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
811-9739
Name of Fund: Merrill Lynch Large Cap Core Fund and 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 and Master Large Cap Core Portfolio, 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: 10/31/03
Date of reporting period: 11/01/02 - 10/31/03
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.
Annual Report
October 31, 2003
[LOGO] Merrill Lynch Investment Managers
A Letter From the President
[PHOTO OMITTED]
Dear Shareholder
As 2003 draws to a close, it seems appropriate to reflect on what has been a
meaningful year in many respects. We saw the beginning and the end of all-out
war in Iraq, equity market uncertainty turned to strength and sub par gross
domestic product (GDP) growth of 1.4% in the first quarter of 2003 grew to an
extraordinary 8.2% in the third quarter.
Equity markets rebounded from one of the most dismal three-year periods in
history to make a strong showing this year. The S&P 500 Index posted
year-to-date and 12-month returns of +21.21% and +20.80%, respectively, as of
October 31, 2003. The Russell 1000 Index returned +22.49% year-to-date and
+22.32% over the past 12 months. Although continued market strength cannot be
assured, the positives have begun to eclipse the negatives. In addition to the
impressive GDP growth, the positive economic news includes waning risk of
deflation and surprisingly strong business spending and corporate earnings. In
fact, business spending in the third quarter was the strongest it has been in
three years, up 14%, and many company earnings reports exceeded forecasts in the
first three quarters of the year.
At Merrill Lynch Investment Managers, we believe the recent optimism suggests it
is time for investors to consider "what can go right." The long market downturn
may have taken a toll on your investment portfolio. We encourage you to review
your portfolio and your asset allocation strategy to ensure you are positioned
to take advantage of potential investment opportunities.
We thank you for trusting Merrill Lynch Investment Managers with your investment
assets, and we look forward to serving your financial needs in the months and
years ahead.
Sincerely,
/S/ Terry K. Glenn
Terry K. Glenn
President and Director/Trustee
2 MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003
We are pleased to present to you the management team of
Merrill Lynch Large Cap Core Fund
[PHOTO OMITTED]
Robert C. Doll, Jr.
Senior Portfolio Manager
[PHOTO OMITTED]
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 Core 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, Director of Equity Operations Brenda Sklar, Equity
Portfolio Strategist Gregory Brunk and Fundamental Analyst Dan Hanson. Mr.
Bouloutas earned a master's degree and a Ph.D. from Columbia University, New
York. Ms. Sklar earned a bachelor's degree from the University of Delaware. She
is a Certified Public Accountant. Mr. Brunk received a bachelor's degree from
the University of Iowa. Mr. Hanson received a bachelor's degree from Middlebury
College and an MBA from the University of Chicago. He is a CFA charterholder and
member of the Association for Investment Management and Research. The team has a
collective 60 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 ........................................... 10
Fund Financial Highlights ............................................ 13
Fund Notes to Financial Statements ................................... 18
Master Schedule of Investments ....................................... 22
Master Financial Information ......................................... 25
Master Financial Highlights .......................................... 28
Master Notes to Financial Statements ................................. 29
Independent Auditors' Report ......................................... 21, 32
Portfolio Information ................................................ 33
Officers and Directors/Trustees ...................................... 34
MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
The Fund outperformed its benchmark for the period and remained positioned
to benefit from improving corporate earnings and economic revitalization, which
we believe will persist into 2004.
How did the Fund perform during the period in light of the existing market
conditions?
For the 12-month period ended October 31, 2003, the Fund's Class A, Class B,
Class C and Class I Shares had total returns of +24.00%, +23.05%, +23.05% and
+24.31%, 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 - 9 of this report to shareholders.) These results
compare quite favorably to the +22.32% return of the Fund's unmanaged benchmark,
the Russell 1000 Index, for the same period. In addition, the Fund significantly
outperformed its comparable Lipper category of Large-Cap Core Funds, which
posted an average return of +17.75% for the same 12-month period.
For the six months ended October 31, 2003, the Fund's Class A, Class B, Class C
and Class I Shares had total returns of +23.10%, +22.74%, +22.74% and +23.42%,
respectively. The six-month results were well ahead of the +16.77% total return
of the Russell 1000 Index and the +14.42% average return of the Lipper Large-Cap
Core Funds for the same period.
The Fund invests primarily in a diversified portfolio (Master Large Cap Core
Portfolio) of large cap companies selected from securities found in the Russell
1000 Index. During this particular period, the main driver of the positive
performance was stock selection in the consumer discretionary and health care
sectors. In contrast, stock selection in information technology had a negative
impact on Fund returns.
In the last six months of the fiscal year, the Portfolio began to benefit from
its exposure to cyclical stocks -- those believed to strengthen along with a
strengthening economy. This enabled the Fund to gain significant ground relative
to both its benchmark and its peers. Stock selection in the health care and
consumer discretionary sectors benefited performance in the last six months. The
Portfolio's overweight in information technology also contributed to
performance. On the negative side, stock selection in utilities was a drag on
performance.
At the individual stock level, the largest positive contributors to performance
in the last six months were Invitrogen Corporation, Humana Inc., Ryland Group
Inc., SanDisk Corporation, National Semiconductor Corporation and Juniper
Networks, Inc. The largest detractors from performance included Calpine
Corporation and Dynegy, Inc. Underweights in Altria Group, Inc. and Intel
Corporation also negatively impacted performance.
Because the Fund invests in large-capitalization stocks that represent a
significant part of the U.S. stock market, its portfolio was influenced by the
same economic and market events that affected the broader stock market during
the period. The last quarter of 2002 and the first quarter of 2003 were marked
by dramatic rises and falls in world markets, sub par economic growth and frail
consumer confidence. This was prompted by geopolitical uncertainties,
particularly war fears, and exacerbated by a weak employment picture. The period
following the Iraq war, however, saw a rise in investor confidence that drove
the major stock market indexes to levels not seen since early in 2002. Despite
alternating periods of rising and falling consumer confidence, spending by
consumers helped propel the slow and steady growth of the economy throughout the
entire period. Capital spending by businesses remained sluggish until late in
the period when signs of a pickup began to emerge, along with improved corporate
earnings and a third-quarter 2003 jump in gross domestic product.
What changes were made to the Portfolio during the fiscal year?
We increased our position relative to the benchmark in technology based on our
belief that stocks in this sector would benefit from the increases in business
and consumer spending that accompany economic recovery. We reduced our position
relative to the benchmark in financials in light of the potential for rising
interest rates over the next 12 months, as the financial sector tends to lag in
periods of rising rates. We also reduced our position in consumer staples, as
these stocks tend to be more defensive in nature. Accordingly, we would not
expect the sector to benefit meaningfully during times of economic recovery. The
largest purchases during the period included The Bear Stearns Companies, Inc.,
Calpine, Citigroup Inc. and Sprint Corp. (PCS Group). The largest sales included
Bank of America Corporation, H&R Block, Inc., CheckFree Corp. and National City
Corporation.
4 MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003
How would you characterize the Portfolio's position at the close of the period?
The Portfolio's largest overweights as of October 31, 2003 were in information
technology and consumer discretionary, which we believe should continue to
benefit from economic improvement. The largest underweights were in consumer
staples and financials.
Companies exhibiting good earnings momentum, earnings surprise and valuation
characteristics saw a pickup in performance late in the summer that accelerated
in the fall. We remain committed to these disciplines for stock selection,
although cognizant that the equity market could experience a temporary downturn
at any time.
Looking ahead, we believe the economic recovery will continue to gain traction.
Record monetary and fiscal policy stimulus, in the form of low interest rates
and tax cuts, along with solid consumer spending and increasing business
spending, all support this thesis. The job market was still disappointingly weak
as we ended the period, but there were signs of improvement.
As low interest rates continue to make for a positive liquidity environment, we
are reluctant to abandon our strategy of focusing on cyclical stocks that have
the potential to benefit from economic recovery. We are prepared to move to a
more cautious investment stance as the likelihood of monetary tightening by the
Federal Reserve Board approaches, although that still seems months away. From a
longer-term perspective, the U.S. current account imbalance and the potential
for a destabilizing decline in the dollar pose the greatest threats to our
outlook. We will continue to monitor these situations for developments that
could potentially impact the Fund.
Robert C. Doll, Jr.
Senior Vice President and Senior Portfolio Manager
November 26, 2003
MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 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 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.
