UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-09375
811-09633
Name of Fund: Merrill Lynch Global Financial Services Fund, Inc.
Global Financial Services Master Trust
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, Merrill Lynch Global Financial Services Fund, Inc. and Global
Financial Services Master 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: 09/30/05
Date of reporting period: 10/01/04 - 03/31/05
Item 1 - Report to Stockholders
Merrill Lynch
Global Financial
Services Fund, Inc.
Semi-Annual Report
March 31, 2005
Merrill Lynch Global Financial Services Fund, Inc.
Worldwide Investments as of March 31, 2005
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
New Century Financial Corp. ........................................ 7.6
Kensington Group Plc ............................................... 6.1
American Home Mortgage
Investment Corp. ................................................ 5.9
PXRE Group Ltd. .................................................... 4.7
Friedman, Billings, Ramsey Group, Inc. .............................
Class A ......................................................... 4.5
Korean Reinsurance Co. ............................................. 3.8
ACE Ltd. ........................................................... 3.6
Bank Central Asia Tbk PT ........................................... 3.4
Hana Bank .......................................................... 3.2
Oriental Fire & Marine
Insurance Co., Ltd. ............................................. 3.1
- --------------------------------------------------------------------------------
Industries Represented in Percent of
the Portfolio* Net Assets
- --------------------------------------------------------------------------------
Insurance ............................................... 28.3%
Commercial Banks ........................................ 25.2
Real Estate ............................................. 19.0
Thrifts & Mortgage Finance .............................. 11.6
Capital Markets ......................................... 5.6
Consumer Finance ........................................ 5.4
Diversified Financial Services .......................... 1.1
Commercial Services & Supplies .......................... 0.7
- --------------------------------------------------------------------------------
* For Portfolio compliance purposes, "Industries" means any one or more of
the industry sub-classifications used by one or more widely recognized
market indexes or ratings group indexes, and/or as defined by Portfolio
management. This definition may not apply for purposes of this report,
which may combine such industry sub-classifications for reporting ease.
Geographic Allocation Percent of
by Country Total Investments
- --------------------------------------------------------------------------------
United States ........................................... 32.9%
South Korea ............................................. 17.5
United Kingdom .......................................... 12.0
Bermuda ................................................. 10.3
Germany ................................................. 4.5
Japan ................................................... 3.8
Indonesia ............................................... 3.3
India ................................................... 2.6
Ireland ................................................. 1.8
Turkey .................................................. 1.5
Russia .................................................. 0.9
Denmark ................................................. 0.8
Netherlands ............................................. 0.8
Hong Kong ............................................... 0.7
Belgium ................................................. 0.5
Hungary ................................................. 0.4
Spain ................................................... 0.2
Australia ............................................... 0.1
China ................................................... 0.1
France .................................................. 0.1
Canada .................................................. --*
Other** ................................................. 5.2
- --------------------------------------------------------------------------------
* Amount is less than 0.1%.
** Includes portfolio holdings in short-term investments.
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site at 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 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005
A Letter From the President
Dear Shareholder
Financial markets broadly posted positive returns over the most recent reporting
period, with international equities providing some of the most impressive
results.
Total Returns as of March 31, 2005 6-month 12-month
================================================================================================
U.S. equities (Standard & Poor's 500 Index) + 6.88% + 6.69%
- ------------------------------------------------------------------------------------------------
Small-cap U.S. equities (Russell 2000 Index) + 8.00 + 5.41
- ------------------------------------------------------------------------------------------------
International equities (MSCI Europe Australasia Far East Index) +15.13 +15.06
- ------------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers Aggregate Bond Index) + 0.47 + 1.15
- ------------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 1.21 + 2.67
- ------------------------------------------------------------------------------------------------
High yield bonds (Credit Suisse First Boston High Yield Index) + 3.39 + 7.84
- ------------------------------------------------------------------------------------------------
The U.S. economy continued to show resilience in the face of the Federal Reserve
Board's (the Fed's) continued interest rate hikes and, more recently, higher oil
prices. The Fed's measured tightening program brought the federal funds rate to
2.75% by period-end as the central bank continued its campaign to combat
emergent inflation. In fact, business costs have been rising, which is beginning
to put pressure on corporate profit margins. Consumer prices have been moving up
as well, particularly in the areas of gasoline prices, healthcare costs, housing
and education.
U.S. equities ended 2004 in a strong rally, but stumbled into negative territory
in the first quarter of 2005. On the positive side, corporations have been
accelerating their hiring plans, capital spending remains reasonably robust and
merger-and-acquisition activity has increased. Offsetting the positives are
slowing corporate earnings growth, renewed energy price concerns and the
potential for an economic slowdown later this year. International equities,
especially in Asia, have benefited from higher economic growth rates. China, in
particular, recorded growth of more than 9% in 2004.
In the bond market, long-term interest rates finally began to inch higher while
significant increases have been recorded on the short end. This resulted in a
flattening of the yield curve throughout much of the current reporting period.
At March 31, 2005, the two-year Treasury note yielded 3.80% and the 10-year note
yielded 4.50%, a difference of 70 basis points (.70%). This compared to a spread
of 151 basis points six months earlier and 226 basis points 12 months ago.
Looking ahead, the environment is likely to be a challenging one for investors,
with diversification and selectivity becoming increasingly important themes.
With this in mind, we encourage you to meet with your financial advisor to
review your goals and asset allocation and to rebalance your portfolio, as
necessary, to ensure it remains aligned with your objectives and risk tolerance.
As always, 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/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Director/Trustee
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005 3
A Discussion With Your Fund's Portfolio Manager
The Fund provided excellent returns over the past six months, outperforming the
broad-market MSCI World Index and the sector-specific MSCI World Financials
Index.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended March 31, 2005, Merrill Lynch Global Financial
Services Fund, Inc.'s Class A, Class B, Class C, Class I and Class R Shares had
total returns of +15.73%, +15.29%, +15.26%, +15.89% and +15.58%, respectively.
(Fund results shown do not reflect sales charges and would be lower if sales
charges were included. Complete performance information can be found on pages 6
and 7 of this report to shareholders.) The Fund significantly outperformed its
unmanaged benchmarks, the Morgan Stanley Capital International (MSCI) World
Index and the MSCI World Financials Index, which posted respective returns of
+10.71% and +9.53% for the same period.
Most world stock markets rose during the six-month period, probably because of
renewed optimism about the economies of the United States and China, the world's
largest sources of economic growth. Concerns about inflation in both countries
moderated on the belief that tighter monetary policy in the United States and
administrative restrictions on lending in China were achieving their objectives.
The general climate of controlled inflation and continued growth in economic
output and corporate profits helped stocks. These factors were favorable to many
stocks in the Fund, especially emerging market stocks. Stocks in South Korea,
which has China and the United States as its largest export markets, were the
biggest beneficiaries, but stocks in other emerging markets, such as Indonesia
and India, also did quite well. The two other large concentrations of stocks in
the Fund, namely Bermuda insurance stocks and mortgage lenders in the United
States, did not do as well. Insurance stocks performed poorly, although the Fund
did not suffer on a relative basis because it did not hold any shares of
American International Group (AIG), a typically large holding in many funds,
which performed poorly. Mortgage companies in the Fund showed average
performance, except for a single stock, the Kensington Group Plc, which
contributed over 30% of the Fund's overall relative performance. The Kensington
Group is a specialty mortgage lender in the United Kingdom that was purchased at
a low price during the period and that announced exceptionally good results for
its 2004 fiscal year.
What changes were made to the Portfolio during the period?
Portfolio activity during the period was, as usual, the combined effect of a
stable long-term outlook on the businesses underlying the stocks in the
Portfolio and a quick reaction to changes in relative prices. The major examples
of such portfolio activity were the purchases of New Century Financial Corp. and
the Kensington Group, both specialty mortgage lenders catering to borrowers who
have lower credit ratings or difficulty documenting their creditworthiness.
These two companies were the largest two holdings in the Portfolio by the end of
the period, with a combined weight of 13.7%, compared to a 1.1% weight at the
beginning of the period. This percentage increase was offset by selling most of
Freddie Mac and trimming several emerging market stocks. It is typical of the
Portfolio's approach that the investment view on the stocks that were sold did
not change for the worse; in fact, if anything, it became more positive, as was
the case with most South Korean stocks. The rationale behind portfolio activity
was merely the relative attractiveness of various investment options, which
changed as a result of stock prices rather than as a result of a change in the
business outlook.
How would you characterize the Portfolio's position at the close of the period?
The Portfolio continues to be focused on what appear to be the best bargains in
financial stocks globally, namely mortgage lenders, property and casualty
insurers, and emerging markets. The groups that are left out or underrepresented
include large financial conglomerates, such as AIG, Citigroup and HSBC; retail
banks in the United States and Western Europe; and life insurers.
4 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005
Mortgage lenders are attractive for reasons that are so obvious that they may at
times be forgotten by some investors. Residential mortgages are just about the
safest form of lending, in our view, since they are protected by the underlying
properties and since borrowers are keen not to lose their residences. In fact,
losses on typical residential mortgages tend to be extremely low, and most of
the risk consists of interest rate risk (that is, a potential reduction in the
spread between the rates at which the mortgage lenders borrow and lend). This
interest rate risk typically is hedged by the companies in which the Portfolio
invests. Since many investors nonetheless are concerned about mortgage lenders,
it is possible to buy fast-growing, very profitable and safe companies at
surprisingly low prices. This accounts for the concentration of mortgage lenders
in the Portfolio.
Property and casualty insurers make up another group with good profits, good
growth, and low stock prices, although short-term results tend to be more
volatile than most other financial stocks because of the unpredictability of
claim occurrences. The Portfolio accordingly has a large concentration in
property and casualty insurance stocks, especially Bermuda companies that
specialize in reinsurance and "excess loss" insurance (that is, insuring losses
exceeding a pre-contracted amount). The U.S. and Bermuda property and casualty
stocks in the Portfolio, much like other such stocks, have not performed well.
