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 811-2809
811-10095
Name of Fund: Merrill Lynch Value Opportunities Fund, Inc.
Master Value Opportunities Trust
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, Merrill Lynch
Value Opportunities Fund, Inc. and Master Value Opportunities 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: 03/31/04
Date of reporting period: 04/01/04 - 09/30/04
Item 1 - Report to Stockholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
Merrill Lynch
Value Opportunities
Fund, Inc.
Semi-Annual Report
September 30, 2004
[LOGO] Merrill Lynch Investment Managers
Merrill Lynch Value Opportunities Fund, Inc.
Portfolio Information as of September 30, 2004
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
Parametric Technology Corporation ................................. 2.3%
Valassis Communications, Inc. ..................................... 2.2
Convergys Corporation ............................................. 2.1
CommScope, Inc. ................................................... 2.0
Diamond Offshore Drilling, Inc. ................................... 2.0
Triumph Group, Inc. ............................................... 1.9
WebMD Corporation ................................................. 1.8
Foot Locker, Inc. ................................................. 1.8
Conseco, Inc. ..................................................... 1.7
Tech Data Corporation ............................................. 1.6
- --------------------------------------------------------------------------------
Percent of
Five Largest Industries* Net Assets
- --------------------------------------------------------------------------------
Commercial Banks .................................................. 7.3%
Software .......................................................... 5.9
Media ............................................................. 5.8
Oil & Gas ......................................................... 5.6
Electronic Equipment & Instruments ................................ 4.5
- --------------------------------------------------------------------------------
* For Trust 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 Fund management.
This definition may not apply for purposes of this report, which may
combine such industry sub-classifications for reporting ease.
Percent of
Sector Weightings Total Investments
- --------------------------------------------------------------------------------
Financials ........................................................ 21.1%
Information Technology ............................................ 19.5
Consumer Discretionary ............................................ 12.6
Industrials ....................................................... 10.8
Energy ............................................................ 8.5
Health Care ....................................................... 7.1
Materials ......................................................... 5.7
Utilities ......................................................... 1.9
Consumer Staples .................................................. 1.4
Other* ............................................................ 11.4
- --------------------------------------------------------------------------------
* Includes portfolio holdings in short-term investments.
2 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004
A Letter From the President
Dear Shareholder
As we ended the current reporting period, the financial markets were facing a
number of uncertainties. At the top of investors' minds were questions about
economic expansion, corporate earnings, interest rates and inflation, politics,
oil prices and terrorism.
After benefiting from aggressive monetary and fiscal policy stimulus, some fear
the U.S. economy has hit a "soft patch." In fact, economic expansion has slowed
somewhat in recent months, but we believe it is easing into a pace of growth
that is sustainable and healthy. The favorable economic environment has served
to benefit American corporations, which have continued to post strong earnings.
Although the most impressive results were seen earlier in the year, solid
productivity, improved revenue growth and cost discipline all point to a vital
corporate sector.
In terms of inflation and interest rates, the Federal Reserve Board (the Fed)
has signaled its confidence in the economic recovery by increasing the Federal
Funds target rate three times in the past several months, from 1% to 1.75%.
Inflation, for its part, has remained in check. Investors and economists are
focused on how quickly Fed policy will move from here, anxiously absorbing every
bit of economic data and Fed innuendo.
While any market jitters associated with the presidential election should
subside after November, the effect of oil prices is more difficult to predict.
At around $50 per barrel, the price of oil is clearly a concern. However, on an
inflation-adjusted basis and considering modern usage levels, the situation is
far from the crisis proportions we saw in the 1980s. Finally, although terrorism
and geopolitical crises are realities we are forced to live with today, history
has shown us that the financial effects of any single event tend to be
short-lived.
Amid the uncertainty, the Standard & Poor's 500 Index returned +13.87% for the
12-month period and -.18% for the six-month period ended September 30, 2004. As
always, our investment professionals are closely monitoring the markets, the
economy and the overall environment in an effort to make well-informed decisions
for the portfolios they manage. For the individual investor, the key during
uncertain times is to remain focused on the big picture. While tracking current
events is important, investment success comes not from reacting to short-term
volatility, but from maintaining a long-term perspective and adhering to the
disciplines of asset allocation, diversification and rebalancing. We encourage
you to work with your financial advisor to ensure these time-tested techniques
are incorporated into your investment plan.
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 VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
For the most recent six-month reporting period, Merrill Lynch Value
Opportunities Fund, Inc. posted returns approximately in line with the benchmark
Russell 2000 Index of small-capitalization stocks.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended September 30, 2004, Merrill Lynch Value
Opportunities Fund, Inc.'s Class A, Class B, Class C, Class I and Class R Shares
had total returns of -2.31%, -2.67%, -2.68%, -2.19% and -2.45%, respectively.
(Fund results shown do not reflect sales charges and would be lower if sales
charges were included. Complete performance information can be found on pages 6
and 7 of this report to shareholders.) For the same period, the benchmark
Russell 2000 Index posted a total return of -2.40% and the Lipper Small Cap
Value Funds category had an average return of +.88%. (Funds in this Lipper
category seek long-term growth of capital by investing in small-capitalization
companies that are considered to be undervalued relative to a major unmanaged
stock index.)
Fund performance, which was competitive with the Russell 2000 Index and below
the Lipper Small Cap Value Category average, was influenced by our "relative
value" investment approach. The Fund's exposure to more growth-oriented
industries hindered performance relative to competitor funds that emphasize more
traditional value sectors, such as financial services and materials.
The six-month period may be best described as two separate environments. The
first three months were characterized by equity market strength, with small cap
stocks extending their lead over large caps. The last three months were marked
by sharply declining equity markets pressured by interest rate concerns, weak
employment data and higher energy prices. The second environment favored
defensive issues and more-established companies. We have gradually repositioned
the Trust to benefit from such a "quality trade," or rotation toward
higher-quality companies with modest price-to-earnings ratios.
Leading contributors to the Fund's performance during the period included CNF
Inc., a provider of transportation and logistics services. CNF shares rallied on
strong operating results at the company's trucking division, and speculation
regarding asset sales at the company. CommScope Inc., a provider of specialty
wire and cable products, also contributed favorably to results as end market
demand and bookings improved. Shares of Diamond Offshore Drilling, Inc., an
offshore drilling company, further benefited results on higher oil prices and
strength in the overall energy sector. The leading detractor from Fund
performance during the period was our investment in shares of Allied Waste
Industries Inc., a provider of non-hazardous waste disposal. Shares of Allied
Waste were particularly weak as the company under-invested in maintenance and
repair of their fleet, and recent landfill price increases proved unsustainable.
Based on deteriorating company fundamentals, we reduced our investment in shares
of Allied Waste.
What changes were made to the portfolio during the period?
Most importantly, we trimmed the Trust's exposure to the consumer discretionary
sector. We believe that rapid growth in consumer spending has largely run its
course and is now likely to decline with the slowdown in mortgage-refinancing
activity and higher energy prices. During the six-month period, we eliminated
several retail holdings, including The Men's Wearhouse, Inc., Electronics
Boutique Holdings Corp., and Abercrombie & Fitch Co. We also reduced exposure to
restaurant stocks with the sale of Outback Steakhouse, Inc. and Bob Evans Farms,
Inc.
Additionally, we reduced the Trust's weighting in the materials sector based on
strong share price appreciation, as many stocks exceeded our price objectives.
We trimmed exposure to steel-related stocks by reducing our position in Steel
Dynamics, Inc., an operator of steel mini-mills, and by eliminating our
investment in Quanex Corporation, a manufacturer of specialized metal products
made from steel and aluminum.
We have been active buyers in the healthcare sector, particularly of specialty
pharmaceutical stocks. We believe that valuations are compelling by historical
standards given widespread concern about generic competition. Some of these
concerns are valid but, in certain circumstances, we believe investors are
underestimating the ability of specialty pharmaceutical companies to respond
with licensing agreements and further market consolidation. There are specific
steps that specialty pharmaceutical companies can take to strengthen their
competitive position.
4 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004
Additions to the portfolio within the health care sector included Medicis
Pharmaceutical, a specialty pharmaceuticals company; Par Pharmaceutical Company,
a manufacturer and distributor of generic drugs; and Cephalon Inc., a
biopharmaceutical company. Separately, we added to regional banking stocks with
a strong geographic presence, including Anchor Bancorp Wisconsin, Inc., Dime
Community Bancshares and Webster Financial Corporation. Overall, the Fund
remains underweight in financial services stocks.
Over the summer months, we rebuilt the Trust's exposure to information
technology stocks given extreme stock price weakness and what we view as
appealing low valuation levels. We anticipate a shift away from consumer
spending toward an environment where business spending leads the economy.
Corporate balance sheets are strong and cash generation is high by historical
standards. We believe businesses will emphasize spending on information
technology, with tax incentives that permit accelerated depreciation on
investments this year. One recent addition to the portfolio is Ascential
Software Corp., a provider of software enterprise integration solutions. We had
previously owned shares of Ascential Software, but sold them last year on share
price appreciation. We repurchased the stock based on our favorable assessment
of company management, the company's balance sheet, a strong product suite and
an attractive valuation level.
