UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-09375
811-09633
Name of Fund: BlackRock 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, BlackRock 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 - 09/30/06
Item 1 - Report to Stockholders
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES
FIXED INCOME LIQUIDITY REAL ESTATE
BlackRock Global Financial BLACKROCK
Services Fund, Inc.
ANNUAL REPORT | SEPTEMBER 30, 2006
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BlackRock Global Financial Services Fund, Inc.
Worldwide Investments of Global Financial Services Portfolio as of September 30,
2006
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
Bank of America Corp. ............................................... 6.0%
Citigroup, Inc. ..................................................... 5.5
JPMorgan Chase & Co. ................................................ 5.1
American International Group, Inc. .................................. 5.0
ACE Ltd. ............................................................ 4.2
Wachovia Corp. ...................................................... 4.0
American Home Mortgage Investment Corp. ............................. 3.7
RenaissanceRe Holdings Ltd. ......................................... 3.5
Meritz Fire & Marine Insurance Co., Ltd. ............................ 2.8
Hartford Financial Services Group, Inc. ............................. 2.8
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Geographic Allocation Percent of
by Country Total Investments
- --------------------------------------------------------------------------------
United States ....................................................... 41.8%
South Korea ......................................................... 15.4
United Kingdom ...................................................... 6.7
Japan ............................................................... 4.7
Cayman Islands ...................................................... 3.9
Bermuda ............................................................. 3.8
Hong Kong ........................................................... 3.7
Switzerland ......................................................... 1.0
Denmark ............................................................. 0.9
Belgium ............................................................. 0.7
Germany ............................................................. 0.7
Indonesia ........................................................... 0.7
China ............................................................... 0.6
Ireland ............................................................. 0.6
Turkey .............................................................. 0.4
Egypt ............................................................... 0.2
Netherlands ......................................................... 0.2
Spain ............................................................... --*
Other** ............................................................. 14.0
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* Holdings are less than 0.1%.
** Includes portfolio holdings in short-term investments and options.
Industries Represented in Percent of
the Portfolio Net Assets*
- --------------------------------------------------------------------------------
Insurance ........................................................... 27.7%
Commercial Banks .................................................... 17.6
Diversified Financial Services ...................................... 17.5
Real Estate Investment Trusts (REITs) ............................... 7.5
Real Estate Management & Development ................................ 6.4
Consumer Finance .................................................... 5.0
Capital Markets ..................................................... 4.7
Thrifts & Mortgage Finance .......................................... 3.1
Household Durables .................................................. 1.4
Other** ............................................................. 14.8
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* 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.
Proxy Results
During the six-month period ended September 30, 2006, BlackRock Global Financial
Services Fund, Inc.'s shareholders voted on the following proposals. Proposals 1
and 3 were approved at a shareholders' meeting on August 15, 2006. A description
of the proposals and number of shares voted were as follows:
- -------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- -------------------------------------------------------------------------------------------------------
1. To approve a new investment advisory agreement
with BlackRock Advisors, Inc. 4,639,014 116,498 85,842
- -------------------------------------------------------------------------------------------------------
3. To approve a contingent subadvisory agreement
with BlackRock Advisors, Inc. 4,693,559 57,235 90,560
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2 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
A Letter to Shareholders
Dear Shareholder
It is my pleasure to welcome you to BlackRock.
On September 29, 2006, BlackRock, Inc. ("BlackRock") and Merrill Lynch
Investment Managers, L.P. ("MLIM") united to form one of the largest asset
management firms in the world. Now with more than $1 trillion in assets under
management, over 4,000 employees in 18 countries and representation in key
markets worldwide, BlackRock's global presence means greater depth and scale to
serve you.
The new BlackRock unites some of the finest money managers in the industry. Our
ranks include more than 500 investment professionals globally -- portfolio
managers, research analysts, risk management professionals and traders. With
offices strategically located around the world, our investment professionals
have in-depth local knowledge and the ability to leverage our global presence
and robust infrastructure to deliver focused investment solutions. BlackRock's
professional investors are supported by disciplined investment processes and
best-in-class technology, ensuring that our portfolio managers are well equipped
to research, uncover and capitalize on the opportunities the world's markets
have to offer.
The BlackRock culture emphasizes excellence, teamwork and integrity in the
management of a variety of equity, fixed income, cash management, alternative
investment and real estate products. Our firm's core philosophy is grounded in
the belief that experienced investment and risk professionals using disciplined
investment processes and sophisticated analytical tools can consistently add
value to client portfolios.
As you probably are aware, most former MLIM investment products now carry the
"BlackRock" name. This is reflected in newspapers and online fund reporting
resources. Your account statements, as of the October month-end reporting
period, also reflect the BlackRock name. Unless otherwise communicated to you,
your funds maintain the same investment objectives that they did prior to the
combination of MLIM and BlackRock. Importantly, this union does not affect your
brokerage account or your relationship with your financial advisor. Clients of
Merrill Lynch remain clients of Merrill Lynch.
We view this combination of asset management leaders as a complementary union
that reinforces our commitment to shareholders. Individually, each firm made
investment performance its single most important mission. Together, we are even
better prepared to capitalize on market opportunities on behalf of our
shareholders. Our focus on investment excellence is accompanied by an unwavering
commitment to service, enabling us to assist clients, in cooperation with their
financial professionals, in working toward their investment goals. We thank you
for allowing us the opportunity, and we look forward to serving your investment
needs in the months and years ahead as the new BlackRock.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
Vice Chairman
BlackRock, Inc.
Data, including assets under management, are as of June 30, 2006.
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 3
A Discussion With Your Fund's Portfolio Manager
The Fund was repositioned late in the fiscal year to reduce risk and bring
sector exposures closer in line with the MSCI World Financials Index.
How did the Fund perform during the fiscal year in light of the existing market
conditions?
For the 12-month period ended September 30, 2006, BlackRock Global Financial
Services Fund, Inc.'s (formerly Merrill Lynch Global Financial Services Fund,
Inc.) Class A, Class B, Class C, Class I and Class R Shares had total returns of
+15.17%, +14.23%, +14.35%, +15.48% and +14.90%, 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 - 7 of this
report to shareholders.) The Fund's results were competitive with the +14.18%
return of the Morgan Stanley Capital International (MSCI) World Index, but
lagged the +23.27% return of the MSCI World Financials Index for the 12-month
period.
For most of the fiscal year, the Fund was much less diversified than its MSCI
World Financials Index benchmark. Prior to a change in portfolio management in
August, the Fund had little or no representation in large U.S., European and
Japanese banks and insurers. Conversely, there were large concentrations in U.S.
mortgage banks, particularly in the sub-prime sector, and in South Korean
financial companies, which tend to be volatile. The Fund's performance in the
first 11 months of the fiscal year was below that of the benchmark, as U.S.
mortgage banking stocks dropped precipitously amid concerns regarding a flat to
inverted Treasury yield curve, a potential "housing bubble" and more aggressive
marketing of interest-only and option adjustable rate mortgages. Investments in
housing stocks detracted from Fund results during this time, as the use of call
options in these sectors magnified losses in U.S. residential real
estate-related stocks. Also during the past year, South Korean bank and
insurance stocks that had been hugely successful investments during the
2004-2005 period gave back some of their gains; and, as mentioned in the
semi-annual report to shareholders, a significant investment in troubled
Bermuda-based reinsurer PXRE Group detracted meaningfully from performance.
Still, the Fund provided positive returns for the year. The insurance sector,
excluding PXRE, added more than 500 basis points (5%) to performance relative to
the MSCI World Financials Index, with South Korean insurance companies
contributing over one-half of the outperformance. On an absolute basis, the
insurance sector contributed 6% to performance, despite a 282 basis point drag
from PXRE. The commercial banking sector added 5% to absolute returns for the
year, led by South Korean banks. Finally, call options on Goldman Sachs
contributed more than 2% to the Fund's fiscal year performance.
In mid-August, nearly 40% of the Fund was tied to the U.S. housing market via
its investments in household durables, thrifts & mortgage finance, and real
estate investment trusts (REITs). Since that time, we repositioned the portfolio
with the goal of reducing risk, particularly in those subsectors that had
negatively influenced performance. The heavy exposure to call options, as well
as positions in real estate-related and mortgage finance companies, was trimmed
significantly. This shift helped the Fund to generate positive results and
outperformance relative to the MSCI World Financials benchmark in the final
month of the fiscal year. In September, the portfolio's insurance holdings
generated positive results, driven largely by strong appreciation in the shares
of RenaissanceRe Holdings Ltd. and Meritz Fire & Marine Insurance Co. Ltd.
Capital markets also performed well during this time, with strong results from
Goldman Sachs, in particular, and Bear Stearns. Recently purchased shares of
large cap diversified financials and insurance companies also enhanced
performance late in the fiscal period.
What changes were made to the portfolio during the period?
Upon assuming management responsibility for the Fund in mid-August, we began
repositioning the portfolio with an eye toward enhanced diversification and risk
reduction. This involved moving into larger cap stocks and increasing exposure
to the diversified financial services, commercial banks, consumer finance and
insurance subsectors, while significantly reducing exposure to real estate,
thrifts & mortgage finance, mortgage REITs and emerging markets. In light of the
weakening U.S. housing market, we sold investments in homebuilders such as Toll
Brothers, Inc., Pulte Homes, Inc. and KB HOME, among others. Proceeds were
reinvested primarily in large cap diversified financial services and insurance
stocks.
Diversified financials now represent 17% of the portfolio's net assets, more in
line with the benchmark weighting, and include new positions in Citigroup, Inc.,
JPMorgan Chase & Co. and Bank of America Corp. Additionally, we initiated
positions in American International Group, Inc., The Allstate
4 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
Corp., Hartford Financial Services Group, Inc. and Prudential Financial, Inc.,
thereby establishing an overweight position in the insurance industry. Other
changes included the unwinding of a number of options positions that we felt
were no longer adding value, primarily in the housing and mortgage REIT sectors.
From a geographic standpoint, our strategy was little changed, aside from an
increased weighting in the United States. The overweight position in South
Korean banks and insurance companies, while reduced, remains significant, as we
continue to see value in their combination of high profitability, high growth
and relatively low valuations. The valuations and business prospects of these
companies remain more attractive than most alternatives in both developed and
emerging markets.
How would you characterize the portfolio's position at the close of the period?
We believe that, on a global basis, real economic growth will continue to be
relatively healthy. The Fund continues to have a heavy concentration in
insurance and emerging markets stocks, especially in South Korea. We believe
these groups may do well in the next few months. We are cautious about the
outlook for more interest-rate-sensitive subsectors and have scaled back
exposure to such names.
The Fund's commitment to stocks outside of the financial sector has been
significantly reduced. Conversely, attractively valued large cap, diversified
financials, including those with significant capital markets businesses, have
been added to the portfolio, as we believe they are undervalued and offer
above-average dividend yields. We believe their exposure to capital markets
business leaves them less vulnerable to ongoing concerns about the direction of
U.S. interest rates.
Finally, in our view, larger-cap financial stocks appear undervalued and more
attractive than their small to mid-cap counterparts and, as such, should
experience good earnings growth and expansion going forward.
Jacob L. Silady
Portfolio Manager
October 13, 2006
- --------------------------------------------------------------------------------
Effective August 15, 2006, Portfolio Manager Jacob (Jack) Silady assumed
responsibility for the day-to-day management of the Fund's portfolio and the
selection of its investments. Mr. Silady has been a Vice President and research
analyst on the U.S. Active Large Cap Value team responsible for covering the
financial, telecommunications and utility sectors with BlackRock, Inc. since
2006 and previously was a Vice President and research analyst on the Merrill
Lynch Investment Managers (MLIM) U.S. Active Large Cap Value team since 2004.
Prior to that, he was a research analyst with MLIM covering the financial sector
since 2001.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Effective October 2, 2006, the Fund's Class A, Class B, Class C and Class I
Shares were redesignated Investor A, Investor B, Investor C and Institutional
Shares, respectively. Class R Shares remain the same.
- --------------------------------------------------------------------------------
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 5
Performance Data
About Fund Performance
The Fund has multiple classes of shares:
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 Class I Shares are not 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.
