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 811-9637
Name of Fund: Merrill Lynch Large Cap Core Fund
Master Large Cap Core Portfolio
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, Merrill Lynch
Large Cap Core Fund, 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: 04/30/03
Date of reporting period: 11/01/02 - 04/30/03
Item 1 - Attach shareholder report
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
Merrill Lynch
Large Cap Core Fund
Of Merrill Lynch Large Cap Series Funds, Inc.
Semi-Annual Report
April 30, 2003
[LOGO] Merrill Lynch Investment Managers
A Letter From the President
[PHOTO OMITTED]
Dear Shareholder
Despite a difficult year, it brings me great pleasure to write to you today with
positive news. The war in Iraq has ended, oil prices have fallen, credit spreads
have tightened and April marked the most promising month for equities since last
October. Many companies have announced better-than-expected earnings and
consumer confidence is beginning to improve. Although the economy still must
wrestle with high unemployment, the risk of deflation, state and federal
deficits and still unpredictable markets, there exist hopeful signs for an
upturn.
While both the S&P 500 Index and the Nasdaq were well into negative territory
for the six-month period ended October 31, 2002, both indexes rebounded over the
six months that followed. From October 31, 2002 to April 30, 2003, the S&P 500
and Nasdaq returned +4.48% and +10.12%, respectively.
Our portfolio managers continue to work diligently to deliver on our commitment
to provide superior performance within reasonable expectations for risk and
return. That includes striving to outperform our peers and the market indexes.
Remember also that the advice and guidance of a skilled financial advisor can
mean the difference between fruitful and fruitless investing -- particularly
during unsettling economic times. A financial professional can help you choose
those investments that will best serve you as you plan for your financial
future.
Finally, I am proud to premier a new look to our shareholder communications. Our
portfolio manager commentaries have been trimmed and organized in such a way
that you can get the information you need at a glance, in plain language.
Today's markets are confusing enough. We want to help you put it all in
perspective. The report's new size also allows us certain mailing efficiencies.
The cost savings in both production and postage are passed on to the Fund and,
ultimately, to Fund shareholders.
We thank you for trusting Merrill Lynch Investment Managers with your investment
assets, and we look forward to serving you in the months and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
2 MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003
We are pleased to present to you the management team of
Merrill Lynch Large Cap Core Fund
[PHOTO OMITTED]
[PHOTO OMITTED]
Robert C. Doll, Jr.
Senior Portfolio Manager
Senior Portfolio Manager Bob Doll, President and Chief Investment Officer of
Merrill Lynch Investment Managers, joined Merrill Lynch Investment Managers in
1999 and heads the Merrill Lynch Large Cap Growth Fund team. Mr. Doll received
bachelor's degrees in accounting and economics from Lehigh University and an MBA
from The Wharton School of the University of Pennsylvania. He is a CFA(R)
charterholder and a Certified Public Accountant.
In addition to Mr. Doll, the investment team includes Senior Quantitative
Analyst Tasos Bouloutas and Director of Equity Operations Brenda Sklar. Mr.
Bouloutas earned a master's degree and a Ph.D. from Columbia University, New
York. Ms. Sklar earned a bachelor's degree in accounting and economics from the
University of Delaware. She is a Certified Public Accountant. The team has a
collective 55 years of industry experience.
- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------
A Letter From the President ............................................... 2
A Discussion With Your Fund's Portfolio Manager ........................... 4
Performance Data .......................................................... 6
Fund Financial Information ................................................ 8
Fund Financial Highlights ................................................. 11
Fund Notes to Financial Statements ........................................ 16
Master Schedule of Investments ............................................ 19
Master Financial Information .............................................. 22
Master Financial Highlights ............................................... 25
Master Notes to Financial Statements ...................................... 26
Portfolio Information ..................................................... 29
Officers and Directors .................................................... 30
MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
We have positioned the Fund to take advantage of a potential economic
recovery. It has been a challenging six months, but we believe there are good
reasons for investors to take a constructive outlook.
What is the Fund's investment process?
The Fund invests in securities found in the Russell 1000(R) Index, which is made
up of the 1,000 largest publicly traded companies in the United States. Our
investment process aims to add value through security selection and portfolio
construction. Security selection involves the use of specific quantitative
selection criteria: earnings momentum, earnings surprise and valuation. These
criteria are input into a proprietary quantitative model and are subject to
selective fundamental overrides. Portfolio construction consists of an
optimization process whereby risk management controls style, capitalization,
sector and individual security selection.
What economic and market developments affected the Fund during the period?
The Fund invests in large capitalization equities that represent a large part of
the U.S. stock market. For that reason, our portfolio was influenced by the same
economic and market events that affected the broader stock market over the past
six months.
During the six months ended April 30, 2003, world markets rose and fell
dramatically, and investors remained on the sidelines, reluctant to participate
in the markets given the exceptional level of uncertainty. Investors also
suffered a sharp loss of confidence in the economy due to ongoing concerns about
employment. Although new unemployment claims had not surged, job creation
remained weak, and investors feared that if the business sector saw demand
slipping, a new round of layoffs and investment cutbacks could result.
Understandably, this lack of confidence led to slower consumption in the early
part of 2003. Bad weather, the geopolitical climate and the accompanying energy
price crunch also contributed to the slowdown. While we saw a modest drop in oil
and natural gas prices in April, the relief was not enough to offset these
concerns.
The Federal Reserve Board continued its efforts to stimulate the economy and
likely will not shift from this course until well after the economy has
strengthened. Treasuries, which have been overvalued, are likely to remain so
until economic expectations stabilize and fears of deflation subside. Corporate
bonds weathered a challenging economic patch in recent months, underscoring the
significance of good value and improving corporate balance sheets. In our view,
many companies are beginning to come out of their difficulties, as restructuring
and cost cutting have helped them resize and stabilize. These activities also
may help create a more favorable environment for stock prices.
During the period, the S&P 500(R) Index hovered in the middle of its trading
range (800 - 950). We hope to see a breakthrough in the upper end of that range
if the economy and corporate earnings can demonstrate sustainable improvement.
Corporate profits were better than expected, with 62% of S&P 500 companies
exceeding consensus earnings expectations as of April month-end. However, some
of the results were driven by cutbacks in investment and labor. Strong
productivity growth helped to contain unit labor costs, and pricing power
improved somewhat. While the profit environment will remain tough, the corporate
sector is focused on boosting the bottom line, which we hope will translate into
stronger business conditions as geopolitical tensions and oil prices ease.
It could be a few months before the economic data clarify whether the economy is
on a clear path to recovery. Until then, we believe equities will remain
trendless. While it has been a challenging six months, we believe there is good
reason for investors to take a constructive outlook.
How did the Fund perform for the past six months relative to its benchmark?
For the six months ended April 30, 2003, the Fund's Class A, Class B, Class C
and Class I Shares had total returns of +0.73%, +0.25%, +0.25% and +0.72%,
respectively. (Fund results shown do not reflect sales charges and would be
lower if sales charges were included. Complete performance information can be
found on pages 6 and 7 of this report to shareholders.) The six-month results
were below the +4.75% total return of the Fund's benchmark, the unmanaged
Russell 1000 Index for the same six-month period.
4 MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003
While the Fund generated positive absolute performance over the six-month
period, its relative performance trailed the benchmark. On the plus side, the
Fund benefited from stock selection in financials and industrials. Our stock
selection and underweight position in consumer staples also contributed
favorably to performance. On the negative side, stock selection in health care
and information technology hindered performance.
At the individual stock level, the largest positive contributors were CheckFree
Corp., The Ryland Group, Inc., Countrywide Credit Industries, Inc., GTECH
Holdings Corporation and Aetna Inc. Those holdings that detracted most from
performance included Adolph Coors Company, Sprint (FON), Tenet Healthcare
Corporation, BMC Software, Inc. and Hewlett-Packard Company.
What changes did you make to the portfolio during the period?
During the course of the period, we increased our investments relative to the
benchmark in technology, health care and telecommunication services and reduced
our positions relative to the benchmark in materials, consumer staples and
consumer discretionary.
