CMA
CMA GOVERNMENT
SECURITIES FUND
Semi-Annual Report
September 30, 1996
MERRILL LYNCH
BULL LOGO
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. Statements and
other information herein are as dated and are subject to change.
<PAGE>
CMA Government Securities Fund
Box 9011
Princeton, NJ 08543-9011
Printed on post-consumer recycled paper
DEAR SHAREHOLDER:
For the six-month period ended September 30, 1996, CMA Government
Securities Fund paid shareholders a net annualized dividend of
4.76%.* As of September 30, 1996, the Fund's 7-day yield was 4.78%.
The average portfolio maturity for CMA Government Securities Fund at
September 30, 1996 was 71 days, compared to 60 days at March 31,
1996.
The Environment
Although the US stock and bond markets rallied late in the six-month
period ended September 30, 1996, much of the period was marked by
volatility in the capital markets. The US economy demonstrated
surprising resilience during the first half of the year. As a
result, when economic data releases appeared to indicate that the US
economy was expanding at a stronger-than-expected (and potentially
inflationary) rate, investors focused on the increasing possibility
of monetary policy tightening by the Federal Reserve Board. During
these periods, stock prices declined and long-term interest rates
moved higher. Accordingly, when the market seemed to have fully
priced in a tightening, the main focus of our investments was in the
six-month--twelve-month sector to seek to enhance the Fund's overall
return. However, with inflationary pressures still under control,
the US central bank did not tighten monetary policy at its September
24 meeting. This development, coupled with several economic data
releases that showed growth was at or below expectations, helped to
assuage investors' concerns about an overheating economy. Stock and
bond prices improved, with stock market averages reaching historic
high levels.
<PAGE>
The shifts in perceptions were exemplified by investors' reactions
to the release of recent employment reports. Inflationary concerns
were heightened in early July with the release of a stronger-than-
expected employment report for June. However, more subdued job
growth and decelerating hourly wage gains were subsequently reported
for the month of July. Although the employment report for August
showed that unemployment had dropped to its lowest level since 1989,
these results were generally in line with expectations, and were
received favorably by investors. The greatest boost in investor
confidence occurred in early October with the release of September's
employment report, which showed a slight increase in unemployment.
As a result, the Fund reduced its repurchase agreement position, in
favor of investments in the nine-month--twelve-month sector, which
represented value on the yield curve and over financing rates.
Investors will continue to monitor economic data releases to
determine the probable direction of the US economy. The outcome of
the upcoming November election will also increasingly influence
investor psychology in the weeks ahead.
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
<PAGE>
(Donaldo S. Benito)
Donaldo S. Benito
Vice President and Portfolio Manager
October 24, 1996
[FN]
*Based on a constant investment throughout the period, with
dividends compounded daily, and reflecting a net return to the
investor after all expenses.
