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 Value Fund and Master Large Cap Value
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 Value Fund and Master Large Cap Value 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 Value Fund
Of Merrill Lynch Large Cap Series Funds, Inc.
Annual Report
October 31, 2003
[LOGO] Merrill Lynch Investment Managers
Merrill Lynch Large Cap Value Fund
Portfolio Information as of October 31, 2003 (unaudited)
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
Citigroup Inc. ..................................................... 5.8%
Exxon Mobil Corporation ............................................ 3.0
J.P. Morgan Chase & Co. ............................................ 2.5
U.S. Bancorp ....................................................... 2.0
Wachovia Corporation ............................................... 1.4
Cendant Corporation ................................................ 1.4
Lehman Brothers Holdings, Inc. ..................................... 1.4
Sears, Roebuck & Co. ............................................... 1.3
Sprint Corporation ................................................. 1.3
CVS Corporation .................................................... 1.3
- --------------------------------------------------------------------------------
Percent of
Five Largest Industries* Net Assets
- --------------------------------------------------------------------------------
Household Durables ................................................. 9.7%
Commercial Banks ................................................... 8.0
Diversified Financial Services ..................................... 5.8
Oil & Gas .......................................................... 5.7
Capital Markets .................................................... 5.0
- --------------------------------------------------------------------------------
* 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.
2 MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003
A Letter From the President
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. 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. The good news did not go unnoticed, as investors appeared
to regain confidence by returning to the equity market.
Against this backdrop, our portfolio managers continued to work diligently to
deliver on our commitment to provide superior performance within reasonable
expectations for risk and return. This included striving to outperform our peers
and the market indexes. With that said, remember that the advice and guidance of
a skilled financial advisor often can mean the difference between successful and
unsuccessful investing. A financial professional can help you choose those
investments that will best serve you as you plan for your financial future.
Finally, I am proud to premiere a new look to our shareholder communications.
Our portfolio manager commentaries have been trimmed and organized in such a way
that you can get the information you need at a glance, in plain language.
Today's markets are confusing enough. We want to help you put it all in
perspective. The report's new size also allows us certain mailing efficiencies.
Any cost savings in production or postage are passed on to the Fund and,
ultimately, to Fund shareholders.
We thank you for trusting Merrill Lynch Investment Managers with your investment
assets, and we look forward to serving you in the months and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director/Trustee
MERRILL LYNCH LARGE CAP VALUE 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 fiscal year 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 +25.94%, +24.97%, +24.97% and
+26.25%, 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 +22.87% total return of the Fund's unmanaged
benchmark, the Russell 1000 Value Index, for the same period. In addition, the
Fund outperformed its comparable Lipper category of Large-Cap Value Funds, which
posted an average return of +20.75% 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 +24.22%, +23.73 %, +23.73% and +24.42%,
respectively. The six-month results were well ahead of the +16.74% total return
of the Russell 1000 Value Index and the +15.95% average return of the Lipper
Large-Cap Value Funds for the same period.
The Fund invests primarily in a diversified portfolio (Master Large Cap Value
Portfolio) of large cap companies selected from securities found in the Russell
1000 Index. During this particular period, the main drivers of the positive
performance were stock selection in the consumer discretionary and health care
sectors, as well as an overweight position in information technology and an
underweighting in telecommunication services. In contrast, stock selection in
materials 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. For the six-month period, most of the
outperformance is attributable to stock selection, particularly in the
information technology, health care and consumer discretionary sectors. The
Portfolio also benefited from its overweight position in information technology.
At the individual stock level, the largest positive contributors to performance
in the last six months were National Semiconductor Corporation, Amkor
Technology, Inc., Macromedia, Inc. and Invitrogen Corporation. The Fund also
benefited from its underweight in Verizon Communications. The largest detractors
from performance included Calpine Corporation, Dynegy Inc. and Norfolk Southern
Corporation, as well as our underweight positions in Altria Group, Inc. and
Merrill Lynch & Co., Inc.
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 pick-up began to emerge, along with improved
corporate earnings and a third-quarter 2003 jump in gross domestic product.
4 MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003
What changes were made to the Portfolio during the fiscal year?
We increased our position relative to the benchmark in the information
technology sector, based on our belief that stocks in this sector could benefit
from continued economic recovery, and utilities, given their favorable
valuations. We reduced our positions in consumer staples, as these stocks tend
to be more defensive in nature and we would not expect the sector to benefit
meaningfully during times of economic revitalization. We also reduced our
holdings in the financials sector in light of the potential for rising interest
rates over the next 12 months, as financial stocks tend to lag in periods of
rising rates. Our largest purchases during the period included The Bear Stearns
Companies Inc., Cendant Corporation, Citigroup Inc. and Sprint Corp. (PCS
Group). The largest sales included Bank of America Corporation, City National
Corporation, Occidental Petroleum Corporation and Wachovia Corporation.
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 the
information technology and consumer discretionary sectors, based on our belief
that continued economic improvement could result in earnings acceleration for
stocks in these sectors. The largest underweights were in financials, energy and
materials.
Companies exhibiting good earnings momentum, earnings surprise and valuation
characteristics saw a pick-up 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 VALUE 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 R Shares do not incur a maximum sales charge (front-end load) or
deferred sales charge. These shares are subject to a distribution fee of
0.25% and an account maintenance fee of 0.25%. Class R Shares are
available only to certain retirement plans.
None of the past results shown should be considered a representation of future
performance. Performance results do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.
Figures shown in each of the following tables assume reinvestment of all
dividends and capital gains distributions at net asset value on the ex-dividend
date. Investment return and principal value of shares will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
Dividends paid to each class of shares will vary because of the different levels
of account maintenance, distribution and transfer agency fees applicable to each
class, which are deducted from the income available to be paid to shareholders.
Recent Performance Results
6-Month 12-Month Since Inception
As of October 31, 2003 Total Return Total Return Total Return
=========================================================================================================
ML Large Cap Value Fund Class A Shares* +24.22% +25.94% +27.83%
- ---------------------------------------------------------------------------------------------------------
ML Large Cap Value Fund Class B Shares* +23.73 +24.97 +24.11
- ---------------------------------------------------------------------------------------------------------
ML Large Cap Value Fund Class C Shares* +23.73 +24.97 +24.11
- ---------------------------------------------------------------------------------------------------------
ML Large Cap Value Fund Class I Shares* +24.42 +26.25 +29.07
- ---------------------------------------------------------------------------------------------------------
ML Large Cap Value Fund Class R Shares* +24.40 -- +23.91
- ---------------------------------------------------------------------------------------------------------
Russell 1000 Value Index* +16.74 +22.87 +5.33/+17.21
- ---------------------------------------------------------------------------------------------------------
* 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 and Class I Shares and from 1/03/03 for Class R Shares.
