[LOGO] CMA(R)
CMA GOVERNMENT
SECURITIES FUND
Semi-Annual Report
[GRAPHIC OMITTED]
September 30, 2000
[LOGO] Merrill Lynch
<PAGE>
DEAR SHAREHOLDER:
For the six-month period ended September 30, 2000, CMA Government Securities
Fund paid shareholders a net annualized dividend of 5.63%.* As of September 30,
2000, the Fund's 7-day yield was 5.82%.
The average portfolio maturity for CMA Government Securities Fund at September
30, 2000 was 25 days, compared to 36 days at March 31, 2000.
Economic Environment
By September 30, 2000, there was ample evidence to indicate the economy was
finally beginning to moderate from the unsustainable growth rate of the previous
three quarters. The increases in the Federal Funds rate so far this year have
begun to have an effect. Since our last report to shareholders, the US equity
market has also moderated, with major equity indexes experiencing volatility.
Recently, weaker earnings reports by several technology leaders drove the
technology-heavy NASDAQ significantly lower. The optimism that fueled
unrealistic expectations in the equity market earlier this year is almost gone,
as a weak euro slowed demand from overseas. The stock and bond markets are
presently driven by expectations of a neutral monetary policy from the Federal
Reserve Board, but concern remains in the equity market that the economy may
have a harder landing than is currently anticipated. Although the labor market
is still tight, with the unemployment rate hovering around 4%, continued
productivity gains will most likely alleviate inflationary pressures from gains
in wages and benefits. The extraordinary rise in oil and gasoline prices, while
eating into corporate profits, also contributed to the drop in consumer
confidence. Investors are hoping that the economy has a soft landing, with gross
domestic product growth more in line with the Federal Reserve Board's target of
about 3%, making further interest rate increases unnecessary.
Portfolio Matters
During the six-month period ended September 30, 2000, the Treasury market
focused on the paydown of Treasury debt as a result of the Federal budget
surplus. Because of the inversion of the Treasury curve, along with the
diminished auction schedule, much of the longer end of the curve became
inactive. Therefore, we focused our purchases primarily on the Treasury bill
sector with maturities no greater than six months. We continued to remain
heavily weighted in repurchase agreements because of the negative cost of carry
associated with purchasing Treasury securities compared to repurchase
agreements. The issuance of cash management bills throughout the period along
with the increase in supply of three-month and six-month Treasury bills kept
yields in the short-end of the market high, allowing us to take advantage of
their superior value to repurchase agreements.
Going forward, we intend to continue to take advantage of pressure in the
short-end of the yield curve, while remaining heavily weighted in repurchase
agreements as a result of their relative value compared to Treasury issues.
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/ Terry K. Glenn
Terry K. Glenn
President and Trustee
/s/ Robert Sabatino
Robert Sabatino
Vice President and Portfolio Manager
November 3, 2000
* 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, 2000 (IN THOUSANDS)
Face Interest Maturity
Issue Amount Rate Date Value
--------------------------------------------------------------------------------
US Government Obligations* -- 24.6%
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US Treasury $85,000 5.935% 11/02/2000 $ 84,543
Bills 17,000 5.245 11/09/2000 16,890
90,000 6.145 11/09/2000 89,419
50,000 5.94 12/28/2000 49,269
30,000 5.94 1/04/2001 29,525
85,000 6.00 1/25/2001 83,352
42,000 5.925 3/22/2001 40,797
--------------------------------------------------------------------------------
US Treasury 30,000 4.00 10/31/2000 29,931
Notes 12,158 5.75 10/31/2000 12,148
40,000 4.625 12/31/2000 39,800
75,000 4.50 1/31/2001 74,508
3,718 4.875 3/31/2001 3,691
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Total US Government Obligations
(Cost--$553,902).......................................... 553,873
--------------------------------------------------------------------------------
Face
Amount Issue
--------------------------------------------------------------------------------
Repurchase Agreements**--75.3%
--------------------------------------------------------------------------------
$112,500 Chase Securities Inc., purchased
on 9/29/2000 to yield 6.62%
to 10/02/2000.................................. 112,500
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113,600 Credit Suisse First Boston Corp.,
purchased on 9/27/2000 to yield
6.51% to 10/04/2000 ........................... 113,600
--------------------------------------------------------------------------------
110,000 Deutsche Bank Securities Inc.,
purchased on 9/26/2000 to
yield 6.43% to 10/03/2000...................... 110,000
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112,500 Fuji Securities, Inc., purchased
on 9/29/2000 to yield 6.52% to
10/02/2000 .................................... 112,500
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118,100 Goldman Sachs & Company,
purchased on 9/08/2000 to yield
6.48% to 10/06/2000............................ 118,100
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68,925 Greenwich Capital Markets, Inc.,
purchased on 9/29/2000 to
yield 6.51% to 10/02/2000...................... 68,925
