UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-02809
811-10095
Name of Fund: Merrill Lynch Value Opportunities Fund, Inc.
Master Value Opportunities Trust
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, Merrill Lynch Value Opportunities Fund, Inc. and Master Value
Opportunities Trust, 800 Scudders Mill Road, Plainsboro, NJ 08536.
Mailing address: P.O. Box 9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 03/31/06
Date of reporting period: 04/01/05 - 03/31/06
Item 1 - Report to Stockholders
Annual Report
March 31, 2006
Merrill Lynch
Value Opportunities
Fund, Inc.
Merrill Lynch Value Opportunities Fund, Inc.
Announcement to Shareholders
On February 15, 2006, BlackRock, Inc. ("BlackRock") and Merrill Lynch & Co.,
Inc. ("Merrill Lynch") entered into an agreement to contribute Merrill Lynch's
investment management business, Merrill Lynch Investment Managers, L.P. and
certain affiliates (including Fund Asset Management, L.P. and Merrill Lynch
Investment Managers International Limited), to BlackRock to create a new
independent company that will be one of the world's largest asset management
firms with over $1 trillion in assets under management (based on combined assets
under management as of March 31, 2006). The transaction is expected to close in
the third quarter of 2006, at which time the new company will operate under the
BlackRock name. If approved by the Fund's/Trust's Board of Directors/Trustees
and Fund/Trust shareholders, the combined company that results from the
transaction is expected to become the investment adviser of the Fund/Trust.
Portfolio Information of Master Value Opportunities Trust as of March 31, 2006
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
Convergys Corp. .......................................... 2.7%
Triumph Group, Inc. ...................................... 2.6
Conseco, Inc. ............................................ 2.6
Allied Waste Industries, Inc. ............................ 2.5
Anixter International, Inc. .............................. 2.5
Medicis Pharmaceutical Corp. Class A ..................... 2.4
Foot Locker, Inc. ........................................ 1.9
Denbury Resources, Inc. .................................. 1.9
First Midwest Bancorp, Inc. .............................. 1.8
The Colonial BancGroup, Inc. ............................. 1.7
- --------------------------------------------------------------------------------
Percent of
Five Largest Industries Net Assets
- --------------------------------------------------------------------------------
Commercial Banks .......................................... 6.2%
Real Estate ............................................... 5.8
Insurance ................................................. 5.3
Oil, Gas & Consumable Fuels ............................... 4.9
Electronic Equipment & Instruments ........................ 4.8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Percent of
Sector Weightings Total Investments
- --------------------------------------------------------------------------------
Financials ................................................ 20.8%
Information Technology .................................... 16.0
Industrials ............................................... 15.3
Consumer Discretionary .................................... 10.7
Health Care ............................................... 9.0
Energy .................................................... 6.8
Materials ................................................. 2.8
Consumer Staples .......................................... 1.7
Other* .................................................... 16.9
- --------------------------------------------------------------------------------
* Includes portfolio holdings in short-term investments and certain
exchange-traded funds.
For Trust compliance purposes, the Trust's industry and sector
classifications refer to any one or more of the industry and sector
subclassifications used by one or more widely recognized market indexes or
ratings group indexes, and/or as defined by Trust management. This
definition may not apply for the purposes of this report, which may
combine industry and sector sub-classifications for reporting ease.
2 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006
A Letter From the President
Dear Shareholder
You may be aware that changes are on the horizon at Merrill Lynch Investment
Managers ("MLIM"). On February 15, 2006, Merrill Lynch announced plans to
combine the firm's investment advisory business, including MLIM, with another
highly regarded investment manager -- BlackRock, Inc. ("BlackRock").
We believe this merger of asset management strength will benefit our investors.
MLIM is a leading investment management organization with over $576 billion in
assets under management globally and 2,757 employees in 17 countries. It offers
over 100 investment strategies in vehicles ranging from mutual funds to
institutional portfolios. BlackRock is one of the largest publicly traded
investment management firms in the United States with $463.1 billion in assets
under management and 1,839 employees. It manages assets on behalf of
institutional and individual investors worldwide through a variety of equity,
fixed income, liquidity and alternative investment products.
At the completion of the transaction, which is expected in the third quarter of
this year, the resultant firm will be a top-10 investment manager worldwide with
over $1 trillion in assets under management.* The combined company will provide
a wider selection of high-quality investment solutions across a range of asset
classes and investment styles. MLIM and BlackRock possess complementary
capabilities that together create a well-rounded organization uniting some of
the finest money managers in the industry. At the same time, the firms share
similar values and beliefs -- they are focused on delivering excellence on
behalf of clients, and both make investment performance their single most
important mission. In short, the merger only reinforces our commitment to
shareholders.
Most of MLIM's investment products -- including mutual funds, separately managed
accounts, annuities and variable insurance funds -- eventually will carry the
"BlackRock" name. As a shareholder in one or more MLIM-advised mutual funds, you
will receive a proxy package in the coming weeks in connection with this
transaction. After you receive this information, should you have any questions
or concerns, do not hesitate to contact your financial advisor.
As always, we thank you for entrusting us with your investment assets, and we
look forward to continuing to serve your investment needs with even greater
strength and scale as the new BlackRock.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Chief Investment Officer
Merrill Lynch Investment Managers
* $1.039 trillion in assets under management as of March 31, 2006.
Data, including assets under management, are as of March 31, 2006.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006 3
A Discussion With Your Fund's Portfolio Manager
The Fund outperformed the average return of the Lipper Small-Cap Value
Funds category for the fiscal year, benefiting primarily from an overweight
position in the energy sector and superior stock selection.
How did the Fund perform during the fiscal year in light of the existing market
conditions?
For the 12-month period ended March 31, 2006, Merrill Lynch Value Opportunities
Fund, Inc.'s Class A, Class B, Class C, Class I and Class R Shares had total
returns of +25.76%, +24.82%, +24.82%, +26.13% and +25.43%, 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.) Fund returns were competitive with the +25.85%
return of the benchmark Russell 2000 Index over the past 12 months and
significantly outpaced the +19.91% average return of the Lipper Small-Cap Value
Funds category for the same period. (Funds in this Lipper category seek
long-term growth of capital by investing in small capitalization companies that
are considered to be undervalued relative to a major unmanaged stock index.)
Small-capitalization stocks, as measured by the Russell 2000 Index, performed
extremely well over the 12-month period. The +11.73% total return of large cap
stocks, as measured by the S&P 500 Index, was less than half of the total return
provided by small cap stocks as measured by the Russell 2000 Index.
Stronger-than-expected earnings for small cap stocks catapulted their prices
higher. Many investors, including large hedge funds, have been bidding up prices
for smaller cap stocks in anticipation of an end to the Federal Reserve Board's
interest rate-tightening campaign. Typically, small cap stocks perform extremely
well approximately six months before the end of a rate tightening cycle.
What factors most influenced Fund performance?
The Fund's strong performance can be attributed to favorable sector positioning
and superior stock selection. Our decision to move "down cap" (reducing the
median market capitalization of the Fund) at the end of calendar year 2005 also
benefited investment results, as we anticipated a strong "January effect" in
small cap stocks following solid absolute returns in 2005.
One of the most positive contributors to relative performance was the Fund's
overweight position in the energy sector. The price of crude oil and other
commodities moved steadily higher over the past year, benefiting our holdings in
oil service providers, exploration and production companies, and construction
companies with significant energy exposure. Similarly, the Fund's underweight
position in the consumer discretionary sector contributed to performance. Rising
interest rates, continued high energy prices and a gradual slowing of the
housing market have pressured consumer spending levels, causing consumer
discretionary stocks to underperform the broader Russell 2000 Index.
Regarding specific stock selection, the leading contributor to Fund performance
was King Pharmaceuticals, Inc., a maker of generic and brand-name prescription
drugs. During the 12-month period, however, we realized profits in King
Pharmaceuticals and eliminated our position. We were concerned about King's
ability to provide further upside earnings surprises and the potential for
channel inventory problems to resurface.
Two other important contributors to Fund performance were both holdings in the
industrials sector -- Administaff, Inc., a provider of benefits and payroll
administration to small- and medium-sized businesses, and McDermott
International, Inc., a worldwide energy services company. Shares of Administaff
surged during the fiscal year on higher reported earnings and improved growth
prospects as the company profited from lower benefits costs and a tight labor
market. We realized gains in Administaff by selling the Fund's position as the
stock surpassed even our most optimistic internal price targets. McDermott
International also performed well based on the bright prospects for the energy
sector and the long-awaited resolution of asbestos-related issues.
Finally, the manner in which we managed the overall median market capitalization
of the Fund contributed to relative performance over the past year. During most
of 2005, companies that were at the higher capitalization range of our universe
outperformed the smallest companies. Several of the companies in the portfolio
migrated to the mid-capitalization range because of their strong performance.
Late in 2005, we realized opportunities to pare down or eliminate some of the
higher cap exposure. The sale of King Pharmaceuticals and McDermott
International are just two such examples of investments that migrated from small
cap to mid cap based on exceptional price performance. The strategy of moving
down cap at calendar year-end proved to be effective. Since early in 2006, the
smallest capitalization companies have sharply outperformed the broader market.
4 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006
Although Fund performance was positive on both an absolute and relative basis,
there were some factors that hindered results. Within the retail sector, for
example, a few Fund holdings performed poorly. The most significant detractor
was Foot Locker, Inc., a leading retailer of athletic shoes and apparel. Foot
Locker shares fell based on disappointing international sales. Despite the
decline in share price and its drag on overall portfolio performance, we still
believe that Foot Locker represents a good investment opportunity. The stock
valuation appears attractive and we believe the company will be able to turn
around its international sales efforts. In fact, we added to our position in
Foot Locker during the period on stock price weakness.
What changes were made to the portfolio during the period?
In addition to the changes outlined above, we made several other portfolio
adjustments over the past 12 months as we eliminated some positions and found
new investment opportunities.
In the biotechnology industry, we reduced or eliminated several companies that
performed well and reached or exceeded our internal price targets. One example
was Human Genome Sciences, Inc., a biotechnology company that had been
developing a new drug to treat Lupus. As the drug neared FDA approval, there was
a great deal of investor optimism about its prospects, which helped drive up the
company's share price. As a result of this price appreciation, we sold our
position in anticipation of the drug's approval. We made similar moves in other
areas of the portfolio, adding positions in waste disposal companies and defense
and electronics providers, while selling a number of our stocks in engineering
and construction companies.
We moved to an underweight position in the information technology sector by the
end of the period. Technology stocks performed extremely well in the fourth
quarter of 2005, and as a result, we reduced or eliminated positions in some
companies that posted strong performance. We still believe that information
technology is an attractive sector, and continue to seek compelling investment
opportunities in software and telecommunications companies.
Finally, we rebalanced our positions in the financial services sector. We ended
the period overweight compared to the Russell 2000 Index, but reduced holdings
in regional banks and thrifts in favor of capital markets exposure and real
estate investment trusts.
