UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-03450
Name of Fund: Merrill Lynch Focus Value Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, Merrill Lynch Focus Value Fund, Inc., 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: 07/31/05
Date of reporting period: 08/01/04 - 01/31/05
Item 1 - Report to Stockholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
Merrill Lynch
Focus Value Fund, Inc.
Semi-Annual Report
January 31, 2005
[LOGO] Merrill Lynch Investment Managers
Merrill Lynch Focus Value Fund, Inc.
Portfolio Information as of January 31, 2005
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
The Topps Co., Inc. ................................................. 4.9%
Citigroup, Inc. ..................................................... 4.3
GlobalSantaFe Corp. ................................................. 3.8
The St. Paul Travelers Cos., Inc. ................................... 3.1
Foot Locker, Inc. ................................................... 3.1
Goodrich Corp. ...................................................... 3.1
Exxon Mobil Corp. ................................................... 3.0
Liberty Media Corp. Class A ......................................... 3.0
LSI Logic Corp. ..................................................... 2.8
Morgan Stanley ...................................................... 2.7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Percent of
Total
Asset Mix Investments
- --------------------------------------------------------------------------------
Stocks .............................................................. 95.7%
Bonds ............................................................... 0.7
Other* .............................................................. 3.6
- --------------------------------------------------------------------------------
* Includes portfolio holdings in short-term investments.
Percent of
Five Largest Industries* Net Assets
- --------------------------------------------------------------------------------
Media ............................................................... 10.3%
Capital Markets ..................................................... 8.1
Energy Equipment & Services ......................................... 7.3
Diversified Financial Services ...................................... 7.3
Aerospace & Defense ................................................. 6.6
- --------------------------------------------------------------------------------
* For Fund compliance purposes, "Industries" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Fund management.
This definition may not apply for purposes of this report, which may
combine such industry sub-classifications for reporting ease.
2 MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005
A Letter From the President
Dear Shareholder
The U.S. equity market ended the current reporting period in positive territory,
although not without some suspense along the way. Fixed income markets also
performed well, with high yield bond investors enjoying some of the best
returns.
Total Returns as of January 31, 2005 6-month 12-month
===================================================================================
Equities (Standard & Poor's 500 Index) +8.16% +6.23%
- -----------------------------------------------------------------------------------
Fixed income (Lehman Brothers Aggregate Bond Index) +3.81 +4.16
- -----------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) +4.80 +4.86
- -----------------------------------------------------------------------------------
High yield bonds (Credit Suisse First Boston High Yield Index) +7.85 +9.81
- -----------------------------------------------------------------------------------
Over the past year, the U.S. economy transitioned from dependence on record
monetary and fiscal stimulus to a broad-based, high-productivity,
high-profit-margin growth engine. The year also marked the end of one of the
most aggressive Federal Reserve Board (Fed) policy periods in history as
deflation concerns, prevalent at the beginning of 2004, gave way to modest
inflation scares -- notably, food prices in the spring and energy prices in the
fall.
The Fed more than doubled the federal funds rate, increasing it from 1% to 2.25%
in five separate moves between June and December 2004. Yet, even as the Fed
raised its target short-term interest rate, long-term bond yields were little
changed year over year as buying interest on the part of foreign central banks
remained strong. The yield on the 10-year Treasury note stood at 4.14% on
January 31, 2005. Despite very strong earnings growth, stocks remained in a
narrow trading range for most of 2004, but rebounded nicely in the fourth
quarter as election uncertainties and energy price concerns dissipated. January,
the first month of the new year and the final month of the current reporting
period, was a challenging one for equities as reflected in the -2.44% return of
the S&P 500 Index for the month.
As we ended the current reporting period, the economy and earnings growth were
beginning to slow and the Fed appeared poised to continue moving interest rates
higher (and, in fact, raised the federal funds rate another 25 basis points on
February 2, 2005). Progress was being monitored on many fronts in Washington,
although concerns remained about the structural problems of debt and deficits,
as reflected by a significant decline in the U.S. dollar.
Looking ahead, the environment is likely to be a challenging one for investors.
At the start of the new year, we encourage you to meet with your financial
advisor to review your goals and asset allocation and to rebalance your
portfolio, as necessary, to ensure it remains aligned with your objectives and
risk tolerance. As always, 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/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Director
MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Managers
The Fund provided competitive returns for the period and is positioned to
take advantage of companies that are deploying their cash flow in
shareholder-friendly ways.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended January 31, 2005, Merrill Lynch Focus Value Fund,
Inc.'s Class A, Class B, Class C, Class I and Class R Shares had total returns
of +10.70%, +10.30%, +10.24%, +10.86% and +10.59%, 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 - 7 of this
report to shareholders.) Fund performance exceeded the +8.16% return of the
broad-based Standard & Poor's 500 (S&P 500) Index and slightly lagged the
+11.67% return of the Russell 1000 Value Index for the six-month period. In
addition, Fund results were highly competitive with the +10.33% average return
of the Lipper Multi-Cap Value Funds category for the same period. (Funds in this
Lipper category invest in companies in a variety of market-capitalization ranges
that are considered to be undervalued relative to a major unmanaged stock
index.)
The six-month period could be viewed in two distinct parts -- pre-election and
post-election. Prior to November, the stock market floundered in an effort to
find direction amid the uncertainty of the impending U.S. presidential election.
Once the votes were cast and we had some clarity in terms of the country's
governance, the market enjoyed a fairly strong advance through the final weeks
of 2004. The positive performance was driven by better-than-expected earnings
growth as well as an extraordinary amount of free cash flow being generated by
Corporate America. Nevertheless, the dynamics changed in January, as questions
about what the new year could bring and how the markets might react to slower
economic and corporate earnings growth caused a modest retreat in the indexes
for the month.
What factors influenced Fund performance?
Positive performance was generated by our consumer discretionary investments,
especially those stocks in the media and retail sectors. Top media names were
Liberty Media Corporation, Viacom, Inc. and Comcast Corporation. The group is
benefiting from an overall shift toward cash-flow generation and away from a
historical cycle of very large capital expenditures. This free cash-flow
generation is making the stocks much more attractive to investors. In the retail
sector, Toys 'R' Us, Inc. generated gains, primarily because of the company's
decision to consider value-enhancing alternatives, such as closing select stores
and selling real estate. Foot Locker, Inc. continues to recover from a poor 2003
and is making progress in its expansion overseas.
Another sector that positively influenced performance was energy, where high
commodity prices continued to bolster returns. The Fund is primarily invested in
the oil service sector, which we expect will continue to benefit as the
producing companies look to replace their reserves. Our top two performers in
this area were GlobalSantaFe Corp. and Rowan Cos., Inc.
