Prudential
Government
Securities
Trust
(ARTWORK)
Intermediate Term Series
Money Market Series
U.S. Treasury
Money Market Series
Semi-Annual Report May 31, 1994
Prudential Mutual Funds
Building Your Future
On Our Strength (LOGO)
<PAGE>
LETTER TO
SHAREHOLDERS
------------------------------
July 11, 1994
Dear Shareholder:
Over the six months ended May 31, 1994, rising interest rates have benefitted
money market funds, which outperformed most other mutual fund categories during
this period. However, falling bond prices have hampered longer-term bond
investment returns. Throughout the last six months, the Money Market Series and
the U.S. Treasury Money Market Series helped investors take advantage of
increasing interest rates, while the Intermediate Term Series provided returns
within market averages.
Rates Rose Rapidly
During January, interest rates began to rise in anticipation of a change in
Federal Reserve monetary policy. In February, the Federal Reserve started to
increase short-term interest rates for the first time in five years as a
preemptive strike against future inflation. From February to May, the Fed moved
to increase the Fed funds rate, (the rate banks charge each other for overnight
loans) from 3.0% to 4.25%. The Fed also raised the discount rate (the rate it
charges to loan banks money) to 3.5% from 3%.
While the Fed's actions only directly influence short-term rates, interest
rates on intermediate and long-term bonds also rose more than a percentage
point. Bond investors, anticipating higher inflation as a result (inflation
erodes the value of fixed-income securities), began to demand higher yields
for bonds. The yield on the two-year U.S. Treasury rose to 6.0% on May 31
from 4.2% on November 30, while the five-year jumped to 6.8% from 5.2% and the
10-year increased to 7.2% from 5.8% over the same time horizon.
Money Market Series
The Money Market Series seeks high current income, preservation of capital
and maintenance of liquidity from a portfolio of money market instruments
issued by the U.S. government, its agencies and instrumentalities.
-1-
<PAGE>
MONEY MARKET SERIES PERFORMANCE
As of May 31, 1994
<TABLE>
<CAPTION>
Weighted
7-Day Avg. Mat. Net Asset Total
Current Yield (WAM) Value (NAV) Net Assets
<S> <C> <C> <C> <C>
Money Market Series 3.18% 39 days $1.00 $701 million
Donoghue's Money
Fund Averages (Gov't)* 3.35% 41 days $1.00 N/A
</TABLE>
*This is the average 7-day yield, WAM and NAV of 201 funds in Donoghue's
Money Fund Averages/U.S. Government Category.
An investment in the Series is neither insured nor guaranteed by the U.S.
government and there can be no assurance that it will be able to maintain a
stable net asset value of $1.00 per share.
As Rates Rose, We Reduced Maturities
For the first time since August 1992, the Series' 7-day current yield has
risen above 3%. On November 30, 1993, the 7-day yield was 2.60%. In this
period of rising rates, we substantially reduced the Series' weighted average
maturity (WAM) to 39 days on May 31, 1994 from 64 days on November 30, 1993,
so we could reinvest funds more quickly at higher rates.
In addition to shortening the Series' WAM, we also invested in more
repurchase agreements, which were increased to 47.8% of net assets at the end
of the period, from 40.5% on November 30. A repurchase agreement is a contract
in which the Series agrees to buy securities only to sell them back at a later
date, at a specific price. These are very high quality, short-term investments
fully collateralized by U.S. government agency debt. These positions usually
mature in a week or less and enable us to capture higher interest rates as they
rise, because we can invest the proceeds at current interest rates.
Intermediate-Term Series
The Intermediate-Term Series seeks high income consistent with providing
reasonable principal safety by investing primarily in a diversified portfolio
of short- to intermediate-term (up to 10 years) securities issued by the U.S.
government, its agencies or instrumentalities.
The Series' net asset value (NAV) fell to $9.47 on May 31 from $10.06 on
November 30, 1993. At the same time, the Series' 30-day SEC yield rose above
4% for the first time since February 1993. On May 31, the Series' 30-day SEC
yield was 4.79%, up from 3.93% on November 30.
-2-
<PAGE>
INTERMEDIATE TERM SERIES PERFORMANCE
As of May 31, 19941
<TABLE>
<CAPTION>
6 Month One Year Five Year Ten Year Since 9/22/82
<S> <C> <C> <C> <C> <C>
Intermediate
Term Series -2.5% 0.4% 43.9% 148.7% 176.0%
Lipper Int. U.S.
Govt Bond Fund Avg.* -3.3% 0.0% 45.3% 148.4% N/A
</TABLE>
AVERAGE TOTAL RETURNS
As of June 30, 19942
<TABLE>
<CAPTION>
One Year Five Year Ten Year Since 9/22/82
<S> <C> <C> <C> <C>
Intermediate Term Series -1.0% 7.1% 9.2% 8.7%
</TABLE>
1Source: Lipper Analytical Services. Past performance is no guarantee of
future results. Investment return and principal will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Shares of this Series are sold without an initial or contingent deferred
sales charge.
2Source: Prudential Mutual Fund Management, Inc.
*These are the average returns of 69 funds in the Intermediate U.S.
Government Bond Fund category for six months, 60 funds for one year, 19 funds
for five years and 4 funds for 10 years, as determined by Lipper Analytical
Services, Inc.
Investment Strategy
This Series invests in securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities with maturities of 10 years or less. During
the six month period ending May 31, 1994, the Series has maintained an effective
maturity of about 3.5 to 4.0 years. Although share prices did fall, bonds in
this maturity range performed better during the period than long-term bonds. As
rates rose, our primary objective was to attempt to reduce net asset value
volatility. Our strategy was three-fold:
1) We shifted some assets across U.S. government sectors that were less
vulnerable to rising rates. For example, we added mortgage-backed securities
in December, including GNMA adjustable rate mortgages, then sold these
instruments in February after the Fed raised short-term interest rates.