How would you characterize the portfolio's position at the close of the period?
As of March 31, 2006, the Trust's most significant overweight was in the
industrials sector. The Trust was 17% invested in industrials, compared to 15%
for the Russell 2000 Index. We believe that given the strength in capital
spending and the softness in consumer spending, industrials may be poised for
outperformance. As a corollary, we maintained underweight positions in the
consumer discretionary and consumer staples sectors. Additionally, we retained
the Trust's overweight position in the energy sector with an 8% weighting
compared to 6% for the benchmark. We did have a larger energy overweight at the
beginning of the 12-month period, but given the substantial outperformance of
energy stocks, we eliminated and reduced several positions and narrowed the gap.
Looking ahead, we believe that small cap stocks are poised for continued
outperformance. Merger and acquisition activity has remained strong among small
cap stocks, which tends to drive up stock prices of these firms. Earnings
comparisons also appear to be favorable for small cap stocks and, in our view,
valuations are reasonable. As a result, we ended the period nearly fully
invested, with only a small amount of cash in the portfolio.
R. Elise Baum, CFA
Vice President and Portfolio Manager
April 12, 2006
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006 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. 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 Effective December 28, 2005, Class I Shares are no longer subject to any
front-end sales charge. Class I Shares bear no ongoing distribution or
account maintenance fees and are available only to eligible investors. Had
the sales charge been included, the Fund's Class I Shares' performance
would have been lower.
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 the 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. The Fund may charge a 2% redemption fee for sales or exchange of shares
within 30 days of purchase or exchange. Performance data does not reflect this
potential fee. Figures shown in each of the following tables assume reinvestment
of all dividends and capital gain distributions, if any, at net asset value on
the ex-dividend date. Investment return and principal value of shares will
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost. Dividends paid to each class of shares will vary because of the
different levels of account maintenance, distribution and transfer agency fees
applicable to each class, which are deducted from the income available to be
paid to shareholders.
Recent Performance Results
6-Month 12-Month 10-Year
As of March 31, 2006 Total Return Total Return Total Return
================================================================================================================
ML Value Opportunities Fund, Inc. Class A Shares* +12.45% +25.76% +319.39%
- ----------------------------------------------------------------------------------------------------------------
ML Value Opportunities Fund, Inc. Class B Shares* +11.99 +24.82 +294.01
- ----------------------------------------------------------------------------------------------------------------
ML Value Opportunities Fund, Inc. Class C Shares* +12.05 +24.82 +287.58
- ----------------------------------------------------------------------------------------------------------------
ML Value Opportunities Fund, Inc. Class I Shares* +12.58 +26.13 +329.89
- ----------------------------------------------------------------------------------------------------------------
ML Value Opportunities Fund, Inc. Class R Shares* +12.28 +25.43 +308.11
- ----------------------------------------------------------------------------------------------------------------
Russell 2000(R) Index** +15.23 +25.85 +162.92
- ----------------------------------------------------------------------------------------------------------------
* 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.
** An unmanaged broad-based Index comprised of approximately 2,000
small-capitalization common stocks from various industrial sectors.
Russell 2000 is a registered trademark of the Frank Russell Company.
6 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006
Performance Data (concluded)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Class A, Class
B, Class C, Class I and Class R Shares compared to growth of an investment in
the Russell 2000 Index. Values are from March 1996 to March 2006.
ML Value Opportunities ML Value Opportunities ML Value Opportunities
Fund, Inc.+-- Fund, Inc.+-- Fund, Inc.+--
Class A Shares* Class B Shares* Class C Shares*
3/96 $9,475 $10,000 $10,000
3/97 $11,122 $11,644 $11,639
3/98 $15,880 $16,502 $16,497
3/99 $12,328 $12,712 $12,705
3/00 $19,352 $19,796 $19,774
3/01 $20,535 $20,837 $20,820
3/02 $26,936 $27,134 $27,115
3/03 $19,370 $19,346 $19,335
3/04 $30,450 $30,192 $30,162
3/05 $31,597 $31,330 $31,052
3/06 $39,737 $39,401 $38,758
ML Value Opportunities ML Value Opportunities
Fund, Inc.+-- Fund, Inc.+-- Russell 2000
Class I Shares* Class R Shares* Index++
3/96 $10,000 $10,000 $10,000
3/97 $11,762 $11,704 $10,511
3/98 $16,841 $16,675 $14,927
3/99 $13,107 $12,912 $12,500
3/00 $20,615 $20,209 $17,162
3/01 $21,933 $21,394 $14,532
3/02 $28,854 $28,006 $16,564
3/03 $20,795 $20,006 $12,097
3/04 $32,776 $31,428 $19,819
3/05 $34,083 $32,536 $20,892
3/06 $42,989 $40,811 $26,292
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
+ The Fund invests all of its assets in Master Value Opportunities Trust.
The Trust invests in a diversified portfolio of securities, primarily
common stocks, of relatively small companies which the Trust's management
believes have special investment value, and emerging growth companies
regardless of size.
++ This unmanaged Index is comprised of approximately 2,000
small-capitalization common stocks from various industrial sectors.
Past performance is not predictive of future results.
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 3/31/06 +25.76% +19.16%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/06 +14.11 +12.89
- --------------------------------------------------------------------------------
Ten Years Ended 3/31/06 +15.41 +14.79
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC++
================================================================================
Class B Shares+
================================================================================
One Year Ended 3/31/06 +24.82% +20.82%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/06 +13.24 +13.00
- --------------------------------------------------------------------------------
Ten Years Ended 3/31/06 +14.70 +14.70
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC++
================================================================================
Class C Shares***
================================================================================
One Year Ended 3/31/06 +24.82% +23.82%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/06 +13.23 +13.23
- --------------------------------------------------------------------------------
Ten Years Ended 3/31/06 +14.51 +14.51
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class I Shares Return
================================================================================
One Year Ended 3/31/06 +26.13%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/06 +14.41
- --------------------------------------------------------------------------------
Ten Years Ended 3/31/06 +15.70
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class R Shares Return
================================================================================
One Year Ended 3/31/06 +25.43%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/06 +13.79
- --------------------------------------------------------------------------------
Ten Years Ended 3/31/06 +15.10
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
*** Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
+ Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
++ Assuming payment of applicable contingent deferred sales charge.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006 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
12b-1 fees, and other Fund expenses. The following example (which is based on a
hypothetical investment of $1,000 invested on October 1, 2005 and held through
March 31, 2006) 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 October 1, 2005 to
October 1, 2005 March 31, 2006 March 31, 2006
=====================================================================================================================
Actual
=====================================================================================================================
Class A $ 1,000 $1,124.50 $ 6.67
- ---------------------------------------------------------------------------------------------------------------------
Class B $ 1,000 $1,119.90 $ 10.73
- ---------------------------------------------------------------------------------------------------------------------
Class C $ 1,000 $1,120.50 $ 10.78
- ---------------------------------------------------------------------------------------------------------------------
Class I $ 1,000 $1,125.80 $ 5.41
- ---------------------------------------------------------------------------------------------------------------------
Class R $ 1,000 $1,122.80 $ 7.99
=====================================================================================================================
Hypothetical (5% annual return before expenses)**
=====================================================================================================================
Class A $ 1,000 $1,018.62 $ 6.34
- ---------------------------------------------------------------------------------------------------------------------
Class B $ 1,000 $1,014.78 $ 10.20
- ---------------------------------------------------------------------------------------------------------------------
Class C $ 1,000 $1,014.73 $ 10.25
- ---------------------------------------------------------------------------------------------------------------------
Class I $ 1,000 $1,019.81 $ 5.14
- ---------------------------------------------------------------------------------------------------------------------
Class R $ 1,000 $1,017.37 $ 7.59
- ---------------------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (1.26% for Class A, 2.03% for Class B, 2.04% for Class
C, 1.02% for Class I and 1.51% 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 trust in which it invests.
** Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half year divided by 365.
8 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006
Statement of Assets and Liabilities
Merrill Lynch Value Opportunities Fund, Inc.
As of March 31, 2006
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investment in Master Value Opportunities Trust (the "Trust"),
at value (identified cost--$2,566,977,183) ....................... $ 3,061,862,400
Prepaid expenses .................................................. 44,092
---------------
Total assets ...................................................... 3,061,906,492
---------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Payables:
Distributor .................................................... $ 1,292,489
Other affiliates ............................................... 1,119,682
Administrative fees ............................................ 572,751 2,984,922
---------------
Accrued expenses .................................................. 13,482
---------------
Total liabilities ................................................. 2,998,404
---------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets ........................................................ $ 3,058,908,088
===============
===================================================================================================================================
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.10 par value, 100,000,000
shares authorized ................................................ $ 2,700,695
Class B Shares of Common Stock, $.10 par value, 100,000,000
shares authorized ................................................ 3,005,641
Class C Shares of Common Stock, $.10 par value, 100,000,000
shares authorized ................................................ 2,357,303
Class I Shares of Common Stock, $.10 par value, 100,000,000
shares authorized ................................................ 3,220,707
Class R Shares of Common Stock, $.10 par value, 100,000,000
shares authorized ................................................ 155,583
Paid-in capital in excess of par .................................. 2,315,164,428
Undistributed realized capital gains allocated from the
Trust--net ....................................................... $ 237,418,514
Unrealized appreciation allocated from the Trust--net ............. 494,885,217
---------------
Total accumulated earnings--net ................................... 732,303,731
---------------
Net Assets ........................................................ $ 3,058,908,088
===============
===================================================================================================================================
Net Asset Value
- -----------------------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $760,306,547 and 27,006,946
shares outstanding ............................................... $ 28.15
===============
Class B--Based on net assets of $762,339,519 and 30,056,409
shares outstanding ............................................... $ 25.36
===============
Class C--Based on net assets of $580,318,418 and 23,573,033
shares outstanding ............................................... $ 24.62
===============
Class I--Based on net assets of $916,561,655 and 32,207,065
shares outstanding ............................................... $ 28.46
===============
Class R--Based on net assets of $39,381,949 and 1,555,832
shares outstanding ............................................... $ 25.31
===============
See Notes to Financial Statements.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006 9
Statement of Operations Merrill Lynch Value Opportunities Fund, Inc.