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.blackrock.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 September 30, 2006 Total Return Total Return Total Return
================================================================================
Class A Shares* -7.86% +15.17% +152.67%
- --------------------------------------------------------------------------------
Class B Shares* -8.22 +14.23 +139.63
- --------------------------------------------------------------------------------
Class C Shares* -8.20 +14.35 +139.64
- --------------------------------------------------------------------------------
Class I Shares* -7.76 +15.48 +157.03
- --------------------------------------------------------------------------------
Class R Shares* -7.94 +14.90 +149.82
- --------------------------------------------------------------------------------
MSCI World Index** +3.93 +14.18 + 13.55
- --------------------------------------------------------------------------------
MSCI World Financial Index*** +6.16 +23.27 + 60.58
- --------------------------------------------------------------------------------
* 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 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
Performance Data (concluded)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Class A, Class
B, Class C, Class I and Class R Shares compared to growth of an investment in
the MSCI World Index and the MSCI World Financial Index. Values are from
November 26, 1999 to September 2006:
MSCI World
MSCI World Financial
Class A Shares*+ Class B Shares*+ Class C Shares*+ Class I Shares*+ Class R Shares*+ Index++ Index+++
11/26/99** $ 9,475 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
9/00 $11,616 $12,180 $12,180 $12,290 $12,239 $ 9,806 $10,742
9/01 $10,511 $10,936 $10,936 $11,140 $11,039 $ 7,046 $ 8,695
9/02 $ 9,444 $ 9,752 $ 9,751 $10,043 $ 9,901 $ 5,695 $ 7,157
9/03 $13,112 $13,429 $13,428 $13,969 $13,778 $ 7,141 $ 9,302
9/04 $16,357 $16,637 $16,628 $17,474 $17,155 $ 8,362 $11,081
9/05 $20,787 $20,977 $20,956 $22,257 $21,743 $ 9,945 $13,027
9/06 $23,940 $23,963 $23,964 $25,703 $24,982 $11,355 $16,058
* Assuming maximum sales charge, if any, transaction costs and other
operating expenses, including advisory fees.
** Commencement of operations.
+ The Fund invests primarily in a portfolio of common stocks of financial
services companies that Fund management believes have the potential to
increase in value.
++ 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.
+++ 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. The starting date for the Index in the
Class A, Class B, Class C, Class I and Class R Shares' graph is 11/30/99.
Past performance is not indicative of future results.
Average Annual Total Return
- --------------------------------------------------------------------------------
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 9/30/06 +15.17% + 9.12%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/06 +17.89 +16.63
- --------------------------------------------------------------------------------
Inception (11/26/99) through 9/30/06 +14.50 +13.60
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC+++
================================================================================
Class B Shares+
================================================================================
One Year Ended 9/30/06 +14.23% +10.23%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/06 +16.99 +16.77
- --------------------------------------------------------------------------------
Inception (11/26/99) through 9/30/06 +13.61 +13.61
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC+++
================================================================================
Class C Shares++
================================================================================
One Year Ended 9/30/06 +14.35% +13.35%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/06 +16.99 +16.99
- --------------------------------------------------------------------------------
Inception (11/26/99) through 9/30/06 +13.62 +13.62
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class I Shares Return
================================================================================
One Year Ended 9/30/06 +15.48%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/06 +18.20
- --------------------------------------------------------------------------------
Inception (11/26/99) through 9/30/06 +14.78
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class R Shares Return
================================================================================
One Year Ended 9/30/06 +14.90%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/06 +17.75
- --------------------------------------------------------------------------------
Inception (11/26/99) through 9/30/06 +14.31
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
+ Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
++ Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
+++ Assuming payment of applicable contingent deferred sales charge.
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 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 April 1, 2006 and held through
September 30, 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 April 1, 2006 to
April 1, 2006 September 30, 2006 September 30, 2006
=====================================================================================================================
Actual
=====================================================================================================================
Class A $ 1,000 $ 921.40 $ 7.52
- ---------------------------------------------------------------------------------------------------------------------
Class B $ 1,000 $ 917.80 $ 11.14
- ---------------------------------------------------------------------------------------------------------------------
Class C $ 1,000 $ 918.00 $ 11.19
- ---------------------------------------------------------------------------------------------------------------------
Class I $ 1,000 $ 922.40 $ 6.23
- ---------------------------------------------------------------------------------------------------------------------
Class R $ 1,000 $ 920.60 $ 8.76
=====================================================================================================================
Hypothetical (5% annual return before expenses)**
=====================================================================================================================
Class A $ 1,000 $1,017.07 $ 7.90
- ---------------------------------------------------------------------------------------------------------------------
Class B $ 1,000 $1,013.28 $ 11.70
- ---------------------------------------------------------------------------------------------------------------------
Class C $ 1,000 $1,013.23 $ 11.75
- ---------------------------------------------------------------------------------------------------------------------
Class I $ 1,000 $1,018.42 $ 6.54
- ---------------------------------------------------------------------------------------------------------------------
Class R $ 1,000 $1,015.78 $ 9.20
- ---------------------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (1.57% for Class A, 2.33% for Class B, 2.34% for Class
C, 1.30% for Class I and 1.83% 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 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
Statement of Assets and Liabilities
BlackRock Global Financial Services Fund, Inc.
As of September 30, 2006
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investment in Global Financial Services Portfolio (the "Portfolio"), at value
(identified cost--$69,832,943) ................................................... $ 96,601,019
Prepaid expenses .................................................................. 59,994
-------------
Total assets ...................................................................... 96,661,013
-------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Payables:
Distributor .................................................................... $ 45,522
Other affiliates ............................................................... 31,925
Administrative fees ............................................................ 27,423 104,870
-------------
Accrued expenses .................................................................. 9,028
-------------
Total liabilities ................................................................. 113,898
-------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets ........................................................................ $ 96,547,115
=============
===================================================================================================================================
Net Assets Consist of*
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.10 par value, 100,000,000 shares authorized ..... $ 152,184
Class B Shares of Common Stock, $.10 par value, 100,000,000 shares authorized ..... 176,489
Class C Shares of Common Stock, $.10 par value, 100,000,000 shares authorized ..... 141,964
Class I Shares of Common Stock, $.10 par value, 100,000,000 shares authorized ..... 111,993
Class R Shares of Common Stock, $.10 par value, 100,000,000 shares authorized ..... 34,204
Paid-in capital in excess of par .................................................. 66,939,094
Undistributed investment income--net .............................................. $ 1,965,219
Undistributed realized capital gains allocated from the Portfolio--net ............ 257,892
Unrealized appreciation allocated from the Portfolio--net ......................... 26,768,076
-------------
Total accumulated earnings--net ................................................... 28,991,187
-------------
Net Assets ........................................................................ $ 96,547,115
=============
===================================================================================================================================
Net Asset Value*
- -----------------------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $24,077,793 and 1,521,842 shares outstanding ...... $ 15.82
=============
Class B--Based on net assets of $27,396,649 and 1,764,893 shares outstanding ...... $ 15.52
=============
Class C--Based on net assets of $21,915,436 and 1,419,639 shares outstanding ...... $ 15.44
=============
Class I--Based on net assets of $17,843,013 and 1,119,931 shares outstanding ...... $ 15.93
=============
Class R--Based on net assets of $5,314,224 and 342,038 shares outstanding ......... $ 15.54
=============
* Effective October 2, 2006, Class A, Class B, Class C and Class I Shares
were redesignated Investor A, Investor B, Investor C and Institutional
Shares, respectively.
See Notes to Financial Statements.
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 9
Statement of Operations BlackRock Global Financial Services Fund, Inc.
For the Year Ended September 30, 2006
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income allocated from the Portfolio:
Dividends ...................................................................... $ 5,323,975
Securities lending--net ........................................................ 77,945
Interest from affiliates ....................................................... 50,940
Expenses ....................................................................... (842,278)
-------------
Total income ...................................................................... 4,610,582
-------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Administration fees ............................................................... $ 444,830
Account maintenance and distribution fees--Class B* ............................... 313,459
Account maintenance and distribution fees--Class C* ............................... 206,991
Transfer agent fees--Class I* ..................................................... 69,639
Printing and shareholder reports .................................................. 60,669
Registration fees ................................................................. 58,906
Account maintenance fees--Class A* ................................................ 51,257
Transfer agent fees--Class B* ..................................................... 48,709
Transfer agent fees--Class C* ..................................................... 33,847
Transfer agent fees--Class A* ..................................................... 29,211
Professional fees ................................................................. 29,081
Account maintenance and distribution fees--Class R ................................ 19,235
Transfer agent fees--Class R ...................................................... 5,575
Other ............................................................................. 16,088
-------------
Total expenses .................................................................... 1,387,497
-------------
Investment income--net ............................................................ 3,223,085
-------------
===================================================================================================================================
Realized & Unrealized Gain (Loss) Allocated from the Portfolio--Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments--net ............................................................... 4,099,578
Foreign currency transactions--net ............................................. (121,518) 3,978,060
-------------
Change in unrealized appreciation/depreciation on:
Investments--net ............................................................... 5,765,586
Foreign currency transactions--net ............................................. 7,234 5,772,820
-------------------------------
Total realized and unrealized gain--net ........................................... 9,750,880
-------------
Net Increase in Net Assets Resulting from Operations .............................. $ 12,973,965
=============
* Effective October 2, 2006, Class A, Class B, Class C and Class I Shares
were redesignated Investor A, Investor B, Investor C and Institutional
Shares, respectively.
See Notes to Financial Statements.
10 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
Statements of Changes in Net Assets
BlackRock Global Financial Services Fund, Inc.
For the Year Ended
September 30,
-------------------------------
Increase (Decrease) in Net Assets: 2006 2005
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ............................................................ $ 3,223,085 $ 1,664,042
Realized gain--net ................................................................ 3,978,060 9,131,002
Change in unrealized appreciation/depreciation--net ............................... 5,772,820 8,022,831
-------------------------------
Net increase in net assets resulting from operations .............................. 12,973,965 18,817,875
-------------------------------
===================================================================================================================================
Dividends & 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 ........................................................................ (1,455,871) (1,108,185)
Class B ........................................................................ (3,145,740) (4,533,317)
Class C ........................................................................ (1,689,548) (2,386,248)
Class I ........................................................................ (5,111,324) (1,566,016)
Class R ........................................................................ (221,591) (91,305)
-------------------------------
Net decrease in net assets resulting from dividends and distributions
to shareholders .................................................................. (13,874,082) (10,107,452)
-------------------------------
===================================================================================================================================
Capital Share Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets derived from capital share transactions ..... (10,473,381) 28,473,224
-------------------------------
===================================================================================================================================
Redemption Fee
- -----------------------------------------------------------------------------------------------------------------------------------
Redemption fee .................................................................... 15,349 1,167
-------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets ........................................... (11,358,149) 37,184,814
Beginning of year ................................................................. 107,905,264 70,720,450
-------------------------------
End of year* ...................................................................... $ 96,547,115 $ 107,905,264
===============================
* Undistributed investment income--net ......................................... $ 1,965,219 $ 1,556,189
===============================
** Effective October 2, 2006, Class A, Class B, Class C and Class I Shares
were redesignated Investor A, Investor B, Investor C and Institutional
Shares, respectively.
See Notes to Financial Statements.
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 11
Financial Highlights BlackRock Global Financial Services Fund, Inc.