CMA GOVERNMENT SECURITIES FUND
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (IN THOUSANDS)
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
US Government Obligations*--38.7%
US Treasury $ 20,000 4.55 % 2/06/97 $ 19,635
Bills 9,460 4.67 2/06/97 9,287
4,300 5.305 8/21/97 4,091
8,500 5.31 8/21/97 8,086
8,500 5.32 8/21/97 8,086
US Treasury 40,000 8.00 10/15/96 40,046
Notes 85,000 6.875 10/31/96 85,093
35,000 4.375 11/15/96 34,952
90,000 7.25 11/15/96 90,226
15,000 7.50 12/31/96 15,080
21,500 8.00 1/15/97 21,661
117,000 7.50 1/31/97 117,804
81,900 6.875 2/28/97 82,386
183,720 6.625 3/31/97 184,782
44,750 6.875 3/31/97 45,065
70,660 8.50 4/15/97 71,764
92,495 6.50 4/30/97 92,987
12,900 6.875 4/30/97 12,997
46,800 6.50 5/15/97 47,049
20,000 5.625 6/30/97 20,000
101,200 8.50 7/15/97 103,319
12,750 5.50 7/31/97 12,728
53,100 5.875 7/31/97 53,150
14,400 6.50 8/15/97 14,490
10,000 6.00 8/31/97 10,016
40,800 5.625 10/31/97 40,711
4,250 6.125 8/31/98 4,251
<PAGE>
Total US Government Obligations
(Cost--$1,249,501) 1,249,742
Face Value
Amount Issue (Notes 1a & 1e)
Repurchase Agreements**--61.3%
$150,000 BZW Securities, Inc., purchased on
9/30/96 to yield 5.70% to 10/01/96 150,000
145,000 Bear Stearns & Co., Inc., purchased on
9/30/96 to yield 5.70% to 10/01/96 145,000
CMA GOVERNMENT SECURITIES FUND
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (IN THOUSANDS)
Face Value
Amount Issue (Notes 1a & 1e)
Repurchase Agreements**(concluded)
$150,000 Chase Securities, Inc., purchased on
9/30/96 to yield 5.70% to 10/01/96 $ 150,000
150,000 Daiwa Securities America, Inc.,
purchased on 9/30/96 to yield 5.75%
to 10/01/96 150,000
145,000 Donaldson, Lufkin & Jenrette
Securities Corp., purchased on
9/30/96 to yield 5.72% to 10/01/96 145,000
100,000 Fuji Securities Inc., purchased on
9/30/96 to yield 5.74% to 10/01/96 100,000
145,000 Greenwich Capital Markets, Inc.,
purchased on 9/30/96 to yield 5.75%
to 10/01/96 145,000
155,000 HSBC Securities Inc., purchased on
9/30/96 to yield 5.75% to 10/01/96 155,000
155,040 Lehman Brothers Inc., purchased on
9/30/96 to yield 5.80% to 10/01/96 155,040
155,000 Nesbitt Burns Securities, Inc.,
purchased on 9/30/96 to yield 5.75%
to 10/01/96 155,000
155,000 Nomura Securities International, Inc.,
purchased on 9/30/96 to yield 5.75%
to 10/01/96 155,000
<PAGE>
155,000 PaineWebber Inc., purchased on
9/30/96 to yield 5.75% to 10/01/96 155,000
67,000 Smith Barney Inc., purchased on
9/30/96 to yield 5.70% to 10/01/96 67,000
155,000 UBS Securities Inc., purchased on
9/30/96 to yield 5.75% to 10/01/96 155,000
Total Repurchase Agreements
(Cost--$1,982,040) 1,982,040
Total Investments
(Cost--$3,231,541)--100.0% 3,231,782
Other Assets Less Liabilities--0.0% 1,123
----------
Net Assets--100.0% $3,232,905
==========
[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, 1996
<S> <C> <C>
Assets:
Investments, at value (identified cost--$3,231,540,531++) (Notes 1a & 1e) $3,231,781,567
Cash 920
Receivables:
Interest $ 20,106,545
Beneficial interest sold 5,858,220 25,964,765
--------------
Prepaid registration fees and other assets (Note 1d) 255,369
--------------
Total assets 3,258,002,621
--------------
<PAGE>
Liabilities:
Payables:
Securities purchased 22,658,730
Investment adviser (Note 2) 1,123,321
Distributor (Note 2) 846,147
Beneficial interest redeemed 211 24,628,409
--------------
Accrued expenses and other liabilities 468,819
--------------
Total liabilities 25,097,228
--------------
Net Assets $3,232,905,393
==============
Net Assets Consist of:
Shares of beneficial interest, $0.10 par value, unlimited number of shares
authorized $ 323,266,436
Paid-in capital in excess of par 2,909,397,921
Unrealized appreciation on investments--net 241,036
--------------
Net Assets--Equivalent to $1.00 per share based on 3,232,664,357 shares of
beneficial interest outstanding $3,232,905,393
==============
<FN>
++Cost for Federal income tax purposes. As of September 30, 1996,
net unrealized appreciation for Federal income tax purposes amounted
to $241,036, of which $539,600 related to appreciated securities and
$298,564 related to depreciated securities.
