(ICON)
Prudential
Government
Securities Trust
Money Market Series
Short-Intermediate
Term Series
U.S. Treasury Money
Market Series
ANNUAL
REPORT
Nov. 30, 1995
(LOGO)
<PAGE>
Portfolio
Manager's Report
Both money market funds and short-intermediate bond funds have generally
provided good returns over the past year. Investors in money market funds
today are receiving higher yields than they were a year ago, although interest
rates peaked earlier this year. And while investors in short-intermediate bond
funds are receiving declining yields, their net asset value has risen
significantly, putting their total return for the year in double digits.
(That's because bond prices rise as interest rates fall.)
Money Market Series.
The Money Market Series' 7-day current yield was 5.13% on November 30, 1995:
up from 4.69% on November 30, 1994. The Series performed in line with similar
funds measured by Lipper Analytical Services.
Short-Intermediate Term Series.
The Short-Intermediate Term Series' net asset value rose as interest rates
declined. Over the 12 months ended November 30, the Series returned 12.4%,
performing much better than the average Short-Term U.S. Government fund
measured by Lipper Analytical Services.
U.S. Treasury Money Market Series.
The U.S. Treasury Money Market Series' 7-day current yield was 4.99% on
November 30, 1995, up from 4.64% on November 30, 1994. The Series performed
in line with similar funds measured by Lipper Analytical Services.
Falling Rates / Historical Yield Curve. Subject to change.
(CHART>
How Investments Compared.
(As of 11/30/95)
(CHART)
Source: Lipper Analytical Services. Financial markets change, so a mutual
fund's past performance should never be used to predict future results. The
risks to each of the investments listed above are different -- we provide
12-month total return averages for several Lipper mutual fund categories to
show you that reaching for higher yields means tolerating more risk. The
greater the risk, the larger the potential reward or loss. In addition, we've
added historical 20-year average annual returns to show that some of 1995's
returns in the U.S. market (so far) are higher than normal. These returns
assume the reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal. Smaller capitalization stocks
offer greater potential for long term growth but may be more volatile than
larger capitalization stocks. Investors have received higher historical total
returns from stocks than from most other investments.
General Bond Funds provide more income than stock funds, which can help smooth
out their total returns year by year. But their prices still fluctuate
(sometimes significantly) and their returns have been historically lower than
those of stock funds.
General Municipal Debt Funds invest in bonds issued by state governments, state
agencies and/or municipalities. This investment provides income that is usually
exempt from federal and state income taxes.
Money Market Funds attempt to preserve a constant share value; they don't
fluctuate much in price but, historically, their returns have been generally
among the lowest of the major investment categories.
*19 years for General Municipal Debt Funds.
<PAGE>
Money Market Series
The Money Market Series seeks high current income, preservation of capital and
maintenance of liquidity from a portfolio of money market instruments issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
<TABLE>
<CAPTION>
7-Day Weighted Net Asset
Current Avg.Maturity Value Total Net
Yield* (WAM) (NAV) Assets
<S> <C> <C> <C> <C>
Performance
As of
11/30/95
Money Market Series 5.13% 50 days $1 $598 million
IBC/Donoghue's
Money Fund Average** 5.09 45 days $1 N/A
</TABLE>
*Yields will fluctuate from time to time and past performance is not indicative
of future results.
**This is the average 7-day current yield, WAM and NAV of 101 funds in
Donoghue's Money Fund Average/U.S. Government Category for the week ended
November 28.
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 per share.
Money Market Yields
Remain Above 5%.
The Money Market Series' 7-day current yield has been above 5% since February,
when it passed that mark for the first time since 1991. At present, our 7-day
current yield is several percentage points above the rate of inflation (2.6% to
date this year, as measured by the Consumer Price Index).
Interest rates are falling because demand for money has tapered off as economic
growth has slowed. In 1994, the value of all goods and services produced (Gross
Domestic Product) rose by 4.1%. Through the first three quarters of 1995,
GDP has grown by an average of only 2.7%.
Citing receding inflationary pressures, the Federal Reserve eased short-term
rates twice in the second half of 1995, lowering its federal funds target rate
by a total of a half a percentage point to 5.5%. We expect it will further
loosen the money supply in 1996.
U.S. Treasury Money Market Series
The U.S. Treasury Money Market Series seeks high current income consistent with
preservation of capital and maintenance of liquidity from a portfolio of U.S.
Treasury obligations with maturities of 13 months or less. During the last
year, the U.S. Treasury Money Market Series produced yields competitive with
the Donoghue U.S. Treasury Money Fund Averages.
<TABLE>
<CAPTION>
7-Day Weighted Net Asset
Current Avg.Maturity Value Total Net
Yield* (WAM) (NAV) Assets
<S> <C> <C> <C> <C>
Performance
As of
11/30/95
U.S. Treasury Series 4.99% 70 days $1 $339 million
IBC/Donoghue's
100% U.S. Treasury
Money Fund Average** 4.92 59 days $1 N/A
</TABLE>
*Yields will fluctuate from time to time and past performance is not indicative
of future results.
**This is the average 7-day current yield, WAM and NAV of 37 funds in
Donoghue's 100% U.S. Treasury Money Fund Average for the week ended
November 28.
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 per share.
*
We Locked In Yields
As Treasury Rates Fell.
Yields for U.S. Treasury securities are typically lower than those offered by
U.S. government agencies, because they are considered to be of the highest
credit quality. So the Series' yield ended the period slightly below 5%. On
May 31, the 7-day current yield was 5.38%.
To lock in high yields as interest rates fell, we held securities with
maturities that were much longer than those of our competition, through
virtually the entire period. For example, on August 31, our weighted average
maturity was 69 days, 12 days longer than the Donoghue U.S. Government Money
Fund average for similar funds. We ended on November 30 with a WAM of 70
days.
<PAGE>
- - Prudential Government Securities Trust: Short-Intermediate Term Series
- - Lehman Brothers Intermediate Government Bond Index
Prudential Government Securities Trust:
Short-Intermediate Term Series and the Lehman
Bros. Index: Comparing a $10,000 Investment.
