CMA GOVERNMENT
SECURITIES FUND
Semi-Annual Report
September 30, 1997
[FUND LOGO]
Print column design running the length of the right side of the page.
A picture of a bull with the name Merrill Lynch next to it.
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.
CMA Government Securities Fund
Box 9011
Princeton, NJ 08543-9011 #11212 -- 9/97
[RECYCLE LOGO]
Printed on post-consumer recycled paper
DEAR SHAREHOLDER:
For the six-month period ended September 30, 1997, CMA Government
Securities Fund paid shareholders a net annualized dividend of 5.00%.*
As of September 30, 1997, the Fund's 7-day yield was 4.99%.
The average portfolio maturity for CMA Government Securities Fund at
September 30, 1997 was 80 days, compared to 68 days at March 31, 1997.
The Environment
During the six-month period ended September 30, 1997, investor
perceptions regarding the prospects for the US economy shifted
dramatically. Early in the period, investor concerns focused on an
overheating economy, increasing inflationary pressures, and the prospect
of higher interest rates. However, as the period continued, there was
increasing evidence of noninflationary economic growth. Investor
confidence was boosted further when the Federal Reserve Board chose to
leave monetary policy unchanged at its May, July and August meetings.
This increased confidence was reinforced further in late July by the
passage of tax-cut and five-year balanced budget bills. In this
environment, we focused the Fund's investments in the one-year sector of
the yield curve which represented attractive value versus the 18-month -
- - two-year sector.
By late August, the consensus outlook had changed, with forecasts of
overheating growth and inflationary expectations. These concerns were
reinforced by a large upward revision in second-quarter real gross
domestic product growth from an original estimate of 2.2% to 3.6%.
However, in September, this rate of growth was revised downward to 3.3%.
This report set the stage for renewed investor confidence, which was
bolstered further by the continued absence of inflationary pressures.
Accordingly, we extended the Fund's average maturity into the mid 70-day
range through purchases of one-year Treasury bills which traded even
yield to similar maturity Treasury coupons.
Although it was widely anticipated that the Federal Reserve Board would
not tighten monetary policy at its September meeting, investors were
pleasantly surprised by the release of September employment data in
early October, since the US economy added jobs at a slower-than-expected
pace during the month. Over the balance of 1997, the determining factor
in the investment outlook is likely to be whether or not the US economy
continues to follow a pattern of moderate, noninflationary growth.
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,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/DONALDO S. BENITO
Donaldo S. Benito
Vice President and Portfolio Manager
October 24, 1997
* Based on a constant investment throughout the period, with dividends
compounded daily, and reflecting a net return to the investor after
all expenses.
<TABLE>
<CAPTION>
CMA Government Securities Fund
Schedule of Investments as of September 30, 1997 (in Thousands)
Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
<S> <C> <C> <C> <C>
US Government Obligations* -- 37.5%
US Treasury $13,800 5.52% 5/28/98 $13,329
Bills 12,750 5.525 5/28/98 12,315
12,900 5.255 8/20/98 12,296
18,920 5.29 9/17/98 17,962
US Treasury 70,175 5.625 10/31/97 70,186
Notes 20,000 5.75 10/31/97 20,000
63,500 7.375 11/15/97 63,642
10,000 5.375 11/30/97 10,000
83,150 7.875 1/15/98 83,761
74,770 5.00 1/31/98 74,677
107,350 5.625 1/31/98 107,434
120,580 7.25 2/15/98 121,334
22,400 5.125 2/28/98 22,372
31,560 6.125 3/31/98 31,668
82,875 7.875 4/15/98 83,911
21,235 5.125 4/30/98 21,192
32,500 5.875 4/30/98 32,571
123,190 6.125 5/15/98 123,633
50,520 8.25 7/15/98 51,530
8,500 5.25 7/31/98 8,476
16,500 6.25 7/31/98 16,582
7,750 5.875 8/15/98 7,762
24,900 9.25 8/15/98 25,647
27,900 6.00 9/30/98 27,992
12,600 7.125 10/15/98 12,781
