MERRILL LYNCH
GLOBAL FINANCIAL
SERVICES FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
March 31, 2000
<PAGE>
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC.
Officers and Directors
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Arthur Zeikel, Director
Robert C. Doll, Senior Vice President
James Ellman, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Ira P. Shapiro, Secretary
Custodian
Browns Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
<PAGE>
Merrill Lynch Global Financial Services Fund, Inc., March 31, 2000
DEAR SHAREHOLDER
We are pleased to provide you with this first semi-annual report for Merrill
Lynch Global Financial Services Fund, Inc. In this and future shareholder
reports, we will highlight the Fund's performance and describe recent investment
activities. The Fund seeks to provide capital appreciation by investing
primarily in a portfolio of common stocks of financial services companies that
we believe have the potential to increase in value. The Fund will seek to
achieve its investment objective by investing all of its assets in Master Global
Financial Services Portfolio, which has the same investment objective as the
Fund. The Fund's investment experience will correspond directly to the
investment experience of the Portfolio.
Since inception (November 26, 1999) through March 31, 2000, Merrill Lynch Global
Financial Services Fund, Inc.'s Class A, Class B, Class C and Class D Shares had
total returns of +2.50%, +2.20%, +2.20% and +2.40%, respectively. (Results shown
do not reflect sales charges and would be lower if sales charges were included.
Complete performance information can be found on pages 3 and 4 of this report to
shareholders.) This compares favorably with the -0.90% total return of the
unmanaged Standard & Poor's Financials Index and the Lipper Analytical Services
Inc.'s peer group of financial services funds, which had an average total return
of -2.1%.
The Fund's outperformance was driven by the Portfolio's careful stock selection
as well as industry positioning. Our strategy of seeking companies with earnings
momentum led to successful large positions in Silicon Valley Bancshares, Kansas
City Southern Industries, Inc. (owner of DST Systems and Janus), Knight/Trimark
Group, Inc., Amvescap PLC, The Chase Manhattan Corporation and U.S. Trust
Corporation, among others. By period-end, the Portfolio was overweighted in the
credit card specialist, brokerage and money center bank areas. Underweighted
sectors included reinsurance, property and casualty insurance and savings and
loan associations. We currently favor large-capitalization stocks over smaller
competitors. During the period, we maintained the Portfolio's cash position at
approximately 5% of net assets.
Financial stocks were under extreme pressure throughout most of the period.
Fears of rising interest rates and continued sector rotation into
technology-oriented stocks extended the underperformance of financial issues
that has been ongoing since 1998. However, financial stocks have been showing
improvement, and staged a very strong rally in March. Solid earnings, concerns
that technology stocks have peaked and expectations that the Federal Reserve
Board may be close to finishing its current policy of raising interest rates
have focused renewed interest on bank, insurance and brokerage shares. We hope
that a continued recovery in investor attention to this group will allow
financial stocks to outperform the broader market for the balance of 2000.
In Conclusion
We appreciate your investment in Merrill Lynch Global Financial Services Fund,
Inc., and we look forward to assisting you with your financial needs in the
months and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ James Ellman
James Ellman
Senior Vice President and
Portfolio Manager
May 8, 2000
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select Pricing(SM) System, which offers four pricing alternatives:
o Class A Shares incur a maximum initial sales charge (front-end load) of
5.25% and bear no ongoing distribution or account maintenance fees. Class
A Shares are available only to eligible investors.
o Class B Shares are subject to a maximum contingent deferred sales charge
of 4% if redeemed during the first year, decreasing 1% each year
thereafter to 0% after the fourth year. In addition, Class B Shares are
subject to a distribution fee of 0.75% and an account maintenance fee of
0.25%. These shares automatically convert to Class D Shares after
approximately 8 years. (There is no initial sales charge for automatic
share conversions.)
o Class C Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
o Class D Shares incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation of
future performance. Figures shown in the "Recent Performance Results" and
"Aggregate Total Return" tables assume reinvestment of all dividends and
capital gains distributions 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.
2 & 3
<PAGE>
Merrill Lynch Global Financial Services Fund, Inc., March 31, 2000
PERFORMANCE DATA (concluded)
Recent Performance Results*
Since Inception
As of March 31, 2000 Total Return
================================================================================
ML Global Financial Services Fund, Inc. Class A Shares +2.50%
- --------------------------------------------------------------------------------
ML Global Financial Services Fund, Inc. Class B Shares +2.20
- --------------------------------------------------------------------------------
ML Global Financial Services Fund, Inc. Class C Shares +2.20
- --------------------------------------------------------------------------------
ML Global Financial Services Fund, Inc. Class D Shares +2.40
================================================================================
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. 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. The Fund commenced operations on 11/26/99.