6-Month 12-Month Since Inception
As of October 31, 2003 Total Return Total Return Total Return
=============================================================================================================
ML Large Cap Core Fund Class A Shares* +23.10% +24.00% + 2.33%
- -------------------------------------------------------------------------------------------------------------
ML Large Cap Core Fund Class B Shares* +22.74 +23.05 - 0.69
- -------------------------------------------------------------------------------------------------------------
ML Large Cap Core Fund Class C Shares* +22.74 +23.05 - 0.69
- -------------------------------------------------------------------------------------------------------------
ML Large Cap Core Fund Class I Shares* +23.42 +24.31 + 3.35
- -------------------------------------------------------------------------------------------------------------
ML Large Cap Core Fund Class R Shares* +23.25 -- +23.40
- -------------------------------------------------------------------------------------------------------------
Russell 1000 Index** +16.77 +22.32 -20.81/+18.66
- -------------------------------------------------------------------------------------------------------------
* 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. Since inception total returns are from 12/22/99 and 1/03/03.
6 MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003
Performance Data (continued)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Class A & Class
C Shares compared to growth of an investment in the Russell 1000(R) Index.
Values are from December 22, 1999 to October 2003:
12/22/99** 10/00 10/01 10/02 10/03
ML Large Cap Core Fund+--
Class A Shares* $ 9,475 $11,124 $8,587 $7,819 $9,696
ML Large Cap Core Fund+--
Class C Shares* $10,000 $11,670 $8,931 $8,071 $9,931
12/31/99 10/00 10/01 10/02 10/03
Russell 1000(R) Index++ $10,000 $10,250 $7,581 $6,474 $7,919
* Assuming maximum sales charge, transaction costs and other operating
expenses, including administration fees.
** Commencement of operations.
+ ML Large Cap Core Fund invests all of its assets in Master Large Cap Core
Portfolio of Master Large Cap Series Trust. The Portfolio invests
primarily in a diversified portfolio of equity securities of large cap
companies located in the United States that the Investment Adviser
believes blends growth and value.
++ 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.
Past performance is not predictive of future results.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 10/31/03 +24.00% +17.49%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 10/31/03 + 0.60 - 0.80
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
One Year Ended 10/31/03 +23.05% +22.05%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 10/31/03 - 0.18 - 0.18
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
** Assuming payment of applicable contingent deferred sales charge.
MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003 7
[LOGO] Merrill Lynch Investment Managers
Performance Data (continued)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Class B & Class
I Shares compared to growth of an investment in the Russell 1000(R) Index.
Values are from December 22, 1999 to October 2003:
12/22/99** 10/00 10/01 10/02 10/03
ML Large Cap Core Fund+--
Class B Shares* $10,000 $11,670 $8,931 $8,071 $9,633
ML Large Cap Core Fund+--
Class I Shares* $ 9,475 $11,152 $8,626 $7,877 $9,792
12/31/99 10/00 10/01 10/02 10/03
Russell 1000(R) Index++ $10,000 $10,250 $7,581 $6,474 $7,919
* Assuming maximum sales charge, transaction costs and other operating
expenses, including administration fees.
** Commencement of operations.
+ ML Large Cap Core Fund invests all of its assets in Master Large Cap Core
Portfolio of Master Large Cap Series Trust. The Portfolio invests
primarily in a diversified portfolio of equity securities of large cap
companies located in the United States that the Investment Adviser
believes blends growth and value.
++ 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.
Past performance is not predictive of future results.
Average Annual Total Return
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 10/31/03 +23.05% +19.05%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 10/31/03 - 0.18 - 0.96
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
** Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class I Shares*
================================================================================
One Year Ended 10/31/03 +24.31% +17.78%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 10/31/03 + 0.86 - 0.54
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
8 MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003
Performance Data (concluded)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Class R Shares
compared to growth of an investment in the Russell 1000(R) Index. Values are
from January 3, 2003 to October 2003:
1/03/03** 10/03
ML Large Cap Core Fund+--
Class R Shares* $10,000 $12,340
Russell 1000(R) Index++ $10,000 $11,866
* Assuming maximum sales charge, transaction costs and other operating
expenses, including administration fees.
** Commencement of operations.
+ ML Large Cap Core Fund invests all of its assets in Master Large Cap Core
Portfolio of Master Large Cap Series Trust. The Portfolio invests
primarily in a diversified portfolio of equity securities of large cap
companies located in the United States that the Investment Adviser
believes blends growth and value.
++ 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.
Past performance is not predictive of future results.
Aggregate Total Return
% Return Without
Sales Charge
================================================================================
Class R Shares
================================================================================
Inception (1/03/03) through 10/31/03 +23.40%
- --------------------------------------------------------------------------------
MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003 9
[LOGO] Merrill Lynch Investment Managers
Statement of Assets and Liabilities Merrill Lynch Large Cap Core Fund
As of October 31, 2003
==============================================================================================================
Assets
- --------------------------------------------------------------------------------------------------------------
Investment in Master Large Cap Core Portfolio, at value
(identified cost--$1,003,181,071) ..................... $ 1,241,771,530
Prepaid registration fees ............................. 62,306
---------------
Total assets .......................................... 1,241,833,836
---------------
==============================================================================================================
Liabilities
- --------------------------------------------------------------------------------------------------------------
Payables:
Distributor ........................................ $ 591,490
Administrator ...................................... 288,271
Other affiliates ................................... 277,922 1,157,683
-------------
Accrued expenses and other liabilities ................ 47,447
---------------
Total liabilities ..................................... 1,205,130
---------------
==============================================================================================================
Net Assets
- --------------------------------------------------------------------------------------------------------------
Net assets ............................................ $ 1,240,628,706
===============
==============================================================================================================
Net Assets Consist of
- --------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.10 par value,
100,000,000 shares authorized ......................... $ 2,865,592
Class B Shares of Common Stock, $.10 par value,
200,000,000 shares authorized ......................... 3,924,065
Class C Shares of Common Stock, $.10 par value,
100,000,000 shares authorized ......................... 2,523,260
Class I Shares of Common Stock, $.10 par value,
100,000,000 shares authorized ......................... 2,975,755
Class R Shares of Common Stock, $.10 par value,
200,000,000 shares authorized ......................... 1,183
Paid-in capital in excess of par ...................... 1,254,105,301
Accumulated realized capital losses on investments
from the Portfolio--net ............................... $(264,356,909)
Unrealized appreciation on investments from the
Portfolio--net ........................................ 238,590,459
-------------
Total accumulated losses--net ......................... (25,766,450)
---------------
Net Assets ............................................ $ 1,240,628,706
===============
==============================================================================================================
Net Asset Value
- --------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $293,144,320
and 28,655,922 shares outstanding ..................... $ 10.23
===============
Class B--Based on net assets of $389,597,896
and 39,240,645 shares outstanding ..................... $ 9.93
===============
Class C--Based on net assets of $250,491,436
and 25,232,601 shares outstanding ..................... $ 9.93
===============
Class I--Based on net assets of $307,276,479
and 29,757,554 shares outstanding ..................... $ 10.33
===============
Class R--Based on net assets of $118,575 and
11,832 shares outstanding ............................. $ 10.02
===============
See Notes to Financial Statements.
