EX-17.(C) 85 e24001ex_17c.txt ANNUAL REPORT OF ML FUND Exhibit 17(c) Merrill Lynch Large Cap Series Funds, Inc. Annual Reports October 31, 2005 A Letter From the President [PHOTO OMITTED] Dear Shareholder As the financial markets continued to muddle their way through 2005, the Federal Reserve Board (the Fed) advanced its monetary tightening campaign full steam ahead. The 12th consecutive interest rate hike since June 2004 came on November 1, bringing the target federal funds rate to 4%. The central bank is clearly more focused on inflationary figures than on economic growth, which has shown some signs of moderating. Despite rising short-term interest rates and record-high energy prices, the major market indexes managed to post positive results for the current reporting period:
Total Returns as of October 31, 2005 6-month 12-month ===================================================================================== U.S. equities (Standard & Poor's 500 Index) + 5.27% + 8.72% ------------------------------------------------------------------------------------ Small-cap U.S. equities (Russell 2000 Index) +12.25 +12.08 ------------------------------------------------------------------------------------ International equities (MSCI Europe Australasia Far East Index) + 8.63 +18.09 ------------------------------------------------------------------------------------ Fixed income (Lehman Brothers Aggregate Bond Index) + 0.15 + 1.13 ------------------------------------------------------------------------------------ Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 0.59 + 2.54 ------------------------------------------------------------------------------------ High yield bonds (Credit Suisse First Boston High Yield Index) + 2.87 + 3.54 ------------------------------------------------------------------------------------
The headlines in recent months focused on Hurricanes Katrina and Rita and, more recently, the nomination of Ben Bernanke to succeed Alan Greenspan as Chairman of the Fed. While the hurricanes prompted a spike in energy prices and short-term disruptions to production and spending, the longer-term economic impact is likely to be tempered. In fact, the fiscal stimulus associated with reconstruction efforts in the Gulf Coast region could add to gross domestic product growth in 2006. Notably, the uncontroversial nomination of Dr. Bernanke was well received by the markets. The U.S. equity markets remained largely range bound in 2005. Up to this point, strong corporate earnings reports and relatively low long-term bond yields have worked in favor of equities. Looking ahead, high energy prices, continued interest rate hikes, a potential consumer slowdown and/or disappointing earnings pose the greatest risks to U.S. stocks. Internationally, many markets have benefited from strong economic statistics, trade surpluses and solid finances. The bond market continued to be characterized by a flattening yield curve, although long-term yields finally began to inch higher toward period end. The 10-year Treasury yield hit 4.57% on October 31, 2005, its highest level in more than six months. Still, the difference between the two-year and 10-year Treasury yield was just 17 basis points (.17%) at period end, compared to 149 basis points a year earlier. Financial markets are likely to face continued crosscurrents in the months ahead. Nevertheless, opportunities do exist and we encourage you to work with your financial advisor to diversify your portfolio among a variety of asset types. This can help to diffuse risk while also tapping into the potential benefits of a broader range of investment alternatives. As always, we thank you for trusting Merrill Lynch Investment Managers with your investment assets. Sincerely, /s/ Robert C. Doll, Jr. Robert C. Doll, Jr. President and Director/Trustee 2 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 We are pleased to present to you the management team of Merrill Lynch Large Cap Series Funds, Inc. [PHOTO OMITTED] [PHOTO OMITTED] Robert C. Doll, Jr. Senior Portfolio Manager Senior Portfolio Manager Bob Doll, President and Chief Investment Officer of Merrill Lynch Investment Managers, joined Merrill Lynch Investment Managers in 1999. He is the head of Merrill Lynch Large Cap Series Funds, Inc. Mr. Doll received bachelor's degrees from Lehigh University and an MBA from The Wharton School of the University of Pennsylvania. He is a CFA(R) charterholder and a Certified Public Accountant. Mr. Doll's investment team includes Senior Quantitative Analyst Tasos Bouloutas, Director of Equity Operations Brenda Sklar and Fundamental Analyst Dan Hanson. Mr. Bouloutas earned a master's degree and a Ph.D. from Columbia University. Ms. Sklar earned a bachelor's degree from the University of Delaware. She is a Certified Public Accountant. Mr. Hanson received a bachelor's degree from Middlebury College and an MBA from the University of Chicago. He is a CFA charterholder and member of the CFA Institute. ================================================================================ Table of Contents Page -------------------------------------------------------------------------------- A Letter From the President ............................................ 2 A Discussion With Your Funds' Portfolio Manager ........................ 4 Performance Data ....................................................... 6 Disclosure of Expenses ................................................. 11 Fund Financial Statements .............................................. 13 Fund Financial Highlights .............................................. 18 Fund Notes to Financial Statements ..................................... 28 Portfolio Information .................................................. 34 Master Schedules of Investments ........................................ 36 Master Financial Statements ............................................ 43 Master Financial Highlights ............................................ 