UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21197
Name of Fund: WCMA Government Securities Fund
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, WCMA
Government Securities Fund, 800 Scudders Mill Road, Plainsboro, NJ 08536.
Mailing address: P.O. Box 9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 03/31/03
Date of reporting period: 03/03/03 - 3/31/03
Item 1 - Attach shareholder report
WCMA Government Securities Fund
Annual Report
March 31, 2003
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
dated and are subject to change.
WCMA Government Securities Fund
Notes to Financial Statements
1. Significant Accounting Policies:
WCMA 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 seeks to achieve its investment objective by investing all of
its assets in the Master Government Securities Trust (the "Trust"), which has
the same investment objective as the Fund. The value of the Fund's investment in
the Trust reflects the Fund's proportionate interest in the net assets of the
Trust. The performance of the Fund is directly affected by the performance of
the Trust. The financial statements of the Trust, including the Schedule of
Investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements. 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. The Fund commenced operations on March 3,
2003 when it contributed its initial seed capital to the Trust. The effective
date of the Fund's registration with the Securities and Exchange Commission was
March 20, 2003. Prior to March 3, 2003, the Fund had no operations other than
those relating to organizational matters and the issuance of 100,000 shares of
beneficial interest of the Fund to Fund Asset Management, L.P. ("FAM") for
$100,000. The percentage of the Trust owned by the Fund at March 31, 2003 was
less than 0.1%. The Fund offers four classes, designated Class 1, Class 2, Class
3 and Class 4. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that each
class bears certain expenses related to the distribution of such shares. Each
class has exclusive voting rights with respect to matters relating to such
distribution expenditures. Income, expenses (other than expenses attributed to a
specific class) and realized and unrealized gains and losses on investments are
allocated daily to each class based on its relative net assets. The following is
a summary of significant accounting policies followed by the Fund.
(a) Valuation of investments - The Fund records its investments in the Trust at
fair value. Valuation of securities held by the Trust is discussed in Note 1a of
the Trust's Notes to Financial Statements, which are included elsewhere in this
report.
(b) Investment income and expenses - The Fund records daily its proportionate
share of the Trust's income, expenses and realized and unrealized gains and
losses. In addition, the Fund accrues its own expenses.
(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) Prepaid registration fees - Prepaid registration fees are charged to expense
as the related shares are issued.
(e) 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
(f) Investment transactions - Investment transactions in the Trust are accounted
for on a trade date basis.
2. Transactions with Affiliates:
The Fund has entered into an Administration Agreement with FAM. The general
partner of FAM is Princeton Services, Inc. ("PSI"), a wholly-owned subsidiary of
Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited partner. The Fund
pays a monthly fee at an annual rate of .25% of the Fund's average daily net
assets for the performance of administrative services (other than investment
advice and related portfolio activities) necessary for the operation of the
Fund.
The Fund has adopted Distribution Plans in compliance with Rule 12b-1 under the
Investment Company Act of 1940, pursuant to which Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., receives account
maintenance and distribution fees from the Fund. The fees are accrued daily and
paid monthly at annual rates based upon the average daily net assets of the
shares of the Fund as follows:
- --------------------------------------------------------------------------------
Account
Maintenance Distribution
Fee Fee
- --------------------------------------------------------------------------------
Class 1.............................. .25% .75%
Class 2.............................. .25% .43%
Class 3.............................. .25% .125%
Class 4.............................. .25% .125%
- --------------------------------------------------------------------------------
The ongoing account maintenance fee compensates MLPF&S for providing account
maintenance services to Class 1, Class 2, Class 3 and Class 4 shareholders. The
ongoing distribution fee compensates MLPF&S for providing shareholder and
distribution-related services to shareholders. For the period ended March 31,
2003, MLPF&S has waived the Fund's account maintenance and distribution fees.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
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 reinvested during the period corresponds to the amount
included in the Statement of Changes in Net Assets for value of shares
reinvested since shares are recorded at $1.00 per share.
3
4. Distributions to Shareholders:
The tax character of distributions paid during the period March 3, 2003 to March
31, 2003 was as follows:
- --------------------------------------------------------------------------------
For the Period
March 3, 2003+ to
March 31, 2003
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 74
--------
Total taxable distributions $ 74
========
- --------------------------------------------------------------------------------
+ Commencement of operations.
- --------------------------------------------------------------------------------
As of March 31, 2003, there were no significant differences between the book and
tax components of net assets.
