As filed with the Securities and Exchange Commission
on January 27, 1994
Registration No. 2-74139
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 19 /X/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 20 /X/
(Check appropriate box or boxes)
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PRUDENTIAL GOVERNMENT SECURITIES TRUST
(Formerly Prudential-Bache Government Securities Trust)
(Exact name of registrant as specified in charter)
ONE SEAPORT PLAZA,
NEW YORK, NEW YORK 10292
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 214-1250
S. Jane Rose, Esq.
One Seaport Plaza
New York, New York 10292
(Name and Address of Agent for Service)
Approximate date of proposed public offering:
As soon as practicable after the effective
date of the Registration Statement.
It is proposed that this filing will become effective
(check appropriate box):
/ / immediately upon filing pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (b)
/X/ on April 1, 1994 pursuant to paragraph (a) of Rule 485.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has previously registered an indefinite number of shares of beneficial interest,
par value $.01 per share. The Registrant filed a notice under such Rule for its
fiscal year ended November 30, 1993 on January 25, 1994.
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<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 495)
<TABLE>
<CAPTION>
N-1a Item No. Location
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Part A
<S> <C>
Item 1. Cover Page.................................................. Cover Page
Item 2. Synopsis.................................................... Trust Expenses
Item 3. Condensed Financial Information............................. Trust Expenses; Financial
Highlights; Calculation of
Yield; How the Trust
Calculates Performance
Item 4. General Description of Registrant........................... Cover Page; Trust Highlights;
How the Trust Invests; General
Information
Item 5. Management of Fund.......................................... Financial Highlights; How the
Trust is Managed
Item 6. Capital Stock and Other Securities.......................... Taxes, Dividends and
Distributions; General
Information
Item 7. Purchase of Securities Being Offered........................ Shareholder Guide; How the
Trust Values Its Shares
Item 8. Redemption or Repurchase.................................... Shareholder Guide; How the
Trust Values Its Shares
Item 9. Pending Legal Proceedings................................... Not Applicable
Part B
Item 10. Cover Page.................................................. Cover Page
Item 11. Table of Contents........................................... Table of Contents
Item 12. General Information and History............................. General Information
Item 13. Investment Objectives and Policies.......................... Investment Objective(s) and
Policies; Investment
Restrictions
Item 14. Management of the Fund...................................... Trustees and Officers;
Manager; Distributor
Item 15. Control Persons and Principal Holders of Securities......... Not Applicable
Item 16. Investment Advisory and Other Services...................... Manager; Distributor;
Custodian and Transfer and
Dividend Disbursing Agent and
Independent Accountants
Item 17. Brokerage Allocation and Other Practices.................... Portfolio Transactions and
Brokerage
Item 18. Capital Stock and Other Securities.......................... Not Applicable
Item 19. Purchase, Redemption and Pricing of Securities Being Shareholder Investment
Offered..................................................... Account; Net Asset Value
Item 20. Tax Status.................................................. Taxes
Item 21. Underwriters................................................ Manager
Item 22. Calculation of Performance Data............................. Performance Information
Item 23. Financial Statements........................................ Financial Statements
Part C
Information required to be included in Part C is set forth under the appropriate Item, so
numbered, in Part C to this Post-Effective Amendment to the Registration Statement.
</TABLE>
Prudential Government
Securities Trust
(U.S. Treasury Money Market Series)
_________________________________________________________________________
Prospectus dated April 1, 1994
_________________________________________________________________________
Prudential Government Securities Trust (the Trust) is a diversified, open-
end management investment company whose shares of beneficial interest are
offered in three series. Each series operates as a separate fund with its
own investment objectives and policies designed to meet its specific
investment goals.
The investment objective of the U.S. Treasury Money Market Series (the
Series) is high current income consistent with the preservation of
principal and liquidity. The Series seeks to achieve its objective by
investing exclusively in U.S. Treasury obligations which have maturities
of thirteen months or less. Interest on U.S. Treasury obligations is
specifically exempted from state and local income taxes under federal law.
All states allow the character of the Series' income to pass through to
the dividends distributed to its shareholders. Interest on U.S. Treasury
obligations is not exempt from federal income tax. See "How the Trust
Invests-Investment Objective and Policies" and "Taxes, Dividends and
Distributions."
An investment in the Series is neither insured nor guaranteed by the U.S
Government and there can be no assurance that the Series will be able to
maintain a stable net asset value of $1.00 per share. See "How the Trust
Values its Shares."
The Trust's address is One Seaport Plaza, New York, New York 10292, and
its telephone number is (800) 225-1852.
_________________________________________________________________________
This Prospectus sets forth concisely the information about the Trust and
the Series that a prospective investor ought to know before investing.
Additional information about the Trust and the Series has been filed with
the Securities and Exchange Commission in a Statement of Additional
Information, dated April 1, 1994, which information is incorporated herein
by reference (is legally considered a part of this Prospectus) and is
available without charge upon request to the Trust at the address or
telephone number noted above.
_________________________________________________________________________
Investors are advised to read this Prospectus and retain it for future
reference.
_________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TRUST HIGHLIGHTS
What is Prudential Government Securities Trust?
Prudential Government Securities Trust is a mutual fund whose shares
are offered in three series, each of which operates as a separate fund. A
mutual fund pools the resources of investors by selling its shares to the
public and investing the proceeds of such sale in a portfolio of
securities designed to achieve its investment objective. Technically, the
Trust is an open-end, diversified management investment company. Only the
U.S. Treasury Money Market Series is offered through this Prospectus.
What is the Series' Investment Objective?
The Series' investment objective is high current income consistent
with the preservation of principal and liquidity. The Series invests
exclusively in U.S. Treasury obligations which have effective maturities
of thirteen months or less. See "How the Trust Invests-Investment
Objective and Policies" at page 6.
What are the Series' Special Characteristics and Risks?
It is anticipated that the net asset value of the Series will remain
constant at $1.00 per share, although this cannot be assured. In order to
maintain such constant net asset value, the Series will value its
portfolio securities at amortized cost. While this method provides
certainty in valuation, it may result in periods during which the value of
a security in the Series' portfolio , as determined by amortized cost, is
higher or lower than the price the Series would receive if it sold such
security. See "How the Trust Values its Shares" at page 9.
Who Manages the Trust?
Prudential Mutual Fund Management, Inc. (PMF or the Manager) is the
Manager of the Trust and is compensated for its services at an annual rate
of .40 of 1% of the Series' average daily net assets. As of February 28,
1994, PMF served as manager or administrator to {65} investment companies,
including {37} mutual funds, with aggregate assets of approximately ${50}
billion. The Prudential Investment Corporation (PIC or the Subadviser)
furnishes investment advisory services in connection with the management
of the Trust under a Subadvisory Agreement with PMF. See "How the Trust is
Managed-Manager" at page 8.
2
<PAGE>
Who Distributes the Series' Shares?
Prudential Mutual Fund Distributors, Inc. (PMFD or the Distributor)
acts as the Distributor of the Series' shares. The Trust reimburses PMFD
for expenses related to the distribution of the Series' shares at an
annual rate of up to .125 of 1% of the average daily net assets of the
Series. See "How the Trust is Managed-Distributor" at page 8.
What is the Minimum Investment?
The minimum initial investment is $2,500. The subsequent minimum
investment is $100. There is no minimum investment requirement for the
Command Account Program (if the Series is designated as your primary fund)
and certain retirement and employee savings plans or custodial accounts
for the benefit of minors. For purchases made through the Automatic
Savings Accumulation Plan, the minimum initial and subsequent investment
is $50. See "Shareholder Guide-How to Buy Shares of the Trust" at page 11
and "Shareholder Guide-Shareholder Services" at page 17.
How Do I Purchase Shares?
You may purchase shares of the Series through Prudential Securities,
Pruco Securities Corporation (Prusec) or directly from the Trust, through
its transfer agent, Prudential Mutual Fund Services, Inc. (PMFS or the
Transfer Agent) at the net asset value per share (NAV) next determined
after receipt of your purchase order by the Transfer Agent or Prudential
Securities. Orders are received on each business day until 4:00 P.M., New
York time. See "How the Trust Values its Shares" at page 9 and
"Shareholder Guide-How to Buy Shares of the Trust" at page 11.
How Do I Sell My Shares?
You may redeem shares of the Series at any time at the NAV next
determined after Prudential Securities or the Transfer Agent receives your
sell order. See "Shareholder Guide-How to Sell Your Shares" at page 14.
How Are Dividends and Distributions Paid?
The Series expects to declare daily and pay monthly dividends of net
investment income and short-term capital gains, if any. Dividends and
distributions will be automatically reinvested in additional shares of the
Series at NAV unless you request that they be paid to you in cash. See
"Taxes, Dividends and Distributions" at page 10.
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<PAGE>
TRUST EXPENSES-U.S. TREASURY MONEY MARKET SERIES
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases ......................... None
Maximum Sales Load Imposed on Reinvested Dividends .............. None
Deferred Sales Load ............................................. None
Redemption Fees ................................................. None
Exchange Fee .................................................... None
Annual Series Operating Expenses
(as a percentage of average net assets)
Management Fees ............................................... 0.400%
12b-1 Fees .................................................... 0.125%
Other Expenses ................................................ 0.135%
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Total Series Operating Expenses ................................. 0.660%
=====
Example 1 Year 3 Years 5 Years 10 Years
------- ------ ------- ------- --------
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period: $7 $21 $37 $82
- -------------
The above example is based on data for the Series' fiscal year ended
November 30, 1993. The example should not be considered a representation
of past or future expenses. Actual expenses may be greater or less than
those shown.
The purpose of this table is to assist investors in understanding the
various costs and expenses that an investor in the Series will bear,
whether directly or indirectly. For more complete descriptions of the
various costs and expenses, see "How the Trust is Managed." "Other
Expenses" include an estimate of operating expenses of the Series, such as
trustees' and professional fees, registration fees, reports to
shareholders and transfer agency and custodian fees.
4
<PAGE>
FINANCIAL HIGHLIGHTS
(for a share of beneficial interest outstanding throughout the period indicated)
The following financial highlights for the Series have been audited by
Price Waterhouse, independent accountants, whose report thereon was
unqualified. This information should be read in conjunction with the
financial statements and notes thereto, which appear in the Statement of
Additional Information. The following financial highlights contain
selected data for a share of beneficial interest outstanding, total
return, ratios to average net assets and other supplemental data for each
of the periods indicated. The information is based on data contained in
the financial statements.
U.S. Treasury Money Market Series
---------------------------------
December 3, 1990*
through
Year ended November 30, November 30,
-----------------------
1993 1992 1991
---- ---- ----
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
------ ------ ------
Net investment income .025 .034 .057+
Dividends from net investment income (.025) (.034) (.057)
----- ----- -----
Net asset value, end of period 1.00 1.00 1.00
==== ==== ====
TOTAL RETURN++ 2.54% 3.46% 5.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $284,978 $233,600 $288,922
Average net assets (000) $273,313 $263,459 $273,203
Ratio to average net assets:
Expenses, including distribution fees .66% .66% .50%+ /**
Expenses, excluding distribution fees .53% .54% .38%+ /**
Net investment income 2.49% 3.29% 5.74%+ /**
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* Commencement of investment operations.
** Annualized.
+ Net of expense subsidy and management fee waiver.
++ 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.
5
<PAGE>
CALCULATION OF YIELD
The Series calculates its "current yield" based on the net change,
exclusive of realized and unrealized gains or losses, in the value of a
hypothetical account over a seven calendar day base period. The Series
also calculates its "effective annual yield" assuming weekly compounding
and its "tax-equivalent yield." Tax-equivalent yield shows the taxable
yield an investor would have to earn from a fully taxable investment in
order to equal an after-tax yield equivalent to the Series' tax-free yield
and is calculated by dividing the Series' current or effective yield by
the result of one minus a certain state tax rate. The following is an
example of the yield calculations as of November 30, 1993:
Value of hypothetical account at end of period .......... $1.000475559
Value of hypothetical account at beginning of period .... 1.000000000
------------
Base period return ...................................... $0.000475559
============
Current yield (.000475559 x (365/7)) 2.48%
Effective annual yield, assuming weekly compounding ..... 2.51%
The yield will fluctuate from time to time and is not necessarily
representative of future performance.
The weighted average maturity of the portfolio of the Series on
November 30, 1993 was 67 days.
Yield is computed in accordance with a standardized formula described
in the Statement of Additional Information. In addition, comparative
performance information may be used from time to time in advertising or
marketing the Series' shares, including data from Lipper Analytical
Services, Inc., Donoghue's Money Fund Report, other industry publications,
business periodicals, and market indices.
HOW THE TRUST INVESTS
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Series is high current income
consistent with the preservation of principal and liquidity. The Series
invests exclusively in U.S. Treasury obligations which have effective
maturities of thirteen months or less. There can be no assurance that this
objective will be achieved.
The Series' investment objective is a fundamental policy and,
therefore, may not be changed without the approval of the holders of a
majority of the Series' outstanding voting securities, as defined in the
Investment Company Act of 1940, as amended (the Investment Company Act).
Policies that are not fundamental may be modified by the Trustees.
The Series will invest in the following instruments:
U.S. Treasury Securities. The Series will invest in U.S. Treasury
securities, including bills, notes and bonds. These instruments are direct
obligations of the U.S. Government and, as such, are backed by the "full
faith and credit" of the United States. They differ primarily in their
interest rates and the lengths of their maturities.
Components of U.S. Treasury Securities. The Series may also invest in
component parts of U.S. Treasury notes or bonds, namely, either the corpus
(principal) of such Treasury obligations or one of the interest payments
scheduled to be paid on such obligations. These obligations may take the
form of (i) Treasury obligations from which the interest coupons have been
stripped, (ii) the interest coupons that are stripped, or (iii) book-
entries at a Federal Reserve member bank representing ownership of
Treasury obligation components.
6
<PAGE>
Interest on U.S. Treasury obligations is specifically exempted from
state and local taxes under federal law. While shareholders in the Series
do not directly receive interest on U.S. Treasury obligations,
substantially all of the dividends from the Series will be derived
primarily from such interest. All states allow the character of the
Series' income to pass through to its shareholders so that distributions
from the Series derived from interest on U.S. Treasury obligations will
also be exempt from state and local income taxes when earned by an
individual shareholder through a distribution from the Trust. See "Taxes,
Dividends and Distributions."
The Series does not engage in repurchase agreements or lend its
portfolio securities because the income from such activities is generally
not exempt from state and local income taxes.
Interest income on U.S. Treasury obligations is not, however, exempt
from federal income tax. In addition, capital gains, if any, realized by
the Series upon the sale of U.S. Treasury obligations are not exempt from
federal taxes or, generally, from state and local taxes. See "Taxes,
Dividends and Distributions."
The Series seeks to maintain a $1.00 share price at all times. To
achieve this, the Series purchases only securities with remaining
maturities of thirteen months or less and limits the dollar-weighted
average maturity of its portfolio to 90 days or less. There is no
assurance that the Series will be able to maintain a stable net asset
value. See "How the Trust Values its Shares."
OTHER INVESTMENTS AND POLICIES
When-Issued and Delayed Delivery Securities
The Series may purchase or sell securities on a when-issued or delayed
delivery basis. When-issued or delayed delivery transactions arise when
securities are purchased or sold by the Series with payment and delivery
taking place as much as a month or more into the future in order to secure
what is considered to be an advantageous price and yield to the Series at
the time of entering into the transaction. The Trust's Custodian will
maintain, in a segregated account of the Series, cash or U.S. Treasury
obligations having a value equal to or greater than the Series' purchase
commitments. The Custodian will likewise segregate securities sold on a
delayed delivery basis. The securities so purchased are subject to market
fluctuation and no interest accrues to the purchaser during the period
between purchase and settlement. At the time of delivery of the securities
the value may be more or less than the purchase price and an increase in
the percentage of the Series' assets committed to the purchase of
securities on a when-issued or delayed delivery basis may increase the
volatility of the Series' net asset value.
Borrowing
The Series may borrow an amount equal to no more than 20% of the value
of its total assets (calculated when the loan is made) for temporary,
extraordinary or emergency purposes. Such borrowings shall be made only
from banks, unless the Trust receives an order from the Securities and
Exchange Commission (SEC) to permit borrowing from entities other than
banks. The Series may pledge up to 20% of its total assets to secure these
borrowings. The Series will not purchase portfolio securities if its
borrowings exceed 5% of its assets.
INVESTMENT RESTRICTIONS
The Series is subject to certain investment restrictions which, like
its investment objective, constitute fundamental policies. Fundamental
policies cannot be changed without the approval of the holders of a
majority of the Series' outstanding voting securities, as defined in the
Investment Company Act. See "Investment Restrictions" in the Statement of
Additional Information.
7
<PAGE>
HOW THE TRUST IS MANAGED
The Trust has Trustees who, in addition to overseeing the actions of
the Trust's Manager, Subadviser and Distributor, as set forth below,
decide upon matters of general policy. The Trust's Manager conducts and
supervises the daily business operations of the Trust. The Trust's
Subadviser furnishes daily investment advisory services.
For the fiscal year ended November 30, 1993, total expenses of the
Series as a percentage of its average net assets were .66%. See "Financial
Highlights."
MANAGER
Prudential Mutual Fund Management, Inc. (PMF or the Manager), One
Seaport Plaza, New York, New York 10292, is the Manager of the Trust and
is compensated for its services at an annual rate of .40 of 1% of the
Series' average daily net assets. It was incorporated in May 1987 under
the laws of the State of Delaware. For the fiscal year ended November 30,
1993, the Trust paid management fees to PMF of .40% of the average net
assets of the Series. See "Manager" in the Statement of Additional
Information.
As of February 28, 1994, PMF served as the manager to {37} open-end
investment companies, constituting all of the Prudential Mutual Funds, and
as manager or administrator to {28} closed-end investment companies with
aggregate assets of approximately ${50} billion.
Under the Management Agreement with the Trust, PMF manages the
investment operations of the Trust and also administers the Trust's
business affairs. See "Manager" in the Statement of Additional
Information.
Under a Subadvisory Agreement between PMF and The Prudential
Investment Corporation (PIC or the Subadviser), PIC furnishes investment
advisory services in connection with the management of the Trust and is
reimbursed by PMF for its reasonable costs and expenses incurred in
providing such services. Under the Management Agreement, PMF continues to
have responsibility for all investment advisory services and supervises
PIC's performance of such services.
PMF and PIC are indirect, wholly-owned subsidiaries of The Prudential
Insurance Company of America (Prudential), a major diversified insurance
and financial services company.
DISTRIBUTOR
Prudential Mutual Fund Distributors, Inc. (PMFD or the Distributor),
One Seaport Plaza, New York, New York 10292, is a corporation organized
under the laws of the State of Delaware and serves as the Distributor of
the Series. It is a wholly-owned subsidiary of PMF.
Under a Distribution and Service Plan (the Plan) adopted by the Series
under Rule 12b-1 under the Investment Company Act and a distribution and
service agreement (the Distribution Agreement), the Distributor incurs the
expenses of distributing the shares of the Series. These expenses include
account servicing fees paid to, or on account of, financial advisers of
Prudential Securities Incorporated (Prudential Securities) and Pruco
Securities Corporation (Prusec), affiliated broker-dealers, account
servicing fees paid to, or on account of, other broker-dealers or
financial institutions (other than national banks) which have entered into
agreements with the Distributor, advertising expenses, the cost of
printing and mailing prospectuses to potential investors and indirect and
overhead costs of Prudential Securities and Prusec associated with the
sale of the Series' shares, including lease, utility, communications and
sales promotion expenses. There are no carry forward amounts under the
Plan and interest expenses are not incurred under the Plan. The State of
Texas requires that shares of the Series may be sold in that State only by
dealers or other financial institutions which are registered there as
broker-dealers.
Under the Plan, the Trust reimburses the Distributor for its
distribution-related expenses with respect to the Series at an annual rate
of up to .125 of 1% of the Series' average daily net assets. Account
servicing fees are paid
8
<PAGE>
based on the average balance of Series' shares held in the accounts of
customers of financial advisers. The entire distribution fee may be used
to pay account servicing fees.
The Plan provides that it shall continue in effect from year to year
provided that each such continuance is approved annually by a majority vote of
the Trustees, including a majority of the Trustees who are not interested
persons of the Trust and who have no direct or indirect financial interest in
the operation of the Plan or in any agreement related to the Plan. The Trustees
are provided with and review quarterly reports of expenditures under the Plan.
For the fiscal year ended November 30, 1993, PMFD incurred distribution
expenses in the aggregate of $341,641, all of which was recovered through
the distribution fee paid by the Series to PMFD. The Trust records all
payments made under the Plan as expenses in the calculation of its net
investment income.
In addition to distribution and service fees paid by the Series under
the Plan, the Manager (or one of its affiliates) may make payments to
dealers and other persons which distribute shares of the Series. Such
payments may be calculated by reference to the net asset value of shares
sold by such persons or otherwise.
PORTFOLIO TRANSACTIONS
Prudential Securities may act as a broker for the Trust, provided that
the commissions, fees or other remuneration it receives are fair and
reasonable. See "Portfolio Transactions and Brokerage" in the Statement of
Additional Information.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Trust's portfolio
securities and cash and, in that capacity, maintains certain financial and
accounting books and records pursuant to an agreement with the Trust. Its
mailing address is P.O. Box 1713, Boston, Massachusetts 02105.
Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza One,
Edison, New Jersey 08837, serves as Transfer Agent and Dividend Disbursing
Agent and, in those capacities, maintains certain books and records for
the Trust. PMFS is a wholly-owned subsidiary of PMF. Its mailing address
is P.O. Box 15005, New Brunswick, New Jersey 08906-5005.
HOW THE TRUST VALUES ITS SHARES
The Series' net asset value per share or NAV is determined by
subtracting its liabilities from the value of its assets and dividing the
remainder by the number of outstanding shares. The Trustees have fixed the
specific time of day for the computation of the Series' NAV to be as of
4:30 P.M., New York time, immediately after the declaration of dividends.
The Series will compute its NAV once daily on days that the New York
Stock Exchange is open for trading except on days on which no orders to
purchase, sell or redeem Series shares have been received or days on which
changes in the value of the Series' portfolio securities do not materially
affect the net asset value. The New York Stock Exchange is closed on the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Series determines the value of its portfolio securities by the
amortized cost method. This method involves valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any
discount or premium regardless of the impact of fluctuating interest rates
on the market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Series
would receive if it sold the instrument. During these periods, the yield
to a shareholder may differ somewhat from that which could be obtained
from a similar fund which marks its portfolio securities to the
9
<PAGE>
market each day. For example, during periods of declining interest rates,
if the use of the amortized cost method resulted in a lower value of the
Series' portfolio on a given day, a prospective investor in the Series
would be able to obtain a somewhat higher yield and existing shareholders
would receive correspondingly less income. The converse would apply during
periods of rising interest rates. The Trustees have established procedures
designed to stabilize, to the extent reasonably possible, the NAV of the
shares of the Series at $1.00 per share. See "Net Asset Value" in the
Statement of Additional Information.
TAXES, DIVIDENDS AND DISTRIBUTIONS
Taxation of the Series
Each series of the Trust is treated as a separate entity for federal
income tax purposes and each has elected to qualify and intends to remain
qualified as a regulated investment company under the Internal Revenue
Code. Accordingly, the Series will not be subject to federal income taxes
on its net investment income and capital gains, if any, that it
distributes to its shareholders. To the extent not distributed by the
Series, taxable net investment income and net capital gains are taxable to
the Series. The performance and tax qualification of one series will have
no effect on the federal income tax liability of shareholders of the other
series. See "Taxes" in the Statement of Additional Information.
Taxation of Shareholders
Distributions of net investment income and realized net short-term
capital gains, if any, are taxable to shareholders of the Series for U.S.
federal income tax purposes as ordinary income, whether or not reinvested.
The Series does not expect to realize long-term capital gains or losses.
Because none of the income of the Series will consist of dividends from
domestic corporations, dividends of net investment income and
distributions of net short-term capital gains will not be eligible for the
dividends-received deduction for corporate shareholders. Tax-exempt
shareholders generally will not be required to pay taxes on amounts
distributed to them.
The Series will invest exclusively in U.S. Treasury obligations whose
interest is specifically exempted from state and local income taxes under
federal law. See "How the Trust Invests-Investment Objective and Policies"
for a discussion of the treatment of dividends from the Fund for state and
local income tax purposes. Investors should recognize that the state and
local income tax rules that apply to the Series and its shareholders may
be subject to change in the future and that such changes could have an
adverse impact on the Series and its shareholders.
Shareholders are advised to consult their own tax advisers regarding
specific questions as to federal, state or local taxes.
Witholding Taxes
Under U.S. Treasury Regulations, the Trust is required to withhold and
remit to the U.S. Treasury 31% of dividend, capital gain distributions and
redemption proceeds on the accounts of those shareholders who fail to
furnish their tax identification numbers on IRS Form W-9 (or IRS Form W-8
in the case of certain foreign shareholders) or who are otherwise subject
to backup withholding. Dividends from net investment income and short-term
capital gains paid to a foreign shareholder will generally be subject to
U.S. withholding tax at the rate of 30% (or lower treaty rate).
Dividends and Distributions
The Series expects to declare daily and pay monthly dividends of net
investment income and short-term capital gains, if any. A shareholder
begins to earn dividends on the first business day after the settlement
date of his or her order and continues to earn dividends through the day
on which his or her shares are redeemed.
10
<PAGE>
Dividends and distributions will be paid in additional shares of the
Series based on the net asset value of the Series' shares on the payment
date, unless the shareholder elects in writing not less than five business
days prior to the payment date to receive such dividends and distributions
in cash. Such election should be submitted to Prudential Mutual Fund
Services, Inc., Att: Account Maintenance, P.O. Box 15015, New Brunswick,
New Jersey 08906-5015. If you hold shares through Prudential Securities,
you should contact your financial adviser to elect to receive dividends
and distributions in cash. The Trust will notify each shareholder after
the close of the Trust's taxable year of both the dollar amount and
taxable status of that year's dividends and distributions on a per share
basis. Distributions may be subject to state and local taxes. See
"Taxation of Shareholders" above.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Trust, organized as an unincorporated business trust under the
laws of Massachusetts, is a trust fund of the type commonly known as a
"Massachusetts business trust." The Trust's activities are supervised by
its Trustees. The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares in separate series.
The shareholders of the U.S. Treasury Money Market Series, the Money
Market Series and the Intermediate Term Series are each entitled to a full
vote for each full share of beneficial interest (par value $.01 per share)
held (and fractional votes for fractional shares). Shares of each series
are entitled to vote as a class only to the extent required by the
provisions of the Investment Company Act or as otherwise permitted by the
Trustees in their sole discretion. Under the Investment Company Act,
shareholders of each series have to approve the adoption of any investment
advisory agreement relating to such series and of any changes in the
investment policies related thereto.
It is the intention of the Trust not to hold Annual Meetings of
Shareholders. The Trustees may call Special Meetings of Shareholders for
action by shareholder vote as may be required by the Investment Company
Act or the Declaration of Trust. Shareholders have certain rights,
including the right to call a meeting upon a vote of 10% of the Trust's
outstanding shares for the purpose of voting on the removal of one or more
Trustees.
ADDITIONAL INFORMATION
This Prospectus, including the Statement of Additional Information
which has been incorporated by reference herein, does not contain all the
information set forth in the Registration Statement filed by the Trust
with the SEC under the Securities Act of 1933. Copies of the Registration
Statement may be obtained at a reasonable charge from the SEC or may be
examined, without charge, at the office of the SEC in Washington, D.C.
SHAREHOLDER GUIDE
HOW TO BUY SHARES OF THE TRUST
You may purchase shares of the Series through Prudential Securities or
Prusec or directly from the Trust through its Transfer Agent, Prudential
Mutual Fund Services, Inc. (PMFS or the Transfer Agent), Attention:
Investment Services, P.O. Box 15020, New Brunswick, New Jersey 08906-5020.
The minimum initial investment is $2,500. The minimum subsequent
investment is $100. All minimum investment requirements are waived for the
Command Account Program (if the Series is designated as your primary fund)
and certain retirement and employee savings plans or custodial accounts
for the benefit of minors. For purchases made through the Automatic
Savings Accumulation Plan, the minimum initial and subsequent investment
is $50. See "Shareholder Services."
Shares of the Series are sold, without a sales charge, at the NAV next
determined after receipt and acceptance by PMFS of a purchase order and
payment in proper form {i.e., a check or Federal Funds wired to State
Street Bank
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and Trust Company (State Street)}. See "How the Trust Values its Shares."
Orders are received on each business day until 4:00 P.M., New York time.
When payment is received by PMFS prior to 4:00 P.M., New York time, in
proper form, a share purchase order will be entered at the price
determined as of 4:00 P.M., New York time, on that day, and dividends on
the shares purchased will begin on the business day following such
investment. See "Taxes, Dividends and Distributions."
Application forms can be obtained from PMFS, Prudential Securities or
Prusec. If a stock certificate is desired, it must be requested in writing
for each transaction. Certificates are issued only for full shares.
Shareholders who hold their shares through Prudential Securities will not
receive stock certificates. Shareholders cannot utilize Expedited
Redemption or Check Redemption or have a Systematic Withdrawal Plan if
they have been issued share certificates.
The Trust reserves the right to reject any purchase order (including
an exchange) or to suspend or modify the continuous offering of its
shares. See "How to Sell Your Shares" below.
Your dealer is responsible for forwarding payment promptly to the
Trust. The Distributor reserves the right to cancel any purchase order for
which payment has not been received by the fifth business day following
the investment.
Transactions in Trust shares made through dealers other than
Prudential Securities or Prusec may be subject to postage and other
charges imposed by the dealer. You may avoid such charges by placing
orders directly with Prudential Mutual Fund Services, Inc., Attention:
Investment Services, P.O. Box 15020, New Brunswick, New Jersey 08906-
5020.
Purchases through Prudential Securities
If you have an account with Prudential Securities (or open such an
account), you may ask Prudential Securities to purchase shares of the
Series on your behalf. On the business day following confirmation that a
free credit balance (i.e., immediately available funds) exists in your
account, Prudential Securities will effect a purchase order for shares of
the Series in an amount up to the balance at the NAV determined on that
day. Funds held by Prudential Securities on behalf of its clients in the
form of free credit balances are delivered to the Trust by Prudential
Securities and begin earning dividends the second business day after
receipt of the order by Prudential Securities. Accordingly, Prudential
Securities will have the use of such free credit balances during this
period.
Shares of the Series purchased by Prudential Securities on behalf of
its clients will be held by Prudential Securities as record holder.
Prudential Securities will therefore receive statements and dividends
directly from the Trust and will in turn provide investors with Prudential
Securities account statements reflecting purchases, redemptions and
dividend payments. Although Prudential Securities clients who purchase
shares of the Series through Prudential Securities may not redeem shares
of the Series by check, Prudential Securities provides its clients with
alternative forms of immediate access to monies invested in shares of the
Series.
Prudential Securities clients wishing additional information
concerning investment in Series shares made through Prudential Securities
should call their Prudential Securities financial adviser.
Automatic Investment. Prudential Securities has advised the Series
that it has instituted procedures pursuant to which, upon enrollment by a
Prudential Securities client, Prudential Securities will make automatic
investments of free credit balances of $2,500 or more for initial
purchases and $1,000 or more ($1.00 for IRAs) thereafter (Eligible Credit
Balances) held in such client's account in shares of the Series
(Autosweep). To effect the automatic investment of Eligible Credit
Balances representing the proceeds from the sale of securities, Prudential
Securities will enter orders for the purchase of Series shares at the
opening of business on the day following the settlement of such securities
transaction; to effect the automatic investment of Eligible Credit
Balances representing non-trade related credits, Prudential Securities
will enter orders for the purchase of Series shares at the opening of
business semi-monthly. All shares purchased pursuant to such procedures
will be issued at the NAV determined on the date the order is entered and
will receive the next dividend declared after such shares are issued.
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Self-Directed Investment. Prudential Securities clients not electing
the automatic investment of Eligible Credit Balances may continue to place
orders for the purchase of Series shares through Prudential Securities,
subject to minimum initial and subsequent investment requirements as
described above.
A Prudential Securities client who has not elected Autosweep (see
"Automatic Investment") and who does not place a purchase order promptly
after funds are credited to his or her Prudential Securities account will
have a free credit balance with Prudential Securities and will not begin
earning dividends on shares of the Fund until the second business day
after receipt of the order by Prudential Securities. Accordingly,
Prudential Securities will have the use of such free credit balances
during this period.
Purchases through Prusec
You may purchase shares of the Series by placing an order with your
Prusec registered representative accompanied by payment for the purchase
price of such shares and, in the case of a new account, a completed
Application Form. You should also submit an IRS Form W-9. The Prusec
registered representative will then forward these items to the Transfer
Agent. See "Purchase By Mail" below.
Purchase by Wire
For an initial purchase of shares of the Series by wire, you must
first telephone PMFS at (800) 225-1852 (toll-free) to receive an account
number. The following information will be requested: your name, address,
tax identification number, dividend distribution election, amount being
wired and wiring bank. Instructions should then be given by you or your
bank to transfer funds by wire to State Street Bank and Trust Company,
Boston, Massachusetts, Custody and Shareholder Services Division,
Attention: Prudential Government Securities Trust, U.S. Treasury Money
Market Series, specifying on the wire the account number assigned by PMFS
and your name.
If you arrange for receipt by State Street of Federal Funds prior to
4:00 P.M., New York time, on a business day, you may purchase shares of
the Series as of that day and receive dividends commencing on the next
business day.
In making a subsequent purchase order by wire, you should wire State
Street directly and should be sure that the wire specifies Prudential
Government Securities Trust (U.S. Treasury Money Market Series) and your
name and individual account number. It is not necessary to call PMFS to
make subsequent purchase orders by wire. The minimum amount which may be
invested by wire is $1,000.
Purchase by Mail
Purchase orders for which remittance is to be made by check or money
order may be submitted directly by mail to Prudential Mutual Fund
Services, Inc., Attention: Investment Services, P.O. Box 15020, New
Brunswick, New Jersey 08906-5020, together with payment of the purchase
price of such shares and, in the case of a new account, a completed
Application Form. You should also submit an IRS Form W-9. If PMFS receives
an order to purchase shares of the Series and payment in proper form prior
to 4:00 P.M., New York time, the purchase order will be effective on that
day and you will begin earning dividends on the following business day.
See "Taxes, Dividends and Distributions." Checks should be made payable to
Prudential Government Securities Trust, U.S. Treasury Money Market Series.
Certified checks are not necessary, but checks must be drawn on a bank
located in the United States. There are restrictions on the redemption of
shares purchased by check while the funds are being collected. See "How to
Sell Your Shares."
The Prudential Advantage Account Program
Shares of the Series are offered to participants in the Prudential
Advantage Account Program (the Advantage Account Program), a financial
services program available to clients of Pruco Securities Corporation.
Investors
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participating in the Advantage Account Program may select the Series as
their primary investment vehicle. Such investors will have the free credit
cash balances in their Securities Account (a component of the Advantage
Account Program carried through Prudential Securities) automatically
invested in shares of the Series. For free credit cash balances of $1,000
or more, an order to purchase shares of the Series will be placed on the
business day following confirmation that a free credit cash balance
exists. For free credit cash balances of less than $1,000, an order will
be placed on Monday of each week or on the next business day if Monday is
a holiday. Prudential Securities will have the use of such free credit
cash balances during this period.
Participation in the Advantage Account Program will allow you to
utilize checkwriting and VISA debit card privileges. Redemptions will be
automatically effected to satisfy debit balances arising under the
Advantage Account Program, such as those incurred by use of the VISA
Account, i.e., VISA card charges, or checks. Each Advantage Account
Program Securities Account will be automatically scanned for debits each
business day, as of the close of business, and a sufficient number of
shares of the Series (if selected as the primary fund) will be redeemed as
of that day to satisfy such debits. Advantage Account participants will
not be entitled to dividends declared on the date of redemption.
Advantage Account Program charges and expenses are not reflected in
the table of Trust expenses. See "Trust Expenses."
For information on participation in the Advantage Account Program, you
should telephone (800) 235-7637 (toll-free).
Command AccountTM Program
Shares of the Series are offered to participants in the Prudential
Securities Command AccountTM program, an integrated financial services
program of Prudential Securities. Investors having a Command Account may
select the Series as their primary fund. Such investors will have the free
credit cash balances of $1.00 or more in their Securities Account
(Available Cash) (a component of the Command Account program)
automatically invested in shares of the Series as described below.
Specifically, an order to purchase shares of the Series is placed (i) in
the case of Available Cash resulting from the proceeds of securities
sales, on the settlement date of the securities sale, and (ii) in the case
of Available Cash resulting from non-trade related credits (i.e., receipt
of dividends and interest payments, or a cash payment by the participant
into his or her Securities Account), on the business day after receipt by
Prudential Securities of the non-trade related credit.
The automatic purchase procedures described above are also applicable
for Corporate Command Accounts except that Available Cash of $1,000 or
more will be invested on the next business day, and Available Cash of less
than $1,000 will be invested weekly (on Monday of each week or on the next
business day if Monday is a holiday), in shares of the Series. Prudential
Securities may determine to make the automatic purchase procedures
described above available to Corporate Command Accounts with Available
Cash of $1.00 or more in the future.
All shares purchased pursuant to these automatic purchase procedures
will begin earning dividends on the business day after the order is
placed. Prudential Securities will arrange for investment in shares of the
Series at 4:00 P.M. on the day the order is placed and cause payment to be
made in federal funds for the shares prior to 4:00 P.M. on the next
business day. Prudential Securities will have the use of free credit cash
balances until delivery to the Fund. There are no minimum investment
requirements for participants in the Command Account program.
Redemptions will be automatically effected by Prudential Securities to
satisfy debit balances in a Securities Account created by activity therein
or arising under the Command program, such as those incurred by use of the
Visa Gold Account, including Visa purchases, cash advances and Visa
Account checks. Each Command program Securities Account will be
automatically scanned for debits each business day as of the close of
business on that day and after application of any free credit cash
balances in the account to such debits, a sufficient number of shares of
the Series and, if necessary, shares of other Command funds owned by the
Command program participant which have not been selected as his or her
primary fund or shares of a participant's money market funds managed by
PMF which are not primary Command funds will be redeemed as of that
business day to satisfy any remaining debits in the Securities
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Account. Margin loans will be utilized to satisfy debits remaining after
the liquidation of all shares of the Series in a Securities Account, and
shares may not be purchased until all debits, margin loans and other
requirements in the Securities Account are satisfied. Command Account
participants will not be entitled to dividends declared on the date of
redemption.
For information on participation in the Command Account program, you
should telephone (800) 222-4321 (toll-free).
HOW TO SELL YOUR SHARES
You can redeem your shares at any time for cash at the NAV next
determined after the redemption request is received in proper form by the
Transfer Agent or Prudential Securities. See "How the Trust Values its
Shares." Orders are received on each business day until 4:00 P.M., New
York time.
Shares for which a redemption request is received by PMFS prior to
4:00 P.M., New York time, are entitled to a dividend on the day on which
the request is received. By pre-authorizing Expedited Redemption, you may
arrange to have payment for redeemed shares made in Federal Funds wired to
your bank, normally on the next bank business day following the date of
receipt of the redemption instructions. Should you redeem all of your
shares, you will receive the amount of all dividends declared for the
month-to-date on those shares. See "Taxes, Dividends and Distributions."
If redemption is requested by a corporation, partnership, trust or
fiduciary, written evidence of authority acceptable to the Transfer Agent
must be submitted before such request will be accepted. All correspondence
and documents concerning redemptions should be sent to the Trust in care
of its Transfer Agent, Prudential Mutual Fund Services, Inc., Attention:
Redemption Services, P.O. Box 15010, New Brunswick, New Jersey 08906-
5010.
If the proceeds of the redemption (a) exceed $50,000, (b) are to be
paid to a person other than the record owner, (c) are to be sent to an
address other than the address on the Transfer Agent's records or (d) are
to be paid to a corporation, partnership, trust or fiduciary, the
signature(s) on the redemption request and on the certificates, if any, or
stock power, must be guaranteed by an "eligible guarantor institution." An
"eligible guarantor institution" includes any bank, broker, dealer or
credit union. The Transfer Agent reserves the right to request additional
information from, and make reasonable inquiries of, any eligible guarantor
institution. For clients of Prusec, a signature guarantee may be obtained
from the agency or office manager of most Prudential Insurance and
Financial Services or Preferred Financial Services offices.
Normally, the Trust makes payment on the next business day for all
shares of the Series redeemed, but in any event, payment will be made
within seven days after receipt by PMFS of share certificates and/or of a
redemption request in proper form. However, the Trust may suspend the
right of redemption or postpone the date of payment (a) for any periods
during which the New York Stock Exchange is closed (other than for
customary weekend or holiday closings), (b) for any periods when trading
in the markets which the Trust normally utilizes is closed or restricted
or an emergency exists as determined by the SEC so that disposal of the
Series' investments or determination of its NAV is not reasonably
practicable or (c) for such other periods as the SEC may permit for
protection of the Series' shareholders.
Payment for redemption of recently purchased shares will be delayed
until the Trust or its Transfer Agent has been advised that the purchase
check has been honored, up to 10 calendar days from the time of receipt of
the purchase check by the Transfer Agent. Such delay may be avoided by
purchasing shares by wire or by certified or official bank check.
Redemption of Shares Purchased through Prudential Securities
Prudential Securities clients for whom Prudential Securities has
purchased shares of the Series may have these shares redeemed only by
instructing their Prudential Securities financial adviser orally or in
writing.
Prudential Securities has advised the Trust that it has established
procedures pursuant to which shares of the Series held by a Prudential
Securities client having a deficiency in his or her Prudential Securities
account will be redeemed automatically to the extent of that deficiency to
the nearest highest dollar, unless the client notifies Prudential
Securities to the contrary. The amount of the redemption will be the
lesser of (a) the total NAV of the Series held in the client's Prudential
Securities account or (b) the deficiency in the client's Prudential
Securities account at the close of
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business on the date such deficiency is due. Accordingly, a Prudential
Securities client utilizing this automatic redemption procedure and who
wishes to pay for a securities transaction or meet any market action
related deficiency in his or her account other than through such automatic
redemption procedure must do so not later than the day of settlement for
such securities transaction or the date such market action related
deficiency is incurred. Prudential Securities clients who have elected to
utilize Autosweep will not be entitled to dividends declared on the date
of redemption.
Redemption of Shares Purchased through PMFS
If you purchase shares of the Series through PMFS, you may use Check
Redemption, Expedited Redemption or Regular Redemption. Prudential
Securities clients for whom Prudential Securities has purchased shares may
not use such services.