10 MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003
Statement of Operations Merrill Lynch Large Cap Core Fund
For the Year Ended October 31, 2003
=====================================================================================================
Investment Income from the Portfolio--Net
- -----------------------------------------------------------------------------------------------------
Net investment income allocated from the Portfolio:
Dividends (net of $4,876 foreign withholding tax) $ 10,012,787
Securities lending--net ......................... 196,744
Interest ........................................ 54,307
Expenses ........................................ (5,398,685)
------------
Net investment income from the Portfolio ........... 4,865,153
------------
=====================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------
Account maintenance and distribution fees--Class B . $3,378,925
Administration fees ................................ 2,478,887
Account maintenance and distribution fees--Class C . 2,011,790
Transfer agent fees--Class B ....................... 604,169
Account maintenance fees--Class A .................. 507,405
Transfer agent fees--Class I ....................... 372,652
Transfer agent fees--Class C ....................... 372,355
Transfer agent fees--Class A ....................... 300,596
Printing and shareholder reports ................... 161,027
Registration fees .................................. 83,848
Professional fees .................................. 42,326
Account maintenance and distribution fees--Class R . 123
Transfer agent fees--Class R ....................... 35
Other .............................................. 29,019
----------
Total expenses ..................................... 10,343,157
------------
Investment loss--net ............................... (5,478,004)
------------
=====================================================================================================
Realized & Unrealized Gain from the Portfolio--Net
- -----------------------------------------------------------------------------------------------------
Realized gain on investments from the Portfolio--net 703,560
Change in unrealized appreciation on investments
from the Portfolio--net ............................ 238,685,680
------------
Total realized and unrealized gain on investments
from the Portfolio--net ............................ 239,389,240
------------
Net Increase in Net Assets Resulting from Operations $233,911,236
============
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003 11
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets Merrill Lynch Large Cap Core Fund
For the Year Ended
October 31,
-----------------------------------
Increase (Decrease) in Net Assets: 2003 2002
==========================================================================================================
Operations
- ----------------------------------------------------------------------------------------------------------
Investment loss--net ........................... $ (5,478,004) $ (1,558,904)
Realized gain (loss) on investments from
the Portfolio--net ............................. 703,560 (126,246,008)
Change in unrealized appreciation on investments
from the Portfolio--net ........................ 238,685,680 56,508,509
-----------------------------------
Net increase (decrease) in net assets resulting
from operations ................................ 233,911,236 (71,296,403)
-----------------------------------
==========================================================================================================
Capital Share Transactions
- ----------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital
share transactions ............................. 147,632,037 522,836,011
-----------------------------------
==========================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------
Total increase in net assets ................... 381,543,273 451,539,608
Beginning of year .............................. 859,085,433 407,545,825
-----------------------------------
End of year .................................... $ 1,240,628,706 $ 859,085,433
===================================
See Notes to Financial Statements.
12 MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003
Financial Highlights Merrill Lynch Large Cap Core Fund
Class A@@@
-----------------------------------------------------------------
For the
Period
The following per share data and ratios have been derived For the Year Ended December 22,
from information provided in the financial statements. October 31, 1999+ to
--------------------------------------------- October 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 ....................... (.02)+++ .01+++ --+++@@ --@@
Realized and unrealized gain (loss) on
investments from the Portfolio--net ................. 2.00 (.82) (2.68) 1.74
---------------------------------------------------------------
Total from investment operations .................... 1.98 (.81) (2.68) 1.74
---------------------------------------------------------------
Less distributions in excess of realized
gain on investments from the Portfolio--net ......... -- -- --@@ --
---------------------------------------------------------------
Net asset value, end of period ...................... $ 10.23 $ 8.25 $ 9.06 $ 11.74
===============================================================
=================================================================================================================================
Total Investment Return**
- ---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................. 24.00% (8.94%) (22.80%) 17.40%@
===============================================================
=================================================================================================================================
Ratios to Average Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement++ .................... 1.23% 1.28% 1.32% 1.59%*
===============================================================
Expenses++ .......................................... 1.23% 1.28% 1.32% 2.10%*
===============================================================
Investment income (loss)--net ....................... (.21%) .10% (.05%) (.59%)*
===============================================================
=================================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ............ $ 293,144 $ 136,552 $ 84,891 $ 25,627
===============================================================
Portfolio turnover of Master Large Cap Core Portfolio 138.73% 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 OCTOBER 31, 2003 13
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (continued) Merrill Lynch Large Cap Core Fund
Class B
-----------------------------------------------------------------
For the
Period
The following per share data and ratios have been derived For the Year Ended December 22,
from information provided in the financial statements. October 31, 1999+ to
---------------------------------------------- October 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 ................................ (.08)+++ (.06)+++ (.08)+++ (.01)
Realized and unrealized gain (loss) on
investments from the Portfolio--net ................. 1.94 (.80) (2.66) 1.68
---------------------------------------------------------------
Total from investment operations .................... 1.86 (.86) (2.74) 1.67
---------------------------------------------------------------
Less distributions in excess of realized
gain on investments from the Portfolio--net ......... -- -- --@@ --
---------------------------------------------------------------
Net asset value, end of period ...................... $ 9.93 $ 8.07 $ 8.93 $ 11.67
===============================================================
=================================================================================================================================
Total Investment Return**
- ---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................. 23.05% (9.63%) (23.47%) 16.70%@
===============================================================
=================================================================================================================================
Ratios to Average Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement++ .................... 2.00% 2.07% 2.06% 2.37%*
===============================================================
Expenses++ .......................................... 2.00% 2.07% 2.06% 2.70%*
===============================================================
Investment loss--net ................................ (.96%) (.64%) (.80%) (1.33%)*
===============================================================
=================================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ............ $ 389,598 $ 329,121 $ 159,287 $ 85,036
===============================================================
Portfolio turnover of Master Large Cap Core Portfolio 138.73% 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.
14 MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003
Financial Highlights (continued) Merrill Lynch Large Cap Core Fund
Class C
-----------------------------------------------------------------
For the
Period
The following per share data and ratios have been derived For the Year Ended December 22,
from information provided in the financial statements. October 31, 1999+ to
---------------------------------------------- October 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 ................................ (.08)+++ (.06)+++ (.08)+++ (.01)
Realized and unrealized gain (loss) on
investments from the Portfolio--net ................. 1.94 (.80) (2.66) 1.68
---------------------------------------------------------------
Total from investment operations .................... 1.86 (.86) (2.74) 1.67
---------------------------------------------------------------
Less distributions in excess of realized
gain on investments from the Portfolio--net ......... -- -- --@@ --
---------------------------------------------------------------
Net asset value, end of period ...................... $ 9.93 $ 8.07 $ 8.93 $ 11.67
===============================================================
=================================================================================================================================
Total Investment Return**
- ---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................. 23.05% (9.63%) (23.47%) 16.70%@
===============================================================
=================================================================================================================================
Ratios to Average Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement++ .................... 2.01% 2.07% 2.07% 2.35%*
===============================================================
Expenses++ .......................................... 2.01% 2.07% 2.07% 2.80%*
===============================================================
Investment loss--net ................................ (.97%) (.66%) (.81%) (1.34%)*
===============================================================
=================================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ............ $ 250,491 $ 178,459 $ 86,694 $ 41,028
===============================================================
Portfolio turnover of Master Large Cap Core Portfolio 138.73% 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 OCTOBER 31, 2003 15
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (continued) Merrill Lynch Large Cap Core Fund
Class I@@@
-----------------------------------------------------------------
For the
Period
The following per share data and ratios have been derived For the Year Ended December 22,
from information provided in the financial statements. October 31, 1999+ to
---------------------------------------------- October 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 ................. 2.01 (.82) (2.69) 1.78
---------------------------------------------------------------
Total from investment operations .................... 2.02 (.79) (2.67) 1.77
---------------------------------------------------------------
Less distributions in excess of realized
gain on investments from the Portfolio--net ......... -- -- --@@ --
---------------------------------------------------------------
Net asset value, end of period ...................... $ 10.33 $ 8.31 $ 9.10 $ 11.77
===============================================================
=================================================================================================================================
Total Investment Return**
- ---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................. 24.31% (8.68%) (22.65%) 17.70%@
===============================================================
=================================================================================================================================
Ratios to Average Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement++ .................... .98% 1.04% 1.05% 1.21%*
===============================================================
Expenses++ .......................................... .98% 1.04% 1.05% 3.11%*
===============================================================
Investment income (loss)--net ....................... .06% .33% .21% (.52%)*
===============================================================
=================================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ............ $ 307,277 $ 214,953 $ 76,674 $ 33,886
===============================================================
Portfolio turnover of Master Large Cap Core Portfolio 138.73% 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.
16 MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003
Financial Highlights (concluded) Merrill Lynch Large Cap Core Fund
Class R
-----------
For the
Period
The following per share data and ratios have been derived January 3,
from information provided in the financial statements. 2003+ to
October 31,
Increase (Decrease) in Net Asset Value: 2003
========================================================================================================
Per Share Operating Performance
- --------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .............................. $ 8.12
--------
Investment loss--net+++ ........................................... (.05)
Realized and unrealized gain on investments from the Portfolio--net 1.95
--------
Total from investment operations .................................. 1.90
--------
Net asset value, end of period .................................... $ 10.02
========
========================================================================================================
Total Investment Return**
- --------------------------------------------------------------------------------------------------------
Based on net asset value per share ................................ 23.40%@
========
========================================================================================================
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement++ .................................. 1.48%*
========
Expenses++ ........................................................ 1.48%*
========
Investment loss--net .............................................. (.44%)*
========
========================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .......................... $ 119
========
Portfolio turnover of Master Large Cap Core Portfolio ............. 138.73%
========
* 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.
