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 811-09637
811-09739
Name of Fund: Merrill Lynch Large Cap Value Fund of Merrill Lynch Large Cap
Series Funds, Inc. Master Large Cap Value Portfolio of Master
Large Cap Series Trust
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, Merrill Lynch Large Cap Value Fund of Merrill Lynch Large Cap
Series Funds, Inc. and Master Large Cap Value Portfolio of Master Large
Cap Series Trust, 800 Scudders Mill Road, Plainsboro, NJ 08536. Mailing
address: P.O. Box 9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 10/31/05
Date of reporting period: 11/01/04 - 04/30/05
Item 1 - Report to Stockholders
Merrill Lynch
Large Cap Value Fund
Of Merrill Lynch Large Cap Series Funds, Inc.
Semi-Annual Report
April 30, 2005
Merrill Lynch Large Cap Value Fund
Officers and Directors/Trustees
Robert C. Doll, Jr., President, Director/Trustee
and Portfolio Manager
James H. Bodurtha, Director/Trustee
Joe Grills, Director/Trustee
Herbert I. London, Director/Trustee
Roberta Cooper Ramo, Director/Trustee
Robert S. Salomon, Jr., Director/Trustee
Stephen B. Swensrud, Director/Trustee
Donald C. Burke, Vice President and Treasurer
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109-3661
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
- --------------------------------------------------------------------------------
Effective January 1, 2005, Terry K. Glenn retired as President and
Director/Trustee of Merrill Lynch Large Cap Series Fund, Inc. and Master Large
Cap Series Trust. The Fund's/Trust's Board of Directors/Trustees wishes Mr.
Glenn well in his retirement.
Effective January 1, 2005, Robert C. Doll, Jr. became President and
Director/Trustee of the Fund and the Trust.
- --------------------------------------------------------------------------------
2 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005
A Letter From the President
Dear Shareholder
Financial markets faced a number of crosscurrents over the past several months,
but most major benchmarks managed to post positive returns for the annual and
semi-annual reporting periods ended April 30, 2005:
Total Returns as of April 30, 2005 6-month 12-month
===================================================================================
U.S. equities (Standard & Poor's 500 Index) +3.28% + 6.34%
- -----------------------------------------------------------------------------------
Small-cap U.S. equities (Russell 2000 Index) -0.15% + 4.71%
- -----------------------------------------------------------------------------------
International equities (MSCI Europe Australasia Far East Index) +8.71% +14.95%
- -----------------------------------------------------------------------------------
Fixed income (Lehman Brothers Aggregate Bond Index) +0.98% + 5.26%
- -----------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) +1.93% + 6.81%
- -----------------------------------------------------------------------------------
High yield bonds (Credit Suisse First Boston High Yield Index) +0.65% + 6.92%
- -----------------------------------------------------------------------------------
After expanding at an annualized rate of 4.4% in 2004, U.S. gross domestic
product growth for the first quarter of 2005 came in at an estimated 3.1%
(although that figure was later revised upward to 3.5%). Nevertheless, the
Federal Reserve Board continued increasing interest rates at a measured pace to
combat emergent inflation. The most recent hike came on May 3, and brought the
federal funds rate to 3%. Recently, signs of inflation have taken the form of
rising business costs and increasing consumer prices, particularly in the areas
of gasoline, healthcare, housing and education.
U.S. equities ended 2004 in a strong rally, but stumbled into negative territory
in 2005. The market weakness was largely fueled by the potential for slowing
economic and corporate earnings growth, renewed energy price concerns and a lack
of investor conviction. On the positive side, certain sectors of the market have
been performing well (particularly energy) and corporate transactions, such as
mergers and acquisitions, stock buy-backs and dividend payouts, have all
increased. International equities, especially in Asia, have benefited from
higher economic growth rates.
In the bond market, we witnessed a yield curve flattening trend over the past
several months as short-term yields increased and longer-term interest rates
remained more stable or fell. At the end of April 2005, the two-year Treasury
note yielded 3.66% and the 10-year Treasury note yielded 4.21%, a difference of
55 basis points (.55%). This compared to a spread of 149 basis points six months
earlier and 222 basis points 12 months ago.
Looking ahead, the environment is likely to be a challenging one for investors.
With this in mind, 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/Trustee
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005 3
A Discussion With Your Fund's Portfolio Manager
The Fund significantly outperformed both its benchmark and its comparable
Lipper category average for the period, benefiting primarily from successful
stock selection across various industry sectors.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended April 30, 2005, the Fund's Class A, Class B,
Class C, Class I and Class R Shares had total returns of +8.04%, +7.61%, +7.69%,
+8.15% and +7.93%, respectively. (Fund results shown do not reflect sales
charges and would be lower if sales charges were included. Complete performance
information can be found on pages 6 and 7 of this report to shareholders.) These
results compare quite favorably to the +6.72% return of the Fund's unmanaged
benchmark, the Russell 1000 Value Index, for the same period. In addition, the
Fund significantly outperformed its comparable Lipper category of Multi-Cap
Value Funds, which posted an average return of +5.15% for the six-month period.
(Funds in this Lipper category invest in a variety of market capitalization
ranges without concentrating 75% of their equity assets in any one market
capitalization range over an extended period of time. Multi-Cap Value funds
typically have a below-average price-to-earnings ratio, price-to-book ratio and
three-year sales-per-growth value compared to the S&P SuperComposite 1500
Index.)
The Fund invests primarily in a diversified portfolio of large cap companies
selected from securities found in the Russell 1000 Index. Stock selection in the
health care sector (particularly health care providers and services) and
financials (particularly insurance) benefited Fund performance. In the energy
sector, the combination of a sector overweight and effective stock selection
enhanced returns, although this was somewhat offset by the negative impact of
our underweight position in Exxon Mobil Corp. Detracting from performance versus
the benchmark was our relative weighting and security selection in the
technology and consumer staples sectors.
At the individual stock level, the largest positive contributors to performance
during the six-month period were Humana, Inc., PacifiCare Health Systems, Valero
Energy Corp. and Cigna Corp. For the most part, we retained our positions in
these strong performers, although we do typically take some marginal profits in
select stocks that appreciate significantly. This allows us to maintain our
desired relative weightings in any individual stock and/or sector. Also
benefiting Fund performance were our underweight positions in JPMorgan Chase &
Co., Verizon Communications Inc. and International Business Machines Corp.
Hindering relative performance somewhat was an underweight position in Altria
Group. The largest individual detractors included Dynegy, Inc., Claire's Stores,
Inc. and Eastman Kodak Co. Each of these stocks disappointed during the period
as company fundamentals developed unfavorably and, in general, contrary to our
expectations. As part of our overall investment strategy, we eliminated or
reduced the detractors to make room in the portfolio for stocks with more
promising investment cases.
Because the Fund invests in large-capitalization stocks that represent a
significant part of the U.S. stock market, its portfolio was influenced by the
same economic and market events that affected the broader stock market during
the period. Over the past six months, the markets reacted to positive and
negative economic news, as well as national and international events, such as
the conclusion of the U.S. presidential election and the ongoing war and
elections in Iraq. The major indexes posted impressive returns in the fourth
quarter of 2004, although these gains were largely given back in the new year as
concerns grew over inflation, record-high oil prices, the weakening of the U.S.
dollar and the threat of continuing interest rate hikes. Under these conditions,
large-capitalization shares were favored by investors. Notably, value stocks
outperformed during the period. For the six months ended April 30, 2005, the
Russell 1000 Value Index's return of +6.72% far outpaced the +1.14% return of
the Russell 1000 Growth Index. An advanced estimate of first quarter 2005 gross
domestic product (GDP) growth came in unexpectedly low at 3.1%, although that
figure was later revised upward to 3.5%. However, throughout this challenging
environment, solid growth in corporate profits was recorded, and the housing
market continued at a strong pace.
The recent correction in the broad markets--and cyclical stocks in particular --
reflects both general concerns over the slowing of economic growth and specific
concerns regarding the impact of tighter monetary policy, higher energy prices,
currency market volatility and credit market risks. Amid these conditions, we
are pleased with the Fund's ability to outperform its benchmark and its peers.
4 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005
What changes were made to the Portfolio during the period?
