<PAGE>
Portfolio of Investments PRUDENTIAL GOVERNMENT SECURITIES TRUST
May 31, 1995 (Unaudited) MONEY MARKET SERIES
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Federal Farm Credit Bank--10.8%
$19,000 5.375%, 8/1/95 $ 18,996,058
16,250 6.65%, 8/1/95 16,251,842
9,900 6.56%, 11/14/95 9,893,616
16,600 5.97%, 2/23/96, F.R.N. 16,593,928
------------
61,735,444
- ------------------------------------------------------------
Federal Home Loan Bank--17.1%
12,000 5.78%, 6/5/95, F.R.N. 11,999,700
10,100 5.625%, 8/23/95 10,098,852
14,150 6.07%, 9/1/95 13,930,502
2,500 5.92%, 10/13/95 2,444,911
4,500 5.92%, 10/19/95 4,396,400
10,000 5.98%, 11/1/95 9,745,850
6,000 6.787%, 2/15/96 5,992,380
6,930 6.85%, 2/28/96 6,935,991
15,000 5.97%, 3/8/96, F.R.N. 14,980,487
6,000 6.22%, 3/22/96 5,694,183
9,000 6.015%, 6/3/96 8,985,750
2,500 6.11%, 6/3/96, F.R.N. 2,498,775
------------
97,703,781
- ------------------------------------------------------------
Federal Home Loan Mortgage Corporation--2.1%
5,145 8.70%, 7/6/95 5,156,117
7,375 5.80%, 2/1/96 7,083,892
------------
12,240,009
- ------------------------------------------------------------
Federal National Mortgage Association--18.6%
28,000 5.80%, 6/1/95 28,000,000
4,000 11.15%, 6/12/95 4,005,228
3,150 5.25%, 6/30/95 3,146,909
13,075 5.90%, 8/14/95 12,916,429
15,000 5.90%, 8/17/95 14,810,709
15,000 6.02%, 8/25/95, F.R.N. 15,000,000
Federal National Mortgage Association (cont'd.)
$4,050 6.05%, 9/1/95 $ 3,987,382
10,000 5.9125%, 10/30/95 9,996,902
3,750 8.80%, 11/10/95 3,781,460
8,685 5.825%, 11/13/95 8,453,129
2,590 6.24%, 12/8/95 2,504,703
------------
106,602,851
- ------------------------------------------------------------
Student Loan Marketing Association--9.5%
9,000 6.12%, 6/2/95, F.R.N. 9,000,060
17,000 6.17%, 8/7/95, F.R.N. 17,009,166
6,600 6.17%, 3/20/96, F.R.N. 6,610,596
10,000 6.04%, 4/16/96, F.R.N. 10,000,000
12,000 5.48%, 6/1/96, F.R.N. 11,984,396
------------
54,604,218
- ------------------------------------------------------------
Repurchase Agreements(a)--42.7%
93,981 Joint Repurchase Agreement Account
6.137%, 6/1/95 (Note 5) 93,981,000
11,017 Morgan Stanley & Co., Inc., 5.97%,
dated 5/25/95, due 6/1/95 in the
amount of $11,029,789 (cost
$11,017,000; the value of the
collateral including accrued
interest is $12,050,822) 11,017,000
35,469 Morgan Stanley & Co., Inc., 6.01%,
dated 5/30/95, due 6/1/95 in the
amount of $35,480,843 (cost
$35,469,000; the value of the
collateral including accrued
interest is $37,029,278) 35,469,000
26,000 Bear, Stearns & Co., 6.00%, dated
5/30/95, due 6/2/95 in the amount
of $26,013,000 (cost $26,000,000;
the value of the collateral
including accrued interest is
$26,630,741) 26,000,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3 -----
<PAGE>
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
MONEY MARKET SERIES
Portfolio of Investments May 31, 1995 (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Repurchase Agreements(a) (cont'd.)