Average Annual Total Returns
8.9% Since Inception
7.9% for 10 Years
7.4% for 5 Years
12.4 for 1 Year
Class A
(CHART)
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so an investor's shares, when redeemed, will be
worth more or less than their original cost. The chart on the right is designed
to give you an idea how much the Series' returns can fluctuate from year to
year by measuring the best and worst years in terms of total annual return
since inception of the Series.
This graph is furnished to you in accordance with SEC regulations. It compares
a $10,000 investment in the Prudential Government Securities Trust:
Short-Intermediate Term Series with a similar investment in the Lehman Brothers
Intermediate Government Bond Index by portraying the account value for 10
years, and subsequent account value at the end of this reporting period
(November 30), as measured on a quarterly basis, beginning in 1985. For
purposes of the graph, and unless otherwise indicated, in the accompanying
table it has been assumed all recurring fees (including management fees) were
deducted; and all dividends and distributions were reinvested.
The Index is a weighted index comprised of securities issued or backed by the
U.S. government, its agencies and instrumentalities with a remaining maturity
of one to ten years. The index is unmanaged and includes the reinvestment of
all dividends, but does not reflect the payment of transactions costs and
advisory fees associated with an investment in the Series. The securities that
comprise the Index may differ substantially from the securities in the Series'
portfolio. The Index is not the only one that may be used to characterize
performance of short-intermediate U.S. government bond funds and other indexes
may portray different comparative performance.
<PAGE>
Short-Intermediate Term Series
The Short-Intermediate Term Series invests at least 65% of assets in securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities,
and as much as 35% of its total assets in mortgage-backed securities,
asset-backed securities or corporate debt. The dollar- weighted average
maturity of the Series will be more than two but less than five years.
<TABLE>
<CAPTION>
One Five Ten Since
Year Years Years Inception
<S> <C> <C> <C> <C>
Cumulative
Total Returns*
As of
11/30/95
Short-Intermediate
Term Series 12.4% 42.8% 114.0% 206.7%
Lipper Short
U.S. Government Bond
Fund Average** 10.7 38.8 104.1 199.4
</TABLE>
<TABLE>
<CAPTION>
One Five Ten Since
Year Years Years Inception
<S> <C> <C> <C> <C>
Average
Annual
Total Returns*
As of
11/30/95
Short-Intermediate
Term Series 12.9% 7.3% 7.8% 8.9%
</TABLE>
<TABLE>
<CAPTION>
Dividends & Yields
As of 11/30/95
Total Dividends 30-Day
Paid for 12 Mos. SEC Yield
<S> <C>
$0.54 5.27%
</TABLE>
Past performance is no guarantee of future results. Investment return and
principal will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
*Source: Prudential Mutual Fund Management, Inc. and Lipper Analytical
Services, Inc. Shares of this Series are sold without an initial or contingent
deferred sales charge.
**These are the average returns of 136 funds in the Short-Term U.S. Government
Bond Fund category for one year, 41 funds for five years, eight funds for 10
years, and three funds since inception, as determined by Lipper Analytical
Services, Inc.1Inception Date 9/22/82
In August, the Fund's dollar-weighted average maturity was changed to more
than two years but less than five years. As a result, its performance is now
compared to that of the Lipper Short U.S. Government Bond Fund average, which
includes funds with dollar-weighted maturities of five years or less.
Previously, performance was compared against the Lipper Intermediate U.S.
Government Bond Fund average, which includes funds with dollar-weighted
maturities of five to 10 years.
1995 Was A Very Good
Year For Bond Investors.
As the performance statistics above show, 1995 was an exceptional year for
investors in the Short-Intermediate Term Series.
Driving your net asset value higher was a sharp drop in interest rates. (Of
course, as rates fall, bond prices rise, and vice versa). Interest rates
plunged because economic growth slowed sharply and investors bet that the
Federal Reserve would be lowering interest rates soon to prevent recession.
Over the 12-month period, yield of the five-year U.S. Treasury note plunged by
more than two full percentage points to 5.52%, not far above the rate banks
charge each other on overnight loans (the federal funds rate).
Over the past six months, we have significantly changed our asset allocation,
halving our holdings in U.S. Treasurys, down to 38% from 75% on May 31. We used
the proceeds to purchase government agency bonds, now 29% of net assets and
asset-backed securities, now 5% of net assets. (Asset backed securities can be
collateralized by many types of non-mortgage debt, including auto loans, credit
card accounts, and equipment leases, among others.) As the Treasury market
progressed, we tried to find issues which would participate if rates continued
to decline but would also provide a cushion if they rose.
We've also reined in our duration, a measure of the Series' sensitivity to
interest rates changes. Duration at the end of November was 2.5 years, down
from 3.2 years in May. Although we expect interest rates to decline in the
near future, we expect the rate of decline to be much slower and choppier.
- -------------------------------------------------------------------------------
1
<PAGE>
Looking
Ahead.
Bonds may produce further price gains in 1996 if Treasury yields continue to
fall, as we expect they may. We look for much of the activity in the shorter
portion of the maturity range, so our largest single holding on Nov. 30 was a
three-year U.S. Treasury note (12% of net assets), while six months earlier it
was a 10-year Treasury bond (18% of net assets).
In the money market, we believe that short-term interest rates are too high to
permit the economy to continue to expand, and look for the Federal Reserve to
adjust short-term rates slowly lower.
Barbara L. Kenworthy
Portfolio Manager
Intermediate-Term Series
Bernard D. Whitsett II
Portfolio Manager
Money Market Series &
U.S. Treasury Money Market Series
- -------------------------------------------------------------------------------
2
<PAGE>
President's Letter
(PHOTO)
January 5, 1996
Dear Shareholder:
For many investors, 1995 was a profitable year -- most stock and bond funds
enjoyed healthy returns from the U.S. markets. While climbing returns can tempt
even the most skittish investors to start buying again, it is important to
remember that the stock and bond markets go down just as they go up. At times
like these, remember the importance of working with your Financial Advisor or
Registered Representative to help you find investments that are consistent with
your risk tolerance and time horizon. Your Financial Advisor or Registered
Representative can help you maintain realistic expectations about both the
potential performance and risks associated with your investments.
