<PAGE> PAGE 1
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002 C000000 NY
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008 C00AA01 801-31104
008 D01AA01 NEW YORK
008 D02AA01 NY
008 D03AA01 10292
008 A00AA02 THE PURDENTIAL INVESTMENT CORPORATION
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012 A00AA01 PRUDENTIAL MUTUAL FUND SERVICES, INC.
<PAGE> PAGE 2
012 B00AA01 85-4110019
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012 C02AA01 NJ
012 C03AA01 08906
013 A00AA01 PRICE WATERHOUSE
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013 B03AA01 10036
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 5
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<PAGE> PAGE 6
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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<PAGE> PAGE 9
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<PAGE> PAGE 10
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<PAGE> PAGE 11
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<PAGE> PAGE 12
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<PAGE> PAGE 13
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<PAGE> PAGE 14
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<PAGE> PAGE 15
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<PAGE> PAGE 16
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<PAGE> PAGE 17
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<PAGE> PAGE 18
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SIGNATURE SUSAN C. COTE'
TITLE TREASURER
For fiscal year ended (a) November 30, 1993
File number (c) 811-3264
SUB- ITEM 77J
Restatement of Capital Share Account
Effective June 1, 1993 the Prudential Government Securities
Trust (the "Fund"), began accounting and reporting for
distributions to shareholders in accordance with Statement of
Position 93-2: Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. 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 previously reported through November 30, 1992. Net
investment income, net realized gains, and net assets were not
affected by this change.
\RCSA
For period ending (a) November 30, 1993
File number (c) 811-3264
Exhibit 77Q1
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 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.
(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 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 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:
(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").
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.
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 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 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 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 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 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 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
[agr2]gst.mgmt.agr
January 5, 1994
To the Trustees of
Prudential Government Securities Trust
In planning and performing our audits of the financial statements of
Intermediate erm Series, U.S. Treasury Money Market Series and Money
Market Series (constituting Prudential Government Securities Trust,
hereafter referred to as the "Fund") for the year ended November 30, 1993,
we considered the Fund's internal control structure, including procedures
for safeguarding securities, in order to determine our auditing procedures
for the purposes of expressing our opinion on the financial statements and
to comply with the requirements of Form N-SAR, and not to provide
assurance on the internal control structure.
The management of the Fund is responsible for establishing and maintaining
an internal control structure. In fulfilling this responsibility,
estimates and judgments by management are required to assess the expected
benefits and related costs of internal control structure policies and
procedures. Two of the objectives of an internal control structure are to
provide management with reasonable, but not absolute, assurance that
assets are appropriately safeguarded against loss from unauthorized use or
disposition and that transactions are executed in accordance with
management's authorization and recorded properly to permit preparation of
financial statements in conformity with generally accepted accounting
principles.
Because of inherent limitations in any internal control structure, errors
or irregularities may occur and not be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that
it may become inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be
material weaknesses under standards established by the American Institute
of Certified Public Accountants. A material weakness is a condition in
which the design or operation of the specific internal control structure
elements does not reduce to a relatively low level the risk that errors or
irregularities in amounts that would be material in relation to the
financial statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing their
assigned functions. However, we noted no matters involving the internal
control structure, including procedures for safeguarding securities, that
we consider to be material weaknesses as defined above as of November 30,
1993.
This report is intended solely for the information and use of management
and the Securities and Exchange Commission.
Price Waterhouse
