-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, We/XjoqwsxpDRzwk9iDJEa+lBMtFGyd6RI5xSHdDldz8hqqRFEjdk00iw1dmm1un 5elBRVPXGptIBs+8966aIg== 0001193805-04-000864.txt : 20040603 0001193805-04-000864.hdr.sgml : 20040603 20040603083516 ACCESSION NUMBER: 0001193805-04-000864 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040603 EFFECTIVENESS DATE: 20040603 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WCMA GOVERNMENT SECURITIES FUND CENTRAL INDEX KEY: 0001186233 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-21197 FILM NUMBER: 04845815 MAIL ADDRESS: STREET 1: 800 SCUDDERS MILL RD CITY: PLAINSBORO STATE: NJ ZIP: 08536 N-CSR 1 e400516_ncsr-wcmagovsec.txt ANNUAL REPORT 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 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: 04/01/03 - 03/31/04 Item 1 - Report to Stockholders [LOGO] Merrill Lynch Investment Managers www.mlim.ml.com WCMA Government Securities Fund Annual Report March 31, 2004 [LOGO] Merrill Lynch Investment Managers WCMA Government Securities Fund Important Tax Information (unaudited) Of the ordinary income distributions paid by WCMA Government Securities Fund during the taxable year ended March 31, 2004, 34.99% was attributable to Federal obligations. In calculating the foregoing percentage, Fund expenses have been allocated on a pro rata basis. The law varies in each state as to whether and what percentage of dividend income attributable to Federal obligations is exempt from state income tax. We recommend that you consult your tax adviser to determine if any portion of the dividends you received is exempt from state income taxes. Please retain this information for your records. 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 website 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. 2 WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 A Letter From the President Dear Shareholder Index returns during the most recent six-month and 12-month reporting periods indicate that fixed income markets -- both taxable and tax-exempt -- continued to reward those investors who were willing to accept greater risk. The high yield market, as measured by the Credit Suisse First Boston High Yield Index, provided a six-month return of +8.65% and a 12-month return of +22.86% as of March 31, 2004. By comparison, the Lehman Brothers Aggregate Bond Index returned +2.98% and +5.40% and the Lehman Brothers Municipal Bond Index returned +3.12% and +5.86% for the six-month and 12-month periods ended March 31, 2004, respectively. As of March month-end, the Federal Reserve Board maintained its accommodative policy stance, pledging "patience" in raising rates. As a result, short-term interest rates remained at historic lows and kept the short end of the yield curve relatively flat, making it increasingly difficult to find attractive income opportunities. Market watchers continue to monitor the economic data and Federal Reserve Board language for indications of interest rate direction. Having said that, if the economy continues to grow at its recent pace, many believe it is just a matter of time before rates move upward. Equity markets, in the meantime, continued to provide attractive returns. For the six-month and 12-month periods ended March 31, 2004, the Standard & Poor's 500 Index returned +14.08% and +35.12%, respectively. Much of the boost came from improving economic conditions throughout the past year. Significant fiscal and monetary stimulus, including the low interest rates and tax cuts, has opened the door to consumer spending, capital spending, increases in exports and long-awaited job growth. As expected, these positive developments have led the way to improvements in corporate earnings -- a positive for stock markets. The events and efforts of the past year leave us with a much stronger economy today. With all of this in mind, we believe it is time for investors to consider what can go right in 2004. We encourage you to revisit your portfolio and your asset allocation strategy to ensure you are well positioned to take advantage of the opportunities that lie ahead. Your financial advisor can help you develop a strategy designed to perform through all types of market and economic cycles. 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 MARCH 31, 2004 3 [LOGO] Merrill Lynch Investment Managers A Discussion With Your Fund's Portfolio Manager With interest rates at historical lows, our strategy was to remain liquid in the front end of the money market yield curve while reaping the benefits of higher interest rates on the longer end. How did the Fund perform during the fiscal year in light of the existing market conditions? For the year ended March 31, 2004, WCMA Government Securities Fund's Class 1, Class 2, Class 3 and Class 4 Shares paid shareholders net annualized dividends of .05%, .16%, .48% and .47%, respectively.* The Fund's seven-day yields as of March 31, 2004 were .04% for Class 1 Shares, .16% for Class 2 Shares, .48% for Class 3 Shares and .48% for Class 4 Shares. The Fund's average portfolio maturity at March 31, 2004 was 60 days, compared to 64 days at September 30, 2003. As the Fund's fiscal year began, the U.S. economy was relatively weak, having registered a dismal 1.4% rate of gross domestic product growth in the first quarter of 2003. The Federal Reserve Board, in order to prevent any further deterioration in economic conditions, was bound to maintain its accommodative monetary policy -- and investors began to price in further interest rate cuts. The result was a flattening of the front end of the yield curve. As the period progressed, economic conditions improved, consumer confidence strengthened and equity markets rallied. May 2003 brought the passage of a Federal tax-cut plan. In June, the Federal Reserve Board, focused on preventing deflation, dropped the Federal Funds rate to 1%, its lowest level in 45 years. On the heels of the fiscal and monetary stimulus, the economy grew at an astounding annualized rate of 8.2% in the third quarter of 2003 and 4.1% in the fourth quarter. A similar rate of growth is expected in the first quarter of 2004. Despite the generally positive economic news, it was clear that an improvement in employment would be essential to sustain above-trend economic growth. Although interest rates experienced significant volatility over the past 12 months, yields at period end were only modestly higher than March 2003 levels. Specifically, the yield on the two-year Treasury note opened the year at 1.49% and closed at 1.59%, but traded at extreme levels of 1.09% and 2.10% throughout the year. Trading ranges, especially in these longer-term securities, became dynamic over the course of the year, which weighed on the potential risks and rewards of our transactions. On the issuance front, Treasury 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. In the front end, the Treasury was prudent in its issuance of bills, which held the front end of the yield curve relatively flat to financing levels. With that being said, the Fund delivered highly competitive results relative to its peers. This was a direct result of managing the portfolio's average life and longer-dated holdings. How did you manage the portfolio during the period? In general, we managed the portfolio in line with our view that sustainable economic growth will eventually require interest rates to rise. With interest rates so low for such a long period of time, the natural tendency is for interest rates to increase, thus moderating the pace of economic growth and inflation. When interest rates do eventually rise, we believe they could climb faster than most anticipate. Under these circumstances, we adopted a defensive posture in managing the portfolio, monitoring economic data, employment statistics and Federal Reserve Board language for cues of interest rate movement. * Based on a constant investment throughout the period, with dividends compounded daily, and reflecting a net return to the investor after all expenses. 