We maintained a procyclical bias throughout the period. Through our bottom-up
stock selection process, we continued to identify stocks with favorable growth
characteristics and earnings developments, selling at attractive relative
valuations. As a result of this process, we increased our positions relative to
the benchmark in the information technology, energy and health care sectors. We
reduced our positions in the consumer discretionary, industrials, utilities,
consumer staples and materials sectors, although the Portfolio remained
overweight in materials at period-end.
The largest purchases during the period included Exxon Mobil Corp.,
Hewlett-Packard Co., Lehman Brothers Holdings, Inc. and Unocal Corp. The largest
sales included McDonald's Corp., WellPoint, Inc., Countrywide Financial Corp.
and Costco Wholesale Corp. These transactions reflected our ongoing refinement
of the portfolio, as we continue to look for stocks that best meet our
investment criteria while pruning those that have deteriorated versus our
original assessment.
How would you characterize the Portfolio's position at the close of the period?
The Portfolio's largest overweights as of April 30, 2005 were in information
technology, which we believe should benefit from strong earnings growth, as well
as energy, health care and materials. The largest underweights were in
financials, which tend to underperform in periods of rising interest rates,
telecommunications services, consumer staples, industrials and utilities.
Companies exhibiting good earnings momentum, earnings surprise and valuation
characteristics continue to deliver strong performance, and we remain committed
to these disciplines for stock selection. The Portfolio remains positioned in
cyclical stocks, which should benefit amid favorable economic conditions.
Despite softer first quarter GDP growth and some recent rumblings of an economic
slowdown, we believe the current environment is still generally supportive of
equities. Having said that, we continue to believe that a highly diversified
portfolio and a focus on individual security selection (rather than a more macro
approach) is appropriate and should be rewarded on a relative basis.
Robert C. Doll, Jr.
President, Director/Trustee and Portfolio Manager
May 26, 2005
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005 5
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. Prior to inception,
Class R Share performance results are those of Class I Shares (which have
no distribution or account maintenance fees) restated for Class R Share
fees.
None of the past results shown should be considered a representation of future
performance. Current performance may be lower or higher than the performance
data quoted. Refer to www.mlim.ml.com to obtain performance data current to the
most recent month-end. Performance results do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. Figures shown in each of the following tables assume reinvestment of all
dividends and capital gain distributions, if any, at net asset value on the
ex-dividend date. Investment return and principal value of shares will fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost. Dividends paid to each class of shares will vary because of the different
levels of account maintenance, distribution and transfer agency fees applicable
to each class, which are deducted from the income available to be paid to
shareholders.
Recent Performance Results
6-Month 12-Month Since Inception
As of April 30, 2005 Total Return Total Return Total Return
========================================================================================
ML Large Cap Value Fund Class A Shares* +8.04% +14.25% +57.14%
- ----------------------------------------------------------------------------------------
ML Large Cap Value Fund Class B Shares* +7.61 +13.35 +50.87
- ----------------------------------------------------------------------------------------
ML Large Cap Value Fund Class C Shares* +7.69 +13.43 +50.88
- ----------------------------------------------------------------------------------------
ML Large Cap Value Fund Class I Shares* +8.15 +14.54 +59.30
- ----------------------------------------------------------------------------------------
ML Large Cap Value Fund Class R Shares* +7.93 +14.02 +55.96
- ----------------------------------------------------------------------------------------
Russell 1000(R) Value Index** +6.72 +13.92 +29.79
- ----------------------------------------------------------------------------------------
* Investment results shown do not reflect sales charges; results shown 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. Since inception total return
is from 12/22/99.
** This unmanaged broad-based Index is a subset of the Russell 1000 Index
consisting of those Russell 1000 securities with lower price/book ratios
and lower forecasted growth values. Since inception total return is from
12/22/99.
Russell 1000 is a registered trademark of the Frank Russell Company.
6 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005
Performance Data (concluded)
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 4/30/05 +14.25% +8.25%
- --------------------------------------------------------------------------------
Five Years Ended 4/30/05 + 7.71 +6.55
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 4/30/05 + 8.80 +7.71
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
Return Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 4/30/05 +13.35% +9.35%
- --------------------------------------------------------------------------------
Five Years Ended 4/30/05 + 6.88 +6.57
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 4/30/05 + 7.98 +7.85
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
** Assuming payment of applicable contingent deferred sales charge.
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
One Year Ended 4/30/05 +13.43% +12.43%
- --------------------------------------------------------------------------------
Five Years Ended 4/30/05 + 6.88 + 6.88
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 4/30/05 + 7.98 + 7.98
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
** Assuming payment of applicable contingent deferred sales charge.
- --------------------------------------------------------------------------------
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class I Shares*
================================================================================
One Year Ended 4/30/05 +14.54% +8.52%
- --------------------------------------------------------------------------------
Five Years Ended 4/30/05 + 7.98 +6.83
- --------------------------------------------------------------------------------
Inception (12/22/99)
through 4/30/05 + 9.08 +7.99
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
- --------------------------------------------------------------------------------
Class R Shares Return
================================================================================
One Year Ended 4/30/05 +14.02%
- --------------------------------------------------------------------------------
Five Years Ended 4/30/05 + 7.57
- --------------------------------------------------------------------------------
Inception (12/22/99) through 4/30/05 + 8.65
- --------------------------------------------------------------------------------
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005 7
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 November 1, 2004 and held
through April 30, 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 November 1, 2004
November 1, 2004 April 30, 2005 to April 30, 2005
==============================================================================================================
Actual
==============================================================================================================
Class A $1,000 $1,080.40 $ 6.33
- --------------------------------------------------------------------------------------------------------------
Class B $1,000 $1,076.10 $10.30
- --------------------------------------------------------------------------------------------------------------
Class C $1,000 $1,076.90 $10.30
- --------------------------------------------------------------------------------------------------------------
Class I $1,000 $1,081.50 $ 5.03
- --------------------------------------------------------------------------------------------------------------
Class R $1,000 $1,079.30 $ 7.62
==============================================================================================================
Hypothetical (5% annual return before expenses)**
==============================================================================================================
Class A $1,000 $1,018.85 $ 6.14
- --------------------------------------------------------------------------------------------------------------
Class B $1,000 $1,015.01 $10.00
- --------------------------------------------------------------------------------------------------------------
Class C $1,000 $1,015.01 $10.00
- --------------------------------------------------------------------------------------------------------------
Class I $1,000 $1,020.09 $ 4.89
- --------------------------------------------------------------------------------------------------------------
Class R $1,000 $1,017.60 $ 7.39
- --------------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (1.22% for Class A, 1.99% for Class B, 1.99% for Class
C, .97% for Class I and 1.47% for Class R), multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the
one-half year period shown). Because the Fund is a feeder fund, the
expense table example reflects the expenses of both the feeder fund and
the master fund in which it invests.
** Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half-year divided by 365.
8 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005
Statement of Assets and Liabilities Merrill Lynch Large Cap Value Fund
As of April 30, 2005
==========================================================================================================================
Assets
- --------------------------------------------------------------------------------------------------------------------------
Investment in Master Large Cap Value Portfolio
(the "Portfolio"), at value
(identified cost--$941,906,238) ........................... $ 1,060,237,462
Prepaid expenses and other assets .......................... 124,536
---------------
Total assets ............................................... 1,060,361,998
---------------
==========================================================================================================================
Liabilities
- --------------------------------------------------------------------------------------------------------------------------
Payables:
Distributor ............................................. $ 488,347
Other affiliates ........................................ 272,950
Administrator ........................................... 204,255
---------------
Total liabilities .......................................... 965,552
---------------
==========================================================================================================================
Net Assets
- --------------------------------------------------------------------------------------------------------------------------
Net assets ................................................. $ 1,059,396,446
===============
==========================================================================================================================
Net Assets Consist of
- --------------------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.10 par value,
100,000,000 shares authorized ............................. $ 1,723,714
Class B Shares of Common Stock, $.10 par value,
200,000,000 shares authorized ............................. 1,620,755
Class C Shares of Common Stock, $.10 par value,
100,000,000 shares authorized ............................. 2,061,311
Class I Shares of Common Stock, $.10 par value,
100,000,000 shares authorized ............................. 1,591,748
Class R Shares of Common Stock, $.10 par value,
200,000,000 shares authorized ............................. 182,395
Paid-in capital in excess of par ........................... 905,638,862
Undistributed investment income--net ....................... $ 116,635
Undistributed realized capital gains allocated from the
Portfolio--net ............................................ 28,129,802
Unrealized appreciation allocated from the Portfolio--net .. 118,331,224
---------------
Total accumulated earnings--net ............................ 146,577,661
---------------
Net Assets ................................................. $ 1,059,396,446
===============
==========================================================================================================================
Net Asset Value
- --------------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $259,110,375 and
17,237,143 shares outstanding ............................. $ 15.03
===============
Class B--Based on net assets of $233,729,014 and
16,207,546 shares outstanding ............................. $ 14.42
===============
Class C--Based on net assets of $297,172,779 and
20,613,105 shares outstanding ............................. $ 14.42
===============
Class I--Based on net assets of $242,594,543 and
15,917,478 shares outstanding ............................. $ 15.24
===============
Class R--Based on net assets of $26,789,735 and
1,823,945 shares outstanding .............................. $ 14.69
===============
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005 9
Statement of Operations Merrill Lynch Large Cap Value Fund
For the Six Months Ended April 30, 2005
==========================================================================================================================
Investment Income
- --------------------------------------------------------------------------------------------------------------------------
Net investment income allocated from the Portfolio:
Dividends ............................................... $ 7,665,097
Interest from affiliates ................................ 42,751
Securities lending--net ................................. 12,128
Expenses ................................................ (2,653,169)
---------------
Total income ............................................... 5,066,807
---------------
==========================================================================================================================
Expenses
- --------------------------------------------------------------------------------------------------------------------------
Account maintenance and distribution fees--Class C ......... $ 1,335,414
Administration fees ........................................ 1,211,538
Account maintenance and distribution fees--Class B ......... 1,188,866
Account maintenance fees--Class A .......................... 274,786
Transfer agent fees--Class C ............................... 218,464
Transfer agent fees--Class B ............................... 194,664
Transfer agent fees--Class I ............................... 162,969
Transfer agent fees--Class A ............................... 158,552
Printing and shareholder reports ........................... 60,850
Registration fees .......................................... 56,145
Account maintenance and distribution fees--Class R ......... 50,087
Professional fees .......................................... 16,443
Transfer agent fees--Class R ............................... 14,341
Other ...................................................... 7,053
---------------
Total expenses ............................................. 4,950,172
---------------
Investment income--net ..................................... 116,635
---------------
==========================================================================================================================
Realized & Unrealized Gain Allocated from the Portfolio--Net
- --------------------------------------------------------------------------------------------------------------------------
Realized gain on investments--net .......................... 33,156,141
Change in unrealized appreciation on investments--net ...... 26,344,859
---------------
Total realized and unrealized gain--net .................... 59,501,000
---------------
Net Increase in Net Assets Resulting from Operations ....... $ 59,617,635
===============
See Notes to Financial Statements.
10 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005
Statements of Changes in Net Assets Merrill Lynch Large Cap Value Fund
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2005 2004
==========================================================================================================================
Operations
- --------------------------------------------------------------------------------------------------------------------------
Investment income (loss)--net .............................. $ 116,635 $ (1,096,859)
Realized gain--net ......................................... 33,156,141 78,138,759
Change in unrealized appreciation--net ..................... 26,344,859 (2,549,598)
-----------------------------------
Net increase in net assets resulting from operations ....... 59,617,635 74,492,302
-----------------------------------
==========================================================================================================================
Distributions to Shareholders
- --------------------------------------------------------------------------------------------------------------------------
Realized gain--net:
Class A ................................................... (8,283,910) --
Class B ................................................... (10,290,416) --
Class C ................................................... (10,721,593) --
Class I ................................................... (8,685,584) --
Class R ................................................... (707,934) --
-----------------------------------
Net decrease in net assets resulting from distributions to
shareholders .............................................. (38,689,437) --
-----------------------------------
==========================================================================================================================
Capital Share Transactions
- --------------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share
transactions .............................................. 228,752,145 220,472,373
-----------------------------------
==========================================================================================================================
Net Assets
- --------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ............................... 249,680,343 294,964,675
Beginning of period ........................................ 809,716,103 514,751,428
-----------------------------------
End of period* ............................................. $ 1,059,396,446 $ 809,716,103
===================================
* Undistributed investment income--net .................... $ 116,635 --
===================================
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005 11
Financial Highlights Merrill Lynch Large Cap Value Fund
Class A
---------------------------------------------------------------------
For the Six For the Year Ended
Months Ended October 31,
The following per share data and ratios have been derived April 30, ----------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 14.53 $ 12.77 $ 10.14 $ 10.62 $ 11.61
---------------------------------------------------------------------
Investment income--net**** ............. .03 .03 .03 .04 .04
Realized and unrealized gain (loss)--net 1.13 1.73 2.60 (.52) (1.02)
---------------------------------------------------------------------
Total from investment operations ....... 1.16 1.76 2.63 (.48) (.98)
---------------------------------------------------------------------
Less distributions:
Realized gain--net .................... (.66) -- -- -- --
Return of capital--net ................ -- -- -- -- (.01)
---------------------------------------------------------------------
Total distributions .................... (.66) -- -- -- (.01)
---------------------------------------------------------------------
Net asset value, end of period ......... $ 15.03 $ 14.53 $ 12.77 $ 10.14 $ 10.62
=====================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 8.04%+ 13.78% 25.94% (4.52%) (8.43%)
=====================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses*** ............................ 1.22%* 1.26% 1.28% 1.28% 1.29%
=====================================================================
Investment income--net ................. .34%* .21% .24% .49% .32%
=====================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $259,110 $161,867 $ 90,358 $ 46,020 $ 37,190
=====================================================================
Portfolio turnover of the Portfolio .... 45.62% 127.59% 157.04% 136.92% 168.54%
=====================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Includes the Fund's share of the Portfolio's allocated expenses.
**** Based on average shares outstanding.
+ Aggregate total investment return.
See Notes to Financial Statements.
12 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005
Financial Highlights (continued) Merrill Lynch Large Cap Value Fund
Class B
---------------------------------------------------------------------
For the Six For the Year Ended
Months Ended October 31,
The following per share data and ratios have been derived April 30, ----------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 14.02 $ 12.41 $ 9.93 $ 10.48 $ 11.54
---------------------------------------------------------------------
Investment loss--net**** ............... (.03) (.07) (.05) (.03) (.04)
Realized and unrealized gain (loss)--net 1.09 1.68 2.53 (.52) (1.02)
---------------------------------------------------------------------
Total from investment operations ....... 1.06 1.61 2.48 (.55) (1.06)
---------------------------------------------------------------------
Less distributions:
Realized gain--net .................... (.66) -- -- -- --
Return of capital--net ................ -- -- -- -- --@
---------------------------------------------------------------------
Total distributions .................... (.66) -- -- -- --@
---------------------------------------------------------------------
Net asset value, end of period ......... $ 14.42 $ 14.02 $ 12.41 $ 9.93 $ 10.48
=====================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 7.61%+ 12.97% 24.97% (5.25%) (9.18%)
=====================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses*** ............................ 1.99%* 2.02% 2.05% 2.05% 2.07%
=====================================================================
Investment loss--net ................... (.37%)* (.53%) (.50%) (.28%) (.44%)
=====================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $233,729 $222,055 $202,190 $174,623 $167,613
=====================================================================
Portfolio turnover of the Portfolio .... 45.62% 127.59% 157.04% 136.92% 168.54%
=====================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Includes the Fund's share of the Portfolio's allocated expenses.
**** Based on average shares outstanding.
+ Aggregate total investment return.
@ Amount is less than $(.01) per share.