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of
WCMA Government Securities Fund:
We have audited the accompanying statement of assets and liabilities of WCMA
Government Securities Fund as of March 31, 2003, and the related statements of
operations and changes in net assets for the period March 3, 2003 (commencement
of operations) through March 31, 2003, and the financial highlights for the
period March 20, 2003 through March 31, 2003. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of WCMA
Government Securities Fund as of March 31, 2003, the results of its operations
and the changes in its net assets for the period March 3, 2003 through March 31,
2003, and its financial highlights for the period March 20, 2003 through March
31, 2003, in conformity with accounting principles generally accepted in the
United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
May 21, 2003
4
WCMA Government Securities Fund, March 31, 2003
STATEMENT OF ASSETS AND LIABILITIES
WCMA GOVERNMENT
SECURITIES FUND As of March 31, 2003
==================================================================================================================================
Assets: Investment in Master Government Securities Trust,
at value (identified cost-$100,092) ................................................... $ 100,092
Prepaid registration fees and other assets ............................................... 255,895
---------
Total assets ............................................................................. 355,987
---------
==================================================================================================================================
Liabilities: Payable to administrator ................................................................. 18
Accrued expenses ......................................................................... 255,895
---------
Total liabilities ........................................................................ 255,913
---------
==================================================================================================================================
Net Assets: Net assets ............................................................................... $ 100,074
=========
==================================================================================================================================
Net Assets Class 1 Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized .............................................................. $ 2,502
Class 2 Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized .............................................................. 2,502
Class 3 Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized .............................................................. 2,502
Class 4 Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized .............................................................. 2,502
Paid-in capital in excess of par ......................................................... 90,066
---------
Net assets ............................................................................... $ 100,074
=========
==================================================================================================================================
Net Asset Class 1 - Based on net assets of $25,018 and 25,018
Value: shares outstanding ....................................................................... $ 1.00
=========
Class 2 - Based on net assets of $25,018 and 25,018
shares outstanding ....................................................................... $ 1.00
=========
Class 3 - Based on net assets of $25,019 and 25,019
shares outstanding ....................................................................... $ 1.00
=========
Class 4 - Based on net assets of $25,019 and 25,019
shares outstanding ....................................................................... $ 1.00
=========
==================================================================================================================================
See Notes to Financial Statements.
5
WCMA Government Securities Fund, March 31, 2003
STATEMENT OF OPERATIONS
WCMA GOVERNMENT
SECURITIES FUND For the Period March 3, 2003+ to March 31, 2003
==================================================================================================================================
Investment Net investment income allocated from the Trust:
Income from the Interest ....................................................................... $ 114
Trust-Net: Expenses ....................................................................... (22)
---------
Net investment income from the Trust ............................................... 92
---------
==================================================================================================================================
Expenses: Administration fees ................................................................ 18
---------
Investment income-net .............................................................. 74
---------
==================================================================================================================================
Net Increase in Net Assets Resulting
from Operations .................................................................... $ 74
=========
==================================================================================================================================
+ Commencement of operations.
See Notes to Financial Statements.
6
WCMA Government Securities Fund, March 31, 2003
STATEMENT OF CHANGES IN NET ASSETS
For the Period
March 3, 2003+
WCMA GOVERNMENT to March 31,
SECURITIES FUND Increase (Decrease) in Net Assets: 2003
====================================================================================================================================
Operations: Investment income-net ................................................................. $ 74
---------
Net increase in net assets resulting from operations .................................. 74
---------
====================================================================================================================================
Dividends to Investment income-net:
Shareholders: Class 1 .......................................................................... (18)
Class 2 .......................................................................... (18)
Class 3 .......................................................................... (19)
Class 4 .......................................................................... (19)
---------
Net decrease in net assets resulting from dividends
to shareholders ....................................................................... (74)
---------
====================================================================================================================================
Beneficial Interest Value of shares issued to shareholders in reinvestment of dividends ................... 74
Transactions: ---------
====================================================================================================================================
Net Assets: Total increase in net assets .......................................................... 74
Beginning of period ................................................................... 100,000
---------
End of period ......................................................................... $ 100,074
=========
====================================================================================================================================
+ Commencement of operations.
See Notes to Financial Statements.
7
WCMA Government Securities Fund, March 31, 2003
FINANCIAL HIGHLIGHTS
The following per share data and ratios have Class 1
been derived from information provided ---------------
in the financial statements. For the Period
March 20, 2003+
WCMA GOVERNMENT to March 31,
SECURITIES FUND Increase (Decrease) in Net Asset Value: 2003
=================================================================================================================
Per Share Net asset value, beginning of period .................................. $ 1.00
Operating -------
Performance: Investment income-net ................................................. .0003
Unrealized gain on investments from the Trust-net ..................... .0002
-------
Total from investment operations ...................................... .0005
-------
Less dividends from investment income-net ............................. (.0003)
-------
Net asset value, end of period ........................................ $ 1.00
=======
=================================================================================================================
Total Investment .05%
Return: =======
=================================================================================================================
Ratios to Expenses++ ............................................................ .02%
Average Net =======
Assets: Investment income-net ................................................. .03%
=======
=================================================================================================================
Supplemental Net assets, end of period (in thousands) .............................. $ 25
Data: =======
=================================================================================================================
+ Effective date of the Fund's registration.
