<PAGE>
(ICON)
Prudential
Government
Securities
Trust
- -----------------------
Money Market Series
Short-Intermediate
Term Series
U.S. Treasury Money
Market Series
ANNUAL
REPORT
Nov. 30, 1999
(LOGO)
<PAGE>
A Message from the Series' President January 7, 2000
(PHOTO)
Dear Shareholder,
The Prudential Government Securities Trust--Money Market Series
and U.S. Treasury Money Market Series both provided stable $1
net asset values during their fiscal year that closed November
30, 1999. The Short-Intermediate Term Series' Class A shares
posted a very modest 1.26% annual return that matched the return
on the average short-intermediate U.S. government fund tracked
by Lipper Inc.
The following report takes a closer look at developments in
the fixed-income markets during our fiscal year, and explains
how the three Series were positioned accordingly.
One integrated and expanded team
I would like to take this opportunity to tell you about some
changes we've made to our Fixed Income Group. In 1999, we
combined our fixed-income areas into one integrated group
that will manage money for Prudential's investors and policyholders.
This group now manages approximately $135 billion in assets,
making it one of the three largest fixed-income money managers
in the country. Our expanded depth, breadth, and scale also
allow us to tap the best talent and share investment ideas,
proprietary research, and analytical tools.
To utilize these resources effectively, we recently organized
the group into teams, each specializing in a different sector
of the fixed-income market. The one team that was already in
place is the Money Market Sector team, which has been headed by
Joseph Tully since 1995. This team will continue to be
responsible for the day-to-day management of the Money Market
Series and the U.S. Treasury Money Market Series. The U.S.
Liquidity Sector team, headed by Michael Lillard, is now
responsible for the daily management of the Short-Intermediate
Term Series.
Thank you for your continued confidence in Prudential mutual
funds. I firmly believe that the group's combined resources
and our new team approach will make us a powerhouse in the
world of fixed-income investing across all sectors.
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
<PAGE>
Prudential Government Securities Trust--Money Market Series
(PHOTO) (PHOTO)
Team portfolio managers Joseph Tully (Money Market [Sector] Team
Leader) and Bernard D. Whitsett, II
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
Series benefited from rising money market yields
We positioned the Series to take advantage of the rise in
money market yields during our fiscal year that ended
November 30, 1999. We bought federal agency securities
whose interest rates adjusted either daily, weekly, or
monthly. By the close of our fiscal year, they comprised
roughly 50% of the Series' total investments. Owning
securities whose rates reset frequently to higher
levels enabled the Series to benefit more expediently
from the rise in money market yields.
Investors pushed money market yields higher because
they expected the Federal Reserve to increase a key
short-term interest rate to slow U.S. economic growth
and prevent higher inflation. Mounting inflation is
undesirable for nearly everyone, but
particularly for those on fixed incomes whose
buying power declines if their incomes are not
adjusted for the rise in prices. A rate hike could
prevent this destructive cycle by curbing economic
activity via higher borrowing costs for businesses and
consumers. We did not believe a rate hike was imminent
early in 1999, nor did we believe the Fed would tighten
as aggressively as indicated by the rise in yields.
Therefore, we locked in yields on fixed-rate federal
agency securities maturing in one year and reduced
repurchase agreement transactions, which were priced
less attractively. Buying fixed-rate securities early
in 1999 worked well since the first rate hike did not
occur until June 1999. At that time, the Federal funds
rate (what U.S. banks charge each other for overnight
loans) was increased a quarter of a percentage point
to 5.00%. Two more moves in August and November 1999
left the rate at 5.50%.
<TABLE>
Performance As of 11/30/99
<CAPTION>
7-Day Net Asset Weighted Avg. Net Assets
Current Yield* Value (NAV) Maturity (WAM) (Millions)
<S> <C> <C> <C>
Class A 4.68% $1.00 60 Days $577
Class Z 4.80% $1.00 60 Days $ 42
IBC Financial Data Gov't &
Agencies Money Fund Avg.** 4.90% $1.00 51 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 November 30,
1999.
<PAGE>
Prudential Government Securities Trust--U.S. Treasury Money Market Series
(PHOTO) (PHOTO)
Team portfolio managers Joseph Tully (Money Market [Sector]
Team Leader) and Bernard D. Whitsett, IIInvestment Goals
and StyleThe 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 focused on cash management bills and shorter-term U.S. Treasury notes
Among U.S. Treasury money market securities, we primarily purchased
cash management bills maturing in three months or less, and Treasury
notes with nine to 12 months left to maturity. This emphasis on
shorter- and longer-term Treasury money market securities is
called a "barbell strategy." We maintained this approach
throughout the Series' fiscal year that closed November 30, 1999.
Cash management bills are issued when the U.S. Treasury is
temporarily short on funds to finance government operations.
A fairly steady supply of cash management bills were issued
with solid yields during our fiscal year in order to attract
investors. As a result, we took advantage of good buying
opportunities that enhanced the Series' yield. Cash
management bills also provided another important
benefit: with their short maturities, we could
easily sell them for money to meet
shareholder liquidity needs.
Turning to Treasury notes, these securities are originally
issued with maturities between two and 10 years. We bought
Treasury notes with nine to 12 months left to maturity
because they fit the Series' investment constraints.
Furthermore, they were relatively inexpensive compared to
Treasury bills, which are issued for maturities of three
months, six months, or one year. Treasury bills grew more
expensive, on a relative basis, as their supply declined.
Because the U.S. government's budget is
in surplus, it borrows fewer dollars via regularly
scheduled auctions of Treasury bills.
<TABLE>
Performance As of 11/30/99
<CAPTION>
7-Day Net Asset Weighted Avg. Net Assets
Current Yield* Value (NAV) Maturity (WAM) (Millions)
<S> <C> <C> <C> <C>
Class A 4.63% $1.00 79 Days $322
Class Z 4.78% $1.00 79 Days $ 2
IBC Financial Data 100%
U.S. Treasury Money Fund Avg.** 4.47% $1.00 70 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 November 30, 1999.