Shareholder Legislative Action Program.
From time to time we've been informing you about significant legislation
before Congress, such as the American Dream Savings Account, that may
potentially impact mutual fund investors. We want to make it easier for you to
share your views with your Congressional member. So, beginning in 1996, your
shareholder reports will contain postage-paid message cards that you simply
drop in the mail if you want to let your senator or representative know how you
feel about pending legislation.
Fund Profiles.
Over the past year, we've worked to make your shareholder reports more
interesting, informative and easy to read. This year, we'll be turning our
attention to "fund profiles." Some mutual fund companies now offer one to
shareholders along with a full prospectus. The purpose of a fund profile is
to provide a very brief, reader-friendly summary of a fund's objective,
investments, risks and expenses. Would you like to see fund profiles from us?
Please call your Financial Advisor or Registered Representative to share your
views.
As always, thank you for your confidence in Prudential Mutual Funds.
Sincerely,
Richard A. Redeker
President
- ------------------------------------------------------------------------------
3
<PAGE>
Portfolio of Investments PRUDENTIAL GOVERNMENT SECURITIES TRUST
as of November 30, 1995 MONEY MARKET SERIES
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description (Note 1)
<C> <S> <C>
- -------------------------------------------------
Federal Farm Credit Bank--7.4%
$1,985 7.76%, 12/1/95 $ 1,985,000
16,600 5.57%, 2/23/96, F.R.N. 16,598,090
20,000 5.70%, 6/20/96, F.R.N. 19,992,916
6,000 5.75%, 8/1/96 5,993,297
------------
44,569,303
- ------------------------------------------------------------
Federal Home Loan Bank--12.0%
12,000 5.645%, 12/4/95, F.R.N. 11,988,801
2,500 5.66%, 12/4/95, F.R.N. 2,499,384
15,000(d) 5.48%, 12/8/95, F.R.N. 14,993,195
15,000(c) 6.20%, 1/2/96 14,989,667
5,000(e) 5.67%, 1/26/96 4,956,367
6,000 6.787%, 2/15/96 5,997,764
6,930 6.85%, 2/28/96 6,931,960
6,000(e) 6.63%, 3/22/96 5,883,893
3,730 7.39%, 8/2/96 3,765,925
------------
72,006,956
- ------------------------------------------------------------
Federal Home Loan Mortgage Corporation--1.2%
7,375 5.80%, 2/1/96 7,301,332
- ------------------------------------------------------------
Federal National Mortgage Association--26.7%
2,590 6.24%, 12/8/95 2,586,857
23,900(e) 5.64%, 2/7/96, F.R.N. 23,649,900
3,000 5.74%, 2/9/96, F.R.N. 3,000,036
14,605(e) 5.66%, 2/28/96 14,406,413
12,000(e) 5.73%, 4/29/96 11,726,000
9,000 5.71%, 6/10/96 8,986,385
30,000 6.31%, 9/3/96, F.R.N. 29,991,146
14,500 5.813%, 9/27/96, F.R.N. 14,500,000
29,500 5.672%, 10/1/96, F.R.N. 29,482,965
$10,000 5.60%, 11/1/96 $ 9,985,815
11,400 5.72%, 11/20/96, F.R.N. 11,392,532
------------
159,708,049
- ------------------------------------------------------------
Student Loan Marketing Association--7.3%
16,600 5.83%, 12/20/95, F.R.N. 16,603,882
12,000 6.08%, 12/30/95, F.R.N. 11,991,607
10,000 5.70%, 1/16/96, F.R.N. 10,000,000
5,000 5.66%, 2/14/96, F.R.N. 4,996,577
------------
43,592,066
- ------------------------------------------------------------
United States Treasury Notes--1.7%
10,000 6.875%, 10/31/96 10,102,382
- ------------------------------------------------------------
Repurchase Agreements(b)--46.2%
40,000 Smith Barney, Inc., 5.77%, dated
11/07/95, due 01/08/96 in the
amount of $40,397,489 (cost
$40,000,000; the value of the
collateral including accrued
interest is $41,037,448) 40,000,000
20,600 Goldman Sachs & Co., 5.78%, dated
11/09/95, due 01/08/96 in the
amount of $20,798,447 (cost
$20,600,000; the value of the
collateral including accrued
interest is $21,012,000) 20,600,000
8,038 Bear, Stearns & Co., 5.82%, dated
11/30/95, due 12/07/95 in the
amount of $8,049,511 (cost
$8,038,000; the value of the
collateral including accrued
interest is $8,213,515) 8,038,000
30,000 Bear, Stearns & Co., 5.83%, dated
11/27/95, due 12/04/95 in the
amount of $30,034,008 (cost
$30,000,000; the value of the
collateral including accrued
interest is $30,661,341) 30,000,000
- --------------------------------------------------------------------------------
4 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL GOVERNMENT SECURITIES TRUST
as of November 30, 1995 MONEY MARKET SERIES
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
(000) Description (Note 1)
<C> <S> <C>
- -------------------------------------------------
Repurchase Agreements(b) (cont'd.)
$40,000 Dean Witter, Reynolds Inc., 5.83%,
dated 11/27/95, due 12/04/95 in
the amount of $40,045,344 (cost
$40,000,000; the value of the
collateral including accrued
interest is $40,804,552) $ 40,000,000
58,000 Nomura Securities International,
Inc., 5.83%, dated 11/27/95, due
12/04/95 in the amount of
$58,065,749 (cost $58,000,000;
the value of the collateral
including accrued interest is
$59,160,930) 58,000,000
26,497 UBS Securities Inc., 5.81%, dated
11/28/95, due 12/05/95 in the
amount of $26,526,934 (cost
$26,497,000; the value of
collateral including accrued
interest is $27,029,463) 26,497,000
16,000 Smith Barney, Inc., 5.81%, dated
11/29/95, due 12/04/95 in the
amount of $16,012,911 (cost
$16,000,000; the value of the
collateral including accrued
interest is $16,083,665) 16,000,000
$37,000 CS First Boston Corp., 5.80%, dated
11/29/95, due 12/06/95 in the
amount of $37,041,728 (cost
$37,000,000; the value of the
collateral including accrued
interest is $38,024,458) $ 37,000,000
------------
276,135,000
- ------------------------------------------------------------
Total Investments--102.5%
(amortized cost $613,415,088(a)) 613,415,088
Liabilities in excess of other
assets--(2.5%) (15,221,505)
------------
Net Assets--100% $598,193,583
------------
------------
- ---------------
F.R.N.--Floating Rate Note.