Aggregate Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Inception (11/26/99)
through 3/31/00 +2.50% -2.88%
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Inception (11/26/99)
through 3/31/00 +2.20% -1.80%
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after 4
years.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
Inception (11/26/99)
through 3/31/00 +2.20% +1.20%
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after 1
year.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class D Shares*
================================================================================
Inception (11/26/99)
through 3/31/00 +2.40% -2.98%
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MERRILL LYNCH
GLOBAL FINANCIAL
SERVICES FUND, INC. As of March 31, 2000
====================================================================================================================================
<C> <S> <C> <C>
Assets: Investment in Global Financial Services Portfolio, at value
(identified cost--$64,830,248) ................................................. $67,299,061
Prepaid expenses ............................................................... 130,733
-----------
Total assets ................................................................... 67,429,794
-----------
====================================================================================================================================
Liabilities: Payables:
Administrative fees .......................................................... $ 69,992
Distributor .................................................................. 42,389 112,381
-----------
Accrued expenses and other liabilities ......................................... 37,208
-----------
Total liabilities .............................................................. 149,589
-----------
====================================================================================================================================
Net Assets: Net assets ..................................................................... $67,280,205
===========
====================================================================================================================================
Net Assets Class A Shares of Common Stock, $.10 par value, 100,000,000 shares authorized .. $ 48,648
Consist of: Class B Shares of Common Stock, $.10 par value, 100,000,000 shares authorized .. 420,834
Class C Shares of Common Stock, $.10 par value, 100,000,000 shares authorized .. 97,473
Class D Shares of Common Stock, $.10 par value, 100,000,000 shares authorized .. 91,189
Paid-in capital in excess of par ............................................... 64,776,410
Accumulated investment loss--net ............................................... (70,913)
Accumulated realized capital losses on investments from the Portfolio--net ..... (552,249)
Unrealized appreciation on investments from the Portfolio--net ................. 2,468,813
-----------
Net assets ..................................................................... $67,280,205
===========
====================================================================================================================================
Net Asset Class A--Based on net assets of $4,986,931 and 486,477 shares outstanding ...... $ 10.25
Value: ===========
Class B--Based on net assets of $42,994,029 and 4,208,343 shares outstanding ... $ 10.22
===========
Class C--Based on net assets of $9,957,929 and 974,731 shares outstanding ...... $ 10.22
===========
Class D--Based on net assets of $9,341,316 and 911,894 shares outstanding ...... $ 10.24
===========
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
4 & 5
<PAGE>
Merrill Lynch Global Financial Services Fund, Inc., March 31, 2000
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MERRILL LYNCH
GLOBAL FINANCIAL
SERVICES FUND, INC. For the Period November 26, 1999+ to March 31, 2000
====================================================================================================================================
<C> <S> <C> <C>
Investment Investment income allocated from the Portfolio (net of $8,870 foreign
Income: withholding tax) ................................................................ $ 456,712
Expenses allocated from the Portfolio ........................................... (133,971)
----------
Net investment income from the Portfolio ........................................ 322,741
----------
====================================================================================================================================
Expenses: Account maintenance and distribution fees--Class B .............................. $ 125,675
Administration fee .............................................................. 69,992
Offering costs .................................................................. 60,725
Registration fees ............................................................... 40,187
Printing and shareholder reports ................................................ 32,187
Account maintenance and distribution fees--Class C .............................. 29,131
Transfer agent fees--Class B .................................................... 14,239
Account maintenance fee--Class D ................................................ 7,296
Professional fees ............................................................... 4,834
Transfer agent fees--Class C .................................................... 3,453
Transfer agent fees--Class D .................................................... 2,787
Transfer agent fees--Class A .................................................... 1,543
Accounting services ............................................................. 419
Other ........................................................................... 1,186
----------
Total expenses .................................................................. 393,654
----------
Investment loss--net ............................................................ (70,913)
----------
====================================================================================================================================
Realized & Realized loss from the Portfolio:
Unrealized Gain Investments--net .............................................................. (551,344)
(Loss) from the Foreign currency transactions--net ............................................ (905) (552,249)
Portfolio--Net: ----------
Unrealized appreciation on investments from the Portfolio--net .................. 2,468,813
----------
Net Increase in Net Assets Resulting from Operations ............................ $1,845,651
----------
====================================================================================================================================
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MERRILL LYNCH For the Period
GLOBAL FINANCIAL Nov. 26, 1999+ to
SERVICES FUND, INC. Increase (Decrease) in Net Assets: March 31, 2000
====================================================================================================================================