The Fund's largest purchases during the period included Fannie Mae, J.P. Morgan
Chase & Co., Merck & Co., Inc., QUALCOMM Inc. and Sprint Corp. (PCS and FON),
while the largest sales included H&R Block, Inc., The Procter & Gamble Company,
Eastman Kodak Company, Freddie Mac, Safeco Corporation and Union Pacific
Corporation.
How would you characterize the portfolio's position at the close of the period?
The Fund's largest overweights are in information technology, health care and
consumer discretionary, and the largest underweights are in consumer staples,
utilities and financials. In preparation for an economic revival, we attempted
to take advantage of economically sensitive names while trimming some of our
defensive positions.
We have positioned the Fund for an improvement in economic activity, continued
positive earnings comparisons, and an eventual rise in interest rates. As
always, we attempt to invest in companies with improving earnings momentum, a
high probability of positive earnings surprises, and reasonable valuations.
Robert C. Doll, Jr.
Senior Vice President and Senior Portfolio Manager
May 28, 2003
- --------------------------------------------------------------------------------
Effective April 14, 2003, the share class names for the Merrill Lynch family of
mutual funds were changed to be consistent with the standard share classes of
most other mutual fund families. As of that date, all Class A Shares were
redesignated Class I Shares. At the same time, Class D Shares were redesignated
Class A Shares. There are no changes to the Class B or Class C share class
labels. Trading symbols have not changed nor have current eligibility rules or
pricing structures. This redesignation of share classes does not impact your
investment in any way.
- --------------------------------------------------------------------------------
MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003 5
[LOGO] Merrill Lynch Investment Managers
Performance Data
About Fund Performance
Effective April 14, 2003, Class A Shares were redesignated Class I Shares and
Class D Shares were redesignated Class A Shares. Investors are able to purchase
shares of the Fund through multiple pricing alternatives:
o Class A Shares incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
o Effective June 1, 2001, Class B Shares are subject to a maximum contingent
deferred sales charge of 4% declining to 0% after six years. All Class B
Shares purchased prior to June 1, 2001 will maintain the four-year
schedule. In addition, Class B Shares are subject to a distribution fee of
0.75% and an account maintenance fee of 0.25%. These shares automatically
convert to Class A Shares after approximately eight 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 I Shares incur a maximum initial sales charge (front-end load) of
5.25% and bear no ongoing distribution or account maintenance fees. Class
I Shares are available only to eligible investors.
o Class R Shares do not incur a maximum sales charge (front-end load) or
deferred sales charge. These shares are subject to a distribution fee of
0.25% and an account maintenance fee of 0.25%. Class R Shares are
available only to certain retirement plans.
None of the past results shown should be considered a representation of future
performance. Performance results do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.
Figures shown in each of the following 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.
Recent Performance Results
6-Month 12-Month Since Inception
As of April 30, 2003 Total Return Total Return Total Return
===========================================================================================================
ML Large Cap Core Fund Class A Shares* +0.73% -16.57% -16.87%
- -----------------------------------------------------------------------------------------------------------
ML Large Cap Core Fund Class B Shares* +0.25 -17.28 -19.09
- -----------------------------------------------------------------------------------------------------------
ML Large Cap Core Fund Class C Shares* +0.25 -17.28 -19.09
- -----------------------------------------------------------------------------------------------------------
ML Large Cap Core Fund Class I Shares* +0.72 -16.47 -16.26
- -----------------------------------------------------------------------------------------------------------
ML Large Cap Core Fund Class R Shares* -- -- + 0.12
- -----------------------------------------------------------------------------------------------------------
Russell 1000 Index** +4.75 -13.46 -32.18/+1.62
- -----------------------------------------------------------------------------------------------------------
* 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. Performance results are for a limited asset
pool. The Fund's since inception periods are from 12/22/99 for Class A,
Class B, Class C & Class I Shares and from 1/03/03 for Class R Shares.
** This unmanaged broad-based Index measures the performance of the 1,000
largest companies in the Russell 3000(R)Index, which represents
approximately 92% of the total market capitalization of the Russell 3000
Index. The since inception total returns are from 12/22/99 and 1/03/03.
6 MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003
Performance Data (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 4/30/03 -16.57% -20.95%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 4/30/03 - 5.36 - 6.87
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
- --------------------------------------------------------------------------------
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 4/30/03 -17.28% -20.59%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 4/30/03 - 6.12 - 6.97
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
** Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
One Year Ended 4/30/03 -17.28% -18.11%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 4/30/03 - 6.12 - 6.12
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
** Assuming payment of applicable contingent deferred sales charge.
- --------------------------------------------------------------------------------
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class I Shares*
================================================================================
One Year Ended 4/30/03 -16.47% -20.85%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 4/30/03 - 5.15 - 6.66
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
Aggregate Total Return
% Return Without
Sales Charge
================================================================================
Class R Shares
================================================================================
Inception (1/03/03) through 4/30/03 +0.12%
- --------------------------------------------------------------------------------
MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003 7
[LOGO] Merrill Lynch Investment Managers
Statement of Assets and Liabilities Merrill Lynch Large Cap Core Fund
As of April 30, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investment in Master Large Cap Core Portfolio, at value
(identified cost--$901,837,956) .............................................. $ 964,713,341
Prepaid registration fees and other assets ................................... 54,128
---------------
Total assets ................................................................. 964,767,469
---------------
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Payables:
Distributor ............................................................... $ 450,479
Other affiliates .......................................................... 283,018
Administrator ............................................................. 202,309 935,806
------------
Accrued expenses and other liabilities ....................................... 20,338
---------------
Total liabilities ............................................................ 956,144
---------------
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets ................................................................... $ 963,811,325
===============
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.10 par value, 100,000,000 shares authorized $ 2,444,376
Class B Shares of Common Stock, $.10 par value, 200,000,000 shares authorized 4,012,668
Class C Shares of Common Stock, $.10 par value, 100,000,000 shares authorized 2,388,434
Class I Shares of Common Stock, $.10 par value, 100,000,000 shares authorized 2,897,489
Class R Shares of Common Stock, $.10 par value, 200,000,000 shares authorized 1
Paid-in capital in excess of par ............................................. 1,212,647,585
Accumulated investment loss--net ............................................. $ (2,172,888)
Accumulated realized capital losses on investments from the Portfolio--net ... (321,281,725)
Unrealized appreciation on investments from the Portfolio--net ............... 62,875,385
------------
Total accumulated losses--net ................................................ (260,579,228)
---------------
Net assets ................................................................... $ 963,811,325
===============
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
- -----------------------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $203,062,930 and 24,443,758 shares outstanding $ 8.31
===============
Class B--Based on net assets of $324,784,855 and 40,126,681 shares outstanding $ 8.09
===============
Class C--Based on net assets of $193,303,904 and 23,884,346 shares outstanding $ 8.09
===============
Class I--Based on net assets of $242,659,536 and 28,974,893 shares outstanding $ 8.37
===============
Class R--Based on net assets of $100.17 and 12.32 shares outstanding ......... $ 8.13
===============
See Notes to Financial Statements.
