[LOGO] CMA(R)
CMA GOVERNMENT
SECURITIES FUND
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Semi-Annual Report
[GRAPHIC OMITTED]
September 30, 1999
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[LOGO] Merrill Lynch
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DEAR SHAREHOLDER:
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For the six-month period ended September 30, 1999, CMA Government Securities
Fund paid shareholders a net annualized dividend of 4.42%.* As of September 30,
1999, the Fund's 7-day yield was 4.60%.
The average portfolio maturity for CMA Government Securities Fund at September
30, 1999 was 71 days, compared to 73 days at March 31, 1999. However, during the
six-month period ended September 30, 1999, the average life ranged from 62 days
to 80 days.
The Environment
During the six-month period ended September 30, 1999, continued strength in the
domestic economy and increasing signs of recovery in the global economies
prevailed. In June, the broad US stock market averages reached record highs.
However, by July, fears of accelerating inflation and the associated risk of
additional increases in interest rates persisted. The likelihood of additional
monetary policy tightening by the Federal Reserve Board was renewed following
the release of stronger-than-expected economic data.
Stock prices declined for the third consecutive month in September as a
weakening of the US dollar against the Japanese yen prompted worries over
threats to Japan's fragile economic recovery and the potential for accelerated
repatriation of US investments. In addition, the bulging trade deficit, coupled
with rising commodity prices and ongoing robust economic activity, suggested the
Federal Reserve Board might increase short-term interest rates for the third
time this year at its November meeting. Finally, announced earnings shortfalls
for many prominent companies, particularly in the consumer arena, raised
concerns over the sustainability of corporate earnings growth.
For the September period, the US bond market was a beneficiary of many of these
developments. While fixed-income investors reacted poorly to evidence of
incipient inflationary pressures and the prospect of higher interest rates in
the early months of the quarter, a significant rally ensued in September driven
by a slowdown in average hourly earnings and extremely benign inflation reports.
Investment Strategy
During the past six months, yield curve changes and interest rate increases
created some investment opportunities for us. Uncertainty surrounding Year 2000
issues caused yields on six-month Treasury bills to rise and trade at the same
or better yield than repurchase agreements at times. Therefore, we increased the
Fund's exposure to Treasury bills maturing in February and March 2000 at
favorable yields, with a limited increase in interest rate risk. The allocation
to Treasury bills also has the added benefit of providing enhanced liquidity as
year-end approaches.
The short-term Treasury coupon curve benefited from increased demand as a
by-product of central bank intervention in the foreign currency markets during
periods of US dollar weakness. Because of demand, prices on several issues owned
by the portfolio were pushed abnormally high, which drove yields lower than fair
value. This allowed us to swap into other issues with higher yields.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
/s/ Linda B. Costanzo
Linda B. Costanzo
Portfolio Manager
October 29, 1999
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We are pleased to announce that Linda B. Costanzo is responsible for the
day-to-day management of CMA Government Securities Fund. Ms. Costanzo has been
employed by Merrill Lynch Asset Management, L.P. since 1986 and for the last ten
years in the fixed-income portfolio management group.
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* Based on a constant investment throughout the period, with dividends
compounded daily, and reflecting a net return to the investor after all
expenses.