1
<PAGE>
Prudential Government Securities Trust--Short-Intermediate
Term Series
(PHOTO)
Team portfolio manager Michael Lillard (U.S.
Liquidity [Sector] Team Leader)
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
A dismal year for U.S. bond markets
The threat of mounting inflationary pressures roiled U.S.
bond markets during our fiscal year that closed November
30, 1999. A strong U.S. economic expansion, a global
economic recovery, and soaring oil prices risked
boosting inflation, which erodes
the value of bonds' fixed-interest payments.
Concerned that the Federal Reserve might increase a key
short-term interest rate to slow U.S. economic growth and
avoid rising inflation, investors required higher yields
on bonds, which forced bond prices lower. Under this bearish
trend, U.S. fixed-income markets provided either negative
returns or very modest positive returns for the 12-month
period. Similarly, the Series and its benchmark Lipper
Average posted annual returns well below 2.00%.
The Fed made its first move in June 1999, when the
Federal funds rate (the rate U.S. banks charge each
other for overnight loans) was increased a quarter of
a percentage point to 5.00%. It was raised by the same
amount in August and November 1999, leaving it at 5.50%.
We cut our exposure to Treasuries
In anticipation of these changes in monetary policy, we
altered the Series' asset allocation primarily during the
first half of our fiscal year. Treasuries stood at 19% of
the Series' total investments as of November 30, 1999,
down from 46% on November 30, 1998. Cutting back proved
a wise choice as intermediate-term Treasuries posted only
a 1.08% return for the 12-month period, based on the Lehman
Brothers U.S. Treasury Index. This was one of the worst
performances among intermediate-term U.S. bond markets
for that period of time. Besides the expectation of a
higher Federal funds rate, Treasuries performed poorly
because demand for them and other safe government
securities declined as the global economic recovery
continued in 1999.
We used some of our proceeds from selling Treasuries to
purchase federal agency securities--particularly those
with shorter maturities. Federal agency securities rose
to 27% of the Series' total investments as of November
30, 1999 from 3% a year earlier. We favored these
securities because they pay higher yields than
Treasuries. In addition, prices of shorter-term
federal agency securities fell less than Treasuries
during our fiscal year.
2
<PAGE>
We bought securities backed by mortgages
A portion of our proceeds were also used to buy mortgage
pass-through securities, which stood at 23% of the Series'
total investments as of November 30, 1999, up from 17% a
year earlier. Fixed-rate mortgage pass-through securities
performed better than Treasuries, returning 2.54% for the
12-month period, based on the Lehman Brothers Mortgage-Backed
Securities Index. Mortgage pass-through securities outperformed
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 pass-through
securities are often paid off ahead of schedule when
homeowners refinance their mortgages at lower rates
in order to save money. Because mortgage
rates climbed along with bond yields, homeowners had
less opportunity to refinance their mortgages and
prompt prepayments on mortgage pass-through securities.
Meanwhile, we either reduced or eliminated the Series' exposure
to asset-backed securities and collateralized mortgage
obligations, which are a complex type of security backed
by mortgages. We were concerned that some of these securities were
relatively illiquid, which means they could not always be
sold at or near their true value. Therefore, we readily
sold them when we were offered a good price. Asset-backed
securities fell to 6% of the Series' total investments as
of November 30, 1999 from 16% a year earlier. We sold all
of the Series' collateralized mortgage obligations.
Looking Ahead
Since the end of November, investors pushed yields on
debt securities higher in anticipation of another hike
in the Federal funds rate early in 2000. Should yields
rise even further, our exposure to adjustable-rate federal
agency securities would continue to benefit the Money Market
Series. The Short-Intermediate Term Series would be aided by
its increased exposure to securities that provide higher
yields than Treasuries.
<TABLE>
Cumulative Total Returns1 As of 11/30/99
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 1.26% 34.63% 82.61% 267.50%
Class Z 1.46 N/A N/A 14.01
Lipper Short-Intermediate
U.S. Gov't Fund Avg.3 1.26 34.53 88.55 ***
</TABLE>
<TABLE>
Average Annual Total Returns1 As of 12/31/99
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 0.55% 6.02% 6.16% 7.83%
Class Z 0.74 N/A N/A 4.72
</TABLE>
<TABLE>
Distributions and Yields As of 11/30/99
<CAPTION>
Total Distributions 30-Day
Paid for 12 Months SEC Yield
<S> <C> <C>
Class A $0.48 5.15%
Class Z 0.50 5.33
</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 These are the average returns in the Lipper Short-Intermediate
U.S. Gov't Fund Category for the one-, five-, and ten-year
periods. The Lipper average is unmanaged. Short-Intermediate
Government funds invest at least 65% of their assets in
securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities, with dollar-weighted
average maturities of one to five years.
*** Lipper Since Inception returns are 271.02% for Class
A and 14.06% for Class Z, based on all funds in each share
class.