How would you characterize the portfolio's position at the close of the period?
At September 30, 2004, the portfolio was overweight in the information
technology and energy sectors relative to the Russell 2000 Index. The portfolio
was underweight in financial services, health care and industrials. Given our
expectation for a slowdown in consumer spending and an increase in business
spending, the portfolio is positioned to benefit from what we consider
business-centric rather than consumer-centric investments.
Looking ahead, we believe small cap stocks could experience a very strong finish
to the year as tax loss selling abates and uncertainty surrounding the
presidential election is eliminated. Any significant pullback in energy prices
also could provide an immediate catalyst for share price appreciation. Longer
term, however, we are concerned that further meaningful outperformance of small
cap over large cap stocks is unsustainable. Small caps appear fully valued on a
wide range of metrics. In Merrill Lynch Value Opportunities Fund, Inc., new
purchases are currently focused on companies with market capitalizations of $1
billion to $2 billion, where we believe small cap value opportunities are most
plentiful. Merrill Lynch Mid Cap Value Opportunities Fund employs the same
investment approach and management team to target companies over $2 billion in
market capitalization.*
R. Elise Baum
Vice President and Portfolio Manager
October 14, 2004
* For a current prospectus of Merrill Lynch Mid Cap Value Opportunities Fund
of The Asset Program, Inc., which contains more complete information,
please call your financial advisor. Before investing, consider the
investment objectives, risks and charges and expenses of the Fund. This
and other information may be found in the Fund's prospectus. Read the
prospectus carefully before you invest or send money.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 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 (front-end load) of
5.25% and an account maintenance fee of 0.25% per year (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% per year and an account
maintenance fee of 0.25% per year. 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% per year and an
account maintenance fee of 0.25% per year. 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% per year and an account maintenance fee of 0.25% per year. 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 performance data current to the
most recent month-end. Performance results do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. The Fund is subject to a 2% redemption fee for sales or exchange of
shares within 30 days of purchase. Performance data does not reflect this
potential fee. 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*
10-Year/
6-Month 12-Month Since Inception
As of September 30, 2004 Total Return Total Return Total Return
==================================================================================================================
ML Value Opportunities Fund, Inc. Class A Shares* -2.31% +18.43% +293.65%
- ------------------------------------------------------------------------------------------------------------------
ML Value Opportunities Fund, Inc. Class B Shares* -2.67 +17.57 +263.86
- ------------------------------------------------------------------------------------------------------------------
ML Value Opportunities Fund, Inc. Class C Shares* -2.68 +17.54 +264.13
- ------------------------------------------------------------------------------------------------------------------
ML Value Opportunities Fund, Inc. Class I Shares* -2.19 +18.74 +297.20
- ------------------------------------------------------------------------------------------------------------------
ML Value Opportunities Fund, Inc. Class R Shares* -2.45 +18.12 + 50.03
- ------------------------------------------------------------------------------------------------------------------
Russell 2000(R) Index** -2.40 +18.77 +156.33/+159.57/+58.53
- ------------------------------------------------------------------------------------------------------------------
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are
based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the ex-dividend date. The Fund's 10-year/since inception periods
are for 10 years for Class B & Class I Shares, from 10/21/94 for Class A &
Class C Shares and from 2/04/03 for Class R Shares. Class B Shares convert
to Class A Shares eight years after purchase, the "10-year/since
inception" total return for Class B Shares uses Class A Shares'
performance for the period after conversion.
** An unmanaged broad-based Index comprised of small-capitalization common
stocks. Ten-year/since inception total returns are for 10 years, from
10/21/94 and from 2/04/03, respectively.
Russell 2000 is a registered trademark of the Frank Russell Company.
6 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004
Performance Data (concluded)
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 9/30/04 +18.43% +12.21%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/04 +15.22 +13.98
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 9/30/04 +14.78 +14.16
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 9/30/04 +17.57% +13.57%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/04 +14.34 +14.10
- --------------------------------------------------------------------------------
Ten Years Ended 9/30/04 +13.79 +13.79
- --------------------------------------------------------------------------------
* 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 9/30/04 +17.54% +16.54%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/04 +14.33 +14.33
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 9/30/04 +13.88 +13.88
- --------------------------------------------------------------------------------
* 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 9/30/04 +18.74% +12.51%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/04 +15.52 +14.28
- --------------------------------------------------------------------------------
Ten Years Ended 9/30/04 +14.79 +14.17
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
- --------------------------------------------------------------------------------
Class R Shares Return
================================================================================
One Year Ended 9/30/04 +18.12%
- --------------------------------------------------------------------------------
Inception (2/04/03) through 9/30/04 +27.83
- --------------------------------------------------------------------------------
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004 7
[LOGO] Merrill Lynch Investment Managers
Disclosure of Expenses
Shareholders of this Fund may incur the following charges: (a) expenses related
to transactions, including sales charges, redemption fees and exchange fees; and
(b) operating expenses, including advisory fees, distribution fees including
12(b)-1 fees, and other Fund expenses. The following example (which is based on
a hypothetical investment of $1,000 invested on April 1, 2004 and held through
September 30, 2004) is intended to assist shareholders both in calculating
expenses based on an investment in the Fund and in comparing these expenses with
similar costs of investing in other mutual funds.
The first table below provides information about actual account values and
actual expenses. In order to estimate the expenses a shareholder paid during the
period covered by this report, shareholders can divide their account value by
$1,000 and then multiply the result by the number in the first line under the
heading entitled "Expenses Paid During the Period."
The second table below provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses. In order to assist
shareholders in comparing the ongoing expenses of investing in this Fund and
other funds, compare the 5% hypothetical example with the 5% hypothetical
examples that appear in other funds' shareholder reports.
The expenses shown in the table are intended to highlight shareholders ongoing
costs only and do not reflect any transactional expenses, such as sales charges,
redemption fees, or exchange fees. Therefore, the second table is useful in
comparing ongoing expenses only, and will not help shareholders determine the
relative total expenses of owning different funds. If these transactional
expenses were included, shareholder expenses would have been higher.
Expenses Paid
Beginning Ending During the Period*
Account Value Account Value April 1, 2004 to
April 1, 2004 September 30, 2004 September 30, 2004
=======================================================================================================================
Actual
=======================================================================================================================
Class A $1,000 $ 976.90 $ 6.19
- -----------------------------------------------------------------------------------------------------------------------
Class B $1,000 $ 973.30 $ 9.99
- -----------------------------------------------------------------------------------------------------------------------
Class C $1,000 $ 973.20 $10.04
- -----------------------------------------------------------------------------------------------------------------------
Class I $1,000 $ 978.10 $ 4.96
- -----------------------------------------------------------------------------------------------------------------------
Class R $1,000 $ 975.50 $ 7.43
=======================================================================================================================
Hypothetical (5% annual return before expenses)**
=======================================================================================================================
Class A $1,000 $1,018.80 $ 6.33
- -----------------------------------------------------------------------------------------------------------------------
Class B $1,000 $1,014.94 $10.20
- -----------------------------------------------------------------------------------------------------------------------
Class C $1,000 $1,014.89 $10.25
- -----------------------------------------------------------------------------------------------------------------------
Class I $1,000 $1,020.05 $ 5.06
- -----------------------------------------------------------------------------------------------------------------------
Class R $1,000 $1,017.55 $ 7.59
- -----------------------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (1.25% for Class A, 2.02% for Class B, 2.03% for Class
C, 1.00% for Class I and 1.50% for Class R), multiplied by the average
account value over the period, multiplied by 183/365 (to reflect the
one-half year period shown). Because the Fund is a feeder fund, the
expense table example reflects the expenses of both the feeder fund and
the master fund in which it invests.
** Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half year divided by 365.
8 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004
Statement of Assets and Liabilities
Merrill Lynch Value Opportunities Fund, Inc.