$50,000 Nomura Securities International,
Inc., 6.00%, dated 5/30/95, due
6/6/95 in the amount of
$50,058,333 (cost $50,000,000; the
value of the collateral including
accrued interest is $51,000,079) $ 50,000,000
18,000 Smith Barney, Inc., 6.00%, dated
5/30/95, due 6/6/95 in the amount
of $18,021,000 (cost $18,000,000;
the value of the collateral
including accrued interest is
$18,360,015) 18,000,000
10,000 Smith Barney, Inc., 5.99%, dated
5/17/95, due 6/19/95 in the amount
of $10,054,908 (cost $10,000,000;
the value of the collateral
including accrued interest is
$10,200,009) 10,000,000
------------
244,467,000
- ------------------------------------------------------------
Total Investments--100.8%
(amortized cost $577,353,303(b)) 577,353,303
Liabilities in excess of other
assets--(0.8%) (4,824,904)
------------
Net Assets--100% $572,528,399
------------
------------
</TABLE>
- ---------------
F.R.N.--Floating Rate Note.
(a) Repurchase Agreements are collateralized by U.S.
Treasury or Federal agency obligations.
(b) Federal income tax basis of portfolio securities is the
same as for financial reporting purposes.
- --------------------------------------------------------------------------------
- ----- 4 See Notes to Financial Statements.
<PAGE>
<PAGE>
Portfolio of Investments PRUDENTIAL GOVERNMENT SECURITIES TRUST
May 31, 1995 (Unaudited) INTERMEDIATE TERM SERIES
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--97.3%
- ------------------------------------------------------------
Federal Home Loan Mortgage Corporation--1.8%
$3,638 7.184%, 10/1/23 $ 3,763,932
- ------------------------------------------------------------
Federal National Mortgage Association--15.6%
9,760 6.50%, 2/1/25 10,077,475
4,978 6.50%, 3/1/25 5,134,921
6,570 6.75%, 3/1/25 6,763,845
10,786 9.00%, 4/1/25 11,237,122
------------
33,213,363
- ------------------------------------------------------------
Government National Mortgage Association--4.8%
9,789 9.00%, 6/15/98-9/15/09 10,247,686
- ------------------------------------------------------------
United States Treasury Notes--75.1%
25,000(c) 4.00%, 1/31/96 24,691,500
5,000 7.50%, 12/31/96 5,123,450
17,000(c) 4.75%, 2/15/97 16,689,240
16,000(c) 8.50%, 4/15/97 16,737,440
10,000 7.375%, 11/15/97 10,328,100
7,000 6.125%, 5/15/98 7,036,120
6,000 7.50%, 10/31/99 6,329,040
7,000 7.75%, 11/30/99 7,458,290
6,000(c) 7.25%, 8/15/04 6,378,720
35,000(d) 7.875%, 11/15/04 38,784,200
5,000 7.50%, 2/15/05 5,420,300
15,000 6.50%, 5/15/05 15,229,650
------------
160,206,050
------------------------------------------------------------
Total long-term investments
(cost $201,061,179) 207,431,031
Joint Repurchase Agreement Account,
$965 6.137%, 6/1/95 (Note 5)
(cost $965,000) $ 965,000
- ------------------------------------------------------------
Total Investments--97.7%
(cost $202,026,179; Note 4) 208,396,031
Other assets in excess of
liabilities--2.3% 4,838,534
------------
Net Assets--100% $213,234,565
------------
------------
</TABLE>
- ---------------
(c) Asset segregated for dollar rolls.
(d) Security on loan.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5 -----
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
U.S. TREASURY MONEY MARKET SERIES
Portfolio of Investments May 31, 1995 (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
United States Treasury Bills--65.5%
$50,000 5.79%, 6/15/95 $ 49,895,458
25,000 5.80%, 6/15/95 24,947,639
22,500 5.84%, 6/15/95 22,452,550
2,897 5.81%, 6/22/95 2,883,658
25,000 5.82%, 6/22/95 24,915,125
50,000 5.695%, 8/24/95 49,335,583
5,426 5.64%, 8/31/95 5,348,643
6,907 5.64%, 11/16/95 6,725,208
------------
186,503,864
- ------------------------------------------------------------
United States Treasury Bond--18.3%
51,908 8.375%, 8/15/95 52,160,722
- ------------------------------------------------------------
United States Treasury Notes--13.8%
9,050 4.625%, 8/15/95 9,024,084
5,000 3.875%, 9/30/95 4,963,529
5,000 8.625%, 10/15/95 5,043,800
10,000 4.25%, 11/30/95 9,906,408
5,500 4.625%, 2/15/96 5,425,592
5,000 5.125%, 3/31/96 4,938,946
------------
39,302,359
- ------------------------------------------------------------
Total Investments--97.6%
(amortized cost $277,966,945(b)) 277,966,945
Other assets in excess of
liabilities--2.4% 6,907,217
------------
Net Assets--100% $284,874,162
------------
------------
</TABLE>
- ---------------
(b) Federal income tax basis of portfolio securities is the same as for
financial reporting purposes.