3
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
Portfolio of Investments as
of November 30, 1999 MONEY MARKET SERIES
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Federal Farm Credit Bank--1.1%
$ 2,000 6.88%, 5/1/00 $ 2,008,160
5,000 5.85%, 12/1/00 4,988,050
------------
6,996,210
- ------------------------------------------------------------
Federal Home Loan Bank--58.2%
24,000 5.36%, 12/1/99, F.R.N. 23,985,128
2,500 5.655%, 12/1/99, F.R.N. 2,499,587
22,500 5.706%, 12/1/99, F.R.N. 22,500,000
9,000 5.716%, 12/1/99, F.R.N. 8,998,692
31,000 5.956%, 12/1/99, F.R.N. 30,999,864
24,000 5.25875%, 12/6/99, F.R.N. 23,991,053
12,000 5.23%, 12/13/99, F.R.N. 11,996,328
23,500 5.4525%, 12/21/99, F.R.N. 23,494,405
26,000 5.44125%, 12/28/99, F.R.N. 25,991,475
28,500 5.924%, 1/4/00, F.R.N. 28,483,507
11,000 5.97625%, 1/11/00, F.R.N. 10,999,147
18,000 4.90%, 1/14/00 18,000,000
9,000 4.90%, 2/11/00 8,998,289
4,000 4.95%, 2/17/00 3,999,543
7,000 5.00%, 2/24/00 6,999,689
7,000 5.00%, 2/25/00 7,000,000
14,000 5.035%, 2/25/00 13,997,592
7,000 5.035%, 3/2/00 7,000,000
2,000 5.07%, 3/17/00 1,995,822
1,000 4.495%, 3/23/00 995,461
5,000 5.135%, 3/29/00 5,000,905
12,000 5.01%, 4/28/00 11,994,631
2,000 5.075%, 4/28/00 2,000,034
12,000 5.02%, 5/12/00 11,992,901
2,500 5.125%, 5/19/00 2,492,153
9,500 5.15%, 5/19/00 9,496,205
5,000 5.35%, 6/8/00 4,998,130
Federal Home Loan Bank
$ 4,500 5.66%, 7/6/00 $ 4,503,583
7,000 5.875%, 9/7/00 6,997,689
4,500 Zero Coupon, 9/15/00 4,299,071
5,000 5.705%, 10/6/00 4,992,093
7,000 5.915%, 10/13/00 6,994,665
1,500 5.965%, 12/1/00 1,497,706
------------
360,185,348
- ------------------------------------------------------------
Federal Home Loan Mortgage Corporation--0.2%
1,250 6.395%, 5/16/00 1,257,322
- ------------------------------------------------------------
Federal National Mortgage Association--15.8%
12,000 5.695%, 12/1/99, F.R.N. 11,989,965
24,000 5.74%, 12/1/99, F.R.N. 23,996,181
3,000 5.33375%, 12/6/99, F.R.N. 2,999,037
3,000 5.32125%, 12/22/99, F.R.N. 2,997,712
14,500 5.94%, 2/9/00, F.R.N. 14,490,516
7,000 5.83%, 2/17/00, F.R.N. 6,992,662
12,500 5.10%, 5/19/00 12,462,513
6,500 5.33%, 6/9/00 6,496,931
7,000 5.80%, 8/17/00 6,995,261
3,000 5.97%, 10/2/00 3,001,387
5,000 5.90%, 12/1/00 4,992,850
------------
97,415,015
- ------------------------------------------------------------
Student Loan Marketing Association--7.8%
24,000 5.745%, 12/1/99, F.R.N. 23,994,574
24,000 6.055%, 12/7/99, F.R.N. 23,984,210
------------
47,978,784
- ------------------------------------------------------------
Tennessee Valley Authority--4.4%
25,500 8.625%, 12/16/99 27,096,879
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
MONEY MARKET SERIES
Portfolio of Investments as of November 30, 1999
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Repurchase Agreements(a)--13.7%
$ 25,000 Bank of America Securities Corp.,
5.75%, dated 11/29/99, due
12/1/99 in the amount of
$25,007,986 (cost $25,000,000;
the value of the collateral
including accrued interest is
$25,530,601) $ 25,000,000
25,000 Credit Suisse First Boston Corp.,
5.71%, dated 11/29/99, due
12/1/99 in the amount of
$25,007,931 (cost $25,000,000;
the value of the collateral
including accrued interest is
$25,952,995) 25,000,000
9,333 Goldman, Sachs & Co., 5.30%, dated
11/4/99, due 12/6/99 in the
amount of $9,376,969 (cost
$9,333,000; the value of the
collateral including accrued
interest is $9,519,661) 9,333,000
25,543 Morgan Stanley Dean Witter, 5.70%,
dated 11/30/99, due 12/2/99 in
the amount of $25,551,191 (cost
$25,543,000; the value of the
collateral including accrued
interest is $26,233,005) 25,543,000
------------
84,876,000
------------
- ------------------------------------------------------------
Total Investments--101.2%
(amortized cost $625,805,558(b)) 625,805,558
Liabilities in excess of other
assets--(1.2%) (7,391,277)
------------
Net Assets--100% $618,414,281
------------
------------
</TABLE>
- ---------------
F.R.N.--Floating Rate Note. The interest rate reflected is the rate in effect at
November 30, 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. 5
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
Portfolio of Investments as of November 30, 1999
SHORT-INTERMEDIATE TERM SERIES
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--88.6%
- ------------------------------------------------------------
Asset-Backed--7.2%
Capital One Master Trust
$ 5,000 5.43%, Ser. 98-4 A, 1/15/07 $ 4,734,375
Premier Auto Trust
5,000(a) 5.77%, Ser. 98-2 A3, 1/6/02 4,987,500
------------
9,721,875
- ------------------------------------------------------------
Corporate Obligations--1.8%
Merck and Company
2,500(a) 5.76%, 5/3/37 2,507,812
- ------------------------------------------------------------
U.S. Government Agency Mortgage Pass-Through
Obligations--27.2%
Federal Home Loan Mortgage
Association
71 7.375%, 3/1/06 70,759
804 9.00%, 9/1/05 - 11/1/05 819,369
Federal National Mortgage
Association
28,215(c) 6.50%, 12/1/14 - 1/1/15 27,588,910
2,531 7.50%, 4/1/10 - 12/1/10 2,558,181
Government National Mortgage
Association
6,030(a) 7.00%, 1/15/25 - 2/15/29 5,914,545
------------
36,951,764
- ------------------------------------------------------------
U.S. Government Agency Obligation--32.9%
Federal Home Loan Bank
15,000 5.375%, 3/2/01 14,852,400
Federal National Mortgage
Association
10,000 5.50%, 10/12/01 9,837,500
15,600 5.625%, 5/14/04 15,032,004
5,000 6.30%, 9/25/02 4,932,800
------------
44,654,704
U.S. Treasury Notes--19.5%
$ 4,720(a) 6.50%, 5/31/01 $ 4,755,400
2,400(a) 5.875%, 9/30/02 2,388,384
2,300(a) 5.75%, 11/30/02 2,280,956
1,500 5.25%, 5/15/04 1,449,135
15,000(a) 6.875%, 5/15/06 15,478,050
------------
26,351,925
------------
Total long-term investments
(cost $122,699,612) 120,188,080
------------
SHORT-TERM INVESTMENTS--31.4%
- ------------------------------------------------------------
Commercial Paper--14.7%
Citicorp
5,500 5.52%, 12/16/99 5,487,350
Enterprise Funding Corp.