4 WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 The portfolio's average life throughout the period was a good indicator of how we perceived the market. Our lowest average life occurred in late May through early June when the spread between three-month Treasury bills and two-year Treasury notes narrowed to 18 basis points (.18%). As interest rates rose in August and the curve grew steeper, we extended the portfolio's average life to the 70-day range by adding 13-month - 14-month notes. By the end of September, the yield curve began to flatten and we reduced the portfolio's average life to 64 days. Later in 2003, as employment figures continually failed to meet expectations, we became convinced that any Federal Reserve Board move toward higher interest rates would be delayed well into 2004. As a result, we once again were content to increase the average portfolio maturity into the 70-day area, until January. By period end, we had reduced the portfolio's average life to 60 days given the strong prospects for an improved economic environment and the potential for gains in employment and inflation. In addition, with two-year Treasury rates yielding 1.5%, there had been little incentive to extend our maturity. How would you characterize the portfolio's position at the close of the period? We believe the portfolio is well positioned going forward. Our high liquidity base offers us opportunities to become more involved if interest rates increase, while currently enjoying yields higher than offered by the front end of the Treasury curve. The majority of our interest rate exposure is in the 12-month - 15-month sector. This area has been the fulcrum of the yield curve, which has allowed us to "roll down" the yield curve and extend at higher levels as opportunities present themselves. We will continue to look for trading opportunities in the 18-month - 24-month sector when interest rates rise. Such a scenario occurred shortly after the close of the period, when the U.S. Department of Labor released better-than-expected employment data. The news prompted two-year Treasury yields to rise from 1.63% to 1.92%. In general, we will continue to evaluate the longer end of the yield curve for opportunities to add additional yield, but intend to remain selective as we monitor economic conditions and the results of the Federal Reserve Board's upcoming meetings. John Ng Vice President and Portfolio Manager April 15, 2004 WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 5 [LOGO] Merrill Lynch Investment Managers Statement of Assets and Liabilities WCMA Government Securities Fund As of March 31, 2004 ============================================================================================================== Assets - -------------------------------------------------------------------------------------------------------------- Investment in Master Government Securities Trust, at value (identified cost--$541,378,807) ........................ $ 541,328,627 Prepaid expenses ......................................... 130,633 ------------- Total assets ............................................. 541,459,260 ------------- ============================================================================================================== Liabilities - -------------------------------------------------------------------------------------------------------------- Payables: Distributor ........................................... $ 26,285 Administrator ......................................... 17,944 Other affiliates ...................................... 3,690 47,919 -------- Accrued expenses ......................................... 104,134 ------------- Total liabilities ........................................ 152,053 ------------- ============================================================================================================== Net Assets - -------------------------------------------------------------------------------------------------------------- Net assets ............................................... $ 541,307,207 ============= ============================================================================================================== Net Assets Consist of - -------------------------------------------------------------------------------------------------------------- Class 1 Shares of beneficial interest, $.10 par value, unlimited number of shares authorized .................. $ 2,226,379 Class 2 Shares of beneficial interest, $.10 par value, unlimited number of shares authorized .................. 13,758,349 Class 3 Shares of beneficial interest, $.10 par value, unlimited number of shares authorized .................. 22,430,349 Class 4 Shares of beneficial interest, $.10 par value, unlimited number of shares authorized .................. 15,720,663 Paid-in capital in excess of par ......................... 487,221,647 Unrealized depreciation on investments--net .............. (50,180) ------------- Net Assets ............................................... $ 541,307,207 ============= ============================================================================================================== Net Asset Value - -------------------------------------------------------------------------------------------------------------- Class 1--Based on net assets of $22,260,353 and 22,263,785 shares outstanding .......................... $ 1.00 ============= Class 2--Based on net assets of $137,565,886 and 137,583,491 shares outstanding ......................... $ 1.00 ============= Class 3--Based on net assets of $224,277,728 and 224,303,487 shares outstanding ......................... $ 1.00 ============= Class 4--Based on net assets of $157,203,240 and 157,206,626 shares outstanding ......................... $ 1.00 =============
See Notes to Financial Statements. 6 WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 Statement of Operations WCMA Government Securities Fund For the Year Ended March 31, 2004 ====================================================================================================================== Investment Income--Net - ---------------------------------------------------------------------------------------------------------------------- Interest ....................................................... $ 3,487 Net investment income allocated from the Trust: Interest and amortization of premium and discount earned (includes $177,708 from affiliates) ................ 3,943,237 Expenses .................................................... (807,294) ----------- Total income and net investment income allocated from the Trust 3,139,430 ----------- ====================================================================================================================== Expenses - ---------------------------------------------------------------------------------------------------------------------- Administration fees ............................................ $ 879,472 Account maintenance and distribution fees--Class 2 ............. 592,607 Account maintenance and distribution fees--Class 3 ............. 570,422 Account maintenance and distribution fees--Class 4 ............. 360,770 Registration fees .............................................. 227,472 Account maintenance and distribution fees--Class 1 ............. 125,016 Offering costs ................................................. 71,933 Professional fees .............................................. 30,298 Printing and shareholder reports ............................... 26,792 Transfer agent fees--Class 3 ................................... 6,781 Transfer agent fees--Class 4 ................................... 4,435 Transfer agent fees--Class 2 ................................... 3,880 Transfer agent fees--Class 1 ................................... 557 Other .......................................................... 9,368 ----------- Total expenses before waiver and reimbursement ................. 2,909,803 Waiver and reimbursement of expenses ........................... (1,089,843) ----------- Total expenses after waiver and reimbursement .................. 1,819,960 ----------- Investment income--net ......................................... 1,319,470 ----------- ====================================================================================================================== Realized & Unrealized Gain (Loss) on Investments Allocated from the Trust--Net - ---------------------------------------------------------------------------------------------------------------------- Realized gain on investments allocated from the Trust--net ..... 17,972 Change in unrealized depreciation on investments allocated from the Trust--net .......................................... (50,180) ----------- Total realized and unrealized loss allocated from the Trust--net (32,208) ----------- Net Increase in Net Assets Resulting from Operations ........... $ 1,287,262 ===========