Regular Redemption. You may redeem your shares by sending a written
request, accompanied by duly endorsed share certificates, if issued, to
PMFS, Attention: Redemption Services, P.O. Box 15010, New Brunswick, New
Jersey 08906-5010. In this case, all share certificates must be endorsed
by you with signature guaranteed, as described above. PMFS may request
further documentation from corporations, executors, administrators,
trustees or guardians. Regular redemption is made by check sent to the
shareholder's address.
Expedited Redemption. By pre-authorizing Expedited Redemption, you may
arrange to have payment for redeemed shares made in Federal Funds wired to
your bank, normally on the next business day following redemption. In
order to use Expedited Redemption, you may so designate at the time the
initial Application Form is filed or at a later date. Once the Expedited
Redemption authorization form has been completed, the signature on the
authorization form guaranteed as set forth above and the form returned to
PMFS, requests for redemption may be made by telegraph, letter or
telephone. To request Expedited Redemption by telephone, you should call
PMFS at (800) 255-1852. Calls must be received by PMFS before 4:00 P.M.,
New York time to permit redemption as of such date. Requests by letter
should be addressed to Prudential Mutual Fund Services, Inc., Att:
Redemption Services, P.O. Box 15010, New Brunswick, New Jersey 08906-
5010.
A signature guarantee is not required under Expedited Redemption once
the authorization form is properly completed and returned. The Expedited
Redemption privilege may be used only to redeem shares in an amount of
$200 or more, except that, if an account for which Expedited Redemption is
requested has a net asset value of less than $200, the entire account must
be redeemed. The proceeds of redeemed shares in the amount of $1,000 or
more are transmitted by wire to your account at a domestic commercial bank
which is a member of the Federal Reserve System. Proceeds of less than
$1,000 are forwarded by check to your designated bank account.
During periods of severe market or economic conditions, Expedited
Redemption may be difficult to implement and you should redeem your shares
by mail as described above.
Check Redemption. At your request, State Street will establish a
personal checking account for you. Checks drawn on this account can be
made payable to the order of any person in any amount greater than $500.
When such check is presented to State Street for payment, State Street
presents the check to the Trust as authority to redeem a sufficient number
of shares of the Series in your account to cover the amount of the check.
If insufficient shares are in the account, or if the purchase was made by
check within 10 calendar days, the check will be returned marked
"insufficient funds." Checks in an amount less than $500 will not be
honored. Shares for which certificates have been issued cannot be redeemed
by check. PMFS reserves the right to impose a service charge to establish
a checking account and order checks.
Involuntary Redemption
Because of the relatively high cost of maintaining an account, the
Trust reserves the right to redeem, upon 60 days' written notice, an
account which is reduced by a shareholder to an NAV of $500 or less due to
redemption. You may avoid such redemption by increasing the NAV of your
account to an amount in excess of $500.
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Redemption in Kind
If the Trustees determine that it would be detrimental to the best
interests of the remaining shareholders of the Series to make payment
wholly or partly in cash, the Trust may pay the redemption price in whole
or in part by a distribution in kind of securities from the portfolio of
the Series, in lieu of cash in conformity with applicable rules of the
Securities and Exchange Commission. Securities will be readily marketable
and will be valued in the same manner as in a regular redemption. See "How
the Trust Values its Shares." If your shares are redeemed in kind, you
would incur transaction costs in converting the assets into cash. The
Trust, however, has elected to be governed by Rule 18f-1 under the
Investment Company Act pursuant to which the Trust is obligated to redeem
shares solely in cash up to the lesser of $250,000 or one percent of the
net asset value of the Series during any 90-day period for any one
shareholder.
30-Day Repurchase Privilege
If you redeem your shares and have not previously exercised the
repurchase privilege, you may reinvest any portion or all of the proceeds
of such redemption in shares of the Series at the NAV next determined
after the order is received, which must be within 30 days after the date
of the redemption. Exercise of the repurchase privilege will not affect
the federal income tax treatment of any gain realized upon the redemption.
If the redemption resulted in a loss, some or all of the loss, depending
on the amount reinvested, will not be allowed for federal income tax
purposes.
Class B Purchase Privilege
You may direct that the proceeds of the redemption of your shares be
invested in Class B shares of any Prudential Mutual Fund by calling your
Prudential Securities financial adviser or the Transfer Agent at (800) 225-
1852. The transaction will be effected on the basis of the relative NAV.
HOW TO EXCHANGE YOUR SHARES
As a shareholder of the Series you may exchange your shares for shares
of other series of the Trust and certain other Prudential Mutual Funds,
including money market funds and funds sold with an initial sales charge,
subject to the minimum investment requirements of such funds on the basis
of the relative NAV. You may exchange your shares for Class A shares of
the Prudential Mutual Funds on the basis of the relative NAV, plus the
applicable sales charge. No additional sales charge is imposed in
connection with subsequent exchanges. You may not exchange your shares for
Class B shares of the Prudential Mutual Funds, except that shares acquired
prior to January 22, 1990 subject to a contingent deferred sales charge
can be exchanged for Class B shares. See "How to Sell Your Shares-Class B
Purchase Privilege" above and "Shareholder Investment Account-Exchange
Privilege" in the Statement of Additional Information. An exchange will be
treated as a redemption and purchase for tax purposes.
In order to exchange shares by telephone, you must authorize telephone
exchanges on your initial application form or by written notice to the
Transfer Agent and hold shares in non-certificate form. Thereafter, you
may call the Trust at (800) 225-1852 to execute a telephone exchange of
shares, on weekdays, except holidays, between the hours of 8:00 A.M. and
4:00 P.M., New York time. For your protection and to prevent fraudulent
exchanges, your telephone call will be recorded and you will be asked to
provide your personal identification number. A written confirmation of the
exchange transaction will be sent to you. All exchanges will be made on
the basis of the relative NAV of the two funds (or series) next determined
after the request is received in good order. The Exchange Privilege is
available only in states where the exchange may legally be made.
If you hold shares through Prudential Securities, you must exchange
your shares by contacting your Prudential Securities financial adviser. If
you hold certificates, the certificates, signed in the name(s) shown on
the face of the certificates, must be returned in order for the shares to
be exchanged. See "How to Sell Your Shares" above.
Neither the Trust nor its agents will be liable for any loss,
liability or cost which results from acting upon instructions reasonably
believed to be genuine under the foregoing procedures.
You may also exchange shares by mail by writing to Prudential Mutual
Fund Services, Inc., Attention: {Exchange Processing,} P.O. Box 15010, New
Brunswick, New Jersey 08906-5010.
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In periods of severe market or economic conditions the telephone
exchange of shares may be difficult to implement and you should make
exchanges by mail in writing to Prudential Mutual Fund Services, Inc., at
the address noted above.
The Exchange Privilege may be modified or terminated at any time on
sixty days' notice to shareholders.
SHAREHOLDER SERVICES
In addition to the exchange privilege, as a shareholder in the Series,
you can take advantage of the following additional services and
privileges:
*Automatic Reinvestment of Dividends and/or Distributions. For your
convenience, all dividends and distributions are automatically reinvested
in full and fractional shares of the Series at NAV. You may direct the
Transfer Agent in writing not less than 5 full business days prior to the
record date to have subsequent dividends and/or distributions sent in cash
rather than reinvested.
*Automatic Savings Accumulation Plan (ASAP). Under ASAP you may make
regular purchases of Series shares in amounts as little as $50 via an
automatic charge to a bank account or Prudential Securities account
(including a Command Account). For additional information about this
service, you may contact your Prudential Securities financial adviser,
Prusec registered representative or the Transfer Agent directly.
*Tax-Deferred Retirement Plans. Various tax-deferred retirement plans,
including a 401(k) plan, self-directed individual retirement accounts and
"tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue
Code are available through the Distributor. These plans are for use by
both self-employed individuals and corporate employers. These plans permit
either self-direction of accounts by participants, or a pooled account
arrangement. Information regarding the establishment of these plans, the
administration, custodial fees and other details is available from
Prudential Securities or the Transfer Agent. If you are considering
adopting such a plan, you should consult with your own legal or tax
adviser with respect to the establishment and maintenance of such a plan.
*Systematic Withdrawal Plan. A systematic withdrawal plan is available
for shareholders having shares of the Series which provides for monthly or
quarterly checks. If you hold your shares through Prudential Securities,
you should contact your financial adviser.
*Multiple Accounts. Special procedures have been designed for banks
and other institutions that wish to open multiple accounts. An institution
may open a single master account by filing an Application Form with
Prudential Mutual Fund Services, Inc. (PMFS or the Transfer Agent),
{Attention: Customer Service, P.O. Box 15005, New Brunswick, New Jersey
08906,} signed by personnel authorized to act for the institution.
Individual sub-accounts may be opened at the time the master account is
opened by listing them, or they may be added at a later date by written
advice or by filing forms supplied by the Trust. Procedures are available
to identify sub-accounts by name and number within the master account
name. The investment minimums set forth above are applicable to the
aggregate amounts invested by a group and not to the amount credited to
each sub-account.
*Reports to Shareholders. The Trust will send you annual and semi-
annual reports. The financial statements appearing in annual reports are
audited by independent accountants. In order to reduce duplicate mailing
and printing expenses the Trust will provide one annual report and semi-
annual shareholder report and annual prospectus per household. You may
request additional copies of such reports by calling (800) 225-1852 or by
writing to the Trust at One Seaport Plaza, New York, NY 10292.
*Shareholder Inquiries. Inquiries should be addressed to the Trust at
One Seaport Plaza, New York, New York 10292, or by telephone, at (800) 225-
1852 (toll free) or, from outside the U.S.A., at (908) 417-7555
(collect).
For additional information regarding the services and privileges
described above, see "Shareholder Investment Account" in the Statement of
Additional Information.
18
<PAGE>
THE PRUDENTIAL MUTUAL FUND FAMILY
Prudential Mutual Fund Management offers a broad range of mutual funds
designed to meet your individual needs. We welcome you to review the
investment options available through our family of funds. For more
information on the Prudential Mutual Funds, including charges and
expenses, contact your Prudential Securities financial adviser or Prusec
registered representative or telephone the Fund at (800) 225-1852 for a
free prospectus. Read the prospectus carefully before you invest or send
money.
Taxable Bond Funds
Prudential Adjustable Rate Securities Fund, Inc.
Prudential GNMA Fund
Prudential Government Plus Fund
Prudential Government Securities Trust
Intermediate Term Series
Prudential High Yield Fund
Prudential Structured Maturity Fund
Income Portfolio
Prudential U.S. Government Fund
The BlackRock Government Income Trust
Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Modified Term Series
Prudential Municipal Series Fund
Arizona Series
Florida Series
Georgia Series
Maryland Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund
Global Funds
Prudential Global Fund, Inc.
Prudential Global Genesis Fund
Prudential Global Natural Resources Fund
Prudential Intermediate Global Income Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio
Short-Term Global Income Portfolio
Global Utility Fund, Inc.
Equity Funds
Prudential Equity Fund
Prudential Equity Income Fund
Prudential FlexiFund
Conservatively Managed Portfolio
Strategy Portfolio
Prudential Growth Fund, Inc.
Prudential Growth Opportunity Fund
Prudential IncomeVertible(R) Fund, Inc.
Prudential Multi-Sector Fund, Inc.
Prudential Utility Fund
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Money Market Funds
Taxable Money Market Funds
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund
Money Market Series
Prudential MoneyMart Assets
Tax-Free Money Market Funds
Prudential Tax-Free Money Fund
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
19
<PAGE>
No dealer, sales representative or any other person has
been authorized to give any information or to make any
representations, other than those contained in this
Prospectus, in connection with the offer contained
herein, and, if given or made, such other information or
representations must not be relied upon as having been
authorized by the Trust or the Distributor. This
Prospectus does not constitute an offer by the Trust or
by the Distributor to sell or a solicitation of an offer to
buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction.
___________________________________________________________
TABLE OF CONTENTS
Page
----
TRUST HIGHLIGHTS............................. 2
TRUST EXPENSES............................... 4
FINANCIAL HIGHLIGHTS......................... 5
CALCULATION OF YIELD......................... 6
HOW THE TRUST INVESTS........................ 6
Investment Objective and Policies.......... 6
Other Investments and Policies............. 7
Investment Restrictions.................... 7
HOW THE TRUST IS MANAGED..................... 8
Manager.................................... 8
Distributor................................ 8
Portfolio Transactions..................... 9
Custodian and Transfer and
Dividend Disbursing Agent................ 9
HOW THE TRUST VALUES ITS SHARES.............. 9
TAXES, DIVIDENDS AND DISTRIBUTIONS........... 10
GENERAL INFORMATION.......................... 11
Description of Shares...................... 11
Additional Information..................... 11
SHAREHOLDER GUIDE............................ 11
How to Buy Shares of the Trust............. 11
How to Sell Your Shares.................... 15
How to Exchange Your Shares................ 17
Shareholder Services....................... 18
THE PRUDENTIAL MUTUAL FUND FAMILY............ 19
________________________________________________
MF145A 4441280
________________________________________________
CUSIP No.: 744342 30 4
________________________________________________
Prudential
Government
Securities
Trust
(U.S. Treasury Money Market Series)
PROSPECTUS
APRIL 1, 1994
Prudential Mutual Funds (LOGO)
BUILDING YOUR FUTURE
ON OUR STRENGTH SM
<PAGE>
Prudential Government
Securities Trust
(Money Market Series)
_________________________________________________________________________
Prospectus dated April 1, 1994
_________________________________________________________________________
Prudential Government Securities Trust (the Trust) is a diversified, open-
end management investment company whose shares of beneficial interest are
offered in three series. Each series operates as a separate fund with its
own investment objectives and policies designed to meet its specific
investment goals.
The investment objectives of the Money Market Series (the Series) are to
obtain high current income, preservation of capital and maintenance of
liquidity by investing principally in a diversified portfolio of short-
term money-market instruments issued or guaranteed by the United States
Government or its agencies or instrumentalities. See "How the Trust
Invests-Investment Objectives and Policies."
An investment in the Series is neither insured nor guaranteed by the U.S.
Government and there can be no assurance that the Series will be able to
maintain a stable net asset value of $1.00 per share. See "How the Trust
Values its Shares."
The Trust's address is One Seaport Plaza, New York, New York 10292, and
its telephone number is (800) 225-1852.
_________________________________________________________________________
This Prospectus sets forth concisely the information about the Trust and
the Series that a prospective investor ought to know before investing.
Additional information about the Trust has been filed with the Securities
and Exchange Commission in a Statement of Additional Information, dated
April 1, 1994, which information is incorporated herein by reference (is
legally considered a part of this Prospectus) and is available without
charge upon request to the Trust at the address or telephone number noted
above.
_________________________________________________________________________
Investors are advised to read this Prospectus and retain it for future
reference.
_________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TRUST HIGHLIGHTS
What is Prudential Government Securities Trust?
Prudential Government Securities Trust is a mutual fund whose shares
are offered in three series, each of which operates as a separate fund. A
mutual fund pools the resources of investors by selling its shares to the
public and investing the proceeds of such sale in a portfolio of
securities designed to achieve its investment objective. Technically, the
Trust is an open-end, diversified management investment company. Only the
Money Market Series is offered through this Prospectus.
What are the Series' Investment Objectives?
The Series' investment objectives are to obtain high current income,
preservation of capital and maintenance of liquidity by investing
principally in a diversified portfolio of short-term money-market
instruments issued or guaranteed by the United States Government or its
agencies or instrumentalities. See "How the Trust invests-Investment
Objectives and Policies" at page 6.
What are the Series' Special Characteristics and Risks?
It is anticipated that the net asset value of the Series will remain
constant at $1.00 per share, although this cannot be assured. In order to
maintain such constant net asset value, the Series will value its
portfolio securities at amortized cost. While this method provides
certainty in valuation, it may result in periods during which the value of
a security in its portfolio, as determined by amortized cost, is higher or
lower than the price the Series would receive if it sold such security.
See "How the Trust Values its Shares" at page 9.
Who Manages the Trust?
Prudential Mutual Fund Management, Inc. (PMF or the Manager) is the
Manager of the Trust and is compensated for its services at an annual rate
of .40 of 1% of the Series' average daily net assets up to $1 billion,
.375 of 1% of the Series' average daily net assets between $1 billion
and $1.5 billion and .35 of 1% in excess of $1.5 billion. As of
February 28, 1994, PMF served as manager or administrator to {65}
investment companies, including {37} mutual funds, with aggregate assets
of approximately ${50} billion. The Prudential Investment Corporation (PIC
or the Subadviser) furnishes investment advisory services in connection
with the management of the Trust under a Subadvisory Agreement with PMF.
See "How the Trust is Managed-Manager" at page 8.
2
<PAGE>
Who Distributes the Series' Shares?
Prudential Mutual Fund Distributors, Inc. (PMFD or the Distributor)
acts as the Distributor of the Series' shares. The Trust reimburses PMFD
for expenses related to the distribution of the Series' shares at an
annual rate of up to .125 of 1% of the average daily net assets of the
Series. See "How the Trust is Managed-Distributor" at page 8.
What is the Minimum Investment?
The minimum initial investment is $1,000. The subsequent minimum
investment is $100. There is no minimum investment requirement for certain
retirement and employee savings plans or custodial accounts for the
benefit of minors. For purchases made through the Automatic Savings
Accumulation Plan, the minimum initial and subsequent investment is $50.
See "Shareholder Guide-How to Buy Shares of the Trust" at page 11 and
"Shareholder Guide-Shareholder Services" at page 16.
How Do I Purchase Shares?
You may purchase shares of the Series through Prudential Securities,
Pruco Securities Corporation (Prusec) or directly from the Trust, through
its transfer agent, Prudential Mutual Fund Services, Inc. (PMFS or the
Transfer Agent) at the net asset value per share (NAV) next determined
after receipt of your purchase order by the Transfer Agent or Prudential
Securities. Orders are received on each business day until 4:00 P.M., New
York time. See "How the Trust Values its Shares" at page 9 and
"Shareholder Guide-How to Buy Shares of the Trust" at page 11.
How Do I Sell My Shares?
You may redeem shares of the Series at any time at the NAV next
determined after Prudential Securities or the Transfer Agent receives your
sell order. See "Shareholder Guide-How to Sell Your Shares" at page 13.
How Are Dividends and Distributions Paid?
The Series expects to declare daily and pay monthly dividends of net
investment income and short-term capital gains, if any. Dividends and
distributions will be automatically reinvested in additional shares of the
Series at NAV unless you request that they be paid to you in cash. See
"Taxes, Dividends and Distributions" at page 10.
3
<PAGE>
TRUST EXPENSES-MONEY MARKET SERIES
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases ..................... None
Maximum Sales Load Imposed on Reinvested Dividends .......... None
Deferred Sales Load ......................................... None
Redemption Fees ............................................. None
Exchange Fee ................................................ None
Annual Series Operating Expenses
(as a percentage of average net assets)
Management Fees ............................................. 0.400%
12b-1 Fees .................................................. 0.125%
Other Expenses .............................................. 0.195%
-----
Total Series Operating Expenses ............................. 0.720%
=====
Example 1 Year 3 Years 5 Years 10 Years
------- ------ ------- ------- --------
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period: $7 $23 $40 $89
- --------------
The above example is based on data for the Series' fiscal year ended
November 30, 1993. The example should not be considered a representation
of past or future expenses. Actual expenses may be greater or less than
those shown.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that an investor in the Series will bear,
whether directly or indirectly. For more complete descriptions of the
various costs and expenses, see "How the Trust is Managed." "Other
Expenses" include operating expenses of the Series, such as Trustees' and
professional fees, registration fees, reports to shareholders and transfer
agent and custodian fees.
4
<PAGE>
FINANCIAL HIGHLIGHTS
(for a share of beneficial interest outstanding throughout each period
indicated)
The following financial highlights with respect to the five-year period ended
November 30, 1993 for the Series have been audited by Price Waterhouse,
independent accountants, whose report thereon was unqualified. This information
should be read in conjunction with the financial statements and notes thereto,
which appear in the Statement of Additional Information. The following financial
highlights contain selected data for a share of beneficial interest outstanding,
total return, ratios to average net assets and other supplemental data for each
of the periods indicated. The information is based on data contained in the
financial statements.
<TABLE>
<CAPTION>
Money Market Series
-------------------------------------------------------------------------------------------
Year Ended November 30,
-------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988+ 1987 1986 1985 1984
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year ........................ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment income ......... .026 .035 .058 .076 .084 .067 .058 .061 .075 .095
Dividends from net investment
income ...................... (.026) (.035) (.058) (.076) (.084) (.067) (.058) (.061) (.075) (.095)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year .. $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN++ 2.62% 3.57% 5.96% 7.83% 8.77% 6.99% 6.01% 6.30% 7.73% 9.87%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) . $919,503 $1,026,187 $1,212,836 $1,355,058 $667,571 $470,727 $445,761 $329,789 $268,046 $244,979
Average net assets (000) ...... $950,988 $1,113,759 $1,255,014 $857,385 $528,820 $480,598 $368,100 $315,520 $257,977 $202,021
Ratio to average net assets:+++
Expenses, including
distribution fees ........... .72% .72% .65% .66% .68% .65% .68% .70% .73% .65%
Expenses, excluding
distribution fees ........... .59% .60% .53% .53% .56% .52% .55% .57% .60% .64%
Net investment income ......... 2.56% 3.42% 5.78% 7.52% 8.30% 6.69% 5.78% 6.13% 7.39% 9.48%
<FN>
+ On August 9, 1988, Prudential Mutual Fund Management, Inc.
succeeded The Prudential Insurance Company of America as
investment adviser and since then has acted as manager of the
Trust. See "Manager" in the Statement of Additional Information.
++ 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.
+++ Because of the adoption of a plan of distribution effective
October 26, 1984, historical expenses and ratios of expenses to
average net assets are not necessarily indicative of future
expenses and related ratios. See "How the Trust is
Managed-Distributor."
</FN>
</TABLE>
5
<PAGE>
CALCULATION OF YIELD
The Series calculates its "current yield" based on the net change,
exclusive of realized and unrealized gains or losses, in the value of a
hypothetical account over a seven calendar day base period. The Series
also calculates its "effective annual yield" assuming weekly compounding.
The following is an example of the yield calculations as of November 30,
1993:
Value of hypothetical account at end of period .............. $1.000497911
Value of hypothetical account at beginning of period ........ 1.000000000
-----------
Base period return .......................................... $0.000497911
============
Current yield (.000497911 x (365/7)) ........................ 2.60%
Effective annual yield, assuming weekly compounding ......... 2.63%
The yield will fluctuate from time to time and is not necessarily
representative of future performance.
The weighted average life to maturity of the portfolio of the Series
on November 30, 1993 was 64 days.
Yield is computed in accordance with a standardized formula described
in the Statement of Additional Information. In addition, comparative
performance information may be used from time to time in advertising or
marketing the Trust's shares, including data from Lipper Analytical
Services, Inc., Donoghue's Money Fund Report, The Bank Rate Monitor, other
industry publications, business periodicals, and market indices.
HOW THE TRUST INVESTS
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Series are to obtain high current
income, preserve capital and maintain liquidity. There is no assurance
that these objectives will be achieved.
The Series will invest at least 80% of its total assets in United
States Government securities. These securities may include securities
issued or guaranteed by the United States Treasury, by various agencies of
the United States Government or by various instrumentalities which have
been established or sponsored by the United States Government including
repurchase agreements with respect to such securities. The Series may also
invest in fully insured certificates of deposit issued by banks or savings
and loan associations subject to certain restrictions and obligations of
the International Bank for Reconstruction and Development (the World
Bank). Obligations of the World Bank are supported by appropriated but
unpaid commitments of its member countries, including the United States,
and there is no assurance these commitments will be undertaken or met in
the future. See "Investment Restrictions" in the Statement of Additional
Information.
The Series may also purchase instruments of the types described above
together with the right to resell the instruments at an agreed-upon price
or yield within a specified period prior to the maturity date of the
instrument, commonly known as a "put." The aggregate price that the Series
pays for instruments with a put may be higher than the price that
otherwise would be paid for the instruments. See "Investment Objectives
and Policies" in the Statement of Additional Information.
The Series' investment objectives and policies described above are
fundamental policies, and, therefore, may not be changed without the
approval of the holders of a majority of the outstanding voting securities
of the Money Market Series, as defined in the Investment Company Act of
1940, as amended (the Investment Company Act). Policies that are not
fundamental may be modified by the Trustees.
6
<PAGE>
The Series may not invest in securities other than the types of
securities listed above and is subject to other specific investment
restrictions as detailed under "Investment Restrictions" in the Statement
of Additional Information.
The Series seeks to maintain a $1.00 share price at all times. To
achieve this, the Series purchases only securities with remaining
maturities of thirteen months or less and limits the dollar-weighted
average maturity of its portfolio to 90 days or less. There is no
assurance that the Series will be able to maintain a stable net asset
value. See "How the Trust Values its Shares."
OTHER INVESTMENTS AND POLICIES
Repurchase Agreements
The Series may enter into repurchase agreements, whereby the seller of
a security agrees to repurchase that security from the Series at a
mutually agreed-upon time and price. The period of maturity is usually
quite short, possibly overnight or a few days, although it may extend over
a number of months. The resale price is in excess of the purchase price,
reflecting an agreed-upon rate of return effective for the period of time
the Series' money is invested in the security. The Series' repurchase
agreements will at all times be fully collateralized in an amount at least
equal to the purchase price including accrued interest earned on the
underlying securities. The instruments held as collateral are valued
daily, and if the value of such instruments declines, the Series will
require additional collateral. If the seller defaults and the value of the
collateral securing the repurchase agreement declines, the Series may
incur a loss. The Series participates in a joint repurchase account with
other investment companies managed by Prudential Mutual Fund Management,
Inc. pursuant to an order of the Securities and Exchange Commission
(SEC).
When-Issued and Delayed Delivery Securities
The Series may purchase or sell securities on a when-issued or delayed
delivery basis. When-issued or delayed delivery transactions arise when
securities are purchased or sold by the Series with payment and delivery
taking place as much as a month or more into the future in order to secure
what is considered to be an advantageous price and yield to the Series at
the time of entering into the transaction. The Trust's Custodian will
maintain, in a segregated account of the Series, cash, U.S. Government
securities or other liquid high-grade debt obligations having a value
equal to or greater than the Series' purchase commitments; the Custodian
will likewise segregate securities sold on a delayed delivery basis. The
securities so purchased are subject to market fluctuation and no interest
accrues to the purchaser during the period between purchase and
settlement. At the time of delivery of the securities the value may be
more or less than the purchase price and an increase in the purcentage of
the Series' assets commited to the purchase of securities on a when-issued
or delayed delivery basis may increase the volatility of the Series' net
asset value.
Borrowing
The Series may borrow an amount equal to no more than 20% of the value
of its total assets (calculated when the loan is made) from banks for
temporary, extraordinary or emergency purposes. The Series may pledge up
to 20% of its total assets to secure these borrowings. Borrowing for
purposes other than meeting redemptions may not exceed 5% of the value of
the Series' total assets. Investment securities will not be purchased
while borrowings are outstanding.
INVESTMENT RESTRICTIONS
The Series is subject to certain investment restrictions which, like
its investment objective, constitute fundamental policies. Fundamental
policies cannot be changed without the approval of the holders of a
majority of the Series' outstanding securities, as defined in the
Investment Company Act. See "Investment Restrictions" in the Statement of
Additional Information.
7
<PAGE>
HOW THE TRUST IS MANAGED
The Trust has Trustees who, in addition to overseeing the actions of
the Trust's Manager, Subadviser and Distributor, as set forth below,
decide upon matters of general policy. The Trust's Manager conducts and
supervises the daily business operations of the Trust. The Trust's
Subadviser furnishes daily investment advisory services.
For the fiscal year ended November 30, 1993, total expenses of the
Series as a percentage of its average net assets were .72%. See "Financial
Highlights."
MANAGER
Prudential Mutual Fund Management, Inc. (PMF or the Manager), One
Seaport Plaza, New York, New York 10292, is the Manager of the Trust and
is compensated for its services at an annual rate of .40 of 1% of the
Series' average daily net assets up to $1 billion, .375 of 1% of the
Series' average daily net assets between $1 billion and $1.5 billion and
.35 of 1% in excess of $1.5 billion. It was incorporated in May 1987 under
the laws of the State of Delaware. For the fiscal year ended November 30,
1993, the Trust paid management fees to PMF of .40% of the average net
assets of the Series. See "Manager" in the Statement of Additional
Information.
As of February 28, 1994, PMF served as the manager to {37} open-end
investment companies, constituting all of the Prudential Mutual Funds, and
as manager or administrator to {28} closed-end investment companies with
aggregate assets of approximately ${50} billion.
Under the Management Agreement with the Trust, PMF manages the
investment operations of the Trust and also administers the Trust's
corporate affairs. See "Manager" in the Statement of Additional
Information.
Under a Subadvisory Agreement between PMF and The Prudential
Investment Corporation (PIC or the Subadviser), PIC furnishes investment
advisory services in connection with the management of the Trust and is
reimbursed by PMF for its reasonable costs and expenses incurred in
providing such services. Under the Management Agreement, PMF continues to
have responsibility for all investment advisory services and supervises
PIC's performance of such services.
PMF and PIC are indirect, wholly-owned subsidiaries of The Prudential
Insurance Company of America (Prudential), a major diversified insurance
and financial services company.
DISTRIBUTOR
Prudential Mutual Fund Distributors, Inc. (PMFD or the Distributor),
One Seaport Plaza, New York, New York 10292, is a corporation organized
under the laws of the State of Delaware and serves as the Distributor for
the Series. It is a wholly-owned subsidiary of PMF.
Under a Distribution and Service Plan (the Plan) adopted by the Series
under Rule 12b-1 under the Investment Company Act and a distribution and
service agreement (the Distribution Agreement), the Distributor incurs the
expenses of distributing shares of the Series. These expenses include
account servicing fees paid to, or on account of, financial advisers of
Prudential Securities Incorporated (Prudential Securities) and Pruco
Securities Corporation (Prusec), an affiliated broker-dealer, account
servicing fees paid to, or on account of, other broker-dealers or
financial institutions (other than national banks) which have entered into
agreements with the Distributor, advertising expenses, the cost of
printing and mailing prospectuses to potential investors and indirect and
overhead costs of Prudential Securities and Prusec associated with the
sale of the Series' shares, including lease, utility, communications and
sales promotion expenses. There are no carryforward amounts under the Plan
and interest expenses are not incurred under the Plan. The State of Texas
requires that shares of the Trust may be sold in that state only by
dealers or other financial institutions which are registered there as
broker-dealers.
Under the Plan, the Trust reimburses the Distributor for its
distribution-related expenses with respect to the Series at an annual rate
of up to .125 of 1% of the Series' average daily net assets. Account
servicing fees are paid
8
<PAGE>
based on the average balance of Series shares held in accounts of
customers of financial advisers. The entire distribution fee may be used
to pay account servicing fees.
The Plan provides that it shall continue in effect from year to year
provided that each such continuance is approved annually by a majority
vote of the Trustees, including a majority of the Trustees who are not
interested persons of the Trust and who have no direct or indirect
financial interest in the operation of the Plan or any agreements related
to the Plan. The Trustees are provided with and review quarterly reports
of expenditures under the Plan.
For the fiscal year ended November 30, 1993, PMFD incurred
distribution expenses in the aggregate of $1,188,735, all of which was
recovered through the distribution fee paid by the Series to PMFD. The
Trust records all payments made under the Plan as expenses in the
calculation of its net investment income.
In addition to distribution and service fees paid by the Series under
the Plan, the Manager (or one of its affiliates) may make payments to
dealers and other persons which distribute shares of the Series. Such
payments may be calculated by reference to the net asset value of shares
sold by such persons or otherwise.
PORTFOLIO TRANSACTIONS
Prudential Securities may act as a broker for the Trust, provided that
the commissions, fees or other remuneration it receives are fair and
reasonable. See "Portfolio Transactions and Brokerage" in the Statement of
Additional Information.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian of the Trust's portfolio
securities and, in that capacity, maintains certain financial and
accounting books and records pursuant to an agreement with the Trust. Its
mailing address is P.O. Box 1713, Boston, Massachusetts 02105.
Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza One,
Edison, New Jersey 08837, serves as Transfer and Dividend Disbursing Agent
and, in those capacities, maintains certain books and records for the
Trust. PMFS is a wholly-owned subsidiary of PMF. Its mailing address is
P.O. Box 15005, New Brunswick, New Jersey 08906-5005.
HOW THE TRUST VALUES ITS SHARES
The Series' net asset value per share or NAV is determined by
subtracting its liabilities from the value of its assets and dividing the
remainder by the number of outstanding shares. The Trustees have fixed the
specific time of day for the computation of the Series' NAV to be as of
4:30 P.M., New York time, immediately after the daily declaration of
dividends.
The Series will compute its NAV once daily on the days that the New
York Stock Exchange is open for trading, except on days on which no orders
to purchase, sell or redeem Series shares have been received or days on
which changes in the value of the Series portfolio securities do not
materially affect the NAV. The New York Stock Exchange is closed on the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Series determines the value of its portfolio securities by the
amortized cost method. This method involves valuing a security at its cost
at the time of purchase and thereafter assuming a constant amortization to
maturity of any discount or premium regardless of the impact of
fluctuating interest rates on the market value of the instrument. While
this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower
than the price the Series would receive if it sold the instrument. During
these periods, the yield to a shareholder may differ somewhat from that
which could be obtained from a similar fund which marks its portfolio
securities to the market each day. For example, during periods of
declining interest rates, if the use of the amortized cost
9
<PAGE>
method resulted in a lower value of the Series' portfolio on a given day,
a prospective investor in the Series would be able to obtain a somewhat
higher yield and existing shareholders would receive correspondingly less
income. The converse would apply during periods of rising interest rates.
The Trustees have established procedures designed to stabilize, to the
extent reasonably possible, the NAV of the Series' shares at $1.00 per
share. See "Net Asset Value" in the Statement of Additional Information.
TAXES, DIVIDENDS AND DISTRIBUTIONS
Taxation of The Series
Each series of the Trust is treated as a separate entity for federal
income tax purposes and each has elected to qualify and intends to remain
qualified as a regulated investment company under the Internal Revenue
Code. Accordingly, the Series will not be subject to federal income taxes
on its net investment income and capital gain, if any, it distributes to
shareholders. To the extent not distributed by the Series, taxable net
investment income and net capital gains are taxable to the Series. The
performance and tax qualification of one series will have no effect on the
federal income tax liability of shareholders of the other series. See
"Taxes" in the Statement of Additional Information.
Taxation of Shareholders
Distributions of net investment income and short-term capital gains,
if any, will be taxable to shareholders of the Series as ordinary income,
whether or not reinvested. The Series does not expect to realize long-term
capital gains or losses. Because none of the income of the Series will
consist of dividends from domestic corporations, dividends of net
investment income and distributions of net short-term capital gains will
not be eligible for the dividends-received deduction for corporate
shareholders. Tax-exempt shareholders will generally not be required to
pay taxes on amounts distributed to them.
Shareholders are advised to consult their own tax advisers regarding
specific questions as to federal, state or local taxes.
Withholding Taxes
Under Treasury Regulations, the Trust is required to withhold and
remit to the U.S. Treasury 31% of dividends, capital gain distributions
and redemption proceeds on the accounts of those shareholders who fail to
furnish their tax identification numbers on IRS Form W-9 (or IRS Form W-8
in the case of certain foreign shareholders) or who are otherwise subject
to backup withholding. Dividends from net investment income and short-term
capital gains paid to a foreign shareholder will generally be subject to
U.S. withholding tax at the rate of 30% (or lower treaty rate).
Dividends and Distributions
The Series expects to declare daily and pay monthly dividends of net
investment income and short-term capital gains, if any. A shareholder
begins to earn dividends on the first business day after the settlement
date of his or her order and continues to earn dividends through the day
on which his or her shares are redeemed.
Dividends and distributions will be paid in additional shares of the
Series based on the net asset value of the Series' shares on the payment
date, unless the shareholder elects in writing not less than five business
days prior to the payment date to receive such dividends and distributions
in cash. Such election should be submitted to Prudential Mutual Fund
Services, Inc., Att: Account Maintenance, P.O. Box 15015, New Brunswick,
New Jersey 08906-5015. If you hold shares through Prudential Securities,
you should contact your financial adviser to elect to receive dividends
and distributions in cash. The Trust will notify each shareholder after
the close of the Trust's taxable year of both the dollar amount and
taxable status of that year's dividends and distributions on a per share
basis. Distributions may be subject to state and local taxes. See
"Taxation of Shareholders" above.
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GENERAL INFORMATION
DESCRIPTION OF SHARES
The Trust, organized as an unincorporated business trust under the
laws of Massachusetts, is a trust fund of the type commonly known as a
"Massachusetts business trust." The Trust's activities are supervised by
its Trustees. The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares in separate series.
The shareholders of the Money Market Series, the Intermediate Term
Series and the U.S. Treasury Money Market Series are each entitled to a
full vote for each full share of beneficial interest (par value $.01 per
share) held (and fractional votes for fractional shares). Shares of each
series are entitled to vote as a class only to the extent required by the
provisions of the Investment Company Act or as otherwise permitted by the
Trustees in their sole discretion. Under the Investment Company Act,
shareholders of each series have to approve the adoption of any investment
advisory agreement relating to such series and of any changes in the
investment policies related thereto.
It is the intention of the Trust not to hold Annual Meetings of
Shareholders. The Trustees may call Special Meetings of Shareholders for
action by shareholder vote as may be required by the Investment Company
Act or the Declaration of Trust. Shareholders have certain rights,
including the right to call a meeting upon vote of 10% of the Trust's
outstanding shares for the purpose of voting on the removal of one or more
Trustees.
ADDITIONAL INFORMATION
This Prospectus, including the Statement of Additional Information
which has been incorporated by reference herein, does not contain all the
information set forth in the Registration Statement filed by the Trust
with the SEC under the Securities Act of 1933. Copies of the Registration
Statement may be obtained at a reasonable charge from the SEC or may be
examined, without charge, at the office of the SEC in Washington, D.C.
SHAREHOLDER GUIDE
HOW TO BUY SHARES OF THE TRUST
You may purchase shares of the Series through Prudential Securities or
through Prusec, or directly from the Trust through its Transfer Agent,
Prudential Mutual Fund Services, Inc. (PMFS or the Transfer Agent),
Attention: Investment Services, P.O. Box 15020, New Brunswick, New Jersey
08906-5020. The minimum initial investment is $1,000. The minimum
subsequent investment is $100. All minimum investment requirements are
waived for certain retirement and employee savings plans and for custodial
accounts for the benefit of minors. For purchases through the Automatic
Savings Accumulation Plan, the minimum initial and subsequent investment
is $50. See "Shareholder Services" below.
Shares of the Series are sold, without a sales charge, at the NAV next
determined after receipt and acceptance by PMFS of a purchase order and
payment in proper form {i.e., a check or Federal Funds wired to State
Street Bank and Trust Company (State Street), the Trust's custodian}. See
"How the Trust Values its Shares." Orders are received on each business
day until 4:00 P.M., New York time. When payment is received by PMFS prior
to 4:00 P.M., New York time, in proper form, a share purchase order will
be entered at the price determined as of 4:00 P.M., New York time, on that
day, and dividends on the shares purchased will begin on the business day
following such investment. See "Taxes, Dividends and Distributions."
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Application forms can be obtained from PMFS, Prudential Securities or
Prusec. If a stock certificate is desired, it must be requested in writing
for each transaction. Certificates are issued only for full shares.
Shareholders who hold their shares through Prudential Securities will not
receive stock certificates. Shareholders cannot utilize Expedited
Redemption or Check Redemption or have a Systematic Withdrawal Plan if
they have been issued share certificates.
The Trust reserves the right to reject any purchase order (including
an exchange) or to suspend or modify the continuous offering of its
shares. See "How to Sell Your Shares" below.
Your dealer is responsible for forwarding payment promptly to the
Trust. The Distributor reserves the right to cancel any purchase order for
which payment has not been received by the fifth business day following
the investment.
Transactions in Trust shares made through dealers other than
Prudential Securities or Prusec may be subject to postage and handling
charges imposed by the dealer; however, you may avoid such charges by
placing orders directly with the Trust's Transfer Agent, Prudential Mutual
Fund Services, Inc., Attention: Investment Services, P.O. Box 15020, New
Brunswick, New Jersey 08906-5020.
Purchase through Prudential Securities
If you have an account with Prudential Securities (or open such an
account), you may ask Prudential Securities to purchase shares of the
Series on your behalf. On the business day following confirmation that a
free credit balance (i.e., immediately available funds) exists in your
account, Prudential Securities will effect a purchase order for shares of
the Series in an amount up to the balance at the NAV determined on that
day. Funds held by Prudential Securities on behalf of its clients in the
form of free credit balances are delivered to the Trust by Prudential
Securities and begin earning dividends the second business day after
receipt of the order by Prudential Securities. Accordingly, Prudential
Securities will have the use of such free credit balances during this
period.
Shares of the Series purchased by Prudential Securities on behalf of
its clients will be held by Prudential Securities as record holder.
Prudential Securities will thereafter receive statements and dividends
directly from the Series and will in turn provide investors with
Prudential Securities account statements reflecting purchases, redemptions
and dividend payments. Although Prudential Securities clients who purchase
shares of the Series through Prudential Securities may not redeem shares
of the Series by check, Prudential Securities may provide its clients with
alternative forms of immediate access to monies invested in shares of the
Series.
Prudential Securities clients wishing additional information
concerning investment in Series shares made through Prudential Securities
should call their Prudential Securities financial adviser.
Automatic Investment. Prudential Securities has advised the Series
that it has instituted procedures pursuant to which, upon enrollment by a
Prudential Securities client, Prudential Securities will make automatic
investments of free credit balances of $1,000 or more (Eligible Credit
Balances) held in such client's account in shares of the Money Market
Series (Autosweep). To effect the automatic investment of Eligible Credit
Balances representing the proceeds from the sale of securities, Prudential
Securities will enter orders for the purchase of Series shares at the
opening of business on the day following the settlement of such securities
transaction; to effect the automatic investment of Eligible Credit
Balances representing non-trade related credits, Prudential Securities
will enter orders for the purchase of Series shares at the opening of
business semi-monthly. All shares purchased pursuant to such procedures
will be issued at the NAV determined on the date the order is entered and
will receive the next dividend declared after such shares are issued.
Self-directed Investment. Prudential Securities clients not electing
the automatic investment of Eligible Credit Balances may continue to place
orders for the purchase of Series shares through Prudential Securities,
subject to minimum initial and subsequent investment requirements as
described above.
