CMA
CMA GOVERNMENT
SECURITIES FUND
Semi-Annual Report
FUND LOGO
September 30, 1995
MERRILL LYNCH BULL LOGO
Officers and Trustees
Arthur Zeikel--President and Trustee
Ronald W. Forbes--Trustee
Cynthia A. Montgomery--Trustee
Charles C. Reilly--Trustee
Kevin A. Ryan--Trustee
Richard R. West--Trustee
Terry K. Glenn--Executive Vice President
Joseph T. Monagle, Jr.--Senior Vice President
Donaldo S. Benito--Vice President
Donald C. Burke--Vice President
Kevin J. McKenna--Vice President
Gerald M. Richard--Treasurer
Robert Harris--Secretary
<PAGE>
Custodian
State Street Bank and Trust Company
P.O. Box 1713
Boston, MA 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 221-7210*
[FN]
*For inquiries regarding your CMA account, call (800) CMA-INFO
[(800) 262-4636].
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance, which will fluctuate. The Fund
seeks to maintain a consistent $1.00 net asset value per share,
although this cannot be assured. An investment in the Fund is
neither insured nor guaranteed by the US Government.
CMA Government Securities Fund
Box 9011
Princeton, NJ 08543-9011
DEAR SHAREHOLDER:
For the six-month period ended September 30, 1995, CMA Government
Securities Fund paid shareholders a net annualized dividend of
5.47%*. As of September 30, 1995, the Fund's 7-day yield was 5.25%.
<PAGE>
The Environment
After losing momentum through the second calendar quarter, it now
appears that the US economy has resumed a moderate growth trend.
Gross domestic product growth for the three months ended June 30 was
revised to show that the economy expanded at a 1.1% pace, rather
than the 0.5% rate that was originally reported. The employment
report for August exceeded consensus expectations, although most of
the new jobs created were in the service sector, reflecting the
ongoing sluggishness in manufacturing. However, durable goods orders
rebounded somewhat in August, supported by stronger automobile
sales. Reflecting the trend of renewed economic growth--and
continued containment of inflationary pressures--the Federal Reserve
Board signaled no shift in monetary policy following its September
meeting.
One of the major developments during the latter part of the period
under review was the strengthening of the US dollar relative to the
yen and the Deutschemark. Improving interest rate differentials
favoring the US currency, combined with coordinated central bank
intervention and more positive investor sentiment, have helped to
bolster the dollar in foreign exchange markets. Other factors that
appear to be improving the US dollar's outlook in the near term are
a pick-up in capital flows to the United States and the prospect of
increased capital outflows from Japan. However, it remains to be
seen if the US dollar's strengthening trend can continue without
significant improvements in the US budget and trade deficits.
[FN]
*Based on a constant investment throughout the period, with
dividends compounded daily, and reflecting a net return to the
investor after all expenses.
In the weeks ahead, investor interest will continue to focus on US
economic activity. Clear signs of a moderate, noninflationary
expansion could further benefit the US stock and bond markets. In
addition, should the current Federal budget deficit reduction
efforts now underway in Washington prove successful, the
implications would likely be positive for the US financial markets.
Portfolio Matters
During the six-month period ended September 30, 1995, CMA Government
Securities Fund maintained an average portfolio maturity ranging
from 54 days--85 days, as we grew optimistic that interest rates
would be moving lower. Early in the six-month period, we extended
the Fund's average portfolio maturity to the mid 60-day range by
buying one-year Treasury bills in response to the steepness of the
yield curve and economic data suggesting that inflation remained
subdued. As we approached May, in response to a decline in the Index
of Leading Economic Indicators, we extended the Fund's average
portfolio maturity to the low 70-day range with purchases in the 9-
month--14-month sector in response to the steepness of the yield
curve.
<PAGE>
In June and July, in response to weaker-than-expected economic data
and well-contained inflationary pressures, we took advantage of
anomalies in the 90-day--180-day Treasury market. In August, the
economy showed signs of strength and an increase in average hourly
earnings. Accordingly, we focused on investments in the 9-month--12-
month maturity sector in response to the flatness of the yield curve
further out. As the month of August progressed, the Fund generated
profits in the two-year sector as a result of a lower-than-expected
durable goods number and accompanying volatility. As the month of
September progressed, the Fund participated in the 9-month--13-month
sector, in response to its attractiveness compared to two-year US
Treasuries and a slight moderation in economic activity.