As of September 30, 2004
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investment in Master Value Opportunities Trust, at value
(identified cost--$2,820,152,647) .................................... $ 3,084,186,714
Prepaid expenses ...................................................... 50,850
---------------
Total assets .......................................................... 3,084,237,564
---------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Payables:
Distributor ........................................................ $ 1,279,489
Other affiliates ................................................... 1,204,200
Administrative fees ................................................ 125,251 2,608,940
---------------
Accrued expenses ...................................................... 5,722
---------------
Total liabilities ..................................................... 2,614,662
---------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets ............................................................ $ 3,081,622,902
===============
===================================================================================================================================
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.10 par value, 100,000,000 shares
authorized ........................................................... $ 2,544,210
Class B Shares of Common Stock, $.10 par value, 100,000,000 shares
authorized ........................................................... 3,836,591
Class C Shares of Common Stock, $.10 par value, 100,000,000 shares
authorized ........................................................... 2,408,739
Class I Shares of Common Stock, $.10 par value, 100,000,000 shares
authorized ........................................................... 4,198,199
Class R Shares of Common Stock, $.10 par value, 100,000,000 shares
authorized ........................................................... 41,829
Paid-in capital in excess of par ...................................... 2,721,738,279
Accumulated investment loss--net ...................................... $ (10,936,284)
Undistributed realized capital gains allocated from the Trust--net .... 93,757,272
Unrealized appreciation allocated from the Trust--net ................. 264,034,067
---------------
Total accumulated earnings--net ....................................... 346,855,055
---------------
Net Assets ............................................................ $ 3,081,622,902
===============
===================================================================================================================================
Net Asset Value
- -----------------------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $628,372,015 and 25,442,104 shares
outstanding .......................................................... $ 24.70
===============
Class B--Based on net assets of $866,204,238 and 38,365,908 shares
outstanding .......................................................... $ 22.58
===============
Class C--Based on net assets of $531,035,631 and 24,087,387 shares
outstanding .......................................................... $ 22.05
===============
Class I--Based on net assets of $1,046,539,294 and 41,981,987 shares
outstanding .......................................................... $ 24.93
===============
Class R--Based on net assets of $9,471,724 and 418,292 shares
outstanding .......................................................... $ 22.64
===============
See Notes to Financial Statements.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004 9
[LOGO] Merrill Lynch Investment Managers
Statement of Operations Merrill Lynch Value Opportunities Fund, Inc.
For the Six Months Ended September 30, 2004
===================================================================================================================================
Investment Income Allocated from the Trust--Net
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income allocated from the Trust:
Dividends (including $343,457 from affiliates) ..................... $ 11,396,163
Interest from affiliates ........................................... 868,113
Securities lending--net ............................................ 287,985
Expenses ........................................................... (7,789,160)
---------------
Net investment income allocated from the Trust ........................ 4,763,101
---------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Account maintenance and distribution fees--Class B .................... $ 4,459,136
Administration fees ................................................... 3,862,402
Account maintenance and distribution fees--Class C .................... 2,644,828
Transfer agent fees--Class I .......................................... 1,186,576
Transfer agent fees--Class B .......................................... 1,101,230
Account maintenance fees--Class A ..................................... 772,843
Transfer agent fees--Class A .......................................... 702,759
Transfer agent fees--Class C .......................................... 690,186
Printing and shareholder reports ...................................... 112,664
Registration fees ..................................................... 72,089
Professional fees ..................................................... 35,454
Account maintenance and distribution fees--Class R .................... 16,633
Directors' fees and expenses .......................................... 15,757
Transfer agent fees--Class R .......................................... 7,607
Other ................................................................. 19,221
---------------
Total expenses ........................................................ 15,699,385
---------------
Investment loss--net .................................................. (10,936,284)
---------------
===================================================================================================================================
Realized & Unrealized Gain (Loss) Allocated from the Trust--Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain allocated from the Trust--net ........................... 109,464,153
Change in unrealized appreciation allocated from the Trust--net ....... (179,761,917)
---------------
Total realized and unrealized loss allocated from the Trust--net ...... (70,297,764)
---------------
Net Decrease in Net Assets Resulting from Operations .................. $ (81,234,048)
===============
See Notes to Financial Statements.
10 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004
Statements of Changes in Net Assets
Merrill Lynch Value Opportunities Fund, Inc.
For the Six For the
Months Ended Year Ended
September 30, March 31,
Increase (Decrease) in Net Assets: 2004 2004
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment loss--net .................................................. $ (10,936,284) $ (16,953,828)
Realized gain allocated from the Trust--net ........................... 109,464,153 248,569,142
Change in unrealized appreciation allocated from the Trust--net ....... (179,761,917) 878,215,072
-----------------------------------
Net increase (decrease) in net assets resulting from operations ....... (81,234,048) 1,109,830,386
-----------------------------------
===================================================================================================================================
Distributions to Shareholders
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain allocated from the Trust--net:
Class A ............................................................ (38,128,799) --
Class B ............................................................ (52,482,034) --
Class C ............................................................ (32,953,222) --
Class I ............................................................ (65,554,937) --
Class R ............................................................ (473,084) --
-----------------------------------
Net decrease in net assets resulting from distributions to shareholders (189,592,076) --
-----------------------------------
===================================================================================================================================
Capital Share Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share transactions .... 165,840,261 146,819,263
-----------------------------------
===================================================================================================================================
Redemption Fees
- -----------------------------------------------------------------------------------------------------------------------------------
Redemption fees ....................................................... 2,246 --
-----------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets ............................... (104,983,617) 1,256,649,649
Beginning of period ................................................... 3,186,606,519 1,929,956,870
End of period* ........................................................ $ 3,081,622,902 $ 3,186,606,519
===================================
* Accumulated investment loss--net ................................... $ (10,936,284) --
===================================
See Notes to Financial Statements.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004 11
[LOGO] Merrill Lynch Investment Managers
Financial Highlights Merrill Lynch Value Opportunities Fund, Inc.
Class A
------------------------------------------------------------------
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended For the Year Ended March 31,
September 30, -------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2004 2003 2002 2001+
==============================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 26.96 $ 17.15 $ 24.45 $ 19.73 $ 22.80
----------------------------------------------------------------
Investment loss--net*** ............ (.06) (.08) (.09) (.07) --@@
Realized and unrealized gain (loss)
and allocated from the Trust--net . (.61) 9.89 (6.73) 6.08 1.23
----------------------------------------------------------------
Total from investment operations ... (.67) 9.81 (6.82) 6.01 1.23
----------------------------------------------------------------
Less distributions from realized
gain allocated from the Trust ..... (1.59) -- (.48) (1.29) (4.30)
----------------------------------------------------------------
Net asset value, end of period ..... $ 24.70 $ 26.96 $ 17.15 $ 24.45 $ 19.73
================================================================
==============================================================================================================================
Total Investment Return*
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share . (2.31%)@@@ 57.20% (28.09%) 31.17% 6.11%
================================================================
==============================================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Expenses** ......................... 1.25%**** 1.27% 1.33% 1.25% 1.30%
================================================================
Investment loss--net ............... (.43%)**** (.34%) (.48%) (.30%) (.02%)
================================================================
==============================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) .................... $628,372 $620,193 $347,736 $467,733 $198,094
================================================================
Portfolio turnover ................. 36.47%++ 80.35%++ 68.27%++ 54.14%++ 42.30%@
================================================================
* Total investment returns exclude the effects of sales charges.
** Includes the Fund's share of the Trust's allocated expenses.
*** Based on average shares outstanding.
**** Annualized.
+ On September 1, 2000, the Fund converted from a stand-alone investment
company to a "feeder" fund that seeks to achieve its investment objective
by investing all of its assets in the Trust, which has the same investment
objective as the Fund. All investments will be made at the Trust level.
This structure is sometimes called a "master/feeder" structure.
++ Portfolio turnover for the Trust.
@ Portfolio turnover for the Trust for the period September 1, 2000
(commencement of operations of the Trust) to March 31, 2001.
@@ Amount is less than $(.01) per share.
@@@ Aggregate total investment return.
See Notes to Financial Statements.
12 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004
Financial Highlights (continued) Merrill Lynch Value Opportunities Fund, Inc.
Class B
---------------------------------------------------------------------
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended For the Year Ended March 31,
September 30, ---------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2004 2003 2002 2001@
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.69 $ 15.82 $ 22.74 $ 18.44 $ 21.59
--------------------------------------------------------------------
Investment loss--net*** ............ (.14) (.24) (.23) (.22) (.15)
Realized and unrealized gain (loss)
and allocated from the Trust--net . (.56) 9.11 (6.25) 5.67 1.15
--------------------------------------------------------------------
Total from investment operations ... (.70) 8.87 (6.48) 5.45 1.00
--------------------------------------------------------------------
Less distributions from realized
gain allocated from the Trust ..... (1.41) -- (.44) (1.15) (4.15)
--------------------------------------------------------------------
Net asset value, end of period ..... $ 22.58 $ 24.69 $ 15.82 $ 22.74 $ 18.44
====================================================================
==================================================================================================================================
Total Investment Return*
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share . (2.67%)@@ 56.07% (28.70%) 30.22% 5.26%
====================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses** ......................... 2.02%**** 2.04% 2.10% 2.01% 2.06%
====================================================================
Investment loss--net ............... (1.21%)**** (1.11%) (1.26%) (1.04%) (.75%)
====================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) .................... $ 866,204 $951,562 $640,017 $1,003,961 $563,316
====================================================================
Portfolio turnover ................. 36.47%++ 80.35%++ 68.27%++ 54.14%++ 42.30%+
====================================================================
* Total investment returns exclude the effects of sales charges.
** Includes the Fund's share of the Trust's allocated expenses.
*** Based on average shares outstanding.
**** Annualized.
+ Portfolio turnover for the Trust for the period September 1, 2000
(commencement of operations of the Trust) to March 31, 2001.
++ Portfolio turnover for the Trust.