4,017 5.53%, 12/16/99 4,007,744
Old Line Funding Corp.
4,000 5.57%, 12/15/99 3,991,336
Thunder Bay Funding, Inc.
1,007 5.56%, 12/14/99 1,004,978
Triple A One Funding Corp.
5,416 5.54%, 12/10/99 5,408,499
------------
Total commercial paper
(cost $19,899,907) 19,899,907
------------
- ------------------------------------------------------------
Repurchase Agreement--13.2%
17,880 Joint Repurchase Agreement Account,
5.51%, 12/1/99
(cost $17,880,000; Note 5) 17,880,000
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
SHORT-INTERMEDIATE TERM SERIES
Portfolio of Investments as of November 30, 1999
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
U.S. Treasury Notes--3.5%
$ 500(c) 6.375%, 5/15/00 $ 501,640
4,340 4.50%, 9/30/00 4,293,215
------------
Total U.S. treasury notes
(cost $4,804,314) 4,794,855
------------
Total short-term investments
(cost $42,584,221) 42,574,762
------------
- ------------------------------------------------------------
Total Investments--120.0%
(amortized cost $165,283,833; Note
4) 162,762,842
Liabilities in excess of other
assets--(20.0%) (27,105,323)
------------
Net Assets--100% $135,657,519
------------
------------
</TABLE>
- ---------------
(a) Asset segregated as collateral for dollar rolls.
(b) Mortgage dollar roll, see Note 1 and Note 4.
(c) Security pledged as initial margin for financial futures contracts.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
U.S. TREASURY MONEY MARKET SERIES
Portfolio of Investments as of November 30, 1999
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
United States Treasury Bills--75.7%
$ 70,735 5.315%, 1/13/00 $ 70,285,941
43,750 5.17%, 1/20/00 43,435,851
75,000 5.175%, 1/20/00 74,460,937
25,000 5.18%, 1/20/00 24,820,139
15,000 5.195%, 1/20/00 14,891,771
15,990 5.20%, 1/20/00 15,874,517
505 5.205%, 1/20/00 501,349
700 5.215%, 1/20/00 694,930
------------
244,965,435
- ------------------------------------------------------------
United States Treasury Notes--24.9%
5,000 6.375%, 1/15/00 5,007,837
3,295 5.375%, 1/31/00 3,297,673
24,784 7.75%, 1/31/00 24,884,466
1,845 7.125%, 2/29/00 1,853,977
6,065 6.375%, 5/15/00 6,103,295
12,569 6.25%, 5/31/00 12,640,281
7,395 6.00%, 8/15/00 7,426,254
4,571 6.25%, 8/31/00 4,596,616
1,020 4.50%, 9/30/00 1,010,891
6,325 6.125%, 9/30/00 6,356,440
7,590 4.625%, 11/30/00 7,505,619
------------
80,683,349
- ------------------------------------------------------------
Total Investments--100.6%
(amortized cost $325,648,784(a)) 325,648,784
Liabilities in excess of other
assets--(0.6%) (1,994,704)
------------
Net Assets--100% $323,654,080
------------
------------
</TABLE>
- ---------------
(a) Federal income tax basis of Portfolio securities is the same
as for financial reporting purposes.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 8
<PAGE>
Statement of Assets and Liabilities
November 30, 1999 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 $540,929,558, $147,403,833 and $325,648,784,
respectively)............................................................ $540,929,558 $144,882,842 $325,648,784
Repurchase agreements, at value (cost $84,876,000, $17,880,000 and $0,
respectively)............................................................ 84,876,000 17,880,000 --
Cash........................................................................ 104,507 103,368 --
Receivable for investments sold............................................. -- 27,775,610 --
Interest receivable......................................................... 4,948,822 1,153,672 1,150,737
Receivable for Series shares sold........................................... 4,177,203 16,491 2,693,703
Deferred expenses and other assets.......................................... 28,900 4,755 8,290
Securities lending income receivable........................................ -- 1,365 --
------------ ------------ ------------
Total assets............................................................. 635,064,990 191,818,103 329,501,514
------------ ------------ ------------
Liabilities
Payable for investments purchased........................................... 11,478,606 27,709,481 --
Dollar roll payable......................................................... -- 27,776,688 --
Payable for Series shares reacquired........................................ 4,287,974 228,382 5,122,582
Dividends payable........................................................... 553,197 148,782 292,068
Due to Manager.............................................................. 211,097 45,248 103,256
Due to distributor.......................................................... 32,147 10,207 17,509
Accrued expenses and other liabilities...................................... 87,688 239,390 312,019
Due to broker - variation margin............................................ -- 2,406 --
------------ ------------ ------------
Total liabilities........................................................ 16,650,709 56,160,584 5,847,434
------------ ------------ ------------
Net Assets.................................................................. $618,414,281 $135,657,519 $323,654,080
------------ ------------ ------------
------------ ------------ ------------
Net assets were comprised of:
Shares of beneficial interest, at par ($.01 per share)................... $ 6,184,143 $ 144,104 $ 3,236,541
Paid-in capital in excess of par......................................... 612,230,138 168,707,205 320,417,539
------------ ------------ ------------
618,414,281 168,851,309 323,654,080
Accumulated net realized loss on investments............................. -- (30,684,502) --
Net unrealized depreciation on investments............................... -- (2,509,288) --
------------ ------------ ------------
Net assets, November 30, 1999............................................... $618,414,281 $135,657,519 $323,654,080
------------ ------------ ------------
------------ ------------ ------------
Net asset value
Class A:
Net asset value, offering price and redemption price per share
($576,868,299 3 576,868,299 shares of beneficial interest issued and
outstanding).......................................................... $1.00
------------
------------
($127,297,554 3 13,525,862 shares of beneficial interest issued and
outstanding).......................................................... $9.41
------------
------------
($321,640,663 3 321,640,663 shares of beneficial interest issued and
outstanding).......................................................... $1.00
------------
------------
Class Z:
Net asset value, offering price and redemption price per share
($41,545,982 3 41,545,982 shares of beneficial interest issued and
outstanding).......................................................... $1.00
------------
------------