For the Year Ended March 31, 2006
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income allocated from the Trust:
Dividends ...................................................... $ 31,717,214
Interest from affiliates ....................................... 1,361,949
Securities lending--net ........................................ 564,910
Expenses ....................................................... (15,164,543)
---------------
Total income ...................................................... 18,479,530
---------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Account maintenance and distribution fees--Class B ................ $ 7,764,753
Administration fees ............................................... 7,486,145
Account maintenance and distribution fees--Class C ................ 5,312,329
Transfer agent fees--Class I ...................................... 2,431,764
Transfer agent fees--Class B ...................................... 2,069,093
Transfer agent fees--Class A ...................................... 1,769,412
Account maintenance fees--Class A ................................. 1,670,325
Transfer agent fees--Class C ...................................... 1,301,122
Printing and shareholder reports .................................. 164,328
Account maintenance and distribution fees--Class R ................ 132,769
Registration fees ................................................. 126,748
Professional fees ................................................. 66,100
Transfer agent fees--Class R ...................................... 64,828
Directors' fees and expenses ...................................... 37,050
Other ............................................................. 25,738
---------------
Total expenses .................................................... 30,422,504
---------------
Investment loss--net .............................................. (11,942,974)
---------------
===================================================================================================================================
Realized & Unrealized Gain (Loss) Allocated from the Trust--Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments--net ................................................ 562,842,598
Foreign currency transactions--net .............................. (5,490) 562,837,108
---------------
Change in unrealized appreciation on investments--net ............. 130,184,338
---------------
Total realized and unrealized gain--net ........................... 693,021,446
---------------
Net Increase in Net Assets Resulting from Operations .............. $ 681,078,472
===============
See Notes to Financial Statements.
10 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006
Statements of Changes in Net Assets
Merrill Lynch Value Opportunities Fund, Inc.
For the Year Ended
March 31,
--------------------------------------
Increase (Decrease) in Net Assets: 2006 2005
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment loss--net .............................................. $ (11,942,974) $ (20,709,608)
Realized gain--net ................................................ 562,837,108 205,898,506
Change in unrealized appreciation--net ............................ 130,184,338 (79,095,105)
--------------------------------------
Net increase in net assets resulting from operations .............. 681,078,472 106,093,793
--------------------------------------
===================================================================================================================================
Distributions to Shareholders
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain--net:
Class A ........................................................ (99,431,727) (43,952,529)
Class B ........................................................ (116,197,410) (60,980,285)
Class C ........................................................ (82,656,784) (38,412,279)
Class I ........................................................ (151,044,604) (74,900,960)
Class R ........................................................ (4,363,485) (613,903)
--------------------------------------
Net decrease in net assets resulting from distributions to
shareholders ..................................................... (453,694,010) (218,859,956)
--------------------------------------
===================================================================================================================================
Capital Share Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets derived from capital share
transactions ..................................................... (170,503,936) (71,827,902)
--------------------------------------
===================================================================================================================================
Redemption Fees
- -----------------------------------------------------------------------------------------------------------------------------------
Redemption fees ................................................... 2,767 12,341
--------------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets ........................... 56,883,293 (184,581,724)
Beginning of year ................................................. 3,002,024,795 3,186,606,519
--------------------------------------
End of year ....................................................... $ 3,058,908,088 $ 3,002,024,795
======================================
See Notes to Financial Statements.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006 11
Financial Highlights Merrill Lynch Value Opportunities Fund, Inc.
Class A
--------------------------------------------------------------------------
The following per share data and ratios have been For the Year Ended March 31,
derived from information provided in the financial --------------------------------------------------------------------------
statements. 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ..... $ 26.01 $ 26.96 $ 17.15 $ 24.45 $ 19.73
--------------------------------------------------------------------------
Investment loss--net*** ................ (.04) (.10) (.08) (.09) (.07)
Realized and unrealized gain (loss)--net 6.31**** .97**** 9.89 (6.73) 6.08
--------------------------------------------------------------------------
Total from investment operations ....... 6.27 .87 9.81 (6.82) 6.01
--------------------------------------------------------------------------
Less distributions from realized gain .. (4.13) (1.82) -- (.48) (1.29)
--------------------------------------------------------------------------
Net asset value, end of year ........... $ 28.15 $ 26.01 $ 26.96 $ 17.15 $ 24.45
==========================================================================
==================================================================================================================================
Total Investment Return*
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 25.76% 3.77% 57.20% (28.09%) 31.17%
==========================================================================
==================================================================================================================================
Ratios to Average Net Assets**
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 1.27% 1.25% 1.27% 1.33% 1.25%
==========================================================================
Investment loss--net ................... (.14%) (.39%) (.34%) (.48%) (.30%)
==========================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) . $ 760,307 $ 643,904 $ 620,193 $ 347,736 $ 467,733
==========================================================================
Portfolio turnover of the Trust ........ 77.26% 74.31% 80.35% 68.27% 54.14%
==========================================================================
* Total investment returns exclude the effects of sales charges.
** Includes the Fund's share of the Trust's allocated expenses and/or
investment loss--net.
*** Based on average shares outstanding.
**** Includes redemption fees, which are less than $.01 per share.
See Notes to Financial Statements.
12 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006
Financial Highlights (continued)
Merrill Lynch Value Opportunities Fund, Inc.
Class B
--------------------------------------------------------------------------
The following per share data and ratios have been For the Year Ended March 31,
derived from information provided in the financial --------------------------------------------------------------------------
statements. 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ..... $ 23.66 $ 24.69 $ 15.82 $ 22.74 $ 18.44
--------------------------------------------------------------------------
Investment loss--net*** ................ (.22) (.27) (.24) (.23) (.22)
Realized and unrealized gain (loss)--net 5.72**** .88**** 9.11 (6.25) 5.67
--------------------------------------------------------------------------
Total from investment operations ....... 5.50 .61 8.87 (6.48) 5.45
--------------------------------------------------------------------------
Less distributions from realized gain .. (3.80) (1.64) -- (.44) (1.15)
--------------------------------------------------------------------------
Net asset value, end of year ........... $ 25.36 $ 23.66 $ 24.69 $ 15.82 $ 22.74
==========================================================================
==================================================================================================================================
Total Investment Return*
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 24.82% 2.96% 56.07% (28.70%) 30.22%
==========================================================================
==================================================================================================================================
Ratios to Average Net Assets**
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 2.03% 2.02% 2.04% 2.10% 2.01%
==========================================================================
Investment loss--net ................... (.91%) (1.17%) (1.11%) (1.26%) (1.04%)
==========================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) . $ 762,340 $ 809,643 $ 951,562 $ 640,017 $1,003,961
==========================================================================
Portfolio turnover of the Trust ........ 77.26% 74.31% 80.35% 68.27% 54.14%
==========================================================================
* Total investment returns exclude the effects of sales charges.
** Includes the Fund's share of the Trust's allocated expenses and/or
investment loss--net.
*** Based on average shares outstanding.
**** Includes redemption fees, which are less than $.01 per share.
See Notes to Financial Statements.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006 13
Financial Highlights (continued) Merrill Lynch Value Opportunities Fund, Inc.
Class C
--------------------------------------------------------------------------
The following per share data and ratios have been For the Year Ended March 31,
derived from information provided in the financial --------------------------------------------------------------------------
statements. 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ..... $ 23.10 $ 24.18 $ 15.50 $ 22.30 $ 18.13
--------------------------------------------------------------------------
Investment loss--net*** ................ (.22) (.27) (.23) (.23) (.23)
Realized and unrealized gain (loss)--net 5.57**** .86**** 8.91 (6.13) 5.58
--------------------------------------------------------------------------
Total from investment operations ....... 5.35 .59 8.68 (6.36) 5.35
--------------------------------------------------------------------------
Less distributions from realized gain .. (3.83) (1.67) -- (.44) (1.18)
--------------------------------------------------------------------------
Net asset value, end of year ........... $ 24.62 $ 23.10 $ 24.18 $ 15.50 $ 22.30
==========================================================================
==================================================================================================================================
Total Investment Return*
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 24.82% 2.95% 56.00% (28.69%) 30.23%
==========================================================================
==================================================================================================================================
Ratios to Average Net Assets**
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 2.05% 2.03% 2.05% 2.12% 2.02%
==========================================================================
Investment loss--net ................... (.92%) (1.18%) (1.13%) (1.27%) (1.11%)
==========================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) . $ 580,318 $ 524,132 $ 539,393 $ 334,720 $ 504,537
==========================================================================
Portfolio turnover of the Trust ........ 77.26% 74.31% 80.35% 68.27% 54.14%
==========================================================================
* Total investment returns exclude the effects of sales charges.
** Includes the Fund's share of the Trust's allocated expenses and/or
investment loss--net.
*** Based on average shares outstanding.
**** Includes redemption fees, which are less than $.01 per share.
See Notes to Financial Statements.
14 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006
Financial Highlights (continued) Merrill Lynch Value Opportunities Fund, Inc.
Class I
--------------------------------------------------------------------------
The following per share data and ratios have been For the Year Ended March 31,
derived from information provided in the financial --------------------------------------------------------------------------
statements. 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ..... $ 26.28 $ 27.22 $ 17.27 $ 24.58 $ 19.81
--------------------------------------------------------------------------
Investment income (loss)--net*** ....... .03 (.04) (.02) (.05) (.01)
Realized and unrealized gain (loss)--net 6.39**** .97**** 9.97 (6.77) 5.84
--------------------------------------------------------------------------
Total from investment operations ....... 6.42 .93 9.95 (6.82) 5.83
--------------------------------------------------------------------------
Less distributions from realized gain .. (4.24) (1.87) -- (.49) (1.06)
--------------------------------------------------------------------------
Net asset value, end of year ........... $ 28.46 $ 26.28 $ 27.22 $ 17.27 $ 24.58
==========================================================================
==================================================================================================================================
Total Investment Return*
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 26.13% 3.99% 57.61% (27.93%) 31.56%
==========================================================================
==================================================================================================================================
Ratios to Average Net Assets**
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 1.02% 1.00% 1.02% 1.07% .99%
==========================================================================
Investment income (loss)--net .......... .11% (.15%) (.09%) (.24%) (.03%)
==========================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) . $ 916,562 $1,005,642 $1,072,299 $ 607,484 $1,259,688
==========================================================================
Portfolio turnover of the Trust ........ 77.26% 74.31% 80.35% 68.27% 54.14%
==========================================================================
* Total investment returns exclude the effects of sales charges. Effective
December 28, 2005, Class I Shares are no longer subject to any front-end
sales charge.
** Includes the Fund's share of the Trust's allocated expenses and/or
investment income (loss)--net.
*** Based on average shares outstanding.
**** Includes redemption fees, which are less than $.01 per share.
See Notes to Financial Statements.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006 15
Financial Highlights (concluded) Merrill Lynch Value Opportunities Fund, Inc.
Class R
------------------------------------------------------------
For the Period
For the Year Ended February 4,
March 31, 2003+
The following per share data and ratios have been derived --------------------------------------------- to March 31,
from information provided in the financial statements. 2006 2005 2004 2003
=================================================================================================================================
Per Share Operating Performance
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............. $ 23.80 $ 24.93 $ 15.87 $ 16.12
------------------------------------------------------------
Investment loss--net** ........................... (.09) (.15) (.12) --@@@
Realized and unrealized gain (loss)--net ......... 5.73*** .88*** 9.18 (.25)
------------------------------------------------------------
Total from investment operations ................. 5.64 .73 9.06 (.25)
------------------------------------------------------------
Less distributions from realized gain--net ....... (4.13) (1.86) -- --
------------------------------------------------------------
Net asset value, end of period ................... $ 25.31 $ 23.80 $ 24.93 $ 15.87
============================================================
=================================================================================================================================
Total Investment Return
- ---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ............... 25.43% 3.53% 57.09% (1.55%)@
============================================================
=================================================================================================================================
Ratios to Average Net Assets++
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses ......................................... 1.51% 1.50% 1.52% 1.66%*
============================================================
Investment loss--net ............................. (.39%) (.61%) (.59%) (.65%)*
============================================================
=================================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ......... $ 39,382 $ 18,703 $ 3,160 --@@
============================================================
Portfolio turnover of the Trust .................. 77.26% 74.31% 80.35% 68.27%
============================================================
* Annualized.