Class A@
The following per share data --------------------------------------------------------------------------
and ratios have been derived For the Year Ended September 30,
from information provided in --------------------------------------------------------------------------
the financial statements. 2006 2005 2004 2003 2002
===============================================================================================================================
Per Share Operating Performance
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .............. $ 15.45 $ 14.06 $ 12.71 $ 9.43 $ 10.87
--------------------------------------------------------------------------
Investment income (loss)--net** ................. .44 .27 .17 .06 .02
Realized and unrealized gain (loss)--net ........ 1.90++ 3.29++ 2.76++ 3.53 (1.07)
--------------------------------------------------------------------------
Total from investment operations ................ 2.34 3.56 2.93 3.59 (1.05)
--------------------------------------------------------------------------
Less dividends and distributions:
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 year .................... $ 15.82 $ 15.45 $ 14.06 $ 12.71 $ 9.43
==========================================================================
===============================================================================================================================
Total Investment Return*
- -------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .............. 15.17% 27.08% 24.75% 38.83% (10.15%)
==========================================================================
===============================================================================================================================
Ratios to Average Net Assets+
- -------------------------------------------------------------------------------------------------------------------------------
Expenses ........................................ 1.54% 1.62% 1.78% 1.86% 1.76%
==========================================================================
Investment income (loss)--net ................... 2.66% 1.87% 1.21% .59% .17%
==========================================================================
===============================================================================================================================
Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) .......... $24,078 $10,040 $ 8,684 $ 7,800 $ 5,520
==========================================================================
Portfolio turnover of the Portfolio ............. 79.29% 80.05% 115.38% 205.93% 144.60%
==========================================================================
Class B@
The following per share data --------------------------------------------------------------------------
and ratios have been derived For the Year Ended September 30,
from information provided in --------------------------------------------------------------------------
the financial statements. 2006 2005 2004 2003 2002
===============================================================================================================================
Per Share Operating Performance
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .............. $ 15.18 $ 13.86 $ 12.51 $ 9.36 $ 10.78
--------------------------------------------------------------------------
Investment income (loss)--net** ................. .33 .16 .06 (.03) (.07)
Realized and unrealized gain (loss)--net ........ 1.84++ 3.23++ 2.74++ 3.49 (1.06)
--------------------------------------------------------------------------
Total from investment operations ................ 2.17 3.39 2.80 3.46 (1.13)
--------------------------------------------------------------------------
Less dividends and distributions:
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 year .................... $ 15.52 $ 15.18 $ 13.86 $ 12.51 $ 9.36
==========================================================================
===============================================================================================================================
Total Investment Return*
- -------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .............. 14.23% 26.08% 23.89% 37.71% (10.83%)
==========================================================================
===============================================================================================================================
Ratios to Average Net Assets+
- -------------------------------------------------------------------------------------------------------------------------------
Expenses ........................................ 2.30% 2.39% 2.55% 2.64% 2.53%
==========================================================================
Investment income (loss)--net ................... 2.08% 1.09% .46% (.24%) (.60%)
==========================================================================
===============================================================================================================================
Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) .......... $27,397 $31,126 $33,733 $37,202 $36,476
==========================================================================
Portfolio turnover of the Portfolio ............. 79.29% 80.05% 115.38% 205.93% 144.60%
==========================================================================
* 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 a redemption fee, which is less than $.01 per share.
@ Effective October 2, 2006, Class A and Class B Shares were redesignated
Investor A and Investor B Shares, respectively.
See Notes to Financial Statements.
12 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
Financial Highlights (continued) BlackRock Global Financial Services Fund, Inc.
Class C@
The following per share data --------------------------------------------------------------------------
and ratios have been derived For the Year Ended September 30,
from information provided in --------------------------------------------------------------------------
the financial statements. 2006 2005 2004 2003 2002
===============================================================================================================================
Per Share Operating Performance
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .............. $ 15.10 $ 13.82 $ 12.51 $ 9.36 $ 10.78
--------------------------------------------------------------------------
Investment income (loss)--net** ................. .30 .16 .07 (.02) (.07)
Realized and unrealized gain (loss)--net ........ 1.87++ 3.21++ 2.72++ 3.48 (1.06)
--------------------------------------------------------------------------
Total from investment operations ................ 2.17 3.37 2.79 3.46 (1.13)
--------------------------------------------------------------------------
Less dividends and distributions:
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 year .................... $ 15.44 $ 15.10 $ 13.82 $ 12.51 $ 9.36
==========================================================================
===============================================================================================================================
Total Investment Return*
- -------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .............. 14.35% 26.02% 23.83% 37.71% (10.84%)
==========================================================================
===============================================================================================================================
Ratios to Average Net Assets+
- -------------------------------------------------------------------------------------------------------------------------------
Expenses ........................................ 2.31% 2.40% 2.56% 2.64% 2.55%
==========================================================================
Investment income (loss)--net ................... 1.91% 1.10% .48% (.22%) (.61%)
==========================================================================
===============================================================================================================================
Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) .......... $21,915 $15,087 $16,714 $13,762 $ 9,666
==========================================================================
Portfolio turnover of the Portfolio ............. 79.29% 80.05% 115.38% 205.93% 144.60%
==========================================================================
Class I@
The following per share data --------------------------------------------------------------------------
and ratios have been derived For the Year Ended September 30,
from information provided in --------------------------------------------------------------------------
the financial statements. 2006 2005 2004 2003 2002
===============================================================================================================================
Per Share Operating Performance
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .............. $ 15.53 $ 14.12 $ 12.76 $ 9.45 $ 10.89
--------------------------------------------------------------------------
Investment income (loss)--net** ................. .50 .44 .20 .09 .05
Realized and unrealized gain (loss)--net ........ 1.89++ 3.17++ 2.78++ 3.53 (1.07)
--------------------------------------------------------------------------
Total from investment operations ................ 2.39 3.61 2.98 3.62 (1.02)
--------------------------------------------------------------------------
Less dividends and distributions:
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 year .................... $ 15.93 $ 15.53 $ 14.12 $ 12.76 $ 9.45
==========================================================================
===============================================================================================================================
Total Investment Return*
- -------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .............. 15.48% 27.37% 25.09% 39.10% (9.85%)
==========================================================================
===============================================================================================================================
Ratios to Average Net Assets+
- -------------------------------------------------------------------------------------------------------------------------------
Expenses ........................................ 1.27% 1.32% 1.53% 1.60% 1.51%
==========================================================================
Investment income (loss)--net ................... 3.05% 2.93% 1.46% .81% .43%
==========================================================================
===============================================================================================================================
Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) .......... $17,843 $49,612 $11,034 $11,325 $ 8,641
==========================================================================
Portfolio turnover of the Portfolio ............. 79.29% 80.05% 115.38% 205.93% 144.60%
==========================================================================
* 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 a redemption fee, which is less than $.01 per share.
@ Effective October 2, 2006, Class C and Class I Shares were redesignated
Investor C and Institutional Shares, respectively.
See Notes to Financial Statements.
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 13
Financial Highlights (concluded) BlackRock Global Financial Services Fund, Inc.
Class R
----------------------------------------------------------
For the
For the Year Ended Period
September 30, Jan. 3, 2003@@
----------------------------------------- to Sept. 30,
The following per share data and ratios have been derived 2006 2005 2004 2003
from information provided in the financial statements. ----------------------------------------------------------
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............................ $ 15.21 $ 13.91 $ 12.62 $ 10.16
----------------------------------------------------------
Investment income--net** ........................................ .36 .29 .14 .04
Realized and unrealized gain--net ............................... 1.90++ 3.18++ 2.74++ 2.42
----------------------------------------------------------
Total from investment operations ................................ 2.26 3.47 2.88 2.46
----------------------------------------------------------
Less dividends and distributions:
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 .................................. $ 15.54 $ 15.21 $ 13.91 $ 12.62
==========================================================
==================================================================================================================================
Total Investment Return
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .............................. 14.90% 26.74% 24.51% 24.21%@
==========================================================
==================================================================================================================================
Ratios to Average Net Assets+
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ........................................................ 1.80% 1.83% 2.11% 2.17%*
==========================================================
Investment income--net .......................................... 2.22% 2.02% .99% .45%*
==========================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ........................ $ 5,314 $ 2,040 $ 555 $ 49
==========================================================
Portfolio turnover of the Portfolio ............................. 79.29% 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 a redemption fee, which is less than $.01 per share.
@ Aggregate total investment return.
@@ Commencement of operations.
See Notes to Financial Statements.
14 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
Notes to Financial Statements BlackRock Global Financial Services Fund, Inc.
1. Significant Accounting Policies:
On September 29, 2006, Merrill Lynch Global Financial Services Fund, Inc. was
renamed BlackRock Global Financial Services Fund, Inc. (the "Fund"). 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 Global Financial Services Portfolio (the
"Portfolio"), of Global Financial Services Master Trust, which 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. The percentage of the
Portfolio owned by the Fund at September 30, 2006 was 100%. The Fund offers
multiple classes of shares. 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). Effective October 2, 2006, Class A, Class B, Class C and
Class I Shares were redesignated Investor A, Investor B, Investor C and
Institutional Shares, respectively. Class R Shares were not redesignated.
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) Recent accounting pronouncement -- In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48") entitled
"Accounting for Uncertainty in Income Taxes -- an interpretation of FASB
Statement No. 109." FIN 48 prescribes the minimum recognition threshold a tax
position must meet in connection with accounting for uncertainties in income tax
positions taken or expected to be taken by an entity including mutual funds
before being measured and recognized in the financial statements. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006. The
impact on the Fund's financial statements, if any, is currently being assessed.
(e) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.
(f) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(g) Investment transactions -- Investment transactions in the Portfolio are
accounted for on a trade date basis.
(h) Reclassification -- U.S. generally accepted accounting principles require
than certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, during the current
year, $564,047 has been reclassified between undistributed net investment income
and accumulated net realized capital losses allocated from the portfolio as a
result of permanent differences attributable to foreign currency transactions,
the reclassification of distributions, the classification of investments and the
characterization of expenses. This reclassification has no effect on net assets
or net asset values per share.
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
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 15
Notes to Financial Statements (continued)
BlackRock Global Financial Services Fund, Inc.
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 also has entered into a Distribution Agreement and Distribution Plan
with FAM Distributors, Inc. ("FAMD" or the "Distributor"), 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%
- --------------------------------------------------------------------------------
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 year ended September 30, 2006, FAMD earned underwriting discounts and
direct commissions 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 ................................ $ 8,302 $107,673
Class I ................................ $ 2,245 $ 43,287
- --------------------------------------------------------------------------------
For the year ended September 30, 2006, MLPF&S received contingent deferred sales
charges of $16,055 and $6,303 relating to transactions in Class B and Class C
Shares, respectively. Furthermore, MLPF&S received contingent deferred sales
charges of $313 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.
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 closed on
September 29, 2006.
On August 15, 2006, shareholders of the Fund approved a new Investment Advisory
Agreement, for the Trust, with BlackRock Advisors, Inc. (the "Manager"), a
wholly owned subsidiary of BlackRock, Inc. BlackRock Advisors, Inc. was
reorganized into BlackRock Advisors, LLC. The new advisory agreement became
effective on September 29, 2006 and the investment advisory fee is unchanged. In
addition, the Manager will provide administrative services and the
administrative fee is unchanged.
In connection with the closing, the Fund's Transfer Agent became PFPC, Inc., an
affiliate of the Manager. In addition, BlackRock Distributors, Inc., an
affiliate of BlackRock, Inc., became an additional distributor.
Prior to the closing, certain officers and/or directors of the Fund are officers
and/or directors of FAM, PSI, FAMD, FDS, and/or ML & Co.
Commencing September 29, 2006, certain officers and/or directors of the Fund are
officers and/or directors of BlackRock, Inc. or its affiliates.
3. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share transactions
was $(10,473,381) and 28,473,224 for the years ended September 30, 2006 and
September 30, 2005, respectively.
Effective October 2, 2006, Class A, Class B, Class C and Class I Shares were
redesignated Investor A, Investor B, Investor C and Institutional Shares,
respectively. Class R Shares were not redesignated.
Transactions in capital shares for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended September 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 1,208,511 $ 19,950,103
Automatic conversion of shares ........... 76,691 1,265,767
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 104,496 1,645,815
-------------------------------
Total issued ............................. 1,389,698 22,861,685
Shares redeemed .......................... (517,621) (8,241,866)
-------------------------------
Net increase ............................. 872,077 $ 14,619,819
===============================
16 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
Notes to Financial Statements (continued)
BlackRock Global Financial Services Fund, Inc.
