UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
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 of Merrill Lynch Large Cap
Series Funds, Inc.
Master Large Cap Value Portfolio of Master Large Cap Series Trust
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 of Merrill Lynch Large Cap Series Funds, Inc.
and Master Large Cap Value Portfolio of Master Large Cap Series Trust,
800 Scudders Mill Road, Plainsboro, NJ 08536. Mailing address: P.O. Box
9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 10/31/04
Date of reporting period: 11/01/03 - 04/30/04
Item 1 - Report to Stockholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
Merrill Lynch
Large Cap Value Fund
Of Merrill Lynch Large Cap Series Funds, Inc.
Semi-Annual Report
April 30, 2004
[LOGO] Merrill Lynch Investment Managers
Merrill Lynch Large Cap Value Fund
Portfolio Information as of April 30, 2004
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
Citigroup Inc. ....................................................... 4.4%
Exxon Mobil Corporation .............................................. 3.3
J.P. Morgan Chase & Co. .............................................. 2.1
The Allstate Corporation ............................................. 1.6
Motorola, Inc. ....................................................... 1.5
ConocoPhillips ....................................................... 1.3
Norfolk Southern Corporation ......................................... 1.3
Lucent Technologies Inc. ............................................. 1.3
Cendant Corporation .................................................. 1.3
TXU Corporation ...................................................... 1.2
- --------------------------------------------------------------------------------
Percent of
Five Largest Industries* Net Assets
- --------------------------------------------------------------------------------
Household Durables ................................................... 8.4%
Insurance ............................................................ 8.1
Oil & Gas ............................................................ 6.8
Health Care Providers & Services ..................................... 6.1
Multiline Retail ..................................................... 5.6
- --------------------------------------------------------------------------------
* For Portfolio compliance purposes, "Industries" means any one or more of
the industry sub-classifications used by one or more widely recognized
market indexes or ratings group indexes, and/or as defined by Portfolio
management. This definition may not apply for purposes of this report,
which may combine such industry sub-classifications for reporting ease.
Electronic Delivery
The Fund offers 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.
2 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004
A Letter From the President
Dear Shareholder
Equity markets produced positive results for the most recent six-month and
12-month reporting periods. The U.S. stock market, as measured by the Standard &
Poor's 500 Index, returned +6.27% for the six-month period and +22.88% for the
12-month period ended April 30, 2004.
Though equity markets enjoyed favorable returns overall, we did experience an
overdue market correction late in the period. This was largely in response to
disappointing employment news (which has improved markedly since then),
terrorist attacks in Madrid and instability in Iraq -- all of which weighed
heavily on the markets. However, despite the more recent skittishness, we still
observe substantial economic strength in the United States.
In fact, the U.S. economy has continued to benefit from 2003's significant
fiscal and monetary stimulus in the form of low interest rates and tax cuts.
This has opened the door to consumer spending, capital spending, increases in
exports and long-awaited job growth. A major shift on the employment front came
on April 2 when the Department of Labor reported the biggest monthly jobs
increase in four years. These developments have supported continued improvements
in corporate earnings -- a positive for stock markets. For its part, the Federal
Reserve Board maintained its accommodative policy stance, and is expected to
raise interest rates at a gradual pace in order to ensure the sustainability of
the current economic recovery.
The events and efforts of the past year leave us with a much stronger economy
today. Of course, markets will always fluctuate, and there are many
uncertainties -- not the least of which are geopolitical in nature -- which can
translate into negative market movements. Keeping this in mind, however, we
encourage you to revisit your portfolio and your asset allocation strategy to
ensure you are well positioned to take advantage of the opportunities that lie
ahead. Importantly, your financial advisor can help you develop a strategy most
suitable for your circumstances through all types of market and economic cycles.
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 APRIL 30, 2004 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
Despite a favorable backdrop of improving corporate earnings and economic
revitalization, an equity market correction late in the period produced a drag
on Fund performance.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended April 30, 2004, Merrill Lynch Large Cap Value
Fund's Class A, Class B, Class C, Class I and Class R Shares had total returns
of +7.60%, +7.25%, +7.17%, +7.76% and +7.42%, respectively. While these returns
reflect positive absolute results, the Fund's relative performance trailed the
+8.15% return of the unmanaged benchmark, the Russell 1000 Value Index, for the
same period. Fund returns were competitive with the Lipper Large-Cap Value Funds
category, which posted a return of +7.62% for the same six-month period. (Funds
in this Lipper category seek long-term growth of capital by investing in
large-capitalization companies that are considered to be undervalued relative to
a major unmanaged stock index.)
Importantly, over the long-term, the Fund has outperformed its benchmark, the
Russell 1000 Value Index. Since inception on December 22, 1999 through April 30,
2004, the Fund's Class A, Class B, Class C and Class I Shares had respective
total returns of +37.54%, +33.11%, +33.01% and +39.08%, far exceeding the
+13.92% return of the Russell 1000 Value Index. The Fund's Class R Shares, since
inception (January 3, 2003) to April 30, 2004, returned +33.10% compared to the
Index return of +26.77%. (Fund results shown do not reflect sales charges and
would be lower if sales charges were included. Complete performance information
can be found on pages 6 and 7 of this report to shareholders.)
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 2003 and the first quarter of 2004 were marked
by dramatic rises and falls in world markets, with the equity markets undergoing
a correction in the spring of 2004, despite strong economic growth and robust
corporate earnings.
What factors influenced Fund performance during the period?
The Fund invests primarily in a diversified portfolio of large cap companies
selected from securities found in the Russell 1000 Index. During the past six
months, the Portfolio was positioned in economically sensitive cyclical stocks.
Despite improving corporate earnings and economic revitalization, a combination
of interest rate fears, rising energy prices, risks to growth in China and a
destabilized U.S. dollar pushed equity prices lower late in the period. Given
the Portfolio's heightened exposure to stocks leveraged to economic recovery and
a market upturn, the correction had a greater impact on the Portfolio and
ultimately resulted in the underperformance of the Fund relative to its
benchmark index.
Stock selection in the health care, financials and industrials sectors benefited
performance during the period. On the negative side, stock selection in
information technology was a drag on performance.
At the individual stock level, the largest positive contributors to performance
were Foot Locker, Inc., DaVita, Inc., Motorola, Inc., Georgia-Pacific
Corporation and J.C. Penney Company, Inc. The largest detractors from
performance included Amkor Technology, Inc., Cypress Semiconductor Corporation,
Emulex Corporation and VERITAS Software Corporation. Underweights in Exxon Mobil
Corporation and Altria Group, Inc. also negatively affected performance.
What changes were made to the Portfolio during the period?
We increased our positions relative to the benchmark in materials, consumer
staples and energy based on our belief that stocks in these sectors would
benefit as we transition from an economic recovery to an environment of rising
interest rates. We reduced our position relative to the benchmark in
telecommunication services, given improved valuations, and in financials, based
on interest rate concerns.