A Prudential Securities client who has not elected Autosweep (see
"Automatic Investment") and who does not place a purchase order promptly
after funds are credited to his or her Prudential Securities account will
have a free credit
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balance with Prudential Securities and will not begin earning dividends
until the business day after Prudential Securities has placed the client's
purchase order with the Trust to purchase shares of the Series.
Accordingly, Prudential Securities will have the use of such free credit
balances during this period.
Purchases through Prusec
You may purchase shares of the Series by placing an order with your
Prusec registered representative accompanied by payment for the purchase
price of such shares and, in the case of a new account, a completed
Application Form. You should also submit an IRS Form W-9. The Prusec
registered representative will then forward these items to the Transfer
Agent. See "Purchase By Mail" below.
Purchase by Wire
For an initial purchase of shares of the Series by wire, you must
first telephone PMFS at (800) 225-1852 (toll free) to receive an account
number. The following information will be requested: your name, address,
tax identification number, dividend distribution election, amount being
wired and wiring bank. Instructions should then be given by you to your
bank to transfer funds by wire to State Street Bank and Trust Company,
Boston, Massachusetts 02205, Services Division, Attention: Prudential
Government Securities Trust (Money Market Series), specifying on the wire
the account number assigned by PMFS and your name.
If you arrange for receipt by State Street of Federal Funds prior to
4:00 P.M., New York time, on a business day, you may purchase Series
shares as of that day and receive dividends commencing on the next
business day.
In making a subsequent purchase order by wire, you should wire State
Street directly, and should be sure that the wire specifies Prudential
Government Securities Trust (Money Market Series) and your name and
individual account number. It is not necessary to call PMFS to make
subsequent purchase orders by wire. The minimum amount which may be
invested by wire is $1,000.
Purchase by Mail
Purchase orders for which remittance is to be made by check or money
order may be submitted directly by mail to Prudential Mutual Fund
Services, Inc., Attention: Investment Services, P.O. Box 15020, New
Brunswick, New Jersey 08906-5020, together with payment of the purchase
price of such shares and, in the case of a new account, a completed
Application Form. You should also submit an IRS Form W-9. If PMFS receives
your order to purchase shares of the Trust and payment in proper form
prior to 4:00 P.M., New York time, the purchase order will be effective on
that day and you will begin earning dividends on the following business
day. See "Taxes, Dividends and Distributions." Checks should be made
payable to Prudential Government Securities Trust (Money Market Series).
Certified checks are not necessary, but checks are accepted subject to
collection at full face value in United States funds and must be drawn on
a bank located in the United States. There are restrictions on the
redemption of shares purchased by check while the funds are being
collected. See "How to Sell Your Shares."
HOW TO SELL YOUR SHARES
You can redeem your shares at any time for cash at the NAV next
determined after the redemption request is received in proper form by the
Transfer Agent or Prudential Securities. See "How the Trust Values its
Shares." Orders are received on each business day until 4:00 P.M., New
York time.
Shares for which a redemption request is received prior to 4:00 P.M.,
New York time, are entitled to a dividend on the day the request is
received. By pre-authorizing Expedited Redemption, you may arrange to have
payment for redeemed shares made in Federal Funds wired to your bank,
normally on the next bank business day following the date of receipt of
the redemption instructions. Should you redeem all of your shares, you
will receive the amount of all dividends declared for the month-to-date on
those shares. See "Taxes, Dividends and Distributions."
If redemption is requested by a corporation, partnership, trust or
fiduciary, written evidence of authority acceptable to the Transfer Agent
must be submitted before such request will be accepted. All correspondence
and documents
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concerning redemptions should be sent to the Trust in care of its Transfer
Agent, Prudential Mutual Fund Services, Inc., Attention: Redemption
Services, P.O. Box 15010, New Brunswick, New Jersey 08906-5010.
If the proceeds of the redemption (a) exceed $50,000, (b) are to be
paid to a person other than the record owner, (c) are to be sent to an
address other than the address on the Transfer Agent's records or (d) are
to be paid to a corporation, partnership, trust or fiduciary, the
signature(s) on the redemption request and on the certificates, if any, or
stock power, must be guaranteed by an "eligible guarantor institution." An
"eligible guarantor institution" includes any bank, broker, dealer or
credit union. The Transfer Agent reserves the right to request additional
information from, and make reasonable inquiries of, any eligible guarantor
institution. For clients of Prusec a signature guarantee may be obtained
from the agency or office manager of most Prudential Insurance and
Financial Services or Preferred Financial Services offices.
Normally, the Trust makes payment on the next business day for all
shares of the Series redeemed, but in any event, payment will be made
within seven days after receipt by PMFS of share certificates and/or of a
redemption request in proper form. However, the Trust may suspend the
right of redemption or postpone the date of payment (a) for any periods
during which the New York Stock Exchange is closed (other than for
customary weekend or holiday closings), (b) for any periods when trading
in the markets the Series normally utilizes is closed or restricted or an
emergency exists as determined by the SEC so that disposal of the
investments of the Series or determination of its NAV is not reasonably
practicable, or (c) for such other periods as the SEC may permit for
protection of the shareholders of the Money Market Series.
Payment for redemption of recently purchased shares will be delayed
until the Trust or its Transfer Agent has been advised that the purchase
check has been honored, up to 10 calendar days from the time of receipt of
the purchase check by the Transfer Agent. Such delay may be avoided if
shares are purchased by wire or by certified or official bank check.
Redemption of Shares Purchased Through Prudential Securities
Prudential Securities clients for whom Prudential Securities has
purchased shares of the Series may have such shares redeemed only by
instructing their Prudential Securities financial adviser orally or in
writing.
Prudential Securities has advised the Series that it has established
procedures pursuant to which shares of the Series held by a Prudential
Securities client having a deficiency in his or her Prudential Securities
account will be redeemed automatically to the extent of that deficiency to
the nearest highest dollar, unless the client notifies Prudential
Securities to the contrary. The amount of the redemption will be the
lesser of (a) the total NAV of Series shares held in the client's
Prudential Securities account or (b) the deficiency in the client's
Prudential Securities account at the close of business on the date such
deficiency is due. Accordingly, a Prudential Securities client utilizing
this automatic redemption procedure and who wishes to pay for a securities
transaction or meet any market action related deficiency in his or her
account must do so not later than the day of settlement for such
securities transaction or the date such market action related deficiency
is incurred. Prudential Securities clients who have elected to utilize
Autosweep will not be entitled to dividends declared on the date of
redemption.
Redemption of Shares Purchased Through PMFS
If you purchase shares of the Series through PMFS, you may use Check
Redemption, Expedited Redemption or Regular Redemption. Prudential
Securities clients for whom Prudential Securities has purchased shares may
not use such services.
Regular Redemption. You may redeem your shares of the Trust by sending
a written request to PMFS, Attention: Redemption Services, P.O. Box 15010,
New Brunswick, New Jersey 08906-5010. In this case, all share certificates
must be endorsed by you with signature guaranteed, as described above.
PMFS may request further documentation from corporations, executors,
administrators, trustees or guardians. Regular redemption is made by check
mailed to the shareholder's address.
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Expedited Redemption. By pre-authorizing Expedited Redemption, you may
arrange to have payment for redeemed shares made in Federal Funds wired to
your bank, normally on the next business day following redemption. In
order to use Expedited Redemption, you may so designate at the time the
initial investment is made or at a later date. Once an Expedited
Redemption authorization form has been completed, the signature on the
authorization form guaranteed as set forth above and the form returned to
PMFS, requests for redemption may be made by telegraph, letter or
telephone. To request Expedited Redemption by telephone, you should call
PMFS at (800) 225-1852. Calls must be received by PMFS before 4:00 P.M.,
New York time, to permit redemption as of such date. Requests by letter
should be addressed to Prudential Mutual Fund Services, Inc., Att:
Redemption Services, P.O. Box 15010, New Brunswick, New Jersey 08906-
5010.
A signature guarantee is not required under Expedited Redemption once
the authorization form is properly completed and returned. The Expedited
Redemption privilege may be used to redeem shares in an amount of $200 or
more, except that if an account for which Expedited Redemption is
requested has a net asset value of less than $200, the entire account must
be redeemed. The proceeds of redeemed shares in the amount of $1,000 or
more are transmitted by wire to your account at a domestic commercial bank
which is a member of the Federal Reserve System. Proceeds of less than
$1,000 are forwarded by check to your designated bank account.
During periods of severe market or economic conditions, Expedited
Redemption may be difficult to implement and you should redeem your shares
by mail as described above.
Check Redemption. At your request, State Street Bank & Trust Company
(State Street) will establish a personal checking account for you. Checks
drawn on this account can be made payable to the order of any person in
any amount greater than $500. When such check is presented to State Street
for payment, State Street presents the check to the Trust as authority to
redeem a sufficient number of shares of the Trust in your account to cover
the amount of the check. If insufficient shares are in the account or, if
the purchase was made by check within 10 calendar days, the check will be
returned marked "insufficient funds." Checks in an amount less than $500
will not be honored. Shares for which certificates have been issued cannot
be redeemed by check. PMFS reserves the right to impose a service charge
to establish a checking account and order checks.
Involuntary Redemption
Because of the relatively high cost of maintaining an account, the
Trust reserves the right to redeem, upon 60 days' written notice, an
account which is reduced to an NAV of $500 or less due to a redemption.
You may avoid such redemption by increasing the NAV of your account to an
amount in excess of $500.
Redemption in Kind
If the Trustees determine that it would be detrimental to the best
interests of the remaining shareholders of the Series to make payment
wholly or partly in cash, the Trust may pay the redemption price in whole
or in part by a distribution in kind of securities from the investment
portfolio of the Series in lieu of cash, in conformity with applicable
rules of the SEC. Securities will be readily marketable and will be valued
in the same manner as in a regular redemption. See "How the Trust Values
its Shares." If your shares are redeemed in kind, you would incur
transaction costs in converting the assets into cash. The Trust, however,
has elected to be governed by Rule 18f-1 under the Investment Company Act,
under which the Trust is obligated to redeem shares solely in cash up to
the lesser of $250,000 or one percent of the net asset value of the Trust
during any 90-day period for any one shareholder.
30-Day Repurchase Privilege
If you redeem your shares and have not previously exercised the
repurchase privilege, you may reinvest any portion or all of the proceeds
of such redemption in shares of the Trust at the NAV next determined after
the order is received,
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which must be within 30 days after the date of the redemption. Exercise of
the repurchase privilege will not affect the federal income tax treatment
of any gain realized upon the redemption. If the redemption resulted in a
loss, some or all of the loss, depending on the amount reinvested, will
not be allowed for federal income tax purposes.
Class B Purchase Privilege
You may direct that the proceeds of the redemption of your shares be
invested in Class B shares of any Prudential Mutual Fund by calling your
Prudential Securities financial adviser or the Transfer Agent at (800) 225-
1852. The transaction will be effected on the basis of the relative NAV.
HOW TO EXCHANGE YOUR SHARES
As a shareholder of the Series you may exchange your shares for shares
of other series of the Trust and certain other Prudential Mutual Funds,
including money market funds and funds sold with an initial sales charge,
subject to the minimum investment requirements of such funds on the basis
of the relative NAV. You may exchange your shares for Class A shares of
the Prudential Mutual Funds on the basis of the relative NAV, plus the
applicable sales charge. No additional sales charge is imposed in
connection with subsequent exchanges. You may not exchange your shares for
Class B shares of the Prudential Mutual Funds, except that shares acquired
prior to January 22, 1990 subject to a contingent deferred sales charge
can be exchanged for Class B shares. See "How to Sell Your Shares-Class B
Purchase Privilege" above and "Shareholder Investment Account-Exchange
Privilege" in the Statement of Additional Information. An exchange will be
treated as a redemption and purchase for tax purposes.
In order to exchange shares by telephone, you must authorize telephone
exchanges on your initial application form or by written notice to the
Transfer Agent and hold shares in non-certificate form. Thereafter, you
may call the Trust at (800) 225-1852 to execute a telephone exchange of
shares, on weekdays, except holidays, between the hours of 8:00 A.M. and
4:00 P.M., New York time. For your protection and to prevent fradulent
exchanges, your telephone call will be recorded and you will be asked to
provide your personal identification number. A written confirmation of the
exchange transaction will be sent to you. All exchanges will be made on
the basis of the relative NAV of the two funds (or series) next determined
after the request is received in good order. The Exchange Privilege is
available only in states where the exchange may legally be made.
If you hold shares through Prudential Securities, you must exchange
your shares by contacting your Prudential Securities financial adviser. If
you hold certificates, the certificates, signed in the name(s) shown on
the face of the certificates, must be returned in order for the shares to
be exchanged. See "How to Sell Your Shares" above.
Neither the Trust nor its agents will be liable for any loss,
liability or cost which results from acting upon instructions reasonably
believed to be genuine under the foregoing procedures.
You may also exchange shares by mail by writing to Prudential Mutual
Fund Services, Inc., Attention: Exchange Processing, P.O. Box 15010, New
Brunswick, New Jersey 08906-5010.
In periods of severe market or economic conditions the telephone
exchange of shares may be difficult to implement and you should make
exchanges by mail by writing to Prudential Mutual Fund Services, Inc., at
the address noted above.
The Exchange Privilege may be modified or terminated at any time on
sixty days' notice to shareholders.
SHAREHOLDER SERVICES
In addition to the exchange privilege, as a shareholder in the Series,
you can take advantage of the following additional services and
privileges:
* Automatic Reinvestment of Dividends and/or Distributions. For your
convenience, all dividends and distributions are automatically reinvested
in full and fractional shares of the Series at NAV. You may direct the
Transfer
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Agent in writing not less than 5 full business days prior to the record date to
have subsequent dividends and/or distributions sent in cash rather than
reinvested.
* Automatic Savings Accumulation Plan (ASAP). Under ASAP you may make
regular purchases of Series shares in amounts as little as $50 via an
automatic charge to a bank account or Prudential Securities account
(incuding a Command Account). For additional information about this
service, you may contact your Prudential Securities financial adviser,
Prusec registered representative or the Transfer Agent directly.
* Tax-Deferred Retirement Plans. Various tax-deferred retirement
plans, including a 401(k) plan, self-directed individual retirement
accounts and "tax-sheltered accounts" under Section 403(b)(7) of the
Internal Revenue Code are available through the Distributor. These plans
are for use by both self-employed individuals and corporate employers.
These plans permit either self-direction of accounts by participants, or a
pooled account arrangement. Information regarding the establishment of
these plans, the administration, custodial fees and other details is
available from Prudential Securities or the Transfer Agent. If you are
considering adopting such a plan, you should consult with your own legal
or tax adviser with respect to the establishment and maintenance of such a
plan.
* Systematic Withdrawal Plan. A systematic withdrawal plan is
available for shareholders having shares of the Series which provides for
monthly or quarterly checks. If you hold your shares through Prudential
Securities, you should contact your financial adviser.
* Multiple Accounts. Special procedures have been designed for banks
and other institutions that wish to open multiple accounts. An institution
may open a single master account by filing an Application Form with
Prudential Mutual Fund Services, Inc. (PMFS or the Transfer Agent),
{Attention: Customer Service, P.O. Box 15005, New Brunswick, New Jersey
08906,} signed by personnel authorized to act for the institution.
Individual sub-accounts may be opened at the time the master account is
opened by listing them, or they may be added at a later date by written
advice or by filing forms supplied by the Trust. Procedures are available
to identify sub-accounts by name and number within the master account
name. The investment minimums set forth above are applicable to the
aggregate amounts invested by a group and not to the amount credited to
each sub-account.
* Reports to Shareholders. The Trust will send you annual and semi-
annual reports. The financial statements appearing in annual reports are
audited by independent accountants. In order to reduce duplicate mailing
and printing expenses the Trust will provide one annual report and semi-
annual shareholder report and annual prospectus per household. You may
request additional copies of such reports by calling (800) 225-1852 or by
writing to the Trust at One Seaport Plaza, New York, NY 10292.
* Shareholder Inquiries. Inquiries should be addressed to the Trust at
One Seaport Plaza, New York, New York 10292, or by telephone, at (800) 225-
1852 (toll free) or, from outside the U.S.A., at (908) 417-7555
(collect).
For additional information regarding the services and privileges
described above, see "Shareholder Investment Account" in the Statement of
Additional Information.
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THE PRUDENTIAL MUTUAL FUND FAMILY
Prudential Mutual Fund Management offers a broad range of mutual funds
designed to meet your individual needs. We welcome you to review the
investment options available through our family of funds. For more
information on the Prudential Mutual Funds, including charges and
expenses, contact your Prudential Securities financial adviser or Prusec
registered representative or telephone the Fund at (800) 225-1852 for a
free prospectus. Read the prospectus carefully before you invest or send
money.
Taxable Bond Funds
Prudential Adjustable Rate Securities Fund, Inc.
Prudential GNMA Fund
Prudential Government Plus Fund
Prudential Government Securities Trust
Intermediate Term Series
Prudential High Yield Fund
Prudential Structured Maturity Fund
Income Portfolio
Prudential U.S. Government Fund
The BlackRock Government Income Trust
Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Modified Term Series
Prudential Municipal Series Fund
Arizona Series
Florida Series
Georgia Series
Maryland Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund
Global Funds
Prudential Global Fund, Inc.
Prudential Global Genesis Fund
Prudential Global Natural Resources Fund
Prudential Intermediate Global Income Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio
Short-Term Global Income Portfolio
Global Utility Fund, Inc.
Equity Funds
Prudential Equity Fund
Prudential Equity Income Fund
Prudential FlexiFund
Conservatively Managed Portfolio
Strategy Portfolio
Prudential Growth Fund, Inc.
Prudential Growth Opportunity Fund
Prudential IncomeVertible(R) Fund, Inc.
Prudential Multi-Sector Fund, Inc.
Prudential Utility Fund
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Money Market Funds
Taxable Money Market Funds
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund
Money Market Series
Prudential MoneyMart Assets
Tax-Free Money Market Funds
Prudential Tax-Free Money Fund
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
<PAGE>
No dealer, sales representative or any other person has
been authorized to give any information or to make any
representations, other than those contained in this
Prospectus, in connection with the offer contained
herein, and, if given or made, such other information or
representations must not be relied upon as having been
authorized by the Trust or the Distributor. This
Prospectus does not constitute an offer by the Trust or
by the Distributor to sell or a solicitation of an offer to
buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction.
___________________________________________________________
TABLE OF CONTENTS
Page
----
TRUST HIGHLIGHTS............................. 2
TRUST EXPENSES............................... 4
FINANCIAL HIGHLIGHTS......................... 5
CALCULATION OF YIELD......................... 6
HOW THE TRUST INVESTS........................ 6
Investment Objective and Policies.......... 6
Other Investments and Policies............. 7
Investment Restrictions.................... 7
HOW THE TRUST IS MANAGED..................... 8
Manager.................................... 8
Distributor................................ 8
Portfolio Transactions..................... 9
Custodian and Transfer and
Dividend Disbursing Agent................ 9
HOW THE TRUST VALUES ITS SHARES.............. 9
TAXES, DIVIDENDS AND DISTRIBUTIONS........... 10
GENERAL INFORMATION.......................... 11
Description of Shares...................... 11
Additional Information..................... 11
SHAREHOLDER GUIDE............................ 11
How to Buy Shares of the Trust............. 11
How to Sell Your Shares.................... 13
How to Exchange Your Shares................ 16
Shareholder Services....................... 16
THE PRUDENTIAL MUTUAL FUND FAMILY............ 18
________________________________________________
100A 430144C
________________________________________________
CUSIP No.: 744342 20 5
________________________________________________
Prudential
Government
Securities
Trust
(Money Market Series)
PROSPECTUS
APRIL 1, 1994
Prudential Mutual Funds (LOGO)
BUILDING YOUR FUTURE
ON OUR STRENGTH SM
<PAGE>
Prudential Government
Securities Trust
(Intermediate Term Series)
- --------------------------------------------------------------------------
Prospectus dated April 1, 1994
- --------------------------------------------------------------------------
Prudential Government Securities Trust (the Trust) is a diversified, open-
end management investment company whose shares of beneficial interest are
presently offered in three series. Each series operates as a separate fund
with its own investment objectives and policies designed to meet its
specific investment goals.
The investment objective of the Intermediate Term Series (the Series) is
to achieve a high level of income consistent with providing reasonable
safety by investing principally in a diversified portfolio of intermediate
term securities issued or guaranteed by the United States Government or
its agencies or instrumentalities. See "How the Trust Invests-Investment
Objective and Policies."
The Trust's address is One Seaport Plaza, New York, New York 10292, and
its telephone number is (800) 225-1852.
- -------------------------------------------------------------------------
This Prospectus sets forth concisely the information about the Trust and
the Series that a prospective investor ought to know before investing.
Additional information about the Trust has been filed with the Securities
and Exchange Commission in a Statement of Additional Information, dated
April 1, 1994, which information is incorporated herein by reference (is
legally considered a part of this Prospectus) and is available without
charge upon request to the Trust at the address or telephone number noted
above.
- -------------------------------------------------------------------------
Investors are advised to read this Prospectus and retain it for future
reference.
- -------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TRUST HIGHLIGHTS
What is Prudential Government Securities Trust?
Prudential Government Securities Trust is a mutual fund whose shares
are offered in three series, each of which operates as a separate fund. A
mutual fund pools the resources of investors by selling its shares to the
public and investing the proceeds of such sale in a portfolio of
securities designed to achieve its investment objective. Technically, the
Trust is an open-end, diversified management investment company. Only the
Intermediate Term Series is offered through this Prospectus.
What is the Series' Investment Objective?
The Series' investment objective is to achieve a high level of income
consistent with providing reasonable safety by investing principally in a
diversified portfolio of securities issued or guaranteed by the United
States Government or its agencies or instrumentalities with maturities of
10 years or less. See "How the Trust Invests-Investment Objective and
Policies" at page 6.
What are the Series' Special Characteristics and Risks?
United States Government securities, including those which are
guaranteed by Federal agencies or instrumentalities, may or may not be
backed by the "full faith and credit" of the United States. In the case of
securities not backed by the full faith and credit of the United States,
the Trust must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment and may not be able to assert a claim
against the United States itself in the event the agency or
instrumentality does not meet its commitments. See "How the Trust Invests-
Investment Objective and Policies" at page 6.
Who Manages the Trust?
Prudential Mutual Fund Management, Inc. (PMF or the Manager) is the
Manager of the Trust and is compensated for its services at an annual rate
of .40 of 1% of the Series' average daily net assets. As of February 28,
1994, PMF served as manager or administrator to {65} investment companies,
including {37} mutual funds, with aggregate assets of approximately ${50}
billion. The Prudential Investment Corporation (PIC or the Subadviser)
furnishes investment advisory services in connection with the management
of the Trust under a Subadvisory Agreement with PMF. See "How the Trust is
Managed-Manager" at page 8.
2
<PAGE>
Who Distributes the Series' Shares?
Prudential Mutual Fund Distributors, Inc. (PMFD or the Distributor)
acts as the Distributor of the Series' shares. The Trust reimburses PMFD
for expenses related to the distribution of the Series' shares at an
annual rate of up to .25 of 1% of the average daily net assets of the
Series. See "How the Trust is Managed-Distributor" at page 8.
What is the Minimum Investment?
The minimum initial investment is $1,000. The subsequent minimum
investment is $100. There is no minimum investment requirement for certain
retirement and employee savings plans or custodial accounts for the
benefit of minors. For purchases made through the Automatic Savings
Accumulation Plan the minimum initial and subsequent investment is $50.
See "Shareholder Guide-How to Buy Shares of the Trust" at page 12 and
"Shareholder Guide-Shareholder Services" at page 16.
How Do I Purchase Shares?
You may purchase shares of the Series through Prudential Securities,
Pruco Securities Corporation (Prusec) or directly from the Trust, through
its transfer agent, Prudential Mutual Fund Services, Inc. (PMFS or the
Transfer Agent) at the net asset value per share (NAV) next determined
after receipt of your purchase order by the Transfer Agent or Prudential
Securities. Orders are received on each business day until 4:00 P.M., New
York time. See "How the Trust Values its Shares" at page 10 and
"Shareholder Guide-How to Buy Shares of the Trust" at page 12.
How Do I Sell My Shares?
You may redeem shares of the Series at any time at the NAV next
determined after Prudential Securities or the Transfer Agent receives your
sell order. See "Shareholder Guide-How to Sell Your Shares" at page 14.
How Are Dividends and Distributions Paid?
The Series expects to declare daily and pay monthly dividends of net
investment income and make distributions annually of any net capital
gains. Dividends and distributions will be automatically reinvested in
additional shares of the Series at NAV unless you request that they be
paid to you in cash. See "Taxes, Dividends and Distributions" at page 11.
3
<PAGE>
TRUST EXPENSES-INTERMEDIATE TERM SERIES
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases ............. None
Maximum Sales Load Imposed on Reinvested Dividends .. None
Deferred Sales Load ................................. None
Redemption Fees ..................................... None
Exchange Fee ........................................ None
Annual Series Operating Expenses
(as a percentage of average net assets)
Management Fees .................................... 0.40%
12b-1 Fees ......................................... 0.21%
Other Expenses ..................................... 0.19%
----
Total Series Operating Expenses .................... 0.80%
====
Example 1 Year 3 Years 5 Years 10 Years
------- ------ ------- ------- --------
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period: $8 $25 $44 $98
- -----------------
The above example is based on data for the Series' fiscal year ended
November 30, 1993. The example should not be considered a representation
of past or future expenses. Actual expenses may be greater or less than
those shown.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that an investor in the Series will bear,
whether directly or indirectly. For more complete descriptions of the
various costs and expenses, see "How the Trust is Managed." "Other
Expenses" include operating expenses of the Series, such as Trustees' and
professional fees, registration fees, reports to shareholders and transfer
agent and custodian fees.
4
<PAGE>
FINANCIAL HIGHLIGHTS
(for a share of beneficial interest outstanding throughout each period
indicated)
The following financial highlights with respect to the five-year period
ended November 30, 1993, for the Series have been audited by Price
Waterhouse, independent accountants, whose report thereon was unqualified.
This information should be read in conjunction with the financial
statements and notes thereto, which appear in the Statement of Additional
Information. The following financial highlights contain selected data for
a share of beneficial interest outstanding, total return, ratios to
average net assets and other supplemental data for each of the periods
indicated. The information is based on data contained in the financial
statements.
<TABLE>
<CAPTION>
Intermediate Term Series
----------------------------------------------------------------------------------------------
Year Ended November 30,
----------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988++ 1987 1986 1985 1984
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of year $ 9.97 $10.00 $ 9.71 $ 9.96 $ 9.92 $10.24 $10.97 $10.48 $10.01 $ 9.81
Income from investment operations
Net investment income .......... .69 .75 .82 .84 .92 .92 .92 .96 .95 1.08+
Net realized and unrealized gain
(loss) on investment
transactions .................. .11 (.03) .31 (.21) .12 (.29) (.71) .68 .54 .14
Total from investment
operations ................... .80 .72 1.13 .63 1.04 .63 .21 1.64 1.49 1.22
Less distributions
Dividends from net investment
income ........................ (.69) (.75) (.84) (.88) (1.00) (.95) (.78) (.99) (1.02) (1.02)
Tax return of capital distribution (.02) - - - - - - - - -
Distributions of net realized gains - - - - - - (.16) (.16) - -
Total distributions ............ (.71) (.75) (.84) (.88) (1.00) (.95) (.94) (1.15) (1.02) (1.02)
Net asset value, end of year ... $10.06 $ 9.97 $10.00 $ 9.71 $ 9.96 $ 9.92 $10.24 $10.97 $10.48 $10.01
TOTAL RETURN++++ ............... 8.26% 7.40% 12.19% 6.73% 11.12% 6.47% 1.87% 16.48% 15.67% 13.39%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) .. $347,944 $303,451 $298,086 $328,458 $396,519 $473,982 $633,652 $866,218 $414,835 $35,290
Average net assets (000) ....... $321,538 $294,388 $301,643 $354,064 $424,386 $537,422 $903,473 $637,637 $121,991 $42,318
Ratio to average net assets:+++
Expenses, including distribution
fees ......................... .80% .79% .79% .88% .86% .83% .72% .75% .67% .48%+
Expenses, excluding distribution
fees ......................... .59% .58% .63% .63% .63% .59% .55% .52% .50% .48%+
Net investment income ......... 6.80% 7.47% 8.36% 8.60% 9.16% 9.39% 8.30% 8.51% 8.04% 11.19%+
Portfolio turnover rate ........ 44% 60% 151% 68% 186% 28% 59% 139% 191% 59%
<FN>
- --------------------
+ Net of expense subsidy.
++ On August 9, 1988, Prudential Mutual Fund Management, Inc.
succeeded The Prudential Insurance Company of America as
investment adviser and since then has acted as manager of the
Trust. See "Manager" in the Statement of Additional Information.
+++ Because of the adoption of a plan of distribution effective July
1, 1985, historical expenses and ratios of expenses to average
net assets are not necessarily indicative of future expenses and
related ratios. See "How the Trust is Managed-Distributor."
++++ 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.
</FN>
</TABLE>
5
<PAGE>
HOW THE TRUST INVESTS
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Series is to achieve a high level of
income consistent with providing reasonable safety. There is no assurance
that this objective will be achieved.
United States Government Securities
The Series seeks to achieve its objective by investing in United
States Government securities that have maturities of ten years or less,
including a variety of securities which are issued or guaranteed by the
United States Treasury, by various agencies of the United States
Government or by various instrumentalities which have been established or
sponsored by the United States Government. (In the case of securities
with put features, when the put is at the option of the Trust as holder of
the security, maturity will be defined as the lesser of stated final
maturity or put date.) These obligations, including those which are
guaranteed by Federal agencies or instrumentalities, may or may not be
backed by the "full faith and credit" of the United States. In the case of
securities not backed by the full faith and credit of the United States,
the Trust must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment and may not be able to assert a claim
against the United States itself in the event the agency or
instrumentality does not meet its commitments. Securities in which the
Series may invest which are not backed by the full faith and credit of the
United States include obligations of the Tennessee Valley Authority, the
Federal National Mortgage Association and the United States Postal
Service, each of which has the right to borrow from the United States
Treasury to meet its obligations, and obligations of the Federal Farm
Credit System and the Federal Home Loan Banks, whose obligations may only
be satisfied by the individual credits of each issuing agency. Treasury
securities include Treasury bills, Treasury notes and Treasury bonds, all
of which are backed by the full faith and credit of the United States, as
are obligations of the Government National Mortgage Association, the
Farmers Home Administration and the Export-Import Bank. The Intermediate
Term Series will limit its investments to those which are eligible for
federal credit unions.
Certain United States Government securities, such as those issued by
the Government National Mortgage Association and the Federal National
Mortgage Association, are mortgage-backed "pass-through" securities. The
U.S. Government or the issuing agency guarantees the payment of principal
and interest of these securities. However, the guarantees do not extend to
the securities' yield or value, which is likely to vary inversely with
fluctuations in interest rates, nor do the guarantees extend to the yield
or value of the Trust's shares. Such mortgage-backed securities are
subject to more rapid repayment than their stated maturity date as a
result of the pass-through of prepayments of principal on the underlying
mortgage obligations. Accordingly, the Series' ability to maintain
positions in high-yielding mortgage-backed securities will be affected by
reductions in the principal amount of such securities resulting from such
prepayments, and its ability to reinvest the returns of principal at
comparable yields is subject to interest rates prevailing generally at
that time. In addition, during periods of declining interest rates,
prepayment of mortgages underlying mortgage-backed securities tends to
accelerate. For purposes of the Trust's maturity limitation, the maturity
of a mortgage-backed security will be deemed to be equal to its remaining
maturity (i.e., the average maturity of the mortgages underlying such
security determined by the investment adviser on the basis of assumed
prepayment rates with respect to such mortgages).
The Series will invest at least 80% of its total assets in the types
of government securities described above, including repurchase agreements
with respect to such securities.
The Series' investment objective and policies described above are
fundamental policies and, therefore, may not be changed without the
approval of the holders of a majority of the outstanding voting securities
of the Series, as defined in the Investment Company Act of 1940, as
amended (the Investment Company Act). Policies that are not fundamental
may be modified by the Trustees.
The Series' net asset value will vary with changes in the values of
the Series' portfolio securities. Such values will vary with changes in
market interest rates generally and the differentials in yields among
various kinds of United States Government securities.
6
<PAGE>
The Series may not invest in securities other than the types of
securities listed above and is subject to other specific investment
restrictions as detailed under "Investment Restrictions" in the Statement
of Additional Information.
It is currently anticipated that the Series will invest primarily in
securities with maturities ranging from 2 to 5 years, but depending on
market conditions and changing economic conditions the Series may invest
in securities of any maturity of 10 years or less. Certain securities with
maturities of ten years or less which are purchased at auction or on a
when-issued basis may mature later than ten years from date of purchase
and are eligible for purchase by the series. The average weighted maturity
of the Series' investments will be from 3 to 10 years.
OTHER INVESTMENTS AND POLICIES
Repurchase Agreements
The Series may enter into repurchase agreements, whereby the seller of
a security agrees to repurchase that security from the Series at a
mutually agreed-upon time and price. The period of maturity is usually
quite short, possibly overnight or a few days, although it may extend over
a number of months. The resale price is in excess of the purchase price,
reflecting an agreed-upon rate of return effective for the period of time
the Series' money is invested in the security. The Series' repurchase
agreements will at all times be fully collateralized in an amount at least
equal to the purchase price including accrued interest earned on the
underlying securities. The instruments held as collateral are valued
daily, and if the value of such instruments declines, the Series will
require additional collateral. If the seller defaults and the value of the
collateral securing the repurchase agreement declines, the Series may
incur a loss. The Series participates in a joint repurchase account with
other investment companies managed by Prudential Mutual Fund Management,
Inc. pursuant to an order of the Securities and Exchange Commission
(SEC).
When-Issued and Delayed Delivery Securities
The Series may purchase or sell securities on a when-issued or delayed
delivery basis, provided that delivery takes place within 120 days of the
transaction. When-issued or delayed delivery transactions arise when
securities are purchased or sold by the Series with payment and delivery
taking place as much as a month or more into the future in order to secure
what is considered to be an advantageous price and yield to the Series at
the time of entering into the transaction. The Trust's Custodian will
maintain, in a segregated account of the Series, cash, U.S. Government
securities or other liquid high-grade debt obligations having a value
equal to or greater than the Series' purchase commitments; the Custodian
will likewise segregate securities sold on a delayed delivery basis. The
securities so purchased are subject to market fluctuation and no interest
accrues to the purchaser during the period between purchase and
settlement. At the time of delivery of the securities the value may be
more or less than the purchase price and an increase in the percentage of
the Series' assets committed to the purchase of securities on a when-
issued or delayed delivery basis may increase the volatility of the
Series' net asset value.
Securities Lending
The Series may lend its portfolio securities to brokers or dealers,
banks or other recognized institutional borrowers of securities, provided
that the borrower at all times maintains cash or equivalent collateral or
secures a letter of credit in favor of the Series in an amount equal to at
least 100% of the market value of the securities loaned. During the time
portfolio securities are on loan, the borrower will pay the Series an
amount equivalent to any dividend or interest paid on such securities and
the Series may invest the cash collateral and earn additional income, or
it may receive an agreed-upon amount of interest income from the borrower.
As a matter of fundamental policy, the Series may not lend more than 30%
of the value of its total assets.
Borrowing
The Series may borrow an amount equal to no more than 20% of the value
of its total assets (calculated when the loan is made) from banks for
temporary, extraordinary or emergency purposes. The Series may pledge up
to 20% of its total assets to secure these borrowings. Borrowing for
purposes other than meeting redemptions may not exceed 5% of the value of
the Series' total assets. Investment securities will not be purchased
while borrowings are outstanding.
7
<PAGE>
INVESTMENT RESTRICTIONS
The Series is subject to certain investment restrictions which, like
its investment objective, constitute fundamental policies. Fundamental
policies cannot be changed without the approval of the holders of a
majority of the Series' outstanding securities, as defined in the
Investment Company Act. See "Investment Restrictions" in the Statement of
Additional Information.
HOW THE TRUST IS MANAGED
The Trust has Trustees who, in addition to overseeing the actions of
the Trust's Manager, Subadviser and Distributor, as set forth below,
decide upon matters of general policy. The Trust's Manager conducts and
supervises the daily business operations of the Trust. The Trust's
Subadviser furnishes daily investment advisory services.
For the fiscal year ended November 30, 1993, total expenses of the
Series as a percentage of its average net assets were .80%. See "Financial
Highlights."
MANAGER
Prudential Mutual Fund Management, Inc. (PMF or the Manager), One
Seaport Plaza, New York, New York 10292, is the Manager of the Trust and
is compensated for its services at an annual rate of .40 of 1% of the
Series' average daily net assets. It was incorporated in May 1987 under
the laws of the State of Delaware. For the fiscal year ended November 30,
1993, the Trust paid management fees to PMF of .40% of the average net
assets of the Series. See "Manager" in the Statement of Additional
Information.
As of February 28, 1994, PMF served as the manager to {37} open-end
investment companies, constituting all of the Prudential Mutual Funds, and
as manager or administrator to {28} closed-end investment companies with
aggregate assets of approximately ${50} billion.
Under the Management Agreement with the Trust, PMF manages the
investment operations of the Trust and also administers the Trust's
corporate affairs. See "Manager" in the Statement of Additional
Information.
Under a Subadvisory Agreement between PMF and The Prudential
Investment Corporation (PIC or the Subadviser), PIC furnishes investment
advisory services in connection with the management of the Trust and is
reimbursed by PMF for its reasonable costs and expenses incurred in
providing such services. Under the Management Agreement, PMF continues to
have responsibility for all investment advisory services and supervises
PIC's performance of such services.
The current portfolio manager of the Series is David Graham, a Vice
President of Prudential Investment Advisors, a unit of PIC. Mr. Graham has
responsibility for the day-to-day management of the Series' portfolio. Mr.
Graham was previously employed by Alliance Capital Management L.P.
(February 1993-October 1993) as a fixed-income portfolio manager in the
mortgage-backed securities group, by Equitable Capital Management
Corporation (May 1989-February 1993) where he served as a Vice President
and was responsible for managing total return accounts with mortgage
securities, and prior thereto, by Metropolitan Life Insurance Company
(June 1986-April 1989) where he served as a portfolio manager. Mr. Graham
joined PIC on November 15, 1993.
PMF and PIC are indirect, wholly-owned subsidiaries of The Prudential
Insurance Company of America (Prudential), a major diversified insurance
and financial services company.
DISTRIBUTOR
Prudential Securities Incorporated (Prudential Securities or the
Distributor), One Seaport Plaza, New York, New York 10292, is a
corporation organized under the laws of the State of Delaware and serves
as the Distributor for the Series. It is an indirect, wholly-owned
subsidiary of Prudential.
8
<PAGE>
Under a Distribution and Service Plan (the Plan) adopted by the Series
under Rule 12b-1 under the Investment Company Act and a distribution and
service agreement (the Distribution Agreement), the Distributor incurs the
expenses of distributing shares of the Series. These expenses include
commission credits to Prudential Securities branch offices for payments of
commissions and account servicing fees to financial advisers and an
allocation of overhead and other branch office distribution-related
expenses. Such account servicing fees are paid based on the average
balance of Series' shares held in the account of the customers of
financial advisers. The Distributor also pays the cost of printing and
mailing prospectuses to potential investors and advertising expenses. In
addition, the Distributor pays other broker-dealers, including Pruco
Securities Corporation (Prusec), an affiliated broker-dealer, for
commissions and other expenses incurred by such broker-dealers in
distributing the Series' shares. The State of Texas requires that shares
of the Trust may be sold in that state only by dealers or other financial
institutions which are registered there as broker-dealers.
Under the Plan, the Trust reimburses the Distributor for its
distribution-related expenses with respect to the Series at the annual
rate of the lesser of (a) .25 of 1% per annum of the aggregate sales of
the Series' shares, not including shares issued in connection with
reinvestment of dividends and capital gains distributions, issued 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) .25 of 1% per annum of the
average daily net asset value of the shares issued after the effective
date of the Plan. Such amounts are accrued daily and paid monthly and
average daily net assets are calculated on the basis of the Series' fiscal
year.
Actual distribution expenses for any given year may exceed the fees
received pursuant to the Plan and will be carried forward and paid by the
Trust in future years so long as the Plan is in effect. See "Distributor"
in the Statement of Additional Information.
For the fiscal year ended November 30, 1993, the Distributor received
$676,731 from the Series under the Plan. It is estimated that the
Distributor spent approximately $799,600 on behalf of the Series. At
November 30, 1993, the aggregate amount of distribution expenses incurred
by the Distributor and not yet reimbursed by the Series was approximately
$11,441,000, which represented 3.3% of the Series' net assets. These
unreimbursed amounts may be recovered by the Distributor through future
payments under the Plan.
For the fiscal year ended November 30, 1993, the Series paid
distribution expenses under the Plan of .21 of 1% of its average net
assets. The Trust records all payments made under the Plan as expenses in
the calculation of its net investment income.
In addition to distribution and service fees paid by the Series under
the Plan, the Manager (or one of its affiliates) may make payments to
dealers and other persons which distribute shares of the Series. Such
payments may be calculated by reference to the net asset value of shares
sold by such persons or otherwise.
The Plan provides that it shall continue in effect from year to year
provided that a majority of the Trustees, including a majority of the
Trustees who are not interested persons of the Trust (as defined in the
Investment Company Act) and who have no direct or indirect financial
interest in the operation of the Plan or any agreement related to the Plan
(the Rule 12b-1 Trustees), vote annually to continue the Plan. The Plan
may be terminated at any time by vote of a majority of the Rule 12b-1
Trustees or of a majority of the outstanding shares of the Series. In the
event of termination or noncontinuation of the Plan, the Series would not
be legally obligated to pay the Distributor for any expenses not
previously reimbursed, including carry-over amounts.
PORTFOLIO TRANSACTIONS
Prudential Securities may act as a broker for the Trust provided that
the commissions, fees or other remuneration it receives are fair and
reasonable. See "Portfolio Transactions and Brokerage" in the Statement of
Additional Information.
9
<PAGE>
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian of the Trust's portfolio
securities and, in that capacity, maintains certain financial and
accounting books and records pursuant to an agreement with the Trust. Its
mailing address is P.O. Box 1713, Boston, Massachusetts 02105.
Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza One,
Edison, New Jersey 08837, serves as Transfer and Dividend Disbursing Agent
and, in those capacities, maintains certain books and records for the
Trust. PMFS is a wholly-owned subsidiary of PMF. Its mailing address is
P.O. Box 15005, New Brunswick, New Jersey 08906-5005.