(a) Federal income tax basis of portfolio securities is the
same as for financial reporting purposes.
(b) Repurchase Agreements are collateralized by U.S. Treasury
or Federal agency obligations.
(c) When-issued security.
(d) Segregated as collateral for when-issued security.
(e) Percentages quoted represent yields to maturity.
- --------------------------------------------------------------------------------
Notes to Financial Statements.
5
<PAGE>
Portfolio of Investments PRUDENTIAL GOVERNMENT SECURITIES TRUST
as of November 30, 1995 SHORT-INTERMEDIATE TERM SERIES
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
(000) Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--97.2%
- ------------------------------------------------------------
Asset-Backed--4.7%
Chase Manhattan Credit Card Trust
$5,000 5.94%, 8/15/01, F.R.N. $ 4,996,850
Main Place Funding Corporation
5,000 6.085%, 7/17/98, F.R.N. 5,008,594
------------
10,005,444
- ------------------------------------------------------------
Federal Home Loan Mortgage Corporation--15.5%
10,000 6.71%, 6/11/02 10,228,100
15,000 6.82%, 6/29/05 15,330,450
7,354 6.813%, 8/01/24, ARMS 7,377,102
------------
32,935,652
- ------------------------------------------------------------
Federal National Mortgage Association--22.1%
21,510 7.50%, 3/10/99 21,610,882
15,000 6.63%, 6/20/05 15,578,850
9,493 9.00%, 4/01/25 9,955,842
------------
47,145,574
- ------------------------------------------------------------
Government National Mortgage Association--13.7%
9,320 9.00%, 6/15/98 - 9/15/09 9,837,988
10,890 8.00%, 6/15/23 - 8/15/25 11,267,671
7,943 6.00%, 7/20/25 - 11/20/25, ARMS 8,021,827
------------
29,127,486
Resolution Trust Corporation--3.3%
$6,921 6.905%, 12/25/20, CMO, Series 1992 $ 6,964,107
- ------------------------------------------------------------
United States Treasury Notes--37.9%
9,000 7.50%, 12/31/96 9,195,480
16,000(a) 8.50%, 4/15/97 16,644,960
25,700 6.50%, 8/15/97 26,161,797
10,000(a) 7.375%, 11/15/97 10,359,400
5,000(a) 6.25%, 8/31/00 5,140,600
12,600 6.50%, 8/15/05 13,253,625
------------
80,755,862
------------
Total long-term investments
(cost $205,303,802) 206,934,125
------------
SHORT-TERM INVESTMENT--5.3%
- ------------------------------------------------------------
11,398 Joint Repurchase Agreement Account,
5.90%, 12/1/95 (Note 5)
(cost $11,398,000) 11,398,000
- ------------------------------------------------------------
Total Investments--102.5%
(cost $216,701,802; Note 4) 218,332,125
Liabilities in excess of other
assets--(2.5%) (5,335,689)
------------
Net Assets--100% $212,996,436
------------
------------
</TABLE>
- ---------------
(a) Asset segregated for dollar rolls.
ARMS--Adjustable Rate Mortgage Security.
CMO--Collateralized Mortgage Obligation.
F.R.N.--Floating Rate Note.
- --------------------------------------------------------------------------------
6 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
U.S. TREASURY MONEY MARKET SERIES
Portfolio of Investments as of November 30, 1995
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
United States Treasury Bills--77.4%
$75,000 5.625%, 12/14/95 $ 74,847,747
64,153 5.37%, 12/21/95 63,961,610
1,266 5.40%, 12/21/95 1,262,202
1,082 5.42%, 12/21/95 1,078,742
3,689 5.515%, 12/21/95 3,677,697
6,481 5.54%, 12/21/95 6,461,052
21,674 5.625%, 12/21/95 21,606,269
25,000 5.63%, 12/21/95 24,921,806
25,000 5.64%, 12/21/95 24,921,667
19,000 5.365%, 2/8/96 18,804,625
11,457 5.425%, 2/8/96 11,337,871
10,000 5.355%, 2/15/96 9,886,950
------------
262,768,238
- ------------------------------------------------------------
United States Treasury Notes--28.2%
5,500 4.625%, 2/15/96 5,478,166
5,000 5.125%, 3/31/96 4,975,699
15,390 7.75%, 3/31/96 15,495,806
7,500 9.375%, 4/15/96 7,599,919
10,000 5.50%, 4/30/96 9,986,315
36,000 7.375%, 5/15/96 36,284,241
15,000 6.125%, 7/31/96 15,053,527
657 7.875%, 7/31/96 665,594
------------
95,539,267
- ------------------------------------------------------------
Total Investments--105.6%
(amortized cost $358,307,505(a)) 358,307,505
Liabilities in excess of other
assets--(5.6%) (18,973,171)
------------
Net Assets--100% $339,334,334
------------
------------
</TABLE>
- ---------------
(a) Federal income tax basis of portfolio securities is the same as for
financial reporting purposes.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE>
Statement of Assets and Liabilities
November 30, 1995 PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.
Treasury
Money Short- Money
Market Intermediate Market
Assets
Series Term Series Series
<S>
<C> <C> <C>
------------ ------------ ------------
Investments, at value (cost $613,415,088, $216,701,802 and $358,307,505,
respectively).............................................................
$613,415,088 $218,332,125 $358,307,505
Cash........................................................................
87,271 -- 12,240
Receivable for investments sold.............................................
-- 32,377,599 74,768,056
Interest receivable.........................................................
