S. corporations in respect of dividends
received from other U.S. corporations.
B-18
<PAGE>
Income received by the Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Income tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. It is impossible to determine in advance the effective rate of
foreign tax to which the Fund will be subject, since the amount of the Fund's
assets to be invested in various countries is not known.
If the Fund is liable for foreign income taxes, and if more than 50% of the
value of the Fund's assets consists of securities of foreign corporations, the
Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign income taxes paid by the Fund, but there can be no assurance that the
Fund will be able to do so. If the Fund does elect to "pass through" the foreign
taxes paid, shareholders will be required to (i) include in gross income (in
addition to taxable dividends actually received) their PRO RATA share of the
foreign income taxes paid by the Fund; and (ii) treat their PRO RATA share of
foreign income taxes as paid by them. Shareholders will then be permitted either
to deduct their PRO RATA share of foreign income taxes in computing their
taxable income or to claim a foreign tax credit against U.S. income taxes. No
deduction for foreign taxes may be claimed by a shareholder who does not itemize
deductions. Foreign shareholders may not deduct or claim a credit for foreign
tax unless the dividends paid to them by the Fund are effectively connected with
a U.S. trade or business. Accordingly, a foreign shareholder may recognize
additional taxable income as a result of the Fund's election to pass through the
foreign taxes to shareholders.
The amount of foreign taxes for which a shareholder may claim a credit in
any year will generally be subject to a separate limitation for "passive income"
which includes, among other things, dividends, interest and certain foreign
currency gains. Gain from the sale of a security will be treated as derived from
sources within the United States, potentially reducing the amount allowable as a
credit under the limitation.
Each shareholder will be notified within 60 days after the close of the
Fund's taxable year whether the foreign taxes paid by the Fund will "pass
through" for that year and, if so, such notification will designate (a) the
shareholder's portion of the foreign taxes paid by the Fund and (b) the portion
of the dividend which represents income derived from foreign sources.
The tax consequences to a foreign shareholder entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign shareholders are advised to consult their own tax advisers with respect
to the particular tax consequences to them of an investment in the Fund.
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.
Dividends and distributions subject to federal income taxation may also be
subject to state and local taxes. Furthermore, under the laws of certain states,
distributions of net income from the Funds may be taxable to shareholders as
income even though a portion of such distributions may be derived from interest
on U.S. obligations which, if realized directly, would be exempt from state
income taxes. Shareholders are advised to consult their tax advisors concerning
the application of state and local taxes.
CALCULATION OF YIELD
Each Fund will prepare a current quotation of yield daily. The yield quoted
will be the simple annualized yield for an identified seven calendar day period.
The yield calculation will be based on a hypothetical account having a balance
of exactly one share at the beginning of the seven-day period. The base period
return will be the change in the value of the hypothetical account during the
seven-day period, including dividends declared on any shares purchased with
dividends on the shares, but excluding any capital changes, divided by the value
of the account at the beginning of the base period. The yield will vary as
interest rates and other conditions affecting money market instruments change.
Yield also depends on the quality, length of maturity and type of instruments in
a Fund's portfolio, and its operating expenses. Each Fund also may prepare an
effective annual yield computed by compounding the unannualized seven-day period
return as follows: by adding 1 to the unannualized seven-day period return,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the
result.
Effective yield = [(base period return+1)TO THE POWER OF 365/7]-1
The yield and effective yield for NMMF based on the 7 days ended
September 30, 2000 were 6.10% and 6.26%, respectively. The yield and effective
yield for LAF based on 7 days ended September 30, 2000 were 6.53% and 6.73%,
respectively.
B-19
<PAGE>
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.
ADVERTISING. Advertising materials for the Fund may include biographical
information relating to its portfolio manager(s), and may include or refer to
commentary by the Fund's manager(s) concerning investment style, investment
discipline, asset growth, current or past business experience, business
capabilities, political, economic or financial conditions and other matters of
general interest to investors. Advertising materials for the Fund also may
include mention of The Prudential Insurance Company of America, its affiliates
and subsidiaries, and reference the assets, products and services of those
entities.
From time to time, advertising materials for the Fund may include
information concerning retirement and investing for retirement, may refer to the
approximate number of Fund shareholders and may refer to Lipper rankings or
Morningstar ratings, other related analysis supporting those ratings, other
industry publications, business periodicals and market indices. In addition,
advertising materials may reference studies or analyses performed by the manager
or its affiliates. Advertising materials for sector funds, funds that focus on
market capitalizations, index funds and international/global funds may discuss
the potential benefits and risks of that investment style. Advertising materials
for fixed income funds may discuss the benefits and risks of investing in the
bond market including discussions of credit quality, duration and maturity.
B-20
<PAGE>
CASH ACCUMULATION TRUST National Money Market Fund
--------------------------------------------------------------------------------
Portfolio of Investments as of September 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
-------------------------------------------------------------------------------------
<S> <C> <C>
BANK NOTES 7.8%
Bank of America N.A.
$ 6,700 6.82%, 2/5/01 $ 6,700,000
First Union National Bank
2,500 6.74%, 2/15/01 2,498,022
Lasalle National Bank of Chicago
13,139 6.71%, 2/1/01 13,136,931
National City Bank of Cleveland
7,400 6.55%, 1/31/01 7,398,825
--------------
29,733,778
-------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - EURODOLLAR 0.5%
Svenska Handelsbank AB
2,000 6.76%, 2/20/01 2,000,076
-------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - YANKEE 7.8%
Bank of Nova Scotia
2,500 6.65%, 2/1/01 2,499,600
Bayerische Hypo Und Vereinsbank
1,000 6.72%, 2/14/01 999,881
Commerzbank AG
500 6.77%, 2/28/01 499,535
UBS AG
8,000 7.00%, 7/18/01 7,998,797
Westpac Banking Corp.
9,200 6.54%, 1/18/01 9,198,695
8,600 6.52%, 1/29/01 8,598,657
--------------
29,795,165
-------------------------------------------------------------------------------------
COMMERCIAL PAPER 44.9%
Anz Delaware, Inc.
2,900 6.55%, 11/3/00 2,882,588
Aon Corp.
8,771 6.57%, 10/13/00 8,751,791
Axa Financial
7,000 6.70%, 10/23/00 7,000,000
</TABLE>
See Notes to Financial Statements
B-21
<PAGE>
CASH ACCUMULATION TRUST National Money Market Fund
--------------------------------------------------------------------------------
Portfolio of Investments as of September 30, 2000 Cont'd.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
-----------------------------------------------------------------------------------------
<S> <C> <C>
B-One Australia Ltd.