Mortgages generally pay about one percentage point higher than U.S. Treasuries
of comparable maturities. We concentrated on the 7.5% to 8.5% coupon range
because they are less susceptible to prepayments than higher-coupon mortgages
and less sensitive to interest rate risk than lower-coupon mortgages.
2) We "barbelled" short-term securities and bonds with 7- to 10- year
maturities. This action essentially helped to balance low-volatility,
low-income investments with higher income, more price-sensitive instruments.
-3-
<PAGE>
3) Finally, we raised our net cash position to 12% of net assets as of May 31,
1994, in contrast to a fully invested portfolio on November 30, 1993. The
accompanying pie chart shows the portfolio breakdown of the Series as of May
31, 1994.
Intermediate Term Series
(CHART)
As a result, the Intermediate Term Series, which has paid a monthly dividend
of $0.0575 per share since November 1993 will decrease its monthly dividend
rate effective with the dividend payable on August 19, 1994. The new monthly
dividend rate of $0.0450 per share more accurately reflects the current
earnings rate of the Series.
U.S. Treasury Money Market Series
The U.S. Treasury Money Market Series seeks high current income, consistent
with preservation of capital and maintenance of liquidity from a portfolio of
U.S. Treasury obligations with maturities of 13 months or less. During the
last six months, the U.S. Treasury Money Market Series produced competitive
yields.
MONEY MARKET SERIES PERFORMANCE
As of May 31, 1994
<TABLE>
<CAPTION>
Weighted
7-Day Avg. Mat. Net Asset Total
Current Yield (WAM) Value (NAV) Net Assets
<S> <C> <C> <C> <C>
U.S. Treasury Series 3.20% 51 days $1.00 $309 million
Donoghue's Money
Fund Averages (Gov't)* 3.22% 47 days $1.00 N/A
</TABLE>
*This is the average 7-day yield, WAM and NAV of 201 funds in Donoghue's
Money Fund Averages/U.S. Government Category.
An investment in the Series is neither insured nor guaranteed by the U.S.
government and there can be no assurance that it will be able to maintain a
stable net asset value of $1.00 per share.
The last time the Series' 7-day current yield was at least 3% was in July
1992.
As Rates Increase, Maturity Decreases
Anticipating the Federal Reserve's actions to increase short-term interest
rates, we shortened the Series' weighted average maturity from 67 days on
November 30, 1993 to 51 days on May 31, 1994. We shortened the Series' WAM so
that we could take advantage of higher short-term interest rates more quickly.
-4-
<PAGE>
Outlook
After raising short-term rates several times over the past few months, the
Fed is now evaluating its actions and their impact on the economy. Nonetheless,
increases in commodity prices and lower unemployment levels, along with a
weaker dollar may continue to concern the Fed and the fixed-income markets. But
inflationary expectations should remain under control, as long as the Fed moves
swiftly if inflationary problems develop further.
As always, we appreciate having you as a shareholder in the Prudential
Government Securities Trust and are pleased to report our activities to you.
Sincerely,
Lawrence C. McQuade Bernard D. Whitsett, II
President Portfolio Manager
Money Market Series
David Graham John H. Anderson Jr.
Portfolio Manager Portfolio Manager
Intermediate-Term Series US Treasury Money Market Series
-5-
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST Portfolio of Investments
MONEY MARKET SERIES May 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description(a) (Note 1)
<C> <S> <C>
Federal Farm Credit Bank--7.4%
$ 5,000 3.64%, 8/1/94............... $ 5,001,389
16,600 4.40%, 8/23/94, F.R.N....... 16,585,629
10,000 3.40%, 9/1/94............... 9,998,771
7,000 8.625%, 9/1/94.............. 7,086,666
3,000 3.48%, 11/1/94.............. 2,998,561
9,400 3.49%, 11/1/94.............. 9,260,574
1,000 5.60%, 2/14/95.............. 1,010,955
------------
51,942,545
------------
Federal Home Loan Bank--12.7%
15,000 3.62%, 6/8/94, F.R.N........ 14,955,141
21,000 2.819%, 6/23/94............. 21,000,000
1,150 8.625%, 6/27/94............. 1,154,411
4,775 8.30%, 7/25/94.............. 4,808,344
10,500 8.60%, 8/25/94.............. 10,622,315
8,400 6.58%, 9/25/94.............. 8,479,993
7,000 3.81%, 10/19/94............. 7,009,940
3,575 8.30%, 10/25/94............. 3,640,914
250 5.89%, 11/25/94............. 252,713
1,000 8.05%, 12/26/94............. 1,025,118
7,300 8.40%, 1/25/95.............. 7,523,649
8,500 3.48%, 2/3/95............... 8,489,359
------------
88,961,897
------------
Federal Home Loan Mortgage Corp.--1.4%
10,000 3.575%, 6/15/94, F.R.N...... 10,000,000
------------
Federal National Mortgage
Association--8.7%
6,415 8.60%, 6/10/94.............. 6,422,081
525 7.45%, 7/11/94.............. 527,361
4,500 8.90%, 8/10/94.............. 4,545,560