4 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004
The largest purchases during the period included The Allstate Corporation,
Lucent Technologies Inc., Norfolk Southern Corporation, Motorola, Inc.,
Fairchild Semiconductor Corporation and CIGNA Corporation. The largest sales
included CVS Corporation, Sprint Corp. (PCS), Lehman Brothers Holdings, Inc.,
Anthem, Inc. and National Semiconductor Corporation.
How would you characterize the Portfolio's position at the close of the period?
The Portfolio's largest overweights as of April 30, 2004 were in the consumer
discretionary and information technology sectors, which we believe should
benefit from strong earnings growth. The largest underweights were in
financials, which tend to underperform in periods of rising interest rates, and
telecommunication services.
Companies exhibiting good earnings momentum, earnings surprise and valuation
characteristics saw strong performance through the end of 2003. However,
relative performance for these companies deteriorated as the broad markets
turned downward in spring 2004. We remain committed to these disciplines for
stock selection, and the Portfolio ended the period positioned in cyclical
stocks that we believe should benefit as investor focus returns to the robust
corporate earnings environment. Nonetheless, given the recent equity market
correction and interest rate pressures, we are moderating our exposure to
economic sensitivity as well as reducing our exposure to lower-capitalization
securities. Our intention is to continue to reduce the interest rate sensitivity
of the Portfolio as rates continue to increase.
The Federal Funds futures market now projects a near certain hike in the Federal
Funds target rate in June with another potential increase in August. We believe
the economy is stronger than many expected at this point. Strong payroll reports
for March and April, as well as recent data from the Institute for Supply
Management survey, indicate that a sustainable economic recovery is underway,
which should continue to support consumption and other business activity. We
believe a modest increase in inflation also is underway, and our projection at
the beginning of the year that the Federal Reserve Board would double its rate
from 1% to 2% by year-end currently seems more realistic.
The equity market correction, while not a surprise, has been more significant
than expected, particularly given the boom in corporate earnings. Our view is
that there is at least one more up-leg in the equity market before the cyclical
backdrop becomes a problem. The timing of this rally will hinge on when the
Treasury market calms, the dollar stabilizes or resumes its slow decline, and
oil prices ease. Some combination of these factors should set the stage for more
focus on earnings and a better equity market. In the meantime, sluggishness in
stock prices is likely to persist. We will continue to monitor economic and
market developments in order to make the most informed decisions regarding the
Portfolio's investments.
Robert C. Doll, Jr.
Senior Vice President and Senior Portfolio Manager
May 24, 2004
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004 5
[LOGO] Merrill Lynch Investment Managers
Performance Data
About Fund Performance
Investors are able to purchase shares of the Fund through multiple pricing
alternatives:
o Class A Shares incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
o Class B Shares are subject to a maximum contingent deferred sales charge
of 4% declining to 0% after six years. All Class B Shares purchased prior
to June 1, 2001 will maintain the four-year schedule. In addition, Class B
Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to Class A
Shares after approximately eight years. (There is no initial sales charge
for automatic share conversions.)
o Class C Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
o Class I Shares incur a maximum initial sales charge (front-end load) of
5.25% and bear no ongoing distribution or account maintenance fees. Class
I Shares are available only to eligible investors.
o Class R Shares do not incur a maximum sales charge (front-end load) or
deferred sales charge. These shares are subject to a distribution fee of
0.25% and an account maintenance fee of 0.25%. Class R Shares are
available only to certain retirement plans.
None of the past results shown should be considered a representation of future
performance. Current performance may be lower or higher than the performance
data quoted. Refer to www.mlim.ml.com to obtain more current performance
information. 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 gain distributions, if any, at net asset value on the
ex-dividend date. Investment return and principal value of shares will fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost. Dividends paid to each class of shares will vary because of the different
levels of account maintenance, distribution and transfer agency fees applicable
to each class, which are deducted from the income available to be paid to
shareholders.
Recent Performance Results
6-Month 12-Month Since Inception
As of April 30, 2004 Total Return Total Return Total Return
==========================================================================================
ML Large Cap Value Fund Class A Shares* +7.60% +33.66% +37.54%
- ------------------------------------------------------------------------------------------
ML Large Cap Value Fund Class B Shares* +7.25 +32.70 +33.11
- ------------------------------------------------------------------------------------------
ML Large Cap Value Fund Class C Shares* +7.17 +32.60 +33.01
- ------------------------------------------------------------------------------------------
ML Large Cap Value Fund Class I Shares* +7.76 +34.07 +39.08
- ------------------------------------------------------------------------------------------
ML Large Cap Value Fund Class R Shares* +7.42 +33.63 +33.10
- ------------------------------------------------------------------------------------------
Russell 1000 Value Index** +8.15 +26.26 +13.92/+26.77
- ------------------------------------------------------------------------------------------
* 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 APRIL 30, 2004
Performance Data (concluded)
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 4/30/04 +33.66% +26.64%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 4/30/04 + 7.59 + 6.27
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
Return Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 4/30/04 +32.70% +28.70%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 4/30/04 + 6.79 + 6.42
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
** Assuming payment of applicable contingent deferred sales charge.
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
One Year Ended 4/30/04 +32.60% +31.60%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 4/30/04 + 6.77 + 6.77
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
** Assuming payment of applicable contingent deferred sales charge.
- --------------------------------------------------------------------------------
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class I Shares*
================================================================================
One Year Ended 4/30/04 +34.07% +27.03%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 4/30/04 + 7.87 + 6.54
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
- --------------------------------------------------------------------------------
Return Without
Sales Charge
================================================================================
Class R Shares
================================================================================
One Year Ended 4/30/04 +33.63%
- --------------------------------------------------------------------------------
Inception (1/03/03) through 4/30/04 +24.18
- --------------------------------------------------------------------------------
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004 7
[LOGO] Merrill Lynch Investment Managers
Statement of Assets and Liabilities Merrill Lynch Large Cap Value Fund
As of April 30, 2004
=====================================================================================================================
Assets
- ---------------------------------------------------------------------------------------------------------------------
Investment in Master Large Cap Value Portfolio, at value
(identified cost--$570,817,708) ............................ $649,932,930
Prepaid expenses and other assets ........................... 78,874
------------
Total assets ................................................ 650,011,804
------------
=====================================================================================================================
Liabilities
- ---------------------------------------------------------------------------------------------------------------------
Payables:
Distributor .............................................. $ 348,193
Other affiliates ......................................... 162,620
Administrator ............................................ 159,449
-----------
Total liabilities ........................................... 670,262
------------
=====================================================================================================================
Net Assets
- ---------------------------------------------------------------------------------------------------------------------
Net assets .................................................. $649,341,542
============
=====================================================================================================================
Net Assets Consist of
- ---------------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.10 par value, 100,000,000
shares authorized .......................................... $ 758,584
Class B Shares of Common Stock, $.10 par value, 200,000,000
shares authorized .......................................... 1,607,507
Class C Shares of Common Stock, $.10 par value, 100,000,000
shares authorized .......................................... 1,268,502
Class I Shares of Common Stock, $.10 par value, 100,000,000
shares authorized .......................................... 1,137,972
Class R Shares of Common Stock, $.10 par value, 200,000,000
shares authorized .......................................... 32,295
Paid-in capital in excess of par ............................ 559,900,965
Accumulated investment loss--net ............................ $ (175,935)
Undistributed realized capital gains on investments allocated
from the Portfolio--net .................................... 5,696,430
Unrealized appreciation on investments allocated from the
Portfolio--net ............................................. 79,115,222
-----------
Total accumulated earnings--net ............................. 84,635,717
------------
Net Assets .................................................. $649,341,542
============
=====================================================================================================================
Net Asset Value
- ---------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $104,246,392 and 7,585,843
shares outstanding ......................................... $ 13.74
============
Class B--Based on net assets of $213,911,773 and 16,075,070
shares outstanding ......................................... $ 13.31
============
Class C--Based on net assets of $168,756,154 and 12,685,020
shares outstanding ......................................... $ 13.30
============
Class I--Based on net assets of $158,075,534 and 11,379,722
shares outstanding ......................................... $ 13.89
============
Class R--Based on net assets of $4,351,689 and 322,946 shares
outstanding ................................................ $ 13.47
============
See Notes to Financial Statements.