@ On September 1, 2000, the Fund converted from a stand-alone investment
company to a "feeder" fund that seeks to achieve its investment objective
by investing all of its assets in the Trust, which has the same investment
objective as the Fund. All investments will be made at the Trust level.
This structure is sometimes called a "master/feeder" structure.
@@ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004 13
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (continued) Merrill Lynch Value Opportunities Fund, Inc.
Class C
------------------------------------------------------------------
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended For the Year Ended March 31,
September 30, -------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2004 2003 2002 2001@
==============================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.18 $ 15.50 $ 22.30 $ 18.13 $ 21.32
----------------------------------------------------------------
Investment loss--net*** ............ (.14) (.23) (.23) (.23) (.15)
Realized and unrealized gain (loss)
and allocated from the Trust--net . (.55) 8.91 (6.13) 5.58 1.14
----------------------------------------------------------------
Total from investment operations ... (.69) 8.68 (6.36) 5.35 .99
----------------------------------------------------------------
Less distributions from realized
gain allocated from the Trust ..... (1.44) -- (.44) (1.18) (4.18)
----------------------------------------------------------------
Net asset value, end of period ..... $ 22.05 $ 24.18 $ 15.50 $ 22.30 $ 18.13
================================================================
==============================================================================================================================
Total Investment Return*
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share . (2.68%)@@ 56.00% (28.69%) 30.23% 5.29%
================================================================
==============================================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Expenses** ......................... 2.03%**** 2.05% 2.12% 2.02% 2.08%
================================================================
Investment loss--net ............... (1.22%)**** (1.13%) (1.27%) (1.11%) (.75%)
================================================================
==============================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) .................... $531,036 $539,393 $334,720 $504,537 $140,610
================================================================
Portfolio turnover ................. 36.47%++ 80.35%++ 68.27%++ 54.14%++ 42.30%+
================================================================
* Total investment returns exclude the effects of sales charges.
** Includes the Fund's share of the Trust's allocated expenses.
*** Based on average shares outstanding.
**** Annualized.
+ Portfolio turnover for the Trust for the period September 1, 2000
(commencement of operations of the Trust) to March 31, 2001.
++ Portfolio turnover for the Trust.
@ On September 1, 2000, the Fund converted from a stand-alone investment
company to a "feeder" fund that seeks to achieve its investment objective
by investing all of its assets in the Trust, which has the same investment
objective as the Fund. All investments will be made at the Trust level.
This structure is sometimes called a "master/feeder" structure.
@@ Aggregate total investment return.
See Notes to Financial Statements.
14 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004
Financial Highlights (continued) Merrill Lynch Value Opportunities Fund, Inc.
Class I
----------------------------------------------------------------------
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended For the Year Ended March 31,
September 30, ----------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2004 2003 2002 2001@
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.22 $ 17.27 $ 24.58 $ 19.81 $ 22.87
---------------------------------------------------------------------
Investment income (loss)--net*** ... (.02) (.02) (.05) (.01) .06
Realized and unrealized gain (loss)
and allocated from the Trust--net . (.63) 9.97 (6.77) 5.84 1.23
---------------------------------------------------------------------
Total from investment operations ... (.65) 9.95 (6.82) 5.83 1.29
---------------------------------------------------------------------
Less distributions from realized
gain allocated from the Trust ..... (1.64) -- (.49) (1.06) (4.35)
---------------------------------------------------------------------
Net asset value, end of period ..... $ 24.93 $ 27.22 $ 17.27 $ 24.58 $ 19.81
=====================================================================
==================================================================================================================================
Total Investment Return*
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share . (2.19%)@@ 57.61% (27.93%) 31.56% 6.39%
=====================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses** ......................... 1.00%**** 1.02% 1.07% .99% 1.04%
=====================================================================
Investment income (loss)--net ...... (.19%)**** (.09%) (.24%) (.03%) .27%
=====================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) .................... $1,046,539 $1,072,299 $607,484 $1,259,688 $648,806
=====================================================================
Portfolio turnover ................. 36.47%++ 80.35%++ 68.27%++ 54.14%++ 42.30%+
=====================================================================
* Total investment returns exclude the effects of sales charges.
** Includes the Fund's share of the Trust's allocated expenses.
*** Based on average shares outstanding.
**** Annualized.
+ Portfolio turnover for the Trust for the period September 1, 2000
(commencement of operations of the Trust) to March 31, 2001.
++ Portfolio turnover for the Trust.
@ On September 1, 2000, the Fund converted from a stand-alone investment
company to a "feeder" fund that seeks to achieve its investment objective
by investing all of its assets in the Trust, which has the same investment
objective as the Fund. All investments will be made at the Trust level.
This structure is sometimes called a "master/feeder" structure.
@@ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004 15
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (concluded) Merrill Lynch Value Opportunities Fund, Inc.
Class R
-------------------------------------------
For the Period
The following per share data and ratios have been derived For the Six For the February 4,
from information provided in the financial statements. Months Ended Year Ended 2003+
September 30, March 31, to March 31,
Increase (Decrease) in Net Asset Value: 2004 2004 2003
==========================================================================================================================
Per Share Operating Performance
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............... $ 24.93 $ 15.87 $ 16.12
-------------------------------------------
Investment loss--net*** ............................ (.08) (.12) --@@@
Realized and unrealized gain (loss) allocated from
the Trust--net .................................... (.58) 9.18 (.25)
-------------------------------------------
Total from investment operations ................... (.66) 9.06 (.25)
-------------------------------------------
Less distributions from realized gain allocated from
the Trust--net .................................... (1.63) -- --
-------------------------------------------
Net asset value, end of period ..................... $ 22.64 $ 24.93 $ 15.87
===========================================
==========================================================================================================================
Total Investment Return**
- --------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ................. (2.45%)@ 57.09% (1.55%)@
===========================================
==========================================================================================================================
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------------------
Expenses++ ......................................... 1.48%* 1.52% 1.66%*
===========================================
Investment loss--net ............................... (.66%)* (.59%) (.65%)*
===========================================
==========================================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ........... $ 9,472 $ 3,160 --@@
===========================================
Portfolio turnover of the Trust .................... 36.47% 80.35% 68.27%
===========================================
* 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 Trust's allocated expenses.
@ Aggregate total investment return.
@@ Amount is less than $1,000.
@@@ Amount is less than $(.01) per share.
See Notes to Financial Statements.
16 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004
Notes to Financial Statements Merrill Lynch Value Opportunities Fund, Inc.
1. Significant Accounting Policies:
Merrill Lynch Value Opportunities Fund, Inc., (the "Fund") (formerly Merrill
Lynch Small Cap Value Fund, Inc.) is registered under the Investment Company Act
of 1940, as amended, as a diversified, open-end investment company. The Fund
seeks to achieve its investment objective by investing all of its assets in
Master Value Opportunities Trust (the "Trust") (formerly Master Small Cap Value
Trust), which has the same investment objective and strategies as the Fund. The
value of the Fund's investment in the Trust reflects the Fund's proportionate
interest in the net assets of the Trust. The performance of the Fund is directly
related to the performance of the Trust. The financial statements of the Trust,
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 U.S. generally accepted
accounting principles, 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 present a fair statement of the results for the interim
period. All adjustments are of a normal recurring nature. The percentage of the
Trust owned by the Fund at September 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 (except that Class B shareholders may vote on material
changes to the Class A distribution plan). Income, expenses (other than expenses
attributed 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 Trust at
fair value. Valuation of securities held by the Trust is discussed in Note 1a of
the Trust'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 Trust'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 Trust are
accounted for on a trade date basis.
2. Transactions with Affiliates:
The Fund has entered into an Administration Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), a wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."),
which is the limited partner. The Fund pays a monthly fee at an annual rate of
..25% of the Fund's average daily net assets for the performance of
administrative services (other than investment advice and related portfolio
activities) necessary for the operation of the Fund.
The Fund has also entered into a Distribution Agreement and Distribution Plans
with FAM Distributors, Inc. ("FAMD" or the "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc. Pursuant to the Distribution Plans
adopted by the Fund in accordance with Rule 12b-1 under the Investment Company
Act of 1940, the Fund pays the Distributor ongoing account maintenance and
distribution fees. The fees are accrued daily and paid monthly at annual rates
based
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004 17
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (continued)
Merrill Lynch Value Opportunities Fund, Inc.
upon the average daily net assets of the shares of the Fund 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 September 30, 2004, FAMD earned underwriting discounts
and direct commissions 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 ............................ $ 10,163 $138,376
Class I ............................ $ 739 $ 9,034
- --------------------------------------------------------------------------------
For the six months ended September 30, 2004, MLPF&S received contingent deferred
sales charges of $350,645 and $35,554 relating to transactions in Class B and
Class C Shares, respectively. Furthermore, MLPF&S received contingent deferred
sales charges of $169 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, PSI, FAMD, FDS, and/or ML & Co.
3. Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$165,840,261 and $146,819,263 for the six months ended September 30, 2004 and
for the year ended March 31, 2004, respectively.