$ 2,000 6.52%, 11/15/00 $ 1,983,700
Banc One Corp
1,000 6.52%, 12/13/00 986,779
BankAmerica Corp.
5,000 6.48%, 2/23/01 4,869,500
Barton Capital Corp.
3,144 6.65%, 10/12/00 3,137,612
Bear, Stearns & Co. Inc.
3,000 6.51%, 10/25/00 2,986,980
Black Forest Funding Corp.
2,000 6.54%, 10/10/00 1,996,730
3,000 6.55%, 10/10/00 2,995,087
Brahms Funding Corp.
5,000 6.605%, 10/26/00 4,977,066
1,000 6.60%, 11/9/00 992,850
British Telecommunications PLC
1,429 6.60%, 10/17/00 1,424,808
1,284 6.60%, 10/19/00 1,279,763
505 6.55%, 11/16/00 500,774
1,992 6.55%, 11/20/00 1,973,878
2,000 6.54%, 12/12/00 1,973,840
Campbell Soup Company
500 6.53%, 10/30/00 497,370
Cargill Global Funding
1,400 6.65%, 10/20/00 1,395,086
Cooper Industries, Inc.
1,363 6.80%, 10/2/00 1,362,742
Cregem North America Inc.
5,470 6.55%, 1/12/01 5,367,491
DaimlerChrysler North America Holding Corp.
1,000 6.51%, 11/22/00 990,597
3,700 6.50%, 12/7/00 3,655,240
Delaware Funding Corp.
3,300 6.59%, 10/24/00 3,286,106
Dow Chemical & Company, Inc.
1,000 6.85%, 10/4/00 999,429
</TABLE>
See Notes to Financial Statements
B-22
<PAGE>
CASH ACCUMULATION TRUST National Money Market Fund
--------------------------------------------------------------------------------
Portfolio of Investments as of September 30, 2000 Cont'd.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
-----------------------------------------------------------------------------------------
<S> <C> <C>
Edison Asset Securitization, LLC
$ 1,305 6.55%, 1/31/01 $ 1,276,033
Falcon Asset Securitization Corp.
1,000 6.80%, 10/2/00 999,811
3,000 6.55%, 10/16/00 2,991,812
3,856 6.55%, 10/24/00 3,839,864
First Data Corp.
8,000 6.48%, 12/27/00 7,874,720
Forrestal Funding Master Trust
500 6.57%, 11/3/00 496,989
1,200 6.52%, 11/29/00 1,187,177
1,000 6.56%, 1/31/01 977,769
1,830 6.59%, 2/9/01 1,786,116
2,643 6.51%, 2/16/01 2,577,044
Fortune Brands, Inc.
313 6.57%, 10/10/00 312,486
1,000 6.55%, 10/13/00 997,817
GE Capital International Funding
6,000 6.52%, 2/12/01 5,854,387
General Electric Capital Corp.
600 6.57%, 10/11/00 598,905
1,100 6.50%, 11/29/00 1,088,282
1,700 6.50%, 12/6/00 1,679,742
1,000 6.51%, 12/7/00 987,884
1,700 6.52%, 1/26/01 1,663,977
3,096 6.58%, 2/13/01 3,019,606
General Motors Acceptance Corp.
5,500 6.50%, 11/27/00 5,443,396
10,000 6.52%, 2/5/01 9,769,989
Halifax PLC
2,500 6.65%, 10/11/00 2,495,382
Halliburton Co.
893 6.75%, 10/2/00 892,833
Hartford Financial Services Group, Inc.
2,000 6.54%, 11/9/00 1,985,830
</TABLE>
See Notes to Financial Statements
B-23
<PAGE>
CASH ACCUMULATION TRUST National Money Market Fund
--------------------------------------------------------------------------------
Portfolio of Investments as of September 30, 2000 Cont'd.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
-----------------------------------------------------------------------------------------
<S> <C> <C>
International Business Machines Corp.
$ 2,400 6.50%, 11/1/00 $ 2,386,567
PNC Funding Corp.
5,552 6.56%, 10/26/00 5,526,707
Preferred Receivables Funding Corp.
1,525 6.54%, 11/1/00 1,516,412
Sweetwater Capital Corp.
939 6.53%, 10/27/00 934,572
1,965 6.52%, 10/31/00 1,954,323
5,279 6.55%, 11/28/00 5,223,292
2,420 6.51%, 12/27/00 2,381,927
1,262 6.52%, 12/27/00 1,242,115
Swedbank
8,000 6.54%, 10/12/00 7,984,013
3,300 6.60%, 10/12/00 3,293,345
Verizon Global Funding Corp.
2,400 6.55%, 10/4/00 2,398,690
1,600 6.51%, 11/1/00 1,591,031
2,734 6.49%, 11/30/00 2,704,427
Wood Street Funding Corp.
3,211 6.54%, 10/2/00 3,210,417
--------------
171,413,496
-------------------------------------------------------------------------------------
LOAN PARTICIPATION 0.8%
Southern California Edison Co.
3,000 6.67%, 10/31/00 3,000,000
-------------------------------------------------------------------------------------
OTHER CORPORATE OBLIGATIONS 34.7%
American Express Centurion Bank
2,000 6.59063%, 10/23/00(a) 1,999,565
Bank One Corp.
3,100 6.72%, 10/6/00(a) 3,100,013
11,200 6.75%, 11/17/00(a) 11,200,388
Chrysler Financial Co., LLC, M.T.N.
2,000 6.13%, 12/11/00 1,999,763
CIT Group Inc.
5,000 6.6225%, 12/6/00(a) 4,998,346
2,000 6.67625%, 10/16/00(a) 1,997,816
</TABLE>
See Notes to Financial Statements
B-24
<PAGE>
CASH ACCUMULATION TRUST National Money Market Fund
--------------------------------------------------------------------------------
Portfolio of Investments as of September 30, 2000 Cont'd.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
-----------------------------------------------------------------------------------------
<S> <C> <C>
Comerica Bank N.A.
$ 2,000 6.57%, 10/10/00(a) $ 1,999,591
3,000 6.62%, 10/6/00(a) 3,000,129
8,200 6.5825%, 10/19/00(a) 8,198,281
Dover Corp.
8,000 6.70%, 11/28/00(a) 8,000,000
First Union National Bank
12,400 6.89%, 11/13/00(a) 12,402,018
Ford Motor Credit Co.
3,800 6.77%, 10/2/00(a) 3,799,990
Ford Motor Credit Co., M.T.N.
4,400 5.99%, 2/27/01 4,387,238
General Electric Capital Corp., M.T.N.
3,000 5.92%, 4/3/01 2,987,536
Goldman, Sachs & Co.