48 Master Notes to Financial Statements ................................... 50 Reports of Independent Registered Public Accounting Firm ............... 33, 53 Important Tax Information .............................................. 56 Officers and Directors/Trustees ........................................ 57 CFA(R) and Chartered Financial Analyst(R) are trademarks owned by the CFA Institute. MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 3 A Discussion With Your Funds' Portfolio Manager The Funds significantly outperformed their respective benchmarks for the period, largely due to successful stock selection across various sectors and good sector allocation decisions. How did the Merrill Lynch Large Cap Series Funds perform during the fiscal year in light of the existing market conditions? For the 12-month period ended October 31, 2005, Merrill Lynch Large Cap Core Fund's Class A, Class B, Class C, Class I and Class R Shares had total returns of +17.61%, +16.69%, +16.80%, +17.94% and 17.39%, respectively, well ahead of the +10.47% return of the benchmark Russell 1000 Index and the +10.50% average return of its comparable Lipper category of Multi-Cap Core Funds*. Merrill Lynch Large Cap Growth Fund's Class A, Class B, Class C, Class I and Class R Shares had 12-month total returns of +11.62%, +10.80%, +10.82%, +11.96% and +11.39%, respectively, exceeding the +8.81% return of the benchmark Russell 1000 Growth Index. For the same period the Lipper Multi-Cap Growth Funds category had an average return of +12.95%*. Merrill Lynch Large Cap Value Fund's Class A, Class B, Class C, Class I and Class R Shares had total returns of +21.20%, +20.29%, +20.31%, +21.49% and +20.93%, respectively, also surpassing the +11.86% return of its benchmark, the Russell 1000 Value Index, and the +11.02% average return of the Lipper Multi-Cap Value Funds category for the 12-month period*. (Fund results shown do not reflect sales charges and would be lower if sales charges were included. Complete performance information for each Fund can be found on pages 6 - 10 of this report to shareholders.) Because the Funds invest in large-capitalization stocks that represent a significant part of the U.S. stock market, their portfolios were influenced by the same economic and market events that affected the broader stock market during the past 12 months. Impressive gains in the fourth quarter of 2004 were given back in the early months of 2005 as major equity indexes struggled to find their footing. The rally that followed the conclusion of the presidential election in November 2004 was hampered by concerns over inflation, a weak U.S. dollar and continuing interest rate hikes by the Federal Reserve Board (the Fed). As of November 1, 2005, the Fed had increased the federal funds rate 12 consecutive times since June 2004, bringing the short-term interest rate target to 4%. Oil prices continued to fluctuate and achieved record highs on more than one occasion during the reporting period, leading to inflationary concerns, but also contributing to strong performance from the energy sector. January, March and April were particularly weak months for the market. May through July brought a stock market upturn, as a significant number of acquisition announcements, along with a resilient economy, solid consumer spending, a robust housing sector, and solid growth in corporate profits, served to boost equities. The summer rally was short-lived, however, as the markets reacted to the uncertainty created in the aftermath of Hurricanes Katrina and Rita. Specifically, equities stalled in response to spiking energy prices, still rising interest rates, waning consumer confidence, the potential for slowing corporate profit growth and impending new leadership at the Fed as Chairman Alan Greenspan approaches the end of his 18-year tenure. Notably, the October 24 nomination of Dr. Ben Bernanke as Greenspan's replacement was well received by the markets. Still, October ended as one of the weaker months of the fiscal year. What factors most influenced the Funds' performance during the fiscal year? In the case of all three Funds, stock selection contributed positively to returns in most sectors, including health care (particularly health care providers and services) and financials (particularly insurance). In the energy sector, the combination of a sector overweight and effective stock selection enhanced returns, particularly in oil, gas and consumable fuels. Although stock selection in the technology sector added to returns for Merrill Lynch Large Cap Growth Fund, the combination of a sector overweight and stock selection detracted from the relative performance of Merrill Lynch Large Cap Value Fund and Merrill Lynch Large Cap Core Fund. Our positions in the consumer staples sector detracted from relative performance in all three portfolios; however, this was more than offset by the strong positive returns from other sectors. * Lipper Multi-Cap funds invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Multi-Cap Core funds typically have an average price-to-earnings ratio, price-to-book ratio and three-year sales-per-share growth value compared to the S&P SuperComposite 1500 Index. Multi-Cap Growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio and three-year sales-per-growth value compared to the S&P SuperComposite 1500 Index. Multi-Cap Value funds typically have a below-average price-to-earnings ratio, price-to-book ratio and three-year sales-per-growth value compared to the S&P SuperComposite 1500 Index. 