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: 09/30/06
Date of reporting period: 10/01/05 - 03/31/06
Item 1 - Report to Stockholders
Semi-Annual Report
March 31, 2006
Merrill Lynch
Global Financial
Services Fund, Inc.
Merrill Lynch Global Financial Services Fund, Inc.
Announcement to Shareholders
On February 15, 2006, BlackRock, Inc. ("BlackRock") and Merrill Lynch & Co.,
Inc. ("Merrill Lynch") entered into an agreement to contribute Merrill Lynch's
investment management business, Merrill Lynch Investment Managers, L.P. and
certain affiliates (including Fund Asset Management, L.P. and Merrill Lynch
Investment Managers International Limited), to BlackRock to create a new
independent company that will be one of the world's largest asset management
firms with over $1 trillion in assets under management (based on combined assets
under management as of March 31, 2006). The transaction is expected to close in
the third quarter of 2006, at which time the new company will operate under the
BlackRock name. If approved by the Fund's/Trust's Board of Directors/Trustees
and Fund/Trust shareholders, the combined company that results from the
transaction is expected to become the investment adviser of the Fund/Trust.
Worldwide Investments of Global Financial Services Portfolio as of March 31,
2006
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
American Home Mortgage Investment Corp. ................ 9.0%
New Century Financial Corp. ............................ 6.1
RenaissanceRe Holdings Ltd. ............................ 4.5
Fremont General Corp. .................................. 4.2
Daegu Bank ............................................. 4.2
Meritz Fire & Marine Insurance Co., Ltd. ............... 4.0
Accredited Home Lenders Holding Co. .................... 3.7
Kensington Group Plc ................................... 3.4
Dongbu Insurance Co., Ltd. ............................. 3.2
Korean Reinsurance Co. ................................. 3.2
- --------------------------------------------------------------------------------
Geographic Allocation Percent of
by Country Total Investments
- --------------------------------------------------------------------------------
United States .......................................... 36.6%
South Korea ............................................ 22.0
United Kingdom ......................................... 6.6
Japan .................................................. 5.2
Bermuda ................................................ 4.8
Hong Kong .............................................. 3.2
Denmark ................................................ 0.8
Germany ................................................ 0.6
China .................................................. 0.5
Belgium ................................................ 0.5
Turkey ................................................. 0.4
Indonesia .............................................. 0.4
Ireland ................................................ 0.3
Egypt .................................................. 0.2
Netherlands ............................................ 0.1
Spain .................................................. 0.0**
Canada ................................................. 0.0**
Other* ................................................. 17.8
- --------------------------------------------------------------------------------
* Includes portfolio holdings in short-term investments and options.
** Holdings are less than 0.1%.
Industries Represented in Percent of
the Portfolio Net Assets*
- --------------------------------------------------------------------------------
Real Estate ............................................ 26.9%
Insurance .............................................. 16.3
Commercial Banks ....................................... 15.8
Thrifts & Mortgage Finance ............................. 12.2
Household Durables ..................................... 5.5
Capital Markets ........................................ 4.0
Consumer Finance ....................................... 3.6
Diversified Financial Services ......................... 0.6
Distributors ........................................... 0.2
Construction & Engineering ............................. 0.1
Other** ................................................ 18.5
- --------------------------------------------------------------------------------
* Total may not equal 100%.
** Includes portfolio holdings in short-term investments and options.
For Portfolio compliance purposes, the Portfolio's industry
classifications refer to 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
industry sub-classifications for reporting ease.
2 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006
A Letter From the President
Dear Shareholder
You may be aware that changes are on the horizon at Merrill Lynch Investment
Managers ("MLIM"). On February 15, 2006, Merrill Lynch announced plans to
combine the firm's investment advisory business, including MLIM, with another
highly regarded investment manager -- BlackRock, Inc. ("BlackRock").
We believe this merger of asset management strength will benefit our investors.
MLIM is a leading investment management organization with over $576 billion in
assets under management globally and 2,757 employees in 17 countries. It offers
over 100 investment strategies in vehicles ranging from mutual funds to
institutional portfolios. BlackRock is one of the largest publicly traded
investment management firms in the United States with $463.1 billion in assets
under management and 1,839 employees. It manages assets on behalf of
institutional and individual investors worldwide through a variety of equity,
fixed income, liquidity and alternative investment products.
At the completion of the transaction, which is expected in the third quarter of
this year, the resultant firm will be a top-10 investment manager worldwide with
over $1 trillion in assets under management.* The combined company will provide
a wider selection of high-quality investment solutions across a range of asset
classes and investment styles. MLIM and BlackRock possess complementary
capabilities that together create a well-rounded organization uniting some of
the finest money managers in the industry. At the same time, the firms share
similar values and beliefs -- they are focused on delivering excellence on
behalf of clients, and both make investment performance their single most
important mission. In short, the merger only reinforces our commitment to
shareholders.
Most of MLIM's investment products -- including mutual funds, separately managed
accounts, annuities and variable insurance funds -- eventually will carry the
"BlackRock" name. As a shareholder in one or more MLIM-advised mutual funds, you
will receive a proxy package in the coming weeks in connection with this
transaction. After you receive this information, should you have any questions
or concerns, do not hesitate to contact your financial advisor.
As always, we thank you for entrusting us with your investment assets, and we
look forward to continuing to serve your investment needs with even greater
strength and scale as the new BlackRock.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Chief Investment Officer
Merrill Lynch Investment Managers
* $1.039 trillion in assets under management as of March 31, 2006.
Data, including assets under management, are as of March 31, 2006.
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006 3
A Discussion With Your Fund's Portfolio Manager
The Fund provided excellent returns for the six-month period, both in
absolute terms and relative to the MSCI World Financials Index and the broader
MSCI World Index.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended March 31, 2006, Merrill Lynch Global Financial
Services Fund, Inc.'s Class A, Class B, Class C, Class I and Class R Shares had
total returns of +25.00%, +24.47%, +24.57%, +25.20% and +24.80%, 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 outperformed its unmanaged
benchmarks, the Morgan Stanley Capital International (MSCI) World Financials
Index and the MSCI World Index, which had respective total returns of +16.12%
and +9.86% for the same period.
Fund returns were volatile during the six-month period, which reflected the
underlying markets, amplified by the fact that the Fund was much less
diversified than its MSCI World Financials benchmark. The Fund, for example, had
little or no representation in large U.S., European and Japanese banks and
insurers. The Portfolio, moreover, had large concentrations in U.S. mortgage
banks, which experienced large swings in value, and South Korean financial
companies, which tend to be volatile. All of the Fund's positive performance
relative to the MSCI World Financials Index occurred in the last three months of
2005. The Fund's performance during the first three months of 2006 was about
even with the benchmark, despite a significant loss with PXRE Group Ltd., the
Bermuda-based property reinsurer, which was offset by strong performance from
New Century Financial Corp., a U.S. mortgage banker.
The stock of PXRE collapsed in February 2006 when the company disclosed further
losses due to the September 2005 Hurricane Katrina. The revised loss estimates
were significantly greater than the estimates already disclosed in late
September 2005. The February disclosure was particularly surprising in that
estimates of claims in property insurance tend to be made quickly and reasonably
accurately, relative to liabilities claims, and the company had recapitalized
itself in October 2005, which signaled -- incorrectly it turns out -- closure on
the capital problems caused by Hurricane Katrina. In light of these events, the
whole position of PXRE was liquidated. In spite of losses associated with PXRE,
gains on other securities led the Fund to outperform its unmanaged benchmark. It
is unlikely that the Portfolio will again make as significant an investment in a
company with a relatively undiversified and opaque business such as PXRE.
