UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21197
811-21300
Name of Fund: WCMA Government Securities Fund
Master Government Securities Trust
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 and Master Government Securities Trust, 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: 03/31/04
Date of reporting period: 04/01/04 - 09/30/04
Item 1 - Report to Stockholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
WCMA Government
Securities Fund
Semi-Annual Report
September 30, 2004
[LOGO] Merrill Lynch Investment Managers
WCMA Government Securities Fund
Officers and Trustees
Terry K. Glenn, President and Trustee
Ronald W. Forbes, Trustee
Cynthia A. Montgomery, Trustee
Jean Margo Reid, Trustee
Kevin A. Ryan, Trustee
Roscoe S. Suddarth, Trustee
Richard R. West, Trustee
Edward D. Zinbarg, Trustee
John Ng, Vice President
Donald C. Burke, Vice President and Treasurer
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
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 WCMA account, call 800-262-4636.
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
2 WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004
A Letter From the President
Dear Shareholder
As we ended the current reporting period, the financial markets were facing a
number of uncertainties. At the top of investors' minds were questions about
economic expansion, corporate earnings, interest rates and inflation, politics,
oil prices and terrorism.
After benefiting from aggressive monetary and fiscal policy stimulus, some fear
the U.S. economy has hit a "soft patch." In fact, economic expansion has slowed
somewhat in recent months, but we believe it is easing into a pace of growth
that is sustainable and healthy. The favorable economic environment has served
to benefit American corporations. Although the most impressive earnings results
were seen earlier in the year, solid productivity, improved revenue growth and
cost discipline all point to a vital corporate sector.
In terms of inflation and interest rates, the Federal Reserve Board (the Fed)
has signaled its confidence in the economic recovery by increasing the Federal
Funds target rate three times in the past several months, from 1% to 1.75%.
Inflation, for its part, has remained in check. Investors and economists are
focused on how quickly Fed policy will move from here.
While any market jitters associated with the presidential election should
subside after November, the effect of oil prices is more difficult to predict.
At around $50 per barrel, the price of oil is clearly a concern. However, on an
inflation-adjusted basis and considering modern usage levels, the situation is
far from the crisis proportions we saw in the 1980s. Finally, although terrorism
and geopolitical crises are realities we are forced to live with today, history
has shown us that the financial effects of any single event tend to be
short-lived.
Amid the uncertainty, fixed income markets provided modestly positive results.
For the six-month and 12-month periods ended September 30, 2004, the Lehman
Brothers Aggregate Bond Index returned +.68% and +3.68%, respectively; the
Credit Suisse First Boston High Yield Index returned +4.30% and +13.32%; and the
Citigroup Three-Month Treasury Bill Index returned +.56% and +1.04%. In terms of
yield, the 10-year Treasury note recorded a yield of 4.14% at September 30,
2004, versus 3.96% at September 30, 2003. The three-month Treasury bill's yield
was 1.71% at period-end, compared to .95% a year earlier.
The key during uncertain times is to remain focused on the big picture.
Investment success comes not from reacting to short-term volatility, but from
maintaining a long-term perspective and adhering to the disciplines of asset
allocation, diversification and rebalancing. We encourage you to work with your
financial advisor to ensure these time-tested techniques are incorporated into
your investment plan. We thank you for trusting Merrill Lynch Investment
Managers with your investment assets, and we look forward to serving you in the
months and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
As the Federal Reserve Board embarked on its "measured" tightening
program, we began to target shorter maturities on the yield curve and gradually
reduce the portfolio's average duration.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended September 30, 2004, WCMA Government Securities
Fund's Class 1, Class 2, Class 3 and Class 4 Shares paid shareholders net
annualized dividends of .04%, .30%, .63% and .63%, respectively. The Fund's
seven-day yields as of September 30, 2004, were .07% for Class 1, .69% for Class
2, 1.02% for Class 3 and 1.02% for Class 4.
The Fund's average portfolio maturity at September 30, 2004 was 47 days,
compared to 60 days at March 31, 2004.
We employed a barbell strategy throughout the period. That is, we emphasized the
very front end of the market (overnight and term financing) for liquidity and
looked to longer-dated securities for yield enhancement and price appreciation.
Our focus on yield enhancement and net asset appreciation initially encompassed
the one-year sector but was gradually moved to the six-month area of the yield
curve as the period progressed and higher interest rates appeared imminent. With
that being said, the Fund delivered above-average results relative to its peers.
This was a direct result of managing the portfolio's average life and
longer-dated holdings.
For the most part, the interest rate environment took its cue from the economy.
While economic growth had been favorable for some time, the labor market had
been stubbornly weak. With the consumer accounting for the majority of gross
domestic product (GDP), an improvement in employment would be essential to
sustainable above-trend economic growth. Until such time, the Federal Reserve
Board (the Fed) seemed apt to keep interest rates at their historic lows.
The employment picture began to show its first signs of revival at the start of
the period with the release of a surprisingly robust payroll report for the
month of March. Similarly strong jobs reports followed for the months of April
and May, and investors began to anticipate a Fed tightening.
On June 30, the Fed raised the target for the Federal Funds rate from 1% to
1.25%. The 25 basis point (.25%) hike was followed by two more in August and
September, bringing the target rate to 1.75% by period-end. Still, interest
rates remained near historic lows, and the Fed telegraphed its intention to
maintain a "measured" approach to interest rate increases.
As the period neared its end, the strength of the economic expansion came into
question. GDP, which grew at an annualized rate of 4.5% in the first quarter,
slowed to 3.3% in the second quarter. Nevertheless, business capital spending
and export activity expanded at a record pace. We expect this strength to
continue, which should lead to improved hiring in the months ahead. GDP is
estimated at approximately 4% for the third quarter.