($8,359,965 3 884,562 shares of beneficial interest issued and
outstanding).......................................................... $9.45
------------
------------
($2,013,417 3 2,013,417 shares of beneficial interest issued and
outstanding).......................................................... $1.00
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 9
<PAGE>
Statement of Operations
Year Ended November 30, 1999 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................................................................. $32,187,838 $ 8,476,964 $ 18,185,152
Income from securities loaned, net....................................... -- 112,674 --
----------- ------------ -------------
32,187,838 8,589,638 18,185,152
Expenses
Management fee........................................................... 2,509,000 590,583 1,542,859
Distribution fee--Class A................................................ 742,833 257,169 479,715
Transfer agent's fees and expenses....................................... 1,890,000 212,000 155,000
Custodian's fees and expenses............................................ 75,000 82,000 65,000
Reports to shareholders.................................................. 70,000 67,000 67,000
Registration fees........................................................ 211,000 47,000 55,000
Audit fees and expenses.................................................. 25,000 34,000 25,000
Legal fees and expenses.................................................. 30,000 32,000 18,000
Trustees' fees........................................................... 12,000 12,000 12,000
Insurance................................................................ 7,000 2,000 3,500
Miscellaneous............................................................ 4,992 1,606 20,015
----------- ------------ -------------
Total expenses........................................................ 5,576,825 1,337,358 2,443,089
----------- ------------ -------------
Net investment income....................................................... 26,611,013 7,252,280 15,742,063
----------- ------------ -------------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions.................................................. 22,795 (1,535,082) 92,022
Financial futures contracts.............................................. -- (13,779) --
----------- ------------ -------------
22,795 (1,548,861) 92,022
Net change in unrealized appreciation (depreciation) on:
Investments.............................................................. -- (3,961,882) --
Financial futures contracts.............................................. -- 11,703 --
----------- ------------ -------------
Net gain (loss) on investments.............................................. 22,795 (5,499,040) 92,022
----------- ------------ -------------
Net Increase in Net Assets Resulting from Operations........................ $26,633,808 $ 1,753,240 $ 15,834,085
----------- ------------ -------------
----------- ------------ -------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 10
<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
---------------------------------- ------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year ended November 30,
Increase (Decrease) -----------------------------------------------------------------------------------------------------------
in Net Assets 1999 1998 1999 1998 1999 1998
--------------- --------------- --------------- ------------ --------------- ---------------
Operations:
Net investment
income....... $ 26,611,013 $ 29,027,146 $ 7,252,280 $ 8,383,801 $ 15,742,063 $ 19,215,442
Net realized
gain (loss)
on investment
transactions... 22,795 26,721 (1,548,861) 1,506,782 92,022 293,468
Net change in
unrealized
depreciation
on
investments... -- -- (3,950,179) (564,958) -- --
--------------- --------------- --------------- ------------ --------------- ---------------
Net increase in
net assets
resulting
from
operations... 26,633,808 29,053,867 1,753,240 9,325,625 15,834,085 19,508,910
--------------- --------------- --------------- ------------ --------------- ---------------
Dividends and
distributions
(Note 1)........ (26,633,808) (29,053,867) (7,397,439) (8,799,007) (15,834,085) (19,508,910)
--------------- --------------- --------------- ------------ --------------- ---------------
Series share transactions(a) (Note
6):
Net proceeds
from shares
subscribed... 1,745,594,547 2,267,004,069 28,989,720 48,203,029 3,016,500,664 4,398,749,349
Net asset value
of shares
issued in
reinvestment
of dividends
and
distributions... 25,608,555 27,554,570 5,237,511 5,999,888 13,902,487 17,472,551
Cost of shares
reacquired... (1,769,693,659) (2,269,663,230) (47,069,301) (49,748,114) (3,043,734,040) (4,512,021,356)
--------------- --------------- --------------- ------------ --------------- ---------------
Net increase
(decrease) in
net assets
from Series
share
transactions.. 1,509,443 24,895,409 (12,842,070) 4,454,803 (13,330,889) (95,799,456)
--------------- --------------- --------------- ------------ --------------- ---------------
Total increase
(decrease)......... 1,509,443 24,895,409 (18,486,269) 4,981,421 (13,330,889) (95,799,456)
Net Assets
Beginning of
year............ 616,904,838 592,009,429 154,143,788 149,162,367 336,984,969 432,784,425
--------------- --------------- --------------- ------------ --------------- ---------------
End of year(b)..... $ 618,414,281 $ 616,904,838 $ 135,657,519 $154,143,788 $ 323,654,080 $ 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. 11
<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 and the U.S. Treasury Money Market Series (each a
'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 and each Series 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
with U.S. financial institutions, it is the Fund's policy that its 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. To the extent that any repurchase agreement exceeds one
business day, the value of the collateral is marked-to-market on a daily basis
to ensure the adequacy of the collateral. 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 may enter into
financial futures contracts which are agreements 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.
Securities Lending: The Money Market Series and 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 Series continues to receive any dividend or interest paid on such
securities. Each Series receives compensation net of rebates for lending
securities in the form of fees or it retains a portion of interest on the
investments of any cash received as collateral. 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 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. Expenses are
recorded on the accrual basis which may require the use of certain estimates by
management.