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003 17
[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 amended,
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. The percentage of the Portfolio owned by the
Fund at October 31, 2003 was 85.4%. 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.
(g) Reclassification -- Accounting principles generally accepted in the United
States of America require that certain components of net assets be adjusted to
reflect permanent differences between financial and tax reporting. Accordingly,
the current year's permanent book/tax differences of $5,478,004 have been
reclassified between paid-in capital in excess of par and accumulated net
investment loss and $1,989,387 has been reclassified between paid-in capital in
excess of par and accumulated net realized capital losses. These
reclassifications have no effect on net assets or net asset values per share.
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.
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
18 MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003
Notes to Financial Statements (continued) Merrill Lynch Large Cap Core Fund
by the Fund in accordance with Rule 12b-1 under the Investment Company Act of
1940, the Fund pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class A ................................ .25% --
Class B ................................ .25% .75%
Class C ................................ .25% .75%
Class R ................................ .25% .25%
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), 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 year ended October 31, 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 ............................ $ 13,145 $187,010
Class I ............................ $ 103 $ 1,539
- --------------------------------------------------------------------------------
For the year ended October 31, 2003, MLPF&S received contingent deferred sales
charges of $931,410, of which $2,416 was retained by the Fund as a credit,
pursuant to the National Association of Securities Dealers, Inc. ("NASD") rules
and $36,631 relating to transactions in Class B and Class C Shares,
respectively. Furthermore, MLPF&S received contingent deferred sales charges of
$11,346 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, PSI, and/or ML & Co.
3. Capital Share Transactions:
Net increase in net assets derived from capital share transactions were
$147,632,037 and $522,836,011 for the years ended October 31, 2003 and October
31, 2002, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended October 31, 2003+ Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 15,168,440 $ 129,706,074
Shares issued resulting from
reorganization ...................... 4,522 36,634
Automatic conversion of shares ......... 1,067,805 9,023,558
-------------------------------
Total issued ........................... 16,240,767 138,766,266
Shares redeemed ........................ (4,139,881) (36,119,036)
-------------------------------
Net increase ........................... 12,100,886 $ 102,647,230
===============================
+ 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 Year Dollar
Ended October 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 7,678,274 $ 63,980,913
Shares issued resulting from
reorganization ...................... 282,624 2,231,082
-------------------------------
Total issued ........................... 7,960,898 66,211,995
Automatic conversion of shares ......... (1,093,937) (9,023,558)
Shares redeemed ........................ (8,422,726) (70,204,964)
-------------------------------
Net decrease ........................... (1,555,765) $ (13,016,527)
===============================
- --------------------------------------------------------------------------------
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 OCTOBER 31, 2003 19
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (concluded) Merrill Lynch Large Cap Core Fund
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended October 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 7,616,420 $ 63,792,038
Shares issued resulting from
reorganization ...................... 62,855 496,146
-------------------------------
Total issued ........................... 7,679,275 64,288,184
Shares redeemed ........................ (4,568,412) (38,047,851)
-------------------------------
Net increase ........................... 3,110,863 $ 26,240,333
===============================
- --------------------------------------------------------------------------------
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 Year Dollar
Ended October 31, 2003+ Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 11,400,663 $ 98,081,723
Shares redeemed ........................ (7,524,454) (66,425,859)
-------------------------------
Net increase ........................... 3,876,209 $ 31,655,864
===============================
+ 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
Jan. 1, 2003+ to Oct. 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 12,151 $ 108,116
Shares redeemed ........................ (319) (2,979)
-------------------------------
Net increase ........................... 11,832 $ 105,137
===============================
+ Commencement of operations.
4. Distributions to Shareholders:
As of October 31, 2003, the components of accumulated losses on a tax basis were
as follows:
- -----------------------------------------------------------------------------
Undistributed ordinary income--net ..................... $ --
Undistributed long-term capital gains--net ............. --
-------------
Total undistributed earnings--net ...................... --
Capital loss carryforward .............................. (245,596,476)*
Unrealized gains--net .................................. 219,830,026**
-------------
Total accumulated losses--net .......................... $ (25,766,450)
=============
* On October 31, 2003, the Fund had a net capital loss carryforward of
$245,596,476, of which $17,112,478 expires in 2007, $67,717,535 expires in
2008, $79,878,915 expires in 2009 and $80,887,548 expires in 2010. This
amount will be available to offset like amounts of any future taxable
gains.
** The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on wash sales.
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 $3,238,823 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.
20 MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003
Independent Auditors' Report Merrill Lynch Large Cap Core Fund
To the Shareholders and Board of Directors of
Merrill Lynch Large Cap Core Fund
(One of the Series constituting Merrill Lynch
Large Cap Series Funds, Inc.):
We have audited the accompanying statement of assets and liabilities of Merrill
Lynch Large Cap Core Fund as of October 31, 2003, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the respective periods then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Merrill Lynch Large Cap Core Fund as of October 31, 2003, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and its financial highlights for the
respective periods then ended, in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
December 19, 2003
MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003 21
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments Master Large Cap Core Portfolio
Value Percent of
Sector Industry++ Shares Held Common Stocks (in U.S. dollars) Net Assets
====================================================================================================================================
Consumer Auto Components 60,000 + Lear Corporation $ 3,485,400 0.2%
Discretionary ---------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing 140,000 Wal-Mart Stores, Inc. 8,253,000 0.6
---------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure 390,000 Applebee's International, Inc. 14,628,900 1.0
330,000 GTECH Holdings Corporation 14,744,400 1.0
500,000 International Game Technology 16,375,000 1.1
140,000 Station Casinos, Inc. 4,165,000 0.3
---------------------------------------------------------------------------------------------------------------------
Household Durables 160,000 Centex Corporation 15,600,000 1.1
380,000 D.R. Horton, Inc. 15,124,000 1.0
191,000 Fortune Brands, Inc. 12,443,650 0.9
170,000 + Hovnanian Enterprises, Inc. (Class A) 13,817,600 1.0
180,000 KB HOME 12,328,200 0.9
150,000 Lennar Corporation (Class A) 13,777,500 1.0
170,000 MDC Holdings, Inc. 11,444,400 0.8
20,000 + NVR, Inc. 9,788,000 0.7
170,000 Pulte Corporation 14,706,700 1.0
170,000 The Ryland Group, Inc. 15,113,000 1.0
---------------------------------------------------------------------------------------------------------------------
Leisure Equipment & Products 670,000 Hasbro, Inc. 14,606,000 1.0
---------------------------------------------------------------------------------------------------------------------
Multiline Retail 690,000 Dollar General Corporation 15,504,300 1.1
470,000 Nordstrom, Inc. 14,330,300 1.0
---------------------------------------------------------------------------------------------------------------------
Specialty Retail 800,000 + AutoNation, Inc. 14,960,000 1.0
260,000 + Barnes & Noble, Inc. 7,748,000 0.5
60,000 + Best Buy Co., Inc. 3,498,600 0.2
250,000 Blockbuster Inc. (Class A) 4,817,500 0.3
130,000 Claire's Stores, Inc. 5,031,000 0.3
750,000 Foot Locker, Inc. 13,425,000 0.9
820,000 The Gap, Inc. 15,645,600 1.1
180,000 + Staples, Inc. 4,827,600 0.3
---------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury 440,000 + Coach, Inc. 15,606,800 1.1
Goods 150,000 + Columbia Sportswear Company 8,736,000 0.6
---------------------------------------------------------------------------------------------------------------------
Total Consumer Discretionary 334,531,450 23.0
====================================================================================================================================
Consumer Beverages 50,000 + Constellation Brands, Inc. (Class A) 1,568,500 0.1
Staples ---------------------------------------------------------------------------------------------------------------------
Food Products 910,000 Tyson Foods, Inc. (Class A) 12,985,700 0.9
---------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing 1,680,000 + Rite Aid Corporation 9,626,400 0.6
---------------------------------------------------------------------------------------------------------------------
Household Products 40,000 The Procter & Gamble Company 3,931,600 0.3
---------------------------------------------------------------------------------------------------------------------
Total Consumer Staples 28,112,200 1.9
====================================================================================================================================