Stock selection in the health care sector also contributed positively to
performance. One of the major benefits during the period was our limited
exposure to large-capitalization pharmaceutical companies, which have been
struggling with patent expirations and government scrutiny of their pricing.
Some of these companies also have suffered from well-publicized and serious
product issues, with one of the most notable being Merck & Co., Inc.'s recall of
its arthritis-pain medication Vioxx. We did not own Merck in the portfolio.
Conversely, the Fund benefited from its position in Beverly Enterprises, Inc., a
large U.S. nursing home company that has been the target of a takeover bid.
Finally, information technology stocks helped Fund performance over the past six
months after struggling in the prior period. Major contributors were Parametric
Technology Corp., a software provider, as well as LSI Logic Corp., Advanced
Micro Devices, Inc. and Agere Systems Inc., three semiconductor companies that
are recovering from an excessive inventory situation that existed in the middle
of last year.
On the negative side, we were early sellers of materials stocks during the
course of 2004, causing us to miss a major run-up in these stocks during the
fourth quarter. We sold many of our materials stocks after they had reached our
target prices, but clearly the group still had some momentum left. Also
detracting from the Fund's relative performance was stock selection in consumer
staples. Although we did not necessarily hold any big losers in the portfolio,
we also did not own the major contributor to that sector's success -- Altria
Group, Inc. We have avoided Altria, the world's largest tobacco firm, given its
excessive litigation risk. Finally, the
4 MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005
Fund's underweight position in the financials sector detracted from performance,
as this group performed extremely well during the period. We have 20% of net
assets invested in the financials sector compared to the Russell 1000 Value
Index weighting of 32%. Although we are positively disposed to this group, we
continue to believe that a 20% allocation is a prope
What changes were made to the portfolio during the period?
Purchases during the six-month period were concentrated in companies generating
a significant amount of cash flow, which we expect will be deployed for the
benefit of shareholders in the form of share buybacks, higher dividends and
mergers and acquisitions. Specific additions included Rowan, UAP Holding Corp.,
Alcoa, Inc., General Mills, Inc. and Tyco International Ltd. Rowan is an
offshore drilling company whose earnings are expected to benefit from higher day
rates as oil producers increase their exploration budgets. UAP is the largest
distributor of agricultural products in the United States. The company is a good
cash-flow generator and the stock yields more than 3%. Alcoa is a major producer
of aluminum and aluminum products and, in our view, is positioned to benefit
from the continuing global economic expansion. Although General Mills,
manufacturer and marketer of consumer products, is currently pressured by rising
commodity costs, we believe the company will be able to successfully offset this
drag through price increases. In addition, its international operations
represent a source of future growth. Tyco, a diversified manufacturing and
services company, has been focused on repairing its balance sheet for the past
few years. Going forward, we expect Tyco to use its cash to buy back shares and
increase its dividend.
The new purchases over the past six months represent a variety of market
capitalizations, although the majority was concentrated in larger-cap companies.
While there were no major industry themes evident in our additions, technology
and financials seemed to get the bulk of the new money.
In terms of sales, we took profits in a number of our larger holdings that had
benefited from acquisition interest or corporate reorganizations. These included
Beverly Enterprises and Toys 'R' Us. In addition, we lowered our exposure to the
energy group, which has made a very strong move upward over the past year, by
selling Kerr-McGee Corp. and a portion of our holdings in Exxon Mobil Corp. We
also took partial profits on our investments in defense contractor Raytheon Co.
and railroad company Norfolk Southern Corp. Both stocks performed well, having
benefited from a return to economic strength.
How would you characterize the Fund's position at the close of the period?
Overall, 2004 was characterized by a return to healthy economic growth, very
strong profit growth and a redistribution of corporate cash flows to
shareholders. In 2005, we expect economic and profit growth to slow and the
environment to be much like that of the mid-1990s where growth was modest but
positive and stocks, likewise, generated positive performance. Thus, we expect
the year to be a good one for large cap stocks, as earnings deceleration and a
lower dollar historically have been met by outperformance on the part of
large-capitalization equities. As mentioned previously, we also believe strong
corporate balance sheets and excess cash flow will be deployed in
shareholder-friendly ways -- another positive for the markets.
Based on this scenario, the Fund remains more heavily weighted toward
large-capitalization equities and in those companies that we believe will
generate the most impressive free cash-flow growth. Given that dividends are
becoming a more important part of total return, we are also focused on stocks
that are paying above-market dividend yields. At period-end, the Fund was still
somewhat geared toward a recovering economy with overweight positions in capital
goods, consumer discretionary (primarily media shares) and technology, a group
that has been in a four-year slump. In our view, these same corporations that
are generating the excess cash are likely to begin spending that money on much
needed and much delayed technology upgrades. We remain underweight in
financials, although within that sector we are overweight in capital
markets-related companies and less focused on regional banks and those
businesses that are much more sensitive to interest rate changes. We also are
underweight in utilities, a group that we would expect to struggle in a rising
interest rate environment.
Robert J. Martorelli
Vice President and Co-Portfolio Manager
Kevin M. Rendino
Vice President and Co-Portfolio Manager
February 8, 2005
MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005 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.) All returns for periods greater
than eight years reflect this conversion.
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. The Fund's Investment Adviser voluntarily waived a portion of its
administrative fee. Without such waiver, the Fund's performance would have been
lower.
6 MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005
Performance Data (Concluded)
Recent Performance Results
10-Year/
6-Month 12-Month Since Inception
As of January 31, 2005 Total Return Total Return Total Return
===================================================================================================
ML Focus Value Fund, Inc. Class A Shares* +10.70% + 7.32% +222.63%
- ---------------------------------------------------------------------------------------------------
ML Focus Value Fund, Inc. Class B Shares* +10.30 + 6.48 +203.25
- ---------------------------------------------------------------------------------------------------
ML Focus Value Fund, Inc. Class C Shares* +10.24 + 6.44 +198.08
- ---------------------------------------------------------------------------------------------------
ML Focus Value Fund, Inc. Class I Shares* +10.86 + 7.58 +230.62
- ---------------------------------------------------------------------------------------------------
ML Focus Value Fund, Inc. Class R Shares* +10.59 + 7.00 + 44.52
- ---------------------------------------------------------------------------------------------------
Russell 1000(R) Value Index** +11.67 +12.45 +247.91/+44.32
- ---------------------------------------------------------------------------------------------------
S&P 500(R) Index*** + 8.16 + 6.23 +197.25/+34.79
- ---------------------------------------------------------------------------------------------------
* Investment results shown do not reflect sales charges; results would be
lower if a sales charge was included. Cumulative total investment returns
are based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the ex-dividend date. The Fund's 10-year/since inception total
return periods are 10 years for Class A, Class B, Class C & Class I Shares
and from 1/03/03 for Class R Shares.