Issuance of Treasury securities increased during the period, primarily due to
deficit spending and the mounting costs associated with the war in Iraq. Supply
continued to favor the longer end, thus creating a steeper yield curve past the
one-year sector. Notably, however, continued foreign interest in holding U.S.
assets meant that investors readily accepted the increased supply. Issuance of
Treasury bills had been more reserved, which allowed the front end of the yield
curve to remain relatively flat to financing levels.
How did you manage the portfolio during the period?
In general, we managed the portfolio in line with our view that sustainable
economic growth would eventually require interest rates to rise. Under these
circumstances, we adopted a more defensive posture.
The portfolio's average life was in the mid 60-day range early in the period
when the Fed appeared poised to hold interest rates at their historic lows. As
it became apparent that the Fed would increase interest rates at a measured
pace, we
4 WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004
decided to reduce the Fund's average life, ultimately taking it into the mid
40-day range.
While we continued to employ our barbelled approach throughout the period, we
believed the two-year sector would give up the most ground in a rising interest
rate environment. As a result, we trimmed our exposure in longer-dated
securities and focused primarily on increasing our liquidity profile, namely in
repurchase agreements and shorter-dated Treasury issues. We determined that the
six-month sector offered the best opportunity for yield enhancement and price
appreciation, and added securities in this area when they became available.
During the period, we noted the establishment of trading ranges -- that is, we
identified certain interest rate levels at which we held or reduced our longer
interest rate exposure. These ranges became dynamic over the course of the
period as we weighed the potential risks and rewards of our transactions.
How would you characterize the portfolio's position at the close of the period?
The portfolio's average maturity was conservative at period-end. While the
Federal Funds forward curve was projecting at least a 2% target rate by
year-end, we expected the Fed to raise interest rates gradually rather than race
to neutrality. Based on this view and the results of our internal analyses, we
ended the period with a focus on the six-month sector as the fulcrum of the
yield curve. This area offered the Fund attractive yields while allowing us the
flexibility to extend at higher levels as opportunities presented themselves.
The Trust's portfolio composition as a percent of net assets at the end of
September and as of our last report to shareholders is detailed below:
- --------------------------------------------------------------------------------
9/30/04 3/31/04
- --------------------------------------------------------------------------------
Repurchase Agreements .......................... 67.8% 73.0%
U.S. Government Obligations .................... 31.8 26.4
Other Assets Less Liabilities .................. 0.4 0.6
--------------------
Total .......................................... 100.0% 100.0%
====================
Looking ahead, if investors overreact by increasing market rates ahead of the
Fed, we will take the opportunity to reenter the market. Having said that, we
will maintain a high liquidity base given investor needs in a rising interest
rate environment. Finally, although we do not anticipate a dramatic change in
the level of Treasury issuance for the near term, we will take advantage of any
technical aberrations in the yield curve. As always, we continue to monitor the
economy and interest rates, and will remain ready to adjust our strategy as
market dynamics dictate.
John Ng
Vice President and Portfolio Manager
October 7, 2004
WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004 5
[LOGO] Merrill Lynch Investment Managers
Disclosure of Expenses
Shareholders of this Fund may incur the following charges: (a) expenses related
to transactions, including sales charges, redemption fees and exchange fees; and
(b) operating expenses, including advisory fees, distribution fees including
12(b)-1 fees, and other Fund expenses. The following example (which is based on
a hypothetical investment of $1,000 invested on April 1, 2004 and held through
September 30, 2004) is intended to assist shareholders both in calculating
expenses based on an investment in the Fund and in comparing these expenses with
similar costs of investing in other mutual funds.
The first table below provides information about actual account values and
actual expenses. In order to estimate the expenses a shareholder paid during the
period covered by this report, shareholders can divide their account value by
$1,000 and then multiply the result by the number in the first line under the
heading entitled "Expenses Paid During the Period."
The second table below provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses. In order to assist
shareholders in comparing the ongoing expenses of investing in this Fund and
other funds, compare the 5% hypothetical example with the 5% hypothetical
examples that appear in other funds' shareholder reports.
The expenses shown in the table are intended to highlight shareholders ongoing
costs only and do not reflect any transactional expenses, such as sales charges,
redemption fees, or exchange fees. Therefore, the second table is useful in
comparing ongoing expenses only, and will not help shareholders determine the
relative total expenses of owning different funds. If these transactional
expenses were included, shareholder expenses would have been higher.
Expenses Paid
Beginning Ending During the Period*
Account Value Account Value April 1, 2004 to
April 1, 2004 September 30, 2004 September 30, 2004
=====================================================================================================
Actual
=====================================================================================================
Class 1 $1,000 $1,000.20 $6.22
- -----------------------------------------------------------------------------------------------------
Class 2 $1,000 $1,001.50 $4.92
- -----------------------------------------------------------------------------------------------------
Class 3 $1,000 $1,003.10 $3.26
- -----------------------------------------------------------------------------------------------------
Class 4 $1,000 $1,003.10 $3.26
=====================================================================================================
Hypothetical (5% annual return before expenses)**
=====================================================================================================
Class 1 $1,000 $1,018.85 $6.28
- -----------------------------------------------------------------------------------------------------
Class 2 $1,000 $1,020.16 $4.96
- -----------------------------------------------------------------------------------------------------
Class 3 $1,000 $1,021.81 $3.29
- -----------------------------------------------------------------------------------------------------
Class 4 $1,000 $1,021.81 $3.29
- -----------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (1.24% for Class 1, .98% for Class 2, .65% for Class 3
and .65% for Class 4), multiplied by the average account value over the
period, multiplied by 183/365 (to reflect the one-half year period shown).
Because the Fund is a feeder fund, the expense table example reflects the
expenses of both the feeder fund and the master fund in which it invests.
** Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half year divided by 365.
6 WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004
Statement of Assets and Liabilities WCMA Government Securities Fund
As of September 30, 2004
=========================================================================================================================
Assets
- -------------------------------------------------------------------------------------------------------------------------
Investment in Master Government Securities Trust, at value
(identified cost--$460,427,199) .............................. $ 459,938,054
Prepaid expenses .............................................. 130,633
-------------
Total assets .................................................. 460,068,687
-------------
=========================================================================================================================
Liabilities
- -------------------------------------------------------------------------------------------------------------------------
Payables:
Distributor ................................................ $ 58,148
Administrator .............................................. 19,179
Other affiliates ........................................... 5,435 82,762
-------------
Accrued expenses .............................................. 59,438
-------------
Total liabilities ............................................. 142,200
-------------
=========================================================================================================================
Net Assets
- -------------------------------------------------------------------------------------------------------------------------
Net assets .................................................... $ 459,926,487
=============
=========================================================================================================================
Net Assets Consist of
- -------------------------------------------------------------------------------------------------------------------------
Class 1 Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized .................................. $ 2,279,184
Class 2 Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized .................................. 11,120,488
Class 3 Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized .................................. 18,706,439
Class 4 Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized .................................. 13,935,452
Paid-in capital in excess of par .............................. 414,374,069
Unrealized depreciation allocated from the Trust--net ......... (489,145)
-------------
Net Assets .................................................... $ 459,926,487
=============
=========================================================================================================================
Net Asset Value
- -------------------------------------------------------------------------------------------------------------------------
Class 1--Based on net assets of $22,772,413 and 22,791,840
shares of beneficial interest outstanding .................... $ 1.00
=============
Class 2--Based on net assets of $111,081,949 and 111,204,881
shares of beneficial interest outstanding .................... $ 1.00
=============
Class 3--Based on net assets of $186,845,118 and 187,064,390
shares of beneficial interest outstanding .................... $ 1.00
=============
Class 4--Based on net assets of $139,227,007 and 139,354,523
shares of beneficial interest outstanding .................... $ 1.00
=============
See Notes to Financial Statements.
WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004 7
[LOGO] Merrill Lynch Investment Managers
Statement of Operations WCMA Government Securities Fund
For the Six Months Ended September 30, 2004
=========================================================================================================================
Investment Income--Net
- -------------------------------------------------------------------------------------------------------------------------
Interest ...................................................... $ 5,309
Net investment income allocated from the Trust:
Interest (includes $146,489 from affiliates) and amortization
of premium and discount earned ............................ 3,166,244
Expenses ................................................... (603,362)
-------------
Total income and net investment income allocated from the Trust 2,568,191
-------------
=========================================================================================================================
Expenses
- -------------------------------------------------------------------------------------------------------------------------
Administration fees ........................................... $ 624,040
Account maintenance and distribution fees--Class 2 ............ 404,661
Account maintenance and distribution fees--Class 3 ............ 397,162
Account maintenance and distribution fees--Class 4 ............ 273,436
Registration fees ............................................. 209,238
Account maintenance and distribution fees--Class 1 ............ 99,215
Printing and shareholder reports .............................. 26,051
Professional fees ............................................. 15,971
Transfer agent fees--Class 3 .................................. 5,765
Transfer agent fees--Class 4 .................................. 3,954
Transfer agent fees--Class 2 .................................. 3,256
Transfer agent fees--Class 1 .................................. 535
Other ......................................................... 20,997
-------------
Total expenses before waiver and reimbursement ................ 2,084,281
Waiver and reimbursement of expenses .......................... (804,482)
-------------
Total expenses after waiver and reimbursement ................. 1,279,799
-------------
Investment income--net ........................................ 1,288,392
-------------
=========================================================================================================================
Realized & Unrealized Gain (Loss) Allocated from the Trust--Net
- -------------------------------------------------------------------------------------------------------------------------
Realized gain allocated from the Trust--net ................... 490
Change in unrealized depreciation allocated from the Trust--net (438,965)
-------------
Total realized and unrealized loss allocated from the Trust--net (438,475)
-------------
Net Increase in Net Assets Resulting from Operations .......... $ 849,917
=============
See Notes to Financial Statements.
8 WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004
Statements of Changes in Net Assets WCMA Government Securities Fund
For the Six For the
Months Ended Year Ended
September 30, March 31,
Increase (Decrease) in Net Assets: 2004 2004
=========================================================================================================================
Operations
- -------------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................ $ 1,288,392 $ 1,319,470
Realized gain allocated from the Trust--net ................... 490 17,972
Change in unrealized depreciation allocated from the Trust--net (438,965) (50,180)
-------------------------------
Net increase in net assets resulting from operations .......... 849,917 1,287,262
-------------------------------
=========================================================================================================================
Dividends & Distributions to Shareholders
- -------------------------------------------------------------------------------------------------------------------------
Investment income--net:
Class 1 .................................................... (3,811) (4,498)
Class 2 .................................................... (175,829) (130,640)
Class 3 .................................................... (650,582) (722,881)
Class 4 .................................................... (458,170) (461,453)
Realized gain allocated from the Trust--net:
Class 1 .................................................... (19) (658)
Class 2 .................................................... (116) (4,641)
Class 3 .................................................... (216) (8,056)
Class 4 .................................................... (139) (4,617)
-------------------------------
Net decrease in net assets resulting from dividends and
distributions to shareholders ................................ (1,288,882) (1,337,444)
-------------------------------
=========================================================================================================================
Beneficial Interest Transactions
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets derived from beneficial
interest transactions ........................................ (80,941,755) 541,257,315
-------------------------------
=========================================================================================================================
Net Assets
- -------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets ....................... (81,380,720) 541,207,133
Beginning of period ........................................... 541,307,207 100,074
-------------------------------
End of period ................................................. $ 459,926,487 $ 541,307,207
===============================
See Notes to Financial Statements.
WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004 9
[LOGO] Merrill Lynch Investment Managers
Financial Highlights WCMA Government Securities Fund
Class 1
-------------------------------------------
For the Period
The following per share data and ratios have been derived For the Six For the March 20,
from information provided in the financial statements. Months Ended Year Ended 2003+ to
September 30, March 31, March 31,
Increase (Decrease) in Net Asset Value: 2004 2004 2003
================================================================================================================================
Per Share Operating Performance
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00
-----------------------------------------
Investment income--net ...................................... .0002 .0004 .0003
Realized and unrealized gain (loss) allocated
from the Trust--net ........................................ (.0010) (.0002) .0002
-----------------------------------------
Total from investment operations ............................ (.0008) .0002 .0005
-----------------------------------------
Less dividends and distributions:
Investment income--net ................................... (.0002) (.0004) (.0003)
Realized gain allocated from the Trust--net .............. --++ (.0001) --
-----------------------------------------
Total dividends and distributions ........................... (.0002) (.0005) (.0003)
-----------------------------------------
Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00
=========================================
================================================================================================================================
Total Investment Return
- --------------------------------------------------------------------------------------------------------------------------------
Total investment return ..................................... .02%+++ .05% .05%
=========================================
================================================================================================================================
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver and reimbursement** ........... 1.24%* 1.09% .02%
=========================================
Total expenses** ............................................ 1.60%* 1.58% .02%
=========================================
Total investment income and realized gain
allocated from the Trust ................................... .04%* .04% .03%
=========================================
================================================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .................... $ 22,772 $ 22,260 $ 25
=========================================
* Annualized.
** Includes the Fund's share of the Trust's allocated expenses.
+ Effective date of the Fund's registration.
++ Amount is less than $(.0001) per share.
+++ Aggregate total investment return.
See Notes to Financial Statements.
10 WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004
Financial Highlights (continued) WCMA Government Securities Fund
Class 2
-------------------------------------------
For the Period
The following per share data and ratios have been derived For the Six For the March 20,
from information provided in the financial statements. Months Ended Year Ended 2003+ to
September 30, March 31, March 31,
Increase (Decrease) in Net Asset Value: 2004 2004 2003
================================================================================================================================
Per Share Operating Performance
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00
-----------------------------------------
Investment income--net ...................................... .0015 .0015 .0003
Realized and unrealized gain (loss) allocated
from the Trust--net ........................................ (.0011) (.0001) .0002
-----------------------------------------
Total from investment operations ............................ .0004 .0014 .0005
-----------------------------------------
Less dividends and distributions:
Investment income--net ................................... (.0015) (.0015) (.0003)
Realized gain allocated from the Trust--net .............. --++ (.0001) --
-----------------------------------------
Total dividends and distributions ........................... (.0015) (.0016) (.0003)
-----------------------------------------
Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00
=========================================
================================================================================================================================
Total Investment Return
- --------------------------------------------------------------------------------------------------------------------------------
Total investment return ..................................... .15%+++ .16% .05%
=========================================
================================================================================================================================
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver and reimbursement** ........... .98%* .97% .02%
=========================================
Total expenses** ............................................ 1.28%* 1.26% .02%
=========================================
Total investment income and realized gain
allocated from the Trust ................................... 29%* .15% .03%
=========================================
================================================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .................... $111,082 $137,566 $ 25
=========================================
* Annualized.
** Includes the Fund's share of the Trust's allocated expenses.
+ Effective date of the Fund's registration.
++ Amount is less than $(.0001) per share.
+++ Aggregate total investment return.
See Notes to Financial Statements.
WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004 11
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (continued) WCMA Government Securities Fund
Class 3
-------------------------------------------
For the Period
The following per share data and ratios have been derived For the Six For the March 20,
from information provided in the financial statements. Months Ended Year Ended 2003+ to
September 30, March 31, March 31,
Increase (Decrease) in Net Asset Value: 2004 2004 2003
================================================================================================================================
Per Share Operating Performance
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00
-----------------------------------------
Investment income--net ...................................... .0031 .0047 .0003
Realized and unrealized gain (loss) allocated
from the Trust--net ........................................ (.0011) (.0001) .0002
-----------------------------------------
Total from investment operations ............................ .0020 .0046 .0005
-----------------------------------------
Less dividends and distributions:
Investment income--net ................................... (.0031) (.0047) (.0003)
Realized gain allocated from the Trust--net .............. --++ (.0001) --
-----------------------------------------
Total dividends and distributions ........................... (.0031) (.0048) (.0003)
-----------------------------------------
Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00
=========================================
================================================================================================================================
Total Investment Return
- --------------------------------------------------------------------------------------------------------------------------------
Total investment return ..................................... .31%+++ .48% .05%
=========================================
================================================================================================================================
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver and reimbursement** ........... .65%* .65% .02%
=========================================
Total expenses** ............................................ .98%* .96% .02%
=========================================
Investment income and realized gain allocated
from the Trust ............................................. .61%* .48% .03%
=========================================
================================================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .................... $186,845 $224,278 $ 25
=========================================
* Annualized.
** Includes the Fund's share of the Trust's allocated expenses.
+ Effective date of the Fund's registration.
++ Amount is less than $(.0001) per share.
+++ Aggregate total investment return.
See Notes to Financial Statements.
12 WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004
Financial Highlights (concluded) WCMA Government Securities Fund
Class 4
----------------------------------------------
For the Period
The following per share data and ratios have been derived For the Six For the March 20,
from information provided in the financial statements. Months Ended Year Ended 2003+ to
September 30, March 31, March 31,
Increase (Decrease) in Net Asset Value: 2004 2004 2003
================================================================================================================================
Per Share Operating Performance
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00
-----------------------------------------
Investment income--net ...................................... .0031 .0047 .0003
Realized and unrealized gain allocated from
the Trust--net ............................................. (.0009) --++ .0002
-----------------------------------------
Total from investment operations ............................ .0022 .0047 .0005
-----------------------------------------
Less dividends and distributions:
Investment income--net ................................... (.0031) (.0047) (.0003)
Realized gain allocated from the Trust--net .............. --*** --*** --
-----------------------------------------
Total dividends and distributions ........................... (.0031) (.0047) (.0003)
-----------------------------------------
Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00
=========================================
================================================================================================================================
Total Investment Return
- --------------------------------------------------------------------------------------------------------------------------------
Total investment return ..................................... .31%+++ .47% .05%
=========================================
================================================================================================================================
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver and reimbursement** ........... .65%* .65% .02%
=========================================
Total expenses** ............................................ .98%* .96% .02%
=========================================
Investment income and realized gain allocated
from the Trust ............................................. .62%* .48% .03%
=========================================
================================================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .................... $139,227 $157,203 $ 25
=========================================
* Annualized.