Dollar Rolls: The Short-Intermediate Term Series may enter 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
- --------------------------------------------------------------------------------
12
<PAGE>
Notes to Financial Statements PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
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 at least 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.
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with American Institute of Certified
Public Accountants (AICPA) 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 effect of applying this statement was to
increase net investment income by $52,535, decrease accumulated net realized
losses by $2,336,371 and increase paid-in-capital in excess of par by $2,283,836
which represents the expiration of a portion of the capital loss carryforward.
Net investment income, net realized gains and net assets were not affected by
this change.
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 Class A and Class Z
shares of the Fund. The Fund compensates PIMS for distributing and servicing the
Fund's Class A shares, pursuant to a plan of distribution (the 'Class A Plan'),
regardless of expenses actually incurred by them. The distribution fees for
Class A shares are accrued daily and payable monthly. The distributor pays
various broker-dealers for account servicing fees and for the expenses incurred
by such broker-dealers. No distribution or service fees are paid to PIMS as
distributor of the Class Z shares of the Fund.
Pursuant to the Class A Plan, the Money Market Series and the U.S. Treasury
Money Market Series compensate PIMS at an annual rate of .125 of 1% of each
Series' average daily net assets. The Short-Intermediate Term Series' Class A
Plan compensates PIMS 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.
PIFM, PIC and PIMS are wholly owned subsidiaries of The Prudential Insurance
Company of America.
As of March 11, 1999, the Short-Intermediate Term Series, 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. Interest on any borrowings will be at
market rates. 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 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 year ended November 30, 1999. The purpose of the
- --------------------------------------------------------------------------------
13
<PAGE>
Notes to Financial Statements PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
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 year ended November 30, 1999,
the Fund incurred fees of approximately $1,687,100, $190,000, and $149,700,
respectively, for the Money Market Series, Short-Intermediate Term Series, and
U.S. Treasury Money Market Series. As of November 30, 1999, approximately
$145,000, $15,400, and $9,400 of such fees were due to PMFS, 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, 1999 were
$400,163,371 and $399,824,787, respectively.
For the Short-Intermediate Term Series, the cost basis of investments for
federal income tax purposes was $165,283,833 and, accordingly, as of November
30, 1999, net unrealized depreciation of investments for federal income tax
purposes was $2,520,991 (gross unrealized appreciation $8,466; gross unrealized
depreciation--$2,529,457).
For federal income tax purposes, the Short-Intermediate Term Series has a
capital loss carryforward as of November 30, 1999 of approximately $30,673,000
of which $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,
$3,290,000 expires in 2005 and $1,537,000 expires in 2006. 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, 1999, approximately $4,746,000 of the capital loss
carryforward expired unused.
The average balance of dollar rolls outstanding during the year ended November
30, 1999 was approximately $13,957,017 for the Short-Intermediate Term Series.
During the fiscal year ended November 30, 1999, the Short-Intermediate Term
Series entered into financial futures contracts. Details of open contracts at
November 30, 1999 are as follows:
<TABLE>
<CAPTION>
Value at Value at
Number of Expiration Trade November 30, Unrealized
Contracts Type Date Date 1999 Appreciation
- --------- ----------- ----------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Short
Position:
U.S.
Treasury
7 Index Mar. 2000 $663,141 $651,438 $11,703
-------------
-------------
</TABLE>
- ------------------------------------------------------------
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, 1999, the
Short-Intermediate Term Series had a 2.74% undivided interest in the repurchase
agreements in the joint account. This undivided interest represented $17,880,000
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., 5.68%, in the principal amount of $210,000,000,
repurchase price $210,033,133, due 12/1/99. The value of the collateral
including accrued interest was $214,561,994.
Deutsche Bank Securities Corp., 5.41%, in the principal amount of $30,000,000,
repurchase price $30,004,508, due 12/1/99. The value of the collateral including
accrued interest was $30,600,246.
Goldman, Sachs & Co., 5.45%, in the principal amount of $210,000,000, repurchase
price $210,031,792, due 12/1/99. The value of the collateral including accrued
interest was $214,200,305.
Warburg Dillon Read LLC, 5.42%, in the principal amount of $202,578,000,
repurchase price $202,608,499, due 12/1/99. The value of the collateral
including accrued interest was $206,633,395.
- ------------------------------------------------------------
Note 6. Capital
The Fund offers Class A and Class Z shares. Neither Class A nor Class Z shares
are subject to any sales or redemption charge. Class Z shares are offered
exclusively for sale to a limited group of investors. Each series has authorized
an unlimited number of shares of beneficial interest at $.01 par value.