See Notes to Financial Statements. WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 7 [LOGO] Merrill Lynch Investment Managers Statements of Changes in Net Assets WCMA Government Securities Fund
For the For the Period Year Ended March 3, 2003+ March 31, to March 31, Increase (Decrease) in Net Assets: 2004 2003 ===================================================================================================================== Operations - --------------------------------------------------------------------------------------------------------------------- Investment income--net .................................... $ 1,319,470 $ 74 Realized gain on investments allocated from the Trust--net 17,972 -- Change in unrealized depreciation on investments allocated from the Trust--net ..................................... (50,180) -- ------------------------------- Net increase in net assets resulting from operations ...... 1,287,262 74 ------------------------------- ===================================================================================================================== Dividends & Distributions to Shareholders - --------------------------------------------------------------------------------------------------------------------- Investment income--net: Class 1 ................................................ (4,498) (18) Class 2 ................................................ (130,640) (18) Class 3 ................................................ (722,881) (19) Class 4 ................................................ (461,453) (19) Realized gain on investments allocated from the Trust--net: Class 1 ................................................ (658) -- Class 2 ................................................ (4,641) -- Class 3 ................................................ (8,056) -- Class 4 ................................................ (4,617) -- ------------------------------- Net decrease in net assets resulting from dividends and distributions to shareholders ........................... (1,337,444) (74) ------------------------------- ===================================================================================================================== Beneficial Interest Transactions - --------------------------------------------------------------------------------------------------------------------- Net increase in net assets derived from beneficial interest transactions ............................................ 541,257,315 74 ------------------------------- ===================================================================================================================== Net Assets - --------------------------------------------------------------------------------------------------------------------- Total increase in net assets .............................. 541,207,133 74 Beginning of period ....................................... 100,074 100,000 ------------------------------- End of period ............................................. $ 541,307,207 $ 100,074 ===============================
+ Commencement of operations. See Notes to Financial Statements. 8 WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 Financial Highlights WCMA Government Securities Fund
Class 1 Class 2 -------------------------------------------------------------- For the For the For the Period For the Period The following per share data and ratios have been derived Year March 20, Year March 20, from information provided in the financial statements. Ended 2003+ to Ended 2003+ to March 31, March 31, March 31, March 31, Increase (Decrease) in Net Asset Value: 2004 2003 2004 2003 =================================================================================================================================== Per Share Operating Performance - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------------------------------------------------------------- Investment income--net .................... .0004 .0003 .0015 .0003 Realized and unrealized gain (loss) on investments allocated from the Trust--net (.0002) .0002 (.0001) .0002 -------------------------------------------------------------- Total from investment operations .......... .0002 .0005 .0014 .0005 -------------------------------------------------------------- Less dividends and distributions: Investment income--net ................. (.0004) (.0003) (.0015) (.0003) Realized gain on investments allocated from the Trust--net .................. (.0001) -- (.0001) -- -------------------------------------------------------------- Total dividends and distributions ......... (.0005) (.0003) (.0016) (.0003) -------------------------------------------------------------- Net asset value, end of period ............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============================================================== =================================================================================================================================== Total Investment Return - ----------------------------------------------------------------------------------------------------------------------------------- Total investment return ................... .05% .05% .16% .05% ============================================================== =================================================================================================================================== Ratios to Average Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Total expenses, net of waiver and reimbursement++ ......................... 1.09% .02% .97% .02% ============================================================== Total expenses++ .......................... 1.58% .02% 1.26% .02% ============================================================== Total investment income and realized gain on investments allocated from the Trust--net .............................. .04% .03% .15% .03% ============================================================== =================================================================================================================================== Supplemental Data - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) .. $ 22,260 $ 25 $ 137,566 $ 25 ==============================================================
+ Effective date of the Fund's registration. ++ Includes the Fund's share of the Trust's allocated expenses. See Notes to Financial Statements WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 9 [LOGO] Merrill Lynch Investment Managers Financial Highlights (concluded) WCMA Government Securities Fund