3,172,886 3,216,974 898,319
Receivable for Series shares sold...........................................
2,742,918 57,881 4,949,719
Deferred expenses and other assets..........................................
12,221 4,525 7,334
------------ ------------ ------------
Total assets.............................................................
619,430,384 253,989,104 438,943,173
------------ ------------ ------------
Liabilities
Payable for investments purchased...........................................
14,989,667 40,146,036 84,963,758
Payable for Series shares reacquired........................................
5,388,612 275,980 14,174,206
Dividends payable...........................................................
602,145 288,363 327,563
Due to Manager..............................................................
198,448 61,985 114,824
Due to Distributors.........................................................
32,859 18,400 19,088
Accrued expenses and other liabilities......................................
25,070 201,904 9,400
------------ ------------ ------------
Total liabilities........................................................
21,236,801 40,992,668 99,608,839
------------ ------------ ------------
Net Assets..................................................................
$598,193,583 $212,996,436 $339,334,334
------------ ------------ ------------
------------ ------------ ------------
Net assets were comprised of:
Shares of beneficial interest, at par ($.01 per share)...................
$ 5,981,936 $ 218,689 $ 3,393,343
Paid-in capital in excess of par.........................................
592,211,647 262,790,304 335,940,991
------------ ------------ ------------
598,193,583 263,008,993 339,334,334
Undistributed net investment income......................................
-- 2,191,284 --
Accumulated net realized losses..........................................
-- (53,834,164) --
Net unrealized appreciation of investments...............................
-- 1,630,323 --
------------ ------------ ------------
Net assets, November 30, 1995...............................................
$598,193,583 $212,996,436 $339,334,334
------------ ------------ ------------
------------ ------------ ------------
Shares of beneficial interest issued and outstanding........................
598,193,583 21,868,861 339,334,334
------------ ------------ ------------
------------ ------------ ------------
Net asset value.............................................................
$1.00 $9.74 $1.00
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
8 See Notes to Financial Statements.<PAGE>
<PAGE>
Statement of Operations
Year Ended November 30, 1995 PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money Short- U.S. Treasury
Market Intermediate Money
Net Investment Income
Series Term Series Market Series
<S>
<C> <C> <C>
----------- ------------ -------------
Income
Interest.................................................................
$35,446,030 $$13,976,899 $ 19,441,897
Income from securities lending...........................................
-- 216,951 --
----------- ------------ -------------
35,446,030 14,193,850 19,441,897
----------- ------------ -------------
Expenses
Management fee...........................................................
2,390,395 838,085 1,381,478
Distribution fee.........................................................
746,998 419,803 431,712
Transfer agent's fees and expenses.......................................
1,159,000 285,000 121,000
Custodian's fees and expenses............................................
110,000 102,000 37,000
Registration fees........................................................
100,000 65,000 50,000
Reports to shareholders..................................................
95,000 155,000 49,000
Audit fee................................................................
42,000 39,000 39,000
Trustees' fees...........................................................
12,000 12,000 12,000
Insurance expense........................................................
20,000 8,000 10,200
Legal fees...............................................................
7,000 63,000 5,000
Amortization of deferred organization expenses...........................
-- -- 7,900
Miscellaneous............................................................
4,381 7,051 2,875
----------- ------------ -------------
Total expenses........................................................
4,686,774 1,993,939 2,147,165
----------- ------------ -------------
Net investment income.......................................................
30,759,256 12,199,911 17,294,732
----------- ------------ -------------
Realized and Unrealized Gain on Investments
Net realized gain on investment transactions................................
39,057 7,255,112 251,743
Net change in unrealized appreciation of investments........................
-- 5,231,521 --
----------- ------------ -------------
Net gain on investments.....................................................
39,057 12,486,633 251,743
----------- ------------ -------------
Net Increase in Net Assets Resulting from Operations........................
$30,798,313 $ 24,686,544 $ 17,546,475
----------- ------------ -------------
----------- ------------ -------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
9
<PAGE>
Statement of Changes in Net Assets PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Short- U.S. Treasury
Money Market
Intermediate Money Market
Series Term
Series Series
-------------------------------
- ------------------------------- -------------------------------
Increase (Decrease) Year ended
November 30,
- -----------------------------------------------------------------------------
- ----------------------
in Net Assets 1995 1994 1995
1994 1995 1994
-------------- -------------- --------------
-------------- -------------- --------------
<S> <C> <C> <C>
<C> <C> <C>
Operations
Net investment income.... $ 30,759,256 $ 23,366,223 $ 12,199,911
$ 16,852,611 $ 17,294,732 $ 9,891,712
Net realized gain (loss)
on investment
transactions.......... 39,057 84,741 7,255,112
(15,205,293) 251,743 55,159
Net change in unrealized
appreciation/depreciation
of investments........ -- -- 5,231,521
(10,351,690) -- --
-------------- -------------- --------------
-------------- -------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 30,798,313 23,450,964 24,686,544
(8,704,372) 17,546,475 9,946,871
-------------- -------------- --------------
-------------- -------------- --------------
Net equalization debits..... -- -- (413,787)
(3,335) -- --
-------------- -------------- --------------
-------------- -------------- --------------
Dividends and distributions
to shareholders:
Dividends to
shareholders.......... (30,798,313) (23,450,964) (11,844,750)
(16,669,920) (17,546,475) (9,946,871)
Tax return of capital
distribution to
shareholders.......... -- -- --
(3,852,402) -- --
-------------- -------------- --------------
-------------- -------------- --------------
Total dividends and
distributions to
shareholders............. (30,798,313) (23,450,964) (11,844,750)
(20,522,322) (17,546,475) (9,946,871)
-------------- -------------- --------------
-------------- -------------- --------------
Series share transactions(a)
Net proceeds from shares
subscribed............ 1,668,939,755 1,978,695,920
40,102,462(b) 86,065,731 2,801,540,919 1,582,592,660
Net asset value of shares
issued to shareholders
in reinvestment of
dividends and
distributions......... 29,404,107 22,318,739 7,611,953
14,086,719 15,973,007 9,338,121
Cost of shares
reacquired............ (1,737,493,726) (2,283,173,810) (89,126,093)
(176,886,461) (2,772,163,839) (1,582,924,124)
-------------- -------------- --------------
-------------- -------------- --------------
Net increase (decrease)
in net assets from
Series share
transactions.......... (39,149,864) (282,159,151) (41,411,678)
(76,734,011) 45,350,087 9,006,657
-------------- -------------- --------------
-------------- -------------- --------------
Total increase (decrease)... (39,149,864) (282,159,151) (28,983,671)
(105,964,040) 45,350,087 9,006,657
Net Assets
Beginning of year........... 637,343,447 919,502,598 241,980,107
347,944,147 293,984,247 284,977,590
-------------- -------------- --------------
-------------- -------------- --------------
End of year................. $ 598,193,583 $ 637,343,447 $ 212,996,436
$ 241,980,107 $ 339,334,334 $ 293,984,247
-------------- -------------- --------------
-------------- -------------- --------------
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
- ---------------
(a) At $1.00 per share for the Money Market Series and the U.S. Treasury Money
Market Series.
