<PAGE>
(ICON)
Prudential
Government
Securities
Trust
- ------------------------
Money Market Series
Short-Intermediate
Term Series
U.S. Treasury Money
Market Series
SEMI
ANNUAL
REPORT
May 31, 1999
(LOGO)
<PAGE>
Portfolio Managers' Report
During the six months that ended May 31, 1999, anxiety about a
global financial crisis faded and was replaced by fear that a
robust U.S. economy might ignite higher inflation. Throughout
this period of shifting market concerns, yields on money market
securities and intermediate-term bonds remained volatile.
As investors waited to see how much damage the global financial
crisis would inflict on Brazil, some sought refuge in U.S. Treasury
bills for their relative safety. This strong demand drove down yields
on Treasury bills, which caused them to remain overvalued relative to
other money market securities in late 1998 and early 1999. As it
turned out, Brazil came through the financial crisis far better
than expected.
Meanwhile, the unrelenting strength of the U.S. economy led many
investors to believe the Federal Reserve might soon raise the
Federal funds rate (the rate banks charge each other for overnight
loans) to curb U.S. economic growth and avoid mounting inflation.
Investors fear rising inflation because it erodes the value of their
bonds' fixed interest payments. If left unchecked, rising inflation
could also eventually derail the economic expansion.
In anticipation of a Federal funds rate increase, investors drove
yields on money market securities and intermediate-term bonds
sharply higher. For example, the yield on one-year Treasury bills
rose from 4.56% on February 1, 1999 to 4.97% on May 31, 1999. When
the Federal Reserve met in May, it left the Federal funds rate
unchanged, but announced it was considering increasing short-term
rates because of the potential for higher inflation.
Money Market Series
Class A shares' seven-day current yield was 4.05% and Class
Z shares' was 4.18% on May 31, 1999, compared with the 4.25%
provided by the average U.S. government and agency money market
fund tracked by IBC Financial Data.
U.S. Treasury Money Market Series
Class A shares' seven-day current yield was 3.80% and Class Z
shares' was 3.93% on May 31, 1999, compared with 3.96% for the
average U.S. Treasury money fund measured by IBC Financial Data.
Short-Intermediate Term Series
Class A shares' 30-day SEC yield was 4.86% and Class Z shares'
was 5.05% on May 31, 1999, compared to 4.78%
for similar funds as tracked by Lipper, Inc.
How Investments Compared
(As of 5/31/99)
(GRAPH)
Source: Lipper, Inc. 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 returns for several Lipper
mutual fund categories to show you that reaching for higher
returns means tolerating more risk. The greater the risk, the
larger the potential reward or loss. In addition, we've included
historical 20-year average annual returns. These returns assume
the reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal. Investors have
received higher historical total returns from stocks than from
most other investments. Smaller capitalization stocks offer
greater potential for long-term growth, but may be more volatile
than larger capitalization stocks.
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.
U.S. Taxable Money 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.
<PAGE>
Prudential Government Securities Trust--Money Market Series
(PHOTO)
Bernard D. Whitsett, II
Fund Manager
Investment Goals and Style
The Money Market Series seeks high current income, preservation of
capital, and maintenance of liquidity from a portfolio of money
market securities issued or guaranteed by the U.S. government,
its agencies, or instrumentalities. There can be no assurance
that the Series will achieve its investment objective. The U.S.
government guarantee applies only to the underlying
securities of the Series, and not to the value of the Series' shares.
Market Review
Early shift in assets benefited the Series
Early in our six-month reporting period, we enhanced the
Series' yield by purchasing adjustable-rate federal agency
securities with rates set well above the yield on comparable
U.S. Treasury bills. At the same time, we reduced the Series'
exposure to repurchase agreement transactions because they
were priced less attractively.
As noted earlier, money market yields began to climb sharply
during February 1999 in anticipation of a Federal funds rate
increase. We did not believe a change in monetary
policy was imminent. We therefore viewed this rise in
yields as a buying opportunity, and purchased fixed-rate
federal agency securities maturing in one year that also
provided enhancement to the Series' yield.
Our purchases of federal agency securities, along with other
money market assets, enabled the Series' weighted average maturity
(WAM) to remain slightly longer than that of its competition for
most of the six months. WAM takes into account the maturity level
of each security held by the Series. It is the measurement tool
that determines the Series' sensitivity to fluctuations in
interest rates.
<TABLE>
Performance As of 5/31/99
<CAPTION>
7-Day Net Asset Weighted Avg. Net Assets
Current Yield* Value (NAV) Maturity (WAM) (Millions)
<S> <C> <C> <C> <C>
Class A 4.05% $1 68 days $589
Class Z 4.18% $1 68 days $ 28
IBC Financial Data Gov't
& Agencies Money Fund Avg.** 4.21% $1 56 days N/A
</TABLE>
* Yields will fluctuate from time to time, and past performance
is not indicative of future results. An investment in the Series
is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the Series
seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Series.
** International Business Communications (IBC) Financial Data
reports a seven-day current yield, NAV, and WAM on Tuesdays.
This is the data of all funds in the IBC Gov't & Agencies Money Fund
Average category as of June 1, 1999, the closest date to the
end of our reporting period.
<PAGE>
Prudential Government Securities Trust--U.S. Treasury Money Market Series
(PHOTO)
Bernard D. Whitsett, II
Fund Manager
Investment Goals and Style
The U.S. Treasury Money Market Series seeks high current income
consistent with the preservation of principal and liquidity from
a portfolio of U.S. Treasury obligations with maturities of 13
months or less. There can be no assurance that the Series
will achieve its investment objective. The U.S. government
guarantee applies only to the underlying securities of the
Series, and not to the value of the Series' shares.
Market Review
We found good buys among shorter- and longer-term U.S.
Treasury money market securities
We maintained a barbell strategy throughout the six months that
allowed the Series to take advantage of buying opportunities in
both shorter- and longer-term Treasury money market securities.
By contrast, intermediate-term Treasury money market securities
provided less value, so we avoided purchasing them.
Among shorter-term securities, we bought cash management bills
maturing in less than three months. Cash management bills are
issued when the U.S. Treasury is temporarily short of money.
The Treasury issued cash management bills totaling more than
$150 billion in the first six months of 1999, up sharply from
the same period a year earlier, according to federal government
data. Because of this huge increase in supply, investors demanded
higher yields on cash management bills. Therefore we were able
to purchase them at very attractive levels.
Turning to the longer end of the money market sector, we bought
Treasury notes with 9 to 11 months left to maturity. We avoided
purchasing Treasury bills as an unusually large amount of them
matured in mid-April. With far fewer Treasury bills available,
they temporarily became overvalued relative to other Treasury
money market securities during early spring.