- --------------------------------------------------------------------------------
14
<PAGE>
Notes to Financial Statements PRUDENTIAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
Transactions in shares of beneficial interest for the Money Market Series for
the fiscal years ended November 30, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
Year Ended November 30,
---------------------------------
<S> <C> <C>
Class A 1999 1998
- ------------------------------- --------------- ---------------
<S> <C> <C>
Shares sold.................... 1,712,722,383 2,221,883,796
Shares issued in reinvestment
of dividends and
distributions................ 24,187,413 26,646,608
Shares reacquired.............. (1,750,045,596) (2,249,954,294)
--------------- ---------------
Net decrease in shares
outstanding.................. (13,135,800) (1,423,890)
--------------- ---------------
--------------- ---------------
<CAPTION>
Class Z
- -------------------------------
<S> <C> <C>
Shares sold.................... 32,872,164 45,120,273
Shares issued in reinvestment
of dividends and
distributions................ 1,421,142 907,962
Shares reacquired.............. (19,648,063) (19,708,936)
--------------- ---------------
Net increase in shares
outstanding.................. 14,645,243 26,319,299
--------------- ---------------
--------------- ---------------
</TABLE>
Transactions in shares of beneficial interest for the Short-Intermediate Term
Series for the fiscal years ended November 30, 1999 and November 30, 1998 were
as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------------- ---------- ------------
<S> <C> <C>
Year Ended November 30, 1999:
Shares sold.......................... 1,586,933 $ 15,183,562
Shares issued in reinvestment of
dividends and distributions........ 500,676 4,786,911
Shares reacquired.................... (3,863,436) (36,892,313)
---------- ------------
Net decrease in shares outstanding... (1,775,827) $(16,921,840)
---------- ------------
---------- ------------
Year ended November 30, 1998:
Shares sold.......................... 1,705,356 $ 16,600,350
Shares issued in connection with
acquisition of BlackRock Government
Income Trust (Note 7).............. 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 Shares Amount
- ------------------------------------- ---------- ------------
<S> <C> <C>
Year ended November 30, 1999:
Shares sold.......................... 1,423,368 $ 13,806,158
Shares issued in reinvestment of
dividends and distributions........ 47,015 450,600
Shares reacquired.................... (1,058,235) (10,176,988)
---------- ------------
Net increase in shares outstanding... 412,148 $ 4,079,770
---------- ------------
---------- ------------
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>
Transactions in shares of beneficial interest for the U.S. Treasury Money Market
Series for the fiscal years ended November 30, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
Year Ended November 30,
---------------------------------
Class A 1999 1998
- ------------------------------- --------------- ---------------
<S> <C> <C>
Shares sold.................... 3,013,485,594 4,398,749,349
Shares issued in reinvestment
of dividends and
distributions................ 13,826,283 17,472,545
Shares reacquired.............. (3,042,655,971) (4,512,021,356)
--------------- ---------------
Net decrease in shares
outstanding.................. (15,344,094) (95,799,462)
--------------- ---------------
--------------- ---------------
<CAPTION>
Class Z
- -------------------------------
<S> <C> <C>
Shares sold.................... 3,015,070 --
Shares issued in reinvestment
of dividends and
distributions................ 76,204 6
Shares reacquired.............. (1,078,069) --
--------------- ---------------
Net increase in shares
outstanding.................. 2,013,205 6
--------------- ---------------
--------------- ---------------
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
MONEY MARKET SERIES
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class Z
------------------------------------------------------------ -------------------------------
Year Ended November 30, Year Ended November 30,
------------------------------------------------------------ -------------------------------
1999 1998 1997 1996 1995 1999 1998 1997
-------- -------- -------- -------- -------- -------- ------- ------
<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............... 0.042 0.048 0.048 0.046 0.052 0.044 0.049 0.048
Dividends and
distributions........ (0.042) (0.048) (0.048) (0.046) (0.052) (0.044) (0.049) (0.048)
-------- -------- -------- -------- -------- -------- ------- ------
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)........ 4.31% 4.87% 4.87% 4.74% 5.20% 4.44% 5.00% 5.03%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000)......... $576,868 $590,004 $591,428 $552,123 $598,194 $ 41,546 $26,901 $ 581
Average net assets
(000)................ $594,266 $589,649 $586,513 $589,147 $597,599 $ 32,984 $19,236 $ 672
Ratios to average net
assets:
Expenses, including
distribution
fees............. 0.90% 0.80% 0.77% 0.86% 0.78% 0.77% 0.67% 0.65%
Expenses, excluding
distribution
fees............. 0.77% 0.67% 0.65% 0.73% 0.65% 0.77% 0.67% 0.65%
Net investment
income........... 4.23% 4.77% 4.77% 4.63% 5.15% 4.38% 4.89% 4.92%
<CAPTION>
<S> <C>
March 1,
1996(b)
Through
November 30,
1996
-----
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period.. $ 1.000
Net investment
income............... 0.038
Dividends and
distributions........ (0.038)
-----
Net asset value, end of
period............... $ 1.000
-----
-----
TOTAL RETURN(a)........ 3.87%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000)......... $ 204(c)
Average net assets
(000)................ $ 1,962
Ratios to average net
assets:
Expenses, including
distribution
fees............. 0.68%(d)
Expenses, excluding
distribution
fees............. 0.68%(d)
Net investment
income........... 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 returns for periods of less than one
full year are 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. 16
<PAGE>
PRUDENTIAL GOVERNMENT SECURITIES TRUST
SHORT-INTERMEDIATE TERM SERIES
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class Z
------------------------------------------------------------ -----------------------
Year Ended November 30, Year Ended November 30,
------------------------------------------------------------ -----------------------
1999 1998 1997 1996 1995 1999 1998
-------- -------- -------- -------- -------- ------ -----
<S> <C> <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 $ 9.81 $ 9.77
-------- -------- -------- -------- -------- ------ -----
Income from investment
operations:
Net investment income........ 0.47 0.51 0.56 0.51 0.56 0.51 0.47
Net realized and unrealized
gain (loss) on investment
transactions............... (0.35) 0.06 -- (0.01) 0.55 (0.37) 0.13
-------- -------- -------- -------- -------- ------ -----
Total from investment
operations............. 0.12 0.57 0.56 0.50 1.11 0.14 0.60
-------- -------- -------- -------- -------- ------ -----
Less distributions:
Dividends from net investment
income..................... (0.48) (0.54) (0.52) (0.54) (0.54) (0.50) (0.56)
-------- -------- -------- -------- -------- ------ -----
Net asset value, end of
period..................... $ 9.41 $ 9.77 $ 9.74 $ 9.70 $ 9.74 $ 9.45 $ 9.81
-------- -------- -------- -------- -------- ------ -----
-------- -------- -------- -------- -------- ------ -----