8 MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003
Statement of Operations Merrill Lynch Large Cap Core Fund
For the Six Months Ended April 30, 2003
- --------------------------------------------------------------------------------------------------------------------------
Investment Income from the Portfolio--Net
- --------------------------------------------------------------------------------------------------------------------------
Net investment income allocated from the Portfolio:
Dividends (net of $2,295 foreign withholding tax) .................... $ 4,901,905
Securities lending--net .............................................. 75,657
Interest ............................................................. 21,155
Expenses ............................................................. (2,422,367)
------------
Net investment income from the Portfolio ................................ 2,576,350
------------
- --------------------------------------------------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------------------------------------------------
Account maintenance and distribution fees--Class B ...................... $1,570,942
Administration fees ..................................................... 1,084,422
Account maintenance and distribution fees--Class C ...................... 895,318
Transfer agent fees--Class B ............................................ 298,101
Account maintenance fees--Class A ....................................... 193,755
Transfer agent fees--Class C ............................................ 176,939
Transfer agent fees--Class I ............................................ 173,807
Transfer agent fees--Class A ............................................ 123,056
Printing and shareholder reports ........................................ 67,584
Registration fees ....................................................... 44,370
Professional fees ....................................................... 25,028
Other ................................................................... 95,916
----------
Total expenses .......................................................... 4,749,238
------------
Investment loss--net .................................................... (2,172,888)
------------
- --------------------------------------------------------------------------------------------------------------------------
Realized & Unrealized Gain (Loss) from the Portfolio--Net
- --------------------------------------------------------------------------------------------------------------------------
Realized loss on investments from the Portfolio--net .................... (54,231,091)
Change in unrealized appreciation/depreciation on investments from
the Portfolio--net ...................................................... 62,968,530
------------
Total realized and unrealized gain on investments from the Portfolio--net 8,737,439
------------
Net Increase in Net Assets Resulting from Operations .................... $ 6,564,551
============
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003 9
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets Merrill Lynch Large Cap Core Fund
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2003 2002
- --------------------------------------------------------------------------------------------------------------------------
Operations
- --------------------------------------------------------------------------------------------------------------------------
Investment loss--net ............................................. $ (2,172,888) $ (1,558,904)
Realized loss on investments from the Portfolio--net ............. (54,231,091) (126,246,008)
Change in unrealized appreciation/depreciation on investments
from the Portfolio--net .......................................... 62,968,530 56,508,509
--------------------------------
Net increase (decrease) in net assets resulting from operations .. 6,564,551 (71,296,403)
--------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions
- --------------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share transactions 98,161,341 522,836,011
--------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ..................................... 104,725,892 451,539,608
Beginning of period .............................................. 859,085,433 407,545,825
--------------------------------
End of period* ................................................... $ 963,811,325 $ 859,085,433
================================
* Accumulated investment loss--net ............................ $ (2,172,888) --
================================
See Notes to Financial Statements.
10 MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003
Financial Highlights Merrill Lynch Large Cap Core Fund
Class A@@@
-----------------------------------------------------
For the For the
Six Period
The following per share data and ratios have been derived Months For the Year Ended Dec. 22,
from information provided in the financial statements. Ended October 31, 1999+ to
April 30, ------------------------- Oct. 31,
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............. $ 8.25 $ 9.06 $ 11.74 $ 10.00
------------------------------------------------------
Investment income (loss)--net .................... (.01)+++ .01+++ --+++@@ --@@
Realized and unrealized gain (loss) on investments
from the Portfolio--net .......................... .07 (.82) (2.68) 1.74
------------------------------------------------------
Total from investment operations ................. .06 (.81) (2.68) 1.74
------------------------------------------------------
Less distributions in excess of realized gain on
investments from the Portfolio--net .............. -- -- --@@ --
------------------------------------------------------
Net asset value, end of period ................... $ 8.31 $ 8.25 $ 9.06 $ 11.74
======================================================
- --------------------------------------------------------------------------------------------------------------------------------
Total Investment Return**
- --------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ............... .73%@ (8.94%) (22.80%) 17.40%@
======================================================
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement++ ................. 1.27%* 1.28% 1.32% 1.59%*
======================================================
Expenses++ ....................................... 1.27%* 1.28% 1.32% 2.10%*
======================================================
Investment income (loss)--net .................... (.13%)* .10% (.05%) (.59%)*
======================================================
- --------------------------------------------------------------------------------------------------------------------------------
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ......... $ 203,063 $ 136,552 $ 84,891 $ 25,627
======================================================
Portfolio turnover ............................... 59.37% 150.18% 162.28% 79.18%
======================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Includes the Fund's share of the Portfolio's allocated expenses.
+++ Based on average shares outstanding.
@ Aggregate total investment return.
@@ Amount is less than $(.01) per share.
@@@ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003 11
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (continued) Merrill Lynch Large Cap Core Fund
Class B
------------------------------------------------------
For the For the
Six Period
The following per share data and ratios have been derived Months For the Year Ended Dec. 22,
from information provided in the financial statements. Ended October 31, 1999+ to
April 30, ------------------------- Oct. 31,
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............. $ 8.07 $ 8.93 $ 11.67 $ 10.00
------------------------------------------------------
Investment loss--net ............................. (.03)+++ (.06)+++ (.08)+++ (.01)
Realized and unrealized gain (loss) on investments
from the Portfolio--net .......................... .05 (.80) (2.66) 1.68
------------------------------------------------------
Total from investment operations ................. .02 (.86) (2.74) 1.67
------------------------------------------------------
Less distributions in excess of realized gain on
investments from the Portfolio--net .............. -- -- --@@ --
------------------------------------------------------
Net asset value, end of period ................... $ 8.09 $ 8.07 $ 8.93 $ 11.67
======================================================
- ---------------------------------------------------------------------------------------------------------------------------------
Total Investment Return**
- ---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ............... .25%@ (9.63%) (23.47%) 16.70%@
======================================================
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement++ ................. 2.05%* 2.07% 2.06% 2.37%*
======================================================
Expenses++ ....................................... 2.05%* 2.07% 2.06% 2.70%*
======================================================
Investment loss--net ............................. (.89%)* (.64%) (.80%) (1.33%)*
======================================================
- ---------------------------------------------------------------------------------------------------------------------------------
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ......... $ 324,785 $ 329,121 $ 159,287 $ 85,036
======================================================
Portfolio turnover ............................... 59.37% 150.18% 162.28% 79.18%
======================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Includes the Fund's share of the Portfolio's allocated expenses.
+++ Based on average shares outstanding.
@ Aggregate total investment return.
@@ Amount is less than $(.01) per share.
See Notes to Financial Statements.
12 MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003
Financial Highlights (continued) Merrill Lynch Large Cap Core Fund
Class C
--------------------------------------------------------
For the For the
Six Period
The following per share data and ratios have been derived Months For the Year Ended Dec. 22,
from information provided in the financial statements. Ended October 31, 1999+ to
April 30, ------------------------- Oct. 31,
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............. $ 8.07 $ 8.93 $ 11.67 $ 10.00
--------------------------------------------------------
Investment loss--net ............................. (.04)+++ (.06)+++ (.08)+++ (.01)
Realized and unrealized gain (loss) on investments
from the Portfolio--net .......................... .06 (.80) (2.66) 1.68
--------------------------------------------------------
Total from investment operations ................. .02 (.86) (2.74) 1.67
--------------------------------------------------------
Less distributions in excess of realized gain on
investments from the Portfolio--net .............. -- -- --@@ --
--------------------------------------------------------
Net asset value, end of period ................... $ 8.09 $ 8.07 $ 8.93 $ 11.67
========================================================
- --------------------------------------------------------------------------------------------------------------------------------
Total Investment Return**
- --------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ............... .25%@ (9.63%) (23.47%) 16.70%@
========================================================
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement++ ................. 2.06%* 2.07% 2.07% 2.35%*
========================================================
Expenses++ ....................................... 2.06%* 2.07% 2.07% 2.80%*
========================================================
Investment loss--net ............................. (.91%)* (.66%) (.81%) (1.34%)*
========================================================
- --------------------------------------------------------------------------------------------------------------------------------
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ......... $ 193,304 $ 178,459 $ 86,694 $ 41,028
========================================================
Portfolio turnover ............................... 59.37% 150.18% 162.28% 79.18%
========================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Includes the Fund's share of the Portfolio's allocated expenses.
+++ Based on average shares outstanding.
@ Aggregate total investment return.
@@ Amount is less than $(.01) per share.
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003 13
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (continued) Merrill Lynch Large Cap Core Fund
Class I@@@
-------------------------------------------------------
For the For the
Six Period
The following per share data and ratios have been derived Months For the Year Ended Dec. 22,
from information provided in the financial statements. Ended October 31, 1999+ to
April 30, ------------------------- Oct. 31,
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............. $ 8.31 $ 9.10 $ 11.77 $ 10.00
-------------------------------------------------------
Investment income (loss)--net .................... .01+++ .03+++ .02+++ (.01)
Realized and unrealized gain (loss) on investments
from the Portfolio--net .......................... .05 (.82) (2.69) 1.78
-------------------------------------------------------
Total from investment operations ................. .06 (.79) (2.67) 1.77
-------------------------------------------------------
Less distributions in excess of realized gain on
investments from the Portfolio--net .............. -- -- --@@ --
-------------------------------------------------------
Net asset value, end of period ................... $ 8.37 $ 8.31 $ 9.10 $ 11.77
=======================================================
- -------------------------------------------------------------------------------------------------------------------------------
Total Investment Return**
- -------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ............... .72%@ (8.68%) (22.65%) 17.70%@
=======================================================
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets
- -------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement++ ................. 1.02%* 1.04% 1.05% 1.21%*
=======================================================
Expenses++ ....................................... 1.02%* 1.04% 1.05% 3.11%*
=======================================================
Investment income (loss)--net .................... .13%* .33% .21% (.52%)*
=======================================================
- -------------------------------------------------------------------------------------------------------------------------------
Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ......... $ 242,659 $ 214,953 $ 76,674 $ 33,886
=======================================================
Portfolio turnover ............................... 59.37% 150.18% 162.28% 79.18%
=======================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Includes the Fund's share of the Portfolio's allocated expenses.