** Based on average shares outstanding.
*** Includes redemption fees, which are less than $.01 per share.
+ Commencement of operations.
++ Includes the Fund's share of the Trust's allocated expenses and/or
investment loss -- net.
@ Aggregate total investment return.
@@ Amount is less than $1,000.
@@@ Amount is less than $(.01) per share.
See Notes to Financial Statements.
16 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006
Notes to Financial Statements Merrill Lynch Value Opportunities Fund, Inc.
1. Significant Accounting Policies:
Merrill Lynch Value Opportunities Fund, 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 Value Opportunities Trust (the "Trust")
which has the same investment objective and strategies as the Fund. The value of
the Fund's investment in the Trust reflects the Fund's proportionate interest in
the net assets of the Trust. The performance of the Fund is directly affected by
the performance of the Trust. The financial statements of the Trust, including
the Schedule of Investments, are included elsewhere in this report and should be
read in conjunction with the Fund's financial statements. The Fund's financial
statements are prepared in conformity with U.S. generally accepted accounting
principles, which may require the use of management accruals and estimates.
Actual results may differ from these estimates. The percentage of the Trust
owned by the Fund at March 31, 2006 was 100%. The Fund offers multiple classes
of shares. Effective December 28, 2005, Class I Shares are no longer subject to
any front-end sales charge. Class A Shares 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 I Shares are sold only to certain eligible investors. 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 attributed 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 Trust at
fair value. Valuation of securities held by the Trust is discussed in Note 1(a)
of the Trust's Notes to Financial Statements, which are included elsewhere in
this report.
(b) Investment income and expenses -- The Fund records daily its proportionate
share of the Trust's income, expenses and realized and unrealized gains and
losses. In addition, the Fund accrues its own expenses.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to shareholders. Therefore,
no federal income tax provision is required.
(d) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.
(e) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(f) Investment transactions -- Investment transactions in the Trust are
accounted for on a trade date basis.
(g) Reclassification -- U.S. generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, during the current
year, $11,942,974 has been reclassified between undistributed net realized
capital gains and accumulated net investment loss as a result of permanent
differences attributable to net operating losses and foreign currency
transactions. This reclassification has no effect on net assets or net asset
values per share.
2. Transactions with Affiliates:
The Fund has entered into an Administration Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner. The Fund pays a monthly fee at an annual
rate of .25% of the Fund's average daily net assets for the performance of
administrative services (other than investment advice and related portfolio
activities) necessary for the operation of the Fund.
The Fund has entered into an Investment Advisory Agreement with FAM, whereby the
Fund may pay a monthly management fee based upon the average daily value of the
Fund's net assets at the following annual rates: .50% of the average daily net
assets of the Fund for the first $1 billion; .475% of the daily net assets from
$1 billion to $1.5 billion and .45% of the average daily net assets above $1.5
billion. However, the Investment Adviser has entered into a contrac-
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006 17
Notes to Financial Statements (continued)
Merrill Lynch Value Opportunities Fund, Inc.
tual agreement with the Fund pursuant to which the management fee will not be
charged to the Fund so long as the Fund remains invested in the Trust. As a
result, the management fee has not been accrued and will not be payable by the
Fund for the period covered by this report.
The Fund has also entered into a Distribution Agreement and Distribution Plan
with FAM Distributors, Inc. ("FAMD" or the "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc. 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 of the Fund as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class A ................................ .25% --
Class B ................................ .25% .75%
Class C ................................ .25% .75%
Class R ................................ .25% .25%
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), 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 year ended March 31, 2006, FAMD earned underwriting discounts and direct
commissions and MLPF&S earned dealer concessions on sales of the Fund's Class A
and Class I Shares as follows:
- --------------------------------------------------------------------------------
FAMD MLPF&S
- --------------------------------------------------------------------------------
Class A ............................ $ 16,645 $212,349
Class I ............................ $ 969 $ 15,300
- --------------------------------------------------------------------------------
For the year ended March 31, 2006, MLPF&S received contingent deferred sales
charges of $566,585 and $34,931 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, PSI, FAMD, FDS, and/or ML & Co.
In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to
contribute ML & Co.'s investment management business, including FAM, to the
investment management business of BlackRock, Inc. The transaction is expected to
close in the third quarter of 2006.
3. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$170,503,936 and $71,827,902 for the years ended March 31, 2006 and March 31,
2005, respectively.
Transactions in capital shares for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended March 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 4,970,290 $ 133,530,402
Automatic conversion of shares ......... 2,435,396 65,585,278
Shares issued to shareholders in
reinvestment of distributions ........ 3,576,373 94,401,097
--------------------------------
Total issued ........................... 10,982,059 293,516,777
Shares redeemed ........................ (8,733,796) (233,245,026)
--------------------------------
Net increase ........................... 2,248,263 $ 60,271,751
================================
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended March 31, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 6,228,570 $ 160,460,362
Automatic conversion of shares ......... 1,600,696 41,149,466
Shares issued to shareholders in
reinvestment of distributions ........ 1,714,044 41,587,287
--------------------------------
Total issued ........................... 9,543,310 243,197,115
Shares redeemed ........................ (7,786,984) (200,430,174)
--------------------------------
Net increase ........................... 1,756,326 $ 42,766,941
================================
- -------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended March 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 4,630,190 $ 112,055,715
Shares issued to shareholders in
reinvestment of distributions ........ 4,593,369 109,836,852
--------------------------------
Total issued ........................... 9,223,559 221,892,567
--------------------------------
Automatic conversion of shares ......... (2,686,557) (65,585,278)
Shares redeemed ........................ (10,695,576) (258,951,920)
--------------------------------
Total redeemed ......................... (13,382,133) (324,537,198)
--------------------------------
Net decrease ........................... (4,158,574) $(102,644,631)
================================
- -------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended March 31, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 6,316,450 $ 148,268,872
Shares issued to shareholders in
reinvestment of distributions ........ 2,573,022 57,177,124
--------------------------------
Total issued ........................... 8,889,472 205,445,996
--------------------------------
Automatic conversion of shares ......... (1,752,553) (41,149,466)
Shares redeemed ........................ (11,454,692) (268,628,432)
--------------------------------
Total redeemed ......................... (13,207,245) (309,777,898)
--------------------------------
Net decrease ........................... (4,317,773) $(104,331,902)
================================
18 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006
Notes to Financial Statements (concluded)
Merrill Lynch Value Opportunities Fund, Inc.
- -------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended March 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 4,186,981 $ 98,758,950
Shares issued to shareholders in
reinvestment of distributions ........ 3,271,117 75,944,387
--------------------------------
Total issued ........................... 7,458,098 174,703,337
Shares redeemed ........................ (6,574,936) (154,735,660)
--------------------------------
Net increase ........................... 883,162 $ 19,967,677
================================
- -------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended March 31, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 5,045,226 $ 115,757,806
Shares issued to shareholders in
reinvestment of distributions ........ 1,627,214 35,309,619
--------------------------------
Total issued ........................... 6,672,440 151,067,425
Shares redeemed ........................ (6,287,728) (144,155,903)
--------------------------------
Net increase ........................... 384,712 $ 6,911,522
================================
- -------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended March 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 6,890,063 $ 186,278,745
Shares issued to shareholders in
reinvestment of distributions ........ 5,357,055 142,948,755
--------------------------------
Total issued ........................... 12,247,118 329,227,500
Shares redeemed ........................ (18,299,747) (496,011,156)
--------------------------------
Net decrease ........................... (6,052,629) $(166,783,656)
================================
- -------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended March 31, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 10,043,727 $ 261,511,800
Shares issued to shareholders in
reinvestment of distributions ........ 2,895,059 70,843,252
--------------------------------
Total issued ........................... 12,938,786 332,355,052
Shares redeemed ........................ (14,073,876) (365,025,967)
--------------------------------
Net decrease ........................... (1,135,090) $ (32,670,915)
================================
- -------------------------------------------------------------------------------
Class R Shares for the Year Dollar
Ended March 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 957,085 $ 23,258,712
Shares issued to shareholders in
reinvestment of distributions ........ 182,392 4,341,509
--------------------------------
Total issued ........................... 1,139,477 27,600,221
Shares redeemed ........................ (369,623) (8,915,298)
--------------------------------
Net increase ........................... 769,854 $ 18,684,923
================================
- -------------------------------------------------------------------------------
Class R Shares for the Year Dollar
Ended March 31, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 893,962 $ 21,064,961
Shares issued to shareholders in
reinvestment of distributions ........ 27,094 608,284
--------------------------------
Total issued ........................... 921,056 21,673,245
Shares redeemed ........................ (261,821) (6,176,793)
--------------------------------
Net increase ........................... 659,235 $ 15,496,452
================================
The Fund charges a 2% redemption fee on the proceeds (calculated at market
value) of a redemption (either by sale or exchange) of Fund shares made within
30 days of purchase or exchange. The redemption fee is paid to the Fund and is
intended to offset the trading costs, market impact and other costs associated
with short-term trading into and out of the Fund.
4. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years ended March 31,
2006 and March 31, 2005 was as follows:
- --------------------------------------------------------------------------------
3/31/2006 3/31/2005
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income ...................... $159,973,153 $117,682,392
Net long-term capital gains .......... 293,720,857 101,177,564
--------------------------------
Total taxable distributions ............ $453,694,010 $218,859,956
================================
As of March 31, 2006, the components of accumulated earnings on a tax basis were
as follows:
- -------------------------------------------------------------------------------
Undistributed ordinary income--net ....................... $110,075,679
Undistributed long-term capital gains--net ............... 137,490,058
------------
Total undistributed earnings--net ........................ 247,565,737
Capital loss carryforward ................................ --
Unrealized gains--net .................................... 484,737,994*
------------
Total accumulated earnings--net .......................... $732,303,731
============
* The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on wash sales.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006 19
Report of Independent Registered Public Accounting Firm
Merrill Lynch Value Opportunities Fund, Inc.
To the Shareholders and Board of Directors of Merrill Lynch Value Opportunities
Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Merrill
Lynch Value Opportunities Fund, Inc. as of March 31, 2006, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Merrill Lynch Value Opportunities Fund, Inc. as of March 31, 2006, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and its financial highlights for
each of the five years in the period then ended, in conformity with U.S.