4 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 At the individual stock level (based on the combined effect of stock returns and relative weightings in each Portfolio), the largest positive contributors to Merrill Lynch Large Cap Core Fund's relative performance during the 12-month period were Valero Energy Corp., Humana, Inc., PacifiCare Health Systems, Sunoco, Inc., Express Scripts, Inc., Cigna Corp. and Autodesk, Inc. The largest performance detractors included Altria Group, Inc., TIBCO Software, Inc., Symantec Corporation, Dell, Inc. and QLogic Corp. In the Merrill Lynch Large Cap Growth Fund portfolio, the largest positive contributors to relative performance were PacifiCare Health Systems, Aetna, Inc., Express Scripts, AutoDesk and Burlington Resources, Inc. Stocks that detracted most from that Fund's relative performance included Dell, Pfizer, Inc., Amgen, Inc., Advanced Micro Devices, Inc. and Cree, Inc. In terms of Merrill Lynch Large Cap Value Fund, the largest positive contributors to relative performance were Valero Energy, Humana, PacifiCare Health Systems, Sunoco and Pfizer. The largest detractors included Altria Group, Claire's Stores, Inc., Exxon Mobil Corp., QLogic and Energizer Holdings, Inc. Our underweight position in Fannie Mae also had a positive impact on the performance of all three Funds, as this was a negative contributor in all three benchmarks. What changes were made to the Portfolios during the fiscal period? Overall, we continued to identify companies with favorable growth characteristics and earnings developments, selling at attractive relative valuations. As a result of our bottom-up stock-selection process, we increased the Portfolios' positions in technology and energy while reducing exposure to the consumer discretionary, materials and consumer staples sectors. In Master Large Cap Core Portfolio, the largest purchases during the period included Intel Corp., Dell, Exxon Mobil, Hewlett-Packard Co. and Texas Instruments, Inc. The largest sales included Johnson & Johnson, Apple Computer, Inc., Chevron Corp., PacifiCare Health Systems and Monsanto Co. In Master Large Cap Growth Portfolio, the largest purchases included Intel Corp., Dell, Amgen, General Electric Co. and Best Buy Co., Inc. The largest sales included Johnson & Johnson, Pfizer, Microchip Technology, The Home Depot, Inc. and PacifiCare Health Systems. In Master Large Cap Value Portfolio, the largest purchases included Intel, Exxon Mobil, Goldman Sachs Group, Inc., Hewlett-Packard, The St. Paul Travelers Companies, Inc. and MeadWestvaco Corp. The largest sales included Chevron Texaco, The Bear Stearns Cos., Inc., PacifiCare Health Systems, Monsanto and Chubb Corp. These transactions reflect our ongoing refinement of the portfolios, as we continue to look for stocks that best meet our investment criteria while pruning those that have deteriorated versus our original assessment. How would you characterize the Portfolios' positioning at the close of the period? The Portfolios' largest overweights as of October 31, 2005, were in the technology and energy sectors. The largest underweights were in financials, which tend to underperform in periods of rising interest rates, consumer staples, utilities, industrials and telecommunications services. Our view is that a somewhat conservative investment position makes sense, at least until there is more evidence that the Fed is prepared to cease increasing short-term interest rates. Recently reported third quarter gross domestic product (GDP) data showed that, contrary to investors' concerns, core inflation (which excludes food and energy prices) actually declined from the second quarter. By early 2006, we believe it will become more evident that consumers are retrenching, and that real GDP has decelerated to a more non-inflationary pace, specifically 3% or less. Having said that, we continue to believe that a highly diversified portfolio and a focus on individual security selection (rather than a more macro approach) is appropriate and should be rewarded on a relative basis. Robert C. Doll, Jr. President, Director/Trustee and Senior Portfolio Manager November 4, 2005 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 5 Performance Data About Fund Performance Investors are able to purchase shares of the Funds 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 Class I Shares incur a maximum initial sales charge (front-end load) of 5.25% and bear no ongoing distribution or account maintenance fees. Class I Shares are available only to eligible investors. o Class R Shares do not incur a maximum sales charge (front-end load) or deferred sales charge. These shares are subject to a distribution fee of 0.25% per year and an account maintenance fee of 0.25% per year. Class R Shares are available only to certain retirement plans. Prior to inception, Class R Share performance results are those of Class I Shares (which have no distribution or account maintenance fees) restated for Class R Share fees. None of the past results shown should be considered a representation of future performance. Current performance may be lower or higher than the performance data quoted. Refer to www.mlim.ml.com to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in each of the following tables assume reinvestment of all dividends and capital gain distributions, if any, at net asset value on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Dividends paid to each class of shares will vary because of the different levels of account maintenance, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders. 6 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Performance Data (continued) Recent Performance Results