<C> <S> <C>
Operations: Investment loss--net ....................................................................... $ (70,913)
Realized loss on investments from the Portfolio--net ....................................... (552,249)
Unrealized appreciation on investments from the Portfolio--net ............................. 2,468,813
===========
Net increase in net assets resulting from operations ....................................... 1,845,651
===========
====================================================================================================================================
Capital Share Net increase in net assets derived from capital share transactions ......................... 65,334,554
Transactions: -----------
====================================================================================================================================
Net Assets: Total increase in net assets ............................................................... 67,180,205
Beginning of period ........................................................................ 100,000
-----------
End of period .............................................................................. $67,280,205
===========
====================================================================================================================================
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
MERRILL LYNCH from information provided in the financial statements. For the Period Nov. 26, 1999+ to March 31, 2000
GLOBAL FINANCIAL -----------------------------------------------
SERVICES FUND, INC. Increase (Decrease) in Net Asset Value: Class A Class B Class C Class D
====================================================================================================================================
<C> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period .............................. $ 10.00 $ 10.00 $ 10.00 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income (loss)--net ..................................... .02 (.02) (.02) .01
Realized and unrealized gain on investments from the Portfolio--net .23 .24 .24 .23
------- ------- ------- -------
Total from investment operations .................................. .25 .22 .22 .24
------- ------- ------- -------
Net asset value, end of period .................................... $ 10.25 $ 10.22 $ 10.22 $ 10.24
======= ======= ======= =======
====================================================================================================================================
Total Investment Based on net asset value per share ................................ 2.50%++ 2.20%++ 2.20%++ 2.40%++
Return**: ======= ======= ======= =======
====================================================================================================================================
Ratios to Average Expenses@ ......................................................... 1.82%* 2.82%* 2.82%* 2.06%*
Net Assets: ======= ======= ======= =======
Investment income (loss)--net ..................................... .25%* (.54%)* (.57%)* .42%*
======= ======= ======= =======
====================================================================================================================================
Supplemental Net assets, end of period (in thousands) .......................... $ 4,987 $42,994 $ 9,958 $ 9,341
Data: ======= ======= ======= =======
====================================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
@ Includes the Fund's share of the Portfolio's allocated expenses.
++ Aggregate total investment return.
See Notes to Financial Statements.
6 & 7
<PAGE>
Merrill Lynch Global Financial Services Fund, Inc., March 31, 2000
NOTES TO FINANCIAL STATEMENTS
MERRILL LYNCH GLOBAL FINANCIAL SERVICES FUND, INC.
1. Significant Accounting Policies:
Merrill Lynch Global Financial Services Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a non-diversified mutual fund. The
Fund seeks to achieve its investment objective by investing all of its assets in
the Global Financial Services Portfolio (the "Portfolio"), which is the
portfolio of Global Financial Services Master Trust that has the same investment
objective as the Fund. The value of the Fund's investment in the Portfolio
reflects the Fund's proportionate interest in the net assets of the Portfolio.
The performance of the Fund is directly affected by the performance of the
Portfolio. The financial statements of the Portfolio, including the Schedule of
Investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements. The Fund's financial
statements are prepared in accordance with accounting principles generally
accepted in the United States of America, which may require the use of
management accruals and estimates. These unaudited financial statements reflect
all adjustments, which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented. All such adjustments
are of a normal recurring nature. Prior to commencement of operations on
November 26, 1999, the Fund had no operations other than those relating to
organizational matters and the issuance of 10,000 capital shares of the Fund on
June 1, 1999 to Fund Asset Management, L.P. ("FAM") for $100,000. The Fund
offers four classes of shares under the Merrill Lynch Select Pricing(SM) System.
Shares of Class A and Class D are sold with a front-end sales charge. Shares of
Class B and Class C may be subject to a contingent deferred sales charge. All
classes of shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that Class B, Class C and Class D
Shares bear certain expenses related to the account maintenance of such shares,
and Class B and Class C 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.
The following is a summary of significant accounting policies followed by the
Fund.
(a) Valuation of investments--Valuation of securities is discussed in Note 1a of
the Portfolio's Notes to Financial Statements, which are included elsewhere in
this report.
(b) Income--The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and accrued
expenses of the Fund determined in accordance with generally accepted accounting
principles.
(c) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to shareholders. Therefore,
no Federal income tax provision is required. Under the applicable foreign tax
law, a withholding tax may be imposed on interest, dividends and capital gains
at various rates.
(d) Prepaid registration fees--Prepaid registration fees are charged to expense
as the related shares are issued.
(e) Dividends and distributions--Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(f) Investment transactions-- Investment transactions are accounted for on a
trade date basis.
2. Transactions with Affiliates:
The Fund has entered into an Administrative Services Agreement with FAM. The
general partner of FAM is Princeton Services, Inc. ("PSI"), a wholly-owned
subsidiary of Merrill Lynch & Co., Inc. (ML & Co.), which is the limited
partner. The Fund pays a monthly fee at an annual rate of .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.