** This unmanaged Index measures the performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth
values. Ten-year/since inception total returns are for 10 years and from
1/03/03.
*** This unmanaged Index covers 500 industrial, utility, transportation and
financial companies of the U.S. markets (mostly NYSE issues), representing
about 75% of NYSE market capitalization and 30% of NYSE issues.
Ten-year/since inception total returns are for 10 years and from 1/03/03.
Russell 1000 is a registered trademark of the Frank Russell Company.
S&P 500 is a registered trademark of McGraw-Hill Companies.
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 1/31/05 + 7.32% + 1.68%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/05 + 4.86 + 3.74
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/05 +12.43 +11.82
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
Return Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 1/31/05 + 6.48% + 2.48%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/05 + 4.05 + 3.74
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/05 +11.73 +11.73
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
** Assuming payment of applicable contingent deferred sales charge.
Return Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
One Year Ended 1/31/05 + 6.44% + 5.44%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/05 + 4.05 + 4.05
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/05 +11.54 +11.54
- --------------------------------------------------------------------------------
* 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 1/31/05 + 7.58% + 1.93%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/05 + 5.13 + 4.00
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/05 +12.70 +12.10
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
- --------------------------------------------------------------------------------
Class R Shares Return
================================================================================
One Year Ended 1/31/05 + 7.00%
- --------------------------------------------------------------------------------
Inception (1/03/03) through 1/31/05 +19.40
- --------------------------------------------------------------------------------
MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005 7
[LOGO] Merrill Lynch Investment Managers
Disclosure of Expenses
Shareholders of this Fund may incur the following charges: (a) expenses related
to transactions, including sales charges, redemption fees and exchange fees; and
(b) operating expenses including advisory fees, distribution fees including
12(b)-1 fees, and other Fund expenses. The following example (which is based on
a hypothetical investment of $1,000 invested on August 1, 2004 and held through
January 31, 2005) 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 August 1, 2004 to
August 1, 2004 January 31, 2005 January 31, 2005
=======================================================================================================
Actual
=======================================================================================================
Class A $1,000 $1,107.00 $ 6.78
- -------------------------------------------------------------------------------------------------------
Class B $1,000 $1,103.00 $10.87
- -------------------------------------------------------------------------------------------------------
Class C $1,000 $1,102.40 $10.87
- -------------------------------------------------------------------------------------------------------
Class I $1,000 $1,108.60 $ 5.45
- -------------------------------------------------------------------------------------------------------
Class R $1,000 $1,105.90 $ 8.11
=======================================================================================================
Hypothetical (5% annual return before expenses)**
=======================================================================================================
Class A $1,000 $1,018.91 $ 6.50
- -------------------------------------------------------------------------------------------------------
Class B $1,000 $1,015.00 $10.42
- -------------------------------------------------------------------------------------------------------
Class C $1,000 $1,015.00 $10.42
- -------------------------------------------------------------------------------------------------------
Class I $1,000 $1,020.17 $ 5.22
- -------------------------------------------------------------------------------------------------------
Class R $1,000 $1,017.64 $ 7.77
- -------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (1.27% for Class A, 2.04% for Class B, 2.04% for Class
C, 1.02% for Class I and 1.52% for Class R), multiplied by the average
account value over the period, multiplied by 185/365 (to reflect the
one-half year period shown).
** Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half-year divided by 365.
8 MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005
Schedule of Investments
Industry* Shares Held Common Stocks Value
===================================================================================================================================
Above-Average Diversified Financial Services--0.5% 71,900 +Macquarie Infrastructure Co. $ 2,109,546
Yield--5.5% ---------------------------------------------------------------------------------------------------------
Food Products--1.3% 99,800 General Mills, Inc. 5,288,402
---------------------------------------------------------------------------------------------------------
Media--0.6% 60,700 Dow Jones & Co., Inc. 2,313,884
---------------------------------------------------------------------------------------------------------
Pharmaceuticals--1.0% 163,100 Pfizer, Inc. 3,940,496
---------------------------------------------------------------------------------------------------------
Trading Companies & 574,400 +UAP Holding Corp. 8,616,000
Distributors--2.1%
---------------------------------------------------------------------------------------------------------
Total Above-Average Yield 22,268,328
===================================================================================================================================
Discount to Communications Equipment--0.8% 873,700 +3Com Corp. 3,206,479
Assets--7.6% ---------------------------------------------------------------------------------------------------------
Energy Equipment & Services--3.8% 435,900 GlobalSantaFe Corp. 15,413,424
---------------------------------------------------------------------------------------------------------
Media--3.0% 1,164,460 +Liberty Media Corp. Class A 12,156,963
---------------------------------------------------------------------------------------------------------
Total Discount to Assets 30,776,866
===================================================================================================================================
Earnings Aerospace & Defense--4.6% 360,800 Goodrich Corp. 12,375,440
Turnaround--50.2% 174,700 Honeywell International, Inc. 6,285,706
------------
18,661,146
---------------------------------------------------------------------------------------------------------
Capital Markets--5.4% 39,800 Goldman Sachs Group, Inc. 4,292,430
217,400 Mellon Financial Corp. 6,380,690
197,300 Morgan Stanley 11,040,908
------------
21,714,028
---------------------------------------------------------------------------------------------------------
Communications Equipment--0.6% 395,900 +Extreme Networks 2,533,760
---------------------------------------------------------------------------------------------------------
Computers & Peripherals--1.1% 261,400 Seagate Technology 4,422,888
---------------------------------------------------------------------------------------------------------
Energy Equipment & Services--3.5% 170,200 +Grant Prideco, Inc. 3,335,920
386,400 +Rowan Cos., Inc. 10,881,024
------------
14,216,944
---------------------------------------------------------------------------------------------------------
Food & Staples Retailing--5.0% 2,008,400 The Topps Co., Inc. 19,963,496
---------------------------------------------------------------------------------------------------------
Food Products--1.0% 62,000 Unilever NV (a) 4,049,220
---------------------------------------------------------------------------------------------------------
IT Services--2.0% 374,000 Electronic Data Systems Corp. 8,011,080
---------------------------------------------------------------------------------------------------------
Industrial Conglomerates--2.3% 260,300 General Electric Co. 9,404,639
---------------------------------------------------------------------------------------------------------
Media--2.5% 264,200 Viacom, Inc. Class B 9,865,228
