UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-09637
811-09739
Name of Fund: Merrill Lynch Large Cap Growth Fund of Merrill Lynch Large Cap
Series Funds, Inc.
Master Large Cap Growth Portfolio of Master Large Cap Series Trust
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, Merrill Lynch
Large Cap Growth Fund of Merrill Lynch Large Cap Series Funds, Inc. and
Master Large Cap Growth Portfolio of Master Large Cap Series Trust, 800
Scudders Mill Road, Plainsboro, NJ 08536. Mailing address: P.O. Box
9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 10/31/04
Date of reporting period: 11/01/03 - 10/31/04
Item 1 - Report to Stockholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
Merrill Lynch
Large Cap Growth Fund
Of Merrill Lynch Large Cap Series Funds, Inc.
Annual Report
October 31, 2004
[LOGO] Merrill Lynch Investment Managers
Merrill Lynch Large Cap Growth Fund
Portfolio Information as of October 31, 2004 (unaudited)
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
Pfizer, Inc. ......................................................... 5.1%
Johnson & Johnson .................................................... 4.2
The Home Depot, Inc. ................................................. 2.6
QUALCOMM Incorporated ................................................ 2.2
Microsoft Corporation ................................................ 1.9
Medtronic, Inc. ...................................................... 1.8
Motorola, Inc. ....................................................... 1.8
The Gillette Company ................................................. 1.7
The Boeing Company ................................................... 1.7
FedEx Corp. .......................................................... 1.4
- --------------------------------------------------------------------------------
Percent of
Sector Representation* Total Investments
- --------------------------------------------------------------------------------
Information Technology .................................... 24.0%
Health Care ............................................... 23.4
Consumer Discretionary .................................... 20.5
Industrials ............................................... 8.3
Consumer Staples .......................................... 5.4
Materials ................................................. 4.6
Financials ................................................ 3.7
Energy .................................................... 2.8
Utilities ................................................. 1.0
Other** ................................................... 6.3
- --------------------------------------------------------------------------------
Percent of
Five Largest Industries* Net Assets
- --------------------------------------------------------------------------------
Specialty Retail ............................................. 12.4%
Pharmaceuticals .............................................. 9.3
Software ..................................................... 7.9
Communications Equipment ..................................... 7.1
Health Care Providers & Services ............................. 6.2
- --------------------------------------------------------------------------------
* For Portfolio compliance purposes, "Sector" and "Industries" mean any one
or more of the sector and industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Portfolio management. This definition may not apply for
purposes of this report, which may combine such sector and industry
sub-classifications for reporting ease.
** Includes portfolio holdings in short-term investments.
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.
2 MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 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 four times in the past several months, from 1% to 2% as of the
November 10 Federal Open Market Committee meeting. Inflation, for its part, has
remained in check. Investors and economists are focused on how quickly monetary
policy will move from here, anxiously absorbing every bit of economic data and
Fed innuendo.
With the presidential election now behind us, any politically provoked market
angst should subside to some extent. The effect of oil prices, however, 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 tensions 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 +9.42% for the
12-month period and +2.96% for the six-month period ended October 31, 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 LARGE CAP GROWTH FUND OCTOBER 31, 2004 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
The Fund provided positive returns for the year, outperforming the
benchmark Russell 1000 Growth Index and pacing its comparable Lipper category of
Multi-Cap Growth Funds.
How did the Fund perform during the fiscal year in light of the existing market
conditions?
For the 12-month period ended October 31, 2004, Merrill Lynch Large Cap Growth
Fund's Class A, Class B, Class C, Class I and Class R Shares had total returns
of +4.69%, +3.92%, +3.92%, +4.89% and +4.39%, respectively. (Fund results shown
do not reflect sales charges and would be lower if sales charges were included.
Complete performance information can be found on pages 6 - 9 of this report to
shareholders.) Fund returns exceeded the +3.38% return of the benchmark Russell
1000 Growth Index and were generally competitive with the +4.67% average return
of its comparable Lipper category of Multi-Cap Growth Funds. (Funds in this
Lipper category invest in a variety of market capitalization ranges without
concentrating 75% of their equity assets in any one market capitalization range
over an extended period of time. Multi-cap growth funds typically have an
above-average price-to-earnings ratio, price-to-book ratio and three-year
sales-per-growth value compared to the S&P SuperComposite 1500 Index.)
For the six-month period ended October 31, 2004, the Fund outperformed both its
benchmark and the Lipper category average. The Fund's Class A, Class B, Class C,
Class I and Class R Shares had total returns of +3.25%, +2.84%, +2.85%, +3.34%
and +3.06%, respectively, for the six months ended October 31, 2004. This
compared to a return of -.73% for the Russell 1000 Growth Index and +2.09% for
the Lipper Multi-Cap Growth Funds average.
Because the Fund invests in large-capitalization stocks that represent a
significant part of the U.S. stock market, its portfolio was influenced by the
same economic and market events that affected the broader stock market during
the period. Essentially, the past year could be described as two distinct
periods. The stock market performed strongly in the first six months, carrying
the momentum from year-end 2003 into the new year. Specifically, equities
gleaned support from favorable economic news, unprecedented fiscal and monetary
policy stimulus, extraordinary corporate earnings results, strong money flows
and attractive valuations. In the six months that followed, the market was much
more volatile, taking its cues from election-related uncertainty, violence in
Iraq, record-high oil prices, rising interest rates and a series of soft
economic data.
For the 12-month period, the value style of investing significantly outpaced
growth. The Standard & Poor's 500 (S&P 500) Barra Growth Index recorded a
one-year return of +4.49% as of October 31, 2004, while the S&P 500 Barra Value
Index returned +14.46% for the same period. Also during the year, we witnessed a
"flight to quality," whereby investor favor shifted from low-quality, low-price
and higher-risk securities early in 2004 to higher-quality, higher-cap and
lower-risk stocks as investors became more cautious. Looking ahead, we believe
good stock picking is going to be more a matter of evaluating underlying company
fundamentals, with no clear winners in terms of sector, style or market cap
size.
What were the primary factors that influenced Fund performance?
The Fund invests primarily in a diversified portfolio of large cap companies
selected from securities found in the Russell 1000 Growth Index. Over the past
12 months, positive performance came from stock selection in the consumer
discretionary, especially specialty retailers, and health care sectors. This was
partially offset by stock selection in information technology and industrials,
especially education-related stocks.
At the individual stock level, the largest positive contributors to performance
were Harman International Industries, Incorporated, American Eagle Outfitters,
Inc., Urban Outfitters, Inc., The Home Depot Inc., Limited Brands, Inc., Oxford
Health Plans, Inc. and Autodesk, Inc. The largest detractors from performance
included Best Buy Co., Inc., Blockbuster Inc., Rite Aid Corporation, ImClone
Systems, ITT Educational Services Inc., Amkor Technology, Inc. and Cypress
Semiconductor Corporation. In addition, our underweight position in UnitedHealth
Group Incorporated negatively affected performance.
4 MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004
What changes were made to the Portfolio during the year?
We maintained a procyclical bias for the majority of the fiscal year, investing
in those companies and sectors that we believed could benefit from a burgeoning
U.S. economy. For the most part, portfolio activity involved fine-tuning our
exposures based on our fundamental research, including the use of both
qualitative and quantitative screens. Although we continue to believe the U.S.
economy is on relatively solid footing, we had moderated our cyclical focus to
some extent by period-end as investors grew somewhat more cautious.
From a sector perspective, we increased our positions relative to the Russell
1000 Growth Index in health care, industrials and energy. Conversely, we reduced
exposure relative to the benchmark in information technology, financials and
consumer discretionary, although we remained significantly overweight in this
sector at period-end.
In terms of individual stocks, we continued to search for companies with what we
viewed as good earnings momentum and compelling valuations. The largest
purchases during the year included Johnson & Johnson, Pfizer, Inc., The Home
Depot, Inc., Cree, Inc., Medtronic, Inc., The Gillette Company, The Boeing
Company and QUALCOMM Incorporated. Among the largest sales were General Electric
Company, Intel Corporation, Cendant Corporation, Station Casinos Inc., Yahoo!
Inc., Apollo Group Inc., Rite Aid Corporation and Sprint Corp. (PCS).
How would you characterize the Portfolio's position at the close of the period?
In general, we maintain our focus on cyclical stocks in anticipation of positive
economic developments and continued strong earnings growth. Some observers have
come to question the vitality of economic growth in recent months, citing
negligible inflation, slowing consumer spending and record-high oil prices.
However, we continue to believe that the foundations of the economy are
reasonably strong and corporate balance sheets are in good shape. Corporations
continue to post earnings increases well above the historical average of 7%. At
this time, the market has already found some relief in the conclusion of the
presidential election. Investors appear to have viewed the re-election of
President Bush as a positive for American businesses.
Based on our relatively optimistic view, the Portfolio's largest overweights
compared to the Russell 1000 Growth Index as of October 31, 2004 were in
consumer discretionary, materials and energy. In our view, these sectors should
benefit from continued strong corporate earnings growth. The Portfolio's largest
underweights compared to the Russell 1000 Growth Index at period-end were in
financials, which tend to underperform in periods of rising interest rates, and
consumer staples, traditionally a more defensive sector.
We remain committed to our search for companies exhibiting good earnings
momentum, earnings surprise and favorable valuation characteristics, and that we
believe are positioned to deliver strong performance over the long term.
Robert C. Doll, Jr.
Senior Vice President and Senior Portfolio Manager
November 12, 2004
MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 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. Figures shown in each of the following tables assume reinvestment of all
dividends and capital gain distributions, if any, at net asset value on the
ex-dividend date. Investment return and principal value of shares will fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost. Dividends paid to each class of shares will vary because of the different
levels of account maintenance, distribution and transfer agency fees applicable
to each class, which are deducted from the income available to be paid to
shareholders.