Korean regional bank and insurance stocks were the big success story of the Fund
during the six-month period. They were all significantly revalued in the last
three months of 2005, following a strong appreciation during the preceding nine
months. The Portfolio started investing in Korean stocks in late 2003, on the
basis of their unique combination of high profitability, high growth and
surprisingly low valuations, ignoring the lack of any "catalyst" for stock
revaluation. In time, the market recognized the value of these stocks and many
stocks tripled or almost quadrupled in value during the 2004-2005 period. A
decision was made to maintain a large proportion of the Portfolio in these
stocks, despite their appreciation, because their valuations and business
prospects remained more attractive than most alternatives in both developed and
emerging markets.
Finally, U.S. mortgage banking stocks started to have a positive impact on
performance in the first three months of 2006, mostly the result of New Century
Financial, after declines at the end of 2005. U.S. mortgage banking stocks
dropped precipitously as a result of a mix of concerns about a flat yield curve,
a "housing bubble" and new interest-only and adjustable rate mortgages. Such
macro-economic concerns in our view were not founded, and provided an
opportunity to invest in an attractive group of companies. We expect that a
perception by the market that the tight monetary policy by the U.S. central bank
(the Fed) is coming to an end will result in a rise in mortgage banking stocks.
What changes were made to the Portfolio during the period?
The major changes made to the portfolio during the six-month period have been
trimming stocks in emerging markets and in the U.K. This has been offset by
increasing U.S. mortgage bank holdings and investments in U.S. investment banks.
4 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006
The decision to trim emerging market stocks, especially South Korean financial
companies, was not an easy one, because these stocks clearly were benefiting
from strong positive momentum and are still attractively valued. As an example
among many, Daegu Bank had a total return of 47% over the six-month period, of
which perhaps 20% may be attributed to a rise in earnings estimates for 2006 and
the remainder to a revaluation of the stock. The situation was similar with the
Kensington Group Plc, the U.K. mortgage banker.
The investment in U.S. mortgage banking stocks reached exceptionally high levels
in the Portfolio because of the low prices they reached. Some investments also
were made in U.S. home builders such as Toll Brothers, Inc., Pulte Homes, Inc.,
KB HOME and Lennar Corp., which are similar in valuation, profitability and
potential to mortgage bankers, even though they are not strictly speaking
financial stocks. U.S. mortgage banks in the Fund are profitable and continue to
have good prospects. Their stocks are inexpensive as a group for reasons that
are short term in nature and largely irrelevant, such as current interest rates
and house prices.
The Portfolio also invested during the period in investment banks that include
Bear Stearns and Goldman Sachs. These companies are well managed in our view,
profitable, and taking advantage of any opportunities that arise around the
globe, be they in trading, proprietary investing or hedge fund brokering.
Finally, the Portfolio has invested in call options on stocks that allow the
purchase of a stock at a certain price up to a certain date. The Portfolio has
invested in two fairly different types, with different objectives. The first
type is "out of the money" call options, meaning that the exercise price is
above the current price and the option will be worthless unless this changes by
expiration time. The second type is "in the money" options, which will be
worthless only if the stock drops significantly. The first type of options has
been used in the Fund to take advantage of prices that are so low that they are
not expected to stay there for more than a few months, as has been the case with
U.S. mortgage banks. The second type of options has been used to invest mostly
in investment banks, to add some leverage safely to the Portfolio, since the
stocks are not only low priced, but they are not typically the subject of
controversy.
How would you characterize the Portfolio's position at the close of the period?
The Portfolio is concentrated in U.S. mortgage banks, South Korean stocks, and
property and casualty insurance companies, and it is also positioned to take
advantage of potentially good performance from U.S. investment banks. The
Portfolio has little or no positions in the large developed market bank or
insurance companies, which probably would be considered by most investors as
safer havens than the stocks in the Portfolio, except for South Korean stocks.
We believe the Portfolio is quite safe from the perspective of underlying value,
since it is practically totally composed of companies with profitable businesses
and low stock valuations.
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 21, 2006
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006 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. 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 Effective December 28, 2005, Class I Shares are no longer subject to any
front-end sales charge. Class I Shares bear no ongoing distribution or
account maintenance fees and are available only to eligible investors. Had
the sales charge been included, the Fund's Class I Shares' performance
would have been lower.
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 or exchange. 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, 2006 Total Return Total Return Total Return
========================================================================================================
ML Global Financial Services Fund, Inc. Class A Shares* +25.00% +37.26% +174.23%
- --------------------------------------------------------------------------------------------------------
ML Global Financial Services Fund, Inc. Class B Shares* +24.47 +36.12 +161.09
- --------------------------------------------------------------------------------------------------------
ML Global Financial Services Fund, Inc. Class C Shares* +24.57 +36.21 +161.05
- --------------------------------------------------------------------------------------------------------
ML Global Financial Services Fund, Inc. Class I Shares* +25.20 +37.60 +178.65
- --------------------------------------------------------------------------------------------------------
ML Global Financial Services Fund, Inc. Class R Shares* +24.80 +36.86 +171.36
- --------------------------------------------------------------------------------------------------------
MSCI World Index** + 9.86 +18.02 + 9.26
- --------------------------------------------------------------------------------------------------------
MSCI World Financial Index*** +16.12 +24.63 + 51.26
- --------------------------------------------------------------------------------------------------------
* 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, 2006
Performance Data (concluded)
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 3/31/06 +37.26% +30.05%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/06 +19.06 +17.79
- --------------------------------------------------------------------------------
Inception (11/26/99)
through 3/31/06 +17.23 +16.24
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
Return Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 3/31/06 +36.12% +32.12%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/06 +18.15 +17.94
- --------------------------------------------------------------------------------
Inception (11/26/99)
through 3/31/06 +16.33 +16.33
- --------------------------------------------------------------------------------
* 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 3/31/06 +36.21% +35.21%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/06 +18.14 +18.14
- --------------------------------------------------------------------------------
Inception (11/26/99)
through 3/31/06 +16.33 +16.33
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
** Assuming payment of applicable contingent deferred sales charge.
Return
================================================================================
Class I Shares
================================================================================
One Year Ended 3/31/06 +37.60%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/06 +19.37
- --------------------------------------------------------------------------------
Inception (11/26/99) through 3/31/06 +17.53
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class R Shares Return
================================================================================
One Year Ended 3/31/06 +36.86%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/06 +18.89
- --------------------------------------------------------------------------------
Inception (11/26/99) through 3/31/06 +17.04
- --------------------------------------------------------------------------------
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006 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
12b-1 fees, and other Fund expenses. The following example (which is based on a
hypothetical investment of $1,000 invested on October 1, 2005 and held through
March 31, 2006) 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, 2005 to
October 1, 2005 March 31, 2006 March 31, 2006
==========================================================================================================
Actual
==========================================================================================================
Class A $1,000 $1,250.00 $ 8.41
- ----------------------------------------------------------------------------------------------------------
Class B $1,000 $1,244.70 $12.70
- ----------------------------------------------------------------------------------------------------------
Class C $1,000 $1,245.70 $12.71
- ----------------------------------------------------------------------------------------------------------
Class I $1,000 $1,252.00 $ 7.02
- ----------------------------------------------------------------------------------------------------------
Class R $1,000 $1,248.00 $ 9.81
==========================================================================================================
Hypothetical (5% annual return before expenses)**
==========================================================================================================
Class A $1,000 $1,017.42 $ 7.54
- ----------------------------------------------------------------------------------------------------------
Class B $1,000 $1,013.58 $11.40
- ----------------------------------------------------------------------------------------------------------
Class C $1,000 $1,013.58 $11.40
- ----------------------------------------------------------------------------------------------------------
Class I $1,000 $1,018.67 $ 6.29
- ----------------------------------------------------------------------------------------------------------
Class R $1,000 $1,016.17 $ 8.80
- ----------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (1.50% for Class A, 2.27% for Class B, 2.27% for Class
C, 1.25% for Class I and 1.75% 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 portfolio 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, 2006
Statement of Assets and Liabilities
Merrill Lynch Global Financial Services Fund, Inc.