7,465 3.39%, 9/30/94.............. 7,379,943
Federal National Mortgage
Association--cont'd
$ 13,525 10.10%, 10/1/94............. $ 13,844,995
17,000 3.47%, 10/3/94.............. 16,796,812
11,000 9.25%, 11/10/94............. 11,244,010
------------
60,760,762
------------
Student Loan Marketing
Association--12.7%
6,000 4.48%, 6/7/94, F.R.N........ 6,000,000
20,000 4.51%, 6/7/94, F.R.N........ 20,000,000
10,000 4.55%, 6/7/94, F.R.N........ 10,000,000
17,000 4.68%, 6/7/94, F.R.N........ 17,059,584
5,000 4.93%, 6/7/94, F.R.N........ 5,021,843
1,180 3.62%, 6/30/94.............. 1,180,409
24,000 3.83%, 6/30/94, F.R.N....... 24,000,000
6,000 7.50%, 7/11/94.............. 6,025,446
------------
89,287,282
------------
Tennessee Valley Authority--6.3%
15,000 3.65%, 6/1/94............... 15,000,000
25,335 8.25%, 10/1/94.............. 25,722,437
3,500 8.75%, 10/1/94.............. 3,713,908
------------
44,436,345
------------
United States Treasury Bond--2.6%
18,000 8.75%, 8/15/94.............. 18,186,168
------------
Repurchase Agreements--47.8%
71,900 Merrill Lynch, Pierce,
Fenner & Smith, Inc.,
4.24%, dated 5/25/94, due
6/1/94 in the amount of
$71,959,278 (cost
$71,900,000; the value of
the collateral including
accrued
interest is
$73,560,734).............. 71,900,000
</TABLE>
-6- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
MONEY MARKET SERIES
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description(a) (Note 1)
<C> <S> <C>
Repurchase Agreements--cont'd
$ 13,364 Nomura Securities
International, Inc.,
4.15%, dated 5/27/94,
due 6/2/94 in the amount
of $13,373,243 (cost
$13,364,000; the value of
the collateral
including accrued interest
is $13,633,823)........... $ 13,364,000
10,000 Goldman Sachs & Co., 4.28%,
dated 5/31/94, due 6/2/94
in the amount of $10,002,378
(cost $10,000,000; the
value of the collateral
including accrued interest
is $10,200,000)............ 10,000,000
70,970 Morgan Stanley & Co., 4.30%,
dated 5/31/94, due 6/2/94
in the amount of $70,986,954
(cost $70,970,000; the
value of the collateral
including accrued interest
is $72,791,878)............ 70,970,000
32,133 Bear, Stearns & Co., 4.28%,
dated 5/31/94, due 6/6/94
in the amount of
$32,155,922 (cost
$32,133,000; the value of
the collateral including
accrued interest is
$33,144,366)................ 32,133,000
57,610 Nomura Securities
International, Inc.,
4.28%, dated 5/31/94,
due 6/6/94 in the amount
of $57,651,095 (cost
$57,610,000; the value of
the collateral
including accrued interest
is $58,766,788)........... 57,610,000
$ 70,970 UBS Securities Inc., 4.35%,
dated 5/31/94, due 6/7/94
in the amount of
$71,030,029 (cost
$70,970,000; the value of
the collateral including
accrued
interest is
$72,391,359).............. $ 70,970,000
7,843 Bear, Stearns & Co., 4.35%,
dated 5/18/94, due 6/13/94
in the amount of
$7,867,640 (cost
$7,843,000; the value of
the
collateral including
accrued
interest is $7,973,140)... 7,843,000
------------
334,790,000
------------
Total Investments--99.6%
(amortized cost
$698,364,999*)............ 698,364,999
Other assets in excess of
liabilities--0.4%........... 2,551,990
------------
Net Assets--100%............ $700,916,989
------------
------------
</TABLE>
- ---------------
(a) The following abbreviations are used in portfolio descriptions:
F.H.L.M.C.--Federal Home Loan Mortgage Corporation.
F.N.M.A.--Federal National Mortgage Association.
F.R.N.--Floating Rate Note.
* Federal income tax basis of portfolio securities is the same as for
financial reporting purposes.
-7- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST Portfolio of Investments
INTERMEDIATE TERM SERIES May 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description (Note 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--88.4%
Federal National Mortgage
Association--11.8%
$ 36,000 8.00%, 1/1/99............... $ 35,808,532
------------
United States Treasury Notes--76.6%
65,000(D) 4.00%, 1/31/96.............. 63,141,650
17,000(D) 4.75%, 2/15/97.............. 16,357,230
30,000(D) 8.50%, 4/15/97.............. 31,664,100
61,000(D) 5.125%, 6/30/98............. 57,740,160
28,000(D) 9.25%, 8/15/98.............. 30,616,320
25,000 5.875%, 2/15/04............. 22,769,500
10,000 7.25%, 5/15/04.............. 10,062,500
------------
232,351,460
------------
Total long-term investments
(cost $272,050,876)....... 268,159,992
------------
SHORT-TERM INVESTMENT--22.7%
Joint Repurchase Agreement Account,
68,732 4.23%, 6/1/94; Note 5
(cost $68,732,000)........ 68,732,000
------------
Total Investments--111.1%
(amortized cost
$340,782,876; Note 4)..... 336,891,992
Liabilities in excess of
other
assets--(11.1%)........... (33,531,795)
------------
Net Assets--100%............ $303,360,197
------------
------------
</TABLE>
- ---------------
(D) Asset segregated for dollar rolls.