HOW THE TRUST VALUES ITS SHARES
The Series' net asset value per share or NAV is determined by
subtracting its liabilities from the value of its assets and dividing the
remainder by the number of outstanding shares. The Trustees have fixed the
specific time of day for the computation of the NAV of the Series to be as
of 4:15 P.M., New York time.
Portfolio securities are valued based on market quotations or, if not
readily available, at fair value as determined in good faith under
procedures established by the Trustees. See "Net Asset Value" in the
Statement of Additional Information.
The Series will compute its NAV once daily on days that the New York
Stock Exchange is open for trading except on days on which no orders to
purchase, sell or redeem Intermediate Term Series shares have been
received or days on which changes in the value of the Series' portfolio
securities do not materially affect the NAV. The New York Stock Exchange
is closed on the following holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. See "Net Asset Value" in the Statement of Additional
Information.
HOW THE TRUST CALCULATES PERFORMANCE
The Series may from time to time advertise its "yield" and its total
return (including "average annual" total return and "aggregate" total
return) in advertisements or sales literature. These figures are based on
historical earnings and are not intended to indicate future performance.
The "yield" refers to the income generated by an investment in the Series
over a 30-day period. This income is then "annualized"; that is, the
amount of income generated by the investment during that 30-day period is
assumed to be generated each 30-day period for twelve periods and is shown
as a percentage of the investment. The income earned on the investment is
also assumed to be reinvested at the end of the sixth 30-day period. The
"total return" shows how much an investment in the Series would have
increased (decreased) over a specified period of time (i.e., one, five or
ten years or since inception of the Trust) assuming that all distributions
and dividends by the Series were reinvested on the reinvestment dates
during the period and less all recurring fees. The "aggregate" total
return reflects actual performance over a stated period of time. "Average
annual" total return is a hypothetical rate of return that, if achieved
annually, would have produced the same aggregate total return if
performance had been constant over the entire period. "Average annual"
total return smooths out variations in performance. Neither "average
annual" nor "aggregate" total return takes into account any federal or
state income taxes which may be payable upon redemption. The Series may
include comparative performance information in advertising or marketing
its shares. Such performance information may include data from Lipper
Analytical Services, Inc., other industry publications, business
periodicals, and market indices. See "Performance Information" in the
Statement of Additional Information. Further performance information is
contained in the Trust's annual report to shareholders, which may be
obtained without charge. See "Shareholder Guide-Shareholder Services-
Reports to Shareholders."
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TAXES, DIVIDENDS AND DISTRIBUTIONS
Taxation of the Series
Each series of the Trust is treated as a separate entity for federal
income tax purposes and each has elected to qualify and intends to remain
qualified as a regulated investment company under the Internal Revenue
Code. Accordingly, the Series will not be subject to federal income taxes
on the taxable income it distributes to shareholders. The performance and
tax qualification of one series will have no effect on the federal income
tax liability of shareholders of the other series. See "Taxes" in the
Statement of Additional Information.
Gains or losses on sales of securities by the Series are treated as
long-term capital gains or losses if the securities have been held by it
for more than one year and otherwise as short-term capital gains or
losses.
Taxation of Shareholders
Distributions of net investment income and realized net short-term
capital gains of the Series, if any, are taxable to shareholders of the
Series as ordinary income, whether such distributions are received in cash
or reinvested in additional shares. Distributions of net long-term capital
gains, if any, are taxable as long-term capital gains, whether paid in
cash or reinvested in additional shares, regardless of how long the
shareholder has held the Series' shares. Because none of the income of the
Series will consist of dividends from domestic corporations, dividends of
net investment income and distributions of net short-term or long-term
capital gains will not be eligible for the dividends-received deduction
for corporate shareholders. Tax-exempt shareholders will not be required
to pay taxes on amounts distributed to them.
Any gain or loss realized upon a sale, redemption or exchange of
shares of the Series 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 loss realized by a shareholder upon the sale, redemption
or exchange of Series shares held six months or less will be treated as a
long-term capital loss, however, to the extent of any net long-term
capital gain distributions received by the shareholder with respect to
those shares. Any loss realized on a sale, redemption or exchange will be
disallowed to the extent the shares disposed of are replaced (including by
reinvestment of dividends) within the 61-day period ending 30 days after
the shares are disposed of.
Shareholders are advised to consult their own tax advisers regarding
specific questions as to federal, state or local taxes.
Witholding Taxes
Under Treasury Regulations, the Series is required to withhold and
remit to the U.S. Treasury 31% of dividends, capital gain distributions
and redemption proceeds on the accounts of those shareholders who fail to
furnish their tax identification numbers on IRS Form W-9 (or IRS Form W-8
in the case of certain foreign shareholders) or who are otherwise subject
to backup withholding. Dividends from net investment income and short-term
capital gains paid to a foreign shareholder will generally be subject to
U.S. withholding tax at the rate of 30% (or lower treaty rate).
Dividends and Distributions
The Series declares dividends on a daily basis payable monthly in an
amount based on actual and projected net investment income determined in
accordance with generally accepted accounting principles.
Dividends and distributions will be paid in additional shares of the
Series, based on the NAV on the payment date, unless the shareholder
elects in writing not less than five business days prior to the payment
date to receive such dividends and distributions in cash. Such election
should be submitted to Prudential Mutual Fund Services, Inc.,
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Attention: Account Maintenance, P.O. Box 15015, New Brunswick, New Jersey
08906-5015. If you hold shares through Prudential Securities, you should
contact your financial adviser to elect to receive dividends and
distributions in cash. The Trust will notify each shareholder after the
close of the Trust's taxable year of both the dollar amount and taxable
status of that year's dividends and distributions on a per share basis.
Distributions may be subject to state and local taxes. See "Taxation of
Shareholders" above.
As of November 30, 1993, the Series has a capital loss carryforward
for federal income tax purposes of approximately $67,624,000. Accordingly,
no capital gains distribution is expected to be paid to shareholders until
net gains have been realized in excess of such carryforward.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Trust, organized as an unincorporated business trust under the
laws of Massachusetts, is a trust fund of the type commonly known as a
"Massachusetts business trust." The Trust's activities are supervised by
its Trustees. The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares in separate series.
The shareholders of the Money Market Series, the Intermediate Term
Series and the U.S. Treasury Money Market Series are each entitled to a
full vote for each full share of beneficial interest (par value $.01 per
share) held (and fractional votes for fractional shares). Shares of each
series are entitled to vote as a class only to the extent required by the
provisions of the Investment Company Act or as otherwise permitted by the
Trustees in their sole discretion. Under the Investment Company Act,
shareholders of each series have to approve the adoption of any investment
advisory agreement relating to such series and of any changes in
investment policies related thereto.
It is the intention of the Trust not to hold Annual Meetings of
Shareholders. The Trustees may call Special Meetings of Shareholders for
action by shareholder vote as may be required by the Investment Company
Act or the Declaration of Trust. Shareholders have certain rights,
including the right to call a meeting upon a vote of 10% of the Trust's
outstanding shares for the purpose of voting on the removal of one or more
Trustees.
ADDITIONAL INFORMATION
This Prospectus, including the Statement of Additional Information
which has been incorporated by reference herein, does not contain all the
information set forth in the Registration Statement filed by the Trust
with the SEC under the Securities Act of 1933. Copies of the Registration
Statement may be obtained at a reasonable charge from the SEC or may be
examined, without charge, at the office of the SEC in Washington, D.C.
SHAREHOLDER GUIDE
HOW TO BUY SHARES OF THE TRUST
You may purchase shares of the Series through Prudential Securities or
through Prusec or directly from the Trust through its Transfer Agent,
Prudential Mutual Fund Services, Inc. (PMFS or the Transfer Agent),
Attention: Investment Services, P.O. Box 15020, New Brunswick, New Jersey
08906-5020. The minimum initial investment is $1,000. The minimum
subsequent investment is $100. All minimum investment requirements are
waived for certain retirement and employee savings plans and for custodial
accounts for the benefit of minors. For purchases through the Automatic
Savings Accumulation Plan, the minimum initial and subsequent investment
is $50. See "Shareholder Services" below.
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Shares of the Series are sold, without a sales charge, at the NAV next
determined after receipt of an order by PMFS of a purchase order and
payment in proper form {i.e., a check or Federal Funds wired to State
Street Bank & Trust Company (State Street)}. See "How the Trust Values its
Shares." Orders are received on each business day until 4:00 P.M., New
York time. When payment is received by PMFS prior to 4:00 P.M., New York
time, in proper form, a share purchase order will be entered at the price
determined as of 4:00 P.M., New York time, on that day, and dividends on
the shares purchased will begin on the business day following such
investment. See "Taxes, Dividends and Distributions."
Application forms can be obtained from PMFS, Prudential Securities or
Prusec. If a stock certificate is desired, it must be requested in writing
for each transaction. Certificates are issued only for full shares.
Shareholders who hold their shares through Prudential Securities will not
receive stock certificates. Shareholders cannot utilize Expedited
Redemption or have a Systematic Withdrawal Plan if they have been issued
share certificates.
The Trust reserves the right to reject any purchase order (including
an exchange) or to suspend or modify the continuous offering of its
shares. See "How to Sell Your Shares" below.
Your dealer is responsible for forwarding payment promptly to the
Trust. The Distributor reserves the right to cancel any purchase order for
which payment has not been received by the fifth business day following
the investment.
Transactions in Trust shares made through dealers other than
Prudential Securities or Prusec may be subject to postage and handling
charges imposed by the dealer; however, you may avoid such charges by
placing orders directly with the Trust's Transfer Agent, Prudential Mutual
Fund Services, Inc., Attention: Investment Services, P.O. Box 15020, New
Brunswick, New Jersey 08906-5020.
Purchases through Prudential Securities. If you have an account with
Prudential Securities (or open such an account), you may ask Prudential
Securities to purchase shares of the Series on your behalf. On the
business day following confirmation that a free credit balance (i.e.,
immediately available funds) exists in your account, Prudential Securities
will effect a purchase order for shares of the Series in an amount up to
the balance at the NAV determined that day. Funds held by Prudential
Securities on behalf of its clients in the form of free credit balances
are delivered to State Street by Prudential Securities and begin earning
dividends the second business day after receipt of the order by Prudential
Securities. Accordingly, Prudential Securities will have the use of such
free credit balances during this period.
Shares of the Series purchased by Prudential Securities on behalf of
its clients will be held by Prudential Securities as record holder.
Prudential Securities will thereafter receive statements and dividends
directly from the Trust and will in turn provide investors with Prudential
Securities account statements reflecting Series purchases, redemptions and
dividend payments.
Prudential Securities clients wishing additional information
concerning investment in Series shares made through Prudential Securities
should call their Prudential Securities financial adviser.
Purchases through Prusec. You may purchase shares of the Series by
placing an order with your Prusec registered representative accompanied by
payment for the purchase price of such shares and, in the case of a new
account, a completed Application Form. You should also submit an IRS Form
W-9. The Prusec registered representative will then forward these items to
the Transfer Agent. See "Purchase By Mail" below.
Purchase by Wire. For an initial purchase of shares of the Series by
wire, you must first telephone PMFS at (800) 225-1852 to receive an
account number. The following information will be requested: your name,
address, tax identification number, dividend and distribution elections,
amount being wired and wiring bank. Instructions should then be given by
you to your bank to transfer funds by wire to State Street Bank and Trust
Company, Boston, Massachusetts, Custody and Shareholder Services Division,
Attention: Prudential Government Securities Trust, Intermediate Term
Series, specifying on the wire the account number assigned and your name.
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If you arrange for receipt by State Street of Federal Funds prior to
4:00 P.M., New York time, on a business day, you may purchase Series
shares as of that day and receive dividends commencing on the next
business day.
In making a subsequent purchase utilizing Federal Funds, you should
wire State Street directly and should be sure that the wire specifies
Prudential Government Securities Trust (Intermediate Term Series) and your
name and individual account number. It is not necessary to call PMFS to
make subsequent purchase orders utilizing Federal Funds. The minimum
amount which may be subsequently invested by wire is $1,000.
Purchase by Mail. Purchase orders for which remittance is to be made
by check must be submitted directly by mail to Prudential Mutual Fund
Services, Inc., Attention: Investment Services, P.O. Box 15020, New
Brunswick, New Jersey 08906-5020, together with payment for the purchase
price of such shares and, in the case of a new account, a completed
Application Form. You should also submit an IRS Form W-9. If PMFS receives
your order to purchase shares of the Trust and payment in proper form
prior to 4:00 P.M., New York time, the purchase order will be effective on
that day and you will begin earning dividends on the following business
day. See "Taxes, Dividends and Distributions." Checks should be made
payable to "Prudential Government Securities Trust, Intermediate Term
Series." Certified checks are not necessary, but checks are accepted
subject to collection at full face value in United States funds and must
be drawn on a bank located in the United States. There are restrictions on
the redemption of shares purchased by check while the funds are being
collected. See "How to Sell Your Shares."
HOW TO SELL YOUR SHARES
You can redeem your shares at any time for cash at the NAV next
determined after the redemption request is received in proper form by the
Transfer Agent or Prudential Securities. See "How the Trust Values its
Shares." Orders are received on each business day until 4:00 P.M., New
York time.
Shares for which a redemption request is received by PMFS prior to
4:00 P.M., New York time, are entitled to a dividend on the day on which
the request is received. By pre-authorizing Expedited Redemption, a
shareholder may arrange to have payment for redeemed shares made in
Federal Funds wired to the shareholder's bank, normally on the next bank
business day following the date of receipt of the redemption instructions.
Should a shareholder redeem all of his or her shares, he or she will
receive the amount of all dividends declared for the month-to-date on
those shares. Any capital gain or loss realized by a shareholder upon any
redemption of Trust shares must be recognized for federal income tax
purposes. See "Taxes, Dividends and Distributions."
Prudential Securities clients for whom Prudential Securities has
purchased shares of the Trust may have their shares redeemed by calling
their Prudential Securities financial adviser.
If redemption is requested by a corporation, partnership, trust or
fiduciary, written evidence of authority acceptable to the Transfer Agent
must be submitted before such request will be accepted. All correspondence
and documents concerning redemptions should be sent to the Trust in care
of its Transfer Agent, Prudential Mutual Fund Services, Inc., Attention:
Redemption Services, P.O. Box 15010, New Brunswick, New Jersey 08906-
5020.
If the proceeds of the redemption (a) exceed $50,000, (b) are to be paid to
a person other than the record owner, (c) are to be sent to an address other
than the address on the Transfer Agent's records or (d) are to be paid to a
corporation, partnership, trust or fiduciary, the signature(s) on the redemption
request and on the certificates, if any, or stock, power must be guaranteed by
an "eligible guarantor institution." An "eligible guarantor institution"
includes any bank, broker, dealer or credit union. The Transfer Agent reserves
the right to request additional information from, and make reasonable inquiries
of, any eligible guarantor institution. For clients of Prusec, a signature
guarantee may be obtained from the agency or office manager of most Prudential
Insurance and Financial Services or Preferred Financial Services offices.
Payment for shares presented for redemption will ordinarily be made by
check mailed to the shareholder's address within seven days after receipt
of the redemption request in proper order. Such payment may be postponed
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or the right of redemption suspended at times (a) when the New York Stock
Exchange is closed, for other than customary weekends and holidays, (b)
when trading on such Exchange is restricted, (c) when an emergency exists
as a result of which disposal by the Trust of securities owned by it is
not reasonably practicable or it is not reasonably practicable for the
Trust fairly to determine the value of its net assets or (d) during any
other period when the Securities and Exchange Commission, by order, so
permits; provided that applicable rules and regulations of the Securities
and Exchange Commission shall govern as to whether the conditions
prescribed in (b), (c) or (d) exist.
Payment for redemption of recently purchased shares will be delayed
until the Trust or its Transfer Agent has been advised that the purchase
check has been honored, up to 10 calendar days from the time of receipt of
the purchase check by the Transfer Agent. Such delay may be avoided if
shares are purchased by wire or by certified or official bank check.
Expedited Redemption. By pre-authorizing Expedited Redemption, you may
arrange to have payment for redeemed shares made in Federal Funds wired to
your bank, normally on the next business day following redemption. In
order to use Expedited Redemption, you may so designate at the time the
initial investment is made or at a later date. Once an Expedited
Redemption authorization form has been completed, the signature on the
authorization form guaranteed as set forth above and the form returned to
PMFS, requests for redemption may be made by telegraph, letter or
telephone. To request Expedited Redemption by telephone, you should call
PMFS at (800) 225-1852. Calls must be received by PMFS before 4:00 P.M.,
New York time, to permit redemption as of such date. Requests by letter
should be addressed to Prudential Mutual Fund Services, Inc., Att:
Redemption Services, P.O. Box 15010, New Brunswick, New Jersey 08906-
5010.
A signature guarantee is not required under Expedited Redemption once
the authorization form is properly completed and returned. The Expedited
Redemption privilege may be used to redeem shares in an amount of $200 or
more, except that if an account for which Expedited Redemption is
requested has a net asset value of less than $200, the entire account must
be redeemed. The proceeds of redeemed shares in the amount of $1,000 or
more are transmitted by wire to your account at a domestic commercial bank
which is a member of the Federal Reserve System. Proceeds of less than
$1,000 are forwarded by check to your designated bank account.
During periods of severe market or economic conditions, Expedited
Redemptions may be difficult to implement and you should redeem your
shares by mail as described above.
Redemption in Kind. If the Trustees determine that it would be
detrimental to the best interests of the remaining shareholders of the
Series to make payment wholly or partly in cash, the Trust may pay the
redemption price in whole or in part by a distribution in kind of
securities from the portfolio of the Series, in lieu of cash in conformity
with applicable rules of the Securities and Exchange Commission.
Securities will be readily marketable and will be valued in the same
manner as in a regular redemption. See "How the Trust Values its Shares."
If your shares are redeemed in kind, you would incur transaction costs in
converting the assets into cash. The Trust, however, has elected to be
governed by Rule 18f-1 under the Investment Company Act pursuant to which
the Trust is obligated to redeem shares solely in cash up to the lesser of
$250,000 or one percent of the net asset value of the Series during any 90-
day period for any one shareholder.
Involuntary Redemption. In order to reduce the expenses of the Trust,
the Trustees may redeem all of the shares of any shareholder whose account
has a net asset value of less than $500 due to a redemption. The Trust
would give shareholders whose shares were being redeemed 60 days' prior
written notice in which to purchase sufficient additional shares to avoid
such redemption.
30-Day Repurchase Privilege. If you redeem your shares and have not
previously exercised the repurchase privilege, you may reinvest any
portion or all of the proceeds of such redemption in shares of the Trust
at the NAV next determined after the order is received, which must be
within 30 days after the date of the redemption. Exercise of the
repurchase privilege will not affect the federal income tax treatment of
any gain realized upon the redemption. If the
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<PAGE>
redemption resulted in a loss, some or all of the loss, depending on the
amount reinvested, will not be allowed for federal income tax purposes.
Class B Purchase Privilege. You may direct that the proceeds of the
redemption of Fund shares be invested in Class B shares of any Prudential
Mutual Fund by calling your Prudential Securities financial adviser or the
Transfer Agent at (800) 225-1852. The transaction will be effected on the
basis of the relative NAV.
HOW TO EXCHANGE YOUR SHARES
As a shareholder of the Series, you may exchange your shares for
shares of other series of the Trust and certain other Prudential Mutual
Funds, including money market funds and funds sold with an initial sales
charge, subject to the minimum investment requirements of such funds on
the basis of relative NAV. You may exchange your shares for Class A shares
of the Prudential Mutual Funds on the basis of the relative NAV plus the
applicable sales charge. No additional sales charge is imposed in
connection with subsequent exchanges. You may not exchange your shares for
Class B shares of the Prudential Mutual Funds, except that shares acquired
prior to January 22, 1990 subject to a contingent deferred sales charge
can be exchanged for Class B shares. See "How to Sell Your Shares-Class B
Purchase Privilege" above and "Shareholder Investment Account-Exchange
Privilege" in the Statement of Additional Information. An exchange will be
treated as a redemption and purchase for tax purposes.
In order to exchange shares by telephone, you must authorize telephone
exchanges on your initial application form or by written notice to the
Transfer Agent and hold shares in non-certificate form. Thereafter, you
may call the Trust at (800) 225-1852 to execute a telephone exchange of
shares, on weekdays, except holidays, between the hours of 8:00 A.M. and
4:00 P.M., New York time. For your protection and to prevent fradulent
exchanges, your telephone call will be recorded and you will be asked to
provide your personal identification number. A written confirmation of the
exchange transaction will be sent to you. All exchanges will be made on
the basis of the relative NAV of the two funds (or series) next determined
after the request is received in good order. The Exchange Privilege is
available only in states where the exchange may legally be made.
If you hold shares through Prudential Securities, you must exchange
your shares by contacting your Prudential Securities financial adviser. If
you hold certificates, the certificates, signed in the name(s) shown on
the face of the certificates, must be returned in order for the shares to
be exchanged. See "Purchase and Redemption of Trust Shares-How to Sell
Your Shares" above.
Neither the Trust nor its agents will be liable for any loss,
liability or cost which results from acting upon instructions reasonably
believed to be genuine under the foregoing procedures.
You may also exchange shares by mail by writing to Prudential Mutual
Fund Services, Inc., Attention: {Exchange Processing,} P.O. Box 15010, New
Brunswick, New Jersey 08906-5010.
In periods of severe market or economic conditions, the telephone
exchange of shares may be difficult to implement and you should make
exchanges by mail by writing to Prudential Mutual Fund Services, Inc., at
the address noted above.
The Exchange Privilege may be modified or terminated at any time on
sixty days' notice to shareholders.
SHAREHOLDER SERVICES
In addition to the exchange privilege, as a shareholder in the Trust,
you can take advantage of the following additional services and
privileges:
*Automatic Reinvestment of Dividends and/or Distributions. For your
convenience, all dividends and distributions are automatically reinvested
in full and fractional shares of the Series at NAV. You may direct the
Transfer
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Agent in writing not less than 5 full business days prior to the record
date to have subsequent dividends and/or distributions sent in cash rather
than reinvested.
*Automatic Savings Accumulation Plan (ASAP). Under ASAP you may make
regular purchases of Series shares in amounts as little as $50 via an
automatic charge to a bank account or Prudential Securities account
(including a Command Account). For additional information about this
service, you may contact your Prudential Securities financial adviser,
Prusec registered representative or the Transfer Agent directly.
*Tax-Deferred Retirement Plans. Various tax-deferred retirement plans,
including a 401(k) plan, self-directed individual retirement accounts and
"tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue
Code are available through the Distributor. These plans are for use by
both self-employed individuals and corporate employers. These plans permit
either self-direction of accounts by participants, or a pooled account
arrangement. Information regarding the establishment of these plans, the
administration, custodial fees and other details is available from
Prudential Securities or the Transfer Agent. If you are considering
adopting such a plan, you should consult with your own legal or tax
adviser with respect to the establishment and maintenance of such a plan.
*Systematic Withdrawal Plan. A systematic withdrawal plan is available
for shareholders having shares of the Series which provides for monthly or
quarterly checks. If you hold your shares through Prudential Securities,
you should contact your financial adviser.
*Reports to Shareholders. The Trust will send you annual and semi-
annual reports. The financial statements appearing in annual reports are
audited by independent accountants. In order to reduce duplicate mailing
and printing expenses the Trust will provide one annual report and semi-
annual shareholder report and annual prospectus per household. You may
request additional copies of such reports by calling (800) 225-1852 or by
writing to the Trust at One Seaport Plaza, New York, NY 10292. In
addition, monthly unaudited financial data is available upon request from
the Trust.
*Shareholder Inquiries. Inquiries should be addressed to the Trust at
One Seaport Plaza, New York, New York 10292, or by telephone, at (800) 225-
1852 (toll free) or, from outside the U.S.A., at (908) 417-7555
(collect).
For additional information regarding the services and privileges
described above, see "Shareholder Investment Account" in the Statement of
Additional Information.
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THE PRUDENTIAL MUTUAL FUND FAMILY
Prudential Mutual Fund Management offers a broad range of mutual funds
designed to meet your individual needs. We welcome you to review the
investment options available through our family of funds. For more
information on the Prudential Mutual Funds, including charges and
expenses, contact your Prudential Securities financial adviser or Prusec
registered representative or telephone the Fund at (800) 225-1852 for a
free prospectus. Read the prospectus carefully before you invest or send
money.
Taxable Bond Funds
Prudential Adjustable Rate Securities Fund, Inc.
Prudential GNMA Fund
Prudential Government Plus Fund
Prudential Government Securities Trust
Intermediate Term Series
Prudential High Yield Fund
Prudential Structured Maturity Fund
Income Portfolio
Prudential U.S. Government Fund
The BlackRock Government Income Trust
Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Modified Term Series
Prudential Municipal Series Fund
Arizona Series
Florida Series
Georgia Series
Maryland Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund
Global Funds
Prudential Global Fund, Inc.
Prudential Global Genesis Fund
Prudential Global Natural Resources Fund
Prudential Intermediate Global Income Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio
Short-Term Global Income Portfolio
Global Utility Fund, Inc.
Equity Funds
Prudential Equity Fund
Prudential Equity Income Fund
Prudential FlexiFund
Conservatively Managed Portfolio
Strategy Portfolio
Prudential Growth Fund, Inc.
Prudential Growth Opportunity Fund
Prudential IncomeVertible(R) Fund, Inc.
Prudential Multi-Sector Fund, Inc.
Prudential Utility Fund
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Money Market Funds
Taxable Money Market Funds
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund
Money Market Series
Prudential MoneyMart Assets
Tax-Free Money Market Funds
Prudential Tax-Free Money Fund
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
<PAGE>
No dealer, sales representative or any other person has
been authorized to give any information or to make any
representations, other than those contained in this
Prospectus, in connection with the offer contained
herein, and, if given or made, such other information or
representations must not be relied upon as having been
authorized by the Trust or the Distributor. This
Prospectus does not constitute an offer by the Trust or
by the Distributor to sell or a solicitation of an offer to
buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction.
___________________________________________________________
TABLE OF CONTENTS
Page
TRUST HIGHLIGHTS............................. 2
TRUST EXPENSES............................... 4
FINANCIAL HIGHLIGHTS......................... 5
HOW THE TRUST INVESTS........................ 6
Investment Objective and Policies.......... 6
Other Investments and Policies............. 7
Investment Restrictions.................... 8
HOW THE TRUST IS MANAGED..................... 8
Manager.................................... 8
Distributor................................ 8
Portfolio Transactions..................... 9
Custodian and Transfer and
Dividend Disbursing Agent................ 9
HOW THE TRUST VALUES ITS SHARES.............. 10
HOW THE TRUST CALCULATES PERFORMANCE......... 10
TAXES, DIVIDENDS AND DISTRIBUTIONS........... 10
GENERAL INFORMATION.......................... 12
Description of Shares...................... 12
Additional Information..................... 12
SHAREHOLDER GUIDE............................ 12
How to Buy Shares of the Trust............. 12
How to Sell Your Shares.................... 14
How to Exchange Your Shares................ 16
Shareholder Services....................... 16
THE PRUDENTIAL MUTUAL FUND FAMILY............ 18
________________________________________________
111A 4440381
________________________________________________
CUSIP No.: 744342 10 6
________________________________________________
Prudential
Government
Securities
Trust
(Intermediate Term Series)
PROSPECTUS
APRIL 1, 1994
Prudential Mutual Funds (LOGO)
BUILDING YOUR FUTURE
ON OUR STRENGTH SM
<PAGE>
Prudential Government Securities Trust
Statement of Additional Information
dated April 1, 1994
Prudential Government Securities Trust (the Trust) is offered in three
series: the Money Market Series, the U.S. Treasury Money Market Series and the
Intermediate Term Series. Each series operates as a separate fund with its own
investment objectives and policies designed to meet its specific investment
goals. Information about each series is set forth in separate prospectuses, each
dated April 1, 1994, copies of which may be obtained from the Trust upon
request.
This Statement of Additional Information sets forth information about each
of the series. This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Trust's Money Market Series Prospectus,
U.S. Treasury Money Market Series Prospectus or Intermediate Term Series
Prospectus, each dated April 1, 1994.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Cross-reference
Cross-reference to page in U.S. Cross-reference
to page in Treasury Money to page in
Money Market Market Series Intermediate Term
Page Series Prospectus Prospectus Series Prospectus
---- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
General Information...................... B-2 11 11 12
Investment Objective(s) and Policies..... B-3 --
Money Market Series................. B-3 6 --
U.S. Treasury Money Market Series... B-4 -- 6 --
Intermediate Term Series............ B-5 -- -- 6
Portfolio Turnover....................... B-5 -- -- --
Investment Restrictions.................. B-5 7 7 8
Trustees and Officers.................... B-7 8 8 8
Manager.................................. B-9 8 8 8
Distributor.............................. B-10 8 8 8
Portfolio Transactions and Brokerage..... B-12 9 9 9
Shareholder Investment Account........... B-12 16 18 16
Net Asset Value.......................... B-14 9 9 10
Performance Information.................. B-15
Money Market Series and U.S. Treasury
Money Market Series--Calculation
of Yield.......................... B-15 6 6 --
Intermediate Term
Series--Calculation of Yield and
Total Return...................... B-16 -- -- 10
Taxes.................................... B-16 10 10 11
Custodian and Transfer and Dividend
Disbursing Agent and Independent
Accountants............................ B-17 9 9 9
Financial Statements..................... B-18 -- -- --
Report of Independent Accountants........ B-33 -- -- --
</TABLE>
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111B 430145A
<PAGE>
GENERAL INFORMATION
The Trust is a trust fund of the type commonly known as a "Massachusetts
business trust." The Declaration of Trust and the By-Laws of the Trust are
designed to make the Trust similar in most respects to a Massachusetts business
corporation. The principal distinction between the two forms relates to
shareholder liability: under Massachusetts law, shareholders of a business trust
may, in certain circumstances, be held personally liable as partners for the
obligations of the Trust, which is not the case with a corporation. The
Declaration of Trust of the Trust provides that shareholders shall not be
subject to any personal liability for the acts or obligations of the Trust and
that every written obligation, contract, instrument or undertaking made by the
Trust shall contain a provision to the effect that the shareholders are not
individually bound thereunder.
Massachusetts counsel for the Trust are of the opinion that no personal
liability will attach to the shareholders under any undertaking containing such
provision when adequate notice of such provision is given, except possibly in a
few jurisdictions. With respect to all types of claims in the latter
jurisdictions and with respect to tort claims, contract claims where the
provision referred to is omitted from the undertaking, claims for taxes and
certain statutory liabilities in other jurisdictions, a shareholder may be held
personally liable to the extent that claims are not satisfied by the Trust.
However, upon payment of any such liability the shareholder will be entitled to
reimbursement from the general assets of the Trust. The Trustees intend to
conduct the operations of the Trust, with the advice of counsel, in such a way
so as to avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Trust.
The Declaration of Trust further provides that no trustee, officer,
employee or agent of the Trust is liable to the Trust or to a shareholder, nor
is any trustee, officer, employee or agent liable to any third persons in
connection with the affairs of the Trust, except as such liability may arise
from his or its own bad faith, wilful misfeasance, gross negligence, or reckless
disregard of his or its duties. It also provides that all third persons shall
look solely to the Trust property for satisfaction of claims arising in
connection with the affairs of the Trust. With the exceptions stated, the
Declaration of Trust permits the Trustees to provide for the indemnification of
trustees, officers, employees or agents of the Trust against all liability in
connection with the affairs of the Trust.
Other distinctions between a corporation and a Massachusetts business trust
include the absence of a requirement that business trusts issue share
certificates.
The Trust shall continue without limitation of time subject to the
provisions in the Declaration of Trust concerning termination by action of the
shareholders or by the Trustees by written notice to the shareholders.
Pursuant to the Declaration of Trust, the Trustees initially authorized the
issuance of an unlimited number of full and fractional shares of a single class.
In connection with the establishment of the Intermediate Term Series on July 1,
1982, the Trustees designated the outstanding shares and shares that may
thereafter be issued under previous authority as the shares of the Money Market
Series. On November 1, 1991, the Trustees established the U.S. Treasury Money
Market Series by designating it out of the unissued shares of beneficial
interest of the Trust. In so designating, the Trustees did not change any of the
existing shareholders' preferences, privileges, limitations or voting rights.
Each share of the Money Market Series, the U.S. Treasury Money Market Series and
the Intermediate Term Series represents an equal proportionate interest in the
assets of the Trust attributable to the respective series with each other share
of the respective series. The Declaration of Trust permits the Trustees to
divide or combine the shares of either series into a greater or lesser number of
shares without thereby changing the proportionate beneficial interests of the
shares of either series in the assets of the Trust attributable to such series.
If the assets attributable to one series of shares are insufficient to satisfy
its liabilities, the assets of other series could be subjected to such
liabilities. Upon liquidation of the Trust, shareholders are entitled to share
pro rata in the net assets of the Trust attributable to the series of which
shares are held and available for distribution to shareholders. Shares have no
preemptive, appraisal or conversion rights and, except as may be otherwise
indicated hereby, no preference rights. Shares are fully paid and nonassessable
by the Trust.
Pursuant to the Declaration of Trust, the Trustees may authorize the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios with distinct investment
objectives and policies and share purchase, redemption and net asset valuation
procedures) and additional classes of shares within any series (which would be
used to distinguish among the rights of different categories of shareholders, as
might be required by future regulations or other unforeseen circumstances) with
such preferences, privileges, limitations and voting and dividend rights as the
Trustees may determine. All consideration received by the Trust for shares of
any additional series or class, and all assets in which such consideration is
invested, would belong to that series or class (subject only to the rights of
creditors of the Trust) and would be subject to the liabilities related thereto.
Pursuant to the Investment Company Act of 1940, as amended (the Investment
Company Act), shareholders of any additional series or class of shares would
normally have to approve the adoption of any management contract relating to
such series or class and of any changes in the investment policies related
thereto.
The Trustees themselves have the power to alter the number and the terms of
office of the Trustees, and they may at any time lengthen their own terms or
make their terms of unlimited duration (subject to certain removal procedures)
and appoint their own successors, provided that always at least a majority of
the Trustees have been elected by the shareholders of the Trust. The voting
rights
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<PAGE>
of shareholders are not cumulative, so that holders of more than 50 percent of
the shares voting can, if they choose, elect all trustees being selected, while
the holders of the remaining shares would be unable to elect any trustees.
On April 22, 1983, the Trustees at a meeting of the Board of Trustees
approved an amendment to the Declaration of Trust to effect a name change from
Chancellor Government Securities Trust to Prudential-Bache Government Securities
Trust. On February 28, 1991, the Trustees approved an amendment to the Fund's
Declaration of Trust to change the Trust's name from Prudential-Bache Government
Securities Trust to Prudential Government Securities Trust.
INVESTMENT OBJECTIVES AND POLICIES
The Money Market Series, the U.S. Treasury Money Market Series and the
Intermediate Term Series operate as separate funds with their own investment
objectives and policies. The investment objectives of the Money Market Series
and the U.S. Treasury Money Market Series are to obtain high current income,
preserve capital and maintain liquidity. The investment objective of the
Intermediate Term Series is to achieve a high level of income consistent with
providing reasonable safety. For a further description of the investment
objectives and policies for each series see "Investment Objective(s) and
Policies" in their respective Prospectuses.
In order to achieve such objectives, the Money Market Series, the U.S.
Treasury Money Market Series and the Intermediate Term Series (collectively
referred to as the Series), each acting independently of the other, may, when
appropriate, invest in the types of instruments and use certain strategies
described below:
Repurchase Agreements. The Trust's repurchase agreements will be
collateralized by U.S. Government obligations. The Trust will enter into
repurchase transactions only with parties meeting creditworthiness standards
approved by the Trustees. The Trust's investment adviser will monitor the
creditworthiness of such parties, under the general supervision of the Trustees.
In the event of a default or bankruptcy by a seller, the Trust will promptly
seek to liquidate the collateral. To the extent that the proceeds from any sale
of such collateral upon a default in the obligation to repurchase are less than
the repurchase price, the Trust will suffer a loss.
The Trust participates in a joint repurchase account with other investment
companies managed by Prudential Mutual Fund Mangement, Inc. (PMF or the Manager)
pursuant to an order of the Securities and Exchange Commission (SEC). On a daily
basis, any uninvested cash balances of the Trust may be aggregated with those of
such investment companies and invested in one or more repurchase agreements.
Each fund participates in the income earned or accrued in the joint account
based on the percentage of its investment.
Money Market Series
The Money Market Series seeks to achieve its objectives by investing in
United States Government securities that mature within thirteen months from date
of purchase, including a variety of securities which are issued or guaranteed by
the United States Treasury, by various agencies of the United States Government
or by various instrumentalities which have been established or sponsored by the
United States Government. These obligations, including those which are
guaranteed by Federal agencies or instrumentalities, may or may not be backed by
the "full faith and credit" of the United States. In the case of securities
not backed by the full faith and credit of the United States, the Trust must
look principally to the agency issuing or guaranteeing the obligation for
ultimate repayment and may not be able to assert a claim against the United
States itself in the event the agency or instrumentality does not meet its
commitments. Securities in which the Money Market Series may invest which are
not backed by the full faith and credit of the United States include, but are
not limited to, obligations of the Tennessee Valley Authority, the Federal
National Mortgage Association and the United States Postal Service, each of
which has the right to borrow from the United States Treasury to meet its
obligations, and obligations of the Federal Farm Credit System and the Federal
Home Loan Banks, whose obligations may only be satisfied by the individual
credits of each issuing agency. Treasury securities include Treasury bills,
Treasury notes and Treasury bonds, all of which are backed by the full faith and
credit of the United States, as are obligations of the Government National
Mortgage Association, the Farmers Home Administration and the Export-Import
Bank. The Money Market Series will invest at least 80% of its assets in such
types of government securities.
The Series may also invest in component parts of U.S. Treasury notes or
bonds, namely, either the corpus (principal) of such Treasury obligations or one
of the interest payments scheduled to be paid on such obligations. These
obligations may take the form of (i) Treasury obligations from which the
interest coupons have been stripped, (ii) the interest coupons that are
stripped, (iii) book-entries at a Federal Reserve member bank representing
ownership of Treasury obligation components, or (iv) receipts evidencing the
component parts (corpus or coupons) of Treasury obligations that have not
actually been stripped. Such receipts evidence ownership of component parts of
Treasury obligations (corpus or coupons) purchased by a third party (typically
an investment banking firm) and held on behalf of the third party in physical or
book-entry form by a major commercial bank or trust company pursuant to a
custody agreement with the third party. Treasury obligations, including those
underlying such receipts, are backed by the full faith and credit of the U.S.
Government.
The Money Market Series may also invest in fully insured certificates of
deposit. The Federal Deposit Insurance Corporation and the Federal Savings and
Loan Insurance Corporation, which are agencies of the United States Government,
insure the deposits of insured banks and savings and loan associations,
respectively, up to $100,000 per depositor. Current federal regulations also
permit such
B-3
<PAGE>
institutions to issue insured negotiable certificates of deposit (CDs) in
amounts of $100,000 or more without regard to the interest rate ceilings on
other deposits. To remain fully insured as to principal, such CDs must currently
be limited to $100,000 per bank or savings and loan association. Interest on
such CDs is not insured. The Money Market Series may invest in such CDs, limited
to the insured amount of principal ($100,000) in each case and to 10% or less of
the gross assets of the Money Market Series in all such CDs in the aggregate.
Such CDs may or may not have a readily available market, and the investment of
the Money Market Series in CDs which do not have a readily available market is
further limited by the restriction on investment by the Money Market Series of
not more than 10% of assets in securities for which there is no readily
available market. See "Investment Restrictions."
The Money Market Series will attempt to balance its objectives of high
income, capital preservation and liquidity by investing in securities of varying
maturities and risks. As a result, the Money Market Series may not necessarily
invest in securities with the highest available yield. The Money Market Series
will not, however, invest in securities with remaining maturities of more than
thirteen months or maintain a dollar-weighted average maturity which exceeds 90
days. The amounts invested in obligations of various maturities of thirteen
months or less will depend on management's evaluation of the risks involved.
Longer-term issues, while frequently paying higher interest rates, are subject
to greater fluctuations in value resulting from general changes in interest
rates than are shorter-term issues. Thus, when rates on new securities increase,
the value of outstanding longer-term securities may decline and vice versa. Such
changes may also occur, but to a lesser degree, with short-term issues. These
changes, if realized, may cause fluctuations in the amount of daily dividends
and, in extreme cases, could cause the net asset value per share to decline. See
"Net Asset Value." In the event of unusually large redemption demands,
securities may have to be sold at a loss prior to maturity or the Money Market
Series may have to borrow money and incur interest expense. Either occurrence
would adversely affect the amount of daily dividends and could result in a
decline in daily net asset value per share or the reduction by the Money Market
Series of the number of shares held in a shareholder's account. The Money Market
Series will attempt to minimize these risks by investing in longer-term
securities, subject to the foregoing limitations, when it appears to management
that yields on such securities are not likely to increase substantially during
the period of expected holding, and then only in securities which are readily
marketable. However, there can be no assurance that the Money Market Series will
be successful in achieving this objective.
Liquidity Puts. The Money Market Series may also purchase instruments of
the types described in this section together with the right to resell the
instruments at an agreed-upon price or yield within a specified period prior to
the maturity date of the instruments. Such a right to resell is commonly known
as a "put," and the aggregate price which the Money Market Series pays for
instruments with puts may be higher than the price which otherwise would be paid
for the instruments. Consistent with the Money Market Series' investment
objective and applicable rules issued by the SEC and subject to the supervision
of the Trustees, the purpose of this practice is to permit the Money Market
Series to be fully invested while preserving the necessary liquidity to meet
unusually large redemptions and to purchase at a later date securities other
than those subject to the put. The Money Market Series may choose to exercise
puts during periods in which proceeds from sales of its shares and from recent
sales of portfolio securities are insufficient to meet redemption requests or
when the funds available are otherwise allocated for investment. In determining
whether to exercise puts prior to their expiration date and in selecting which
puts to exercise in such circumstances, the Money Market Series' investment
adviser considers, among other things, the amount of cash available to the Money
Market Series, the expiration dates of the available puts, any future
commitments for securities purchases, the yield, quality and maturity dates of
the underlying securities, alternative investment opportunities and the
desirability of retaining the underlying securities in the Money Market Series'
portfolio.
Since the value of the put is dependent on the ability of the put writer to
meet its obligation to repurchase, the Money Market Series' policy is to enter
into put transactions only with such brokers, dealers or financial institutions
which present minimal credit risks. There is a credit risk associated with the
purchase of puts in that the broker, dealer or financial institution might
default on its obligation to repurchase an underlying security. In the event
such a default should occur, the Money Market Series is unable to predict
whether all or any portion of any loss sustained could subsequently be recovered
from the broker, dealer or financial institution.