6-Month 12-Month Since Inception As of October 31, 2005 Total Return Total Return Total Return ======================================================================================================== ML Large Cap Core Fund Class A Shares* +10.44% +17.61% +31.18% ------------------------------------------------------------------------------------------------------- ML Large Cap Core Fund Class B Shares* +10.00 +16.69 +25.34 ------------------------------------------------------------------------------------------------------- ML Large Cap Core Fund Class C Shares* +10.00 +16.80 +25.34 ------------------------------------------------------------------------------------------------------- ML Large Cap Core Fund Class I Shares* +10.55 +17.94 +33.10 ------------------------------------------------------------------------------------------------------- ML Large Cap Core Fund Class R Shares* +10.26 +17.39 +29.84 ------------------------------------------------------------------------------------------------------- ML Large Cap Growth Fund Class A Shares* + 9.37 +11.62 - 7.76 ------------------------------------------------------------------------------------------------------- ML Large Cap Growth Fund Class B Shares* + 9.02 +10.80 -11.79 ------------------------------------------------------------------------------------------------------- ML Large Cap Growth Fund Class C Shares* + 8.90 +10.82 -11.88 ------------------------------------------------------------------------------------------------------- ML Large Cap Growth Fund Class I Shares* + 9.47 +11.96 - 6.35 ------------------------------------------------------------------------------------------------------- ML Large Cap Growth Fund Class R Shares* + 9.22 +11.39 - 8.58 ------------------------------------------------------------------------------------------------------- ML Large Cap Value Fund Class A Shares* +12.18 +21.20 +76.28 ------------------------------------------------------------------------------------------------------- ML Large Cap Value Fund Class B Shares* +11.79 +20.29 +68.66 ------------------------------------------------------------------------------------------------------- ML Large Cap Value Fund Class C Shares* +11.72 +20.31 +68.56 ------------------------------------------------------------------------------------------------------- ML Large Cap Value Fund Class I Shares* +12.34 +21.49 +78.95 ------------------------------------------------------------------------------------------------------- ML Large Cap Value Fund Class R Shares* +12.05 +20.93 +74.76 ------------------------------------------------------------------------------------------------------- Russell 1000(R) Index** + 6.18 +10.47 - 4.36 ------------------------------------------------------------------------------------------------------- Russell 1000(R) Growth Index*** + 7.59 + 8.81 -36.43 ------------------------------------------------------------------------------------------------------- Russell 1000(R) Value Index**** + 4.82 +11.86 +36.04 -------------------------------------------------------------------------------------------------------
* Investment results shown do not reflect sales charges; results shown would be lower if a sales charge was included. Cumulative total investment returns are based on changes in net asset values for the periods shown, and assume reinvestment of all dividends and capital gains distributions at net asset value on the ex-dividend date. Since inception total return is from 12/22/99. ** This unmanaged broad-based Index measures the performance of the 1,000 largest companies in the Russell 3000(R) Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. Since inception total return is from 12/22/99. *** This unmanaged broad-based Index is a subset of the Russell 1000 Index consisting of those Russell 1000 securities with a greater-than-average growth orientation. Since inception total return is from 12/22/99. **** This unmanaged broad-based Index is a subset of the Russell 1000 Index consisting of those Russell 1000 securities with lower price/book ratios and lower forecasted growth values. Since inception total return is from 12/22/99. Russell 1000 is a registered trademark of the Frank Russell Company. MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 7 Performance Data (continued) Merrill Lynch Large Cap Core Fund 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 1000 Index. Values are from December 22, 1999 to October 2005:
ML Large Cap ML Large Cap ML Large Cap ML Large Cap ML Large Cap Russell Core Fund+-- Core Fund+-- Core Fund+-- Core Fund+-- Core Fund+-- 1000 Class A Shares* Class B Shares* Class C Shares* Class I Shares* Class R Shares* Index++ 12/22/99** $ 9,475 $10,000 $10,000 $ 9,475 $10,000 $10,000 10/00 $11,124 $11,670 $11,670 $11,152 $11,720 $10,250 10/01 $ 8,587 $ 8,931 $ 8,931 $ 8,626 $ 9,020 $ 7,581 10/02 $ 7,819 $ 8,071 $ 8,071 $ 7,877 $ 8,195 $ 6,474 10/03 $ 9,696 $ 9,931 $ 9,931 $ 9,792 $10,177 $ 7,919 10/04 $10,568 $10,741 $10,731 $10,693 $11,061 $ 8,658 10/05 $12,429 $12,434 $12,534 $12,611 $12,984 $ 9,564
* Assuming maximum sales charge, transaction costs and other operating expenses, including administration fees. ** Commencement of operations. + ML Large Cap Core Fund invests all of its assets in Master Large Cap Core Portfolio of Master Large Cap Series Trust. The Portfolio invests primarily in a diversified portfolio of equity securities of large cap companies located in the United States that the Investment Adviser believes blends growth and value. ++ This unmanaged broad-based Index measures the performance of the 1,000 largest companies in the Russell 3000(R) Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. Past performance is not predictive of future results. Average Annual Total Return Return Without Return With Sales Charge Sales Charge** ================================================================================ Class A Shares* ================================================================================ One Year Ended 10/31/05 +17.61% +11.44% ------------------------------------------------------------------------------- Five Years Ended 10/31/05 + 2.24 + 1.15 ------------------------------------------------------------------------------- Inception (12/22/99) through 10/31/05 + 4.74 + 3.78 ------------------------------------------------------------------------------- Return Return Without CDSC With CDSC+++ ================================================================================ Class B Shares++ ================================================================================ One Year Ended 10/31/05 +16.69% +12.69% ------------------------------------------------------------------------------- Five