Transactions in capital shares for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended September 30, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................... 3,345,843 $ 85,421,216
Automatic conversion of shares . 781,571 19,933,033
Shares issued to shareholders
in reinvestment of distributions 1,505,021 36,075,362
------------------------------------
Total issued ................... 5,632,435 141,429,611
Shares redeemed ................ (3,192,688) (80,624,376)
------------------------------------
Net increase ................... 2,439,747 $ 60,805,235
====================================
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended March 31, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................... 7,355,410 $ 171,011,025
Automatic conversion of shares . 1,839,214 41,811,547
------------------------------------
Total issued ................... 9,194,624 212,822,572
Shares redeemed ................ (6,474,293) (150,175,716)
------------------------------------
Net increase ................... 2,720,331 $ 62,646,856
====================================
- -------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended September 30, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................... 3,405,335 $ 79,289,773
Shares issued to shareholders
in reinvestment of distributions 2,240,026 49,168,572
------------------------------------
Total issued ................... 5,645,361 128,458,345
Automatic conversion of shares . (854,346) (19,933,033)
Shares redeemed ................ (4,957,863) (114,683,211)
------------------------------------
Net decrease ................... (166,848) $ (6,157,899)
====================================
- -------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended March 31, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................... 10,154,910 $ 215,460,830
Automatic conversion of shares . (1,999,667) (41,811,547)
Shares redeemed ................ (10,066,294) (215,593,957)
------------------------------------
Net decrease ................... (1,911,051) $ (41,944,674)
====================================
- -------------------------------------------------------------------------------
Class C Shares for the Six Month Dollar
Ended September 30, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................... 2,757,710 $ 62,941,585
Shares issued to shareholders
in reinvestment of distributions 1,413,343 30,287,947
------------------------------------
Total issued ................... 4,171,053 93,229,532
Shares redeemed ................ (2,388,825) (53,871,941)
------------------------------------
Net increase ................... 1,782,228 $ 39,357,591
====================================
- -------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended March 31, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................... 5,342,274 $ 115,762,960
Shares redeemed ................ (4,633,448) (95,640,822)
------------------------------------
Net increase ................... 708,826 $ 20,122,138
====================================
18 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004
Notes to Financial Statements (concluded)
Merrill Lynch Value Opportunities Fund, Inc.
- -------------------------------------------------------------------------------
Class I Shares for the Six Months Dollar
Ended September 30, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................... 5,474,530 $ 141,845,486
Shares issued to shareholders
in reinvestment of distributions 2,562,361 61,983,509
------------------------------------
Total issued ................... 8,036,891 203,828,995
Shares redeemed ................ (5,449,688) (138,807,936)
------------------------------------
Net increase ................... 2,587,203 $ 65,021,059
====================================
- -------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended March 31, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................... 15,484,530 $ 367,911,503
Shares redeemed ................ (11,274,789) (264,974,932)
------------------------------------
Net increase ................... 4,209,741 $ 102,936,571
====================================
- -------------------------------------------------------------------------------
Class R Shares for Six Months Dollar
Ended September 30, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................... 328,740 $ 7,693,436
Shares issued to shareholders
in reinvestment of distributions 21,288 468,134
------------------------------------
Total issued ................... 350,028 8,161,570
Shares redeemed ................ (58,479) (1,347,295)
------------------------------------
Net increase ................... 291,549 $ 6,814,275
====================================
- -------------------------------------------------------------------------------
Class R Shares for the Year Dollar
Ended March 31, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .................... 167,761 $ 4,074,962
Shares redeemed ................ (41,024) (1,016,590)
------------------------------------
Net increase ................... 126,737 $ 3,058,372
====================================
The Fund charges a 2% redemption fee on the proceeds (calculated at market
value) of a redemption (either by sale or exchange) of Fund shares made within
30 days of purchase. The redemption fee is paid to the Fund and is intended to
offset the trading costs, market impact and other costs associated with
short-term trading into and out of the Fund. For the six months ended September
30, 2004, the Fund charged redemption fees of $2,246.
4. Capital Loss Carryforward:
On March 31, 2004, the Fund had a net capital loss carry-forward of $492,581 all
of which expires in 2010. This amount will be available to offset like amounts
of any future taxable gains.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004 19
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments Master Value Opportunities Trust
Industry* Shares Held Common Stocks Value
==========================================================================================================================
Aerospace & Defense--1.9% 1,769,300 +Triumph Group, Inc. (a) $ 59,855,419
==========================================================================================================================
Air Freight & Logistics--1.0% 730,600 CNF Transportation Inc. 29,947,294
==========================================================================================================================
Auto Components--1.4% 1,039,300 American Axle & Manufacturing Holdings, Inc. 30,409,918
995,300 +Hayes Lemmerz International, Inc. 10,112,248
275,100 +Shiloh Industries, Inc. 3,823,890
------------
44,346,056
==========================================================================================================================
Biotechnology--2.1% 403,100 +Applera Corporation--Celera Genomics Group 4,712,239
172,700 +Cephalon, Inc. 8,272,330
1,819,400 +Human Genome Sciences, Inc. (d) 19,849,654
419,232 +Incyte Genomics, Inc. 4,037,204
1,674,800 +Maxygen Inc. 16,563,772
362,600 +Medarex, Inc. (d) 2,675,988
1,556,558 +Vical Incorporated (a) 7,473,035
------------
63,584,222
==========================================================================================================================
Capital Markets--2.1% 2,363,400 Janus Capital Group Inc. (d) 32,165,874
2,458,500 +Knight Trading Group, Inc. (Class A) 22,691,955
471,600 W.P. Stewart & Co., Ltd. 9,427,284
------------
64,285,113
==========================================================================================================================
Chemicals--0.4% 244,000 Cytec Industries Inc. 11,943,800
==========================================================================================================================
Commercial Banks--7.3% 545,300 Bank of Hawaii Corporation 25,765,425
706,000 Banknorth Group, Inc. 24,710,000
78,100 Banner Corporation 2,296,140
1,890,000 The Colonial BancGroup, Inc. 38,650,500
752,200 Compass Bancshares, Inc. 32,961,404
132,000 First Merchants Corporation 3,253,932
1,379,300 First Midwest Bancorp, Inc. 47,668,608
134,400 Mid-State Bancshares 3,458,112
1,665,200 Old National Bancorp 41,363,568
190,700 +Texas Capital Bancshares, Inc. 3,461,205
------------
223,588,894
==========================================================================================================================
Commercial Services 3,522,600 +Allied Waste Industries, Inc. (d) 31,175,010
& Supplies--3.9% 617,900 Ambassadors International, Inc. (a) 7,810,256
1,388,100 +Cornell Companies, Inc. (a) 17,212,440
926,200 +Corrections Corporation of America 32,750,432
444,600 +Tetra Tech, Inc. 5,633,082
1,643,700 +United Rentals, Inc. (d) 26,118,393
------------
120,699,613
==========================================================================================================================
Communications 180,400 +Advanced Fibre Communications, Inc. 2,868,360
Equipment--4.4% 1,599,650 Belden CDT Inc. 34,872,370
2,918,900 +CommScope, Inc. (a) 63,048,240
275,900 +Network Equipment Technologies, Inc. 1,823,699
3,429,800 +Tellabs, Inc. (d) 31,519,862
------------
134,132,531
==========================================================================================================================
Construction & 432,600 Fluor Corporation 19,259,352
Engineering--0.7% 672,700 +MasTec, Inc. 3,531,675
------------
22,791,027
==========================================================================================================================
Construction Materials--0.9% 614,400 Martin Marietta Materials, Inc. 27,813,888
==========================================================================================================================
Containers & Packaging--1.9% 2,691,600 +Crown Holdings, Inc. 27,750,396
1,604,000 +Smurfit-Stone Container Corporation (d) 31,069,480
------------
58,819,876
==========================================================================================================================
20 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004
Schedule of Investments (continued) Master Value Opportunities Trust
Industry* Shares Held Common Stocks Value
==========================================================================================================================
Diversified Financial 146,900 iShares Russell 2000 Index Fund (d)(m) $ 16,724,565
Services--4.0% 278,700 iShares S&P Midcap 400 Index Fund (d)(h) 33,120,708
266,500 iShares S&P SmallCap 600/BARRA Value Index Fund (i) 29,147,105
275,500 iShares S&P SmallCap 600 Index Fund (d)(j) 39,738,120
30,000 S&P Mid-Cap 400 Depositary Receipts (l) 3,252,600
------------
121,983,098
==========================================================================================================================
Electric Utilities--1.0% 789,700 Cinergy Corp. 31,272,120
==========================================================================================================================
Electrical Equipment--0.1% 502,500 +Global Power Equipment Group Inc. 3,723,525
==========================================================================================================================
Electronic Equipment 1,054,400 Anixter International Inc. (d) 36,998,896
& Instruments--4.5% 232,300 +Cogent Inc. 4,232,506