---------------------------------------------------------------------------------------------------------
Metals & Mining--2.0% 268,100 Alcoa, Inc. 7,911,631
---------------------------------------------------------------------------------------------------------
Oil & Gas--3.0% 237,500 Exxon Mobil Corp. 12,255,000
---------------------------------------------------------------------------------------------------------
Pharmaceuticals--1.8% 162,300 GlaxoSmithKline Plc (a) 7,233,711
---------------------------------------------------------------------------------------------------------
Road & Rail--2.0% 232,600 Norfolk Southern Corp. 8,122,392
---------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor 5,930,500 +Agere Systems, Inc. Class B 8,539,920
Equipment--4.9% 1,862,100 +LSI Logic Corp. 11,377,431
------------
19,917,351
---------------------------------------------------------------------------------------------------------
Software--5.4% 804,400 +BEA Systems, Inc. 6,853,488
842,500 +Borland Software Corp. 7,228,650
1,328,400 +Parametric Technology Corp. 7,571,880
------------
21,654,018
---------------------------------------------------------------------------------------------------------
Specialty Retail--3.1% 470,100 Foot Locker, Inc. 12,655,092
---------------------------------------------------------------------------------------------------------
Total Earnings Turnaround 202,591,624
===================================================================================================================================
Financial Construction & Engineering--0.0% 3 +New Millennium Homes, LLC (h) 750
Restructuring--0.0% ---------------------------------------------------------------------------------------------------------
Total Financial Restructuring 750
===================================================================================================================================
MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005 9
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued)
Industry* Shares Held Common Stocks Value
===================================================================================================================================
Operational Aerospace & Defense--2.0% 218,800 Raytheon Co. $ 8,183,120
Restructuring--23.6% ---------------------------------------------------------------------------------------------------------
Capital Markets--2.7% 360,700 The Bank of New York Co., Inc. 10,716,397
---------------------------------------------------------------------------------------------------------
Chemicals--1.1% 91,000 EI du Pont de Nemours & Co. 4,327,960
---------------------------------------------------------------------------------------------------------
Computers & Peripherals--2.4% 499,400 Hewlett-Packard Co. 9,783,246
---------------------------------------------------------------------------------------------------------
Diversified Financial Services--2.5% 272,640 JPMorgan Chase & Co. 10,177,651
---------------------------------------------------------------------------------------------------------
Diversified Telecommunication 163,000 Sprint Corp. 3,884,290
Services--1.0%
---------------------------------------------------------------------------------------------------------
Health Care Providers & 491,200 +Beverly Enterprises, Inc. 6,007,376
Services--1.5%
---------------------------------------------------------------------------------------------------------
Household Products--2.6% 161,100 Kimberly-Clark Corp. 10,553,661
---------------------------------------------------------------------------------------------------------
IT Services--2.6% 1,353,000 +Unisys Corp. 10,621,050
---------------------------------------------------------------------------------------------------------
Industrial Conglomerates--1.0% 112,900 Tyco International Ltd. 4,080,206
---------------------------------------------------------------------------------------------------------
Media--4.2% 228,500 +Comcast Corp. Special Class A 7,222,885
156,100 +Interpublic Group of Cos., Inc. 2,037,105
427,300 +Time Warner, Inc. 7,691,400
------------
16,951,390
---------------------------------------------------------------------------------------------------------
Total Operational Restructuring 95,286,347
===================================================================================================================================
Price to Book--9.5% Diversified Financial 350,000 Citigroup, Inc. 17,167,520
Services--4.3%
---------------------------------------------------------------------------------------------------------
Insurance--5.2% 128,000 American International Group, Inc. 8,485,120
338,345 The St. Paul Travelers Cos., Inc. (e) 12,701,471
------------
21,186,591
---------------------------------------------------------------------------------------------------------
Total Price to Book 38,354,111
=========================================================================================================
Total Common Stocks
(Cost--$326,496,801)--96.4% 389,278,026
=========================================================================================================
===================================================================================================================================
Face Amount Corporate Bonds
===================================================================================================================================
Financial Construction & Engineering--0.7% $5,021,000 New Millennium Homes, LLC, 0%
Restructuring--0.7% due 12/31/2007 (b)(g)(h) 3,012,600
---------------------------------------------------------------------------------------------------------
Total Corporate Bonds
(Cost--$4,396,479)--0.7% 3,012,600
=========================================================================================================
===================================================================================================================================
Shares Held Preferred Stock
===================================================================================================================================
Financial Construction & Engineering--0.0% 5,414 +New Millennium Homes, LLC (Convertible) (h) 135,350
Restructuring--0.0% ---------------------------------------------------------------------------------------------------------
Total Preferred Stock (Cost--$395)--0.0% 135,350
=========================================================================================================
===================================================================================================================================
Beneficial Interest Other Interests (f)
===================================================================================================================================
Financial Oil & Gas--0.0% $1,981,437 WRT (Litigation Trust Certificates) 0
Restructuring--0.0% ---------------------------------------------------------------------------------------------------------
Total Other Interests
(Cost--$202,416)--0.0% 0
=========================================================================================================
10 MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005
Schedule of Investments (concluded)
Beneficial Interest Short-Term Securities Value
=========================================================================================================
$7,918,478 Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I (c) $ 7,918,478
6,536,000 Merrill Lynch Liquidity Series, LLC
Money Market Series (c)(d) 6,536,000
---------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost--$14,454,478)--3.6% 14,454,478
=========================================================================================================
Total Investments (Cost--$345,550,569**)--100.7% 406,880,454
Liabilities in Excess of Other Assets--(0.7%) (3,021,301)
------------
Net Assets--100.0% $403,859,153
============
* For Fund compliance purposes, "Industry" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Fund management.
This definition may not apply for purposes of this report, which may
combine such industry sub-classifications for reporting ease.
** The cost and unrealized appreciation (depreciation) of investments as of
January 31, 2005, as computed for federal income tax purposes, were as
follows:
Aggregate cost ......................................... $346,205,750
============
Gross unrealized appreciation .......................... $ 73,282,096
Gross unrealized depreciation .......................... (12,607,392)
------------
Net unrealized appreciation ............................ $ 60,674,704
============
+ Non-income producing security.
(a) Depositary Receipts.
(b) Represents a zero coupon bond.