Years Ended 10/31/05 + 1.44 + 1.06 ------------------------------------------------------------------------------- Inception (12/22/99) through 10/31/05 + 3.93 + 3.79 ------------------------------------------------------------------------------- Return Return Without CDSC With CDSC+++ ================================================================================ Class C Shares+ ================================================================================ One Year Ended 10/31/05 +16.80% +15.80% ------------------------------------------------------------------------------- Five Years Ended 10/31/05 + 1.44 + 1.44 ------------------------------------------------------------------------------- Inception (12/22/99) through 10/31/05 + 3.93 + 3.93 ------------------------------------------------------------------------------- Return Without Return With Sales Charge Sales Charge** ================================================================================ Class I Shares* ================================================================================ One Year Ended 10/31/05 +17.94% +11.75% ------------------------------------------------------------------------------- Five Years Ended 10/31/05 + 2.49 + 1.39 ------------------------------------------------------------------------------- Inception (12/22/99) through 10/31/05 + 5.00 + 4.04 ------------------------------------------------------------------------------- Class R Shares Return ================================================================================ One Year Ended 10/31/05 +17.39% ------------------------------------------------------------------------------- Five Years Ended 10/31/05 + 2.07 ------------------------------------------------------------------------------- Inception (12/22/99) through 10/31/05 + 4.56 ------------------------------------------------------------------------------- * 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. 8 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Performance Data (continued) Merrill Lynch Large Cap Growth Fund 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 1000 Growth Index. Values are from December 22, 1999 to October 2005:
ML Large Cap ML Large Cap ML Large Cap ML Large Cap ML Large Cap Russell Growth Fund+-- Growth Fund+-- Growth Fund+-- Growth Fund+-- Growth Fund+-- 1000 Class A Shares* Class B Shares* Class C Shares* Class I Shares* Class R Shares* Growth Index++ 12/22/99** $ 9,475 $10,000 $10,000 $ 9,475 $10,000 $10,000 10/00 $10,726 $11,260 $11,250 $10,754 $11,302 $ 9,610 10/01 $ 7,081 $ 7,371 $ 7,362 $ 7,110 $ 7,434 $ 5,771 10/02 $ 6,057 $ 6,251 $ 6,252 $ 6,105 $ 6,351 $ 4,639 10/03 $ 7,479 $ 7,661 $ 7,652 $ 7,556 $ 7,862 $ 5,651 10/04 $ 7,830 $ 7,961 $ 7,952 $ 7,925 $ 8,207 $ 5,842 10/05 $ 8,740 $ 8,733 $ 8,812 $ 8,873 $ 9,142 $ 6,357
* Assuming maximum sales charge, transaction costs and other operating expenses, including administration fees. ** Commencement of operations. + ML Large Cap Growth Fund invests all of its assets in Master Large Cap Growth Portfolio of Master Large Cap Series Trust. The Portfolio invests primarily in a diversified portfolio of equity securities of large cap companies located in the United States that the Investment Adviser believes have good prospects for earnings growth. ++ This unmanaged broad-based Index is a subset of the Russell 1000 Index consisting of those Russell 1000 securities with a greater-than-average growth orientation. Past performance is not predictive of future results. Average Annual Total Return Return Without Return With Sales Charge Sales Charge** ================================================================================ Class A Shares* ================================================================================ One Year Ended 10/31/05 +11.62% + 5.76% ------------------------------------------------------------------------------- Five Years Ended 10/31/05 - 4.01 - 5.04 ------------------------------------------------------------------------------- Inception (12/22/99) through 10/31/05 - 1.37 - 2.27 ------------------------------------------------------------------------------- Return Return Without CDSC With CDSC+++ ================================================================================ Class B Shares++ ================================================================================ One Year Ended 10/31/05 +10.80% + 6.80% ------------------------------------------------------------------------------- Five Years Ended 10/31/05 - 4.76 - 5.15 ------------------------------------------------------------------------------- Inception (12/22/99) through 10/31/05 - 2.12 - 2.28 ------------------------------------------------------------------------------- Return Return Without CDSC With CDSC+++ ================================================================================ Class C Shares+ ================================================================================ One Year Ended 10/31/05 +10.82% + 9.82% ------------------------------------------------------------------------------- Five Years Ended 10/31/05 - 4.77 - 4.77 ------------------------------------------------------------------------------- Inception (12/22/99) through 10/31/05 - 2.13 - 2.13 ------------------------------------------------------------------------------- Return Without Return With Sales Charge Sales Charge** ================================================================================ Class I Shares* ================================================================================ One Year Ended 10/31/05 +11.96% + 6.08% ------------------------------------------------------------------------------- Five Years Ended 10/31/05 - 3.77 - 4.80 ------------------------------------------------------------------------------- Inception (12/22/99) through 10/31/05 - 1.11 - 2.02 ------------------------------------------------------------------------------- Class R Shares Return ================================================================================ One Year Ended 10/31/05 +11.39% ------------------------------------------------------------------------------- Five Years Ended 10/31/05 - 4.15 ------------------------------------------------------------------------------- Inception (12/22/99) through 10/31/05 - 1.52 ------------------------------------------------------------------------------- * 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 LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 9 Performance Data (concluded) Merrill Lynch Large Cap Value Fund 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 1000 Value Index. Values are from December 22, 1999 to October 2005:
ML Large Cap ML Large Cap ML Large Cap ML Large Cap ML Large Cap Russell Value Fund+-- Value Fund+-- Value Fund+-- Value Fund+-- Value Fund+-- 1000 Class A Shares* Class B Shares* Class C Shares* Class I Shares* Class R Shares* Value Index++ 12/22/99** $ 9,475 $10,000 $10,000 $ 9,475 $10,000 $10,000 10/00 $11,000 $11,540 $11,540 $11,029 $11,590 $10,809 10/01 $10,073 $10,481 $10,481 $10,123 $10,586 $ 9,527 10/02 $ 9,617 $ 9,931 $ 9,931 $ 9,687 $10,079 $ 8,573 10/03 $12,112 $12,411 $12,411 $12,230 $12,735 $10,533 10/04 $13,781 $14,021 $14,011 $13,956 $14,451 $12,161 10/05 $16,702 $16,766 $16,856 $16,956 $17,476 $13,604
* Assuming maximum sales charge, transaction costs and other operating expenses, including administration fees. ** Commencement of operations. + ML Large Cap Value Fund invests all of its assets in Master Large Cap Value Portfolio of the Master Large Cap Series Trust. The Portfolio invests primarily in a diversified portfolio of equity securities of large cap companies located in the United States that the Investment Adviser believes are undervalued. ++ This unmanaged broad-based Index is a subset of the Russell 1000 Index consisting of those Russell 1000 securities with lower price/book ratios and lower forecasted growth values. Past performance is not predictive of future results. Average Annual Total Return Return Without Return With Sales Charge Sales Charge** ================================================================================ Class A Shares* ================================================================================ One Year Ended 10/31/05 +21.20% +14.83% ------------------------------------------------------------------------------- Five Years Ended 10/31/05 + 8.71 + 7.54 ------------------------------------------------------------------------------- Inception (12/22/99) through 10/31/05 +10.16 + 9.15 ------------------------------------------------------------------------------- Return Return Without CDSC With CDSC+++ ================================================================================ Class B Shares++ ================================================================================ One Year Ended 10/31/05 +20.29% +16.29% ------------------------------------------------------------------------------- Five Years Ended 10/31/05 + 7.89 + 7.59 ------------------------------------------------------------------------------- Inception (12/22/99) through 10/31/05 + 9.33 + 9.22 ------------------------------------------------------------------------------- Return Return Without CDSC With CDSC+++ ================================================================================ Class C Shares+ ================================================================================ One Year Ended 10/31/05 +20.31% +19.31% ------------------------------------------------------------------------------- Five Years Ended 10/31/05 + 7.87 + 7.87 ------------------------------------------------------------------------------- Inception (12/22/99) through 10/31/05 + 9.32 + 9.32 ------------------------------------------------------------------------------- Return Without Return With Sales Charge Sales Charge** ================================================================================ Class I Shares* ================================================================================ One Year Ended 10/31/05 +21.49% +15.11% ------------------------------------------------------------------------------- Five Years Ended 10/31/05 + 8.98 + 7.81 ------------------------------------------------------------------------------- Inception (12/22/99) through 10/31/05 +10.44 + 9.43 ------------------------------------------------------------------------------- Class R Shares Return ================================================================================ One Year Ended 10/31/05 +20.93% ------------------------------------------------------------------------------- Five Years Ended 10/31/05 + 8.56 ------------------------------------------------------------------------------- Inception (12/22/99) through 10/31/05 + 9.99 ------------------------------------------------------------------------------- * 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. 10 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Disclosure of Expenses Shareholders of these Funds may incur the following charges: (a) expenses related to transactions, including sales charges, redemption fees and exchange fees; and (b) operating expenses including advisory fees, distribution fees including 12(b)-1 fees, and other Fund expenses. The following example (which is based on a hypothetical investment of $1,000 invested on May 1, 2005 and held through October 31, 2005) is intended to assist shareholders both in calculating expenses based on an investment in each 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 each 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 these Funds and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in other funds' shareholder reports. The expenses shown in the table are intended to highlight shareholders ongoing costs only and do not reflect any transactional expenses, such as sales charges, redemption fees or exchange fees. Therefore, the second table is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.