** This unmanaged broad-based Index is a subset of the Russell 1000 Index
consisting of those Russell 1000 securities with lower price/book ratios
and lower forecasted growth values. Since inception total returns are from
12/22/99 and 1/03/03, respectively.
6 MERRILL LYNCH LARGE CAP VALUE 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 Value Index.
Values are from December 22, 1999 to October 2003:
12/22/99** 10/00 10/01 10/02 10/03
ML Large Cap Value Fund+--
Class A Shares* $ 9,475 $11,000 $10,073 $9,617 $12,112
ML Large Cap Value Fund+--
Class C Shares* $10,000 $11,540 $10,481 $9,931 $12,411
Russell 1000 Value Index++ $10,000 $10,809 $ 9,527 $8,573 $10,533
* Assuming maximum sales charge, transaction costs and other operating
expenses, including administration fees.
** Commencement of operations.
+ ML Large Cap Value Fund invests all of its assets in Master Large Cap
Value Portfolio of the 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 are undervalued.
++ This unmanaged broad-based Index is a subset of the Russell 1000 Index
consisting of those Russell 1000 securities with lower price/book ratios
and lower forecasted growth values.
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 +25.94% +19.33%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 10/31/03 + 6.57 + 5.09
- --------------------------------------------------------------------------------
* 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 +24.97% +23.97%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 10/31/03 + 5.75 + 5.75
- --------------------------------------------------------------------------------
* 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 VALUE 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 Value Index.
Values are from December 22, 1999 to October 2003:
12/22/99** 10/00 10/01 10/02 10/03
ML Large Cap Value Fund+--
Class B Shares* $10,000 $11,540 $10,481 $9,931 $12,111
ML Large Cap Value Fund+--
Class I Shares* $ 9,475 $11,029 $10,123 $9,687 $12,230
Russell 1000 Value Index++ $10,000 $10,809 $ 9,527 $8,573 $10,533
* Assuming maximum sales charge, transaction costs and other operating
expenses, including administration fees.
** Commencement of operations.
+ ML Large Cap Value Fund invests all of its assets in Master Large Cap
Value Portfolio of the 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 are undervalued.
++ This unmanaged broad-based Index is a subset of the Russell 1000 Index
consisting of those Russell 1000 securities with lower price/book ratios
and lower forecasted growth values.
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 +24.97% +20.97%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 10/31/03 + 5.75 + 5.09
- --------------------------------------------------------------------------------
* 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 +26.25% +19.62%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 10/31/03 + 6.83 + 5.35
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
8 MERRILL LYNCH LARGE CAP VALUE 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 Value Index. Values are
from January 3, 2003 to October 2003:
1/03/03** 10/03
ML Large Cap Value Fund+--
Class R Shares* $10,000 $12,391
Russell 1000 Value Index++ $10,000 $11,721
* Assuming maximum sales charge, transaction costs and other operating
expenses, including administration fees.
** Commencement of operations.
+ ML Large Cap Value Fund invests all of its assets in Master Large Cap
Value Portfolio of the 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 are undervalued.
++ This unmanaged broad-based Index is a subset of the Russell 1000 Index
consisting of those Russell 1000 securities with lower price/book ratios
and lower forecasted growth values.
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 +23.91%
- --------------------------------------------------------------------------------
MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003 9
[LOGO] Merrill Lynch Investment Managers
Statement of Assets and Liabilities Merrill Lynch Large Cap Value Fund
As of October 31, 2003
============================================================================================================================
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investment in Master Large Cap Value Portfolio, at value
(identified cost--$420,719,569) .................................. $ 515,255,532
Prepaid expenses and registration fees ........................... 46,555
-------------
Total assets ..................................................... 515,302,087
-------------
============================================================================================================================
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payables:
Distributor ................................................... $ 292,086
Other affiliates .............................................. 121,790
Administrator ................................................. 118,339 532,215
-------------
Accrued expenses and other liabilities ........................... 18,444
-------------
Total liabilities ................................................ 550,659
-------------
============================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets ....................................................... $ 514,751,428
=============
============================================================================================================================
Net Assets Consist of
- ----------------------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.10 par value,
100,000,000 shares authorized .................................... $ 707,772
Class B Shares of Common Stock, $.10 par value,
200,000,000 shares authorized .................................... 1,629,291
Class C Shares of Common Stock, $.10 par value,
100,000,000 shares authorized .................................... 1,043,439
Class I Shares of Common Stock, $.10 par value,
100,000,000 shares authorized .................................... 719,552
Class R Shares of Common Stock, $.10 par value,
200,000,000 shares authorized .................................... 92
Paid-in capital in excess of par ................................. 460,590,980
Accumulated realized capital losses on investments
from the Portfolio--net .......................................... $ (44,475,661)
Unrealized appreciation on investments from the
Portfolio--net ................................................... 94,535,963
-------------
Total accumulated earnings--net .................................. 50,060,302
-------------
Net Assets ....................................................... $ 514,751,428
=============
============================================================================================================================
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $90,357,987
and 7,077,716 shares outstanding ................................. $ 12.77
=============
Class B--Based on net assets of $202,189,710
and 16,292,910 shares outstanding ................................ $ 12.41
=============
Class C--Based on net assets of $129,456,400
and 10,434,391 shares outstanding ................................ $ 12.41
=============
Class I--Based on net assets of $92,735,781
and 7,195,522 shares outstanding ................................. $ 12.89
=============
Class R--Based on net assets of $11,550
and 921 shares outstanding ....................................... $ 12.54
=============
See Notes to Financial Statements.