+++ Based on average shares outstanding.
@ Aggregate total investment return.
@@ Amount is less than $(.01) per share.
@@@ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
See Notes to Financial Statements.
14 MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003
Financial Highlights (concluded) Merrill Lynch Large Cap Core Fund
Class R
----------
For the
Period
January 3,
The following per share data and ratios have been derived 2003+ to
from information provided in the financial statements. April 30,
Increase (Decrease) in Net Asset Value: 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ....................................................... $ 8.12
------
Investment loss--net ....................................................................... --+++@@
Realized and unrealized gain on investments from the Portfolio--net ........................ .01
------
Total from investment operations ........................................................... .01
------
Net asset value, end of period ............................................................. $ 8.13
======
- ---------------------------------------------------------------------------------------------------------------------------------
Total Investment Return**
- ---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ......................................................... .12%@
======
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement++ ........................................................... 1.50%*
======
Expenses++ ................................................................................. 1.50%*
======
Investment loss--net ....................................................................... (.43%)*
======
- ---------------------------------------------------------------------------------------------------------------------------------
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ................................................... $ 0***
======
Portfolio turnover ......................................................................... 59.37%
======
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Amount is less than $1,000.
+ Commencement of operations.
++ Includes the Fund's share of the Portfolio's allocated expenses.
+++ Based on average shares outstanding.
@ Aggregate total investment return.
@@ Amount is less than $(.01) per share.
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003 15
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements Merrill Lynch Large Cap Core Fund
1. Significant Accounting Policies:
Merrill Lynch Large Cap Core Fund of Merrill Lynch Large Cap Series Funds, Inc.
(the "Fund") is registered under the Investment Company Act of 1940 as a
diversified mutual fund. The Fund seeks to achieve its investment objective by
investing all of its assets in the Master Large Cap Core Portfolio (the
"Portfolio"), which is a portfolio of Master Large Cap Series 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 conformity 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 percentage of the Portfolio owned by the
Fund at April 30, 2003 was 88.6%. The Fund offers multiple classes of shares.
Effective April 14, 2003, Class A Shares were redesignated Class I Shares and
Class D Shares were redesignated Class A Shares. The Fund's financial statements
and financial highlights contained within this report reflect the new share
class redesignation. Shares of Class A and Class I are sold with a front-end
sales charge. Shares of Class B and Class C may be subject to a contingent
deferred sales charge. Class R Shares are sold only to certain retirement plans.
All classes of shares have identical voting, dividend, liquidation and other
rights and the same terms and conditions, except that Class A, Class B, Class C
and Class R Shares bear certain expenses related to the account maintenance of
such shares, and Class B, Class C and Class R Shares also bear certain expenses
related to the distribution of such shares. Each class has exclusive voting
rights with respect to matters relating to its account maintenance and
distribution expenditures. Income, expenses (other than expenses attributable to
a specific class) and realized and unrealized gains and losses on investments
are allocated daily to each class based on its relative net assets. The
following is a summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--The Fund records its investments in the Portfolio
at fair value. Valuation of securities held by the Portfolio is discussed in
Note 1a of the Portfolio's Notes to Financial Statements, which are included
elsewhere in this report.
(b) Investment income and expenses--The Fund records daily its proportionate
share of the Portfolio's income, expenses and realized and unrealized gains and
losses. In addition, the Fund accrues its own expenses.
(c) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends and
capital gains at various rates.
(d) Prepaid registration fees--Prepaid registration fees are charged to expense
as the related shares are issued.
(e) Dividends and distributions--Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(f) Investment transactions--Investment transactions in the Portfolio are
accounted for on a trade date basis.
2. Transactions with Affiliates:
The Fund has entered into an Administration Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), a wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."),
which is the limited partner. The Fund pays a monthly fee at an annual rate of
..25% of the Fund's average daily net assets for the performance of
administrative services (other than investment advice and related portfolio
activities) necessary for the operation of the Fund. FAM has entered into a
contractual arrangement with the Fund under which the expenses incurred by each
class of shares of the Fund (excluding distribution and/or account maintenance
fees) will not exceed 1.50%. This arrangement expired October 31, 2002 and was
not renewed.
The Fund has entered into a Distribution Agreement and Distribution Plans with
FAM Distributors, Inc. ("FAMD" or the "Distributor"), which is a wholly-owned
subsidiary of Merrill Lynch Group, Inc. Pursuant to the Distribution Plans
adopted by the Fund in accordance with Rule 12b-1 under the Investment Company
Act of 1940, the Fund pays the Distributor ongoing account maintenance and
distribution fees. The fees
16 MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003
Notes to Financial Statements (continued) Merrill Lynch Large Cap Core Fund
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"), 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 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.
Financial Data Services, Inc. ("FDS"), an indirect, wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
For the six months ended April 30, 2003, FAMD earned underwriting discounts and
MLPF&S earned dealer concessions on sales of the Fund's Class A and Class I
Shares as follows:
- --------------------------------------------------------------------------------
FAMD MLPF&S
- --------------------------------------------------------------------------------
Class A .......................... $ 7,308 $103,179
Class I .......................... $ 78 $ 1,035
- --------------------------------------------------------------------------------
For the six months ended April 30, 2003, MLPF&S received contingent deferred
sales charges of $530,803 and $22,941 relating to transactions in Class B and
Class C Shares, respectively. Furthermore, MLPF&S received contingent deferred
sales charges of $10,202 relating to transactions subject to front-end sales
charge waivers in Class A Shares.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, FAMD, FDS, and/or ML & Co.
3. Capital Share Transactions:
Net increase in net assets derived from capital share transactions were
$98,161,341 and $522,836,011 for the six months ended April 30, 2003 and the
year ended October 31, 2002, respectively.