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended September 30, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 131,919 $ 1,942,018
Automatic conversion of shares ........... 58,153 857,339
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 74,811 1,036,129
-------------------------------
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 Year Dollar
Ended September 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 270,523 $ 4,392,282
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 197,570 3,072,220
-------------------------------
Total issued ............................. 468,093 7,464,502
-------------------------------
Automatic conversion of shares ........... (77,928) (1,265,767)
Shares redeemed .......................... (676,273) (10,785,532)
-------------------------------
Total redeemed ........................... (754,201) (12,051,299)
-------------------------------
Net decrease ............................. (286,108) $ (4,586,797)
===============================
- -------------------------------------------------------------------------------
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)
===============================
- -------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended September 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 731,517 $ 11,953,322
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 112,742 1,742,999
-------------------------------
Total issued ............................. 844,259 13,696,321
Shares redeemed .......................... (423,568) (6,645,669)
-------------------------------
Net increase ............................. 420,691 $ 7,050,652
===============================
- -------------------------------------------------------------------------------
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 Year Dollar
Ended September 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 811,951 $ 13,597,704
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 89,283 1,413,354
-------------------------------
Total issued ............................. 901,234 15,011,058
Shares redeemed .......................... (2,974,979) (45,917,547)
-------------------------------
Net decrease ............................. (2,073,745) $(30,906,489)
===============================
- -------------------------------------------------------------------------------
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 Year Dollar
Ended September 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 333,121 $ 5,348,447
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 17,173 266,186
-------------------------------
Total issued ............................. 350,294 5,614,633
Shares redeemed .......................... (142,390) (2,265,199)
-------------------------------
Net increase ............................. 207,904 $ 3,349,434
===============================
- -------------------------------------------------------------------------------
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 or exchange. 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.
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 17
Notes to Financial Statements (concluded)
BlackRock Global Financial Services Fund, Inc.
4. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years ended September
30, 2006 and September 30, 2005 was as follows:
- --------------------------------------------------------------------------------
9/30/2006 9/30/2005
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income ........................ $ 5,652,659 $ 5,507,362
Net long-term capital gains ............ 8,221,423 4,600,090
------------------------------
Total taxable distributions .............. $13,874,082 $10,107,452
==============================
As of September 30, 2006, the components of accumulated earnings on a tax basis
were as follows:
- -------------------------------------------------------------------------------
Undistributed ordinary income--net ........................ $ 1,965,269
Undistributed long-term capital gains--net ................ 866,705
-----------
Total undistributed earnings--net ......................... 2,831,974
Capital loss carryforward ................................. --
Unrealized gains--net ..................................... 26,159,213*
-----------
Total accumulated earnings--net ........................... $28,991,187
===========
* The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on wash sales and the
realization for tax purposes of unrealized gains (losses) on certain
forward foreign currency contracts.
Report of Independent Registered Public Accounting Firm
BlackRock Global Financial Services Fund, Inc.
To the Shareholders and Board of Directors of BlackRock Global Financial
Services Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
BlackRock Global Financial Services Fund, Inc. (the "Fund") (formerly the
Merrill Lynch Global Financial Services Fund, Inc.) as of September 30, 2006,
and the related statement of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
BlackRock Global Financial Services Fund, Inc. as of September 30, 2006, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and its financial highlights
for each of the five years in the period then ended, in conformity with U.S.
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
November 21, 2006
18 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
Schedule of Investments
Global Financial Services Portfolio (in U.S. dollars)
Shares
Industry Common Stocks Held Value
================================================================================
Europe
- --------------------------------------------------------------------------------
Belgium--0.8%
Commercial Banks--0.2%
KBC Bancassurance Holding 1,800 $ 189,367
--------------------------------------------------------------------
Diversified Financial
Services--0.6%
Fortis 13,600 551,463
--------------------------------------------------------------------
Total Common Stocks in Belgium 740,830
================================================================================
Denmark --0.9%
Commercial Banks --0.9%
Danske Bank A/S 23,100 907,417
--------------------------------------------------------------------
Total Common Stocks in Denmark 907,417
================================================================================
Germany--0.7%
Insurance--0.7%
Hannover Rueckversicherungs AG
Registered Shares 16,300 684,897
--------------------------------------------------------------------
Total Common Stocks in Germany 684,897
================================================================================
Ireland--0.6%
Commercial Banks--0.6%
Allied Irish Banks Plc 21,200 563,319
--------------------------------------------------------------------
Total Common Stocks in Ireland 563,319
================================================================================
Netherlands--0.3%
Diversified Financial
Services--0.3%
ING Groep NV CVA 5,300 232,901
--------------------------------------------------------------------
Total Common Stocks
in the Netherlands 232,901
================================================================================
Spain--0.0%
Insurance--0.0%
Corporacion Mapfre SA 1,600 33,402
--------------------------------------------------------------------
Total Common Stocks in Spain 33,402
================================================================================
Switzerland--1.0%
Capital Markets--1.0%
UBS AG 16,700 996,180
--------------------------------------------------------------------
Total Common Stocks in Switzerland 996,180
================================================================================
Turkey--0.4%
Commercial Banks--0.4%
Akbank T.A.S. 81,987 420,101
--------------------------------------------------------------------
Total Common Stocks in Turkey 420,101
================================================================================
United Kingdom--7.1%
Commercial Banks--2.4%
Barclays Plc 700 8,813
HSBC Holdings Plc 53,700 977,503
Lloyds TSB Group Plc 134,400 1,354,419
-------------
2,340,735
--------------------------------------------------------------------
Consumer Finance--1.6%
Provident Financial Plc 129,600 1,514,239
--------------------------------------------------------------------
Thrifts & Mortgage Finance--3.1%
Kensington Group Plc 105,600 1,633,264
Northern Rock Plc 63,300 1,381,048
-------------
3,014,312
--------------------------------------------------------------------
Total Common Stocks
in the United Kingdom 6,869,286
--------------------------------------------------------------------
Total Common Stocks
in Europe--11.8% 11,448,333
================================================================================
================================================================================
Middle East
- --------------------------------------------------------------------------------
Egypt--0.3%
Commercial Banks--0.3%
Commercial International Bank 31,800 255,080
--------------------------------------------------------------------
Total Common Stocks
in the Middle East--0.3% 255,080
================================================================================
================================================================================
North America
- --------------------------------------------------------------------------------
Bermuda--4.0%
Insurance--4.0%
Everest Re Group Ltd. 4,600 448,638
RenaissanceRe Holdings Ltd. 61,300 3,408,280
--------------------------------------------------------------------
Total Common Stocks in Bermuda 3,856,918
================================================================================
Cayman Islands--4.2%
Insurance--4.2%
ACE Ltd. 73,600 4,028,128
--------------------------------------------------------------------
Total Common Stocks
in the Cayman Islands 4,028,128
================================================================================
United States--44.2%
Capital Markets--2.0%
Affiliated Managers Group (a)(d) 19,300 1,932,123
--------------------------------------------------------------------
Commercial Banks--4.0%
Wachovia Corp. 69,956 3,903,545
--------------------------------------------------------------------
Consumer Finance--3.4%
American Express Co. 24,365 1,366,389
Capital One Financial Corp. 24,600 1,935,036
-------------
3,301,425
--------------------------------------------------------------------
Diversified Financial
Services--16.6%
Bank of America Corp. 108,368 5,805,274
Citigroup, Inc. 106,319 5,280,865
JPMorgan Chase & Co. 104,275 4,896,754
-------------
15,982,893
--------------------------------------------------------------------
Insurance--10.7%
The Allstate Corp. 22,433 1,407,222
American International Group, Inc. 72,232 4,786,092
Brown & Brown, Inc. 400 12,224
Hartford Financial Services Group, Inc. 31,111 2,698,879
Hilb Rogal & Hobbs Co. 2,000 85,300
Prudential Financial, Inc. 17,724 1,351,455
-------------
10,341,172
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 19
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 Investment Trusts
(REITs)--7.5%
American Home Mortgage
Investment Corp. (d) 102,500 $ 3,574,175
Equity Office Properties Trust 1,400 55,664
New Century Financial Corp. (d) 40,500 1,592,055
NovaStar Financial, Inc. (d) 11,800 344,442
Saxon Capital, Inc. 119,200 1,673,568
------------
7,239,904
-------------------------------------------------------------------
Total Common Stocks
in the United States 42,701,062
-------------------------------------------------------------------
Total Common Stocks
in North America--52.4% 50,586,108
===============================================================================
===============================================================================
Pacific Basin/Asia
- -------------------------------------------------------------------------------
China--0.6%
Real Estate Management &
Development--0.6%
Beijing Capital Land Ltd. 1,504,300 583,013
-------------------------------------------------------------------
Total Common Stocks in China 583,013
===============================================================================
Hong Kong--3.9%
Real Estate Management &
Development--3.9%
China Resources Land Ltd. 1,532,000 1,032,179
Hopson Development Holdings Ltd. 739,300 1,491,456
Midland Holdings Ltd. 600 283
Shanghai Forte Land Co. Ltd. 3,503,500 1,222,948
-------------------------------------------------------------------
Total Common Stocks
in Hong Kong 3,746,866
===============================================================================
Indonesia--0.7%
Commercial Banks--0.7%
Bank Central Asia Tbk PT 746,900 390,655
Bank Mandiri Persero Tbk PT 1,154,100 290,871
-------------------------------------------------------------------
Total Common Stocks in Indonesia 681,526
===============================================================================
Japan--5.0%
Capital Markets--1.7%
Daiichi Commodities Co. Ltd. 57,000 397,332
Daikoh Holdings, Inc. 26,000 57,257
Nomura Holdings, Inc. 14,400 253,691
Takagi Securities Co. Ltd. 85,000 370,050
Toyo Securities Co., Ltd. 125,800 600,950
------------
1,679,280
-------------------------------------------------------------------
Household Durables--1.4%
The Japan General Estate Co. Ltd. 56,400 1,349,511
-------------------------------------------------------------------
Real Estate Management &
Development--1.9%
Sumitomo Real Estate Sales 18,500 1,576,335
Sunwood Corp. 100 216,830
------------
1,793,165
-------------------------------------------------------------------
Total Common Stocks in Japan 4,821,956
===============================================================================
South Korea--16.2%
Commercial Banks--8.1%
Daegu Bank 103,400 1,731,527
Hana Financial Group, Inc. 45,645 2,088,144
Industrial Bank of Korea 131,800 2,255,848
Pusan Bank 139,400 1,723,170
------------
7,798,689
-------------------------------------------------------------------
Insurance--8.1%
Dongbu Insurance Co., Ltd. 104,800 2,480,211
Korean Reinsurance Co. 215,021 2,657,946
Meritz Fire & Marine Insurance Co. Ltd. 417,800 2,750,020
------------
7,888,177
-------------------------------------------------------------------
Total Common Stocks
in South Korea 15,686,866
-------------------------------------------------------------------
Total Common Stocks
in the Pacific Basin/Asia--26.4% 25,520,227
-------------------------------------------------------------------
Total Common Stocks
(Cost--$62,802,859)--90.9% 87,809,748
===============================================================================
Beneficial
Short-Term Securities Interest
===============================================================================
BlackRock Liquidity Series, LLC
Cash Sweep Series I, 5.18% (b)(e) $1,768,561 1,768,561
BlackRock Liquidity Series, LLC
Money Market Series, 5.33% (b)(c)(e) 5,696,300 5,696,300
-------------------------------------------------------------------
Total Short-Term Securities
(Cost--$7,464,861)--7.7% 7,464,861
===============================================================================
20 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
Schedule of Investments (concluded)
Global Financial Services Portfolio (in U.S. dollars)
Number of
Call Options Purchased Contracts Value
===============================================================================
United States--7.1%
The Bear Stearns Cos., Inc., expiring
January 2007 at USD 90 218 $ 1,109,620
The Bear Stearns Cos., Inc., expiring
January 2008 at USD 95 134 686,080
The Bear Stearns Cos., Inc., expiring
January 2008 at USD 100 235 1,106,850
Goldman Sachs Group, Inc., expiring
January 2007 at USD 115 200 1,116,000
Goldman Sachs Group, Inc., expiring
January 2007 at USD 125 188 891,120
Goldman Sachs Group, Inc., expiring
January 2007 at USD 140 229 746,540
Goldman Sachs Group, Inc., expiring
January 2007 at USD 145 280 817,600
Goldman Sachs Group, Inc., expiring
January 2007 at USD 150 168 401,520
-------------------------------------------------------------------
Total Options Purchased
(Premiums Paid--$5,113,401)--7.1% 6,875,330
===============================================================================
Total Investments
(Cost--$75,381,121*)--105.7% 102,149,939
Liabilities in Excess of Other Assets--(5.7%) (5,548,920)
------------
Net Assets--100.0% $ 96,601,019
============
* The cost and unrealized appreciation (depreciation) of investments as of
September 30, 2006, as computed for federal income tax purposes, were as
follows:
Aggregate cost ............................... $ 75,989,934
============
Gross unrealized appreciation ................ $ 26,796,512
Gross unrealized depreciation ................ (636,507)
------------
Net unrealized appreciation .................. $ 26,160,005
============
(a) Non-income producing security.