Energy Oil & Gas 580,000 Exxon Mobil Corporation 21,216,400 1.4
90,000 Pogo Producing Company 3,762,900 0.3
---------------------------------------------------------------------------------------------------------------------
Total Energy 24,979,300 1.7
====================================================================================================================================
Financials Capital Markets 200,000 The Bear Stearns Companies Inc. 15,250,000 1.1
700,000 J.P. Morgan Chase & Co. 25,130,000 1.7
90,000 Legg Mason, Inc. 7,492,500 0.5
---------------------------------------------------------------------------------------------------------------------
Commercial Banks 40,000 Bank of America Corporation 3,029,200 0.2
40,000 Popular, Inc. 1,800,000 0.1
800,000 U.S. Bancorp 21,776,000 1.5
---------------------------------------------------------------------------------------------------------------------
Diversified Financial Services 1,040,000 Citigroup Inc. 49,296,000 3.4
---------------------------------------------------------------------------------------------------------------------
Insurance 100,000 American International Group, Inc. 6,083,000 0.4
360,000 Berkley (W.R.) Corporation 12,344,400 0.9
260,000 MBIA, Inc. 15,498,600 1.1
---------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance 150,000 Countrywide Credit Industries, Inc. 15,768,000 1.1
87,000 Independence Community Bank Corp. 3,197,250 0.2
460,001 New York Community Bancorp, Inc. 16,652,036 1.1
---------------------------------------------------------------------------------------------------------------------
Total Financials 193,316,986 13.3
=====================================================================================================================
22 MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003
Schedule of Investments (continued) Master Large Cap Core Portfolio
Value Percent of
Sector Industry++ Shares Held Common Stocks (in U.S. dollars) Net Assets
====================================================================================================================================
Health Care Biotechnology 210,000 + Genentech, Inc. $ 17,213,700 1.2%
230,000 + Gilead Sciences, Inc. 12,553,400 0.9
250,000 + Invitrogen Corporation 15,897,500 1.1
---------------------------------------------------------------------------------------------------------------------
Health Care Equipment & 250,000 Bausch & Lomb Incorporated 12,040,000 0.8
Supplies 320,000 Beckman Coulter Inc. 15,888,000 1.1
130,000 + Bio-Rad Laboratories, Inc. (Class A) 6,792,500 0.5
230,000 + Fisher Scientific International Inc. 9,257,500 0.6
---------------------------------------------------------------------------------------------------------------------
Health Care Providers & 361,000 + DaVita, Inc. 12,671,100 0.9
Services 790,000 + Humana Inc. 16,029,100 1.1
380,000 Omnicare, Inc. 14,569,200 1.0
380,000 + Oxford Health Plans, Inc. 15,390,000 1.0
260,000 + PacifiCare Health Systems, Inc. 15,470,000 1.1
570,000 + Service Corporation International 2,764,500 0.2
---------------------------------------------------------------------------------------------------------------------
Pharmaceuticals 140,000 Johnson & Johnson 7,046,200 0.5
650,000 + King Pharmaceuticals, Inc. 8,710,000 0.6
630,000 Mylan Laboratories, Inc. 15,214,500 1.0
670,000 Pfizer Inc. 21,172,000 1.4
220,000 + SICOR Inc. 5,896,000 0.4
140,000 + Watson Pharmaceuticals, Inc. 5,497,800 0.4
---------------------------------------------------------------------------------------------------------------------
Total Health Care 230,073,000 15.8
====================================================================================================================================
Industrials Air Freight & Logistics 590,000 + J.B. Hunt Transport Services, Inc. 14,974,200 1.0
250,000 Ryder System, Inc. 7,500,000 0.5
---------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies 193,000 + Apollo Group, Inc. (Class A) 12,261,290 0.9
290,000 + Career Education Corporation 15,529,500 1.1
860,000 + Cendant Corporation 17,569,800 1.2
100,000 + ITT Educational Services, Inc. 4,980,000 0.3
---------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates 960,000 General Electric Company 27,849,600 1.9
230,000 Textron, Inc. 11,428,700 0.8
---------------------------------------------------------------------------------------------------------------------
Machinery 300,000 Cummins Engine Company, Inc. 14,220,000 1.0
---------------------------------------------------------------------------------------------------------------------
Total Industrials 126,313,090 8.7
====================================================================================================================================
Information Communications Equipment 190,000 Adtran, Inc. 12,925,700 0.9
Technology 1,050,000 + Cisco Systems, Inc. 22,029,000 1.5
1,500,000 + Corning Incorporated 16,470,000 1.1
450,000 + Emulex Corporation 12,744,000 0.9
630,000 + Foundry Networks, Inc. 14,653,800 1.0
790,000 + Juniper Networks, Inc. 14,212,100 1.0
1,160,000 Motorola, Inc. 15,694,800 1.1
170,000 + QLogic Corporation 9,528,500 0.7
310,000 Scientific-Atlanta, Inc. 9,176,000 0.6
460,000 + UTStarcom, Inc. 14,490,000 1.0
---------------------------------------------------------------------------------------------------------------------
Computers & Peripherals 540,000 + Dell Inc. 19,504,800 1.3
70,000 International Business Machines
Corporation 6,263,600 0.4
200,000 + SanDisk Corporation 16,120,000 1.1
460,000 + Storage Technology Corporation 11,086,000 0.8
1,080,000 + Western Digital Corporation 14,526,000 1.0
---------------------------------------------------------------------------------------------------------------------
Electrical Equipment 350,000 Rockwell International Corporation 10,867,500 0.7
---------------------------------------------------------------------------------------------------------------------
Electronic Equipment & 450,000 + Avnet, Inc. 8,730,000 0.6
Instruments 340,000 PerkinElmer, Inc. 6,123,400 0.4
160,000 + Sanmina--SCI Corporation 1,688,000 0.1
330,000 + Waters Corporation 10,371,900 0.7
---------------------------------------------------------------------------------------------------------------------
IT Services 70,000 + CheckFree Corp. 1,927,100 0.1
390,000 + Computer Sciences Corporation 15,451,800 1.1
530,000 + Unisys Corporation 8,140,800 0.6
---------------------------------------------------------------------------------------------------------------------
Office Electronics 1,330,000 + Xerox Corporation 13,965,000 1.0
MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003 23
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (concluded) Master Large Cap Core Portfolio
Value Percent of
Sector Industry++ Shares Held Common Stocks (in U.S. dollars) Net Assets
====================================================================================================================================
Information Semiconductors & 760,000 + Amkor Technology, Inc. $ 14,326,000 1.0%
Technology Semiconductor Equipment 740,000 + Cypress Semiconductor Corporation 15,880,400 1.1
(concluded) 500,000 Intel Corporation 16,525,000 1.1
420,000 + National Semiconductor Corporation 17,064,600 1.2
---------------------------------------------------------------------------------------------------------------------
Software 30,000 Fair, Isaac and Company, Incorporated 1,913,400 0.1
510,000 + Macromedia, Inc. 9,746,100 0.7
780,000 Microsoft Corporation 20,397,000 1.4
400,000 + Synopsys, Inc. 12,688,000 0.9
450,000 + VERITAS Software Corporation 16,267,500 1.1
---------------------------------------------------------------------------------------------------------------------
Total Information Technology 411,497,800 28.3
====================================================================================================================================
Materials Paper & Forest Products 590,000 Georgia-Pacific Group 15,505,200 1.1
---------------------------------------------------------------------------------------------------------------------
Total Materials 15,505,200 1.1
====================================================================================================================================
Telecom- Diversified Telecommunication 260,000 Sprint Corporation 4,160,000 0.3
munication Services
Services ---------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication 170,000 + American Tower Corporation (Class A) 1,972,000 0.1
Services 750,000 + Nextel Communications, Inc. (Class A) 18,150,000 1.3
3,580,000 + Sprint Corp. (PCS Group) 15,573,000 1.1
---------------------------------------------------------------------------------------------------------------------
Total Telecommunication Services 39,855,000 2.8
====================================================================================================================================
Utilities Electric Utilities 200,000 Alliant Energy Corporation 4,812,000 0.3
750,000 + Edison International 14,782,500 1.0
---------------------------------------------------------------------------------------------------------------------
Multi-Utilities & Unregulated 3,100,000 + Calpine Corporation 14,291,000 1.0
Power 3,830,000 + Dynegy Inc. (Class A) 15,358,300 1.1
---------------------------------------------------------------------------------------------------------------------
Total Utilities 49,243,800 3.4
=====================================================================================================================
Total Common Stocks
(Cost--$1,184,530,921) 1,453,427,826 100.0
====================================================================================================================================
====================================================================================================================================
Beneficial Interest/
Shares Held Short-Term Securities
====================================================================================================================================
$ 1,713,628 Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I (a) 1,713,628 0.1
$264,312,973 Merrill Lynch Liquidity Series, LLC
Money Market Series (a)(b) 264,312,973 18.2
88,104,324 Merrill Lynch Premier Institutional
Fund (a)(b) 88,104,324 6.0
---------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost--$354,130,925) 354,130,925 24.3
====================================================================================================================================
Total Investments (Cost--$1,538,661,846) 1,807,558,751 124.3
Liabilities in Excess of Other Assets (353,449,875) (24.3)
------------------------
Net Assets $1,454,108,876 100.0%
========================
+ Non-income producing security.