<TABLE>
Performance As of 5/31/99
<CAPTION>
7-Day Net Asset Weighted Avg. Net Assets
Current Yield* Value (NAV) Maturity (WAM) (Millions)
<S> <C> <C> <C>
Class A 3.80% $1 62 days $304
Class Z 3.93% $1 62 days $ 2
IBC Financial Data 100%
U.S.Treasury Money Fund Avg.** 3.94% $1 67 days N/A
</TABLE>
* Yields will fluctuate from time to time, and past performance is
not indicative of future results. An investment in the Series is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. Although the Series seeks to preserve
the value of your investment at $1.00 per share, it is possible to
lose money by investing in the Series.
** International Business Communications (IBC) Financial Data reports
a seven-day current yield, NAV, and WAM on Tuesdays. This is the data
of all funds in the IBC 100% U.S. Treasury Money Fund Average category
as of June 1, 1999, the closest date to the end of our reporting
period.
1
<PAGE>
Prudential Government Securities Trust--Short-Intermediate Term Series
(PHOTO)
Barbara L. Kenworthy and
Robert Felice--Fund Managers
Investment Goals and Style
The Short-Intermediate Term Series seeks a high level of income
consistent with providing reasonable safety. It is anticipated
that the dollar-weighted average maturity of the Series will be
more than two years, but less than five. There can be no assurance
that the Series will achieve its investment objective.
Market Review
Rate hike fears prompt major reallocation of assets
We made substantial shifts in the Series' asset allocation amid
growing con-cern that the Federal Reserve would increase the
Federal funds rate to slow U.S. economic growth and keep
inflation in check. Anticipating this change in U.S. monetary
policy, investors pushed bond yields higher and their prices
lower. This trend resulted in negative or marginally positive
returns in many U.S. debt markets for the
six-month period that ended on May 31, 1999.
Amid these unfavorable market conditions, mortgage-backed securities
performed better than Treasuries. We increased mortgage-backed
securities from 17% of the Series' total investments as of
November 30, 1998 to 27% at the close of May 1999, and cut
Treasuries from 46% to 22%. Mortgage-backed securities
outperformed primarily because there was less risk they
would get paid off early and leave investors to face the
unpleasant task of reinvesting their money at lower interest
rates. Mortgage-backed securities are typically paid off ahead
of schedule when homeowners refinance their mortgages at lower
rates in order to save money. Since mortgage rates rose along
with bond yields, homeowners had less opportunity to refinance
their mortgages and trigger prepayments on mortgage-backed
securities.
Some of our proceeds derived from selling Treasuries were also
used to buy shorter-term federal agency securities, which rose
from 3% of the Series' total investments as of November 30, 1998
to 31% by the end of May 1999. We favored these securities for
two key reasons: they pay higher yields than comparable Treasuries,
and their prices declined less because they were
shorter-term securities.
Trimming Treasuries and buying shorter-term federal agency securities
and mortgage-backed securities helped cut the Series' duration
from 3.4 years on November 30, 1998 to 2.7 years on May 31, 1999.
(Duration is a measure of the Series' sensitivity to fluctuations
in bond yields.) The shorter duration made the Series less
sensitive to the rise in bond yields and the decline in their
prices. Nevertheless, the Series' returns would have been better
had we cut the duration earlier and more aggressively.
We unloaded hard-to-sell securities at attractive prices
The growing risk of a Federal funds rate increase was not
the only reason we altered the Series' asset mix. Concern
that some of the Series' holdings were relatively illiquid
2
<PAGE>
(they could not always be sold at or near their true value)
also prompted us to act when we saw attractive bids. For
example, the Series held certain asset-backed securities.
They paid solid interest rates but had not been in demand
because many investors were unfamiliar with them. When we
were finally bid a good price for these securities, we
readily sold them.
Asset-backed securities declined from 16% of the Series'
total investments as of November 30, 1998 to 9% by the end
of May 1999. Similarly, we sold all of the Series'
collateralized mortgage obligations, which are a more
complicated type of mortgage-backed security.
Looking Ahead
Yields could head lower toward year end
On June 30, 1999, the Federal Reserve raised the Federal funds
rate by a quarter of a percentage point to 5%. This marked the
first rate increase since March 25, 1997. We believe another
increase in the key rate is possible this summer or early fall if
economic data show signs of continued strong growth or higher
inflation. However, we expect yields on money market securities
and bonds to decline as 1999 draws to a close, and issuance of
new fixed-income securities will likely taper off. Many
banks and brokerage firms could grow increasingly reluctant to
underwrite new debt securities toward the end of the year
because of the uncertainty surrounding the Year 2000 computer
problem. With fewer fixed-income securities available, the prices
of the securities could rise and their yields fall.
<TABLE>
Cumulative Total Returns1 As of 5/31/99
<CAPTION>
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A -0.15% 3.07% 32.66% 91.48% 262.39%
Class Z -0.04 3.27 N/A N/A 12.32
Lipper Short-Intermediate
U.S. Gov't Fund Avg.3 0.20 3.94 33.19 97.08 ***
</TABLE>
<TABLE>
Average Annual Total Returns1 As of 6/30/99
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 2.81% 5.84% 6.48% 7.97%
Class Z 3.01 N/A N/A 5.15
</TABLE>
<TABLE>
Distributions and Yields As of 5/31/99
<CAPTION>
Total Distributions 30-Day
Paid for Six Months SEC Yield
<S> <C> <C>
Class A $0.25 4.86%
Class Z $0.26 5.05
</TABLE>
Past performance is not indicative of future results. Principal and
investment return will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
1 Source: Prudential Investments Fund Management LLC and Lipper, Inc.
Shares of this Series are sold without an initial or contingent
deferred sales charge.
2 Inception dates: Class A, 9/22/82; Class Z, 2/26/97.
3 Lipper average returns are for all funds in each class for
the six-month, one-, five-, and ten-year periods.
*** Lipper Since Inception returns are 265.99% for Class A and
12.87% for Class Z, based on all funds in each share class.
3
<PAGE>
A Message to Our Shareholders July 16, 1999
(PHOTO)
Dear Shareholder:
In the last couple of years, the recurring possibility of a
global economic crisis caused investors to focus on securities
they perceived to be safe. In the equity market, they focused
on the stocks of a handful of very large companies that were
perceived to be well-buffeted from an economic slowdown. These
stocks became very expensive--out of proportion to their earnings
expectations. As a result, there was a substantial disparity in
value between large and small companies and between growth and
value stocks.
Since earlier this year, however, that gap has narrowed significantly
amid news of strong U.S. economic growth and faster-than-expected
global stability. While the long-term prospects of U.S. growth
stocks are still very good, many of the smaller and economically
sensitive companies favored by our value managers now are posting
very attractive returns.