The Money Market Series values instruments which are subject to puts at
amortized cost; no value is assigned to the put. The cost of the put, if any, is
carried as an unrealized loss from the time of purchase until it is exercised or
expires.
U.S. Treasury Money Market Series
The U.S. Treasury Money Market Series seeks to achieve its objective by
investing in U.S. Treasury securities, including bills,notes and bonds. These
instruments are direct obligations of the U.S. Government and, as such, are
backed by the "full faith and credit" of the United States. They differ
primarily in their interest rates and the lengths of their maturities.
The U.S. Treasury Money Market Series may also invest in component parts of
U.S. Treasury notes or bonds, namely, either the corpus (principal) of such
Treasury obligations or one of the interest payments scheduled to be paid on
such obligations. These obligations may take the form of (i) Treasury
obligations from which the interest coupons have been stripped, (ii) the
interest coupons that are stripped, or (iii) book-entries at a Federal Reserve
member bank representing ownership of Treasury obligation components.
B-4
<PAGE>
The U.S. Treasury Money Market Series does not engage in repurchase
agreements or lend its portfolio securities because the income from such
activities is generally not exempt from state and local income taxes, but may
purchase or sell securities on a when-issued or delayed delivery basis.
When-issued or delayed delivery transactions arise when securities are purchased
or sold by the Series 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
Series at the time of entering into the transaction. The Trust's Custodian will
maintain, in a segregated account of the Series, cash or U.S. Treasury
obligations having a value equal to or greater than the Series' purchase
commitments. The Custodian will likewise segregate securities sold on a delayed
delivery basis.
Intermediate Term Series
The Intermediate Term Series seeks to achieve its objective by investing in
United States Government securities that have maturities of ten years or less,
including a variety of securities which are issued or guaranteed by the United
States Treasury, by various agencies of the United States Government or by
various instrumentalities which have been established or sponsored by the United
States Government. Such obligations are more fully described under "Investment
Objective and Policies" in the Prospectus.
The Intermediate Term Series will make purchases and sales of portfolio
securities with the issuer or a government securities dealer on a net price
basis; brokerage commissions are not normally charged on the purchase or sale of
securities such as United States Government obligations. See "Portfolio
Transactions and Brokerage."
The Intermediate Term Series intends to vary the proportion of its holdings
of long-and short-term debt securities in order to reflect its assessment of
prospective changes in interest rates even if such action may adversely affect
current income. For example, if, in the opinion of the Intermediate Term Series'
investment adviser, interest rates generally are expected to decline, the
Intermediate Term Series may sell its shorter-term securities and purchase
longer-term securities in order to benefit from greater expected relative price
appreciation; the securities sold may have a higher current yield than those
being purchased. The success of this strategy will depend on the investment
adviser's ability to forecast changes in interest rates. Moreover, the
Intermediate Term Series intends to manage its portfolio actively by taking
advantage of trading opportunities such as sales of portfolio securities and
purchases of higher yielding securities of similar quality due to distortions in
normal yield differentials. In addition, if in the opinion of the investment
adviser market conditions warrant, the Intermediate Term Series may purchase U.
S. Government securities at a discount or trade securities in response to
fluctuations in interest rates to provide for the prospect of modest capital
appreciation at maturity.
The Intermediate Term Series' investment adviser currently anticipates that
investments will primarily be made in securities with maturities ranging from 2
to 5 years, but depending on market conditions and changing economic conditions
the Intermediate Term Series may invest in securities of any maturity 10 years
or less. Certain securities with maturities of ten years or less which are
purchased at auction or on a when-issued basis may mature later than ten years
from date of purchase and are eligible for purchase by the Series.
PORTFOLIO TURNOVER
The Money Market Series and the U.S. Treasury Money Market Series intend
normally to hold their portfolio securities to maturity. The Money Market Series
and the U.S. Treasury Money Market Series do not normally expect to trade
portfolio securities although they may do so to take advantage of short-term
market movements. The Money Market Series and the U.S. Treasury Money Market
Series will make purchases and sales of portfolio securities with a government
securities dealer on a net price basis; brokerage commissions are not normally
charged on the purchase or sale of U.S. Treasury Securities. See "Portfolio
Transactions and Brokerage."
Although the Intermediate Term Series does not intend to engage in
substantial short-term trading, it may sell portfolio securities without regard
to the length of time that they have been held in order to take advantage of new
investment opportunities or yield differentials, or because the Intermediate
Term Series desires to preserve gains or limit losses due to changing economic
conditions. Accordingly, it is possible that the portfolio turnover rate of the
Intermediate Term Series may reach, or even exceed, 150%. A portfolio turnover
rate of 150% may exceed that of other investment companies with similar
objectives. The portfolio turnover rate is computed by dividing the lesser of
the amount of the securities purchased or securities sold (excluding all
securities whose maturities at acquisition were one year or less) by the average
monthly value of such securities owned during the year. A 100% turnover rate
would occur, for example, if all of the securities held in the portfolio of the
Intermediate Term Series were sold and replaced within one year. However, when
portfolio changes are deemed appropriate due to market or other conditions, such
turnover rate may be greater than anticipated. A higher rate of turnover results
in increased transaction costs to the Intermediate Term Series. The portfolio
turnover rate for the Intermediate Term Series for the fiscal years ended
November 30, 1992 and 1993 was 60% and 44%, respectively.
INVESTMENT RESTRICTIONS
The Trust's fundamental policies as they affect a particular Series cannot
be changed without the approval of the outstanding shares of such Series by a
vote which is the lesser of (i) 67% or more of the voting securities of such
Series represented at a meeting at which more than 50% of the outstanding voting
securities of such Series are present in person or represented by proxy or (ii)
more than
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50% of the outstanding voting securities of such Series. With respect to the
submission of a change in fundamental policy or investment objective to a
particular Series, such matters shall be deemed to have been effectively acted
upon with respect to all Series of the Trust if a majority of the outstanding
voting securities of the particular Series 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 any other Series
affected by such matter and (2) that such matter has not been approved by a
majority of the outstanding voting securities of the Trust.
Money Market Series and Intermediate Term Series
The following investment restrictions are fundamental policies of the Trust
with respect to the Money Market Series and the Intermediate Term Series of the
Trust and may not be changed except as described above.
The Trust may not:
1. As to any Series, invest in any securities other than the types of
securities listed under the "Investment Objectives and Policies" relating to
such Series;
2. Borrow money, except from banks for temporary or emergency purposes,
including the meeting of redemption requests which might otherwise require the
untimely disposition of securities; borrowing in the aggregate may not exceed
20%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the value of the Trust's total assets (including the amount borrowed),
less liabilities (not including the amount borrowed) at the time the borrowing
is made; investment securities will not be purchased while borrowings are
outstanding;
3. Pledge, hypothecate, mortgage or otherwise encumber its assets, except
in an amount up to 10% of the value of its net assets but only to secure
permitted borrowings of money;
4. Make loans to others, except through the purchase of the debt
obligations and the repurchase agreements covering government securities and the
lending of portfolio securities (limited to thirty percent of the Trust's total
assets);
5. Purchase or sell real estate or real estate mortgage loans;
6. Purchase securities on margin or sell short;
7. Purchase or sell commodities or commodity futures contracts, or oil,
gas, or mineral exploration or development programs;
8. Purchase securities for which there are legal or contractual
restrictions on resale (i.e. restricted securities) or invest more than 10% of
its assets in securities for which there is no readily available market, except
for repurchase agreements for seven days or less;
9. Underwrite securities of other issuers;
10. Purchase warrants, or write, purchase or sell puts, calls, straddles,
spreads or combinations thereof except that the Money Market Series may purchase
instruments together with the right to resell such instruments;
11. Purchase the securities of any other investment company, except in
connection with a merger, consolidation, reorganization or acquisition of
assets;
12. Issue senior securities as defined in the Investment Company Act except
insofar as the Trust may be deemed to have issued a senior security by reason
of: (a) entering into any repurchase agreement; (b) permitted borrowings of
money; or (c) purchasing securities on a when-issued or delayed delivery basis;
and
13. Purchase securities on a when-issued basis if, as a result, more than
15% of the Trust's net assets would be committed.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions. However, in the event that
either Series' asset coverage for borrowings falls below 300%, that Series will
take prompt action to reduce its borrowings, as required by applicable law.
In addition, although not as fundamental policies of the Trust, the Trust
will apply the percentage limitations set forth in Investment Restrictions Nos.
2, 8 and 13 separately to investments made by each of the Money Market Series
and the Intermediate Term Series.
U.S. Treasury Money Market Series
In connection with its investment objective and policies as set forth in
the Prospectus, the U.S. Treasury Money Market Series has adopted the following
investment restrictions.
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The U.S. Treasury Money Market Series may not:
1. Invest in any securities other than U.S. Treasury obligations.
2. Purchase securities on margin (but the Series may obtain such
short-term credits as may be necessary for the clearance of transactions).
3. Make short sales of securities or maintain a short position.
4. Issue senior securities, borrow money or pledge its assets, except that
the Series may borrow up to 20% of the value of its total assets (calulated when
the loan is made) from banks and from entities other than banks if so permitted
pursuant to an order of the Securities and Exchange Commission for temporary,
extraordinary or emergency purposes. The Series may pledge up to 20% of the
value of its total assets to secure such borrowings.
5. Buy or sell real estate or interests in real estate.
6. 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 laws.
7. Make investments for the purpose of exercising control or management.
8. Invest in interests in oil, gas or other mineral exploration or
development programs.
9. Buy or sell commodities or commodity contracts (including futures
contracts and options thereon).
10. Purchase securities for which there are legal or contractual
restrictions on resale (i.e. restricted securities) or invest more than 10% of
its assets in securities for which there is no readily available market, except
for repurchase agreements for seven days or less.
Whenever any fundamental investment policy or investment restriction states
a maximum percentage of the U.S. Treasury Money Market Series' 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 U.S. Treasury Money Market Series' asset coverage for borrowings falls
below 300%, the Series will take prompt action to reduce its borrowings, as
required by applicable law.
TRUSTEES AND OFFICERS
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Position with Principal Occupations
Name and Address Trust During Past 5 Years
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<S> <C> <C>
Delayne Dedrick Gold Trustee Marketing and Management Consultant.
529 South Flagler Drive
West Palm Beach, FL
Arthur Hauspurg Trustee Trustee and former President, Chief Executive Officer and
5 John Jay Place Chairman of the Board of Consolidated Edison Company of
Rye, NY New York, Inc.; Director of COMSAT Corp.
Thomas J. McCormack Trustee Chairman, Chief Executive Officer and Editorial Director
175 Fifth Avenue (since 1987) and President (1970-1987) of St. Martin's
New York, NY Press, Inc.; Director of Macmillan Publishers Limited
(London) and Pan Books, Limited (London).
*Lawrence C. McQuade President Vice Chairman of PMF (since 1988); Managing Director,
One Seaport Plaza and Trustee Investment Banking , Prudential Securities Incorporated
New York, NY (Prudential Securities) (1988-1991); Director of Quixote
Corporation (since February 1992) and BUNZL, P.L.C.
(since June 1991); formerly, Director of Crazy Eddie
Inc. (1987-1990) Kaiser Tech, Ltd. and Kaiser Aluminum
and Chemical Corp. (March 1987-November 1988); formerly
Executive Vice President and Director of WR Grace &
Company; President and Director of The Global Government
Plus Fund, Inc., The Global Yield Fund, Inc. and The
High Yield Income Fund, Inc.
Stephen P. Munn Trustee Director, President and Chief Executive Officer (since
101 South Salina Street 1988) of Carlisle Companies Incorporated; formerly,
Syracuse, NY President of Carrier Transicold (a division of United
Technologies Carrier) (1985-1988).
</TABLE>
B-7
<PAGE>
<TABLE>
<CAPTION>
Position with Principal Occupations
Name and Address Trust During Past 5 Years
- ---------------------- -------------- ----------------------------------------------------------
<S> <C> <C>
*Edwin F. Payne Trustee Senior Vice President and former Director (until July
One Seaport Plaza 1991) of Prudential Securities; Director of
New York, NY Mortgage-Backed Securities Clearing Corporation, Liberty
Brokerage Corporation and Government Securities Price
Dissemination Service; Member of the Primary Dealers
Committee of the Public Securities Association and of
the District Committee of the National Association of
Securities Dealers, Inc.; former Member of the Executive
Committee and Board of Directors and former Chairman of
the Mortgage Securities Division of the Public
Securities Association.
Louis A. Weil, III Trustee Publisher and Chief Executive Officer, Phoenix Newpapers,
Phoenix Newspapers, Inc. Inc. (since August 1991); Director of Central
120 E. Van Buren Newspapers, Inc. (since September 1991); prior thereto,
Phoenix, AZ Publisher of Time Magazine (May 1989-March 1991);
formerly President, Publisher and Chief Executive
Officer of The Detroit News (February 1986-August 1989);
formerly member of the Advisory Board, Chase Manhattan
Bank-Westchester; Director of The Global Government Plus
Fund, Inc.
Robert F. Gunia Vice President Chief Administrative Officer (since July 1990), Director
One Seaport Plaza (since January 1989), Executive Vice President,
New York, NY Treasurer and Chief Financial Officer (since June 1987)
of PMF; Senior Vice President (since March 1987) of
Prudential Securities; Vice President and Director of
The Asia Pacific Fund, Inc. (since May 1989) and Vice
President and Director (since February 1992) of
Nicholas-Applegate Fund, Inc.
Susan C. Cote Treasurer Senior Vice President (since January 1989) and First Vice
One Seaport Plaza President (June 1987-December 1988) of PMF; Senior Vice
New York, NY President (since January 1992) and Vice President
(January 1986-December 1991) of Prudential Securities.
S. Jane Rose Secretary Senior Vice President (since January 1991), Senior Counsel
One Seaport Plaza (since June 1987) and First Vice President (June
New York, NY 1987-December 1990) of PMF; Senior Vice President and
Senior Counsel of Prudential Securities (since July
1992); formerly Vice President and Associate General
Counsel of Prudential Securities.
Ronald Amblard Assistant Vice President (since January 1991), and Associate General
One Seaport Plaza Secretary Counsel (since January 1992) of PMF; Vice President and
New York, NY Associate General Counsel of Prudential Securities
(since January 1992); Assistant General Counsel (August
1988-December 1991) and Associate Vice President
(January 1989-December 1990) of PMF.
</TABLE>
- ------------------
* "Interested" Trustee, as defined in the Investment Company Act.
Trustees of the Trust are elected by the holders of the shares of all
Series of the Trust, and not separately by holders of each Series voting as a
class.
Trustees and officers of the Trust are also trustees, directors and
officers of some or all of the other investment companies distributed by
Prudential Securities or Prudential Mutual Fund Distributors, Inc.
The officers conduct and supervise the daily business operations of the
Trust, while the Trustees, in addition to their functions set forth under
"Manager," and "Distributor," review such actions and decide on general
policy.
The Trust pays each of its directors who is not an affiliated person of PMF
or The Prudential Investment Corporation (PIC) annual compensation of $9,000, in
addition to certain out-of-pocket expenses. The Chairman of the Audit Committee
receives an additional $200 per year.
Trustees may receive their Trustee's fee 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 fee 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 exemptive
order, at the daily rate of return of the Trust (the Trust Rate). Payment of the
interest so accrued is also deferred and accruals become payable at the option
of the
B-8
<PAGE>
Trustee. The Trust's obligation to make payments of deferred Trustees' fees,
together with interest thereon, is a general obligation of the Trust.
Pursuant to the terms of the Management Agreement 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.
As of January 7, 1994, 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 Money Market Series, U.S. Treasury Money Market Series and the Intermediate
Term Series of the Trust.
As of January 7, 1994, Prudential Securities was the record holder for
other beneficial owners of 21,557,846 Intermediate Term Series Shares (or 63% of
such shares outstanding), 734,812,744 Money Market Series Shares (or 87% of such
shares outstanding) and 394,841,218 U.S. Treasury Money Market Series Shares (or
99% of such shares outstanding). 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.
MANAGER
The Manager of the Trust is Prudential Mutual Fund Management, Inc. (PMF or
the Manager), One Seaport Plaza, New York, New York 10292. PMF serves as manager
of all of the investment companies that, together with the Trust, comprise the
Prudential Mutual Funds. See "How the Trust is Managed--Manager" in the
Prospectus of each Series. As of February 28, 1994, PMF managed and/or
administered open-end and closed-end management investment companies with assets
of approximately ${50} billion. According to the Investment Company Institute,
as of June 30, 1993, the Prudential Mutual Funds were the 10th largest family of
mutual funds in the United States.
Pursuant to a management agreement with the Trust (the Management
Agreement), PMF, subject to the supervision of the Trustees and in conformity
with the stated policies of the Trust, manages both the investment operations of
the Trust and the composition of the Trust's portfolio, including the purchase,
retention, disposition and loan of securities and other investments. PMF is
obligated to keep certain books and records of the Trust in connection
therewith. PMF is also obligated to provide research and statistical analysis
and to pay costs of certain clerical and administrative services involved in the
portfolio management. The management services of PMF to the Trust are not
exclusive under the terms of the Management Agreement and PMF is free to, and
does, render management services to others.
PMF has authorized any of its directors, officers and employees who have
been elected as trustees or officers of the Trust to serve in the capacities in
which they have been elected. Services furnished by PMF under the Management
Agreement may be furnished by any such directors, officers or employees of PMF.
In connection with the services it renders, PMF 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 the Manager;
(b) all expenses incurred by the Manager or by the Trust in connection
with managing the ordinary course of the Trust's business, other than those
assumed by the Trust, as described below; and
(c) the costs and expenses payable to The Prudential Investment
Coporation (PIC) pursuant to a subadvisory agreement between PMF and PIC
(the Subadvisory Agreement.)
Under the terms of the Management Agreement, the Trust is responsible for
the payment of the following expenses, including (a) the fee payable to the
Manager, (b) the fees and expenses of Trustees who are not affiliated with PMF
or PIC, (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 fees and expenses of the
Trust's legal counsel and independent accountants, (e) brokerage commissions and
any issue or transfer taxes chargeable to the Trust in connection with its
securities transactions, (f) all taxes and corporate 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 representing shares of the
Trust, (i) the cost of fidelity, directors and officers and errors and omissions
insurance, (j) the fees and expenses involved in registering and maintaining
registration of the Trust and of its shares with the SEC and registering the
Trust as a broker or dealer and qualifying its shares under state securities
laws, including the preparation and printing of the Trust's registration
statements and prospectuses for such purposes, (k) allocable communications
expenses with respect to investor services and all expenses of shareholders' and
Trustees' meetings and of preparing, printing and mailing reports to
shareholders, (l) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Trust's
business and (m) distribution fees.
The Trust pays a fee to PMF for the services performed and the facilities
furnished by PMF, computed daily and payable monthly, at an annual rate of .40
of 1% of the Intermediate Term Series' and the U.S. Treasury Money Market
Series' average daily net assets and at an annual rate of .40 of 1% of the
average daily net assets up to $1 billion, .375 of 1% on assets between $1
billion and $1.5 billion and .35
B-9
<PAGE>
of 1% on assets in excess of $1.5 billion of the average daily net assets of the
Money Market Series. The Management Agreement also provides that in the event
the expenses of the Series (including the fees of the Manager but excluding
interest, taxes, brokerage commissions, distribution fees, litigation and
indemnification expenses and other extraordinary expenses) for any fiscal year
exceed the lowest applicable annual expense limitation established and enforced
pursuant to the statute or regulations of any jurisdictions in which shares of
the Series are then qualified for offer and sale, PMF will reduce its fee by the
amount of such excess. Reductions in excess of the total compensation payable to
PMF will be paid by PMF to the Series. Any such reductions are subject to
readjustment during the year. Currently, the Trust believes that the most
restrictive expense limitation of state securities commissions is 2 1/2% of the
average daily net assets of each Series up to $30 million, 2% of the average
daily net assets of each Series from $30 million to $100 million and 1 1/2% of
any excess over $100 million. The Management Agreement provides that the Manager
shall not be liable to the Trust for any error of judgment by the Manager or for
any loss sustained by the Trust except in the case of a breach of fiduciary duty
with respect to the receipt of compensation for services (in which case any
award of damages will be limited as provided in the Investment Company Act) or
of wilful misfeasance, bad faith, gross negligence or reckless disregard of
duty.
The Management Agreement provides that it shall terminate automatically if
assigned, and that it may be terminated without penalty by either party upon not
more than 60 days', nor less than 30 days', written notice. The Management
Agreement was last approved by the Trustees, including all of the Trustees who
are not interested persons as defined in the Investment Company Act, on May 3,
1993 and by a majority of the outstanding shares of the Money Market Series and
the Intermediate Term Series on April 28, 1988 and a majority of the outstanding
shares of the U.S. Treasury Money Market Series on November 26, 1991.
For the fiscal year ended November 30, 1993, the Trust paid management fees
to PMF of $3,803,950, $1,286,150 and $1,093,251 relating to the Money Market
Series, Intermediate Term Series and U.S. Treasury Money Market Series,
respectively. For the fiscal year ended November 30, 1992, the Trust paid
management fees to PMF of $4,455,034, $1,177,548 and $1,053,834 relating to the
Money Market Series, Intermediate Term Series and U.S. Treasury Money Market
Series respectively. For the fiscal year ended November 30, 1991, the Trust paid
management fees to PMF of $5,020,055 and $1,206,574 relating to the Money Market
Series and the Intermediate Term Series, respectively, and $599,267 (net of
management fees waived of $484,562) relating to the U.S. Treasury Money Market
Series for the period December 3, 1990 (commencement of investment operations)
through November 30, 1991.
PMF has entered into the Subadvisory Agreement with PIC (the Subadviser).
The Subadvisory Agreement provides that PIC 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 Trust. PMF continues to have
responsibility for all investment advisory services pursuant to the Management
Agreement and supervises PIC's performance of those services. PIC is reimbursed
by PMF for the reasonable costs and expenses incurred by PIC in furnishing those
services.
The Subadvisory Agreement was last approved by the Trustees, including all
of the Trustees who are not interested persons as defined in the Investment
Company Act, on May 3, 1993, and by the shareholders of each of the Money Market
Series and the Intermediate Term Series on April 28, 1988 and the shareholders
of the U.S. Treasury Money Market Series on November 26, 1991.
The Subadvisory Agreement provides that it will terminate in the event of
its assignment or upon the termination of the Management Agreement. The
Subadvisory Agreement may be terminated by the Trust, PMF or PIC upon not less
than 30 days' nor more than 60 days' written notice. The Subadvisory Agreement
provides that it will continue in effect for a period of more than two years
only so long as such continuance is specifically approved at least annually in
accordance with the requirements of the Investment Company Act applicable to
continuance of investment advisory contracts.
The Manager and the Subadviser are subsidiaries of The Prudential Insurance
Company of America (The Prudential) which, as of December 31, 1991, was the
largest insurance company in the United States and the second largest insurance
company in the world. The Prudential has been engaged in the insurance business
since 1875. In July 1993, Institutional Investor ranked The Prudential the third
largest institutional money manager of the 300 largest money management
organizations in the United States as of December 31, 1992.
DISTRIBUTOR
Prudential Securities Incorporated (Prudential Securities), One Seaport
Plaza, New York, New York 10292, has entered into an agreement with the Trust
under which Prudential Securities acts as distributor for the Intermediate Term
Series. Prudential Securities is engaged in the securities underwriting and
securities and commodities brokerage business and is a member of the New York
Stock Exchange, other major securities and commodities exchanges and the
National Association of Securities Dealers. Prudential Securities is also
engaged in the investment advisory business. Prudential Securities is a
wholly-owned subsidiary of Prudential Securities Group Inc., which is an
indirect, wholly-owned subsidiary of Prudential. The services it provides to the
Trust are discussed in the Intermediate Term Series' Prospectus. See "How the
Trust is Managed--Distributor."
B-10
<PAGE>
Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport Plaza, New
York, New York 10292, has entered into an agreement with the Trust pursuant to
which PMFD serves as distributor for the Money Market Series and the U.S.
Treasury Money Market Series. PMFD is a wholly-owned subsidiary of PMF. The
services it provides to the Trust are described in the Money Market Series and
the U.S. Treasury Money Market Series Prospectuses. See "How the Trust is
Managed--Distributor."
Distribution and Service Plans. See "How the Trust is Managed--Distributor"
in the prospectus of each Series.
During the fiscal year ended November 30, 1993, PMFD incurred distribution
expenses in the aggregate of $1,188,735 and $341,641 with respect to the Money
Market Series and the U.S. Treasury Money Market Series, respectively, all of
which was recovered through the distribution fee paid by each Series to PMFD. It
is estimated that of these amounts approximately $933,200 (78.5%) and $289,000
(84.6%) was spent on payment of account servicing fees to financial advisers for
the Money Market Series and U.S. Treasury Money Market Series, respectively, and
$255,500 (21.5%) and $52,600 (15.4%) on allocation of overhead and other branch
office distribution-related expenses for the Money Market Series and U.S.
Treasury Money Market Series, respectively.
For the fiscal year ended November 30, 1993, Prudential Securities received
$676,731 from the Intermediate Term Series under the Plan and spent
approximately $800,000 on behalf of the Intermediate Term Series.
It is estimated that of the expenses incurred by Prudential Securities
under the Plan of the Intermediate Term Series approximately $5,700 (0.7%) was
spent on compensation to Pruco Securities Corporation (Prusec), an affiliated
broker-dealer, for commissions to its financial advisers and other expenses,
including an allocation on account of overhead and other branch office
distribution-related expenses, incurred by it for distribution of Intermediate
Term Series shares; and $794,300 (99.3%) was spent on commission credits to
Prudential Securities branch offices for payments of account servicing fees
(trailer commissions) to financial advisers including an allocation on account
of overhead and other branch office distribution-related expenses. The term
"overhead and other branch office distribution-related expenses" represents
(a) the expenses of operating Prudential Securities' branch offices in
connection with the sale of shares of the Intermediate Term Series, including
lease costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communications costs and the costs of stationery and
supplies, (b) the costs of client sales seminars, (c) travel expenses of mutual
fund sales coordinators to promote the sale of shares of the Intermediate Term
Series, and (d) other incidental expenses relating to branch promotion of sales
of the Intermediate Term Series. Reimbursable distribution expenses do not
include any direct interest or carrying charges.
Pursuant to Rule 12b-1, the Distribution and Service Plan of the Money
Market Series and Plan of Distribution of the Intermediate Term Series were
approved by the vote of a majority of their outstanding voting securities on
April 28, 1988 and June 26, 1985, respectively, and the Plan of Distribution of
the U.S. Treasury Money Market Series was approved by a majority of its
outstanding voting securities on November 26, 1991 (collectively referred to as
the Plans). The Plans were last approved by the Trustees, including a majority
of the Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of the Plans or in any
agreements related to the Plans (the Rule 12b-1 Trustees), cast in person at a
meeting called for the purpose of voting on such Plans on May 3, 1993.
In each Distribution and Service Agreement, the Trust has agreed to
indemnify Prudential Securities or PMFD to the extent permitted by applicable
law against certain liabilities under the Securities Act of 1933, as amended.
Pursuant to the Plans, the Trustees are provided at least quarterly with
written reports of the amounts expended under the Plans and the purposes for
which such expenditures were made. The Trustees review such reports on a
quarterly basis.
The Plans provide that they will continue in effect from year to year,
provided each such continuance is approved annually by a vote of the Trustees in
the manner described above. The Plans may not be amended to increase materially
the amount to be spent for the services described therein without approval of
the shareholders of the applicable Series, and all material amendments of the
Plans must also be approved by the Trustees in the manner described above. Each
Plan may be terminated at any time, without payment of any penalty, by vote of a
majority of the Rule 12b-1 Trustees, or by a vote of a majority of the
outstanding voting securities of the applicable Series (as defined in the
Investment Company Act). Each Plan will automatically terminate in the event of
its assignment (as defined in the Investment Company Act). The Trustees have
determined that, in their judgment, there is a reasonable likelihood that the
Plans will benefit the Trust and its shareholders.
So long as the Plans are in effect, the selection and nomination of
Trustees who are not interested persons of the Trust shall be committed to the
discretion of the Trustees who are not interested persons. The Trustees have
determined that, in their judgment, there is a reasonable likelihood that the
Plans will benefit the Trust and its shareholders. In the Trustees' quarterly
review of the Plans, they consider the continued appropriateness and the level
of payments provided therein.
The Distribution Agreements provide that each shall terminate automatically
if assigned and that each may be terminated without penalty by either party upon
not more than 60 days' nor less than 30 days' written notice.
B-11
<PAGE>
Each Distribution Agreement was last approved by the Trustees, including
all of the Trustees who are not interested persons of the Trust and have no
direct or indirect financial interest in the operation of the Plans or the
Distribution Agreements on May 3, 1993.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Manager and PIC are responsible for decisions to buy and sell
securities for the Money Market Series, Intermediate Term Series and U.S.
Treasury Money Market Series, arranging the execution of portfolio security
transactions on each Series' behalf, and the selection of brokers and dealers to
effect the transactions. Purchases of portfolio securities are made from
dealers, underwriters and issuers; sales, if any, prior to maturity, are made to
dealers and issuers. Each Series does not normally incur any brokerage
commission expense on such transactions. The instruments purchased by the Series
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. Securities purchased in
underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
When securities are purchased or sold directly from or to an issuer, no
commissions or discounts are paid.
The policy of each of the Series regarding purchases and sales of
securities is that primary consideration will be given to obtaining the most
favorable price and efficient execution of transactions.
The Trust paid no brokerage commissions for the fiscal years ended November
30, 1991, 1992 and 1993.
SHAREHOLDER INVESTMENT ACCOUNT
Upon the initial purchase of shares of the Trust, a Shareholder Investment
Account is established for each investor under which a record of the shares held
is maintained by the Transfer Agent. If a share certificate is desired, it must
be requested in writing for each transaction. Certificates are issued only for
full shares and may be redeposited in the account at any time. There is no
charge to the investor for issuance of a certificate. Whenever a transaction
takes place in the Shareholder Investment Account, the shareholder will be
mailed a statement showing the transaction and the status of such account.
Procedure for Multiple Accounts
Special procedures have been designed for banks and other institutions that
wish to open multiple accounts. An institution may open a single master account
by filing an Application Form with Prudential Mutual Fund Services, Inc. (PMFS
or the Transfer Agent), Attention: Customer Service, P.O. Box 15005, New
Brunswick, New Jersey 08906, signed by personnel authorized to act for the
institution. Individual sub-accounts may be opened at the time the master
account is opened by listing them, or they may be added at a later date by
written advice or by filing forms supplied by the Trust. Procedures are
available to identify sub-accounts by name and number within the master account
name. The investment minimums set forth above are applicable to the aggregate
amounts invested by a group and not to the amount credited to each sub-account.
PMFS provides each institution with a written confirmation for each
transaction in sub-accounts. Further, PMFS provides, to each institution on a
monthly basis, a statement which sets forth for each master account its share
balance and income earned for the month. In addition, each institution receives
a statement for each individual account setting forth transactions in the
sub-account for the year-to-date, the total number of shares owned as of the
dividend payment date and the dividends paid for the current month, as well as
for the year-to-date.
Further information on the sub-accounting system and procedures is
available from the Transfer Agent, Prudential Securities or Prusec.
Automatic Reinvestment of Dividends and Distributions
For the convenience of investors, all dividends and distributions are
automatically invested in full and fractional shares of the applicable Series at
net asset value. An investor may direct the Transfer Agent in writing not less
than 5 full business days prior to the payable date to have subsequent dividends
and/or distributions sent in cash rather than invested. In the case of recently
purchased shares for which registration instructions have not been received on
the record date, cash payment will be made directly to the dealer. Any
shareholder who receives a cash payment representing a dividend or distribution
may reinvest such dividend or distribution at net asset value by returning the
check or the proceeds to the Transfer Agent within 30 days after the payment
date. Such investment will be made at the net asset value per share next
determined after receipt of the check or proceeds by the Transfer Agent.
Exchange Privilege
The Trust makes available to its Money Market Series, Intermediate Term
Series and U.S. Treasury Money Market Series shareholders the privilege of
exchanging their shares for shares of either Series and certain other Prudential
Mutual Funds, including one or more specified money market funds, subect in each
case to the minimum investment requirements of such funds. Class A shares of
B-12
<PAGE>
such other Prudential Mutual Funds may also be exchanged for Money Market
Series, Intermediate Term Series and U.S. Treasury Money Market Series shares.
All exchanges are made on the basis of relative net asset value next determined
after receipt of an order in proper form. An exchange will be treated as a
redemption and purchase for tax purposes. Shares may be exchanged for shares of
another fund only if shares of such fund may legally be sold under applicable
state laws.
It is contemplated that the exchange privilege may be applicable to new
mutual funds whose shares may be distributed by the Distributor.
Shareholders of the Trust may exchange their shares for Class A shares of
the Prudential Mutual Funds, and shares of the money market funds specified
below. No fee or sales load will be imposed upon the exchange.
The following money market funds participate in the Class A Exchange
Privilege:
Prudential California Municipal Fund
(California Money Market Series)
Prudential Government Securities Trust
(Money Market Series)
(U.S. Treasury Money Market Series)
Prudential Municipal Series Fund
(Connecticut Money Market Series)
(Massachusetts Money Market Series)
(New York Money Market Series)
(New Jersey Money Market Series)
Prudential MoneyMart Assets
Prudential Tax-Free Money Fund
Shareholders of The Trust may not exchange their shares for Class B shares
of the Prudential Mutual Funds or shares of Prudential Special Money Market
Fund, a money market fund, except that shares acquired prior to January 22, 1990
subject to a contingent deferred sales charge can be exchanged for Class B
shares.
Additional details about the Exchange Privilege and prospectuses for each
of the Prudential Mutual Funds are available from the Trust's Transfer Agent,
Prudential Securities or Prusec. The Exchange Privilege may be modified,
terminated or suspended on sixty days notice, and any fund, including the Trust,
or the Distributor, has the right to reject any exchange application relating to
such fund's shares.
Dollar Cost Averaging
Dollar cost averaging is a method of accumulating shares by investing a
fixed amount of dollars in shares at set intervals. An investor buys more shares
when the price is low and fewer shares when the price is high. The overall cost
is lower than it would be if a constant number of shares were bought at set
intervals.
Dollar cost averaging may be used, for example, to plan for retirement, to
save for a major expenditure, such as the purchase of a home, or to finance a
college education. The cost of a year's education at a four-year college today
averages around $14,000 at a private college and around $4,800 at a public
university. Assuming these costs increase at a rate of 7% a year, as has been
projected, for the freshman class of 2007, the cost of four years at a private
college could reach $163,000 and over $97,000 at a public university.(1)
The following chart shows how much you would need in monthly investments to
achieve specified lump sums to finance your investment goals.(2)
<TABLE>
<CAPTION>
Period of
Monthly investments: $100,000 $150,000 $200,000 $250,000
--------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
25 Years......................... $ 110 $ 165 $ 220 $ 275
20 Years......................... 176 264 352 440
15 Years......................... 296 444 592 740
10 Years......................... 555 833 1,110 1,388
5 Years......................... 1,371 2,057 2,742 3,428
</TABLE>
See "Automatic Savings Accumulation Plan."
B-13
<PAGE>
- ---------------
(1) Source information concerning the costs of education at public
universities is available from The College Board Annual Survey of Colleges,
1992. Information about the costs of private colleges is from the Digest of
Education Statistics, 1992; The National Center for Educational Statistics; and
the U.S. Department of Education. Average costs for private institutions include
tuition, fees, room and board.
(2) The chart assumes an effective rate of return of 8% (assuming monthly
compounding). This example is for illustrative purposes only and is not intended
to reflect the performance of an investment in shares of the Fund. The
investment return and principal value of an investment will fluctuate so that an
investor's shares when redeemed may be worth more or less than their original
cost.
Automatic Savings Accumulation Plan (ASAP)
Under ASAP, an investor may arrange to have a fixed amount automatically
invested in any Series' shares each month by authorizing his or her bank account
or Prudential Securities Account (including a Command Account) to be debited to
invest specified dollar amounts in shares of that Series. The investor's bank
must be a member of the Automatic Clearing House System. Stock certificates are
not issued to ASAP participants.
Further information about this program and an application form can be
obtained from the Transfer Agent, Prudential Securities or Prusec.
Systematic Withdrawal Plan
A systematic withdrawal plan is available for shareholders having shares of
the Trust held through Prudential Securities or the Transfer Agent. Such
withdrawal plan provides for monthly or quarterly checks in any amount, except
as provided below, up to the value of the shares in the shareholder's account.
In the case of shares held through the Transfer Agent (i) a $10,000 minimum
account value applies, (ii) withdrawals may not be for less than $100 and (iii)
the shareholder must elect to have all dividends and/or distributions
automatically reinvested in additional full and fractional shares of the
applicable series at net asset value on shares held under this plan. See
"Shareholder Investment Account-Automatic Reinvestment of Dividends and
Distributions."
Prudential Securities and the Transfer Agent act as agents for the
shareholder in redeeming sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment. The systematic withdrawal plan may be
terminated at any time, and the Distributor reserves the right to initiate a fee
of up to $5 per withdrawal, upon 30 days' written notice to the shareholder.
Withdrawal payments should not generally be considered as dividends, yield
or income. If periodic withdrawals continuously exceed reinvested dividends and
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted. Furthermore, each withdrawal constitutes a
redemption of shares, and any gain or loss realized must generally be recognized
for federal income tax purposes. Each shareholder should consult his or her own
tax adviser with regard to the tax consequences of the plan, particularly if
used in connection with a retirement plan.
Tax-Deferred Retirement Plans
Various tax-deferred retirement plans, including a 401(k) Plan,
self-directed individual retirement accounts and "tax-sheltered accounts"
under Section 403(b)(7) of the Internal Revenue Code are available through the
Distributor. These plans are for use by both self-employed individuals and
corporate employers. These plans permit either self-direction of accounts by
participants, or a pooled account arrangement. Information regarding the
establishment of these plans, the administration, custodial fees and other
details are available from Prudential Securities or the Transfer Agent.
Investors who are considering the adoption of such a plan should consult
with their own legal counsel or tax adviser with respect to the establishment
and maintenance of any such plan.
NET ASSET VALUE
Money Market Series and U.S. Treasury Money Market Series
Amortized Cost Valuation. The Money Market Series and the U.S. Treasury
Money Market Series use the amortized cost method to determine the value of
their portfolio securities in accordance with regulations of the Securities and
Exchange Commission. The amortized cost method involves valuing a security at
its cost and amortizing any discount or premium over the period until maturity.
The method does not take into account unrealized capital gains and losses which
may result from the effect of fluctuating interest rates on the market value of
the security.
With respect to the Money Market Series and the U.S. Treasury Money Market
Series, the Trustees have determined to maintain a dollar-weighted average
maturity of 90 days or less, to purchase instruments having remaining maturities
of thirteen months or less and
B-14
<PAGE>
to invest only in securities determined by the investment adviser under the
supervison of the Trustees to present minimal credit risks and to be of eligible
quality in accordance with the provisions of Rule 2a-7 of the Investment Company
Act. The Trustees have adopted procedures designed to stabilize, to the extent
reasonably possible, both Series' price per share as computed for the purpose of
sales and redemptions at $1.00. Such procedures will include review of the
Series' portfolio holdings by the Trustees, at such intervals as they may deem
appropriate, to determine whether the Series' 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 Trustees. If
such deviation exceeds 1/2 of 1%, the Trustees will promptly consider what
action, if any, will be initiated. In the event the Trustees determine that a
deviation exists which may result in material dilution or other unfair results
to prospective investors or existing shareholders, the Trustees will take such
corrective action as they consider necessary and appropriate,including the sale
of portfolio instruments prior to maturity to realize capital gains or losses or
to shorten average portfolio maturity, the withholding of dividends, redemptions
of shares in kind, or the use of available market quotations to establish a net
asset value per share.
Intermediate Term Series
In determining the value of the assets of the Intermediate Term Series, the
value of each U.S. Government security for which quotations are available will
be based on the valuation provided by an independent pricing service. Pricing
services consider such factors as security prices, yields, maturities, call
features, ratings and developments relating to specific securities in arriving
at securities valuations. Securities for which market quotations are not readily
available are valued by appraisal at their fair value as determined in good
faith by the Manager under procedures established under the general supervision
and responsibility of the Trustees.
Short-term investments which mature in 60 days or less are valued at
amortized cost, if their term to maturity from date of purchase was 60 days or
less, or by amortizing their value on the 61st day prior to maturity if their
term to maturity when acquired by the Intermediate Series was more than 60 days,
unless this is determined not to represent fair value by the Trustees.
PERFORMANCE INFORMATION
Money Market Series and U.S. Treasury Money Market Series--Calculation of Yield
The Money Market Series and U.S. Treasury Money Market Series will each
prepare a current quotation of yield from time to time. 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. 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 the Money Market Series and U.S. Treasury Money Market Series'
portfolios and their operating expenses. The Money Market Series and U.S.
Treasury Money Market Series may also each prepare an effective annual yield
computed by compounding the unannualized seven-day period return as follows: by
adding 1 to the unannualized seven-day period return, raising the sum to a power
equal to 365 divided by 7, and subtracting 1 from the result.
Effective yield = ((base period return+1)^(365/7))-1
The U.S. Treasury Money Market Series may also calculate the tax equivalent
yield over a 7-day period. The tax equivalent yield will be determined by first
computing the current yield as discussed above. The Series will then determine
what portion of the yield is attributable to securities, the income of which is
exempt for state and local income tax purposes. This portion of the yield will
then be divided by one minus the maximum state tax rate of individual taxpayers
and then added to the portion of the yield that is attributable to other
securities.
Comparative performance information may be used from time to time in
advertising or marketing the Money Market Series' and U.S. Treasury Money Market
Series' shares, including data from Lipper Analytical Services, Inc., Donoghue's
Money Fund Report, The Bank Rate Monitor, other industry publications, business
perodicals, rating services and market indices.
The Money Market Series' and U.S. Treasury Money Market Series' yields
fluctuate, and annualized yield quotations are not a representation by the Money
Market Series or U.S. Treasury Money Market Series as to what an investment in
the Money Market Series and U.S. Treasury Money Market Series 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 the Money
Market Series and U.S. Treasury Money Market Series is held, but also on any
realized or unrealized gains and losses and changes in the Money Market Series
and U.S. Treasury Money Market Series' expenses.
B-15
<PAGE>
Intermediate Term Series--Calculation of Yield and Total Return
Yield. The Intermediate Term Series may from time to time advertise its
yield as calculated over a 30-day period. Yield will be computed by dividing the
Intermediate Term Series' net investment income per share earned during this
30-day period by the net asset value per share on the last day of this period.