As of March 31, 2006
===========================================================================================================================
Assets
- ---------------------------------------------------------------------------------------------------------------------------
Investment in Global Financial Services Portfolio (the "Portfolio"), at value
(identified cost--$94,509,483) ............................................. $137,714,283
Prepaid expenses and other assets ........................................... 139,688
------------
Total assets ................................................................ 137,853,971
------------
===========================================================================================================================
Liabilities
- ---------------------------------------------------------------------------------------------------------------------------
Payables:
Other affiliates ......................................................... $ 121,555
Distributor .............................................................. 50,956
Administrative fees ...................................................... 34,814
------------
Total liabilities ........................................................... 207,325
------------
===========================================================================================================================
Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
Net assets .................................................................. $137,646,646
============
===========================================================================================================================
Net Assets Consist of
- ---------------------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.10 par value, 100,000,000 shares authorized $ 134,108
Class B Shares of Common Stock, $.10 par value, 100,000,000 shares authorized 199,870
Class C Shares of Common Stock, $.10 par value, 100,000,000 shares authorized 133,295
Class I Shares of Common Stock, $.10 par value, 100,000,000 shares authorized 314,975
Class R Shares of Common Stock, $.10 par value, 100,000,000 shares authorized 23,704
Paid-in capital in excess of par ............................................ 93,991,403
Undistributed investment income--net ........................................ $ 1,472,344
Accumulated realized capital losses allocated from the Portfolio--net ....... (1,827,853)
Unrealized appreciation allocated from the Portfolio--net ................... 43,204,800
------------
Total accumulated earnings--net ............................................. 42,849,291
------------
Net Assets .................................................................. $137,646,646
============
===========================================================================================================================
Net Asset Value
- ---------------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $23,029,261 and 1,341,080 shares outstanding $ 17.17
============
Class B--Based on net assets of $33,803,812 and 1,998,698 shares outstanding $ 16.91
============
Class C--Based on net assets of $22,418,045 and 1,332,946 shares outstanding $ 16.82
============
Class I--Based on net assets of $54,393,469 and 3,149,747 shares outstanding $ 17.27
============
Class R--Based on net assets of $4,002,059 and 237,043 shares outstanding ... $ 16.88
============
See Notes to Financial Statements.
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006 9
Statement of Operations Merrill Lynch Global Financial Services Fund, Inc.
For the Six Months Ended March 31, 2006
===========================================================================================================================
Investment Income
- ---------------------------------------------------------------------------------------------------------------------------
Investment income allocated from the Portfolio:
Dividends ................................................................ $ 3,150,372
Interest from affiliates ................................................. 5,050
Securities lending--net .................................................. 48,496
Expenses ................................................................. (384,720)
------------
Total income ................................................................ 2,819,198
------------
===========================================================================================================================
Expenses
- ---------------------------------------------------------------------------------------------------------------------------
Administration fees ......................................................... $ 211,746
Account maintenance and distribution fees--Class B .......................... 160,028
Account maintenance and distribution fees--Class C .......................... 89,854
Printing and shareholder reports ............................................ 33,002
Transfer agent fees--Class I ................................................ 32,666
Registration fees ........................................................... 28,447
Transfer agent fees--Class B ................................................ 22,584
Account maintenance fees--Class A ........................................... 20,321
Professional fees ........................................................... 14,807
Transfer agent fees--Class C ................................................ 13,271
Transfer agent fees--Class A ................................................ 10,135
Account maintenance and distribution fees--Class R .......................... 6,885
Transfer agent fees--Class R ................................................ 1,726
Other ....................................................................... 7,563
------------
Total expenses .............................................................. 653,035
------------
Investment income--net ...................................................... 2,166,163
------------
===========================================================================================================================
Realized & Unrealized Gain (Loss) Allocated from the Portfolio--Net
- ---------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments--net ......................................................... 2,554,848
Foreign currency transactions--net ....................................... (98,484) 2,456,364
------------
Change in unrealized appreciation/depreciation on:
Investments--net ......................................................... 22,207,017
Foreign currency transactions--net ....................................... 2,527 22,209,544
---------------------------
Total realized and unrealized gain--net ..................................... 24,665,908
------------
Net Increase in Net Assets Resulting from Operations ........................ $ 26,832,071
============
See Notes to Financial Statements.
10 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006
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: 2006 2005
===========================================================================================================================
Operations
- ---------------------------------------------------------------------------------------------------------------------------
Investment income--net ...................................................... $ 2,166,163 $ 1,664,042
Realized gain--net .......................................................... 2,456,364 9,131,002
Change in unrealized appreciation/depreciation--net ......................... 22,209,544 8,022,831
---------------------------
Net increase in net assets resulting from operations ........................ 26,832,071 18,817,875
---------------------------
===========================================================================================================================
Dividends and Distributions to Shareholders
- ---------------------------------------------------------------------------------------------------------------------------
Investment income--net:
Class A .................................................................. (323,686) (81,274)
Class B .................................................................. (424,641) (113,482)
Class C .................................................................. (233,824) (82,807)
Class I .................................................................. (1,223,262) (137,854)
Class R .................................................................. (44,595) (6,964)
Realized gain--net:
Class A .................................................................. (1,455,872) (1,108,185)
Class B .................................................................. (3,145,740) (4,533,317)
Class C .................................................................. (1,689,548) (2,386,248)
Class I .................................................................. (5,111,325) (1,566,016)
Class R .................................................................. (221,591) (91,305)
---------------------------
Net decrease in net assets resulting from dividends and distributions to
shareholders ................................................................ (13,874,084) (10,107,452)
---------------------------
===========================================================================================================================
Capital Share Transactions
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share transactions .......... 16,777,226 28,473,224
---------------------------
===========================================================================================================================
Redemption Fees
- ---------------------------------------------------------------------------------------------------------------------------
Redemption fees ............................................................. 6,169 1,167
---------------------------
===========================================================================================================================
Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ................................................ 29,741,382 37,184,814
Beginning of period ......................................................... 107,905,264 70,720,450
---------------------------
End of period* .............................................................. $137,646,646 $107,905,264
===========================
* Undistributed investment income--net ................................... $ 1,472,344 $ 1,556,189
===========================
See Notes to Financial Statements.
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006 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. 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 15.45 $ 14.06 $ 12.71 $ 9.43 $ 10.87
-------------------------------------------------------------------
Investment income--net*** .............. .31 .27 .17 .06 .02
Realized and unrealized gain (loss)--net 3.38++ 3.29++ 2.76++ 3.53 (1.07)
-------------------------------------------------------------------
Total from investment operations ....... 3.69 3.56 2.93 3.59 (1.05)
-------------------------------------------------------------------
Less dividends and distributions from:
Investment income--net .............. (.36) (.15) -- -- --
Realized gain--net .................. (1.61) (2.02) (1.58) (.31) (.39)
-------------------------------------------------------------------
Total dividends and distributions ...... (1.97) (2.17) (1.58) (.31) (.39)
-------------------------------------------------------------------
Net asset value, end of period ......... $ 17.17 $ 15.45 $ 14.06 $ 12.71 $ 9.43
===================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 25.00%@ 27.08% 24.75% 38.83% (10.15%)
===================================================================
==================================================================================================================================
Ratios to Average Net Assets+
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 1.50%* 1.62% 1.78% 1.86% 1.76%
===================================================================
Investment income--net ................. 3.89%* 1.87% 1.21% .59% .17%
===================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 23,029 $ 10,040 $ 8,684 $ 7,800 $ 5,520
===================================================================
Portfolio turnover of the Portfolio .... 34.46% 80.05% 115.38% 205.93% 144.60%
===================================================================
* 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 and/or
investment income--net.
++ Includes redemption fees, which are less than $.01 per share.
@ Aggregate total investment return.