1
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CMA GOVERNMENT SECURITIES FUND
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1999 (IN THOUSANDS)
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Face Interest Maturity Value
Issue Amount Rate Date (Note 1a)
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US Government Obligations--32.2%
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US Treasury $ 35,000 4.89 % 2/17/00 $ 34,362
Bills* 30,000 4.90 2/17/00 29,453
60,000 4.935 2/24/00 58,847
30,000 4.99 3/02/00 29,393
38,000 4.905 3/09/00 37,189
29,000 4.995 9/14/00 27,617
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US Treasury 45,000 5.625 10/31/99 45,021
Notes* 31,000 5.875 11/15/99 31,044
30,000 5.625 12/31/99 30,038
47,000 5.375 1/31/00 47,044
47,000 7.75 1/31/00 47,411
35,000 5.875 2/15/00 35,098
10,000 5.50 2/29/00 10,016
80,000 7.125 2/29/00 80,675
25,000 5.50 3/31/00 25,047
60,000 6.875 3/31/00 60,525
102,000 6.375 5/15/00 102,669
10,000 8.875 5/15/00 10,228
40,000 6.25 5/31/00 40,263
67,000 5.375 6/30/00 67,042
41,000 5.375 7/31/00 41,000
118,000 5.125 8/31/00 117,705
10,000 4.50 9/30/00 9,906
30,000 4.00 10/31/00 29,550
27,000 5.75 10/31/00 27,076
10,000 4.875 3/31/01 9,894
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Total US Government Obligations
(Cost--$1,084,980) ................................................. 1,084,113
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Face Value
Amount Issue (Notes 1a & 1b)
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Repurchase Agreements**--67.5%
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$ 89,550 Aubrey G. Lanston & Co., Inc.,
purchased on 9/30/99 to yield
5.27% to 10/01/99 ................................... 89,550
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127,000 Barclays Capital Inc., purchased on
9/29/99 to yield 5.27% to 10/06/99 .................. 127,000
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165,000 Credit Suisse First Boston Corp.,
purchased on 9/29/99 to yield
5.32% to 10/06/99 ................................... 165,000
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160,000 Deutsche Bank Securities Inc.,
purchased on 9/30/99 to yield 5.44%
to 10/01/99 ......................................... 160,000
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165,000 Donaldson, Lufkin & Jenrette Securities
Corp., purchased on 9/28/99 to yield
5.30% to 10/05/99 ................................... 165,000
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160,000 Goldman Sachs & Company, purchased
on 9/30/99 to yield 5.27% to 10/07/99 ............... 160,000
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127,000 Greenwich Capital Markets, Inc.,
purchased on 9/29/99 to yield
5.28% to 10/06/99 ................................... 127,000
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125,000 HSBC Securities Inc., purchased on
9/30/99 to yield 5.40% to 10/01/99 .................. 125,000
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150,000 J.P. Morgan Securities Inc., purchased
on 9/30/99 to yield 5.28% to 10/07/99 ............... 150,000
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85,000 Lehman Brothers Inc., purchased on
9/30/99 to yield 5.32% to 10/01/99 .................. 85,000
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162,000 Morgan Stanley & Co., Inc., purchased
on 9/17/99 to yield 5.20% to 10/08/99 ............... 162,000
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100,000 Nesbitt Burns Securities, Inc.,
purchased on 9/28/99 to yield 5.25%
to 10/05/99 ......................................... 100,000
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165,000 PaineWebber Inc., purchased on
9/28/99 to yield 5.31% to 10/05/99 .................. 165,000
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165,000 Prudential Securities Inc., purchased
on 9/30/99 to yield 5.28% to 10/07/99 ............... 165,000
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165,000 S.G. Cowen Securities Corporation,
purchased on 9/30/99 to yield 5.32%
to 10/07/99 ......................................... 165,000
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166,000 Salomon, Smith Barney, Inc., purchased
on 9/24/99 to yield 5.22% to 10/01/99 ............... 166,000
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Total Repurchase Agreements
(Cost--$2,276,550) ................................................. 2,276,550
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Total Investments (Cost--$3,361,530)--99.7% ........................ 3,360,663
Other AssetsLess Liabilities--0.3% ................................. 9,772
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Net Assets--100.0% ................................................. $3,370,435
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* US Treasury Bills are traded on a discount basis; the interest rates shown
reflect the discount rates paid at the time of purchase by the Fund. US
Treasury Notes bear interest at the rates shown, payable at fixed rates
upon maturity.
** Repurchase Agreements are fully collateralized by US Government
Obligations.
See Notes to Financial Statements.