In the bond market, U.S. Treasuries and select European government
bonds were the major beneficiaries of the flight to quality that
occurred in recent years. When this trend reversed
itself toward the end of 1998, other sectors of the bond market
rebounded. However, with a strong U.S. economy comes the threat
of higher inflation, which erodes the value of bonds' fixed
interest payments. The recent inflation concerns jolted the
bond market and helped send long-term interest rates to a
19-month high.
The winds of change in the equity market and the recent turbulence
in the bond market not only highlight the value of professional
portfolio management, but they illustrate why investors should
have a well-diversified asset allocation strategy. It is also a
good practice to rebalance your holdings, when necessary, to keep
your asset allocation consistent with your long-term objectives
and risk tolerance. A properly diversified portfolio of value-
and growth-oriented equity funds, domestic and international bond
funds, and money market funds could help you weather inevitable
market turbulence and achieve more consistent returns over time.
Prudential offers a wide range of mutual funds to help our
shareholders diversify, as well as several balanced and
diversified funds to allow one-decision diversification.
Thank you for your continued confidence in Prudential mutual funds.
Sincerely,
John R. Strangfeld
President
Prudential Government Securities Trust--Money Market Series
Prudential Government Securities Trust--Short-Intermediate Term Series
Prudential Government Securities Trust--U.S. Treasury Money Market Series
4
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
Portfolio of Investments as of
May 31, 1999 (Unaudited) MONEY MARKET SERIES
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
Federal Home Loan Bank--46.4%
$ 26,500 4.87%, 6/1/99, F.R.N. $ 26,491,981
34,500 5.071%, 6/2/99, F.R.N. 34,498,475
9,000 5.081%, 6/2/99, F.R.N. 8,996,892
73,000 4.72125%, 6/8/99, F.R.N. 72,990,021
5,000 5.61%, 6/18/99 5,001,410
11,000 4.80%, 7/12/99, F.R.N. 10,995,342
10,000 5.54%, 7/13/99 9,999,330
2,000 5.536%, 7/15/99 2,001,243
9,000 5.00%, 10/27/99 9,000,000
18,000 4.90%, 1/14/00 18,000,000
9,000 4.90%, 2/11/00 8,993,939
4,000 4.95%, 2/17/00 3,998,470
7,000 5.00%, 2/24/00 6,999,021
7,000 5.00%, 2/25/00 7,000,000
14,000 5.035%, 2/25/00 13,992,468
7,000 5.035%, 3/2/00 7,000,000
5,000 5.135%, 3/29/00 5,002,296
12,000 5.01%, 4/28/00 11,988,037
2,000 5.075%, 4/28/00 2,000,077
12,000 5.02%, 5/12/00 11,984,930
9,500 5.15%, 5/19/00 9,492,120
------------
286,426,052
- ------------------------------------------------------------
Federal Home Loan Mortgage Corporation--6.3%
23,000 4.70%, 6/18/99, F.R.N. 22,996,612
15,000 4.85%, 8/26/99 14,826,208
1,250 6.395%, 5/16/00 1,265,345
------------
39,088,165
- ------------------------------------------------------------
Federal National Mortgage Association--11.3%
24,600 5.405%, 6/2/99, F.R.N. 24,595,471
1,400 6.31%, 6/3/99 1,400,115
2,000 8.70%, 6/10/99 2,001,711
30,000 4.82%, 6/17/99, F.R.N. 29,994,646
$ 7,614 4.74%, 8/13/99 $ 7,540,817
4,000 5.47%, 8/16/99 4,005,113
------------
69,537,873
- ------------------------------------------------------------
Student Loan Marketing Association--6.7%
17,500 4.88%, 6/1/99, F.R.N. 17,495,569
8,500 5.745%, 6/2/99, F.R.N. 8,497,788
4,355 5.53%, 7/16/99 4,354,639
11,000 4.50%, 8/2/99 10,989,599
------------
41,337,595
- ------------------------------------------------------------
Repurchase Agreements(a)--27.9%
13,783 Credit Suisse First Boston Corp.,
4.75%, dated 5/7/99, due 6/7/99
in the amount of $13,839,376
(cost $13,783,000; the value of
the collateral including accrued
interest is $14,191,241) 13,783,000
28,170 Credit Suisse First Boston Corp.,
4.77%, dated 5/24/99, due 6/1/99
in the amount of $28,199,860
(cost $28,170,000; the value of
the collateral including accrued
interest is $28,979,297) 28,170,000
59,684 Goldman, Sachs & Co., 4.92%, dated
5/27/99, due 6/3/99 in the amount
of $59,741,098 (cost $59,684,000;
the value of the collateral
including accrued interest is
$60,877,681) 59,684,000
13,220 J.P. Morgan Securities, Inc., 4.80%,
dated 5/20/99, due 6/21/99 in the
amount of $13,276,405 (cost
$13,220,000; the value of the
collateral including accrued
interest is $13,516,356) 13,220,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
MONEY MARKET SERIES
Portfolio of Investments as of May 31, 1999 (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Repurchase Agreements(a) (cont'd.)
$ 24,879 Salomon Smith Barney Inc., 4.84%,
dated 5/26/99, due 6/2/99 in the
amount of $24,902,414 (cost
$24,879,000; the value of the
collateral including accrued
interest is $40,086,703) $ 24,879,000
32,706 Salomon Smith Barney Inc., 4.92%,
dated 5/28/99, due 6/2/99 in the
amount of $32,728,349 (cost
$32,706,000; the value of the
collateral including accrued
interest is $52,698,088) 32,706,000
------------
172,442,000
------------
- ------------------------------------------------------------
Total Investments--98.6%
(amortized cost $608,831,685(b)) 608,831,685
Other assets in excess of
liabilities--1.4% 8,422,113
------------
Net Assets--100% $617,253,798
------------
------------
</TABLE>
- ---------------
F.R.N.--Floating Rate Note. The interest rate reflected is the rate in effect at
May 31, 1999.