17,000 6.81%, 12/15/00(a) 17,000,000
Morgan (J.P.) & Company, Inc.
19,300 6.6125%, 10/16/00(a) 19,300,000
Morgan Stanley Dean Witter & Co.
8,000 6.64625%, 10/16/00(a) 8,000,000
Restructured Asset Securities Enhanced Return
00-15MM-ABS
5,000 6.64%, 10/13/00(a) 5,000,000
Short-Term Repackaged Asset Trust 1998-E-ABS
3,000 6.6525%, 10/18/00(a) 3,000,000
Unilever Capital Corp.
10,000 6.68313%, 12/6/00(a) 10,000,000
--------------
132,370,674
</TABLE>
See Notes to Financial Statements
B-25
<PAGE>
CASH ACCUMULATION TRUST National Money Market Fund
--------------------------------------------------------------------------------
Portfolio of Investments as of September 30, 2000 Cont'd.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
-----------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE BACKED SECURITIES 2.6%
Federal Home Loan Banks
$ 10,000 6.528%, 10/4/00(a) $ 9,997,315
TOTAL INVESTMENTS 99.1%
(AMORTIZED COST $378,310,504(b)) 378,310,504
Other assets in excess of liabilities 0.9% 3,525,821
--------------
NET ASSETS 100% $ 381,836,325
--------------
--------------
</TABLE>
------------------------------
(a) Variable rate instrument. The maturity date presented for these instruments
is the later of the next date on which the security can be redeemed at par
or the next date on which the rate of interest is adjusted.
(b) The cost for federal income tax purposes is substantially the same as for
financial reporting purposes.
M.T.N.--Medium Term Note.
The industry classification of portfolio holdings and other assets in excess of
liabilities shown as a percentage of net assets as of September 30, 2000 was as
follows:
<TABLE>
<S> <C>
Financial Services 45.4%
Commercial Banks 29.0
Insurance 4.6
Asset-Backed Securities 3.7
Telecommunications 3.6
Consumer Products 3.1
U.S. Government Agency Mortgage Backed Securities 2.6
Oil & Gas Equipment & Services 2.3
Business Services 2.1
Electronic Components 1.0
Utilities 0.8
Computers 0.6
Chemicals 0.3
-----
99.1
Other assets in excess of liabilities 0.9
-----
100.0%
-----
-----
</TABLE>
See Notes to Financial Statements
B-26
<PAGE>
CASH ACCUMULATION TRUST National Money Market Fund
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
----------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at amortized cost which approximates market
value $378,310,504
Cash 668
Receivable for Fund shares sold 16,443,689
Interest receivable 2,519,031
Prepaid expenses 79,965
------------------
TOTAL ASSETS 397,353,857
------------------
LIABILITIES
Payable for Fund shares repurchased 12,140,363
Payable for investments purchased 2,604,739
Dividends payable 370,089
Accrued expenses 272,072
Management fee payable 114,561
Distribution fee payable 15,708
------------------
TOTAL LIABILITIES 15,517,532
------------------
NET ASSETS $381,836,325
------------------
------------------
Net assets were comprised of:
Shares of beneficial interest, at $.00001 par value $ 3,818
Paid-in capital in excess of par 381,832,507
------------------
Net assets, September 30, 2000 $381,836,325
------------------
------------------
Net asset value, offering price and redemption price per
share ($381,836,325 DIVIDED BY 381,836,325 shares of
beneficial interest issued and outstanding) $1.00
------------------
------------------
</TABLE>
See Notes to Financial Statements
B-27
<PAGE>
CASH ACCUMULATION TRUST National Money Market Fund
--------------------------------------------------------------------------------
Statement of Operations
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR
ENDED
SEPTEMBER 30, 2000
----------------------------------------------------------------------------------------
<S> <C>
NET INVESTMENT INCOME
Income
Interest $ 24,453,610
------------------
Expenses
Management fee 1,532,983
Distribution fee 393,073
Transfer agent's fees and expenses 258,000
Registration fees 257,000
Custodian's fees & expenses 77,000
Reports to shareholders 65,000
Audit fees 27,000
Legal fees and expenses 25,000
Trustees' fees 13,000
Miscellaneous 9,451
------------------
TOTAL EXPENSES 2,657,507
------------------
Net investment income 21,796,103
------------------
REALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 2,730
------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 21,798,833
------------------
------------------
</TABLE>
See Notes to Financial Statements
B-28
<PAGE>
CASH ACCUMULATION TRUST National Money Market Fund
--------------------------------------------------------------------------------
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------
2000 1999
-----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $ 21,796,103 $ 18,795,764
Net realized gain on investment
transactions 2,730 21,374
-------------------- ---------------
Net increase in net assets resulting
from operations 21,798,833 18,817,138
-------------------- ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
(NOTE 1) (21,798,833) (18,817,138)
-------------------- ---------------
FUND SHARE TRANSACTIONS (AT $1 PER SHARE)
Net proceeds from shares sold 3,980,580,744 3,676,378,022
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions 21,374,486 18,433,584
Cost of shares reacquired (4,023,684,617) (3,798,533,694)
-------------------- ---------------
Net increase (decrease) in net assets from
Fund share transactions (21,729,387) (103,722,088)
-------------------- ---------------
Total increase (decrease) (21,729,387) (103,722,088)
NET ASSETS
Beginning of year 403,565,712 507,287,800
-------------------- ---------------
End of year $ 381,836,325 $ 403,565,712
-------------------- ---------------
-------------------- ---------------
</TABLE>
See Notes to Financial Statements
B-29
<PAGE>
CASH ACCUMULATION TRUST National Money Market Fund
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
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"). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services.
B-30
<PAGE>
CASH ACCUMULATION TRUST National Money Market Fund
--------------------------------------------------------------------------------
Notes to Financial Statements Cont'd.
--------------------------------------------------------------------------------
PIFM has entered into a subadvisory agreement with The Prudential Investment
Corporation ("PIC"). The subadvisory agreement provides that PIC will furnish
investment advisory services in connection with the management of the Trust. In
connection therewith, PIC is obligated to keep certain books and records of the
Fund. PIFM continues to have responsibility for all investment advisory services
pursuant to the management agreement and supervises PIC's performance of such
services. PIFM pays for the services of PIC, the cost of compensation of
officers of the Trust, occupancy and certain clerical and bookkeeping costs of
the Fund. The Trust bears all other costs and expenses.
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.