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005 13
Financial Highlights (continued) Merrill Lynch Large Cap Value Fund
Class C
---------------------------------------------------------------------
For the Six For the Year Ended
Months Ended October 31,
The following per share data and ratios have been derived April 30, ----------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 14.01 $ 12.41 $ 9.93 $ 10.48 $ 11.54
---------------------------------------------------------------------
Investment loss--net**** ............... (.03) (.07) (.05) (.03) (.04)
Realized and unrealized gain (loss)--net 1.10 1.67 2.53 (.52) (1.02)
---------------------------------------------------------------------
Total from investment operations ....... 1.07 1.60 2.48 (.55) (1.06)
---------------------------------------------------------------------
Less distributions:
Realized gain--net .................... (.66) -- -- -- --
Return of capital--net ................ -- -- -- -- --@
---------------------------------------------------------------------
Total distributions .................... (.66) -- -- -- --@
---------------------------------------------------------------------
Net asset value, end of period ......... $ 14.42 $ 14.01 $ 12.41 $ 9.93 $ 10.48
=====================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 7.69%+ 12.89% 24.97% (5.25%) (9.18%)
=====================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses*** ............................ 1.99%* 2.03% 2.06% 2.05% 2.07%
=====================================================================
Investment loss--net ................... (.40%)* (.54%) (.51%) (.28%) (.45%)
=====================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $297,173 $219,806 $129,456 $ 95,895 $ 77,901
=====================================================================
Portfolio turnover of the Portfolio .... 45.62% 127.59% 157.04% 136.92% 168.54%
=====================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Includes the Fund's share of the Portfolio's allocated expenses.
**** Based on average shares outstanding.
+ Aggregate total investment return.
@ Amount is less than $(.01) per share.
See Notes to Financial Statements.
14 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005
Financial Highlights (continued) Merrill Lynch Large Cap Value Fund
Class I
---------------------------------------------------------------------
For the Six For the Year Ended
Months Ended October 31,
The following per share data and ratios have been derived April 30, ----------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 14.71 $ 12.89 $ 10.21 $ 10.67 $ 11.64
---------------------------------------------------------------------
Investment income--net**** ............. .05 .07 .06 .05 .07
Realized and unrealized gain (loss)--net 1.14 1.75 2.62 (.51) (1.03)
---------------------------------------------------------------------
Total from investment operations ....... 1.19 1.82 2.68 (.46) (.96)
---------------------------------------------------------------------
Less distributions:
Realized gain--net .................... (.66) -- -- -- --
Return of capital--net ................ -- -- -- -- (.01)
---------------------------------------------------------------------
Total distributions .................... (.66) -- -- -- (.01)
---------------------------------------------------------------------
Net asset value, end of period ......... $ 15.24 $ 14.71 $ 12.89 $ 10.21 $ 10.67
=====================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 8.15%+ 14.12% 26.25% (4.31%) (8.21%)
=====================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses*** ............................ .97%* 1.01% 1.03% 1.03% 1.04%
=====================================================================
Investment income--net ................. .63%* .49% .51% .76% .60%
=====================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $242,595 $194,625 $ 92,736 $ 66,754 $ 42,641
=====================================================================
Portfolio turnover of the Portfolio .... 45.62% 127.59% 157.04% 136.92% 168.54%
=====================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Includes the Fund's share of the Portfolio's allocated expenses.
**** Based on average shares outstanding.
+ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005 15
Financial Highlights (concluded) Merrill Lynch Large Cap Value Fund
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 April 30, October 31, to October 31,
from information provided in the financial statements. 2005 2004 2003
=========================================================================================================================
Per Share Operating Performance
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ..... $ 14.23 $ 12.54 $ 10.12
----------------------------------------------------
Investment income (loss)--net**** ........ .01 --++ .01
Realized and unrealized gain--net ........ 1.11 1.69 2.41
----------------------------------------------------
Total from investment operations ......... 1.12 1.69 2.42
----------------------------------------------------
Less distributions from realized gain--net (.66) -- --
----------------------------------------------------
Net asset value, end of period ........... $ 14.69 $ 14.23 $ 12.54
====================================================
=========================================================================================================================
Total Investment Return**
- -------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ....... 7.93%@ 13.48% 23.91%@
====================================================
=========================================================================================================================
Ratios to Average Net Assets
- -------------------------------------------------------------------------------------------------------------------------
Expenses*** .............................. 1.47%* 1.53% 1.53%*
====================================================
Investment income (loss)--net ............ .07%* (.03%) .01%*
====================================================
=========================================================================================================================
Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) . $ 26,790 $ 11,362 $ 12
====================================================
Portfolio turnover of the Portfolio ...... 45.62% 127.59% 157.04%
====================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Includes the Fund's share of the Portfolio's allocated expenses.
**** Based on average shares outstanding.
+ Commencement of operations.
++ Amount is less than $(.01) per share.
@ Aggregate total investment return.
See Notes to Financial Statements.
16 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005
Notes to Financial Statements Merrill Lynch Large Cap Value Fund
1. Significant Accounting Policies:
Merrill Lynch Large Cap Value Fund of Merrill Lynch Large Cap Series Funds, Inc.
(the "Fund") is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end investment company. The Fund seeks to achieve its
investment objective by investing all of its assets in Master Large Cap Value
Portfolio (the "Portfolio"), which is a portfolio of Master Large Cap Series
Trust that has the same investment objective and strategies as the Fund. The
value of the Fund's investment in the Portfolio reflects the Fund's
proportionate interest in the net assets of the Portfolio. The performance of
the Fund is directly affected by the performance of the Portfolio. The financial
statements of the Portfolio, including the Schedule of Investments, are included
elsewhere in this report and should be read in conjunction with the Fund's
financial statements. The Fund's financial statements are prepared in conformity
with U.S. generally accepted accounting principles, which may require the use of
management accruals and estimates. Actual results may differ from these
estimates. 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 percentage of the Portfolio owned by the Fund at April 30, 2005 was
100%. The Fund offers multiple classes of shares. Shares of Class A and Class I
are sold with a front-end sales charge. Shares of Class B and Class C may be
subject to a contingent deferred sales charge. Class R Shares are sold only to
certain retirement plans. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that
Class A, Class B, Class C and Class R Shares bear certain expenses related to
the account maintenance of such shares, and Class B, Class C and Class R Shares
also bear certain expenses related to the distribution of such shares. Each
class has exclusive voting rights with respect to matters relating to its
account maintenance and distribution expenditures (except that Class B
shareholders may vote on 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 are allocated daily to each class based
on its relative net assets. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments--The Fund records its investment in the Portfolio
at fair value. Valuation of securities held by the Portfolio is discussed in
Note 1(a) of the Portfolio's Notes to Financial Statements, which are included
elsewhere in this report.
(b) Investment income and expenses--The Fund records daily its proportionate
share of the Portfolio's income, expenses and realized and unrealized gains and
losses. In addition, the Fund accrues its own expenses.
(c) Income taxes--It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required. Under the applicable
foreign tax law, withholding taxes may be imposed on interest, dividends and
capital gains at various rates.
(d) Prepaid registration fees--Prepaid registration fees are charged to expense
as the related shares are issued.
(e) Dividends and distributions--Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(f) Investment transactions--Investment transactions in the Portfolio are
accounted for on a trade date basis.
2. Transactions with Affiliates:
The Fund has entered into an Administration Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner. The Fund pays a monthly fee at an annual
rate of .25% of the Fund's average daily net assets for the performance of
administrative services (other than investment advice and related portfolio
activities) necessary for the operation of the Fund.
The Fund has also entered into a Distribution Agreement and Distribution Plan
with FAM Distributors, Inc. ("FAMD" or the "Distributor"), which is a
wholly-owned subsidiary of Merrill Lynch Group, Inc.
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005 17
Notes to Financial Statements (continued) Merrill Lynch Large Cap Value Fund
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"), an affiliate of FAM, also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class A, Class B, Class C and Class R shareholders. The
ongoing distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B, Class C and Class R
shareholders.
For the six months ended April 30, 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 ............................ $ 16,402 $202,771
Class I ............................ $ 160 $ 2,646
- --------------------------------------------------------------------------------
For the six months ended April 30, 2005, MLPF&S received contingent deferred
sales charges of $91,371 and $13,735 relating to transactions in Class B and
Class C Shares, respectively.
Financial Data Services, Inc. ("FDS"), an indirect, wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, FAMD, PSI, FDS, and/or ML & Co.
3. Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$228,752,145 and $220,472,373 for the six months ended April 30, 2005 and the
year ended October 31, 2004, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended April 30, 2005 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 6,880,075 $ 106,413,499
Automatic conversion of shares ......... 503,191 7,720,944
Shares issued resulting from
reinvestment of distributions ....... 493,981 7,315,853
---------------------------------
Total issued ........................... 7,877,247 121,450,296
Shares redeemed ........................ (1,780,377) (27,372,633)
---------------------------------
Net increase ........................... 6,096,870 $ 94,077,663
=================================
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended October 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 6,851,969 $ 96,047,859
Automatic conversion of shares ......... 617,127 8,580,936
---------------------------------
Total issued ........................... 7,469,096 104,628,795
Shares redeemed ........................ (3,406,539) (46,365,233)
---------------------------------
Net increase ........................... 4,062,557 $ 58,263,562
=================================
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended April 30, 2005 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 2,423,435 $ 35,875,274
Shares issued resulting from
reinvestment of distributions ....... 645,905 9,204,154
---------------------------------
Total issued ........................... 3,069,340 45,079,428
---------------------------------
Automatic conversion of shares ......... (522,826) (7,720,944)
Shares redeemed ........................ (2,182,223) (32,287,133)
---------------------------------
Total redeemed ......................... (2,705,049) (40,008,077)
---------------------------------
Net increase ........................... 364,291 $ 5,071,351
=================================
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended October 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 3,414,404 $ 46,104,000
---------------------------------
Automatic conversion of shares ......... (637,251) (8,580,936)
Shares redeemed ........................ (3,226,808) (43,435,015)
---------------------------------
Total redeemed ......................... (3,864,059) (52,015,951)
---------------------------------
Net decrease ........................... (449,655) $ (5,911,951)
=================================
18 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005
Notes to Financial Statements (concluded) Merrill Lynch Large Cap Value Fund
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended April 30, 2005 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 5,865,622 $ 86,972,940
Shares issued resulting from
reinvestment of distributions ....... 699,915 9,966,785
---------------------------------
Total issued ........................... 6,565,537 96,939,725
Shares redeemed ........................ (1,639,349) (24,277,376)
---------------------------------
Net increase ........................... 4,926,188 $ 72,662,349
=================================
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended October 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 7,243,397 $ 98,014,167
Shares redeemed ........................ (1,990,871) (26,850,346)
---------------------------------
Net increase ........................... 5,252,526 $ 71,163,821
=================================
- --------------------------------------------------------------------------------
Class I Shares for the Six Months Dollar
Ended April 30, 2005 Shares Amount
- --------------------------------------------------------------------------------
Total sold ............................. 4,713,361 $ 73,559,243
Shares issued resulting from
reinvestment of distributions ...... 549,731 8,245,964
---------------------------------
Total issued ........................... 5,263,092 81,805,207
Shares redeemed ........................ (2,580,921) (40,276,623)
---------------------------------
Net increase ........................... 2,682,171 $ 41,528,584
=================================
- --------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended October 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Total sold ............................. 8,635,426 $ 122,477,143
Shares redeemed ........................ (2,595,641) (36,662,508)
---------------------------------
Net increase ........................... 6,039,785 $ 85,814,635
=================================
- --------------------------------------------------------------------------------
Class R Shares for the Six Months Dollar
Ended April 30, 2005 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 1,247,481 $ 18,797,144
Shares issued resulting from
reinvestment of distributions ....... 48,890 707,933
---------------------------------
Total issued ........................... 1,296,371 19,505,077
Shares redeemed ........................ (270,970) (4,092,879)
---------------------------------
Net increase ........................... 1,025,401 $ 15,412,198
=================================
- --------------------------------------------------------------------------------
Class R Shares for the Year Dollar
Ended October 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 949,150 $ 13,228,217
Shares redeemed ........................ (151,527) (2,085,911)
---------------------------------
Net increase ........................... 797,623 $ 11,142,306
=================================
4. Capital Loss Carryforward:
On October 31, 2004, the Fund had a net capital loss carryforward of $314,488,
of which $119,110 expires in 2009 and $195,378 expires in 2010. This amount will
be available to offset like amounts of any future taxable gains.
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005 19
Portfolio Information as of April 30, 2005 Master Large Cap Value Portfolio
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
Exxon Mobil Corp. .................................................... 7.1%
General Electric Co. ................................................. 3.6
ChevronTexaco Corp. .................................................. 2.5
ConocoPhillips ....................................................... 2.2
Citigroup, Inc. ...................................................... 2.1
Hewlett-Packard Co. .................................................. 2.0
The Allstate Corp. ................................................... 1.7
Lehman Brothers Holdings, Inc. ....................................... 1.5
Prudential Financial, Inc. ........................................... 1.5
Occidental Petroleum Corp. ........................................... 1.4
- --------------------------------------------------------------------------------
Percent of
Sector* Representation Total Investments
- --------------------------------------------------------------------------------
Energy ............................................................... 21.3%
Financials ........................................................... 20.8
Information Technology ............................................... 14.3
Consumer Discretionary ............................................... 8.7
Industrials .......................................................... 8.5
Materials ............................................................ 7.7
Health Care .......................................................... 7.3
Utilities ............................................................ 3.4
Consumer Staples ..................................................... 2.8
Other** .............................................................. 5.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Percent of
Five Largest Industries* Net Assets
- --------------------------------------------------------------------------------
Oil & Gas ............................................................ 22.4%
Insurance ............................................................ 13.7
Health Care Providers & Services ..................................... 6.6
Computers & Peripherals .............................................. 5.6
Software ............................................................. 4.3
- --------------------------------------------------------------------------------
* For Portfolio compliance purposes, "Sector" and "Industries" mean any one
or more of the sector and industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Portfolio management. This definition may not apply for
purposes of this report, which may combine such sector and industry
sub-classifications for reporting ease.
** Includes portfolio holdings in short-term investments.
20 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005
Schedule of Investments Master Large Cap Value Portfolio
Sector* Industry* Shares Held Common Stocks Value
===================================================================================================================================
Consumer Automobiles--0.6% 687,000 Ford Motor Co. $ 6,258,570
Discretionary--9.2% ---------------------------------------------------------------------------------------------------------
Hotels, Restaurants & 370,000 Darden Restaurants, Inc. 11,100,000
Leisure--1.0%
---------------------------------------------------------------------------------------------------------
Household Durables--1.0% 210,000 Lennar Corp. Class A 10,808,700
---------------------------------------------------------------------------------------------------------
Leisure Equipment & 450,000 Eastman Kodak Co. (d) 11,250,000
Products--1.3% 110,000 Mattel, Inc. 1,985,500
---------------
13,235,500
---------------------------------------------------------------------------------------------------------
Multiline Retail--3.2% 367,000 Dillard's, Inc. Class A 8,540,090
42,000 Federated Department Stores (d) 2,415,000
270,000 JC Penney Co., Inc. 12,800,700
200,000 Nordstrom, Inc. 10,166,000
---------------
33,921,790
---------------------------------------------------------------------------------------------------------
Specialty Retail--2.1% 410,000 American Eagle Outfitters 10,750,200
620,000 Autonation, Inc. (c)(d) 11,327,400
---------------
22,077,600
---------------------------------------------------------------------------------------------------------
Total Consumer Discretionary 97,402,160
===================================================================================================================================
Consumer Staples-- Beverages--0.7% 286,000 PepsiAmericas, Inc. 7,061,340
3.0% ---------------------------------------------------------------------------------------------------------
Food Products--2.1% 630,000 Archer-Daniels-Midland Co. 11,333,700
310,000 Pilgrim's Pride Corp. 11,187,900
---------------
22,521,600
---------------------------------------------------------------------------------------------------------