(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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
Portfolio of Investments as of
May 31, 1999 (Unaudited) SHORT-INTERMEDIATE TERM SERIES
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--89.1%
- ------------------------------------------------------------
Asset-Backed--9.2%
Capital One Master Trust
$ 5,000(a) Ser. 98-4 A, 5.43%, 1/15/07 $ 4,853,125
Federal Home Loan Mortgage
Corporation,
Loan Receivable Trust
32,088 Ser. 97-A, AX, 2.80%, 4/1/19 I/O 3,697,618
Premier Auto Trust
5,000(a) Ser. 98-2 A3, 5.77%, 1/6/02 4,981,250
------------
13,531,993
- ------------------------------------------------------------
Corporate Obligation--1.8%
Merck and Company
2,500(a) 5.76%, 5/3/37(b) 2,555,000
- ------------------------------------------------------------
U.S. Government Agency Mortgage Pass-Through
Obligations--26.6%
Federal Home Loan Mortgage
Association
148 7.375%, 3/1/06 150,124
1,052(a) 9.00%, 9/1/05 - 11/1/05 1,083,597
Federal National Mortgage
Association
28,215 6.50%, 8/1/14 28,106,655
2,930(a) 7.50%, 4/1/10 - 12/1/10 3,011,114
Government National Mortgage
Association
6,611(a) 7.00%, 1/15/25 - 2/15/29 6,625,956
------------
38,977,446
- ------------------------------------------------------------
U.S. Government Agency Obligation--30.8%
Federal Home Loan Bank
15,000(a) 5.375%, 3/2/01 14,913,300
Federal National Mortgage
Association
10,000 5.50%, 10/12/01 $ 9,920,300
15,600 5.625%, 5/14/04 15,329,496
5,000(a) 6.30%, 9/25/02 4,997,650
------------
45,160,746
- ------------------------------------------------------------
U.S. Treasury Notes--20.7%
4,750 6.00%, 8/15/00 4,789,330
4,720(a) 6.50%, 5/31/01 4,813,645
2,500(a) 6.00%, 7/31/02 2,528,125
2,300(a) 5.75%, 11/30/02 2,307,176+
15,000 6.875%, 5/15/06 15,900,000
------------
30,338,276
------------
Total long-term investments
(cost $132,976,580) 130,563,461
------------
SHORT-TERM INVESTMENT--30.7%
- ------------------------------------------------------------
Commercial Paper--13.6%
Edison Asset Securitization LLC
1,955 4.85%, 6/18/99 1,950,523
Mont Blanc Capital Corp.
1,231 4.86%, 6/16/99 1,228,507
Monte Rosa Capital Corp.
5,890 4.85%, 6/21/99 5,874,130
Thunder Bay Funding, Inc.
5,900 4.87%, 6/7/99 5,895,211
Windmill Funding Corp.
1,370 4.86%, 6/7/99 1,368,890
3,600 4.86%, 6/18/99 3,591,738
------------
Total commercial paper
(cost $19,908,999) 19,908,999
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
SHORT-INTERMEDIATE TERM SERIES
Portfolio of Investments as of May 31, 1999 (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Repurchase Agreement--15.4%
$ 22,653 Joint Repurchase Agreement Account
4.80%, 6/01/99
(cost $22,653,000; Note 5) $ 22,653,000
------------
- ------------------------------------------------------------
U.S. Treasury Notes--1.7%
1,950(a) 5.875%, 7/31/99 1,953,354
500(a) 6.375%, 5/15/00 505,310
------------
Total U.S. treasury notes
(cost $2,452,236) 2,458,664
------------
Total short-term investments
(cost $45,014,235) 45,020,663
------------
- ------------------------------------------------------------
Total Investments--119.8%
(amortized cost $177,990,815; Note
4) 175,584,124
Liabilities in excess of other
assets--(19.8%) (29,026,358)
------------
Net Assets--100% $146,557,766
------------
------------
</TABLE>
- ---------------
I/O--Interest Only.
(a) All or portion of securities segregated as collateral for dollar rolls.
(b) Putable annually.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 8
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
U.S. TREASURY MONEY MARKET SERIES
Portfolio of Investments as of May 31, 1999 (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
U.S. Treasury Bills--20.4%
$ 58,366 4.42%, 6/3/99 $ 58,351,668
3,974 4.445%, 7/1/99 3,959,280
176 4.52%, 8/19/99 174,254
50 4.56%, 11/12/99 48,961
------------
62,534,163
- ------------------------------------------------------------
United States Treasury Notes--62.4%
50,000 6.75%, 6/30/99 50,086,627
5,701 6.375%, 7/15/99 5,707,115
30,000 6.875%, 7/31/99 30,111,094
25,000 5.75%, 9/30/99 25,091,905
5,000 6.375%, 1/15/00 5,039,706
5,000 7.125%, 2/29/00 5,073,794
6,065 6.375%, 5/15/00 6,145,513
12,569 6.25%, 5/31/00 12,711,953
47,000 6.00%, 6/30/99 47,055,839
3,180 5.375%, 1/31/00 3,190,577
1,090 7.75%, 1/31/00 1,109,396
------------
191,323,519
- ------------------------------------------------------------
Total Investments--82.8%
(amortized cost $253,857,682(a)) 253,857,682
Other assets in excess of
liabilities--17.2% 52,754,717
------------
Net Assets--100% $306,612,399
------------
------------
</TABLE>
- ---------------
(a) Federal income tax basis of Portfolio securities is the same
as for financial reporting purposes.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 9
<PAGE>
Statement of Assets and Liabilities
May 31, 1999 (Unaudited) 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 $436,389,685, $155,337,815 and $253,857,682,
respectively)............................................................ $436,389,685 $152,931,124 $253,857,682
Repurchase agreements, at value (cost $172,442,000, $22,653,000 and $0,
respectively)............................................................ 172,442,000 22,653,000 --
Cash........................................................................ 1,302 -- --
Receivable for investments sold............................................. -- 300,000 49,222,000
Interest receivable......................................................... 3,654,910 1,188,723 5,960,457
Receivable for Series shares sold........................................... 12,528,733 25,628 2,215,077
Deferred expenses and other assets.......................................... 89,310 3,001 4,649
------------ ------------ ------------
Total assets............................................................. 625,105,940 177,101,476 311,259,865
------------ ------------ ------------
Liabilities
Bank overdraft.............................................................. -- 596,835 5,426
Payable for investments purchased........................................... -- 28,567,898 --
Payable for Series shares reacquired........................................ 7,001,200 900,233 3,991,836
Dividends payable........................................................... 544,902 214,591 264,151
Due to Manager.............................................................. 210,687 50,816 107,522
Due to distributors......................................................... 34,433 11,844 18,046
Accrued expenses and other liabilities...................................... 60,920 201,493 260,485
------------ ------------ ------------
Total liabilities........................................................ 7,852,142 30,543,710 4,647,466
------------ ------------ ------------
Net Assets.................................................................. $617,253,798 $146,557,766 $306,612,399
------------ ------------ ------------
------------ ------------ ------------
Net assets were comprised of:
Shares of beneficial interest, at par ($.01 per share)................... $ 6,172,538 $ 154,103 $ 3,066,124
Paid-in capital in excess of par......................................... 611,081,260 175,844,505 303,546,275
------------ ------------ ------------
617,253,798 175,998,608 306,612,399
Distributions in excess of net investment income......................... -- (86,884) --
Accumulated net realized losses.......................................... -- (26,947,267) --
Net unrealized depreciation of investments............................... -- (2,406,691) --
------------ ------------ ------------
Net assets, May 31, 1999.................................................... $617,253,798 $146,557,766 $306,612,399
------------ ------------ ------------
------------ ------------ ------------
Net asset value
Class A:
Net asset value, offering price and redemption price per share
($589,351,237 / 589,351,237 shares of beneficial interest issued and
outstanding).......................................................... $1.00