Class 3 Class 4 ------------------------------------------------------------ For the For the For the Period For the Period The following per share data and ratios have been derived Year March 20, Year March 20, from information provided in the financial statements. Ended 2003+ to Ended 2003+ to March 31, March 31, March 31, March 31, Increase (Decrease) in Net Asset Value: 2004 2003 2004 2003 =================================================================================================================================== Per Share Operating Performance - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------------------------------------------------------------- Investment income--net .................... .0047 .0003 .0047 .0003 Realized and unrealized gain (loss) on investments allocated from the Trust--net (.0001) .0002 --* .0002 ------------------------------------------------------------- Total from investment operations .......... .0046 .0005 .0047 .0005 ------------------------------------------------------------- Less dividends and distributions: Investment income--net ................. (.0047) (.0003) (.0047) (.0003) Realized gain on investments allocated from the Trust--net .................. (.0001) -- --** -- ------------------------------------------------------------- Total dividends and distributions ......... (.0048) (.0003) (.0047) (.0003) ------------------------------------------------------------- Net asset value, end of period ............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============================================================= =================================================================================================================================== Total Investment Return - ----------------------------------------------------------------------------------------------------------------------------------- Total investment return ................... .48% .05% .47% .05% ============================================================= =================================================================================================================================== Ratios to Average Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Total expenses, net of waiver and reimbursement++ ......................... .65% .02% .65% .02% ============================================================= Total expenses++ .......................... .96% .02% .96% .02% ============================================================= Investment income and realized gain on investments allocated from the Trust--net .48% .03% .48% .03% ============================================================= =================================================================================================================================== Supplemental Data - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) .. $ 224,278 $ 25 $ 157,203 $ 25 =============================================================
* Amount is less than $.0001 per share. ** Amount is less than $(.0001) per share. + 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, 2004 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 accounting principles generally accepted in the United States of America, which may require the use of management accruals and estimates. The percentage of the Trust owned by the Fund at March 31, 2004 was 45.3%. 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 rights 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. (g) Reclassification -- Accounting principles generally accepted in the United States of America require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. There were no significant reclassifications in the current year. 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 Distribution Maintenance Fee Fee - -------------------------------------------------------------------------------- Class 1 ............................... .25% .75% Class 2 ............................... .25% .425% Class 3 ............................... .25% .125% Class 4 ............................... .25% .125% - -------------------------------------------------------------------------------- WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 11 [LOGO] Merrill Lynch Investment Managers Notes to Financial Statements (continued) WCMA Government Securities Fund 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, which began on the commencement date of operations 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 year ended, March 31, 2004, FAM and MLPF&S have earned $879,472 and $1,648,815, respectively, of which $1,089,843 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 in net assets derived from beneficial interest transactions was $541,257,315 and $74 for the year ended March 31, 2004 and for the period March 3, 2003 to March 31, 2003, respectively. In addition, on August 18, 2003, $579,002,824 was transferred from CMA Government Fund as planned, following the formation of WCMA Government Fund. Transactions in shares of beneficial interest for each class were as follows: - ------------------------------------------------------------------------------- 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 1 Shares for the Period March 3, 2003+ Dollar to March 31, 2003 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................ 18 $ 18 ---------------------------------- Net increase ........................... 18 $ 18 ================================== + Prior to March 3, 2003 (commencement of operations), the Fund issued 25,000 shares to FAM for $25,000. - ------------------------------------------------------------------------------- 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 ================================== - ------------------------------------------------------------------------------- Class 2 Shares for the Period March 3, 2003+ Dollar to March 31, 2003 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................ 18 $ 18 ---------------------------------- Net increase ........................... 18 $ 18 ================================== + Prior to March 3, 2003 (commencement of operations), the Fund issued 25,000 shares to FAM for $25,000. - ------------------------------------------------------------------------------- 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 3 Shares for the Period March 3, 2003+ Dollar to March 31, 2003 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................ 19 $ 19 ---------------------------------- Net increase ........................... 19 $ 19 ================================== + Prior to March 3, 2003 (commencement of operations), the Fund issued 25,000 shares to FAM for $25,000. 12 WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 Notes to Financial Statements (concluded) WCMA Government Securities Fund - ------------------------------------------------------------------------------- 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 ================================== - ------------------------------------------------------------------------------- Class 4 Shares for the Period March 3, 2003+ Dollar to March 31, 2003 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................ 19 $ 19 ---------------------------------- Net increase ........................... 19 $ 19 ================================== + Prior to March 3, 2003 (commencement of operations), the Fund issued 25,000 shares to FAM for $25,000. 4. Distributions to Shareholders: The tax character of distributions paid during the year ended March 31, 2004 and during the period March 3, 2003 to March 31, 2003 were as follows: - ------------------------------------------------------------------------------- For the For the Year Ended Period March 3, March 31, 2003+ to 2004 March 31, 2003 - ------------------------------------------------------------------------------- Distributions paid from: Ordinary income ...................... $ 1,329,878 $ 74 Net long-term capital gains .......... 7,566 -- ---------------------------------- Total taxable distributions ............ $ 1,337,444 $ 74 ================================== + Commencement of operations. As of March 31, 2004, there were no significant differences between the book and tax components of net assets. WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 13 [LOGO] Merrill Lynch Investment Managers Independent Auditors' Report WCMA Government Securities Fund 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, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for the year then ended and for the period March 3, 2003 (commencement of operations) through March 31, 2003, and the financial highlights for the year then ended and 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 audits. We conducted our audits 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 audits provide 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, 2004, the results of its operations for the year then ended, the changes in its net assets for the year then ended and for the period March 3, 2003 through March 31, 2003, and its financial highlights for the year then ended and 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 14, 2004 14 WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 Schedule of Investments Master Government Securities Trust (in Thousands)