Effective January 1, 2000, the subadvisory fee paid to PIC by PIFM is
computed daily and payable monthly at an annual rate of .195% of the Fund's
average daily net assets up to and including $1 billion, .169% of the next $500
million, .140% of the next $500 million and .114% of the Fund's average daily
net assets in excess of $2 billion. Prior to January 1, 2000, PIC was reimbursed
by PIFM for reasonable costs and expenses incurred in furnishing investment
advisory services. The change in the subadvisory fee structure has no impact on
the management fee charged to the Fund or its shareholders.
The Trust has a distribution agreement with Prudential Investment
Management Services LLC ("PIMS"). The Fund compensates 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.
PIFM, PIC and PIMS are wholly owned subsidiaries of The Prudential
Insurance Company of America ("the Prudential").
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 and during the year ended September 30,
2000, the Fund incurred fees of approximately $247,000 for the services of PMFS.
As of September 30, 2000, approximately $21,000 of such fees were due to PMFS.
Transfer agent fees and expenses in the Statement of Operations include certain
out-of-pocket expenses paid to nonaffiliates.
B-31
<PAGE>
CASH ACCUMULATION TRUST National Money Market Fund
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR
ENDED
SEPTEMBER 30, 2000
----------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 1.00
----------
Net investment income 0.06
Dividends and distributions to shareholders (0.06)
----------
Net asset value, end of year $ 1.00
----------
----------
TOTAL RETURN(a) 5.7%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $381,836
Ratios to average net assets:
Expenses, including distribution and service (12b-1)
fees 0.68%
Expenses, excluding distribution and service (12b-1)
fees 0.58%
Net investment income 5.55%
</TABLE>
------------------------------
(a) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each year reported and includes reinvestment
of dividends and distributions.
See Notes to Financial Statements
B-32
<PAGE>
CASH ACCUMULATION TRUST National Money Market Fund
--------------------------------------------------------------------------------
Financial Highlights Cont'd.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------
1999 1998 1997 1996
-----------------------------------------------------
<S> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
0.05 0.05 0.05 0.05
(0.05) (0.05) (0.05) (0.05)
-------- -------- -------- --------
$ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
-------- -------- -------- --------
4.6% 5.2% 5.0% 5.0%
$403,566 $507,288 $702,003 $652,327
0.68% 0.62% 0.65% 0.69%
0.58% 0.52% 0.55% 0.59%
4.56% 5.05% 4.89% 4.86%
</TABLE>
See Notes to Financial Statements
B-33
<PAGE>
CASH ACCUMULATION TRUST National Money Market Fund
--------------------------------------------------------------------------------
Report of Independent Accountants
--------------------------------------------------------------------------------
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, 2000, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the four years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 2000 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion. The accompanying financial highlights for the
year 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 22, 2000
B-34
<PAGE>
CASH ACCUMULATION TRUST Liquid Assets Fund
--------------------------------------------------------------------------------
Portfolio of Investments as of September 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
-----------------------------------------------------------------------------------------
<S> <S> <C>
BANK NOTES 7.4%
American Express Centurion Bank
$ 7,000 6.58%, 10/30/00(b) $ 6,998,613
Bank of America NA
6,000 6.82%, 2/5/01 6,000,000
Bank One Corp. NA
10,000 6.70%, 9/6/01(b) 10,001,669
Comerica Bank
3,000 6.62%, 10/6/00(b) 3,000,129
National City Bank
10,000 6.55%, 1/31/01 9,998,412
---------------
35,998,823
-------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - DOMESTIC 1.4%
First Union National Bank
3,000 7.09%, 12/22/00 3,000,000
Southtrust Bank NA
4,000 6.70%, 3/6/01 3,999,979
---------------
6,999,979
-------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - YANKEE 12.7%
Bank of Scotland
5,000 7.13%, 6/29/01 4,998,246
Bayerische Landesbank Girozentrale
2,000 6.74%, 2/16/01 1,999,907
Canadian Imperial Bank of Commerce
5,000 6.69%, 11/27/00 5,000,000
5,000 7.30%, 5/14/01 5,000,000
Citibank NA
6,000 6.72%, 11/20/00 6,000,082
Deutsche Bank AG
5,000 6.08%, 11/24/00 4,999,471
5,000 6.75%, 2/22/01 4,999,065
National Bank of Canada
1,000 6.96%, 10/23/00 1,000,117
1,000 6.95%, 10/24/00 1,000,115
Svenska Handelsbanken
17,712 6.84%, 1/31/01 17,712,720
</TABLE>
See Notes to Financial Statements
B-35
<PAGE>
CASH ACCUMULATION TRUST Liquid Assets Fund
--------------------------------------------------------------------------------
Portfolio of Investments as of September 30, 2000 Cont'd.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
-----------------------------------------------------------------------------------------
<S> <C> <C>
Toronto Dominion Bank
$ 3,400 6.69%, 2/7/01 $ 3,398,966
UBS AG
2,000 6.38%, 12/20/00 1,999,791
Westpac Banking Corp.
4,000 6.22%, 11/30/00 3,999,499
---------------
62,107,979
-------------------------------------------------------------------------------------
COMMERCIAL PAPER 52.8%
Alliance & Leicester PLC
3,338 6.54%, 10/10/00 3,332,542
AON Corp.
3,000 6.57%, 11/2/00 2,982,480
2,000 6.57%, 11/10/00 1,985,400
Banc One Financial Corp.
5,820 6.79%, 11/27/00 5,757,430
3,000 6.51%, 2/15/01 2,925,677
BankAmerica Corp.
5,000 6.48%, 2/23/01 4,869,500
10,000 6.51%, 2/27/01 9,730,558
Barclays Bank
3,784 6.55%, 10/25/00 3,767,477
Barton Capital Corp.
15,423 6.52%, 10/13/00 15,389,481
6,000 6.52%, 11/9/00 5,957,620
Baus Funding LLC
4,000 6.50%, 10/12/00 3,992,056
BBL North America Funding Corp.
4,792 6.52%, 10/18/00 4,777,257
BCI Funding Corp.
5,000 6.50%, 2/12/01 4,879,028
BHF Finance, Inc.
2,001 6.60%, 10/20/00 1,994,030
Black Forest Funding Corp.
5,000 6.55%, 10/10/00 4,991,812
Blue Ridge Asset Funding Corp.
2,750 6.52%, 11/8/00 2,731,074
</TABLE>
See Notes to Financial Statements
B-36
<PAGE>
CASH ACCUMULATION TRUST Liquid Assets Fund
--------------------------------------------------------------------------------
Portfolio of Investments as of September 30, 2000 Cont'd.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
-----------------------------------------------------------------------------------------
<S> <C> <C>
Bradford & Bingley Building Society
$ 2,000 6.58%, 10/5/00 $ 1,998,538
Brahms Funding Corp.