The two main reasons have been losses following exceptionally severe hurricanes
in late summer 2004 in the United States and the investigation of some brokerage
and reinsurance transactions by the New York attorney general. There is no
reason to believe that the long-term outlook of the major insurance holdings in
the Portfolio has changed as a result of these two factors and, accordingly, the
weight of these holdings generally has been increased.
The third favored group in the Fund is emerging market stocks, mostly retail
banks, with a major emphasis on South Korea and sizable holdings in Indonesia,
India and other markets. The investment case in South Korea is especially
compelling. South Korea has some of the best long-term economic growth prospects
in the world, as a result of a "can-do" attitude in many technological
activities. South Korea has become a major force in consumer electronics,
including wireless telephones and televisions, as well as in automobiles, in
semiconductors, and in steel production, despite its relatively small population
when compared to Japan. Many Korean companies, including banks, are managed with
a focus on profitability and are beneficiaries of economic growth in China,
which is the largest export market for Korea. To top it all off, South Korean
companies should get an extra boost when domestic consumption rises again, which
appears likely soon. Despite all these attractions, Korean stocks sell at low
valuations, which likely are a leftover from the fears of a repeat of the 1998
Asian crisis, when the devaluation of the won made many companies unable to
service their dollar debt. Such fears do not appear to have a basis today.
Finally, some of the groups that are underrepresented in the Fund today, mostly
retail banks in the United States and Western Europe, include many companies
with attractive characteristics, such as a return on capital of about 20%,
growth of about 10%, and a current dividend of about 3% or better. The only
reason for not purchasing such companies for the Portfolio is that there are
more attractive opportunities, price wise, elsewhere, as discussed above. Should
relative pricing conditions change, the composition of the Portfolio likely will
change accordingly.
We thank you for your continued support of Merrill Lynch Global Financial
Services Fund, Inc., and we look forward to reviewing our outlook and strategy
with you again in our next report to shareholders.
Walid Kassem
Vice President and Portfolio Manager
April 18, 2005
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005 5
Performance Data
About Fund Performance
Investors are able to purchase shares of the Fund through multiple pricing
alternatives:
o Class A Shares incur a maximum initial sales charge (front-end load) of
5.25% and an account maintenance fee of 0.25% per year (but no
distribution fee).
o Class B Shares are subject to a maximum contingent deferred sales charge
of 4% declining to 0% after six years. All Class B Shares purchased prior
to June 1, 2001 will maintain the four-year schedule. In addition, Class B
Shares are subject to a distribution fee of 0.75% per year and an account
maintenance fee of 0.25% per year. These shares automatically convert to
Class A Shares after approximately eight years. (There is no initial sales
charge for automatic share conversions.) All returns for periods greater
than eight years reflect this conversion.
o Class C Shares are subject to a distribution fee of 0.75% per year and an
account maintenance fee of 0.25% per year. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within one
year of purchase.
o Class I Shares incur a maximum initial sales charge (front-end load) of
5.25% and bear no ongoing distribution or account maintenance fees. Class
I Shares are available only to eligible investors.
o Class R Shares do not incur a maximum sales charge (front-end load) or
deferred sales charge. These shares are subject to a distribution fee of
0.25% per year and an account maintenance fee of 0.25% per year. Class R
Shares are available only to certain retirement plans. Prior to inception,
Class R Share performance results are those of the Class I Shares (which
have no distribution or account maintenance fees) restated for Class R
Share fees.
None of the past results shown should be considered a representation of future
performance. Current performance may be lower or higher than the performance
data quoted. Refer to www.mlim.ml.com to obtain performance data current to the
most recent month-end. Performance results do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. The Fund may charge a 2% redemption fee for sales or exchanges of shares
within 30 days of purchase. Performance data does not reflect this potential
fee. Figures shown in each of the following tables assume reinvestment of all
dividends and capital gain distributions, if any, at net asset value on the
ex-dividend date. Investment return and principal value of shares will fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost. Dividends paid to each class of shares will vary because of the different
levels of account maintenance, distribution and transfer agency fees applicable
to each class, which are deducted from the income available to be paid to
shareholders.
Recent Performance Results
6-Month 12-Month Since Inception
As of March 31, 2005 Total Return Total Return Total Return
=======================================================================================================================
ML Global Financial Services Fund, Inc. Class A Shares* +15.73% +12.92% + 99.79%
- -----------------------------------------------------------------------------------------------------------------------
ML Global Financial Services Fund, Inc. Class B Shares* +15.29 +12.13 + 91.81
- -----------------------------------------------------------------------------------------------------------------------
ML Global Financial Services Fund, Inc. Class C Shares* +15.26 +12.09 + 91.65
- -----------------------------------------------------------------------------------------------------------------------
ML Global Financial Services Fund, Inc. Class I Shares* +15.89 +13.24 +102.50
- -----------------------------------------------------------------------------------------------------------------------
ML Global Financial Services Fund, Inc. Class R Shares* +15.58 +12.66 + 98.27
- -----------------------------------------------------------------------------------------------------------------------
MSCI World Index** +10.71 +10.56 - 7.43
- -----------------------------------------------------------------------------------------------------------------------
MSCI World Financial Index*** + 9.53 + 8.17 + 21.37
- -----------------------------------------------------------------------------------------------------------------------
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Cumulative total investment
returns are based on changes in net asset values for the periods shown,
and assume reinvestment of all dividends and capital gains distributions
at net asset value on the ex-dividend date. Since inception total return
is from 11/26/99.
** This unmanaged market capitalization-weighted Index is comprised of a
representative sampling of large-, medium- and small-capitalization
companies in 23 countries, including the United States. Since inception
total return is from 11/26/99.
*** This Index is comprised of the constituents of the MSCI World Index that
are classified into the financial sector. This sector contains companies
involved in activities such as banking, mortgage finance, consumer
finance, specialized finance, investment banking and brokerage, asset
management and custody, corporate lending, insurance, financial investment
and real estate including REITS. Since inception total return is from
11/30/99.
6 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005
Performance Data (concluded)
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 3/31/05 +12.92% + 6.99%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/05 +14.30 +13.08
- --------------------------------------------------------------------------------
Inception (11/26/99)
through 3/31/05 +13.82 +12.68
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
Return Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 3/31/05 +12.13% + 8.23%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/05 +13.42 +13.18
- --------------------------------------------------------------------------------
Inception (11/26/99)
through 3/31/05 +12.96 +12.85
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
** Assuming payment of applicable contingent deferred sales charge.
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
One Year Ended 3/31/05 +12.09% +11.12%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/05 +13.40 +13.40
- --------------------------------------------------------------------------------
Inception (11/26/99)
through 3/31/05 +12.94 +12.94
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
** Assuming payment of applicable contingent deferred sales charge.
- --------------------------------------------------------------------------------
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class I Shares*
================================================================================
One Year Ended 3/31/05 +13.24% + 7.30%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/05 +14.59 +13.36
- --------------------------------------------------------------------------------
Inception (11/26/99)
through 3/31/05 +14.11 +12.97
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
- --------------------------------------------------------------------------------
Class R Shares Return
================================================================================
One Year Ended 3/31/05 +12.66%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/05 +14.15
- --------------------------------------------------------------------------------
Inception (11/26/99) through 3/31/05 +13.66
- --------------------------------------------------------------------------------
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005 7
Disclosure of Expenses
Shareholders of this Fund may incur the following charges: (a) expenses related
to transactions, including sales charges, redemption fees and exchange fees; and
(b) operating expenses, including advisory fees, distribution fees including
12(b)-1 fees, and other Fund expenses. The following example (which is based on
a hypothetical investment of $1,000 invested on October 1, 2004 and held through
March 31, 2005) is intended to assist shareholders both in calculating expenses
based on an investment in the Fund and in comparing these expenses with similar
costs of investing in other mutual funds.
The first table below provides information about actual account values and
actual expenses. In order to estimate the expenses a shareholder paid during the
period covered by this report, shareholders can divide their account value by
$1,000 and then multiply the result by the number in the first line under the
heading entitled "Expenses Paid During the Period."
The second table below provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses. In order to assist
shareholders in comparing the ongoing expenses of investing in this Fund and
other funds, compare the 5% hypothetical example with the 5% hypothetical
examples that appear in other funds' shareholder reports.
The expenses shown in the table are intended to highlight shareholders ongoing
costs only and do not reflect any transactional expenses, such as sales charges,
redemption fees or exchange fees. Therefore, the second table is useful in
comparing ongoing expenses only, and will not help shareholders determine the
relative total expenses of owning different funds. If these transactional
expenses were included, shareholder expenses would have been higher.
Expenses Paid
Beginning Ending During the Period*
Account Value Account Value October 1, 2004 to
October 1, 2004 March 31, 2005 March 31, 2005
=========================================================================================================================
Actual
=========================================================================================================================
Class A $1,000 $1,157.30 $ 9.20
- -------------------------------------------------------------------------------------------------------------------------
Class B $1,000 $1,152.90 $13.31
- -------------------------------------------------------------------------------------------------------------------------
Class C $1,000 $1,152.60 $13.31
- -------------------------------------------------------------------------------------------------------------------------
Class I $1,000 $1,158.90 $ 7.54
- -------------------------------------------------------------------------------------------------------------------------
Class R $1,000 $1,155.80 $10.32
=========================================================================================================================
Hypothetical (5% annual return before expenses)**
=========================================================================================================================
Class A $1,000 $1,016.40 $ 8.60
- -------------------------------------------------------------------------------------------------------------------------
Class B $1,000 $1,012.57 $12.44
- -------------------------------------------------------------------------------------------------------------------------
Class C $1,000 $1,012.57 $12.44
- -------------------------------------------------------------------------------------------------------------------------
Class I $1,000 $1,017.95 $ 7.04
- -------------------------------------------------------------------------------------------------------------------------
Class R $1,000 $1,015.36 $ 9.65
- -------------------------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (1.71% for Class A, 2.48% for Class B, 2.48% for Class
C, 1.40% for Class I and 1.92% for Class R), multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the
one-half year period shown). Because the Fund is a feeder fund, the
expense table example reflects the expenses of both the feeder fund and
the master fund in which it invests.
** Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half-year divided by 365.
8 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005
Statement of Assets and Liabilities
Merrill Lynch Global Financial Services Fund, Inc.
As of March 31, 2005
==============================================================================================================================
Assets
- ------------------------------------------------------------------------------------------------------------------------------
Investment in Global Financial Services Portfolio
(the "Portfolio"), at value (identified cost--$88,459,019) .... $ 105,138,233
Prepaid expenses ............................................... 39,790
-------------
Total assets ................................................... 105,178,023
-------------
==============================================================================================================================
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------
Payables:
Distributor ................................................. $ 47,614
Other affiliates ............................................ 35,023
Administrative fees ......................................... 25,899 108,536
-------------
Accrued expenses ............................................... 17,066
-------------
Total liabilities .............................................. 125,602
-------------
==============================================================================================================================
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Net assets ..................................................... $ 105,052,421
=============
==============================================================================================================================
Net Assets Consist of
- ------------------------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.10 par value, 100,000,000
shares authorized ............................................. $ 61,701
Class B Shares of Common Stock, $.10 par value, 100,000,000
shares authorized ............................................. 234,002
Class C Shares of Common Stock, $.10 par value, 100,000,000
shares authorized ............................................. 135,083
Class I Shares of Common Stock, $.10 par value, 100,000,000
shares authorized ............................................. 309,558
Class R Shares of Common Stock, $.10 par value, 100,000,000
shares authorized ............................................. 10,752
Paid-in capital in excess of par ............................... 83,963,386
Undistributed investment income--net ........................... $ 366,974
Undistributed realized capital gains allocated from the
Portfolio--net ................................................ 3,291,751
Unrealized appreciation allocated from the Portfolio--net ...... 16,679,214
-------------
Total accumulated earnings--net ................................ 20,337,939
-------------
Net Assets ..................................................... $ 105,052,421
=============
==============================================================================================================================
Net Asset Value
- ------------------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $8,684,257 and 617,010 shares
outstanding ................................................... $ 14.07
=============
Class B--Based on net assets of $32,472,330 and 2,340,020 shares
outstanding ................................................... $ 13.88
=============
Class C--Based on net assets of $18,655,248 and 1,350,832 shares
outstanding ................................................... $ 13.81
=============
Class I--Based on net assets of $43,749,147 and 3,095,582 shares
outstanding ................................................... $ 14.13
=============
Class R--Based on net assets of $1,491,439 and 107,522 shares
outstanding ................................................... $ 13.87
=============
See Notes to Financial Statements.
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005 9
Statement of Operations Merrill Lynch Global Financial Services Fund, Inc.
For the Six Months Ended March 31, 2005
==============================================================================================================================
Investment Income Allocated from the Portfolio--Net
- ------------------------------------------------------------------------------------------------------------------------------
Investment income allocated from the Portfolio:
Dividends (net of $64,592 foreign withholding tax) .......... $ 1,193,119
Interest from affiliates .................................... 20,348
Securities lending--net ..................................... 239
Expenses .................................................... (299,588)
-------------
Net income ..................................................... 914,118
-------------
==============================================================================================================================
Expenses
- ------------------------------------------------------------------------------------------------------------------------------
Account maintenance and distribution fees--Class B ............. $ 171,566
Administration fees ............................................ 136,706
Account maintenance and distribution fees--Class C ............. 92,146
Registration fees .............................................. 29,385
Printing and shareholder reports ............................... 27,382
Transfer agent fees--Class B ................................... 24,501
Professional fees .............................................. 16,162
Transfer agent fees--Class C ................................... 13,586
Account maintenance fees--Class A .............................. 11,068
Transfer agent fees--Class I ................................... 8,928
Transfer agent fees--Class A ................................... 5,522
Account maintenance and distribution fees--Class R ............. 2,087
Transfer agent fees--Class R ................................... 489
Other .......................................................... 7,613
-------------
Total expenses ................................................. 547,141
-------------
Investment income--net ......................................... 366,977
-------------
==============================================================================================================================
Realized & Unrealized Gain (Loss) Allocated from the Portfolio--Net
- ------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments (including $898 from foreign capital gain
tax)--net .................................................. 5,205,936
Foreign currency transactions--net .......................... (15,191) 5,190,745
-------------
Change in unrealized appreciation (including $71,860 from
deferred foreign capital gain tax)--net ....................... 3,706,789
-------------
Total realized and unrealized gain--net ........................ 8,897,534
-------------
Net Increase in Net Assets Resulting from Operations ........... $ 9,264,511
=============
See Notes to Financial Statements.
10 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005
Statements of Changes in Net Assets
Merrill Lynch Global Financial Services Fund, Inc.
For the Six For the
Months Ended Year Ended
March 31, September 30,
Increase (Decrease) in Net Assets: 2005 2004
==============================================================================================================================
Operations
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ......................................... $ 366,977 $ 531,791
Realized gain--net ............................................. 5,190,745 11,602,587
Change in unrealized appreciation--net ......................... 3,706,789 3,972,700
---------------------------------
Net increase in net assets resulting from operations ........... 9,264,511 16,107,078
---------------------------------
==============================================================================================================================
Dividends and Distributions to Shareholders
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net:
Class A ..................................................... (81,274) --
Class B ..................................................... (113,482) --
Class C ..................................................... (82,807) --
Class I ..................................................... (137,854) --
Class R ..................................................... (6,963) --
Realized gain--net:
Class A ..................................................... (1,108,186) (961,927)
Class B ..................................................... (4,533,317) (4,081,132)
Class C ..................................................... (2,386,249) (1,616,424)
Class I ..................................................... (1,566,016) (1,398,493)
Class R ..................................................... (91,305) (8,157)
---------------------------------
Net decrease in net assets resulting from dividends and
distributions to shareholders ................................. (10,107,453) (8,066,133)
---------------------------------
==============================================================================================================================
Capital Share Transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets derived from capital share
transactions .................................................. 35,174,382 (7,458,905)
---------------------------------
==============================================================================================================================
Redemption Fees
- ------------------------------------------------------------------------------------------------------------------------------
Redemption fees ................................................ 531 23
---------------------------------
==============================================================================================================================
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ................................... 34,331,971 582,063
Beginning of period ............................................ 70,720,450 70,138,387
---------------------------------
End of period* ................................................. $ 105,052,421 $ 70,720,450
=================================
* Undistributed investment income--net ...................... $ 366,974 $ 422,377
=================================
See Notes to Financial Statements.
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005 11
Financial Highlights Merrill Lynch Global Financial Services Fund, Inc.
Class A
-----------------------------------------------------------------
For the Six
Months Ended For the Year Ended September 30,
The following per share data and ratios have been derived March 31, --------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 14.06 $ 12.71 $ 9.43 $ 10.87 $ 12.26
-----------------------------------------------------------------
Investment income--net*** .............. .08 .17 .06 .02 .05
Realized and unrealized gain (loss)--net 2.10 2.76 3.53 (1.07) (1.20)
-----------------------------------------------------------------
Total from investment operations ....... 2.18 2.93 3.59 (1.05) (1.15)
-----------------------------------------------------------------
Less dividends and distributions from:
Investment income--net .............. (.15) -- -- -- --
Realized gain--net .................. (2.02) (1.58) (.31) (.39) (.24)
-----------------------------------------------------------------
Total dividends and distributions ...... (2.17) (1.58) (.31) (.39) (.24)
-----------------------------------------------------------------
Net asset value, end of period ......... $ 14.07 $ 14.06 $ 12.71 $ 9.43 $ 10.87
=================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 15.73%@ 24.75% 38.83% (10.15%) (9.51%)
=================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses+ .............................. 1.71%* 1.78% 1.86% 1.76% 1.50%
=================================================================
Investment income--net ................. 1.10%* 1.21% .59% .17% .46%
=================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 8,684 $ 8,684 $ 7,800 $ 5,520 $ 8,032
=================================================================
Portfolio turnover of Global Financial
Services Portfolio .................... 39.92% 115.38% 205.93% 144.60% 111.71%
=================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
+ Includes the Fund's share of the Portfolio's allocated expenses.
@ Aggregate total investment return.
See Notes to Financial Statements.
12 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005
Financial Highlights (continued)
Merrill Lynch Global Financial Services Fund, Inc.
Class B
-----------------------------------------------------------------
For the Six
Months Ended For the Year Ended September 30,
The following per share data and ratios have been derived March 31, --------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 13.86 $ 12.51 $ 9.36 $ 10.78 $ 12.18
-----------------------------------------------------------------
Investment income (loss)--net*** ....... .02 .06 (.03) (.07) (.03)
Realized and unrealized gain (loss)--net 2.07 2.74 3.49 (1.06) (1.20)
-----------------------------------------------------------------
Total from investment operations ....... 2.09 2.80 3.46 (1.13) (1.23)
-----------------------------------------------------------------
Less dividends and distributions from:
Investment income--net .............. (.05) -- -- -- --
Realized gain--net .................. (2.02) (1.45) (.31) (.29) (.17)
-----------------------------------------------------------------
Total dividends and distributions ...... (2.07) (1.45) (.31) (.29) (.17)
-----------------------------------------------------------------
Net asset value, end of period ......... $ 13.88 $ 13.86 $ 12.51 $ 9.36 $ 10.78
=================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 15.29%@ 23.89% 37.71% (10.83%) (10.21%)
=================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses+ .............................. 2.48%* 2.55% 2.64% 2.53% 2.28%
=================================================================
Investment income (loss)--net .......... .35%* .46% (.24%) (.60%) (.30%)
=================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 32,472 $ 33,733 $ 37,202 $ 36,476 $ 59,928
=================================================================
Portfolio turnover of Global Financial
Services Portfolio .................... 39.92% 115.38% 205.93% 144.60% 111.71%
=================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
+ Includes the Fund's share of the Portfolio's allocated expenses.
@ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005 13
Financial Highlights (continued)
Merrill Lynch Global Financial Services Fund, Inc.
Class C
-----------------------------------------------------------------
For the Six
Months Ended For the Year Ended September 30,
The following per share data and ratios have been derived March 31, --------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 13.82 $ 12.51 $ 9.36 $ 10.78 $ 12.18
-----------------------------------------------------------------
Investment income (loss)--net*** ....... .03 .07 (.02) (.07) (.04)
Realized and unrealized gain (loss)--net 2.05 2.72 3.48 (1.06) (1.19)
-----------------------------------------------------------------
Total from investment operations ....... 2.08 2.79 3.46 (1.13) (1.23)
-----------------------------------------------------------------
Less dividends and distributions from:
Investment income--net .............. (.07) -- -- -- --
Realized gain--net .................. (2.02) (1.48) (.31) (.29) (.17)
-----------------------------------------------------------------
Total dividends and distributions ...... (2.09) (1.48) (.31) (.29) (.17)
-----------------------------------------------------------------
Net asset value, end of period ......... $ 13.81 $ 13.82 $ 12.51 $ 9.36 $ 10.78
=================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 15.26%@ 23.83% 37.71% (10.84%) (10.21%)
=================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses+ .............................. 2.48%* 2.56% 2.64% 2.55% 2.29%
=================================================================
Investment income (loss)--net .......... .39%* .48% (.22%) (.61%) (.31%)
=================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 18,655 $ 16,714 $ 13,762 $ 9,666 $ 14,805
=================================================================
Portfolio turnover of Global Financial
Services Portfolio .................... 39.92% 115.38% 205.93% 144.60% 111.71%
=================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
+ Includes the Fund's share of the Portfolio's allocated expenses.
@ Aggregate total investment return.
See Notes to Financial Statements.
14 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005
Financial Highlights (continued)
Merrill Lynch Global Financial Services Fund, Inc.
Class I
-----------------------------------------------------------------
For the Six
Months Ended For the Year Ended September 30,
The following per share data and ratios have been derived March 31, --------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 14.12 $ 12.76 $ 9.45 $ 10.89 $ 12.29
-----------------------------------------------------------------
Investment income--net*** .............. .19 .20 .09 .05 .08
Realized and unrealized gain (loss)--net 2.02 2.78 3.53 (1.07) (1.21)
-----------------------------------------------------------------
Total from investment operations ....... 2.21 2.98 3.62 (1.02) (1.13)
-----------------------------------------------------------------
Less dividends and distributions from:
Investment income--net .............. (.18) -- -- -- --
Realized gain--net .................. (2.02) (1.62) (.31) (.42) (.27)
-----------------------------------------------------------------
Total dividends and distributions ...... (2.20) (1.62) (.31) (.42) (.27)
-----------------------------------------------------------------
Net asset value, end of period ......... $ 14.13 $ 14.12 $ 12.76 $ 9.45 $ 10.89
=================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 15.89%@ 25.09% 39.10% (9.85%) (9.36%)
=================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses+ .............................. 1.40%* 1.53% 1.60% 1.51% 1.27%
=================================================================
Investment income--net ................. 2.77%* 1.46% .81% .43% .71%
=================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 43,749 $ 11,034 $ 11,325 $ 8,641 $ 12,741
=================================================================
Portfolio turnover of Global Financial
Services Portfolio .................... 39.92% 115.38% 205.93% 144.60% 111.71%
=================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
+ Includes the Fund's share of the Portfolio's allocated expenses.
@ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005 15
Financial Highlights (concluded)
Merrill Lynch Global Financial Services Fund, Inc.
Class R
------------------------------------------
For the For the
Six For the Period
Months Year Jan. 3,
Ended Ended 2003+ to
The following per share data and ratios have been derived March 31, Sept. 30, Sept. 30,
from information provided in the financial statements. 2005 2004 2003
================================================================================================================================
Per Share Operating Performance
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................... $ 13.91 $ 12.62 $ 10.16
------------------------------------------
Investment income--net*** ............................... .09 .14 .04
Realized and unrealized gain--net ....................... 2.04 2.74 2.42
------------------------------------------
Total from investment operations ........................ 2.13 2.88 2.46
------------------------------------------
Less dividends and distributions from:
Investment income--net ............................... (.15) -- --
Realized gain--net ................................... (2.02) (1.59) --
------------------------------------------
Total dividends and distributions ....................... (2.17) (1.59) --
------------------------------------------
Net asset value, end of period .......................... $ 13.87 $ 13.91 $ 12.62
==========================================
================================================================================================================================
Total Investment Return**
- --------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ...................... 15.58%@ 24.51% 24.21%@
==========================================
================================================================================================================================
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Expenses**** ............................................ 1.92%* 2.11% 2.17%*
==========================================
Investment income--net .................................. 1.26%* .99% .45%*
==========================================
================================================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ................ $ 1,491 $ 555 $ 49
==========================================
Portfolio turnover of Global Financial Services Portfolio 39.92% 115.38% 205.93%
==========================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
**** Includes the Fund's share of the Portfolio's allocated expenses.
+ Commencement of operations.
@ Aggregate total investment return.
See Notes to Financial Statements.
16 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005
Notes to Financial Statements
Merrill Lynch Global Financial Services Fund, Inc.
1. Significant Accounting Policies:
Merrill Lynch Global Financial Services Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940, as amended, as a diversified mutual
fund. The Fund seeks to achieve its investment objective by investing all of its
assets in the Global Financial Services Portfolio (the "Portfolio"), which is a
portfolio of Global Financial Services Master Trust, that has the same
investment objective and strategies as the Fund. The value of the Fund's
investment in the Portfolio reflects the Fund's proportionate interest in the
net assets of the Portfolio. The performance of the Fund is directly affected by
the performance of the Portfolio. The financial statements of the Portfolio,
including the Schedule of Investments, are included elsewhere in this report and
should be read in conjunction with the Fund's financial statements. The Fund's
financial statements are prepared in conformity with U.S. generally accepted
accounting principles, which may require the use of management accruals and
estimates. Actual results may differ from these estimates. These unaudited
financial statements reflect all adjustments, which are, in the opinion of
management, necessary to present a fair statement of the results for the period.
All such adjustments are of a normal, recurring nature. The percentage of the
Portfolio owned by the Fund at March 31, 2005, was 100%. The Fund offers
multiple classes of shares. Shares of Class A and Class I are sold with a
front-end sales charge. Shares of Class B and Class C may be subject to a
contingent deferred sales charge. Class R Shares are sold only to certain
retirement plans. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that
Class A, Class B, Class C and Class R Shares bear certain expenses related to
the account maintenance of such shares, and Class B, Class C and Class R Shares
also bear certain expenses related to the distribution of such shares. Each
class has exclusive voting rights with respect to matters relating to its
account maintenance and distribution expenditures (except that Class B
shareholders may vote on certain changes to the Class A distribution plan).
Income, expenses (other than expenses attributable to a specific class) and
realized and unrealized gains and losses 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 investment in the Portfolio
at fair value. Valuation of securities held by the Portfolio is discussed in
Note 1a of the Portfolio'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 Portfolio'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 shareholders. Therefore,
no federal income tax provision is required. Under the applicable foreign tax
law, a withholding tax may be imposed on interest, dividends and capital gains
at various rates.
(d) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.
(e) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(f) Investment transactions -- Investment transactions in the Portfolio are
accounted for on a trade date basis.
2. Transactions with Affiliates:
The Fund has entered into an Administrative Services Agreement with Fund Asset
Management, L.P. ("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
..35% 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 entered into a Distribution Agreement and Distribution Plan with
FAM Distributors, Inc. ("FAMD" or the "Distributor"), which is a wholly-owned
subsidiary of Merrill Lynch Group, Inc. Pursuant to the Distribution Plan
adopted by the Fund in accordance with Rule 12b-1 under the Investment Company
Act of 1940, the Fund pays the Distributor ongoing account maintenance and
distribution fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class A .............................. .25% --
Class B .............................. .25% .75%
Class C .............................. .25% .75%
Class R .............................. .25% .25%
- --------------------------------------------------------------------------------
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005 17
Notes to Financial Statements (continued)
Merrill Lynch Global Financial Services Fund, Inc.
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), an affiliate of FAM, also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class A, Class B, Class C and Class R shareholders. The
ongoing distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B, Class C and Class R
shareholders.
For the six months ended March 31, 2005, FAMD earned underwriting discounts and
MLPF&S earned dealer concessions on sales of the Fund's Class A and Class I
Shares as follows:
- --------------------------------------------------------------------------------
FAMD MLPF&S
- --------------------------------------------------------------------------------
Class A ............................ $ 364 $5,686
Class I ............................ -- $ 3
- --------------------------------------------------------------------------------
For the six months ended March 31, 2005, MLPF&S received contingent deferred
sales charges of $10,907 and $2,123 relating to transactions in Class B and
Class C Shares, respectively.
Financial Data Services, Inc. ("FDS"), an indirect, wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, FAMD, FDS, and/or ML & Co.
3. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share transactions
was $35,174,382 and $(7,458,905) for the six months ended March 31, 2005 and for
the year ended September 30, 2004, respectively.