- --------------------------------------------------------------------------------
- ----- 6 See Notes to Financial Statements.
<PAGE>
<PAGE>
Statement of Assets and Liabilities
May 31, 1995 (Unaudited) PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.
Treasury
Money Money
Market Intermediate Market
Assets
Series Term Series Series
<S>
<C> <C> <C>
------------ ------------ ------------
Investments, at value (cost $577,353,303, $202,026,179 and $277,966,945,
respectively).............................................................
$577,353,303 $208,396,031 $277,966,945
Cash........................................................................
147,712 378 263,301
Collateral for securities on loan, at value.................................
-- 39,583,000 --
Receivable for investments sold.............................................
-- 10,385,938 136,070,446
Receivable for Series shares sold...........................................
8,521,653 55,336 3,393,512
Interest receivable.........................................................
3,397,048 2,078,786 1,602,783
Fees receivable on securities loaned........................................
-- 16,347 --
Deferred expenses and other assets..........................................
21,855 7,285 16,256
------------ ------------ ------------
Total assets.............................................................
589,441,571 260,523,101 419,313,243
------------ ------------ ------------
Liabilities
Payable upon return of securities loaned....................................
-- 39,583,000 --
Payable for investments purchased...........................................
8,985,750 7,046,912 113,714,894
Payable for Series shares reacquired........................................
6,638,353 111,968 20,118,365
Dividends payable...........................................................
666,591 298,697 370,231
Accrued expenses and other liabilities......................................
397,648 156,127 119,462
Due to Manager..............................................................
191,779 72,282 98,947
Due to Distributors.........................................................
33,051 19,550 17,182
------------ ------------ ------------
Total liabilities........................................................
16,913,172 47,288,536 134,439,081
------------ ------------ ------------
Net Assets..................................................................
$572,528,399 $213,234,565 $284,874,162
------------ ------------ ------------
Net assets were comprised of:
Shares of beneficial interest, at par ($.01 per share)......................
$ 5,725,284 $ 221,250 $ 2,848,742
Paid-in capital in excess of par............................................
566,803,115 286,721,205 282,025,420
------------ ------------ ------------
572,528,399 286,942,455 284,874,162
Undistributed net investment income.........................................
-- 2,044,481 --
Accumulated net realized losses.............................................
-- (82,122,223) --
Net unrealized appreciation of investments..................................
-- 6,369,852 --
------------ ------------ ------------
Net assets, May 31, 1995....................................................
$572,528,399 $213,234,565 $284,874,162
------------ ------------ ------------
------------ ------------ ------------
Shares of beneficial interest issued and outstanding........................
572,528,399 22,125,052 284,874,162
------------ ------------ ------------
------------ ------------ ------------
Net asset value.............................................................
$1.00 $9.64 $1.00
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7 -----
<PAGE>
<PAGE>
Statement of Operations
Six Months Ended May 31, 1995 (Unaudited) PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money U.S. Treasury
Market Intermediate Money
Net Investment Income
Series Term Series Market Series
<S>
<C> <C> <C>
----------- ------------ -------------
Income
Interest.................................................................
$17,541,172 $ 7,027,370 $ 9,995,058
Income from securities loaned............................................
-- 188,846 --
----------- ------------ -------------
17,541,172 7,216,216 9,995,058
----------- ------------ -------------
Expenses
Management fee...........................................................
1,183,106 438,466 707,447
Distribution fee.........................................................
369,721 227,698 221,077
Transfer agent's fees and expenses.......................................
656,000 163,000 41,000
Custodian's fees and expenses............................................