Expenses Paid Beginning Ending During the Period* Account Value Account Value May 1, 2005 to Merrill Lynch Large Cap Core Fund May 1, 2005 October 31, 2005 October 31, 2005 ============================================================================================================ Actual ============================================================================================================ Class A $1,000 $1,104.40 $ 6.24 ----------------------------------------------------------------------------------------------------------- Class B $1,000 $1,100.00 $10.38 ----------------------------------------------------------------------------------------------------------- Class C $1,000 $1,100.00 $10.38 ----------------------------------------------------------------------------------------------------------- Class I $1,000 $1,105.50 $ 4.91 ----------------------------------------------------------------------------------------------------------- Class R $1,000 $1,102.60 $ 7.62 ============================================================================================================ Hypothetical (5% annual return before expenses)** ============================================================================================================ Class A $1,000 $1,019.41 $ 5.99 ----------------------------------------------------------------------------------------------------------- Class B $1,000 $1,015.46 $ 9.96 ----------------------------------------------------------------------------------------------------------- Class C $1,000 $1,015.46 $ 9.96 ----------------------------------------------------------------------------------------------------------- Class I $1,000 $1,020.68 $ 4.71 ----------------------------------------------------------------------------------------------------------- Class R $1,000 $1,018.09 $ 7.31 -----------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense ratio for the class (1.17% for Class A, 1.95% for Class B, 1.95% for Class C, .92% for Class I and 1.43% for Class R), multiplied by the average account value over the period, multiplied by 185/365 (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 portfolio 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. MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 11 Disclosure of Expenses (concluded)
Expenses Paid Beginning Ending During the Period* Account Value Account Value May 1, 2005 to Merrill Lynch Large Cap Growth Fund May 1, 2005 October 31, 2005 October 31, 2005 ============================================================================================================ Actual ============================================================================================================ Class A $1,000 $1,093.70 $ 7.06 ----------------------------------------------------------------------------------------------------------- Class B $1,000 $1,090.20 $11.18 ----------------------------------------------------------------------------------------------------------- Class C $1,000 $1,089.00 $11.17 ----------------------------------------------------------------------------------------------------------- Class I $1,000 $1,094.70 $ 5.73 ----------------------------------------------------------------------------------------------------------- Class R $1,000 $1,092.20 $ 8.38 ============================================================================================================ Hypothetical (5% annual return before expenses)** ============================================================================================================ Class A $1,000 $1,018.60 $ 6.80 ----------------------------------------------------------------------------------------------------------- Class B $1,000 $1,014.65 $10.77 ----------------------------------------------------------------------------------------------------------- Class C $1,000 $1,014.65 $10.77 ----------------------------------------------------------------------------------------------------------- Class I $1,000 $1,019.87 $ 5.53 ----------------------------------------------------------------------------------------------------------- Class R $1,000 $1,017.33 $ 8.08 -----------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense ratio for the class (1.33% for Class A, 2.11% for Class B, 2.11% for Class C, 1.08% for Class I and 1.58% for Class R), multiplied by the average account value over the period, multiplied by 185/365 (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 portfolio 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.
Expenses Paid Beginning Ending During the Period* Account Value Account Value May 1, 2005 to Merrill Lynch Large Cap Value Fund May 1, 2005 October 31, 2005 October 31, 2005 ============================================================================================================ Actual ============================================================================================================ Class A $1,000 $1,121.80 $ 6.67 ----------------------------------------------------------------------------------------------------------- Class B $1,000 $1,117.90 $10.73 ----------------------------------------------------------------------------------------------------------- Class C $1,000 $1,117.20 $10.73 ----------------------------------------------------------------------------------------------------------- Class I $1,000 $1,123.40 $ 5.33 ----------------------------------------------------------------------------------------------------------- Class R $1,000 $1,120.50 $ 8.01 ============================================================================================================ Hypothetical (5% annual return before expenses)** ============================================================================================================ Class A $1,000 $1,019.06 $ 6.34 ----------------------------------------------------------------------------------------------------------- Class B $1,000 $1,015.21 $10.21 ----------------------------------------------------------------------------------------------------------- Class C $1,000 $1,015.21 $10.21 ----------------------------------------------------------------------------------------------------------- Class I $1,000 $1,020.32 $ 5.07 ----------------------------------------------------------------------------------------------------------- Class R $1,000 $1,017.79 $ 7.62 -----------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense ratio for the class (1.24% for Class A, 2.00% for Class B, 2.00% for Class C, .99% for Class I and 1.49% for Class R), multiplied by the average account value over the period, multiplied by 185/365 (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 portfolio 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. 12 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Statements of Assets and Liabilities Merrill Lynch Large Cap Series Funds, Inc.