(b) 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
--------------------------------------------------------------------------
BlackRock Liquidity Series, LLC
Cash Sweep Series I $1,768,561 $ 50,940
BlackRock Liquidity Series, LLC
Money Market Series $2,178,800 $ 77,945
--------------------------------------------------------------------------
(c) Security was purchased with the cash proceeds from securities loans.
(d) Security, or a portion of security, is on loan.
(e) Represents the current yield as of September 30, 2006.
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 the purposes of this report, which may
combine industry sub-classifications for reporting ease. Industries are
shown as a percent of net assets. These industry classifications are
unaudited.
See Notes to Financial Statements.
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 21
Statement of Assets and Liabilities Global Financial Services Portfolio
As of September 30, 2006
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (including securities
loaned of $5,556,594) (identified cost--$62,802,859) ........................ $ 87,809,748
Investments in affiliated securities, at value (identified cost--$7,464,861) . 7,464,861
Options purchased, at value (premiums paid--$5,113,401) ...................... 6,875,330
Foreign cash (cost--$4,674) .................................................. 4,658
Receivables:
Dividends ................................................................. $ 266,792
Securities sold ........................................................... 75,735
Contributions ............................................................. 64,858
Securities lending ........................................................ 3,250 410,635
-------------
Prepaid expenses ............................................................. 4,831
-------------
Total assets ................................................................. 102,570,063
-------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value .................................... 5,696,300
Bank overdraft ............................................................... 45,066
Payables:
Withdrawals ............................................................... 120,194
Investment adviser ........................................................ 31,346
Other affiliates .......................................................... 696 152,236
-------------
Accrued expenses ............................................................. 75,442
-------------
Total liabilities ............................................................ 5,969,044
-------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets ................................................................................. $ 96,601,019
=============
===================================================================================================================================
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------------
Investor's capital ........................................................... $ 69,832,943
Unrealized appreciation--net ................................................. 26,768,076
-------------
Net Assets ................................................................... $ 96,601,019
=============
See Notes to Financial Statements.
22 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
Statement of Operations Global Financial Services Portfolio
For the Year Ended September 30, 2006
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends (net of $137,554 foreign withholding tax) .......................... $ 5,323,975
Securities lending--net ...................................................... 77,945
Interest from affiliates ..................................................... 50,940
-------------
Total income ................................................................. 5,452,860
-------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ..................................................... $ 509,207
Custodian fees ............................................................... 127,337
Accounting services .......................................................... 106,096
Trustees' fees and expenses .................................................. 44,782
Professional fees ............................................................ 35,245
Pricing fees ................................................................. 5,082
Printing and shareholder reports ............................................. 4,334
Other ........................................................................ 10,195
-------------
Total expenses ............................................................... 842,278
-------------
Investment income--net ....................................................... 4,610,582
-------------
===================================================================================================================================
Realized & Unrealized Gain (Loss)--Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments--net (including $27,504 from foreign capital gain tax) .......... 4,099,578
Foreign currency transactions--net .......................................... (121,518) 3,978,060
-------------
Change in unrealized appreciation/depreciation on:
Investments--net (including $754 from deferred capital gain tax credit) ..... 5,765,586
Foreign currency transactions--net .......................................... 7,234 5,772,820
---------------------------------
Total realized and unrealized gain--net ...................................... 9,750,880
-------------
Net Increase in Net Assets Resulting from Operations ......................... $ 14,361,462
=============
See Notes to Financial Statements.
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 23
Statements of Changes in Net Assets Global Financial Services Portfolio
For the Year Ended
September 30,
---------------------------------
Increase (Decrease) in Net Assets: 2006 2005
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ....................................................... $ 4,610,582 $ 2,809,491
Realized gain--net ........................................................... 3,978,060 9,131,002
Change in unrealized appreciation/depreciation--net .......................... 5,772,820 8,022,831
---------------------------------
Net increase in net assets resulting from operations ......................... 14,361,462 19,963,324
---------------------------------
===================================================================================================================================
Capital Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions .................................................. 55,241,858 51,456,892
Fair value of withdrawals .................................................... (80,955,336) (34,228,936)
---------------------------------
Net increase (decrease) in net assets derived from capital transactions ...... (25,713,478) 17,227,956
---------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets ...................................... (11,352,016) 37,191,280
Beginning of year ............................................................ 107,953,035 70,761,755
---------------------------------
End of year .................................................................. $ 96,601,019 $ 107,953,035
=================================
See Notes to Financial Statements.
Financial Highlights Global Financial Services Portfolio
For the Year Ended September 30,
The following ratios have been derived from ---------------------------------------------------------------------
information provided in the financial statements. 2006 2005 2004 2003 2002
================================================================================================================================
Total Investment Return
- --------------------------------------------------------------------------------------------------------------------------------
Total investment return ................. 16.07% 28.02% 25.86% 40.92% (8.61%)
=====================================================================
================================================================================================================================
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Expenses ................................ .66% .70% .78% .76% .67%
=====================================================================
Investment income--net .................. 3.62% 3.05% 2.23% 1.64% 1.26%
=====================================================================
================================================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) .. $ 96,601 $107,953 $ 70,762 $ 70,172 $ 60,342
=====================================================================
Portfolio turnover ...................... 79.29% 80.05% 115.38% 205.93% 144.60%
=====================================================================
See Notes to Financial Statements.
24 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
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. 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. As of October 2, 2006, foreign currency exchange rates
will be determined at 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 financial futures
contracts. Financial futures contracts are contracts for delayed delivery
of securities at specific future date and at a specific price or yield.
Upon entering
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 25
Notes to Financial Statements (continued) Global Financial Services Portfolio
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 OTC 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) Recent accounting pronouncement -- In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48") entitled
"Accounting for Uncertainty in Income Taxes--an interpretation of FASB Statement
No. 109." FIN 48 prescribes the minimum recognition threshold a tax position
must meet in connection with accounting for uncertainties in income tax
positions taken or expected to be taken by an entity including mutual funds
before being measured and recognized in the financial statements. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006. The
impact on the Portfolio's financial statements, if any, is currently being
assessed.
(f) 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.
(g) 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
26 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
Notes to Financial Statements (continued) Global Financial Services Portfolio
be maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. The market value of the loaned securities
is determined at the close of business of the Portfolio and any additional
required collateral is delivered to the Portfolio on the next business day.
Where the Portfolio receives securities as collateral for the loaned securities,
it collects a fee from the borrower. The Portfolio typically receives the income
on the loaned securities but does not receive the income on the collateral.
Where the Portfolio receives cash collateral, it may invest such collateral and
retain the amount earned on such investment, net of any amount rebated to the
borrower. Loans of securities are terminable at any time and the borrower, after
notice, is required to return borrowed securities within five business days. The
Portfolio may pay reasonable finder's, lending agent, administrative and
custodial fees in connection with its loans. In the event that the borrower
defaults on its obligation to return borrowed securities because of insolvency
or for any other reason, the Portfolio could experience delays and costs in
gaining access to the collateral. The Portfolio also could suffer a loss where
the value of the collateral falls below the market value of the borrowed
securities, in the event of borrower default or in the event of losses on
investments made with cash collateral.
(h) Bank overdraft -- The Portfolio 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 year ended September 30, 2006, MLIM, LLC received $33,463 in
securities lending agent fees.
In addition, MLPF&S received $7,373 in commissions on the execution of portfolio
security transactions for the Portfolio for the year ended September 30, 2006.
For the year ended September 30, 2006, the Portfolio reimbursed FAM $2,970 for
certain accounting services.
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 closed on
September 29, 2006.
On August 15, 2006, the shareholders of the investors of the Trust approved a
new Investment Advisory Agreement with BlackRock Advisors, Inc. (the "Manager"),
a wholly owned subsidiary of BlackRock, Inc. BlackRock Advisors, Inc. was
reorganized into BlackRock Advisors, LLC. The new advisory agreement became
effective on September 29, 2006 and the investment advisory fee is unchanged. In
addition, the Manager has entered into sub-advisory agreements with BlackRock
Investment Management, LLC and BlackRock Asset Management U.K. Limited, both
affiliates of the Manager, under which the Manager pays each Sub-Adviser for
services it provides a fee equal to 37% of the management fee paid to the
Manager.
In connection with the closing, MLIM, LLC, the security lending agent, became
BlackRock Investment Management, LLC.
Prior to the closing, 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.
Commencing September 29, 2006, certain officers and/or trustees of the Trust are
officers and/or directors of BlackRock, Inc. or its affiliates.
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 27
Notes to Financial Statements (concluded) Global Financial Services Portfolio
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended September 30, 2006 were $93,854,434 and $128,740,656, 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, which
expires November 2006. 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 year ended
September 30, 2006.
5. Commitments:
At September 30, 2006, the Portfolio had entered into foreign exchange contracts
under which it had agreed to sell various foreign currencies with an approximate
value of $76,000.
Report of Independent Registered Public Accounting Firm
Global Financial Services Master Trust
To the Investor and Board of Trustees of Global Financial Services Master Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Global Financial Services Portfolio of Global
Financial Services Master Trust (the "Trust") as of September 30, 2006, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Trust
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Trust's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of September 30, 2006, by correspondence with the
custodian. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Global
Financial Services Portfolio of Global Financial Services Master Trust as of
September 30, 2006, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and its financial highlights for each of the five years in the period then
ended, in conformity with U.S. generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
November 21, 2006
28 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
Disclosure of New Investment Advisory Agreement
New BlackRock Investment Advisory Agreement -- Matters Considered by the Boards
In connection with the combination of Merrill Lynch's investment advisory
business, including Fund Asset Management, L.P. (the "Previous Investment
Adviser"), with that of BlackRock, Inc. ("BlackRock") to create a new
independent company ("New BlackRock") (the "Transaction"), the Board of Trustees
of Global Financial Services Portfolio of Global Financial Services Master Trust
(the "Trust") considered and approved a new investment advisory agreement (the
"BlackRock Investment Advisory Agreement") between the Trust and BlackRock
Advisors, LLC ("BlackRock Advisors"). Because BlackRock Global Financial
Services Fund, Inc. is a feeder fund that invests all of its assets in the
Trust, the Board of Directors of the Fund also considered the BlackRock
Investment Advisory Agreement. Shareholders subsequently approved the BlackRock
Investment Advisory Agreement, and it became effective on September 29, 2006,
replacing the investment advisory agreement with the Previous Investment Adviser
(the "Previous Investment Advisory Agreement").
Each Board discussed the BlackRock Investment Advisory Agreement at telephonic
and in-person meetings held during April and May 2006. Each Board, including the
independent directors/trustees, approved the BlackRock Investment Advisory
Agreement at an in-person meeting held on May 12, 2006.
To assist each Board in its consideration of the BlackRock Investment Advisory
Agreement, BlackRock provided materials and information about BlackRock,
including its financial condition and asset management capabilities and
organization, and Merrill Lynch provided materials and information about the
Transaction. The independent directors/trustees, through their independent legal
counsel, also requested and received additional information from Merrill Lynch
and BlackRock in connection with their consideration of the BlackRock Investment
Advisory Agreement. The additional information was provided in advance of the
May 12, 2006 meetings. In addition, the independent directors/trustees consulted
with their counsel and counsel for the Fund and the Trust on numerous occasions,
discussing, among other things, the legal standards and certain other
considerations relevant to each Board's deliberations.
At each Board meeting, the directors/trustees discussed with Merrill Lynch
management and certain BlackRock representatives the Transaction, its strategic
rationale and BlackRock's general plans and intentions regarding the Fund and
the Trust. At these Board meetings, representatives of Merrill Lynch and
BlackRock made presentations to and responded to questions from each Board. Each
Board also inquired about the plans for and anticipated roles and
responsibilities of certain employees and officers of the Previous Investment
Adviser, and of its affiliates, to be transferred to BlackRock in connection
with the Transaction. The independent directors/trustees also conferred
separately and with their counsel about the Transaction and other matters
related to the Transaction on a number of occasions, including in connection
with the April and May 2006 meetings. After the presentations and after
reviewing the written materials provided, the independent directors/trustees met
in executive sessions with their counsel to consider the BlackRock Investment
Advisory Agreement.