2,056,300 +Ingram Micro Inc. (Class A) 33,106,430
673,873 +Itron, Inc. (d) 11,759,084
146,510 +Nu Horizons Electronics Corp. 930,338
1,302,300 +Tech Data Corporation 50,203,665
------------
137,230,919
==========================================================================================================================
Energy Equipment & 1,822,300 Diamond Offshore Drilling, Inc. (d) 60,117,677
Service--3.8% 582,500 Energy Select Sector SPDR Fund (k) 20,375,850
209,900 +FMC Technologies, Inc. 7,010,660
1,676,600 +Key Energy Services, Inc. 18,526,430
100,200 Oil Service HOLDRs Trust (b) 8,190,348
96,000 +Rowan Companies, Inc. 2,534,400
------------
116,755,365
==========================================================================================================================
Food & Staples Retailing--0.0% 85,600 +CHRONIMED Inc. 515,312
==========================================================================================================================
Food Products--1.5% 2,851,900 +Del Monte Foods Company 29,916,431
237,758 +Hain Celestial Group, Inc. 4,203,561
518,200 +Smithfield Foods, Inc. 12,955,000
------------
47,074,992
==========================================================================================================================
Health Care Equipment 81,300 +CTI Molecular Imaging, Inc. 656,091
& Supplies--1.6% 8,600 +Cutera, Inc. 97,008
313,400 Invacare Corp. 14,416,400
413,000 Mentor Corporation 13,909,840
884,600 +STERIS Corporation 19,408,124
------------
48,487,463
==========================================================================================================================
Health Care Providers 156,700 +First Health Group Corp. 2,521,303
& Services--2.3% 2,589,900 Hooper Holmes, Inc. 11,602,752
7,979,900 +WebMD Corporation 55,540,104
------------
69,664,159
==========================================================================================================================
Hotels, Restaurants 627,055 Ambassadors Group, Inc. (a) 16,930,485
& Leisure--1.8% 599,840 Dover Downs Gaming & Entertainment, Inc. (a) 6,172,354
790,800 +Isle of Capri Casinos, Inc. 15,317,796
2,244,700 +La Quinta Corporation 17,508,660
------------
55,929,295
==========================================================================================================================
IT Services--3.1% 4,884,700 +Convergys Corporation 65,601,521
1,183,200 Sabre Holdings Corporation (Class A) 29,023,896
------------
94,625,417
==========================================================================================================================
Insurance--4.2% 88,000 American National Insurance Company 8,517,520
2,887,600 +Conseco, Inc. (d) 50,995,016
385,800 The First American Financial Corporation 11,894,214
576,771 Presidential Life Corporation 9,908,926
1,184,100 Protective Life Corporation 46,546,971
------------
127,862,647
==========================================================================================================================
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004 21
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Value Opportunities Trust
Industry* Shares Held Common Stocks Value
==========================================================================================================================
Internet Software 2,240,900 +DoubleClick Inc. $ 13,243,719
& Services--2.1% 2,127,800 +Entrust Technologies Inc. 5,383,334
2,995,467 +Retek Inc. (a) 13,659,330
365,700 +Stellent, Inc. 2,819,547
23,035,371 +Vignette Corporation (a) 30,637,043
------------
65,742,973
==========================================================================================================================
Leisure Equipment 471,500 Callaway Golf Company 4,983,755
& Products--0.7% 865,400 +Leapfrog Enterprises, Inc. (d) 17,524,350
------------
22,508,105
==========================================================================================================================
Machinery--1.7% 904,000 Kaydon Corp. 26,008,080
439,300 Reliance Steel & Aluminum Co. 17,440,210
815,600 +Wolverine Tube, Inc. (a) 9,420,180
------------
52,868,470
==========================================================================================================================
Media--5.8% 822,453 +APAC Customer Services Inc. 1,373,497
61,000 +Arbitron Inc. 2,233,210
947,800 Catalina Marketing Corporation 21,875,224
99,600 +Entercom Communications Corp. 3,252,936
961,300 Harte-Hanks, Inc. 24,042,113
4,890,400 +Paxson Communications Corporation (a) 6,602,040
2,418,900 The Reader's Digest Association, Inc. (Class A) 35,291,751
569,300 +Scholastic Corporation 17,585,677
2,271,900 +Valassis Communications, Inc. (d) 67,202,802
------------
179,459,250
==========================================================================================================================
Metals & Mining--3.1% 953,000 Gibraltar Steel Corporation 34,460,480
3,288,100 +GrafTech International Ltd. (d) 45,868,995
217,500 Steel Dynamics, Inc. 8,399,850
227,400 +Wheeling-Pittsburgh Corporation 7,119,894
------------
95,849,219
==========================================================================================================================
Oil & Gas--5.6% 1,212,200 +Denbury Resources Inc. 30,789,880
846,600 Noble Energy, Inc. 49,305,984
918,391 +Plains Exploration & Production Company 21,912,809
774,600 +Stone Energy Corporation 33,896,496
769,700 Unocal Corporation 33,097,100
223,500 Vintage Petroleum, Inc. 4,485,645
------------
173,487,914
==========================================================================================================================
Pharmaceuticals--1.9% 3,733,900 +King Pharmaceuticals, Inc. 44,582,766
258,200 Medicis Pharmaceutical (Class A) 10,080,128
135,700 +Par Pharmaceutical Cos Inc. 4,875,701
------------
59,538,595
==========================================================================================================================
Real Estate--1.4% 761,500 Brandywine Realty Trust 21,687,520
1,328,593 Trizec Properties, Inc. 21,217,630
------------
42,905,150
==========================================================================================================================
Road & Rail--1.4% 2,909,200 +Kansas City Southern Industries, Inc. (d) 44,132,564
==========================================================================================================================
Semiconductors & Semiconductor 3,927,200 +ANADIGICS, Inc. (a)(d) 13,234,664
Equipment--1.6% 4,562,100 +Applied Micro Circuits Corporation 14,279,373
613,400 +DSP Group, Inc. 12,912,070
247,500 +TranSwitch Corporation (d) 311,850
125,200 +TriQuint Semiconductor, Inc. 488,280
414,500 +Zoran Corporation 6,515,940
------------
47,742,177
==========================================================================================================================
22 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004
Schedule of Investments (continued) Master Value Opportunities Trust
Industry* Shares Held Common Stocks Value
==========================================================================================================================
Software--5.9% 1,101,200 +Agile Software Corporation $ 8,732,516
2,300,800 +Ascential Software Corporation 30,991,776
484,700 +BEA Systems, Inc. 3,349,277
1,000,100 +Borland Software Corporation (d) 8,350,835
3,899,200 +Compuware Corporation 20,080,880
4,755,768 +E.piphany, Inc. (a) 19,165,745
492,400 +FileNET Corporation 8,597,304
983,200 +i2 Technologies, Inc. 698,072
60,400 +JAMDAT Mobile Inc. 1,393,428
689,295 +JDA Software Group, Inc. 7,458,172
13,447,600 +Parametric Technology Corporation (a) 71,003,328
193,100 +Synopsys, Inc. 3,056,773
--------------
182,878,106
==========================================================================================================================
Specialty Retail--4.0% 385,700 Christopher & Banks Corporation 6,175,057
2,289,700 Foot Locker, Inc. 54,265,890
877,200 +Linens `n Things, Inc. 20,324,724
849,100 Pier 1 Imports, Inc. (d) 15,351,728
1,157,600 The Talbots, Inc. 28,696,904
--------------
124,814,303
==========================================================================================================================
Thrifts & Mortgage 119,800 Anchor Bancorp, Inc. 3,102,820
Finance--2.3% 185,800 Dime Community Bancshares 3,121,440
87,200 Fidelity Bankshares, Inc 3,242,968
76,100 +FirstFed Financial Corp. 3,719,768
207,500 +Franklin Bank Corporation 3,537,875
1,994,900 Sovereign Bancorp, Inc. 43,528,718
101,100 +Sterling Financial Corporation 3,562,764
156,300 Webster Financial Corporation 7,719,657
--------------
71,536,010
==========================================================================================================================
Trading Companies 361,300 Applied Industrial Technologies, Inc. 12,912,862
& Distributors--1.1% 709,500 Watsco, Inc. 21,306,285
--------------
34,219,147
==========================================================================================================================
Total Common Stocks (Cost--$2,646,868,313)--94.5% 2,914,614,028
==========================================================================================================================
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004 23
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Value Opportunities Trust
Industry* Shares Held Preferred Stocks Value
==========================================================================================================================
Personal Products--0.0% 1,317 Adrien Arpel, Inc. $ 0
==========================================================================================================================
Total Preferred Stocks (Cost--$0)--0.0% 0
==========================================================================================================================
Warrants (g)
==========================================================================================================================
Capital Markets--2.1% 760,000 UBS AG (e) 34,732,000
610,000 UBS AG (e) 29,127,500
==========================================================================================================================
Total Warrants (Cost--$67,571,148)--2.1% 63,859,500
==========================================================================================================================
Beneficial Interest Short-Term Securities
==========================================================================================================================
$110,971,294 Merrill Lynch Liquidity Series, LLC Cash Sweep
Series I (c) 110,971,294
311,662,600 Merrill Lynch Liquidity Series, LLC Money Market
Series (c)(f) 311,662,600
==========================================================================================================================
Total Short-Term Securities
(Cost--$422,633,894)--13.7% 422,633,894
==========================================================================================================================
Total Investments (Cost--$3,137,073,355**)--110.3% 3,401,107,422
Liabilities in Excess of Other Assets--(10.3%) (316,920,708)
--------------
Net Assets--100.0% $3,084,186,714
==============
* For Trust 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 Trust management.