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 B ........................................ .25% .75%
Class C ........................................ .25% .75%
Class D ........................................ .25% --
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., 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 B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the period November 26, 1999 to March 31, 2000, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the Fund's Class D
Shares as follows:
- --------------------------------------------------------------------------------
MLFD MLPF&S
- --------------------------------------------------------------------------------
Class D ........................................ $2,501 $323,895
- --------------------------------------------------------------------------------
For the period November 26, 1999 to March 31, 2000, MLPF&S received contingent
deferred sales charges of $33,016 and $3,781 relating to transactions in Class B
and Class C Shares, respectively.
Financial Data Services, Inc. ("FDS"), an indirect wholly-owned subsidiary of ML
& Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, PFD, FDS, and/or ML & Co.
3. Investments:
Increases and decreases in the Fund's investment in the Portfolio for the period
November 26, 1999 to March 31, 2000 were $67,486,126 and $2,426,369,
respectively.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$65,334,554 for the period November 26, 1999 to March 31, 2000.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Period Dollar
November 26, 1999+ to March 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 745,706 $ 7,339,342
Shares redeemed ............................. (261,729) (2,409,689)
--------- -----------
Net increase ................................ 483,977 $ 4,929,653
========= ===========
- --------------------------------------------------------------------------------
+ Prior to November 26, 1999 (commencement of operations), the Fund issued 2,500
shares to FAM for $25,000.
- --------------------------------------------------------------------------------
Class B Shares for the Period Dollar
November 26, 1999+ to March 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 4,466,719 $44,128,264
Automatic conversion of shares .............. (3,009) (27,702)
Shares redeemed ............................. (257,867) (2,389,344)
--------- -----------
Net increase ................................ 4,205,843 $41,711,218
========= ===========
- --------------------------------------------------------------------------------
+ Prior to November 26, 1999 (commencement of operations), the Fund issued 2,500
shares to FAM for $25,000.
- --------------------------------------------------------------------------------
Class C Shares for the Period Dollar
November 26, 1999+ to March 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 1,063,951 $10,470,699
Shares redeemed ............................. (91,720) (837,602)
--------- -----------
Net increase ................................ 972,231 $ 9,633,097
========= ===========
- --------------------------------------------------------------------------------
+ Prior to November 26, 1999 (commencement of operations), the Fund issued 2,500
shares to FAM for $25,000.
- --------------------------------------------------------------------------------
Class D Shares for the Period Dollar
November 26, 1999+ to March 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ................................. 1,032,169 $10,234,805
Automatic conversion of shares .............. 3,007 27,702
--------- -----------
Total issued ................................ 1,035,176 10,262,507
Shares redeemed ............................. (125,782) (1,201,921)
--------- -----------
Net increase ................................ 909,394 $ 9,060,586
========= ===========
- --------------------------------------------------------------------------------
+ Prior to November 26, 1999 (commencement of operations), the Fund issued 2,500
shares to FAM for $25,000.
8 & 9
<PAGE>
Merrill Lynch Global Financial Services Fund, Inc., March 31, 2000
SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
Global Financial Services Portfolio
--------------------------------------------------------------------------------------------------
Percent
Shares of Net
MIDDLE EAST Industries Held Investments Value Assets
=======================================================================================================================
<C> <C> <C> <S> <C> <C>
Israel Banking 110,000 Bank Hapoalim $ 350,367 0.5%
137,000 Bank Leumi Le-Israel 317,295 0.5
-------------------------------------------------------------------------------------------------
Total Investments in the Middle East
(Cost--$549,807) 667,662 1.0
=======================================================================================================================
NORTH AMERICA
=======================================================================================================================
Canada Banking 12,700 Bank of Nova Scotia 254,122 0.4
9,000 Royal Bank of Canada 421,546 0.7
16,500 The Toronto-Dominion Bank 436,424 0.6
-------------------------------------------------------------------------------------------------
Total Investments in Canada 1,112,092 1.7