** Includes the Fund's share of the Trust's allocated expenses.
*** Amount is less than $(.0001) per share.
+ Effective date of the Fund's registration.
++ Amount is less than $.0001 per share.
+++ Aggregate total investment return.
See Notes to Financial Statements.
WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004 13
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements WCMA Government Securities Fund
1. Significant Accounting Policies:
WCMA Government Securities Fund (the "Fund") is registered under the Investment
Company Act of 1940, as amended, 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 U.S. generally accepted accounting
principles, which may require the use of management accruals and estimates.
Actual results may differ from these estimates. These unaudited financial
statements reflect all adjustments, which are, in the opinion of management,
necessary to present a fair statement of the results for the interim period. All
such adjustments are of a normal, recurring nature. The percentage of the Trust
owned by the Fund at September 30, 2004 was 44.1%. The Fund is divided into four
classes, designated Class 1, Class 2, Class 3 and Class 4. Each Class 1, Class
2, Class 3 and Class 4 share represents interests in the same assets of the Fund
and have identical voting, dividend, liquidation and other rights and the same
terms and conditions, except that each class bears certain expenses related to
account maintenance and the distribution of such shares and the additional
incremental transfer agency costs resulting from the conversion of shares and
have exclusive voting with respect to matters relating to such account
maintenance and 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.
(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.
14 WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004
Notes to Financial Statements (continued) WCMA Government Securities 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 Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class 1 ................................. .25% .75%
Class 2 ................................. .25% .425%
Class 3 ................................. .25% .125%
Class 4 ................................. .25% .125%
- --------------------------------------------------------------------------------
The ongoing account maintenance fee compensates MLPF&S for providing account
maintenance services to shareholders. The ongoing distribution fee compensates
MLPF&S for providing shareholder and distribution related services to
shareholders. The Fund has entered into a contractual arrangement with FAM and
MLPF&S to waive and/or reimburse a portion of the Fund's fees and expenses to
ensure that the net expenses for the Fund's Class 2 Shares is 32 basis points
(.32%) higher than that of CMA Government Securities Fund, and Class 3 and Class
4 Shares is equal to that of CMA Government Securities Fund. The fee/expense
waiver or reimbursement includes account maintenance and distribution fees. This
arrangement has a one-year term and is renewable. The Distributor has
voluntarily agreed to waive a portion of its distribution fees in order to
ensure that each class of shareholders receive a positive yield on each daily
dividend. For the six months ended September 30, 2004, FAM and MLPF&S have
earned $624,040 and $1,174,474, respectively, of which $804,482 was waived
and/or reimbursed.
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. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial interest
transactions was $(80,941,755) for the six months ended September 30, 2004 and
$541,257,315 for the year ended March 31, 2004, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- -------------------------------------------------------------------------------
Class 1 Shares for the
Six Months Ended Dollar
September 30, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 88,368,719 $ 88,368,719
Shares issued to shareholders
in reinvestment of dividends
and distributions ................. 3,825 3,825
-----------------------------------
Total issued ......................... 88,372,544 88,372,544
Shares redeemed ...................... (87,844,489) (87,844,489)
-----------------------------------
Net increase ......................... 528,055 $ 528,055
===================================
- -------------------------------------------------------------------------------
Class 1 Shares for the Year Dollar
Ended March 31, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 129,156,599 $ 129,156,599
Shares issued to shareholders
in reinvestment of dividends
and distributions ................. 5,155 5,155
Shares issued in connection
with the bulk transfer of
WCMA shareholder assets ........... 24,197,893 24,197,893
-----------------------------------
Total issued ......................... 153,359,647 153,359,647
Shares redeemed ...................... (131,120,880) (131,120,880)
-----------------------------------
Net increase ......................... 22,238,767 $ 22,238,767
===================================
- -------------------------------------------------------------------------------
Class 2 Shares for the
Six Months Ended Dollar
September 30, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 305,648,668 $ 305,648,668
Shares issued to shareholders
in reinvestment of dividends
and distributions ................. 175,951 175,951
-----------------------------------
Total issued ......................... 305,824,619 305,824,619
Shares redeemed ...................... (332,203,229) (332,203,229)
-----------------------------------
Net decrease ......................... (26,378,610) $ (26,378,610)
===================================
- -------------------------------------------------------------------------------
Class 2 Shares for the Year Dollar
Ended March 31, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 451,353,350 $ 451,353,350
Shares issued to shareholders
in reinvestment of dividends
and distributions ................. 135,249 135,249
Shares issued in connection
with the bulk transfer of
WCMA shareholder assets ........... 153,348,889 153,348,889
-----------------------------------
Total issued ......................... 604,837,488 604,837,488
Shares redeemed ...................... (467,279,015) (467,279,015)
-----------------------------------
Net increase ......................... 137,558,473 $ 137,558,473
===================================
WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004 15
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (concluded) WCMA Government Securities Fund
- -------------------------------------------------------------------------------
Class 3 Shares for the
Six Months Ended Dollar
September 30, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 607,857,230 $ 607,857,230
Shares issued to shareholders
in reinvestment of dividends
and distributions ................. 650,798 650,798
-----------------------------------
Total issued ......................... 608,508,028 608,508,028
Shares redeemed ...................... (645,747,125) (645,747,125)
-----------------------------------
Net decrease ......................... (37,239,097) $ (37,239,097)
===================================
- -------------------------------------------------------------------------------
Class 3 Shares for the Year Dollar
Ended March 31, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 1,097,426,217 $ 1,097,426,217
Shares issued to shareholders in
reinvestment of dividends
and distributions ................. 730,937 730,937
Shares issued in connection
with the bulk transfer of
WCMA shareholder assets ........... 232,545,615 232,545,615