8 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004
Statement of Operations Merrill Lynch Large Cap Value Fund
For the Six Months Ended April 30, 2004
==================================================================================================================
Investment Income Allocated from the Portfolio--Net
- ------------------------------------------------------------------------------------------------------------------
Net investment income allocated from the Portfolio:
Dividends (net of $3,213 foreign withholding tax) ........ $ 4,600,521
Securities lending--net .................................. 44,745
Interest from affiliates ................................. 9,786
Expenses ................................................. (1,619,520)
------------
Net investment income allocated from the Portfolio .......... 3,035,532
------------
==================================================================================================================
Expenses
- ------------------------------------------------------------------------------------------------------------------
Account maintenance and distribution fees--Class B .......... $1,068,019
Account maintenance and distribution fees--Class C .......... 751,769
Administration fees ......................................... 726,788
Transfer agent fees--Class B ................................ 164,432
Transfer agent fees--Class C ................................ 117,350
Account maintenance fees--Class A ........................... 116,287
Transfer agent fees--Class I ................................ 82,125
Transfer agent fees--Class A ................................ 62,490
Printing and shareholder reports ............................ 48,927
Registration fees ........................................... 45,234
Professional fees ........................................... 14,353
Account maintenance and distribution fees--Class R .......... 4,598
Transfer agent fees--Class R ................................ 1,221
Other ....................................................... 7,874
----------
Total expenses .............................................. 3,211,467
------------
Investment loss--net ........................................ (175,935)
------------
==================================================================================================================
Realized & Unrealized Gain (Loss) on Investments Allocated from the Portfolio--Net
- ------------------------------------------------------------------------------------------------------------------
Realized gain on investments allocated from the Portfolio--net 50,172,091
Change in unrealized appreciation on investments allocated
from the Portfolio--net .................................... (15,420,741)
------------
Total realized and unrealized gain on investments allocated
from the Portfolio--net .................................... 34,751,350
------------
Net Increase in Net Assets Resulting from Operations ........ $ 34,575,415
============
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004 9
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets Merrill Lynch Large Cap Value Fund
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2004 2003
=====================================================================================================================
Operations
- ---------------------------------------------------------------------------------------------------------------------
Investment loss--net ........................................ $ (175,935) $ (893,002)
Realized gain on investments allocated from the Portfolio--net 50,172,091 2,715,422
Change in unrealized appreciation on investments allocated
from the Portfolio--net .................................... (15,420,741) 100,673,550
-----------------------------
Net increase in net assets resulting from operations ........ 34,575,415 102,495,970
-----------------------------
=====================================================================================================================
Capital Share Transactions
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share
transactions ............................................... 100,014,699 28,963,246
-----------------------------
=====================================================================================================================
Net Assets
- ---------------------------------------------------------------------------------------------------------------------
Total increase in net assets ................................ 134,590,114 131,459,216
Beginning of period ......................................... 514,751,428 383,292,212
-----------------------------
End of period* .............................................. $649,341,542 $514,751,428
=============================
* Accumulated investment loss--net ....................... $ (175,935) --
=============================
See Notes to Financial Statements.
10 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004
Financial Highlights Merrill Lynch Large Cap Value Fund
Class A
---------------------------------------------------------------
The following per share data and ratios have been derived For the Six For the Year Ended For the Period
from information provided in the financial statements. Months Ended October 31,@@ Dec. 22, 1999+
April 30, ------------------------------- to Oct. 31,
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000@@
====================================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ................. $ 12.77 $ 10.14 $ 10.62 $ 11.61 $ 10.00
-----------------------------------------------------------
Investment income (loss)--net ........................ .03++ .03++ .04++ .04++ --@
Realized and unrealized gain (loss)
on investments allocated from the
Portfolio--net ...................................... .94 2.60 (.52) (1.02) 1.61
-----------------------------------------------------------
Total from investment operations ..................... .97 2.63 (.48) (.98) 1.61
-----------------------------------------------------------
Less dividends from return of
capital--net ........................................ -- -- -- (.01) --
-----------------------------------------------------------
Net asset value, end of period ....................... $ 13.74 $ 12.77 $ 10.14 $ 10.62 $ 11.61
===========================================================
====================================================================================================================================
Total Investment Return**
- ------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ................... 7.60%+++ 25.94% (4.52%) (8.43%) 16.10%+++
===========================================================
====================================================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement*** .................... 1.22%* 1.28% 1.28% 1.29% 1.74%*
===========================================================
Expenses*** .......................................... 1.22%* 1.28% 1.28% 1.29% 3.78%*
===========================================================
Investment income (loss)--net ........................ .38%* .24% .49% .32% (.25%)*
===========================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ............. $104,246 $90,358 $46,020 $37,190 $ 8,377
===========================================================
Portfolio turnover of Master Large Cap Value Portfolio 61.30% 157.04% 136.92% 168.54% 81.99%
===========================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Includes the Fund's share of the Portfolio's allocated expenses.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Aggregate total investment return.
@ Amount is less than $(.01) per share.