(c) Investments in companies considered to be an affiliate of the Fund (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) were as follows:
--------------------------------------------------------------------------
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $ (1,558,216) $87,601
Merrill Lynch Liquidity Series, LLC
Money Market Series $(60,190,550) $ 5,032
--------------------------------------------------------------------------
(d) Security was purchased with the cash proceeds from securities loans.
(e) Security, or portion of security, is on loan.
(f) Other interests represent beneficial interest in liquidation trusts and
other reorganizational entities and are non-income producing.
(g) Non-income producing; issuer filed for bankruptcy or is in default of
interest payments.
(h) Restricted securities as to resale, representing 0.8% of net assets.
--------------------------------------------------------------------------
Acquisition
Issue Dates Cost Value
--------------------------------------------------------------------------
New Millennium 4/26/1996 -
Homes, LLC 8/29/1997 $2,891,337 $ 750
New Millennium 8/29/1997 -
Homes, LLC (Preferred) 3/05/1999 395 135,350
New Millennium
Homes, LLC, 8/29/1997 -
0% due 12/31/07 3/05/1999 4,396,479 3,012,600
--------------------------------------------------------------------------
Total $7,288,211 $3,148,700
=============================
See Notes to Financial Statements.
MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005 11
[LOGO] Merrill Lynch Investment Managers
Statement of Assets and Liabilities
As of January 31, 2005
============================================================================================================================
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (including
securities loaned of $6,456,880)
(identified cost--$331,096,091) ................................. $ 392,425,976
Investments in affiliated securities, at value
(identified cost--$14,454,478) .................................. 14,454,478
Receivables:
Securities sold ............................................... $ 5,674,740
Capital shares sold ........................................... 1,845,901
Dividends ..................................................... 290,235
Interest from affiliates ...................................... 8,088
Securities lending ............................................ 149 7,819,113
-------------
Prepaid expenses and other assets ................................ 55,576
-------------
Total assets ..................................................... 414,755,143
-------------
============================================================================================================================
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value ........................ 6,536,000
Payables:
Securities purchased .......................................... 2,076,462
Capital shares redeemed ....................................... 1,717,339
Investment adviser ............................................ 257,091
Other affiliates .............................................. 149,222
Distributor ................................................... 105,053 4,305,167
-------------
Accrued expenses ................................................. 54,823
-------------
Total liabilities ................................................ 10,895,990
-------------
============================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets ....................................................... $ 403,859,153
=============
============================================================================================================================
Net Assets Consist of
- ----------------------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.10 par value, 100,000,000
shares authorized ............................................... $ 1,052,538
Class B Shares of Common Stock, $.10 par value, 100,000,000
shares authorized ............................................... 423,863
Class C Shares of Common Stock, $.10 par value, 50,000,000
shares authorized ............................................... 287,280
Class I Shares of Common Stock, $.10 par value, 50,000,000
shares authorized ............................................... 1,306,529
Class R Shares of Common Stock, $.10 par value, 100,000,000
shares authorized ............................................... 2,918
Paid-in capital in excess of par ................................. 356,047,314
Undistributed investment income--net ............................. $ 205,968
Accumulated realized capital losses--net ......................... (16,797,142)
Unrealized appreciation--net ..................................... 61,329,885
-------------
Total accumulated earnings--net .................................. 44,738,711
-------------
Net Assets ....................................................... $ 403,859,153
=============
============================================================================================================================
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $140,504,869 and 10,525,382
shares outstanding .............................................. $ 13.35
=============
Class B--Based on net assets of $52,223,411 and 4,238,634
shares outstanding .............................................. $ 12.32
=============
Class C--Based on net assets of $34,649,542 and 2,872,802
shares outstanding .............................................. $ 12.06
=============
Class I--Based on net assets of $176,115,684 and 13,065,291
shares outstanding .............................................. $ 13.48
=============
Class R--Based on net assets of $365,647 and 29,179
shares outstanding .............................................. $ 12.53
=============
See Notes to Financial Statements.
12 MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005
Statement of Operations
For the Six Months Ended January 31, 2005
============================================================================================================================
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Dividends (net of $16,306 foreign withholding tax) ............... $ 2,838,372
Interest from affiliates ......................................... 87,601
Securities lending--net .......................................... 5,032
-------------
Total income ..................................................... 2,931,005
-------------
============================================================================================================================
Expenses
- ----------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ......................................... $ 2,044,072
Account maintenance and distribution fees--Class B ............... 282,050
Account maintenance fees--Class A ................................ 175,812
Account maintenance and distribution fees--Class C ............... 175,793
Transfer agent fees--Class I ..................................... 125,582
Transfer agent fees--Class A ..................................... 100,244
Accounting services .............................................. 88,903
Transfer agent fees--Class B ..................................... 46,054
Registration fees ................................................ 39,718
Professional fees ................................................ 34,779
Printing and shareholder reports ................................. 30,312
Transfer agent fees--Class C ..................................... 29,789
Custodian fees ................................................... 29,764
Directors' fees and expenses ..................................... 11,757
Account maintenance and distribution fees--Class R ............... 1,024
Pricing fees ..................................................... 577
Transfer agent fees--Class R ..................................... 292
Other ............................................................ 19,533
-------------
Total expenses before waiver ..................................... 3,236,055
Waiver of expenses ............................................... (511,018)
-------------
Total expenses after waiver ...................................... 2,725,037
-------------
Investment income--net ........................................... 205,968
-------------
============================================================================================================================
Realized & Unrealized Gain--Net
- ----------------------------------------------------------------------------------------------------------------------------
Realized gain on investments--net ................................ 22,833,450
Change in unrealized appreciation on investments--net ............ 18,006,909
-------------
Total realized and unrealized gain--net .......................... 40,840,359
-------------
Net Increase in Net Assets Resulting from Operations ............. $ 41,046,327
=============
See Notes to Financial Statements.
MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005 13
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 2005 2004
============================================================================================================================
Operations
- ----------------------------------------------------------------------------------------------------------------------------
Investment income (loss)--net .................................... $ 205,968 $ (29,746)
Realized gain--net ............................................... 22,833,450 44,470,394
Change in unrealized appreciation--net ........................... 18,006,909 19,365,944
-------------------------------
Net increase in net assets resulting from operations ............. 41,046,327 63,806,592
-------------------------------
============================================================================================================================
Capital Share Transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets derived from capital share transactions (38,278,804) (43,505,395)
-------------------------------
============================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ..................................... 2,767,523 20,301,197
Beginning of period .............................................. 401,091,630 380,790,433
-------------------------------
End of period* ................................................... $ 403,859,153 $ 401,091,630
===============================
* Undistributed investment income--net ........................ $ 205,968 --
===============================
See Notes to Financial Statements.