Tobacco--0.2% 30,000 Altria Group, Inc. 1,949,700
---------------------------------------------------------------------------------------------------------
Total Consumer Staples 31,532,640
===================================================================================================================================
Energy--22.4% Oil & Gas--22.4% 116,000 Amerada Hess Corp. 10,863,400
190,000 Anadarko Petroleum Corp. 13,877,600
30,000 Apache Corp. 1,688,700
280,000 Burlington Resources, Inc. 13,610,800
503,000 ChevronTexaco Corp. 26,156,000
220,000 ConocoPhillips 23,067,000
320,000 Devon Energy Corp. 14,454,400
1,320,000 Exxon Mobil Corp. 75,279,600
220,000 Occidental Petroleum Corp. 15,180,000
120,000 Sunoco, Inc. 11,911,200
230,000 Unocal Corp. 12,546,500
200,000 Valero Energy Corp. 13,706,000
320,000 Williams Cos., Inc. 5,446,400
---------------------------------------------------------------------------------------------------------
Total Energy 237,787,600
=========================================================================================================
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005 21
Schedule of Investments (continued) Master Large Cap Value Portfolio
Sector* Industry* Shares Held Common Stocks Value
===================================================================================================================================
Financials--21.9% Capital Markets--3.9% 10,000 AG Edwards, Inc. $ 397,100
130,000 The Bear Stearns Cos., Inc. (d) 12,305,800
110,000 Goldman Sachs Group, Inc. 11,746,900
170,000 Lehman Brothers Holdings, Inc. 15,592,400
30,000 Morgan Stanley 1,578,600
---------------
41,620,800
---------------------------------------------------------------------------------------------------------
Commercial Banks--1.0% 240,000 Bank of America Corp. 10,809,600
---------------------------------------------------------------------------------------------------------
Consumer Finance--1.1% 710,000 Providian Financial Corp. (c)(d) 11,835,700
---------------------------------------------------------------------------------------------------------
Diversified Financial 480,000 Citigroup, Inc. 22,540,800
Services--2.2%
---------------------------------------------------------------------------------------------------------
Insurance--13.7% 310,000 Allmerica Financial Corp. (c) 10,406,700
320,000 The Allstate Corp. 17,971,200
270,000 American Financial Group, Inc. 8,394,300
170,000 Chubb Corp. (d) 13,902,600
270,000 Cincinnati Financial Corp. 10,864,800
50,000 Hartford Financial Services Group, Inc. 3,618,500
240,000 Lincoln National Corp. 10,792,800
70,000 Mercury General Corp. 3,700,200
284,000 Metlife, Inc. 11,047,600
132,000 Nationwide Financial Services Class A 4,676,760
270,000 Prudential Financial, Inc. 15,430,500
220,000 Safeco Corp. 11,587,400
700,000 UnumProvident Corp. 11,704,000
350,000 WR Berkley Corp. 11,375,000
---------------
145,472,360
---------------------------------------------------------------------------------------------------------
Total Financials 232,279,260
===================================================================================================================================
Health Care--7.7% Biotechnology--1.1% 160,000 Invitrogen Corp. (c) 11,723,200
---------------------------------------------------------------------------------------------------------
Health Care Providers & 190,000 Aetna, Inc. New Shares 13,940,300
Services--6.6% 20,000 AmerisourceBergen Corp. 1,225,600
150,000 Cigna Corp. 13,797,000
240,000 HCA, Inc. 13,401,600
370,000 Humana, Inc. (c) 12,820,500
60,000 Laboratory Corp. of America Holdings (c) 2,970,000
200,000 PacifiCare Health Systems (c) 11,952,000
---------------
70,107,000
---------------------------------------------------------------------------------------------------------
Total Health Care 81,830,200
===================================================================================================================================
Industrials--8.9% Aerospace & Defense--0.7% 194,000 Goodrich Corp. 7,818,200
---------------------------------------------------------------------------------------------------------
Electrical Equipment--1.0% 240,000 Rockwell Automation, Inc. 11,095,200
---------------------------------------------------------------------------------------------------------
Industrial 1,040,000 General Electric Co. 37,648,000
Conglomerates--3.6%
---------------------------------------------------------------------------------------------------------
Machinery--1.0% 124,000 Cummins, Inc. 8,432,000
85,000 Timken Co. 2,111,400
---------------
10,543,400
---------------------------------------------------------------------------------------------------------
Road & Rail--2.6% 146,000 CNF, Inc. 6,241,500
323,000 Norfolk Southern Corp. 10,142,200
230,000 Yellow Roadway Corp. (c)(d) 11,270,000
---------------
27,653,700
---------------------------------------------------------------------------------------------------------
Total Industrials 94,758,500
=========================================================================================================
22 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005
Schedule of Investments (continued) Master Large Cap Value Portfolio
Sector* Industry* Shares Held Common Stocks Value
===================================================================================================================================
Information Communications 402,000 Motorola, Inc. $ 6,166,680
Technology--15.1% Equipment--0.6%
---------------------------------------------------------------------------------------------------------
Computers & 1,010,000 Hewlett-Packard Co. 20,674,700
Peripherals--5.6% 290,000 NCR Corp. (c) 9,570,000
270,000 QLogic Corp. (c) 8,974,800
390,000 Storage Technology Corp. (c) 10,842,000
740,000 Western Digital Corp. (c)(d) 9,390,600
---------------
59,452,100
---------------------------------------------------------------------------------------------------------
Electronic Equipment & 650,000 Ingram Micro, Inc. Class A (c) 10,829,000
Instruments--1.0%
---------------------------------------------------------------------------------------------------------
IT Services--2.6% 67,000 Checkfree Corp. (c) 2,457,560
196,000 Computer Sciences Corp. (c) 8,522,080
360,000 Electronic Data Systems Corp. 6,966,000
490,000 Sabre Holdings Corp. Class A 9,584,400
---------------
27,530,040
---------------------------------------------------------------------------------------------------------
Office Electronics--1.0% 810,000 Xerox Corp. (c)(d) 10,732,500
---------------------------------------------------------------------------------------------------------
Software--4.3% 245,000 Autodesk, Inc. (d) 7,798,350
680,000 BMC Software, Inc. (c) 11,016,000
1,020,000 Compuware Corp. (c) 6,069,000
470,000 McAfee, Inc. (c)(d) 9,827,700
880,000 Oracle Corp. (c) 10,172,800
---------------
44,883,850
---------------------------------------------------------------------------------------------------------
Total Information Technology 159,594,170
===================================================================================================================================
Materials--8.1% Chemicals--2.9% 115,000 E.I. du Pont de Nemours & Co. 5,417,650
230,000 Eastman Chemical Co. 12,420,000
230,000 Monsanto Co. 13,482,600
---------------
31,320,250
---------------------------------------------------------------------------------------------------------
Containers & 190,000 Ball Corp. 7,505,000
Packaging--1.2% 200,000 Owens-Illinois, Inc. (c) 4,904,000
---------------
12,409,000
---------------------------------------------------------------------------------------------------------
Metals & Mining--3.1% 230,000 Nucor Corp. 11,753,000
107,000 Phelps Dodge Corp. 9,185,950
270,000 United States Steel Corp. 11,545,200
---------------
32,484,150
---------------------------------------------------------------------------------------------------------
Paper & Forest 311,000 MeadWestvaco Corp. 9,158,950
Products--0.9%
---------------------------------------------------------------------------------------------------------
Total Materials 85,372,350
===================================================================================================================================
Utilities--3.5% Electric Utilities--2.9% 308,000 Edison International 11,180,400
306,000 Northeast Utilities 5,602,860
170,000 TXU Corp. 14,584,300
---------------
31,367,560
---------------------------------------------------------------------------------------------------------
Multi-Utilities & 1,780,000 Dynegy, Inc. Class A (c) 5,963,000
Unregulated Power--0.6%
---------------------------------------------------------------------------------------------------------
Total Utilities 37,330,560
=========================================================================================================
Total Investments in Common Stocks
(Cost--$939,556,216)--99.8% 1,057,887,440
=========================================================================================================
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005 23
Schedule of Investments (concluded) Master Large Cap Value Portfolio
Beneficial Interest Short-Term Securities Value
=========================================================================================================
$ 4,262,821 Merrill Lynch Liquidity Series, LLC Cash
Sweep Series I (a) $ 4,262,821
53,754,550 Merrill Lynch Liquidity Series, LLC Money
Market Series (a)(b) 53,754,550
---------------------------------------------------------------------------------------------------------
Total Investments in Short-Term Securities
(Cost--$58,017,371)--5.5% 58,017,371
=========================================================================================================
Total Investments (Cost--$997,573,587**)--105.3% 1,115,904,811
Liabilities in Excess of Other Assets--(5.3%) (55,667,349)
---------------
Net Assets--100.0% $ 1,060,237,462
===============
* For Portfolio compliance purposes, "Sector" and "Industry" mean any one or
more of the sector and industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Portfolio management. This definition may not apply for
purposes of this report, which may combine such sector and industry
sub-classifications for reporting ease.
** The cost and unrealized appreciation (depreciation) of investments as of
April 30, 2005, as computed for federal income tax purposes, were as
follows:
Aggregate cost ......................................... $1,002,285,394
==============
Gross unrealized appreciation .......................... $ 145,226,587
Gross unrealized depreciation .......................... (31,607,170)
--------------
Net unrealized appreciation ............................ $ 113,619,417
==============
See Notes to Financial Statements.