Transactions in capital shares for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended March 31, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 61,079 $ 879,351
Shares issued to shareholders in
reinvestment of dividends
and distributions ................. 74,811 1,036,129
Automatic conversion of shares ....... 36,080 531,895
---------------------------------
Total issued ......................... 171,970 2,447,375
Shares redeemed ...................... (172,397) (2,575,750)
---------------------------------
Net decrease ......................... (427) $ (128,375)
=================================
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended September 30, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 169,917 $ 2,380,633
Shares issued to shareholders in
reinvestment of distributions ..... 70,612 875,587
Automatic conversion of shares ....... 57,760 793,529
---------------------------------
Total issued ......................... 298,289 4,049,749
Shares redeemed ...................... (294,621) (4,106,372)
---------------------------------
Net increase (decrease) .............. 3,668 $ (56,623)
=================================
- -------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended March 31, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 134,799 $ 1,920,369
Shares issued to shareholders in
reinvestment of dividends
and distributions ................. 284,042 3,888,536
---------------------------------
Total issued ......................... 418,841 5,808,905
---------------------------------
Automatic conversion of shares ....... (36,611) (531,895)
Shares redeemed ...................... (476,637) (6,869,913)
---------------------------------
Total redeemed ....................... (513,248) (7,401,808)
---------------------------------
Net decrease ......................... (94,407) $ (1,592,903)
=================================
- -------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended September 30, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 179,988 $ 2,446,506
Shares issued to shareholders in
reinvestment of distributions ..... 264,693 3,253,082
---------------------------------
Total issued ......................... 444,681 5,699,588
---------------------------------
Automatic conversion of shares ....... (58,493) (793,529)
Shares redeemed ...................... (925,089) (12,560,184)
---------------------------------
Total redeemed ....................... (983,582) (13,353,713)
---------------------------------
Net decrease ......................... (538,901) $ (7,654,125)
=================================
18 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005
Notes to Financial Statements (concluded)
Merrill Lynch Global Financial Services Fund, Inc.
- -------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended March 31, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 180,094 $ 2,543,046
Shares issued to shareholders in
reinvestment of dividends
and distributions ................. 165,876 2,259,235
---------------------------------
Total issued ......................... 345,970 4,802,281
Shares redeemed ...................... (204,862) (2,928,821)
---------------------------------
Net increase ......................... 141,108 $ 1,873,460
=================================
- -------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended September 30, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 237,793 $ 3,267,034
Shares issued to shareholders in
reinvestment of distributions ..... 117,887 1,445,300
---------------------------------
Total issued ......................... 355,680 4,712,334
Shares redeemed ...................... (246,220) (3,334,545)
---------------------------------
Net increase ......................... 109,460 $ 1,377,789
=================================
- -------------------------------------------------------------------------------
Class I Shares for the Six Months Dollar
Ended March 31, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 2,337,619 $ 34,488,155
Shares issued to shareholders in
reinvestment of dividends
and distributions ................. 110,858 1,540,920
---------------------------------
Total issued ......................... 2,448,477 36,029,075
Shares redeemed ...................... (134,255) (1,959,078)
---------------------------------
Net increase ......................... 2,314,222 $ 34,069,997
=================================
- -------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended September 30, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 235,571 $ 3,258,165
Shares issued to shareholders in
reinvestment of distributions ..... 104,603 1,300,211
---------------------------------
Total issued ......................... 340,174 4,558,376
Shares redeemed ...................... (446,456) (6,182,958)
---------------------------------
Net decrease ......................... (106,282) $ (1,624,582)
=================================
- -------------------------------------------------------------------------------
Class R Shares for the Six Months Dollar
Ended March 31, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 88,943 $ 1,261,179
Shares issued to shareholders in
reinvestment of dividends
and distributions ................. 7,194 98,268
---------------------------------
Total issued ......................... 96,137 1,359,447
Shares redeemed ...................... (28,524) (407,244)
---------------------------------
Net increase ......................... 67,613 $ 952,203
=================================
- -------------------------------------------------------------------------------
Class R Shares for the Year Dollar
Ended September 30, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 38,284 $ 531,927
Shares issued to shareholders in
reinvestment of distributions ..... 664 8,157
---------------------------------
Total issued ......................... 38,948 540,084
Shares redeemed ...................... (2,946) (41,448)
---------------------------------
Net increase ......................... 36,002 $ 498,636
=================================
The Fund charges a 2% redemption fee on the proceeds (calculated at market
value) of a redemption (either by sale or exchange) of Fund shares made within
30 days of purchase. The redemption fee is paid to the Fund and is intended to
offset the trading costs, market impact and other costs associated with
short-term trading into and out of the Fund.
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005 19
Schedule of Investments Global Financial Services Portfolio
Value
Europe Industry* Shares Held Common Stocks (in U.S. dollars)
===================================================================================================================================
Belgium--0.5% Commercial Banks--0.2% 1,900 KBC Bancassurance Holding $ 160,630
---------------------------------------------------------------------------------------------------------------
Diversified Financial 11,700 Fortis 334,225
Services--0.3%
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in Belgium 494,855
===================================================================================================================================
Denmark--0.9% Commercial Banks--0.9% 31,000 Danske Bank A/S 901,792
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in Denmark 901,792
===================================================================================================================================
France--0.0% Insurance--0.0% 700 CNP Assurances 49,718
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in France 49,718
===================================================================================================================================
Germany--4.6% Capital Markets--2.0% 142,000 MLP AG 2,068,803
---------------------------------------------------------------------------------------------------------------
Insurance--2.6% 69,500 Hannover Rueckversicherungs AG Registered
Shares 2,755,829
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in Germany 4,824,632
===================================================================================================================================
Hungary--0.4% Commercial Banks--0.4% 11,800 OTP Bank Rt 404,375
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in Hungary 404,375
===================================================================================================================================
Ireland--1.8% Commercial Banks--1.8% 29,100 Allied Irish Banks Plc 610,789
50,500 Anglo Irish Bank Corp. Plc 1,268,013
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in Ireland 1,878,802
===================================================================================================================================
Netherlands--0.8% Commercial Banks--0.3% 11,000 ABN AMRO Holding NV 273,628
---------------------------------------------------------------------------------------------------------------
Diversified Financial 18,900 ING Groep NV CVA 572,325
Services--0.5%
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in the Netherlands 845,953
===================================================================================================================================
Russia--0.9% Commercial Banks--0.9% 1,690 Sberbank RF 995,410
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in Russia 995,410
===================================================================================================================================
Spain--0.2% Commercial Banks--0.2% 2,700 Banco Popular Espanol SA 175,101
---------------------------------------------------------------------------------------------------------------
Insurance--0.0% 1,700 Corporacion Mapfre SA 26,248
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in Spain 201,349
===================================================================================================================================
Turkey--1.5% Commercial Banks--1.5% 324,284 Akbank T.A.S. 1,572,795
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in Turkey 1,572,795
===================================================================================================================================
United Kingdom-- Capital Markets--0.3% 9,200 Close Brothers Group Plc 134,729
12.2% 17,500 ICAP Plc 90,772
3,400 Man Group Plc 88,275
------------
313,776
---------------------------------------------------------------------------------------------------------------
Commercial Banks--1.6% 700 Barclays Plc 7,156
177,000 Lloyds TSB Group Plc 1,598,723
29,100 London Scottish Bank Plc 68,735
------------
1,674,614
---------------------------------------------------------------------------------------------------------------
Consumer Finance--1.0% 40,200 Cattles Plc 256,753
60,300 Provident Financial Plc 806,719
------------
1,063,472
---------------------------------------------------------------------------------------------------------------
Insurance--0.2% 25,900 Jardine Lloyd Thompson Group Plc 187,444
---------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance--9.1% 574,300 Kensington Group Plc 6,456,955
211,100 Northern Rock Plc 3,167,238
------------
9,624,193
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in the United Kingdom 12,863,499
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in Europe--23.8% 25,033,180
===============================================================================================================
20 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005
Schedule of Investments (continued) Global Financial Services Portfolio
Value
North America Industry* Shares Held Common Stocks (in U.S. dollars)
===================================================================================================================================
Bermuda--10.5% Insurance--10.5% 92,100 ACE Ltd. $ 3,800,967
12,100 Everest Re Group Ltd. 1,029,831
8,600 Montpelier Re Holdings Ltd. 302,290
800 PartnerRe Ltd. 51,680
125,100 RenaissanceRe Holdings Ltd. 5,842,170
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in Bermuda 11,026,938
===================================================================================================================================
Canada--0.0% Commercial Banks--0.0% 117 Toronto-Dominion Bank 4,838
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in Canada 4,838
===================================================================================================================================
United States-- Capital Markets--2.7% 46,700 Affiliated Managers Group (a) 2,896,801
33.5%
---------------------------------------------------------------------------------------------------------------
Commercial Banks--0.0% 245 TD Banknorth, Inc. 7,654
300 U.S. Bancorp 8,646
------------
16,300
---------------------------------------------------------------------------------------------------------------
Commercial Services & 6,200 Equifax, Inc. 190,278
Supplies--0.2%
---------------------------------------------------------------------------------------------------------------
Consumer Finance--2.2% 31,200 Capital One Financial Corp. 2,332,824
---------------------------------------------------------------------------------------------------------------
Insurance--7.8% 500 Arthur J. Gallagher & Co. 14,400
200,800 Bristol West Holdings, Inc. 3,112,400
200 Brown & Brown, Inc. 9,218
2,000 Hilb Rogal & Hobbs Co. 71,600
191,300 PXRE Group Ltd. 4,906,845
200 The Progressive Corp. 18,352
1,000 Protective Life Corp. 39,300
------------
8,172,115
---------------------------------------------------------------------------------------------------------------
Real Estate--18.1% 1,000 AMB Property Corp. 37,800
218,200 American Home Mortgage Investment Corp. 6,249,248
1,400 Equity Office Properties Trust 42,182
297,900 Friedman Billings Ramsey Group, Inc. Class A 4,727,673
169,700 New Century Financial Corp. 7,945,354
------------
19,002,257
---------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance--2.5% 59,400 Accredited Home Lenders Holding Co. (a) 2,152,062
7,000 Freddie Mac 442,400
------------
2,594,462
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in the United States 35,205,037
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in North America--44.0% 46,236,813
===============================================================================================================
Pacific Basin/Asia
===================================================================================================================================
Australia--0.1% Commercial Banks--0.1% 2,700 National Australia Bank Ltd. 59,211
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in Australia 59,211
===================================================================================================================================
China--0.1% Real Estate--0.1% 519,500 Beijing Capital Land Ltd. 132,550