Looking ahead, we are prepared to extend the Fund's average
portfolio maturity if Congress achieves a comprehensive budget
accord which could make the Federal Reserve Board more likely to
lower interest rates.
In Conclusion
We thank you for your interest in CMA Government Securities Fund,
and we look forward to assisting you with your financial needs in
the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Donaldo S. Benito)
Donaldo S. Benito
Vice President and Portfolio Manager
October 27, 1995
<PAGE>
CMA GOVERNMENT SECURITIES FUND
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1995 (IN THOUSANDS)
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
US Government Obligations*--45.2%
US Treasury $ 60,000 5.72 % 10/12/95 $ 59,882
Bills 50,000 5.70 10/19/95 49,848
40,000 5.705 10/19/95 39,879
30,000 5.61 11/30/95 29,727
40,000 5.63 11/30/95 39,636
25,000 5.87 5/02/96 24,192
US Treasury 120,000 3.875 10/31/95 119,803
Notes 135,000 4.25 11/30/95 134,705
105,000 9.25 1/15/96 106,017
140,000 4.00 1/31/96 139,234
110,000 7.875 2/15/96 110,859
20,000 4.625 2/29/96 19,913
20,000 7.50 2/29/96 20,144
97,000 5.50 4/30/96 96,879
70,000 4.25 5/15/96 69,366
25,000 7.375 5/15/96 25,250
140,000 5.875 5/31/96 140,131
15,000 6.00 6/30/96 15,028
15,000 7.875 7/15/96 15,244
20,000 6.25 8/31/96 20,075
42,000 6.875 10/31/96 42,446
55,000 7.25 11/15/96 55,825
15,000 7.50 12/31/96 15,295
10,000 7.50 1/31/97 10,209
15,000 5.625 6/30/97 14,939
5,000 5.875 7/31/97 4,999
10,000 6.00 8/31/97 10,019
Total US Government Obligations
(Cost--$1,428,748) 1,429,544
Face Value
Amount Issue (Notes 1a & 1e)
Repurchase Agreements**--54.3%
$115,000 Chase Securities Inc., purchased on
9/29/95 to yield 6.30% to 10/02/95 115,000
145,000 Chemical Securities, Inc., purchased on
9/29/95 to yield 6.45% to 10/02/95 145,000
<PAGE>
CMA GOVERNMENT SECURITIES FUND
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1995 (IN THOUSANDS)
Face Value
Amount Issue (Notes 1a & 1e)
Repurchase Agreements** (concluded)
$125,000 Donaldson, Lufkin & Jenrette Securities
Corp., purchased on 9/29/95 to yield
6.25% to 10/02/95 $ 125,000
135,000 First Chicago Capital Markets, Inc.,
purchased on 9/29/95 to yield 6.35%
to 10/02/95 135,000
140,000 Fuji Securities Inc., purchased on
9/29/95 to yield 6.45% to 10/02/95 140,000
125,000 Greenwich Capital Markets, Inc.,
purchased on 9/29/95 to yield 6.50%
to 10/02/95 125,000
125,000 HSBC Securities Inc., purchased on
9/29/95 to yield 6.45% to 10/02/95 125,000
152,132 Lehman Brothers Inc., purchased on
9/29/95 to yield 6.55% to 10/02/95 152,132
120,000 Morgan Stanley & Co., Inc.,
purchased on 9/29/95 to yield
6.30% to 10/02/95 120,000
120,000 Nikko Securities International, Inc.,
purchased on 9/29/95 to yield 6.375%
to 10/02/95 120,000
140,000 Nomura Securities International, Inc.,
purchased on 9/29/95 to yield 6.45%
to 10/02/95 140,000
<PAGE>
145,000 PaineWebber Inc., purchased on
9/29/95 to yield 6.45% to 10/02/95 145,000
130,000 Smith Barney Inc., purchased on
9/29/95 to yield 6.45% to 10/02/95 130,000
Total Repurchase Agreements
(Cost--$1,717,132) 1,717,132
Total Investments
(Cost--$3,145,880)--99.5% 3,146,676
Other Assets Less Liabilities--0.5% 17,701
----------
Net Assets--100.0% $3,164,377
==========
[FN]
*US Treasury Bills are traded on a discount basis; the interest
rates shown are the discount rates paid at the time of purchase by
the Fund. US Treasury Notes bear interest at the rates shown,
payable at fixed dates or upon maturity.