14 MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005
Financial Highlights
Class A
------------------------------------------------------------------
For the Six For the
Months Ended Year Ended July 31,
The following per share data and ratios have been derived January 31, --------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 12.06 $ 10.30 $ 8.58 $ 12.01 $ 13.86
-----------------------------------------------------------------
Investment income (loss)--net*** ....... .01 .01 (.02) (.01) .05
Realized and unrealized gain (loss)--net 1.28 1.75 1.74 (2.70) .94
-----------------------------------------------------------------
Total from investment operations ....... 1.29 1.76 1.72 (2.71) .99
-----------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............. -- -- -- -- (.05)
In excess of investment income--net . -- -- -- -- (.04)
Realized gain--net .................. -- -- -- (.72) (2.75)
-----------------------------------------------------------------
Total dividends and distributions ...... -- -- -- (.72) (2.84)
-----------------------------------------------------------------
Net asset value, end of period ......... $ 13.35 $ 12.06 $ 10.30 $ 8.58 $ 12.01
=================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 10.70%+ 17.09% 20.05% (23.06%) 7.73%
=================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver ................ 1.27%* 1.34% 1.42% 1.41% 1.49%
=================================================================
Expenses ............................... 1.52%* 1.51% 1.57% 1.54% 1.49%
=================================================================
Investment income (loss)--net .......... .16%* .08% (.23%) (.12%) .45%
=================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $140,505 $136,688 $120,193 $109,033 $119,272
=================================================================
Portfolio turnover ..................... 31.47% 91.79% 54.67% 123.59% 112.13%
=================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges. The Fund's
Investment Adviser has agreed to waive a portion of its fee. Without such
waiver, the Fund's performance would have been lower.
*** Based on average shares outstanding.
+ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005 15
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (continued)
Class B
------------------------------------------------------------------
For the Six For the
Months Ended Year Ended July 31,
The following per share data and ratios have been derived January 31, ---------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 11.17 $ 9.62 $ 8.07 $ 11.36 $ 13.23
-----------------------------------------------------------------
Investment loss--net*** ................ (.04) (.08) (.09) (.09) (.03)
Realized and unrealized gain (loss)--net 1.19 1.63 1.64 (2.54) .89
-----------------------------------------------------------------
Total from investment operations ....... 1.15 1.55 1.55 (2.63) .86
-----------------------------------------------------------------
Less dividends and distributions:
Investment income--net ................ -- -- -- -- (.01)
In excess of investment income--net ... -- -- -- -- (.01)
Realized gain--net .................... -- -- -- (.66) (2.71)
-----------------------------------------------------------------
Total dividends and distributions ...... -- -- -- (.66) (2.73)
-----------------------------------------------------------------
Net asset value, end of period ......... $ 12.32 $ 11.17 $ 9.62 $ 8.07 $ 11.36
=================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 10.30%+ 16.11% 19.21% (23.69%) 6.91%
=================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver ................ 2.04%* 2.11% 2.20% 2.18% 2.26%
=================================================================
Expenses ............................... 2.29%* 2.27% 2.35% 2.30% 2.26%
=================================================================
Investment loss--net ................... (.60%)* (.70%) (1.02%) (.89%) (.27%)
=================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 52,223 $ 57,812 $ 67,382 $ 79,617 $132,202
=================================================================
Portfolio turnover ..................... 31.47% 91.79% 54.67% 123.59% 112.13%
=================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges. The Fund's
Investment Adviser has agreed to waive a portion of its fee. Without such
waiver, the Fund's performance would have been lower.
*** Based on average shares outstanding.
+ Aggregate total investment return.
See Notes to Financial Statements.
16 MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005
Financial Highlights (continued)
Class C
------------------------------------------------------------------
For the Six For the
Months Ended Year Ended July 31,
The following per share data and ratios have been derived January 31, ---------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 10.94 $ 9.42 $ 7.90 $ 11.17 $ 13.07
-----------------------------------------------------------------
Investment loss--net*** ................ (.04) (.08) (.08) (.09) (.04)
Realized and unrealized gain (loss)--net 1.16 1.60 1.60 (2.50) .88
-----------------------------------------------------------------
Total from investment operations ....... 1.12 1.52 1.52 (2.59) .84
-----------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............. -- -- -- -- (.02)
In excess of investment income--net . -- -- -- -- (.01)
Realized gain--net .................. -- -- -- (.68) (2.71)
-----------------------------------------------------------------
Total dividends and distributions ...... -- -- -- (.68) (2.74)
-----------------------------------------------------------------
Net asset value, end of period ......... $ 12.06 $ 10.94 $ 9.42 $ 7.90 $ 11.17
=================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 10.24%+ 16.14% 19.24% (23.73%) 6.90%
=================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver ................ 2.04%* 2.12% 2.21% 2.19% 2.27%
=================================================================
Expenses ............................... 2.29%* 2.28% 2.36% 2.32% 2.27%
=================================================================
Investment loss--net ................... (.61%)* (.70%) (1.02%) (.88%) (.39%)
=================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 34,650 $ 34,179 $ 31,492 $ 31,763 $ 16,776
=================================================================
Portfolio turnover ..................... 31.47% 91.79% 54.67% 123.59% 112.13%
=================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges. The Fund's
Investment Adviser has agreed to waive a portion of its fee. Without such
waiver, the Fund's performance would have been lower.
*** Based on average shares outstanding.
+ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005 17
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (continued)
Class I
-------------------------------------------------------------------
For the Six For the
Months Ended Year Ended July 31,
The following per share data and ratios have been derived January 31, ---------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
===================================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 12.16 $ 10.36 $ 8.60 $ 12.04 $ 13.89
------------------------------------------------------------------
Investment income--net*** .............. .03 .04 --+ .01 .09
Realized and unrealized gain (loss)--net 1.29 1.76 1.76 (2.71) .93
------------------------------------------------------------------
Total from investment operations ....... 1.32 1.80 1.76 (2.70) 1.02
------------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............. -- -- -- -- (.06)
In excess of investment income--net . -- -- -- -- (.05)
Realized gain--net .................. -- -- -- (.74) (2.76)
------------------------------------------------------------------
Total dividends and distributions ...... -- -- -- (.74) (2.87)
------------------------------------------------------------------
Net asset value, end of period ......... $ 13.48 $ 12.16 $ 10.36 $ 8.60 $ 12.04
==================================================================
===================================================================================================================================
Total Investment Return**
- -----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 10.86%@ 17.37% 20.47% (22.95%) 8.00%
==================================================================
===================================================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver ................ 1.02%* 1.09% 1.17% 1.16% 1.24%
==================================================================
Expenses ............................... 1.27%* 1.26% 1.32% 1.28% 1.24%
==================================================================
Investment income--net ................. .42%* .33% .02% .14% .74%
==================================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $176,116 $172,024 $161,723 $154,734 $192,820
==================================================================
Portfolio turnover ..................... 31.47% 91.79% 54.67% 123.59% 112.13%
==================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges. The Fund's
Investment Adviser has agreed to waive a portion of its fee. Without such
waiver, the Fund's performance would have been lower.