(a) Investments in companies considered to be an affiliate of the Portfolio
(such companies are defined as "Affiliated Companies" in Section 2(a)(3)
of the Investment Company Act of 1940) were as follows:
--------------------------------------------------------------------------
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $ 3,059,720 $42,751
Merrill Lynch Liquidity Series, LLC
Money Market Series $18,531,350 $12,128
--------------------------------------------------------------------------
(b) Security was purchased with the cash proceeds from securities loans.
(c) Non-income producing security.
(d) Security, or a portion of security, is on loan.
24 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005
Statement of Assets and Liabilities Master Large Cap Value Portfolio
As of April 30, 2005
==========================================================================================================================
Assets
- --------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value
(including securities loaned of $52,329,777)
(identified cost--$939,556,216) ........................... $ 1,057,887,440
Investments in affiliated securities, at value
(identified cost--$58,017,371) ............................ 58,017,371
Receivables:
Contributions ........................................... $ 4,166,566
Securities sold ......................................... 1,596,505
Dividends ............................................... 744,880
Interest from affiliates ................................ 10,749
Securities lending ...................................... 3,398 6,522,098
---------------
Prepaid expenses ........................................... 9,881
---------------
Total assets ............................................... 1,122,436,790
---------------
==========================================================================================================================
Liabilities
- --------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value .................. 53,754,550
Payables:
Securities purchased .................................... 5,922,596
Withdrawals ............................................. 1,777,419
Investment adviser ...................................... 408,710
Custodian bank .......................................... 285,911
Other affiliates ........................................ 6,680 8,401,316
---------------
Accrued expenses ........................................... 43,462
---------------
Total liabilities .......................................... 62,199,328
---------------
==========================================================================================================================
Net Assets
- --------------------------------------------------------------------------------------------------------------------------
Net assets ................................................. $ 1,060,237,462
===============
==========================================================================================================================
Net Assets Consist of
- --------------------------------------------------------------------------------------------------------------------------
Investors' capital ......................................... $ 941,906,238
Unrealized appreciation--net ............................... 118,331,224
---------------
Net Assets ................................................. $ 1,060,237,462
===============
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005 25
Statement of Operations Master Large Cap Value Portfolio
For the Six Months Ended April 30, 2005
==========================================================================================================================
Investment Income
- --------------------------------------------------------------------------------------------------------------------------
Dividends .................................................. $ 7,665,097
Interest from affiliates ................................... 42,751
Securities lending--net .................................... 12,128
---------------
Total income ............................................... 7,719,976
---------------
==========================================================================================================================
Expenses
- --------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ................................... $ 2,425,378
Accounting services ........................................ 145,091
Custodian fees ............................................. 32,300
Professional fees .......................................... 24,797
Trustees' fees and expenses ................................ 16,275
Printing and shareholder reports ........................... 1,590
Pricing fees ............................................... 554
Other ...................................................... 7,184
---------------
Total expenses ............................................. 2,653,169
---------------
Investment income--net ..................................... 5,066,807
---------------
==========================================================================================================================
Realized & Unrealized Gain--Net
- --------------------------------------------------------------------------------------------------------------------------
Realized gain on investments--net .......................... 33,156,141
Change in unrealized appreciation on investments--net ...... 26,344,859
---------------
Total realized and unrealized gain--net .................... 59,501,000
---------------
Net Increase in Net Assets Resulting from Operations ....... $ 64,567,807
===============
See Notes to Financial Statements.
26 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005
Statements of Changes in Net Assets Master Large Cap Value Portfolio
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2005 2004
==========================================================================================================================
Operations
- --------------------------------------------------------------------------------------------------------------------------
Investment income--net ..................................... $ 5,066,807 $ 6,104,616
Realized gain--net ......................................... 33,156,141 78,138,823
Change in unrealized appreciation--net ..................... 26,344,859 (2,549,830)
-----------------------------------
Net increase in net assets resulting from operations ....... 64,567,807 81,693,609
-----------------------------------
==========================================================================================================================
Capital Transactions
- --------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions ................................ 357,058,789 375,871,386
Fair value of withdrawals .................................. (171,878,489) (162,332,461)
-----------------------------------
Net increase in net assets derived from capital transactions 185,180,300 213,538,925
-----------------------------------
==========================================================================================================================
Net Assets
- --------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ............................... 249,748,107 295,232,534
Beginning of period ........................................ 810,489,355 515,256,821
-----------------------------------
End of period .............................................. $ 1,060,237,462 $ 810,489,355
===================================
See Notes to Financial Statements.
Financial Highlights Master Large Cap Value Portfolio
For the Six
Months Ended For the Year Ended October 31,
The following ratios have been derived April 30, --------------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
===================================================================================================================================
Total Investment Return**
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return ................ 8.36%+ 14.57% 27.05% (3.40%) --
==========================================================================
===================================================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... .55%* .56% .57% .60% .67%
==========================================================================
Investment income--net ................. 1.04%* .93% .97% 1.17% .96%
==========================================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,060,237 $ 810,489 $ 515,257 $ 386,918 $ 328,219
==========================================================================
Portfolio turnover ..................... 45.62% 127.59% 157.04% 136.92% 168.54%
==========================================================================
* Annualized.
** Total return is required to be disclosed for fiscal years beginning after
December 15, 2000.
+ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005 27
Notes to Financial Statements Master Large Cap Value Portfolio
1. Significant Accounting Policies:
Master Large Cap Value Portfolio (the "Portfolio") is part of Master Large Cap
Series Trust (the "Trust"). The Trust is registered under the Investment Company
Act of 1940, as amended, and is organized as a Delaware statutory trust. The
Declaration of Trust permits the Trustees to issue nontransferable interests in
the Portfolio, subject to certain limitations. The Portfolio's financial
statements are prepared in conformity with U.S. generally accepted accounting
principles, which may require the use of management accruals and estimates.
Actual results may differ from these estimates. These unaudited financial
statements reflect all adjustments, which are, in the opinion of management,
necessary to present a fair statement of the results for the interim period. All
such adjustments are of a normal, recurring nature. The following is a summary
of significant accounting policies followed by the Portfolio.
(a) Valuation of investments--Equity securities that are held by the Portfolio
that are traded on stock exchanges or the NASDAQ National Market are valued at
the last sale price or official close price on the exchange, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price for long positions, and at the last available asked
price for short positions. In cases where equity securities are traded on more
than one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Trustees of the Trust.
Long positions traded in the over-the-counter ("OTC") market, NASDAQ Small Cap
or Bulletin Board are valued at the last available bid price or yield equivalent
obtained from one or more dealers or pricing services approved by the Board of
Trustees of the Trust. Short positions traded in the OTC market are valued at
the last available asked price. Portfolio securities that are traded both in the
OTC market and on a stock exchange are valued according to the broadest and most
representative market.
Options written are valued at the last sale price in the case of exchange-traded
options or, in the case of options traded in the OTC market, the last ask price.
Options purchased are valued at their last sale price in the case of
exchange-traded options or, in the case of options traded in the OTC market, the
last bid price. Swap agreements are valued daily based upon quotations from
market makers. Financial futures contracts and options thereon, which are traded
on exchanges, are valued at their last sale price as of the close of such
exchanges. Obligations with remaining maturities of 60 days or less are valued
at amortized cost unless the Investment Adviser believes that this method no
longer produces fair valuations.
Repurchase agreements are valued at cost plus accrued interest. The Portfolio
employs pricing services to provide certain securities prices for the Portfolio.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Trustees of the Trust, including valuations furnished by the
pricing services retained by the Portfolio, which may use a matrix system for
valuations. The procedures of a pricing service and its valuations are reviewed
by the officers of the Portfolio under the general supervision of the Trust's
Board of Trustees. Such valuations and procedures will be reviewed periodically
by the Board of Trustees of the Trust.
Generally, trading in foreign securities, as well as U.S. government securities
and money market instruments, is substantially completed each day at various
times prior to the close of business on the New York Stock Exchange ("NYSE").
The values of such securities used in computing the net assets of the
Portfolio's shares are determined as of such times. Foreign currency exchange
rates also are generally determined prior to the close of business on the NYSE.