Recent Performance Results
6-Month 12-Month Since Inception
As of October 31, 2004 Total Return Total Return Total Return
======================================================================================================
ML Large Cap Growth Fund Class A Shares* +3.25% +4.69% -17.36%
- ------------------------------------------------------------------------------------------------------
ML Large Cap Growth Fund Class B Shares* +2.84 +3.92 -20.39
- ------------------------------------------------------------------------------------------------------
ML Large Cap Growth Fund Class C Shares* +2.85 +3.92 -20.48
- ------------------------------------------------------------------------------------------------------
ML Large Cap Growth Fund Class I Shares* +3.34 +4.89 -16.36
- ------------------------------------------------------------------------------------------------------
ML Large Cap Growth Fund Class R Shares* +3.06 +4.39 +31.17
- ------------------------------------------------------------------------------------------------------
Russell 1000(R) Growth Index** -0.73 +3.38 -41.58/+24.15
- ------------------------------------------------------------------------------------------------------
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are
based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the ex-dividend date. Performance results are for a limited asset
pool. The Fund's since inception periods are from 12/22/99 for Class A,
Class B, Class C and Class I Shares and from 1/03/03 for Class R Shares.
** This unmanaged broad-based Index is a subset of the Russell 1000 Index
consisting of those Russell 1000 securities with a greater-than-average
growth orientation. Since inception total returns are from 12/22/99 and
1/03/03.
Russell 1000 is a registered trademark of the Frank Russell Company.
6 MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004
Performance Data (continued)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Class A & Class
B Shares compared to growth of an investment in the Russell 1000 Growth Index.
Values are from December 22, 1999 to October 2004:
12/22/99** 10/00 10/01 10/02 10/03 10/04
ML Large Cap Growth Fund+--
Class A Shares* $ 9,475 $10,726 $7,081 $6,057 $7,479 $7,830
ML Large Cap Growth Fund+--
Class B Shares* $10,000 $11,260 $7,371 $6,251 $7,661 $7,802
Russell 1000 Growth Index++ $10,000 $ 9,610 $5,771 $4,639 $5,651 $5,842
* Assuming maximum sales charge, transaction costs and other operating
expenses, including administration fees.
** Commencement of operations.
+ ML Large Cap Growth Fund invests all of its assets in Master Large Cap
Growth Portfolio of Master Large Cap Series Trust. The Portfolio invests
primarily in a diversified portfolio of equity securities of large cap
companies located in the United States that the Investment Adviser
believes have good prospects for earnings growth.
++ This unmanaged broad-based Index is a subset of the Russell 1000 Index
consisting of those Russell 1000 securities with a greater-than-average
growth orientation.
Past performance is not predictive of future results.
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 10/31/04 +4.69% - .81%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 10/31/04 -3.85 -4.91
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
Return Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 10/31/04 +3.92% - .08%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 10/31/04 -4.58 -4.98
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
** Assuming payment of applicable contingent deferred sales charge.
MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004 7
[LOGO] Merrill Lynch Investment Managers
Performance Data (continued)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Class C & Class
I Shares compared to growth of an investment in the Russell 1000 Growth Index.
Values are from December 22, 1999 to October 2004:
12/22/99** 10/00 10/01 10/02 10/03 10/04
ML Large Cap Growth Fund+--
Class C Shares* $10,000 $11,250 $7,362 $6,252 $7,652 $7,952
ML Large Cap Growth Fund+--
Class I Shares* $ 9,475 $10,754 $7,110 $6,105 $7,556 $7,925
Russell 1000 Growth Index++ $10,000 $ 9,610 $5,771 $4,639 $5,651 $5,842
* Assuming maximum sales charge, transaction costs and other operating
expenses, including administration fees.
** Commencement of operations.
+ ML Large Cap Growth Fund invests all of its assets in Master Large Cap
Growth Portfolio of Master Large Cap Series Trust. The Portfolio invests
primarily in a diversified portfolio of equity securities of large cap
companies located in the United States that the Investment Adviser
believes have good prospects for earnings growth.
++ This unmanaged broad-based Index is a subset of the Russell 1000 Index
consisting of those Russell 1000 securities with a greater-than-average
growth orientation.
Past performance is not predictive of future results.
Average Annual Total Return
Return Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
One Year Ended 10/31/04 +3.92% +2.92%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 10/31/04 -4.61 -4.61
- --------------------------------------------------------------------------------
* 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 10/31/04 +4.89% - .61%
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 10/31/04 -3.61 -4.67
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
8 MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004
Performance Data (concluded)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Class R Shares
compared to growth of an investment in the Russell 1000 Growth Index. Values are
from January 3, 2003 to October 2004:
1/03/03** 10/03 10/04
ML Large Cap Growth Fund+--
Class R Shares* $10,000 $12,565 $13,117
Russell 1000 Growth Index++ $10,000 $12,010 $12,415
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
** Commencement of operations.
+ ML Large Cap Growth Fund invests all of its assets in Master Large Cap
Growth Portfolio of Master Large Cap Series Trust. The Portfolio invests
primarily in a diversified portfolio of equity securities of large cap
companies located in the United States that the Investment Adviser
believes have good prospects for earnings growth.
++ This unmanaged broad-based Index is a subset of the Russell 1000 Index
consisting of those Russell 1000 securities with a greater-than-average
growth orientation.
Past performance is not predictive of future results.
Average Annual Total Return
Class R Shares Return
================================================================================
One Year Ended 10/31/04 + 4.39%
- --------------------------------------------------------------------------------
Inception (1/03/03) through 10/31/04 +16.03
- --------------------------------------------------------------------------------
MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004 9
[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 May 1, 2004 and held through
October 31, 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 May 1, 2004 to
May 1, 2004 October 31, 2004 October 31, 2004
==============================================================================================================
Actual
==============================================================================================================
Class A $1,000 $1,032.50 $ 7.06
- --------------------------------------------------------------------------------------------------------------
Class B $1,000 $1,028.40 $11.05
- --------------------------------------------------------------------------------------------------------------
Class C $1,000 $1,028.50 $11.00
- --------------------------------------------------------------------------------------------------------------
Class I $1,000 $1,033.40 $ 5.80
- --------------------------------------------------------------------------------------------------------------
Class R $1,000 $1,030.60 $ 8.27
==============================================================================================================
Hypothetical (5% annual return before expenses)**
==============================================================================================================
Class A $1,000 $1,018.05 $ 7.01
- --------------------------------------------------------------------------------------------------------------
Class B $1,000 $1,014.10 $10.98
- --------------------------------------------------------------------------------------------------------------
Class C $1,000 $1,014.15 $10.93
- --------------------------------------------------------------------------------------------------------------
Class I $1,000 $1,019.30 $ 5.76
- --------------------------------------------------------------------------------------------------------------
Class R $1,000 $1,016.85 $ 8.22
- --------------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (1.39% for Class A, 2.18% for Class B, 2.17% for Class
C, 1.14% for Class I and 1.63% for Class R), multiplied by the average
account value over the period, multiplied by 182/364 (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 364.
10 MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004
Statement of Assets and Liabilities Merrill Lynch Large Cap Growth Fund
As of October 31, 2004
============================================================================================================================
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investment in Master Large Cap Growth Portfolio (the "Portfolio"),
at value (identified cost--$314,547,407) ........................ $ 344,399,881
Prepaid expenses ................................................. 57,850
-------------
Total assets ..................................................... 344,457,731
-------------
============================================================================================================================
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payables:
Distributor ................................................... $ 164,875
Other affiliates .............................................. 133,060
Administrator ................................................. 79,529 377,464
-------------
Accrued expenses ................................................. 17,546
-------------
Total liabilities ................................................ 395,010
-------------
============================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets ....................................................... $ 344,062,721
=============
============================================================================================================================
Net Assets Consist of
- ----------------------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.10 par value, 100,000,000 shares
authorized ...................................................... $ 781,439
Class B Shares of Common Stock, $.10 par value, 200,000,000 shares
authorized ...................................................... 1,173,246
Class C Shares of Common Stock, $.10 par value, 100,000,000 shares
authorized ...................................................... 1,194,400
Class I Shares of Common Stock, $.10 par value, 100,000,000 shares
authorized ...................................................... 954,995
Class R Shares of Common Stock, $.10 par value, 200,000,000 shares
authorized ...................................................... 139,810
Paid-in capital in excess of par ................................. 396,079,721
Accumulated realized capital losses allocated from the
Portfolio--net .................................................. $ (86,113,364)
Unrealized appreciation allocated from the Portfolio--net ........ 29,852,474
-------------
Total accumulated losses--net .................................... (56,260,890)
-------------
Net Assets ....................................................... $ 344,062,721
=============
============================================================================================================================
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $64,539,244 and 7,814,390 shares
outstanding ..................................................... $ 8.26
=============
Class B--Based on net assets of $93,382,092 and 11,732,463 shares
outstanding ..................................................... $ 7.96
=============
Class C--Based on net assets of $94,968,782 and 11,943,998 shares
outstanding ..................................................... $ 7.95
=============
Class I--Based on net assets of $79,869,063 and 9,549,946 shares
outstanding ..................................................... $ 8.36
=============
Class R--Based on net assets of $11,303,540 and 1,398,098 shares
outstanding ..................................................... $ 8.08
=============
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004 11
[LOGO] Merrill Lynch Investment Managers
Statement of Operations Merrill Lynch Large Cap Growth Fund
For the Year Ended October 31, 2004
============================================================================================================================
Investment Income Allocated from the Portfolio--Net
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income allocated from the Portfolio:
Dividends (net of $810 foreign withholding tax) ............... $ 1,993,727
Securities lending--net ....................................... 22,843
Interest from affiliates ...................................... 10,460
Expenses ...................................................... (1,745,776)
-------------
Net investment income allocated from the Portfolio ............... 281,254
-------------
============================================================================================================================
Expenses
- ----------------------------------------------------------------------------------------------------------------------------
Account maintenance and distribution fees--Class B ............... $ 1,017,026
Account maintenance and distribution fees--Class C ............... 824,123
Administration fees .............................................. 741,278
Transfer agent fees--Class B ..................................... 259,925
Transfer agent fees--Class C ..................................... 210,611
Transfer agent fees--Class I ..................................... 151,629
Account maintenance fees--Class A ................................ 99,974
Transfer agent fees--Class A ..................................... 89,400
Printing and shareholder reports ................................. 78,455
Registration fees ................................................ 63,067
Professional fees ................................................ 27,006
Account maintenance and distribution fees--Class R ............... 19,807
Transfer agent fees--Class R ..................................... 9,427
Other ............................................................ 35,139
-------------
Total expenses ................................................... 3,626,867
-------------
Investment loss--net ............................................. (3,345,613)
-------------
============================================================================================================================
Realized & Unrealized Gain (Loss) Allocated from the Portfolio--Net
- ----------------------------------------------------------------------------------------------------------------------------
Realized gain on investments allocated from the Portfolio--net ... 24,609,663
Change in unrealized appreciation on investments allocated from
the Portfolio--net .............................................. (10,279,020)
-------------
Total realized and unrealized gain allocated from the
Portfolio--net .................................................. 14,330,643
-------------
Net Increase in Net Assets Resulting from Operations ............. $ 10,985,030
=============
See Notes to Financial Statements.