@@ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004 11
[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 Six For the Year Ended For the Period
from information provided in the financial statements. Months Ended October 31, Dec. 22, 1999+
April 30, -------------------------------- to Oct. 31,
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
====================================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ................. $ 12.41 $ 9.93 $ 10.48 $ 11.54 $ 10.00
-----------------------------------------------------------
Investment loss--net ................................. (.03)++ (.05)++ (.03)++ (.04)++ (.01)
Realized and unrealized gain (loss)
on investments allocated from the
Portfolio--net ...................................... .93 2.53 (.52) (1.02) 1.55
-----------------------------------------------------------
Total from investment operations ..................... .90 2.48 (.55) (1.06) 1.54
-----------------------------------------------------------
Less dividends from return of
capital--net ........................................ -- -- -- --@ --
-----------------------------------------------------------
Net asset value, end of period ....................... $ 13.31 $ 12.41 $ 9.93 $ 10.48 $ 11.54
===========================================================
====================================================================================================================================
Total Investment Return**
- ------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ................... 7.25%+++ 24.97% (5.25%) (9.18%) 15.40%+++
===========================================================
====================================================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement*** .................... 2.00%* 2.05% 2.05% 2.07% 2.55%*
===========================================================
Expenses*** .......................................... 2.00%* 2.05% 2.05% 2.07% 3.91%*
===========================================================
Investment loss--net ................................. (.42%)* (.50%) (.28%) (.44%) (1.05%)*
===========================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) ...................................... $213,912 $202,190 $174,623 $167,613 $36,037
===========================================================
Portfolio turnover of Master Large
Cap Value Portfolio ................................. 61.30% 157.04% 136.92% 168.54% 81.99%
===========================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Includes the Fund's share of the Portfolio's allocated expenses.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Aggregate total investment return.
@ Amount is less than $(.01) per share.
See Notes to Financial Statements.
12 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004
Financial Highlights (continued) Merrill Lynch Large Cap Value Fund
Class C
---------------------------------------------------------------
The following per share data and ratios have been derived For the Six For the Year Ended For the Period
from information provided in the financial statements. Months Ended October 31, Dec. 22, 1999+
April 30, -------------------------------- to Oct. 31,
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
====================================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ................. $ 12.41 $ 9.93 $ 10.48 $ 11.54 $ 10.00
-----------------------------------------------------------
Investment loss--net ................................. (.03)++ (.05)++ (.03)++ (.04)++ (.01)
Realized and unrealized gain (loss)
on investments allocated from the
Portfolio--net ...................................... .92 2.53 (.52) (1.02) 1.55
-----------------------------------------------------------
Total from investment operations ..................... .89 2.48 (.55) (1.06) 1.54
-----------------------------------------------------------
Less dividends from return of capital--net ........... -- -- -- --@ --
-----------------------------------------------------------
Net asset value, end of period ....................... $ 13.30 $ 12.41 $ 9.93 $ 10.48 $ 11.54
===========================================================
====================================================================================================================================
Total Investment Return**
- ------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ................... 7.17%+++ 24.97% (5.25%) (9.18%) 15.40%+++
===========================================================
====================================================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement*** .................... 2.00%* 2.06% 2.05% 2.07% 2.54%*
===========================================================
Expenses*** .......................................... 2.00%* 2.06% 2.05% 2.07% 4.05%*
===========================================================
Investment loss--net ................................. (.40%)* (.51%) (.28%) (.45%) (1.04%)*
===========================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) ...................................... $168,756 $129,456 $ 95,895 $77,901 $15,885
===========================================================
Portfolio turnover of Master Large
Cap Value Portfolio ................................. 61.30% 157.04% 136.92% 168.54% 81.99%
===========================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Includes the Fund's share of the Portfolio's allocated expenses.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Aggregate total investment return.
@ Amount is less than $(.01) per share.
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004 13
[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 Six For the Year Ended For the Period
from information provided in the financial statements. Months Ended October 31,@@ Dec. 22, 1999+
April 30, ------------------------------ to Oct. 31,
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000@@
====================================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ................. $ 12.89 $ 10.21 $ 10.67 $ 11.64 $ 10.00
-----------------------------------------------------------
Investment income (loss)--net ........................ .04++ .06++ .05++ .07++ --@
Realized and unrealized gain (loss)
on investments allocated from the
Portfolio--net ...................................... .96 2.62 (.51) (1.03) 1.64
-----------------------------------------------------------
Total from investment operations ..................... 1.00 2.68 (.46) (.96) 1.64
-----------------------------------------------------------
Less dividends from return of
capital--net ........................................ -- -- -- (.01) --
-----------------------------------------------------------
Net asset value, end of period ....................... $ 13.89 $ 12.89 $ 10.21 $ 10.67 $ 11.64
===========================================================
====================================================================================================================================
Total Investment Return**
- ------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ................... 7.76%+++ 26.25% (4.31%) (8.21%) 16.40%+++
===========================================================
====================================================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement*** .................... .97%* 1.03% 1.03% 1.04% 1.32%*
===========================================================
Expenses*** .......................................... .97%* 1.03% 1.03% 1.04% 5.32%*
===========================================================
Investment income (loss)--net ........................ .65%* .51% .76% .60% (.07%)*
===========================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) ...................................... $158,076 $92,736 $66,754 $42,641 $16,211
===========================================================
Portfolio turnover of Master Large
Cap Value Portfolio ................................. 61.30% 157.04% 136.92% 168.54% 81.99%
===========================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Includes the Fund's share of the Portfolio's allocated expenses.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Aggregate total investment return.
@ Amount is less than $(.01) per share.
@@ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
See Notes to Financial Statements.
14 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004
Financial Highlights (concluded) Merrill Lynch Large Cap Value Fund
Class R
----------------------------
For the Period
The following per share data and ratios have been derived For the Six January 3,
from information provided in the financial statements. Months Ended 2003+ to
April 30, October 31,
Increase in Net Asset Value: 2004 2003
====================================================================================================================
Per Share Operating Performance
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ........................ $ 12.54 $ 10.12
----------------------------
Investment income--net*** ................................... .03 .01
Realized and unrealized gain on investments allocated from
the Portfolio--net ......................................... .90 2.41
----------------------------
Total from investment operations ............................ .93 2.42
----------------------------
Net asset value, end of period .............................. $ 13.47 $ 12.54
============================
====================================================================================================================
Total Investment Return**
- --------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .......................... 7.42%@ 23.91%@
============================
====================================================================================================================
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement++ ............................ 1.38%* 1.53%*
============================
Expenses++ .................................................. 1.38%* 1.53%*
============================
Investment income--net ...................................... .39%* .01%*
============================
====================================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .................... $ 4,352 $ 12
============================
Portfolio turnover of Master Large Cap Value Portfolio ...... 61.30% 157.04%
============================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
+ Commencement of operations.
++ 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 APRIL 30, 2004 15
[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 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. Actual results may differ from these
estimates. These unaudited financial statements reflect all adjustments, which
are, in the opinion of management, necessary to a fair statement of the results
for the interim period presented. All such adjustments are of a normal,
recurring nature. The percentage of the Portfolio owned by the Fund at April 30,
2004 was 100%. The Fund offers multiple classes of shares. Shares of Class A and
Class I are sold with a front-end sales charge. Shares of Class B and Class C
may be subject to a contingent deferred sales charge. Class R Shares are sold
only to certain retirement plans. All classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
that Class A, Class B, Class C and Class R Shares bear certain expenses related
to the account maintenance of such shares, and Class B, Class C and Class R
Shares also bear certain expenses related to the distribution of such shares.
Each class has exclusive voting rights with respect to matters relating to its
account maintenance and distribution expenditures. Income, expenses (other than
expenses attributable to a specific class) and realized and unrealized gains and
losses on investments are allocated daily to each class based on its relative
net assets. The following is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments -- The Fund records its 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.