-8- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST Portfolio of Investments
U.S. TREASURY MONEY MARKET SERIES May 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description (Note 1)
<C> <S> <C>
United States Treasury Bills--81.4%
$ 4,385 3.31%, 6/2/94............... $ 4,384,597
10,000 3.48%, 6/2/94............... 9,999,033
10,000 3.525%, 6/2/94.............. 9,999,021
3,260 3.54%, 6/2/94............... 3,259,679
2,840 3.58%, 6/2/94............... 2,839,718
10,000 3.605%, 6/2/94.............. 9,998,999
10,000 4.05%, 6/2/94............... 9,998,875
5,000 3.535%, 6/9/94.............. 4,996,072
20,870 3.60%, 6/9/94............... 20,853,304
5,000 3.45%, 6/16/94.............. 4,992,812
5,000 3.48%, 6/16/94.............. 4,992,750
5,450 3.505%, 6/16/94............. 5,442,041
5,000 3.52%, 6/16/94.............. 4,992,667
1,275 3.83%, 6/23/94.............. 1,272,016
10,000 3.73%, 6/30/94.............. 9,969,953
4,940 3.80%, 7/7/94............... 4,921,228
10,000 3.82%, 7/7/94............... 9,961,800
4,860 3.56%, 7/14/94.............. 4,839,334
10,000 3.86%, 7/14/94.............. 9,953,894
8,285 3.66%, 7/21/94.............. 8,242,885
5,000 3.735%, 7/21/94............. 4,974,062
2,000 3.875%, 7/28/94............. 1,987,729
5,000 3.995%, 7/28/94............. 4,968,373
1,765 4.02%, 7/28/94.............. 1,753,766
1,380 3.91%, 8/4/94............... 1,370,407
10,000 4.035%, 8/4/94.............. 9,928,267
15,000 4.04%, 8/4/94............... 14,892,267
5,000 4.07%, 8/11/94.............. 4,959,865
7,400 3.74%, 8/18/94.............. 7,340,035
United States Treasury Bills--cont'd
$ 3,903 4.20%, 8/18/94.............. $ 3,867,483
4,810 3.775%, 8/25/94............. 4,767,128
5,000 4.21%, 8/25/94.............. 4,950,299
10,000 3.73%, 9/1/94............... 9,904,678
2,230 3.785%, 9/8/94.............. 2,206,788
5,000 3.81%, 9/29/94.............. 4,936,500
10,983 4.35%, 10/6/94.............. 10,814,457
7,560 4.355%, 10/6/94............. 7,443,852
5,000 4.41%, 10/6/94.............. 4,922,212
------------
251,898,846
------------
United States Treasury Notes--18.4%
21,045 5.00%, 6/30/94.............. 21,062,921
5,867 8.00%, 7/15/94.............. 5,898,875
5,000 4.25%, 7/31/94.............. 5,006,110
1,800 4.25%, 7/31/94.............. 1,800,758
2,930 6.875%, 8/15/94............. 2,947,168
9,110 12.625%, 8/15/94............ 9,263,113
6,000 9.50%, 10/15/94............. 6,104,828
2,660 6.00%, 11/15/94............. 2,673,783
2,000 8.25%, 11/15/94............. 2,041,213
------------
56,798,769
------------
Total Investments--99.8%
(amortized cost
$308,697,615*)............ 308,697,615
Other assets in excess of
liabilities--0.2%........... 562,496
------------
Net Assets--100%............ $309,260,111
------------
------------
</TABLE>
- ---------------
* Federal income tax basis of portfolio securities is the same as for financial
reporting purposes.
-9- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
Statement of Assets and Liabilities
May 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
US TREASURY
MONEY MONEY
MARKET INTERMEDIATE MARKET
Assets SERIES TERM SERIES SERIES
<S> <C> <C> <C>
------------ ------------ ------------
Investments, at value (cost $698,364,999, $340,782,876 and
$308,697,615, respectively)................................... $698,364,999 $336,891,992 $308,697,615
Cash............................................................ -- 26,397 1,025
Receivable for Series shares sold............................... 7,609,157 264,854 3,883,277
Interest receivable............................................. 4,292,275 3,984,080 1,200,016
Deferred expenses and other assets.............................. 24,152 9,975 27,080
------------ ------------ ------------
Total assets................................................ 710,290,583 341,177,298 313,809,013
------------ ------------ ------------
Liabilities
Payable for investments purchased............................... -- 36,090,000 --
Payable for Series shares reacquired............................ 8,319,470 864,521 4,093,517
Dividends payable............................................... 339,989 552,671 167,371
Management fee payable.......................................... 246,753 104,705 106,679
Bank overdraft.................................................. 164,761 -- --
Distribution fee payable........................................ 42,010 143,909 18,213
Accrued expenses and other liabilities.......................... 260,611 61,295 163,122
------------ ------------ ------------
Total liabilities........................................... 9,373,594 37,817,101 4,548,902
------------ ------------ ------------
Net Assets...................................................... $700,916,989 $303,360,197 $309,260,111
------------ ------------ ------------
------------ ------------ ------------
Net assets were comprised of:
Shares of beneficial interest, $.01 par value................... $ 7,009,170 $ 320,216 $ 3,092,601
Paid-in capital in excess of par................................ 693,907,819 382,487,496 306,167,510
------------ ------------ ------------
700,916,989 382,807,712 309,260,111
Distributions in excess of net investment income................ -- (477,108 ) --
Accumulated net realized loss................................... -- (75,079,523 ) --
Net unrealized depreciation of investments...................... -- (3,890,884 ) --
------------ ------------ ------------
Net assets, May 31, 1994........................................ $700,916,989 $303,360,197 $309,260,111
------------ ------------ ------------
------------ ------------ ------------
Shares of beneficial interest issued and outstanding............ 700,916,989 32,021,579 309,260,111
------------ ------------ ------------
------------ ------------ ------------
Net asset value................................................. $1.00 $9.47 $1.00
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See Notes to Financial Statements.