12 MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004
Statements of Changes In Net Assets Merrill Lynch Large Cap Growth Fund
For the Year Ended
October 31,
-------------------------------
Increase (Decrease) in Net Assets: 2004 2003
============================================================================================================================
Operations
- ----------------------------------------------------------------------------------------------------------------------------
Investment loss--net ............................................. $ (3,345,613) $ (2,682,487)
Realized gain allocated from the Portfolio--net .................. 24,609,663 10,079,577
Change in unrealized appreciation allocated from the
Portfolio--net .................................................. (10,279,020) 37,997,575
-------------------------------
Net increase in net assets resulting from operations ............. 10,985,030 45,394,665
-------------------------------
============================================================================================================================
Capital Share Transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share transactions 83,194,823 20,027,496
-------------------------------
============================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ..................................... 94,179,853 65,422,161
Beginning of year ................................................ 249,882,868 184,460,707
-------------------------------
End of year ...................................................... $ 344,062,721 $ 249,882,868
===============================
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004 13
[LOGO] Merrill Lynch Investment Managers
Financial Highlights Merrill Lynch Large Cap Growth Fund
Class A
----------------------------------------------------------------------
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. For the Year Ended October 31, Dec. 22, 1999+
------------------------------------------------------- to October 31,
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
================================================================================================================================
Per Share Operating Performance
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period ...................... $ 7.89 $ 6.39 $ 7.47 $ 11.32 $ 10.00
----------------------------------------------------------------------
Investment loss--net ......... (.06)@@ (.05)@@ (.06)@@ (.07)@@ (.01)
Realized and unrealized gain
(loss) allocated from the
Portfolio--net .............. .43 1.55 (1.02) (3.78) 1.33
----------------------------------------------------------------------
Total from investment
operations .................. .37 1.50 (1.08) (3.85) 1.32
----------------------------------------------------------------------
Less distributions in excess
of realized gain allocated
from the Portfolio--net ..... -- -- -- --@ --
----------------------------------------------------------------------
Net asset value, end of period $ 8.26 $ 7.89 $ 6.39 $ 7.47 $ 11.32
======================================================================
================================================================================================================================
Total Investment Return**
- --------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per
share ....................... 4.69% 23.47% (14.46%) (33.98%) 13.20%@@@
======================================================================
================================================================================================================================
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Expenses, net of
reimbursement*** ............ 1.38% 1.46% 1.54% 1.38% 1.74%*
======================================================================
Expenses*** .................. 1.38% 1.46% 1.56% 1.38% 3.94%*
======================================================================
Investment loss--net ......... (.69%) (.81%) (.88%) (.90%) (1.14%)*
======================================================================
================================================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) .............. $ 64,539 $ 27,410 $ 15,874 $ 15,032 $ 7,540
======================================================================
Portfolio turnover of Master
Large Cap Growth Portfolio .. 164.94% 178.11% 177.46% 230.34% 94.75%
======================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Includes the Fund's share of the Portfolio's allocated expenses.
+ Commencement of operations.
@ Amount is less than $(.01) per share.
@@ Based on average shares outstanding.
@@@ Aggregate total investment return.
See Notes to Financial Statements.
14 MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004
Financial Highlights (continued) Merrill Lynch Large Cap Growth Fund
Class B
----------------------------------------------------------------------
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. For the Year Ended October 31, Dec. 22, 1999+
------------------------------------------------------- to October 31,
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
================================================================================================================================
Per Share Operating Performance
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period ...................... $ 7.66 $ 6.25 $ 7.37 $ 11.26 $ 10.00
----------------------------------------------------------------------
Investment loss--net ......... (.12)@@ (.10)@@ (.12)@@ (.14)@@ (.01)
Realized and unrealized gain
(loss) allocated from the
Portfolio--net .............. .42 1.51 (1.00) (3.75) 1.27
----------------------------------------------------------------------
Total from investment
operations .................. .30 1.41 (1.12) (3.89) 1.26
----------------------------------------------------------------------
Less distributions in excess
of realized gain allocated
from the Portfolio--net ..... -- -- -- --@ --
----------------------------------------------------------------------
Net asset value, end of period $ 7.96 $ 7.66 $ 6.25 $ 7.37 $ 11.26
======================================================================
================================================================================================================================
Total Investment Return**
- --------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per
share ....................... 3.92% 22.56% (15.20%) (34.54%) 12.60%@@@
======================================================================
================================================================================================================================
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Expenses, net of
reimbursement*** ............ 2.16% 2.27% 2.32% 2.17% 2.56%*
======================================================================
Expenses*** .................. 2.16% 2.27% 2.34% 2.17% 4.14%*
======================================================================
Investment loss--net ......... (1.48%) (1.61%) (1.66%) (1.67%) (1.82%)*
======================================================================
================================================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) .............. $ 93,382 $ 100,683 $ 83,726 $ 70,428 $ 47,370
======================================================================
Portfolio turnover of Master
Large Cap Growth Portfolio .. 164.94% 178.11% 177.46% 230.34% 94.75%
======================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Includes the Fund's share of the Portfolio's allocated expenses.
+ Commencement of operations.
@ Amount is less than $(.01) per share.
@@ Based on average shares outstanding.
@@@ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004 15
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (continued) Merrill Lynch Large Cap Growth Fund
Class C
----------------------------------------------------------------------
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. For the Year Ended October 31, Dec. 22, 1999+
------------------------------------------------------- to October 31,
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
================================================================================================================================
Per Share Operating Performance
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period ...................... $ 7.65 $ 6.25 $ 7.36 $ 11.25 $ 10.00
----------------------------------------------------------------------
Investment loss--net ......... (.12)@@ (.10)@@ (.12)@@ (.14)@@ (.01)
Realized and unrealized gain
(loss) allocated from the
Portfolio--net .............. .42 1.50 (.99) (3.75) 1.26
----------------------------------------------------------------------
Total from investment
operations .................. .30 1.40 (1.11) (3.89) 1.25
----------------------------------------------------------------------
Less distributions in excess
of realized gain allocated
from the Portfolio--net ..... -- -- -- --@ --
----------------------------------------------------------------------
Net asset value, end of period $ 7.95 $ 7.65 $ 6.25 $ 7.36 $ 11.25
======================================================================
================================================================================================================================
Total Investment Return**
- --------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per
share ....................... 3.92% 22.40% (15.08%) (34.56%) 12.50%@@@
======================================================================
================================================================================================================================
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Expenses, net of
reimbursement*** ............ 2.16% 2.27% 2.33% 2.17% 2.56%*
======================================================================
Expenses*** .................. 2.16% 2.27% 2.35% 2.17% 4.16%*
======================================================================
Investment loss--net ......... (1.48%) (1.62%) (1.67%) (1.68%) (1.83%)*
======================================================================
================================================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) .............. $ 94,969 $ 68,337 $ 52,872 $ 39,167 $ 23,736
======================================================================
Portfolio turnover of Master
Large Cap Growth Portfolio .. 164.94% 178.11% 177.46% 230.34% 94.75%
======================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Includes the Fund's share of the Portfolio's allocated expenses.
+ Commencement of operations.
@ Amount is less than $(.01) per share.
@@ Based on average shares outstanding.
@@@ Aggregate total investment return.
See Notes to Financial Statements.
16 MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004
Financial Highlights (continued) Merrill Lynch Large Cap Growth Fund
Class I
----------------------------------------------------------------------
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. For the Year Ended October 31, Dec. 22, 1999+
------------------------------------------------------- to October 31,
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
================================================================================================================================
Per Share Operating Performance
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period ...................... $ 7.97 $ 6.44 $ 7.50 $ 11.35 $ 10.00
----------------------------------------------------------------------
Investment loss--net ......... (.04)@@ (.04)@@ (.05)@@ (.06)@@ (.02)
Realized and unrealized gain
(loss) allocated from the
Portfolio--net .............. .43 1.57 (1.01) (3.78) 1.37
----------------------------------------------------------------------
Total from investment
operations .................. .39 1.53 (1.06) (3.84) 1.35
----------------------------------------------------------------------
Less distributions in excess
of realized gain allocated
from the Portfolio--net ..... -- -- -- (.01) --
----------------------------------------------------------------------
Net asset value, end of period $ 8.36 $ 7.97 $ 6.44 $ 7.50 $ 11.35
======================================================================
================================================================================================================================
Total Investment Return**
- --------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per
share ....................... 4.89% 23.76% (14.13%) (33.89%) 13.50%@
======================================================================
================================================================================================================================
Ratios to Average Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Expenses, net of
reimbursement*** ............ 1.13% 1.22% 1.29% 1.14% 1.38%*
======================================================================
Expenses*** .................. 1.13% 1.22% 1.31% 1.14% 4.77%*
======================================================================
Investment loss--net ......... (.45%) (.57%) (.63%) (.65%) (1.04%)*
======================================================================
================================================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) .............. $ 79,869 $ 53,163 $ 31,989 $ 23,112 $ 18,859
======================================================================
Portfolio turnover of Master
Large Cap Growth Portfolio .. 164.94% 178.11% 177.46% 230.34% 94.75%
======================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Includes the Fund's share of the Portfolio's allocated expenses.
+ Commencement of operations.