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
May 22, 2006
Important Tax Information (unaudited)
The following information is provided with respect to the ordinary income
distributions paid by Merrill Lynch Value Opportunities Fund, Inc. for the
fiscal year ended March 31, 2006:
- ---------------------------------------------------------------------------------------------------------------------
Record Date July 21, 2005 December 5, 2005
Payable Date July 27, 2005 December 9, 2005
- ---------------------------------------------------------------------------------------------------------------------
Qualified Dividend Income for Individuals ...................................... 36.04%* 21.32%*
- ---------------------------------------------------------------------------------------------------------------------
Dividends Qualifying for the Dividends Received Deduction for Corporations ..... 36.30%* 21.51%*
- ---------------------------------------------------------------------------------------------------------------------
Short-Term Capital Gain Dividends for Non-U.S. Residents ....................... 100%** 100%**
- ---------------------------------------------------------------------------------------------------------------------
* The fund hereby designates the percentage indicated above or the maximum
amount allowable by law.
** Represents the portion of the taxable ordinary income dividends eligible
for exemption from U.S. withholding tax for nonresident aliens and foreign
corporations.
Additionally, the Fund distributed long-term capital gains of $.883077 per share
to shareholders of record on July 21, 2005 and $1.718182 per share to
shareholders of record on December 5, 2005.
20 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006
Schedule of Investments Master Value Opportunities Trust
Shares
Held Common Stocks Value
====================================================================================
Aerospace & Defense--3.5%
119,500 BE Aerospace, Inc. (e) $ 3,001,840
252,400 Curtiss-Wright Corp. 16,708,880
253,200 EDO Corp. 7,811,220
1,822,800 Triumph Group, Inc. (a)(e) 80,677,128
--------------
108,199,068
====================================================================================
Auto Components--0.8%
1,356,400 American Axle & Manufacturing Holdings, Inc. (d) 23,235,132
====================================================================================
Biotechnology--3.3%
86,500 Affymetrix, Inc. (d)(e) 2,848,445
1,724,300 Angiotech Pharmaceuticals, Inc. (e) 25,519,640
1,184,800 Applera Corp.--Celera Genomics Group (e) 13,850,312
540,100 Human Genome Sciences, Inc. (e) 5,870,887
482,473 Immunogen, Inc. (e) 2,093,933
2,319,219 Maxygen, Inc. (a)(e) 19,203,133
986,700 NPS Pharmaceuticals, Inc. (e) 8,426,418
1,294,691 Neurogen Corp. (e) 8,014,137
279,000 Regeneron Pharmaceuticals, Inc. (e) 4,639,770
1,528,190 Vical, Inc. (a)(e) 9,444,214
--------------
99,910,889
====================================================================================
Capital Markets--1.6%
151,500 Knight Capital Group, Inc. Class A (e) 2,110,395
43,900 Piper Jaffray Cos. (e) 2,414,500
1,001,000 WP Stewart & Co. Ltd. 21,101,080
1,077,000 Waddell & Reed Financial, Inc. Class A (d) 24,878,700
--------------
50,504,675
====================================================================================
Chemicals--0.5%
532,200 Valspar Corp. 14,832,414
====================================================================================
Commercial Banks--6.2%
108,800 Banner Corp. 3,699,200
2,021,200 The Colonial BancGroup, Inc. 50,530,000
306,900 First Merchants Corp. 8,138,988
1,504,500 First Midwest Bancorp, Inc. 55,019,565
110,900 Greater Bay Bancorp 3,076,366
307,400 Mid-State Bancshares 9,046,782
1,446,545 Old National Bancorp 31,303,234
278,650 Sterling Financial Corp. 8,080,850
470,000 Susquehanna Bancshares, Inc. 12,111,900
391,900 Texas Capital Bancshares, Inc. (e) 9,405,600
--------------
190,412,485
====================================================================================
Commercial Services & Supplies--4.6%
6,258,200 Allied Waste Industries, Inc. (d)(e) 76,600,368
408,500 Ambassadors International, Inc. 7,418,360
274,084 CBIZ, Inc. (e) 2,192,672
525,800 Casella Waste Systems, Inc. (e) 7,471,618
1,161,200 Cornell Cos., Inc. (a)(e) 16,767,728
276,900 Corrections Corp. of America (e) 12,515,880
129,400 Heidrick & Struggles International, Inc. (e) 4,694,632
519,200 NCO Group, Inc. (e) 12,331,000
--------------
139,992,258
====================================================================================
Communications Equipment--3.5%
3,940,200 Andrew Corp. (d)(e) 48,385,656
199,900 CommScope, Inc. (a)(d)(e) 5,707,145
1,033,400 Dycom Industries, Inc. (e) 21,959,750
1,321,400 Extreme Networks Inc. (e) 6,633,428
2,449,600 Harmonic, Inc. (e) 15,603,952
1,954,200 Westell Technologies, Inc. Class A (e) 7,953,594
--------------
106,243,525
====================================================================================
Construction & Engineering--1.1%
1,388,000 Chicago Bridge & Iron Co. NV 33,312,000
====================================================================================
Containers & Packaging--1.2%
2,617,200 Smurfit-Stone Container Corp. (e) 35,515,404
====================================================================================
Diversified Consumer Services--1.0%
2,035,900 Corinthian Colleges, Inc. (d)(e) 29,316,960
====================================================================================
Electrical Equipment--0.1%
1,021,400 Global Power Equipment Group, Inc. (e) 3,932,390
====================================================================================
Electronic Equipment & Instruments--4.8%
1,602,300 Anixter International, Inc. (d) 76,557,894
2,094,800 Ingram Micro, Inc. Class A (e) 41,896,000
126,819 NU Horizons Electronics Corp. (e) 1,079,230
707,000 Tech Data Corp. (e) 26,095,370
--------------
145,628,494
====================================================================================
Energy Equipment & Services--2.9%
124,100 Dresser-Rand Group, Inc. (e) 3,083,885
363,400 FMC Technologies, Inc. (d)(e) 18,613,348
1,444,900 Key Energy Services, Inc. (e) 22,034,725
990,300 Rowan Cos., Inc. 43,533,588
--------------
87,265,546
====================================================================================
Food Products--1.9%
655,100 The J.M. Smucker Co. 26,007,470
1,095,700 Smithfield Foods, Inc. (e) 32,147,838
--------------
58,155,308
====================================================================================
Health Care Equipment & Supplies--2.0%
3,019,800 OraSure Technologies, Inc. (a)(e) 31,103,940
1,578,774 Wright Medical Group, Inc. (d)(e) 31,180,787
--------------
62,284,727
====================================================================================
Health Care Providers & Services--2.3%
2,637,918 Emdeon Corp. (e) 28,489,514
1,895,500 Hooper Holmes, Inc. 5,477,995
810,500 LifePoint Hospitals, Inc. (d)(e) 25,206,550
473,461 Parexel International Corp. (e) 12,518,309
--------------
71,692,368
====================================================================================
Hotels, Restaurants & Leisure--1.5%
463,500 Ambassadors Group, Inc. (a) 11,772,900
605,443 Bob Evans Farms, Inc. (d) 17,987,712
1,205,500 Ryan's Restaurant Group, Inc. (e) 17,479,750
--------------
47,240,362
====================================================================================
Household Durables--0.2%
123,300 Furniture Brands International, Inc. 3,022,083
103,100 La-Z-Boy, Inc. (d) 1,752,700
--------------
4,774,783
====================================================================================
IT Services--4.0%
2,584,500 The BISYS Group, Inc. (e) 34,839,060
4,609,300 Convergys Corp. (e) 83,935,353
137,800 Hewitt Associates, Inc. Class A (e) 4,098,172
--------------
122,872,585
====================================================================================
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006 21
Schedule of Investments (continued) Master Value Opportunities Trust
Shares
Held Common Stocks Value
====================================================================================
Insurance--5.3%
237,400 AmerUs Group Co. $ 14,300,976
93,800 American National Insurance Co. 10,513,104
3,178,100 Conseco, Inc. (d)(e) 78,880,442
641,471 Presidential Life Corp. 16,299,778
555,700 Protective Life Corp. 27,640,518
574,900 Scottish Annuity & Life Holdings, Ltd. 14,263,269
--------------
161,898,087
====================================================================================
Internet & Catalog Retail--0.4%
1,870,445 1-800-FLOWERS.COM, Inc. Class A (a)(e) 13,280,159
====================================================================================
Internet Software & Services--1.5%
1,968,175 Matrixone, Inc. (e) 14,092,133
2,420,472 SupportSoft, Inc. (a)(e) 10,722,691
2,421,007 webMethods, Inc. (e) 20,384,879
--------------
45,199,703
====================================================================================
Machinery--2.9%
598,400 AGCO Corp. (d)(e) 12,410,816
986,400 Kaydon Corp. 39,811,104
523,500 Timken Co. 16,893,345
877,000 Wabash National Corp. 17,320,750
364,700 Wolverine Tube, Inc. (a)(e) 1,466,094
--------------
87,902,109
====================================================================================
Media--3.3%
194,200 Catalina Marketing Corp. 4,486,020
2,465,900 The Reader's Digest Association, Inc. Class A (d) 36,372,025
1,205,000 Scholastic Corp. (e) 32,245,800
1,007,500 Valassis Communications, Inc. (e) 29,590,275
--------------
102,694,120
====================================================================================
Metals & Mining--1.2%
564,600 Steel Dynamics, Inc. 32,029,758
309,100 Wheeling-Pittsburgh Corp. (e) 5,675,076
--------------
37,704,834
====================================================================================
Multiline Retail--1.0%
1,155,600 Dollar Tree Stores, Inc. (e) 31,975,452
====================================================================================
Oil, Gas & Consumable Fuels--4.9%
495,300 Cabot Oil & Gas Corp. Class A 23,739,729
1,812,500 Denbury Resources, Inc. (d)(e) 57,401,875
325,000 Houston Exploration Co. (d)(e) 17,127,500
719,591 Plains Exploration & Production Co. (d)(e) 27,804,996
534,100 Stone Energy Corp. (e) 23,569,833
--------------
149,643,933
====================================================================================
Paper & Forest Products--0.3%
280,200 Neenah Paper, Inc. 9,176,550
====================================================================================
Pharmaceuticals--2.5%
429,500 Discovery Laboratories, Inc. (e) 3,148,235
2,267,600 Medicis Pharmaceutical Corp. Class A 73,923,760
--------------
77,071,995
====================================================================================
Real Estate--4.9%
1,072,400 Brandywine Realty Trust 34,059,424
455,200 CarrAmerica Realty Corp. 20,306,472
1,061,900 Crescent Real Estate EQT Co. 22,374,233
3,289,100 Friedman Billings Ramsey Group, Inc. Class A (d) 30,851,758
59,300 New Plan Excel Realty Trust 1,538,242
417,000 Rayonier, Inc. 19,011,030
895,193 Trizec Properties, Inc. (d) 23,033,316
--------------
151,174,475
====================================================================================
Road & Rail--4.2%
1,186,400 JB Hunt Transport Services, Inc. 25,555,056
1,407,300 Kansas City Southern (d)(e) 34,760,310
70,600 Old Dominion Freight Line Inc. (e) 1,902,670
1,727,800 RailAmerica, Inc. (e) 18,418,348
1,030,900 Swift Transportation Co., Inc. (e) 22,401,457
1,067,600 U.S. Xpress Enterprises, Inc. Class A (a)(e) 20,786,172
266,921 Vitran Corp., Inc. (e) 5,357,104
--------------
129,181,117
====================================================================================
Semiconductors & Semiconductor Equipment--0.4%
842,900 Actel Corp. (e) 13,435,826
====================================================================================
Software--4.1%
3,134,343 Agile Software Corp. (a)(e) 23,915,037
788,300 Bottomline Technologies, Inc. (e) 10,823,359
315,900 Filenet Corp. (d)(e) 8,535,618
1,360,000 InterVoice, Inc. (e) 11,709,600
2,427,700 NetIQ Corp. (a)(e) 27,068,855
4,069,500 Novell, Inc. (e) 31,253,760
1,309,571 TIBCO Software, Inc. (e) 10,948,014
--------------
124,254,243
====================================================================================
Specialty Retail--3.6%
2,408,000 Foot Locker, Inc. 57,503,040
124,700 HOT Topic, Inc. (e) 1,808,150
589,900 Pier 1 Imports, Inc. (d) 6,848,739
1,616,500 RadioShack Corp. (d) 31,085,295
466,100 Talbots, Inc. (d) 12,524,107
--------------
109,769,331
====================================================================================