Face Interest Maturity Issue Amount Rate Date Value ============================================================================================ U.S. Government Obligations*--26.4% ============================================================================================ U.S. Treasury Bills $10,500 1.04- 1.045% 5/06/2004 $ 10,491 - -------------------------------------------------------------------------------------------- U.S. Treasury Notes 30,000 3.375 4/30/2004 30,057 24,200 2.875 6/30/2004 24,313 10,875 2.25 7/31/2004 10,920 25,800 2.125 8/31/2004 25,920 81,400 1.875 9/30/2004 81,746 5,200 2.125 10/31/2004 5,233 34,300 2.00 11/30/2004 34,513 22,600 1.75 12/31/2004 22,712 25,500 1.50 2/28/2005 25,588 13,800 1.625 3/31/2005 13,865 15,700 1.25 5/31/2005 15,710 2,500 1.625 9/30/2005 2,511 8,800 1.625 10/31/2005 8,835 2,250 1.50 3/31/2006 2,246 - -------------------------------------------------------------------------------------------- Total U.S. Government Obligations (Cost--$314,037) ............................................................... 314,660 - -------------------------------------------------------------------------------------------- Face Amount Issue ============================================================================================ Repurchase Agreements--73.0% ============================================================================================ $58,000 ABN AMRO Inc., purchased on 3/31/2004 to yield 1.02% to 4/07/2004, repurchase price $58,002, collateralized by U.S. Treasury Note, 1.625% to 2% due 3/31/2005 to 5/15/2006 ................................................. 58,000 - -------------------------------------------------------------------------------------------- 58,000 Bank of America Securities LLC, purchased on 3/25/2004 to yield 1% to 4/01/2004, repurchase price $58,011, collateralized by GNMA, 4.5% to 7% due 7/15/2018 to 3/15/2034 .................................................... 58,000 - -------------------------------------------------------------------------------------------- 58,500 Barclays Capital Inc., purchased on 3/31/2004 to yield 1.02% to 4/01/2004, repurchase price $58,502, collateralized by U.S. Treasury Bills, 1.875% due 7/15/2013 ......................................... 58,500 - -------------------------------------------------------------------------------------------- 58,500 Bear Stearns & Co. Inc., purchased on 3/31/2004 to yield 1.02% to 4/01/2004, repurchase price $58,502, collateralized by U.S. Treasury Note, 6.25% due 8/15/2023 ...................... 58,500 - -------------------------------------------------------------------------------------------- 58,000 Citigroup Global Markets Inc., purchased on 3/31/2004 to yield 0.98% to 4/07/2004, repurchase price $58,002, collateralized by GNMA, 6.5% due 8/20/2032 ..................................... 58,000 - -------------------------------------------------------------------------------------------- 58,000 Credit Suisse First Boston Corp., purchased on 3/30/2004 to yield 1.03% to 4/06/2004, repurchase price $58,003, collateralized by GNMA, 6% to 9.75% due 7/15/2004 to 3/15/2042 ................................................. 58,000 - -------------------------------------------------------------------------------------------- 58,000 Deutsche Bank Securities Inc., purchased on 3/31/2004 to yield 1.04% to 4/01/2004, repurchase price $58,002, collateralized by GNMA, 5.5% to 8.5% due 12/15/2019 to 1/15/2034 ................................................. 58,000 - -------------------------------------------------------------------------------------------- 60,000 Goldman Sachs & Company, purchased on 3/05/2004 to yield 1% to 4/02/2004, repurchase price $60,002, collateralized by GNMA, 5.5% to 6% due 1/20/2034 to 3/15/2034 ................................................. 60,000 - -------------------------------------------------------------------------------------------- 58,000 Greenwich Capital Markets, Inc., purchased on 3/31/2004 to yield 1.02% to 4/07/2004, repurchase price $58,004, collateralized by GNMA, 4.75% to 6% due 2/15/2008 to 1/15/2044 ................................................. 58,000 - -------------------------------------------------------------------------------------------- 57,180 HSBC Securities (USA) Inc., purchased on 3/31/2004 to yield 1.02% to 4/01/2004, repurchase price $57,181, collateralized by U.S. Treasury Strips, 0% to 11.75% due 8/15/2004 to 2/15/2031 ....................................... 57,180 - -------------------------------------------------------------------------------------------- 58,000 J.P. Morgan Securities Inc., purchased on 3/31/2004 to yield 1.02% to 4/07/2004, repurchase price $58,003, collateralized by GNMA, 5% to 8% due 1/15/2008 to 11/15/2044 ................................................ 58,000 - -------------------------------------------------------------------------------------------- 58,000 Lehman Brothers Inc., purchased on 3/30/2004 to yield 1% to 4/06/2004, repurchase price $58,002, collateralized by GNMA ,4.375% to 7% due 4/20/2026 to 5/15/2043 ................................ 58,000 - --------------------------------------------------------------------------------------------
WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 15 [LOGO] Merrill Lynch Investment Managers Schedule of Investments (concluded) Master Government Securities Trust (in Thousands)
Face Amount Issue Value ============================================================================================ Repurchase Agreements (continued) ============================================================================================ $58,000 Merrill Lynch Government Securities, purchased on 3/25/2004 to yield 1% to 4/1/2004, repurchase price $58,002, collateralized by GNMA, 3.5% to 7.5% due 9/15/2006 to 8/15/2043 (a) ................................... $ 58,000 - -------------------------------------------------------------------------------------------- 58,000 Morgan Stanley & Co., Inc., purchased on 3/31/2004 to yield 0.98% to 4/06/2004, repurchase price $58,002, collateralized by GNMA, 6% to 8.3% due 4/15/2020 to 10/15/2033 ................................................... 58,000 - -------------------------------------------------------------------------------------------- 58,000 UBS Warburg LLC, purchased on 3/25/2004 to yield 1% to 4/01/2004, repurchase price $58,001, collateralized by GNMA, 3.5% to 7% due 12/15/2023 to 8/15/2043 ............................... 58,000 - -------------------------------------------------------------------------------------------- Total Repurchase Agreements (Cost--$872,180) ............................................................... 872,180 - -------------------------------------------------------------------------------------------- Total Investments (Cost--$1,186,217)--99.4% ...................................................... 1,186,840 Other Assets Less Liabilities--0.6% ............................................ 7,398 ---------- Net Assets--100.0% ............................................................. $1,194,238 ========== ============================================================================================