------------
------------
($137,373,478 / 14,448,361 shares of beneficial interest issued and
outstanding).......................................................... $9.51
------------
------------
($304,333,121 / 304,333,121 shares of beneficial interest issued and
outstanding).......................................................... $1.00
------------
------------
Class Z:
Net asset value, offering price and redemption price per share
($27,902,561 / 27,902,561 shares of beneficial interest issued and
outstanding).......................................................... $1.00
------------
------------
($9,184,288 / 961,973 shares of beneficial interest issued and
outstanding).......................................................... $9.55
------------
------------
($2,279,278 / 2,279,278 shares of beneficial interest issued and
outstanding).......................................................... $1.00
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 10
<PAGE>
Statement of Operations
Six Months Ended May 31, 1999
(Unaudited) 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................................................................. $15,692,226 $ 4,362,561 $ 10,845,631
Income from securities loaned, net....................................... -- 102,387 --
----------- ------------ -------------
15,692,226 4,464,948 10,845,631
Expenses
Management fee........................................................... 1,247,153 306,706 928,062
Distribution fee--Class A................................................ 372,220 132,515 288,972
Transfer agent's fees and expenses....................................... 907,000 105,000 82,000
Custodian's fees and expenses............................................ 35,000 40,000 40,000
Registration fees........................................................ 113,000 20,000 25,000
Reports to shareholders.................................................. 21,000 39,000 37,000
Audit fee and expenses................................................... 12,500 17,000 12,500
Trustees' fees........................................................... 6,000 6,000 6,000
Legal fees............................................................... 8,000 20,000 6,000
Insurance expense........................................................ 4,000 1,000 1,000
Miscellaneous............................................................ 2,752 2,844 12,265
----------- ------------ -------------
Total expenses........................................................ 2,728,625 690,065 1,438,799
----------- ------------ -------------
Net investment income....................................................... 12,963,601 3,774,883 9,406,832
----------- ------------ -------------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) on investment transactions......................... 11,220 (147,997) 45,235
Net change in unrealized depreciation on investments........................ -- (3,847,582) --
----------- ------------ -------------
Net gain (loss) on investments.............................................. 11,220 (3,995,579) 45,235
----------- ------------ -------------
Net Increase (Decrease) in Net Assets Resulting from Operations............. $12,974,821 $ (220,696) $ 9,452,067
----------- ------------ -------------
----------- ------------ -------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 11
<PAGE>
Statement of Changes in Net Assets
(Unaudited) PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Short- U.S. Treasury
Money Market Intermediate Money Market
Series Term Series Series
------------------------------- --------------------------- -------------------------------
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 1999 1998 1999 1998 1999 1998
-------------- -------------- ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income....... $ 12,963,601 $ 29,027,146 $ 3,774,883 $ 8,383,801 $ 9,406,832 $ 19,215,442
Net realized gain (loss) on
investment
transactions............. 11,220 26,721 (147,997) 1,506,782 45,235 293,468
Net change in unrealized
depreciation on
investments.............. -- -- (3,847,582) (564,958 ) -- --
-------------- -------------- ------------ ------------ -------------- --------------
Net increase (decrease) in
net assets resulting from
operations............... 12,974,821 29,053,867 (220,696) 9,325,625 9,452,067 19,508,910
-------------- -------------- ------------ ------------ -------------- --------------
Dividends and distributions to
shareholders:
Dividends to shareholders... (12,974,821) (29,053,867) (3,954,391) (8,799,007 ) (9,452,067) (19,508,910)
-------------- -------------- ------------ ------------ -------------- --------------
Series share transactions(a)
(Note 6):
Net proceeds from shares
subscribed............... 964,597,372 2,267,004,069 21,215,054 48,203,029 2,277,787,525 4,398,749,349
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions........ 12,474,616 27,554,570 2,763,351 5,999,888 7,933,672 17,472,551
Cost of shares reacquired... (976,723,028) (2,269,663,230) (27,389,340) (49,748,114 ) (2,316,093,767) (4,512,021,356)
-------------- -------------- ------------ ------------ -------------- --------------
Net increase (decrease) in
net assets from Series
share transactions....... 348,960 24,895,409 (3,410,935) 4,454,803 (30,372,570) (95,799,456)
-------------- -------------- ------------ ------------ -------------- --------------
Total increase (decrease) in
net assets..................... 348,960 24,895,409 (7,586,022) 4,981,421 (30,372,570) (95,799,456)
Net Assets
Beginning of period............ 616,904,838 592,009,429 154,143,788 149,162,367 336,984,969 432,784,425
-------------- -------------- ------------ ------------ -------------- --------------
End of period(b)............... $ 617,253,798 $ 616,904,838 $146,557,766 $154,143,788 $ 306,612,399 $ 336,984,969
-------------- -------------- ------------ ------------ -------------- --------------
-------------- -------------- ------------ ------------ -------------- --------------
- ---------------
(a) At $1.00 per share for the Money Market Series and the U.S. Treasury Money Market Series.
(b) Includes undistributed net
investment income of........ $ -- $ -- $ -- $ 92,624 $ -- $ --
-------------- -------------- ------------ ------------ -------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 12
<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
Short-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.
Repurchase Agreements: 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.
Financial Futures Contracts: The Short-Intermediate Term Series enters into a
financial futures contract which is an agreement to purchase (long) or sell
(short) an agreed amount of securities at a set price for delivery on a future
date. Upon entering into a financial futures contract, the Series is required to
pledge to the broker an amount of cash and/or other assets equal to a certain
percentage of the contract amount. This amount is known as the 'initial margin'.
Subsequent payments, known as 'variation margin', are made or received by the
Series each day, depending on the daily fluctuations in the value of the
underlying security. Such variation margin is recorded for financial statement
purposes on a daily basis as unrealized gain or loss. When the contract expires
or is closed, the gain or loss is realized and is presented in the statement of
operations as net realized gain (loss) on financial futures contracts.
The Short-Intermediate Term Series invests in financial futures contracts in
order to hedge its existing portfolio securities, or securities the Series
intends to purchase, against fluctuations in value caused by changes in
prevailing interest rates. Should interest rates move unexpectedly, the Series
may not achieve the anticipated benefits of the financial futures contracts and
may realize a loss. The use of futures transactions involves the risk of
imperfect correlation in movements in the price of futures contracts, interest
rates and the underlying hedged assets.