2
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CMA GOVERNMENT SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES AS OF SEPTEMBER 30, 1999
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<TABLE>
<S> <C> <C>
Assets:
Investments, at value (identified cost--$3,361,529,521+) (Notes 1a & 1b) .... $ 3,360,662,719
Cash ........................................................................ 780
Interest receivable ......................................................... 11,096,273
Prepaid registration fees and other assets (Note 1e) ........................ 233,527
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Total assets ................................................................ 3,371,993,299
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Liabilities:
Payables:
Distributor (Note 2) ...................................................... $ 867,761
Investment adviser (Note 2) ............................................... 222,907
Beneficial interest redeemed .............................................. 188 1,090,856
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Accrued expenses and other liabilities ...................................... 467,022
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Total liabilities ........................................................... 1,557,878
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Net Assets .................................................................. $ 3,370,435,421
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Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares
authorized .................................................................. $ 337,130,222
Paid-in capital in excess of par ............................................ 3,034,172,001
Unrealized depreciation on investments--net ................................. (866,802)
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Net Assets--Equivalent to $1.00 per share based on 3,371,302,224 shares of
beneficial interest outstanding ............................................. $ 3,370,435,421
===============
</TABLE>
+ Cost for Federal income tax purposes was $3,361,529,521. As of September
30, 1999, net unrealized depreciation for Federal income tax purposes
amounted to $866,802, of which $281,373 related to appreciated securities
and $1,148,175 related to depreciated securities.
See Notes to Financial Statements.
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CMA GOVERNMENT SECURITIES FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
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<TABLE>
<S> <C> <C>
Investment Income (Note 1d):
Interest and amortization of premium and discount earned .................... $ 88,094,844
Expenses:
Investment advisory fees (Note 2) ........................................... $ 7,122,105
Distribution fees (Note 2) .................................................. 2,162,574
Transfer agent fees (Note 2) ................................................ 228,004
Registration fees (Note 1e) ................................................. 152,810
Accounting services (Note 2) ................................................ 114,379
Custodian fees .............................................................. 96,728
Professional fees ........................................................... 37,133
Printing and shareholder reports ............................................ 18,310
Trustees' fees and expenses ................................................. 4,461
Other ....................................................................... 30,788
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Total expenses .............................................................. 9,967,292
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Investment income--net ...................................................... 78,127,552
Realized Gain on Investments--Net (Note 1d) ................................. 99,306
Change in Unrealized Appreciation/Depreciation on Investments--Net .......... (1,448,171)
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Net Increase in Net Assets Resulting from Operations ........................ $ 76,778,687
===============
</TABLE>
See Notes to Financial Statements.
3
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CMA GOVERNMENT SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
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For the For the
Six Months Year
Ended Ended
September 30, March 31,
Increase (Decrease) in Net Assets: 1999 1999
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<S> <C> <C>
Operations:
Investment income--net ................................................. $ 78,127,552 $ 166,567,188
Realized gain on investments--net ...................................... 99,306 419,102
Change in unrealized appreciation/depreciation on investments--net ..... (1,448,171) 329,288
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Net increase in net assets resulting from operations ................... 76,778,687 167,315,578
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Dividends & Distributions to Shareholders (Note 1f):
Investment income--net ................................................. (78,127,552) (166,567,188)
Realized gain on investments--net ...................................... (99,306) (419,102)
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Net decrease in net assets resulting from dividends and distributions
to shareholders ........................................................ (78,226,858) (166,986,290)
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Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares ....................................... 5,869,119,169 13,270,135,147
Net asset value of shares issued to shareholders in reinvestment of
dividends and distributions (Note 1f) .................................. 78,149,565 166,833,005
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5,947,268,734 13,436,968,152
Cost of shares redeemed ................................................ (6,268,571,189) (13,284,151,025)
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Net increase (decrease) in net assets derived from beneficial
interest transactions .................................................. (321,302,455) 152,817,127
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Net Assets:
Total increase (decrease) in net assets ................................ (322,750,626) 153,146,415
Beginning of period .................................................... 3,693,186,047 3,540,039,632
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End of period .......................................................... $ 3,370,435,421 $ 3,693,186,047
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</TABLE>
See Notes to Financial Statements.