++ Includes the Fund's share of the Trust's allocated expenses.
See Notes to Financial Statements.
8
WCMA Government Securities Fund, March 31, 2003
FINANCIAL HIGHLIGHTS
The following per share data and ratios have Class 2
been derived from information provided ---------------
in the financial statements. For the Period
March 20, 2003+
WCMA GOVERNMENT to March 31,
SECURITIES FUND Increase (Decrease) in Net Asset Value: 2003
=================================================================================================================
Per Share Net asset value, beginning of period .................................. $1.00
Operating -------
Performance: Investment income-net ................................................. .0003
Unrealized gain on investments from the Trust-net ..................... .0002
-------
Total from investment operations ...................................... .0005
-------
Less dividends from investment income-net ............................. (.0003)
-------
Net asset value, end of period ........................................ $1.00
=======
=================================================================================================================
Total Investment .05%
Return: =======
=================================================================================================================
Ratios to Expenses++ ............................................................ .02%
Average Net =======
Assets: Investment income-net ................................................. .03%
=======
=================================================================================================================
Supplemental Net assets, end of period (in thousands) .............................. $25
Data: =======
=================================================================================================================
+ Effective date of the Fund's registration.
++ Includes the Fund's share of the Trust's allocated expenses.
See Notes to Financial Statements.
9
WCMA Government Securities Fund, March 31, 2003
FINANCIAL HIGHLIGHTS
The following per share data and ratios have Class 3
been derived from information provided ---------------
in the financial statements. For the Period
March 20, 2003+
WCMA GOVERNMENT to March 31,
SECURITIES FUND Increase (Decrease) in Net Asset Value: 2003
=================================================================================================================
Per Share Net asset value, beginning of period .................................. $ 1.00
Operating -------
Performance: Investment income-net ................................................. .0003
Unrealized gain on investments from the Trust-net ..................... .0002
-------
Total from investment operations ...................................... .0005
-------
Less dividends from investment income-net ............................. (.0003)
-------
Net asset value, end of period ........................................ $ 1.00
=======
=================================================================================================================
Total Investment .05%
Return: =======
=================================================================================================================
Ratios to Expenses++ ............................................................ .02%
Average Net =======
Assets: Investment income-net ................................................. .03%
=======
=================================================================================================================
Supplemental Net assets, end of period (in thousands) .............................. $ 25
Data: =======
=================================================================================================================
+ Effective date of the Fund's registration.
++ Includes the Fund's share of the Trust's allocated expenses.
See Notes to Financial Statements.
10
WCMA Government Securities Fund, March 31, 2003
FINANCIAL HIGHLIGHTS
The following per share data and ratios have Class 4
been derived from information provided ---------------
in the financial statements. For the Period
March 20, 2003+
WCMA GOVERNMENT to March 31,
SECURITIES FUND Increase (Decrease) in Net Asset Value: 2003
=================================================================================================================
Per Share Net asset value, beginning of period .................................. $ 1.00
Operating -------
Performance: Investment income-net ................................................. .0003
Unrealized gain on investments from the Trust-net ..................... .0002
-------
Total from investment operations ...................................... .0005
-------
Less dividends from investment income-net ............................. (.0003)
-------
Net asset value, end of period ........................................ $ 1.00
=======
=================================================================================================================
Total Investment .05%
Return: =======
=================================================================================================================
Ratios to Expenses++ ............................................................ .02%
Average Net =======
Assets: Investment income-net ................................................. .03%
=======
=================================================================================================================
Supplemental Net assets, end of period (in thousands) .............................. $ 25
Data: =======
=================================================================================================================
+ Effective date of the Fund's registration.
++ Includes the Fund's share of the Trust's allocated expenses.
See Notes to Financial Statements.