* U.S. Treasury Bills are traded on a discount basis; the interest rate 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. (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) are as follows: (in Thousands) -------------------------------------------------------------------------- Net Interest Affiliate Activity Income -------------------------------------------------------------------------- Merrill Lynch Government Securities, Inc. $(19,000) $721 -------------------------------------------------------------------------- See Notes to Financial Statements. 16 WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 Statement of Assets and Liabilities Master Government Securities Trust As of March 31, 2004 ======================================================================================================== Assets - -------------------------------------------------------------------------------------------------------- Investments in unaffiliated securities, at value (identified cost--$1,128,216,565*) ........... $1,128,840,455 Investments in affiliated securities, at value (identified cost--$58,000,000*) .............. 58,000,000 Cash ........................................... 11,696 Receivables: Contributions ............................... $ 6,190,914 Interest (including $9,667 from affiliates) . 1,288,368 7,479,282 ----------- Prepaid expenses ............................... 8,117 -------------- Total assets ................................... 1,194,339,550 -------------- ======================================================================================================== Liabilities - -------------------------------------------------------------------------------------------------------- Payable to investment adviser .................. 32,152 Other affiliates ............................... 6,597 38,749 ----------- Accrued expenses ............................... 62,583 -------------- Total liabilities .............................. 101,332 -------------- ======================================================================================================== Net Assets - -------------------------------------------------------------------------------------------------------- Net assets ..................................... $1,194,238,218 ============== ======================================================================================================== Net Assets Consist of - -------------------------------------------------------------------------------------------------------- Investors' capital ............................. $1,193,614,328 Unrealized appreciation on investments--net .... 623,890 -------------- Net Assets ..................................... $1,194,238,218 ==============
* Cost for Federal income tax purposes was $1,186,216,565. As of March 31, 2004, net unrealized appreciation for Federal income tax purposes amounted to $623,890, of which $624,770 related to appreciated securities and $880 is related to depreciated securities. See Notes to Financial Statements. WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 17 [LOGO] Merrill Lynch Investment Managers Statement of Operations Master Government Securities Trust For the Year Ended March 31, 2004 ============================================================================================================= Investment Income - ------------------------------------------------------------------------------------------------------------- Interest and amortization of premium and discount earned (includes $721,263 from affiliates) .................. $ 16,004,432 ============================================================================================================= Expenses - ------------------------------------------------------------------------------------------------------------- Investment advisory fees ............................... $2,597,681 Accounting services .................................... 271,746 Custodian fees ......................................... 74,368 Professional fees ...................................... 47,635 Trustees' fees and expenses ............................ 42,489 Pricing fees ........................................... 4,986 Printing and shareholder reports ....................... 2,216 Other .................................................. 25,583 ---------- Total expenses ......................................... 3,066,704 ------------ Investment income--net ................................. 12,937,728 ------------ ============================================================================================================= Realized & Unrealized Gain (Loss) on Investments--Net - ------------------------------------------------------------------------------------------------------------- Realized gain on investments--net ...................... 75,879 Change in unrealized appreciation on investments--net .. (459,784) ------------ Total realized and unrealized loss on investments--net . (383,905) ------------ Net Increase in Net Assets Resulting from Operations ... $ 12,553,823 ============
See Notes to Financial Statements. 18 WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 Statements of Changes in Net Assets Master Government Securities Trust
For the For the Period Year Ended February 13, 2003+ March 31, to March 31, Increase (Decrease) in Net Assets: 2004 2003 ====================================================================================================================== Operations - ---------------------------------------------------------------------------------------------------------------------- Investment income--net .............................. $ 12,937,728 $ 2,258,188 Realized gain on investments--net ................... 75,879 8,057 Change in unrealized appreciation on investments--net (459,784) (2,060) -------------------------------------- Net increase in net assets resulting from operations 12,553,823 2,264,185 -------------------------------------- ====================================================================================================================== Capital Transactions - ---------------------------------------------------------------------------------------------------------------------- Proceeds from contributions ......................... 5,445,099,631 712,600,848 Fair value of net assets contributions .............. -- 1,599,940,901 Fair value of withdrawals ........................... (5,848,609,190) (729,711,980) -------------------------------------- Net increase (decrease) in net assets derived from capital transactions .............................. (403,509,559) 1,582,829,769 -------------------------------------- ====================================================================================================================== Net Assets - ---------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets ............. (390,955,736) 1,585,093,954 Beginning of period ................................. 1,585,193,954 100,000 -------------------------------------- End of period ....................................... $ 1,194,238,218 $ 1,585,193,954 ======================================
+ Commencement of operations. See Notes to Financial Statements. Financial Highlights Master Government Securities Trust
For the For the Period Year Ended February 13, 2003+ The following ratios have been derived from March 31, to March 31, information provided in the financial statements. 2004 2003 ======================================================================================================================== Total Investment Return - ------------------------------------------------------------------------------------------------------------------------ Total investment return ............................... .94% .75%* ====================================== ======================================================================================================================== Ratios to Average Net Assets - ------------------------------------------------------------------------------------------------------------------------ Expenses .............................................. .22% .26%* ====================================== Investment income and realized gain on investments--net .94% 1.08%* ====================================== ======================================================================================================================== Supplemental Data - ------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) .............. $ 1,194,238 $ 1,585,194 ======================================