In connection with each Board's review of the BlackRock Investment Advisory
Agreement, Merrill Lynch and/or BlackRock advised the Boards about a variety of
matters. The advice included the following, among other matters:
o that there was not expected to be any diminution in the nature, quality
and extent of services provided to the Fund and the Trust and their
shareholders by BlackRock Advisors, including compliance services;
o that operation of New BlackRock as an independent investment management
firm would enhance its ability to attract and retain talented
professionals;
o that the Fund and the Trust were expected to benefit from having access to
BlackRock's state of the art technology and risk management analytic
tools, including investment tools, provided under the BlackRock
Solutions(R) brand name;
o that BlackRock had no present intention to alter any applicable expense
waivers or reimbursements that were currently in effect and, while it
reserved the right to do so in the future, it would seek the approval of
each Board before making any changes;
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 29
Disclosure of New Investment Advisory Agreement (continued)
o that BlackRock and Merrill Lynch would enter into an agreement, for an
initial three-year period and automatically renewable from year to year
thereafter, in connection with the Transaction under which Merrill
Lynch-affiliated broker-dealers would continue to offer the Fund as an
investment product;
o that BlackRock Advisors would have substantially the same access to the
Merrill Lynch sales force when distributing shares of the Fund as was
currently being provided to the Previous Investment Adviser and that other
arrangements between the Previous Investment Adviser and Merrill Lynch
sales channels would be preserved;
o that the Fund would have access to BlackRock's network of third party
brokers, retirement plan platforms and registered investment advisers;
o that in connection with the Transaction, Merrill Lynch and BlackRock had
agreed to conduct, and use reasonable best efforts to cause their
respective affiliates to conduct, their respective businesses in
compliance with the conditions of Section 15(f) of the Investment Company
Act of 1940 (the "1940 Act") in relation to any public funds advised by
BlackRock or the Previous Investment Adviser (or affiliates),
respectively; and
o that Merrill Lynch and BlackRock would derive benefits from the
Transaction and that, as a result, they had a financial interest in the
matters being considered that was different from that of Fund or Trust
shareholders.
Each Board considered the information provided by Merrill Lynch and BlackRock
above, and, among other factors, the following:
o the potential benefits to Fund and Trust shareholders from being part of a
combined fund family with BlackRock-sponsored funds, including possible
economies of scale and access to investment opportunities;
o the potential for expanding distribution of Fund shares through improved
access to third party distribution;
o the reputation, financial strength and resources of BlackRock and its
investment advisory subsidiaries and the anticipated financial strength
and resources of New BlackRock;
o the compliance policies and procedures of BlackRock Advisors;
o the terms and conditions of the BlackRock Investment Advisory Agreement,
including the fact that the schedule of the Fund's/Trust's total advisory
and administrative fees would not increase under the BlackRock Investment
Advisory Agreement, but would remain the same;
o that in February 2006, each Board had performed a full annual review of
each respective Previous Investment Advisory Agreement, as required by the
1940 Act, and had determined that the Previous Investment Adviser had the
capabilities, resources and personnel necessary to provide the advisory
and administrative services that were then being provided to the
Fund/Trust; and that the advisory and/or management fees paid by the Fund/
Trust, taking into account any applicable agreed-upon fee waivers and
breakpoints, had represented reasonable compensation to the Previous
Investment Adviser in light of the services provided, the costs to the
Previous Investment Adviser of providing those services, economies of
scale, the fees and other expenses paid by similar funds (including
information provided by Lipper Inc. ["Lipper"]), and such other matters as
the directors/trustees had considered relevant in the exercise of their
reasonable judgment; and
o that Merrill Lynch had agreed to pay all expenses of the Fund and Trust in
connection with the Board's consideration of the BlackRock Investment
Advisory Agreement and related Agreement and all costs of shareholder
approval of the BlackRock Investment Advisory Agreement and as a result
the Fund and the Trust would bear no costs in obtaining shareholder
approval of the BlackRock Investment Advisory Agreement.
Certain of these considerations are discussed in more detail below.
In its review of the BlackRock Investment Advisory Agreement, each Board
assessed the nature, quality and scope of the services to be provided to the
Fund and the Trust by the personnel of BlackRock Advisors and its affiliates,
including administrative services, shareholder services, oversight of fund
accounting, marketing services and assistance in meeting legal and regulatory
requirements. In its review of the BlackRock Investment Advisory Agreement, each
Board also
30 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
considered a range of information in connection with its oversight of the
services to be provided by BlackRock Advisors and its affiliates. Among the
matters considered were: (a) fees (in addition to management fees) to be paid to
BlackRock Advisors and its affiliates by the Fund and the Trust; (b) Fund and
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 their compliance with their Code of Ethics and
BlackRock Advisors' compliance policies and procedures; and (d) the nature, cost
and character of non-investment management services to be provided by BlackRock
Advisors and its affiliates.
In the period prior to the Board meetings to consider renewal of the Previous
Investment Advisory Agreement, each Board had requested and received materials
specifically relating to the Previous Investment Advisory Agreement. These
materials included (a) information compiled by 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) a discussion by the Trust's portfolio
management team on investment strategies used by the Trust during its most
recent fiscal year; (c) information on the profitability to the Previous
Investment Adviser of the Previous Investment Advisory Agreement and other
payments received by the Previous Investment Adviser and its affiliates from the
Fund and the Trust; and (d) information provided by the Previous Investment
Adviser concerning services related to the valuation and pricing of the Trust's
portfolio holdings, allocation of Trust brokerage fees, the Trust's portfolio
turnover statistics, and direct and indirect benefits to the Previous Investment
Adviser and its affiliates from their relationship with the Fund and the Trust.
In its deliberations, each Board considered information received in connection
with its most recent approval of the continuance of the Previous Investment
Advisory Agreement, in addition to information provided by BlackRock and
BlackRock Advisors in connection with their evaluation of the terms and
conditions of the BlackRock Investment Advisory Agreement. The
directors/trustees did not identify any particular information that was
all-important or controlling, and each director/trustee attributed different
weights to the various factors. Each Board, including a majority of the Board's
independent directors/trustees, concluded that the terms of the BlackRock
Investment Advisory Agreement are appropriate, that the fees to be paid are
reasonable in light of the services to be provided to the Fund/Trust, and that
the BlackRock Investment Advisory Agreement should be approved and recommended
to Fund/Trust shareholders.
Nature, Quality and Extent of Services Provided -- Each Board reviewed the
nature, quality and extent of services provided by the Previous Investment
Adviser, including the investment advisory services and the resulting
performance of the Fund and the Trust, as well as the nature, quality and extent
of services expected to be provided by BlackRock Advisors. Each Board focused
primarily on the Previous Investment Adviser's investment advisory services and
the investment performance of the Fund and the Trust, but also considered
certain areas in which both the Previous Investment Adviser and the Fund/Trust
received services as part of the Merrill Lynch complex. Each Board compared the
Fund's performance -- both including and excluding the effects of fees and
expenses -- to the performance of a comparable group of mutual funds, and the
performance of a relevant index or combination of indexes. While each Board
reviews performance data at least quarterly, consistent with the Previous
Investment Adviser's investment goals, the Board attaches more importance to
performance over relatively long periods of time, typically three to five years.
In evaluating the nature, quality and extent of the services to be provided by
BlackRock Advisors under the BlackRock Investment Advisory Agreement, each Board
considered, among other things, the expected impact of the Transaction on the
operations, facilities, organization and personnel of New BlackRock and how it
would affect the Fund and the Trust; the ability of BlackRock Advisors to
perform its duties after the Transaction; and any anticipated changes to the
investment and other practices of the Fund or the Trust.
Each Board was given information with respect to the potential benefits to the
Fund and the Trust and their shareholders from having access to BlackRock's
state of the art technology and risk management analytic tools, including the
investment tools provided under the BlackRock Solutions brand name.
Each Board was advised that, as a result of Merrill Lynch's equity interest in
BlackRock after the Transaction, the Fund and the Trust would continue to be
subject to restrictions concerning certain transactions involving Merrill Lynch
affiliates (for example, transactions with a Merrill Lynch broker-dealer acting
as principal) absent revised or new regulatory relief. Each Board was advised
that a revision of existing regulatory relief with respect to these restrictions
was being sought from the Securities and Exchange Commission and
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 31
Disclosure of New Investment Advisory Agreement (continued)
was advised of the possibility of receipt of such revised regulatory relief.
Based on their review of the materials provided and the assurances they had
received from the management of Merrill Lynch and of BlackRock, the
directors/trustees determined that the nature and quality of services to be
provided to the Fund/Trust under the BlackRock Investment Advisory Agreement
were expected to be as good as or better than that provided under the Previous
Investment Advisory Agreement. The directors/trustees were advised that
BlackRock Advisors did not plan to change the Fund's/Trust's portfolio
management team upon the closing of the Transaction. It was noted, however, that
other changes in personnel were expected to follow the Transaction and the
combination of the operations of the Previous Investment Adviser and its
affiliates with those of BlackRock. The directors/trustees noted that if
portfolio managers or other personnel were to cease to be available prior to the
closing of the Transaction, each Board would consider all available options,
including seeking the investment advisory or other services of BlackRock
affiliates. Accordingly, each Board concluded that, overall, the Board was
satisfied at the present time with assurances from BlackRock and BlackRock
Advisors as to the expected nature, quality and extent of the services to be
provided to the Fund/Trust under the BlackRock Investment Advisory Agreement.
Costs of Services Provided and Profitability -- It was noted that, in
conjunction with the recent review of the Previous Investment Advisory
Agreement, each Board had received, among other things, a report from Lipper
comparing the Fund's fees and expenses to those of a peer group selected by
Lipper, and information as to the fees charged by the Previous Investment
Adviser or its affiliates to other registered investment company clients for
investment management services. Each Board reviewed the Fund's/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 in the Fund's Lipper category. Each Board also compared the
Fund's total expenses to those of other comparable funds. Each Board concluded
that the Fund's/Trust's management fee and fee rate and overall expense ratio
are reasonable compared to those of other comparable funds.
In evaluating the costs of the services to be provided by BlackRock Advisors
under the BlackRock Investment Advisory Agreement, each Board considered, among
other things, whether advisory and administrative fees or other expenses would
change as a result of the Transaction.
The Fund's Board noted that in addition to the BlackRock Investment Advisory
Agreement, they were considering a new administration agreement with BlackRock
Advisors as administrator to replace the Fund's administration agreement under
which the Previous Investment Adviser was serving as administrator. Based on its
review of the materials provided, and the fact that the BlackRock Investment
Advisory Agreement and the new administration agreement are substantially
similar to the corresponding previous agreement in all material respects,
including the rate of compensation, each Board determined that the Transaction
should not increase the total fees payable, including any fee waivers and
expense reimbursements, for advisory and administrative services. Each Board
noted that it was not possible to predict how the Transaction would affect
BlackRock Advisor's profitability from its relationship with the Fund and the
Trust.
Each Board discussed with BlackRock Advisors its general methodology to be used
in determining New BlackRock's profitability with respect to its relationship
with the Fund and the Trust. The directors/trustees noted that they expect to
receive profitability information from BlackRock Advisors on at least an annual
basis and thus be in a position to evaluate whether any adjustments in fees
and/or fee breakpoints would be appropriate.
Fees and Economies of Scale -- Each Board considered the extent to which
economies of scale might be realized as the assets of the Fund and the 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. Each Board determined that changes were not currently
necessary.
In reviewing the Transaction, each Board considered, among other things, whether
advisory and administrative fees or other expenses would change as a result of
the Transaction. Based on the fact that the BlackRock Investment Advisory
Agreement was substantially similar to the Previous Investment Advisory
Agreement in all material respects, including the rate of compensation, and the
fact that the proposed
32 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
new administration agreement with BlackRock Advisors was also substantially
similar to the administration agreement then in effect, each Board determined
that as a result of the Transaction, the Fund's/Trust's total advisory and
administrative fees would be no higher than the fees under the corresponding
Previous Investment Advisory Agreement and administration agreement. Each Board
noted that in conjunction with the most recent deliberations concerning the
Previous Investment Advisory Agreement, the directors/trustees had determined
that the total fees for advisory and administrative services for the Fund and
the Trust were reasonable in light of the services provided. It was noted that
in conjunction with the recent review of the Previous Investment Advisory
Agreement, the Boards had received, among other things, a report from Lipper
comparing the fees, expenses and performance of the Fund/Trust to those of a
peer group selected by Lipper, and information as to the fees charged by the
Previous Investment Adviser to other registered investment company clients for
investment management services. Each Board concluded that because the rates for
advisory and administrative fees for the Fund/Trust would be no higher than the
fee rates in effect at the time, the proposed management fee structure,
including any fee waivers, was reasonable and that no additional changes were
currently necessary.