10 MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003
Statement of Operations Merrill Lynch Large Cap Value Fund
For the Year Ended October 31, 2003
============================================================================================================================
Investment Income from the Portfolio--Net
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income allocated from the Portfolio:
Dividends (net of $10,171 foreign withholding tax) ............ $ 6,497,474
Securities lending--net ....................................... 64,672
Interest ...................................................... 2,871
Expenses ...................................................... (2,441,407)
-------------
Net investment income from the Portfolio ......................... 4,123,610
-------------
============================================================================================================================
Expenses
- ----------------------------------------------------------------------------------------------------------------------------
Account maintenance and distribution fees--Class B ............... $ 1,783,403
Account maintenance and distribution fees--Class C ............... 1,064,628
Administration fees .............................................. 1,063,011
Transfer agent fees--Class B ..................................... 328,537
Transfer agent fees--Class C ..................................... 194,824
Account maintenance fees--Class A ................................ 161,007
Transfer agent fees--Class I ..................................... 115,976
Transfer agent fees--Class A ..................................... 89,456
Printing and shareholder reports ................................. 83,157
Registration fees ................................................ 78,098
Professional fees ................................................ 27,931
Other ............................................................ 26,584
-------------
Total expenses ................................................... 5,016,612
-------------
Investment loss--net ............................................. (893,002)
-------------
============================================================================================================================
Realized & Unrealized Gain from the Portfolio--Net
- ----------------------------------------------------------------------------------------------------------------------------
Realized gain on investments from the Portfolio--net ............. 2,715,422
Change in unrealized appreciation/depreciation on
investments from the Portfolio--net .............................. 100,673,550
-------------
Total realized and unrealized gain from the Portfolio--net ....... 103,388,972
-------------
Net Increase in Net Assets Resulting from Operations ............. $ 102,495,970
=============
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003 11
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets Merrill Lynch Large Cap Value Fund
For the Year Ended
October 31,
-------------------------------
Increase (Decrease) in Net Assets: 2003 2002
============================================================================================================================
Operations
- ----------------------------------------------------------------------------------------------------------------------------
Investment loss--net ............................................. $ (893,002) $ (118,909)
Realized gain (loss) on investments from
the Portfolio--net ............................................... 2,715,422 (26,456,386)
Change in unrealized appreciation/depreciation
on investments from the Portfolio--net ........................... 100,673,550 (4,904,801)
-------------------------------
Net increase (decrease) in net assets resulting
from operations .................................................. 102,495,970 (31,480,096)
-------------------------------
============================================================================================================================
Capital Share Transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share transactions 28,963,246 89,427,595
-------------------------------
============================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ..................................... 131,459,216 57,947,499
Beginning of year ................................................ 383,292,212 325,344,713
-------------------------------
End of year ...................................................... $ 514,751,428 $ 383,292,212
===============================
See Notes to Financial Statements.
12 MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003
Financial Highlights Merrill Lynch Large Cap Value Fund
Class A@@
----------------------------------------------------------------
The following per share data and ratios have been derived For the Year Ended For the Period
from information provided in the financial statements. October 31, Dec. 22, 1999+
-------------------------------------------- to Oct. 31,
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000
====================================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ..... $ 10.14 $ 10.62 $ 11.61 $ 10.00
----------------------------------------------------------------
Investment income (loss)--net ............ .03++ .04++ .04++ --@
Realized and unrealized gain (loss) on
investments from the Portfolio--net ...... 2.60 (.52) (1.02) 1.61
----------------------------------------------------------------
Total from investment operations ......... 2.63 (.48) (.98) 1.61
----------------------------------------------------------------
Less dividends from return of capital--net -- -- (.01) --
----------------------------------------------------------------
Net asset value, end of period ........... $ 12.77 $ 10.14 $ 10.62 $ 11.61
================================================================
====================================================================================================================================
Total Investment Return**
- ------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ....... 25.94% (4.52%) (8.43%) 16.10%@@@
================================================================
====================================================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement+++ ........ 1.28% 1.28% 1.29% 1.74%*
================================================================
Expenses+++ .............................. 1.28% 1.28% 1.29% 3.78%*
================================================================
Investment income (loss)--net ............ .24% .49% .32% (.25%)*
================================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) . $ 90,358 $ 46,020 $ 37,190 $ 8,377
================================================================
Portfolio turnover of the Master Large
Cap Value Portfolio ...................... 157.04% 136.92% 168.54% 81.99%
================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Includes the Fund's share of the Portfolio's allocated expenses.
@ Amount is less than $(.01) per share.
@@ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
@@@ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003 13
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (continued) Merrill Lynch Large Cap Value Fund
Class B
----------------------------------------------------------------
The following per share data and ratios have been derived For the Year Ended For the Period
from information provided in the financial statements. October 31, Dec. 22, 1999+
-------------------------------------------- to Oct. 31,
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000
====================================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ..... $ 9.93 $ 10.48 $ 11.54 $ 10.00
----------------------------------------------------------------
Investment loss--net ..................... (.05)++ (.03)++ (.04)++ (.01)
Realized and unrealized gain (loss) on
investments from the Portfolio--net ...... 2.53 (.52) (1.02) 1.55
----------------------------------------------------------------
Total from investment operations ......... 2.48 (.55) (1.06) 1.54
----------------------------------------------------------------
Less dividends from return of capital--net -- -- --@ --
----------------------------------------------------------------
Net asset value, end of period ........... $ 12.41 $ 9.93 $ 10.48 $ 11.54
================================================================
====================================================================================================================================
Total Investment Return**
- ------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ....... 24.97% (5.25%) (9.18%) 15.40%@@
================================================================
====================================================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement+++ ........ 2.05% 2.05% 2.07% 2.55%*
================================================================
Expenses+++ .............................. 2.05% 2.05% 2.07% 3.91%*
================================================================
Investment loss--net ..................... (.50%) (.28%) (.44%) (1.05%)*
================================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) . $ 202,190 $ 174,623 $ 167,613 $ 36,037
================================================================
Portfolio turnover of the Master Large
Cap Value Portfolio ...................... 157.04% 136.92% 168.54% 81.99%
================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Includes the Fund's share of the Portfolio's allocated expenses.
@ Amount is less than $(.01) per share.
@@ Aggregate total investment return.
See Notes to Financial Statements.