71,000 83,000 31,000
Registration fees........................................................
25,000 30,000 25,000
Reports to shareholders..................................................
47,000 33,000 19,500
Audit fee................................................................
19,000 17,500 17,500
Insurance expense........................................................
12,000 4,000 6,000
Trustees' fees...........................................................
6,000 6,000 6,000
Legal fees...............................................................
3,000 2,000 2,500
Amortization of deferred organization expenses...........................
-- -- 3,955
Miscellaneous............................................................
1,161 3,321 1,655
----------- ------------ -------------
Total expenses...........................................................
2,392,988 1,007,985 1,082,634
----------- ------------ -------------
Net investment income.......................................................
15,148,184 6,208,231 8,912,424
----------- ------------ -------------
Realized and Unrealized Gain on Investments
Net realized gain on investment transactions................................
17,325 856,522 82,090
Net change in unrealized appreciation of investments........................
-- 9,971,050 --
----------- ------------ -------------
Net gain on investments.....................................................
17,325 10,827,572 82,090
----------- ------------ -------------
Net Increase in Net Assets Resulting from Operations........................
$15,165,509 $ 17,035,803 $ 8,994,514
----------- ------------ -------------
----------- ------------ -------------
</TABLE>
- --------------------------------------------------------------------------------
- ----- 8 See Notes to Financial Statements.
<PAGE>
<PAGE>
Statement of Changes in Net Assets
(Unaudited) PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Treasury
Money Market
Intermediate Money Market
Series Term
Series Series
-------------------------------
- ------------------------------- -------------------------------
<S> <C> <C> <C>
<C> <C> <C>
Six months Six months
Six months
ended Year ended ended
Year ended ended Year ended
Increase (Decrease) May 31, November 30, May 31,
November 30, May 31, November 30,
in Net Assets 1995 1994 1995
1994 1995 1994
-------------- -------------- --------------
-------------- -------------- --------------
Operations
Net investment income.... $ 15,148,184 $ 23,366,223 $ 6,208,231
$ 16,852,611 $ 8,912,424 $ 9,891,712
Net realized gain (loss)
on investment
transactions.......... 17,325 84,741 856,522
(15,205,293) 82,090 55,159
Net change in unrealized
appreciation/
depreciation of
investments........... -- -- 9,971,050
(10,351,690) -- --
-------------- -------------- --------------
-------------- -------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 15,165,509 23,450,964 17,035,803
(8,704,372) 8,994,514 9,946,871
-------------- -------------- --------------
-------------- -------------- --------------
Net equalization debits..... -- -- (97,842)
(3,335) -- --
-------------- -------------- --------------
-------------- -------------- --------------
Dividends and distributions
to shareholders:
Dividends to
shareholders.......... (15,165,509) (23,450,964) (6,292,553)
(16,669,920) (8,994,514) (9,946,871)
Tax return of capital
distribution.......... -- -- --
(3,852,402) -- --
-------------- -------------- --------------
-------------- -------------- --------------
Total dividends and
distributions to
shareholders............. (15,165,509) (23,450,964) (6,292,553)
(20,522,322) (8,994,514) (9,946,871)
-------------- -------------- --------------
-------------- -------------- --------------
Series share transactions*
Net proceeds from shares
subscribed............ 890,312,487 1,978,695,920 5,764,181
86,065,731 1,606,210,817 1,582,592,660
Net asset value of shares
issued to shareholders
in reinvestment of
dividends and
distributions......... 14,257,843 22,318,739 4,091,646
14,086,719 7,841,587 9,338,121
Cost of shares
reacquired............ (969,385,378) (2,283,173,810) (49,246,777)
(176,886,461) (1,623,162,489) (1,582,924,124)
-------------- -------------- --------------
-------------- -------------- --------------
Net increase (decrease)
in net assets from
Series share
transactions.......... (64,815,048) (282,159,151) (39,390,950)
(76,734,011) (9,110,085) 9,006,657
-------------- -------------- --------------
-------------- -------------- --------------
Total increase (decrease)... (64,815,048) (282,159,151) (28,745,542)
(105,964,040) (9,110,085) 9,006,657
Net Assets
Beginning of period...... 637,343,447 919,502,598 241,980,107
347,944,147 293,984,247 284,977,590
-------------- -------------- --------------
-------------- -------------- --------------
End of period............ $ 572,528,399 $ 637,343,447 $ 213,234,565
$ 241,980,107 $ 284,874,162 $ 293,984,247
-------------- -------------- --------------
-------------- -------------- --------------
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
- ---------------
*At $1.00 per share for the Money Market Series and the U.S. Treasury Money
Market Series.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 9 -----
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL GOVERNMENT 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
or designated subcustodians, as the case may be under triparty repurchase
agreements, takes possession of the underlying collateral securities, the value
of which exceeds the principal amount of the repurchase transaction, including
accrued interest. If the seller defaults and the value of the collateral
declines or if bankruptcy proceedings are commenced with respect to the seller
of the security, realization of the collateral by the Fund may be delayed or
limited.