4
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CMA GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
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<TABLE>
<CAPTION>
The following per share data and ratios have For the
been derived from information provided in the Six Months
financial statements. Ended For the Year Ended March 31,
September 30, -----------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1999 1998 1997 1996
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<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 ...................... .0220 .0468 .0501 .0477 .0521
Realized and unrealized gain (loss) on
investments--net ............................ (.0004) .0002 .0007 (.0004) .0002
----------- ----------- ----------- ----------- -----------
Total from investment operations ............ .0216 .0470 .0508 .0473 .0523
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Less dividends and distributions:
Investment income--net .................... (.0220) (.0468) (.0501) (.0477) (.0521)
Realized gain on investments--net ......... --+ (.0001) (.0001) --+ (.0003)
----------- ----------- ----------- ----------- -----------
Total dividends and distributions ........... (.0220) (.0469) (.0502) (.0477) (.0524)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ===========
Total Investment Return ..................... 4.42%* 4.81% 5.15% 4.96% 5.37%
=========== =========== =========== =========== ===========
Ratios to Average Net Assets:
Expenses .................................... .56%* .57% .57% .56% .57%
=========== =========== =========== =========== ===========
Investment income and realized gain on
investments--net ............................ 4.39%* 4.68% 5.02% 4.81% 5.25%
=========== =========== =========== =========== ===========
Supplemental Data:
Net assets, end of period (in thousands) .... $ 3,370,435 $ 3,693,186 $ 3,540,040 $ 3,423,468 $ 3,345,603
=========== =========== =========== =========== ===========
</TABLE>
* Annualized.
+ Amount is less than $.0001 per share.
See Notes to Financial Statements.
5
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CMA GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
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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. The Fund's financial statements are prepared in accordance with
generally accepted accounting principles, which may require the use of
management accruals and estimates. 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--Portfolio securities with remaining maturities of
greater than sixty days, for which market quotations are readily available, are
valued at market value. As securities transition from sixty-one to sixty days 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. Securities maturing sixty days or less from their date of acquisition
are valued at amortized cost, which approximates market value. For the purpose
of valuation, the maturity of a variable rate security is deemed to be the next
coupon date on which the interest rate is to be adjusted. Other investments for
which market value quotations are not available are valued at their fair value
as determined in good faith by or under the direction of the Fund's Board of
Trustees.
(b) Repurchase agreements--The Fund invests in US Government securities pursuant
to repurchase agreements. Under such agreements, the counterparty 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 and, if
necessary, receives additional securities daily to ensure that the contract is
fully collateralized.
(c) 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.
(d) 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.
(e) Prepaid registration fees--Prepaid registration fees are charged to expense
as the related shares are issued.
(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: .50% of the Fund's average daily
6
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CMA GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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net assets not exceeding $500 million; .425% of the average daily net assets in
excess of $500 million but not exceeding $1 billion; and .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 Incorporated ("MLPF&S") receives a
distribution fee from the Fund at the end of each month at the annual rate of
.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.
Financial Data Services, Inc. ("FDS"), 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, FDS, and/or ML & Co.
3. Transactions in Shares of Beneficial Interest:
The number of shares sold, reinvested 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, value of shares reinvested and cost of
shares redeemed, respectively, since shares are recorded at $1.00 per share.
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CMA GOVERNMENT SECURITIES FUND
OFFICERS AND TRUSTEES
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Terry K. Glenn--President and Trustee
Ronald W. Forbes--Trustee
Cynthia A. Montgomery--Trustee
Charles C. Reilly--Trustee
Kevin A. Ryan--Trustee
Richard R. West--Trustee
Arthur Zeikel--Trustee
Kevin J. McKenna--Senior Vice President
Joseph T. Monagle Jr.--Senior Vice President
Carlo J. Giannini--Vice President
Donald C. Burke--Vice President and Treasurer
William E. Zitelli--Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 1713
Boston, MA 02101
Transfer Agent
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].
7
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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. An investment in the Fund is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other Government agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund. Past performance
results shown in this report should not be considered a representation of future
performance, which will fluctuate. Statements and other information herein are
as dated and are subject to change.
CMA Government Securities Fund
Box 9011
Princeton, NJ 08543-9011 #11212--9/99
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