(b) Includes proceeds of $28,023,926 from the acquisition of the Prudential
Adjustable Rate Securities Fund, Inc.
- --------------------------------------------------------------------------------
10 See Notes to Financial Statements.<PAGE>
<PAGE>
Notes to Financial Statements 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
Short-Intermediate Term Series (formerly 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 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 Short-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 Short-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 Short-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 Short-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 Short-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 Short-Intermediate Term
Series maintains a segregated account, the dollar value of which is equal to its
obligations in respect of dollar rolls. There were no dollar rolls outstanding
as of November 30, 1995.
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 Short-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 Short-Intermediate Term Series, the
- --------------------------------------------------------------------------------
11
<PAGE>
Notes to Financial Statements PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
effect of applying this statement was to increase undistributed net investment
income by $116,167 for market discount recognized on securities sold, decrease
accumulated net realized losses by $21,796,567, and decrease paid-in capital in
excess of par by $21,912,734. The reduction in accumulated net realized losses
was due to the expiration of a portion of the capital loss carryforward. 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 was deferred and 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 Short-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
Short-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.
The Fund had a distribution agreement with Prudential Mutual Fund Distributors,
Inc. (``PMFD''), which acted as the distributor of the shares of the Money
Market Series and the U.S. Treasury Money Market Series through January 1, 1996.
Effective January 2, 1996, Prudential Securities Incorporated (``PSI'') assumed
these responsibilities. The Fund compensates the distributors for distributing
and servicing each of the series' shares, pursuant to plans of distribution,
regardless of expenses actually incurred by them. The distribution fees are
accrued daily and payable monthly at an annual rate of .125% of each of the
series' average daily net assets. The distributors pay various broker-dealers
for account servicing fees and for the expenses incurred by such broker-dealers.
The Fund compensates PSI for its expenses as distributor of the
Short-Intermediate Term Series. The Short-Intermediate Term Series 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 year ended November 30,
1995, the Fund incurred fees of approximately $986,000, $211,000, and $108,000,
respectively, for the Money Market Series, Short-Intermediate Term Series, and
U.S. Treasury Money Market Series. 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 Short-Intermediate Term Series for the year ended November 30, 1995 were
$436,116,097 and $465,020,126, respectively.
- --------------------------------------------------------------------------------
12
<PAGE>
Notes to Financial Statements PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
For the Short-Intermediate Term Series, the cost basis of investments for
federal income tax purposes was substantially the same as for reporting purposes
and, accordingly, as of November 30, 1995, net unrealized appreciation of
investments for federal income tax purposes was $1,630,323 (gross urealized
appreciation $2,224,711; gross unrealized depreciation-- $594,388).
For federal income tax purposes, the Short-Intermediate Term Series has a
capital loss carryforward as of November 30, 1995 of approximately $53,834,000
of which $11,426,000 expires in 1996, $19,180,000 expires in 1997, $6,864,000
expires in 1998, $4,746,000 expires in 1999, $235,000 expires in 2001, and
$11,383,000 expires in 2002. Such carryforward amount is after realization of
approximately $3,260,000 in net taxable gains recognized during the fiscal year
ended November 30, 1995. Accordingly, no capital gains distribution is expected
to be paid to shareholders until net gains have been realized in excess of such
carryforward. During the fiscal year ended November 30, 1995, approximately
$21,913,000 of the capital loss carryforward expired unused.
- ------------------------------------------------------------
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, 1995, the
Short-Intermediate Term Series had a 1.09% undivided interest in the repurchase
agreements in the joint account. This undivided interest represented $11,398,000
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., 5.90%, in the principal amount of $295,000,000, repurchase
price $295,048,347, due 12/1/95. The value of the collateral including accrued
interest was $301,169,389.
CS First Boston Corp., 5.91%, in the principal amount of $185,000,000,
repurchase price $185,030,371, due 12/1/95. The value of the collateral
including accrued interest was $188,765,433.
Goldman, Sachs & Co., 5.90%, in the principal amount of $160,025,000, repurchase
price $160,051,226, due 12/1/95. The value of the collateral including accrued
interest was $163,225,834.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 5.89%, in the principal amount of
$35,000,000, repurchase price $35,005,726, due 12/1/95. The value of the
collateral including accrued interest was $35,700,962.
Sanwa Bank Limited, 5.90%, in the principal amount of $75,000,000, repurchase
price $75,012,292, due 12/1/95. The value of the collateral including accrued
interest was $76,500,873.
Smith Barney, Inc., 5.89%, in the principal amount of $295,000,000, repurchase
price $295,048,265, due 12/1/95. The value of the collateral including accrued
interest was $300,900,696.
- ------------------------------------------------------------
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, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
Year ended November 30,
--------------------------
1995 1994
---------- ------------
<S> <C> <C>
Shares sold.................. 4,167,583* 8,712,001
Shares issued in reinvestment
of dividends and
distributions.............. 809,302 1,465,698
Shares reacquired............ (9,498,358) (18,375,629)
---------- ------------
Net decrease................. (4,521,473) (8,197,930)
---------- ------------
---------- ------------
</TABLE>
* Includes 2,889,065 shares issued for the acquisition of the Prudential
Adjustable Rate Securities Fund, Inc.