* Annualized. + Commencement of operations. See Notes to Financial Statements. WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 19 [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 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. 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. 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, 2004, the Trust reimbursed FAM $27,919 for certain accounting services. Certain officers and/or trustees of the Trust are officers and/or directors of FAM, PSI, and/or ML & Co. 20 WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 Independent Auditors' Report Master Government Securities Trust 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, 2004, and the related statement of operations for the year then ended and the statements of changes in net assets and the financial highlights for the year then ended and 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 audits. We conducted our audits 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, 2004, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. 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 audits provide 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, 2004, the results of its operations for the year then ended, and the changes in its net assets and its financial highlights for the year then ended and 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 14, 2004 WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 21 [LOGO] Merrill Lynch Investment Managers Officers and Trustees (unaudited)
Number of Portfolios in Other Public Position(s) Length of Fund Complex Directorships Held with Time Overseen by Held by Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee ==================================================================================================================================== Interested Trustee - ------------------------------------------------------------------------------------------------------------------------------------ Terry K. P.O. Box 9011 President 1999 to President of Merrill Lynch Investment Managers, L.P. 124 Funds None Glenn* Princeton, NJ and present ("MLIM")/Fund Asset Management, L.P. ("FAM")-- 160 Portfolios 08543-9011 Trustee and Advised Funds since 1999; Chairman (Americas Region) Age: 63 1997 to of MLIM from 2000 to 2002; Executive Vice President present 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 1989 to 2002; Director of Financial Data Services, Inc. since 1985. ------------------------------------------------------------------------------------------------------------------------ * Mr. Glenn is a director, trustee or member of an advisory board of certain other investment companies for which MLIM or FAM 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 MLIM, FAM, 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. ==================================================================================================================================== Independent Trustees* - ------------------------------------------------------------------------------------------------------------------------------------ Ronald W. P.O. Box 9095 Trustee 2003 to Professor Emeritus of Finance, School of Business, 51 Funds None Forbes Princeton, NJ present State University of New York at Albany since 2000 50 Portfolios 08543-9095 and Professor thereof from 1989 to 2000; Age: 63 International Consultant at the Urban Institute from 1995 to 1999. - ------------------------------------------------------------------------------------------------------------------------------------ Cynthia A. P.O. Box 9095 Trustee 1994 to Professor, Harvard Business School since 1989. 51 Funds Newell Montgomery Princeton, NJ present 50 Portfolios Rubbermaid, 08543-9095 Inc. Age: 51 - ------------------------------------------------------------------------------------------------------------------------------------ Kevin A. P.O. Box 9095 Trustee 2003 to Director Emeritus of The Boston University Center 51 Funds None Ryan Princeton, NJ present for the Advancement of Ethics and Character from 50 Portfolios 08543-9095 1989 to 1999; Professor of Education at Boston Age: 71 University from 1982 to 1999 and Professor Emeritus thereof since 1999. - ------------------------------------------------------------------------------------------------------------------------------------ Roscoe S. P.O. Box 9095 Trustee 2003 to President of Middle East Institute from 1995 to 51 Funds None Suddarth Princeton, NJ present 2001; Foreign Service Officer of United States 50 Portfolios 08543-9095 Foreign Service from 1961 to 1995 and Career Age: 68 Minister thereof from 1989 to 1995; Deputy Inspector General of U.S. Department of State from 1991 to 1994; U.S. Ambassador to the Hashemite Kingdom of Jordan from 1987 to 1990. - ------------------------------------------------------------------------------------------------------------------------------------ Richard R. P.O. Box 9095 Trustee 2003 to Professor of Finance, New York University, Leonard 51 Funds Bowne & Co., West Princeton, NJ present N. Stern School of Business Administration from 50 Portfolios Inc.; Vornado 08543-9095 1982 to 1994 and Dean Emeritus thereof since 1994. Operating Age: 66 Company; Vornado Realty Trust; Alexander's, Inc.
22 WCMA GOVERNMENT SECURITIES FUND MARCH 31, 2004 Officers and Trustees (unaudited) (concluded)
Number of Portfolios in Other Public Position(s) Length of Fund Complex Directorships Held with Time Overseen by Held by Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee ==================================================================================================================================== Independent Trustees* (concluded) - ------------------------------------------------------------------------------------------------------------------------------------ Edward D. P.O. Box 9095 Trustee 2003 to Self-employed financial consultant since 1994; 51 Funds None Zinbarg Princeton, NJ present Executive Vice President of The Prudential 50 Portfolios 08543-9095 Insurance Company of America from 1988 to Age: 69 1994; Former Director of Prudential Reinsurance Company and former Trustee of The Prudential Foundation. ------------------------------------------------------------------------------------------------------------------------ * 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. - ------------------------------------------------------------------------------------------------------------------------------------ Position(s) Length of Held with Time Name Address & Age Fund Served* Principal Occupation(s) During Past 5 Years ==================================================================================================================================== Fund Officers - ------------------------------------------------------------------------------------------------------------------------------------ Donald C. P.O. Box 9011 Vice 2003 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof since 1999; Burke Princeton, NJ President present Senior Vice President and Treasurer of Princeton Services since 1999; Vice 08543-9011 and President of FAMD since 1999; Director of MLIM Taxation since 1990. Age: 43 Treasurer - ------------------------------------------------------------------------------------------------------------------------------------ John Ng P.O. Box 9011 Vice 2003 to Director (Global Fixed Income) of MLIM since 2000; Vice President of MLIM Princeton, NJ President present from 1994 to 2000. 08543-9011 Age: 50 - ------------------------------------------------------------------------------------------------------------------------------------ Phillip S. P.O. Box 9011 Secretary 2003 to First Vice President of MLIM since 2001; Director (Legal Advisory) from 2000 to Gillespie Princeton, NJ present 2001; Vice President from 1999 to 2000; Attorney associated with MLIM since 1998. 