11
MASTER GOVERNMENT SECURITIES TRUST
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 2003 (IN THOUSANDS)
- --------------------------------------------------------------------------------
Face Interest Maturity
Issue Amount Rate Date Value
- --------------------------------------------------------------------------------
U.S. Government Obligations*--21.9%
- --------------------------------------------------------------------------------
U.S. Treasury $44,000 1.17 % 4/24/2003 $ 43,966
Bills 44,000 1.175 4/24/2003 43,965
19,500 1.22 7/17/2003 19,435
- --------------------------------------------------------------------------------
U.S. Treasury 4,500 3.625 8/31/2003 4,546
Notes 43,000 2.75 9/30/2003 43,348
10,000 2.75 10/31/2003 10,094
57,600 3.25 12/31/2003 58,498
13,900 3.625 3/31/2004 14,239
30,000 3.375 4/30/2004 30,701
24,200 2.875 6/30/2004 24,688
10,875 2.25 7/31/2004 11,015
13,700 2.125 8/31/2004 13,858
5,500 1.875 9/30/2004 5,545
5,200 2.125 10/31/2004 5,263
4,400 1.75 12/31/2004 4,425
13,200 1.50 2/28/2005 13,205
- --------------------------------------------------------------------------------
Total U.S. Government Obligations
(Cost--$345,708) ............................................... 346,791
- --------------------------------------------------------------------------------
Face
Amount Issue Value
- --------------------------------------------------------------------------------
Repurchase Agreements**--77.6%
- --------------------------------------------------------------------------------
$78,000 ABN-AMRO Inc., purchased on
3/31/2003 to yield 1.30% to 4/01/2003,
repurchase price $78,003,
collateralized by U.S. Treasury Notes,
10.375% due 11/15/2012 ........................... 78,000
- --------------------------------------------------------------------------------
70,000 Bank of America Securities LLC, purchased
on 3/31/2003 to yield 1.27% to 4/01/2003,
repurchase price $70,002,
collateralized by U.S. Treasury Bills,
1.10% due 5/15/2003 .............................. 70,000
- --------------------------------------------------------------------------------
78,000 Bank One Capital Markets, Inc.,
purchased on 3/31/2003 to yield 1.28% to
4/01/2003, repurchase price $78,003,
collateralized by U.S. Treasury Notes,
2.75% due 10/31/2003 ............................. 78,000
- --------------------------------------------------------------------------------
76,000 Barclays Capital Inc., purchased on
3/31/2003 to yield 1.32% to 4/01/2003,
repurchase price $76,003,
collateralized by U.S. Treasury Notes,
3.875% due 4/15/2029 ............................. 76,000
- --------------------------------------------------------------------------------
78,000 Bear Stearns & Co., Inc., purchased
on 3/31/2003 to yield 1.31%
to 4/01/2003, repurchase price $78,003,
collateralized by U.S. Treasury Notes,
0% due 8/15/2007 ................................. 78,000
- --------------------------------------------------------------------------------
78,000 Credit Suisse First Boston Corp.,
purchased on 3/25/2003 to yield 1.22%
to 4/01/2003, repurchase price $78,019,
collateralized by GNMA, 5.50% to 15%
due 5/15/2003 to 1/15/2033 ....................... 78,000
- --------------------------------------------------------------------------------
77,000 Deutsche Bank Securities Inc.,
purchased on 3/28/2003 to yield 1.26% to
4/04/2003, repurchase price $77,019,
collateralized by GNMA, 6.50%
due 11/15/2023 to 8/15/2032 ...................... 77,000
- --------------------------------------------------------------------------------
78,000 Goldman Sachs & Company, purchased
on 3/07/2003 to yield 1.23% to
4/04/2003, repurchase price $78,075,
collateralized by GNMA, 5.50% to 7%
due 6/15/2024 to 3/15/2033 ....................... 78,000
- --------------------------------------------------------------------------------
77,000 Greenwich Capital Markets, Inc.,
purchased on 3/27/2003 to yield 1.25%
to 4/03/2003, repurchase price $77,019,
collateralized by GNMA, 6.50% due
9/20/2032 to 10/20/2032 .......................... 77,000
- --------------------------------------------------------------------------------
12
MASTER GOVERNMENT SECURITIES TRUST
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 2003 (CONCLUDED) (IN THOUSANDS)
- --------------------------------------------------------------------------------
Face
Amount Issue Value
- --------------------------------------------------------------------------------
Repurchase Agreements (concluded)
- --------------------------------------------------------------------------------
$76,928 HSBC Securities (USA) Inc., purchased
on 3/31/2003 to yield 1.32% to
4/01/2003, repurchase price $76,931,
collateralized by U.S. Treasury
Notes, 0% to 5.875% due 4/30/2003
to 2/15/2028 ..................................... $ 76,928
- --------------------------------------------------------------------------------
77,000 J.P. Morgan Securities Inc., purchased
on 3/26/2003 to yield 1.25% to
4/02/2003, repurchase price $77,019,
collateralized by GNMA, 5% to 10%
due 2/15/2004 to 3/15/2033 ....................... 77,000
- --------------------------------------------------------------------------------
77,000 Lehman Brothers Inc., purchased
on 3/31/2003 to yield 1.25% to
4/07/2003, repurchase price $77,019,
collateralized by GNMA, 3% to 15%
due 2/15/2006 to 3/15/2033 ....................... 77,000
- --------------------------------------------------------------------------------
77,000 Merrill Lynch Government Securities Inc.,
purchased on 3/26/2003 to yield 1.25%
to 4/02/2003, repurchase price $77,019,
collateralized by GNMA, 0% to 7%
due 2/20/2028 to 10/20/2031 ...................... 77,000