Transactions in capital shares for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended April 30, 2003+ Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 8,860,931 $ 71,720,974
Shares issued resulting from
reorganization ..................... 4,522 36,634
Automatic conversion of shares ....... 785,364 6,373,889
--------------------------------
Total issued ......................... 9,650,817 78,131,497
Shares redeemed ...................... (1,762,095) (14,074,450)
--------------------------------
Net increase ......................... 7,888,722 $ 64,057,047
================================
+ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended October 31, 2002+ Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 7,610,514 $ 70,782,175
Automatic conversion of shares ....... 3,367 27,543
Shares issued resulting
from reorganization ................ 2,761,182 22,536,869
--------------------------------
Total issued ......................... 10,375,063 93,346,587
Shares redeemed ...................... (3,185,327) (28,683,972)
--------------------------------
Net increase ......................... 7,189,736 $ 64,662,615
================================
+ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended April 30, 2003 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 4,685,733 $ 36,958,270
Shares issued resulting from
reorganization ..................... 282,624 2,231,082
--------------------------------
Total issued ......................... 4,968,357 39,189,352
Automatic conversion of shares ....... (803,476) (6,373,889)
Shares redeemed ...................... (4,834,610) (37,623,041)
--------------------------------
Net decrease ......................... (669,729) $ (4,807,578)
================================
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended October 31, 2002 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 7,171,745 $ 65,654,881
Shares issued resulting from
reorganization ..................... 21,838,026 174,693,818
--------------------------------
Total issued ......................... 29,009,771 240,348,699
Automatic conversion of shares ....... (3,443) (27,543)
Shares redeemed ...................... (6,038,644) (53,289,852)
--------------------------------
Net increase ......................... 22,967,684 $ 187,031,304
================================
MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003 17
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (concluded) Merrill Lynch Large Cap Core Fund
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended April 30, 2003 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 4,321,294 $ 33,960,699
Shares issued resulting from
reorganization ..................... 62,855 496,146
--------------------------------
Total issued ......................... 4,384,149 34,456,845
Shares redeemed ...................... (2,621,541) (20,390,452)
--------------------------------
Net increase ......................... 1,762,608 $ 14,066,393
================================
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended October 31, 2002 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 8,246,589 $ 75,914,856
Shares issued resulting from
reorganization ..................... 8,208,317 65,662,157
--------------------------------
Total issued ......................... 16,454,906 141,577,013
Shares redeemed ...................... (4,036,447) (36,391,845)
--------------------------------
Net increase ......................... 12,418,459 $ 105,185,168
================================
- --------------------------------------------------------------------------------
Class I Shares for the Six Months Dollar
Ended April 30, 2003+ Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 6,530,440 $ 52,503,027
Shares redeemed ...................... (3,436,892) (27,657,648)
--------------------------------
Net increase ......................... 3,093,548 $ 24,845,379
================================
+ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
- --------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended October 31, 2002+ Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 20,837,767 $ 197,763,530
Shares issued resulting from
reorganization ..................... 865,052 7,104,596
--------------------------------
Total issued ......................... 21,702,819 204,868,126
Shares redeemed ...................... (4,243,287) (38,911,202)
--------------------------------
Net increase ......................... 17,459,532 $ 165,956,924
================================
+ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
- --------------------------------------------------------------------------------
Class R Shares for the Period Dollar
January 1, 2003+ to April 30, 2003 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .......................... 12.32 $ 100
--------------------------------
Net increase ......................... 12.32 $ 100
================================
+ Commencement of operations.
4. Capital Loss Carryforward:
On October 31, 2002, the Fund had a net capital loss carryforward of
$245,021,673, of which $17,112,478 expires in 2007, $67,532,381 expires in 2008,
$79,615,851 expires in 2009 and $80,760,963 expires in 2010. This amount will be
available to offset like amounts of any future taxable gains.
5. Acquisition of Mercury Large Cap Core Fund:
On April 28, 2003, the Fund acquired all of the net assets of Mercury Large Cap
Core Fund pursuant to a plan of reorganization. The acquisition was accomplished
by a tax-free exchange of 386,580 shares of common stock of Mercury Large Cap
Core Fund for 350,001 shares of common stock of the Fund. Mercury Large Cap Core
Fund's net assets on that date of $2,763,862, including $908,346 of net
unrealized appreciation and $3,237,524 of accumulated net realized capital
losses, were combined with those of the Fund. The aggregate net assets
immediately after the acquisition amounted to $936,809,762.
18 MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003
Schedule of Investments Master Large Cap Core Portfolio
Value Percent of
Sector Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
====================================================================================================================================
Consumer Hotels, Restaurants & Leisure 361,000 Applebee's International, Inc. $ 9,891,400 0.9%
Discretionary 330,000 + GTECH Holdings Corporation 11,111,100 1.0
134,000 + International Game Technology 11,564,200 1.1
370,000 + Mandalay Resort Group 9,775,400 0.9
---------------------------------------------------------------------------------------------------------------------
Household Durables 546,000 + American Greetings Corporation (Class A) 7,949,760 0.7
170,000 Centex Corporation 11,223,400 1.0
191,000 Fortune Brands, Inc. 9,244,400 0.8
30,000 + NVR, Inc. 10,732,500 1.0
111,000 Pulte Corporation 6,436,890 0.6
210,000 The Ryland Group, Inc. 11,388,300 1.0
---------------------------------------------------------------------------------------------------------------------
Internet & Catalog Retail 13,000 + eBay Inc. 1,206,010 0.1
---------------------------------------------------------------------------------------------------------------------
Leisure Equipment & Products 250,000 Hasbro, Inc. 4,000,000 0.4
550,000 Mattel, Inc. 11,957,000 1.1
---------------------------------------------------------------------------------------------------------------------
Multiline Retail 600,000 J.C. Penney Company, Inc. 10,236,000 1.0
150,000 Wal-Mart Stores, Inc. 8,448,000 0.8
---------------------------------------------------------------------------------------------------------------------
Specialty Retail 350,000 + Abercrombie & Fitch Co. (Class A) 11,508,000 1.1
810,000 + AutoNation, Inc. 11,218,500 1.0
634,000 The Gap, Inc. 10,543,420 1.0
620,000 + Staples, Inc. 11,804,800 1.1
---------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods 270,000 + Coach, Inc. 11,747,700 1.1
350,000 Liz Claiborne, Inc. 11,385,500 1.0
350,000 + Reebok International Ltd. 10,871,000 1.0
46,000 + The Timberland Company (Class A) 2,299,540 0.2
---------------------------------------------------------------------------------------------------------------------
Total Consumer Discretionary
(Cost--$195,239,492) 216,542,820 19.9
====================================================================================================================================
Consumer Beverages 419,000 Coca-Cola Enterprises Inc. 8,166,310 0.7
Staples 50,000 + Constellation Brands, Inc. (Class A) 1,340,500 0.2
---------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing 159,000 + Whole Foods Market, Inc. 9,438,240 0.9
---------------------------------------------------------------------------------------------------------------------
Food Products 260,000 + Dean Foods Company 11,317,800 1.0
---------------------------------------------------------------------------------------------------------------------
Household Products 50,000 The Procter & Gamble Company 4,492,500 0.4
---------------------------------------------------------------------------------------------------------------------
Total Consumer Staples (Cost--$30,851,413) 34,755,350 3.2
====================================================================================================================================
Energy Oil & Gas 560,000 Exxon Mobil Corporation 19,712,000 1.9
520,000 Marathon Oil Corporation 11,840,400 1.1
150,000 Pogo Producing Company 5,940,000 0.5
70,000 Sunoco, Inc. 2,604,700 0.2
---------------------------------------------------------------------------------------------------------------------
Total Energy (Cost--$40,325,423) 40,097,100 3.7
====================================================================================================================================
Financials Commercial Banks 282,000 Bank of America Corporation 20,882,100 1.9
184,000 Banknorth Group, Inc. 4,393,920 0.4
46,000 First Tennessee National Corporation 2,014,800 0.2
71,000 Golden West Financial Corporation 5,354,820 0.5
243,000 GreenPoint Financial Corp. 11,605,680 1.1
87,000 Independence Community Bank Corp. 2,275,050 0.2
360,000 New York Community Bancorp, Inc. 12,499,200 1.1
70,000 Popular, Inc. 2,557,800 0.2
676,000 U.S. Bancorp 14,973,400 1.4
190,000 Wachovia Corporation 7,259,900 0.7
55,000 Washington Federal, Inc. 1,199,000 0.1
409,000 Washington Mutual, Inc. 16,155,500 1.5
---------------------------------------------------------------------------------------------------------------------
Diversified Financial Services 160,000 The Bear Stearns Companies Inc. 10,694,400 1.0
375,000 Citigroup Inc. 14,718,750 1.3
170,000 Countrywide Credit Industries, Inc. 11,492,000 1.1
270,000 Fannie Mae 19,545,300 1.8
620,000 J.P. Morgan Chase & Co. 18,197,000 1.7
---------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003 19
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Large Cap Core Portfolio
Value Percent of
Sector Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
====================================================================================================================================
Financials Insurance 100,000 American International Group, Inc. $ 5,795,000 0.5%
(concluded) 140,000 Berkley (W.R.) Corporation 6,501,600 0.6
270,000 MetLife, Inc. 7,757,100 0.7
-----------------------------------------------------------------------------------------------------------------------