6,000 6.61%, 10/26/00 5,972,479
2,000 6.60%, 11/9/00 1,985,700
British Telecommunications PLC
2,000 6.54%, 12/12/00 1,973,840
Corporate Asset Funding Co.
846 6.54%, 10/25/00 842,311
Daimler-Chrysler NA Holding Corp.
1,800 6.52%, 11/15/00 1,785,330
Delaware Funding Corp.
6,917 6.70%, 10/4/00 6,913,138
Den Norske Bank
3,000 6.51%, 2/12/01 2,927,305
Dexia CLF Finance Co.
2,909 6.53%, 10/23/00 2,897,391
Dover Corp.
5,000 6.70%, 11/28/00(b) 5,000,000
Equitable Resources, Inc.
5,000 6.55%, 10/18/00 4,984,535
Ford Motor Credit Co.
2,500 6.58%, 10/11/00 2,495,431
2,400 6.55%, 10/18/00 2,392,577
Forrestal Funding Master Trust
1,000 6.57%, 11/14/00 991,970
Fortune Brands, Inc.
1,152 6.57%, 11/13/00 1,142,960
GE Capital International Funding
5,000 6.58%, 11/30/00 4,945,167
5,000 6.52%, 2/12/01 4,878,656
General Electric Capital Corp.
2,000 6.58%, 2/13/01 1,950,650
7,000 6.75%, 2/27/01 6,804,437
Hartford Financial Services
3,000 6.54%, 11/9/00 2,978,745
</TABLE>
See Notes to Financial Statements
B-37
<PAGE>
CASH ACCUMULATION TRUST Liquid Assets Fund
--------------------------------------------------------------------------------
Portfolio of Investments as of September 30, 2000 Cont'd.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
-----------------------------------------------------------------------------------------
<S> <C> <C>
ING America Insurance Holdings, Inc.
$ 1,000 6.55%, 10/12/00 $ 997,999
Nordbanken North America, Inc.
6,000 6.52%, 2/15/01 5,851,127
Old Line Funding Corp.
10,089 6.53%, 10/11/00 10,070,700
Paccar Financial Corp.
5,000 6.55%, 10/18/00 4,984,535
4,800 6.60%, 10/18/00 4,785,040
PNC Funding Corp.
4,000 6.56%, 12/7/00 3,951,164
1,000 6.55%, 12/21/00 985,263
1,000 6.56%, 12/15/00 986,516
Preferred Receivables Funding Corp.
2,000 6.54%, 11/1/00 1,988,737
Salomon Smith Barney Holdings, Inc.
7,000 6.50%, 10/20/00 6,975,986
San Paolo U.S. Finance Co.
8,102 6.54%, 10/11/00 8,087,281
Santander Central Hispano Finance
5,000 6.51%, 2/12/01 4,878,842
2,000 6.48%, 2/27/01 1,946,401
Southern Co.
1,000 6.60%, 10/16/00 997,250
3,845 6.60%, 10/30/00 3,824,557
Svenska Handelsbanken, Inc.
1,321 6.52%, 12/1/00 1,306,406
Swedbank, Inc.
3,000 6.58%, 11/6/00 2,980,260
2,000 6.58%, 11/20/00 1,981,722
Sweetwater Capital Corp.
1,718 6.60%, 10/6/00 1,716,425
662 6.56%, 10/20/00 659,708
1,323 6.56%, 10/23/00 1,317,696
5,091 6.56%, 10/25/00 5,068,735
2,098 6.56%, 10/27/00 2,088,060
</TABLE>
See Notes to Financial Statements
B-38
<PAGE>
CASH ACCUMULATION TRUST Liquid Assets Fund
--------------------------------------------------------------------------------
Portfolio of Investments as of September 30, 2000 Cont'd.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
-----------------------------------------------------------------------------------------
<S> <C> <C>
Thunder Bay Funding, Inc.
$ 3,872 6.50%, 11/13/00 $ 3,841,938
Unilever Capital Corp.
11,000 6.68%, 12/7/00(b) 11,000,000
Variable Funding Capital Corp.
1,209 6.51%, 10/20/00 1,204,846
Verizon Global Funding Corp.
3,000 6.48%, 12/4/00 2,965,440
Woolwich PLC
10,000 6.57%, 10/10/00 9,983,575
3,000 6.54%, 10/26/00 2,986,375
2,000 6.57%, 11/21/00 1,981,385
---------------
258,318,551
-------------------------------------------------------------------------------------
LOAN PARTICIPATIONS 2.5%
Axa Financial, Inc.
9,000 6.70%, 10/23/00(c) 9,000,000
Southern California Edison Co.
2,000 6.67%, 10/31/00(c) 2,000,000
1,000 6.67%, 10/31/00(c) 1,000,000
---------------
12,000,000
-------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS--NON-DISCOUNT 2.0%
Federal Home Loan Bank, M.T.N.
10,000 6.53%, 10/19/00(b) 9,997,315
-------------------------------------------------------------------------------------
OTHER CORPORATE OBLIGATIONS 18.1%
Bank One Corp., M.T.N.
1,400 6.88%, 12/18/00(b) 1,402,616
Centex Home Mortgage LLC
1,000 6.76%, 10/20/00(b)(c) 1,000,000
CIT Group, Inc., M.T.N.
5,000 6.68%, 10/16/00(b) 4,994,539
Ford Motor Credit Co.
9,000 6.77%, 10/2/00, M.T.N.(b) 8,999,976
1,000 6.25%, 11/8/00 999,224
</TABLE>
See Notes to Financial Statements
B-39
<PAGE>
CASH ACCUMULATION TRUST Liquid Assets Fund
--------------------------------------------------------------------------------
Portfolio of Investments as of September 30, 2000 Cont'd.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
-----------------------------------------------------------------------------------------
<S> <C> <C>
General Electric Capital Corp.
$ 3,000 6.67%, 10/20/00(b)(c) $ 3,000,000
Goldman, Sachs & Co., M.T.N.
17,000 6.81%, 12/15/00(b) 17,000,000
J.P. Morgan & Co., Inc., M.T.N.
4,000 6.61%, 10/16/00(b) 4,000,000
Morgan Stanley Dean Witter & Co., M.T.N.
9,000 6.65%, 10/16/00(b) 9,000,000
Restructured Asset Certificates
6,000 6.64%, 10/13/00(b) 6,000,000
Security Life Of Denver
9,000 6.80%, 10/12/00(b)(c) 9,000,000
Short Term Repack Asset Trust
4,000 6.65%, 10/18/00(b)(c) 4,000,000
Strategic Money Market Trust
8,000 6.64%, 10/13/00(b) 8,000,000
Travelers Insurance Co.