**Repurchase Agreements are fully collateralized by US Government
Obligations.
See Notes to Financial Statements.
<TABLE>
CMA GOVERNMENT SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF SEPTEMBER 30, 1995
<S> <C> <C>
Assets:
Investments, at value (identified cost--$3,145,880,076++) (Notes 1a & 1e) $3,146,675,810
Cash 166
Receivables:
Interest $ 18,653,606
Beneficial interest sold 1,136,714 19,790,320
--------------
Prepaid registration fees and other assets (Note 1d) 154,620
--------------
Total assets 3,166,620,916
--------------
<PAGE>
Liabilities:
Payables:
Investment adviser (Note 2) 1,036,245
Distributor (Note 2) 812,777 1,849,022
--------------
Accrued expenses and other liabilities 395,252
--------------
Total liabilities 2,244,274
--------------
Net Assets $3,164,376,642
==============
Net Assets Consist of:
Shares of beneficial interest, $0.10 par value, unlimited number of shares authorized $ 316,358,091
Paid-in capital in excess of par 2,847,222,817
Unrealized appreciation on investments--net 795,734
--------------
Net Assets--Equivalent to $1.00 per share based on 3,163,580,908 shares of
beneficial interest outstanding $3,164,376,642
==============
<FN>
++Cost for Federal income tax purposes. As of September 30, 1995,
net unrealized appreciation for Federal income tax purposes amounted
to $795,734, of which $1,165,995 related to appreciated securities
and $370,261 related to depreciated securities.
</TABLE>
<TABLE>
CMA GOVERNMENT SECURITIES FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 94,136,485
Expenses:
Investment advisory fees (Note 2) $ 6,367,937
Distribution fees (Note 2) 1,969,893
Transfer agent fees (Note 2) 360,856
Custodian fees 120,936
Accounting services (Note 2) 116,534
Registration fees (Note 1d) 93,706
Printing and shareholder reports 38,739
Professional fees 35,403
Trustees' fees and expenses 21,170
Other 24,352
--------------
Total expenses 9,149,526
--------------
Investment income--net 84,986,959
Realized Gain on Investments--Net (Note 1c) 398,451
Change in Unrealized Depreciation on Investments--Net 862,253
--------------
Net Increase in Net Assets Resulting from Operations $ 86,247,663
==============
<PAGE>
See Notes to Financial Statements.
</TABLE>
<TABLE>
CMA GOVERNMENT SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: September 30, 1995 March 31, 1995
<S> <C> <C>
Operations:
Investment income--net $ 84,986,959 $ 134,445,813
Realized gain on investments--net 398,451 607,823
Change in unrealized appreciation/depreciation on investments--net 862,253 1,913,030
--------------- ---------------
Net increase in net assets resulting from operations 86,247,663 136,966,666
--------------- ---------------
Dividends & Distributions to Shareholders (Note 1f):
Investment income--net (84,986,959) (134,445,813)
Realized gain on investments--net (398,451) (607,823)
--------------- ---------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (85,385,410) (135,053,636)
--------------- ---------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 6,365,234,939 12,035,321,698
Net asset value of shares issued to shareholders in reinvestment of dividends
and distributions (Note 1f) 85,252,720 134,913,910
--------------- ---------------
6,450,487,659 12,170,235,608
Cost of shares redeemed (6,419,776,322) (12,602,941,002)
--------------- ---------------
Net increase (decrease) in net assets derived from beneficial interest transactions 30,711,337 (432,705,394)
--------------- ---------------
Net Assets:
Total increase (decrease) in net assets 31,573,590 (430,792,364)
Beginning of period 3,132,803,052 3,563,595,416
--------------- ---------------
End of period $ 3,164,376,642 $ 3,132,803,052
=============== ===============
</TABLE>
<PAGE>
<TABLE>
CMA GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Six
Months Ended For the Year Ended March 31,
Increase (Decrease) in Net Asset Value: Sept. 30, 1995 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Investment income--net .0268 .0419 .0271 .0294 .0473
Realized and unrealized gain (loss) on
investments--net .0004 .0008 (.0013) .0038 .0034
---------- ---------- ---------- ---------- ----------
Total from investment operations .0272 .0427 .0258 .0332 .0507
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.0268) (.0419) (.0271) (.0294) (.0473)
Realized gain on investments--net (.0001) (.0002) (.0004) (.0026) (.0036)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.0269) (.0421) (.0275) (.0320) (.0509)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total Investment Return 5.47%* 4.30% 2.79% 3.25% 5.17%
========== ========== ========== ========== ==========
Ratios to Average Net Assets:
Expenses, excluding distribution fees .45%* .45% .43% .43% .43%
========== ========== ========== ========== ==========
Expenses .58%* .58% .56% .55% .56%
========== ========== ========== ========== ==========
Investment income and realized gain on
investments--net 5.40%* 4.18% 2.75% 3.20% 5.05%
========== ========== ========== ========== ==========
Supplemental Data:
Net assets, end of period (in thousands) $3,164,377 $3,132,803 $3,563,595 $3,858,017 $4,452,247
========== ========== ========== ========== ==========
<FN>
*Annualized.