Total Financials (Cost--$175,580,623) 195,872,320 18.0
====================================================================================================================================
Health Care Biotechnology 110,000 + Invitrogen Corporation 3,597,000 0.3
-----------------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies 300,000 Bausch & Lomb Incorporated 10,548,000 1.0
180,000 C.R. Bard, Inc. 11,408,400 1.0
35,000 DENTSPLY International Inc. 1,310,750 0.1
323,000 + Fisher Scientific International Inc. 9,305,630 0.9
313,000 + STERIS Corporation 7,105,100 0.7
77,000 Stryker Corporation 5,159,770 0.5
198,000 + Varian Medical Systems, Inc. 10,664,280 1.0
-----------------------------------------------------------------------------------------------------------------------
Health Care Providers & Services 390,000 + AdvancePCS 11,723,400 1.1
214,000 Aetna Inc. (New Shares) 10,657,200 1.0
361,000 + DaVita, Inc. 7,443,820 0.7
75,000 + Express Scripts, Inc. (Class A) 4,422,000 0.4
640,000 + Humana Inc. 7,072,000 0.6
296,000 Omnicare, Inc. 7,849,920 0.7
286,000 + Oxford Health Plans, Inc. 8,371,220 0.8
570,000 + Service Corporation International 1,926,600 0.2
140,000 + WellPoint Health Networks Inc. 10,631,600 1.0
-----------------------------------------------------------------------------------------------------------------------
Pharmaceuticals 179,000 + Barr Laboratories, Inc. 9,952,400 0.9
220,000 + Forest Laboratories, Inc. 11,378,400 1.0
200,000 Johnson & Johnson 11,272,000 1.0
200,000 + Medicis Pharmaceutical (Class A) 11,528,000 1.1
470,000 Merck & Co., Inc. 27,344,600 2.4
665,000 Pfizer Inc. 20,448,750 1.9
370,000 + Watson Pharmaceuticals, Inc. 10,755,900 1.0
-----------------------------------------------------------------------------------------------------------------------
Total Health Care (Cost--$218,201,964) 231,876,740 21.3
====================================================================================================================================
Industrials Air Freight & Logistics 250,000 Ryder System, Inc. 6,210,000 0.6
-----------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies 193,000 + Apollo Group, Inc. (Class A) 10,460,407 1.0
91,000 + Career Education Corporation 5,471,830 0.5
430,000 + CheckFree Corp. 11,855,100 1.0
380,000 First Data Corporation 14,907,400 1.4
255,000 H & R Block, Inc. 9,848,100 0.9
-----------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates 870,000 General Electric Company 25,621,500 2.4
-----------------------------------------------------------------------------------------------------------------------
Oil & Gas 300,000 Valero Energy Corporation 11,025,000 1.0
-----------------------------------------------------------------------------------------------------------------------
Road & Rail 560,000 Norfolk Southern Corporation 11,877,600 1.1
-----------------------------------------------------------------------------------------------------------------------
Total Industrials (Cost--$101,375,237) 107,276,937 9.9
====================================================================================================================================
Information Communications Equipment 470,000 + Advanced Fibre Communications, Inc. 7,191,000 0.7
Technology 194,000 + Cisco Systems, Inc. 2,917,760 0.3
450,000 + Emulex Corporation 9,220,500 0.8
1,086,000 + Juniper Networks, Inc. 11,098,920 1.0
410,000 QUALCOMM Inc. 13,074,900 1.2
530,000 + UTStarcom, Inc. 11,538,630 1.1
-----------------------------------------------------------------------------------------------------------------------
Computers & Peripherals 558,000 + Dell Computer Corporation 16,131,780 1.5
1,010,000 Hewlett-Packard Company 16,463,000 1.5
86,000 International Business Machines Corporation 7,301,400 0.7
170,000 + Lexmark International Group, Inc. (Class A) 12,666,700 1.2
504,000 + Storage Technology Corporation 12,458,880 1.1
-----------------------------------------------------------------------------------------------------------------------
Electronic Equipment & Instruments 364,000 + Thermo Electron Corporation 6,613,880 0.6
-----------------------------------------------------------------------------------------------------------------------
IT Services 530,000 + Unisys Corporation 5,512,000 0.5
-----------------------------------------------------------------------------------------------------------------------
Office Electronics 1,260,000 + Xerox Corporation 12,423,600 1.1
-----------------------------------------------------------------------------------------------------------------------
20 MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003
Schedule of Investments (concluded) Master Large Cap Core Portfolio
Shares Held/ Value Percent of
Sector Industry* Beneficial Interest Common Stocks (in U.S. dollars) Net Assets
====================================================================================================================================
Information Semiconductors & Semiconductor 270,000 Intel Corporation $ 4,968,000 0.5%
Technology Equipment
(concluded) ----------------------------------------------------------------------------------------------------------------------
Software 1,010,000 + BEA Systems, Inc. 10,817,100 1.0
670,000 + BMC Software, Inc. 9,996,400 0.9
43,000 Fair, Isaac and Company, Incorporated 2,239,440 0.2
180,000 + Macromedia, Inc. 2,269,800 0.2
700,000 Microsoft Corporation 17,899,000 1.7
167,000 + Oracle Corporation 1,983,960 0.2
280,000 + Symantec Corporation 12,306,000 1.1
120,000 + Synopsys, Inc. 5,836,800 0.5
----------------------------------------------------------------------------------------------------------------------
Total Information Technology
(Cost--$204,658,562) 212,929,450 19.6
====================================================================================================================================
Telecom- Diversified Telecommunication 1,050,000 Sprint Corporation 12,085,500 1.1
munication Services 50,000 Verizon Communications 1,869,000 0.2
Services ----------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication 357,000 + Nextel Communications, Inc. (Class A) 5,280,030 0.4
Services 2,380,000 + Sprint Corp. (PCS Group) 8,330,000 0.8
----------------------------------------------------------------------------------------------------------------------
Total Telecommunication Services
(Cost--$31,219,883) 27,564,530 2.5
====================================================================================================================================
Materials Containers & Packaging 182,000 Ball Corporation 10,221,120 0.9
413,000 + Pactiv Corporation 8,474,760 0.8
----------------------------------------------------------------------------------------------------------------------
Total Materials (Cost--$16,893,054) 18,695,880 1.7
====================================================================================================================================
Total Common Stocks
(Cost--$1,014,345,651) 1,085,611,127 99.8
====================================================================================================================================
Short-Term Securities
====================================================================================================================================
$ 661,873 Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I (a) 661,873 0.0
$149,410,532 Merrill Lynch Liquidity Series, LLC Money
Market Series (a)(b) 149,410,532 13.7
99,607,018 Merrill Lynch Premier Institutional
Fund (a)(b) 99,607,018 9.2
====================================================================================================================================
Total Short-Term Securities
(Cost--$249,679,423) 249,679,423 22.9
====================================================================================================================================
Total Investments (Cost--$1,264,025,074) 1,335,290,550 122.7
Liabilities in Excess of Other Assets (247,006,054) (22.7)
------------------------
Net Assets $1,088,284,496 100.0%
========================
* For Portfolio compliance purposes, "Industry" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Portfolio
management. This definition may not apply for purposes of this report,
which may combine such industry sub-classifications for reporting ease.
+ Non-income producing security.
(a) Investments in companies considered to be an affiliate of the Fund (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) are as follows:
Dividend/
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Liquidity Series,
LLC Cash Sweep Series I $ 661,873 $22,575
Merrill Lynch Liquidity Series,
LLC Money Market Series 149,410,532 42,447
Merrill Lynch Premier Institutional Fund 99,607,018 36,432
--------------------------------------------------------------------------
(b) Security was purchased with the cash proceeds from securities loans.
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003 21
[LOGO] Merrill Lynch Investment Managers
Statement of Assets and Liabilities Master Large Cap Core Portfolio
As of April 30, 2003
- -----------------------------------------------------------------------------------------------------------------------------
Assets
- -----------------------------------------------------------------------------------------------------------------------------
Investments, at value (including securities loaned of $241,818,321)
(identified cost--$1,264,025,074) ................................. $1,335,290,550
Cash .............................................................. 601,967
Receivables:
Securities sold ................................................ $ 8,310,642
Contributions .................................................. 4,015,596
Dividends ...................................................... 447,440
Interest ....................................................... 6,207
Securities lending--net ........................................ 5,303 12,785,188
-----------
Prepaid expenses and other assets ................................. 34,598
--------------
Total assets ...................................................... 1,348,712,303
--------------
- -----------------------------------------------------------------------------------------------------------------------------
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value ......................... 249,017,550
Payables:
Securities purchased ........................................... 9,313,345
Withdrawals .................................................... 1,565,648
Investment adviser ............................................. 466,577
Other liabilities .............................................. 7,416 11,352,986
-----------
Accrued expenses and other liabilities ............................ 57,271
--------------
Total liabilities ................................................. 260,427,807
--------------
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
Net assets ........................................................ $1,088,284,496
==============
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------
Investors' capital ................................................ $1,017,019,020
Unrealized appreciation on investments--net ....................... 71,265,476
--------------
Net assets ........................................................ $1,088,284,496
==============
See Notes to Financial Statements.