3,000 6.79%, 10/6/00(b)(c) 3,000,000
Wells Fargo & Co., M.T.N.
2,000 6.60%, 12/19/00(b) 1,999,151
Westpac Banking Corp.
6,000 6.67%, 10/4/00(b) 5,999,963
---------------
88,395,469
-----------------------------------------------------------------------------------
TOTAL INVESTMENTS 96.9%
(AMORTIZED COST $473,818,116(a)) 473,818,116
Other assets in excess of liabilities 3.1% 14,988,492
---------------
NET ASSETS 100% $ 488,806,608
---------------
---------------
</TABLE>
------------------------------
(a) The cost of securities for federal income tax purposes is substantially the
same as for financial reporting purposes.
(b) Variable rate instruments. The maturity date presented for these instruments
is the later of the next date on which the security can be redeemed at par
or on 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 $32,000,000. The
aggregatge value of $32,000,000 is approximately 6.5% of net assets.
M.T.N.--Medium Term Note.
See Notes to Financial Statements
B-40
<PAGE>
CASH ACCUMULATION TRUST Liquid Assets Fund
--------------------------------------------------------------------------------
Portfolio of Investments as of September 30, 2000 Cont'd.
--------------------------------------------------------------------------------
The industry classification of portfolio holdings and other assets in excess of
liabilities shown as a percentage of net assets as of September 30, 2000 was as
follows:
<TABLE>
<S> <C>
Commercial Banks......................................................... 44.5%
Asset Backed Securities.................................................. 14.5
Security Brokers & Dealers............................................... 8.7
Bank Holding Companies................................................... 6.4
Personal Credit Institutions............................................. 4.9
Motor Vehicles........................................................... 3.6
Life Insurance........................................................... 3.2
Food Products............................................................ 2.3
Federal Credit Agencies.................................................. 2.1
Electric Services........................................................ 1.6
Construction Machinery and Equipment..................................... 1.1
Natural Gas Transportation............................................... 1.0
Accidental & Health Insurance............................................ 1.0
Telephone & Communications............................................... 1.0
Insurance Agencies....................................................... 0.8
Cigarettes............................................................... 0.2
-----
96.9%
Other assets in excess of liabilities.................................... 3.1
-----
100.0%
-----
-----
</TABLE>
See Notes to Financial Statements
B-41
<PAGE>
CASH ACCUMULATION TRUST Liquid Assets Fund
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
----------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at amortized cost which approximates market
value $473,818,116
Receivable for Fund shares sold 33,839,417
Interest receivable 3,074,710
Due from manager 6,668
Prepaid expenses and other assets 2,571
------------------
TOTAL ASSETS 510,741,482
------------------
LIABILITIES
Payable for Fund shares reacquired 20,260,229
Payable for investments purchased 986,516
Dividends payable 495,809
Accrued expenses 192,320
------------------
TOTAL LIABILITIES 21,934,874
------------------
NET ASSETS $488,806,608
------------------
------------------
Net assets were comprised of:
Shares of beneficial interest, at $.00001 par value $ 4,888
Paid-in capital in excess of par 488,801,720
------------------
Net assets, September 30, 2000 $488,806,608
------------------
------------------
Net asset value, offering and redemption price per share
($488,806,608 DIVIDED BY 488,806,608 shares of beneficial
interest issued and outstanding) $1.00
------------------
------------------
</TABLE>
See Notes to Financial Statements
B-42
<PAGE>
CASH ACCUMULATION TRUST Liquid Assets Fund
--------------------------------------------------------------------------------
Statement of Operations
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR
ENDED
SEPTEMBER 30, 2000
----------------------------------------------------------------------------------------
<S> <C>
NET INVESTMENT INCOME
Income
Interest $26,136,915
---------------------
Expenses
Management fee 285,000
Transfer agent's fees and expenses 328,000
Registration fees 177,000
Custodian's fees and expenses 83,000
Reports to shareholders 60,000
Audit fee 27,000
Legal fees and expenses 25,000
Trustees' fees and expenses 14,000
Miscellaneous 2,765
---------------------
TOTAL EXPENSES 1,001,765
---------------------
NET INVESTMENT INCOME 25,135,150
---------------------
REALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 4,468
---------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $25,139,618
---------------------
---------------------
</TABLE>
See Notes to Financial Statements
B-43
<PAGE>
CASH ACCUMULATION TRUST Liquid Assets Fund
--------------------------------------------------------------------------------
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------
2000 1999
------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $ 25,135,150 $ 19,068,883
Net realized gain on investment
transactions 4,468 10,652
------------------ ------------------
Net increase in net assets resulting
from operations 25,139,618 19,079,535
------------------ ------------------
DIVIDENDS AND DISTRIBUTIONS (NOTE 1) (25,139,618) (19,079,535)
------------------ ------------------
Fund share transactions (at $1 per share)
Net proceeds from shares sold 5,226,968,463 4,047,261,454
Net asset value of shares issued in
reinvestment of dividends and
distributions 24,658,865 18,772,289
Cost of shares reacquired (5,157,432,481) (4,113,366,470)
------------------ ------------------
Net increase (decrease) in net assets
from Fund share transactions 94,194,847 (47,332,727)
------------------ ------------------
Total increase (decrease) 94,194,847 (47,332,727)
NET ASSETS
Beginning of year 394,611,761 441,944,488
------------------ ------------------
End of year $ 488,806,608 $ 394,611,761
------------------ ------------------
------------------ ------------------
</TABLE>
See Notes to Financial Statements
B-44
<PAGE>
CASH ACCUMULATION TRUST Liquid Assets Fund
--------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
--------------------------------------------------------------------------------
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 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. Payment of dividends is made
monthly. The Fund does not expect to realize long-term capital gains or losses.
B-45
<PAGE>
CASH ACCUMULATION TRUST Liquid Assets Fund
--------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) Cont'd.
--------------------------------------------------------------------------------
NOTE 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"). The subadvisory agreement provides that PIC will
furnish investment advisory services in connection with the management of the
Trust. In connection therewith, PIC is obligated to keep certain books and
records of the Fund. PIFM continues to have responsibility for all investment
advisory services pursuant to the management agreement and supervises PIC's
performance of such services. PIFM pays for the services of PIC, the cost of
compensation of officers of the Trust, occupancy and certain clerical and
bookkeeping costs of the Fund. 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. For the year ended September 30, 2000, the management costs were
.07% of the Fund's average daily net assets.
The Trust has a distribution agreement with Prudential Investment
Management Services LLC ("PIMS"). 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. During the year ended September 30, 2000,
the Fund incurred fees of approximately $313,700 for the services of PMFS. As of
September 30, 2000, $29,800 of such fees were due to PMFS. Transfer agent fees
and expenses in the Statement of Operations include certain out-of-pocket
expenses paid to nonaffiliates.