-10-
<PAGE>
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
Statement of Operations
Six Months Ended May 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
US TREASURY
MONEY MONEY
MARKET INTERMEDIATE MARKET
Net Investment Income SERIES TERM SERIES SERIES
<S> <C> <C> <C>
----------- ------------ -----------
Income
Interest...................................................... $13,981,667 $10,646,499 $5,655,320
Income from securities loaned................................. -- 9,115 --
----------- ------------ -----------
13,981,667 10,655,614 5,655,320
----------- ------------ -----------
Expenses
Management fee................................................ 1,610,997 672,365 683,525
Distribution fee.............................................. 503,436 363,553 213,602
Transfer agent's fees and expenses............................ 650,000 182,000 41,000
Custodian's fees and expenses................................. 104,000 39,500 23,000
Registration fees............................................. 48,000 30,000 30,500
Reports to shareholders....................................... 42,000 23,500 14,000
Audit fee..................................................... 21,000 18,000 20,000
Insurance expense............................................. 12,000 4,800 4,200
Trustees' fees................................................ 7,500 7,500 7,500
Legal fees.................................................... 7,000 7,000 7,000
Amortization of deferred organization expenses................ -- -- 4,000
Miscellaneous................................................. 4,586 3,552 2,322
----------- ------------ -----------
Total expenses.............................................. 3,010,519 1,351,770 1,050,649
----------- ------------ -----------
Net investment income........................................... 10,971,148 9,303,844 4,604,671
----------- ------------ -----------
Realized and Unrealized Gain (Loss) on Investment Transactions
Net realized gain (loss) on investment transactions............. (5,413) (7,281,743 ) 26,184
Net change in unrealized depreciation of investments............ -- (10,641,376 ) --
----------- ------------ -----------
Net gain (loss) on investments.................................. (5,413) (17,923,119 ) 26,184
----------- ------------ -----------
Net Increase (Decrease) in Net Assets Resulting from
Operations...................................................... $10,965,735 $(8,619,275 ) $4,630,855
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
See Notes to Financial Statements.
-11-
<PAGE>
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
US TREASURY
MONEY MARKET INTERMEDIATE MONEY MARKET
SERIES TERM SERIES SERIES
--------------------------------- ---------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six months Six months Six months
ended Year ended ended Year ended ended Year ended
Increase (Decrease) May 31, November 30, May 31, November 30, May 31, November 30,
in Net Assets 1994 1993 1994 1993 1994 1993
--------------- --------------- ------------- ------------ -------------- ---------------
Operations
Net investment income... $ 10,971,148 $ 24,381,889 $ 9,303,844 $ 21,862,611 $ 4,604,671 $ 6,812,533
Net realized gain (loss)
on investment
transactions.......... (5,413) 240,813 (7,281,743) (234,826) 26,184 141,643
Net change in unrealized
appreciation/depreciation
of investments........ -- -- (10,641,376) 3,085,195 -- --
--------------- --------------- ------------- ------------ -------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 10,965,735 24,622,702 (8,619,275) 24,712,980 4,630,855 6,954,176
--------------- --------------- ------------- ------------ -------------- ---------------
Net equalization credits
(debits)................ -- -- (3,335) 4,795 -- --
--------------- --------------- ------------- ------------ -------------- ---------------
Dividends and
distributions to
shareholders:
Dividends to
shareholders.......... (10,965,735) (24,622,702) (9,303,844) (21,877,946) (4,630,855) (6,954,176)
Dividends in excess of
net investment
income................ -- -- (2,545,390) -- -- --
Tax return of capital
distribution.......... -- -- -- (702,835) -- --
--------------- --------------- ------------- ------------ -------------- ---------------
Total dividends and
distributions to
shareholders............ (10,965,735) (24,622,702) (11,849,234) (22,580,781) (4,630,855) (6,954,176)
--------------- --------------- ------------- ------------ -------------- ---------------
Series share transactions*
Net proceeds from shares
subscribed............ 1,150,994,565 2,705,725,541 76,078,295 191,340,556 1,005,224,384 1,255,246,290
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions......... 10,445,176 23,600,594 8,095,866 14,618,822 4,283,569 6,581,355
Cost of shares
reacquired............ (1,380,025,350) (2,836,010,964) (108,286,267) (163,603,524) (985,225,432) (1,210,449,881)
--------------- --------------- ------------- ------------ -------------- ---------------
Net increase (decrease)
in net assets from
Series share
transactions.......... (218,585,609) (106,684,829) (24,112,106) 42,355,854 24,282,521 51,377,764
--------------- --------------- ------------- ------------ -------------- ---------------
Total increase
(decrease)................ (218,585,609) (106,684,829) (44,583,950) 44,492,848 24,282,521 51,377,764
Net Assets
Beginning of period..... 919,502,598 1,026,187,427 347,944,147 303,451,299 284,977,590 233,599,826
--------------- --------------- ------------- ------------ -------------- ---------------
End of period........... $ 700,916,989 $ 919,502,598 $ 303,360,197 $347,944,147 $ 309,260,111 $ 284,977,590
--------------- --------------- ------------- ------------ -------------- ---------------
--------------- --------------- ------------- ------------ -------------- ---------------
</TABLE>
- ---------------
*At $1.00 per share for the Money Market Series and the U.S. Treasury Money
Market Series.
See Notes to Financial Statements.
-12-
<PAGE>
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
Notes to Financial Statements
(Unaudited)
Prudential Government Securities Trust (the ``Fund'') is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Fund consists of three series--the Money Market Series, the
Intermediate Term Series and the U.S. Treasury Money Market Series; the monies
of each series are invested in separate, independently managed portfolios.
Note 1. Significant The following is a summary
Accounting Policies of the significant accounting
policies followed by the Fund in the preparation
of its financial statements.