- ------------------------------------------------------------
Note 7. Acquisition of Prudential Adjustable Rate Securities Fund
On November 24, 1995, the Short-Intermediate Term Series (``the Series'')
acquired all the net assets of Prudential Adjustable Rate Securities Fund, Inc.
(``Adjustable Rate'') pursuant to a plan of reorganization approved by
Adjustable Rate shareholders on May 4, 1995. The acquisition was accomplished
by
a tax-free exchange of 2,889,065 shares of the Series (consisting of 2,886,329
shares of the Series for 2,918,596 Class A shares of Adjustable Rate and 2,736
shares of the Series for 2,757 Class B shares of Adjustable Rate) valued at
$28,023,926 in the aggregate on November 24, 1995. The aggregate net assets of
the Series and Adjustable Rate immediately before the acquisition were
$184,719,629 and $28,023,926 (including $10,208 of net unrealized depreciation),
respectively.
- --------------------------------------------------------------------------------
13<PAGE>
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
MONEY MARKET SERIES
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended November 30,
- ----------------------------------------------------------------
1995 1994 1993
1992 1991
-------- -------- --------
- ---------- ----------
<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.......... 0.052 0.033 0.026
0.035 0.058
Dividends from net investment
income....................... (0.052) (0.033) (0.026)
(0.035) (0.058)
-------- -------- --------
- ---------- ----------
Net asset value, end of year... $ 1.000 $ 1.000 $ 1.000 $
1.000 $ 1.000
-------- -------- --------
- ---------- ----------
-------- -------- --------
- ---------- ----------
TOTAL RETURN(a):............... 5.20% 3.29% 2.62%
3.57% 5.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)........................ $598,194 $637,343 $919,503
$1,026,187 $1,212,836
Average net assets (000)....... $597,599 $732,867 $950,988
$1,113,759 $1,255,014
Ratios to average net assets:
Expenses, including
distribution fees........ 0.78% 0.77% 0.72%
0.72% 0.65%
Expenses, excluding
distribution fees........ 0.65% 0.64% 0.59%
0.60% 0.53%
Net investment income....... 5.15% 3.19% 2.56%
3.42% 5.78%
</TABLE>
- ---------------
(a) 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.
- --------------------------------------------------------------------------------
14 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
SHORT-INTERMEDIATE TERM SERIES
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended November 30,
- ----------------------------------------------------------------
1995 1994 1993
1992 1991
-------- -------- --------
- ---------- ----------
<S> <C> <C> <C> <C>
<C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
year......................... $ 9.17 $ 10.06 $ 9.97 $
10.00 $ 9.71
-------- -------- --------
- ---------- ----------
Income from investment
operations
Net investment income.......... 0.56 0.64 0.69
0.75 0.82
Net realized and unrealized
gain (loss) on investment
transactions................. 0.55 (0.89) 0.11
(0.03) 0.31
-------- -------- --------
- ---------- ----------
Total from investment
operations............... 1.11 (0.25) 0.80
0.72 1.13
-------- -------- --------
- ---------- ----------
Less distributions
Dividends from net investment
income....................... (0.54) (0.52) (0.69)
(0.75) (0.84)
Tax return of capital
distribution................. -- (0.12) (0.02)
-- --
-------- -------- --------
- ---------- ----------
Total distributions............ (0.54) (0.64) (0.71)
(0.75) (0.84)
-------- -------- --------
- ---------- ----------
Net asset value, end of year... $ 9.74 $ 9.17 $ 10.06 $
9.97 $ 10.00
-------- -------- --------
- ---------- ----------
-------- -------- --------
- ---------- ----------
TOTAL RETURN(a):............... 12.37% (2.58)% 8.26%
7.40% 12.19%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)........................ $212,996 $241,980 $347,944 $
303,451 $ 298,086
Average net assets (000)....... $209,521 $307,382 $321,538 $
294,388 $ 301,643
Ratios to average net assets:
Expenses, including
distribution fees........ 0.95% 0.84% 0.80%
0.79% 0.79%
Expenses, excluding
distribution fees........ 0.75% 0.63% 0.59%
0.58% 0.63%
Net investment income....... 5.82% 5.48% 6.80%
7.47% 8.36%
Portfolio turnover rate........ 217% 431% 44%
60% 151%
</TABLE>
- ---------------
(a) 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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
15
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
U.S. TREASURY MONEY MARKET SERIES
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 3,
1990(d)
Year Ended November 30,
Through
- ----------------------------------------------- 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.......... 0.050 0.033 0.025
0.034 0.057(c)
Dividends from net investment
income....................... (0.050) (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(a)................ 5.08% 3.31% 2.54%
3.46% 5.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)........................ $339,334 $293,984 $284,978
$233,600 $288,922
Average net assets (000)....... $345,369 $308,454 $273,313
$263,459 $273,203
Ratios to average net assets:
Expenses, including
distribution fees........ 0.62% 0.62% 0.66%
0.66% 0.50%(b)/(c)
Expenses, excluding
distribution fees........ 0.50% 0.50% 0.53%
0.54% 0.38%(b)/(c)
Net investment income....... 5.01% 3.21% 2.49%
3.29% 5.74%(b)/(c)
</TABLE>
- ---------------
(a) 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.
(b) Annualized.
(c) Net of expense subsidy.
(d) Commencement of investment operations.
- --------------------------------------------------------------------------------
16 See Notes to Financial Statements.
<PAGE>
<PAGE>
Report of Independent Accountants PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of
Prudential Government Securities Trust:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolios 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 Money Market Series,
Short-Intermediate Term Series and U.S. Treasury Money Market Series
(constituting Prudential Government Securities Trust, hereafter referred to as
the ``Fund'') at November 30, 1995, 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 five
years in the period then ended, 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, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
January 24, 1996
- --------------------------------------------------------------------------------
17
<PAGE>
Important Notice for
Certain Shareholders PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
We are required by New York, California, Massachusetts, Missouri and Oregon to
inform you that dividends which have been derived from interest on federal
obligations are not taxable to shareholders providing the mutual fund meets
certain requirements mandated by the respective state's taxing authorities. We
are pleased to report that 32% of the dividends paid by the Money Market
Series*, 57% of the dividends paid by the Short-Intermediate Term Series* and
100% of the dividends paid by the U.S. Treasury Money Market Series qualify for
such deduction.