B-46
<PAGE>
CASH ACCUMULATION TRUST Liquid Assets Fund
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 22,
YEAR ENDED SEPTEMBER 30, 1997(a) THROUGH
-------------------------------- SEPTEMBER 30,
2000 1999 1998
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.00 $ 1.00 $ 1.00
------------- ------------- ---------------
Net investment income and net
realized gains .06 .05 .04
Dividends and distributions to
shareholders (.06) (.05) (.04)
------------- ------------- ---------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
------------- ------------- ---------------
------------- ------------- ---------------
TOTAL RETURN:(b) 6.15% 5.05% 4.52%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $ 488,807 $ 394,612 $ 441,944
Average net assets (000) $ 417,161 $ 386,144 $ 374,141
Ratios to average net assets:
Expenses .24% .27% .21%(c)
Net investment income 6.03% 4.94% 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
B-47
<PAGE>
CASH ACCUMULATION TRUST Liquid Assets Fund
--------------------------------------------------------------------------------
Report of Independent Accountants
--------------------------------------------------------------------------------
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, 2000, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods presented, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
November 22, 2000
B-48
<PAGE>
CASH ACCUMULATION TRUST Liquid Assets Fund
--------------------------------------------------------------------------------
Important Notice for Certain Shareholders
--------------------------------------------------------------------------------
We are required by Massachusetts, Missouri and Oregon to inform you that
dividends which have been derived from interest on federal obligations are not
taxable to shareholders providing the mutual fund meets certain requirements
mandated by the respective state's taxing authorities. We are pleased to report
that 2% of the dividends paid by the Cash Accumulation Trust Liquid Assets Fund
qualify for such deduction.
For more detailed information regarding your state and local taxes, you
should contact your tax advisor or the state/local taxing authorities.
B-49
<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. Mood'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.
FITCH IBCA--The following summarizes the ratings used by Fitch IBCA for
long-term debt:
"AAA": Highest credit quality. "AAA" ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely affected by
foreseeable events.
"AA": Very high credit quality. "AA" ratings denote a very low
expectation of credit risk. They indicate very strong capacity for timely
payment of financial commitments. This capacity is not significantly
vulnerable to foreseeable events.
"A": High credit quality. "A" ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more vulnerable to
changes in circumstances or in economic conditions than is the case for
higher ratings.
"BBB": Good credit quality. "BBB" ratings indicate that there is
currently a low expectation of credit risk. The capacity for timely
payment of financial commitments is considered adequate, but adverse
changes in circumstances and in economic conditions are more likely to
impair this capacity. This is the lowest investment grade category.
"+" or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the "AAA" long-term rating
category or to categories below "CCC".
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
I-I
<PAGE>
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.
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.
The following summarizes the ratings used by Fitch IBCA for short-term debt,
which apply to most obligations with maturities of less than 12 months, or up to
three years for U.S. public finance securities:
"F1": Highest credit quality. Indicates the strongest capacity for timely
payment of financial commitments; may have an added "+" to denote any
exceptionally strong credit feature.
"F2": Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in the case
of the higher ratings.
"F3": Fair credit quality. The capacity for timely payment of financial
commitments is adequate, however, near-term adverse changes could result in a
reduction to non-investment grade.
"B": Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in financial and
economic conditions.
"C": High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
"D": Default. Denotes actual or imminent payment default.
"+" or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to short-term ratings other than
"F1".
I-II
<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 incorporated by reference to
Exhibit (a)(i) to Post-Effective Amendment No. 26 to the Registration
Statement on Form N-1A (2-91889) filed January 20, 1999.
(ii) Amendment No. 2 to Agreement and Declaration of Trust of the Trust
dated August 9, 1984 incorporated by reference to Exhibit (a)(ii) to
Post-Effective Amendment No. 26 to the Registration Statement on
Form N-1A (2-91889) filed January 20, 1999.
(iii) Amendment No. 3 to Agreement and Declaration of Trust of the Trust
dated September 11, 1984 incorporated by reference to Exhibit (a)(iii) to
Post-Effective Amendment No. 26 to the Registration Statement on
Form N-1A (2-91889) filed January 20, 1999.
(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
incorporated by reference to Exhibit (c)(i) to Post-Effective Amendment
No. 26 to the Registration Statement on Form N-1A (2-91889) filed
January 20, 1999.
(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.
(iii) Instruments defining rights of security holders.*
(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.
(v) Amendment dated November 1, 2000 to Subadvisory Agreement between
Prudential Investments Fund Management LLC and the Prudential Investment
Corporation.*
C-1
<PAGE>
(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.
(f) Not applicable.
(g) (i) 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.
(ii) Amendment dated February 22, 1999 to Custodian Contract.*
(h) (i) 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.
(ii) Amendment dated August 24, 1999 to Transfer Agency and Service
Agreement between the Registrant and Prudential Mutual Fund Services
LLC.*
(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.
(j) Consent of Independent Accountants.*
(k) Not applicable.
(l) Not applicable.
(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) Not applicable.
(o) Reserved.
(p) (i) Code of Ethics of the Registrant.*
(ii) Code of Ethics of Prudential Investment Corporation, Prudential
Investments Fund Management LLC and Prudential Investment Management
Services LLC.*
------------------------
* Filed herewith.
C-2
<PAGE>
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.
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.
(a) 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).
C-3
<PAGE>
The business and other connections of PIFM's directors and principal
executive officers within the last two fiscal years 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>
Robert F. Gunia Executive Vice President and Executive Vice President and Chief
Chief Administrative Officer Administrative Officer, PIFM; Vice President,
Prudential; President, Prudential Investment
Management Services LLC (PIMS)
William V. Healey Executive Vice President, Executive Vice President, Chief Legal Officer
Chief Legal Officer and and Secretary, PIFM; Vice President and
Secretary Associate General Counsel, Prudential; Executive
Vice President, Chief Legal Officer and
Secretary, Prudential Mutual Fund Services LLC;
Senior Vice President, Chief Legal Officer and
Secretary, PIMS
David R. Odenath, Jr. Officer in Charge, President, Officer in Charge, President, Chief Executive
Chief Executive Officer and Officer and Chief Operating Officer, PIFM;
Chief Operating Officer Senior Vice President, The Prudential Insurance
Company of America (Prudential)
Stephen Pelletier Executive Vice President Executive Vice President, PIFM
Judy A. Rice Executive Vice President Executive Vice President, PIFM
Lynn M. Waldvogel Executive Vice President Executive Vice President, PIFM
</TABLE>
(b) The Prudential Investment Corporation (PIC)
See "How the Fund is Managed" in the Prospectus constituting Part A of this
Post-Effective Amendment to the Registration Statement and "Investment Advisory
and Other Services" 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>
John R. Strangfeld, Jr. Chairman of the Board, Chief Executive Officer of Prudential Securities
President and Chief Incorporated (since October 2000), President of
Executive Officer and Prudential Global Asset Management Group; Senior
Director Vice President of Prudential
Bernard Winograd Senior Vice President and Chief Executive Officer, Prudential Real Estate
Director Investors; Senior Vice President and Director,
PIC
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITER.