Securities Valuations: The Money Market Series and U.S. Treasury Money Market
Series value portfolio securities at amortized cost, which approximates market
value. The amortized cost method of valuation 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. For the Intermediate Term Series, the
Trustees have authorized the use of an independent pricing service to determine
valuations. The pricing service considers such factors as security prices,
yields, maturities, call features, ratings and developments relating to specific
securities in arriving at securities valuations. When market quotations are not
readily available, a security is valued by appraisal at its fair value as
determined in good faith under procedures established under the general
supervision and responsibility of the Trustees. Short-term securities which
mature in more than 60 days are valued at current market quotations. Short-term
securities which mature in 60 days or less are valued at amortized cost.
In connection with transactions in repurchase agreements, the Fund's
custodian or designated subcustodians, as the case may be under triparty
repurchase agreements, takes possession of the underlying collateral securities,
the value of which exceeds the principal amount of the repurchase transaction,
including accrued interest. 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 Fund may be
delayed or limited.
Securities Lending: The Intermediate Term Series may lend its U.S. Government
securities to broker-dealers or government securities dealers. The Fund's policy
is to receive collateral on each loan at least equal, at all times, to the
market value of the securities loaned. The Series may bear the risk of delay in
recovery of, or even loss of rights in, the collateral should the borrower of
the securities fail financially. The Series receives compensation for lending
its securities in the form of fees or it retains a portion of interest on the
investment of any cash received as collateral. The Series also continues to
receive interest on the securities loaned, and any gain or loss in the market
price of the securities loaned that may occur during the term of the loan will
be for the account of the Series.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of portfolio
securities are calculated on the identified cost basis. Interest income is
recorded on the accrual basis. The Money Market and the U.S. Treasury Money
Market Series' amortize discounts and premiums on purchases of portfolio
securities as adjustments to income. For the Intermediate Term Series, gains or
losses resulting from discounts or premiums on purchased securities are treated
as capital gains or losses when realized upon disposal.
Dollar Rolls: The Intermediate Term Series enters into mortgage dollar rolls in
which the Series sells mortgage securities for delivery in the current month,
realizing a gain or loss, and simultaneously contracts to repurchase somewhat
similar (same type, coupon and maturity) securities on a specified future date.
During the roll period the Intermediate Term Series forgoes principal and
interest paid on the securities. The Series is compensated by the interest
earned on the cash proceeds of the initial sale and by the lower repurchase
price at the future date. The difference between the sale proceeds and the lower
repurchase price is taken into income. The Intermediate Term Series maintains a
segregated account, the dollar value of which is equal to its obligations, in
respect of dollar rolls.
Federal Income Taxes: For federal income tax purposes, each series of the Fund
is treated as a separate taxable entity. It is each Series' policy 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.
Equalization: The Intermediate Term Series follows the accounting practice known
as equalization by which a portion of the proceeds from sales and costs of
reacquisitions of its shares, equivalent on a per share basis to the amount of
-13-
<PAGE>
<PAGE>
distributable net investment income on the date of the transaction, is credited
or charged to undistributed net investment income. As a result, undistributed
net investment income per share is unaffected by sales or reacquisitions of the
shares.
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. For
the Intermediate Term Series, the effect of applying this statement was to
increase accumulated net realized losses and decrease distributions in excess of
net investment income by $174,002. Current year net investment income, net
realized losses and net assets were not affected by this change.
Deferred Organization Expenses: Approximately $49,000 of expenses were incurred
in connection with the organization and initial registration of the U.S.
Treasury Series and such amount has been deferred and is being amortized over a
period of 60 months ending December, 1995.
Dividends and Distributions: The Money Market Series and U.S. Treasury Money
Market Series declare daily dividends from net investment income and net
short-term capital gains and losses. Dividends are paid monthly.
The Intermediate Term Series declares dividends from net investment income
daily; payment of dividends is made monthly. Distributions of net capital gains,
if any, are made annually.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
Note 2. Agreements The Fund has a management
agreement with Prudential Mutual Fund Management,
Inc. (``PMF''). Pursuant to this agreement, PMF has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PMF has entered into a subadvisory agreement with The Prudential
Investment Corporation (``PIC''); PIC furnishes investment advisory services in
connection with the management of the Fund. PMF pays for the cost of the
subadviser's services, the compensation of officers of the Fund, occupancy and
certain clerical and bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.
The management fee paid to PMF is computed daily and payable monthly, at an
annual rate of .40 of 1% of the average daily net assets of the Intermediate
Term Series and the U.S. Treasury Money Market Series. With respect to the Money
Market Series, the management fee is payable as follows: .40 of 1% of average
daily net assets up to $1 billion, .375 of 1% of average daily net assets
between $1 billion and $1.5 billion and .35 of 1% in excess of $1.5 billion.
To reimburse Prudential Mutual Fund Distributors, Inc. (``PMFD'') as
distributor of the shares of the Money Market Series and the U.S. Treasury Money
Market Series, each series has entered into a distribution agreement pursuant to
which each series pays PMFD a reimbursement, accrued daily and payable monthly,
at an annual rate of .125% of each of the series' average daily net assets. PMFD
pays various broker-dealers, including Prudential Securities Incorporated
(``PSI'') and Pruco Securities Corporation (``Pruco''), affiliated
broker-dealers, for account servicing fees and for the expenses incurred by such
broker-dealers.
To reimburse PSI for its expenses as distributor of the Intermediate Term
Series, the Intermediate Term Series has entered into a distribution agreement
and a plan of distribution pursuant to which it pays PSI a fee, accrued daily
and payable monthly, at an annual rate of .25 of 1% of the lesser of (a) the
aggregate sales of shares issued (not including reinvestment of dividends and
distributions) on or after July 1, 1985 (the effective date of the plan) less
the aggregate net asset value of any such shares redeemed, or (b) the average
net asset value of the shares issued after the effective date of the plan.