=======================================================================================================================
United States Banking 14,600 AmSouth Bancorporation 218,087 0.3
15,000 BB&T Corporation 420,937 0.6
46,900 Bank of America Corporation 2,459,319 3.7
23,000 Bank One Corporation 790,625 1.2
24,100 Capital One Financial Corporation 1,155,294 1.7
24,700 The Chase Manhattan Corporation 2,153,531 3.2
10,000 Comerica Incorporated 418,750 0.6
13,100 Fifth Third Bancorp 825,300 1.2
23,200 First Union Corporation 864,200 1.3
41,000 FleetBoston Financial Corporation 1,496,500 2.2
7,000 Greater Bay Bancorp 281,313 0.4
6,100 Investors Financial Services 357,994 0.5
12,400 J.P. Morgan & Co., Incorporated 1,633,700 2.4
8,300 Mellon Financial Corporation 244,850 0.4
8,900 Northern Trust Corporation 601,306 0.9
13,700 PNC Bank Corp. 617,356 0.9
24,000 +Silicon Valley Bancshares 1,698,000 2.5
10,500 State Street Corporation 1,017,188 1.5
7,000 SunTrust Banks, Inc. 404,250 0.6
11,000 U.S. Bancorp 240,625 0.4
11,000 U.S. Trust Corporation 2,079,000 3.1
18,000 Washington Mutual, Inc. 477,000 0.7
----------- -----
20,455,125 30.3
-------------------------------------------------------------------------------------------------
Computer Services 3,100 +CheckFree Holdings Corporation 218,163 0.3
-------------------------------------------------------------------------------------------------
Computer Software 4,900 +Intuit Inc. 266,131 0.4
-------------------------------------------------------------------------------------------------
Computers 400 +Palm, Inc. 17,925 0.0
-------------------------------------------------------------------------------------------------
Data Processing 5,100 +Digital Insight Corporation 257,231 0.4
10,500 +Fiserv, Inc. 389,813 0.6
16,600 +Netzee, Inc. 242,775 0.4
2,700 +S1 Corporation 231,356 0.3
----------- -----
1,121,175 1.7
-------------------------------------------------------------------------------------------------
Financial Services 30,500 Advanta Corp. 619,531 0.9
12,000 American Express Company 1,787,250 2.7
14,100 Associates First Capital Corporation (Class A) 302,269 0.4
4,400 +The BISYS Group, Inc. 290,400 0.4
40,600 Citigroup Inc. 2,408,087 3.6
13,300 +CompuCredit Corporation 484,619 0.7
22,000 Federal Home Loan Mortgage Association 972,125 1.4
17,000 Federal National Mortgage Association 959,437 1.4
30,000 Firstar Corporation 688,125 1.0
14,000 Franklin Resources, Inc. 468,125 0.7
4,000 The Goldman Sachs Group, Inc. 420,500 0.6
6,100 The Hartford Financial Services Group, Inc. 321,775 0.5
20,900 Household International, Inc. 779,831 1.2
18,000 +Knight/Trimark Group, Inc. (Class A) 919,125 1.4
7,000 Lehman Brothers Holdings, Inc. 679,000 1.0
27,100 MBNA Corporation 691,050 1.0
22,800 Metris Companies Inc. 886,350 1.3
26,000 Morgan Stanley Dean Witter & Co. 2,120,625 3.2
52,000 Wells Fargo Company 2,128,750 3.2
----------- -----
17,926,974 26.6
-------------------------------------------------------------------------------------------------
Insurance 19,000 AFLAC Incorporated 865,687 1.3
14,000 AXA Financial, Inc. 502,250 0.7
8,700 Allmerica Financial Corporation 443,700 0.7
24,900 The Allstate Corporation 592,931 0.9
6,900 Ambac Financial Group, Inc. 347,587 0.5
9,800 American General Corporation 550,025 0.8
24,500 American International Group, Inc. 2,682,750 4.0
4,000 Aon Corporation 129,000 0.2
12,500 CIGNA Corporation 946,875 1.4
28,000 +John Hancock Financial Services, Inc. 505,750 0.8
8,000 Lincoln National Corporation 268,000 0.4
4,800 MBIA, Inc. 249,900 0.4
12,200 Marsh & McLennan Companies, Inc. 1,345,813 2.0
20,200 Providian Financial Corporation 1,749,825 2.6
11,000 Travelers Property Casualty Corp. (Class A) 453,750 0.7
8,000 United HealthCare Corporation 477,000 0.7
----------- -----
12,110,843 18.1
-------------------------------------------------------------------------------------------------
</TABLE>
10 & 11
<PAGE>
Merrill Lynch Global Financial Services Fund, Inc., March 31, 2000
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
Global Financial Services Portfolio (concluded)
--------------------------------------------------------------------------------------------------
Percent
NORTH AMERICA Shares of Net
(concluded) Industries Held Investments Value Assets
=======================================================================================================================
<C> <C> <C> <S> <C> <C>
=======================================================================================================================
United States Investment Management 17,500 Alliance Capital Management Holding L.P. $ 725,156 1.1%
(concluded) 4,200 +Kansas City Southern Industries, Inc. 360,938 0.5
8,300 T. Rowe Price Associates, Inc. 327,850 0.5
----------- -----
1,413,944 2.1
-------------------------------------------------------------------------------------------------
Savings & Loan 27,800 Bank United Corp. (Class A) 875,700 1.3
Associations 12,000 GreenPoint Financial Corp. 235,500 0.3
58,300 Sovereign Bancorp, Inc. 439,072 0.7
----------- -----
1,550,272 2.3
-------------------------------------------------------------------------------------------------
Total Investments in the United States 55,080,552 81.8
=======================================================================================================================