See Notes to Financial Statements.
</TABLE>
<PAGE>
CMA GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CMA Government Securities Fund (the "Fund") is registered under the
Investment Company Act of 1940 as a no load, diversified, open-end
management investment company. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature.
The following is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments--Investments maturing more than sixty
days after the valuation date are valued at the most recent bid
price or yield equivalent as obtained from dealers that make markets
in such securities. When securities are valued with sixty days or
less to maturity, the difference between the valuation existing on
the sixty-first day before maturity and maturity value is amortized
on a straight-line basis to maturity. Investments maturing within
sixty days from their date of acquisition are valued at amortized
cost, which approximates market value. Assets for which market
quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of
Trustees of the Fund.
(b) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
premium and discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(d) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
<PAGE>
(e) Repurchase agreements--The Fund invests in US Government
securities pursuant to repurchase agreements with a member bank of
the Federal Reserve System or a primary dealer in US Government
securities. Under such agreements, the bank or primary dealer agrees
to repurchase the security at a mutually agreed upon time and price.
The Fund takes possession of the underlying securities, marks to
market such securities daily and, if necessary, receives additional
securities to ensure that the contract is adequately collateralized.
(f) Dividends and distributions to shareholders--The Fund declares
dividends daily and reinvests daily such dividends (net of non-
resident alien tax withheld) in additional fund shares at net asset
value. Dividends and distributions are declared from the total of
net investment income and net realized gain or loss on investments.
CMA GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM" or "Adviser"). The general partner of
FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets, at the following annual rates: 0.50%
of the Fund's average daily net assets not exceeding $500 million;
0.425% of the average daily net assets in excess of $500 million but
not exceeding $1 billion; and 0.375% of the average daily net assets
in excess of $1 billion. The most restrictive annual expense
limitation requires that the Adviser reimburse the Fund to the
extent the Fund's expenses (excluding interest, taxes, distribution
fees, brokerage fees and commissions, and extraordinary items)
exceed 2.5% of the Fund's first $30 million of average daily net
assets, 2.0% of the Fund's next $70 million of average daily net
assets, and 1.5% of the average daily net assets in excess thereof.
No fee payment will be made to the Adviser during the year which
will cause such expenses to exceed the pro rata expense limitation
at the time of such payment.
<PAGE>
The Fund has adopted a Distribution and Shareholder Servicing Plan
in compliance with Rule 12b-1 under the Investment Company Act of
1940, pursuant to which Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S") receives a distribution fee from the Fund at the end of
each month at the annual rate of 0.125% of average daily net assets
of the Fund for shareholders who maintain their accounts through
MLPF&S. The distribution fee is to compensate MLPF&S financial
consultants and other directly involved branch office personnel for
selling shares of the Fund and for providing direct personal
services to shareholders. The distribution fee is not compensation
for the administrative and operational services rendered to the Fund
by MLPF&S in processing share orders and administering shareholder
accounts.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, MLFDS, and/or ML & Co.
3. Transactions in Shares of Beneficial
Interest:
The number of shares purchased and redeemed during the periods
corresponds to the amounts included in the Statements of Changes in
Net Assets for net proceeds from sale of shares and cost of shares
redeemed, respectively, since shares are recorded at $1.00 per
share.