</TABLE>
<TABLE>
CMA GOVERNMENT SECURITIES FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 89,352,761
Expenses:
Investment advisory fees (Note 2) $ 6,714,811
Distribution fees (Note 2) 2,063,479
Transfer agent fees (Note 2) 290,867
Registration fees (Note 1d) 174,563
Custodian fees 90,602
Accounting services (Note 2) 69,295
Professional fees 38,108
Printing and shareholder reports 23,667
Trustees' fees and expenses 20,694
Other 23,010
--------------
Total expenses 9,509,096
--------------
Investment income--net 79,843,665
Realized Gain on Investments--Net (Note 1c) 58,415
Change in Unrealized Depreciation on Investments--Net 541,378
--------------
Net Increase in Net Assets Resulting from Operations $ 80,443,458
==============
<PAGE>
See Notes to Financial Statements.
</TABLE>
<TABLE>
CMA GOVERNMENT SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Sept. 30, 1996 March 31, 1996
<S> <C> <C>
Operations:
Investment income--net $ 79,843,665 $ 168,765,912
Realized gain on investments--net 58,415 813,513
Change in unrealized appreciation/depreciation on investments--net 541,378 (233,823)
--------------- ---------------
Net increase in net assets resulting from operations 80,443,458 169,345,602
--------------- ---------------
Dividends & Distributions to Shareholders (Note 1f):
Investment income--net (79,843,665) (168,765,912)
Realized gain on investments--net (58,415) (813,513)
--------------- ---------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (79,902,080) (169,579,425)
--------------- ---------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 6,220,913,657 13,161,152,625
Net asset value of shares issued to shareholders in reinvestment of
dividends and distributions (Note 1f) 79,842,999 169,364,191
--------------- ---------------
6,300,756,656 13,330,516,816
Cost of shares redeemed (6,413,995,905) (13,117,482,781)
--------------- ---------------
Net increase (decrease) in net assets derived from beneficial interest
transactions (113,239,249) 213,034,035
--------------- ---------------
Net Assets:
Total increase (decrease) in net assets (112,697,871) 212,800,212
Beginning of period 3,345,603,264 3,132,803,052
--------------- ---------------
End of period $ 3,232,905,393 $ 3,345,603,264
=============== ===============
<PAGE>
See Notes to Financial Statements.
</TABLE>
<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 For the Year Ended March 31,
Months Ended
Increase (Decrease) in Net Asset Value: Sept. 30, 1996 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Investment income--net .0241 .0521 .0419 .0271 .0294
Realized and unrealized gain (loss) on
investments--net .0002 .0002 .0008 (.0013) .0038
---------- ---------- ---------- ---------- ----------
Total from investment operations .0243 .0523 .0427 .0258 .0332
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.0241) (.0521) (.0419) (.0271) (.0294)
Realized gain on investments--net (.0000)++ (.0003) (.0002) (.0004) (.0026)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.0241) (.0524) (.0421) (.0275) (.0320)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total Investment Return 4.76%* 5.39% 4.30% 2.79% 3.25%
========== ========== ========== ========== ==========
Ratios to Average Net Assets:
Expenses .57%* .57% .58% .56% .55%
========== ========== ========== ========== ==========
Investment income and realized gain on
investments--net 4.76%* 5.25% 4.18% 2.75% 3.20%
========== ========== ========== ========== ==========
Supplemental Data:
Net assets, end of period (in thousands) $3,232,905 $3,345,603 $3,132,803 $3,563,595 $3,858,017
========== ========== ========== ========== ==========
<PAGE>
<FN>
*Annualized.
++Amount is less than $.0001 per share.
See Notes to Financial Statements.
</TABLE>
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.
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.
CMA GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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.
<PAGE>
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.
CMA GOVERNMENT SECURITIES FUND
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
Custodian
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 221-7210*
<PAGE>
[FN]
*For inquiries regarding your CMA account, call (800) CMA-INFO
[(800) 262-4636].