14 MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003
Financial Highlights (continued) Merrill Lynch Large Cap Value Fund
Class C
----------------------------------------------------------------
The following per share data and ratios have been derived For the Year Ended For the Period
from information provided in the financial statements. October 31, Dec. 22, 1999+
-------------------------------------------- to Oct. 31,
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000
====================================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ..... $ 9.93 $ 10.48 $ 11.54 $ 10.00
----------------------------------------------------------------
Investment loss--net ..................... (.05)++ (.03)++ (.04)++ (.01)
Realized and unrealized gain (loss) on
investments from the Portfolio--net ...... 2.53 (.52) (1.02) 1.55
----------------------------------------------------------------
Total from investment operations ......... 2.48 (.55) (1.06) 1.54
----------------------------------------------------------------
Less dividends from return of capital--net -- -- --@ --
----------------------------------------------------------------
Net asset value, end of period ........... $ 12.41 $ 9.93 $ 10.48 $ 11.54
================================================================
====================================================================================================================================
Total Investment Return**
- ------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ....... 24.97% (5.25%) (9.18%) 15.40%@@
================================================================
====================================================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement+++ ........ 2.06% 2.05% 2.07% 2.54%*
================================================================
Expenses+++ .............................. 2.06% 2.05% 2.07% 4.05%*
================================================================
Investment loss--net ..................... (.51%) (.28%) (.45%) (1.04%)*
================================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) . $ 129,456 $ 95,895 $ 77,901 $ 15,885
================================================================
Portfolio turnover of the Master Large
Cap Value Portfolio ...................... 157.04% 136.92% 168.54% 81.99%
================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Includes the Fund's share of the Portfolio's allocated expenses.
@ Amount is less than $(.01) per share.
@@ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003 15
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (continued) Merrill Lynch Large Cap Value Fund
Class I@@
----------------------------------------------------------------
The following per share data and ratios have been derived For the Year Ended For the Period
from information provided in the financial statements. October 31, Dec. 22, 1999+
-------------------------------------------- to Oct. 31,
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000
====================================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ..... $ 10.21 $ 10.67 $ 11.64 $ 10.00
----------------------------------------------------------------
Investment income (loss)--net ............ .06++ .05++ .07++ --@
Realized and unrealized gain (loss) on
investments from the Portfolio--net ...... 2.62 (.51) (1.03) 1.64
----------------------------------------------------------------
Total from investment operations ......... 2.68 (.46) (.96) 1.64
----------------------------------------------------------------
Less dividends from return of capital--net -- -- (.01) --
----------------------------------------------------------------
Net asset value, end of period ........... $ 12.89 $ 10.21 $ 10.67 $ 11.64
================================================================
====================================================================================================================================
Total Investment Return**
- ------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ....... 26.25% (4.31%) (8.21%) 16.40%@@@
================================================================
====================================================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement+++ ........ 1.03% 1.03% 1.04% 1.32%*
================================================================
Expenses+++ .............................. 1.03% 1.03% 1.04% 5.32%*
================================================================
Investment income (loss)--net ............ .51% .76% .60% (.07%)*
================================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) . $ 92,736 $ 66,754 $ 42,641 $ 16,211
================================================================
Portfolio turnover of the Master Large
Cap Value Portfolio ...................... 157.04% 136.92% 168.54% 81.99%
================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Includes the Fund's share of the Portfolio's allocated expenses.
@ Amount is less than $(.01) per share.
@@ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
@@@ Aggregate total investment return.
See Notes to Financial Statements.
16 MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003
Financial Highlights (concluded) Merrill Lynch Large Cap Value Fund
Class R
----------------
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. January 3, 2003+
to October 31,
Increase (Decrease) in Net Asset Value: 2003
==============================================================================================================
Per Share Operating Performance
- --------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .............................. $ 10.12
-------
Investment income--net++ .......................................... .01
Realized and unrealized gain on investments from the Portfolio--net 2.41
-------
Total from investment operations .................................. 2.42
-------
Net asset value, end of period .................................... $ 12.54
=======
==============================================================================================================
Total Investment Return**
- --------------------------------------------------------------------------------------------------------------
Based on net asset value per share ................................ 23.91%@
=======
==============================================================================================================
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement+++ ................................. 1.53%*
=======
Expenses+++ ....................................................... 1.53%*
=======
Investment income--net ............................................ .01%*
=======
==============================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .......................... $ 12
=======
Portfolio turnover of the Master Large Cap Value Portfolio ........ 157.04%
=======
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Includes the Fund's share of the Portfolio's allocated expenses.
@ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003 17
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements Merrill Lynch Large Cap Value Fund
1. Significant Accounting Policies:
Merrill Lynch Large Cap Value 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 Value 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 100%. 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 I and Class A 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 investment 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 shareholders. Therefore,
no Federal income tax provision is required. Under the applicable foreign tax
law, withholding taxes 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 $893,002 have been
reclassified between paid-in capital in excess of par and accumulated net
investment loss; $2 has been reclassified between paid-in capital in excess of
par and accumulated net realized capital losses and $3 has been reclassified
between accumulated net realized capital losses and unrealized appreciation on
investments. 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 also 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.
18 MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003
Notes to Financial Statements (continued) Merrill Lynch Large Cap Value Fund
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class 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.
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 ............................ $ 6,843 $98,301
Class I ............................ $ 57 $ 720
- --------------------------------------------------------------------------------
For the year ended October 31, 2003, MLPF&S received contingent deferred sales
charges of $364,594 and $14,736 relating to transactions in Class B and Class C
Shares, respectively.
Financial Data Services, Inc. ("FDS"), an indirect, wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, FAMD, FDS, and/or ML & Co.
3. Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$28,963,246 and $89,427,595 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 ............................ 2,414,049 $ 26,175,758
Shares issued resulting from
reorganization ...................... 20,860 209,524
Automatic conversion of shares ......... 1,340,510 13,332,162
-------------------------------
Total issued ........................... 3,775,419 39,717,444
Shares redeemed ........................ (1,238,004) (13,354,022)
-------------------------------
Net increase ........................... 2,537,415 $ 26,363,422
===============================
+ 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 ............................ 2,738,977 $ 31,744,144
Shares redeemed ........................ (1,701,757) (17,914,966)
-------------------------------
Net increase ........................... 1,037,220 $ 13,829,178
===============================
+ 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 ............................ 3,692,641 $ 38,125,691
Shares issued resulting from
reorganization ...................... 236,587 2,319,101
-------------------------------
Total issued ........................... 3,929,228 40,444,792
Automatic conversion of shares ......... (1,373,877) (13,332,162)
Shares redeemed ........................ (3,848,797) (39,655,110)
-------------------------------
Net decrease ........................... (1,293,446) $(12,542,480)
===============================
- -------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended October 31, 2002 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 6,025,209 $ 68,249,425
Shares redeemed ........................ (4,430,899) (48,486,592)
-------------------------------
Net increase ........................... 1,594,310 $ 19,762,833
===============================
- -------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended October 31, 2003 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 3,203,068 $ 33,448,716
Shares issued resulting from
reorganization ...................... 16,579 162,483
-------------------------------
Total issued ........................... 3,219,647 33,611,199
Shares redeemed ........................ (2,444,456) (25,350,866)
-------------------------------
Net increase ........................... 775,191 $ 8,260,333
===============================
- -------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended October 31, 2002 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 4,379,496 $ 48,906,399
Shares redeemed ........................ (2,153,830) (23,471,469)
-------------------------------
Net increase ........................... 2,225,666 $ 25,434,930
===============================
MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003 19
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (concluded) Merrill Lynch Large Cap Value Fund
- -------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended October 31, 2003+ Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 2,778,068 $ 29,675,022
Shares redeemed ........................ (2,122,251) (22,804,532)
-------------------------------
Net increase ........................... 655,817 $ 6,870,490
===============================
+ 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 ............................ 4,259,603 $ 49,669,655
Shares redeemed ........................ (1,717,895) (19,269,001)
-------------------------------
Net increase ........................... 2,541,708 $ 30,400,654
===============================
+ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
- --------------------------------------------------------------------------------
Class R Shares for the Period
January 3, 2003+ to Dollar
October 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 925 $ 11,522
Shares redeemed ........................ (4) (41)
-------------------------------
Net increase ........................... 921 $ 11,481
===============================
+ Commencement of operations.