@ Aggregate total investment return.
@@ Based on average shares outstanding.
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004 17
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (concluded) Merrill Lynch Large Cap Growth Fund
Class R
-------------------------------
For the Period
The following per share data and ratios have been derived For the January 3,
from information provided in the financial statements. Year Ended 2003+ to
October 31, October 31,
Increase (Decrease) in Net Asset Value: 2004 2003
============================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............................. $ 7.74 $ 6.16
-------------------------------
Investment loss--net@@ ........................................... (.06) (.05)
Realized and unrealized gain allocated from the Portfolio--net ... .40 1.63
-------------------------------
Total from investment operations ................................. .34 1.58
-------------------------------
Net asset value, end of period ................................... $ 8.08 $ 7.74
===============================
============================================================================================================================
Total Investment Return++
- ----------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ............................... 4.39% 25.65%@
===============================
============================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement** ................................. 1.61% 1.72%*
===============================
Expenses** ....................................................... 1.61% 1.72%*
===============================
Investment loss--net ............................................. (.95%) (.94%)*
===============================
============================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ......................... $ 11,304 $ 290
===============================
Portfolio turnover of Master Large Cap Growth Portfolio .......... 164.94% 178.11%
===============================
* Annualized.
** Includes the Fund's share of the Portfolio's allocated expenses.
+ Commencement of operations.
++ Total investment returns exclude the effects of sales charges.
@ Aggregate total investment return.
@@ Based on average shares outstanding.
See Notes to Financial Statements.
18 MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004
Notes to Financial Statements Merrill Lynch Large Cap Growth Fund
1. Significant Accounting Policies:
Merrill Lynch Large Cap Growth Fund of Merrill Lynch Large Cap Series Funds,
Inc. (the "Fund") is registered under the Investment Company Act of 1940, as
amended, as a diversified mutual fund. The Fund seeks to achieve its investment
objective by investing all of its assets in the Master Large Cap Growth
Portfolio (the "Portfolio"), which is a portfolio of Master Large Cap Series
Trust that has the same investment objective and strategies as the Fund. The
value of the Fund's investment in the Portfolio reflects the Fund's
proportionate interest in the net assets of the Portfolio. The performance of
the Fund is directly affected by the performance of the Portfolio. The financial
statements of the Portfolio, including the Schedule of Investments, are included
elsewhere in this report and should be read in conjunction with the Fund's
financial statements. The Fund's financial statements are prepared in conformity
with U.S. generally accepted accounting principles, which may require the use of
management accruals and estimates. Actual results may differ from these
estimates. The percentage of the Portfolio owned by the Fund at October 31, 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 attributable to a specific class) and
realized and unrealized gains and losses on investments (and foreign currency
transactions) are allocated daily to each class based on its relative net
assets. The following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of investments -- The Fund records its investment in the Portfolio
at fair value. Valuation of securities held by the Portfolio is discussed in
Note 1a of the Portfolio's Notes to Financial Statements, which are included
elsewhere in this report.
(b) Investment income and expenses -- The Fund records daily its proportionate
share of the Portfolio's income, expenses and realized and unrealized gains and
losses. In addition, the Fund accrues its own expenses.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to shareholders. Therefore,
no federal income tax provision is required. Under the applicable foreign tax
law, a withholding tax may be imposed on interest, dividends and capital gains
at various rates.
(d) Prepaid registration fees -- Prepaid registration fees are charged to
expenses as the related shares are issued.
(e) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(f) Investment transactions -- Investment transactions in the Portfolio are
accounted for on a trade date basis.
(g) Reclassification -- U.S. generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, during the current
year, $3,345,613 has been reclassified between paid-in capital in excess of par
and accumulated net investment loss as a result of permanent differences
attributable to net operating losses and non-deductible expenses. This
reclassification has no effect on net assets or net asset values per share.
2. Transactions with Affiliates:
The Fund has entered into an Administration Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner. The Fund pays a monthly fee at an annual
rate of .25% of the Fund's average daily net assets for the performance of
administrative services (other than investment advice and related portfolio
activities) necessary for the operation of the Fund.
The Fund has entered into a Distribution Agreement and Distribution Plans with
FAM Distributors, Inc. ("FAMD" or the "Distributor"), which is a wholly-owned
subsidiary of Merrill Lynch Group, Inc. Pursuant to the Distribution Plans
adopted by the Fund in accordance with Rule 12b-1 under the Investment Company
Act of 1940, the Fund pays the Distributor ongoing account maintenance and
distribution fees. The fees
MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004 19
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (continued) Merrill Lynch Large Cap Growth Fund
are accrued daily and paid monthly at annual rates based upon the average daily
net assets of the shares as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class A ................................ .25% --
Class B ................................ .25% .75%
Class C ................................ .25% .75%
Class R ................................ .25% .25%
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class A, Class B, Class C and Class R shareholders. The
ongoing distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B, Class C and Class R
shareholders.
For the year ended October 31, 2004, FAMD earned underwriting discounts and
MLPF&S earned dealer concessions on sales of the Fund's Class A and Class I
Shares as follows:
- --------------------------------------------------------------------------------
FAMD MLPF&S
- --------------------------------------------------------------------------------
Class A ............................ $ 7,526 $89,931
Class I ............................ $ 111 $ 1,350
- --------------------------------------------------------------------------------
For the year ended October 31, 2004, MLPF&S received contingent deferred sales
charges of $166,821 and $11,403 relating to transactions in Class B and Class C
Shares of the Fund, respectively.
Financial Data Services, Inc. ("FDS"), a 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
$83,194,823 and $20,027,496 for the years ended October 31, 2004 and October 31,
2003, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended October 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 5,354,688 $ 43,501,833
Automatic conversion of shares ......... 707,045 5,697,532
------------------------------
Total issued ........................... 6,061,733 49,199,365
Shares redeemed ........................ (1,722,354) (13,822,082)
------------------------------
Net increase ........................... 4,339,379 $ 35,377,283
==============================
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended October 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 2,096,948 $ 13,866,353
Shares issued resulting from
reorganization ....................... 24,369 150,353
Automatic conversion of shares ......... 10,886 71,282
------------------------------
Total issued ........................... 2,132,203 14,087,988
Shares redeemed ........................ (1,142,207) (7,444,225)
------------------------------
Net increase ........................... 989,996 $ 6,643,763
==============================
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended October 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 2,656,595 $ 20,970,689
Automatic conversion of shares ......... (733,375) (5,697,532)
Shares redeemed ........................ (3,330,795) (26,194,971)
------------------------------
Net decrease ........................... (1,407,575) $(10,921,814)
==============================
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended October 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 3,207,289 $ 20,273,249
Shares issued resulting from
reorganization ....................... 124,168 747,186
------------------------------
Total issued ........................... 3,331,457 21,020,435
Automatic conversion of shares ......... (11,157) (71,282)
Shares redeemed ........................ (3,566,576) (22,576,872)
------------------------------
Net decrease ........................... (246,276) $ (1,627,719)
==============================
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended October 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 5,420,898 $ 42,638,163
Shares redeemed ........................ (2,404,956) (18,800,286)
------------------------------
Net increase ........................... 3,015,942 $ 23,837,877
==============================
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended October 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 3,303,721 $ 21,025,257
Shares issued resulting from
reorganization ....................... 8,965 53,892
------------------------------
Total issued ........................... 3,312,686 21,079,149
Shares redeemed ........................ (2,846,850) (17,916,272)
------------------------------
Net increase ........................... 465,836 $ 3,162,877
==============================
20 MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004
Notes to Financial Statements (concluded) Merrill Lynch Large Cap Growth Fund
- --------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended October 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 5,628,370 $ 46,581,467
Shares redeemed ........................ (2,749,862) (22,603,407)
------------------------------
Net increase ........................... 2,878,508 $ 23,978,060
==============================
- --------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended October 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 3,746,535 $ 25,089,884
Shares issued resulting from
reorganization ....................... 15 91
------------------------------
Total issued ........................... 3,746,550 25,089,975
Shares redeemed ........................ (2,044,660) (13,509,957)
------------------------------
Net increase ........................... 1,701,890 $ 11,580,018
==============================
- --------------------------------------------------------------------------------
Class R Shares for the Year Dollar
Ended October 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 1,768,404 $ 14,093,471
Shares redeemed ........................ (407,775) (3,170,054)
------------------------------
Net increase ........................... 1,360,629 $ 10,923,417
==============================
- --------------------------------------------------------------------------------
Class R Shares for the Period
January 3, 2003+ to Dollar
October 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 38,716 $ 277,457
Shares redeemed ........................ (1,247) (8,900)
------------------------------
Net increase ........................... 37,469 $ 268,557
==============================
+ Commencement of operations.
4. Distributions to Shareholders:
As of October 31, 2004, the components of accumulated losses on a tax basis were
as follows:
- --------------------------------------------------------------------------------
Undistributed ordinary income--net ...................... $ --
Undistributed long-term capital gains--net .............. --
------------
Total undistributed earnings--net ....................... --
Capital loss carryforward ............................... (82,684,257)*
Unrealized gains--net ................................... 26,423,367**
------------
Total accumulated losses--net ........................... $(56,260,890)
============
* On October 31, 2004, the Fund had a net capital loss carryforward of
$82,684,257, of which $7,837,494 expires in 2007, $2,749,271 expires in
2008, $31,647,418 expires in 2009 and $40,450,074 expires in 2010. This
amount will be available to offset like amounts of any future taxable
gains.