Distribution expenses include commission credits to PSI branch offices for
payments of commissions and account servicing fees to financial advisers and an
allocation on account of overhead and other distribution-related expenses, the
cost of printing and mailing prospectuses to potential investors and of
advertising incurred in connection with the distribution of series shares. In
addition, PSI pays other broker-dealers, including Pruco, an affiliated
broker-dealer, for account servicing fees and other expenses incurred by such
broker-dealers in distributing these shares.
At any given time, the amount of expenses incurred by PSI in distributing the
Intermediate Term Series' shares may exceed the total payments made pursuant to
the plan. PSI, as distributor, has advised the Intermediate Term Series that at
May 31, 1994 the amount of distribution expenses incurred by PSI and not yet
reimbursed approximated $11,347,000.
This amount may be recovered through future payments under the plan. In the
event of termination or noncontinuation of the plan, the Intermediate Term
Series would not be contractually obligated to pay PSI, as distributor, for any
expenses not previously reimbursed under the plan.
-14-
<PAGE>
<PAGE>
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are (indirect)
wholly-owned subsidiaries of The Prudential Insurance Company of America.
Note 3. Other Prudential Mutual Fund
Transactions Services, Inc. (``PMFS''), a
with Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During
the six months ended May 31, 1994, the Fund incurred fees of approximately
$547,000, $141,000, and $41,000, respectively, for the Money Market Series,
Intermediate Term Series, and U.S. Treasury Money Market Series. As of May 31,
1994, approximately $96,000, $23,000, and $6,000 of such fees were due to PMFS
from the Money Market Series, Intermediate Term Series and U.S. Treasury Money
Market Series, respectively. Transfer agent fees and expenses in the Statement
of Operations includes certain out-of-pocket expenses paid to non-affiliates.
Note 4. Portfolio Purchases and sales of port-
Securities folio securities for the Inter-
mediate Term Series, other than short-term
investments, for the six months ended May 31, 1994 were $824,160,489 and
$875,277,630, respectively.
For the Intermediate Term Series the cost basis of investments for federal
income tax purposes was $341,587,173 and, accordingly, as of May 31, 1994, net
unrealized depreciation of investments for federal income tax purposes was
$4,695,181 (gross unrealized appreciation--$39,100; gross unrealized
depreciation--$4,734,281).
For federal income tax purposes, the Intermediate Term Series has a capital
loss carryforward as of November 30, 1993 of approximately $67,624,000 of which
$25,173,000 expires in 1995, $11,426,000 expires in 1996, $19,180,000 expires in
1997, $6,864,000 expires in 1998, $4,746,000 expires in 1999, and $235,000
expires in 2001. Accordingly, no capital gains distribution is expected to be
paid to shareholders until net gains have been realized in excess of such
carryforward.
Note 5. Joint The Fund, along with other
Repurchase affiliated registered invest-
Agreement Account ment companies, transfers
uninvested cash balances into a single joint
account, the daily aggregate balance of which is invested in one or more
repurchase agreements collateralized by U.S. Treasury or federal agency
obligations. As of May 31, 1994, the Intermediate Term Series had a 6.32%
undivided interest in the repurchase agreements in the joint account. This
undivided interest represented $68,732,000 in principal amount. As of such date,
the repurchase agreements in the joint account and the value of the collateral
therefor was as follows:
Bear, Stearns & Co., 4.15%, dated 5/31/94, in the principal amount of
$38,197,000, repurchase price $38,201,403, due 6/1/94. The value of the
collateral including accrued interest is $39,133,248.
First Boston International Limited, 4.20%, dated 5/31/94, in the principal
amount of $250,000,000, repurchase price $250,029,167, due 6/1/94. The value of
the collateral including accrued interest is $256,563,532.
Morgan Stanley & Co. Inc., 4.20%, dated 5/31/94, in the principal amount of
$325,000,000, repurchase price $325,037,917, due 6/1/94. The value of the
collateral including accrued interest is $331,929,720.
Smith Barney Shearson, Inc., 4.30%, dated 5/31/94, in the principal amount of
$100,000,000, repurchase price $100,011,944, due 6/1/94. The value of the
collateral including accrued interest is $102,031,250.
J.P. Morgan Securities, Inc., 4.25%, dated 5/31/94, in the principal amount
of $325,000,000, repurchase price $325,038,368, due 6/1/94. The value of the
collateral including accrued interest is $331,601,562.
Sanwa Securities Co., L.P., 4.28%, dated 5/31/94, in the principal amount of
$50,000,000, repurchase price $50,005,944, due 6/1/94. The value of the
collateral including accrued interest is $51,015,625.