Total Investments in North America
(Cost--$53,223,320) 56,192,644 83.5
=======================================================================================================================
PACIFIC
BASIN/ASIA
=======================================================================================================================
Hong Kong Banking 44,800 HSBC Holdings PLC 523,573 0.8
-------------------------------------------------------------------------------------------------
Total Investments in Hong Kong 523,573 0.8
=======================================================================================================================
Japan Banking 21,000 The Bank of Tokyo-Mitsubishi, Ltd. 300,366 0.4
48,000 The Daiwa Bank, Ltd. 142,271 0.2
14,000 The Fuji Bank, Limited 131,721 0.2
10,000 The Sanwa Bank, Ltd. 104,129 0.2
9,000 The Sumitomo Bank, Ltd. 134,256 0.2
17,000 The Tokai Bank Ltd. 102,764 0.1
-------------------------------------------------------------------------------------------------
Total Investments in Japan 915,507 1.3
=======================================================================================================================
Total Investments in the Pacific Basin/Asia
(Cost--$1,628,830) 1,439,080 2.1
=======================================================================================================================
WESTERN EUROPE
=======================================================================================================================
France Banking 6,300 Banque Nationale de Paris (BNP) 497,349 0.7
3,000 Societe Generale 'A' 598,254 0.9
----------- -----
1,095,603 1.6
-------------------------------------------------------------------------------------------------
Insurance 4,000 Axa 566,868 0.8
-------------------------------------------------------------------------------------------------
Total Investments in France 1,662,471 2.4
=======================================================================================================================
Ireland Banking & Financial 23,600 Allied Irish Banks PLC 228,538 0.3
125,000 Anglo Irish Bank Corporation PLC 307,594 0.5
57,000 Bank of Ireland 406,893 0.6
-------------------------------------------------------------------------------------------------
Total Investments in Ireland 943,025 1.4
=======================================================================================================================
Netherlands Banking 20,500 ABN AMRO Holding NV 456,867 0.7
-------------------------------------------------------------------------------------------------
Total Investments in the Netherlands 456,867 0.7
=======================================================================================================================
Norway Financial Services 65,000 DNB Holding 249,550 0.4
21,400 Sparebanken NOR (Capital Certificates) 403,190 0.6
-------------------------------------------------------------------------------------------------
Total Investments in Norway 652,740 1.0
=======================================================================================================================
Spain Banking & Financial 35,000 Banco Santander Central Hispano, SA 376,110 0.6
-------------------------------------------------------------------------------------------------
Total Investments in Spain 376,110 0.6
=======================================================================================================================
United Kingdom Banking 15,500 Barclays PLC 410,965 0.6
-------------------------------------------------------------------------------------------------
Investment Management 29,000 Amvescap PLC 394,398 0.6
-------------------------------------------------------------------------------------------------
Total Investments in the United Kingdom 805,363 1.2
=======================================================================================================================
Total Investments in Western Europe
(Cost--$5,324,897) 4,896,576 7.3
=======================================================================================================================
<CAPTION>
Face
Amount Short-Term Securities
=======================================================================================================================
<C> <C> <S> <C> <C>
Commercial Paper* $2,182,000 General Motors Acceptance Corp.,
6.38% due 4/03/2000 2,181,227 3.2
1,585,000 Transamerica Finance Corporation,
6.03% due 4/12/2000 1,582,080 2.4
-------------------------------------------------------------------------------------------------
Total Investments in Short-Term
Securities (Cost--$3,763,307) 3,763,307 5.6
=======================================================================================================================
Total Investments (Cost--$64,490,161) 66,959,269 99.5
Other Assets Less Liabilities 339,895 0.5
----------- -----
Net Assets $67,299,164 100.0%
=========== =====
=======================================================================================================================
</TABLE>
* Commercial Paper is traded on a discount basis; the interest rates shown
reflect the discount rates paid at the time of purchase by the Fund.
+ Non-income producing security.
See Notes to Financial Statements.