- --------------------------------------------------------------------------------
77,000 Morgan Stanley & Co., Inc., purchased
on 3/31/2003 to yield 1.24% to 4/07/2003,
repurchase price $77,019, collateralized
by U.S. Treasury STRIPS,7.25% to
10.625% due 8/15/2015 to 5/15/2017 ............... 77,000
- --------------------------------------------------------------------------------
78,000 Salomon Smith Barney, Inc., purchased
on 3/25/2003 to yield 1.22% to
4/01/2003, repurchase price $78,019,
collateralized by GNMA, 5% to 11%
due 3/15/2008 to 3/15/2033 ....................... 78,000
- --------------------------------------------------------------------------------
77,000 UBS Warburg LLC, purchased
on 3/27/2003 to yield 1.25% to
4/03/2003, repurchase price $77,019,
collateralized by GNMA, 6% to 10%
due 5/15/2003 to 2/15/2033 ....................... 77,000
- --------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost--$1,229,928) ............................................. 1,229,928
- --------------------------------------------------------------------------------
Total Investments (Cost--$1,575,636)--99.5% .................... 1,576,719
Other Assets Less Liabilities--0.5% ............................ 8,475
----------
Net Assets--100.0% ............................................. $1,585,194
==========
- --------------------------------------------------------------------------------
* U.S. Treasury Bills are traded on a discount basis; the interest rates
shown are the discount rates paid at the time of purchase by the Trust.
U.S. Treasury Notes bear interest at the rates shown, payable at fixed
dates until maturity.
** Repurchase Agreements are fully collateralized by U.S. Government
Obligations.
See Notes to Financial Statements.
13
MASTER GOVERNMENT SECURITIES TRUST
STATEMENT OF ASSETS AND LIABILITIES AS OF MARCH 31, 2003
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost--$1,575,635,780*) ..... $1,576,719,454
Cash ......................................................... 3,544
Interest receivable .......................................... 1,486,911
Other assets ................................................. 7,311,933
--------------
Total assets ................................................. 1,585,521,842
--------------
Liabilities:
Payable to investment adviser ................................ 288,836
Accrued expenses and other liabilities ....................... 39,052
--------------
Total liabilities ............................................ 327,888
--------------
Net Assets ................................................... $1,585,193,954
==============
Net Assets Consist of:
Investors' capital ........................................... $1,584,110,280
Unrealized appreciation on investments--net .................. 1,083,674
--------------
Net assets ................................................... $1,585,193,954
==============
* Cost for Federal income tax purposes was $1,575,637,164. As of March 31,
2003, net unrealized appreciation for Federal income tax purposes amounted
to $1,082,290, of which $1,105,213 is related to appreciated securities
and $22,923 is related to depreciated securities.
See Notes to Financial Statements.
14
MASTER GOVERNMENT SECURITIES TRUST
STATEMENT OF OPERATIONS FOR THE PERIOD FEBRUARY 13, 2003+ TO MARCH 31, 2003
- --------------------------------------------------------------------------------
Investment Income:
Interest and amortization of premium and discount earned $ 2,743,866
Expenses:
Investment advisory fees ............................... $ 439,001
Accounting services .................................... 30,651
Custodian fees ......................................... 7,719
Trustees' fees and expenses ............................ 4,891
Professional fees ...................................... 750
Pricing fees ........................................... 559
Other .................................................. 2,107
-----------
Total expenses ......................................... 485,678
-----------
Investment income--net ................................. 2,258,188
-----------
Realized & Unrealized Gain (Loss) on Investments--Net:
Realized gain on investments--net ...................... 8,057
Change in unrealized appreciation on investments--net .. (2,060)
-----------
Total realized and unrealized gain on investments--net . 5,997
-----------
Net Increase in Net Assets Resulting from Operations ... $ 2,264,185
===========
+ Commencement of operations.
See Notes to Financial Statements.
15
MASTER GOVERNMENT SECURITIES TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Period
February 13, 2003+
to March 31,
Increase (Decrease) in Net Assets: 2003
- --------------------------------------------------------------------------------
Operations:
Investment income--net ...................................... $ 2,258,188
Realized gain on investments--net ........................... 8,057
Change in unrealized appreciation on investments--net ....... (2,060)
---------------
Net increase in net assets resulting from operations ........ 2,264,185
---------------
Capital Transactions:
Proceeds from contributions ................................. 712,600,848
Fair value of net assets contributions ...................... 1,599,940,901
Fair value of withdrawals ................................... (729,711,980)
---------------
Net increase in net assets derived from capital transactions 1,582,829,769
---------------
Net Assets:
Total increase in net assets ................................ 1,585,093,954
Beginning of period ......................................... 100,000
---------------
End of period ............................................... $ 1,585,193,954
===============
+ Commencement of operations.