22 MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003
Statement of Operations Master Large Cap Core Portfolio
For the Six Months Ended April 30, 2003
- --------------------------------------------------------------------------------------------------------------------------
Investment Income
- --------------------------------------------------------------------------------------------------------------------------
Dividends (net of $2,560 foreign withholding tax) ................ $ 5,116,582
Interest ......................................................... 23,255
Securities lending--net .......................................... 78,879
------------
Total income ..................................................... 5,218,716
------------
- --------------------------------------------------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ......................................... $ 2,288,116
Accounting services .............................................. 171,815
Custodian fees ................................................... 39,251
Professional fees ................................................ 27,217
Trustees' fees and expenses ...................................... 19,797
Pricing fees ..................................................... 495
Other ............................................................ 7,952
-----------
Total expenses ................................................... 2,554,643
------------
Investment income--net ........................................... 2,664,073
------------
- --------------------------------------------------------------------------------------------------------------------------
Realized & Unrealized Gain (Loss) on Investments--Net
- --------------------------------------------------------------------------------------------------------------------------
Realized loss on investments--net ................................ (56,255,353)
Change in unrealized appreciation/depreciation on investments--net 72,348,209
------------
Total realized and unrealized gain on investments--net ........... 16,092,856
------------
Net Increase in Net Assets Resulting from Operations ............. $ 18,756,929
============
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003 23
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets Master Large Cap Core Portfolio
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------------
Operations
- ----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................... $ 2,664,073 $ 5,341,068
Realized loss on investments--net ................................ (56,255,353) (128,219,700)
Change in unrealized appreciation/depreciation on investments--net 72,348,209 56,457,791
------------------------------------
Net increase (decrease) in net assets resulting from operations .. 18,756,929 (66,420,841)
------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Capital Transactions
- ----------------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions ...................................... 342,272,578 272,000,014
Fair value of net asset contributions ............................ -- 269,997,441
Fair value of withdrawals ........................................ (146,448,959) (14,709,088)
------------------------------------
Net increase in net assets derived from capital transactions ..... 195,823,619 527,288,367
------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ..................................... 214,580,548 460,867,526
Beginning of period .............................................. 873,703,948 412,836,422
------------------------------------
End of period .................................................... $ 1,088,284,496 $ 873,703,948
====================================
See Notes to Financial Statements.
24 MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003
Financial Highlights Master Large Cap Core Portfolio
For the For the
Six Period
Months For the Year Ended Dec. 22,
Ended October 31, 1999+ to
The following ratios have been derived April 30, ---------------------------- Oct. 31,
from information provided in the financial statements. 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------------
Total Investment Return**
- -------------------------------------------------------------------------------------------------------------------------------
Total investment return ................ 1.24% (8.13%) -- --
============================================================
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets
- -------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ......... .56%* .57% .67% 1.09%*
============================================================
Expenses ............................... .56%* .57% .67% 1.17%*
============================================================
Investment income (loss)--net .......... .58%* .83% .59% (.20%)*
============================================================
- -------------------------------------------------------------------------------------------------------------------------------
Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,088,284 $ 873,704 $ 412,836 $ 186,265
============================================================
Portfolio turnover ..................... 59.37% 150.18% 162.28% 79.18%
============================================================
* Annualized.
** Total investment return is required to be disclosed for fiscal years
beginning after December 15, 2000.
+ Commencement of operations.
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003 25
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements Master Large Cap Core Portfolio
1. Significant Accounting Policies:
Master Large Cap Core Portfolio (the "Portfolio") is part of Master Large Cap
Series Trust (the "Trust"). The Portfolio is registered under the Investment
Company Act of 1940 and is organized as a Delaware statutory trust. The
Declaration of Trust permits the Trustees to issue nontransferable interests in
the Portfolio, subject to certain limitations. The Portfolio's financial
statements are prepared in conformity with accounting principles generally
accepted in the United States of America, which may require the use of
management accruals and estimates. 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 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 or Nasdaq National are valued at the last sale price or official
closing price on the exchange on which such securities are traded, as of the
close of business on the day the securities are being valued or, lacking any
sales, at the last available bid price for long positions, and at the last
available ask price for short positions. Securities traded in the
over-the-counter market are valued at the last available bid price prior to the
time of valuation. 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. Occasionally, events
affecting the values of the securities and other assets may occur between the
times at which valuations of such securities are determined (that is, close of
the market on which such securities trade) and the close of business on the
NYSE. If events (for example, company announcement, natural disasters, market
volatility) occur during such periods that are expected to materially affect the
value for such securities, those securities may be valued at their fair market
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
Board of Trustees of the Trust.
(b) Derivative financial instruments--The Portfolio may engage in various
portfolio investment strategies both to increase the return of the Fund and to
hedge, or protect, its exposure to interest rate movement and movements in the
securities markets. Losses may arise due to changes in the value of the contract
or if the counterparty does not perform under the contract.
o Financial futures contracts--The Portfolio may purchase or sell financial
futures contracts and options on such futures contracts. 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.
26 MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003
Notes to Financial Statements (continued) Master Large Cap Core 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. The contract is marked-to-market
daily and the change in market value is recorded by the Portfolio as an
unrealized gain or loss. When the contract is closed, the Portfolio
records a realized gain or loss equal to the difference between the value
at the time it was opened and the value at the time it was closed.
o Foreign currency options and futures--The Portfolio may also purchase or
sell listed or over-the-counter foreign currency options, foreign currency
futures and related options on foreign currency futures as a short or long
hedge against possible variations in foreign exchange rates. Such
transactions may be effected with respect to hedges on non-U.S.
dollar-denominated securities owned by the Portfolio, sold by the
Portfolio but not yet delivered, or committed or anticipated to be
purchased by the Portfolio.
(c) Foreign currency transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into U.S. dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on investments.
(d) Income taxes--The Portfolio is classified as a partnership 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. Under the applicable foreign tax
law, a withholding tax may be imposed on interest, dividends and capital gains
at various rates. It is intended that the Portfolio's assets will be managed so
an investor in the Portfolio can satisfy the requirements of subchapter M of the
Internal Revenue Code.
(e) Security transactions and investment income--Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Dividends from foreign securities where the ex-dividend date may have passed are
subsequently recorded when the Portfolio has determined the ex-dividend date.
Interest income is recognized on the accrual basis.
(f) Securities lending--The Portfolio may lend securities to financial
institutions that provide cash or securities issued or guaranteed by the U.S.
government as collateral, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities. The
market value of the loaned securities is determined at the close of business of
the Portfolio and any additional required collateral is delivered to the
Portfolio on the next business day. Where the Portfolio receives securities as
collateral for the loaned securities, it collects a fee from the borrower. The
Portfolio typically receives the income on the loaned securities but does not
receive the income on the collateral. Where the Portfolio receives cash
collateral, it may invest such collateral and retain the amount earned on such
investment, net of any amount rebated to the borrower. Loans of securities are
terminable at any time and the borrower, after notice, is required to return
borrowed securities within five business days. The Portfolio may pay reasonable
finder's, lending agent, administrative and custodial fees in connection with
its loans. In the event that the borrower defaults on its obligation to return
borrowed securities because of insolvency or for any other reason, the Portfolio
could experience delays and costs in gaining access to the collateral. The
Portfolio also could suffer a loss where the value of the collateral falls below
the market value of the borrowed securities, in the event of borrower default or
in the event of losses on investments made with cash collateral.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner.