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"), an indirect, 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.
16 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004
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 six months ended April 30, 2004, 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 ............................ $ 8,769 $118,880
Class I ............................ $ 67 $ 966
- --------------------------------------------------------------------------------
For the six months ended April 30, 2004, MLPF&S received contingent deferred
sales charges of $164,377 and $6,569 relating to transactions in Class B and
Class C Shares, respectively. Furthermore, MLPF&S received contingent deferred
sales charges of $24,822 relating to transactions subject to front-end sales
charge waivers in Class A Shares.
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, FAMD, PSI, FDS, and/or ML & Co.
3. Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$100,014,699 and $28,963,246 for the six months ended April 30, 2004 and the
year ended October 31, 2003, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Dollar
Months Ended April 30, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 2,174,676 $ 30,160,906
Automatic conversion of shares ......... 336,250 4,678,195
------------------------------
Total issued ........................... 2,510,926 34,839,101
Shares redeemed ........................ (2,002,799) (26,584,323)
------------------------------
Net increase ........................... 508,127 $ 8,254,778
==============================
- --------------------------------------------------------------------------------
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
==============================
- --------------------------------------------------------------------------------
Class B Shares for the Six Dollar
Months Ended April 30, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 1,596,449 $ 21,480,672
Automatic conversion of shares ......... (346,579) (4,678,195)
Shares redeemed ........................ (1,467,710) (19,557,906)
------------------------------
Net decrease ........................... (217,840) $ (2,755,429)
==============================
- --------------------------------------------------------------------------------
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 C Shares for the Six Dollar
Months Ended April 30, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 3,028,681 $ 40,894,888
Shares redeemed ........................ (778,052) (10,396,068)
------------------------------
Net increase ........................... 2,250,629 $ 30,498,820
==============================
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004 17
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (concluded) Merrill Lynch Large Cap Value Fund
- --------------------------------------------------------------------------------
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 I Shares for the Six Dollar
Months Ended April 30, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................... 5,180,817 $ 73,472,483
Shares redeemed ...................... (996,617) (13,895,888)
------------------------------
Net increase ......................... 4,184,200 $ 59,576,595
==============================
- --------------------------------------------------------------------------------
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
==============================
- --------------------------------------------------------------------------------
Class R Shares for the Six Dollar
Months Ended April 30, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................... 348,770 $ 4,815,707
Shares redeemed ...................... (26,745) (375,772)
------------------------------
Net increase ......................... 322,025 $ 4,439,935
==============================
- --------------------------------------------------------------------------------
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. Capital Loss Carryforward
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.
Officers and Directors/Trustees
Terry K. Glenn, President and Director/Trustee
James H. Bodurtha, Director/Trustee
Joe Grills, Director/Trustee
Herbert I. London, Director/Trustee
Andre F. Perold, Director/Trustee
Roberta Cooper Ramo, Director/Trustee
Robert S. Salomon, Jr., Director/Trustee
Stephen B. Swensrud, Director/Trustee
Robert C. Doll, Jr., Senior Vice President and
Senior Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Phillip S. Gillespie, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109-3661
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
18 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004
Schedule of Investments Master Large Cap Value Portfolio
Value Percent of
Sector Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
====================================================================================================================================
Consumer Discretionary Auto Components 72,000 Autoliv, Inc. $ 3,062,160 0.5%
336,000 Dana Corporation 6,773,760 1.0
60,000 Lear Corporation 3,637,200 0.6
------------------------------------------------------------------------------------------------------------
Automobiles 130,000 General Motors Corporation 6,164,600 1.0
------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure 79,000 Mandalay Resort Group 4,538,550 0.7
180,000 McDonald's Corporation 4,901,400 0.8
------------------------------------------------------------------------------------------------------------
Household Durables 100,000 Centex Corporation 4,795,000 0.7
247,000 D.R. Horton, Inc. 7,113,600 1.1
87,000 Fortune Brands, Inc. 6,633,750 1.0
96,000 KB HOME 6,617,280 1.0
124,000 Lennar Corporation (Class A) 5,809,400 0.9
108,000 MDC Holdings, Inc. 6,673,320 1.0
125,000 Pulte Corporation 6,146,250 0.9
74,000 The Ryland Group, Inc. 5,842,300 0.9
142,000 The Stanley Works 6,036,420 0.9
------------------------------------------------------------------------------------------------------------
Media 30,000 +Getty Images, Inc. 1,638,000 0.3
------------------------------------------------------------------------------------------------------------
Multiline Retail 17,000 Federated Department Stores,
Inc. 833,000 0.1
228,000 J.C. Penney Company, Inc. 7,720,080 1.2
252,000 The May Department Stores
Company 7,761,600 1.2
136,000 The Neiman Marcus Group,
Inc. (Class A) 6,615,040 1.0
193,000 Nordstrom, Inc. 6,876,590 1.1
466,000 Saks Incorporated 6,710,400 1.0
------------------------------------------------------------------------------------------------------------
Specialty Retail 184,000 +Barnes & Noble, Inc. 5,496,080 0.8
93,000 Borders Group, Inc. 2,229,210 0.3
175,000 Claire's Stores, Inc. 3,566,500 0.6
290,000 Foot Locker, Inc. 6,960,000 1.1
20,000 Regis Corporation 868,400 0.1
------------------------------------------------------------------------------------------------------------
Total Consumer Discretionary 142,019,890 21.8
====================================================================================================================================
Consumer Staples Beverages 80,000 Adolph Coors Company (Class B) 5,256,800 0.8
269,000 Coca-Cola Enterprises Inc. 7,263,000 1.1
------------------------------------------------------------------------------------------------------------
Food & Staples Retailing 1,173,000 +Rite Aid Corporation 5,747,700 0.9
41,000 SUPERVALU Inc. 1,262,390 0.2
------------------------------------------------------------------------------------------------------------
Food Products 461,000 Archer-Daniels-Midland
Company 8,095,160 1.2
394,000 Tyson Foods, Inc. (Class A) 7,383,560 1.2
------------------------------------------------------------------------------------------------------------
Household Products 46,000 +Energizer Holdings, Inc. 1,991,800 0.3
------------------------------------------------------------------------------------------------------------
Tobacco 22,000 Altria Group, Inc. 1,218,360 0.2
------------------------------------------------------------------------------------------------------------
Total Consumer Staples 38,218,770 5.9
====================================================================================================================================
Energy Oil & Gas 153,000 Ashland Inc. 7,328,700 1.1
117,000 ConocoPhillips 8,342,100 1.3
511,000 Exxon Mobil Corporation 21,743,050 3.3
72,000 Sunoco, Inc. 4,528,800 0.7
36,000 Valero Energy Corporation 2,295,360 0.4
------------------------------------------------------------------------------------------------------------
Total Energy 44,238,010 6.8
====================================================================================================================================
Financials Capital Markets 91,000 The Bear Stearns Companies
Inc. 7,292,740 1.1
509,000 +E* TRADE Group, Inc. 5,782,240 0.9
363,000 J.P. Morgan Chase & Co. 13,648,800 2.1
94,000 Lehman Brothers Holdings,
Inc. 6,899,600 1.1