Options: The Fund may either purchase or write options in order to hedge against
adverse market movements or fluctuations in value caused by changes in
prevailing interest rates with respect to securities which the Fund currently
owns or intends to purchase. When the Fund purchases an option, it pays a
premium and an amount equal to that premium is recorded as an investment. When
the Fund writes an option, it receives a premium and an amount equal to that
premium is recorded as a liability. The investment or liability is adjusted
daily to reflect the current market value of the option. If an option expires
unexercised, the Fund realizes a gain or loss to the extent of the premium
received or paid. If an option is exercised, the premium received or paid is an
adjustment to the proceeds from the sale or the cost basis of the purchase in
determining whether the Fund has realized a gain or loss. The difference between
the premium and the amount received or paid on effecting a closing purchase or
sale transaction is also treated as a realized gain or loss. Gain or loss on
purchased options is included in net realized gain (loss) on investment
transactions. Gain or loss on written options is presented separately as net
realized gain (loss) on written option transactions. There were no written
options outstanding at May 31, 1999.
Securities Lending: The Short-Intermediate Term Series may lend its portfolio
securities to brokers or dealers, banks or other recognized institutional
borrowers of securities, provided that the borrower at all times maintains cash
or other liquid assets or secures an irrevocable letter of credit in favor of
the Series in an amount equal to at least 100% of the market value of the
securities loaned. During the time portfolio securities are on loan, the
borrower will pay the Series an amount equivalent to any dividend or interest
paid on such securities and the Series may invest the cash collateral and earn
additional income, or it may receive an agreed-upon amount of interest income
from the borrower. In these transactions, there are risks of delay in recovery
and in some cases even loss of rights in the collateral should the borrower of
the securities fail financially. Loans are subject to termination at the option
of the borrower or the Series. The Series may pay reasonable finders',
administrative and custodial fees in connection with a loan of its securities
and may share the
- --------------------------------------------------------------------------------
13
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
interest earned on the collateral with the borrower. As a matter of fundamental
policy the Series may not lend more than 30% of the value of its total assets.
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 Fund amortizes discounts and premiums on
purchases of portfolio securities as adjustments to income.
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.
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.
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 Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. Pursuant to a subadvisory agreement between PIFM and The Prudential
Investment Corporation ('PIC'), PIC furnishes investment advisory services in
connection with the management of the Fund. PIFM 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 PIFM 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 has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS'), which acts as the distributor of the shares of the Money
Market Series and the U.S. Treasury Money Market Series. The Fund compensates
PIMS 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 distributor pays
various broker-dealers for account servicing fees and for the expenses incurred
by such broker-dealers.
The Fund also compensates PIMS 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
PIMS 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 PIMS 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, PIMS 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.
PIFM, PIC and PIMS are indirect, wholly owned subsidiaries of The Prudential
Insurance Company of America.
As of March 11, 1999, the Fund, along with other affiliated registered
investment companies (the 'Funds'), entered into a syndicated credit agreement
('SCA') with an unaffiliated lender. The maximum commitment under the SCA is $1
billion. The Funds pay a commitment fee at an annual rate of .065 of 1% on the
unused portion of the credit facility, which is accrued and paid quarterly on a
pro rata basis by the Funds. The SCA expires on March 9, 2000. Prior to March
11, 1999, the Funds had a credit
- --------------------------------------------------------------------------------
14
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
agreement with a maximum commitment of $200,000,000. The commitment fee was .055
of 1% on the unused portion of the credit facility. The Fund did not borrow any
amounts pursuant to either agreement during the six months ended May 31, 1999.
The purpose of the agreements is to serve as an alternative source of funding
for capital share redemptions.
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly-owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the six months ended May 31, 1999,
the Fund incurred fees of approximately $820,000, $96,400, and $75,700,
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 six months ended May 31, 1999
were $198,423,111 and $193,104,151, respectively.
For the Short-Intermediate Term Series, the cost basis of investments as of May
31, 1999 for federal income tax purposes was substantially the same as for
financial reporting purposes and accordingly, net unrealized depreciation of
investments for federal income tax purposes was $2,406,691 (gross unrealized
appreciation--$110,616; gross unrealized depreciation--$2,517,307).
For federal income tax purposes, the Short-Intermediate Term Series has a
capital loss carryforward as of November 30, 1998 of approximately $33,882,000
of which $4,746,000 expires in 1999, $3,746,000 expires in 2000, $7,594,000
expires in 2001, $12,125,000 expires in 2002, $448,000 expires in 2003,
$1,933,000 expires in 2004 and $3,290,000 expires in 2005. 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, 1998, approximately $5,357,000 of the capital loss
carryforward expired unused.
The average balance of dollar rolls outstanding during the six months ended May
31, 1999 was approximately $14,211,000. The amount of dollar rolls outstanding
at May 31, 1999 was $28,466,011 (principal $28,215,000), which was 16% of total
assets.
- ------------------------------------------------------------
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, 1999, the
Short-Intermediate Term Series had a 3.30% undivided interest in the repurchase
agreements in the joint account. This undivided interest represented $22,653,000
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. Inc., 4.82%, in the principal amount of $200,000,000,
repurchase price $200,107,111, due 6/1/99. The value of the collateral including
accrued interest was $204,177,828.
Credit Suisse First Boston Corp., 4.60%, in the principal amount of $85,711,000,
repurchase price $85,754,808, due 6/1/99. The value of the collateral including
accrued interest was $88,385,257.
Deutsche Bank Securities Inc., 4.83%, in the principal amount of $200,000,000,
repurchase price $200,107,333, due 6/1/99. The value of the collateral including
accrued interest was $204,000,179.
Morgan (J.P.) Securities, Inc., 4.82%, in the principal amount of $200,000,000,
repurchase price $200,107,111, due 6/1/99. The value of the collateral including
accrued interest was $204,000,892.
- ------------------------------------------------------------
Note 6. Capital
Each series has authorized an unlimited number of shares of beneficial interest
at $.01 par value. Effective March 1, 1996 the Money Market Series commenced
offering Class Z shares. Class Z shares are not subject to any sales or
redemption charge and are offered exclusively for sale to a limited group of
investors.