** The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on wash sales.
Report of Independent Registered Public Accounting Firm
Merrill Lynch Large Cap Growth Fund
To the Shareholders and Board of Directors of
Merrill Lynch Large Cap Series Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of Merrill
Lynch Large Cap Growth Fund, one of the series constituting Merrill Lynch Large
Cap Series Funds, Inc. (the "Fund"), as of October 31, 2004, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the respective periods then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Merrill Lynch Large Cap Growth Fund of Merrill Lynch Large Cap Series Funds,
Inc. as of October 31, 2004, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and its financial highlights for each of the respective periods then
ended, in conformity with U.S. generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 14, 2004
MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004 21
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments Master Large Cap Growth Portfolio
Value
Sector* Industry* Shares Held Common Stocks (in U.S. dollars)
===================================================================================================================================
Consumer Auto Components--0.9% 71,000 Autoliv, Inc. $ 3,035,250
Discretionary--21.7% -----------------------------------------------------------------------------------------------------------
Automobiles--1.2% 70,000 Harley-Davidson, Inc. 4,029,900
-----------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure--1.0% 74,000 Starwood Hotels & Resorts Worldwide,
Inc. 3,532,020
-----------------------------------------------------------------------------------------------------------
Household Durables--4.0% 33,000 The Black & Decker Corporation 2,649,240
32,000 Harman International Industries,
Incorporated 3,845,760
46,000 M.D.C. Holdings, Inc. 3,530,500
6,000 +NVR, Inc. 3,762,000
------------
13,787,500
-----------------------------------------------------------------------------------------------------------
Leisure Equipment & Products--0.1% 7,000 Polaris Industries, Inc. 415,450
-----------------------------------------------------------------------------------------------------------
Media--1.0% 61,000 +Getty Images, Inc. 3,606,930
-----------------------------------------------------------------------------------------------------------
Multiline Retail--1.1% 87,000 Nordstrom, Inc. 3,756,660
-----------------------------------------------------------------------------------------------------------
Specialty Retail--12.4% 97,000 Abercrombie & Fitch Co. (Class A) 3,800,460
86,000 American Eagle Outfitters, Inc. 3,515,680
143,000 Claire's Stores, Inc. 3,720,860
194,000 The Gap, Inc. 3,876,120
216,000 The Home Depot, Inc. 8,873,280
145,000 Limited Brands, Inc. 3,593,100
121,000 Michael's Stores, Inc. 3,521,100
117,000 PETsMART, Inc. (c) 3,741,660
149,000 Staples, Inc. (c) 4,431,260
89,000 +Urban Outfitters, Inc. 3,649,000
------------
42,722,520
-----------------------------------------------------------------------------------------------------------
Total Consumer Discretionary 74,886,230
===================================================================================================================================
Consumer Beverages--1.0% 124,000 The Pepsi Bottling Group, Inc. 3,476,960
Staples--5.8% -----------------------------------------------------------------------------------------------------------
Food & Staples Retailing--1.6% 75,000 Costco Wholesale Corporation 3,595,500
37,000 Wal-Mart Stores, Inc. 1,995,040
------------
5,590,540
-----------------------------------------------------------------------------------------------------------
Household Products--0.3% 18,000 The Procter & Gamble Company 921,240
-----------------------------------------------------------------------------------------------------------
Personal Products--2.9% 102,000 Avon Products, Inc. 4,034,100
141,000 The Gillette Company 5,848,680
------------
9,882,780
-----------------------------------------------------------------------------------------------------------
Total Consumer Staples 19,871,520
===================================================================================================================================
Energy--3.0% Oil & Gas--3.0% 47,000 Anadarko Petroleum Corporation 3,170,150
87,000 Burlington Resources Inc. 3,610,500
60,000 +Newfield Exploration Company 3,492,000
-----------------------------------------------------------------------------------------------------------
Total Energy 10,272,650
===================================================================================================================================
Financials--4.0% Consumer Finance--1.0% 224,000 +Providian Financial Corporation 3,483,200
-----------------------------------------------------------------------------------------------------------
Insurance--3.0% 80,000 Berkley (W.R.) Corporation 3,419,200
77,000 Fidelity National Financial, Inc. 2,905,980
83,000 Prudential Financial, Inc. 3,857,010
------------
10,182,190
-----------------------------------------------------------------------------------------------------------
Total Financials 13,665,390
===================================================================================================================================
Health Care--24.8% Biotechnology--3.1% 124,000 +Celgene Corporation (c) 3,672,880
72,000 +Cephalon, Inc. 3,432,240
75,000 +Charles River Laboratories
International, Inc. 3,509,250
------------
10,614,370
-----------------------------------------------------------------------------------------------------------
22 MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004
Schedule of Investments (continued) Master Large Cap Growth Portfolio
Value
Sector* Industry* Shares Held Common Stocks (in U.S. dollars)
===================================================================================================================================
Health Care Health Care Equipment & Supplies--6.2% 60,000 Bausch & Lomb Incorporated $ 3,657,600
(concluded) 83,000 Becton, Dickinson and Company (c) 4,357,500
63,000 C.R. Bard, Inc. 3,578,400
122,000 Medtronic, Inc. 6,235,420
69,000 +Respironics, Inc. 3,525,210
------------
21,354,130
-----------------------------------------------------------------------------------------------------------
Health Care Providers & Services--6.2% 36,000 Aetna Inc. (New Shares) 3,420,000
49,000 +Anthem, Inc. (c) 3,939,600
85,000 +Laboratory Corporation of America
Holdings 3,893,000
98,000 +PacifiCare Health Systems, Inc. 3,490,760
42,000 Quest Diagnostics Incorporated 3,676,680
41,000 UnitedHealth Group Incorporated 2,968,400
------------
21,388,440
-----------------------------------------------------------------------------------------------------------
Pharmaceuticals--9.3% 249,000 Johnson & Johnson 14,536,620
607,000 Pfizer, Inc. 17,572,650
------------
32,109,270
-----------------------------------------------------------------------------------------------------------
Total Health Care 85,466,210
===================================================================================================================================
Industrials--8.8% Aerospace & Defense--1.7% 116,000 The Boeing Company 5,788,400
-----------------------------------------------------------------------------------------------------------
Air Freight & Logistics--2.3% 73,000 CNF Transportation Inc. 3,195,940
53,000 FedEx Corp. 4,829,360
------------
8,025,300
-----------------------------------------------------------------------------------------------------------
Commercial Services & Supplies--0.6% 45,000 The Brink's Company 1,444,500
23,000 +West Corporation 646,760
------------
2,091,260
-----------------------------------------------------------------------------------------------------------
Electrical Equipment--1.1% 94,000 Rockwell Automation, Inc. 3,918,860
-----------------------------------------------------------------------------------------------------------
Machinery--2.1% 104,000 Graco Inc. 3,577,600
147,000 The Timken Company 3,528,000
------------
7,105,600
-----------------------------------------------------------------------------------------------------------
Road & Rail--1.0% 86,000 J.B. Hunt Transport Services, Inc. 3,513,960
-----------------------------------------------------------------------------------------------------------
Total Industrials 30,443,380
===================================================================================================================================
Information Communications Equipment--7.1% 276,000 +Avaya Inc. 3,974,400
Technology--25.5% 77,000 +Cisco Systems, Inc. 1,479,170
31,000 Harris Corporation 1,907,430
350,000 Motorola, Inc. 6,041,000
179,000 QUALCOMM Incorporated 7,483,990
436,000 +Tellabs, Inc. 3,488,000
------------
24,373,990
-----------------------------------------------------------------------------------------------------------
Computers & Peripherals--3.0% 43,000 +Lexmark International, Inc. (Class A) 3,573,730
67,000 +NCR Corporation 3,775,450
116,000 +Storage Technology Corporation 3,134,320
------------
10,483,500
-----------------------------------------------------------------------------------------------------------
Electronic Equipment & 206,000 +Ingram Micro Inc. (Class A) 3,553,500
Instruments--1.5% 59,000 Tektronix, Inc. 1,789,470
------------
5,342,970
-----------------------------------------------------------------------------------------------------------
IT Services--2.0% 114,000 +CheckFree Corp. 3,534,000
71,000 +DST Systems, Inc. 3,184,350
------------
6,718,350
-----------------------------------------------------------------------------------------------------------
Office Electronics--1.1% 251,000 +Xerox Corporation 3,707,270
-----------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor 109,000 +Cree, Inc. (c) 3,761,590
Equipment--2.9% 106,000 Intel Corporation 2,359,560
129,000 Microchip Technology 3,902,250
------------
10,023,400
MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004 23
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (concluded) Master Large Cap Growth Portfolio
Value
Sector* Industry* Shares Held Common Stocks (in U.S. dollars)
===================================================================================================================================
Information Technology Software--7.9% 82,000 Adobe Systems Incorporated (c) $ 4,594,460
(concluded) 78,000 Autodesk, Inc. 4,114,500
185,000 +BMC Software, Inc. 3,500,200
232,000 Microsoft Corporation 6,493,680
47,000 +Oracle Corporation 595,020
76,000 +Symantec Corporation 4,327,440
371,000 +TIBCO Software Inc. 3,606,120
------------
27,231,420
-----------------------------------------------------------------------------------------------------------
Total Information Technology 87,880,900
===================================================================================================================================
Materials--4.9% Chemicals--0.8% 71,000 International Flavors & Fragrances Inc. 2,772,550
-----------------------------------------------------------------------------------------------------------
Containers & Packaging--1.1% 96,000 Ball Corporation 3,825,600
-----------------------------------------------------------------------------------------------------------
Metals & Mining--3.0% 89,000 Nucor Corporation 3,758,470
35,000 Phelps Dodge Corporation (c) 3,063,900
179,000 Worthington Industries, Inc. 3,553,150
------------
10,375,520
-----------------------------------------------------------------------------------------------------------
Total Materials 16,973,670
===================================================================================================================================
Utilities--1.1% Electric Utilities--1.1% 198,000 +Allegheny Energy, Inc. 3,625,380
-----------------------------------------------------------------------------------------------------------
Total Utilities 3,625,380
===========================================================================================================
Total Common Stocks
(Cost--$313,232,856)--99.6% 343,085,330
===================================================================================================================================
Beneficial Interest Short-Term Securities
===================================================================================================================================
$ 16,722 Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I (a) 16,722
22,849,900 Merrill Lynch Liquidity Series, LLC
Money Market Series (a)(b) 22,849,900
-----------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost--$22,866,622)--6.7% 22,866,622
===================================================================================================================================
Total Investments (Cost--$336,099,478**)--106.3% 365,951,952
Liabilities in Excess of Other Assets--(6.3%) (21,552,071)
------------
Net Assets--100.0% $344,399,881
============
* For Portfolio compliance purposes, "Industry" and "Sector" mean any one or
more of the industry and sector sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Portfolio management. This definition may not apply for
purposes of this report, which may combine such industry and sector
sub-classifications for reporting ease. These industry and sector
classifications are unaudited.