Note 6. Capital Each series has authorized an
unlimited number of shares of beneficial interest
at $.01 par value. Transactions in shares of beneficial interest for the
Intermediate Term Series for the fiscal year ended November 30, 1993 and six
months ended May 31, 1994 were as follows:
<TABLE>
<CAPTION>
Six months
ended Year Ended
May 31, November 30,
1994 1993
-------------- --------------
<S> <C> <C>
Shares sold.............. 7,649,545 18,902,083
Shares issued in
reinvestment of
dividends and
distributions.......... 825,563 1,439,530
Shares reacquired........ (11,041,792) (16,203,923)
-------------- --------------
Net increase
(decrease)............. (2,566,684) 4,137,690
-------------- --------------
-------------- --------------
</TABLE>
-15-
<PAGE>
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
MONEY MARKET SERIES
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Six
Months
Ended Year Ended November 30,
May 31, ------------------------------------------------------------
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
-------- -------- ---------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income........................... 0.014 0.026 0.035 0.058 0.076 0.084
Dividends from net investment income............ (0.014) (0.026) (0.035) (0.058) (0.076) (0.084)
-------- -------- ---------- ---------- ---------- ----------
Net asset value, end of period.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- ---------- ---------- ---------- ----------
-------- -------- ---------- ---------- ---------- ----------
TOTAL RETURN#:.................................. 1.37% 2.62% 3.57% 5.96% 7.83% 8.77%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)................. $700,917 $919,503 $1,026,187 $1,212,836 $1,355,058 $ 667,571
Average net assets (000)........................ $807,711 $950,988 $1,113,759 $1,255,014 $ 857,385 $ 528,820
Ratios to average net assets:
Expenses, including distribution fees......... 0.75%(D) 0.72% 0.72% 0.65% 0.66% 0.68%
Expenses, excluding distribution fees......... 0.62%(D) 0.59% 0.60% 0.53% 0.53% 0.56%
Net investment income......................... 2.72%(D) 2.56% 3.42% 5.78% 7.52% 8.30%
</TABLE>
- ---------------
# 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 return for periods of less than a full year
are not annualized.
(D) Annualized.
See Notes to Financial Statements.
-16-
<PAGE>
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
INTERMEDIATE TERM SERIES
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Six
Months
Ended Year Ended November 30,
May 31, ----------------------------------------------------
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
-------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................. $ 10.06 $ 9.97 $ 10.00 $ 9.71 $ 9.96 $ 9.92
-------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income................................ 0.27 0.69 0.75 0.82 0.84 0.92
Net realized and unrealized gain (loss) on investment
transactions....................................... (0.51) 0.11 (0.03) 0.31 (0.21) 0.12
-------- -------- -------- -------- -------- --------
Total from investment operations................... (0.24) 0.80 0.72 1.13 0.63 1.04
-------- -------- -------- -------- -------- --------
Less distributions
Dividends from net investment income................. (0.28) (0.69) (0.75) (0.84) (0.88) (1.00)
Dividends in excess of net investment income......... (0.07) -- -- -- -- --
Tax return of capital distribution................... -- (0.02) -- -- -- --
-------- -------- -------- -------- -------- --------
Total distributions.................................. (0.35) (0.71) (0.75) (0.84) (0.88) (1.00)
-------- -------- -------- -------- -------- --------
Net asset value, end of period....................... $ 9.47 $ 10.06 $ 9.97 $ 10.00 $ 9.71 $ 9.96
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
TOTAL RETURN#........................................ (2.50%) 8.26% 7.40% 12.19% 6.73% 11.12%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...................... $303,360 $347,944 $303,451 $298,086 $328,458 $396,519
Average net assets (000)............................. $337,106 $321,538 $294,388 $301,643 $354,064 $424,386
Ratios to average net assets:
Expenses, including distribution fees.............. 0.80%(D) 0.80% 0.79% 0.79% 0.88% 0.86%
Expenses, excluding distribution fees.............. 0.59%(D) 0.59% 0.58% 0.63% 0.63% 0.63%
Net investment income.............................. 5.53%(D) 6.80% 7.47% 8.36% 8.60% 9.16%
Portfolio turnover rate.............................. 268% 44% 60% 151% 68% 186%
</TABLE>
- ---------------
# 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 return for periods of less than a full year
are not annualized.
(D) Annualized.
See Notes to Financial Statements.
-17-
<PAGE>
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
U.S. TREASURY MONEY MARKET SERIES
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
December 3,
Six Months 1990*
Ended Year Ended November 30, Through
May 31, --------------------------- November 30,
1994 1993 1992 1991
<S> <C> <C> <C> <C>
------------ ------------ ------------ ------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............................ $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income........................................... 0.013 0.025 0.034 0.057(D)(D)
Dividends from net investment income............................ (0.013) (0.025) (0.034) (0.057)
------------ ------------ ------------ ------------
Net asset value, end of period.................................. $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
TOTAL RETURN#................................................... 1.35% 2.54% 3.46% 5.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)................................. $309,260 $284,978 $233,600 $288,922
Average net assets (000)........................................ $342,701 $273,313 $263,459 $273,203
Ratios to average net assets:
Expenses, including distribution fees......................... 0.61%(D) 0.66% 0.66% 0.50%(D)/(D)(D)
Expenses, excluding distribution fees......................... 0.49%(D) 0.53% 0.54% 0.38%(D)/(D)(D)
Net investment income......................................... 2.69%(D) 2.49% 3.29% 5.74%(D)/(D)(D)
</TABLE>
- ---------------
* Commencement of investment operations.
(D) Annualized.
(D)(D) Net of expense subsidy.
# 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 return for a period of less than one year
is not annualized.
See Notes to Financial Statements.
-18-
<PAGE>
Trustees
Delayne Dedrick Gold
Arthur Hauspurg
Thomas J. McCormack
Lawrence C. McQuade
Stephen P. Munn
Edwin F. Payne
Louis A. Weil, III
Officers
Lawrence C. McQuade, President
Robert F. Gunia, Vice President
Susan C. Cote, Treasurer
S. Jane Rose, Secretary
Ronald Amblard, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributors
Prudential Mutual Fund Distributors, Inc.
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
One Seaport Plaza
New York, NY 10292
Toll free (800) 225-1852
Collect (908) 417-7555
The accompanying financial statements as of May 31, 1994
were not audited and, accordingly, no opinion is expressed
on them.
This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a current
prospectus.
744342205 MF100E-3
744342106 Cat.#444437V
744342304