See Notes to Financial Statements.
MASTER GOVERNMENT SECURITIES TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For the Period
February 13, 2003+
The following ratios have been derived from information to March 31,
provided in the financial statements. 2003
- --------------------------------------------------------------------------------
Total Investment Return: ................................... .75%*
===========
Ratios to Average Net Assets:
Expenses ................................................... .26%*
===========
Investment income and realized gain on investments--net .... 1.08%*
===========
Supplemental Data:
Net assets, end of period (in thousands) ................... $ 1,585,194
===========
* Annualized.
+ Commencement of operations.
See Notes to Financial Statements.
16
MASTER GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Significant Accounting Policies:
Master Government Securities Trust (the "Trust") is registered under the
Investment Company Act of 1940 and is organized as a Delaware business trust.
The Declaration of Trust permits the Trustees to issue nontransferable interest
in the Trust, subject to certain limitations. On February 13, 2003, the Trust
received all of the assets of CMA Government Securities Fund, a registered
investment company that converted to a master/feeder structure. The Trust'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. The following is a summary of significant
accounting policies followed by the Trust.
(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 Trust's Board of Trustees.
(b) Repurchase agreements -- The Trust invests in U.S. 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
Trust 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
Trust may be delayed or limited.
(c) Income taxes -- The Trust is classified as a partnership for Federal income
tax purposes. As such, each investor in the Trust is treated as owner of its
proportionate share of the net assets, income, expenses and realized and
unrealized gains and losses of the Trust. Accordingly, as a "pass through"
entity, the Trust pays no income dividends or capital gains distributions.
Therefore, no Federal income tax provision is required. It is intended that the
Trust's assets will be managed so an investor in the Trust can satisfy the
requirements of subchapter M of the Internal Revenue Code.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Interest income (including amortization of premium and
discount) is recognized on the accrual basis.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust 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.
17
MASTER GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
- --------------------------------------------------------------------------------
FAM is responsible for the management of the Trust's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Trust. For such services, the Trust pays a monthly fee
based upon the average daily value of the Trust's net assets, at the following
annual rates: .25% of the Trust's average daily net assets not exceeding $500
million; .175% of the average daily net assets in excess of $500 million but not
exceeding $1 billion; and .125% of the average daily net assets in excess of $1
billion.
For the year ended March 31, 2003, the Fund reimbursed FAM $4,718 for certain
accounting services.
Certain officers and/or trustees of the Trust are officers and/or directors of
FAM, PSI, and/or ML & Co.
MASTER GOVERNMENT SECURITIES TRUST
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Investors and Board of Trustees of
Master Government Securities Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Master Government Securities Trust as of March
31, 2003, and the related statements of operations and changes in net assets,
and the financial highlights for the period February 13, 2003 (commencement of
operations) through March 31, 2003. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 2003, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Master
Government Securities Trust as of March 31, 2003, the results of its operations,
the changes in its net assets, and its financial highlights for the period
February 13, 2003 through March 31, 2003, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
May 21, 2003
18
WCMA GOVERNMENT SECURITIES FUND
OFFICERS AND TRUSTEES
- --------------------------------------------------------------------------------
Number of
Portfolios Other
in Fund Director-
Position(s) Length Complex ships
Held of Time Overseen by Held by
Name, Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Interested Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Terry K. Glenn* President 1999 to President and Chairman of Merrill Lynch 118 Funds None
P.O. Box 9011 and present Investment Managers, L.P. ("MLIM")/Fund 162 Portfolios
Princeton, NJ 08543-9011 Trustee and 1997 Asset Management, L.P. ("FAM")--Advised
Age: 62 to present Funds since 1999; Chairman (Americas Region)
of MLIM from 2000 to 2002; Executive Vice
President of MLIM and FAM (which terms as
used herein include their corporate predecessors)
from 1983 to 2002; President of FAM Distributors,
Inc. ("FAMD") from 1986 to 2002 and Director
thereof from 1991 to 2002; Executive Vice
President and Director of Princeton Services,
Inc. ("Princeton Services") from 1993 to 2002;
President of Princeton Administrators, L.P. from
1988 to 2002; Director of Financial Data Services,
Inc. from 1985 to 2002.