** The cost and unrealized appreciation/depreciation of investments as of
October 31, 2004, as computed for federal income tax purposes, were as
follows:
--------------------------------------------------------------------------
Aggregate cost ........................................... $339,529,233
============
Gross unrealized appreciation ............................ $ 33,303,773
Gross unrealized depreciation ............................ (6,881,054)
------------
Net unrealized appreciation .............................. $ 26,422,719
============
+ Non-income producing security.
(a) Investments in companies considered to be an affiliate of the Portfolio
(such companies are defined as "Affiliated Companies" in Section 2(a)(3)
of the Investment Company Act of 1940) were as follows:
--------------------------------------------------------------------------
Interest/
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $ (447,139) $10,460
Merrill Lynch Liquidity Series, LLC
Money Market Series $ 1,876,337 $19,461
Merrill Lynch Premier
Institutional Fund (6,991,187) $ 3,382
--------------------------------------------------------------------------
(b) Security was purchased with cash proceeds from securities loans.
(c) Security, or portion of security, is on loan.
See Notes to Financial Statements.
24 MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004
Statement of Assets and Liabilities Master Large Cap Growth Portfolio
As of October 31, 2004
============================================================================================================================
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (including
securities loaned of $22,425,478) (identified cost--$313,232,856) $ 343,085,330
Investments in affiliated securities, at value
(identified cost--$22,866,622) .................................. 22,866,622
Receivables:
Securities sold ............................................... $ 7,189,014
Contributions ................................................. 1,973,963
Dividends ..................................................... 61,759
Securities lending--net ....................................... 2,543
Interest from affiliates ...................................... 1,140 9,228,419
-------------
Prepaid expenses ................................................. 4,635
-------------
Total assets ..................................................... 375,185,006
-------------
============================================================================================================================
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value ........................ 22,849,900
Payables:
Securities purchased .......................................... 6,944,694
Withdrawals ................................................... 781,765
Investment adviser ............................................ 159,173
Other affiliates .............................................. 2,233 7,887,865
-------------
Accrued expenses and other liabilities ........................... 47,360
-------------
Total liabilities ................................................ 30,785,125
-------------
============================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets ....................................................... $ 344,399,881
=============
============================================================================================================================
Net Assets Consist of
- ----------------------------------------------------------------------------------------------------------------------------
Investor capital ................................................. $ 314,547,407
Unrealized appreciation--net ..................................... 29,852,474
-------------
Net Assets ....................................................... $ 344,399,881
=============
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004 25
[LOGO] Merrill Lynch Investment Managers
Statement of Operations Master Large Cap Growth Portfolio
For the Year Ended October 31, 2004
============================================================================================================================
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Dividends (net of $810 foreign withholding tax) .................. $ 1,993,729
Securities lending--net .......................................... 22,843
Interest from affiliates ......................................... 10,460
-------------
Total income ..................................................... 2,027,032
-------------
============================================================================================================================
Expenses
- ----------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ......................................... $ 1,483,604
Accounting services .............................................. 142,605
Custodian fees ................................................... 45,539
Professional fees ................................................ 44,435
Trustees' fees and expenses ...................................... 18,900
Pricing fees ..................................................... 1,348
Printing and shareholder reports ................................. 288
Other ............................................................ 9,059
-------------
Total expenses ................................................... 1,745,778
-------------
Investment income--net ........................................... 281,254
-------------
============================================================================================================================
Realized & Unrealized Gain (Loss)--Net
- ----------------------------------------------------------------------------------------------------------------------------
Realized gain on investments--net ................................ 24,609,718
Change in unrealized appreciation on investments--net ............ (10,279,183)
-------------
Total realized and unrealized gain--net .......................... 14,330,535
-------------
Net Increase in Net Assets Resulting from Operations ............. $ 14,611,789
=============
See Notes to Financial Statements.
26 MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004
Statements of Changes in Net Assets Master Large Cap Growth Portfolio
For the Year Ended
October 31,
-------------------------------
Increase (Decrease) in Net Assets: 2004 2003
============================================================================================================================
Operations
- ----------------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................... $ 281,254 $ 79,856
Realized gain--net ............................................... 24,609,718 10,011,741
Change in unrealized appreciation--net ........................... (10,279,183) 38,033,118
-------------------------------
Net increase in net assets resulting from operations ............. 14,611,789 48,124,715
-------------------------------
============================================================================================================================
Capital Transactions
- ----------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions ...................................... 167,785,623 80,542,171
Fair value of withdrawals ........................................ (88,163,265) (64,177,253)
-------------------------------
Increase in net assets derived from capital transactions ......... 79,622,358 16,364,918
-------------------------------
============================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ..................................... 94,234,147 64,489,633
Beginning of year ................................................ 250,165,734 185,676,101
-------------------------------
End of year ...................................................... $ 344,399,881 $ 250,165,734
===============================
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004 27
[LOGO] Merrill Lynch Investment Managers
Financial Highlights Master Large Cap Growth Portfolio
For the Period
For the Year Ended October 31, December 22, 1999+
The following ratios have been derived from ------------------------------------------- to October 31,
information provided in the financial statements. 2004 2003 2002 2001 2000
=================================================================================================================================
Total Investment Return**
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment return ................ 5.42% 25.01% (13.56%) -- --
===============================================================
=================================================================================================================================
Ratios to Average Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ......... .59% .61% .67% .73% 1.30%*
===============================================================
Expenses ............................... .59% .61% .67% .73% 1.82%*
===============================================================
Investment income (loss)--net .......... .09% .04% (.01%) (.24%) (.75%)*
===============================================================
=================================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $344,400 $250,166 $185,676 $148,652 $ 98,125
===============================================================
Portfolio turnover ..................... 164.94% 178.11% 177.46% 230.34% 94.75%
===============================================================
* Annualized.
** Total investment return is required to be disclosed for fiscal years
beginning after December 15, 2000.
+ Commencement of operations.
See Notes to Financial Statements.
28 MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004
Notes to Financial Statements Master Large Cap Growth Portfolio
1. Significant Accounting Policies:
Master Large Cap Growth Portfolio (the "Portfolio") is part of Master Large Cap
Series Trust (the "Trust"). The Trust is registered under the Investment Company
Act of 1940, as amended, and is organized as a Delaware statutory trust. The
Declaration of Trust permits the Trustees to issue nontransferable interests in
the Portfolio, subject to certain limitations. The Portfolio's financial
statements are prepared in conformity with U.S. generally accepted accounting
principles, which may require the use of management accruals and estimates.
Actual results may differ from these estimates. The following is a summary of
significant accounting policies followed by the Portfolio.
(a) Valuation of investments -- Equity securities that are held by the Portfolio
that are traded on stock exchanges or the Nasdaq National Market are valued at
the last sale price or official close price on the exchange, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price for long positions, and at the last available ask
price for short positions. In cases where equity securities are traded on more
than one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Trustees. Long
positions traded in the over-the-counter ("OTC") market, Nasdaq Small Cap or
Bulletin Board are valued at the last available bid price or yield equivalent
obtained from one or more dealers or pricing services approved by the Board of
Trustees. Short positions traded in the OTC market are valued at the last
available ask price. Portfolio securities that are traded both in the OTC market
and on a stock exchange are valued according to the broadest and most
representative market.
Options written are valued at the last sale price in the case of exchange-traded
options or, in the case of options traded in the OTC market, the last ask price.
Options purchased are valued at their last sale price in the case of
exchange-traded options or, in the case of options traded in the OTC market, the
last bid price. Swap agreements are valued daily based upon quotations from
market makers. Financial futures contracts and options thereon, which are traded
on exchanges, are valued at their last sale price as of the close of such
exchanges. Obligations with remaining maturities of 60 days or less are valued
at amortized cost unless the Investment Adviser believes that this method no
longer produces fair valuations.
Repurchase agreements are valued at cost plus accrued interest. The Portfolio
employs pricing services to provide certain securities prices for the Portfolio.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Trustees, including valuations furnished by the pricing services
retained by the Portfolio, which may use a matrix system for valuations. The
procedures of a pricing service and its valuations are reviewed by the officers
of the Trust under the general supervision of the Board of Trustees. Such
valuations and procedures will be reviewed periodically by the Board of
Trustees.
Generally, trading in foreign securities, as well as U.S. government securities
and money market instruments, is substantially completed each day at various
times prior to the close of business on the New York Stock Exchange ("NYSE").
The values of such securities used in computing the net assets of the Portfolio
are determined as of such times. Foreign currency exchange rates also are
generally determined prior to the close of business on the NYSE. Occasionally,
events affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of business on the
NYSE that may not be reflected in the computation of the Portfolio's net assets.
If events (for example, a company announcement, market volatility or a natural
disaster) occur during such periods that are expected to materially affect the
value of such securities, those securities may be valued at their fair value as
determined in good faith by the Board of Trustees or by the Investment Adviser
using a pricing service and/or procedures approved by the Board of Trustees.
(b) Derivative financial instruments -- The Portfolio may engage in various
portfolio investment strategies both to increase the return of the Portfolio and
to hedge, or protect, its exposure to interest rate movements and movements in
the securities markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
o Financial futures contracts -- The Portfolio may purchase or sell
financial futures contracts and options on such futures contracts. Futures
contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Portfolio deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Portfolio agrees to receive from or pay to
the broker an
MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004 29
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (continued) Master Large Cap Growth Portfolio
amount of cash equal to the daily fluctuation in value of the contract.
Such receipts or payments are known as variation margin and are recorded
by the Portfolio as unrealized gains or losses. When the contract is
closed, the Portfolio records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed.
o Options -- The Portfolio may purchase and write call and put options. When
the Portfolio writes an option, an amount equal to the premium received by
the Portfolio is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked-to-market to reflect the
current market value of the option written. When a security is purchased
or sold through an exercise of an option, the related premium paid (or
received) is added to (or deducted from) the basis of the security
acquired or deducted from (or added to) the proceeds of the security sold.