FAM is responsible for the management of the Portfolio's investments and
provides the necessary personnel, facilities,
MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003 27
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (concluded) Master Large Cap Core Portfolio
equipment and certain other services necessary to the operations of the
Portfolio. For such services, the Portfolio pays a monthly fee based upon the
average daily value of the Portfolio's net assets at an annual rate of .50% of
the average daily net assets not exceeding $1 billion and .45% of average daily
net assets in excess of $1 billion.
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") or its affiliates. As of April 30, 2003,
the Portfolio lent securities with a value of $65,176,225 to MLPF&S or its
affiliates. Pursuant to that order, the Portfolio also has retained Merrill
Lynch Investment Managers, LLC ("MLIM, LLC"), an affiliate of FAM, as the
securities lending agent for a fee based on a share of the returns on investment
of cash collateral. MLIM, LLC may, on behalf of the Portfolio, invest cash
collateral received by the Portfolio for such loans, among other things, in a
private investment company managed by MLIM, LLC or in registered money market
funds advised by FAM or its affiliates. For the six months ended April 30, 2003,
MLIM, LLC received $34,485 in securities lending agent fees.
For the six months ended April 30, 2003, the Portfolio reimbursed FAM $10,958
for certain accounting services.
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 six
months ended April 30, 2003 were $744,780,077 and $548,242,667, respectively.
Net realized losses for the six months ended April 30, 2003 and net unrealized
gains as of April 30, 2003 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Losses Gains
- --------------------------------------------------------------------------------
Long-term investments ........... $(56,255,353) $ 71,265,476
----------------------------------
Total ........................... $(56,255,353) $ 71,265,476
==================================
- --------------------------------------------------------------------------------
As of April 30, 2003, net unrealized appreciation for Federal income tax
purposes aggregated $52,178,308, of which $90,249,011 related to appreciated
securities and $38,070,703 related to depreciated securities. At April 30, 2003,
the aggregate cost of investments for Federal income tax purposes was
$1,283,112,242.
4. Short-Term Borrowings:
The Fund, along with certain other funds managed by MLIM and its affiliates, is
a party to a $500,000,000 credit agreement with Bank One, N.A. and certain other
lenders. The Fund may borrow under the credit agreement to fund shareholder
redemptions and for other lawful purposes other than for leverage. The Fund may
borrow up to the maximum amount allowable under the Fund's current prospectus
and statement of additional information, subject to various other legal,
regulatory or contractual limits. The Fund pays a commitment fee of .09% per
annum based on the Fund'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 fund's election, the Federal Funds rate plus .50% or a base
rate as determined by Bank One, N.A. On November 29, 2002, the credit agreement
was renewed for one year under the same terms, except that the commitment was
reduced from $1,000,000,000 to $500,000,000. The Fund did not borrow under the
credit agreement during the six months ended April 30, 2003.
28 MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003
Portfolio Information
As of April 30, 2003
Percent of
Ten Largest Equity Holdings Net Assets
================================================================================
Merck & Co., Inc. .................................................. 2.4%
General Electric Company ........................................... 2.4
Bank of America Corporation ........................................ 1.9
Pfizer Inc. ........................................................ 1.9
Exxon Mobil Corporation ............................................ 1.9
Fannie Mae ......................................................... 1.8
J.P. Morgan Chase & Co. ............................................ 1.7
Microsoft Corporation .............................................. 1.7
Hewlett-Packard Company ............................................ 1.5
Washington Mutual, Inc. ............................................ 1.5
Percent of
Five Largest Industries* Net Assets
================================================================================
Pharmaceuticals .................................................... 9.3%
Commercial Banks ................................................... 9.3
Diversified Financial Services ..................................... 6.9
Health Care Providers & Services ................................... 6.5
Computers & Peripherals ............................................ 6.0
* For Portfolio compliance purposes, "Industry" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Portfolio
management. This definition may not apply for purposes of this report,
which may combine such industry sub-classifications for reporting ease.
MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003 29
[LOGO] Merrill Lynch Investment Managers
Officers and Directors/Trustees
Terry K. Glenn, President and Director/Trustee
James H. Bodurtha, Director/Trustee
Joe Grills, Director/Trustee
Herbert I. London, Director/Trustee
Andre F. Perold, Director/Trustee
Roberta Cooper Ramo, Director/Trustee
Robert S. Salomon, Jr., Director/Trustee
Stephen B. Swensrud, Director/Trustee
Robert C. Doll, Jr., Senior Vice President and
Senior Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Phillip S. Gillespie, Acting Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109-3661
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
- --------------------------------------------------------------------------------
Melvin R. Seiden, Director/Trustee of Merrill Lynch Large Cap Core Fund, has
recently retired. The Fund's Board of Directors/Trustees wishes Mr. Seiden well
in his retirement.
- --------------------------------------------------------------------------------
30 MERRILL LYNCH LARGE CAP CORE FUND APRIL 30, 2003
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. 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 Large Cap Core Fund
Of Merrill Lynch Large Cap Series Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
- --------------------------------------------------------------------------------
#CAPCORE -- 4/03
Item 2 - Did registrant adopt 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, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party? If not, why not? Briefly describe any amendments or
waivers that occurred during the period. State here if code of
ethics/amendments/waivers are on website and give website address-.
State here if fund will send code of ethics to shareholders without
charge upon request-- N/A (not answered until July 15, 2003 and only
annually for funds)
Item 3 - Did the registrant's board of directors determine that the registrant
either: (i) has at least one audit committee financial expert serving
on its audit committee; or (ii) does not have an audit committee
financial expert serving on its audit committee? If yes, disclose name
of financial expert and whether he/she is "independent," (fund may, but
is not required, to disclose name/independence of more than one
financial expert) If no, explain why not. -N/A (not answered until July
15, 2003 and only annually for funds)
Item 4 - Disclose annually only (not answered until December 15, 2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last
two fiscal years for professional services rendered by
the principal accountant for the audit of the
registrant's annual financial statements or services
that are normally provided by the accountant in
connection with statutory and regulatory filings or
engagements for those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of the
last two fiscal years for assurance and
related services by the principal accountant
that are reasonably related to the performance
of the audit of the registrant's financial
statements and are not reported under
paragraph (a) of this Item. Registrants shall
describe the nature of the services comprising
the fees disclosed under this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last two
fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and
tax planning. Registrants shall describe the nature of
the services comprising the fees disclosed under this
category. N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the last
two fiscal years for products and services
provided by the principal accountant, other than
the services reported in paragraphs (a) through
(c) of this Item. Registrants shall describe the
nature of the services comprising the fees
disclosed under this category. N/A.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of
Regulation S-X. N/A.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by
the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule
2-01 of Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended on
the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant for each
of the last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another 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. N/A.
Item 5 - If the registrant is a listed issuer as defined in Rule 10A-3 under the
Exchange Act, state whether or not the registrant has a
separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. If the
registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as the
registrant's audit committee in Section 3(a)(58)(B) of the Exchange
Act, so state.
If applicable, provide the disclosure required by Rule 10A-3(d) under
the Exchange Act regarding an exemption from the listing standards for
audit committees.
(Listed issuers must be in compliance with the new listing rules by the
earlier of their first annual shareholders meeting after January 2004,
or October 31, 2004 (annual requirement))
Item 6 - Reserved
Item 7 - For closed-end funds that contain voting securities in their portfolio,
describe the policies and procedures that it uses to determine how to
vote proxies relating to those portfolio securities. N/A (not answered
until July 1, 2003)
Item 8 -- Reserved
Item 9(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.
Item 9(b) -- There were no significant changes in the registrant's internal
controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of ethics or
amendments/waivers is on website or offered to shareholders upon request
without charge. N/A.
10(b) - Attach certifications pursuant to Section 302 of the Sarbanes-Oxley Act.
Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Merrill Lynch Large Cap Core Fund
By: /s/ Terry K. Glenn
---------------------------
Terry K. Glenn,
President of
Merrill Lynch Large Cap Core Fund
Date: June 23, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By: /s/ Terry K. Glenn
---------------------------
Terry K. Glenn,
President of
Merrill Lynch Large Cap Core Fund
Date: June 23, 2003
By: /s/ Donald C. Burke
---------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Large Cap Core Fund
Date: June 23, 2003
Attached hereto as an exhibit are the certifications pursuant to
Section 906 of the Sarbanes-Oxley Act.