Yield is calculated according to the following formula:
YIELD = 2 ((a-b+1)^6-1)
-----
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the net asset value per share on the last day of the period.
Yield fluctuates and an annualized yield quotation is not a representation
by the Trust as to what an investment in the Intermediate Term Series will
actually yield for any given period.
The Intermediate Term Series' 30-day yield for the period ended November
30, 1993 was 3.93%.
Average Annual Total Return. The Intermediate Term Series may from time to
time advertise its average annual total return. See "How the Trust Calculates
Performance" in the Prospectus.
Average annual total return is computed according to the following formula:
P(1 + T)^n = ERV
Where: P= a hypothetical initial payment of $1,000.
T= average annual total return.
n= number of years.
ERV=Ending Redeemable Value at the end of the 1, 5 or 10 year periods
(or fractional portion thereof) of a hypothetical $1,000 payment
made at the beginning of the 1, 5 or 10 year periods.
Average annual total return does not take into account any federal or state
income taxes that may be payable upon redemption.
The Intermediate Term Series' average annual total return for the one, five
and ten year periods ended November 30, 1993 was 8.26%, 9.11% and 9.96%,
respectively.
Aggregate Total Return. The Intermediate Term Series may also advertise its
aggregate total return. See "How the Trust Calculates Performance" in the
Prospectus.
Aggregate total return represents the cumulative change in the value of an
investment in the Fund and is computed according to the following formula:
ERV - P
-------
P
Where: P = a hypothetical initial payment of $1,000.
ERV = Ending Redeemable Value at the end of the 1, 5 or 10 year
periods (or fractional portion thereof) of a hypothetical
$1,000 investment made at the beginning of the 1, 5 or
10 year periods.
Aggregate total return does not take into account any federal or state
income taxes that may be payable upon redemption.
The Intermediate Term Series' aggregate total return for the one, five and
ten year periods ended November 30, 1993 was 8.26%, 54.71% and 158.60%,
respectively.
TAXES
Each series of the Trust is treated as a separate entity for federal income
tax purposes and each has elected to qualify and intends to remain qualified as
a regulated investment company under the Internal Revenue Code of 1986, as
amended (the Internal Revenue Code). If each series qualifies as a regulated
investment company, it will not be subject to federal income taxes on the
taxable income it distributes to shareholders, provided at least 90% of its net
investment income and net short-term capital gains earned in the taxable year is
so distributed. To qualify for this treatment, each series must, among other
things, (a) derive at least 90% of its gross income (without offset for losses
from the sale or other disposition of securities or foreign currencies) from
dividends, interest, payments with respect to securities loans, gains from the
sale or other disposition of securities or foreign currencies and certain
financial futures, options and forward contracts; (b) derive less than 30% of
its gross income (without offset for losses from the sale or other disposition
of
B-16
<PAGE>
securities or foreign currencies) from the gains on the sale or other
disposition of securities held for less than three months; and (c) diversify its
holdings so that, at the end of each quarter of the taxable year, (i) at least
50% of the value of its assets is represented by cash, U.S. Government
securities and other securities limited in respect of any one issuer to an
amount no greater than 5% of its 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
securities). The performance and tax qualification of one series will have no
effect on the federal income tax liability of shareholders of the other series.
The Internal Revenue Code imposes a 4% nondeductible excise tax to the
extent any series fails to meet certain minimum distribution requirements by the
end of each calendar year. 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 paid by the Trust and received by shareholders in such prior
year. Under this rule, a shareholder may be taxed in one year on dividends or
distributions actually received in January of the following year.
See "Taxes, Dividends and Distributions" in the Prospectus of each
series.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT AND
INDEPENDENT ACCOUNTANTS
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, has been retained to act as Custodian of the Trust's
investments and in such capacity maintains certain financial and accounting
books and records pursuant to an agreement with the Trust.
Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza One, Edison,
New Jersey 08837, serves as Transfer and Dividend Disbursing Agent and in those
capacities maintains certain books and records for the Trust. PMFS is a
wholly-owned subsidiary of PMF. PMFS provides customary transfer agency services
to the Trust, including the handling of shareholder communications, the
processing of shareholder transactions, the maintenance of shareholder account
records, payment of dividends and distributions and related functions. For these
services, PMFS receives an annual fee per shareholder account, a new account
set-up fee for each manually established account and a monthly inactive zero
balance account fee per shareholder account. PMFS is also reimbursed for its
out-of-pocket expenses, including but not limited to postage, stationery,
printing, allocable communications and other costs. For the fiscal year ended
November 30, 1993, the Intermediate Term Series, Money Market Series and U.S.
Treasury Money Market Series incurred fees of $275,000, $1,101,000 and $61,000,
respectively, for the services of PMFS.
Price Waterhouse, 1177 Avenue of the Americas, New York, New York, serves
as the Trust's independent accountants and in that capacity audits the Trust's
annual financial statements.
B-17
<PAGE>
PRUDENTIAL
MONEY MARKET SERIES
GOVERNMENT
PORTFOLIO OF INVESTMENTS
SECURITIES TRUST
NOVEMBER 30, 1993
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description (a) (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Federal Farm Credit Bank--12.5%
$ 14,250 3.18%, 1/7/94..................... $14,203,426
5,700 3.185%, 1/10/94................... 5,679,828
700 3.20%, 1/10/94.................... 697,511
5,000 3.18%, 1/12/94.................... 4,981,450
15,000 3.18%, 1/13/94.................... 14,943,025
10,000 3.18%, 1/14/94.................... 9,961,133
1,255 3.18%, 1/19/94.................... 1,249,568
150 3.19%, 1/21/94.................... 149,322
7,000 3.19%, 3/1/94..................... 6,999,841
12,000 3.34%, 3/1/94..................... 12,002,637
15,000 12.35%, 3/1/94.................... 15,324,805
7,000 3.38%, 4/1/94..................... 6,920,476
5,000 3.64%, 8/1/94..................... 5,005,535
7,000 8.625%, 9/1/94.................... 7,258,112
9,400 3.49%, 11/1/94.................... 9,094,722
-----------
114,471,391
-----------
Federal Home Loan Bank--4.7%
21,000 3.07%, 12/23/93, F.R.N............ 21,000,000
6,100 3.14%, 1/26/94.................... 6,070,205
4,775 8.30%, 7/25/94.................... 4,920,726
10,500 8.60%, 8/25/94.................... 10,884,213
-----------
42,875,144
-----------
Federal Home Loan Mortgage
Corporation--15.5%
15,000 3.03%, 12/3/93, F.R.N............. 14,999,880
10,000 2.89%, 12/15/93, F.R.N............ 9,996,521
180 3.19%, 1/4/94..................... 179,458
13,000 3.13%, 1/7/94..................... 12,958,180
5,090 3.18%, 1/7/94..................... 5,073,364
4,627 3.20%, 1/7/94..................... 4,611,782
16,500 3.13%, 1/12/94.................... 16,439,748
12,000 3.18%, 1/14/94.................... 11,953,360
<CAPTION>
Principal
Amount Value
(000) Description (a) (Note 1)
- ------------------------------------------------------------
<C> <S> <C>
Federal Home Loan Mortgage
Corporation--cont'd
$ 715 3.18%, 1/18/94.................... $ 711,968
3,810 3.18%, 1/21/94.................... 3,792,836
7,000 3.11%, 1/24/94.................... 6,967,345
11,000 3.13%, 1/24/94.................... 10,948,355
10,000 3.14%, 1/24/94.................... 9,952,900
5,000 3.18%, 1/24/94.................... 4,976,150
11,000 3.12%, 1/28/94.................... 10,944,707
18,000 3.12%, 1/31/94.................... 17,904,840
-----------
142,411,394
-----------
Federal National Mortgage
Association--8.9%
1,325 3.20%, 1/10/94.................... 1,320,289
22,380 7.55%, 1/10/94.................... 22,463,396
1,350 9.45%, 1/10/94.................... 1,358,885
5,710 13.00%, 1/13/94................... 5,773,974
15,500 3.14%, 1/27/94.................... 15,422,939
12,185 3.12%, 3/22/94.................... 12,067,780
7,100 9.60%, 4/11/94.................... 7,252,494
17,000 3.47%, 10/3/94.................... 16,498,585
-----------
82,158,342
-----------
Student Loan Marketing
Association--10.3%
29,000 3.20%, 12/7/93, F.R.N............. 29,000,000
20,000 3.37%, 12/7/93, F.R.N............. 20,000,000
10,000 3.41%, 12/7/93, F.R.N............. 10,000,000
6,000 3.34%, 1/19/94, F.R.N............. 6,000,000
24,000 3.83%, 6/30/94, F.R.N............. 24,000,000
6,000 7.50%, 7/11/94.................... 6,141,228
-----------
95,141,228
-----------
Tennessee Valley Authority--3.2%
25,000 8.25%, 10/1/94.................... 25,952,614
3,500 8.75%, 10/1/94.................... 3,798,148
-----------
29,750,762
-----------
</TABLE>
See Notes to Financial Statements.
B-18
<PAGE>
PRUDENTIAL
MONEY MARKET SERIES
GOVERNMENT
PORTFOLIO OF INVESTMENTS
SECURITIES TRUST
NOVEMBER 30, 1993
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description (a) (Note 1)
- ------------------------------------------------------------
<C> <S> <C>
United States Treasury Bond--2.0%
$ 18,000 8.75%, 8/15/94.................... $18,637,937
-----------
United States Treasury Note--2.1%
18,500 8.88%, 2/15/94.................... 18,703,098
-----------
Repurchase Agreements--40.8%
139,502 Joint Repurchase Agreement Account
3.21%, 12/1/93 (Note 5)......... 139,502,000
16,000 Bear Stearns & Co., 3.13%, dated
11/2/93, due 12/1/93 in the
amount of $16,040,342 (cost
$16,000,000; collateralized by
$16,670,000 F.N.M.A., 7.00%,
5/1/08 and $625,000 F.N.M.A.,
9.00%, 7/1/98; approximate
aggregate value including
accrued interest-$16,325,126)... 16,000,000
92,570 Morgan Stanley & Co., 3.18%, dated
11/29/93, due 12/1/93 in the
amount of $92,586,354 (cost
$92,570,000; collateralized by
$15,426,953 F.N.M.A., 7.00%,
3/1/08; $23,237,975 F.H.L.M.C.,
7.50%, 9/1/13; $7,916,000
F.N.M.A., 8.00%, 4/1/23;
$9,800,000 F.N.M.A., 6.00%,
10/1/00; $18,055,000 F.N.M.A.,
7.00%, 11/1/07 and $33,000,000
F.N.M.A., 8.00%, 1/1/08;
approximate aggregate value
including accrued
interest-$94,992,452)........... 92,570,000
<CAPTION>
Principal
Amount Value
(000) Description (a) (Note 1)
- ------------------------------------------------------------
<C> <S> <C>
$ 17,810 Lehman Brothers, 3.10%, dated
11/29/93, due 12/6/93 in the
amount of $17,820,735 (cost
$17,810,000; collateralized by
$18,484,363 F.N.M.A., 6.50%,
9/1/08; approximate value
including accrued
interest-$18,527,344)........... $17,810,000
16,500 Bear Stearns & Co., 3.125%, dated
11/30/93, due 12/6/93 in the
amount of $16,508,594 (cost
$16,500,000; collateralized by
$17,675,000 F.N.M.A., 7.50%,
9/1/08; approximate value
including accrued
interest-$17,029,424)........... 16,500,000
9,370 Bear Stearns & Co., 3.15%, dated
11/29/93, due 12/9/93 in the
amount of $9,378,199 (cost
$9,370,000; collateralized by
$5,575,000 F.N.M.A., 7.00%,
3/1/08 and $4,600,000 F.N.M.A.,
6.50%, 9/1/99; approximate
aggregate value including
accrued interest-$9,670,421).... 9,370,000
8,440 Bear Stearns & Co., 3.15%, dated
11/29/93, due 12/15/93 in the
amount of $8,451,816 (cost
$8,440,000; collateralized by
$11,000,000 F.H.L.M.C., 7.50%,
2/1/99 and $5,375,000
F.H.L.M.C., 8.00%, 8/1/03;
approximate aggregate value
including accrued
interest-$8,729,681)............ 8,440,000
</TABLE>
See Notes to Financial Statements.
B-19
<PAGE>
PRUDENTIAL
MONEY MARKET SERIES
GOVERNMENT
PORTFOLIO OF INVESTMENTS
SECURITIES TRUST
NOVEMBER 30, 1993
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description (a) (Note 1)
- ------------------------------------------------------------
<C> <S> <C>
$ 74,760 Lehman Brothers, 3.35%,
$52,500,000 dated 11/10/93 and
$22,260,000 dated 11/15/93,
aggregate due 1/6/94 in the
amount of $75,146,182 (cost
$74,760,000; collateralized by
$22,050,899 F.N.M.A., 8.50%,
6/1/21; $20,000,000 F.N.M.A.,
8.00%, 6/1/07; $63,372,717
F.N.M.A., 8.00%, 11/1/07 and
$52,561,466 F.H.L.M.C., 9.50%,
12/1/01; approximate aggregate
value including accrued
interest-$76,516,063)........... $ 74,760,000
------------
374,952,000
------------
Total Investments--100.0%
(amortized cost $919,101,296*).... 919,101,296
Other assets in excess of
liabilities--0.0%............... 401,302
------------
Net Assets--100%.................. $919,502,598
============
</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.
See Notes to Financial Statements.
B-20
<PAGE>
PRUDENTIAL
INTERMEDIATE TERM SERIES
GOVERNMENT
PORTFOLIO OF INVESTMENTS
SECURITIES TRUST
NOVEMBER 30, 1993
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--91.2%
Federal National Mortgage
Association--5.1%
$ 16,000 8.45%, 10/21/96................... $17,604,960
-----------
United States Treasury Bonds--13.6%
10,000 11.75%, 2/15/01................... 13,656,200
25,000 10.75%, 5/15/03................... 33,882,750*
-----------
47,538,950
-----------
United States Treasury Notes--72.5%
16,000 8.375%, 4/15/95................... 16,937,440
12,000 5.875%, 5/15/95................... 12,320,640
10,000 8.50%, 5/15/95.................... 10,635,900
12,000 8.875%, 7/15/95................... 12,896,280
20,000 7.75%, 3/31/96.................... 21,481,200
40,000 9.375%, 4/15/96................... 44,431,200
30,000 8.50%, 4/15/97.................... 33,482,700
15,000 8.75%, 10/15/97................... 17,010,900
50,000 9.25%, 8/15/98.................... 58,593,500
21,000 8.875%, 2/15/99................... 24,461,640
-----------
252,251,400
-----------
Total long-term investments
(cost $310,098,228)............. 317,395,310
-----------
<CAPTION>
Principal
Amount Value
(000) Description (Note 1)
- ------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS--7.3%
United States Treasury Notes--6.6%
$ 22,000 9.50%, 10/15/94................... $ 23,089,660
------------
Joint Repurchase Agreement Account--0.7%
2,333 3.21%, 12/1/93 (Note 5)).......... 2,333,000
------------
Total short-term investments
(cost $25,969,250).............. 25,422,660
------------
Total Investments--98.5%
(cost $336,067,478; Note 4)....... 342,817,970
Other assets in excess of
liabilities--1.5%............... 5,126,177
------------
Net Assets--100%.................. $347,944,147
============
</TABLE>
- ---------------
* Security on loan.
See Notes to Financial Statements.
B-21
<PAGE>
PRUDENTIAL
U.S. TREASURY MONEY MARKET
GOVERNMENT SERIES
PORTFOLIO OF INVESTMENTS
SECURITIES TRUST
NOVEMBER 30, 1993
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description (Note 1)
- ------------------------------------------------------------
<C> <S> <C>
United States Treasury Bills--95.7%
$ 5,737 2.90%, 12/2/93.................... $ 5,736,538
872 2.98%, 12/2/93.................... 871,928
3,000 3.015%, 12/2/93................... 2,999,749
1,915 2.96%, 12/9/93.................... 1,913,740
5,000 3.135%, 12/9/93................... 4,996,517
11,150 2.915%, 12/16/93.................. 11,136,456
7,710 2.92%, 12/16/93................... 7,700,620
2,620 2.925%, 12/16/93.................. 2,616,807
4,550 2.98%, 12/16/93................... 4,544,349
5,000 3.02%, 12/16/93................... 4,993,708
5,000 3.025%, 12/16/93.................. 4,993,698
15,000 3.01%, 1/13/94.................... 14,946,071
825 3.035%, 1/13/94................... 822,009
15,430 3.04%, 1/13/94.................... 15,373,972
930 3.00%, 1/20/94.................... 926,125
10,000 3.025%, 1/20/94................... 9,957,986
4,830 3.04%, 1/20/94.................... 4,809,607
4,465 3.045%, 1/20/94................... 4,446,117
5,000 3.08%, 1/20/94.................... 4,978,611
20,000 3.10%, 1/20/94.................... 19,913,889
8,445 3.105%, 1/20/94................... 8,408,581
5,000 3.01%, 2/3/94..................... 4,973,244
20,000 3.075%, 2/3/94.................... 19,890,667
1,070 3.085%, 2/3/94.................... 1,064,132
1,645 3.09%, 2/3/94..................... 1,635,963
9,155 3.10%, 2/3/94..................... 9,104,546
5,000 3.21%, 2/3/94..................... 4,971,467
5,260 3.03%, 2/10/94.................... 5,228,567
385 3.04%, 2/10/94.................... 382,692
3,770 3.085%, 2/10/94................... 3,747,062
6,145 3.09%, 2/10/94.................... 6,107,551
<CAPTION>
Principal
Amount Value
(000) Description (Note 1)
- ------------------------------------------------------------
<C> <S> <C>
United States Treasury Bills--cont'd
$ 742 3.095%, 2/10/94................... $ 737,471
3,025 3.115%, 2/10/94................... 3,006,416
11,125 3.12%, 2/10/94.................... 11,056,544
10,000 3.015%, 2/17/94................... 9,934,675
20,000 3.12%, 2/17/94.................... 19,864,800
6,000 3.08%, 4/7/94..................... 5,934,807
160 3.095%, 4/7/94.................... 158,253
4,065 3.10%, 4/7/94..................... 4,020,545
2,575 3.205%, 5/5/94.................... 2,539,467
10,590 3.225%, 5/5/94.................... 10,442,953
1,490 3.215%, 5/12/94................... 1,468,443
5,000 3.235%, 5/12/94................... 4,927,213
3,680 3.27%, 5/12/94.................... 3,625,849
570 3.32%, 8/25/94.................... 555,965
------------
272,466,370
------------
United States Treasury Bond--0.3%
960 9.00%, 2/15/94.................... 971,155
------------
United States Treasury Strips--4.5%
3,000 3.499%, 2/15/94................... 2,977,837
10,000 3.268%, 5/15/94................... 9,850,205
------------
12,828,042
------------
Total Investments--100.5%
(amortized cost $286,265,567*).... 286,265,567
Liabilities in excess of other
assets--(0.5%).................... (1,287,977)
------------
Net Assets--100%.................. $284,977,590
============
</TABLE>
- ---------------
* Federal income tax basis of portfolio securities is the
same as for financial reporting purposes.
See Notes to Financial Statements.
B-22
<PAGE>
PRUDENTIAL
STATEMENT OF ASSETS
GOVERNMENT
AND LIABILITIES
SECURITIES TRUST
YEAR ENDED NOVEMBER 30, 1993
<TABLE>
<CAPTION>
US
TREASURY
MONEY MONEY
MARKET INTERMEDIATE MARKET
SERIES SERIES SERIES
---------------- --------------- ----------------
<S> <C> <C> <C>
Assets
Investments, at value ($919,101,296, $336,067,478 and $286,265,567,
respectively)........................................................ $919,101,296 $ 342,817,970 $286,265,567
Cash................................................................... 30,735 21,338 27,475
Collateral for securities on loan, at value............................ -- 33,749,566 --
Interest receivable.................................................... 4,893,900 4,681,249 25,357
Receivable for Series shares sold...................................... 19,513,647 1,973,972 8,314,802
Fees receivable on securities loaned................................... -- 7,094 --
Deferred expenses and other assets..................................... 15,445 4,331 22,741
------------ ------------- ------------
Total assets....................................................... 943,555,023 383,255,520 294,655,942
------------ ------------- ------------
Liabilities
Payable upon return of securities loaned............................... -- 33,749,566 --
Payable for Series shares reacquired................................... 22,976,389 633,116 9,289,895
Due to Distributor..................................................... 50,602 92,278 15,768
Due to Manager......................................................... 298,507 114,338 94,772
Dividends payable...................................................... 361,621 595,098 98,712
Accrued expenses and other liabilities................................. 365,306 126,977 179,205
------------ ------------- ------------
Total liabilities.................................................. 24,052,425 35,311,373 9,678,352
------------ ------------- ------------
Net Assets............................................................. $919,502,598 $ 347,944,147 $284,977,590
============ ============= ============
Net assets are comprised of:
Shares of beneficial interest, $.01 par value.......................... $ 9,195,026 $ 345,883 $ 2,849,776
Paid-in capital in excess of par....................................... 910,307,572 406,573,935 282,127,814
------------ ------------- ------------
919,502,598 406,919,818 284,977,590
Undistributed net investment income.................................... -- 1,897,615 --
Accumulated net realized gains (losses)................................ -- (67,623,778) --
Net unrealized appreciation of investments............................. -- 6,750,492 --
------------ ------------- ------------
Net assets, November 30, 1993.......................................... $919,502,598 $ 347,944,147 $284,977,590
============ ============= ============
Shares of beneficial interest issued and outstanding................... 919,502,598 34,588,263 284,977,590
============ ============= ============
Net asset value........................................................ $ 1.00 $ 10.06 $ 1.00
============ ============= ============
</TABLE>
See Notes to Financial Statements.
B-23
<PAGE>
PRUDENTIAL
STATEMENT OF
GOVERNMENT
OPERATIONS
SECURITIES TRUST
YEAR ENDED NOVEMBER 30, 1993
<TABLE>
<CAPTION>
US TREASURY
MONEY MARKET INTERMEDIATE MONEY MARKET
SERIES TERM SERIES SERIES
---------------- --------------- ----------------
<S> <C> <C> <C>
Net Investment Income
Income
Interest............................................................. $ 31,185,304 $ 24,419,666 $ 8,613,158
Income from securities loaned........................................ -- 8,577 --
------------ ------------- ------------
31,185,304 24,428,243 8,613,158
------------ ------------- ------------
Expenses
Management fee....................................................... 3,803,950 1,286,150 1,093,251
Distribution fee..................................................... 1,188,735 676,731 341,641
Transfer agent's fees and expenses................................... 1,279,000 352,000 74,000
Custodian's fees and expenses........................................ 203,000 99,000 92,000
Registration fees.................................................... 110,000 47,000 81,000
Audit fee............................................................ 42,000 36,000 40,000
Reports to shareholders.............................................. 110,000 22,000 30,000
Legal fees........................................................... 15,000 20,000 10,000
Trustees' fees....................................................... 15,000 15,000 15,000
Insurance expense.................................................... 33,000 6,000 8,000
Amortization of deferred organization expenses....................... -- -- 7,932
Miscellaneous........................................................ 3,730 5,751 7,801
------------ ------------- ------------
Total expenses..................................................... 6,803,415 2,565,632 1,800,625
------------ ------------- ------------
Net investment income.................................................. 24,381,889 21,862,611 6,812,533
------------ ------------- ------------
Realized and Unrealized Gain (Loss) on Investment Transactions
Net realized gain (loss) on investment transactions.................... 240,813 (234,826) 141,643
Net change in unrealized appreciation of investments................... -- 3,085,195 --
------------ ------------- ------------
Net gain on investments................................................ 240,813 2,850,369 141,643
------------ ------------- ------------
Net Increase in Net Assets Resulting from Operations................... $ 24,622,702 $ 24,712,980 $ 6,954,176
============ ============= ============
</TABLE>
See Notes to Financial Statements.
B-24
<PAGE>
PRUDENTIAL
STATEMENT OF CHANGES
GOVERNMENT
IN NET ASSETS
SECURITIES TRUST
<TABLE>
<CAPTION>
US TREASURY
MONEY MARKET INTERMEDIATE MONEY MARKET
SERIES TERM SERIES SERIES
------------------------- ---------------------------- --------------------------------
Year Ended November 30,
----------------------------------------------------------------------------------------------------
1993 1992 1993 1992 1993 1992
-------------- -------------- ------------ ------------ -------------- --------------
Increase (Decrease) in Net
Assets
Operations
<S> <C> <C> <C> <C> <C> <C>
Net investment income... $ 24,381,889 $ 38,085,398 $21,862,611 $ 21,995,422 $ 6,812,533 $ 8,654,811
Net realized gain (loss)
on investment
transactions.......... 240,813 1,287,413 (234,826) 2,971,480 141,643 467,396
Net change in unrealized
appreciation/depreciation
of investments........ -- -- 3,085,195 (4,494,587) -- --
-------------- -------------- ------------ ------------ -------------- --------------
Net increase in net
assets resulting from
operations............ 24,622,702 39,372,811 24,712,980 20,472,315 6,954,176 9,122,207
-------------- -------------- ------------ ------------ -------------- --------------
Net equalization
credits................. -- -- 4,795 19,614 -- --
-------------- -------------- ------------ ------------ -------------- --------------
Dividends and
distributions to
shareholders:
Dividends to
shareholders.......... (24,622,702) (39,372,811) (21,877,946) (22,033,578) (6,954,176) (9,122,207)
Tax return of capital
distribution.......... -- -- (702,835) -- -- --
-------------- -------------- ------------ ------------ -------------- --------------
Total dividends and
distributions to
shareholders............ (24,622,702) (39,372,811) (22,580,781) (22,033,578) (6,954,176) (9,122,207)
-------------- -------------- ------------ ------------ -------------- --------------
Series share transactions*
Net proceeds from shares
subscribed............ 2,705,725,541 2,883,150,865 191,340,556 115,976,502 1,255,246,290 985,514,695
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions......... 23,600,594 38,220,623 14,618,822 12,594,240 6,581,355 8,794,444
Cost of shares
reacquired............ (2,836,010,964) (3,108,019,770) (163,603,524) (121,664,086) (1,210,449,881) (1,049,631,002)
-------------- -------------- ------------ ------------ -------------- --------------
Net increase (decrease)
in net assets from
Series share
transactions.......... (106,684,829) (186,648,282) 42,355,854 6,906,656 51,377,764 (55,321,863)
-------------- -------------- ------------ ------------ -------------- --------------
Total increase
(decrease)................ (106,684,829) (186,648,282) 44,492,848 5,365,007 51,377,764 (55,321,863)
Net Assets
Beginning of year....... 1,026,187,427 1,212,835,709 303,451,299 298,086,292 233,599,826 288,921,689
-------------- -------------- ------------ ------------ -------------- --------------
End of year............. $919,502,598 $1,026,187,427 $347,944,147 $303,451,299 $ 284,977,590 $ 233,599,826
============== ============== ============ ============ ============== ==============
* At $1.00 per share for the Money Market Series and the U.S. Treasury Money Market Series.
</TABLE>
See Notes to Financial Statements.
B-25
<PAGE>
PRUDENTIAL
NOTES TO
GOVERNMENT
FINANCIAL STATEMENTS
SECURITIES TRUST
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 Accounting Policies
The following is a summary 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 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.
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
B-26
<PAGE>
PRUDENTIAL
NOTES TO
GOVERNMENT
FINANCIAL STATEMENTS
SECURITIES TRUST
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 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: During the fiscal year, the Fund began
accounting for and reporting 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 adopting
this statement was to decrease paid-in capital by $1,972,302, increase
accumulated net realized losses by $89,174 and increase undistributed net
investment income by $2,061,476 compared to amounts reported at November 30,
1992. 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, prior to September 1, 1993, the management fee paid PMF was
computed daily and payable monthly, at an annual rate of .40 of 1% of its
average daily net assets. Effective September 1, 1993 the management fee of the
Money Market Series was reduced so that it 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
bilion.
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.
B-27
<PAGE>
PRUDENTIAL
NOTES TO
GOVERNMENT
FINANCIAL STATEMENTS
SECURITIES TRUST
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
November 30, 1993 the amount of distribution expenses incurred by PSI and not
yet reimbursed approximated $11,441,000.
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.
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 Transactions with Affiliates
Prudential Mutual Fund Services, Inc. ("PMFS"), a wholly-owned subsidiary
of PMF, serves as the Fund's transfer agent. During the year ended November 30,
1993, the Fund incurred fees of approximately $1,014,000, $275,000, and $61,000,
respectively, for the Money Market Series, Intermediate Term Series, and U.S.
Treasury Money Market Series. As of November 30, 1993, approximately $88,000,
$24,000, and $5,000 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 Securities
Purchases and sales of portfolio securities for the Intermediate Term Series,
other than short-term investments, for the year ended November 30, 1993 were
$183,520,156 and $136,575,157, respectively.
As of November 30, 1993, the Intermediate Term Series had securities on loan
with an aggregate market value of $33,882,750. As of such date, the collateral
held for these securities loaned was as follows: United States Treasury Notes in
the principal amounts of $19,370,000, 6.375%, due 1/15/00 and $12,010,000,
8.50%, due 4/15/97; aggregate value including accrued interest of $33,749,566.
For the Intermediate Term Series, the cost basis of investments for federal
income tax purposes is substantially the same as for financial reporting
purposes and, accordingly, as of November 30, 1993, net unrealized appreciation
of investments for federal income tax purposes is $6,750,492 (gross unrealized
appreciation--$9,171,220; gross unrealized depreciation--$2,420,728).
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
B-28
<PAGE>
PRUDENTIAL
NOTES TO
GOVERNMENT
FINANCIAL STATEMENTS
SECURITIES TRUST
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 Repurchase Agreement Account
The Fund, along with other affiliated registered investment 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 November
30, 1993, the Money Market Series had an 8.48% undivided interest in the
repurchase agreements in the joint account and the Intermediate Term Series had
a .14% undivided interest in the repurchase agreements in the joint account.
These undivided interests represented $139,502,000 and $2,333,000 in principal
amount, respectively, for the Money Market Series and the Intermediate Term
Series. As of such date, the repurchase agreements in the joint account and the
related collateral were as follows:
Bear Stearns & Co., 3.23%, dated 11/30/93, in the principal amount of
$484,000,000, repurchase price $484,043,426, due 12/1/93; collateralized by
$190,685,000 U.S. Treasury Notes, 4.25%, due 11/30/95 and $300,000,000 U.S.
Treasury Notes, 5.75%, due 8/15/03; approximate aggregate value including
accrued interest--$496,292,534.
Goldman Sachs & Co., 3.18%, dated 11/30/93, in the principal amount of
$287,000,000, repurchase price $287,025,352, due 12/1/93; collateralized by
$213,355,000 U.S. Treasury Bonds, 10.375%, due 11/15/12; approximate value
including accrued interest--$297,013,953.
Smith Barney Shearson, Inc., 3.22%, dated 11/30/93, in the principal amount
of $175,000,000, repurchase price $175,015,653, due 12/1/93; collateralized by
$20,000,000 U.S. Treasury Bills, 3.22%, due 12/16/93; $20,000,000 U.S. Treasury
Notes, 4.875%, due 1/31/94; $50,000,000 U.S. Treasury Bills, 3.22% due 3/24/94;
$560,000 U.S. Treasury Bills, 3.22%, due 3/31/94; $30,000,000 U.S. Treasury
Bonds, 7.50%, due 11/15/16; $19,455,000 U.S. Treasury Bonds, 8.125%, due 8/15/21
and $26,000,000 U.S. Treasury Bonds, 8.00%, due 11/15/21; approximate aggregate
value including accrued interest-- $179,435,385.
J.P. Morgan Securities, Inc., 3.20%, dated 11/30/93, in the principal amount
of $325,000,000, repurchase price $325,028,889, due 12/1/93; collateralized by
$50,000,000 U.S. Treasury Notes, 4.25%, due 7/31/95; $23,113,000 U.S. Treasury
Notes, 6.00%, due 11/30/97; $50,000,000 U.S. Treasury Notes, 4.875%, due
1/31/94; $50,000,000 U.S. Treasury Notes, 8.625%, due 8/15/94; $100,000,000 U.S.
Treasury Notes, 5.75%, due 3/31/94 and $50,000,000 U.S. Treasury Notes, 5.125%,
due 2/28/98; approximate aggregate value including accrued
interest--$331,826,945.
Kidder Peabody & Co., 3.23%, dated 11/30/93, in the principal amount of
$375,000,000, repurchase price $375,033,646, due 12/1/93; collateralized by
$16,765,000 U.S. Treasury Notes, 9.25%, due 1/15/96 and $298,000,000 U.S.
Treasury Bonds, 8.125%, due 8/15/21; approximate aggregate value including
accrued interest--$387,047,017.
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 years ended November 30, 1993 and
1992 were as follows:
<TABLE>
<CAPTION>
Year Ended November 30,
--------------------------------
1993 1992
-------------- --------------
<S> <C> <C>
Shares sold.............. 18,902,083 11,512,760
Shares issued in
reinvestment of
dividends and
distributions.......... 1,439,530 1,256,381
Shares reacquired........ (16,203,923) (12,120,950)
-------------- --------------
Net increase............. 4,137,690 648,191
============== ==============
</TABLE>
B-29
<PAGE>
PRUDENTIAL
MONEY MARKET SERIES
GOVERNMENT
FINANCIAL HIGHLIGHTS
SECURITIES TRUST
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------------------------------
1993 1992 1991 1990 1989
------------ ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year.......... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------ ------------ -------------- -------------- --------------
Net investment income....................... 0.026 0.035 0.058 0.076 0.084
Dividends from net investment income........ (0.026) (0.035) (0.058) (0.076) (0.084)
------------ ------------ -------------- -------------- --------------
Net asset value, end of year................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
============ ============ ============== ============== ==============
TOTAL RETURN#:.............................. 2.62% 3.57% 5.96% 7.83% 8.77%
<CAPTION>
RATIOS/SUPPLEMENTAL DATA:
<S> <C> <C> <C> <C> <C>
Net assets, end of year (000)............... $919,503 $1,026,187 $1,212,836 $1,355,058 $667,571
Average net assets (000).................... $950,988 $1,113,759 $1,255,014 $857,385 $528,820
Ratios to average net assets:
Expenses, including distribution fees..... 0.72% 0.72% 0.65% 0.66% 0.68%
Expenses, excluding distribution fees..... 0.59% 0.60% 0.53% 0.53% 0.56%
Net investment income..................... 2.56% 3.42% 5.78% 7.52% 8.30%
- ---------------
# 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.
</TABLE>
See Notes to Financial Statements.
B-30
<PAGE>
PRUDENTIAL
INTERMEDIATE TERM SERIES
GOVERNMENT
FINANCIAL HIGHLIGHTS
SECURITIES TRUST
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------------------------------
1993 1992 1991 1990 1989
------------ ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year.......... $ 9.97 $ 10.00 $ 9.71 $ 9.96 $ 9.92
------------ ------------ -------------- -------------- --------------
Income from investment operations
Net investment income....................... 0.69 0.75 0.82 0.84 0.92
Net realized and unrealized gain (loss) on
investment transactions................... 0.11 (0.03) 0.31 (0.21) 0.12
------------ ------------ -------------- -------------- --------------
Total from investment operations.......... 0.80 0.72 1.13 0.63 1.04
------------ ------------ -------------- -------------- --------------
Less distributions
Dividends from net investment income........ (0.69) (0.75) (0.84) (0.88) (1.00)
Tax return of capital distribution.......... (0.02) -- -- -- --
------------ ------------ -------------- -------------- --------------
Total distributions......................... (0.71) (0.75) (0.84) (0.88) (1.00)
------------ ------------ -------------- -------------- --------------
Net asset value, end of year................ $ 10.06 $ 9.97 $ 10.00 $ 9.71 $ 9.96
============ ============ ============== ============== ==============
TOTAL RETURN#............................... 8.26% 7.40% 12.19% 6.73% 11.12%
<CAPTION>
RATIOS/SUPPLEMENTAL DATA:
<S> <C> <C> <C> <C> <C>
Net assets, end of year (000)............... $347,944 $303,451 $298,086 $328,458 $396,519
Average net assets (000).................... $321,538 $294,388 $301,643 $354,064 $424,386
Ratios to average net assets:
Expenses, including distribution fees..... 0.80% 0.79% 0.79% 0.88% 0.86%
Expenses, excluding distribution fees..... 0.59% 0.58% 0.63% 0.63% 0.63%
Net investment income..................... 6.80% 7.47% 8.36% 8.60% 9.16%
Portfolio turnover rate..................... 44% 60% 151% 68% 186%
- ---------------
# 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.
</TABLE>
See Notes to Financial Statements.
B-31
<PAGE>
PRUDENTIAL
U.S. TREASURY
GOVERNMENT
MONEY MARKET SERIES
SECURITIES TRUST
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
DECEMBER 3,
1990*
YEAR ENDED NOVEMBER 30, THROUGH
---------------------------- NOVEMBER 30,
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.............................. $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------
Net investment income............................................. 0.025 0.034 0.057++
Dividends from net investment income.............................. (0.025) (0.034) (0.057)
------------ ------------ ------------
Net asset value, end of period.................................... $ 1.00 $ 1.00 $ 1.00
============ ============ ============
TOTAL RETURN#..................................................... 2.54% 3.46% 5.84%
<CAPTION>
RATIOS/SUPPLEMENTAL DATA:
<S> <C> <C> <C>
Net assets, end of period (000)................................... $284,978 $233,600 $288,922
Average net assets (000).......................................... $273,313 $263,459 $273,203
Ratios to average net assets:
Expenses, including distribution fees........................... 0.66% 0.66% 0.50%+/++
Expenses, excluding distribution fees........................... 0.53% 0.54% 0.38%+/++
Net investment income........................................... 2.49% 3.29% 5.74%+/++
- ---------------
* Commencement of investment operations.
+ Annualized.
++ 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.
</TABLE>
See Notes to Financial Statements.
B-32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
Prudential Government Securities Trust:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules 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 the Money Market Series, the
Intermediate Term Series and the U.S. Treasury Money Market Series (constituting
The Government Securities Trust, hereafter referred to as the "Fund") at
November 30, 1993, the results of each of their operations for the year then
ended, the changes in each of their 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 generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
November 30, 1993 by correspondence with the custodian and brokers provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
1177 Avenue of the Americas
New York, New York
January 5, 1994
B-33
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
(1) Financial statements included in the Prospectuses constituting Part
A of this Post-Effective Amendment to this Registration Statement:
Financial Highlights for each of the ten years in the period ended
November 30, 1993 for the Intermediate Term Series and the Money Market Series
and for the periods December 3, 1990 through November 30, 1991 and each of the
two years in the period ended November 30, 1993 for the U.S. Treasury Money
Market Series.
(2) Financial statements included in the Statement of Additional
Information constituting Part B of this Post-Effective Amendment to this
Registration Statement:
(a) With respect to the Trust's Money Market Series and
Intermediate Term Series:
Portfolio of Investments at November 30, 1993.
Statement of Assets and Liabilities at November 30, 1993.
Statement of Operations for the year ended November 30, 1993.
Statement of Changes in Net Assets for each of the two years in
the period ended November 30, 1993.
Notes to Financial Statements.
Financial Highlights for each of the five years in the period
ended November 30, 1993.
Report of Independent Accountants.
(b) With respect to the Trust's U.S. Treasury Money Market Series:
Portfolio of Investments at November 30, 1993.
Statement of Assets and Liabilities at November 30, 1993.
Statement of Operations for the year ended November 30, 1993.
Statement of Changes in Net Assets for each of the two years in
the period ended November 30, 1993.
Notes to Financial Statements.
Financial Highlights for the period ended November 30, 1991 and
each of the two years in the period ended November 30, 1993.
Report of Independent Accountants.
(b) Exhibits:
1. (a) Declaration of Trust, as amended and restated on September 6,
1988, of the Registrant. Incorporated by reference to Exhibit 1 to
Post-Effective Amendment No. 5 to the Registration Statement on Form
N-1A (File No. 2-74139.)
(b) Amendment to Declaration of Trust, dated March 1, 1991.
Incorporated by reference to Exhibit No. 1(b) to Post-Effective
Amendment No. 16 to the Registration Statement on Form N-1A (File No.
2-74139).
2. By-Laws of the Registrant. Incorporated by reference to Exhibit No. 2
to Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A (File No. 2-74139).
4. (a) Specimen certificate for shares of beneficial interest issued by
the Registrant. Incorporated by reference to Exhibit No. 4 to
Post-Effective Amendment No. 12 to the Registration Statement on Form
N-1A (File No. 2-74139).
(b) Specimen certificate for shares of beneficial interest issued by
the Registrant's U.S. Treasury Money Market Series. Incorporated by
reference to Exhibit No. 4(b) to Post-Effective Amendment No. 16 to
the Registration Statement on Form N-1A (File No. 2-74139).
(c) Instruments defining rights of holders of the securities being
offered.*
C-1
<PAGE>
5. (a) Management Agreement dated August 9, 1988, as amended on November
19, 1993, between the Registrant and Prudential Mutual Fund
Management, Inc.*
(b) Subadvisory Agreement dated August 9, 1988, between Prudential
Mutual Fund Management, Inc. and The Prudential Investment
Corporation. Incorporated by reference to Exhibit No. 5(b) to
Post-Effective Amendment No. 13 to the Registration Statement on Form
N-1A (File No. 2-74139).
6. (a) Distribution and Service Agreement, dated July 23, 1982, as
amended on July 1, 1993 between the Registrant and Prudential
Securities Incorporated.*
(b) Distribution and Service Agreement, as amended on July 1, 1993,
between the Registrant (U.S. Treasury Money Market Series and Money
Market Series) and Prudential Mutual Fund Distributors, Inc.*
8. Custodian Agreement between the Registrant and State Street Bank and
Trust Company. Incorporated by reference to Exhibit No. 8 to the
Registration Statement on Form N-1A (File No. 2-74139).
9. Transfer Agency Agreement between the Registrant and Prudential Mutual
Fund Services, Inc. Incorporated by reference to Exhibit No. 9(b) to
Post-Effective Amendment No. 12 to the Registration Statement on Form
N-1A (File No. 2-74139).
11. Consent of Independent Accountants.*
13. Purchase Agreement. Incorporated by reference to Exhibit No. 13 to
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A (File No. 2-74139).
15. (a) Distribution and Service Plan pursuant to Rule 12b-1 as amended on
July 1, 1993 for the Intermediate Term Series.*
(b) Distribution and Service Plan pursuant to Rule 12b-1 as amended on
July 1, 1993 for the Money Market Series.*
16. Calculation of Yield and Total Return-Intermediate Series.
Incorporated by reference to Exhibit No. 12 to Post-Effective
Amendment No. 13 to the Registration Statement on Form N-1A (File No.