This definition may not apply for purposes of this report, which may
combine such industry sub-classifications for reporting ease.
** The cost and unrealized appreciation/depreciation of investments as of
September 30, 2004, as computed for federal income tax purposes were as
follows:
-------------------------------------------------------------------------
Aggregate cost .................................. $3,152,287,502
==============
Gross unrealized appreciation ................... $ 468,987,641
Gross unrealized depreciation ................... (220,167,721)
--------------
Net unrealized appreciation ..................... $ 248,819,920
==============
+ Non-income producing security.
(a) Investments in companies 5% or more of whose outstanding securities are
held by the Trust (such companies are defined as "Affiliated Companies" in
Section 2(a)(3) of the Investment Company Act of 1940) were as follows:
------------------------------------------------------------------------------------------------------------------
Net Share Purchase Sales Realized Dividend
Affiliate Activity Cost Cost Gain (Loss) Income
------------------------------------------------------------------------------------------------------------------
ANADIGICS, Inc. ........................ 2,050,000 $ 9,519,396 -- -- +
Ambassadors Group, Inc. ................ (66,800) $ 108,320 $ 1,690,055 $ 738,230 $144,444
Ambassadors International, Inc. ........ (69,500) $ 96,419 $ 949,726 $ 266,230 $127,200
CommScope, Inc. ........................ 925,100 $24,934,619 $ 9,094,330 $ 93,860 +
Cornell Companies, Inc. ................ (99,100) -- $ 1,210,475 $ (439,682) +
Dover Downs Gaming & Entertainment, Inc. 2,800 $ 29,624 -- -- $ 71,813
E.piphany, Inc. ........................ 1,983,300 $ 8,962,453 $ 881,275 $ 381,511 +
Gibraltar Steel Corporation* ........... (141,200) $ 467,700 $ 5,110,388 $ 1,340,611 $ 99,985
Itron Inc.* ............................ (1,137,900) $ 53,360 $23,021,044 $ (916,877) +
Parametric Technology Corporation ...... (4,126,700) $ 413,056 $20,554,828 $(7,293,908) +
Paxson Communications Corporation ...... (180,000) -- $ 391,563 $(1,727,477) +
Retek, Inc. ............................ 2,995,467 $20,356,547 -- -- +
Triumph Group, Inc. .................... -- -- -- -- +
Vical Incorporated ..................... (648,299) -- $ 3,473,134 $(6,074,094) +
Vignette Corporation ................... 1,736,854 $ 2,274,388 -- -- +
Watsco, Inc.* .......................... (498,700) $ 404,534 $14,551,951 $ 8,574,109 $212,630
Wolverine Tube, Inc. ................... (157,000) $ 57,150 $ 1,796,659 $ (672,795) +
------------------------------------------------------------------------------------------------------------------
+ Non-income producing security.
* No longer an affiliated company as of September 30, 2004.
24 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004
Schedule of Investments (concluded) Master Value Opportunities Trust
(b) Represents ownership in Oil Services HOLDRs Trust. The Oil Services HOLDRs
Trust holds shares of common stock issued by 20 specified companies
generally considered to be involved in various segments of the oil service
industry.
(c) Investments in companies considered to be an affiliate of the Trust (such
companies are defined as "Affiliated Companies" in Section 2 (a)(3) of the
Investment Company Act of 1940) were as follows:
-------------------------------------------------------------------------------------------
Interest/
Net Dividend
Affiliate Activity Income
-------------------------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC Cash Sweep Series I $ (8,301,003) $868,113
Merrill Lynch Liquidity Series, LLC Money Market Series $199,540,787 $267,942
Merrill Lynch Premier Institutional Fund (37,373,937) $ 20,043
-------------------------------------------------------------------------------------------
(d) Security, or a portion of security, is on loan.
(e) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(f) Security was purchased with the cash proceeds from securities loans.
(g) Warrants entitle the Trust to purchase a predetermined number of shares of
common stock and are non-income producing. The purchase price and number
of shares are subject to adjustment under certain conditions until the
expiration date.
(h) iShares S&P MidCap 400 Index Fund is an exchange traded Fund. The Fund
seeks investment results that correspond to the performance of the S&P
MidCap 400 Index.
(i) iShares S&P SmallCap 600/BARRA Value Index Fund is an exchange traded
Fund. The Fund seeks investment results that correspond to the performance
of the S&P SmallCap 600/BARRA Value Index.
(j) iShares S&P SmallCap 600 Index Fund is an exchange traded Fund. The Fund
seeks investment results that correspond to the performance of the S&P
SmallCap 600 Index.
(k) Represents ownership in Energy Select Sector SPDR Fund, registered in the
United States. The investment objective of the Energy Select Sector SPDR
Fund is to provide investment results that correspond to the performance
of The Energy Select Sector Index.
(l) Represents ownership in Mid Cap SPDR Trust, a registered unit investment
trust. The investment objective of the Mid Cap SPDR Trust is to provide
investment results that generally correspond to the price performance and
dividend yield of the component.
(m) iShares Russell 2000 Index Fund is an exchange-traded Fund. The Fund seeks
investment results that correspond to the performance of the Russell 2000
Index.
See Notes to Financial Statements.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004 25
[LOGO] Merrill Lynch Investment Managers
Statement of Assets and Liabilities Master Value Opportunities Trust
As of September 30, 2004
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (including
securities loaned of $301,444,302)(identified cost--$2,330,528,121) .. $ 2,636,248,969
Investments in affiliated securities, at value
(identified cost--$806,545,234) ...................................... 764,858,453
Cash .................................................................. 258,644
Receivables:
Securities sold .................................................... $ 20,996,237
Contributions ...................................................... 3,574,682
Dividends .......................................................... 2,003,120
Interest from affiliates ........................................... 181,342
Securities lending--net ............................................ 53,498 26,808,879
---------------
Prepaid expenses ...................................................... 10,624
---------------
Total assets .......................................................... 3,428,185,569
---------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value ............................. 311,662,600
Payables:
Securities purchased ............................................... 24,263,264
Withdrawals ........................................................ 7,269,939
Investment adviser ................................................. 235,926
Other affiliates ................................................... 32,729 31,801,858
---------------
Accrued expenses and other liabilities ................................ 534,397
---------------
Total liabilities ..................................................... 343,998,855
---------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets ............................................................ $ 3,084,186,714
===============
===================================================================================================================================
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------------
Investor's capital .................................................... $ 2,820,152,647
Unrealized appreciation--net .......................................... 264,034,067
---------------
Net Assets ............................................................ $ 3,084,186,714
===============
See Notes to Financial Statements.
26 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004
Statement of Operations Master Value Opportunities Trust
For the Six Months Ended September 30, 2004
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends (including $343,457 from affiliates) ........................ $ 11,396,163
Interest from affiliates .............................................. 868,113
Securities lending--net ............................................... 287,985
---------------
Total income .......................................................... 12,552,261
---------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees .............................................. $ 7,271,082
Accounting services ................................................... 300,604
Custodian fees ........................................................ 112,024
Professional fees ..................................................... 42,146
Trustees' fees and expenses ........................................... 23,901
Printing and shareholder reports ...................................... 4,077
Pricing fees .......................................................... 677
Other ................................................................. 34,649
---------------
Total expenses ........................................................ 7,789,160
---------------
Investment income--net ................................................ 4,763,101
---------------
===================================================================================================================================
Realized & Unrealized Gain (Loss)--Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain on investments--net ..................................... 109,464,153
Change in unrealized appreciation on investments--net ................. (179,761,917)
---------------
Total realized and unrealized loss--net ............................... (70,297,764)
---------------
Net Decrease in Net Assets Resulting from Operations .................. $ (65,534,663)
===============
See Notes to Financial Statements.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004 27
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets Master Value Opportunities Trust
For the Six For the
Months Ended Year Ended
September 30, March 31,
Increase (Decrease) in Net Assets: 2004 2004
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................................ $ 4,763,101 $ 11,149,547
Realized gain--net .................................................... 109,464,153 248,569,142
Change in unrealized appreciation--net ................................ (179,761,917) 878,215,072
-----------------------------------
Net increase (decrease) in net assets resulting from operations ....... (65,534,663) 1,137,933,761
-----------------------------------
===================================================================================================================================
Capital Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions ........................................... 555,175,020 874,221,280
Fair value of withdrawals ............................................. (594,765,093) (755,260,753)
-----------------------------------
Net increase (decrease) in net assets derived from capital transactions (39,590,073) 118,960,527
-----------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets ............................... (105,124,736) 1,256,894,288
Beginning of period ................................................... 3,189,311,450 1,932,417,162
-----------------------------------
End of period ......................................................... $ 3,084,186,714 $ 3,189,311,450
===================================
See Notes to Financial Statements.