Transactions in shares of beneficial interest for the Money Market Series for
the six months ended May 31, 1999 and the fiscal year ended November 30, 1998
were as follows:
<TABLE>
<CAPTION>
Six months
Ended Year Ended
May 31, November 30,
1999 1998
------------- ---------------
Class A
- --------------------------------
<S> <C> <C>
Shares sold..................... 955,858,302 2,221,883,796
Shares issued in reinvestment of
dividends and distributions... 11,881,599 26,646,608
Shares reacquired............... (968,392,763) (2,249,954,294)
------------- ---------------
Net decrease in shares
outstanding................... (652,862) (1,423,890)
------------- ---------------
------------- ---------------
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months
Ended Year Ended
May 31, November 30,
1999 1998
------------- ---------------
Class Z
- --------------------------------
<S> <C> <C>
Shares sold..................... 8,739,070 45,120,273
Shares issued in reinvestment of
dividends and distributions... 593,017 907,962
Shares reacquired............... (8,330,265) (19,708,936)
------------- ---------------
Net increase in shares
outstanding................... 1,001,822 26,319,299
------------- ---------------
------------- ---------------
</TABLE>
Effective February 26, 1997 the Short-Intermediate Term Series commenced
offering Class Z shares. Class Z shares are not subject to any sales or
redemption charge and are offered exclusively to a limited group of investors.
Transactions in shares of beneficial interest for the Short-Intermediate Term
Series for the fiscal years ended November 30, 1998 and the six months ended May
31, 1999 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------------- ---------- ------------
<S> <C> <C>
Six months ended May 31, 1999:
Shares sold.......................... 1,007,965 $ 9,727,261
Shares issued in reinvestment of
dividends and distributions........ 262,710 2,540,221
Shares reacquired.................... (2,124,003) (20,488,913)
---------- ------------
Net decrease in shares outstanding... (853,328) $ (8,221,431)
---------- ------------
---------- ------------
Year ended November 30, 1998:
Shares sold.......................... 1,705,356 $ 16,600,350
Shares issued in connection with
acquisition of BlackRock Government
Income Trust....................... 2,597,731 25,405,808
Shares issued in reinvestment of
dividends and distributions........ 594,479 5,797,497
Shares reacquired.................... (4,917,018) (47,986,897)
---------- ------------
Net decrease in shares outstanding... (19,452) $ (183,242)
---------- ------------
---------- ------------
<CAPTION>
Class Z
- -------------------------------------
<S> <C> <C>
Six months ended May 31, 1999:
Shares sold.......................... 1,178,747 $ 11,487,793
Shares issued in reinvestment of
dividends and distributions........ 23,024 223,130
Shares reacquired.................... (712,212) (6,900,427)
---------- ------------
Net increase in shares outstanding... 489,559 $ 4,810,496
---------- ------------
---------- ------------
<CAPTION>
Class Z Shares Amount
- ------------------------------------- ---------- ------------
<S> <C> <C>
Year ended November 30, 1998:
Shares sold.......................... 631,680 $ 6,196,871
Shares issued in reinvestment of
dividends and distributions........ 20,672 202,391
Shares reacquired.................... (179,959) (1,761,217)
---------- ------------
Net increase in shares outstanding... 472,393 $ 4,638,045
---------- ------------
---------- ------------
</TABLE>
Effective February 21, 1997 the U.S. Treasury Money Market Series commenced
offering Class Z shares. Class Z shares are not subject to any sales or
redemption charge and are offered exclusively for sale to a limited group of
investors.
Transactions in shares of beneficial interest for the U.S. Treasury Money Market
Series for the fiscal years ended November 30, 1998 and the six months ended May
31, 1999 were as follows:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
May 31, November 30,
1999 1998
--------------- ---------------
<S> <C> <C>
Class A
- -------------------------------
Shares sold.................... 2,274,928,637 4,398,749,349
Shares issued in reinvestment
of dividends and
distributions................ 7,904,406 17,472,545
Shares reacquired.............. (2,315,484,680) (4,512,021,356)
--------------- ---------------
Net decrease in shares
outstanding.................. (32,651,637) (95,799,462)
--------------- ---------------
--------------- ---------------
<CAPTION>
Six Months
Ended Year Ended
May 31, November 30,
1999 1998
--------------- ---------------
Class Z
- -------------------------------
<S> <C> <C>
Shares sold.................... 2,858,888 --
Shares issued in reinvestment
of dividends and
distributions................ 29,266 6
Shares reacquired.............. (609,087) --
--------------- ---------------
Net increase in shares
outstanding.................. 2,279,067 6
--------------- ---------------
--------------- ---------------
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
MONEY MARKET SERIES
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class Z
--------------------------------------------------------------------------- ----------------------
Year
Ended
Six Months Six Months November
Ended Year Ended November 30, Ended 30,
May 31, ------------------------------------------------------------ May 31, -------
1999 1998 1997 1996 1995 1994 1999 1998
---------- -------- -------- -------- -------- -------- ---------- -------
<S> <C> <C> <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 $ 1.000 $ 1.000
Net investment
income........... 0.021 0.048 0.048 0.046 0.052 0.033 0.021 0.049
Dividends from net
investment
income........... (0.021) (0.048) (0.048) (0.046) (0.052) (0.033) (0.021) (0.049)
---------- -------- -------- -------- -------- -------- ---------- -------
Net asset value,
end of period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- -------- -------- -------- -------- -------- ---------- -------
---------- -------- -------- -------- -------- -------- ---------- -------
TOTAL RETURN(a).... 2.08% 4.87% 4.87% 4.74% 5.20% 3.29% 2.15% 5.00%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000)..... $589,351 $590,004 $591,428 $552,123 $598,194 $637,343 $ 27,903 $26,901
Average net assets
(000)............ $597,188 $589,649 $586,513 $589,147 $597,599 $732,867 $ 28,101 $19,236
Ratios to average
net assets:
Expenses,
including
distribution
fees......... 0.88%(d) 0.80% 0.77% 0.86% 0.78% 0.77% 0.76%(d) 0.67%
Expenses,
excluding
distribution
fees......... 0.76%(d) 0.67% 0.65% 0.73% 0.65% 0.64% 0.76%(d) 0.67%
Net investment
income....... 4.16%(d) 4.77% 4.77% 4.63% 5.15% 3.19% 4.28%(d) 4.89%
<CAPTION>
March 1, 1996(b)
Through
November 30,
1997 1996
------ -----
<S> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period........... $1.000 $1.000
Net investment
income........... 0.048 0.038
Dividends from net
investment
income........... (0.048) (0.038)
------ -----
Net asset value,
end of period.... $1.000 $1.000
------ -----
------ -----
TOTAL RETURN(a).... 5.03% 3.87%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000)..... $ 581 $ 204(c)
Average net assets
(000)............ $ 672 $1,962
Ratios to average
net assets:
Expenses,
including
distribution
fees......... 0.65% 0.68%(d)
Expenses,
excluding
distribution
fees......... 0.65% 0.68%(d)
Net investment
income....... 4.92% 4.68%(d)
</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) Commencement of offering of Class Z shares.
(c) Figure is actual and not rounded to nearest thousand.