Fall-Out Benefits -- In evaluating the fall-out benefits to be received by
BlackRock Advisors under the BlackRock Investment Advisory Agreement, each Board
considered whether BlackRock Advisors would experience such benefits to the same
extent that the Previous Investment Adviser was experiencing such benefits under
the Previous Investment Advisory Agreement. Based on their review of the
materials provided, including materials received in connection with their most
recent approval of the continuance of the Previous Investment Advisory
Agreement, and their discussions with management of the Previous Investment
Adviser and BlackRock, the directors/trustees determined that BlackRock
Advisors' fall-out benefits could include increased ability for BlackRock to
distribute shares of its funds and other investment products and to obtain
research services using the Trust's portfolio transaction brokerage commissions.
Each Board noted that fall-out benefits were difficult to quantify with
certainty at this time, and indicated that the Board would continue to evaluate
them going forward.
Investment Performance -- Each Board considered investment performance for the
Fund and the Trust. Each Board compared the performance of the Fund and the
Trust -- both including and excluding the effects of fees and expenses -- to the
performance of a comparable group of mutual funds, and the performance of a
relevant index or combination of indexes. The comparative information received
from Lipper showed Fund performance at various levels within the range of
performance of comparable funds over different time periods. While each Board
reviews performance data at least quarterly, consistent with the Previous
Investment Adviser's investment goals, the Board attaches more importance over
relatively long periods of time, typically three to five years. Each Board
believed the Fund's performance was satisfactory. Also, each Board took into
account the investment performance of funds advised by BlackRock Advisors. Each
Board considered comparative information from Lipper which showed that the
performance of the funds advised by BlackRock Advisors was within the range of
performance of comparable funds over different time periods. Each Board noted
BlackRock's considerable investment management experience and capabilities, but
was unable to predict what effect, if any, consummation of the Transaction would
have on the future performance of the Fund.
Conclusion -- After the independent directors of the Fund and the independent
trustees of the Trust deliberated in executive session, each entire Board,
including the independent directors/trustees, approved the BlackRock Investment
Advisory Agreement, concluding that the advisory fee rate was reasonable in
relation to the services provided and that the BlackRock Investment Advisory
Agreement was in the best interests of the shareholders. In approving the
BlackRock Investment Advisory Agreement, each Board noted that it anticipated
reviewing the continuance of the agreement in advance of the expiration of the
initial two-year period.
New BlackRock Sub-Advisory Agreement -- Matters Considered by the Boards
At an in-person meeting held on August 14-16, 2006, each Board, including the
independent directors/trustees, discussed and approved the sub-advisory
agreements with respect to the Trust (the "BlackRock Sub-Advisory Agreements")
between BlackRock Advisors and each of BlackRock Investment Management, LLC and
BlackRock Asset Management U.K. Limited, each an affiliate of BlackRock Advisors
(the "Sub-Advisers"). The BlackRock Sub-Advisory Agreements became effective on
September 29, 2006, at the same time the BlackRock Investment Advisory Agreement
became effective.
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 33
Disclosure of New Investment Advisory Agreement (concluded)
Pursuant to the BlackRock Sub-Advisory Agreements, each Sub-Adviser receives a
monthly fee from BlackRock Advisors equal to 37% of the advisory fee received by
BlackRock Advisors from the Trust. BlackRock Advisors pays each Sub-Adviser out
of its own resources, and there is no increase in Fund or Trust expenses as a
result of the BlackRock Sub-Advisory Agreements.
In approving the BlackRock Sub-Advisory Agreements at the August in-person
meeting, each Board reviewed its considerations in connection with its approval
of the BlackRock Investment Advisory Agreement in May 2006. The Boards relied on
the same information and considered the same factors as those discussed above in
connection with the approval of the BlackRock Investment Advisory Agreement and
came to the same conclusion. In reviewing the sub-advisory fee rate provided in
the BlackRock Sub-Advisory Agreements, each Board noted the fact that BlackRock
Advisors and the Sub-Advisers each have significant responsibilities under their
respective advisory agreements. BlackRock Advisors remains responsible for
oversight of the Fund's and the Trust's operations and administration, and the
Sub-Advisers provide advisory services to the Fund/Trust and are responsible for
the day-to-day management of the Fund's/Trust's portfolio under the BlackRock
Sub-Advisory Agreements. The Boards also took into account the fact that there
is no increase in total advisory fees paid by the Fund or the Trust as a result
of the BlackRock Sub-Advisory Agreements. Under all of the circumstances, each
Board concluded that it was a reasonable allocation of fees for each Sub-Adviser
to receive 37% of the advisory fee paid by the Trust to BlackRock Advisors.
After the independent directors of the Fund and the independent trustees of the
Trust deliberated in executive session, each entire Board, including the
independent directors/trustees, approved each BlackRock Sub-Advisory Agreement,
concluding that the sub-advisory fee was reasonable in relation to the services
provided and that each BlackRock Sub-Advisory Agreement was in the best
interests of Fund/Trust shareholders.
34 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
Officers and Directors/Trustees
Number of
Portfolios in Other Public
Fund Complex Directorships
Position(s) Length of Overseen by Held by
Held with Time Director/ Director/
Name Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Interested Director/Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Robert C. P.O. Box 9011 President 2005 to Vice Chairman and Director of BlackRock, and Global 129 Funds None
Doll, Jr.* Princeton, NJ and present Chief Investment Officer for Equities, Chairman of 174 Portfolios
08543-9011 Director the BlackRock Private Client Operating Committee,
Age: 52 and member of the BlackRock Executive Committee
since 2006; President of the Funds advised by
Merrill Lynch Investment Managers ("MLIM") and its
affiliates ("MLIM/FAM-advised funds") from 2005
to 2006 and Chief Investment Officer thereof from
2001 to 2006; President of MLIM and Fund Asset
Management, L.P. ("FAM") from 2001 to 2006;
Co-Head (Americas Region) thereof from 2000 to
2001 and Senior Vice President from 1999 to 2001;
President and Director of Princeton Services, Inc.
("Princeton Services") since 2001; President of
Princeton Administrators, L.P. ("Princeton
Administrators") from 2001 to 2006; Chief
Investment Officer of OppenheimerFunds, Inc. in
1999 and Executive Vice President thereof from
1991 to 1999.
------------------------------------------------------------------------------------------------------------------------
* Mr. Doll is a director, trustee or member of an advisory board of certain other investment companies for which
BlackRock acts as investment adviser. Mr. Doll is an "interested person," as defined in the Investment Company
Act, of the Fund based on his current and former positions with BlackRock, Inc. and its affiliates. Directors
serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. As Fund
President, Mr. Doll serves at the pleasure of the Board of Directors/Trustees.
====================================================================================================================================
Independent Directors/Trustees*
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald W. P.O. Box 9095 Director/ 1999 to Professor Emeritus of Finance, School of Business, 50 Funds None
Forbes** Princeton, NJ Trustee present State University of New York at Albany since 2000 52 Portfolios
08543-9095 and Professor thereof from 1989 to 2000;
Age: 66 International Consultant, Urban Institute,
Washington, D.C. from 1995 to 1999.
- ------------------------------------------------------------------------------------------------------------------------------------
Cynthia A. P.O. Box 9095 Director/ 1999 to Professor, Harvard Business School since 1989; 50 Funds Newell Rub-
Montgomery Princeton, NJ Trustee present Associate Professor, J.L. Kellogg Graduate School 52 Portfolios bermaid, Inc.
08543-9095 of Management, Northwestern University from (manufac-
Age: 54 1985 to 1989; Associate Professor, Graduate School turing)
of Business Administration, University of Michigan
from 1979 to 1985; Director, Harvard Business
School Publishing since 2005; Director, McLean
Hospital since 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Jean Margo P.O. Box 9095 Director/ 2004 to Self-employed consultant since 2001; Counsel of 50 Funds None
Reid Princeton, NJ Trustee present Alliance Capital Management (investment adviser) 52 Portfolios
08543-9095 in 2000; General Counsel, Director and Secretary of
Age: 61 Sanford C. Bernstein & Co., Inc. (investment adviser/
broker-dealer) from 1997 to 2000; Secretary, Sanford
C. Bernstein Fund, Inc. from 1994 to 2000; Director
and Secretary of SCB, Inc. since 1998; Director and
Secretary of SCB Partners, Inc. since 2000; and
Director of Covenant House from 2001 to 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
Roscoe S. P.O. Box 9095 Director/ 2000 to President, Middle East Institute, from 1995 to 2001; 50 Funds None
Suddarth Princeton, NJ Trustee present Foreign Service Officer, United States Foreign 52 Portfolios
08543-9095 Service from 1961 to 1995 and Career Minister
Age: 71 from 1989 to 1995; Deputy Inspector General, U.S.
Department of State, from 1991 to 1994; U.S.
Ambassador to the Hashemite Kingdom of
Jordan from 1987 to 1990.
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 35
Officers and Directors/Trustees (concluded)
Number of
Portfolios in Other Public
Fund Complex Directorships
Position(s) Length of Overseen by Held by
Held with Time Director/ Director/
Name Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Independent Directors/Trustees* (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
Richard R. P.O. Box 9095 Director/ 1999 to Professor of Finance from 1984 to 1995, Dean from 50 Funds Bowne &
West Princeton, NJ Trustee present 1984 to 1993 and since 1995 Dean Emeritus of 52 Portfolios Co., Inc.
08543-9095 New York University's Leonard N. Stern School of (financial
Age: 68 Business Administration. printers);
Vornado
Realty Trust
(real estate
company);
Alexander's,
Inc. (real
estate
company)
- ------------------------------------------------------------------------------------------------------------------------------------
Edward D. P.O. Box 9095 Director/ 2000 to Self-employed financial consultant since 1994; 50 Funds None
Zinbarg Princeton, NJ Trustee present Executive Vice President of the Prudential Insurance 52 Portfolios
08543-9095 Company of America from 1988 to 1994; Former
Age: 71 Director of Prudential Reinsurance Company and
former Trustee of the Prudential Foundation.
------------------------------------------------------------------------------------------------------------------------
* Directors/Trustees serve until their resignation, removal or death, or until December 31 of the year in which they
turn 72.
** Chairman of the Board of Directors/Trustees and the Audit Committee.
- ------------------------------------------------------------------------------------------------------------------------------------
Position(s) Length of
Held with Time
Name Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund/Trust Officers*
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 1999 to Managing Director of BlackRock since 2006; Managing Director of MLIM and FAM
Burke Princeton, NJ President present from 2006; First Vice President of MLIM and FAM from 1997 to 2005 and Treasurer
08543-9011 and thereof from 1999 to 2006; Vice President of MLIM and FAM from 1990 to 1997.
Age: 46 Treasurer
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey P.O. Box 9011 Fund Chief 2004 to Managing Director of BlackRock and Fund Chief Compliance Officer since 2006;
Hiller Princeton, NJ Compliance present Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice President and
08543-9011 Officer Chief Compliance Officer of MLIM (Americas Region) from 2004 to 2006; Chief
Age: 55 Compliance Officer of the IQ Funds since 2004; Global Director of Compliance at
Morgan Stanley Investment Management from 2002 to 2004; Managing Director and
Global Director of Compliance at Citigroup Asset Management from 2000 to 2002;
Chief Compliance Officer at Soros Fund Management in 2000; Chief Compliance Officer
at Prudential Financial from 1995 to 2000; Senior Counsel in the Securities and
Exchange Commission's Division of Enforcement in Washington, D.C. from 1990 to
1995.
- ------------------------------------------------------------------------------------------------------------------------------------
Alice A. P.O. Box 9011 Secretary 2004 to Director of BlackRock since 2006; Director (Legal Advisory) of MLIM from 2002 to
Pellegrino Princeton, NJ present 2006; Vice President of MLIM from 1999 to 2002; Attorney associated with MLIM from
08543-9011 1997 to 2006; Secretary of MLIM, FAM, FAMD and Princeton Services from 2004 to
Age: 46 2006.