When an option expires (or the Portfolio enters into a closing
transaction), the Portfolio realizes a gain or loss on the option to the
extent of the premiums received or paid (or a gain or loss to the extent
that the cost of the closing transaction exceeds the premium paid or
received).
Written and purchased options are non-income producing investments.
o Forward foreign exchange contracts -- The Portfolio may enter into forward
foreign exchange contracts as a hedge against either specific transactions
or portfolio positions. The contract is marked-to-market daily and the
change in market value is recorded by the Portfolio as an unrealized gain
or loss. When the contract is closed, the Portfolio records a realized
gain or loss equal to the difference between the value at the time it was
opened and the value at the time it was closed.
o Foreign currency options and futures -- The Portfolio may also purchase or
sell listed or over-the-counter foreign currency options, foreign currency
futures and related options on foreign currency futures as a short or long
hedge against possible variations in foreign exchange rates. Such
transactions may be effected with respect to hedges on non-U.S. dollar
denominated securities owned by the Portfolio, sold by the Portfolio but
not yet delivered, or committed or anticipated to be purchased by the
Portfolio.
(c) Foreign currency transactions -- Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into U.S. dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on investments.
(d) Income taxes -- The Portfolio is considered as a "pass through" entity for
federal income tax purposes. As such, each investor in the Portfolio is treated
as owner of its proportionate share of the net assets, income, expenses and
realized and unrealized gains and losses of the Portfolio. Therefore, no federal
income tax provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends and capital gains at
various rates. It is intended that the Portfolio's assets will be managed so an
investor in the Portfolio can satisfy the requirements of subchapter M of the
Internal Revenue Code.
(e) Security transactions and investment income -- Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Dividends from foreign securities where the ex-dividend date may have passed are
subsequently recorded when the Portfolio has determined the ex-dividend date.
Interest income is recognized on the accrual basis.
(f) Securities lending -- The Portfolio may lend securities to financial
institutions that provide cash or securities issued or guaranteed by the U.S.
government as collateral, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities. The
market value of the loaned securities is determined at the close of business of
the Portfolio and any additional required collateral is delivered to the
Portfolio on the next business day. Where the Portfolio receives securities as
collateral for the loaned securities, it receives a fee from the borrower. The
Portfolio typically receives the income on the loaned securities, but does not
receive the income on the collateral. Where the Portfolio receives cash
collateral, it may invest such collateral and retain the amount earned on such
investment, net of any amount rebated to the borrower. Loans of securities are
terminable at any time and the borrower, after notice, is required to return
borrowed securities within five business days. The
30 MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004
Notes to Financial Statements (concluded) Master Large Cap Growth Portfolio
Portfolio may pay reasonable finder's, lending agent, administrative and
custodial fees in connection with its loans. In the event that the borrower
defaults on its obligation to return borrowed securities because of insolvency
or for any other reason, the Portfolio could experience delays and costs in
gaining access to the collateral. The Portfolio also could suffer a loss where
the value of the collateral falls below the market value of the borrowed
securities, in the event of borrower default or in the event of losses on
investments made with cash collateral.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agree-ment with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner.
FAM is responsible for the management of the Portfolio's investments and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Portfolio. For such services, the
Portfolio pays a monthly fee at an annual rate of .50% of the average daily
value of the Portfolio's net assets. FAM has entered into a Sub-Advisory
Agreement with Merrill Lynch Asset Management U.K., Limited ("MLAM U.K."), an
affiliate of FAM, pursuant to which MLAM U.K. provides investment advisory
services to FAM with respect to the Portfolio. There is no increase in the
aggregate fees paid by the Portfolio for these services.
The Portfolio has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated, a subsidiary of ML & Co., or its affiliates.
Pursuant to that order, the Portfolio also has retained Merrill Lynch Investment
Managers, LLC ("MLIM, LLC"), an affiliate of FAM, as the securities lending
agent for a fee based on a share of the returns on investment of cash
collateral. MLIM, LLC may, on behalf of the Portfolio, invest cash collateral
received by the Portfolio for such loans, among other things, in a private
investment company managed by MLIM, LLC or in registered money market funds
advised by FAM or its affiliates. For the year ended October 31, 2004, MLIM, LLC
received $10,029 in securities lending agent fees.
For the year ended October 31, 2004, the Portfolio reimbursed FAM $6,189 for
certain accounting services.
Certain officers and/or trustees of the Trust are officers and/or directors of
FAM, PSI, MLAM U.K. and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 2004 were $571,153,954 and $492,523,219, respectively.
4. Short-Term Borrowings:
The Portfolio, along with certain other funds managed by FAM and its affiliates,
is party to a $500,000,000 credit agreement with a group of lenders. The
Portfolio may borrow under the credit agreement to fund investor withdrawals and
for other lawful purposes other than for leverage. The Portfolio may borrow up
to the maximum amount allowable under the Portfolio's current prospectus and
statement of additional information, subject to various other legal, regulatory
or contractual limits. The Portfolio pays a commitment fee of .09% per annum
based on the Portfolio's pro rata share of the unused portion of the facility.
Amounts borrowed under the facility bear interest at a rate equal to, at each
fund's election, the Federal Funds rate plus .50% or a base rate as defined in
the credit agreement. The Portfolio did not borrow under the facility during the
year ended October 31, 2004. On November 26, 2004, the credit agreement was
renewed for one year under substantially the same terms.
MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004 31
[LOGO] Merrill Lynch Investment Managers
Report of Independent Registered Public Accounting Firm
Master Large Cap Growth Portfolio
To the Investors and Board of Trustees of
Master Large Cap Series Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Master Large Cap Growth Portfolio, one of the
series constituting Master Large Cap Series Trust (the "Trust"), as of October
31, 2004, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the respective periods then
ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2004, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Master
Large Cap Growth Portfolio of Master Large Cap Series Trust as of October 31,
2004, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and its financial
highlights for each of the respective periods then ended, in conformity with
U.S. generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 14, 2004
32 MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004
Officers and Directors/Trustees (unaudited)
Number of
Portfolios in Other Public
Fund Complex Directorships
Position(s) Length of Overseen by Held by
Held with Time Director/ Director/
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Interested Director/Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Terry K. P.O. Box 9011 President 1999 to President of the Merrill Lynch Investment Managers, 124 Funds None
Glenn* Princeton, NJ and present L.P. ("MLIM")/Fund Asset Management, L.P. 157 Portfolios
08543-9011 Director/ ("FAM")-advised funds since 1999; Chairman
Age: 64 Trustee (Americas Region) of MLIM from 2000 to 2002;
Executive Vice President of MLIM and FAM (which
terms as used herein include their corporate
predecessors) from 1983 to 2002; President of FAM
Distributors, Inc. ("FAMD") from 1986 to 2002 and
Director thereof from 1991 to 2002; Executive Vice
President and Director of Princeton Services, Inc.
("Princeton Services") from 1993 to 2002;
President of Princeton Administrators, L.P. from
1989 to 2002; Director of Financial Data Services,
Inc. since 1985.
------------------------------------------------------------------------------------------------------------------------
* Mr. Glenn is a director, trustee or member of an advisory board of certain other investment companies for which MLIM
or FAM acts as investment adviser. Mr. Glenn is an "interested person," as described in the Investment Company Act, of
the Fund based on his present and former positions with MLIM, FAM, FAMD, Princeton Services and Princeton
Administrators, L.P. The Director's/Trustee's term is unlimited. Directors/Trustees serve until their resignation,
removal or death, or until December 31 of the year in which they turn 72. As Fund President, Mr. Glenn serves at the
pleasure of the Board of Directors/Trustees.
====================================================================================================================================
Independent Directors/Trustees*
- ------------------------------------------------------------------------------------------------------------------------------------
James H. P.O. Box 9095 Director/ 1999 to Director, The China Business Group, Inc. since 1996 38 Funds None
Bodurtha Princeton, NJ Trustee present and Executive Vice President thereof from 1996 to 55 Portfolios
08543-9095 2003; Chairman of the Board, Berkshire Holding
Age: 60 Corporation since 1980; Partner, Squire, Sanders &
Dempsey from 1980 to 1993.
- ------------------------------------------------------------------------------------------------------------------------------------
Joe Grills P.O. Box 9095 Director/ 2002 to Member of the Committee of Investment of Employee 38 Funds Kimco Realty
Princeton, NJ Trustee present Benefit Assets of the Association of Financial 55 Portfolios Corporation
08543-9095 Professionals ("CIEBA") since 1986; Member of
Age: 69 CIEBA's Executive Committee since 1988 and its
Chairman from 1991 to 1992; Assistant Treasurer
of International Business Machines Corporation
("IBM") and Chief Investment Officer of IBM
Retirement Funds from 1986 to 1993; Member of
the Investment Advisory Committee of the State of
New York Common Retirement Fund since 1989;
Member of the Investment Advisory Committee of
the Howard Hughes Medical Institute from 1997 to
2000; Director, Duke University Management Company
from 1992 to 2004, Vice Chairman thereof from 1998
to 2004 and Director Emeritus thereof since 2004;
Director, LaSalle Street Fund from 1995 to 2001;
Director, Kimco Realty Corporation since 1997;
Member of the Investment Advisory Committee of
the Virginia Retirement System since 1998 and Vice
Chairman thereof since 2002; Director, Montpelier
Foundation since 1998 and its Vice Chairman since
2000; Member of the Investment Committee of the
Woodberry Forest School since 2000; Member of the
Investment Committee of the National Trust for
Historic Preservation since 2000.
MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004 33
[LOGO] Merrill Lynch Investment Managers
Officers and Directors/Trustees (unaudited) (continued)
Number of
Portfolios in Other Public
Fund Complex Directorships
Position(s) Length of Overseen by Held by
Held with Time Director/ Director/
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Independent Directors/Trustees* (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
Herbert I. P.O. Box 9095 Director/ 1999 to John M. Olin Professor of Humanities, New York 38 Funds None
London Princeton, NJ Trustee present University since 1993 and Professor thereof since 55 Portfolios
08543-9095 1980; President, Hudson Institute since 1997 and
Age: 65 Trustee thereof since 1980; Dean, Gallatin Division
of New York University from 1976 to 1993;
Distinguished Fellow, Herman Kahn Chair, Hudson
Institute from 1984 to 1985; Director, Damon Corp.
from 1991 to 1995; Overseer, Center for Naval
Analyses from 1983 to 1993.