Shortly after the close of the calendar year ended December 31, 1995, you will
be advised as to the federal tax status of the dividends you received in
calendar 1995.
For more detailed information regarding your state and local taxes, you should
contact your tax adviser or the state/local taxing authorities.
* Due to certain minimum portfolio holding requirements in California and New
York, residents of those states will not be able to exclude interest on Federal
obligations from state and local tax.
- --------------------------------------------------------------------------------
18
<PAGE>
Supplemental Proxy Information PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of the Prudential Government Securities
Trust was held on June 27, 1995 at the offices of Prudential Securities
Incorporated, One Seaport Plaza, New York, New York. The meeting was held for
the following purposes:
(1) To elect the following five Trustees:
- Delayne Dedrick Gold
- Arthur Hauspurg
- Stephen P. Munn
- Richard A. Redeker
- Louis A. Weil, III
(2) To ratify the selection by the Trustees of Price Waterhouse LLP as
independent accountants for the fiscal year ending November 30, 1995.
(3) To consider and act upon any other business as may properly come
before the Annual Meeting or any adjournment thereof.
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
Trustee/Auditor Votes for Votes against
Votes withheld Abstentions
--------------------- ------------ --------------
--------------- ------------
<C> <S> <C> <C>
<C> <C>
(1) Delayne Dedrick Gold 739,638,360 --
4,834,797 --
Arthur Hauspurg 739,621,693 --
4,851,464 --
Stephen P. Munn 739,803,864 --
4,669,293 --
Richard A. Redeker 739,764,595 --
4,708,562 --
Louis A. Weil, III 740,021,339 --
4,451,818 --
(2) Price Waterhouse LLP 726,783,497 2,574,740
-- 15,114,825
(3) There was no other business voted upon at the Annual Meeting of
Shareholders.
</TABLE>
- --------------------------------------------------------------------------------
19
<PAGE>
Supplemental Proxy Information PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
A Special Meeting of Shareholders of Prudential Government Securities Trust
was held on July 19, 1995 at the offices of Prudential Securities Incorporated,
One Seaport Plaza, New York, New York, for the purposes and for action by the
shareholders of the Series indicated below:
<TABLE>
<CAPTION>
Proposal Shareholders
No. Voting
Purpose
- ---------- ------------------
- -----------------------------------------------------------------------------
- ----------------
<C> <S> <C>
(1) All Series To approve amended and restated
Distribution and Service Plans.
(2) Money Market and To approve elimination of the Series'
investment restriction that limits investments to those
Intermediate Term securities listed in the Series'
Prospectuses under ``Investment Objective and Policies.''
Series*
(3) All Series To approve elimination of the Series'
investment restrictions regarding restricted and
illiquid securities.
(4) Money Market and To approve elimination of the Series'
investment restriction regarding the purchase and sale
Intermediate Term of warrants, puts, calls, straddles,
spreads or combinations thereof.
Series*
(5) Intermediate Term To approve modification of the Intermediate
Term Series' investment restrictions to permit an
Series* increase in the borrowing capabilities of
the Series.
(6) Intermediate Term To approve modification of the Intermediate
Term Series' investment restrictions to clarify
Series* that the purchase and sale of certain
securities are not deemed to be the purchase or sale of
real estate or real estate mortgage loans.
(7) Intermediate Term To approve modification of the Intermediate
Term Series' investment restriction regarding
Series* purchases of securities on margin and short
sales to permit certain transactions involving
margin and certain short sales.
(8) Intermediate Term To approve modification of the Intermediate
Term Series' investment restriction regarding the
Series* purchase and sale of commodities or
commodity futures contracts to permit the purchase and
sale of financial futures contracts and
options thereon.
(9) All Series To consider and act upon any other business
as may properly come before the Special Meeting
or any adjournment thereof.
</TABLE>
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
Series
Votes For Votes Against Abstentions
---------
- ------------ -------------- -----------
<C> <S>
<C> <C> <C>
(1) Money Market Series
226,473,758 19,867,416 43,163,293
U.S. Treasury Money Market Series
174,627,756 8,670,828 28,720,007
Intermediate Term Series*
12,575,764 1,092,104 1,298,254
(2) Money Market Series
212,988,151 36,301,502 40,214,814
Intermediate Term Series*
12,142,293 1,529,325 1,294,504
(3) Money Market Series
209,465,469 40,280,204 39,758,794
U.S. Treasury Money Market Series
170,070,502 16,665,470 25,282,619
Intermediate Term Series*
12,022,374 1,790,821 1,152,927
(4) Money Market Series
207,010,923 42,136,713 40,356,831
Intermediate Term Series*
11,990,323 1,793,483 1,182,316
(5) Intermediate Term Series*
11,945,380 1,823,174 1,197,568
(6) Intermediate Term Series*
12,351,347 1,359,647 1,255,128
(7) Intermediate Term Series*
12,139,836 1,705,221 1,121,065
(8) Intermediate Term Series*
12,136,288 1,692,339 1,137,495
(9) There was no other business voted upon at the Special Meeting of
Shareholders.
</TABLE>
- ---------------
* Subsequently renamed as the Short-Intermediate Term Series.
- --------------------------------------------------------------------------------
20
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
Internet Address:
http:\\www.prudential.com
(LOGO)
<PAGE>
Trustees
Delayne Dedrick Gold
Arthur Hauspurg
Steven P. Munn
Richard A. Redeker
Louis A. Weil, III
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Eugene S. Stark, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Ronald Amblard, Assistant Secretary
Manager
Prudential Mutual Fund
Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
744342106 MF100E
744342205 Cat. #444437V
744342304