Securities Lending: The Intermediate Term Series may lend its U.S. Government
securities to broker-dealers or government securities dealers. The Fund's policy
is to receive collateral on each loan at least equal, at all times, to the
market value of the securities loaned. The Series may bear the risk of delay in
recovery of, or even loss of rights in, the collateral should the borrower of
the securities fail financially. The Series receives compensation for lending
its securities in the form of fees or it retains a portion of interest on the
investment of any cash received as collateral. The Series also continues to
receive interest on the securities loaned, and any gain or loss in the market
price of the securities loaned that may occur during the term of the loan will
be for the account of the Series.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of portfolio
securities are calculated on the identified cost basis. Interest income is
recorded on the accrual basis. The Money Market and the U.S. Treasury Money
Market Series' amortize discounts and premiums on purchases of portfolio
securities as adjustments to income. For the Intermediate Term Series, gains or
losses resulting from discounts or premiums on purchased securities are treated
as capital gains or losses when realized upon disposal.
Dollar Rolls: The Intermediate Term Series enters into dollar roll transactions
in which the Series sells securities for delivery in the current month,
realizing a gain or loss, and simultaneously contracts to repurchase somewhat
similar (same type, coupon and maturity) securities on a specified future date.
During the roll period the Intermediate Term Series forgoes principal and
interest paid on the securities. The Series is compensated by the interest
earned on the cash proceeds of the initial sale and by the lower repurchase
price at the future date. The difference between the sale proceeds and the lower
repurchase price is taken into income. The Intermediate Term Series maintains
a
segregated account, the dollar value of which is equal to its obligations in
respect of dollar rolls.
Federal Income Taxes: For federal income tax purposes, each series of the Fund
is treated as a separate taxable entity. It is each Series' policy to continue
to meet the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable net income to its
shareholders. Therefore, no federal income tax provision is required.
Equalization: The Intermediate Term Series follows the accounting practice known
as equalization by which a portion of the proceeds from sales and costs of
reacquisitions of its shares, equivalent on a per share basis to the amount of
distributable net investment income on the date of the transaction, is credited
or charged to undistributed net investment income. As a result, undistributed
net investment income per share is unaffected by sales or reacquisitions of the
shares.
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with A.I.C.P.A. Statement of
Position 93-2: Determination, Disclosure, and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distributions by Investment
Companies. For the Intermediate Term Series, the effect of applying this
statement was to increase undistributed net investment income and increase
accumulated net realized losses by $92,902 for market discount recognized on
securities sold. 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
- --------------------------------------------------------------------------------
- ----- 10
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
the U.S. Treasury Series and such amount has been deferred and is being
amortized over a period of 60 months ending December, 1995.
Dividends and Distributions: The Money Market Series and U.S. Treasury Money
Market Series declare daily dividends from net investment income and net
short-term capital gains and losses. Dividends are paid monthly.
The Intermediate Term Series declares dividends from net investment income
daily; payment of dividends is made monthly. Distributions of net capital gains,
if any, are made annually.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.
- ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential Mutual Fund Management, Inc.
(``PMF''). Pursuant to this agreement, PMF has responsibility for all investment
advisory services and supervises the subadviser's performance of such services.