Textiles, Apparel & Luxury Goods--0.4%
393,000 Kenneth Cole Productions, Inc. Class A 10,886,100
====================================================================================
Thrifts & Mortgage Finance--3.0%
232,800 Anchor Bancorp Wisconsin, Inc. 7,056,168
515,600 Dime Community Bancshares, Inc. 7,409,172
278,600 Fidelity Bankshares, Inc. 9,369,318
141,900 FirstFed Financial Corp. (e) 8,487,039
529,100 Franklin Bank Corp. (e) 10,174,593
1,020,600 Webster Financial Corp. 49,458,276
--------------
91,954,566
====================================================================================
Trading Companies & Distributors --0.9%
846,800 United Rentals, Inc. (e) 29,214,600
- ------------------------------------------------------------------------------------
Total Common Stocks
(Cost--$2,344,850,401)--91.8% 2,811,738,573
====================================================================================
Exchange-Traded Funds
====================================================================================
734,200 Financial Select Sector SPDR Fund (d) 23,898,210
369,500 iShares Dow Jones US Real Estate Index Fund (d) 27,158,250
80,900 iShares Goldman Sachs Natural Resources
Index Fund (d) 7,763,973
447,700 iShares Russell 2000 Index Fund (d) 33,980,430
103,000 iShares Russell Microcap Index Fund 6,018,290
358,800 iShares S&P SmallCap 600/BARRA Value
Index Fund (d) 26,127,816
22 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006
Schedule of Investments (concluded) Master Value Opportunities Trust
Shares
Held Exchange-Traded Funds Value
====================================================================================
527,700 iShares S&P SmallCap 600 Index Fund (d) $ 34,395,486
- ------------------------------------------------------------------------------------
Total Exchange-Traded Funds
(Cost--$132,729,211)--5.2% 159,342,455
====================================================================================
Warrants (f)
====================================================================================
Capital Markets--1.7%
943,000 UBS AG (expires 4/30/2007) 49,177,450
- ------------------------------------------------------------------------------------
Total Warrants
(Cost--$47,793,649)--1.6% 49,177,450
====================================================================================
Beneficial
Interest Short-Term Securities
====================================================================================
$ 27,539,523 Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I, 4.56% (b)(g) 27,539,523
430,863,127 Merrill Lynch Liquidity Series, LLC
Money Market Series, 4.75% (b)(c)(g) 430,863,127
- ------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost--$458,402,650)--15.0% 458,402,650
====================================================================================
Total Investments (Cost--$2,983,775,911*)--113.6% 3,478,661,128
Liabilities in Excess of Other Assets--(13.6%) (416,798,728)
--------------
Net Assets--100.0% $3,061,862,400
==============
* The cost and unrealized appreciation (depreciation) of investments as of
March 31, 2006, as computed for federal income tax purposes, were as
follows:
Aggregate cost ............................. $ 2,993,923,134
===============
Gross unrealized appreciation .............. $ 559,542,179
Gross unrealized depreciation .............. (74,804,185)
---------------
Net unrealized appreciation ................ $ 484,737,994
===============
(a) Investments in companies (whereby the Trust held 5% or more of the
companies'outstanding securities) that are considered to be an affiliate,
for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
were as follows:
------------------------------------------------------------------------------------------------------------------------------
Net Share Purchase Sales Realized Dividend
Affiliate Activity Cost Cost Gain (Loss) Income
------------------------------------------------------------------------------------------------------------------------------
1-800-FLOWERS.COM, Inc. Class A 1,063,045 $ 7,456,224 $ 132,729 $ (18,928) +
ANADIGICS, Inc.* (3,936,100) $ 48,915 $ 22,426,910 $ 2,521,852 +
Agile Software, Corp. 2,580,543 $ 17,968,830 $ 1,952,178 $ (303,287) +
Ambassadors Group, Inc.* (83,555)@ $ 263,447 $ 2,626,321 $ 12,812,436 $223,154
CommScope, Inc.* (3,060,000) $ 297,521 $ 54,668,986 $ 9,055,059 +
Cornell Cos., Inc. (145,200) $ 1,170,741 $ 3,612,414 $ (786,725) +
E.piphany, Inc.* (4,079,955)@ $ 1,911,246 $ 17,244,287 $ 2,427,478 +
Maxygen, Inc. 388,219 $ 2,973,053 $ 224,755 $ (90,637) +
NetIQ Corp. 2,228,094 $ 24,855,137 $ 94,330 $ (5,714) +
OraSure Technologies, Inc. 3,019,800 $ 30,553,845 -- -- +
SupportSoft, Inc. 2,420,472 $ 11,385,870 $ 43,605 $ (8,415) +
Triumph Group, Inc. 184,600 $ 13,077,925 $ 6,686,821 $ 322,275 +
U.S. Xpress Enterprises, Inc. Class A 1,067,600 $ 17,701,011 -- -- +
Vical, Inc. (13,913) $ 352,772 $ 809,689 $ (435,018) +
Vignette Corp.* (24,248,271)@@ $ 3,345,294 $ 69,329,814 $(23,300,193) +
Wolverine Tube, Inc.* (452,600) $ 10,935 $ 6,590,914 $ (4,097,553) +
------------------------------------------------------------------------------------------------------------------------------
* No longer an affiliated company as of March 31, 2006.
+ Non-income producing security.
@ Includes shares received due to a corporate action.
@@ Includes returned shares due to a corporate action.
(b) Investments in companies considered to be an affiliate of the Trust, for
purposes of 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 $ 17,000,413 $1,361,949
Merrill Lynch Liquidity Series, LLC
Money Market Series $182,268,627 $ 564,910
--------------------------------------------------------------------------
(c) Security was purchased with the cash proceeds from securities loans.
(d) Security, or a portion of security, is on loan.
(e) Non-income producing security.
(f) Warrants entitle the Trust to purchase a predetermined number of shares of
common stock and are non-income producing. The purchase price and number
of shares are subject to adjustment under certain conditions until the
expiration date.
(g) Represents the current yield as of March 31, 2006.
o For Trust compliance purposes, the Trust's industry classifications refer
to any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Trust management. This definition may not apply for purposes of
this report, which may combine industry sub-classifications for reporting
ease. Industries are shown as a percent of net assets. These industry
classifications are unaudited.
See Notes to Financial Statements.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006 23
Statement of Assets and Liabilities Master Value Opportunities Trust
As of March 31, 2006
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (including
securities loaned of $417,720,200) (identified cost--$2,299,016,544) $ 2,767,289,421
Investments in affiliated securities, at value
(identified cost--$684,759,367) .................................... 711,371,707
Cash ................................................................ 257,730
Receivables:
Securities sold .................................................. $ 21,068,817
Contributions .................................................... 12,852,209
Dividends ........................................................ 2,011,922
Securities lending ............................................... 56,291 35,989,239
---------------
Prepaid expenses and other assets ................................... 46,605
---------------
Total assets ........................................................ 3,514,954,702
---------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value ........................... 430,863,127
Payables:
Securities purchased ............................................. 13,832,094
Withdrawals ...................................................... 7,010,110
Investment adviser ............................................... 1,079,650
Other affiliates ................................................. 31,363 21,953,217
---------------
Accrued expenses .................................................... 275,958
---------------
Total liabilities ................................................... 453,092,302
---------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets .......................................................... $ 3,061,862,400
===============
===================================================================================================================================
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------------
Investors' capital .................................................. $ 2,566,977,183
Unrealized appreciation--net ........................................ 494,885,217
---------------
Net Assets .......................................................... $ 3,061,862,400
===============
See Notes to Financial Statements.
24 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006
Statement of Operations Master Value Opportunities Trust
For the Year Ended March 31, 2006
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends (including $223,154 from affiliates and net of $16,330
foreign withholding tax) ........................................... $ 31,717,214
Interest from affiliates ............................................ 1,361,949
Securities lending--net ............................................. 564,910
---------------
Total income ........................................................ 33,644,073
---------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ............................................ $ 14,111,549
Accounting services ................................................. 586,411
Custodian fees ...................................................... 204,646
Professional fees ................................................... 107,045
Trustees' fees and expenses ......................................... 56,282
Pricing fees ........................................................ 21,280
Printing and shareholder reports .................................... 2,531
Other ............................................................... 74,799
---------------
Total expenses ...................................................... 15,164,543
---------------
Investment income--net .............................................. 18,479,530
---------------
===================================================================================================================================
Realized & Unrealized Gain (Loss)--Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments (including $(1,907,370) from affiliates)--net ........ 562,842,598
Foreign currency transactions--net ............................... (5,490) 562,837,108
---------------
Change in unrealized appreciation on investments--net ............... 130,184,338
---------------
Total realized and unrealized gain--net ............................. 693,021,446
---------------
Net Increase in Net Assets Resulting from Operations ................ $ 711,500,976
===============
See Notes to Financial Statements.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006 25
Statements of Changes in Net Assets Master Value Opportunities Trust
For the Year Ended
March 31,
-------------------------------------
Increase (Decrease) in Net Assets: 2006 2005
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net .............................................. $ 18,479,530 $ 10,875,180
Realized gain--net .................................................. 562,837,108 205,898,506
Change in unrealized appreciation--net .............................. 130,184,338 (79,095,105)
-------------------------------------
Net increase in net assets resulting from operations ................ 711,500,976 137,678,581
-------------------------------------
===================================================================================================================================
Capital Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions ......................................... 553,882,524 912,589,367
Fair value of withdrawals ........................................... (1,209,469,692) (1,233,630,806)
-------------------------------------
Net decrease in net assets derived from capital transactions ........ (655,587,168) (321,041,439)
-------------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets ............................. 55,913,808 (183,362,858)
Beginning of year ................................................... 3,005,948,592 3,189,311,450
-------------------------------------
End of year ......................................................... $ 3,061,862,400 $ 3,005,948,592
=====================================
See Notes to Financial Statements.