4. Distributions to Shareholders:
As of October 31, 2003, the components of accumulated earnings on a tax basis
were as follows:
- -----------------------------------------------------------------------------
Undistributed ordinary income--net ...................... $ --
Undistributed long-term capital gains--net .............. --
------------
Total undistributed earnings--net ....................... --
Capital loss carryforward ............................... (39,599,008)*
Unrealized gains--net ................................... 89,659,310**
------------
Total accumulated earnings--net ......................... $ 50,060,302
============
* On October 31, 2003, the Fund had a net capital loss carryforward of
$39,599,008, of which $51,818 expires in 2008, $15,680,746 expires in 2009
and $23,866,444 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 Value Fund:
On April 28, 2003, the Fund acquired all of the net assets of Mercury Large Cap
Value Fund pursuant to a plan of reorganization. The acquisition was
accomplished by a tax-free exchange of 278,298 shares of Common Stock of Mercury
Large Cap Value Fund for 274,026 shares of Common Stock of the Fund. Mercury
Large Cap Value Fund's net assets on that date of $2,691,108, including $107,885
of net unrealized appreciation and $540,973 of accumulated net realized capital
losses, were combined with those of the Fund. The aggregate net assets
immediately after the acquisition amounted to $398,579,182.
20 MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003
Independent Auditors' Report Merrill Lynch Large Cap Value Fund
To the Shareholders and Board of Directors of
Merrill Lynch Large Cap Value 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 Value 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 Value 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 17, 2003
MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003 21
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments Master Large Cap Value Portfolio
Value Percent of
Sector Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
====================================================================================================================================
Consumer Auto Components 72,000 Autoliv, Inc. $ 2,384,640 0.5%
Discretionary 95,000 + Lear Corporation 5,518,550 1.1
--------------------------------------------------------------------------------------------------------------
Automobiles 74,000 Ford Motor Company 897,620 0.2
--------------------------------------------------------------------------------------------------------------
Hotels, Restaurants 108,000 GTECH Holdings Corporation 4,825,440 0.9
& Leisure
--------------------------------------------------------------------------------------------------------------
Household Durables 57,000 Centex Corporation 5,557,500 1.1
137,000 D.R. Horton, Inc. 5,452,600 1.1
93,000 Fortune Brands, Inc. 6,058,950 1.2
78,000 KB HOME 5,342,220 1.0
60,000 Lennar Corporation (Class A) 5,511,000 1.1
83,000 MDC Holdings, Inc. 5,587,560 1.1
63,000 Pulte Corporation 5,450,130 1.0
64,000 The Ryland Group, Inc. 5,689,600 1.1
71,000 Whirlpool Corporation 5,003,370 1.0
--------------------------------------------------------------------------------------------------------------
Leisure Equipment 258,000 Hasbro, Inc. 5,624,400 1.1
& Products
--------------------------------------------------------------------------------------------------------------
Media 30,000 + Getty Images, Inc. 1,341,000 0.3
--------------------------------------------------------------------------------------------------------------
Multiline Retail 110,000 Federated Department Stores, Inc. 5,230,500 1.0
175,000 Nordstrom, Inc. 5,335,750 1.0
130,000 Sears, Roebuck & Co. 6,841,900 1.3
--------------------------------------------------------------------------------------------------------------
Specialty Retail 290,000 + AutoNation, Inc. 5,423,000 1.0
96,000 + Barnes & Noble, Inc. 2,860,800 0.5
216,000 Blockbuster Inc. (Class A) 4,162,320 0.8
313,000 Foot Locker, Inc. 5,602,700 1.1
--------------------------------------------------------------------------------------------------------------
Textiles, Apparel & 85,000 + Columbia Sportswear Company 4,950,400 1.0
Luxury Goods 21,000 Liz Claiborne, Inc. 774,690 0.1
--------------------------------------------------------------------------------------------------------------
Total Consumer Discretionary 111,426,640 21.6
====================================================================================================================================
Consumer Staples Beverages 153,000 + Constellation Brands, Inc. (Class A) 4,799,610 0.9
--------------------------------------------------------------------------------------------------------------
Food & Staples Retailing 186,000 CVS Corporation 6,543,480 1.3
846,000 + Rite Aid Corporation 4,847,580 0.9
41,000 SUPERVALU Inc. 1,034,020 0.2
--------------------------------------------------------------------------------------------------------------
Food Products 379,000 Tyson Foods, Inc. (Class A) 5,408,330 1.1
--------------------------------------------------------------------------------------------------------------
Total Consumer Staples 22,633,020 4.4
====================================================================================================================================
Energy Oil & Gas 106,000 ConocoPhillips 6,057,900 1.2
419,000 Exxon Mobil Corporation 15,327,020 3.0
157,000 Marathon Oil Corporation 4,642,490 0.9
72,000 Sunoco, Inc. 3,150,720 0.6
--------------------------------------------------------------------------------------------------------------
Total Energy 29,178,130 5.7
====================================================================================================================================
Financials Capital Markets 76,000 The Bear Stearns Companies Inc. 5,795,000 1.1
353,000 J.P. Morgan Chase & Co. 12,672,700 2.5
96,000 Lehman Brothers Holdings, Inc. 6,912,000 1.4
--------------------------------------------------------------------------------------------------------------
Commercial Banks 80,000 Bank of America Corporation 6,058,400 1.2
37,000 City National Corporation 2,227,770 0.4
104,000 FleetBoston Financial Corporation 4,200,560 0.8
129,000 Popular, Inc. 5,805,000 1.1
175,000 SouthTrust Corporation 5,573,750 1.1
371,000 U.S. Bancorp 10,098,620 2.0
159,000 Wachovia Corporation 7,293,330 1.4
--------------------------------------------------------------------------------------------------------------
Consumer Finance 14,000 Capital One Financial Corporation 851,200 0.2
145,000 MBNA Corporation 3,588,750 0.7
--------------------------------------------------------------------------------------------------------------
Diversified Financial 635,000 Citigroup Inc. 30,099,000 5.8
Services
--------------------------------------------------------------------------------------------------------------
Insurance 141,000 Berkley (W.R.) Corporation 4,834,890 1.0
26,000 The Chubb Corporation 1,737,060 0.3
98,000 MBIA, Inc. 5,841,780 1.1
126,000 Reinsurance Group of America,
Incorporated 5,033,700 1.0
22 MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003
Schedule of Investments (continued) Master Large Cap Value Portfolio
Value Percent of
Sector Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
====================================================================================================================================
Financials Thrifts & Mortgage Finance 60,000 Countrywide Credit Industries, Inc. $ 6,307,200 1.2%
(concluded) 137,000 Independence Community Bank Corp. 5,034,750 1.0
159,000 New York Community Bancorp, Inc. 5,755,800 1.1
--------------------------------------------------------------------------------------------------------------
Total Financials 135,721,260 26.4
====================================================================================================================================