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in China 132,550
===================================================================================================================================
Hong Kong--0.7% Real Estate--0.7% 1,164,000 China Resources Land Ltd. 231,327
865,300 Hopson Development Holdings Ltd. 477,064
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in Hong Kong 708,391
===================================================================================================================================
India--2.6% Commercial Banks--2.6% 21,100 HDFC Bank Ltd. 262,995
279,200 ICICI Bank Ltd. 2,512,896
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in India 2,775,891
===================================================================================================================================
Indonesia--3.4% Commercial Banks--3.4% 9,876,400 Bank Central Asia Tbk PT 3,545,909
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in Indonesia 3,545,909
===============================================================================================================
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005 21
Schedule of Investments (concluded) Global Financial Services Portfolio
Pacific Basin/Asia Value
(concluded) Industry* Shares Held Common Stocks (in U.S. dollars)
===================================================================================================================================
Japan--3.9% Capital Markets--0.6% 18,000 Daiichi Commodities Co. Ltd. $ 110,565
24,000 Koyo Futures Co. Ltd. 141,137
7,700 Nomura Holdings, Inc. 107,984
70,700 Toyo Securities Co., Ltd. 316,616
------------
676,302
---------------------------------------------------------------------------------------------------------------
Commercial Banks--0.7% 117,000 The Bank of Yokohama Ltd. (a) 715,389
---------------------------------------------------------------------------------------------------------------
Consumer Finance--2.2% 5,800 Aeon Credit Service Co., Ltd. 392,595
10,200 Aiful Corp. (a) 812,491
29,900 Credit Saison Co., Ltd. 1,079,039
------------
2,284,125
---------------------------------------------------------------------------------------------------------------
Diversified Financial 31,000 ACE Koeki Co. Ltd. 182,881
Services--0.3% 37,000 Gakken Credit Corp. 114,501
------------
297,382
---------------------------------------------------------------------------------------------------------------
Real Estate--0.1% 14,600 Fuso Lexel, Inc. 121,212
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in Japan 4,094,410
===================================================================================================================================
South Korea-- Commercial Banks--10.6% 417,900 Daegu Bank 3,082,295
17.8% 120,800 Hana Bank 3,330,773
199,500 Industrial Bank of Korea 1,726,839
384,800 Pusan Bank 3,046,570
------------
11,186,477
---------------------------------------------------------------------------------------------------------------
Insurance--7.2% 35,600 Dongbu Insurance Co. Ltd. 290,970
725,750 Korean Reinsurance Co. 3,952,139
169,600 Oriental Fire & Marine Insurance Co., Ltd. 3,306,824
------------
7,549,933
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in South Korea 18,736,410
---------------------------------------------------------------------------------------------------------------
Total Common Stocks in the
Pacific Basin/Asia--28.6% 30,052,772
---------------------------------------------------------------------------------------------------------------
Total Investments in Common Stocks
(Cost--$84,580,953)--96.4% 101,322,765
===============================================================================================================
Beneficial
Interest Short-Term Securities
===================================================================================================================================
$5,613,811 Merrill Lynch Liquidity Series, LLC Cash
Sweep Series I (b) 5,613,811
---------------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost--$5,613,811)--5.3% 5,613,811
===================================================================================================================================
Total Investments (Cost--$90,194,764**)--101.7% 106,936,576
Liabilities in Excess of Other Assets--(1.7%) (1,798,343)
------------
Net Assets--100.0% $105,138,233
============
* For Portfolio compliance purposes, "Industry" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Portfolio
management. This definition may not apply for purposes of this report,
which may combine such industry sub-classifications for reporting ease.
** The cost and unrealized appreciation (depreciation) of investments as of
March 31, 2005, as computed for federal income tax purposes, were as
follows:
Aggregate cost ............................. $ 91,227,069
============
Gross unrealized appreciation .............. $ 17,826,290
Gross unrealized depreciation .............. (2,116,783)
------------
Net unrealized appreciation ................ $ 15,709,507
============
(a) Non-income producing security.
(b) Investments in companies considered to be an affiliate of the Portfolio
(such companies are defined as "Affiliated Companies" in Section 2(a)(3)
of the Investment Company Act of 1940) were as follows:
--------------------------------------------------------------------------
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $5,613,811 $ 20,348
Merrill Lynch Liquidity Series, LLC
Money Market Series -- $ 239
--------------------------------------------------------------------------
See Notes to Financial Statements.
22 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005
Statement of Assets and Liabilities Global Financial Services Portfolio
As of March 31, 2005
========================================================================================================================
Assets
- ------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value
(identified cost--$84,580,953) .......................... $ 101,322,765
Investments in affiliated securities, at value
(identified cost--$5,613,811) ........................... 5,613,811
Foreign cash (cost--$298,543) ............................ 298,544
Receivables:
Dividends ............................................. $ 710,334
Contributions ......................................... 483,306
Interest from affiliates .............................. 17,266
Securities sold ....................................... 2,560
Securities lending .................................... 25 1,213,491
-------------
Prepaid expenses ......................................... 3,290
-------------
Total assets ............................................. 108,451,901
-------------
========================================================================================================================
Liabilities
- ------------------------------------------------------------------------------------------------------------------------
Deferred foreign capital gain tax ........................ 71,796
Payables:
Securities purchased .................................. 3,029,167
Withdrawals ........................................... 147,389
Investment adviser .................................... 29,611
Other affiliates ...................................... 783 3,206,950
-------------
Accrued expenses ......................................... 34,922
-------------
Total liabilities ........................................ 3,313,668
-------------
========================================================================================================================
Net Assets
- ------------------------------------------------------------------------------------------------------------------------
Net assets ............................................... $ 105,138,233
=============
========================================================================================================================
Net Assets Consist of
- ------------------------------------------------------------------------------------------------------------------------
Investor's capital ....................................... $ 88,459,019
Unrealized appreciation--net ............................. 16,679,214
-------------
Net Assets ............................................... $ 105,138,233
=============
See Notes to Financial Statements.
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005 23
Statement of Operations Global Financial Services Portfolio
For the Six Months Ended March 31, 2005
========================================================================================================================
Investment Income
- ------------------------------------------------------------------------------------------------------------------------
Dividends (net of $64,592 foreign withholding tax) ....... $ 1,193,119
Interest from affiliates ................................. 20,348
Securities lending--net .................................. 239
-------------
Total income ............................................. 1,213,706
-------------
========================================================================================================================
Expenses
- ------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ................................. $ 156,451
Accounting services ...................................... 49,500
Custodian fees ........................................... 36,789
Trustees' fees and expenses .............................. 25,813
Professional fees ........................................ 21,066
Pricing fees ............................................. 2,821
Printing and shareholder reports ......................... 657
Other .................................................... 6,491
-------------
Total expenses ........................................... 299,588
-------------
Investment income--net ................................... 914,118
-------------
========================================================================================================================
Realized & Unrealized Gain (Loss)--Net
- ------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments (including $898 from foreign capital gain
tax)--net .............................................. 5,205,936
Foreign currency transactions--net ...................... (15,191) 5,190,745
-------------
Change in unrealized appreciation on:
Investments (including $71,860 from deferred foreign
capital gain tax)--net ................................. 3,713,337
Foreign currency transactions--net ...................... (6,548) 3,706,789
---------------------------------
Total realized and unrealized gain--net .................. 8,897,534
-------------
Net Increase in Net Assets Resulting from Operations ..... $ 9,811,652
=============
See Notes to Financial Statements.
24 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005
Statements of Changes in Net Assets Global Financial Services Portfolio
For the Six For the
Months Ended Year Ended
March 31, September 30,
Increase (Decrease) in Net Assets: 2005 2004
========================================================================================================================
Operations
- ------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................... $ 914,118 $ 1,667,386
Realized gain--net ....................................... 5,190,745 11,602,587
Change in unrealized appreciation--net ................... 3,706,789 3,972,700
---------------------------------
Net increase in net assets resulting from operations ..... 9,811,652 17,242,673
---------------------------------
========================================================================================================================
Capital Transactions
- ------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions .............................. 49,915,188 18,766,602
Fair value of withdrawals ................................ (25,350,362) (35,419,030)
---------------------------------
Net increase (decrease) in net assets derived from capital
transactions ............................................ 24,564,826 (16,652,428)
---------------------------------
========================================================================================================================
Net Assets
- ------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ............................. 34,376,478 590,245
Beginning of period ...................................... 70,761,755 70,171,510
---------------------------------
End of period ............................................ $ 105,138,233 $ 70,761,755
=================================
See Notes to Financial Statements.
Financial Highlights Global Financial Services Portfolio
For the Six
Months Ended For the Year Ended September 30,
The following ratios have been derived from March 31, ---------------------------------------------
information provided in the financial statements. 2005 2004 2003 2002 2001
==============================================================================================================================
Total Investment Return**
- ------------------------------------------------------------------------------------------------------------------------------
Total investment return ................ 16.21%+ 25.86% 40.92% (8.61%) --
===========================================================
==============================================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... .77%* .78% .76% .67% .63%
===========================================================
Investment income--net ................. 2.34%* 2.23% 1.64% 1.26% 1.34%
===========================================================
==============================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $105,138 $ 70,762 $ 70,172 $ 60,342 $ 95,504
===========================================================
Portfolio turnover ..................... 39.92% 115.38% 205.93% 144.60% 111.71%
===========================================================
* Annualized.
** Total investment return is required to be disclosed for fiscal years
beginning after December 15, 2000.
+ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005 25
Notes to Financial Statements Global Financial Services Portfolio
1. Significant Accounting Policies:
Global Financial Services Portfolio (the "Portfolio") is part of Global
Financial Services Master Trust (the "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 interests in the Trust, subject to certain limitations. The
Portfolio's financial statements are prepared in conformity with U.S. generally
accepted accounting principles, which may require the use of management accruals
and estimates. Actual results may differ from these estimates. These unaudited
financial statements reflect all adjustments, which are, in the opinion of
management, necessary to present a fair statement of the results for the period.