- ------------------------------------------------------------------------------------------------------------------------------------
Roberta P.O. Box 9095 Director/ 1999 to Shareholder, Modrall, Sperling, Roehl, Harris & 38 Funds None
Cooper Princeton, NJ Trustee present Sisk, P.A. since 1993; President, American Bar 55 Portfolios
Ramo 08543-9095 Association from 1995 to 1996 and Member of the Board
Age: 62 of Governors thereof from 1994 to 1997; Shareholder,
Poole, Kelly & Ramo, Attorneys at Law, P.C. from
1977 to 1993; Director, Coopers, Inc. since 1999;
Director of ECMC Group (service provider to students,
schools and lenders) since 2001; Director, United
New Mexico Bank (now Wells Fargo) from 1983
to 1988; Director, First National Bank of New Mexico
(now Wells Fargo) from 1975 to 1976; Vice President,
American Law Institute since 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert S. P.O. Box 9095 Director/ 2002 to Principal of STI Management (investment adviser) 38 Funds None
Salomon, Princeton, NJ Trustee present since 1994; Chairman and CEO of Salomon Brothers 55 Portfolios
Jr. 08543-9095 Asset Management from 1992 to 1995; Chairman
Age: 67 of Salomon Brothers equity mutual funds from 1992
to 1995; regular columnist with Forbes Magazine
from 1992 to 2002; Director of Stock Research and
U.S. Equity Strategist at Salomon Brothers from 1975
to 1991; Trustee, Commonfund from 1980 to 2001.
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen B. P.O. Box 9095 Director/ 2002 to Chairman of Fernwood Advisors, Inc. (investment 39 Funds None
Swensrud Princeton, NJ Trustee present adviser) since 1996; Principal, Fernwood Associates 56 Portfolios
08543-9095 (financial consultants) since 1975; Chairman of R.P.P.
Age: 71 Corporation (manufacturing company) since 1978;
Director of International Mobile Communications,
Incorporated (telecommunications) since 1998.
------------------------------------------------------------------------------------------------------------------------
* The Director's/Trustee's term is unlimited. Directors/Trustees serve until their resignation, removal or death, or
until December 31 of the year in which they turn 72.
34 MERRILL LYNCH LARGE CAP GROWTH FUND OCTOBER 31, 2004
Officers and Directors/Trustees (unaudited) (concluded)
Position(s) Length of
Held with Time
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund/Trust Officers*
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 1999 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof since 1999;
Burke Princeton, NJ President present Senior Vice President and Treasurer of Princeton Services since 1999 and Director
08543-9011 and since 2004; Vice President of FAMD since 1999; Vice President of MLIM and FAM from
Age: 44 Treasurer 1990 to 1997; Director of MLIM Taxation since 1990.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert C. P.O. Box 9011 Senior Vice 1999 to President of MLIM and member of the Executive Management Committee of ML & Co.,
Doll, Jr. Princeton, NJ President present Inc. since 2001; Global Chief Investment Officer and Senior Portfolio Manager of
08543-9011 MLIM since 1999; Chief Investment Officer of Equities at Oppenheimer Funds, Inc.
Age: 50 from 1990 to 1999 and Chief Investment Officer thereof from 1998 to 1999; Executive
Vice President of Oppenheimer Funds, Inc. from 1991 to 1999.
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey P.O. Box 9011 Chief 2004 to Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice President and
Hiller Princeton, NJ Compliance present Chief Compliance Officer of MLIM since 2004; Global Director of Compliance at
08543-9011 Officer Morgan Stanley Investment Management from 2002 to 2004; Managing Director and
Age: 53 Global Director of Compliance at Citigroup Asset Management from 2000 to 2002;
Chief Compliance Officer at Soros Fund Management in 2000; Chief Compliance Officer
at Prudential Financial from 1995 to 2000.
- ------------------------------------------------------------------------------------------------------------------------------------
Alice A. P.O. Box 9011 Secretary 2004 to Director (Legal Advisory) of MLIM since 2002; Vice President of MLIM from 1999 to
Pellegrino Princeton, NJ present 2002; Attorney associated with MLIM since 1997.
08543-9011
Age: 44
------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund/Trust serve at the pleasure of the Board of Directors/Trustees.
- ------------------------------------------------------------------------------------------------------------------------------------
Further information about the Fund's Officers and Directors/Trustees is available in the Fund's Statement of Additional
Information, which can be obtained without charge by calling 1-800-MER-FUND.
- ------------------------------------------------------------------------------------------------------------------------------------
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109-3661
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
- --------------------------------------------------------------------------------
Andre F. Perold resigned as a Director/Trustee of the Fund effective October 22,
2004.
- --------------------------------------------------------------------------------
Electronic Delivery
The Fund offers electronic delivery of communi cations 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 LARGE CAP GROWTH FUND OCTOBER 31, 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 Large Cap Growth Fund of
Merrill Lynch Large Cap Series Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
#CAPGROW -- 10/04
Item 2 - Code of Ethics - The registrant has adopted a code of ethics, as of the
end of the period covered by this report, that applies to the
registrant's principal executive officer, principal financial officer
and principal accounting officer, or persons performing similar
functions. A copy of the code of ethics is available without charge
upon request by calling toll-free 1-800-MER-FUND (1-800-637-3863).
Item 3 - Audit Committee Financial Expert - The registrant's board of directors
has determined that (i) the registrant has the following audit
committee financial experts serving on its audit committee and (ii)
each audit committee financial expert is independent: (1) Joe Grills,
(2) Andre F. Perold (resigned as of October 1, 2004), (3) Robert S.
Salomon, Jr., and (4) Stephen B. Swensrud.
Item 4 - Principal Accountant Fees and Services
Merrill Lynch Large Cap Growth Fund of Merrill Lynch Large Cap Series
Funds, Inc.
(a) Audit Fees - Fiscal Year Ending October 31, 2004 - $6,200
Fiscal Year Ending October 31, 2003 - $6,000
Master Large Cap Growth Portfolio of Master Large Cap Series Trust
(a) Audit Fees - Fiscal Year Ending October 31, 2004 - $30,500
Fiscal Year Ending October 31, 2003 - $30,000
Merrill Lynch Large Cap Growth Fund of Merrill Lynch Large Cap Series
Funds, Inc.
(b) Audit-Related Fees - Fiscal Year Ending October 31, 2004 - $0
Fiscal Year Ending October 31, 2003 - $0
Master Large Cap Growth Portfolio of Master Large Cap Series Trust
(b) Audit-Related Fees - Fiscal Year Ending October 31, 2004 - $0
Fiscal Year Ending October 31, 2003 - $0
Merrill Lynch Large Cap Growth Fund of Merrill Lynch Large Cap Series
Funds, Inc.
(c) Tax Fees - Fiscal Year Ending October 31, 2004 - $5,800
Fiscal Year Ending October 31, 2003 - $5,400
The nature of the services include tax compliance, tax advice and tax
planning.
Master Large Cap Growth Portfolio of Master Large Cap Series Trust
(c) Tax Fees - Fiscal Year Ending October 31, 2004 - $6,000
Fiscal Year Ending October 31, 2003 - $7,500
The nature of the services include tax compliance, tax advice and tax
planning.
Merrill Lynch Large Cap Growth Fund of Merrill Lynch Large Cap Series
Funds, Inc.
(d) All Other Fees - Fiscal Year Ending October 31, 2004 - $0
Fiscal Year Ending October 31, 2003 - $0
Master Large Cap Growth Portfolio of Master Large Cap Series Trust
(d) All Other Fees - Fiscal Year Ending October 31, 2004 - $0
Fiscal Year Ending October 31, 2003 - $0
(e)(1) The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to the
registrant's affiliated service providers that relate directly to the
operations and the financial reporting of the registrant. Certain of
these non-audit services that the Committee believes are a) consistent
with the SEC's auditor independence rules and b) routine and recurring
services that will not impair the independence of the independent
accountants may be approved by the Committee without consideration on a
specific case-by-case basis ("general pre-approval"). However, such
services will only be deemed pre-approved provided that any individual
project does not exceed $5,000 attributable to the registrant or
$50,000 for all of the registrants the Committee oversees. Any proposed
services exceeding the pre-approved cost levels will require specific
pre-approval by the Committee, as will any other services not subject
to general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending October 31, 2004 - $13,270,096
Fiscal Year Ending October 31, 2003 - $18,737,552
(h) The registrant's audit committee has considered and determined that
the provision of non-audit services that were rendered to the
registrant's investment adviser and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant
to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $945,000, 0%
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 second 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 - See Item 2
11(a)(2) - Certifications - Attached hereto
11(a)(3) - Not Applicable
11(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Merrill Lynch Large Cap Growth Fund of Merrill Lynch Large Cap Series
Funds, Inc. and Master Large Cap Growth Portfolio of Master Large Cap
Series Trust
By: /s/ Terry K. Glenn
-------------------------------
Terry K. Glenn,
President of
Merrill Lynch Large Cap Growth Fund of Merrill Lynch Large Cap
Series Funds, Inc. and Master Large Cap Growth Portfolio of Master
Large Cap Series Trust
Date: December 13, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
By: /s/ Terry K. Glenn
-------------------------------
Terry K. Glenn,
President of
Merrill Lynch Large Cap Growth Fund of Merrill Lynch Large Cap
Series Funds, Inc. and Master Large Cap Growth Portfolio of Master
Large Cap Series Trust
Date: December 13, 2004
By: /s/ Donald C. Burke
-------------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Large Cap Growth Fund of Merrill Lynch Large Cap
Series Funds, Inc. and Master Large Cap Growth Portfolio of Master
Large Cap Series Trust
Date: December 13, 2004