Healthcare Biotechnology 90,000 + Invitrogen Corporation 5,723,100 1.1
--------------------------------------------------------------------------------------------------------------
Health Care Equipment 109,000 Bausch & Lomb Incorporated 5,249,440 1.0
& Supplies 52,000 Becton, Dickinson and Company 1,901,120 0.4
--------------------------------------------------------------------------------------------------------------
Health Care Providers 38,000 + Anthem, Inc. 2,600,340 0.5
& Services 142,000 + DaVita, Inc. 4,984,200 1.0
293,000 + Humana Inc. 5,944,970 1.1
134,000 Omnicare, Inc. 5,137,560 1.0
92,000 + PacifiCare Health Systems, Inc. 5,474,000 1.0
78,000 + Service Corporation International 378,300 0.1
--------------------------------------------------------------------------------------------------------------
Pharmaceuticals 345,000 + King Pharmaceuticals, Inc. 4,623,000 0.9
115,000 + Watson Pharmaceuticals, Inc. 4,516,050 0.9
--------------------------------------------------------------------------------------------------------------
Total Healthcare 46,532,080 9.0
====================================================================================================================================
Industrials Air Freight & Logistics 208,000 + J.B. Hunt Transport Services, Inc. 5,279,040 1.0
159,000 Ryder System, Inc. 4,770,000 0.9
--------------------------------------------------------------------------------------------------------------
Commercial Services & 343,000 + Cendant Corporation 7,007,490 1.4
Supplies 105,000 R.R. Donnelley & Sons Company 2,730,000 0.5
--------------------------------------------------------------------------------------------------------------
Electrical Equipment 190,000 Rockwell International Corporation 5,899,500 1.2
--------------------------------------------------------------------------------------------------------------
Industrial Conglomerates 87,000 Textron, Inc. 4,323,030 0.8
--------------------------------------------------------------------------------------------------------------
Machinery 32,000 Cummins Engine Company, Inc. 1,516,800 0.3
--------------------------------------------------------------------------------------------------------------
Total Industrials 31,525,860 6.1
====================================================================================================================================
Information Communications Equipment 561,000 + Corning Incorporated 6,159,780 1.2
Technology 175,000 + Emulex Corporation 4,956,000 1.0
265,000 + Juniper Networks, Inc. 4,767,350 0.9
66,000 Scientific-Atlanta, Inc. 1,953,600 0.4
--------------------------------------------------------------------------------------------------------------
Computers & Peripherals 194,000 + Storage Technology Corporation 4,675,400 0.9
--------------------------------------------------------------------------------------------------------------
Electronic Equipment & 233,000 + Arrow Electronics, Inc. 4,974,550 1.0
Instruments 297,000 + Avnet, Inc. 5,761,800 1.1
284,000 PerkinElmer, Inc. 5,114,840 1.0
176,000 + Sanmina--SCI Corporation 1,856,800 0.4
--------------------------------------------------------------------------------------------------------------
IT Services 183,000 + CheckFree Corp. 5,037,990 1.0
90,000 + Computer Sciences Corporation 3,565,800 0.7
331,000 + Unisys Corporation 5,084,160 1.0
--------------------------------------------------------------------------------------------------------------
Office Electronics 493,000 + Xerox Corporation 5,176,500 1.0
--------------------------------------------------------------------------------------------------------------
Semiconductors & 253,000 + Amkor Technology, Inc. 4,769,050 0.9
Semiconductor Equipment 239,000 + Cypress Semiconductor Corporation 5,128,940 1.0
131,000 + National Semiconductor Corporation 5,322,530 1.0
--------------------------------------------------------------------------------------------------------------
Software 181,000 Computer Associates International,
Inc. 4,257,120 0.8
171,000 + Macromedia, Inc. 3,267,810 0.6
132,000 + VERITAS Software Corporation 4,771,800 0.9
--------------------------------------------------------------------------------------------------------------
Total Information Technology 86,601,820 16.8
====================================================================================================================================
Materials Paper & Forest Products 217,000 Georgia-Pacific Group 5,702,760 1.1
--------------------------------------------------------------------------------------------------------------
Total Materials 5,702,760 1.1
====================================================================================================================================
Telecommunication Diversified 410,000 Sprint Corporation 6,560,000 1.3
Services Telecommunication Services
--------------------------------------------------------------------------------------------------------------
Wireless Telecommunication 657,000 + AT&T Wireless Services Inc. 4,763,250 0.9
Services 86,000 + Crown Castle International Corp. 1,088,760 0.2
--------------------------------------------------------------------------------------------------------------
Total Telecommunication Services 12,412,010 2.4
==============================================================================================================
MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003 23
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (concluded) Master Large Cap Value Portfolio
Value Percent of
Sector Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
====================================================================================================================================
Utilities Electric Utilities 231,000 Alliant Energy Corporation $ 5,557,860 1.1%
280,000 + Edison International 5,518,800 1.1
46,000 Entergy Corporation 2,479,400 0.5
49,000 Northeast Utilities 923,160 0.2
--------------------------------------------------------------------------------------------------------------
Gas Utilities 147,000 UGI Corporation 4,527,600 0.9
--------------------------------------------------------------------------------------------------------------
Multi-Utilities & 1,124,000 + Calpine Corporation 5,181,640 1.0
Unregulated Power 1,313,000 + Dynegy Inc. (Class A) 5,265,130 1.0
148,500 MDU Resources Group 3,360,555 0.6
26,000 ONEOK, Inc. 517,140 0.1
--------------------------------------------------------------------------------------------------------------
Total Utilities 33,331,285 6.5
==============================================================================================================
Total Common Stocks
(Cost--$420,528,670) 515,064,865 100.0
==============================================================================================================
====================================================================================================================================
Beneficial Interest/
Shares Held Short-Term Securities
====================================================================================================================================
$ 4,528,116 Merrill Lynch Liquidity Series,
LLC Cash Sweep Series I (a) 4,528,116 0.9
$63,959,712 Merrill Lynch Liquidity Series,
LLC Money Market Series (a)(b) 63,959,712 12.4
21,319,903 Merrill Lynch Premier Institutional
Fund (a)(b) 21,319,903 4.1
--------------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost--$89,807,731) 89,807,731 17.4
====================================================================================================================================
Total Investments (Cost--$510,336,401) 604,872,596 117.4
Liabilities in Excess of Other Assets (89,615,775) (17.4)
---------------------------
Net Assets $515,256,821 100.0%
===========================
* For Fund 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.