38,600 5.875 10/31/98 38,660
18,300 5.50 11/15/98 18,257
12,900 5.625 11/30/98 12,888
29,900 5.00 1/31/99 29,610
19,800 5.875 1/31/99 19,831
15,100 6.375 4/30/99 15,237
4,250 5.875 7/31/99 4,253
-----------
Total US Government Obligations
(Cost -- $1,210,534) 1,211,789
===========
<CAPTION>
Face Value
Amount Issue (Notes 1a & 1e)
<S> <C> <C>
Repurchase Agreements** -- 62.0%
$150,000 BZW Securities, Inc., purchased on 9/30/97 to yield
6.15% to 10/01/97 150,000
150,000 Daiwa Securities America, Inc., purchased on 9/30/97
to yield 6.10% to 10/01/97 150,000
150,000 First Chicago Capital Markets, Inc., purchased on
9/30/97 to yield 6.10% to 10/01/97 150,000
100,000 Fuji Securities Inc., purchased on 9/30/97 to yield
6.15% to 10/01/97 100,000
145,000 Goldman Sachs & Co., purchased on 9/30/97 to yield
6.15% to 10/01/97 145,000
150,000 Greenwich Capital Markets, Inc., purchased on 9/30/97
to yield 6.10% to 10/01/97 150,000
125,000 J.P. Morgan Securities Inc., purchased on 9/30/97 to
yield 6.00% to 10/01/97 125,000
155,000 Nesbitt Burns Securities, Inc., purchased on 9/30/97 to
yield 6.15% to 10/01/97 155,000
155,000 Nikko Securities Co. International, Inc., purchased on
9/30/97 to yield 6.15% to 10/01/97 155,000
145,000 Nomura Securities International, Inc., purchased on
9/30/97 to yield 6.15% to 10/01/97 145,000
152,686 PaineWebber Inc., purchased on 9/30/97 to yield 6.15%
to 10/01/97 152,686
145,000 SBC Warburg Inc., purchased on 9/30/97 to yield 6.10%
to 10/01/97 145,000
140,000 Sanwa Securities USA Co., L.P., purchased on 9/30/97 to
yield 6.05% to 10/01/97 140,000
140,000 UBS Securities LLC, purchased on 9/30/97 to yield 6.06%
to 10/01/97 140,000
-----------
Total Repurchase Agreements
(Cost -- $2,002,686) 2,002,686
===========
Total Investments
(Cost -- $3,213,220) -- 99.5% 3,214,475
Other Assets Less Liabilities -- 0.5% 17,580
-----------
Net Assets -- 100.0% $3,232,055
===========
* 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 through maturity.
** Repurchase Agreements are fully collateralized by US Government Obligations.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
CMA Government Securities Fund
Statement of Assets and Liabilities as of September 30, 1997
<S> <C> <C>
Assets:
Investments, at value (identified cost -- $3,213,220,390+) (Notes 1a & 1e) $3,214,474,662
Cash 680
Interest receivable 19,614,325
Prepaid registration fees and other assets (Note 1d) 253,901
---------------
Total assets 3,234,343,568
---------------
Liabilities:
Payables:
Investment adviser (Note 2) $1,172,159
Distributor (Note 2) 783,857
Beneficial interest redeemed 945
Dividends to shareholders (Note 1f) 592 1,957,553
---------------
Accrued expenses and other liabilities 331,288
---------------
Total liabilities 2,288,841
---------------
Net Assets $3,232,054,727
===============
Net Assets Consist of:
Shares of beneficial interest, $0.10 par value, unlimited number of shares
authorized $323,080,046
Paid-in capital in excess of par 2,907,720,409
Unrealized appreciation on investments -- net 1,254,272
---------------
Net Assets -- Equivalent to $1.00 per share based on 3,230,800,456 shares of
beneficial interest outstanding $3,232,054,727
===============
+ Cost for Federal income tax purposes. As of September 30, 1997, net unrealized appreciation for Federal income tax purposes
amounted to $1,254,272, of which $1,258,908 related to appreciated securities and $4,636 related to depreciated securities.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
CMA Government Securities Fund
Statement of Operations for the Six Months Ended September 30, 1997
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $92,397,449
Expenses:
Investment advisory fees (Note 2) $6,673,302
Distribution fees (Note 2) 1,989,822
Transfer agent fees (Note 2) 283,913
Accounting services (Note 2) 119,936
Registration fees (Note 1d) 119,726
Custodian fees 111,031
Professional fees 36,154
Printing and shareholder reports 23,130
Trustees' fees and expenses 19,673
Other 20,751
---------------
Total expenses 9,397,438
---------------
Investment income -- net 83,000,011