------------------------------------------------------------------------------------------------------------
Commercial Banks 92,000 Bank of America Corporation 7,405,080 1.1
100,000 Commerce Bancorp, Inc. 5,701,000 0.9
142,000 National City Corporation 4,923,140 0.8
19,000 Wachovia Corporation 869,250 0.1
------------------------------------------------------------------------------------------------------------
Consumer Finance 256,000 MBNA Corporation 6,241,280 1.0
------------------------------------------------------------------------------------------------------------
Diversified Financial Services 587,000 Citigroup Inc. 28,228,830 4.4
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004 19
[LOGO] Merrill Lynch Investment Managers
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 Insurance 232,000 The Allstate Corporation $ 10,648,800 1.6%
(concluded) 226,000 American Financial Group,
Inc. 6,938,200 1.1
195,000 Fidelity National Financial,
Inc. 7,137,000 1.1
89,000 The Hartford Financial
Services Group, Inc. 5,436,120 0.8
161,000 Lincoln National Corporation 7,225,680 1.1
38,000 Loews Corporation 2,204,380 0.3
115,000 MBIA, Inc. 6,772,350 1.0
129,000 Prudential Financial, Inc. 5,668,260 0.9
27,000 Unitrin, Inc. 1,070,550 0.2
------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance 130,000 Countrywide Credit
Industries, Inc. 7,709,000 1.2
167,000 Independence Community
Bank Corp. 6,083,810 0.9
269,999 New York Community Bancorp,
Inc. 6,768,875 1.0
------------------------------------------------------------------------------------------------------------
Total Financials 160,654,985 24.7
====================================================================================================================================
Health Care Biotechnology 97,000 +Invitrogen Corporation 7,006,310 1.1
------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies 108,000 Bausch & Lomb Incorporated 6,785,640 1.0
140,000 Becton, Dickinson and
Company 7,077,000 1.1
------------------------------------------------------------------------------------------------------------
Health Care Providers & 119,000 CIGNA Corporation 7,676,690 1.2
Services 128,000 +DaVita, Inc. 6,540,800 1.0
413,000 +Humana Inc. 6,727,770 1.0
119,000 Omnicare, Inc. 4,936,120 0.8
183,000 +PacifiCare Health Systems,
Inc. 6,544,080 1.0
946,000 +Service Corporation
International 6,990,940 1.1
------------------------------------------------------------------------------------------------------------
Total Health Care 60,285,350 9.3
====================================================================================================================================
Industrials Air Freight & Logistics 186,000 Ryder System, Inc. 6,842,940 1.0
------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies 344,000 Cendant Corporation 8,145,920 1.3
------------------------------------------------------------------------------------------------------------
Electrical Equipment 215,000 Rockwell Automation, Inc. 7,028,350 1.1
------------------------------------------------------------------------------------------------------------
Industrial Conglomerates 12,000 Textron, Inc. 662,160 0.1
------------------------------------------------------------------------------------------------------------
Machinery 113,000 Cummins Engine Company, Inc. 6,758,530 1.0
------------------------------------------------------------------------------------------------------------
Road & Rail 350,000 Norfolk Southern Corporation 8,337,000 1.3
------------------------------------------------------------------------------------------------------------
Total Industrials 37,774,900 5.8
====================================================================================================================================
Information Technology Communications Equipment 126,000 +Avaya Inc. 1,723,680 0.3
494,000 +Corning Incorporated 5,448,820 0.8
188,000 +Juniper Networks, Inc. 4,113,440 0.6
2,433,000 +Lucent Technologies Inc. 8,199,210 1.3
520,000 Motorola, Inc. 9,490,000 1.5
------------------------------------------------------------------------------------------------------------
Computers & Peripherals 131,000 +NCR Corporation 5,854,390 0.9
110,000 +Storage Technology
Corporation 2,889,700 0.4
------------------------------------------------------------------------------------------------------------
Electronic Equipment & 269,000 +Arrow Electronics, Inc. 6,800,320 1.1
Instruments 306,000 +Avnet, Inc. 6,621,840 1.0
421,000 +Ingram Micro Inc. (Class A) 5,030,950 0.8
239,000 PerkinElmer, Inc. 4,600,750 0.7
176,000 +Sanmina--SCI Corporation 1,763,520 0.3
98,000 +Tech Data Corporation 3,332,000 0.5
------------------------------------------------------------------------------------------------------------
Information Technology Services 90,000 +Computer Sciences Corporation 3,681,900 0.6
------------------------------------------------------------------------------------------------------------
Office Electronics 546,000 +Xerox Corporation 7,332,780 1.1
------------------------------------------------------------------------------------------------------------
Semiconductors & 474,000 +Advanced Micro Devices, Inc. 6,740,280 1.0
Semiconductor Equipment 246,000 +Amkor Technology, Inc. 1,987,680 0.3
670,000 +Atmel Corporation 3,912,800 0.6
268,000 +Cypress Semiconductor
Corporation 3,743,960 0.6
329,000 +Fairchild Semiconductor
Corporation 6,405,630 1.0
------------------------------------------------------------------------------------------------------------
Software 142,000 Autodesk, Inc. 4,757,000 0.7
------------------------------------------------------------------------------------------------------------
Total Information Technology 104,430,650 16.1
============================================================================================================
20 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004
Schedule of Investments (concluded) Master Large Cap Value Portfolio
Value Percent of
Sector Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
====================================================================================================================================
Materials Chemicals 166,000 Eastman Chemical Company $ 7,066,620 1.1%
------------------------------------------------------------------------------------------------------------
Containers & Packaging 46,000 Ball Corporation 3,036,000 0.5
119,000 +Owens-Illinois, Inc. 1,661,240 0.2
------------------------------------------------------------------------------------------------------------
Metals & Mining 9,000 +Phelps Dodge Corporation 592,470 0.1
------------------------------------------------------------------------------------------------------------
Paper & Forest Products 218,000 Georgia-Pacific Corporation 7,651,800 1.2
------------------------------------------------------------------------------------------------------------
Total Materials 20,008,130 3.1
====================================================================================================================================
Utilities Electric Utilities 256,000 Alliant Energy Corporation 6,364,160 1.0
327,000 Edison International 7,651,800 1.2
307,000 Northeast Utilities 5,633,450 0.9
240,000 TXU Corporation 8,193,600 1.2
------------------------------------------------------------------------------------------------------------
Multi-Utilities & Unregulated 1,558,000 +Dynegy Inc. (Class A) 6,169,680 0.9
Power 694,000 The Williams Companies, Inc. 7,148,200 1.1
------------------------------------------------------------------------------------------------------------
Total Utilities 41,160,890 6.3
============================================================================================================
Total Common Stocks
(Cost--$569,676,353) 648,791,575 99.8
============================================================================================================
Beneficial Interest/
Shares Held Short-Term Securities
====================================================================================================================================
$ 2,631,993 Merrill Lynch Liquidity
Series, LLC Cash Sweep Series
I (a) 2,631,993 0.4
$81,444,325 Merrill Lynch Liquidity
Series, LLC Money Market
Series (a)(b) 81,444,325 12.5
27,148,108 Merrill Lynch Premier
Institutional Fund (a)(b) 27,148,108 4.2
------------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost--$111,224,426) 111,224,426 17.1
====================================================================================================================================
Total Investments (Cost--$680,900,779) 760,016,001 116.9
Liabilities in Excess of Other Assets (110,083,071) (16.9)
-----------------------
Net Assets $649,932,930 100.0%
=======================
* For Portfolio compliance purposes, "Industry" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Portfolio
management. This definition may not apply for purposes of this report,
which may combine such industry sub-classifications for reporting ease.