PMF has entered into a subadvisory agreement with The Prudential Investment
Corporation (``PIC''); PIC furnishes investment advisory services in connection
with the management of the Fund. PMF pays for the cost of the subadviser's
services, the compensation of officers of the Fund, occupancy and certain
clerical and bookkeeping costs of the Fund. The Fund bears all other costs and
expenses.
The management fee paid to PMF is computed daily and payable monthly, at an
annual rate of .40 of 1% of the average daily net assets of the Intermediate
Term Series and the U.S. Treasury Money Market Series. With respect to the Money
Market Series, the management fee is payable as follows: .40 of 1% of average
daily net assets up to $1 billion, .375 of 1% of average daily net assets
between $1 billion and $1.5 billion and .35 of 1% in excess of $1.5 billion.
To reimburse Prudential Mutual Fund Distributors, Inc. (``PMFD'') as distributor
of the shares of the Money Market Series and the U.S. Treasury Money Market
Series, each series has entered into a distribution agreement pursuant to which
each series pays PMFD a reimbursement, accrued daily and payable monthly, at an
annual rate of .125% of each of the series' average daily net assets. PMFD pays
various broker-dealers, including Prudential Securities Incorporated (``PSI'')
and Pruco Securities Corporation (``Pruco''), affiliated broker-dealers, for
account servicing fees and for the expenses incurred by such broker-dealers.
To reimburse PSI for its expenses as distributor of the Intermediate Term
Series, the Intermediate Term Series has entered into a distribution agreement
and a plan of distribution pursuant to which it pays PSI a fee, accrued daily
and payable monthly, at an annual rate of .25 of 1% of the lesser of (a) the
aggregate sales of shares issued (not including reinvestment of dividends and
distributions) on or after July 1, 1985 (the effective date of the plan) less
the aggregate net asset value of any such shares redeemed, or (b) the average
net asset value of the shares issued after the effective date of the plan.
Distribution expenses include commission credits to PSI branch offices for
payments of commissions and account servicing fees to financial advisers and an
allocation on account of overhead and other distribution-related expenses, the
cost of printing and mailing prospectuses to potential investors and of
advertising incurred in connection with the distribution of series shares. In
addition, PSI pays other broker-dealers, including Pruco, an affiliated
broker-dealer, for account servicing fees and other expenses incurred by such
broker-dealers in distributing these shares.
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 six months ended May 31,
1995, the Fund incurred fees of approximately $495,000, $111,000, and $34,000,
respectively, for the Money Market Series, Intermediate Term Series, and U.S.
Treasury Money Market Series. As of May 31, 1995, approximately $85,000,
$18,000, and $8,000 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 other than short-term investments,
for the Intermediate Term Series for the six months ended May 31, 1995 were
$255,432,969 and $253,120,731, respectively.
For the Intermediate Term Series, the cost basis of investments for federal
income tax purposes was $202,128,718 and, accordingly, as of May 31, 1995, net
unrealized appreciation of investments for federal income tax purposes was
$6,267,313 (gross urealized appreciation $7,127,061; gross unrealized
depreciation--$859,748).
For federal income tax purposes, the Intermediate Term Series has a capital loss
carryforward as of November 30, 1994 of approximately $79,007,000 of which
$25,173,000 expires in 1995, $11,426,000 expires in 1996, $19,180,000 expires
in
1997, $6,864,000 expires in 1998,
- --------------------------------------------------------------------------------
11 -----
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
$4,746,000 expires in 1999, $235,000 expires in 2001, and $11,383,000 expires
in
2002. Accordingly, no capital gains distribution is expected to be paid to
shareholders until net gains have been realized in excess of such carryforward.
The Intermediate Term Series will elect to treat net capital losses of
approximately $3,428,300 incurred in the one month period ended November 30,
1994 as having incurred in the following fiscal year.
- ------------------------------------------------------------
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 May 31, 1995, the Money
Market Series and the Intermediate Term Series had 9.69% and .10%, respectively,
undivided interests in the repurchase agreements in the joint account. These
undivided interests represented $93,981,000 and $965,000, respectively, in
principal amount. As of such date, the repurchase agreements in the joint
account and the value of the collateral therefor were as follows:
Bear, Stearns & Co., 6.125%, in the principal amount of $280,000,000, repurchase
price $280,047,639, due 6/1/95. The value of the collateral including accrued
interest is $285,803,012.