+ Non-income producing security.
(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 $ 4,528,116 $ 1,715
Merrill Lynch Liquidity Series,
LLC Money Market Series $46,958,802 $38,240
Merrill Lynch Premier Institutional Fund 541,013 $26,641
--------------------------------------------------------------------------
(b) Security was purchased with the cash proceeds from securities loans.
See Notes to Financial Statements.
24 MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003
Statement of Assets and Liabilities Master Large Cap Value Portfolio
As of October 31, 2003
=========================================================================================================================
Assets
- -------------------------------------------------------------------------------------------------------------------------
Investments, at value (including securities loaned of
$81,627,614) (identified cost--$510,336,401) .................. $ 604,872,596
Cash .......................................................... 10,103
Receivables:
Securities sold ............................................ $ 10,468,157
Contributions .............................................. 1,169,909
Dividends .................................................. 379,840
Securities lending--net .................................... 7,005
Interest ................................................... 338 12,025,249
-------------
Prepaid expenses .............................................. 4,192
-------------
Total assets .................................................. 616,912,140
-------------
=========================================================================================================================
Liabilities
- -------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value ..................... 85,279,615
Payables:
Securities purchased ....................................... 15,420,514
Withdrawals ................................................ 686,670
Investment adviser ......................................... 236,853
Other affiliates ........................................... 3,338 16,347,375
-------------
Accrued expenses .............................................. 28,329
-------------
Total liabilities ............................................. 101,655,319
-------------
=========================================================================================================================
Net Assets
- -------------------------------------------------------------------------------------------------------------------------
Net assets .................................................... $ 515,256,821
=============
=========================================================================================================================
Net Assets Consist of
- -------------------------------------------------------------------------------------------------------------------------
Investors' capital ............................................ $ 420,720,626
Unrealized appreciation on investments--net ................... 94,536,195
-------------
Net Assets .................................................... $ 515,256,821
=============
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003 25
[LOGO] Merrill Lynch Investment Managers
Statement of Operations Master Large Cap Value Portfolio
For the Year Ended October 31, 2003
=========================================================================================================================
Investment Income
- -------------------------------------------------------------------------------------------------------------------------
Dividends (net of $10,196 foreign withholding tax) ............ $ 6,519,628
Securities lending--net ....................................... 64,881
Interest ...................................................... 2,888
-------------
Total income .................................................. 6,587,397
-------------
=========================================================================================================================
Expenses
- -------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ...................................... $ 2,134,518
Accounting services ........................................... 194,632
Custodian fees ................................................ 44,246
Professional fees ............................................. 37,980
Trustees' fees and expenses ................................... 24,081
Printing and shareholder reports .............................. 1,116
Pricing fees .................................................. 971
Other ......................................................... 12,168
-------------
Total expenses ................................................ 2,449,712
-------------
Investment income--net ........................................ 4,137,685
-------------
=========================================================================================================================
Realized & Unrealized Gain on Investments--Net
- -------------------------------------------------------------------------------------------------------------------------
Realized gain on investments--net ............................. 2,522,074
Change in unrealized appreciation/depreciation
on investments--net ........................................... 100,831,622
-------------
Total realized and unrealized gain on investments--net ........ 103,353,696
-------------
Net Increase in Net Assets Resulting from Operations .......... $ 107,491,381
=============
See Notes to Financial Statements.
26 MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003
Statements of Changes in Net Assets Master Large Cap Value Portfolio
For the Year Ended
October 31,
---------------------------------
Increase (Decrease) in Net Assets: 2003 2002
=========================================================================================================================
Operations
- -------------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................ $ 4,137,685 $ 4,687,895
Realized gain (loss) on investments--net ...................... 2,522,074 (26,670,388)
Change in unrealized appreciation/depreciation
on investments--net ........................................... 100,831,622 (4,948,662)
---------------------------------
Net increase (decrease) in net assets resulting from operations 107,491,381 (26,931,155)
---------------------------------
=========================================================================================================================
Net Capital Transactions
- -------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions ................................... 127,486,446 109,576,366
Fair value of withdrawals ..................................... (106,638,839) (23,946,550)
---------------------------------
Net increase in net assets derived from capital transactions .. 20,847,607 85,629,816
---------------------------------
=========================================================================================================================
Net Assets
- -------------------------------------------------------------------------------------------------------------------------
Total increase in net assets .................................. 128,338,988 58,698,661
Beginning of year ............................................. 386,917,833 328,219,172
---------------------------------
End of year ................................................... $ 515,256,821 $ 386,917,833
=================================
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003 27
[LOGO] Merrill Lynch Investment Managers
Financial Highlights Master Large Cap Value Portfolio
For the Period
For the Year Ended December 22,
October 31, 1999+ to
The following ratios have been derived --------------------------------------------- October 31,
from information provided in the financial statements. 2003 2002 2001 2000
==============================================================================================================================
Total Investment Return**
- ------------------------------------------------------------------------------------------------------------------------------
Total investment return ................ 27.05% (3.40%) -- --
===============================================================
==============================================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ......... .57% .60% .67% 1.24%*
===============================================================
Expenses ............................... .57% .60% .67% 1.63%*
===============================================================
Investment income--net ................. .97% 1.17% .96% .17%*
===============================================================
==============================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 515,257 $ 386,918 $ 328,219 $ 77,138
===============================================================
Portfolio turnover ..................... 157.04% 136.92% 168.54% 81.99%
===============================================================
* Annualized.