-----------------------------------
Total issued ......................... 1,330,702,769 1,330,702,769
Shares redeemed ...................... (1,106,424,301) (1,106,424,301)
-----------------------------------
Net increase ......................... 224,278,468 $ 224,278,468
===================================
- -------------------------------------------------------------------------------
Class 4 Shares for the
Six Months Ended Dollar
September 30, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 482,604,954 $ 482,604,954
Shares issued to shareholders
in reinvestment of dividends
and distributions ................. 458,309 458,309
-----------------------------------
Total issued ......................... 483,063,263 483,063,263
Shares redeemed ...................... (500,915,366) (500,915,366)
-----------------------------------
Net decrease ......................... (17,852,103) $ (17,852,103)
===================================
- -------------------------------------------------------------------------------
Class 4 Shares for the Year Dollar
Ended March 31, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 842,090,508 $ 842,090,508
Shares issued to shareholders
in reinvestment of dividends
and distributions ................. 466,070 466,070
Shares issued in connection
with the bulk transfer of
WCMA shareholder assets ........... 168,910,427 168,910,427
-----------------------------------
Total issued ......................... 1,011,467,005 1,011,467,005
Shares redeemed ...................... (854,285,398) (854,285,398)
-----------------------------------
Net increase ......................... 157,181,607 $ 157,181,607
===================================
16 WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004
Schedule of Investments Master Government Securities Trust (in Thousands)
Face Interest Maturity
Issue Amount Rate Date Value
======================================================================================================
U.S. Government Obligations* -- 31.8%
======================================================================================================
U.S. Treasury Bills $27,770 1.36 % 11/26/2004 $ 27,703
22,000 1.73 2/03/2005 21,862
22,000 1.732 2/17/2005 21,842
26,000 1.765 2/24/2005 25,800
23,750 1.852 3/10/2005 23,543
21,200 1.945- 3/31/2005 20,988
1.951
- ------------------------------------------------------------------------------------------------------
U.S. Treasury Notes 5,200 2.125 10/31/2004 5,203
34,300 2.00 11/30/2004 34,319
49,400 1.75 12/31/2004 49,396
27,630 1.625 1/31/2005 27,611
18,400 1.50 2/28/2005 18,370
30,550 1.625 3/31/2005 30,496
15,700 1.25 5/31/2005 15,619
5,350 1.125 6/30/2005 5,312
2,500 1.625 9/30/2005 2,486
1,045 1.50 3/31/2006 1,031
- ------------------------------------------------------------------------------------------------------
Total U.S. Government Obligations
(Cost--$331,953) ................................................................ 331,581
- ------------------------------------------------------------------------------------------------------
Face
Amount Issue
======================================================================================================
Repurchase Agreements -- 67.8%
======================================================================================================
$51,000 ABN AMRO Inc., purchased on 9/28/2004 to
yield 1.70% to 10/05/2004, repurchase price
$51,002, collateralized by U.S. Treasury Bills,
0% due 10/14/2004 to 2/17/2005 ................................ 51,000
- ------------------------------------------------------------------------------------------------------
51,000 Banc of America Securities LLC, purchased
on 9/30/2004 to yield 1.76% to 10/07/2004,
repurchase price $51,002, collateralized
by GNMA, 5% to 7% due 4/15/2018
to 9/15/2034 .................................................. 51,000
- ------------------------------------------------------------------------------------------------------
21,000 Barclays Capital Inc., purchased on 9/30/2004
to yield 1.77% to 10/01/2004, repurchase price
$21,001, collateralized by U.S. Treasury Bill, 0%
due 12/30/2004 ................................................ 21,000
- ------------------------------------------------------------------------------------------------------
52,000 Citigroup Global Markets Inc., purchased
on 9/29/2004 to yield 1.74% to 10/06/2004,
repurchase price $52,003, collateralized by
GNMA, 5.50% due 2/15/2034 ..................................... 52,000
- ------------------------------------------------------------------------------------------------------
51,000 Countrywide Securities Corp., purchased
on 9/28/2004 to yield 1.75% to
10/05/2004, repurchase price $51,002,
collateralized by GNMA, 5.50%
due 7/15/2033 ................................................. 51,000
- ------------------------------------------------------------------------------------------------------
51,000 Credit Suisse First Boston LLC, purchased on
9/28/2004 to yield 1.75% to 10/05/2004,
repurchase price $51,002, collateralized
by U.S. Treasury Notes, 6.50% to 8.125%
due 5/15/2005 to 2/15/2023 .................................... 51,000
- ------------------------------------------------------------------------------------------------------
51,000 Deutsche Bank Securities Inc., purchased
on 9/28/2004 to yield 1.71% to 10/05/2004,
repurchase price $51,002, collateralized by
GNMA, 6% due 8/20/2034 ........................................ 51,000
- ------------------------------------------------------------------------------------------------------
50,000 Goldman Sachs & Company, purchased on
9/24/2004 to yield 1.74% to 10/22/2004,
repurchase price $50,002, collateralized
by GNMA, 4.50% to 5.50% due 4/15/2033
to 7/20/2034 .................................................. 50,000
- ------------------------------------------------------------------------------------------------------
52,000 Greenwich Capital Markets, Inc., purchased
on 9/29/2004 to yield 1.74% to 10/06/2004,
repurchase price $52,003, collateralized
by GNMA, 4.50% to 7.50% due 9/15/2005
to 9/20/2034 .................................................. 52,000
- ------------------------------------------------------------------------------------------------------
19,188 HSBC Securities (USA) Inc., purchased on
9/30/2004 to yield 1.77% to 10/01/2004,
repurchase price $19,189, collateralized by
U.S. Treasury Strips, 0% due 5/15/2006 to
8/15/2030 and U.S. Treasury Strips Principal
Only, 6.125% to 6.50% due 10/15/2006
to 8/15/2007 .................................................. 19,188
- ------------------------------------------------------------------------------------------------------
52,000 J.P. Morgan Securities Inc., purchased on
9/29/2004 to yield 1.74% to 10/06/2004,
repurchase price $52,003, collateralized
by GNMA, 5% to 7.50% due 9/15/2029
to 9/20/2034 .................................................. 52,000
- ------------------------------------------------------------------------------------------------------
51,000 Lehman Brothers Inc., purchased on 9/30/2004
to yield 1.76% to 10/07/2004, repurchase price
$51,002, collateralized by GNMA, 2.875% to
14% due 2/15/2006 to 9/20/2034 ................................ 51,000
- ------------------------------------------------------------------------------------------------------
WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004 17
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (concluded)
Master Government Securities Trust (in Thousands)
Face
Amount Issue Value