CS First Boston Corp., 6.14%, in the principal amount of $280,000,000,
repurchase price $280,047,756, due 6/1/95. The value of the collateral including
accrued interest is $285,702,358.
Goldman, Sachs & Co., 6.14%, in the principal amount of $310,000,000, repurchase
price $310,052,872, due 6/1/95. The value of the collateral including accrued
interest is $316,254,589.
UBS Securities Inc., 6.15%, in the principal amount of $100,000,000, repurchase
price $100,017,083, due 6/1/95. The value of the collateral including accrued
interest is $102,000,930.
- ------------------------------------------------------------
Note 6. Capital
Each series has authorized an unlimited number of shares of beneficial interest
at $.01 par value. Transactions in shares of beneficial interest for the
Intermediate Term Series for the fiscal year ended November 30, 1994 and six
months ended May 31, 1995 were as follows:
<TABLE>
<CAPTION>
Six months
ended Year ended
May 31, November 30,
1995 1994
---------- ------------
<S> <C> <C>
Shares sold.................. 619,879 8,712,001
Shares issued in reinvestment
of dividends and
distributions.............. 440,792 1,465,698
Shares reacquired............ (5,325,953) (18,375,629 )
---------- ------------
Net decrease................. (4,265,282) (8,197,930 )
---------- ------------
---------- ------------
</TABLE>
- ------------------------------------------------------------
Note 7. Proposed Reorganization
On May 4, 1995, the Trustees of the Fund approved an Agreement and Plan of
Reorganization (the ``Plan'') which provides for the transfer of substantially
all of the assets and liabilities of the Prudential Adjustable Rate Securities
Fund, Inc. (``Adjustable Rate'') to the Fund. Class A and Class B shares of
Adjustable Rate would be exchanged at net asset value for shares of equivalent
value of the Fund.
It is expected that the reorganization will take place in late August 1995. The
Fund and Adjustable Rate will each bear their pro-rata share of the costs of the
reorganization, including costs of proxy solicitation.
- ------------------------------------------------------------
Note 8. Proposed Name Change
The Trustees have recommended that the Intermediate Term Series change its name
to ``Short-Intermediate Term Series'' effective August 1, 1995.
- --------------------------------------------------------------------------------
- ----- 12
<PAGE>
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
MONEY MARKET SERIES
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year
Ended November 30,
May 31,
- ------------------------------------------------------------------
1995 1994 1993
1992 1991 1990
<S> <C> <C> <C> <C>
<C> <C>
---------- -------- --------
- ---------- ---------- ----------
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period....................... $ 1.000 $ 1.000 $ 1.000 $
1.000 $ 1.000 $ 1.000
Net investment income.......... 0.026 0.033 0.026
0.035 0.058 0.076
Dividends from net investment
income....................... (0.026) (0.033) (0.026)
(0.035) (0.058) (0.076)
---------- -------- --------
- ---------- ---------- ----------
Net asset value, end of
period....................... $ 1.000 $ 1.000 $ 1.000 $
1.000 $ 1.000 $ 1.000
---------- -------- --------
- ---------- ---------- ----------
---------- -------- --------
- ---------- ---------- ----------
TOTAL RETURN(b):............... 2.59% 3.29% 2.62%
3.57% 5.96% 7.83%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)........................ $572,528 $637,343 $919,503
$1,026,187 $1,212,836 $1,355,058
Average net assets (000)....... $593,178 $732,867 $950,988
$1,113,759 $1,255,014 $ 857,385
Ratios to average net assets:
Expenses, including
distribution fees........ 0.81%(a) 0.77% 0.72%
0.72% 0.65% 0.66%
Expenses, excluding
distribution fees........ 0.68%(a) 0.64% 0.59%
0.60% 0.53% 0.53%
Net investment income....... 5.12%(a) 3.19% 2.56%
3.42% 5.78% 7.52%
</TABLE>
- ---------------
(a) Annualized.