++ 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.
These industry classifications are unaudited.
(a) Investments in companies considered to be an affiliate of the Portfolio
(such companies are defined as "Affiliated Companies" in Section 2(a)(3)
of the Investment Company Act of 1940) are as follows:
--------------------------------------------------------------------------
Dividend/
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $ 1,713,628 $ 62,299
Merrill Lynch Liquidity Series, LLC
Money Market Series $199,970,533 $131,062
Merrill Lynch Premier Institutional Fund 9,463,564 $ 87,827
--------------------------------------------------------------------------
(b) Security was purchased with the cash proceeds from securities loans.
See Notes to Financial Statements.
24 MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003
Statement of Assets and Liabilities Master Large Cap Core Portfolio
As of October 31, 2003
==========================================================================================================================
Assets
- --------------------------------------------------------------------------------------------------------------------------
Investments, at value (including securities loaned of $338,253,498)
(identified cost--$1,538,661,846) ................................. $1,807,558,751
Cash .............................................................. 461,686
Receivables:
Securities sold ................................................ $ 29,534,549
Contributions .................................................. 1,826,138
Dividends ...................................................... 672,500
Securities lending--net ........................................ 31,030
Interest ....................................................... 6,388 32,070,605
--------------
Prepaid expenses .................................................. 14,213
--------------
Total assets ...................................................... 1,840,105,255
--------------
==========================================================================================================================
Liabilities
- --------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value ......................... 352,417,297
Payables:
Securities purchased ........................................... 30,874,332
Withdrawals .................................................... 1,541,824
Investment adviser ............................................. 653,866
Other affiliates ............................................... 9,292 33,079,314
--------------
Accrued expenses and other liabilities ............................ 499,768
--------------
Total liabilities ................................................. 385,996,379
--------------
==========================================================================================================================
Net Assets
- --------------------------------------------------------------------------------------------------------------------------
Net assets ........................................................ $1,454,108,876
==============
==========================================================================================================================
Net Assets Consist of
- --------------------------------------------------------------------------------------------------------------------------
Investors' capital ................................................ $1,185,211,971
Unrealized appreciation on investments--net ....................... 268,896,905
--------------
Net Assets ........................................................ $1,454,108,876
==============
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003 25
[LOGO] Merrill Lynch Investment Managers
Statement of Operations Master Large Cap Core Portfolio
For the Year Ended October 31, 2003
==========================================================================================================================
Investment Income
- --------------------------------------------------------------------------------------------------------------------------
Dividends (net of $5,530 foreign withholding tax) ................. $ 10,991,966
Securities lending--net ........................................... 218,889
Interest .......................................................... 61,681
--------------
Total income ...................................................... 11,272,536
--------------
==========================================================================================================================
Expenses
- --------------------------------------------------------------------------------------------------------------------------
Investment advisory fees .......................................... $ 5,436,451
Accounting services ............................................... 341,817
Custodian fees .................................................... 81,802
Professional fees ................................................. 60,552
Trustees' fees and expenses ....................................... 38,953
Printing and shareholder reports .................................. 2,839
Pricing fees ...................................................... 969
Other ............................................................. 22,956
--------------
Total expenses .................................................... 5,986,339
--------------
Investment income--net ............................................ 5,286,197
--------------
==========================================================================================================================
Realized & Unrealized Gain on Investments--Net
- --------------------------------------------------------------------------------------------------------------------------
Realized gain on investments--net ................................. 7,803,027
Change in unrealized appreciation/depreciation on investments--net 269,979,638
--------------
Total realized and unrealized gain on investments--net ............ 277,782,665
--------------
Net Increase in Net Assets Resulting from Operations .............. $ 283,068,862
==============
See Notes to Financial Statements.
26 MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003
Statements of Changes in Net Assets Master Large Cap Core Portfolio
For the Year Ended
October 31,
-----------------------------------
Increase (Decrease) in Net Assets: 2003 2002
============================================================================================================================
Operations
- ----------------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................... $ 5,286,197 $ 5,341,068
Realized gain (loss) on investments--net ......................... 7,803,027 (128,219,700)
Change in unrealized appreciation/depreciation on investments--net 269,979,638 56,457,791
-----------------------------------
Net increase (decrease) in net assets resulting from operations .. 283,068,862 (66,420,841)
-----------------------------------
============================================================================================================================
Capital Transactions
- ----------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions ...................................... 689,136,997 272,000,014
Fair value of net asset contributions ............................ -- 269,997,441
Fair value of withdrawals ........................................ (391,800,931) (14,709,088)
-----------------------------------
Net increase in net assets derived from capital transactions ..... 297,336,066 527,288,367
-----------------------------------
============================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ..................................... 580,404,928 460,867,526
Beginning of year ................................................ 873,703,948 412,836,422
-----------------------------------
End of year ...................................................... $ 1,454,108,876 $ 873,703,948
===================================
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003 27
[LOGO] Merrill Lynch Investment Managers
Financial Highlights Master Large Cap Core Portfolio
For the Year Ended For the Period
October 31, Dec. 22, 1999+
The following ratios have been derived from ------------------------------------------------ to October 31,
information provided in the financial statements. 2003 2002 2001 2000
====================================================================================================================================
Total Investment Return**
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return ................ 25.11% (8.13%) -- --
=====================================================================
====================================================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ......... .54% .57% .67% 1.09%*
=====================================================================
Expenses ............................... .54% .57% .67% 1.17%*
=====================================================================
Investment income (loss)--net .......... .48% .83% .59% (.20%)*
=====================================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,454,109 $ 873,704 $ 412,836 $ 186,265
=====================================================================
Portfolio turnover ..................... 138.73% 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.
28 MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003
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, as amended, 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. The following is a summary of significant
accounting policies followed by the Portfolio.
(a) Valuation of investments -- Equity securities that are held by the Portfolio
that are traded on stock exchanges or the Nasdaq National Market are valued at
the last sale price or official close price on the exchange, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price for long positions, and at the last available ask
price for short positions. In cases where equity securities are traded on more
than one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Trustees of the
Portfolio. Long positions traded in the over-the-counter ("OTC") market, Nasdaq
Small Cap or Bulletin Board are valued at the last available bid price or yield
equivalent obtained from one or more dealers or pricing services approved by the
Board of Trustees of the Portfolio. Short positions traded in the OTC market are
valued at the last available ask price. Portfolio securities that are traded
both in the OTC market and on a stock exchange are valued according to the
broadest and most representative market.
Options written are valued at the last sale price in the case of exchange-traded
options or, in the case of options traded in the OTC market, the last ask price.
Options purchased are valued at their last sale price in the case of
exchange-traded options or, in the case of options traded in the OTC market, the
last bid price. Swap agreements are valued daily based upon quotations from
market makers. Financial futures contracts and options thereon, which are traded
on exchanges, are valued at their last sale price as of the close of such
exchanges. Obligations with remaining maturities of 60 days or less are valued
at amortized cost unless the Investment Adviser believes that this method no
longer produces fair valuations.