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99,998 J.P. Morgan Securities Inc.,
purchased on 9/29/2000 to
yield 6.55% to 10/02/2000...................... 99,998
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112,000 Lehman Brothers Inc., purchased on
9/29/2000 to yield 6.53% to 10/06/2000......... 112,000
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117,000 Morgan Stanley & Co. Inc.,
purchased on 9/07/2000 to
yield 6.49% to 10/06/2000...................... 117,000
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113,600 Nomura Securities International
Inc., purchased on 9/27/2000 to
yield 6.51% to 10/04/2000 ..................... 113,600
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112,378 PaineWebber Inc.,
purchased on 9/28/2000 to
yield 6.54% to 10/05/2000...................... 112,378
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112,500 Prudential Securities Inc.,
purchased on 9/29/2000 to
yield 6.55% to 10/06/2000...................... 112,500
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108,000 S.G. Cowen Securities, Corp.,
purchased on 9/27/2000 to
yield 6.45% to 10/04/2000...................... 108,000
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112,500 Salomon Smith Barney Inc.,
purchased on 9/29/2000 to
yield 6.56% to 10/06/2000 ..................... 112,500
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70,000 State Street Bank & Trust,
purchased on 9/29/2000 to
yield 6.43% to 10/02/2000...................... 70,000
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100,000 UBS Warburg LLC,
purchased on 9/26/2000 to
yield 6.45% to 10/03/2000...................... 100,000
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Total Repurchase Agreements
(Cost--$1,693,601)........................................ 1,693,601
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Total Investments (Cost--$2,247,503)--99.9%............... 2,247,474
Other Assets Less Liabilities--0.1%....................... 1,444
----------
Net Assets--100.0%........................................ $2,248,918
==========
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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, 2000
<TABLE>
<S> <C> <C>
Assets:
Investments, at value (identified cost--$2,247,502,558+) .............. $ 2,247,474,388
Interest receivable ................................................... 3,046,711
Prepaid registration fees and other assets ............................ 201,957
---------------
Total assets .......................................................... 2,250,723,056
---------------
Liabilities:
Payables:
Investment adviser .................................................. $ 734,777
Distributor ......................................................... 686,413
Dividends to shareholders ........................................... 9,561
Beneficial interest redeemed ........................................ 1,051 1,431,802
---------------
Accrued expenses and other liabilities ................................ 373,527
---------------
Total liabilities ..................................................... 1,805,329
---------------
Net Assets ............................................................ $ 2,248,917,727
===============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized ..................................................... $ 224,894,590
Paid-in capital in excess of par ...................................... 2,024,051,307
Unrealized depreciation on investments--net ........................... (28,170)
---------------
Net Assets--Equivalent to $1.00 per share based on 2,248,945,897 shares
of beneficial interest outstanding .................................... $ 2,248,917,727
===============
</TABLE>
+ Cost for Federal income tax purposes was $2,247,502,558. As of September
30, 2000, net unrealized depreciation for Federal income tax purposes
amounted to $28,170, of which $28,358 related to appreciated securities
and $56,528 related to depreciated securities.
See Notes to Financial Statements.
CMA GOVERNMENT SECURITIES FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<S> <C> <C>
Investment Income:
Interest and amortization of premium and discount earned .............. $ 85,680,696
Expenses:
Investment advisory fees .............................................. $ 5,665,670
Distribution fees ..................................................... 1,711,979
Transfer agent fees ................................................... 178,672
Accounting services ................................................... 151,089
Custodian fees ........................................................ 57,318
Professional fees ..................................................... 26,541
Trustees' fees and expenses ........................................... 15,821
Pricing fees .......................................................... 1,021
Printing and shareholder reports ...................................... 798
Other ................................................................. 17,031
---------------
Total expenses ........................................................ 7,825,940
---------------
Investment income--net ................................................ 77,854,756
Realized Gain on Investments--Net ..................................... 71,407
Change in Unrealized Depreciation on Investments--Net ................. 1,609,941
---------------
Net Increase in Net Assets Resulting from Operations .................. $ 79,536,104
===============
</TABLE>
See Notes to Financial Statements.