(d) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 17
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
SHORT-INTERMEDIATE TERM SERIES
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------------
Six Months
Ended Year Ended November 30,
May 31, ------------------------------------------------------------
1999 1998 1997 1996 1995 1994
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period............................. $ 9.77 $ 9.74 $ 9.70 $ 9.74 $ 9.17 $ 10.06
---------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income................ 0.24 0.51 0.56 0.51 0.56 0.64
Net realized and unrealized gain
(loss) on investment
transactions....................... (0.25) 0.06 -- (0.01) 0.55 (0.89)
---------- -------- -------- -------- -------- --------
Total from investment
operations..................... (0.01) 0.57 0.56 0.50 1.11 (0.25)
---------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................. (0.25) (0.54) (0.52) (0.54) (0.54) (0.52)
Tax return of capital distribution... -- -- -- -- -- (0.12)
---------- -------- -------- -------- -------- --------
Total distributions.................. (0.25) (0.54) (0.52) (0.54) (0.54) (0.64)
---------- -------- -------- -------- -------- --------
Net asset value, end of period....... $ 9.51 $ 9.77 $ 9.74 $ 9.70 $ 9.74 $ 9.17
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
TOTAL RETURN(a)...................... 3.07% 6.01% 5.96% 5.34% 12.37% (2.58)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...... $137,374 $149,508 $149,162 $185,235 $212,996 $241,980
Average net assets (000)............. $145,057 $155,680 $166,651 $186,567 $209,521 $307,382
Ratios to average net assets:
Expenses, including distribution
fees........................... 0.91%(b) 0.96% 0.97% 1.01% 0.95% 0.84%
Expenses, excluding distribution
fees........................... 0.73%(b) 0.78% 0.77% 0.79% 0.75% 0.63%
Net investment income............. 4.91%(b) 5.26% 5.76% 5.99% 5.82% 5.48%
Portfolio turnover rate.............. 142% 155% 210% 132% 217% 431%
</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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 18
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
SHORT-INTERMEDIATE TERM SERIES
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class Z
--------------------------------------------
February 26,
Six Months 1997(b)
Ended Year Ended Through
May 31, November 30, November 30,
1999 1998 1997
----- ------ -----
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................... $ 9.81 $ 9.77 $ 9.64
----- ------ -----
Income from investment operations:
Net investment income.................................. 0.26 0.47 0.47
Net realized and unrealized gain (loss) on investment
transactions......................................... (0.26) 0.13 0.07
----- ------ -----
Total from investment operations.................... -- 0.60 0.54
----- ------ -----
Less distributions:
Dividends from net investment income................... (0.26) (0.56) (0.41)
----- ------ -----
Total distributions.................................... (0.26) (0.56) (0.41)
----- ------ -----
Net asset value, end of period......................... $ 9.55 $ 9.81 $ 9.77
----- ------ -----
----- ------ -----
TOTAL RETURN(a)........................................ 3.27% 6.31% 5.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................ $9,184 $ 4,635 $ 207(c)
Average net assets (000)............................... $8,717 $ 3,631 $ 202(c)
Ratios to average net assets:
Expenses, including distribution fees............... 0.73%(d) 0.78% 0.77%(d)
Expenses, excluding distribution fees............... 0.73%(d) 0.78% 0.77%(d)
Net investment income............................... 5.11%(d) 5.36% 6.52%(d)
Portfolio turnover rate................................ 142% 155% 210%
</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) Commencement of offering of Class Z shares.
(c) Figure is actual and not rounded to nearest thousand.
(d) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 19
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
U.S. TREASURY MONEY MARKET SERIES
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class Z
--------------------------------------------------------------------------- ---------------------------
Six Months Six Months
Ended Year Ended November 30, Ended Year Ended
May 31, ------------------------------------------------------------ May 31, November 30,
1999 1998 1997 1996 1995 1994 1999 1998
---------- -------- -------- -------- -------- -------- ----- ------
<S> <C> <C> <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 $1.000 $ 1.000
Net investment
income........... 0.020 0.046 0.047 0.046 0.050 0.033 0.022 0.049
Dividends from net
investment
income........... (0.020) (0.046) (0.047) (0.046) (0.050) (0.033) (0.022) (0.049)
---------- -------- -------- -------- -------- -------- ----- ------
Net asset value,
end of period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000 $ 1.000
---------- -------- -------- -------- -------- -------- ----- ------
---------- -------- -------- -------- -------- -------- ----- ------
TOTAL RETURN(a).... 2.05% 4.66% 4.80% 4.75% 5.08% 3.31% 2.18% 5.05%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000)..... $304,333 $336,985 $432,784 $305,330 $339,334 $293,984 $2,279 $ 211(c)
Average net assets
(000)............ $463,625 $420,140 $402,634 $393,060 $345,369 $308,454 $1,681 $ 209(c)
Ratios to average
net assets:
Expenses,
including
distribution
fees......... 0.62%(d) 0.63% 0.65% 0.63% 0.62% 0.62% 0.50%(d) 0.51%
Expenses,
excluding
distribution
fees......... 0.50%(d) 0.51% 0.52% 0.51% 0.50% 0.50% 0.50%(d) 0.51%
Net investment
income....... 4.04%(d) 4.57% 4.66% 4.57% 5.01% 3.21% 4.17%(d) 4.91%
<CAPTION>
February 21,
1997(b)
Through
November 30,
1997
-----
<S> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period........... $1.000
Net investment
income........... 0.039
Dividends from net
investment
income........... (0.039)
-----
Net asset value,
end of period.... $1.000
-----
-----
TOTAL RETURN(a).... 3.96%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000)..... $ 205(c)
Average net assets
(000)............ $ 197(c)
Ratios to average
net assets:
Expenses,
including
distribution
fees......... 0.52%(d)
Expenses,
excluding
distribution
fees......... 0.52%(d)
Net investment
income....... 3.89%(d)
</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) Commencement of offering of Class Z shares.
(c) Figure is actual and not rounded to nearest thousand.
(d) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 20
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Trustees
Edward D. Beach
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Thomas T. Mooney
Thomas H. O'Brien
Richard A. Redeker
John R. Strangfeld
Nancy H. Teeters
Louis A. Weil, III
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Deborah A. Docs, Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
New York, NY 10022
The views expressed in this report and information about the Fund's
portfolio holdings are for the period covered by this report and
are subject to change thereafter.
The accompanying financial statements as of May 31, 1999, were
not audited and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a current prospectus.
<PAGE>
(LOGO)
Prudential Mutual Funds BULK RATE
Gateway Center Three U.S. POSTAGE
100 Mulberry Street PAID
Newark, NJ 07102-4077 Permit 6807
(800) 225-1852 New York, NY
744342205 744342403 MF100E2
744342106 744342601
744342304 744342502