*** Based on average shares outstanding.
+ Amount is less than $.01 per share.
@ Aggregate total investment return.
See Notes to Financial Statements.
18 MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005
Financial Highlights (concluded)
Class R
-----------------------------------------------
For the Six For the For the Period
Months Ended Year Ended January 3, 2003+
The following per share data and ratios have been derived January 31, July 31, to July 31,
from information provided in the financial statements. 2005 2004 2003
================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 11.33 $ 9.71 $ 8.67
=============================================
Investment income (loss)--net*** ....... --@@ --@@ .04
=============================================
Realized and unrealized gain--net ...... 1.20 1.62 1.00
=============================================
Total from investment operations ....... 1.20 1.62 1.04
=============================================
Net asset value, end of period ......... $ 12.53 $ 11.33 $ 9.71
=============================================
================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 10.59%@ 16.68% 12.00%@
=============================================
================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------
Expenses, net of waiver ................ 1.52%* 1.57% 1.67%*
=============================================
Expenses ............................... 1.77%* 1.75% 1.82%*
=============================================
Investment loss--net ................... (.08%)* (.05%) (.27%)*
=============================================
================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 366 $ 389 $ --++
=============================================
Portfolio turnover ..................... 31.47% 91.79% 54.67%
=============================================
* Annualized.
** Total investment returns exclude the effects of sales charges. The Fund's
Investment Adviser has agreed to waive a portion of its fee. Without such
waiver, the Fund's performance would have been lower.
*** Based on average shares outstanding.
+ Commencement of operations.
++ Amount is less than $1,000.
@ Aggregate total investment return.
@@ Amount is less than $(.01) per share.
See Notes to Financial Statements.
MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005 19
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements
1. Significant Accounting Policies:
Merrill Lynch Focus Value Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's financial statements are prepared in
conformity with U.S. generally accepted accounting principles, which may require
the use of management accruals and estimates. Actual results may differ from
these estimates. These unaudited financial statements reflect all adjustments,
which are, in the opinion of management, necessary to present a fair statement
of the results for the interim period. All such adjustments are of a normal,
recurring nature. 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 certain 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 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 -- Equity securities that are held by the Fund 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 Directors of the Fund.
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
Directors of the Fund. 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 Fund employs
pricing services to provide certain securities prices for the Fund. 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
Directors of the Fund, including valuations furnished by the pricing services
retained by the Fund, which may use a matrix system for valuations. The
procedures of a pricing service and its valuations are reviewed by the officers
of the Fund under the general supervision of the Fund's Board of Directors. Such
valuations and procedures will be reviewed periodically by the Board of
Directors of the Fund.
Generally, trading in foreign securities, as well as U.S. government securities
and money market instruments, is substantially completed each day at various
times prior to the close of business on the New York Stock Exchange ("NYSE").
The values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange rates
also are generally determined prior to the close of business on the NYSE.
Occasionally, events affecting the values of such securities and such exchange
rates may occur between the times at which they are determined and the close of
business on the NYSE that may not be reflected in the computation of the Fund's
net asset value. If events (for example, a company announcement, market
volatility or a natural disaster) occur during such periods that are expected to
materially affect the value of such securities, those securities may be valued
at their fair value as determined in good faith by the Fund's Board of Directors
or by the Investment Adviser using a pricing service and/or procedures approved
by the Fund's Board of Directors.
20 MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005
Notes to Financial Statements (continued)
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund 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 Options -- The Fund may write and purchase call and put options. When the
Fund writes an option, an amount equal to the premium received by the Fund
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 Fund enters into a closing transaction), the Fund realizes a gain
or loss on the option to the extent of the premiums received or paid (or
gain or loss to the extent the cost of the closing transaction exceeds the
premium paid or received).
Written and purchased options are non-income producing investments.
(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 -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no federal
income tax provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends and capital gains at
various rates.
(e) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Dividends from foreign securities where the ex-dividend date may have passed are
subsequently recorded when the Fund has determined the ex-dividend date.
Interest income is recognized on the accrual basis.
(f) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.
(g) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(h) Securities lending -- The Fund 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 Fund and any
additional required collateral is delivered to the Fund on the next business
day. Where the Fund receives securities as collateral for the loaned securities,
it collects a fee from the borrower. The Fund typically receives the income on
the loaned securities but does not receive the income on the collateral. Where
the Fund 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 Fund
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 Fund could experience delays and costs in gaining access to the
collateral. The Fund 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.
MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005 21
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (continued)
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner. The Fund has also entered into a
Distribution Agreement and Distribution Plan with FAM Distributors, Inc. ("FAMD"
or the "Distributor"), which is a wholly-owned subsidiary of Merrill Lynch
Group, Inc.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee of
1.00%, on an annual basis, of the average daily value of the Fund's net assets.
FAM agreed to waive .25% of its fee resulting in an annual fee equal to .75% of
the average daily net assets of the Fund. The contract has a one-year term and
is renewable. For the six months ended January 31, 2005, FAM earned fees of
$2,044,072, of which $511,018 was waived. 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 Fund. There is no increase in the aggregate
fees paid by the Fund for these services.
Pursuant to the Distribution Plan adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class A ....................................... .25% --
Class B ....................................... .25% .75%
Class C ....................................... .25% .75%
Class R ....................................... .25% .25%
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class A, Class B, Class C and Class R shareholders. The
ongoing distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B, Class C and Class R
shareholders.
For the six months ended January 31, 2005, 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 ................................................ $1,172 $8,342
Class I ................................................ $ 53 $ 729
- --------------------------------------------------------------------------------
For the six months ended January 31, 2005, MLPF&S received contingent deferred
sales charges of $35,842 and $851 relating to transactions in Class B and Class
C Shares, respectively. Furthermore, MLPF&S received contingent deferred sales
charges of $134 relating to transactions subject to front-end sales charge
waivers in Class A shares.