(b) Total return is calculated assuming a purchase of shares on the first
day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total return for a period
of less than one year is not annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 13 -----
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
INTERMEDIATE TERM SERIES
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year
Ended November 30,
May 31,
- ------------------------------------------------------------------
1995 1994 1993
1992 1991 1990
<S> <C> <C> <C> <C>
<C> <C>
---------- -------- --------
- ---------- ---------- ----------
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period....................... $ 9.17 $ 10.06 $ 9.97 $
10.00 $ 9.71 $ 9.96
---------- -------- --------
- ---------- ---------- ----------
Income from investment
operations
Net investment income.......... 0.27 0.64 0.69
0.75 0.82 0.84
Net realized and unrealized
gain (loss) on investment
transactions................. 0.47 (0.89) 0.11
(0.03) 0.31 (0.21)
---------- -------- --------
- ---------- ---------- ----------
Total from investment
operations............... 0.74 (0.25) 0.80
0.72 1.13 0.63
---------- -------- --------
- ---------- ---------- ----------
Less distributions
Dividends from net investment
income....................... (0.27) (0.52) (0.69)
(0.75) (0.84) (0.88)
Tax return of capital
distribution................. -- (0.12) (0.02)
-- -- --
---------- -------- --------
- ---------- ---------- ----------
Total distributions............ (0.27) (0.64) (0.71)
(0.75) (0.84) (0.88)
---------- -------- --------
- ---------- ---------- ----------
Net asset value, end of
period....................... $ 9.64 $ 9.17 $ 10.06 $
9.97 $ 10.00 $ 9.71
---------- -------- --------
- ---------- ---------- ----------
---------- -------- --------
- ---------- ---------- ----------
TOTAL RETURN(b):............... 8.17% (2.58)% 8.26%
7.40% 12.19% 6.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)........................ $213,235 $241,980 $347,944 $
303,451 $ 298,086 $ 328,458
Average net assets (000)....... $219,835 $307,382 $321,538 $
294,388 $ 301,643 $ 354,064
Ratios to average net assets:
Expenses, including
distribution fees........ 0.92%(a) 0.84% 0.80%
0.79% 0.79% 0.88%
Expenses, excluding
distribution fees........ 0.71%(a) 0.63% 0.59%
0.58% 0.63% 0.63%
Net investment income....... 5.66%(a) 5.48% 6.80%
7.47% 8.36% 8.60%
Portfolio turnover rate........ 121% 431% 44%
60% 151% 68%
</TABLE>
- ---------------
(a) Annualized.
(b) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total return for a period
of less than one year is not annualized.
- --------------------------------------------------------------------------------
- ----- 14 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
U.S. TREASURY MONEY MARKET SERIES
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 3,
Six Months
1990(d)
Ended Year Ended November 30,
Through
May 31,
- ---------------------------------- November 30,
1995 1994 1993
1992 1991
<S> <C> <C> <C> <C>
<C>
---------- -------- --------
- -------- ------------
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period....................... $ 1.000 $ 1.000 $ 1.000 $
1.000 $ 1.000
Net investment income.......... 0.026 0.033 0.025
0.034 0.057(c)
Dividends from net investment
income....................... (.026) (0.033) (0.025)
(0.034) (0.057)
---------- -------- --------
- -------- ------------
Net asset value, end of
period....................... $ 1.000 $ 1.000 $ 1.000 $
1.000 $ 1.000
---------- -------- --------
- -------- ------------
---------- -------- --------
- -------- ------------
TOTAL RETURN(b)................ 2.59% 3.31% 2.54%
3.46% 5.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)........................ $284,874 $293,984 $284,978
$233,600 $288,922
Average net assets (000)....... $354,695 $308,454 $273,313
$263,459 $273,203
Ratios to average net assets:
Expenses, including
distribution fees........ 0.61%(a) 0.62% 0.66%
0.66% 0.50%(a)/(c)
Expenses, excluding
distribution fees........ 0.49%(a) 0.50% 0.53%
0.54% 0.38%(a)/(c)
Net investment income....... 5.09%(a) 3.21% 2.49%
3.29% 5.74%(a)/(c)
</TABLE>
- ---------------
(a) Annualized.
(b) Total return is calculated assuming a purchase of shares on the first
day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total return for a period
of less than one year is not annualized.
(c) Net of expense subsidy.
(d) Commencement of investment operations.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 15 -----
<PAGE>