Repurchase agreements are valued at cost plus accrued interest. The Portfolio
employs pricing services to provide certain securities prices for the Portfolio.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Trustees of the Portfolio, including valuations furnished by the
pricing services retained by the Fund, which may use a matrix system for
valuations. The procedures of a pricing service and its valuations are reviewed
by the officers of the Portfolio under the general supervision of the Fund's
Board of Trustees. Such valuations and procedures will be reviewed periodically
by the Board of Trustees of the Portfolio.
Generally, trading in foreign securities, as well as U.S. government securities
and money market instruments, is substantially completed each day at various
times prior to the close of business on the New York Stock Exchange ("NYSE").
The values of such securities used in computing the net asset value of the
Portfolio's shares are determined as of such times. Foreign currency exchange
rates also are generally determined prior to the close of business on the NYSE.
Occasionally, events affecting the values of such securities and such exchange
rates may occur between the times at which they are determined and the close of
business on the NYSE that may not be reflected in the computation of the
Portfolio's net asset value. If events (for example, a company announcement,
market volatility or a natural disaster) occur during such periods that are
expected to materially affect the value of such securities, those securities may
be valued at their fair value as determined in good faith by the Portfolio's
Board of Trustees or by the Investment Adviser using a pricing service and/or
procedures approved by the Portfolio's Board of Trustees.
(b) Derivative financial instruments -- The Portfolio may engage in various
portfolio investment strategies both to increase the return of the Portfolio and
to hedge, or protect, its exposure to interest rate movements and movements in
the securities markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
o Financial futures contracts -- The Portfolio may purchase or sell
financial futures contracts and options on such futures contracts. Futures
contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Portfolio deposits and maintains as collateral such
MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003 29
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (continued) Master Large Cap Core Portfolio
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.
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. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a withholding tax
may be imposed on interest, dividends and capital gains at various rates. It is
intended that the Portfolio's assets will be managed so an investor in the
Portfolio can satisfy the requirements of subchapter M of the Internal Revenue
Code.
(e) Security transactions and investment income -- Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Dividends from foreign securities where the ex-dividend date may have passed are
subsequently recorded when the Portfolio has determined the ex-dividend date.
Interest income is recognized on the accrual basis.
(f) Securities lending -- The Portfolio may lend securities to financial
institutions that provide cash or securities issued or guaranteed by the U.S.
government as collateral, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities. The
market value of the loaned securities is determined at the close of business of
the Portfolio and any additional required collateral is delivered to the
Portfolio on the next business day. Where the Portfolio receives securities as
collateral for the loaned securities, it collects a fee from the borrower. The
Portfolio typically receives the income on the loaned securities but does not
receive the income on the collateral. Where the Portfolio receives cash
collateral, it may invest such collateral and retain the amount earned on such
investment,
30 MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003
Notes to Financial Statements (concluded) Master Large Cap Core Portfolio
net of any amount rebated to the borrower. Loans of securities are terminable at
any time and the borrower, after notice, is required to return borrowed
securities within five business days. The Portfolio may pay reasonable finder's,
lending agent, administrative and custodial fees in connection with its loans.
In the event that the borrower defaults on its obligation to return borrowed
securities because of insolvency or for any other reason, the Portfolio could
experience delays and costs in gaining access to the collateral. The Portfolio
also could suffer a loss where the value of the collateral falls below the
market value of the borrowed securities, in the event of borrower default or in
the event of losses on investments made with cash collateral.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner.
FAM is responsible for the management of the Portfolio's investments and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the 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"), a subsidiary of ML & Co., or its
affiliates. As of October 31, 2003, the Portfolio lent securities with a value
of $80,935,864 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
year ended October 31, 2003, MLIM, LLC received $94,660 in securities lending
agent fees.
For the year ended October 31, 2003, the Portfolio reimbursed FAM $23,219 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
year ended October 31, 2003 were $1,817,565,808 and $1,514,900,598,
respectively.
Net realized gains for the year ended October 31, 2003 and net unrealized gains
as of October 31, 2003 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments .............. $ 7,803,027 $268,896,905
----------------------------------
Total .............................. $ 7,803,027 $268,896,905
==================================
As of October 31, 2003, net unrealized appreciation for Federal income tax
purposes aggregated $250,035,262, of which $273,449,914 related to appreciated
securities and $23,414,652 related to depreciated securities. At October 31,
2003, the aggregate cost of investments for Federal income tax purposes was
$1,557,523,489.
4. Short-Term Borrowings:
The Portfolio, along with certain other funds managed by FAM and its affiliates,
is a party to a $500,000,000 credit agreement with Bank One, N.A. and certain
other lenders. The Portfolio may borrow under the credit agreement to fund
shareholder redemptions and for other lawful purposes other than for leverage.
The Portfolio may borrow up to the maximum amount allowable under the
Portfolio's current prospectus and statement of additional information, subject
to various other legal, regulatory or contractual limits. The Portfolio pays a
commitment fee of .09% per annum based on the Portfolio's pro rata share of the
unused portion of the credit agreement. Amounts borrowed under the credit
agreement bear interest at a rate equal to, at each fund's election, the Federal
Funds rate plus .50% or a base rate as determined by Bank One, N.A. On November
28, 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
Portfolio did not borrow under the credit agreement during the year ended
October 31, 2003.
MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003 31
[LOGO] Merrill Lynch Investment Managers
Independent Auditors' Report Master Large Cap Core Portfolio
To the Investors and Board of Trustees of
Master Large Cap Core Portfolio
(One of the Series constituting Master Large
Cap Series Trust):
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Master Large Cap Core Portfolio as of October
31, 2003, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the respective periods then
ended. These financial statements and financial highlights are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free from material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2003, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Master
Large Cap Core Portfolio as of October 31, 2003, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and its financial highlights for the respective
periods then ended, in conformity with accounting principles generally accepted
in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
December 19, 2003
32 MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003
Portfolio Information as of October 31, 2003 (unaudited)
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
Citigroup Inc. .................................................. 3.4%
General Electric Company ........................................ 1.9
J.P. Morgan Chase & Co. ......................................... 1.7
Cisco Systems, Inc. ............................................. 1.5
U.S. Bancorp .................................................... 1.5
Exxon Mobil Corporation ......................................... 1.4
Pfizer Inc. ..................................................... 1.4
Microsoft Corporation ........................................... 1.4
Dell Inc. ....................................................... 1.3
Nextel Communications, Inc. (Class A) ........................... 1.3
- --------------------------------------------------------------------------------
Percent of
Five Largest Industries* Net Assets
- --------------------------------------------------------------------------------
Communications Equipment ........................................ 9.8%
Household Durables .............................................. 9.4
Health Care Providers & Services ................................ 5.3
Specialty Retail ................................................ 4.6
Computers & Peripherals ......................................... 4.6
- --------------------------------------------------------------------------------
* For Portfolio compliance purposes, "Industries" means any one or more of
the industry sub-classifications used by one or more widely recognized
market indexes or ratings group indexes, and/or as defined by Portfolio
management. This definition may not apply for purposes of this report,
which may combine such industry sub-classifications for reporting ease.
These industry classifications are unaudited.
MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003 33
[LOGO] Merrill Lynch Investment Managers
Officers and Directors/Trustees (unaudited)
Number of
Portfolios in Other Public
Fund Complex Directorships
Position(s) Length Overseen by Held by
Held of Time Director/ Director/
Name Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Interested Director/Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Terry K. P.O. Box 9011 President 1999 to President and Chairman of the Merrill Lynch 124 Funds None
Glenn* Princeton, NJ and present Investment Managers, L.P. ("MLIM")/Fund Asset 163 Portfolios
08543-9011 Director/ Management, L.P. ("FAM")--Advised Funds since 1999;
Age: 63 Trustee Chairman (Americas Region) of MLIM from 2000 to
2002; Executive Vice President of FAM and MLIM
(which terms as used herein include their corporate
predecessors) from 1983 to 2002; President of
FAM Distributors, Inc. ("FAMD") from 1986 to 2002
and Director thereof from 1991 to 2002; Executive
Vice President and Director of Princeton Services,
Inc. ("Princeton Services") from 1993 to 2002;
President of Princeton Administrators, L.P. from
1989 to 2002; Director of Financial Data Services,
Inc. since 1985.