28 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004
Financial Highlights Master Value Opportunities Trust
For the Six For the Year Ended For the Period
Months Ended March 31, Sept. 1, 2000+
The following ratios have been derived from September 30, -------------------------------------------- to March 31,
information provided in the financial statements. 2004 2004 2003 2002 2001
================================================================================================================================
Total Investment Return**
- --------------------------------------------------------------------------------------------------------------------------------
Total investment return .. (1.94%)@ 58.26% (27.31%)++ 32.13% --
============================================================================
================================================================================================================================
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Expenses ................. .50%* .51% .51% .52% .54%*
============================================================================
Investment income--net ... .31%* .42% .32% .44% .85%*
============================================================================
================================================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) .......... $3,084,187 $3,189,311 $1,932,417 $3,248,959 $1,553,556
============================================================================
Portfolio turnover ....... 36.47% 80.35% 68.27% 54.14% 42.30%
============================================================================
* Annualized.
** Total investment return is required to be disclosed for fiscal years
beginning after December 15, 2000.
+ Commencement of operations.
++ FAM fully reimbursed the Trust for a loss on a transaction not meeting the
Trust's investment guidelines, which had no impact on total return.
@ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004 29
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements Master Value Opportunities Trust
1. Significant Accounting Policies:
Master Value Opportunities Trust (the "Trust") (formerly Master Small Cap Value
Trust) is registered under the Investment Company Act of 1940, as amended, and
is organized as a Delaware statutory trust. The Declaration of the Trust permits
the Trustees to issue nontransferable interests in the Trust, subject to certain
limitations. The Trust's financial statements are prepared in conformity with
U.S. generally accepted accounting principles, 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 present a fair statement of the
results for the interim period. All such adjustments are of a normal recurring
nature. The following is a summary of significant accounting policies followed
by the Trust.
(a) Valuation of investments -- Equity securities that are held by the Trust
that are traded on stock exchanges or the Nasdaq National Market are valued at
the last sale price or official close price on the exchange as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price for long positions, and at the last available ask
price for short positions. In cases where equity securities are traded on more
than one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Trustees of the Trust.
Long positions in securities traded in the over-the-counter ("OTC") market,
Nasdaq Small Cap or Bulletin Board are valued at the last available bid price or
yield equivalent obtained from one or more dealers or pricing services approved
by the Board of Trustees of the Trust. Short positions traded in the OTC market
are valued at the last available ask price. Trust 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 will be valued at cost plus accrued interest. The Trust
employs certain pricing services to provide securities prices for the Trust.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Trustees of the Trust, including valuations furnished by the
pricing services retained by the Trust, which may use a matrix system for
valuations. The procedures of a pricing service and its valuations are reviewed
by the officers of the Trust under the general supervision of the Trust's Board
of Trustees. Such valuations and procedures will be reviewed periodically by the
Board of Trustees of the Trust.
Generally, trading in foreign securities, as well as U.S. Government securities
and money market instruments, is substantially completed each day at various
times prior to the close of business on the New York Stock Exchange ("NYSE").
The values of such securities used in computing the net assets of the Trust 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 Trust'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 Trust's Board of Trustees or by the Investment
Adviser using a pricing service and/or procedures approved by the Trust's Board
of Trustees.
(b) Derivative financial instruments -- The Trust may engage in various
portfolio investment strategies both to increase the return of the Trust 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 Trust may purchase or sell financial
futures contracts and options on such
30 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004
Notes to Financial Statements (continued) Master Value Opportunities Trust
futures contracts. Futures contracts are contracts for delayed delivery of
securities at a specific future date and at a specific price or yield.
Upon entering into a contract, the Trust deposits and maintains as
collateral such initial margin as required by the exchange on which the
transaction is effected. Pursuant to the contract, the Trust 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 Trust as unrealized gains or
losses. When the contract is closed, the Trust 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 Trust may write put and covered call options and purchase
put and call options. When the Trust writes an option, an amount equal to
the premium received by the Trust 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 Trust
enters into a closing transaction), the Trust realizes a gain or loss on
the option to the extent of the premiums received or paid (or loss or gain
to the extent 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 Trust 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 Trust as an unrealized gain or
loss. When the contract is closed, the Trust 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 Trust may 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 Trust, sold by the Trust but
not yet delivered, or committed or anticipated to be purchased by the
Trust.
(c) Income taxes -- The Trust is considered a "pass through" entity for federal
income tax purposes. As such, each investor in the Trust is treated as owner of
its proportionate share of the net assets, income, expenses and realized and
unrealized gains and losses of the Trust. Therefore, no federal income tax
provision is required. Under the applicable foreign tax law, a withholding tax
may be imposed on interest, dividends, and capital gains at various rates. It is
intended that the Trust's assets will be managed so an investor in the Trust can
satisfy the requirements of subchapter M of the Internal Revenue Code.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (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.
Interest income is recognized on the accrual basis.
(e) Securities lending -- The Trust 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 Trust and any additional required collateral is delivered to the Trust on
the next business day. Where the Trust receives securities as collateral for the
loaned securities, it collects a fee from the borrower. The Trust typically
receives the income on the loaned securities but does not receive the income on
the collateral. Where the Trust receives cash collateral, it may invest such
collateral and retain the amount earned on such investment, net of any amount
rebated to the borrower. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities within five
business days. The Trust 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 Trust could experience delays
and costs in gaining access to the collateral. The Trust 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
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004 31
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (concluded) Master Value Opportunities Trust
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 Trust's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Trust. For such services, the Trust pays a monthly fee
upon the average daily value of the Trust's net assets at the following annual
rates: .50% of the Trust's average net assets not exceeding $1 billion, .475% of
average daily net assets in excess of $1 billion but not exceeding $1.5 billion;
and .45% of average daily net assets in excess of $1.5 billion.
The Trust 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 September 30, 2004, the Trust lent securities with a value of
$1,125,900 to MLPF&S or its affiliates. Pursuant to that order, the Trust 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 Trust,
invest cash collateral received by the Trust 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
September 30, 2004, MLIM, LLC received $125,677 in securities lending agent
fees.
In addition, MLPF&S received $370,902 in commissions on the execution of
portfolio security transactions for the Trust for the six months ended September
30, 2004.
For the six months ended September 30, 2004, the Trust reimbursed FAM $35,167
for certain accounting services.
Certain officers and/or trustees of the Trust are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended September 30, 2004 were $1,090,036,114 and $1,135,461,312,
respectively.
4. Short-Term Borrowings:
The Trust, along with certain other funds managed by FAM and its affiliates, is
a party to a $500,000,000 credit agreement with Bank One, N.A. and certain other
lenders. The Trust may borrow under the credit agreement to fund investors'
withdrawals and for other lawful purposes other than for leverage. The Trust may
borrow up to the maximum amount allowable under the Trust's current prospectus
and statement of additional information, subject to various other legal,
regulatory or contractual limits. The Trust pays a commitment fee of .09% per
annum based on the Trust's pro rata share of the unused portion of the credit
agreement. Amounts borrowed under the credit agreement bear interest at a rate
equal to, at each fund's election, the Federal Funds rate plus .50% or a base
rate as determined by Bank One, N.A. On November 28, 2003, the credit agreement
was renewed for one year under the same terms. The Trust did not borrow under
the credit agreement during the six months ended September 30, 2004.
32 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004
Officers and Directors/Trustees
Terry K. Glenn, President and Director/Trustee
Donald W. Burton, Director/Trustee
M. Colyer Crum, Director/Trustee
Laurie Simon Hodrick, Director/Trustee
David H. Walsh, Director/Trustee
Fred G. Weiss, Director/Trustee
Robert C. Doll, Jr., Senior Vice President
R. Elise Baum, Vice President and
Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004 33
[LOGO] Merrill Lynch Investment Managers
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
34 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004
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 Web
site http://www.icsdelivery.com/live and follow the instructions. When you visit
this site, you will obtain a personal identification number (PIN). You will need
this PIN should you wish to update your e-mail address, choose to discontinue
this service and/or make any other changes to the service. This service is not
available for certain retirement accounts at this time.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2004 35
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
at www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
Merrill Lynch Value Opportunities Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
#10253 -- 9/04
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 Value Opportunities Fund, Inc. and Master Value
Opportunities Trust
By: /s/ Terry K. Glenn
-------------------------------
Terry K. Glenn,
President of
Merrill Lynch Value Opportunities Fund, Inc. and Master Value
Opportunities Trust
Date: November 19, 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 Value Opportunities Fund, Inc. and Master Value
Opportunities Trust
Date: November 19, 2004
By: /s/ Donald C. Burke
-------------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Value Opportunities Fund, Inc. and Master Value
Opportunities Trust
Date: November 19, 2004