See Notes to Financial Statements.
12 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006
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. 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 15.18 $ 13.86 $ 12.51 $ 9.36 $ 10.78
-------------------------------------------------------------------
Investment income (loss)--net*** ....... .24 .16 .06 (.03) (.07)
Realized and unrealized gain (loss)--net 3.32++ 3.23++ 2.74++ 3.49 (1.06)
-------------------------------------------------------------------
Total from investment operations ....... 3.56 3.39 2.80 3.46 (1.13)
-------------------------------------------------------------------
Less dividends and distributions from:
Investment income--net .............. (.22) (.05) -- -- --
Realized gain--net .................. (1.61) (2.02) (1.45) (.31) (.29)
-------------------------------------------------------------------
Total dividends and distributions ...... (1.83) (2.07) (1.45) (.31) (.29)
-------------------------------------------------------------------
Net asset value, end of period ......... $ 16.91 $ 15.18 $ 13.86 $ 12.51 $ 9.36
===================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 24.47%@ 26.08% 23.89% 37.71% (10.83%)
===================================================================
==================================================================================================================================
Ratios to Average Net Assets+
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 2.27%* 2.39% 2.55% 2.64% 2.53%
===================================================================
Investment income (loss)--net .......... 3.05%* 1.09% .46% (.24%) (.60%)
===================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 33,804 $ 31,126 $ 33,733 $ 37,202 $ 36,476
===================================================================
Portfolio turnover of the Portfolio .... 34.46% 80.05% 115.38% 205.93% 144.60%
===================================================================
* 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 and/or
investment income--net.
++ Includes redemption fees, which are less than $.01 per share.
@ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006 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. 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 15.10 $ 13.82 $ 12.51 $ 9.36 $ 10.78
-------------------------------------------------------------------
Investment income (loss)--net*** ....... .24 .16 .07 (.02) (.07)
Realized and unrealized gain (loss)--net 3.31++ 3.21++ 2.72++ 3.48 (1.06)
-------------------------------------------------------------------
Total from investment operations ....... 3.55 3.37 2.79 3.46 (1.13)
-------------------------------------------------------------------
Less dividends and distributions from:
Investment income--net .............. (.22) (.07) -- -- --
Realized gain--net .................. (1.61) (2.02) (1.48) (.31) (.29)
-------------------------------------------------------------------
Total dividends and distributions ...... (1.83) (2.09) (1.48) (.31) (.29)
-------------------------------------------------------------------
Net asset value, end of period ......... $ 16.82 $ 15.10 $ 13.82 $ 12.51 $ 9.36
===================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 24.57%@ 26.02% 23.83% 37.71% (10.84%)
===================================================================
==================================================================================================================================
Ratios to Average Net Assets+
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 2.27%* 2.40% 2.56% 2.64% 2.55%
===================================================================
Investment income (loss)--net .......... 3.06%* 1.10% .48% (.22%) (.61%)
===================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 22,418 $ 15,087 $ 16,714 $ 13,762 $ 9,666
===================================================================
Portfolio turnover of the Portfolio .... 34.46% 80.05% 115.38% 205.93% 144.60%
===================================================================
* 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 and/or
investment income--net.
++ Includes redemption fees, which are less than $.01 per share.
@ Aggregate total investment return.
See Notes to Financial Statements.
14 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006
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. 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 15.53 $ 14.12 $ 12.76 $ 9.45 $ 10.89
-------------------------------------------------------------------
Investment income--net*** .............. .32 .44 .20 .09 .05
Realized and unrealized gain (loss)--net 3.41++ 3.17++ 2.78++ 3.53 (1.07)
-------------------------------------------------------------------
Total from investment operations ....... 3.73 3.61 2.98 3.62 (1.02)
-------------------------------------------------------------------
Less dividends and distributions from:
Investment income--net .............. (.38) (.18) -- -- --
Realized gain--net .................. (1.61) (2.02) (1.62) (.31) (.42)
-------------------------------------------------------------------
Total dividends and distributions ...... (1.99) (2.20) (1.62) (.31) (.42)
-------------------------------------------------------------------
Net asset value, end of period ......... $ 17.27 $ 15.53 $ 14.12 $ 12.76 $ 9.45
===================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 25.20%@ 27.37% 25.09% 39.10% (9.85%)
===================================================================
==================================================================================================================================
Ratios to Average Net Assets+
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 1.25%* 1.32% 1.53% 1.60% 1.51%
===================================================================
Investment income--net ................. 3.99%* 2.93% 1.46% .81% .43%
===================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 54,393 $ 49,612 $ 11,034 $ 11,325 $ 8,641
===================================================================
Portfolio turnover of the Portfolio .... 34.46% 80.05% 115.38% 205.93% 144.60%
===================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges. Effective
December 28, 2005, Class I Shares are no longer subject to any front-end
sales charge.
*** Based on average shares outstanding.
+ Includes the Fund's share of the Portfolio's allocated expenses and/or
investment income--net.
++ Includes redemption fees, which are less than $.01 per share.
@ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006 15
Financial Highlights (concluded)
Merrill Lynch Global Financial Services Fund, Inc.
Class R
--------------------------------------------------------
For the
For the Period
Six Months For the Year Ended Jan. 3,
Ended September 30, 2003@@ to
The following per share data and ratios have been derived March 31, ------------------------- Sept. 30,
from information provided in the financial statements. 2006 2005 2004 2003
========================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 15.21 $ 13.91 $ 12.62 $ 10.16
--------------------------------------------------------
Investment income--net** ............... .28 .29 .14 .04
Realized and unrealized gain--net ...... 3.32++ 3.18++ 2.74++ 2.42
--------------------------------------------------------
Total from investment operations ....... 3.60 3.47 2.88 2.46
--------------------------------------------------------
Less dividends and distributions from:
Investment income--net .............. (.32) (.15) -- --
Realized gain--net .................. (1.61) (2.02) (1.59) --
--------------------------------------------------------
Total dividends and distributions ...... (1.93) (2.17) (1.59) --
--------------------------------------------------------
Net asset value, end of period ......... $ 16.88 $ 15.21 $ 13.91 $ 12.62
========================================================
========================================================================================================================
Total Investment Return
- ------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 24.80%@ 26.74% 24.51% 24.21%@
========================================================
========================================================================================================================
Ratios to Average Net Assets+
- ------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 1.75%* 1.83% 2.11% 2.17%*
========================================================
Investment income--net ................. 3.53%* 2.02% .99% .45%*
========================================================
========================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 4,002 $ 2,040 $ 555 $ 49
========================================================
Portfolio turnover of the Portfolio .... 34.46% 80.05% 115.38% 205.93%
========================================================
* Annualized.
** Based on average shares outstanding.
+ Includes the Fund's share of the Portfolio's allocated expenses and/or
investment income--net.
++ Includes redemption fees, which are less than $.01 per share.
@ Aggregate total investment return.
@@ Commencement of operations.
See Notes to Financial Statements.
16 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006
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 interests 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 interim period. All
such adjustments are of a normal, recurring nature. The percentage of the
Portfolio owned by the Fund at March 31, 2006, was 100%. The Fund offers
multiple classes of shares. Effective December 28, 2005, Class I Shares are no
longer subject to any front-end sales charge. Class A Shares 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 I Shares are sold only to certain
eligible investors. 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 1(a) 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.
(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 Plans
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, 2006 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, 2006, 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 ............................ $ 4,075 $51,109
Class I ............................ $ 2,245 $43,287
- --------------------------------------------------------------------------------
For the six months ended March 31, 2006, MLPF&S received contingent deferred
sales charges of $3,835 and $3,064 relating to transactions in Class B and Class
C Shares, respectively. Furthermore, MLPF&S received contingent deferred sales
charges of $283 relating to transactions subject to front-end sales charge
waivers in Class I Shares.
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.