2-74139).
Other Exhibits
Power of Attorney for:
Lawrence C. McQuade**
Delayne Dedrick Gold**
Arthur Haupspurg**
Thomas J. McCormack**
Edwin F. Payne**
- ------------------
*Filed herewith.
**Executed copies filed under Other Exhibits to Post-Effective Amendment No. 13
to the Registration Statement on Form N-1A (File No. 2-74139).
Item 25. Persons Controlled by or under Common Control with Registrant.
No person is controlled by or under common control with the Registrant.
Item 26. Number of Holders of Securities.
As of January 7, 1994, Registrant had 66,646 record holders of its shares
of beneficial interest of the Money Market Series, 4,884 record holders of its
shares of beneficial interest of the U.S. Treasury Money Market Series and
18,823 record holders of its shares of beneficial interest of the Intermediate
Term Series.
Item 27. Indemnification.
As permitted by Section 17(h) and (i) of the Investment Company Act of 1940
(the "Investment Company Act") and pursuant to Article VII of the Fund's
By-Laws (Exhibit 2 to the Registration Statement), officers, directors,
employees and agents of the Trust may indemnified against certain liabilities in
connection with the Trust, and pursuant to Section 6 of the Distribution
Agreements (Exhibits 6(a) and 6(b) to the Registration Statement),
Prudential-Bache Securities Inc. and Prudential Mutual Fund Distributors, Inc.,
as distributors of the Trust, may be indemnified against certain liabilities
which they may incur. Such Article VII of the By-Laws, as amended and Section 6
of the Distribution Agreements are hereby incorporated by reference in their
entirety.
The Trust has purchased an insurance policy insuring its officers and
trustees against certain liabilities, and certain costs off defending claims
against such officers and trustee, to the extent such officers and trustees are
not found to have committed conduct
C-2
<PAGE>
constituting willful misfeasance, bad faith, gross negligence or reckless
disregard in the performance of their duties. The insurance policy also insures
the Trust against the cost of indemnification payments to officers and trustees
under certain circumstances.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of the
Registrant and the principal underwriter 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 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 trustee, officer, or controlling
person of the Registrant and the principal underwriter in connection with the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such trustee, officer or controlling person or the principal
underwriter 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 whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws in a manner consistent with Release No. 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940 so
long as the interpretations of Sections 17(h) and 17(i) of such Act remain in
effect and are consistently applied.
Item 28. Business and other Connections of Investment Adviser
See "How the Trust Is Managed" in the Prospectus constituting Part A of
this Registration Statement and "Manager" in the Statement of Additional
Information constituting Part B of this Registration Statement.
The business and other connections of the officers of PMF are listed in
Schedules A and D of Form ADV of PMF as currently on file with the Securities
and Exchange Commission, the text of which is hereby incorporated by reference
(File No. 801-31104, filed on October __, 1993).
The business and other connections of PMF's directors and principal
executive officers are set forth below. Except as otherwise indicated, the
address of each person is One Seaport Plaza, New York, NY 10292.
<TABLE>
<CAPTION>
Name and Address Position with PMF Principal Occupations
- -------------------------- ---------------------- --------------------------------------------------------
<S> <C> <C>
Maureen Behning-Doyle Executive Vice Executive Vice President, PMF; Senior Vice President,
President Prudential Securities
John D. Brookmeyer, Jr. Director Senior Vice President, The Prudential Insurance
Two Gateway Center Company of America (Prudential)
Newark, NJ 07102
Susan C. Cote Senior Vice President Senior Vice President, PMF; Senior Vice President,
Prudential Securities
Fred A. Fiandaca Chief Operating Chief Operating Officer and Director, PMF; Chief
Raritan Plaza One Officer and Director Executive Officer and Director, Prudential Mutual Fund
Edison, NJ 08837 Services, Inc.
Stephen P. Fisher Senior Vice President Senior Vice President, PMF; Senior Vice President,
Prudential Securities
Frank W. Giordano Executive Vice Executive Vice President, General Counsel and Secretary,
President, General PMF; Senior Vice President, Prudential Securities
Counsel and Secretary
Robert F. Gunia Executive Vice Executive Vice President, Chief Administrative Officer,
President, Chief Chief Financial Officer and Director, PMF; Senior Vice
Administrative President, Prudential Securities
Officer, Chief
Financial Officer and
Director
Eugene B. Heimberg Director Senior Vice President, Prudential
Prudential Plaza
Newark, NJ 07101
Lawrence C. McQuade Vice Chairman Vice Chairman, PMF
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
Name and Address Position with PMF Principal Occupations
- -------------------------- ---------------------- --------------------------------------------------------
<S> <C> <C>
Leland B. Paton Director Executive Vice President and Director, Prudential
Securities; Director, Prudential Securities Group,
Inc. (PSG)
Richard A. Redeker President, Chief President, Chief Executive Officer and Director, PMF;
Executive Officer Director and Member of Operating Committee, Prudential
and Director Securities; Director, PSG
S. Jane Rose Senior Vice President, Senior Vice President, Senior Counsel and Assistant
Senior Counsel and Secretary, PMF; Senior Vice President and Senior
Assistant Secretary Counsel, Prudential Securities
Donald G. Southwell Director Senior Vice President, Prudential; Director, PSG
213 Washington Street
Newark, NJ 07102
</TABLE>
The business and other connections of PIC's directors and executive
officers are as set forth below. Except as otherwise indicated, the address of
each person is Prudential Plaza, Newark, NJ 07101.
<TABLE>
<CAPTION>
Name and Address Position with PIC Principal Occupations
- -------------------------- ---------------------- --------------------------------------------------------
<S> <C> <C>
Martin A. Berkowitz Senior Vice President, Senior Vice President, Chief Financial Officer and Chief
Chief Financial Compliance Officer, PIC; Vice President, Prudential
Officer and Chief
Compliance Officer
William M. Bethke Senior Vice President Senior Vice President, Prudential
Two Gateway Center
Newark, NJ 07102
Thomas A. Biolsi Vice President and Vice President and Chief Compliance Officer, Prudential
Chief Compliance
Officer
John D. Brookmeyer, Jr. Senior Vice President Senior Vice President, Prudential; Senior Vice
Two Gateway Center President, PIC
Newark, NJ 07102
Eugene B. Heimberg Senior Vice President Senior Vice President, Prudential
and Director
Garnett L. Keith, Jr. President and Director Vice Chairman and Director, Prudential
William P. Link Executive Vice Executive Vice President, Prudential
Four Gateway Center President
Newark, NJ 07102
Gerald Loev Senior Vice President Senior Vice President, Prudential
Robert E. Riley Executive Vice Executive Vice President, Prudential; Director, PSG
800 Boylston Avenue President
Boston, MA 02199
James W. Stevens Executive Vice Executive Vice President, Prudential; Director, PSG
Four Gateway Center President
Newark, NJ 07102
Robert C. Winters Director Chairman of the Board and Chief Executive Officer,
Prudential; Chairman of the Board and Director, PSG
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
Name and Address Position with PIC Principal Occupations
- -------------------------- ---------------------- --------------------------------------------------------
<S> <C> <C>
Claude J. Zinngrabe, Jr. Executive Vice Vice President, Prudential
President,
Acquisitions and
Sales Group
</TABLE>
Item 29. Principal Underwriters
(a)(i) Prudential Securities
Prudential Securities is distributor for Prudential Government
Securities Trust (Intermediate Term Series) and for Class B shares of Prudential
Adjustable Rate Securities Fund, Inc., Prudential California Municipal Fund
(California Series), Prudential-Bache Equity Fund, Inc. (d/b/a Prudential Equity
Fund), Prudential Equity Income Fund, Prudential FlexiFund, Prudential Global
Fund, Inc. Prudential-Bache Global Genesis Fund, Inc. (d/b/a Prudential Global
Genesis Fund), Prudential-Bache Global Natural Resources Fund, Inc. (d/b/a
Prudential Global Natural Resources Fund), Prudential-Bache GNMA Fund, Inc.
(d/b/a Prudential GNMA Fund), Prudential-Bache Government Plus Fund, Inc. (d/b/a
Prudential Government Plus Fund), Prudential Growth Fund, Inc., Prudential-Bache
Growth Opportunity Fund, Inc. (d/b/a Prudential Growth Opportunity Fund),
Prudential-Bache High Yield Fund, Inc. (d/b/a Prudential High Yield Fund),
Prudential IncomeVertible (R) Fund, Inc., Prudential Intermediate Global Income
Fund, Inc., Prudential Multi-Sector Fund, Inc., Prudential Municipal Bond Fund,
Prudential Municipal Series Fund (except Connecticut Money Market Series,
Massachusetts Money Market Series, New York Money Market Series, New Jersey
Money Market Series and Florida Series), Prudential-Bache National Municipals
Fund, Inc. (d/b/a Prudential National Municipals Fund), Prudential Pacific
Growth Fund, Inc., Prudential Short-Term Global Income Fund, Inc., Prudential
U.S. Government Fund, Prudential-Bache Utility Fund, Inc. (d/b/a Prudential
Utility Fund), Global Utility Fund, Inc., Nicholas-Applegate Fund, Inc.
(Nicholas-Applegate Growth Equity Fund) The BlackRock Government Income Trust
and The Target Portfolio Trust. Prudential Securities is also a depositor for
the following unit investment trusts:
The Corporate Income Fund
Corporate Investment Trust Fund
Equity Income Fund
Government Securities Income Fund
International Bond Fund
Municipal Investment Trust
Prudential Equity Trust Shares
National Equity Trust
Prudential Unit Trusts
Government Securities Equity Trust
National Municipal Trust
(ii) Prudential Mutual Fund Distributors, Inc.
Prudential Mutual Fund Distributors, Inc. is distributor for
Command Government Fund, Command Money Fund, Command Tax-Free Fund, Prudential
California Municipal Fund (California Money Market Series, California Income
Series and Class A shares of the California Series), Prudential Institutional
Liquidity Portfolio, Inc., Prudential Intermediate Global Income Fund, Inc.,
Prudential-Bache Special Money Market Fund, Inc. (d/b/a Prudential Special Money
Market Fund), Prudential-Bache Structured Maturity Fund, Inc. (d/b/a Prudential
Structured Maturity Fund), Prudential-Bache Tax-Free Money Fund, Inc. (d/b/a
Prudential Tax-Free Money Fund), and for Class A shares of Prudential Adjustable
Rate Securities Fund, Inc., Prudential-Bache Equity Fund, Inc. (d/b/a Prudential
Equity Fund), Prudential Equity Income Fund, Prudential FlexiFund, Prudential
Global Fund, Inc., Prudential-Bache Global Genesis Fund, Inc. (d/b/a Prudential
Global Genesis Fund), Prudential-Bache Global Natural Resources Fund, Inc.
(d/b/a Prudential Global Natural Resources Fund), Prudential-Bache GNMA Fund,
Inc. (d/b/a Prudential GNMA Fund), Prudential-Bache Government Plus Fund, Inc.
(d/b/a Prudential Government Plus Fund), Prudential Government Securities Trust
(Money Market Series and U.S. Treasury Money Market Series), Prudential Growth
Fund, Inc., Prudential-Bache Growth Opportunity Fund, Inc. (d/b/a Prudential
Growth Opportunity Fund), Prudential-Bache High Yield Fund, Inc. (d/b/a
Prudential High Yield Fund), Prudential IncomeVertiblet Fund, Inc. Prudential
Intermediate Global Income Fund, Inc., Prudential-Bache MoneyMart Assets Inc.
(d/b/a Prudential MoneyMart Assets Fund), Prudential Multi-Sector Fund, Inc.,
Prudential Municipal Bond Fund, Prudential Municipal Series Fund (Connecticut
Money Market Series, Massachusetts Money Market Series, New York Money Market
Series, New Jersey Money Market Series, Florida Series and Class A shares of all
other Series), Prudential-Bache National Municipals Fund, Inc. (d/b/a Prudential
National Municipals Fund), Prudential Pacific Growth Fund, Inc., Prudential
Short-Term Global Income Fund, Inc., Prudential U.S. Government Fund,
Prudential-Bache Utility Fund, Inc. (d/b/a Prudential Utility Fund), Global
Utility Fund, Inc. and Nicholas-Applegate Fund, Inc. (Nicholas Applegate Growth
Equity Fund) and The BlackRock Government Income Trust.
C-5
<PAGE>
(b)(i) Prudential Securities
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name(1) Underwriter Registrant
- --------------------------------- -------------------------------------- -------------------------
<S> <C> <C>
Alan D. Hogan.................... Executive Vice President, Chief None
Administrative Officer and
Director
Howard A. Knight................. Executive Vice President, Director, None
Corporate Strategy and New Business
Development
George A. Murray................. Executive Vice President and Director None
John P. Murray................... Executive Vice President and Director None
of Risk Management
Leland B. Paton.................. Executive Vice President and None
Director
Richard A. Redeker............... Director None
Hardwick Simmons................. Chief Executive Officer, President and None
Director
</TABLE>
(ii) Prudential Mutual Fund Distributors, Inc.
<TABLE>
<S> <C> <C>
Joanne Accurso-Soto.............. Vice President None
Dennis Annarumma................. Vice President, Assistant Treasurer None
and Assistant Controller
Phyllis J. Berman................ Vice President None
Fred A. Fiandaca................. Chief Executive Officer and Director None
Raritan Plaza One
Edison, NJ 08847
Stephen P. Fisher................ Vice President None
Frank W. Giordano................ Executive Vice President, General None
Counsel, Secretary and Director
Robert F. Gunia.................. Executive Vice President, Director, Vice President
Treasurer and Controller
Richard A. Redeker............... President, Chief Executive Officer and None
Director
Andrew J. Varley................. Vice President None
Anita Whelan..................... Vice President and Assistant Secretary None
- ------------------
(1)The address of each person named is One Seaport Plaza, New York, NY 10292 unless otherwise
indicated.
</TABLE>
(c) Registrant has no principal underwriter who is not an affiliated person
of the Registrant.
Item 30. 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, One Heritage Drive, North
Quincy, Massachusetts 02171, The Prudential Investment Corporation, Prudential
Plaza, 745 Broad Street, Newark, New Jersey, the Registrant, One Seaport Plaza,
New York, New York, and Prudential Mutual Fund Services, Inc., Raritan Plaza
One, Edison, New Jersey. Documents required by Rules 31a-1(b)(5), (6), (7), (9),
(10) and (11) and 31a-1(f) will be kept at Two Gateway Center, documents
required by Rules 31a-1(b)(4) and (11) and 31a-1(d) at One Seaport Plaza 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, Inc.
C-6
<PAGE>
Item 31. Management Services
Other than as set forth under the captions "How the Trust Is
Managed-Manager" and "How the Trust Is Managed-Distributor" in the Prospectus
and the captions "Manager" and "Distributor" in the Statement of Additional
Information, constituting Parts A and B, respectively, of this Registration
Statement, Registrant is not a party to any management-related service contract.
Item 32. Undertakings
The Registrant hereby undertakes to furnish each person to whom a
Prospectus is delivered with a copy of Registrant's latest annual report to
shareholders upon request and without charge.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
and State of New York, on the 24th day of January, 1994.
PRUDENTIAL GOVERNMENT SECURITIES TRUST
/s/ Lawrence C. McQuade
------------------------------------------------
(Lawrence C. McQuade, 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
- ------------------------------------- ------------------------------ ------------------
<S> <C> <C>
/s/ Lawrence C. McQuade President and Trustee January 24, 1994
- -------------------------------------
Lawrence C. McQuade
/s/ Delayne Dedrick Gold Trustee January 24, 1994
- -------------------------------------
Delayne Dedrick Gold
/s/ Arthur Hauspurg Trustee January 24, 1994
- -------------------------------------
Arthur Hauspurg
/s/ Thomas J. McCormack Trustee January 24, 1994
- -------------------------------------
Thomas J. McCormack
/s/ Stephen P. Munn Trustee January 24, 1994
- -------------------------------------
Stephen P. Munn
/s/ Edwin F. Payne Trustee January 24, 1994
- -------------------------------------
Edwin F. Payne
/s/ Louis A. Weil, III Trustee January 24, 1994
- -------------------------------------
Louis A. Weil, III
/s/ Susan C. Cote Treasurer and Principal Financial and January 24, 1994
- ------------------------------------- Accounting Officer
Susan C. Cote
</TABLE>
<PAGE>
Exhibit Index
1. (a) Declaration of Trust, as amended and restated on September 6,
1988, of the Registrant. Incorporated by reference to Exhibit 1 to
Post-Effective Amendment No. 5 to the Registration Statement on Form
N-1A (File No. 2-74139.)
(b) Amendment to Declaration of Trust, dated March 1, 1991.
Incorporated by reference to Exhibit No. 1(b) to Post-Effective
Amendment No. 16 to the Registration Statement on Form N-1A (File No.
2-74139).
2. By-Laws of the Registrant. Incorporated by reference to Exhibit No. 2
to Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A (File No. 2-74139).
4. (a) Specimen certificate for shares of beneficial interest issued by
the Registrant. Incorporated by reference to Exhibit No. 4 to
Post-Effective Amendment No. 12 to the Registration Statement on Form
N-1A (File No. 2-74139).
(b) Specimen certificate for shares of beneficial interest issued by
the Registrant's U.S. Treasury Money Market Series. Incorporated by
reference to Exhibit No. 4(b) to Post-Effective Amendment No. 16 to
the Registration Statement on Form N-1A (File No. 2-74139).
(c) Instruments defining rights of holders of the securities being
offered.*
5. (a) Management Agreement dated August 9, 1988, as amended on November
19, 1993, between the Registrant and Prudential Mutual Fund
Management, Inc.*
(b) Subadvisory Agreement dated August 9, 1988, between Prudential
Mutual Fund Management, Inc. and The Prudential Investment
Corporation. Incorporated by reference to Exhibit No. 5(b) to
Post-Effective Amendment No. 13 to the Registration Statement on Form
N-1A (File No. 2-74139).
6. (a) Distribution and Service Agreement, dated July 23, 1982, as
amended on July 1, 1993 between the Registrant and Prudential
Securities Incorporated.*
(b) Distribution and Service Agreement, as amended on July 1, 1993,
between the Registrant (U.S. Treasury Money Market Series and Money
Market Series) and Prudential Mutual Fund Distributors, Inc.*
8. Custodian Agreement between the Registrant and State Street Bank and
Trust Company. Incorporated by reference to Exhibit No. 8 to the
Registration Statement on Form N-1A (File No. 2-74139).
9. Transfer Agency Agreement between the Registrant and Prudential Mutual
Fund Services, Inc. Incorporated by reference to Exhibit No. 9(b) to
Post-Effective Amendment No. 12 to the Registration Statement on Form
N-1A (File No. 2-74139).
11. Consent of Independent Accountants.*
13. Purchase Agreement. Incorporated by reference to Exhibit No. 13 to
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A (File No. 2-74139).
15. (a) Distribution and Service Plan pursuant to Rule 12b-1 as amended on
July 1, 1993 for the Intermediate Term Series.*
(b) Distribution and Service Plan pursuant to Rule 12b-1 as amended on
July 1, 1993 for the Money Market Series.*
16. Calculation of Yield and Total Return-Intermediate Series.
Incorporated by reference to Exhibit No. 12 to Post-Effective
Amendment No. 13 to the Registration Statement on Form N-1A (File No.
2-74139).
Other Exhibits
Power of Attorney for:
Lawrence C. McQuade**
Delayne Dedrick Gold**
Arthur Haupspurg**
Thomas J. McCormack**
Edwin F. Payne**
- ------------------
*Filed herewith.
**Executed copies filed under Other Exhibits to Post-Effective Amendment No. 13
to the Registration Statement on Form N-1A (File No. 2-74139).
Exhibit 4 (c)
The following provisions of the Declaration of Trust and By-Laws of
Prudential Government Securities Trust, copies of which are incorporated by
reference to Exhibits 1 and 2, respectively, constitute all instruments defining
the rights of holders of the securities proposed to be offered:
Declaration of Trust:
Article V, Section 5.1 No Personal Liability of
Shareholders, Trustees, etc.
Article VI, Section 6.2 Rights of Shareholders
Article VII Redemptions
Article VIII, Section 8.2 Distributions to Shareholders
Article IX Duration; Termination of Trust;
Amendment; Mergers, etc.
By-Laws:
Article I Shareholders
Article IV Share Interest
Article IX Amendment of By-Laws
Exhibit 5(a)
PRUDENTIAL GOVERNMENT SECURITIES TRUST
MANAGEMENT AGREEMENT
Agreement, made this 9th day of August, 1988, as amended on November 19,
1993, between Prudential Government Securities Trust, a Massachusetts business
trust (the "Fund"), and Prudential Mutual Fund Management, Inc., a Delaware
corporation (the "Manager").
W I T N E S S E T H
WHEREAS, the Fund is a diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the shares of beneficial interest of the Fund are divided into
separate series, each of which is established pursuant to a written instrument
executed by the Trustees of the Fund, and the Trustees may from time to time
terminate such series or establish and terminate additional series; and
WHEREAS, the Fund desires to retain the Manager to render or contract to
obtain as hereinafter provided investment advisory services to the Fund and the
Fund also desires to avail itself of the facilities available to the Manager
with respect to the administration of its day to day business affairs, and the
Manager is willing to render such investment advisory and administrative
services;
NOW, THEREFORE, the parties agree as follows:
1. The Fund hereby appoints the Manager to act as manager of the Fund and
administrator of its business affairs for the period and on the terms set forth
in this Agreement. The Manager accepts such appointment and agrees to render the
services herein described, for the compensation herein provided. The Manager
<PAGE>
will enter into an agreement, dated the date hereof, with The Prudential
Investment Corporation ("PIC") pursuant to which PIC shall furnish to the Fund
the investment advisory services specified therein in connection with the
management of the Fund. Such agreement in the form attached as Exhibit A is
hereinafter referred to as the "Subadvisory Agreement." The Manager will
continue to have responsibility for all investment advisory services furnished
pursuant to the Subadvisory Agreement.
2. Subject to the supervision of the Trustees of the Fund, the Manager
shall administer the Fund's business affairs and, in connection therewith, shall
furnish the Fund with office facilities and with clerical, bookkeeping and
recordkeeping services at such office facilities and, subject to Section 1
hereof and the Subadvisory Agreement, the Manager shall manage the investment
operations of each series of the Fund and the composition of the portfolio of
each series, including the purchase, retention and disposition thereof, in
accordance with the investment objectives, policies and restrictions of each
series as stated in the Prospectus (hereinafter defined) and subject to the
following understandings:
(a) The Manager shall provide supervision of each series'
investments and determine from time to time what investments or
securities will be purchased, retained, sold or loaned by each series of
the Fund and what portion of the assets will be invested or held
uninvested as cash.
2
<PAGE>
(b) The Manager, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Declaration of
Trust, By-Laws and Prospectus (hereinafter defined) of the Fund and with
the instructions and directions of the Trustees of the Fund and will
conform to and comply with the requirements of the 1940 Act and all
other applicable federal and state laws and regulations.
(c) The Manager shall determine the securities and futures
contracts to be purchased or sold by each series of the Fund and will
place orders pursuant to its determinations with or through such
persons, brokers, dealers or futures commission merchants (including but
not limited to Prudential Securities Incorporated) in conformity with
the policy with respect to brokerage as set forth in the Fund's
Registration Statement and Prospectus (hereinafter defined) or as the
Trustees may direct from time to time. In providing the Fund with
investment supervision, it is recognized that the Manager will give
primary consideration to securing the most favorable price and efficient
execution. Consistent with this policy, the Manager may consider the
financial responsibility, research and investment information and other
services provided by brokers, dealers or futures commission merchants
who may effect or be a party to any such transaction or other
transactions to which other clients of the Manager may be a party. It is
understood that Prudential Securities Incorporated may be used as
principal broker for securities transactions but that no formula has
3
<PAGE>
been adopted for allocation of the Fund's investment transaction
business. It is also understood that it is desirable for the Fund that
the Manager have access to supplemental investment and market research
and security and economic analysis provided by brokers or futures
commission merchants and that such brokers may execute brokerage
transactions at a higher cost to the Fund than may result when
allocating brokerage to other brokers or futures commission merchants on
the basis of seeking the most favorable price and efficient execution.
Therefore, the Manager is authorized to pay higher brokerage commissions
for the purchase and sale of securities and futures contracts for the
Fund to brokers or futures commission merchants who provide such
research and analysis, subject to review by the Fund's Trustees from
time to time with respect to the extent and continuation of this
practice. It is understood that the services provided by such broker or
futures commission merchant may be useful to the Manager in connection
with its services to other clients.
On occasions when the Manager deems the purchase or sale of a
security or a futures contract to be in the best interest of the Fund
(and each series of the Fund) as well as other clients of the Manager or
the Subadviser, the Manager, to the extent permitted by applicable laws
and regulations, may, but shall be under no obligation to, aggregate the
securities or futures contracts to be so sold or purchased in order to
4
<PAGE>
obtain the most favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities or
futures contracts so purchased or sold, as well as the expenses incurred
in the transaction, will be made by the Manager in the manner it
considers to be the most equitable and consistent with its fiduciary
obligations to the Fund (and each series of the Fund) and to such other
clients.
(d) The Manager shall maintain all books and records with respect
to the Fund's portfolio transactions and shall render to the Fund's
Trustees such periodic and special reports as the Board may reasonably
request.
(e) The Manager shall be responsible for the financial and
accounting records to be maintained by the Fund (including those being
maintained by the Fund's Custodian).
(f) The Manager shall provide the Fund's Custodian on each
business day with information relating to all transactions concerning
the Fund's assets.
(g) The investment management services of the Manager to the Fund
under this Agreement are not to be deemed exclusive, and the Manager
shall be free to render similar services to others.
3. The Fund has delivered to the Manager copies of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
5
<PAGE>
(a) Declaration of Trust of the Fund, as filed with the
Commonwealth of Massachusetts (such Declaration of Trust, as in effect
on the date hereof and as amended from time to time, is herein called
the "Declaration of Trust");
(b) By-Laws of the Fund (such By-Laws, as in effect on the date
hereof and as amended from time to time, are herein called the
"By-Laws");
(c) Certified resolutions of the Trustees of the Fund authorizing
the appointment of the Manager and approving the form of this agreement;
(d) Written Instrument to Establish and Designate
Separate Series of Shares;
(e) Registration Statement under the 1940 Act and the Securities
Act of 1933, as amended, on Form N-1A (the "Registration Statement"), as
filed with the Securities and Exchange Commission (the "Commission")
relating to the Fund and shares of beneficial interest of the Fund and
all amendments thereto;
(f) Notification of Registration of the Fund under the 1940 Act on
Form N-8A as filed with the Commission and all amendments thereto; and
(g) Prospectus of the Fund (such Prospectus and Statement of
Additional Information, as currently in effect and as amended or
supplemented from time to time, being herein called the "Prospectus").
6
<PAGE>
4. The Manager shall authorize and permit any of its directors,
officers and employees who may be elected as Trustees or officers of the Fund to
serve in the capacities in which they are elected. All services to be furnished
by the Manager under this Agreement may be furnished through the medium of any
such directors, officers or employees of the Manager.
5. The Manager shall keep the Fund's books and records required to
be maintained by it pursuant to paragraph 2 hereof. The Manager agrees that all
records which it maintains for the Fund are the property of the Fund and it will
surrender promptly to the Fund any such records upon the Fund's request,
provided however that the Manager may retain a copy of such records. The Manager
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act any such records as are required to be maintained by the Manager
pursuant to Paragraph 2 hereof.
6. During the term of this Agreement, the Manager shall pay the
following expenses:
(i) the salaries and expenses of all personnel of the Fund and the
Manager except the fees and expenses of Trustees who are not affiliated
persons of the Manager or the Fund's investment adviser,
(ii) all expenses incurred by the Manager or by the Fund in
connection with managing the ordinary course of the Fund's business
other than those assumed by the Fund herein, and
(iii) the costs and expenses payable to PIC pursuant to the
Subadvisory Agreement.
7
<PAGE>
The Fund assumes and will pay the expenses described below:
(a) the fees and expenses incurred by the Fund in connection with
the management of the investment and reinvestment of the assets of each
series,
(b) the fees and expenses of Trustees who are not affiliated
persons of the Manager or the Fund's investment adviser,
(c) the fees and expenses of the Custodian that relate to (i) the
custodial function and the recordkeeping connected therewith, (ii)
preparing and maintaining the general accounting records of the Fund and
the providing of any such records to the Manager useful to the Manager
in connection with the Manager's responsibility for the accounting
records of the Fund pursuant to Section 31 of the 1940 Act and the rules
promulgated thereunder, (iii) the pricing of the shares of each series
of the Fund, including the cost of any pricing service or services which
may be retained pursuant to the authorization of the Trustees of the
Fund, and (iv) for both mail and wire orders, the cashiering function in
connection with the issuance and redemption of the Fund's securities,
(d) the fees and expenses of the Fund's Transfer and Dividend
Disbursing Agent, which may be the Custodian, that relate to the
maintenance of each shareholder account,
(e) the charges and expenses of legal counsel and independent
accountants for the Fund,
(f) brokers' commissions and any issue or transfer taxes
8
<PAGE>
chargeable to each series of the Fund in connection with its securities
and futures transactions,
(g) all taxes and business fees payable by the Fund to federal,
state or other governmental agencies,
(h) the fees of any trade associations of which the Fund may be a
member,
(i) the cost of share certificates representing, and/or
non-negotiable share deposit receipts evidencing, shares of each series
of the Fund,
(j) the cost of fidelity, directors and officers and errors and
omissions insurance,
(k) the fees and expenses involved in registering and maintaining
registration of the Fund and of its shares with the Securities and
Exchange Commission, registering the Fund as a broker or dealer and
qualifying its shares under state securities laws, including the
preparation and printing of the Fund's registration statements,
prospectuses and statements of additional information for filing under
federal and state securities laws for such purposes,
(l) allocable communications expenses with respect to investor
services and all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing reports to shareholders in the amount
necessary for distribution to the shareholders,
(m) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Fund's
9
<PAGE>
business, and
(n) any expenses assumed by the Fund pursuant to a Plan of
Distribution adopted in conformity with Rule 12b-1 under the 1940 Act.
7. In the event the expenses of the Fund for any fiscal year
(including the fees payable to the Manager but excluding interest, taxes,
brokerage commissions, distribution fees and litigation and indemnification
expenses and other extraordinary expenses not incurred in the ordinary course of
the Fund's business) exceed the lowest applicable annual expense limitation
established and enforced pursuant to the statute or regulations of any
jurisdictions in which shares of the Fund are then qualified for offer and sale,
the compensation due the Manager will be reduced by the amount of such excess,
or, if such reduction exceeds the compensation payable to the Manager, the
Manager will pay to the Fund the amount of such reduction which exceeds the
amount of such compensation.
8. For the services provided and the expenses assumed pursuant to
this Agreement, the Fund will pay to the Manager as full compensation therefor a
fee 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 and .40 of 1%
of the average daily net assets up to $1 billion, .375 of 1% on assets between
$1 billion and $1.5 billion and .35 of 1% on assets in excess of $1.5 billion of
the average daily net assets of the Money Market Series. This fee will be
computed daily and will be paid to the Manager monthly. Any reduction in the fee
10
<PAGE>
payable and any payment by the Manager to the Fund pursuant to paragraph 7 shall
be made monthly. Any such reductions or payments are subject to readjustment
during the year.
9. The Manager shall not be liable for any error of judgment or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services (in which case any award of
damages shall be limited to the period and the amount set forth in Section
36(b)(3) of the 1940 Act) or loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
10. This Agreement shall continue in effect for a period of more
than two years from the date hereof only so long as such continuance is
specifically approved at least annually with respect to each series in
conformity with the requirements of the 1940 Act; provided, however, that this
Agreement may be terminated with respect to any series by the Fund at any time,
without the payment of any penalty, by the Trustees of the Fund or by vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
such series, or by the Manager at any time, without the payment of any penalty,
on not more than 60 days' nor less than 30 days' written notice to the other
11
<PAGE>
party. This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act).
11. Nothing in this Agreement shall limit or restrict the right of
any director, officer or employee of the Manager who may also be a Trustee,
officer or employee of the Fund to engage in any other business or to devote his
or her time and attention in part to the management or other aspects of any
business, whether of a similar or dissimilar nature, nor limit or restrict the
right of the Manager to engage in any other business or to render services of
any kind to any other corporation, firm, individual or association.
12. Except as otherwise provided herein or authorized by the
Trustees of the Fund from time to time, the Manager shall for all purposes
herein be deemed to be an independent contractor and shall have no authority to
act for or represent the Fund in any way or otherwise be deemed an agent of the
Fund.
13. During the term of this Agreement, the Fund agrees to furnish
the Manager at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature, or other material prepared for distribution
to shareholders of the Fund or the public, which refer in any way to the
Manager, prior to use thereof and not to use such material if the Manager
reasonably objects in writing within five business days (or such other time as
may be mutually agreed) after receipt thereof. In the event of termination of
this Agreement, the Fund will continue to furnish to the Manager copies of any
of the above mentioned materials which refer in any way to the Manager. Sales
12
<PAGE>
literature may be furnished to the Manager hereunder by first-class or overnight
mail, facsimile transmission equipment or hand delivery. The Fund shall furnish
or otherwise make available to the Manager such other information relating to
the business affairs of the Fund as the Manager at any time, or from time to
time, reasonably requests in order to discharge its obligations hereunder.
14. This Agreement may be amended by mutual consent, but the
consent of the Fund must be obtained in conformity with the requirements of the
1940 Act.
15. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Manager at One Seaport Plaza, New
York, N.Y. 10292, Attention: Secretary; or (2) to the Fund at One Seaport Plaza,
New York, N.Y. 10292, Attention: President.
16. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
17. The Fund may use the name "Prudential Government Securities
Trust" or any name including the words "Prudential" or "Bache" only for so long
as this Agreement or any extension, renewal or amendment hereof remains in
effect, including any similar agreement with any organization which shall have
succeeded to the Manager's business as Manager or any extension, renewal or
amendment thereof remains in effect. At such time as such an agreement shall no
longer be in effect, the Fund will (to the extent that it lawfully can) cease to
use such a name or any other name indicating that it is advised by, managed by
13
<PAGE>
or otherwise connected with the Manager, or any organization which shall have so
succeeded to such businesses. In no event shall the Fund use the name
"Prudential Government Securities Trust" or any name including the word
"Prudential" or "Bache" if the Manager's function is transferred or assigned to
a company of which The Prudential Insurance Company of America does not have
control.
18. The name "Prudential Government Securities Trust" is the
designation of the Trustees under a Declaration of Trust, dated September 22,
1981, as amended, and all persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year first
above written.
PRUDENTIAL GOVERNMENT SECURITIES TRUST
By: /s/ Lawrence C. McQuade
---------------------------------------
Lawrence C. McQuade
President
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC.
By: /s/ Robert F. Gunia
---------------------------------------
Robert F. Gunia
Executive Vice President
14
Exhibit 6(a)
PRUDENTIAL GOVERNMENT SECURITIES TRUST
(INTERMEDIATE TERM SERIES)
Distribution Agreement
Agreement made as of July 23, 1982, as amended on October 26, 1984 and
June 26, 1985 and as amended and restated on August 9, 1988 and July 1, 1993,
between Prudential Government Securities Trust a Massachusetts business trust
(the Fund) and Prudential Securities Incorporated, a Delaware Corporation
(the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the Investment Company Act), as a diversified, open-end,
management investment company and it is in the interest of the Fund to offer
its shares for sale continuously;
WHEREAS, shares of beneficial interest of the Fund are currently
divided into two separate series, one of which is the Intermediate Term
Series (the Series).
WHEREAS, the Distributor is a broker-dealer registered under the
Securities Exchange Act of 1934, as amended, and is engaged in the business
of selling shares of registered investment companies either directly or
through other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other, with respect to the continuous offering of the shares of the
Series from and after the date hereof in order to promote the growth of the
Series and facilitate the distribution of its shares; and
WHEREAS, the Fund has adopted a distribution and service plan pursuant
to Rule 12b-1 under the Investment Company Act (the Plan) authorizing
payments by the Fund to the Distributor with respect to the distribution of
shares of the Series and the maintenance of shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
The Fund hereby appoints the Distributor as the principal underwriter
and distributor of the Series to sell shares of the Series to the public and
the Distributor hereby accepts such appointment and agrees to act hereunder.
The Fund hereby agrees during the term of this Agreement to sell shares of
the Series to the Distributor on the terms and conditions set forth below.
<PAGE>
Section 2. Exclusive Nature of Duties
The Distributor shall be the exclusive representative of the Series to
act as principal underwriter and distributor, except that:
2.1 The exclusive rights granted to the Distributor to purchase shares
from the Fund shall not apply to shares of the Series issued in connection
with the merger or consolidation of any other investment company or personal
holding company with the Fund or the acquisition by purchase or otherwise of
all (or substantially all) the assets or the outstanding shares of any such
company by the Fund.
2.2 Such exclusive rights shall not apply to shares of the Series
issued by the Fund pursuant to reinvestment of dividends or capital gains
distributions.
2.3 Such exclusive rights shall not apply to shares of the Series
issued by the Fund pursuant to the reinstatement privilege afforded redeeming
shareholders.
2.4 Such exclusive rights shall not apply to purchases made through
the Fund's transfer and dividend disbursing agent in the manner set forth in
the currently effective Prospectus of the Series. The term "Prospectus"
shall mean the Prospectus and Statement of Additional Information included as
part of the Fund's Registration Statement, as such Prospectus and Statement
of Additional Information may be amended or supplemented from time to time,
and the term "Registration Statement" shall mean the Registration Statement
filed by the Fund with the Securities and Exchange Commission and effective
under the Securities Act of 1933, as amended (the Securities Act), and the
Investment Company Act, as such Registration Statement is amended from time
to time.
Section 3. Purchase of Shares from the Fund
3.1 The Distributor shall have the right to buy from the Fund the
shares of the Series needed, but not more than the shares needed (except for
clerical errors in transmission) to fill unconditional orders for shares
placed with the Distributor by investors or registered and qualified
securities dealers and other financial institutions (selected dealers). The
price which the Distributor shall pay for the shares of the Series so
purchased from the Fund shall be the net asset value, determined as set forth
in the Prospectus.
3.2 The shares of the Series are to be resold by the Distributor or
selected dealers, as described in Section 6.4 hereof, to investors at the
offering price as set forth in the Prospectus.
2
<PAGE>
3.3 The Fund shall have the right to suspend the sale of shares of
the Series at times when redemption is suspended pursuant to the conditions
in Section 4.3 hereof or at such other times as may be determined by the
Trustees. The Fund shall also have the right to suspend the sale of shares
the Series if a banking moratorium shall have been declared by federal or New
York authorities.
3.4 The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for shares of the
Series received by the Distributor. Any order may be rejected by the Fund;
provided, however, that the Fund will not arbitrarily or without reasonable
cause refuse to accept or confirm orders for the purchase of shares of the
Series. The Fund (or its agent) will confirm orders upon their receipt, will
make appropriate book entries and upon receipt by the Fund (or its agent) of
payment therefor, will deliver deposit receipts for such shares of the Series
pursuant to the instructions of the Distributor. Payment shall be made to
the Fund in New York Clearing House funds or federal funds. The Distributor
agrees to cause such payment and such instructions to be delivered promptly
to the Fund (or its agent).
Section 4. Repurchase or Redemption of Shares by the Fund
4.1 Any of the outstanding shares of the Series may be tendered for
redemption at any time, and the Fund agrees to repurchase or redeem the
shares so tendered in accordance with its Articles of Incorporation as
amended from time to time, and in accordance with the applicable provisions
of the Prospectus. The price to be paid to redeem or repurchase the shares
of the Series shall be equal to the net asset value determined as set forth
in the Prospectus. All payments by the Fund hereunder shall be made in the
manner set forth in Section 4.2 below.
4.2 The Fund shall pay the total amount of the redemption price as
defined in the above paragraph pursuant to the instructions of the
Distributor on or before the seventh day subsequent to its having received
the notice of redemption in proper form. The proceeds of any redemption of
shares of the Series shall be paid by the Fund or for the account of the
redeeming shareholder, in each case in accordance with applicable provisions
of the Prospectus.
4.3 Redemption of shares of the Series or payment may be suspended at
times when the New York Stock Exchange is closed for other than customary
weekends and holidays, when trading on said Exchange is restricted, when an
emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or during any
other period when the Securities and Exchange Commission, by order, so
permits.
3
<PAGE>
Section 5. Duties of the Fund
5.1 Subject to the possible suspension of the sale of shares of the
Series as provided herein, the Fund agrees to sell shares of the Series so
long as it has shares available.
5.2 The Fund shall furnish the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of shares of the Series,
and this shall include one certified copy, upon request by the Distributor,
of all financial statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Distributor such number of
copies of its Prospectus and annual and interim reports as the Distributor
shall reasonably request.
5.3 The Fund shall take, from time to time, but subject to the
necessary approval of the Trustees and the shareholders, all necessary action
to fix the number of authorized shares of the Series and such steps as may be
necessary to register the same under the Securities Act, to the end that
there will be available for sale such number of shares as the Distributor
reasonably may expect to sell. The Fund agrees to file from time to time
such amendments, reports and other documents as may be necessary in order
that there will be no untrue statement of a material fact in the Registration
Statement, or necessary in order that there will be no omission to state a
material fact in the Registration Statement which omission would make the
statements therein misleading.
5.4 The Fund shall use its best efforts to qualify and maintain the
qualification of any appropriate number of the Series' shares for sales under
the securities laws of such states as the Distributor and the Fund may
approve; provided that the Fund shall not be required to amend its
Declaration of Trust or By-Laws to comply with the laws of any state, to
maintain an office in any state, to change the terms of the offering of
shares of the Series in any state from the terms set forth in its
Registration Statement, to qualify as a foreign corporation in any state or
to consent to service of process in any state other than with respect to
claims arising out of the offering of shares of the Series. Any such
qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8.1 hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund.
The Distributor shall furnish such information and other material relating to
its affairs and activities as may be required by the Fund in connection with
such qualifications.
4
<PAGE>
Section 6. Duties of the Distributor
6.1 The Distributor shall devote reasonable time and effort to effect
sales of shares of the Series, but shall not be obligated to sell any
specific number of shares. Sales of the shares of the Series shall be on the
terms described in the Prospectus. The Distributor may enter into like
arrangements with other investment companies. The Distributor shall
compensate the selected dealers as set forth in the Prospectus.