Realized Gain on Investments -- Net (Note 1c) 159,700
Change in Unrealized Depreciation on Investments -- Net 2,943,275
---------------
Net Increase in Net Assets Resulting from Operations $86,102,986
===============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
CMA Government Securities Fund
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Sept. 30, 1997 March 31, 1997
<S> <C> <C>
Operations:
Investment income -- net $83,000,011 $161,841,782
Realized gain on investments -- net 159,700 116,775
Change in unrealized depreciation on investments -- net 2,943,275 (1,388,661)
--------------- ---------------
Net increase in net assets resulting from operations 86,102,986 160,569,896
--------------- ---------------
Dividends & Distributions to Shareholders (Note 1f):
Investment income -- net (83,000,011) (161,841,782)
Realized gain on investments -- net (159,700) (116,775)
--------------- ---------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (83,159,711) (161,958,557)
--------------- ---------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 7,219,971,462 13,617,455,013
Net asset value of shares issued to shareholders in reinvestment of dividends
and distributions (Note 1f) 83,083,028 161,803,882
--------------- ---------------
7,303,054,490 13,779,258,895
Cost of shares redeemed (7,497,411,336) (13,700,005,200)
--------------- ---------------
Net increase (decrease) in net assets derived from beneficial interest
transactions (194,356,846) 79,253,695
--------------- ---------------
Net Assets:
Total increase (decrease) in net assets (191,413,571) 77,865,034
Beginning of period 3,423,468,298 3,345,603,264
--------------- ---------------
End of period $3,232,054,727 $3,423,468,298
=============== ===============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
CMA Government Securities Fund
Financial Highlights
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended For the Year Ended March 31,
Sept. 30, 1997 1997 1996 1995 1994
Increase (Decrease) in Net Asset Value:
<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 .0250 .0477 .0521 .0419 .0271
Realized and unrealized gain (loss) on
investments -- net .0009 (.0004) .0002 .0008 (.0013)
----------- ----------- ----------- ----------- -----------
Total from investment operations .0259 .0473 .0523 .0427 .0258
----------- ----------- ----------- ----------- -----------
Less dividends and distributions:
Investment income -- net (.0250) (.0477) (.0521) (.0419) (.0271)
Realized gain on investments -- net --+ --+ (.0003) (.0002) (.0004)
----------- ----------- ----------- ----------- -----------
Total dividends and distributions (.0250) (.0477) (.0524) (.0421) (.0275)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
=========== =========== =========== =========== ===========
Total Investment Return 5.00%* 4.96% 5.37% 4.30% 2.79%
=========== =========== =========== =========== ===========
Ratios to Average Net Assets:
Expenses .57%* .56% .57% .58% .56%
=========== =========== =========== =========== ===========
Investment income and realized gain on
investments -- net 5.00%* 4.81% 5.25% 4.18% 2.75%
=========== =========== =========== =========== ===========
Supplemental Data:
Net assets, end of period (in thousands) $3,232,055 $3,423,468 $3,345,603 $3,132,803 $3,563,595
=========== =========== =========== =========== ===========
* 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.
(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 fully collateralized.
(f) Dividends and distributions to shareholders -- The Fund declares
dividends daily and reinvests daily such dividends (net of non-resident
alien tax and back-up withholding 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"). 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 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, 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.
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, MA 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 221-7210*
* For inquiries regarding your CMA account, call (800) CMA-INFO [(800)
262-4636].