In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to
contribute ML & Co.'s investment management business, including FAM, to the
investment management business of BlackRock, Inc. The transaction is expected to
close in the third quarter of 2006.
3. Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$16,777,226 and $28,473,224 for the six months ended March 31, 2006 and the year
ended September 30, 2005, respectively.
Transactions in capital shares for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended March 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 815,946 $ 13,277,794
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 104,496 1,645,816
Automatic conversion of shares ........... 44,364 714,038
-------------------------------
Total issued ............................. 964,806 15,637,648
Shares redeemed .......................... (273,491) (4,370,828)
-------------------------------
Net increase ............................. 691,315 $ 11,266,820
===============================
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended September 30, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 131,919 $ 1,942,018
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 74,811 1,036,129
Automatic conversion of shares ........... 58,153 857,339
-------------------------------
Total issued ............................. 264,883 3,835,486
Shares redeemed .......................... (232,555) (3,470,809)
-------------------------------
Net increase ............................. 32,328 $ 364,677
===============================
- -------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended March 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 146,956 $ 2,355,024
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 197,571 3,072,220
-------------------------------
Total issued ............................. 344,527 5,427,244
-------------------------------
Automatic conversion of shares ........... (45,051) (714,038)
Shares redeemed .......................... (351,779) (5,557,667)
-------------------------------
Total redeemed ........................... (396,830) (6,271,705)
-------------------------------
Net decrease ............................. (52,303) $ (844,461)
===============================
- -------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended September 30, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 211,442 $ 3,035,848
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 284,042 3,888,536
-------------------------------
Total issued ............................. 495,484 6,924,384
-------------------------------
Automatic conversion of shares ........... (59,034) (857,339)
Shares redeemed .......................... (819,876) (11,857,799)
-------------------------------
Total redeemed ........................... (878,910) (12,715,138)
-------------------------------
Net decrease ............................. (383,426) $ (5,790,754)
===============================
18 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006
Notes to Financial Statements (concluded)
Merrill Lynch Global Financial Services Fund, Inc.
- -------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended March 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 385,936 $ 6,134,136
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 112,742 1,742,999
-------------------------------
Total issued ............................. 498,678 7,877,135
Shares redeemed .......................... (164,680) (2,597,544)
-------------------------------
Net increase ............................. 333,998 $ 5,279,591
===============================
- -------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended September 30, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 319,390 $ 4,555,790
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 165,876 2,259,235
-------------------------------
Total issued ............................. 485,266 6,815,025
Shares redeemed .......................... (696,042) (9,772,104)
-------------------------------
Net decrease ............................. (210,776) $ (2,957,079)
===============================
- -------------------------------------------------------------------------------
Class I Shares for the Six Months Dollar
Ended March 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 389,392 $ 6,324,341
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 89,283 1,413,354
-------------------------------
Total issued ............................. 478,675 7,737,695
Shares redeemed .......................... (522,604) (8,275,291)
-------------------------------
Net decrease ............................. (43,929) $ (537,596)
===============================
- -------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended September 30, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 2,699,267 $ 39,820,643
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 110,858 1,540,920
-------------------------------
Total issued ............................. 2,810,125 41,361,563
Shares redeemed .......................... (397,809) (5,846,493)
-------------------------------
Net increase ............................. 2,412,316 $ 35,515,070
===============================
- -------------------------------------------------------------------------------
Class R Shares for the Six Months Dollar
Ended March 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 153,754 $ 2,438,154
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 17,174 266,187
-------------------------------
Total issued ............................. 170,928 2,704,341
Shares redeemed .......................... (68,019) (1,091,469)
-------------------------------
Net increase ............................. 102,909 $ 1,612,872
===============================
- -------------------------------------------------------------------------------
Class R Shares for the Year Dollar
Ended September 30, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 145,615 $ 2,102,593
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 7,194 98,269
-------------------------------
Total issued ............................. 152,809 2,200,862
Shares redeemed .......................... (58,584) (859,552)
-------------------------------
Net increase ............................. 94,225 $ 1,341,310
===============================
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, 2006 19
Schedule of Investments Global Financial Services Portfolio (in U.S. dollars)
Shares
Industry Common Stocks Held Value
================================================================================
Europe
- --------------------------------------------------------------------------------
Belgium--0.5%
Commercial Banks--0.1%
KBC Bancassurance Holding 1,800 $ 192,996
--------------------------------------------------------------------
Diversified Financial
Services--0.4%
Fortis 13,600 485,185
--------------------------------------------------------------------
Total Common Stocks in Belgium 678,181
================================================================================
Denmark--0.8%
Commercial Banks--0.8%
Danske Bank A/S 30,000 1,111,643
--------------------------------------------------------------------
Total Common Stocks in Denmark 1,111,643
================================================================================
Germany--0.6%
Insurance--0.6%
Hannover Rueckversicherungs AG
Registered Shares 24,200 896,437
--------------------------------------------------------------------
Total Common Stocks in Germany 896,437
================================================================================
Ireland--0.4%
Commercial Banks--0.4%
Allied Irish Banks Plc 21,200 505,311
--------------------------------------------------------------------
Total Common Stocks in Ireland 505,311
================================================================================
Netherlands--0.2%
Diversified Financial
Services--0.2%
ING Groep NV CVA 5,300 209,091
--------------------------------------------------------------------
Total Common Stocks
in the Netherlands 209,091
================================================================================
Spain--0.0%
Insurance--0.0%
Corporacion Mapfre SA 1,600 32,548
--------------------------------------------------------------------
Total Common Stocks in Spain 32,548
================================================================================
Turkey--0.4%
Commercial Banks--0.4%
Akbank T.A.S. 67,081 563,369
--------------------------------------------------------------------
Total Common Stocks in Turkey 563,369
================================================================================
United Kingdom--6.8%
Capital Markets--0.2%
Close Brothers Group Plc 8,900 164,640
ICAP Plc 17,500 135,837
-------------
300,477
--------------------------------------------------------------------
Commercial Banks--1.0%
Barclays Plc 700 8,178
Lloyds TSB Group Plc 134,400 1,283,341
London Scottish Bank Plc 29,100 51,990
-------------
1,343,509
--------------------------------------------------------------------
Consumer Finance--1.2%
Cattles Plc 40,300 257,415
Provident Financial Plc 109,900 1,346,776
-------------
1,604,191
--------------------------------------------------------------------
Insurance--0.1%
Jardine Lloyd Thompson Group Plc 25,900 162,627
--------------------------------------------------------------------
Thrifts & Mortgage Finance--4.3%
Kensington Group Plc 226,600 4,669,410
Northern Rock Plc 63,300 1,299,993
-------------
5,969,403
--------------------------------------------------------------------
Total Common Stocks in the
United Kingdom 9,380,207
--------------------------------------------------------------------
Total Common Stocks
in Europe--9.7% 13,376,787
================================================================================
================================================================================
Middle East
- --------------------------------------------------------------------------------
Egypt--0.2%
Commercial Banks--0.2%
Commercial International Bank 21,200 258,199
--------------------------------------------------------------------
Total Common Stocks in the
Middle East--0.2% 258,199
================================================================================
================================================================================
North America
- --------------------------------------------------------------------------------
Bermuda--5.0%
Insurance--5.0%
Everest Re Group Ltd. 4,600 429,502
Montpelier Re Holdings Ltd. 13,200 215,160
PartnerRe Ltd. 800 49,672
RenaissanceRe Holdings Ltd. 140,900 6,146,058
--------------------------------------------------------------------
Total Common Stocks in Bermuda 6,840,392
================================================================================
Canada--0.0%
Commercial Banks--0.0%
Toronto-Dominion Bank 117 6,517
--------------------------------------------------------------------
Total Common Stocks in Canada 6,517
================================================================================
United States--37.9%
Capital Markets--1.7%
Affiliated Managers Group (a) 22,000 2,345,420
--------------------------------------------------------------------
Commercial Banks--0.0%
TD Banknorth, Inc. 245 7,191
--------------------------------------------------------------------
Consumer Finance--1.4%
Capital One Financial Corp. 24,600 1,980,792
--------------------------------------------------------------------
Household Durables--4.5%
KB HOME 25,700 1,669,986
Lennar Corp. Class A 16,200 978,156
Pulte Homes, Inc. 21,000 806,820
Toll Brothers, Inc. (a) 79,700 2,760,011
-------------
6,214,973
--------------------------------------------------------------------
Insurance--0.3%
Arthur J. Gallagher & Co. 500 13,905
Bristol West Holdings, Inc. 12,800 246,400
Brown & Brown, Inc. 400 13,280
Hilb Rogal & Hobbs Co. 2,000 82,440
The Progressive Corp. 200 20,852
-------------
376,877
--------------------------------------------------------------------
20 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006
Schedule of Investments (continued)
Global Financial Services Portfolio (in U.S. dollars)
Shares
Industry Common Stocks Held Value
================================================================================
North America (concluded)
- --------------------------------------------------------------------------------
United States (concluded)
Real Estate--22.1%
AMB Property Corp. 1,000 $ 54,270
Aames Investment Corp. 456,600 2,593,488
American Home Mortgage
Investment Corp. 395,000 12,327,950
Equity Office Properties Trust 1,400 47,012
Friedman Billings Ramsey Group, Inc.