TOTAL RETURN(a).............. 1.26% 6.01% 5.96% 5.34% 12.37% 1.46% 6.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)...................... $127,298 $149,508 $149,162 $185,235 $212,996 $8,360 $4,635
Average net assets (000)..... $138,847 $155,680 $166,651 $186,567 $209,521 $8,798 $3,631
Ratios to average net assets:
Expenses, including
distribution fees...... 0.92% 0.96% 0.97% 1.01% 0.95% 0.73% 0.78%
Expenses, excluding
distribution fees...... 0.73% 0.78% 0.77% 0.79% 0.75% 0.73% 0.78%
Net investment income..... 4.90% 5.26% 5.76% 5.99% 5.82% 5.09% 5.36%
Portfolio turnover rate...... 304% 155% 210% 132% 217% 304% 155%
<CAPTION>
<S> <C>
February 26,
1997(b)
Through
November 30,
1997
-----
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period..................... $ 9.64
-----
Income from investment
operations:
Net investment income........ 0.47
Net realized and unrealized
gain (loss) on investment
transactions............... 0.07
-----
Total from investment
operations............. 0.54
-----
Less distributions:
Dividends from net investment
income..................... (0.41)
-----
Net asset value, end of
period..................... $ 9.77
-----
-----
TOTAL RETURN(a).............. 5.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)...................... $ 207(c)
Average net assets (000)..... $ 202(c)
Ratios to average net assets:
Expenses, including
distribution fees...... 0.77%(d)
Expenses, excluding
distribution fees...... 0.77%(d)
Net investment income..... 6.52%(d)
Portfolio turnover rate...... 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 returns for periods of less than one
full year are 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
U.S. TREASURY MONEY MARKET SERIES
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class Z
------------------------------------------------------------ -------------------------
Year Ended November 30, Year Ended November 30,
------------------------------------------------------------ -------------------------
1999 1998 1997 1996 1995 1999 1998
-------- -------- -------- -------- -------- -------- -----
<S> <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
Net investment income........ 0.041 0.046 0.047 0.046 0.050 0.043 0.049
Dividends and
distributions.............. (0.041) (0.046) (0.047) (0.046) (0.050) (0.043) (0.049)
-------- -------- -------- -------- -------- -------- -----
Net asset value, end of
period..................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
-------- -------- -------- -------- -------- -------- -----
-------- -------- -------- -------- -------- -------- -----
TOTAL RETURN(a).............. 4.19% 4.66% 4.80% 4.75% 5.08% 4.37% 5.05%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)...................... $321,641 $336,985 $432,784 $305,330 $339,334 $ 2,013 $ 211(c)
Average net assets (000)..... $383,772 $420,140 $402,634 $393,060 $345,369 $ 1,942 $ 209(c)
Ratios to average net assets:
Expenses, including
distribution fees...... 0.63% 0.63% 0.65% 0.63% 0.62% 0.51% 0.51%
Expenses, excluding
distribution fees...... 0.51% 0.51% 0.52% 0.51% 0.50% 0.51% 0.51%
Net investment income..... 4.08% 4.57% 4.66% 4.57% 5.01% 4.19% 4.91%
<CAPTION>
<S> <C>
February 21,
1997(b)
Through
November 30,
1997
-----
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period..................... $1.000
Net investment income........ 0.039
Dividends and
distributions.............. (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 returns for periods of less than one
full year are 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. 18
<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, 1999, 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, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
January 17, 2000
- --------------------------------------------------------------------------------
19
<PAGE>
Important Notice for Certain Shareholders
(Unaudited) 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 states' taxing authorities. We
are pleased to report that 54.16% of the dividends paid by the Money Market
Series*, 33.44% 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, 1999, you will
be advised as to the federal tax status of the dividends you received in
calendar 1999.
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,
Connecticut and New York, residents of those states will not be able to exclude
interest on federal obligations from state and local tax.
- --------------------------------------------------------------------------------
20
<PAGE>
Comparing a $10,000 Investment
- ---------------------------------------------------------------
Prudential Government Securities Trust--Short-Intermediate Term
Series vs. the Lehman Brothers Intermediate Government Bond Index
Class A
(GRAPH)
Average Annual Total Returns
As of 11/30/99
Since Inception 7.87%
Ten Years 6.21%
Five Years 6.13%
One Year 1.26%
Average Annual Total Returns
As of 11/30/99
Since Inception 4.87%
One Year 1.46%
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. The information
beneath the graph is designed to give you an idea of how
much the Series' returns can fluctuate from year to year
by measuring the best and worst calendar years in terms
of total annual return since inception of each share class
(or for the past ten years for Class A shares).
These graphs compare a $10,000 investment in the Prudential
Government Securities Trust--Short-Intermediate Term Series
(Class A and Z shares) with a similar investment in the Lehman
Brothers Intermediate Government Bond Index (the Index) by
portraying the initial account values of Class Z shares at
the commencement of operations, and at the beginning of
the ten-year period for Class A shares, and at the end
of the fiscal year (November 30), as measured on a quarterly
basis, beginning in 1989 for Class A shares and 1997 for
Class Z shares. For purposes of the graphs, and unless
otherwise indicated, it has been assumed that all
recurring fees (including management fees) were
deducted and all dividends and distributions reinvested.
Class Z shares are not subject to distribution
and service (12b-1) fees.
The Index is an unmanaged weighted index comprising securities
issued or backed by the U.S. government, its agencies or
instrumentalities, with a remaining maturity of one to ten
years. The Index returns include the reinvestment of all dividends,
but do not include the effect of sales charges or operating
expenses of a mutual fund. These returns would be lower if
they deducted sales charges. 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. Investors cannot invest directly in an index.
These graphs are furnished to you in accordance with SEC regulations.
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Class NASDAQ Cusip NASDAQ Cusip NASDAQ Cusip
A -- 744342205 PBGVX 744342106 -- 744342304
B -- -- -- -- -- --
C -- -- -- -- -- --
Z -- 744342403 -- 744342601 -- 744342502
Trustees
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
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
Deborah A. Docs, Secretary
Stephen M. Ungerman, Assistant Treasurer
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
405 Lexington Avenue, New York, NY 10174
Prudential Investments is a unit of The Prudential Insurance
Company of America, 751 Broad Street, Newark, NJ 07102.
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.
This report is not authorized for distribution to
prospective investors unless preceded or accompanied
by a current prospectus.
MF100E