Occasionally, events affecting the values of such securities and such exchange
rates may occur between the times at which they are determined and the close of
business on the NYSE that may not be reflected in the computation of the
Portfolio's net assets. If events (for example, a company announcement, market
volatility or a natural disaster) occur during such periods that are expected to
materially affect the value of such securities, those securities may be valued
at their fair value as determined in good faith by the Trust's Board of Trustees
or by the Investment Adviser using a pricing service and/or procedures approved
by the Trust's Board of Trustees.
(b) Derivative financial instruments--The Portfolio may engage in various
portfolio investment strategies both to increase the return of the Portfolio and
to hedge, or protect, its exposure to interest rate movements and movements in
the securities markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
28 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005
Notes to Financial Statements (continued) Master Large Cap Value Portfolio
o Financial futures contracts--The Portfolio may purchase or sell financial
futures contracts and options on such futures contracts. Futures contracts
are contracts for delayed delivery of securities at a specific date and at
a specific price or yield. Upon entering into a contract, the Portfolio
deposits and maintains as collateral such initial margin as required by
the exchange on which the transaction is effected. Pursuant to the
contract, the Portfolio agrees to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in value of the contract.
Such receipts or payments are known as variation margin and are recorded
by the Portfolio as unrealized gains or losses. When the contract is
closed, the Portfolio records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed.
o Options--The Portfolio may purchase and write call and put options. When
the Portfolio writes an option, an amount equal to the premium received by
the Portfolio is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked-to-market to reflect the
current market value of the option written. When a security is purchased
or sold through an exercise of an option, the related premium paid (or
received) is added to (or deducted from) the basis of the security
acquired or deducted from (or added to) the proceeds of the security sold.
When an option expires (or the Portfolio enters into a closing
transaction), the Portfolio realizes a gain or loss on the option to the
extent of the premiums received or paid (or a gain or loss to the extent
that the cost of the closing transaction exceeds the premium paid or
received).
Written and purchased options are non-income producing investments.
o Forward foreign exchange contracts--The Portfolio may enter into forward
foreign exchange contracts as a hedge against either specific transactions
or portfolio positions. The contract is marked-to-market daily and the
change in market value is recorded by the Portfolio as an unrealized gain
or loss. When the contract is closed, the Portfolio records a realized
gain or loss equal to the difference between the value at the time it was
opened and the value at the time it was closed.
o Foreign currency options and futures--The Portfolio may also purchase or
sell listed or over-the-counter foreign currency options, foreign currency
futures and related options on foreign currency futures as a short or long
hedge against possible variations in foreign exchange rates. Such
transactions may be effected with respect to hedges on non-U.S. dollar
denominated securities owned by the Portfolio, sold by the Portfolio but
not yet delivered, or committed or anticipated to be purchased by the
Portfolio.
(c) Foreign currency transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into U.S. dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on investments.
(d) Income taxes--The Portfolio is considered as a "pass through" entity for
federal income tax purposes. As such, each investor in the Portfolio is treated
as owner of its proportionate share of the net assets, income, expenses and
realized and unrealized gains and losses of the Portfolio. Therefore, no federal
income tax provision is required. It is intended that the Portfolio's assets
will be managed so an investor in the Portfolio can satisfy the requirements of
subchapter M of the Internal Revenue Code.
(e) Security transactions and investment income--Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Dividends from foreign securities where the ex-dividend date may have passed are
subsequently recorded when the Portfolio has determined the ex-dividend date.
Interest income is recognized on the accrual basis.
(f) Securities lending--The Portfolio may lend securities to financial
institutions that provide cash or securities issued or guaranteed by the U.S.
government as collateral, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities. The
market value of the loaned securities is determined at the close of business of
the Portfolio and any additional required collateral is delivered to the
Portfolio on the next business day. Where the Portfolio receives securities as
collateral for the loaned securities, it receives a fee from the borrower. The
Portfolio typically receives the income on the loaned securities, but does not
receive the income on the collateral. Where
MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005 29
Notes to Financial Statements (concluded) Master Large Cap Value Portfolio
the Portfolio receives cash collateral, it may invest such collateral and retain
the amount earned on such investment, net of any amount rebated to the borrower.
Loans of securities are terminable at any time and the borrower, after notice,
is required to return borrowed securities within five business days. The
Portfolio may pay reasonable finders, lending agent, administrative and
custodial fees in connection with its loans. In the event that the borrower
defaults on its obligation to return borrowed securities because of insolvency
or for any other reason, the Portfolio could experience delays and costs in
gaining access to the collateral. The Portfolio also could suffer a loss where
the value of the collateral falls below the market value of the borrowed
securities, in the event of borrower default or in the event of losses on
investments made with cash collateral.
(g) Custodian bank--The Portfolio recorded an amount payable to the custodian
bank reflecting an overnight overdraft, which resulted from management estimates
of available cash.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc.
("ML & Co."), which is the limited partner.
FAM is responsible for the management of the Portfolio's investments and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Portfolio. For such services, the
Portfolio pays a monthly fee at an annual rate of .50% of the average daily
value of the Portfolio's net assets. FAM has entered into a Sub-Advisory
Agreement with Merrill Lynch Asset Management U.K. Limited ("MLAM U.K."), an
affiliate of FAM, pursuant to which MLAM U.K. provides investment advisory
services to FAM with respect to the Portfolio. There is no increase in the
aggregate fees paid by the Portfolio for these services.
The Portfolio has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), an affiliate of FAM, or its affiliates.
As of April 30, 2005, the Portfolio lent securities with a value of $11,547,294
to MLPF&S or its affiliates. Pursuant to that order, the Portfolio also has
retained Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an affiliate of
FAM, as the securities lending agent for a fee based on a share of the returns
on investment of cash collateral. MLIM, LLC may, on behalf of the Portfolio,
invest cash collateral received by the Portfolio for such loans, among other
things, in a private investment company managed by MLIM, LLC or in registered
money market Portfolios advised by FAM or its affiliates. For the six months
ended April 30, 2005, MLIM, LLC received $5,234 in securities lending agent
fees.
For the six months ended April 30, 2005, the Portfolio reimbursed FAM $10,724
for certain accounting services.
Certain officers and/or trustees of the Trust are officers and/or directors of
FAM, PSI, MLAM U.K., and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended April 30, 2005 were $630,181,714 and $440,822,540, respectively.
4. Short-Term Borrowings:
The Portfolio, 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
Portfolio may borrow under the credit agreement to fund shareholder redemptions
and for other lawful purposes other than for leverage. The Portfolio may borrow
up to the maximum amount allowable under the Portfolio's current prospectus and
statement of additional information, subject to various other legal, regulatory
or contractual limits. The Portfolio pays a commitment fee of .07% per annum
based on the Portfolio'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 Portfolio's election, the federal funds rate plus .50% or a
base rate as defined in the credit agreement. The Portfolio did not borrow under
the credit agreement during the six months ended April 30, 2005. On November 26,
2004, the credit agreement was renewed for one year under substantially the same
terms.
30 MERRILL LYNCH LARGE CAP VALUE FUND APRIL 30, 2005
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.
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 LARGE CAP VALUE FUND APRIL 30, 2005 31
[LOGO] Merrill Lynch Investment Managers
www.mlim.ml.com
- --------------------------------------------------------------------------------
Mercury Advisors
A Division of Merrill Lynch Investment Managers
www.mercury.ml.com
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
at www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
Merrill Lynch Large Cap Value Fund of
Merrill Lynch Large Cap Series Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
#CAPVAL--4/05
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 Large Cap Value Fund of Merrill Lynch Large Cap Series Funds, Inc.
and Master Large Cap Value Portfolio of Master Large Cap Series Trust
By: /s/ Robert C. Doll, Jr.
----------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Merrill Lynch Large Cap Value Fund of Merrill Lynch Large Cap Series Funds,
Inc. and Master Large Cap Value Portfolio of Master Large Cap Series Trust
Date: June 20, 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 Large Cap Value Fund of Merrill Lynch Large Cap Series Funds,
Inc. and Master Large Cap Value Portfolio of Master Large Cap Series Trust
Date: June 20, 2005
By: /s/ Donald C. Burke
----------------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Large Cap Value Fund of Merrill Lynch Large Cap Series Funds,
Inc. and Master Large Cap Value Portfolio of Master Large Cap Series Trust
Date: June 20, 2005