------------------------------------------------------------------------------------------------------------------------
* Mr. Glenn is a director, trustee or member of an advisory board of certain other investment companies for which FAM or
MLIM acts as investment adviser. Mr. Glenn is an "interested person," as described in the Investment Company Act, of
the Fund based on his former positions with FAM, MLIM, FAMD, Princeton Services and Princeton Administrators, L.P. The
Director's/Trustee's term is unlimited. Directors/Trustees serve until their resignation, removal or death, or until
December 31 of the year in which they turn 72. As Fund President, Mr. Glenn serves at the pleasure of the Board of
Directors/Trustees.
====================================================================================================================================
Independent Directors/Trustees*
- ------------------------------------------------------------------------------------------------------------------------------------
James H. P.O. Box 9095 Director/ 1999 to Director, The China Business Group, Inc. since 1996 40 Funds None
Bodurtha Princeton, NJ Trustee present and Executive Vice President thereof from 1996 to 59 Portfolios
08543-9095 2003; Chairman of the Board, Berkshire Holding
Age: 59 Corporation since 1980; Partner, Squire, Sanders &
Dempsey from 1980 to 1993.
- ------------------------------------------------------------------------------------------------------------------------------------
Joe Grills P.O. Box 9095 Director/ 2002 to Member of the Committee of Investment of 40 Funds Kimco Realty
Princeton, NJ Trustee present Employee Benefit Assets of the Association of 59 Portfolios Corporation
08543-9095 Financial Professionals ("CIEBA") since 1986 and
Age: 68 its Chairman from 1991 to 1992; Member of the
Investment Advisory Committees of the State of
New York Common Retirement Fund since 1989;
Member of the Investment Advisory Committee of
the Howard Hughes Medical Institute from 1997 to
2000; Director, Duke Management Company since
1992 and Vice Chairman thereof since 1998;
Director, LaSalle Street Fund from 1995 to 2001;
Director, Kimco Realty Corporation since 1997;
Member of the Investment Advisory Committee of
the Virginia Retirement System since 1998 and Vice
Chairman thereof since 2002; Director, Montpelier
Foundation since 1998 and Vice Chairman thereof
since 2000; Member of the Investment Committee
of the Woodberry Forest School since 2000; Member
of the Investment Committee of the National Trust
for Historic Preservation since 2000.
- ------------------------------------------------------------------------------------------------------------------------------------
Herbert I. P.O. Box 9095 Director/ 1999 to John M. Olin Professor of Humanities, New York 40 Funds None
London Princeton, NJ Trustee present University since 1993 and Professor thereof since 59 Portfolios
08543-9095 1980; President of Hudson Institute since 1997 and
Age: 64 Trustee thereof since 1980.
- ------------------------------------------------------------------------------------------------------------------------------------
34 MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003
Officers and Directors/Trustees (unaudited) (concluded)
Number of
Portfolios in Other Public
Fund Complex Directorships
Position(s) Length Overseen by Held by
Held of Time Director/ Director/
Name Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Independent Directors/Trustees* (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
Andre F. P.O. Box 9095 Director/ 1999 to George Gund Professor of Finance and Banking, 40 Funds None
Perold Princeton, NJ Trustee present Harvard Business School since 2000 and a member 59 Portfolios
08543-9095 of the faculty since 1979; Director and Chairman
Age: 51 of the Board, UNX, Inc. since 2003; Director, Sanlam
Limited and Sanlam Life since 2001; Director, Genbel
Securities and Gensec Bank since 1999; Director,
Stockback.com from 2002 to 2002; Director,
Bulldogresearch.com from 2000 to 2001; Director,
Sanlam Investment Management from 1999 to
2001; Director, Quantec Limited from 1991 to 1999.
- ------------------------------------------------------------------------------------------------------------------------------------
Roberta P.O. Box 9095 Director/ 1999 to Shareholder, Modrall, Sperling, Roehl, Harris & 40 Funds None
Cooper Princeton, NJ Trustee present Sisk, P.A. since 1993; Director of Cooper's, Inc. 59 Portfolios
Ramo 08543-9095 since 1999 and Chairman of the Board since 2000;
Age: 61 Director of ECMC, Inc. since 2001.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert S. P.O. Box 9095 Director/ 2002 to Principal of STI Management since 1994; Trustee 40 Funds None
Salomon, Princeton, NJ Trustee present of Commonfund from 1980 to 2001; Director of 59 Portfolios
Jr. 08543-9095 Rye Country Day School since 2001.
Age: 66
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen B. P.O. Box 9095 Director/ 2002 to Chairman, Fernwood Advisors (investment adviser) 41 Funds None
Swensrud Princeton, NJ Trustee present since 1996; Principal of Fernwood Associates 60 Portfolios
08543-9095 (financial consultant) since 1975; Chairman of RPP
Age: 70 Corporation since 1978; Director, International
Mobile Communications, Inc. since 1998.
------------------------------------------------------------------------------------------------------------------------
* The Director's/Trustee's term is unlimited. Directors/Trustees serve until their resignation, removal or death, or
until December 31 of the year in which they turn 72.
- ------------------------------------------------------------------------------------------------------------------------------------
Position(s) Length
Held of Time
Name Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund/Trust Officers
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 1999 to First Vice President of FAM and MLIM since 1997 and Treasurer thereof since 1999;
Burke Princeton, NJ President present Senior Vice President and Treasurer of Princeton Services since 1999; Vice
08543-9011 and President of FAMD since 1999; Director of MLIM Taxation since 1990.
Age: 43 Treasurer
- ------------------------------------------------------------------------------------------------------------------------------------
Robert C. P.O. Box 9011 Senior Vice 1999 to President of MLIM and member of the Executive Management Committee of ML & Co.,
Doll, Jr. Princeton, NJ President present Inc. since 2001; Global Chief Investment Officer and Senior Portfolio Manager of
08543-9011 MLIM since 1999; Chief Investment Officer of Equities at Oppenheimer Funds,
Age: 49 Inc. from 1990 to 1999 and Chief Investment Officer thereof from 1998 to 1999;
Executive Vice President of Oppenheimer Funds, Inc. from 1991 to 1999.
- ------------------------------------------------------------------------------------------------------------------------------------
Phillip S. P.O. Box 9011 Secretary 2003 to First Vice President of MLIM since 2001; Director of MLIM from 2000 to 2001; Vice
Gillespie Princeton, NJ present President (Legal Advisory) of MLIM from 1999 to 2000 and Attorney associated with
08543-9011 MLIM since 1998; Assistant General Counsel of Chancellor LGT Asset Management,
Age: 39 Inc., from 1997 to 1998.
------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund/Trust serve at the pleasure of the Board of Directors/Trustees.
- ------------------------------------------------------------------------------------------------------------------------------------
Further information about the Fund's Officers and Directors/Trustees is available in the Fund's Statement of Additional
Information, which can be obtained without charge by calling 1-800-MER-FUND.
- ------------------------------------------------------------------------------------------------------------------------------------
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
MERRILL LYNCH LARGE CAP CORE FUND OCTOBER 31, 2003 35
[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.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
on www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
website at http://www.sec.gov.
Merrill Lynch Large Cap Core Fund of
Merrill Lynch Large Cap Series Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
#CAPCORE -- 10/03
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--
The registrant has adopted a code of ethics, as of the end of the
period covered by this report, that applies to the registrant's
principal executive officer, principal financial officer and principal
accounting officer, or persons performing similar functions. A copy of
the code of ethics is available without charge upon request by calling
toll-free 1-800-MER-FUND (1-800-637-3863).
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. -
The registrant's board of directors has determined that (i) the
registrant has the following audit committee financial experts serving
on its audit committee and (ii) each audit committee financial expert
is independent: (1) Joe Grills, (2) Andre Perold, (3) Robert S.
Salomon, Jr., and (4) Stephen B. Swensrud.
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. N/A
(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
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 and Master Large Cap Core Portfolio
By: /s/ Terry K. Glenn
-----------------------------
Terry K. Glenn,
President of
Merrill Lynch Large Cap Core Fund and Master Large Cap Core
Portfolio
Date: December 22, 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 and Master Large Cap Core
Portfolio
Date: December 22, 2003
By: /s/ Donald C. Burke
-----------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Large Cap Core Fund and Master Large Cap Core
Portfolio
Date: December 22, 2003
Attached hereto as a furnished exhibit are the certifications pursuant
to Section 906 of the Sarbanes-Oxley Act.