26 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006
Financial Highlights Master Value Opportunities Trust
For the Year Ended March 31,
The following ratios have been derived from ----------------------------------------------------------------------
information provided in the financial statements. 2006 2005 2004 2003 2002
===================================================================================================================================
Total Investment Return
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return .............. 26.66% 4.48% 58.26% (27.31%)+ 32.13%
======================================================================
===================================================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................. .51% .50% .51% .51% .52%
======================================================================
Investment income--net ............... .62% .35% .42% .32% .44%
======================================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) $3,061,862 $3,005,949 $3,189,311 $1,932,417 $3,248,959
======================================================================
Portfolio turnover ................... 77.26% 74.31% 80.35% 68.27% 54.14%
======================================================================
+ FAM fully reimbursed the Trust for a loss on a transaction not meeting the
Trust's investment guidelines, which had no impact on total return.
See Notes to Financial Statements.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006 27
Notes to Financial Statements Master Value Opportunities Trust
1. Significant Accounting Policies:
Master Value Opportunities 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 Trust, subject to certain limitations. The
Trust's financial statements are prepared in conformity with U.S. generally
accepted accounting principles, which may require the use of management accruals
and estimates. Actual results may differ from these estimates. The following is
a summary of significant accounting policies followed by the Trust.
(a) Valuation of investments -- Equity securities that are held by the Trust
that are traded on stock exchanges or the Nasdaq National Market are valued at
the last sale price or official close price on the exchange, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price for long positions, and at the last available 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 in securities traded in the over-the-counter ("OTC") market,
Nasdaq Small Cap or Bulletin Board are valued at the last available bid price or
yield equivalent obtained from one or more dealers or pricing services approved
by the Board of Trustees of the Trust. Short positions traded in the OTC market
are valued at the last available asked price. Trust securities that are traded
both in the OTC market and on a stock exchange are valued according to the
broadest and most representative market.
Options written are valued at the last sale price in the case of exchange-traded
options or, in the case of options traded in the OTC market, the last asked
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 quoted fair
valuations received daily by the Trust from a pricing service or counterparty.
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. Valuation of other short-term investment vehicles is generally
based on the net asset value of the underlying investment vehicle or amortized
cost.
Repurchase agreements are valued at cost plus accrued interest. The Trust
employs certain pricing services to provide certain securities prices for the
Trust. Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Trustees of the Trust, including valuations furnished
by the pricing services retained by the Trust, which may use a matrix system for
valuations. The procedures of a pricing service and its valuations are reviewed
by the officers of the Trust under the general supervision of the Trust's Board
of Trustees. Such valuations and procedures will be reviewed periodically by the
Board of Trustees of the Trust.
Generally, trading in foreign securities, as well as U.S. Government securities,
money market instruments and certain fixed income securities is substantially
completed each day at various times prior to the close of business on the New
York Stock Exchange ("NYSE"). The values of such securities used in computing
the net assets of the Trust are determined as of such times. Foreign currency
exchange rates also are generally determined prior to the close of business on
the NYSE. Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and the
close of business on the NYSE that may not be reflected in the computation of
the Trust's net assets. If events (for example, a company announcement, market
volatility or a natural disaster) occur during such periods that are expected to
materially affect the value of such securities, those securities may be valued
at their fair value as determined in good faith by the Trust's Board of Trustees
or by the Investment Adviser using a pricing service and/or procedures approved
by the Trust's Board of Trustees.
(b) Derivative financial instruments -- The Trust may engage in various
portfolio investment strategies both to increase the return of the Trust and to
hedge, and protect its exposure to interest rate movements and movements in the
securities market. Losses may arise due to changes in the value of the contract
or if the counterparty does not perform under the contract.
o Financial futures contracts -- The Trust may purchase or sell financial
futures contracts and options on such futures contracts. Futures contracts
are contracts for delayed delivery of securities at a specific future date
and at a specific price or yield. Upon entering into a contract, the Trust
deposits and maintains as collateral such initial margin as required by
the exchange on which the transaction is effected. Pursuant to the
contract, the Trust
28 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006
Notes to Financial Statements (continued) Master Value Opportunities Trust
agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Trust as unrealized
gains or losses. When the contract is closed, the Trust records a realized
gain or loss equal to the difference between the value of the contract at
the time it was opened and the value at the time it was closed.
o Options -- The Trust may write put and covered call options and purchase
and write call and put options. When the Trust writes an option, an amount
equal to the premium received by the Trust is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option
written. When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or deducted
from) the basis of the security acquired or deducted from (or added to)
the proceeds of the security sold. When an option expires (or the Trust
enters into a closing transaction), the Trust realizes a gain or loss on
the option to the extent of the premiums received or paid (or 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 Trust may enter into forward
foreign exchange contracts as a hedge against either specific transactions
or portfolio positions. The contract is marked-to-market daily and the
change in market value is recorded by the Trust as an unrealized gain or
loss. When the contract is closed, the Trust records a realized gain or
loss equal to the difference between the value at the time it was opened
and the value at the time it was closed.
o Foreign currency options and futures -- The Trust may purchase or sell
listed or over-the-counter foreign currency options, foreign currency
futures and related options on foreign currency futures as a short or long
hedge against possible variations in foreign exchange rates. Such
transactions may be effected with respect to hedges on non-U.S.
dollar-denominated securities owned by the Trust, sold by the Trust but
not yet delivered, or committed or anticipated to be purchased by the
Trust.
(c) 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.
The Trust invests in foreign securities, which may involve a number of risk
factors and special considerations not present with investments in securities of
U.S. corporations.
(d) Income taxes -- The Trust is considered as a "pass-through" entity for
federal income tax purposes. As such, each investor in the Trust is treated as
owner of its proportionate share of the net assets, income, expenses and
realized and unrealized gains and losses of the Trust. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends and
capital gains at various rates. Therefore, no federal income tax provision is
required. It is intended that the Trust's assets will be managed so an investor
in the Trust can satisfy the requirements of Subchapter M of the Internal
Revenue Code.
(e) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis.
(f) Securities lending -- The Trust may lend securities to financial
institutions that provide cash or securities issued or guaranteed by the U.S.
government as collateral, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities. The
market value of the loaned securities is determined at the close of business of
the Trust and any additional required collateral is delivered to the Trust on
the next business day. Where the Trust receives securities as collateral for the
loaned securities, it collects a fee from the borrower. The Trust typically
receives the income on the loaned securities but does not receive the income on
the collateral. Where the Trust receives cash collateral, it may invest such
collateral and retain the amount earned on such investment, net of any amount
rebated to the borrower. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities within five
business days. The Trust may pay reasonable finder's, lending agent,
administrative and custodial fees in connection with its loans.
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006 29
Notes to Financial Statements (concluded) Master Value Opportunities Trust
In the event that the borrower defaults on its obligation to return borrowed
securities because of insolvency or for any other reason, the Trust could
experience delays and costs in gaining access to the collateral. The Trust also
could suffer a loss where the value of the collateral falls below the market
value of the borrowed securities, in the event of borrower default or in the
event of losses on investments made with cash collateral.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner.
FAM is responsible for the management of the Trust's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Trust. For such services, the Trust pays a monthly fee
upon the average daily value of the Trust's net assets at the following annual
rates: .50% of the Trust's average net assets not exceeding $1 billion, and
..475% of average daily net assets in excess of $1 billion but not exceeding $1.5
billion; and .45% of average daily net assets in excess of $1.5 billion.
The Trust has received an exemptive order from the Securities and Exchange
Commission permitting it to lend Trust securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), an affiliate of FAM, or its affiliates.
As of March 31, 2006, the Trust lent securities with a value of $26,946,338 to
MLPF&S or its affiliates. Pursuant to that order, the Trust also has retained
Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an affiliate of FAM, as
the securities lending agent for a fee based on a share of the returns on
investment of cash collateral. MLIM, LLC may, on behalf of the Trust, invest
cash collateral received by the Trust for such loans, among other things, in a
private investment company managed by MLIM, LLC or in registered money market
funds advised by Merrill Lynch Investment Managers, L.P. ("MLIM"), an affiliate
of FAM. For the year ended March 31, 2006, MLIM, LLC received $243,979 in
securities lending agent fees.
In addition, MLPF&S received $601,761 in commissions on the execution of Trust
security transactions for the Trust for the year ended March 31, 2006.
For the year ended March 31, 2006, the Trust reimbursed FAM $71,541 for certain
accounting services.
Certain officers and/or trustees of the Trust are officers and/or directors of
FAM, PSI, ML & Co., MLIM, and/or MLIM, LLC.
In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to
contribute ML & Co.'s investment management business, including FAM, to the
investment management business of BlackRock, Inc. The transaction is expected to
close in the third quarter of 2006.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended March 31, 2006 were $2,293,391,447 and $2,958,968,229, respectively.
4. Short-Term Borrowings:
The Trust, along with certain other funds managed by FAM and its affiliates, is
a party to a $500,000,000 credit agreement with a group of lenders. The Trust
may borrow under the credit agreement to fund Shareholder redemptions and for
other lawful purposes other than for leverage. The Trust may borrow up to the
maximum amount allowable under the Trust's current prospectus and statement of
additional information, subject to various other legal, regulatory or
contractual limits. The Trust pays a commitment fee of .07% per annum based on
the Trust's pro rata share of the unused portion of the credit agreement.
Amounts borrowed under the credit agreement bear interest at a rate equal to, at
each fund's election, the federal funds rate plus .50% or a base rate as defined
in the credit agreement. The Trust did not borrow under the credit agreement
during the year ended March 31, 2006. On November 26, 2005, the credit agreement
was renewed for one year under substantially the same terms.
30 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006
Report of Independent Registered Public Accounting Firm
Master Value Opportunities Trust
To the Investor and Board of Trustees of Master Value Opportunities Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Master Value Opportunities Trust as of March 31,
2006, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free from material misstatement. The
Trust is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Trust's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of March 31, 2006, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Master
Value Opportunities Trust as of March 31, 2006, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and its financial highlights for each of the five
years in the period then ended, in conformity with U.S. generally accepted
accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
May 22, 2006
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006 31
Officers and Directors/Trustees
Number of
Portfolios in Other Public
Fund Complex Directorships
Position(s) Length of Overseen by Held by
Held with Time Director/ Director/
Name Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Interested Director/Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Robert C. P.O. Box 9011 President 2005 to President of the MLIM/FAM-advised funds since 2005; 131 Funds None
Doll, Jr.* Princeton, NJ and present President of MLIMand FAM since 2001; Co-Head 177 Portfolios
08543-9011 Director/ (Americas Region) thereof from 2000 to 2001 and
Age: 51 Trustee Senior Vice President from 1999 to 2001; President
and Director of Princeton Services, Inc. ("Princeton
Services") since 2001; President of Princeton
Administrators, L.P. ("Princeton Administrators")
since 2001; Chief Investment Officer of Oppenheimer-
Funds, Inc. in 1999 and Executive Vice President
thereof from 1991 to 1999.