3
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CMA GOVERNMENT SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the For the
Six Months Year
Ended Ended
September 30, March 31,
Increase (Decrease) in Net Assets: 2000 2000
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Investment income--net .............................................. $ 77,854,756 $ 160,057,437
Realized gain on investments--net ................................... 71,407 29,846
Change in unrealized appreciation/depreciation on investments--net .. 1,609,941 (2,219,480)
---------------- ----------------
Net increase in net assets resulting from operations ................ 79,536,104 157,867,803
---------------- ----------------
Dividends & Distributions to Shareholders:
Investment income--net .............................................. (77,854,756) (160,057,437)
Realized gain on investments--net ................................... (71,407) (29,846)
---------------- ----------------
Net decrease in net assets resulting from dividends and distributions
to shareholders ..................................................... (77,926,163) (160,087,283)
---------------- ----------------
Beneficial Interest Transactions:
Net proceeds from sale of shares .................................... 4,044,164,116 12,558,699,912
Value of shares issued to shareholders in reinvestment of
dividends and distributions ......................................... 77,763,237 159,840,251
---------------- ----------------
4,121,927,353 12,718,540,163
Cost of shares redeemed ............................................. (5,163,192,278) (13,120,934,019)
---------------- ----------------
Net decrease in net assets derived from beneficial
interest transactions ............................................... (1,041,264,925) (402,393,856)
---------------- ----------------
Net Assets:
Total decrease in net assets ........................................ (1,039,654,984) (404,613,336)
Beginning of period ................................................. 3,288,572,711 3,693,186,047
---------------- ----------------
End of period ....................................................... $ 2,248,917,727 $ 3,288,572,711
================ ================
</TABLE>
See Notes to Financial Statements.
4
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CMA GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
<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: 2000 2000 1999 1998 1997
---------------------------------------------------------------------------------------------------------------------------------
<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 ................. .0280 .0462 .0468 .0501 .0477
Realized and unrealized gain (loss) on
investments--net ....................... .0006 (.0006) .0002 .0007 (.0004)
---------- ---------- ---------- ---------- ----------
Total from investment operations ....... .0286 .0456 .0470 .0508 .0473
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net ............... (.0280) (.0462) (.0468) (.0501) (.0477)
Realized gain on investments--net .... --+ --+ (.0001) (.0001) --+
---------- ---------- ---------- ---------- ----------
Total dividends and distributions ...... (.0280) (.0462) (.0469) (.0502) (.0477)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period ......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total Investment Return ................ 5.63%* 4.71% 4.81% 5.15% 4.96%
========== ========== ========== ========== ==========
Ratios to Average Net Assets:
Expenses ............................... .56%* .56% .57% .57% .56%
========== ========== ========== ========== ==========
Investment income and realized gain on
investments--net ....................... 5.57%* 4.60% 4.68% 5.02% 4.81%
========== ========== ========== ========== ==========
Supplemental Data:
Net assets, end of period (in thousands) $2,248,918 $3,288,573 $3,693,186 $3,540,040 $3,423,468
========== ========== ========== ========== ==========
</TABLE>
* Annualized.
+ Amount is less than $.0001 per share.
See Notes to Financial Statements.
5
<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. The Fund's financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, 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. If the counterparty defaults and the fair value of the
collateral declines, liquidation of the collateral by the Fund may be delayed or
limited.
(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
backup 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
6
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CMA GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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 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.
CMA GOVERNMENT SECURITIES FUND
OFFICERS AND TRUSTEES
Terry K. Glenn--President and Trustee
Ronald W. Forbes--Trustee
Cynthia A. Montgomery--Trustee
Charles C. Reilly--Trustee
Kevin A. Ryan--Trustee
Roscoe S. Suddarth--Trustee
Richard R. West--Trustee
Arthur Zeikel--Trustee
Edward D. Zinbarg--Trustee
Kevin J. McKenna--Senior Vice President
Joseph T. Monagle Jr.--Senior Vice President
Donald C. Burke--Vice President and
Treasurer
Robert Sabatino--Vice President
Phillip Gillespie--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
<PAGE>
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--9/00
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