08543-9011 Age: 40 ------------------------------------------------------------------------------------------------------------------------ * 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 WCMA account, call 800-262-4636. - -------------------------------------------------------------------------------- Charles C. Reilly, Trustee of WCMA Government Securities Fund, has recently retired. The Fund's Board of Trustees wishes Mr. Reilly well in his retirement. - -------------------------------------------------------------------------------- WCMA GOVERNMENT SECURITIES FUND MARCH 31, 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) on www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's website at http://www.sec.gov. WCMA Government Securities Fund Box 9011 Princeton, NJ 08543-9011 #WCMAGS -- 3/04 Item 2 - Code of Ethics - The registrant has adopted 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 and principal accounting officer, or persons performing similar functions. A copy of the code of ethics is available without charge upon request by calling toll-free 1-800-MER-FUND (1-800-637-3863). Item 3 - Audit Committee Financial Expert - The registrant's board of directors has determined that (i) the registrant has the following audit committee financial experts serving on its audit committee and (ii) each audit committee financial expert is independent: (1) Ronald W. Forbes, (2) Richard R. West, and (3) Edward D. Zinbarg. Item 4 - Principal Accountant Fees and Services (a) Audit Fees WCMA Government Securities Fund Fiscal Year Ending March 31, 2004 - $11,400 Fiscal Year Ending March 31, 2003 - $15,863 Master Government Securities Trust Fiscal Year Ending March 31, 2004 - $35,000 Fiscal Year Ending March 31, 2003 - $40,513 (b) Audit-Related Fees WCMA Government Securities Fund Fiscal Year Ending March 31, 2004 - $0 Fiscal Year Ending March 31, 2003 - $0 Master Government Securities Trust Fiscal Year Ending March 31, 2004 - $0 Fiscal Year Ending March 31, 2003 - $0 (c) Tax Fees WCMA Government Securities Fund Fiscal Year Ending March 31, 2004 - $5,800 Fiscal Year Ending March 31, 2003 - $3,600 The nature of the services include tax compliance, tax advice and tax planning. Master Government Securities Trust Fiscal Year Ending March 31, 2004 - $8,000 Fiscal Year Ending March 31, 2003 - $5,000 The nature of the services include tax compliance, tax advice and tax planning. (d) All Other Fees WCMA Government Securities Fund Fiscal Year Ending March 31, 2004 - $0 Fiscal Year Ending March 31, 2003 - $0 Master Government Securities Trust Fiscal Year Ending March 31, 2004 - $0 Fiscal Year Ending March 31, 2003 - $0 (e)(1) The registrant's audit committee (the "Committee") has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the registrant's affiliated service providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are a) consistent with the SEC's auditor independence rules and b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis ("general pre-approval"). However, such services will only be deemed pre-approved provided that any individual project does not exceed $5,000 attributable to the registrant or $50,000 for the project as a whole. Any proposed services exceeding the pre-approved cost levels will require specific pre-approval by the Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. (e)(2) 0% (f) Not Applicable (g) WCMA Government Securities Fund Fiscal Year Ending March 31, 2004 - $16,708,160 Fiscal Year Ending March 31, 2003 - $17,378,427 Master Government Securities Trust Fiscal Year Ending March 31, 2004 - $16,708,160 Fiscal Year Ending March 31, 2003 - $17,378,427 (h) The registrant's audit committee has considered and determined that the provision of non-audit services that were rendered to the registrant's 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. Regulation S-X Rule 2-01(c)(7)(ii) - $541,640, 0% 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 second 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 - See Item 2 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: May 21, 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: May 21, 2004 By: /s/ Donald C. Burke ---------------------------- Donald C. Burke, Chief Financial Officer of WCMA Government Securities Fund and Master Government Securities Trust Date: May 21, 2004 EX-99.CERT 2 e400516_ex99-cert.txt CERTIFICATION PURSUANT TO SECTION 302 EX-99. CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - -------------------------------------------------------------------------------- I, Terry K. Glenn, President of WCMA Government Securities Fund and Master Government Securities Trust, certify that: 1. I have reviewed this report on Form N-CSR of WCMA Government Securities Fund and Master Government Securities Trust (together, the "Fund"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Fund as of, and for, the periods presented in this report; 4. The Fund's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Fund and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Fund, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the Fund's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) disclosed in this report any change in the Fund's internal control over financial reporting that occurred during the Fund's most recent fiscal half-year (the Fund's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Fund's internal control over financial reporting; and 5. The Fund's other certifying officer(s) and I have disclosed to the Fund's auditors and the audit committee of the Fund's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Fund's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Fund's internal control over financial reporting. Date: May 21, 2004 /s/ Terry K. Glenn ------------------ Terry K. Glenn, President of WCMA Government Securities Fund and Master Government Securities Trust EX-99. CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - -------------------------------------------------------------------------------- I, Donald C. Burke, Chief Financial Officer of WCMA Government Securities Fund and Master Government Securities Trust, certify that: 1. I have reviewed this report on Form N-CSR of WCMA Government Securities Fund and Master Government Securities Trust (together, the "Fund"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Fund as of, and for, the periods presented in this report; 4. The Fund's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Fund and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Fund, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the Fund's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) disclosed in this report any change in the Fund's internal control over financial reporting that occurred during the Fund's most recent fiscal half-year (the Fund's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Fund's internal control over financial reporting; and 5. The Fund's other certifying officer(s) and I have disclosed to the Fund's auditors and the audit committee of the Fund's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Fund's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Fund's internal control over financial reporting. Date: May 21, 2004 /s/ Donald C. Burke ------------------- Donald C. Burke, Chief Financial Officer of WCMA Government Securities Fund and Master Government Securities Trust EX-99.1350CERT 3 e400516_ex99-1350cert.txt CERTIFICATE PURSUANT TO SECTION 906 Exhibit 99.1350CERT Certification Pursuant to Section 906 of the Sarbanes Oxley Act I, Terry K. Glenn, President of WCMA Government Securities Fund and Master Government Securities Trust (together, the "Fund"), certify that: 1. The N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Dated: May 21, 2004 /s/ Terry K. Glenn ------------------ Terry K. Glenn, President of WCMA Government Securities Fund and Master Government Securities Trust A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to WCMA Government Securities Fund and Master Government Securities Trust and will be retained by WCMA Government Securities Fund and Master Government Securities Trust and furnished to the Securities and Exchange Commission or its staff upon request. Exhibit 99.1350CERT Certification Pursuant to Section 906 of the Sarbanes Oxley Act I, Donald C. Burke, Chief Financial Officer of WCMA Government Securities Fund and Master Government Securities Trust (together, the "Fund"), certify that: 1. The N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Dated: May 21, 2004 /s/ Donald C. Burke ------------------- Donald C. Burke, Chief Financial Officer of WCMA Government Securities Fund and Master Government Securities Trust A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to WCMA Government Securities Fund and Master Government Securities Trust and will be retained by WCMA Government Securities Fund and Master Government Securities Trust and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----