------------------------------------------------------------------------------------------------------------------------
* Mr. Doll is a director, trustee or member of an advisory board of certain other investment companies for which
MLIM or FAM acts as investment adviser. Mr. Doll is an "interested person," as defined in the Investment Company
Act, of the Fund based on his positions with MLIM, FAM, Princeton Services and Princeton Administrators.
Directors/Trustees serve until their resignation, removal or death, or until December 31 of the year in which they
turn 72. As Fund/Trust President, Mr. Doll serves at the pleasure of the Board of Directors/Trustees.
====================================================================================================================================
Independent Directors/Trustees*
- ------------------------------------------------------------------------------------------------------------------------------------
Donald W. P.O. Box 9095 Director/ 2002 to General Partner of The Burton Partnership, Limited 23 Funds Knology, Inc.
Burton Princeton, NJ Trustee present Partnership (an investment partnership) since 1979; 42 Portfolios (telecommuni-
08543-9095 Managing General Partner of the South Atlantic cations) and
Age: 62 Venture Funds since 1983; Member of the Investment Symbion, Inc.
Advisory Council of the Florida State Board of (healthcare)
Administration since 2001.
- ------------------------------------------------------------------------------------------------------------------------------------
Laurie P.O. Box 9095 Director/ 1999 to Professor of Finance and Economics, Graduate 23 Funds None
Simon Princeton, NJ Trustee present School of Business, Columbia University since 1998. 42 Portfolios
Hodrick 08543-9095
Age: 43
- ------------------------------------------------------------------------------------------------------------------------------------
John P.O. Box 9095 Director/ 2005 to President and Chief Executive Officer of Allmerica 23 Funds ABIOMED
Francis Princeton, NJ Trustee present Financial Corporation (financial services holding 42 Portfolios (medical
O'Brien 08543-9095 company) from 1995 to 2002 and Director from device manuf-
Age: 62 1995 to 2003; President of Allmerica Investment acturer),
Management Co., Inc. (investment adviser) from Cabot Corpor-
1989 to 2002; Director from 1989 to 2002 and ation
Chairman of the Board from 1989 to 1990; President, (chemicals),
Chief Executive Officer and Director of First LKQ Corpora-
Allmerica Financial Life Insurance Company from 1989 tion (auto
to 2002 and Director of various other Allmerica parts manufa-
Financial companies until 2002; Director since 1989, cturing) and
Member of the Governance Nominating Committee since TJX Compan-
2004, Member of the Compensation Committee since ies, Inc.
1989 and Member of the Audit Committee from 1990 to (retailer)
2004 of ABIOMED; Director, Member of the
Governance and Nomination Committee and
Member of the Audit Committee of Cabot
Corporation since 1990; Director and Member of the
Audit Committee and Compensation Committee of
LKQ Corporation since 2003; Lead Director of TJX
Companies, Inc. since 1999; Trustee of the Woods
Hole Oceanographic Institute since 2003.
32 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006
Officers and Directors/Trustees (concluded)
Number of
Portfolios in Other Public
Fund Complex Directorships
Position(s) Length of Overseen by Held by
Held with Time Director/ Director/
Name Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Independent Directors/Trustees* (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
David H. P.O. Box 9095 Director/ 2003 to Consultant with Putnam Investments from 1993 to 23 Funds None
Walsh Princeton, NJ Trustee present 2003, and employed in various capacities therewith 42 Portfolios
08543-9095 from 1973 to 1992; Director, Massachusetts Audubon
Age: 64 Society from 1990 to 1997; Director, The National
Audubon Society from 1998 to 2005; Director, The
American Museum of Fly Fishing since 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
Fred G. P.O. Box 9095 Director/ 1998 to Managing Director of FGW Associates since 1997; 23 Funds Watson
Weiss** Princeton, NJ Trustee present Vice President, Planning, Investment and Development 42 Portfolios Pharma-
08543-9095 of Warner Lambert Co. from 1979 to 1997; ceuticals
Age: 64 Director of the Michael J. Fox Foundation for Inc.
Parkinson's Research since 2000; Director of BTG (pharma-
International PLC (a global technology commercial- ceutical
ization company) since 2001. company)
------------------------------------------------------------------------------------------------------------------------
* Directors/Trustees serve until their resignation, removal or death, or until December 31 of the year in which they
turn 72.
** Chairman of the Board of Directors and the Audit Committee.
- ------------------------------------------------------------------------------------------------------------------------------------
Position(s) Length of
Held with Time
Name Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund Officers*
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 1993 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof since 1999;
Burke Princeton, NJ President present Senior Vice President and Treasurer of Princeton Services since 1999 and Director
08543-9011 and and since 2004; Vice President of FAM Distributors, Inc. ("FAMD") since 1999 and
Age: 45 Treasurer 1999 to Director since 2004; Vice President of MLIMand FAM from 1990 to 1997; Director of
present Taxation of MLIM from 1990 to 2001; Vice President, Treasurer and Secretary of the
IQ Funds since 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
Robin P.O. Box 9011 Vice 2002 to Managing Director of MLIM since 2000; First Vice President of MLIM from 1999 to
Elise Princeton, NJ President present 2000; Director of MLIM from 1997 to 1999; Vice President of MLIM from 1995 to 1997.
Baum 08543-9011
Age: 45
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey P.O. Box 9011 Chief 2004 to Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice President and
Hiller Princeton, NJ Compliance present Chief Compliance Officer of MLIM (Americas Region) since 2004; Chief Compliance
08543-9011 Officer Officer of the IQ Funds since 2004; Global Director of Compliance at Morgan Stanley
Age: 54 Investment Management from 2002 to 2004; Managing Director and Global Director of
Compliance at Citigroup Asset Management from 2000 to 2002; Chief Compliance
Officer at Soros Fund Management in 2000; Chief Compliance Officer at Prudential
Financial from 1995 to 2000; Senior Counsel in the Commission's Securities and
Exchange Division of Enforcement in Washington, D.C. from 1990 to 1995.
- ------------------------------------------------------------------------------------------------------------------------------------
Alice A. P.O. Box 9011 Secretary 2004 to Director (Legal Advisory) of MLIM since 2002; Vice President of MLIM from 1999 to
Pellegrino Princeton, NJ present 2002; Attorney associated with MLIM since 1997; Secretary of MLIM, FAM, FAMD and
08543-9011 Princeton Services since 2004.
Age: 46
------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund serve at the pleasure of the Board of Directors/Trustees.
- ------------------------------------------------------------------------------------------------------------------------------------
Further information about the Fund's Officers and Directors/Trustees is available in the Fund's Statement of Additional
Information, which can be obtained without charge by calling 1-800-637-3863.
- ------------------------------------------------------------------------------------------------------------------------------------
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
- --------------------------------------------------------------------------------
Laurie Simon Hodrick resigned as a Director of Merrill Lynch Value Opportunities
Fund, Inc. effective May 1, 2006.
- --------------------------------------------------------------------------------
MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006 33
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.
34 MERRILL LYNCH VALUE OPPORTUNITIES FUND, INC. MARCH 31, 2006
[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 1-800-637-3863; (2) at
www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's Web
site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
Merrill Lynch Value Opportunities Fund, Inc.
Box 9011
Princeton, NJ 08543-9011
#10253 -- 3/06
Item 2 - Code of Ethics - The registrant has adopted a code of ethics, as of the
end of the period covered by this report, that applies to the
registrant's principal executive officer, principal financial officer
and principal accounting officer, or persons performing similar
functions. A copy of the code of ethics is available without charge
upon request by calling toll-free 1-800-MER-FUND (1-800-637-3863).
Item 3 - Audit Committee Financial Expert - The registrant's board of directors
has determined that (i) the registrant has the following audit
committee financial experts serving on its audit committee and (ii)
each audit committee financial expert is independent: (1) Ronald W.
Forbes, (2) Richard R. West, and (3) Edward D. Zinbarg.
Item 4 - Principal Accountant Fees and Services
Merrill Lynch Value Opportunities Fund, Inc.
(a) Audit Fees - Fiscal Year Ending March 31, 2006 - $6,600
Fiscal Year Ending March 31, 2005 - $6,500
(b) Audit-Related Fees - Fiscal Year Ending March 31, 2006 - $0
Fiscal Year Ending March 31, 2005 - $0
(c) Tax Fees - Fiscal Year Ending March 31, 2006 - $6,000
Fiscal Year Ending March 31, 2005 - $6,300
The nature of the services include tax compliance, tax advice and tax
planning.
(d) All Other Fees - Fiscal Year Ending March 31, 2006 - $0
Fiscal Year Ending March 31, 2005 - $0
Master Value Opportunities Trust
(a) Audit Fees - Fiscal Year Ending March 31, 2006 - $41,100
Fiscal Year Ending March 31, 2005 - $40,500
(b) Audit-Related Fees - Fiscal Year Ending March 31, 2006 - $0
Fiscal Year Ending March 31, 2005 - $0
(c) Tax Fees - Fiscal Year Ending March 31, 2006 - $0
Fiscal Year Ending March 31, 2005 - $0
(d) All Other Fees - Fiscal Year Ending March 31, 2006 - $0
Fiscal Year Ending March 31, 2005 - $0
(e)(1) The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to the
registrant's affiliated service providers that relate directly to the
operations and the financial reporting of the registrant. Certain of
these non-audit services that the Committee believes are a) consistent
with the SEC's auditor independence rules and b) routine and recurring
services that will not impair the independence of the independent
accountants may be approved by the Committee without consideration on a
specific case-by-case basis ("general pre-approval").
However, such services will only be deemed pre-approved provided that
any individual project does not exceed $5,000 attributable to the
registrant or $50,000 for all of the registrants the Committee
oversees. Any proposed services exceeding the pre-approved cost levels
will require specific pre-approval by the Committee, as will any other
services not subject to general pre-approval (e.g., unanticipated but
permissible services). The Committee is informed of each service
approved subject to general pre-approval at the next regularly
scheduled in-person board meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending March 31, 2006 - $3,754,550
Fiscal Year Ending March 31, 2005 - $10,018,400
(h) The registrant's audit committee has considered and determined that
the provision of non-audit services that were rendered to the
registrant's investment adviser and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant
to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $1,227,000, 0%
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - 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 second fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
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 Value Opportunities Fund, Inc. and Master Value Opportunities
Trust
By: /s/ Robert C. Doll, Jr.
---------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Merrill Lynch Value Opportunities Fund, Inc. and Master Value Opportunities
Trust
Date: May 22, 2006
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 Value Opportunities Fund, Inc. and Master Value Opportunities
Trust
Date: May 22, 2006
By: /s/ Donald C. Burke
---------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Value Opportunities Fund, Inc. and Master Value Opportunities
Trust
Date: May 22, 2006