12 & 13
<PAGE>
Merrill Lynch Global Financial Services Fund, Inc., March 31, 2000
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
GLOBAL
FINANCIAL SERVICES
PORTFOLIO As of March 31, 2000
==================================================================================================================================
<C> <S> <C> <C>
Assets: Investments, at value (identified cost--$64,490,161) .......................... $66,959,269
Cash .......................................................................... 956
Receivables:
Contributions ................................................................ $ 380,109
Dividends .................................................................... 120,229 500,338
-----------
Prepaid expenses and other assets ............................................. 4,363
-----------
Total assets .................................................................. 67,464,926
-----------
==================================================================================================================================
Liabilities: Payables:
Withdrawals .................................................................. 95,507
Investment adviser ........................................................... 18,797
Securities purchased ......................................................... 17,469 131,773
-----------
Accrued expenses .............................................................. 33,989
-----------
Total liabilities ............................................................. 165,762
-----------
==================================================================================================================================
Net Assets: Net assets .................................................................... $67,299,164
===========
==================================================================================================================================
Net Assets Partners' capital ............................................................. $64,830,347
Consist of: Unrealized appreciation on investments and foreign currency transactions--net . 2,468,817
-----------
Net assets .................................................................... $67,299,164
===========
==================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
GLOBAL
FINANCIAL SERVICES
PORTFOLIO For the Period November 26, 1999+ to March 31, 2000
==================================================================================================================================
<C> <S> <C> <C>
Investment Dividends (net of $8,870 foreign withholding tax) ............................... $ 364,670
Income: Interest and discount earned .................................................... 92,042
-----------
Total income .................................................................... 456,712
-----------
==================================================================================================================================
Expenses: Investment advisory fees ........................................................ $ 80,034
Accounting services ............................................................. 15,352
Custodian fees .................................................................. 12,251
Trustees' fees and expenses ..................................................... 10,123
Offering costs .................................................................. 8,634
Professional fees ............................................................... 4,764
Pricing fees .................................................................... 1,548
Other ........................................................................... 1,265
-----------
Total expenses .................................................................. 133,971
-----------
Investment income--net .......................................................... 322,741
-----------
==================================================================================================================================
Realized & Realized loss from:
Unrealized Gain Investments--net .............................................................. (551,345)
(Loss) On Foreign currency transactions--net ............................................ (906) (552,251)
Investments & -----------
Foreign Currency Unrealized appreciation/depreciation on:
Transactions--Net: Investments--net .............................................................. 2,469,108
Foreign currency transactions--net ............................................ (291) 2,468,817
----------- -----------
Net Increase in Net Assets Resulting from Operations ............................ $ 2,239,307
===========
==================================================================================================================================
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
14 & 15
<PAGE>
Merrill Lynch Global Financial Services Fund, Inc., March 31, 2000
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GLOBAL For the Period
FINANCIAL SERVICES Nov. 26, 1999+ to
PORTFOLIO Increase (Decrease) in Net Assets: March 31, 2000
============================================================================================================
<C> <S> <C>
Operations: Investment income--net ............................................. $ 322,741
Realized loss on investments--net .................................. (552,251)
Unrealized appreciation/depreciation on investments--net ........... 2,468,817
-----------
Net increase in net assets resulting from operations ............... 2,239,307
-----------
============================================================================================================
Net Capital Increase in net assets derived from net capital contributions ...... 65,059,857
Contributions: -----------
============================================================================================================
Net Assets: Total increase in net assets ....................................... 67,299,164
Beginning of period ................................................ --
-----------
End of period ...................................................... $67,299,164
===========
============================================================================================================
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GLOBAL For the Period
FINANCIAL SERVICES The following ratios have been derived from Nov. 26, 1999+ to
PORTFOLIO information provided in the financial statements. March 31, 2000
==============================================================================================
<C> <S> <C>
Ratios to Average Expenses ............................................ $ .67%*
Net Assets: ============
Investment income--net .............................. 1.61%*
============
==============================================================================================
Supplemental Net assets, end of period (in thousands) ............ $ 67,299
Data: ============
Portfolio turnover .................................. 29.38%
============
==============================================================================================
</TABLE>
* Annualized.
+ Commencement of operations.
See Notes to Financial Statements.
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 and is organized as a Delaware business trust.
The Portfolio's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, which may require
the use of management accruals and estimates. These unaudited financial
statements reflect all adjustments, which are, in the opinion of management,
necessary to a fair statement of the results for the interim period presented.
All such adjustments are of a normal recurring nature. The following is a
summary of significant accounting policies followed by the Portfolio.
(a) Valuation of investments--Portfolio securities that are traded on stock
exchanges are valued at the last sale price as of the close of business on the
day the securities are being valued or, lacking any sales, at the closing bid
price. Securities traded in the over-the-counter market are valued at the last
quoted bid price at the close of trading on the New York Stock Exchange on each
day by brokers that make markets in the securities. Portfolio securities that
are traded both in the over-the-counter market and on a stock exchange are
valued according to the broadest and most representative market. Options written
or purchased are valued at the last sale price in the case of exchange-traded
options. In the case of options traded in the over-the-counter market, valuation
is the last asked price (options written) or the last bid price (options
purchased). Short-term securities are valued at amortized cost, which
approximates market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets for which
market quotations are not readily available are valued at fair market value, as
determined in good faith by or under the direction of the Trust's Board of
Trustees.