All such adjustments are of a normal, recurring nature. The following is a
summary of significant accounting policies followed by the Portfolio.
(a) Valuation of investments -- Equity securities that are held by the Portfolio
that are traded on stock exchanges or the Nasdaq National Market are valued at
the last sale price or official close price on the exchange, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price for long positions and at the last available ask
price for short positions. In cases where equity securities are traded on more
than one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Trustees of the Trust.
Long positions traded in the over-the-counter ("OTC") market, Nasdaq, Small Cap
or Bulletin Board are valued at the last available bid price or yield equivalent
obtained from one or more dealers or pricing services approved by the Board of
Trustees of the Trust. Short positions traded in the OTC market are valued at
the last available ask price. Portfolio securities that are traded both in the
OTC market and on a stock exchange are valued according to the broadest and most
representative market.
Options written are valued at the last sale price in the case of exchange-traded
options or, in the case of options traded in the OTC market, the last ask price.
Options purchased are valued at their last sale price in the case of
exchange-traded options or, in the case of options traded in the OTC market, the
last bid price. Swap agreements are valued daily based upon quotations from
market makers. Financial futures contracts and options thereon, which are traded
on exchanges, are valued at their last sale price as of the close of such
exchanges. Obligations with remaining maturities of 60 days or less are valued
at amortized cost unless the Investment Adviser believes that this method no
longer produces fair valuations.
Repurchase agreements are valued at cost plus accrued interest. The Portfolio
employs pricing services to provide certain securities prices for the Portfolio.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Trustees of the Trust, including valuations furnished by the
pricing services retained by the Portfolio, which may use a matrix system for
valuations. The procedures of a pricing service and its valuations are reviewed
by the officers of the Portfolio under the general supervision of the Trust's
Board of Trustees. Such valuations and procedures will be reviewed periodically
by the Board of Trustees of the Trust.
Generally, trading in foreign securities, as well as U.S. government securities
and money market instruments, is substantially completed each day at various
times prior to the close of business on the New York Stock Exchange ("NYSE").
The values of such securities used in computing the net assets of the Portfolio
are determined as of such times. Foreign currency exchange rates also are
generally determined prior to the close of business on the NYSE. Occasionally,
events affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of business on the
NYSE that may not be reflected in the computation of the Portfolio's net assets.
If events (for example, a company announcement, market volatility or a natural
disaster) occur during such periods that are expected to materially affect the
value of such securities, those securities may be valued at their fair value as
determined in good faith by the Trust's Board of Trustees or by the Investment
Adviser using a pricing service and/or procedures approved by the Trust's Board
of Trustees.
26 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005
Notes to Financial Statements (continued) Global Financial Services Portfolio
(b) Derivative financial instruments -- The Portfolio may engage in various
portfolio investment strategies, both to increase the return of the Portfolio,
and to hedge, or protect, its exposure to interest rate movements and movements
in the securities markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
o Financial futures contracts -- The Portfolio may purchase or sell
financial futures contracts and options on such futures contracts. Futures
contracts are contracts for delayed delivery of securities at specific
future date and at a specific price or yield. Upon entering into a
contract, the Portfolio deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Portfolio agrees to receive from or pay to
the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as variation margin and
are recorded by the Portfolio as unrealized gains or losses. When the
contract is closed, the Portfolio records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened
and the value at the time it was closed.
o Options -- The Portfolio may purchase and write call and put options. When
the Portfolio writes an option, an amount equal to the premium received by
the Portfolio is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked-to-market to reflect the
current market value of the option written. When a security is purchased
or sold through an exercise of an option, the related premium paid (or
received) is added to (or deducted from) the basis of the security
acquired or deducted from (or added to) the proceeds of the security sold.
When an option expires (or the Portfolio enters into a closing
transaction), the Portfolio realizes a gain or loss on the option to the
extent of the premiums received or paid (or a gain or loss to the extent
that the cost of the closing transaction exceeds the premium paid or
received).
Written and purchased options are non-income producing investments.
o Forward foreign exchange contracts -- The Portfolio may enter into forward
foreign exchange contracts as a hedge against either specific transactions
or portfolio positions. The contract is marked-to-market daily and the
change in market value is recorded by the Portfolio as an unrealized gain
or loss. When the contract is closed, the Portfolio records a realized
gain or loss equal to the difference between the value at the time it was
opened and the value at the time it was closed.
o Foreign currency options and futures -- The Portfolio may also purchase or
sell listed or over-the-counter foreign currency options, foreign currency
futures and related options on foreign currency futures as a short or long
hedge against possible variations in foreign exchange rates. Such
transactions may be effected with respect to hedges on non-U.S.
dollar-denominated securities owned by the Portfolio, sold by the
Portfolio but not yet delivered, or committed or anticipated to be
purchased by the Portfolio.
(c) Foreign currency transactions -- Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into U.S. dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on investments.
(d) Income taxes -- The Portfolio is considered as a "pass through" entity for
federal income tax purposes. As such, each investor in the Portfolio is treated
as owner of its proportionate share of the net assets, income, expenses and
realized and unrealized gains and losses of the Portfolio. Therefore, no federal
income tax provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends and capital gains at
various rates. It is intended that the Portfolio's assets will be managed so an
investor in the Portfolio can satisfy the requirements of subchapter M of the
Internal Revenue Code.
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005 27
Notes to Financial Statements (continued) Global Financial Services Portfolio
(e) Security transactions and investment income -- Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Dividends from foreign securities where the ex-dividend date may have passed are
subsequently recorded when the portfolio has determined the ex-dividend date.
Interest income is recognized on the accrual basis.
(f) Securities lending -- The Portfolio may lend securities to financial
institutions that provide cash or securities issued or guaranteed by the U.S.
government as collateral, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities. The
market value of the loaned securities is determined at the close of business of
the Portfolio and any additional required collateral is delivered to the
Portfolio on the next business day. Where the Portfolio receives securities as
collateral for the loaned securities, it collects a fee from the borrower. The
Portfolio typically receives the income on the loaned securities but does not
receive the income on the collateral. Where the Portfolio receives cash
collateral, it may invest such collateral and retain the amount earned on such
investment, net of any amount rebated to the borrower. Loans of securities are
terminable at any time and the borrower, after notice, is required to return
borrowed securities within five business days. The Portfolio may pay reasonable
finder's, lending agent, administrative and custodial fees in connection with
its loans. In the event that the borrower defaults on its obligation to return
borrowed securities because of insolvency or for any other reason, the Portfolio
could experience delays and costs in gaining access to the collateral. The
Portfolio also could suffer a loss where the value of the collateral falls below
the market value of the borrowed securities, in the event of borrower default or
in the event of losses on investments made with cash collateral.
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 Portfolio's investments and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Trust. For such services, the
Portfolio pays a monthly fee at an annual rate of .40% of the average daily
value of the Trusts' net assets. FAM has entered into a Sub-Advisory Agreement
with Merrill Lynch Asset Management U.K. Limited ("MLAM U.K."), an affiliate of
FAM, pursuant to which MLAM U.K. provides investment advisory services to FAM
with respect to the Fund. There is no increase in the aggregate fees paid by the
Fund for these services.
The Portfolio has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., or its
affiliates. Pursuant to that order, the Portfolio also has retained Merrill
Lynch Investment Managers, LLC ("MLIM, LLC"), an affiliate of FAM, as the
securities lending agent for a fee based on a share of the returns on investment
of cash collateral. MLIM, LLC may, on behalf of the Portfolio, invest cash
collateral received by the Portfolio for such loans, among other things, in a
private investment company managed by MLIM, LLC or in registered money market
funds advised by FAM or its affiliates. For the six months ended March 31, 2005,
MLIM, LLC received $103 in securities lending agent fees.
In addition, MLPF&S received $9,717 in commissions on the execution of portfolio
security transactions for the Portfolio for the six months ended March 31, 2005.
For the six months ended March 31, 2005, the Portfolio reimbursed FAM $1,048 for
certain accounting services.
Certain officers and/or trustees of the Trust are officers and/or directors of
FAM, PSI, MLAM U.K., and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended March 31, 2005 were $52,985,411 and $31,223,401, respectively.
28 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005
Notes to Financial Statements (concluded) Global Financial Services Portfolio
4. Short-Term Borrowings:
The Portfolio, along with certain other funds managed by FAM and its affiliates,
is a party to a $500,000,000 credit agreement with a group of lenders. The
Portfolio may borrow under the credit agreement to fund shareholder redemptions
and for other lawful purposes other than for leverage. The Portfolio may borrow
up to the maximum amount allowable under the Portfolio's current prospectus and
statement of additional information, subject to various other legal, regulatory
or contractual limits. The Portfolio pays a commitment fee of .07% per annum
based on the Portfolio's pro rata share of the unused portion of the credit
agreement. Amounts borrowed under the credit agreement bear interest at a rate
equal to, at each Portfolio's election, the federal funds rate plus .50% or a
base rate as defined in the credit agreement. The Portfolio did not borrow under
the credit agreement during the six months ended March 31, 2005. On November 26,
2004, the credit agreement was renewed for one year under substantially the same
terms.
5. Commitments:
At March 31, 2005, the Portfolio entered into foreign exchange contracts under
which it agreed to purchase various foreign currencies with approximate value of
$1,018,000.
Officers and Directors/Trustees
Robert C. Doll, Jr., President and Director/Trustee
Ronald W. Forbes, Director/Trustee
Cynthia A. Montgomery, Director/Trustee
Jean Margo Reid, Director/Trustee
Roscoe S. Suddarth, Director/Trustee
Richard R. West, Director/Trustee
Edward D. Zinbarg, Director/Trustee
Walid Kassem, Vice President and Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109-3661
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
- --------------------------------------------------------------------------------
Effective January 1, 2005, Terry K. Glenn, President and Director/Trustee and
Kevin A. Ryan, Director/Trustee of Merrill Lynch Global Financial Services Fund,
Inc. and Global Financial Services Master Trust retired. The Fund's/Trust's
Board of Directors/Trustees wishes Messrs. Glenn and Ryan well in their
retirements.