------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund/Trust serve at the pleasure of the Board of Directors/Trustees.
- ------------------------------------------------------------------------------------------------------------------------------------
Further information about the Fund's Officers and Directors/Trustees is available in the Fund's Statement of Additional
Information, which can be obtained without charge by calling 1-800-441-7762.
- ------------------------------------------------------------------------------------------------------------------------------------
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109-3661
Transfer Agent
Pre Transaction
(Until September 29, 2006)
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
Post Transaction
(After September 29, 2006)
PFPC Inc.
Wilmington, DE 19809
36 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
Important Tax Information
The following information is provided with respect to the ordinary income
distributions paid by BlackRock Global Financial Services Fund, Inc. to
shareholders of record on December 15, 2005:
- -------------------------------------------------------------------------------------------
Qualified Dividend Income for Individuals* ................................ 32.92%**
Dividends Qualifying for the Dividends Received Deduction for Corporations* 7.40%**
Foreign Source Income ..................................................... 19.71%**
Foreign Taxes Paid Per Share .............................................. $ .021009
Short-Term Capital Gain Dividends for Non-U.S. Residents Per Share ........ $ .187495***
- -------------------------------------------------------------------------------------------
* The Fund hereby designates the percentage indicated above or the maximum
amount allowable by law.
** Expressed as a percentage of the cash distribution grossed-up for foreign
taxes.
*** Represents the portion of the taxable ordinary income dividends eligible
for exemption from U.S. withholding tax for nonresident aliens and foreign
corporations.
The foreign taxes paid represent taxes incurred by the Fund on income received
by the Fund from foreign sources. Foreign taxes paid may be included in taxable
income with an offsetting deduction from gross income or may be taken as a
credit for taxes paid to foreign governments. You should consult your tax
adviser regarding the appropriate treatment of foreign taxes paid.
Additionally, the Fund distributed long-term capital gains of $1.136862 per
share to shareholders of record on December 15, 2006.
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 37
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund
investors and individual clients (collectively, "Clients") and to safeguarding
their nonpublic personal information. The following information is provided to
help you understand what personal information BlackRock collects, how we protect
that information and why in certain cases we share such information with select
parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal nonpublic information from and about you
from different sources, including the following: (i) information we receive from
you or, if applicable, your financial intermediary, on applications, forms or
other documents; (ii) information about your transactions with us, our
affiliates, or others; (iii) information we receive from a consumer reporting
agency; and (iv) from visits to our Web sites.
BlackRock does not sell or disclose to nonaffiliated third parties any nonpublic
personal information about its Clients, except as permitted by law or as is
necessary to service Client accounts. These nonaffiliated third parties are
required to protect the confidentiality and security of this information and to
use it only for its intended purpose.
We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services that may
be of interest to you. In addition, BlackRock restricts access to nonpublic
personal information about its Clients to those BlackRock employees with a
legitimate business need for the information. BlackRock maintains physical,
electronic and procedural safeguards that are designed to protect the nonpublic
personal information of its Clients, including procedures relating to the proper
storage and disposal of such information.
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
Electronic copies of most financial reports and prospectuses are available on
the Fund's Web site. Shareholders can sign up for e-mail notifications of
quarterly statements, annual and semi-annual reports and prospectuses by
enrolling in the Fund's electronic delivery program.
To enroll:
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial adviser. Please note that not all investment
advisers, banks or brokerages may offer this service.
Shareholders Who Hold Accounts Directly with BlackRock:
1) Access the BlackRock Web site at http://www.blackrock.com/edelivery
2) Log into your account
38 BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006
A World-Class Mutual Fund Family
BlackRock now offers an expanded lineup of open-end mutual funds. Our range
includes more than 85 funds crossing all investment styles and managed by
experts in equity, fixed income and tax-exempt investing.
Equity Portfolios
BlackRock All-Cap Global Resources Portfolio
BlackRock Aurora Portfolio
BlackRock Asset Allocation Portfolio+
BlackRock Balanced Capital Fund+
BlackRock Basic Value Fund
BlackRock Developing Capital Markets Fund
BlackRock Equity Dividend Fund
BlackRock EuroFund
BlackRock Focus Twenty Fund
BlackRock Focus Value Fund
BlackRock Fundamental Growth Fund
BlackRock Global Allocation Fund+
BlackRock Global Dynamic Equity Fund
BlackRock Global Financial Services Fund
BlackRock Global Growth Fund
BlackRock Global Opportunities Portfolio
BlackRock Global Resources Portfolio*
BlackRock Global Science & Technology Opportunities Portfolio
BlackRock Global SmallCap Fund
BlackRock Global Technology Fund
BlackRock Global Value Fund
BlackRock Healthcare Fund
BlackRock Health Sciences Opportunities Portfolio
BlackRock Index Equity Portfolio*
BlackRock International Fund
BlackRock International Index Fund
BlackRock International Opportunities Portfolio*
BlackRock International Value Fund
BlackRock Investment Trust
BlackRock Large Cap Core Fund
BlackRock Large Cap Growth Fund
BlackRock Large Cap Value Fund
BlackRock Latin America Fund
BlackRock Legacy Portfolio
BlackRock Mid-Cap Growth Equity Portfolio
BlackRock Mid-Cap Value Equity Portfolio
BlackRock Mid Cap Value Opportunities Fund
BlackRock Natural Resources Trust
BlackRock Pacific Fund
BlackRock Small Cap Core Equity Portfolio
BlackRock Small Cap Growth Equity Portfolio
BlackRock Small Cap Growth Fund II
BlackRock Small Cap Index Fund
BlackRock Small Cap Value Equity Portfolio*
BlackRock Small/Mid-Cap Growth Portfolio
BlackRock S&P 500 Index Fund
BlackRock U.S. Opportunities Portfolio
BlackRock Utilities and Telecommunications Fund
BlackRock Value Opportunities Fund
Fixed Income Portfolios
BlackRock Bond Fund
BlackRock Enhanced Income Portfolio
BlackRock GNMA Portfolio
BlackRock Government Income Portfolio
BlackRock High Income Fund
BlackRock High Yield Bond Portfolio
BlackRock Inflation Protected Bond Portfolio
BlackRock Intermediate Bond Portfolio
BlackRock Intermediate Bond Portfolio II
BlackRock Intermediate Government Bond Portfolio
BlackRock International Bond Portfolio
BlackRock Low Duration Bond Portfolio
BlackRock Managed Income Portfolio
BlackRock Real Investment Fund
BlackRock Short-Term Bond Fund
BlackRock Total Return Portfolio
BlackRock Total Return Portfolio II
BlackRock World Income Fund
Municipal Bond Portfolios
BlackRock AMT-Free Municipal Bond Portfolio
BlackRock California Insured Municipal Bond Fund
BlackRock Delaware Municipal Bond Portfolio
BlackRock Florida Municipal Bond Fund
BlackRock High Yield Municipal Fund
BlackRock Intermediate Municipal Fund
BlackRock Kentucky Municipal Bond Portfolio
BlackRock Municipal Insured Fund
BlackRock National Municipal Fund
BlackRock New Jersey Municipal Bond Fund
BlackRock New York Municipal Bond Fund
BlackRock Ohio Municipal Bond Portfolio
BlackRock Pennsylvania Municipal Bond Fund
BlackRock Short-Term Municipal Fund
Money Market Portfolios
BlackRock Money Market Portfolio
BlackRock Municipal Money Market Portfolio@
BlackRock NC Municipal MM Portfolio@
BlackRock NJ Municipal MM Portfolio@
BlackRock OH Municipal MM Portfolio@
BlackRock PA Municipal MM Portfolio@
BlackRock Summit Cash Reserves Fund*
BlackRock U.S. Treasury MM Portfolio
BlackRock VA Municipal MM Portfolio@
* See the prospectus for information on specific limitations on investments
in the fund.
+ Mixed asset fund.
@ Tax-exempt fund.
BlackRock mutual funds are distributed by BlackRock Distributors, Inc. You
should consider the investment objectives, risks, charges and expenses of the
funds under consideration carefully before investing. Each fund's prospectus
contains this and other information and is available at www.blackrock.com or by
calling 800-882-0052 or from your financial advisor. The prospectus should be
read carefully before investing.
BLACKROCK GLOBAL FINANCIAL SERVICES FUND, INC. SEPTEMBER 30, 2006 39
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 1-800-441-7762; (2) at
www.blackrock.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.blackrock.com and (2) on the Securities
and Exchange Commission's Web site at http://www.sec.gov.
BlackRock Global Financial Services Fund, Inc.
Box 9011
Princeton, NJ 08543-9011
BLACKROCK
#MLGFSF-9/06
Item 2 - Code of Ethics - The registrant has adopted a code of ethics, as of the
end of the period covered by this report, that applies to the
registrant's principal executive officer, principal financial officer
and principal accounting officer, or persons performing similar
functions. A copy of the code of ethics is available without charge at
www.blackrock.com.
Item 3 - Audit Committee Financial Expert - The registrant's board of directors
has determined that (i) the registrant has the following audit
committee financial experts serving on its audit committee and (ii)
each audit committee financial expert is independent: (1) Ronald W.
Forbes, (2) Richard R. West, and (3) Edward D. Zinbarg.
Item 4 - Principal Accountant Fees and Services
BlackRock Global Financial Services Fund, Inc.
(a) Audit Fees - Fiscal Year Ending September 30, 2006 - $6,600
Fiscal Year Ending September 30, 2005 - $6,500
(b) Audit-Related Fees - Fiscal Year Ending September 30, 2006 - $0
Fiscal Year Ending September 30, 2005 - $0
(c) Tax Fees - Fiscal Year Ending September 30, 2006 - $6,000
Fiscal Year Ending September 30, 2005 - $6,200
The nature of the services include tax compliance, tax advice and tax
planning.
(d) All Other Fees - Fiscal Year Ending September 30, 2006 - $0
Fiscal Year Ending September 30, 2005 - $0
Global Financial Services Master Trust
(a) Audit Fees - Fiscal Year Ending September 30, 2006 - $27,400
Fiscal Year Ending September 30, 2005 - $27,000
(b) Audit-Related Fees - Fiscal Year Ending September 30, 2006 - $0
Fiscal Year Ending September 30, 2005 - $0
(c) Tax Fees - Fiscal Year Ending September 30, 2006 - $1,587
Fiscal Year Ending September 30, 2005 - $1,600
The nature of the services include tax compliance, tax advice and tax
planning.
(d) All Other Fees - Fiscal Year Ending September 30, 2006 - $0
Fiscal Year Ending September 30, 2005 - $0
(e)(1) The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to the
registrant's affiliated service providers that relate directly to the
operations and the financial reporting of the registrant. Certain of
these non-audit services that the Committee believes are a) consistent
with the SEC's auditor independence rules and b) routine and recurring
services that will not impair the independence of the independent
accountants may be approved by the Committee without consideration on a
specific case-by-case basis ("general pre-approval"). However, such
services will only be deemed pre-approved provided that any individual
project does not exceed $5,000 attributable to the registrant or
$50,000 for all of the registrants the Committee oversees. Any proposed
services exceeding the pre-approved cost levels will require specific
pre-approval by the Committee, as will any other services not subject
to general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending September 30, 2006 - $3,050,250
Fiscal Year Ending September 30, 2005 - $6,827,388
(h) The registrant's audit committee has considered and determined that
the provision of non-audit services that were rendered to the
registrant's investment adviser and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant
to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $1,739,500 , 0%
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - 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 - The registrant's
Nominating Committee will consider nominees to the Board recommended
by shareholders when a vacancy becomes available. Shareholders who
wish to recommend a nominee should send nominations which include
biographical information and sets forth the qualifications of the
proposed nominee to the registrant's Secretary. There have been no
material changes to these procedures.
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 second fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
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.
BlackRock 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
BlackRock Global Financial Services Fund, Inc. and Global Financial Services
Master Trust
Date: November 17, 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
BlackRock Global Financial Services Fund, Inc. and Global Financial Services
Master Trust
Date: November 17, 2006
By: /s/ Donald C. Burke
---------------------------------
Donald C. Burke,
Chief Financial Officer of
BlackRock Global Financial Services Fund, Inc. and Global Financial Services
Master Trust
Date: November 17, 2006