(b) Derivative financial instruments--The Portfolio may engage in various
portfolio investment techniques to increase or decrease the level of risk to
which the Portfolio is exposed more quickly and efficiently than transactions in
other types of investments. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
o Financial futures contracts--The Portfolio may purchase or sell financial
futures contracts and options on such futures contracts for the purpose of
hedging the market risk on existing securities or the intended purchase of
securities. Upon entering into a contract, the Portfolio deposits and maintains
as collateral such initial margin as required by the exchange on which the
transaction is effected. Pursuant to the contract, the Portfolio agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
variation margin and are recorded by the Portfolio as unrealized gains or
losses. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
o Options--The Portfolio is authorized to 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.
16 & 17
<PAGE>
Merrill Lynch Global Financial Services Fund, Inc., March 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
GLOBAL FINANCIAL SERVICES PORTFOLIO
o Forward foreign exchange contracts--The Portfolio is authorized to enter into
forward foreign exchange contracts as a hedge against either specific
transactions or portfolio positions. Such contracts are not entered on the
Portfolio's records. However, the effect on operations is recorded from the date
the Portfolio enters into such contracts.
o Foreign currency options and futures--The Portfolio may also purchase or sell
listed or over-the-counter foreign currency options, foreign currency futures
and related options on foreign currency futures as a short or long hedge against
possible variations in foreign exchange rates. Such transactions may be effected
with respect to hedges on non-US 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 US dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on investments.
(d) Income taxes--The Portfolio is classified as a partnership for Federal
income tax purposes. As a partnership for Federal income tax purposes, the
Portfolio will not incur Federal income tax liability. Items of partnership
income, gain, loss and deduction will pass through to investors as partners in
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.
(e) Security transactions and investment income--Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). 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
(including amortization of discount) is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on the
identified cost basis.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the 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.
In addition, MLPF&S received $14,705 in commissions on the execution of
portfolio security transactions for the Fund for the period November 26, 1999 to
March 31, 2000.
Accounting services are provided to the Trust by FAM at cost.
Certain officers and/or trustees of the Trust are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
period November 26, 1999 to March 31, 2000 were $74,657,782 and $13,379,659,
respectively.
Net realized losses for the period November 26, 1999 to March 31, 2000 and net
unrealized gains (losses) as of March 31, 2000 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Losses Gains (Losses)
- --------------------------------------------------------------------------------
Long-term investments .......................... $(551,268) $2,469,108
Short-term investments ......................... (77) --
Foreign currency transactions .................. (906) (291)
--------- ----------
Total .......................................... $(552,251) $2,468,817
========= ==========
- --------------------------------------------------------------------------------
As of March 31, 2000, net unrealized appreciation for Federal income tax
purposes aggregated $2,469,108, of which $5,752,897 related to appreciated
securities and $3,283,789 related to depreciated securities. At March 31, 2000,
the aggregate cost of investments for Federal income tax purposes was
$64,490,161.
PORTFOLIO INFORMATION
Worldwide Investments As of March 31, 2000
Percent of
Ten Largest Holdings Net Assets
American International Group, Inc. .................................. 4.0%
Bank of America Corporation ......................................... 3.7
Citigroup Inc. ...................................................... 3.6
The Chase Manhattan Corporation ..................................... 3.2
Wells Fargo Company ................................................. 3.2
Morgan Stanley Dean Witter & Co. .................................... 3.2
U.S. Trust Corporation .............................................. 3.1
American Express Company ............................................ 2.7
Providian Financial Corporation ..................................... 2.6
Silicon Valley Bancshares ........................................... 2.5
Percent of
Industries Represented in the Portfolio Net Assets
Banking .............................................................. 38.0%
Financial Services ................................................... 27.6
Insurance ............................................................ 18.9
Investment Management ................................................ 2.7
Savings & Loan Associations .......................................... 2.3
Banking & Financial .................................................. 2.0
Data Processing ...................................................... 1.7
Computer Software .................................................... 0.4
Computer Services .................................................... 0.3
Computers ............................................................ 0.0+
+ Amount is less than 0.1%.
Percent of
Breakdown of Investments by Country Net Assets*
United States ....................................................... 81.8%
France .............................................................. 2.4
Canada .............................................................. 1.7
Ireland ............................................................. 1.4
Japan ............................................................... 1.3
United Kingdom ...................................................... 1.2
Israel .............................................................. 1.0
Norway .............................................................. 1.0
Hong Kong ........................................................... 0.8
Netherlands ......................................................... 0.7
Spain ............................................................... 0.6
* Total may not equal 100%.
18 & 19
<PAGE>
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.
Merrill Lynch
Global Financial Services Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #MLGFSF--3/00
[RECYCLE LOGO] Printed on post-consumer recycled paper