** Total 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 VALUE FUND OCTOBER 31, 2003
Notes to Financial Statements Master Large Cap Value Portfolio
1. Significant Accounting Policies:
Master Large Cap Value Portfolio (the "Portfolio") is part of Master Large Cap
Series Trust (the "Trust"). The Trust is registered under the Investment Company
Act of 1940, as amended, and is organized as a Delaware statutory trust. The
Declaration of Trust permits the Trustees to issue nontransferable interests in
the 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 Trust.
Long positions traded in the over-the-counter ("OTC") market, Nasdaq Small Cap
or Bulletin Board are valued at the last available bid price or yield equivalent
obtained from one or more dealers or pricing services approved by the Board of
Trustees of the Trust. Short positions traded in the OTC market are valued at
the last available 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 Trust
employs pricing services to provide certain securities prices for the Trust.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Trustees of the Trust, including valuations furnished by the
pricing services retained by the 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 Trust under the general supervision of the Trust's Board
of Trustees. Such valuations and procedures will be reviewed periodically by the
Board of Trustees of the Trust.
Generally, trading in foreign securities, as well as U.S. government securities
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 Trust's Board
of Trustees or by the Investment Adviser using a pricing service and/or
procedures approved by the Trust's Board of Trustees.
(b) Derivative financial instruments -- The Portfolio may engage in various
portfolio investment strategies both to increase the return of the Portfolio and
to hedge, or protect, its exposure to interest rate movements and movements in
the securities markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
o Financial futures contracts -- The Portfolio may purchase or sell
financial futures contracts and options on such futures contracts. Futures
contracts are contracts for delayed delivery of securities at a specific
date and at a specific price or yield. Upon entering into a contract, the
Portfolio deposits and maintains as collateral such initial margin as
required by the exchange on which the transaction is effected. Pursuant to
the contract, the
MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003 29
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (continued) Master Large Cap Value Portfolio
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 considered as a "pass through" entity for
Federal income tax purposes. As such, each investor in the Portfolio is treated
as owner of its proportionate share of the net assets, income, expenses and
realized and unrealized gains and losses of the Portfolio. Therefore, no Federal
income tax provision is required. 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 receives a fee from the borrower. The
Portfolio typically receives the income on the loaned securities, but does not
receive the income on the collateral. Where the Portfolio receives cash
collateral, it may invest such collateral and retain the amount earned on such
investment, net of any amount rebated to the borrower. Loans of securities are
terminable at any time and the borrower, after notice, is required to return
borrowed securities within five business days. The Portfolio may pay reasonable
finder's, lending agent, administrative and custodial fees in connection with
its loans. In the
30 MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003
Notes to Financial Statements (concluded) Master Large Cap Value Portfolio
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 at an annual rate of .50% of the average daily
value of the Portfolio's net assets. FAM has entered into a Sub-Advisory
Agreement with Merrill Lynch Asset Management U.K. Limited ("MLAM U.K."), an
affiliate of FAM, pursuant to which MLAM U.K. provides investment advisory
services to FAM with respect to the Portfolio. There is no increase in the
aggregate fees paid by the Portfolio for these services.
In addition, MLPF&S received $60 in commissions on the execution of portfolio
security transactions for the Portfolio for the year ended October 31, 2003.
For the year ended October 31, 2003, the Portfolio reimbursed FAM $9,148 for
certain accounting services.
The Portfolio has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated or its affiliates. As of October 31, 2003, the
Portfolio lent securities with a value of $18,142,502 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 $28,011 in securities lending agent fees.
Certain officers and/or trustees of the Trust are officers and/or directors of
FAM, PSI, MLAM U.K. and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 2003 were $693,353,037 and $668,197,431, 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 ................ $ 2,522,074 $94,536,195
--------------------------------
Total ................................ $ 2,522,074 $94,536,195
================================
As of October 31, 2003, net unrealized appreciation for Federal income tax
purposes aggregated $89,659,542, of which $94,841,561 related to appreciated
securities and $5,182,019 related to depreciated securities. At October 31,
2003, the aggregate cost of investments for Federal income tax purposes was
$515,213,054.
4. Short-Term Borrowings:
The Portfolio, along with certain other funds managed by FAM and its affiliates,
is 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
investor withdrawals 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 facility. Amounts borrowed under the facility 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 facility during the year ended October 31, 2003.
MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003 31
[LOGO] Merrill Lynch Investment Managers
Independent Auditors' Report Master Large Cap Value Portfolio
To the Investor and Board of Trustees of
Master Large Cap Value 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 Value Portfolio 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 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 of 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 Value 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 17, 2003
32 MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003
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
Age: 63 Trustee 1999; 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.
- ------------------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003 33
[LOGO] Merrill Lynch Investment Managers
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, Inc.
Age: 49 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, Inc.
Age: 39 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
34 MERRILL LYNCH LARGE CAP VALUE FUND OCTOBER 31, 2003
Electronic Delivery
The Fund is now offering electronic delivery of communications to its
shareholders. In order to receive this service, you must register your account
and provide us with e-mail information. To sign up for this service, simply
access this website http://www.icsdelivery.com/live and follow the instructions.
When you visit this site, you will obtain a personal identification number
(PIN). You will need this PIN should you wish to update your e-mail address,
choose to discontinue this service and/or make any other changes to the service.
This service is not available for certain retirement accounts at this time.
MERRILL LYNCH LARGE CAP VALUE 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 Value Fund of
Merrill Lynch Large Cap Series Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
#CAPVAL -- 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 Value Fund and Master Large Cap Value Portfolio
By: /s/ Terry K. Glenn
------------------------------------
Terry K. Glenn,
President of
Merrill Lynch Large Cap Value Fund
and Master Large Cap Value 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 Value Fund
and Master Large Cap Value Portfolio
Date: December 22, 2003
By: /s/ Donald C. Burke
------------------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Large Cap Value Fund
and Master Large Cap Value Portfolio
Date: December 22, 2003
Attached hereto as a furnished exhibit are the certifications pursuant to
Section 906 of the Sarbanes-Oxley Act.