Effective January 1, 2005, Robert C. Doll, Jr. became President and
Director/Trustee of the Fund and the Trust.
- --------------------------------------------------------------------------------
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005 29
Disclosure of Investment Advisory Agreement
Activities of and Composition of the Board of Directors
All but one member of the Board of Directors is an independent director whose
only affiliation with Fund Asset Management, L.P. (the "Investment Adviser") or
other Merrill Lynch affiliates is as a director of the Fund and certain other
funds advised by the Investment Adviser or its affiliates. The Chairman of the
Board is also an independent director. New director nominees are chosen as
nominees by a Nominating Committee comprised of independent directors. All
independent directors also are members of the Board's Audit Committee and the
independent directors meet in executive session at each in-person Board meeting.
The Board and the Audit Committee meet in person for at least two days each
quarter and conduct other in person and telephone meetings throughout the year,
some of which are formal board meetings, and some of which are informational
meetings. The independent counsel to the independent directors attends all in
person Board and Audit Committee meetings and other meetings at the independent
directors' request.
Investment Advisory Agreement -- Matters Considered by the Board
Every year, the Board considers approval of the investment advisory agreement
(the "Investment Advisory Agreement") between the Investment Adviser and Global
Financial Services Master Trust, in which the Fund invests all of its assets
(throughout this discussion the term "Fund" includes Global Financial Services
Master Trust). The Board also reviews and evaluates the performance of and
services provided by the Investment Adviser throughout each year. The Board also
annually reviews and considers approval of the sub-advisory agreement on behalf
of the Fund between the Investment Adviser and an affiliate. The Board assesses
the nature, scope and quality of the services provided to the Fund by the
personnel of the Investment Adviser, the sub-adviser and their affiliates,
including administrative services, shareholder services, oversight of fund
accounting, marketing services and assistance in meeting legal and regulatory
requirements. The Board also receives and assesses information regarding the
services provided to the Fund by certain unaffiliated service providers.
At various times throughout the year, the Board also considers a range of
information in connection with its oversight of the services provided by the
Investment Adviser and its affiliates, including the sub-adviser. Among the
matters considered are: (a) fees (in addition to management fees) paid to the
Investment Adviser and its affiliates by the Fund, such as transfer agency fees
and fees for marketing and distribution; (b) Fund operating expenses paid to
third parties; (c) the resources devoted to and compliance reports relating to
the Fund's investment objective, policies and restrictions, and its compliance
with its Code of Ethics and the Investment Adviser's compliance policies and
procedures; and (d) the nature, cost and character of non-investment management
services provided by the Investment Adviser and its affiliates.
The Board believes that the Investment Adviser is one of the most experienced
global asset management firms and considers the overall quality of services
provided by the Investment Adviser to be generally of high quality. The Board
also believes that the Investment Adviser is financially sound and well managed
and notes that the Investment Adviser is affiliated with one of America's
largest financial firms. The Board works closely with the Investment Adviser in
overseeing the Investment Adviser's efforts to achieve good performance. As part
of this effort, the Board discusses portfolio manager effectiveness and, when
performance is not satisfactory, discusses with the Investment Adviser taking
steps such as changing investment personnel.
Annual Consideration of Approval by the Board of Directors
In the period prior to the Board meeting to consider renewal of the Investment
Advisory Agreement and the sub-advisory agreement, the Board requests and
receives materials specifically relating to the Fund's Investment Advisory
Agreement and/or the sub-advisory agreement. These materials include (a)
information compiled by Lipper Inc. ("Lipper") on the fees and expenses and the
investment performance of the Fund as compared to a comparable group of funds as
classified by Lipper; (b) sales and redemption data for the Fund; (c) a
discussion by the Fund's portfolio management team of investment strategies used
by the Fund during its most recent fiscal year; (d) information on the
profitability to the Investment Adviser and its affiliates of the Investment
Advisory Agreement, the sub-advisory agreement and other relationships with the
Fund; and (e) information provided by the Investment Adviser concerning
investment advisory fees charged to other clients, such as offshore funds under
similar investment mandates and generally to institutional clients. The Board
also considers other matters it deems important to the approval process such as
payments made to the Investment Adviser or its affiliates relating to the
distribution of Fund shares, services related to the valuation and pricing of
Fund portfolio holdings, allocation of Fund brokerage (including the related
benefits to the Investment Adviser of "soft dollars"), the Fund's portfolio
turnover statistics, and direct and indirect benefits to the Investment Adviser
and the sub-adviser and their affiliates from their relationship with the Fund.
Certain Specific Renewal Data
In connection with the most recent renewal of the Fund's Investment Advisory
Agreement and the sub-advisory
30 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005
agreement in February 2005, the independent directors' and Board's review
included the following:
The Investment Adviser's Services and Fund Performance -- The Board reviewed the
nature, extent and quality of services provided by the Investment Adviser,
including the investment advisory services and the resulting performance of the
Fund, and the sub-adviser. The Board focused primarily on the Investment
Adviser's investment advisory services and the Fund's investment performance,
having concluded that the other services provided to the Fund by the Investment
Adviser were satisfactory. The Board compared Fund performance -- both including
and excluding the effects of the Fund's fees and expenses -- to the performance
of a comparable group of mutual funds, and the performance of a relevant index
or combination of indexes. While the Board reviews performance data at least
quarterly, consistent with the Investment Adviser's investment goals, the Board
attaches importance to performance over relatively long periods of time,
typically three to five years. The Board noted that the Fund's performance
within the group compared for the one, three and five year periods ranked in the
top half and generally in the top 25% for all periods. The Board concluded that
the Fund's performance supported the continuation of the Investment Advisory
agreement.
The Investment Adviser's Personnel and Investment Process -- The Board reviews
at least annually the Fund's investment objectives and strategies. The Board
discusses with senior management of the Investment Adviser responsible for
investment operations and the senior management of the Investment Adviser's
equity investing group the strategies being used to achieve the stated
objectives. Among other things, the Board considers the size, education and
experience of the Investment Adviser's investment staff, its use of technology,
and the Investment Adviser's approach to training and retaining portfolio
managers and other research, advisory and management personnel. The Board also
reviews the Investment Adviser's compensation policies and practices with
respect to the Fund's portfolio manager. The Board also considered the
experience of the Fund's portfolio manager and noted that Mr. Kassem, the Fund's
portfolio manager, has more than ten years' experience investing in equity
securities, including those of financial services companies. The Board concluded
that the Investment Adviser and its investment staff and the Fund's portfolio
manager have extensive experience in analyzing and managing the types of
investments used by the Fund and that the Fund benefits from that expertise.
Management Fees and Other Expenses -- The Board reviews the Fund's contractual
management fee rate and actual management fee rate as a percentage of total
assets at common asset levels -- the actual rate includes advisory and
administrative service fees and the effects of any fee waivers -- compared to
the other funds in its Lipper category. It also compares the Fund's total
expenses to those of other, comparable funds. The Board also considered the
services provided to and the fees charged by the Investment Adviser to other
types of clients, such as offshore funds, with similar investment mandates and
noted that the fees charged by the Investment Adviser in those cases typically
exceeded those being charged to the Fund. The Board also noted that, as a
general matter, fees charged to institutional clients were lower than the fees
charged to the Fund, but believed that less extensive services were being
provided to such clients. The Board noted that, during its most recent fiscal
year, the Fund ranked below the median of its comparable funds classified by
Lipper with respect to both its contractual and actual management fee rates and
above the median with respect to its overall operating expenses. The Board
concluded that the Fund's management fee and fee rate and overall expense ratio
are reasonable compared to those of comparable funds.
Profitability -- The Board considers the cost of the services provided to the
Fund by the Investment Adviser and the Investment Adviser's and its affiliates'
profits relating to the management and distribution of the Fund and the
MLIM/FAM-advised funds. As part of its analysis, the Board reviewed the
Investment Adviser's methodology in allocating its costs to the management of
the Fund and concluded that there was a reasonable basis for the allocation. The
Board believes the Investment Adviser's profits are reasonable in relation to
the nature and quality of services provided.
Economies of Scale -- The Board considered the extent to which economies of
scale might be realized as the assets of the Fund increase and whether there
should be changes in the management fee rate or structure in order to enable the
Fund to participate in these economies of scale. The Board noted that there was
no evidence that the Fund's assets have reached a level where such economies are
effectively available and that it will continue to review the availability of
such economies of scale if the Fund's assets increase to a level where economies
can effectively be realized.
Conclusion
After the independent directors deliberated in executive session, the entire
Board, including all of the independent directors, approved the renewal of the
existing Investment Advisory Agreement and sub-advisory agreement, concluding
that the advisory fee was reasonable in relation to the services provided and
that a contract renewal was in the best interests of the shareholders.
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2005 31
[LOGO] Merrill Lynch Investment Managers
www.mlim.ml.com
- --------------------------------------------------------------------------------
Mercury Advisors
A Division of Merrill Lynch Investment Managers
www.mercury.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. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
at www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
Merrill Lynch Global Financial Services Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
#MLGFSF -- 3/05
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual
report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not
Applicable
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(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.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the last fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(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.
Merrill Lynch Global Financial Services Fund, Inc. and Global Financial Services
Master Trust
By: /s/ Robert C. Doll, Jr.
---------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Merrill Lynch Global Financial Services Fund, Inc. and Global Financial
Services Master Trust
Date: May 23, 2005
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/ Robert C. Doll, Jr.
---------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Merrill Lynch Global Financial Services Fund, Inc. and Global Financial
Services Master Trust
Date: May 23, 2005
By: /s/ Donald C. Burke
---------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Global Financial Services Fund, Inc. and Global Financial
Services Master Trust
Date: May 23, 2005