Class A (b) 330,700 3,101,966
New Century Financial Corp. (b) 183,200 8,430,864
Novastar Financial, Inc. (b) 11,800 394,592
Saxon Capital Inc. 339,000 3,539,160
-------------
30,489,302
--------------------------------------------------------------------
Thrifts & Mortgage Finance--7.9%
Accredited Home Lenders
Holding Co. (a)(b) 100,000 5,118,000
Fremont General Corp. 268,000 5,778,080
-------------
10,896,080
--------------------------------------------------------------------
Total Common Stocks in the
United States 52,310,635
--------------------------------------------------------------------
Total Common Stocks in
North America--42.9% 59,157,544
================================================================================
================================================================================
Pacific Basin/Asia
- --------------------------------------------------------------------------------
China--0.5%
Real Estate--0.5%
Beijing Capital Land Ltd. 1,504,300 741,502
--------------------------------------------------------------------
Total Common Stocks in China 741,502
================================================================================
Hong Kong--3.3%
Real Estate--3.3%
China Resources Land Ltd. 1,532,000 1,145,074
Hopson Development Holdings Ltd. 939,300 2,021,471
Shanghai Forte Land Co., Ltd. 2,655,200 1,385,795
--------------------------------------------------------------------
Total Common Stocks in
Hong Kong 4,552,340
================================================================================
Indonesia--0.4%
Commercial Banks--0.4%
Bank Central Asia Tbk PT 746,900 343,161
Bank Mandiri Persero Tbk PT 1,154,100 214,639
--------------------------------------------------------------------
Total Common Stocks
in Indonesia 557,800
================================================================================
Japan--5.4%
Capital Markets--2.1%
Daiichi Commodities Co., Ltd. 57,000 697,585
Daikoh Holdings, Inc. 122,000 541,809
Kyokuto Securities Co., Ltd. 14,000 242,054
Nomura Holdings, Inc. 14,400 320,366
Takagi Securities Co., Ltd. 62,000 454,530
Toyo Securities Co., Ltd. 82,200 607,496
-------------
2,863,840
--------------------------------------------------------------------
Construction & Engineering--0.1%
Okumura Corp. 23,000 126,316
--------------------------------------------------------------------
Consumer Finance--1.0%
Aeon Credit Service Co., Ltd. 6,600 199,136
Aiful Corp. 6,000 396,135
Credit Saison Co., Ltd. 14,600 805,543
-------------
1,400,814
--------------------------------------------------------------------
Distributors--0.2%
ACE Koeki Co., Ltd. 30,000 332,062
--------------------------------------------------------------------
Household Durables--1.0%
Fuso Lexel, Inc. 37,500 380,753
The Japan General Estate Co., Ltd. 45,400 935,011
-------------
1,315,764
--------------------------------------------------------------------
Real Estate--1.0%
Dynacity Corp. 1,200 241,444
Sanyo Housing Nagoya Co., Ltd. 100 160,183
Sumitomo Real Estate Sales, Inc. 10,900 697,474
Sunwood Corp. 100 248,326
-------------
1,347,427
--------------------------------------------------------------------
Total Common Stocks in Japan 7,386,223
================================================================================
South Korea--22.8%
Commercial Banks--12.5%
Daegu Bank 307,400 5,742,098
Hana Financial Group, Inc. 80,645 3,817,908
Industrial Bank of Korea 221,800 4,108,887
Pusan Bank 239,400 3,498,667
-------------
17,167,560
--------------------------------------------------------------------
Insurance--10.3%
Dongbu Insurance Co., Ltd. 226,100 4,374,703
Korean Reinsurance Co. 401,421 4,358,557
Meritz Fire & Marine Insurance
Co., Ltd. 1,160,000 5,455,874
-------------
14,189,134
--------------------------------------------------------------------
Total Common Stocks in
South Korea 31,356,694
--------------------------------------------------------------------
Total Common Stocks in the
Pacific Basin/Asia--32.4% 44,594,559
--------------------------------------------------------------------
Total Common Stocks
(Cost--$79,325,241)--85.2% 117,387,089
================================================================================
Beneficial
Short-Term Securities Interest
================================================================================
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I, 4.56% (c)(d) $ 296 296
Merrill Lynch Liquidity Series, LLC
Money Market Series, 4.75% (c)(d)(e) 6,447,825 6,447,825
--------------------------------------------------------------------
Total Short-Term Securities
(Cost--$6,448,121)--4.7% 6,448,121
================================================================================
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006 21
Schedule of Investments (concluded)
Global Financial Services Portfolio (in U.S. dollars)
Number of
Options Purchased Contracts Value
===============================================================================
Call Options Purchased--13.8%
ACE Ltd.:
expiring May 2006 at USD 40 350 $ 427,000
expiring May 2006 at USD 45 350 255,500
Accredited Home Lenders Holding Co.:
expiring September 2006 at USD 35 220 382,800
expiring September 2006 at USD 40 270 364,500
expiring January 2007 at USD 40 34 49,980
expiring January 2008 at USD 35 494 1,106,560
expiring January 2008 at USD 40 1,000 1,880,000
expiring January 2008 at USD 50 237 312,840
expiring January 2008 at USD 55 253 275,770
The Bear Stearns Cos., Inc.:
expiring July 2006 at USD 95 118 526,280
expiring January 2007 at USD 75 91 598,780
expiring January 2007 at USD 90 218 1,127,060
expiring January 2007 at USD 100 215 913,750
expiring January 2007 at USD 110 462 1,556,940
expiring January 2008 at USD 95 134 695,460
expiring January 2008 at USD 100 235 1,125,650
Goldman Sachs Group, Inc.:
expiring January 2007 at USD 115 200 926,000
expiring January 2007 at USD 125 188 705,000
New Century Financial Corp.:
expiring May 2006 at USD 40 4,518 3,207,780
expiring August 2006 at USD 40 130 98,800
expiring August 2006 at USD 45 130 57,200
expiring August 2006 at USD 50 130 27,950
expiring January 2007 at USD 40 1,540 1,355,200
expiring January 2008 at USD 40 1,060 985,800
-----------------------------------------------------------------------
Total Options Purchased
(Premiums Paid--$13,814,199)--13.8% 18,962,600
===============================================================================
Total Investments
(Cost--$99,587,561*)--103.7% 142,797,810
Liabilities in Excess of Other Assets--(3.7%) (5,083,527)
------------
Net Assets--100.0% $137,714,283
============
* The cost and unrealized appreciation (depreciation) of investments as of
March 31, 2006, as computed for federal income tax purposes, were as
follows:
Aggregate cost ................................ $ 101,192,299
=============
Gross unrealized appreciation ................. $ 44,077,255
Gross unrealized depreciation ................. (2,471,744)
-------------
Net unrealized appreciation ................... $ 41,605,511
=============
(a) Non-income producing security.