+ Non-income producing security.
(a) Investments in companies considered to be an affiliate of the Portfolio
(such companies are defined as "Affiliated Companies" in Section 2(a)(3)
of the Investment Company Act of 1940) are as follows:
--------------------------------------------------------------------------
Interest/
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $(1,896,123) $ 9,786
Merrill Lynch Liquidity Series, LLC
Money Market Series $17,484,613 $40,911
Merrill Lynch Premier
Institutional Fund 5,828,205 $ 3,834
--------------------------------------------------------------------------
(b) Security was purchased with the cash proceeds from securities loans.
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004 21
[LOGO] Merrill Lynch Investment Managers
Statement of Assets and Liabilities Master Large Cap Value Portfolio
As of April 30, 2004
==================================================================================================================
Assets
- ------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (including
securities loaned of $103,749,521) (identified
cost--$569,676,353) ........................................ $648,791,575
Investments in affiliated securities, at value (identified
cost--$111,224,426) ........................................ 111,224,426
Receivables:
Securities sold .......................................... $16,080,886
Contributions ............................................ 2,301,941
Dividends ................................................ 1,299,300
Securities lending--net .................................. 15,526
Interest from affiliates ................................. 1,573 19,699,226
-----------
Prepaid expenses ............................................ 4,193
------------
Total assets ................................................ 779,719,420
------------
==================================================================================================================
Liabilities
- ------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value ................... 108,592,433
Payables:
Securities purchased ..................................... 20,084,827
Withdrawals .............................................. 778,734
Investment adviser ....................................... 319,065
Other affiliates ......................................... 4,057 21,186,683
-----------
Accrued expenses and other liabilities ...................... 7,374
------------
Total liabilities ........................................... 129,786,490
------------
==================================================================================================================
Net Assets
- ------------------------------------------------------------------------------------------------------------------
Net assets .................................................. $649,932,930
============
==================================================================================================================
Net Assets Consist of
- ------------------------------------------------------------------------------------------------------------------
Investors' capital .......................................... $570,817,708
Unrealized appreciation on investments--net ................. 79,115,222
------------
Net Assets .................................................. $649,932,930
============
See Notes to Financial Statements.
22 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004
Statement of Operations Master Large Cap Value Portfolio
For the Six Months Ended April 30, 2004
==================================================================================================================
Investment Income
- ------------------------------------------------------------------------------------------------------------------
Dividends (net of $3,213 foreign withholding tax) ........... $ 4,600,526
Securities lending--net ..................................... 44,745
Interest from affiliates .................................... 9,786
------------
Total income ................................................ 4,655,057
------------
==================================================================================================================
Expenses
- ------------------------------------------------------------------------------------------------------------------
Investment advisory fees .................................... $1,454,494
Accounting services ......................................... 101,667
Custodian fees .............................................. 23,593
Professional fees ........................................... 20,832
Trustees' fees and expenses ................................. 11,952
Printing and shareholder reports ............................ 579
Pricing fees ................................................ 485
Other ....................................................... 5,920
----------
Total expenses .............................................. 1,619,522
------------
Investment income--net ...................................... 3,035,535
------------
==================================================================================================================
Realized & Unrealized Gain (Loss) on Investments--Net
- ------------------------------------------------------------------------------------------------------------------
Realized gain on investments--net ........................... 50,172,155
Change in unrealized appreciation on investments--net ....... (15,420,973)
------------
Total realized and unrealized gain on investments--net ...... 34,751,182
------------
Net Increase in Net Assets Resulting from Operations ........ $ 37,786,717
============
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004 23
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets Master Large Cap Value Portfolio
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2004 2003
==================================================================================================================
Operations
- ------------------------------------------------------------------------------------------------------------------
Investment income--net ...................................... $ 3,035,535 $ 4,137,685
Realized gain on investments--net ........................... 50,172,155 2,522,074
Change in unrealized appreciation on investments--net ....... (15,420,973) 100,831,622
----------------------------
Net increase in net assets resulting from operations ........ 37,786,717 107,491,381
----------------------------
==================================================================================================================
Capital Transactions
- ------------------------------------------------------------------------------------------------------------------
Proceeds from contributions ................................. 170,824,656 127,486,446
Fair value of withdrawals ................................... (73,935,264) (106,638,839)
----------------------------
Net increase in net assets derived from capital transactions 96,889,392 20,847,607
----------------------------
==================================================================================================================
Net Assets
- ------------------------------------------------------------------------------------------------------------------
Total increase in net assets ................................ 134,676,109 128,338,988
Beginning of period ......................................... 515,256,821 386,917,833
----------------------------
End of period ............................................... $ 649,932,930 $ 515,256,821
============================
See Notes to Financial Statements.
Financial Highlights Master Large Cap Value Portfolio
For the Six For the Period
Months Ended For the Year Ended October 31, December 22, 1999+
The following per share data and ratios have been derived April 30, ------------------------------- to October 31,
from information provided in the financial statements. 2004 2003 2002 2001 2000
====================================================================================================================================
Total Investment Return**
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return ............................ 7.96%++ 27.05% (3.40%) -- --
===========================================================
====================================================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ..................... .56%* .57% .60% .67% 1.24%*
===========================================================
Expenses ........................................... .56%* .57% .60% .67% 1.63%*
===========================================================
Investment income--net ............................. 1.04%* .97% 1.17% .96% .17%*
===========================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) .................................... $649,933 $515,257 $386,918 $328,219 $77,138
===========================================================
Portfolio turnover ................................. 61.30% 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.
++ Aggregate total investment return.
See Notes to Financial Statements.
24 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004
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. Actual results may differ from these
estimates. These unaudited financial statements reflect all adjustments, which
are, in the opinion of management, necessary to a fair statement of the results
for the interim period presented. All such adjustments are of a normal,
recurring nature. The following is a summary of significant accounting policies
followed by the Portfolio.
(a) Valuation of investments -- Equity securities that are held by the Portfolio
that are traded on stock exchanges or the Nasdaq National Market are valued at
the last sale price or official close price on the exchange, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price for long positions, and at the last available ask
price for short positions. In cases where equity securities are traded on more
than one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Trustees of the
Portfolio. Long positions traded in the over-the-counter ("OTC") market, Nasdaq
Small Cap or Bulletin Board are valued at the last available bid price or yield
equivalent obtained from one or more dealers or pricing services approved by the
Board of Trustees of the Portfolio. Short positions traded in the OTC market are
valued at the last available ask price. Portfolio securities that are traded
both in the OTC market and on a stock exchange are valued according to the
broadest and most representative market.