6.2 In selling the shares of the Series, the Distributor shall use its
best efforts in all respects duly to conform with the requirements of all
federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer nor any other person is authorized by the
Fund to give any information or to make any representations, other than those
contained in the Registration Statement or Prospectus and any sales
literature approved by appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures for the
confirmation of sales to investors and selected dealers, the collection of
amounts payable by investors and selected dealers on such sales and the
cancellation of unsettled transactions, as may be necessary to comply with
the requirements of the National Association of Securities Dealers, Inc.
(NASD).
6.4 The Distributor shall have the right to enter into selected dealer
agreements with registered and qualified securities dealers and other
financial institutions of its choice for the sale of shares of the Series,
provided that the Fund shall approve the forms of such agreements. Within
the United States, the Distributor shall offer and sell shares of the Series
only to such selected dealers as are members in good standing of the NASD.
Shares of the Series sold to selected dealers shall be for resale by such
dealers only at the offering price determined as set forth in the Prospectus.
Section 7. Reimbursement of the Distributor under the Plan
7.1 The Fund shall reimburse the Distributor for all costs incurred by
it in performing its duties under the Distribution and Service Plan and this
Agreement including amounts paid on a reimbursement basis to Pruco Securities
Corporation (Prusec), an affiliate of the Distributor, under the selected
dealer agreement between the Distributor and Prusec, amounts paid to other
securities dealers or financial institutions under selected dealer agreements
between the Distributor and such dealers and institutions and amounts paid
for personal service and/or the maintenance of shareholder accounts. Amounts
reimbursable under the Plan shall be accrued daily and paid monthly or at
such other intervals as the Trustees may determine but shall not be paid at a
rate that exceeds the lesser of (a) .25 of 1% per annum of the aggregate
5
<PAGE>
sales of the Series' shares, not including shares issued in connection with
reinvestment of dividends and capital gains distributions from the Series,
issued 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) .25 of 1% per
annum of the average daily net asset value of the Series' shares issued after
the effective date of the Plan. Payment of the distribution and service fee
shall be subject to the limitations of Article III, Section 26 of the NASD
Rules of Fair Practice.
7.2 So long as the Plan or any amendment thereto is in effect, the
Distributor shall inform the Trustees of the commissions and account
servicing fees to be paid by the Distributor to account executives of the
Distributor and to broker-dealers and financial institutions which have
selected dealer agreements with the Distributor. So long as the Plan (or any
amendment thereto) is in effect, at the request of the Trustees or any agent
or representative of the Fund, the Distributor shall provide such additional
information as may reasonably be requested concerning the activities of the
Distributor hereunder and the costs incurred in performing such activities.
7.3 Costs of the Distributor subject to reimbursement hereunder are
all costs of performing distribution activities with respect to the shares of
the Series and include, among others:
(a) sales commissions (including trailer commissions)
paid to, or on account of, account executives of the
Distributor;
(b) indirect and overhead costs of the Distributor
associated with performance of distribution
activities, including central office and branch
expenses;
(c) amounts paid to Prusec in reimbursement of all costs
incurred by Prusec in performing services under a
selected dealer agreement between Prusec and the
Distributor for sale of shares of the Series,
including sales commissions and trailer commissions
paid to, or on account of, agents and indirect and
overhead costs associated with distribution
activities;
(d) sales commissions (including trailer commissions)
paid to, or on account of, broker-dealers and
financial institutions (other than Prusec) which have
entered into selected dealer agreements with the
Distributor with respect to shares of the Series;
6
<PAGE>
(e) amounts paid to, or an account of, account executives
of the Distributor or of other broker-dealers or
financial institutions for personal service and/or
the maintenance of shareholder accounts; and
(f) advertising for the Series in various forms through
any available medium, including the cost of printing
and mailing Series Prospectuses, and periodic
financial reports and sales literature to persons
other than current shareholders of the Series.
Indirect and overhead costs referred to in clauses (b) and (c) of
the foregoing sentence include (i) lease expenses, (ii) salaries and benefits
of personnel including operations and sales support personnel, (iii) utility
expenses, (iv) communications expenses, (v) sales promotion expenses, (vi)
expenses of postage, stationery and supplies and (vii) general overhead.
Section 8. Allocation of Expenses
8.1 The Fund shall bear all costs and expenses of the continuous
offering of the Series' shares. including fees and disbursements of its
counsel and auditors, in connection with the preparation and filing of any
required Registration Statements and/or Prospectuses under the Investment
Company Act or the Securities Act, and all amendments and supplements
thereto, and preparing and mailing annual and periodic reports and proxy
materials to shareholders (including but not limited to the expense of
setting in type any such Registration Statements, Prospectuses, annual or
periodic reports or proxy materials). The Fund shall also bear the cost of
expenses of qualification of the Series' shares for sale, and, if necessary
or advisable in connection therewith, of qualifying the Fund as a broker or
dealer, in such states of the United States or other jurisdictions as shall
be selected by the Fund and the Distributor pursuant to Section 5.4 hereof
and the cost and expense payable to each such state for continuing
qualification therein until the Fund decides to discontinue such
qualification pursuant to Section 5.4 hereof. As set forth in Section 7
above, the Fund shall also bear the expenses it assumes pursuant to the Plan
with respect to Series' shares, so long as the Plan is in effect.
8.2 If the Plan is terminated or discountiued, the costs incurred by
the Distributor in performing the duties set forth in Section 6 hereof shall
be borne by the Distributor and will not be subject to reimbursement by the
Fund.
7
<PAGE>
Section 9. Indemnification
9.1 The Fund agrees to indemnify, defend and hold the Distributor, its
officers and Directors and any person who controls the Distributor within the
meaning of Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and
any counsel fees incurred in connection therewith) which the Distributor, its
officers, Directors or any such controlling person may incur under the
Securities Act, or under common law or otherwise, arising out of or based
upon any untrue statement of a material fact contained in the Registration
Statement or Prospectus or arising out of or based upon any alleged omission
to state a material fact required to be stated in either thereof or necessary
to make the statements in either thereof not misleading, except insofar as
such claims, demands, liabilities or expenses arise out of or are based upon
any such untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with information furnished in writing
by the Distributor to the Fund for use in the Registration Statement or
Prospectus; provided, however, that this indemnity agreement shall not inure
to the benefit of any such officer, Director or controlling person unless a
court of competent jurisdiction shall determine in a final decision on the
merits, that the person to be indemnified was not liable by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations under this
Agreement (disabling conduct), or, in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that the
indemnified person was not liable by reason of disabling conduct, by (a) a
vote of a majority of a quorum of Trustees who are neither "interested
persons" of the Fund as defined in Section 2(a)(19) of the Investment Company
Act nor parties to the proceeding, or (b) an independent legal counsel in a
written opinion. The Fund's agreement to indemnify the Distributor, its
officers and Directors and any such controlling person as aforesaid is
expressly conditioned upon the Fund's being promptly notified of any action
brought against the Distributor, its officers or Directors, or any such
controlling person, such notification to be given by letter or telegram
addressed to the Fund at its principal business office. The Fund agrees
promptly to notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or Directors in connection with
the issue and sale of any shares of the Series.
9.2 The Distributor agrees to indemnify, defend and hold the Fund, its
officers and Trustees and any person who controls the Fund, if any, within
the meaning of Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending against such claims, demands or
8
<PAGE>
liabilities and any counsel fees incurred in connection therewith) which the
Fund, its officers and Trustees or any such controlling person may incur
under the Securities Act or under common law or otherwise, but only to the
extent that such liability or expense incurred by the Fund, its Trustees or
officers or such controlling person resulting from such claims or demands
shall arise out of or be based upon any alleged untrue statement of a
material fact contained in information furnished in writing by the
Distributor to the Fund for use in the Registration Statement or Prospectus
or shall arise out of or be based upon any alleged omission to state a
material fact in connection with such information required to be stated in
the Registration Statement or Prospectus or necessary to make such
information not misleading. The Distributor's agreement to indemnify the
Fund, its officers and Trustees and any such controlling person as aforesaid,
is expressly conditioned upon the Distributor's being promptly notified of
any action brought against the Fund, its officers and Trustees or any such
controlling person, such notification to be given to the Distributor in
writing at its principal business office.
Section 10. Duration and Termination of this Agreement
10.1 This Agreement shall become effective as of the date first above
written and shall remain in force for two years from the date hereof and
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Trustees of the Fund, or by the vote of a majority
of the outstanding voting securities of the shares of the Series, and (b) by
the vote of a majority of those Trustees who are not parties to this
Agreement or interested persons of any such parties and who have no direct or
indirect financial interest in this Agreement or in the operation of the
Fund's Plan or in any agreement related thereto (Rule 12b-1 Trustees) cast in
person at a meeting called for the purpose of voting upon such approval.
10.2 This Agreement may be terminated at any time, without the 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 shares of the Series, or
by the Distributor, on sixty (60) days' written notice to the other party.
This Agreement shall automatically terminate in the event of its assignment.
10.3 The terms "affiliated person," "assignment," "interested person"
and "vote of a majority of the outstanding voting securities," when used in
this Agreement, shall have the respective meanings specified in the
Investment Company Act.
Section 11. Amendments to this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) the Trustees of the Fund, or by the vote of a
majority of the outstanding voting securities of the shares of the Series,
9
<PAGE>
and (b) by the vote of a majority of the Rule 12b-1 Trustees cast in person
at a meeting called for the purpose of voting on such amendment.
Section 12. Governing Law
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect
and the applicable provisions of the Investment Company Act. To the extent
that the applicable law of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Investment Company
Act, the latter shall control.
Section 13. Liabilities of the Fund
The name Prudential Government Securities Trust is the designation of
the Trustees under a Declaration of Trust, dated September 22, 1981, as
thereafter amended, and all persons dealing with the Fund must look solely to
the property of the Fund for the enforcement of any claims against the Fund
as neither the Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year above written.
Prudential Securities
Incorporated
By: /s/ Robert F. Gunia
---------------------------------------
Name: Robert F. Gunia
Title: Senior Vice President
Prudential Government Securities
Trust
By: /s/ Lawrence C. McQuade
---------------------------------------
Name: Lawrence C. McQuade
Title: President
10
Exhibit 6(b)
PRUDENTIAL GOVERNMENT SECURITIES TRUST
(MONEY MARKET SERIES)
(U.S. TREASURY MONEY MARKET SERIES)
Distribution Agreement
Agreement made as of November 20, 1990, as amended and restated on July
1, 1993, between Prudential Government Securities Trust, a Massachusetts
business trust (the Fund) and Prudential Mutual Fund Distributors, Inc., a
Delaware Corporation (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the Investment Company Act), as a diversified, open-end,
management investment company and it is in the interest of the Fund to offer
its shares for sale continuously;
WHEREAS, the Distributor is a broker-dealer registered under the
Securities Exchange Act of 1934, as amended, and is engaged in the business
of selling shares of registered investment companies either directly or
through other broker-dealers;
WHEREAS, shares of beneficial interest of the Fund are currently
divided into three separate series, two of which are the Money Market Series
and the U.S. Treasury Money Market Series(the Series);
WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other, with respect to the continuous offering of the shares of the
Series from and after the date hereof in order to promote the growth of the
Series and facilitate the distribution of their shares; and
WHEREAS, the Fund has adopted a distribution service plan pursuant to
Rule 12b-1 under the Investment Company Act (the Plan) authorizing payments
by the Fund to the Distributor with respect to the distribution of the shares
of the Series and the maintenance of shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
The Fund hereby appoints the Distributor as the principal underwriter
and distributor of the Series to sell shares of the Series to the public and
the Distributor hereby accepts such appointment and agrees to act hereunder.
The Fund hereby agrees during the term of this Agreement to sell shares of
the Series to the Distributor on the terms and conditions set forth below.
<PAGE>
Section 2. Exclusive Nature of Duties
The Distributor shall be the exclusive representative of the Series to
act as principal underwriter and distributor, except that:
2.1 The exclusive rights granted to the Distributor to purchase
shares from the Fund shall not apply to shares of the Series issued in
connection with the merger or consolidation of any other investment company
or personal holding company with the Fund or the acquisition by purchase or
otherwise of all (or substantially all) the assets or the outstanding shares
of any such company by the Fund.
2.2 Such exclusive rights shall not apply to shares of the Series
issued by the Fund pursuant to reinvestment of dividends or capital gains
distributions.
2.3 Such exclusive rights shall not apply to shares of the Series
issued by the Fund pursuant to the reinstatement privilege afforded redeeming
shareholders.
2.4 Such exclusive rights shall not apply to purchases made through
the Fund's transfer and dividend disbursing agent in the manner set forth in
the currently effective Prospectus of the Series. The term "Prospectus"
shall mean the Prospectus and Statement of Additional Information included as
part of the Fund's Registration Statement, as such Prospectus and Statement
of Additional Information may be amended or supplemented from time to time,
and the term "Registration Statement" shall mean the Registration Statement
filed by the Fund with the Securities and Exchange Commission and effective
under the Securities Act of 1933, as amended (Securities Act), and the
Investment Company Act, as such Registration Statement is amended from time
to time.
Section 3. Purchase of Shares from the Fund
3.1 The Distributor shall have the right to buy from the Fund the
shares of the Series needed, but not more than the shares needed (except for
clerical errors in transmission) to fill unconditional orders for shares of
the Series placed with the Distributor by investors or registered and
qualified securities dealers and other financial institutions (selected
dealers). The price which the Distributor shall pay for the shares of the
Series so purchased from the Fund shall be the net asset value, determined as
set forth in the Prospectus.
3.2 The shares of the Series are to be resold by the Distributor or
selected dealers, as described in Section 6.4 hereof, to investors at the
offering price as set forth in the Prospectus.
<PAGE>
3.3 The Fund shall have the right to suspend the sale of its shares
of the Series at times when redemption is suspended pursuant to the
conditions in Section 4.3 hereof or at such other times as may be determined
by the Directors/Trustees. The Fund shall also have the right to suspend the
sale of shares of the Series if a banking moratorium shall have been declared
by federal or New York authorities.
3.4 The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for shares of the
Series received by the Distributor. Any order may be rejected by the Fund;
provided, however, that the Fund will not arbitrarily or without reasonable
cause refuse to accept or confirm orders for the purchase of shares of the
Series. The Fund (or its agent) will confirm orders upon their receipt, will
make appropriate book entries and upon receipt by the Fund (or its agent) of
payment therefor, will deliver deposit receipts for such shares pursuant to
the instructions of the Distributor. Payment shall be made to the Fund in
New York Clearing House funds or federal funds. The Distributor agrees to
cause such payment and such instructions to be delivered promptly to the Fund
(or its agent).
Section 4. Repurchase or Redemption of Shares by the Fund
4.1 Any of the outstanding shares of the Series may be tendered for
redemption at any time, and the Fund agrees to repurchase or redeem the
shares of the Series so tendered in accordance with its Declaration of Trust
as amended from time to time, and in accordance with the applicable
provisions of the Prospectus. The price to be paid to redeem or repurchase
the shares of the Series shall be equal to the net asset value determined as
set forth in the Prospectus. All payments by the Fund hereunder shall be
made in the manner set forth in Section 4.2 below.
4.2 The Fund shall pay the total amount of the redemption price as
defined in the above paragraph pursuant to the instructions of the
Distributor on or before the seventh calendar day subsequent to its having
received the notice of redemption in proper form. The proceeds of any
redemption of shares of the Series shall be paid by the Fund to or for the
account of the redeeming shareholder, in each case in accordance with
applicable provisions of the Prospectus.
4.3 Redemption of shares of the Series or payment may be suspended at
times when the New York Stock Exchange is closed for other than customary
weekends and holidays, when trading on said Exchange is restricted, when an
emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or during any
3
<PAGE>
other period when the Securities and Exchange Commission, by order, so
permits.
Section 5. Duties of the Fund
5.1 Subject to the possible suspension of the sale of shares of the
Series as provided herein, the Fund agrees to sell shares of the Series so
long as it has shares available.
5.2 The Fund shall furnish the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of shares of the Series,
and this shall include one certified copy, upon request by the Distributor,
of all financial statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Distributor such number of
copies of its Prospectus and annual and interim reports as the Distributor
shall reasonably request.
5.3 The Fund shall take, from time to time, but subject to the
necessary approval of the Directors/Trustees and the shareholders, all
necessary action to fix the number of authorized shares of the Series and
such steps as may be necessary to register the same under the Securities Act,
to the end that there will be available for sale such number of shares of the
Series as the Distributor reasonably may expect to sell. The Fund agrees to
file from time to time such amendments, reports and other documents as may be
necessary in order that there will be no untrue statement of a material fact
in the Registration Statement, or necessary in order that there will be no
omission to state a material fact in the Registration Statement which
omission would make the statements therein misleading.
5.4 The Fund shall use its best efforts to qualify and maintain the
qualification of any appropriate number of the Series' shares for sales under
the securities laws of such states as the Distributor and the Fund may
approve; provided that the Fund shall not be required to amend its
Declaration of Trust or By-Laws to comply with the laws of any state, to
maintain an office in any state, to change the terms of the offering of
shares of the Series in any state from the terms set forth in its
Registration Statement, to qualify as a foreign corporation in any state or
to consent to service of process in any state other than with respect to
claims arising out of the offering of shares of the Series. Any such
qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8.1 hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund.
The Distributor shall furnish such information and other material relating to
its affairs and activities as may be required by the Fund in connection with
such qualifications.
4
<PAGE>
Section 6. Duties of the Distributor
6.1 The Distributor shall devote reasonable time and effort to effect
sales of shares of the Series, but shall not be obligated to sell any
specific number of shares. Sales of the shares of the Series shall be on the
terms described in the Prospectus. The Distributor may enter into like
arrangements with other investment companies. The Distributor shall
compensate the selected dealers as set forth in the Prospectus.
6.2 In selling the shares of the Series, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer nor any other person is authorized by the
Fund to give any information or to make any representations, other than those
contained in the Registration Statement or Prospectus and any sales
literature approved by appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures for the
confirmation of sales to investors and selected dealers, the collection of
amounts payable by investors and selected dealers on such sales and the
cancellation of unsettled transactions, as may be necessary to comply with
the requirements of the National Association of Securities Dealers, Inc.
(NASD).
6.4 The Distributor shall have the right to enter into selected
dealer agreements with registered and qualified securities dealers and other
financial institutions of its choice for the sale of shares of the Series,
provided that the Fund shall approve the forms of such agreements. Within
the United States, the Distributor shall offer and sell shares of the Series
only to such selected dealers as are members in good standing of the NASD.
shares of the Series sold to selected dealers shall be for resale by such
dealers only at the offering price determined as set forth in the Prospectus.
Section 7. Reimbursement of the Distributor under the Plan
7.1 The Fund shall reimburse the Distributor for costs incurred by it
in performing its duties under the Distribution and Service Plan and this
Agreement including amounts paid on a reimbursement basis to Prudential
Securities Incorporated (Prudential Securities) and Pruco Securities
Corporation (Prusec), affiliates of the Distributor, under the selected
dealer agreements between the Distributor and Prudential Securities and
Prusec, respectively, amounts paid to other securities dealers or financial
institutions under selected dealer agreements between the Distributor and
such dealers and institutions and amounts paid for personal service and/or
the maintenance of shareholder accounts. Amounts reimbursable under the Plan
shall be accrued daily and paid monthly or at such other intervals as the
Directors/Trustees may determine but shall not be paid at a rate that exceeds
5
<PAGE>
.125 of 1% per annum of the average daily net assets of the shares of the
Series. Payment of the distribution and service fee shall be subject to the
limitations of Article III, Section 26 of the NASD Rules of Fair Practice.
7.2 So long as the Plan or any amendment thereto is in effect, the
Distributor shall inform the Directors/Trustees of the commissions and
account servicing fees to be paid by the Distributor to account executives of
the Distributor and to broker-dealers and financial institutions which have
dealer agreements with the Distributor. So long as the Plan (or any
amendment thereto) is in effect, at the request of the Directors/Trustees or
any agent or representative of the Fund, the Distributor shall provide such
additional information as may reasonably be requested concerning the
activities of the Distributor hereunder and the costs incurred in performing
such activities.
7.3 Costs of the Distributor subject to reimbursement hereunder are
costs of performing distribution activities and may include, among others:
(a) Amounts paid to Prudential Securities in reimbursement of
costs incurred by Prudential Securities in performing services
under a selected dealer agreement between Prudential Securities
and the Distributor for sale of shares of the Series, including
sales commissions and account servicing fees paid to, or on
account of, account executives and indirect and overhead costs
associated with the performance of distribution activities,
including central office and branch expenses;
(b) amounts paid to Prusec in reimbursement of costs incurred by
Prusec in performing services under a selected dealer agreement
between Prusec and the Distributor for sale of shares of the
Series, including sales commissions and account servicing fees
paid to, or on account of, agents and indirect and overhead costs
associated with distribution activities;
(c) sales commissions and account servicing fees paid to, or on
account of, broker-dealers and financial institutions (other than
Prudential Securities and Prusec) which have entered into
selected dealer agreements with the Distributor with respect to
shares of the Series;
(d) amounts paid to, or on account of, account executives of
Prudential Securities, Prusec, or other broker-dealers or
financial institutions for personal services and/or the
maintenance of shareholder accounts; and
6
<PAGE>
(e) advertising for the Series in various forms through any
available medium, including the cost of printing and mailing
Series Prospectuses, and periodic financial reports and sales
literature to persons other than current shareholders of the
Series.
Indirect and overhead costs referred to in clause (b) of the foregoing
sentence include (i) lease expenses, (ii) salaries and benefits of personnel
including operations and sales support personnel, (iii) utility expenses,
(iv) communications expenses, (v) sales promotion expenses, (vi) expenses of
postage, stationery and supplies and (vii) general overhead.
Section 8. Allocation of Expenses
8.1 The Fund shall bear all costs and expenses of the continuous
offering of the Series' shares, including fees and disbursements of its
counsel and auditors, in connection with the preparation and filing of any
required Registration Statements and/or Prospectuses under the Investment
Company Act or the Securities Act, and all amendments and supplements
thereto, and preparing and mailing annual and periodic reports and proxy
materials to shareholders (including but not limited to the expense of
setting in type any such Registration Statements, Prospectuses, annual or
periodic reports or proxy materials). The Fund shall also bear the cost of
expenses of qualification of the Series' shares for sale, and, if necessary
or advisable in connection therewith, of qualifying the Fund as a broker or
dealer, in such states of the United States or other jurisdictions as shall
be selected by the Fund and the Distributor pursuant to Section 5.4 hereof
and the cost and expense payable to each such state for continuing
qualification therein until the Fund decides to discontinue such
qualification pursuant to Section 5.4 hereof. As set forth in Section 7
above, the Fund shall also bear the expenses it assumes pursuant to the Plan
with respect to the Series' shares, so long as the Plan is in effect.
8.2 If the Plan is terminated or discontinued, the costs previously
incurred by the Distributor in performing the duties set forth in Section 6
hereof shall be borne by the Distributor and will not be subject to
reimbursement by the Fund.
Section 9. Indemnification
9.1 The Fund agrees to indemnify, defend and hold the Distributor,
its officers and directors and any person who controls the Distributor within
the meaning of Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and
any counsel fees incurred in connection therewith) which the Distributor, its
officers, directors or any such controlling person may incur under the
7
<PAGE>
Securities Act, or under common law or otherwise, arising out of or based
upon any untrue statement of a material fact contained in the Registration
Statement or Prospectus or arising out of or based upon any alleged omission
to state a material fact required to be stated in either thereof or necessary
to make the statements in either thereof not misleading, except insofar as
such claims, demands, liabilities or expenses arise out of or are based upon
any such untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with information furnished in writing
by the Distributor to the Fund for use in the Registration Statement or
Prospectus; provided, however, that this indemnity agreement shall not inure
to the benefit of any such officer, director, trustee or controlling person
unless a court of competent jurisdiction shall determine in a final decision
on the merits, that the person to be indemnified was not liable by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations under this
Agreement (disabling conduct), or, in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that the
indemnified person was not liable by reason of disabling conduct, by (a) a
vote of a majority of a quorum of directors or trustees who are neither
"interested persons" of the Fund as defined in Section 2(a)(19) of the
Investment Company Act nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion. The Fund's agreement to indemnify the
Distributor, its officers and directors or trustees and any such controlling
person as aforesaid is expressly conditioned upon the Fund's being promptly
notified of any action brought against the Distributor, its officers or
directors or trustees, or any such controlling person, such notification to
be given by letter or telegram addressed to the Fund at its principal
business office. The Fund agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issue and sale of any shares of
the Series.
9.2 The Distributor agrees to indemnify, defend and hold the Fund,
its officers and Directors/Trustees and any person who controls the Fund, if
any, within the meaning of Section 15 of the Securities Act, free and
harmless from and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending against such
claims, demands or liabilities and any counsel fees incurred in connection
therewith) which the Fund, its officers and Directors/Trustees or any such
controlling person may incur under the Securities Act or under common law or
otherwise, but only to the extent that such liability or expense incurred by
the Fund, its Directors/Trustees or officers or such controlling person
resulting from such claims or demands shall arise out of or be based upon any
alleged untrue statement of a material fact contained in information
furnished in writing by the Distributor to the Fund for use in the
Registration Statement or Prospectus or shall arise out of or be based upon
8
<PAGE>
any alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement or Prospectus
or necessary to make such information not misleading. The Distributor's
agreement to indemnify the Fund, its officers and Directors/Trustees and any
such controlling person as aforesaid, is expressly conditioned upon the
Distributor's being promptly notified of any action brought against the Fund,
its officers and Directors/Trustees or any such controlling person, such
notification being given to the Distributor at its principal business office.
Section 10. Duration and Termination of this Agreement
10.1 This Agreement shall become effective as of the date first above
written and shall remain in force for two years from the date hereof and
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Directors/Trustees of the Fund, or by the vote of a
majority of the outstanding voting securities of the Series, and (b) by the
vote of a majority of those Directors/Trustees who are not parties to this
Agreement or interested persons of any such parties and who have no direct or
indirect financial interest in this Agreement or in the operation of the
Fund's Plan or in any agreement related thereto (Rule 12b-1
Directors/Trustees), cast in person at a meeting called for the purpose of
voting upon such approval.
10.2 This Agreement may be terminated at any time, without the payment
of any penalty, by a majority of the Rule 12b-1 Directors/Trustees or by vote
of a majority of the outstanding voting securities of the Series, or by the
Distributor, on sixty (60) days' written notice to the other party. This
Agreement shall automatically terminate in the event of its assignment.
10.3 The terms "affiliated person," "assignment," "interested person"
and "vote of a majority of the outstanding voting securities", when used in
this Agreement, shall have the respective meanings specified in the
Investment Company Act.
Section 11. Amendments to this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) the Directors/Trustees of the Fund, or by the
vote of a majority of the outstanding voting securities of the Series, and
(b) by the vote of a majority of the Rule 12b-1 Directors/Trustees cast in
person at a meeting called for the purpose of voting on such amendment.
Section 12. Governing Law
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect
9
<PAGE>
and the applicable provisions of the Investment Company Act. To the extent
that the applicable law of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Investment Company
Act, the latter shall control.
Section 13. Liabilities of the Fund
The name Prudential Government Securities Trust is the designation of
the Trustees under a Declaration of Trust, dated September 22, 1981, as
thereafter amended, and all persons dealing with the Fund must look solely to
the property of the Fund for the enforcement of any claims against the Fund
as neither the Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Funds.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year above written.
Prudential Mutual Fund
Distributors, Inc.
By: /s/ Robert F. Gunia
---------------------------------------
Name: Robert F. Gunia
Title: Executive Vice President
Prudential Bache
Government Securities Trust
By: /s/ Lawrence C. McQuade
---------------------------------------
Name: Lawrence C. McQuade
Title: President
10
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 19 to the Registration
Statement on Form N-1A (the "Registration Statement") of our report dated
January 5, 1994, relating to the financial statements and financial highlights
of Intermediate Term Series, Money Market Series and U.S. Treasury Money Market
Series(constituting Prudential Government Securities Trust), which appear in
such Statement of Additional Information, and to the incorporation by reference
of our report into the Prospectuses for each of the Intermediate Term Series,
Money Market Series and U.S. Treasury Money Market Series which constitute part
of this Registration Statement. We also consent to the reference to us under the
heading "Custodian, Transfer and Dividend Disbursing Agent and Independent
Accountants" in such Statement of Additional Information and to the reference
to us under the heading "Financial Highlights" in such Prospectuses.
PRICE WATERHOUSE
1177 Avenue of the Americas
New York, New York
January 24,1994
Exhibit 15(a)
PRUDENTIAL GOVERNMENT SECURITIES TRUST
(INTERMEDIATE TERM SERIES)
Distribution and Service Plan
Introduction
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Article III, Section 26
of the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. (NASD) has been adopted by Prudential Government Securities
Trust, (the Fund) and by Prudential Securities Incorporated (Prudential
Securities), the distributor for the Fund's Intermediate Term Series (the
Distributor).
Shares of beneficial interest of the Fund are currently divided into
three separate series, one of which is the Intermediate Term Series (the
Series).
The Fund has entered into a distribution agreement (the Distribution
Agreement) pursuant to which the Fund will continue to employ the Distributor
to distribute shares issued by the Series. Under the Plan, the Fund wishes
to pay to the Distributor for its services a distribution and service fee.
A majority of the Board of Directors or Trustees of the Fund including
a majority who are not "interested persons" of the Fund (as defined in the
Investment Company Act) and who have no direct or indirect financial interest
in the operation of this Plan or any agreements related to it (the Rule 12b-1
Directors or Trustees), have determined by votes cast in person at a meeting
<PAGE>
called for the purpose of voting on this Plan that there is a reasonable
likelihood that adoption of this Plan will benefit the Series and its
shareholders. Expenditures under this Plan by the Fund for Distribution
Activities (defined below) are primarily intended to result in the sale of
shares of the Series within the meaning of paragraph (a)(2) of Rule 12b-1
promulgated under the Investment Company Act.
The purpose of the Plan is to create incentives to the Distributor
and/or other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Series,
to defray the costs and expenses associated with the preparation, printing
and distribution of prospectuses and sales literature and other promotional
and distribution activities and to provide for the servicing and maintenance
of shareholder accounts.
The Plan
The material aspects of the Plan are as follows:
1. Distribution Activities
The Fund shall engage the Distributor to distribute shares of the
Series and to service shareholder accounts using all of the facilities of the
Prudential Securities distribution network including sales personnel and
branch office and central support systems, and also using such other
qualified broker-dealers and financial institutions as the Distributor may
select, including Pruco Securities Corporation (Prusec). Services provided
and activities undertaken to distribute shares of the Series are referred to
herein as "Distribution Activities."
2
<PAGE>
2. Payment of Service Fee
The Fund shall pay to the Distributor for providing personal service
and/or maintaining shareholder accounts a service fee of the lesser of (a)
.25 of 1% per annum of the aggregate sales of the Series' shares, not
including shares issued in connection with reinvestment of dividends and
capital gains distributions from the Series, issued 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) .25 of 1% per annum of the average daily net
asset value of the Series' shares issued after the effective date of the Plan
(service fee). The Fund shall calculate and accrue daily amounts payable by
the Series hereunder and shall pay such amounts monthly or at such other
intervals as the Board of Directors or Trustees may determine. Costs of the
Distributor subject to reimbursement hereunder include account servicing fees
and indirect and overhead costs associated with providing personal service
and/or maintaining shareholder accounts.
3. Payment for Distribution Activities
The Fund shall pay to the Distributor for its services a distribution
fee, together with the service fee (described in Section 2 hereof), of the
lesser of (a) .25 of 1% per annum of the aggregate sales of the Series'
shares, not including shares issued in connection with reinvestment of
dividends and capital gains distributions from the Series, issued on or after
the effective date of the Plan less the aggregate net asset value of any such
shares redeemed, or (b) .25 of 1% per annum of the average daily net asset
value of the Series' shares issued after the effective date of the Plan. The
3
<PAGE>
Fund shall calculate and accrue daily amounts payable by the Series hereunder
and shall pay such amounts monthly or at such other intervals as the Board of
Directors or Trustees may determine.
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:
(a) sales commissions (including trailer commissions) paid to,
or on account of, account executives of the Distributor;
(b) indirect and overhead costs of the Distributor associated
with performance of distribution activities including central
office and branch expenses;
(c) amounts paid to Prusec in reimbursement of all costs
incurred by Prusec in performing services under a selected dealer
agreement between Prusec and the Distributor for sale of shares
of the Series, including sales commissions and trailer
commissions paid to, or on account of, agents and indirect and
overhead costs associated with Distribution Activities;
(d) advertising for the Series in various forms through any
available medium, including the cost of printing and mailing
Series prospectuses, statements of additional information and
periodic financial reports and sales literature to persons other
than current shareholders of the Series; and
(e) sales commissions (including trailer commissions) paid to,
or on account of, broker-dealers and other financial institutions
(other than Prusec) which have entered into selected dealer
agreements with the Distributor with respect to shares of the
Series.
4. Quarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the Board of
Directors or Trustees of the Fund for review, at least quarterly, a written
report specifying in reasonable detail the amounts expended for Distribution
Activities (including payment of the service fee) and the purposes for which
4
<PAGE>
such expenditures were made in compliance with the requirements of Rule
12b-1. The Distributor will provide to the Board of Directors or Trustees of
the Fund such additional information as they shall from time to time
reasonably request, including information about Distribution Activities
undertaken or to be undertaken by the Distributor.
The Distributor will inform the Board of Directors or Trustees of the
Fund of the commissions and account servicing fees to be paid by the
Distributor to account executives of the Distributor and to broker-dealers
and other financial institutions which have selected dealer agreements with
the Distributor.
5. Effectiveness; Continuation
The Plan shall not take effect until it has been approved by a vote of
a majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Series.
If approved by a vote of a majority of the outstanding voting
securities of the Series, the Plan shall, unless earlier terminated in
accordance with its terms, continue in full force and effect thereafter for
so long as such continuance is specifically approved at least annually by a
majority of the Board of Directors or Trustees of the Fund and a majority of
the Rule 12b-1 Directors or Trustees by votes cast in person at a meeting
called for the purpose of voting on the continuation of the Plan.
6. Termination
This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors or Trustees, or by vote of a majority of the outstanding
5
<PAGE>
voting securities (as defined in the Investment Company Act) of the Series.
7. Amendments
The Plan may not be amended to change the distribution expenses to be
paid as provided for in Section 3 hereof so as to increase materially the
amounts payable under this Plan unless such amendment shall be approved by
the vote of a majority of the outstanding voting securities (as defined in
the Investment Company Act) of the Series. All material amendments of the
Plan, including the addition or deletion of categories of expenditures which
are reimbursable hereunder, shall be approved by a majority of the Board of
Directors or Trustees of the Fund and a majority of the Rule 12b-1 Directors
or Trustees by votes cast in person at a meeting called for the purpose of
voting on the Plan.
8. Non-interested Directors or Trustees
While the Plan is in effect, the selection and nomination of the
Directors or Trustees who are not "interested persons" of the Fund
(non-interested Directors or Trustees) shall be committed to the discretion of
the non-interested Directors or Trustees.
9. Records
The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Section 4 hereof, for a period of not less
than six years from the date of effectiveness of the Plan, such agreements or
reports, and for at least the first two years in an easily accessible place.
6
<PAGE>
10. Liabilities of the Fund
The name Prudential Government Securities Trust is the designation of
the Trustees under a Declaration of Trust, dated September 22, 1981, as
thereafter amended, and all persons dealing with the Fund must look solely to
the property of the Fund for the enforcement of any claims against the Fund
as neither the Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
Dated: June 26, 1985
as amended and restated on
July 1, 1993
7
Exhibit 15(b)
PRUDENTIAL GOVERNMENT SECURITIES TRUST
(MONEY MARKET SERIES)
(U.S. TREASURY MONEY MARKET SERIES)
Distribution and Service Plan
Introduction
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Article III, Section 26
of the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. (NASD) has been adopted by Prudential Government Securities
Trust (the Fund) and by Prudential Mutual Fund Distributors, Inc., the
distributor for the Fund's Money Market Series and U.S. Treasury Money Market
Series (the Distributor).
Shares of beneficial interest of the Fund are currently divided into
three separate series, two of which are the Money Market Series and the U.S.
Treasury Money Market Series (the Series).
The Fund has entered into a distribution agreement (the Distribution
Agreement) pursuant to which the Fund will employ the Distributor to
distribute shares issued by the Series. Under the Plan, the Fund intends to
reimburse the Distributor for costs incurred by the Distributor in
distributing shares of the Series and to pay the Distributor a service fee
for the maintenance of shareholder accounts.
A majority of the Board of Directors or Trustees of the Fund, including
a majority of those Directors or Trustees who are not "interested persons" of
<PAGE>
the Fund (as defined in the Investment Company Act) and who have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the Rule 12b-1 Directors or Trustees), have determined by
votes cast in person at a meeting called for the purpose of voting on this
Plan that there is a reasonable likelihood that adoption of this Plan will
benefit the Series and their shareholders. Expenditures under this Plan by
the Fund for Distribution Activities (defined below) are primarily intended
to result in the sale of shares of the Series within the meaning of paragraph
(a)(2) of Rule 12b-1 promulgated under the Investment Company Act.
The purpose of the Plan is to create incentives to the Distributor
and/or other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Series,
to defray the costs and expenses associated with the preparation, printing
and distribution of prospectuses and sales literature and other promotional
and distribution activities and to provide for the servicing and maintenance
of shareholder accounts.
The Plan
The material aspects of the Plan are as follows:
1. Distribution Activities
The Fund shall engage the Distributor to distribute shares of the
Series and to service shareholder accounts using all of the facilities of the
distribution networks of Prudential Securities Incorporated (Prudential
Securities) and Pruco Securities Corporation (Prusec), including sales
2
<PAGE>
personnel and branch office and central support systems, and also using such
other qualified broker-dealers and financial institutions as the Distributor
may select. Services provided and activities undertaken to distribute shares
of the Series are referred to herein as "Distribution Activities."
2. Payment of Service Fee
The Fund shall reimburse the Distributor for costs incurred by it in
providing personal service and/or maintaining shareholder accounts at a rate
not to exceed .125 of 1% per annum of the average daily net assets of the
shares of the Series (service fee). The Fund shall calculate and accrue daily
amounts reimbursable by the shares of the Series hereunder and shall pay such
amounts monthly or at such other intervals as the Board of Directors or
Trustees may determine. Costs of the Distributor subject to reimbursement
hereunder include account servicing fees and indirect and overhead costs
associated with providing personal service and/or maintaining shareholder
accounts.
3. Payment for Distribution Activities
The Fund shall reimburse the Distributor for costs incurred by it in
performing Distribution Activities at a rate which, together with the service
fee (described in Section 2 hereof), shall not exceed .125% per annum of the
average daily net assets of the shares of the Series. The Fund shall
calculate and accrue daily amounts reimbursable by the shares of the Series
hereunder and shall pay such amounts monthly or at such other intervals as
the Board of Directors or Trustees may determine.
3
<PAGE>
Costs of the Distributor subject to reimbursement hereunder are costs
of performing Distribution Activities and may include, among others:
(a) amounts paid to Prudential Securities in
reimbursement of costs incurred by Prudential
Securities in performing services under a selected
dealer agreement between Prudential Securities and
the Distributor for sale of shares of the Series,
including sales commissions and account servicing
fees paid to, or on account of, account executives
and indirect and overhead costs associated with
Distribution Activities, including central office and
branch expenses;
(b) amounts paid to Prusec in reimbursement of costs
incurred by Prusec in performing services under a
selected dealer agreement between Prusec and the
Distributor for sale of shares of the Series,
including sales commissions and account servicing
fees paid to, or on account of, agents and indirect
and overhead costs associated with Distribution
Activities;
(c) advertising for the Series in various forms through
any available medium, including the cost of printing
and mailing Series' prospectuses, statements of
additional information and periodic financial reports
and sales literature to persons other than current
shareholders of the Series; and
(d) sales commissions (including account servicing fees)
paid to, or on account of, broker-dealers and
financial institutions (other than Prudential
Securities and Prusec) which have entered into
selected dealer agreements with the Distributor with
respect to shares of the Series.
4. Quarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the Board of
Directors or Trustees of the Fund for review, at least quarterly, a written
report specifying in reasonable detail the amounts expended for Distribution
4
<PAGE>
Activities (including payment of the service fee) and the purposes for which
such expenditures were made in compliance with the requirements of Rule
12b-1. The Distributor will provide to the Board of Directors or Trustees of
the Fund such additional information as the Board or Trustees shall from time
to time reasonably request, including information about Distribution
Activities undertaken or to be undertaken by the Distributor.
The Distributor will inform the Board of Directors or Trustees of the
Fund of the commissions and account servicing fees to be paid by the
Distributor to broker-dealers and financial institutions which have selected
dealer agreements with the Distributor.
5. Effectiveness; Continuation
The Plan shall not take effect until it has been approved by a vote of
a majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Series.
If approved by a vote of a majority of the outstanding voting
securities of the Series, the Plan shall, unless earlier terminated in
accordance with its terms, continue in full force and effect thereafter for
so long as such continuance is specifically approved at least annually by a
majority of the Board of Directors or Trustees of the Fund and a majority of
the Rule 12b-1 Directors or Trustees by votes cast in person at a meeting
called for the purpose of voting on the continuation of the Plan.
5
<PAGE>
6. Termination
This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors or Trustees, or by vote of a majority of the outstanding
voting securities (as defined in the Investment Company Act) of the Series.
7. Amendments
The Plan may not be amended to change the distribution expenses to be
paid as provided for in Section 3 hereof so as to increase materially the
amounts payable under this Plan unless such amendment shall be approved by
the vote of a majority of the outstanding voting securities (as defined in
the Investment Company Act) of the Series. All material amendments of the
Plan, including the addition or deletion of categories of expenditures which
are reimbursable hereunder, shall be approved by a majority of the Board of
Directors or the Trustees of the Fund and a majority of the Rule 12b-1
Directors or Trustees by votes cast in person at a meeting called for the
purpose of voting on the Plan.
8. Non-interested Directors or Trustees
While the Plan is in effect, the selection and nomination of the
Directors or Trustees who are not "interested persons" of the Fund
(non-interested Directors or Trustees) shall be committed to the discretion of
the non-interested Directors or Trustees.
9. Records
The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Section 4 hereof, for a period of not less
than six years from the date of effectiveness of the Plan, such agreements or
6
<PAGE>
reports, and for at least the first two years in an easily accessible place.
10. Liabilities of the Fund
The name Prudential Government Securities Trust is the designation of
the Trustees under a Declaration of Trust, dated September 22, 1981, as
thereafter amended, and all persons dealing with the Fund must look solely to
the property of the Fund for the enforcement of any claims against the Fund
as neither the Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Funds.
Dated: November 20, 1990
as amended and restated on
July 1, 1993