(b) Security, or a portion of security, is on loan.
(c) Investments in companies considered to be an affiliate of the Portfolio,
for purposes of 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 $ 296 $ 5,050
Merrill Lynch Liquidity Series, LLC
Money Market Series $2,930,325 $ 48,496
--------------------------------------------------------------------------
(d) Represents the current yield as of March 31, 2006.
(e) Security was purchased with the cash proceeds from securities loans.
o For Portfolio compliance purposes, the Portfolio's industry
classifications refer to 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
industry sub-classifications for reporting ease. Industries are shown as a
percent of net assets.
o Forward foreign exchange contracts as of March 31, 2006 were as follows:
-------------------------------------------------------------------------
Foreign Currency Settlement Unrealized
Purchased Date Depreciation
-------------------------------------------------------------------------
JPY 41,493,941 April 2006 $ (1,734)
-------------------------------------------------------------------------
Total Unrealized Depreciation on Forward Foreign
Exchange Contracts--Net (USD Commitment--$353,624) $ (1,734)
============
o Currency Abbreviations:
JPY Japanese Yen
USD U.S. Dollar
See Notes to Financial Statements.
22 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006
Statement of Assets and Liabilities Global Financial Services Portfolio
As of March 31, 2006
=============================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (including securities loaned
of $6,319,708) (identified cost--$79,325,241) .............................. $117,387,089
Investments in affiliated securities, at value (identified cost--$6,448,121) 6,448,121
Options purchased, at value (cost--$13,814,199) ............................. 18,962,600
Foreign cash (cost--$1,198,499) ............................................. 1,186,256
Receivables:
Securities sold .......................................................... $ 1,483,632
Dividends ................................................................ 1,061,802
Contributions ............................................................ 510,362
Securities lending ....................................................... 6,350 3,062,146
------------
Prepaid expenses ............................................................ 28,431
------------
Total assets ................................................................ 147,074,643
------------
=============================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value ................................... 6,447,825
Bank overdraft .............................................................. 329,582
Unrealized depreciation on forward foreign exchange contracts ............... 1,734
Payables:
Securities purchased ..................................................... 2,094,540
Withdrawals .............................................................. 407,819
Investment adviser ....................................................... 39,796
Other affiliates ......................................................... 1,116 2,543,271
------------
Accrued expenses and other liabilities ...................................... 37,948
------------
Total liabilities ........................................................... 9,360,360
------------
=============================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
Net assets .................................................................. $137,714,283
============
=============================================================================================================================
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------
Investor's capital .......................................................... $ 94,509,483
Unrealized appreciation--net ................................................ 43,204,800
------------
Net Assets .................................................................. $137,714,283
============
See Notes to Financial Statements.
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006 23
Statement of Operations Global Financial Services Portfolio
For the Six Months Ended March 31, 2006
=============================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------
Dividends (net of $73,338 foreign withholding tax) .......................... $ 3,150,372
Interest from affiliates .................................................... 5,050
Securities lending--net ..................................................... 48,496
------------
Total income ................................................................ 3,203,918
------------
=============================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------
Investment advisory fees .................................................... $ 242,756
Custodian fees .............................................................. 50,199
Accounting services ......................................................... 46,958
Trustees' fees and expenses ................................................. 20,789
Professional fees ........................................................... 14,739
Pricing fees ................................................................ 2,409
Printing and shareholder reports ............................................ 1,679
Other ....................................................................... 5,191
------------
Total expenses .............................................................. 384,720
------------
Investment income--net ...................................................... 2,819,198
------------
=============================================================================================================================
Realized & Unrealized Gain (Loss)--Net
- -----------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments (including $3,362 from foreign capital gain tax)--net .......... 2,554,848
Foreign currency transactions--net ......................................... (98,484) 2,456,364
------------
Change in unrealized appreciation/depreciation on:
Investments (including reversal of $754 from deferred capital gain tax
credit)--net .............................................................. 22,207,017
Foreign currency transactions--net ......................................... 2,527 22,209,544
---------------------------
Total realized and unrealized gain--net ..................................... 24,665,908
------------
Net Increase in Net Assets Resulting from Operations ........................ $ 27,485,106
============
See Notes to Financial Statements.
24 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006
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: 2006 2005
=============================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------
Investment income--net ...................................................... $ 2,819,198 $ 2,809,491
Realized gain--net .......................................................... 2,456,364 9,131,002
Change in unrealized appreciation/depreciation--net ......................... 22,209,544 8,022,831
---------------------------
Net increase in net assets resulting from operations ........................ 27,485,106 19,963,324
---------------------------
=============================================================================================================================
Capital Transactions
- -----------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions ................................................. 30,529,449 51,456,892
Fair value of withdrawals ................................................... (28,253,307) (34,228,936)
---------------------------
Net increase in net assets derived from capital transactions ................ 2,276,142 17,227,956
---------------------------
=============================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ................................................ 29,761,248 37,191,280
Beginning of period ......................................................... 107,953,035 70,761,755
---------------------------
End of period ............................................................... $137,714,283 $107,953,035
===========================
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. 2006 2005 2004 2003 2002
================================================================================================================================
Total Investment Return
- --------------------------------------------------------------------------------------------------------------------------------
Total investment return ................ 25.52%+ 28.02% 25.86% 40.92% (8.61%)
====================================================================
================================================================================================================================
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... .63%* .70% .78% .76% .67%
====================================================================
Investment income--net ................. 4.65%* 3.05% 2.23% 1.64% 1.26%
====================================================================
================================================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 137,714 $ 107,953 $ 70,762 $ 70,172 $ 60,342
====================================================================
Portfolio turnover ..................... 34.46% 80.05% 115.38% 205.93% 144.60%
====================================================================
* Annualized.
+ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006 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. The actual results may differ from these estimates. These
unaudited financial statements reflect all adjustments, which are, in the
opinion of management, necessary to present a fair statement of the results for
the interim period. All such adjustments are of a normal, recurring nature. The
following is a summary of significant accounting policies followed by the
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 asked
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 asked 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 asked
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 based upon quoted fair valuations
received daily by the Portfolio from a pricing service or counterparty.
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. Valuation of other short-term investment vehicles is generally
based on the net asset value of the underlying investment vehicle or amortized
cost.
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,
money market instruments and certain fixed income securities, 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.
(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
26 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006
Notes to Financial Statements (continued) Global Financial Services Portfolio
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.
The Portfolio invests in foreign securities, which may involve a number of risk
factors and special considerations not present with investments in securities of
U.S. corporations.
(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.
(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
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006 27
Notes to Financial Statements (concluded) Global Financial Services Portfolio
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.
(g) Bank overdraft -- The Fund recorded a bank overdraft which resulted from
management estimates of available cash.
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"), an affiliate of FAM, 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 Merrill Lynch Investment Managers, L.P. ("MLIM"), an affiliate of
FAM. For the six months ended March 31, 2006, MLIM, LLC received $20,951 in
securities lending agent fees.
In addition, MLPF&S received $5,382 in commissions on the execution of portfolio
security transactions for the Portfolio for the six months ended March 31, 2006.
For the six months ended March 31, 2006, the Portfolio reimbursed FAM $1,052 for
certain accounting services.
Certain officers and/or trustees of the Trust are officers and/or directors of
FAM, PSI, MLAM U.K., ML & Co., MLIM, and/or MLIM, LLC.