Options written are valued at the last sale price in the case of exchange-traded
options or, in the case of options traded in the OTC market, the last ask price.
Options purchased are valued at their last sale price in the case of
exchange-traded options or, in the case of options traded in the OTC market, the
last bid price. Swap agreements are valued daily based upon quotations from
market makers. Financial futures contracts and options thereon, which are traded
on exchanges, are valued at their last sale price as of the close of such
exchanges. Obligations with remaining maturities of 60 days or less are valued
at amortized cost unless the Investment Adviser believes that this method no
longer produces fair valuations.
Repurchase agreements are valued at cost plus accrued interest. The Portfolio
employs pricing services to provide certain securities prices for the Portfolio.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Trustees of the Portfolio, including valuations furnished by the
pricing services retained by the Portfolio, which may use a matrix system for
valuations. The procedures of a pricing service and its valuations are reviewed
by the officers of the Portfolio under the general supervision of the
Portfolio's Board of Trustees. Such valuations and procedures will be reviewed
periodically by the Board of Trustees of the Portfolio.
Generally, trading in foreign securities, as well as U.S. government securities
and money market instruments, is substantially completed each day at various
times prior to the close of business on the New York Stock Exchange ("NYSE").
The values of such securities used in computing the net assets 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 assets. If events (for example, a company announcement, market
volatility or a natural disaster) occur during such periods that are expected to
materially affect the value of such securities, those securities may be valued
at their fair value as determined in good faith by the Portfolio's Board of
Trustees or by the Investment Adviser using a pricing service and/or procedures
approved by the Portfolio's Board of Trustees.
(b) Derivative financial instruments -- The Portfolio may engage in various
portfolio investment strategies both to increase the return of the Portfolio and
to hedge, or protect, its exposure to interest rate movements and movements in
the securities markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
o Financial futures contracts -- The Portfolio may purchase or sell
financial futures contracts and options on such futures contracts. Futures
contracts are contracts for
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004 25
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (continued) Master Large Cap Value Portfolio
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 Portfolio
agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Portfolio as unrealized
gains or losses. When the contract is closed, the Portfolio records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was
closed.
o Options -- The Portfolio may purchase and write call and put options. When
the Portfolio writes an option, an amount equal to the premium received by
the Portfolio is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked to market to reflect the
current market value of the option written. When a security is purchased
or sold through an exercise of an option, the related premium paid (or
received) is added to (or deducted from) the basis of the security
acquired or deducted from (or added to) the proceeds of the security sold.
When an option expires (or the Portfolio enters into a closing
transaction), the Portfolio realizes a gain or loss on the option to the
extent of the premiums received or paid (or a gain or loss to the extent
that the cost of the closing transaction exceeds the premium paid or
received).
Written and purchased options are non-income producing investments.
o Forward foreign exchange contracts -- The Portfolio may enter into forward
foreign exchange contracts as a hedge against either specific transactions
or portfolio positions. The contract is marked-to-market daily and the
change in market value is recorded by the Portfolio as an unrealized gain
or loss. When the contract is closed, the Portfolio records a realized
gain or loss equal to the difference between the value at the time it was
opened and the value at the time it was closed.
o Foreign currency options and futures -- The Portfolio may also purchase or
sell listed or 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
26 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004
Notes to Financial Statements (concluded) Master Large Cap Value Portfolio
such collateral and retain the amount earned on such investment, net of any
amount rebated to the borrower. Loans of securities are terminable at any time
and the borrower, after notice, is required to return borrowed securities within
five business days. The Portfolio may pay reasonable finder's, lending agent,
administrative and custodial fees in connection with its loans. In the event
that the borrower defaults on its obligation to return borrowed securities
because of insolvency or for any other reason, the Portfolio could experience
delays and costs in gaining access to the collateral. The Portfolio also could
suffer a loss where the value of the collateral falls below the market value of
the borrowed securities, in the event of borrower default or in the event of
losses on investments made with cash collateral.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner.
FAM is responsible for the management of the Portfolio's investments and
provides the necessary personnel, facilities, 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.
For the six months ended April 30, 2004, the Portfolio reimbursed FAM $5,496 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 ("MLPF&S"), a subsidiary of ML & Co., or its
affiliates. As of April 30, 2004, the Portfolio lent securities with a value of
$15,382,882 to MLPF&S or its affiliates. Pursuant to that order, the Portfolio
also has retained Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an
affiliate of FAM, as the securities lending agent for a fee based on a share of
the returns on investment of cash collateral. MLIM, LLC may, on behalf of the
Portfolio, invest cash collateral received by the Portfolio for such loans,
among other things, in a private investment company managed by MLIM, LLC or in
registered money market funds advised by FAM or its affiliates. For the six
months ended April 30, 2004, MLIM, LLC received $19,576 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 six
months ended April 30, 2004 were $456,970,444 and $357,994,915, respectively.
Net realized gains for the six months ended April 30, 2004 and net unrealized
appreciation as of April 30, 2004 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Appreciation
- --------------------------------------------------------------------------------
Long-term investments ................ $ 50,172,155 $ 79,115,222
---------------------------------
Total ................................ $ 50,172,155 $ 79,115,222
=================================
As of April 30, 2004, net unrealized appreciation for Federal income tax
purposes aggregated $74,238,569, of which $90,567,730 related to appreciated
securities and $16,329,161 related to depreciated securities. At April 30, 2004,
the aggregate cost of investments for Federal income tax purposes was
$685,777,432.
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, 2003, the credit
agreement was renewed for one year under the same terms. The Portfolio did not
borrow under the facility during the six months ended April 30, 2004.
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2004 27
[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 -- 4/04
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual
report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 9 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 10 - Controls and Procedures
10(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.
10(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the last fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 11 - Exhibits attached hereto
11(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
11(a)(2) - Certifications - Attached hereto
11(a)(3) - Not Applicable
11(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Merrill Lynch Large Cap Value Fund of Merrill Lynch Large Cap Series
Funds, Inc. and Master Large Cap Value Portfolio of Master Large Cap
Series Trust
By: /s/ Terry K. Glenn
-------------------------------
Terry K. Glenn,
President of
Merrill Lynch Large Cap Value Fund of Merrill Lynch Large Cap Series
Funds, Inc. and Master Large Cap Value Portfolio of Master Large Cap
Series Trust
Date: June 18, 2004
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 of Merrill Lynch Large Cap Series
Funds, Inc. and Master Large Cap Value Portfolio of Master Large Cap
Series Trust
Date: June 18, 2004
By: /s/ Donald C. Burke
-------------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Large Cap Value Fund of Merrill Lynch Large Cap Series
Funds, Inc. and Master Large Cap Value Portfolio of Master Large Cap
Series Trust
Date: June 18, 2004