(a) Prudential Investment Management Services LLC is distributor for
Prudential Government Securities Trust, The Target Portfolio Trust, Cash
Accumulation Trust, COMMAND Government Fund, COMMAND Money Fund, COMMAND
Tax-Free Fund, Global Utility Fund, Inc., Nicholas-Applegate Fund, Inc.
(Nicholas-Applegate Growth Equity Fund), Prudential Balanced Fund, Prudential
California Municipal Fund, Prudential Diversified Bond Fund, Inc., Prudential
Diversified Funds, Prudential Emerging Growth Fund, Inc., Prudential Equity
Fund, Inc., Prudential Europe Growth Fund, Inc., Prudential Global Genesis Fund,
Inc., Prudential Global Total Return Fund, Inc., Prudential High Yield Fund,
Inc., Prudential Index Series Fund, Prudential MoneyMart Assets Inc., Prudential
Natural Resources Fund, Inc., Prudential Government Income Fund, Inc.,
Prudential High Yield Total Return Fund, Inc., Prudential International Bond
Fund, Inc., Prudential Institutional Liquidity Portfolio, Inc., The Prudential
Investment Portfolios, Inc., Prudential Mid-Cap Value Fund, Prudential Municipal
Bond Fund, Prudential Municipal Series Fund, Prudential National Municipals
Fund, Inc., Prudential Pacific Growth Fund, Inc., Prudential Real Estate
Securities Fund, Prudential Sector Funds, Inc., Prudential Small-Cap Quantum
Fund, Inc., Prudential Small Company Fund, Inc., Prudential Special Money
C-4
<PAGE>
Market Fund, Inc., Prudential Short-Term Corporate Bond Fund, Inc., Prudential
Tax-Free Money Fund, Inc., Prudential Tax-Managed Funds, Prudential 20/20, Focus
Fund, Prudential Value Fund, Prudential World Fund, Inc., Strategic Partners
Series and Target Funds.
(b) Information concerning the Directors and officers of PIMS is set forth
below:
<TABLE>
<CAPTION>
NAME (1) POSITIONS AND OFFICES WITH UNDERWRITER POSITIONS AND OFFICES WITH REGISTRANT
-------- -------------------------------------- -------------------------------------
<S> <C> <C>
Margaret Deverell Vice President and Chief Financial None
Officer
Kevin Frawley Senior Vice President and Chief None
Compliance Officer
Robert F. Gunia President Vice President and Director
William V. Healey Senior Vice President, Secretary and Assistant Secretary
Chief Legal Officer
John R. Strangfeld, Jr. Executive Vice President President and Director
</TABLE>
------------------------
(1) The address of each person named above is Prudential Plaza, 751 Broad
Street, Newark, New Jersey 07102.
(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, 194 Wood Avenue South, Iselin, New Jersey 08853. 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-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement under Rule 485(b) under the Securities Act of 1933 and
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 November 30, 2000.
CASH ACCUMULATION TRUST
By: /s/ DAVID R. ODENATH
----------------------------------------
(David R. Odenath, 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/ DELAYNE D. GOLD
------------------------------------------- Trustee November 30, 2000
Delayne D. Gold
/s/ ROBERT F. GUNIA
------------------------------------------- Trustee November 30, 2000
Robert F. Gunia
/s/ ROBERT E. LABLANC
------------------------------------------- Trustee November 30, 2000
Robert E. LaBlanc
/s/ DAVID R. ODENATH
------------------------------------------- Trustee and President November 30, 2000
David R. Odenath
/s/ ROBIN B. SMITH
------------------------------------------- Trustee November 30, 2000
Robin B. Smith
/s/ STEPHEN STONEBURN
------------------------------------------- Trustee November 30, 2000
Stephen Stoneburn
/s/ NANCY H. TEETERS
------------------------------------------- Trustee November 30, 2000
Nancy H. Teeters
/s/ CLAY T. WHITEHEAD
------------------------------------------- Trustee November 30, 2000
Clay T. Whitehead
/s/ GRACE C. TORRES Treasurer and Principal
------------------------------------------- Financial and Accounting November 30, 2000
Grace C. Torres 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 incorporated by reference to
Exhibit (a)(i) to Post-Effective Amendment No. 26 to the Registration
Statement on Form N-1A (2-91889) filed January 20, 1999.
(ii) Amendment No. 2 to Agreement and Declaration of Trust of the Trust
dated August 9, 1984 incorporated by reference to Exhibit (a)(ii) to
Post-Effective Amendment No. 26 to the Registration Statement on
Form N-1A (2-91889) filed January 20, 1999.
(iii) Amendment No. 3 to Agreement and Declaration of Trust of the Trust
dated September 11, 1984 incorporated by reference to Exhibit (a)(iii) to
Post-Effective Amendment No. 26 to the Registration Statement on
Form N-1A (2-91889) filed January 20, 1999.
(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
incorporated by reference to Exhibit (c)(i) to Post-Effective Amendment
No. 26 to the Registration Statement on Form N-1A (2-91889) filed
January 20, 1999.
(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.
(iii) Instruments defining rights of security holders.*
(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.
(v) Amendment dated November 1, 2000 to Subadvisory Agreement between
Prudential Investments Fund Management LLC and the Prudential Investment
Corporation.*
(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.
<PAGE>
(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.
(f) Not applicable.
(g) (i) 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.
(ii) Amendment dated February 22, 1999 to Custodian Contract.*
(h) (i) 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.
(ii) Amendment dated August 24, 1999 to Transfer Agency and Service
Agreement between the Registrant and Prudential Mutual Fund Services
LLC.*
(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.
(j) Consent of Independent Accountants.*
(k) Not applicable.
(l) Not applicable.
(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) Not applicable.
(o) Reserved.
(p) (i) Code of Ethics of the Registrant.*
(ii) Code of Ethics of Prudential Investment Corporation, Prudential
Investments Fund Management LLC and Prudential Investment Management
Services LLC.*
------------------------
* Filed herewith