In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to
contribute ML & Co.'s investment management business, including FAM, to the
investment management business of BlackRock, Inc. The transaction is expected to
close in the third quarter of 2006.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended March 31, 2006 were $40,317,496 and $50,501,070, respectively.
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, 2006. On November 23,
2005 the credit agreement was renewed for one year under substantially the same
terms.
5. Commitments:
At March 31, 2006, the Portfolio had entered into foreign exchange contracts
under which it had agreed to purchase various foreign currencies with
approximate values of $188,000.
28 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006
Disclosure of Investment Advisory Agreement
Activities and Composition of the Board of Directors/Trustees
All but one member of the Fund's Board of Directors and Global Financial
Services Master Trust's (the "Trust") Board of Trustees, the members of which
are identical, is a non-interested director and trustee as that term is defined
in the Investment Company Act of 1940, whose only association with Fund Asset
Management, L.P., (the "Investment Adviser") or other Merrill Lynch affiliates
is as a director and trustee of the Fund and the Trust, and of certain other
funds advised by the Investment Adviser or its affiliates. We refer to these
persons as independent directors throughout this report. The Chairman of each
Board is an independent director and nominees to become independent directors
are chosen by a Nominating Committee comprised of independent directors. All
independent directors also are members of each Board's Audit Committee. The
independent directors meet in executive session at each regular Board meeting.
Each Board and each Board's 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. Independent counsel to the independent directors attends
all in-person Board and Audit Committee meetings and other meetings at the
request of the independent directors.
Investment Advisory Agreement -- Matters Considered by the Boards
Every year each Board considers approval of the investment advisory agreement
with respect to the Fund and the Trust (together, the "Investment Advisory
Agreement") and throughout each year, reviews and evaluates the performance of
and services provided by the Investment Adviser. Each Board also annually
reviews and considers approval of the sub-advisory agreement on behalf of each
of the Fund and the Trust between the Investment Adviser and Merrill Lynch Asset
Management U.K. Limited (the "sub-adviser"). Each Board assesses the nature,
scope and quality of the services provided to the Trust and/or 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. Each Board also receives and assesses information regarding the
services provided to the Fund and the Trust by certain unaffiliated service
providers.
At various times throughout the year, each 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 with respect to each Fund are: (a) fees (in addition to
management fees) paid to the Investment Adviser and its affiliates by the Fund
and the Trust, such as transfer agency fees and fees for marketing and
distribution; (b) Fund/Trust operating expenses paid to third parties; (c) the
resources devoted to and compliance reports relating to the Fund's and the
Trust's investment objective, policies and restrictions, and the Fund's or the
Trust's compliance with its respective 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.
Each Board believes that the Investment Adviser is one of the most experienced
global asset management firms and considers the overall services provided by the
Investment Adviser to be of high quality. Each 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.
Each Board works closely with the Investment Adviser in overseeing the
Investment Adviser's efforts to achieve good performance. As part of this
effort, each 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/Trustees
In the period prior to the Board meeting to consider renewal of the Investment
Advisory Agreement and the sub-advisory agreement, each Board requests and
receives materials specifically relating to the 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/Trust's portfolio management team regarding investment strategies used by
the Fund/Trust 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 the Trust;
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006 29
Disclosure of Investment Advisory Agreement (continued)
and (e) information provided by the Investment Adviser concerning investment
advisory fees charged to retail offshore funds under similar investment
mandates. Each 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 portfolio holdings, allocation of brokerage fees of the
Fund (including the related benefits to the Investment Adviser of "soft
dollars"), the portfolio turnover statistics of the Fund, and direct and
indirect benefits to the Investment Adviser and the sub-adviser and their
affiliates from their relationship with the Fund and the Trust.
Certain Specific Renewal Data
In connection with the most recent renewal of the Fund's/Trust's Investment
Advisory Agreement and sub-advisory agreement in February 2006, the independent
directors' and Boards' review included the following:
The Investment Adviser's Services and Fund Performance -- Each Board reviewed
the nature, extent and quality of services provided by the Investment Adviser
and the sub-adviser, including the investment advisory services and the
resulting performance of the Fund. Each Board focused primarily on the
Investment Adviser's investment advisory services and the Fund's investment
performance. Each Board compared the Fund's performance -- both including and
excluding the effects of the fees and expenses of the Fund and the Trust -- to
the performance of a comparable group of mutual funds, and the performance of a
relevant index or combination of indexes. While each Board reviews performance
data at least quarterly, consistent with the Investment Adviser's investment
goals, the Board attaches more importance to performance over relatively long
periods of time, typically three to five years. According to Lipper's ranking of
all retail front-end load financial services funds, excluding outliers, for the
periods ended November 30, 2005, the Fund's performance after fees and expenses
ranked in the first quintile for the one-, three-, and five-year periods.
Considering these factors, each Board concluded that the nature and quality of
these services supported the continuation of the Investment Advisory Agreement.
The Investment Adviser's Personnel and Investment Process -- Each Board reviewed
the investment objectives and strategies of the Fund and the Trust. Each Board
discussed 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, each Board considered 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. Each Board also
reviews the Investment Adviser's compensation policies and practices with
respect to the Fund's/Trust's portfolio managers. Each Board also considered the
experience of the Fund's/Trust's co-portfolio management team and noted that Mr.
Kassem, the Fund's/Trust's portfolio manager, has over fifteen years' experience
in portfolio management. Each Board also noted that the Investment Adviser and
its investment staff have extensive experience in analyzing and managing the
types of investments used by the Fund/Trust. Each Board concluded that the
Fund/Trust benefits from that expertise.
Management Fees and Other Expenses -- Each Board reviewed the Fund's and the
Trust'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 considered comparable by Lipper. It also compared
the Fund's/Trust's total expenses to those of other comparable funds. Each Board
considered the services provided to and the fees charged by the Investment
Adviser to retail offshore funds with similar investment mandates and noted that
the fees charged by the Investment Adviser to the retail offshore funds were
more than those being charged to the Fund and the Trust. Each Board noted that
Fund's contractual and actual management fee rates were below the median
management fees charged by comparable funds, while the actual total expenses,
including investment-related expenses, were above the median total expenses
charged by comparable funds as classified by Lipper. Each Board considered that
the actual total expenses included a high rate of non-management expenses
relating to the small number of accounts and the small size of assets under
management. Each Board has concluded that the Fund's/Trust's management fee rate
and overall expense ratio are acceptable compared to those of other comparable
funds.
Profitability -- The Boards considered the cost of the services provided to the
Fund and/or the Trust 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 Boards reviewed the
Investment Adviser's methodology in
30 MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006
Disclosure of Investment Advisory Agreement (concluded)
allocating its costs to the management of the Fund and the Trust and concluded
that there was a reasonable basis for the allocation. Each Board concluded that
the Investment Adviser's profits are acceptable in relation to the nature and
quality of services provided and given the level of fees and expenses overall.
Economies of Scale -- The Boards considered the extent to which economies of
scale might be realized as the assets of the Fund and Trust increase and whether
there should be changes in the management fee rate or structure in order to
enable the Fund and the Trust to participate in these economies of scale. While
there was no evidence to date that the Fund's/Trust's assets have reached a
level where such economies are effectively available, the Boards noted that they
would continue to seek information relating to economies of scale. The Boards
determined that no changes were currently necessary.
Conclusion
After the independent directors deliberated in executive session, the Board of
the Fund and of the Trust, 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.
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
Donald C. Burke, Vice President and Treasurer
Walid Kassem, Vice President and Portfolio Manager
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
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.
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC. MARCH 31, 2006 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.
Investment in foreign securities involves special risks including fluctuating
foreign exchange rates, foreign government regulations, differing degrees of
liquidity and the possibility of substantial volatility due to adverse
political, economic or other developments.
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 1-800-637-3863; (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 -- 3/06
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 22, 2006
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 22, 2006
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 22, 2006