The Fund has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to MLPF&S, or its
affiliates. Pursuant to that order, the Fund 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 Fund, invest cash collateral
received by the Fund for such loans, among other things, in a private investment
company managed by MLIM, LLC or in registered money market funds advised by FAM
or its affiliates. For the six months ended January 31, 2005, MLIM, LLC received
$2,011 in securities lending agent fees.
For the six months ended January 31, 2005, the Fund reimbursed FAM $4,381 for
certain accounting services.
In addition, MLPF&S received $73,331 in commissions on the execution of
portfolio security transactions for the Fund for the six months ended January
31, 2005.
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, MLAM U.K., FDS, FAMD, and/or ML & Co.
22 MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005
Notes to Financial Statements (continued)
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended January 31, 2005 were $123,762,867 and $163,141,632, respectively.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$38,278,804 and $43,505,395 for the six months ended January 31, 2005 and for
the year ended July 31, 2004, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended January 31, 2005 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 639,430 $ 8,018,770
Automatic conversion of shares ......... 396,426 5,051,621
------------------------------
Total issued ........................... 1,035,856 13,070,391
Shares redeemed ........................ (1,848,093) (23,400,155)
------------------------------
Net decrease ........................... (812,237) $(10,329,764)
==============================
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 716,143 $ 8,534,193
Automatic conversion of shares ......... 1,073,783 12,779,849
------------------------------
Total issued ........................... 1,789,926 21,314,042
Shares redeemed ........................ (2,121,355) (25,217,807)
------------------------------
Net decrease ........................... (331,429) $ (3,903,765)
==============================
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended January 31, 2005 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 210,253 $ 2,473,225
------------------------------
Shares redeemed ........................ (718,200) (8,494,247)
Automatic conversion of shares ......... (428,620) (5,051,621)
------------------------------
Total redeemed ......................... (1,146,820) (13,545,868)
------------------------------
Net decrease ........................... (936,567) $(11,072,643)
==============================
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 798,733 $ 8,796,123
------------------------------
Shares redeemed ........................ (1,474,993) (16,377,636)
Automatic conversion of shares ......... (1,154,991) (12,779,849)
------------------------------
Total redeemed ......................... (2,629,984) (29,157,485)
------------------------------
Net decrease ........................... (1,831,251) $(20,361,362)
==============================
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended January 31, 2005 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 95,086 $ 1,099,407
Shares redeemed ........................ (347,649) (4,022,324)
------------------------------
Net decrease ........................... (252,563) $ (2,922,917)
==============================
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 425,220 $ 4,605,702
Shares redeemed ........................ (644,419) (6,947,219)
------------------------------
Net decrease ........................... (219,199) $ (2,341,517)
==============================
- --------------------------------------------------------------------------------
Class I Shares for the Six Months Dollar
Ended January 31, 2005 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 521,432 $ 6,762,684
Shares redeemed ........................ (1,604,622) (20,651,619)
------------------------------
Net decrease ........................... (1,083,190) $(13,888,935)
==============================
- --------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended July 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 1,628,933 $ 19,598,346
Shares redeemed ........................ (3,087,919) (36,904,286)
------------------------------
Net decrease ........................... (1,458,986) $(17,305,940)
==============================
- --------------------------------------------------------------------------------
Class R Shares for the Six Months Dollar
Ended January 31, 2005 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 7,350 $ 89,355
Shares redeemed ........................ (12,539) (153,900)
------------------------------
Net decrease ........................... (5,189) $ (64,545)
==============================
- --------------------------------------------------------------------------------
Class R Shares for the Year Dollar
Ended July 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 48,440 $ 570,646
Shares redeemed ........................ (14,083) (163,457)
------------------------------
Net increase ........................... 34,357 $ 407,189
==============================
MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005 23
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (concluded)
5. Short-Term Borrowings:
The Fund, along with certain other funds managed by FAM and its affiliates, is a
party to a $500,000,000 credit agreement with a group of lenders. The Fund may
borrow under the credit agreement to fund shareholder redemptions and for other
lawful purposes other than for leverage. The Fund may borrow up to the maximum
amount allowable under the Fund's current prospectus and statement of additional
information, subject to various other legal, regulatory or contractual limits.
The Fund pays a commitment fee of .07% per annum based on the Fund's pro rata
share of the unused portion of the credit agreement. Amounts borrowed under the
credit agreement bear interest at a rate equal to, at each Fund's election, the
federal funds rate plus .50% or a base rate as defined in the credit agreement.
The Fund did not borrow under the credit agreement during the six months ended
January 31, 2005. On November 26, 2004, the credit agreement was renewed for one
year under substantially the same terms.
6. Capital Loss Carryforward:
On July 31, 2004, the Fund had a net capital loss carryforward of $38,975,411,
of which $8,284,542 expires in 2010 and $30,690,869 expires in 2011. This amount
will be available to offset like amounts of any future taxable gains.
24 MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005
Officers and Directors
Robert C. Doll, Jr., President and Director
James H. Bodurtha, Director
Joe Grills, Director
Herbert I. London, Director
Roberta Cooper Ramo, Director
Robert S. Salomon, Jr., Director
Stephen B. Swensrud, Director
Robert J. Martorelli, Vice President and
Co-Portfolio Manager
Kevin M. Rendino, Vice President and
Co-Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
JPMorgan Chase Bank
4 Chase MetroTech Center, 18th Floor
Brooklyn, NY 11245
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 of Merrill Lynch Focus Value Fund, Inc.
effective October 22, 2004.
Effective January 1, 2005, Terry K. Glenn retired as President and Director of
the Fund. The Fund's Board of Directors wishes Mr. Glenn well in his retirement.
Effective January 1, 2005, Robert C. Doll, Jr. became President and Director of
the Fund.
- --------------------------------------------------------------------------------
MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005 25
[LOGO] Merrill Lynch Investment Managers
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
26 MERRILL LYNCH FOCUS VALUE FUND, INC. JANUARY 31, 2005
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site at 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 FOCUS VALUE FUND, INC. JANUARY 31, 2005 27
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
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 Focus Value Fund, Inc.
Box 9011
Princeton, NJ
08543
#10263 -- 1/05
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual
report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not
Applicable
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(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.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the last fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(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 Focus Value Fund, Inc.
By: /s/ Robert C. Doll, Jr.
----------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Merrill Lynch Focus Value Fund, Inc.
Date: March 21, 2005
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/ Robert C. Doll, Jr.
----------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Merrill Lynch Focus Value Fund, Inc.
Date: March 21, 2005
By: /s/ Donald C. Burke
----------------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Focus Value Fund, Inc.
Date: March 21, 2005