======================================================================================================
Repurchase Agreements (continued)
======================================================================================================
$51,000 Merrill Lynch Government Securities, Inc.,
purchased on 9/30/2004 to yield
1.76% to 10/07/2004, repurchase price
$51,002, collateralized by GNMA,
3.375% to 6.50% due 9/15/2008
to 12/15/2046 (a) ............................................. $ 51,000
- ------------------------------------------------------------------------------------------------------
52,000 Morgan Stanley & Co., Inc., purchased
on 9/29/2004 to yield 1.73% to
10/06/2004, repurchase price $52,002,
collateralized by GNMA, 5.50% to 6.50%
due 9/15/2031 to 3/15/2034 .................................... 52,000
- ------------------------------------------------------------------------------------------------------
51,000 UBS Warburg LLC, purchased on 9/30/2004
to yield 1.76% to 10/07/2004, repurchase
price $51,002, collateralized by GNMA,
3.50% to 11.50% due 4/15/2009
to 7/15/2033 .................................................. 51,000
- ------------------------------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost--$706,188) ................................................................ 706,188
- ------------------------------------------------------------------------------------------------------
Total Investments
(Cost--$1,038,141**)--99.6% ..................................................... 1,037,769
Other Assets Less Liabilities--0.4% ............................................. 4,518
----------
Net Assets--100.0% .............................................................. $1,042,287
==========
* U.S. Treasury Bills are traded on a discount basis; the interest rates
shown are the range of 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.
** The cost and unrealized appreciation/depreciation of investments as of
September 30, 2004, as computed for federal income tax purposes, were as
follows:
(in Thousands)
-------------------------------------------------------------------------
Aggregate cost ........................................ $1,038,141
==========
Gross unrealized appreciation ......................... $ 2
Gross unrealized depreciation ......................... (374)
----------
Net unrealized depreciation ........................... $ (372)
==========
(a) Investments in companies considered to be an affiliate of the Trust (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) were as follows:
(in Thousands)
--------------------------------------------------------------------------
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Government Securities, Inc. $(7,000) $332
--------------------------------------------------------------------------
See Notes to Financial Statements.
18 WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004
Statement of Assets and Liabilities Master Government Securities Trust
As of September 30, 2004
=================================================================================================================================
Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (identified
cost--$987,140,747) .............................................. $ 986,768,665
Investments in affiliated securities, at value (identified
cost--$51,000,000) ............................................... 51,000,000
Cash .............................................................. 6,961
Receivables:
Contributions .................................................. $ 3,856,951
Interest ....................................................... 711,708 4,568,659
---------------
Prepaid expenses .................................................. 8,117
---------------
Total assets ...................................................... 1,042,352,402
---------------
=================================================================================================================================
Liabilities
- ---------------------------------------------------------------------------------------------------------------------------------
Payable to investment adviser ..................................... 36,129
Other affiliates .................................................. 11,933 48,062
---------------
Accrued expenses .................................................. 17,630
---------------
Total liabilities ................................................. 65,692
---------------
=================================================================================================================================
Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets ........................................................ $ 1,042,286,710
===============
=================================================================================================================================
Net Assets Consist of
- ---------------------------------------------------------------------------------------------------------------------------------
Investors' capital ................................................ $ 1,042,658,792
Unrealized depreciation--net ...................................... (372,082)
---------------
Net Assets ........................................................ $ 1,042,286,710
===============
See Notes to Financial Statements.
WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004 19
[LOGO] Merrill Lynch Investment Managers
Statement of Operations Master Government Securities Trust
For the Six Months Ended September 30, 2004
=================================================================================================================================
Investment Income
- ---------------------------------------------------------------------------------------------------------------------------------
Interest (includes $332,174 from affiliates) and amortization of
premium and discount earned ...................................... $ 7,139,485
=================================================================================================================================
Expenses
- ---------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees .......................................... $ 1,142,843
Accounting services ............................................... 129,500
Custodian fees .................................................... 31,939
Professional fees ................................................. 23,083
Trustees' fees and expenses ....................................... 19,631
Pricing fees ...................................................... 2,223
Printing and shareholder reports .................................. 1,521
Other ............................................................. 10,730
---------------
Total expenses .................................................... 1,361,470
---------------
Investment income--net ............................................ 5,778,015
---------------
=================================================================================================================================
Realized & Unrealized Gain (Loss)--Net
- ---------------------------------------------------------------------------------------------------------------------------------
Realized gain on investments--net ................................. 1,099
Change in unrealized appreciation/depreciation on investments--net (995,972)
---------------
Total realized and unrealized loss--net ........................... (994,873)
---------------
Net Increase in Net Assets Resulting from Operations .............. $ 4,783,142
===============
See Notes to Financial Statements.