- ------------------------------------------------------------------------------------------------------------------------------------
* Mr. Glenn is a director, trustee or member of an advisory board of certain other investment companies for which FAM or MLIM
acts as investment adviser. Mr. Glenn is an "interested person," as described in the Investment Company Act, of the Fund based
on his former positions with FAM, MLIM, FAMD, Princeton Services and Princeton Administrators, L.P. The Trustee's term is
unlimited. Trustees serve until their resignation, removal, or death, or until December 31 of the year in which they turn 72.
As Fund President, Mr. Glenn serves at the pleasure of the Board of Trustees.
- ------------------------------------------------------------------------------------------------------------------------------------
19
WCMA GOVERNMENT SECURITIES FUND
OFFICERS AND TRUSTEES (CONTINUED)
- --------------------------------------------------------------------------------
Number of
Portfolios Other
in Fund Director-
Position(s) Length Complex ships
Held of Time Overseen by Held by
Name, Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years Trustee Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald W. Forbes Trustee 1981 to Professor Emeritus of Finance, School of Business, 45 Funds None
P.O. Box 9095 present State University of New York at Albany since 2000; 51 Portfolios
Princeton, NJ 08543-9095 and Professor thereof from 1989 to 2000;
Age: 62 International Consultant, Urban Institute
from 1995 to 1999.
- ------------------------------------------------------------------------------------------------------------------------------------
Cynthia A. Montgomery Trustee 1994 to Professor, Harvard Business School since 1989; 45 Funds Unum-
P.O. Box 9095 present Director, Unum Provident Corporation since 1990; 51 Portfolios Provident
Princeton, NJ 08543-9095 Director, Newell Rubbermaid, Inc. since 1995. Corporation;
Age: 50 Newell
Rubbermaid,
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Charles C. Reilly Trustee 1990 to Self-employed financial consultant since 1990. 45 Funds None
P.O. Box 9095 present 51 Portfolios
Princeton, NJ 08543-9095
Age: 71
- ------------------------------------------------------------------------------------------------------------------------------------
Kevin A. Ryan Trustee 1992 to Founder and Director Emeritus of The Boston 45 Funds None
P.O. Box 9095 present University Center for the Advancement of 51 Portfolios
Princeton, NJ 08543-9095 Ethics and Character; Professor of Education at
Age: 70 Boston University from 1982 to 1999 and
Professor Emeritus since 1999.
- ------------------------------------------------------------------------------------------------------------------------------------
Roscoe S. Suddarth Trustee 2000 to President, Middle East Institute from 1995 to 2001; 45 Funds None
P.O. Box 9095 present Foreign Service Officer, United States Foreign 51 Portfolios
Princeton, NJ 08543-9095 Service from 1961 to 1995; Career Minister from
Age: 67 1989 to 1995; Deputy Inspector General, U.S.
Department of State from 1991 to 1994; U.S.
Ambassador to the Hashemite Kingdom of
Jordan from 1987 to 1990.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard R. West Trustee 1981 to Dean Emeritus of New York University, Leonard N. 45 Funds Bowne & Co.,
P.O. Box 9095 present Stern School of Business Administration 51 Portfolios Inc.; Vornado
Princeton, NJ 08543-9095 since 1994. Operating
Age: 65 Company;
Vornado
Realty
Trust;
Alexander's,
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Edward D. Zinbarg Trustee 2000 to Self-employed financial consultant since 1994. 45 Funds None
P.O. Box 9095 present 51 Portfolios
Princeton, NJ 08543-9095
Age: 68
- ------------------------------------------------------------------------------------------------------------------------------------
* The Trustee's term is unlimited. Trustees serve until their resignation, removal, or death, or until December 31 of the year
in which they turn 72.
- ------------------------------------------------------------------------------------------------------------------------------------
20
WCMA GOVERNMENT SECURITIES FUND
OFFICERS AND TRUSTEES (CONCLUDED)
- --------------------------------------------------------------------------------
Position(s) Length
Held of Time
Name, Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Fund Officers
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. Burke Vice 1993 to First Vice President of FAM and MLIM since 1997 and Treasurer thereof
P.O. Box 9011 President present since 1999; Senior Vice President and Treasurer of Princeton Services since
Princeton, NJ 08543-9011 and and 1999; Vice President of FAMD since 1999; Director of MLIM Taxation
Age: 42 Treasurer 1999 to since 1990.
present
- ------------------------------------------------------------------------------------------------------------------------------------
Kevin J. McKenna Senior 1997 to Managing Director of MLIM and Head of MLIM Americas Fixed Income since
P.O. Box 9011 Vice present 2000; Director (Global Fixed Income) of MLIM from 1997 to 2000.
Princeton, NJ 08543-9011 President
Age: 46
- ------------------------------------------------------------------------------------------------------------------------------------
John Ng Vice 2001 to Director (Global Fixed Income) of MLIM since 1998; Vice President of MLIM
P.O. Box 9011 President present from 1984 to 1998.