20 WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004
Statements of Changes in Net Assets Master Government Securities Trust
For the Six For the
Months Ended Year Ended
September 30, March 31,
Increase (Decrease) in Net Assets: 2004 2004
=================================================================================================================================
Operations
- ---------------------------------------------------------------------------------------------------------------------------------
Investment income--net ............................................ $ 5,778,015 $ 12,937,728
Realized gain--net ................................................ 1,099 75,879
Change in unrealized appreciation/depreciation--net ............... (995,972) (459,784)
-----------------------------------
Net increase in net assets resulting from operations .............. 4,783,142 12,553,823
-----------------------------------
=================================================================================================================================
Capital Transactions
- ---------------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions ....................................... 2,341,336,101 5,445,099,631
Fair value of withdrawals ......................................... (2,498,070,751) (5,848,609,190)
-----------------------------------
Net decrease in net assets derived from capital transactions ...... (156,734,650) (403,509,559)
-----------------------------------
=================================================================================================================================
Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Total decrease in net assets ...................................... (151,951,508) (390,955,736)
Beginning of period ............................................... 1,194,238,218 1,585,193,954
-----------------------------------
End of period ..................................................... $ 1,042,286,710 $ 1,194,238,218
===================================
See Notes to Financial Statements.
Financial Highlights Master Government Securities Trust
For the Six For the For the Period
Months Ended Year Ended February 13, 2003+
The following ratios have been derived from September 30, March 31, to March 31,
information provided in the financial statements. 2004 2004 2003
=========================================================================================================================
Total Investment Return
- -------------------------------------------------------------------------------------------------------------------------
Total investment return ................ .52%++ .94% .75%*
======================================================
=========================================================================================================================
Ratios to Average Net Assets
- -------------------------------------------------------------------------------------------------------------------------
Expenses ............................... .24%* .22% .26%*
======================================================
Investment income and realized gain--net 1.03%* .94% 1.08%*
======================================================
=========================================================================================================================
Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,042,287 $ 1,194,238 $ 1,585,194
======================================================
* Annualized.
+ Commencement of operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004 21
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements Master Government Securities Trust
1. Significant Accounting Policies:
Master Government Securities Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, and is organized as a Delaware
statutory trust. The Declaration of Trust permits the Trustees to issue
nontransferable interest in the Trust, subject to certain limitations. The
Trust's financial statements are prepared in conformity with U.S. generally
accepted accounting principles, which may require the use of management accruals
and estimates. Actual results may differ from these estimates. These unaudited
financial statements reflect all adjustments, which are, in the opinion of
management, necessary to present a fair statement of the results for the interim
period. All such adjustments are of a normal, recurring nature. 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 and assets for which market quotations are not
available are valued at fair value as determined in good faith by or under the
direction of the Trust's Board of Trustees.
(b) Repurchase agreements -- The Trust may invest 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. 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.
(e) Securities lending -- The Trust may lend securities to financial
institutions that provide cash or securities issued or guaranteed by the U.S.
government as collateral, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities. The
market value of the loaned securities is determined at the close of business of
the Trust and any additional required collateral is delivered to the Trust on
the next business day. Where the Trust receives securities as collateral for the
loaned securities, it collects a fee from the borrower. The Trust typically
receives the income on the loaned securities but does not receive the income on
the collateral. Where the Trust receives cash collateral, it may invest such
collateral and retain the amount earned on such investment, net of any amount
rebated to the borrower. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities within five
business days. The Trust may pay reasonable finder's, lending agent,
administrative and custodial fees in connection with its loans. In the event
that the borrower defaults on its obligation to return borrowed securities
because of insolvency or for any other reason, the Trust could experience delays
and costs in gaining access to the collateral. The Trust also could suffer a
loss where the value of the collateral falls below the market value of the
borrowed securities, in the event of borrower default or in the event of losses
on investments made with cash collateral.
22 WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004
Notes to Financial Statements (concluded) Master Government Securities Trust
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.
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.
The Trust has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), or its affiliates. Pursuant to that
order, the Trust also has retained Merrill Lynch Investment Managers, LLC
("MLIM, LLC"), an affiliate of FAM, as the securities lending agent for a fee
based on a share of the returns on investment of cash collateral. MLIM, LLC may,
on behalf of the Trust, invest cash collateral received by the Trust for such
loans, among other things, in a private investment company managed by MLIM, LLC
or in registered money market funds advised by FAM or its affiliates.
For the six months ended September 30, 2004, the Trust reimbursed FAM $12,379
for certain accounting services.
Certain officers and/or trustees of the Trust are officers and/or directors of
FAM, PSI, and/or ML & Co.
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site http://www.icsdelivery.com/live and follow the instructions. When you visit
this site, you will obtain a personal identification number (PIN). You will need
this PIN should you wish to update your e-mail address, choose to discontinue
this service and/or make any other changes to the service. This service is not
available for certain retirement accounts at this time.
WCMA GOVERNMENT SECURITIES FUND SEPTEMBER 30, 2004 23
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
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.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
at www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
WCMA Government Securities Fund
Box 9011
Princeton, NJ
08543-9011
#WCMAGS -- 9/04
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual
report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 9 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 10 - Controls and Procedures
10(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others particularly
during the period in which this report is being prepared. The
registrant's certifying officers have determined that the registrant's
disclosure controls and procedures are effective based on our evaluation
of these controls and procedures as of a date within 90 days prior to
the filing date of this report.
10(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the last fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 11 - Exhibits attached hereto
11(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
11(a)(2) - Certifications - Attached hereto
11(a)(3) - Not Applicable
11(b) - Certifications - 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 and Master Government Securities Trust
By: /s/ Terry K. Glenn
------------------------------
Terry K. Glenn,
President of
WCMA Government Securities Fund and Master Government Securities
Trust
Date: November 19, 2004
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 and Master Government Securities
Trust
Date: November 19, 2004
By: /s/ Donald C. Burke
------------------------------
Donald C. Burke,
Chief Financial Officer of
WCMA Government Securities Fund and Master Government Securities
Trust
Date: November 19, 2004