Princeton, NJ 08543-9011
Age: 49
- ------------------------------------------------------------------------------------------------------------------------------------
Phillip S. Gillespie Secretary 2000 to First Vice President of MLIM since 2001; Director (Legal Advisory) of MLIM from
P.O. Box 9011 present 2000 to 2001; Vice President of MLIM from 1999 to 2000 and Attorney associated
Princeton, NJ 08543-9011 with MLIM since 1998; Assistant General Counsel of Chancellor LGT Asset
Age: 39 Management, Inc., from 1997 to 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund serve at the pleasure of the Board of Trustees.
- ------------------------------------------------------------------------------------------------------------------------------------
Further information about the Fund's Officers and Trustees is available in the
Fund's Statement of Additional Information, which can be obtained without charge
by calling 1-800-MER-FUND.
Custodian
State Street Bank and Trust Company
P.O. Box 351
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 or
800-262-4636.
21
Item 2 - Did registrant adopt a code of ethics, as of the end of the period
covered by this report, that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party? If not, why not? Briefly describe any amendments or
waivers that occurred during the period. State here if code of
ethics/amendments/waivers are on website and give website address-.
State here if fund will send code of ethics to shareholders without
charge upon request-- N/A (not answered until July 15, 2003 and only
annually for funds)
Item 3 - Did the registrant's board of directors determine that the registrant
either: (i) has at least one audit committee financial expert serving
on its audit committee; or (ii) does not have an audit committee
financial expert serving on its audit committee? If yes, disclose name
of financial expert and whether he/she is "independent," (fund may, but
is not required, to disclose name/independence of more than one
financial expert) If no, explain why not. -N/A (not answered until July
15, 2003 and only annually for funds)
Item 4 - Disclose annually only (not answered until December 15, 2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last two
fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's
annual financial statements or services that are
normally provided by the accountant in connection with
statutory and regulatory filings or engagements for
those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of the
last two fiscal years for assurance and related
services by the principal accountant that are
reasonably related to the performance of the
audit of the registrant's financial statements
and are not reported under paragraph (a) of this
Item. Registrants shall describe the nature of
the services comprising the fees disclosed under
this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last two
fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and
tax planning. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the last
two fiscal years for products and services provided
by the principal accountant, other than the services
reported in paragraphs (a) through (c) of this Item.
Registrants shall describe the nature of the
services comprising the fees disclosed under this
category. N/A.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. N/A.
(e)(2) Disclose the percentage of services described in each of paragraphs
(b) through (d) of this Item that were approved by the audit
committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended on
the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Item 5 - If the registrant is a listed issuer as defined in Rule 10A-3 under the
Exchange Act, state whether or not the registrant has a
separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. If the
registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as the
registrant's audit committee in Section 3(a)(58)(B) of the Exchange
Act, so state.
If applicable, provide the disclosure required by Rule 10A-3(d) under
the Exchange Act regarding an exemption from the listing standards for
audit committees.
(Listed issuers must be in compliance with the new listing rules by the
earlier of their first annual shareholders meeting after January 2004,
or October 31, 2004 (annual requirement))
Item 6 - Reserved
Item 7 - For closed-end funds that contain voting securities in their portfolio,
describe the policies and procedures that it uses to determine how to
vote proxies relating to those portfolio securities. N/A (not answered
until July 1, 2003)
Item 8 -- Reserved
Item 9(a) - Disclose the conclusions of the registrant's principal executive
officer or officers and principal financial officer or officers, or
persons performing similar functions, about the effectiveness of the
registrant's disclosure controls and procedures (as defined in Rule
30a-2(c) under the Act (17 CFR 270.30a-2(c))) based on their
evaluation of these controls and procedures as of a date within 90
days of the filing date of the report that includes the disclosure
required by this paragraph. N/A (not answered until July 15, 2003
and only annually for funds)
Item 9(b) -- There were no significant changes in the registrant's internal
controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of ethics or
amendments/waivers is on website or offered to shareholders upon request
without charge. N/A.
10(b) - Attach certifications pursuant to Section 302 of the Sarbanes-Oxley Act.
Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WCMA Government Securities Fund
By: /s/ Terry K. Glenn
-------------------------------
Terry K. Glenn,
President of
WCMA Government Securities Fund
Date: June 3, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
By: /s/ Terry K. Glenn
-------------------------------
Terry K. Glenn,
President of
WCMA Government Securities Fund
Date: June 3, 2003
By: /s/ Donald C. Burke
-------------------------------
Donald C. Burke,
Chief Financial Officer of
WCMA Government Securities Fund
Date: June 3, 2003
Attached hereto as an exhibit are the certifications pursuant to Section 906 of
the Sarbanes-Oxley Act.