Merrill Lynch Merrill Lynch Merrill Lynch Large Large Large Cap Core Cap Growth Cap Value As of October 31, 2005 Fund Fund Fund =================================================================================================================================== Assets ---------------------------------------------------------------------------------------------------------------------------------- Investment in Master Large Cap Core Portfolio, Master Large Cap Growth Portfolio and Master Large Cap Value Portfolio, respectively (the"Portfolios")* ............. $2,463,214,494 $ 489,398,122 $1,535,988,062 Prepaid expenses ........................................ 70,077 59,501 120,343 --------------------------------------------------- Total assets ............................................ 2,463,284,571 489,457,623 1,536,108,405 --------------------------------------------------- =================================================================================================================================== Liabilities ---------------------------------------------------------------------------------------------------------------------------------- Payables: Distributor .......................................... 1,133,067 219,238 657,504 Other affiliates ..................................... 807,040 252,889 473,143 Administrator ........................................ 511,011 101,696 322,605 Accrued expenses and other liabilities .................. 88,991 20,407 90,471 --------------------------------------------------- Total liabilities ....................................... 2,540,109 594,230 1,543,723 --------------------------------------------------- =================================================================================================================================== Net Assets ---------------------------------------------------------------------------------------------------------------------------------- Net assets .............................................. $2,460,744,462 $ 488,863,393 $1,534,564,682 =================================================== =================================================================================================================================== Net Assets Consist of ---------------------------------------------------------------------------------------------------------------------------------- Undistributed (accumulated) realized capital gains (losses) allocated from the Portfolios--net ............ $ 64,565,590 $ (58,161,863) $ 69,881,864 Unrealized appreciation allocated from the Portfolios--net ........................................ 332,200,332 47,127,989 204,111,128 --------------------------------------------------- Total accumulated earnings (losses)--net ................ 396,765,922 (11,033,874) 273,992,992 Class A Shares of Common Stock, $.10 par value, 100,000,000 shares authorized .......................... 4,838,218 1,224,394 2,201,242 Class B Shares of Common Stock, $.10 par value, 200,000,000 shares authorized .......................... 3,588,997 1,084,321 1,621,698 Class C Shares of Common Stock, $.10 par value, 100,000,000 shares authorized .......................... 5,928,877 1,420,981 2,544,487 Class I Shares of Common Stock, $.10 par value, 100,000,000 shares authorized .......................... 4,554,523 1,374,606 2,606,262 Class R Shares of Common Stock, $.10 par value, 200,000,000 shares authorized .......................... 365,648 295,093 278,883 Paid-in capital in excess of par ........................ 2,044,702,277 494,497,872 1,251,319,118 --------------------------------------------------- Net Assets .............................................. $2,460,744,462 $ 488,863,393 $1,534,564,682 ===================================================
MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 13 Statements of Assets and Liabilities (concluded) Merrill Lynch Large Cap Series Funds, Inc.
Merrill Lynch Merrill Lynch Merrill Lynch Large Large Large Cap Core Cap Growth Cap Value As of October 31, 2005 Fund Fund Fund =================================================================================================================================== Net Asset Value ---------------------------------------------------------------------------------------------------------------------------------- Class A: Net assets ........................................... $ 629,682,419 $ 112,886,500 $ 371,216,409 =================================================== Shares outstanding ................................... 48,382,179 12,243,944 22,012,424 =================================================== Net asset value ...................................... $ 13.01 $ 9.22 $ 16.86 =================================================== Class B: Net assets ........................................... $ 446,242,276 $ 95,593,206 $ 261,344,935 =================================================== Shares outstanding ................................... 35,889,965 10,843,205 16,216,977 =================================================== Net asset value ...................................... $ 12.43 $ 8.82 $ 16.12 =================================================== Class C: Net assets ........................................... $ 737,062,637 $ 125,150,254 $ 409,937,149 =================================================== Shares outstanding ................................... 59,288,768 14,209,813 25,444,869 =================================================== Net asset value ...................................... $ 12.43 $ 8.81 $ 16.11 =================================================== Class I: Net assets ........................................... $ 601,378,310 $ 128,667,124 $ 446,172,027 =================================================== Shares outstanding ................................... 45,545,231 13,746,055 26,062,618 =================================================== Net asset value ...................................... $ 13.20 $ 9.36 $ 17.12 =================================================== Class R Net assets ........................................... $ 46,378,820 $ 26,566,309 $ 45,894,162 =================================================== Shares outstanding ................................... 3,656,479 2,950,926 2,788,826 =================================================== Net asset value ...................................... $ 12.68 $ 9.00 $ 16.46 =================================================== * Identified cost ...................................... $2,131,014,162 $ 442,270,133 $1,331,876,934 ===================================================
See Notes to Financial Statements. 14 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Statements of Operations Merrill Lynch Large Cap Series Funds, Inc.
Merrill Lynch Merrill Lynch Merrill Lynch Large Large Large Cap Core Cap Growth Cap Value For the Year Ended October 31, 2005 Fund Fund Fund =================================================================================================================================== Investment Income ---------------------------------------------------------------------------------------------------------------------------------- Net investment income allocated from the Portfolios: Dividends ............................................ $ 25,958,189 $ 3,809,535 $ 15,255,855 Securities lending--net .............................. 161,565 35,059 43,166 Interest from affiliates ............................. 114,544 34,055 156,787 Expenses ............................................. (10,848,593) (2,458,800) (6,252,664) --------------------------------------------------- Total income ............................................ 15,385,705 1,419,849 9,203,144 --------------------------------------------------- =================================================================================================================================== Expenses ---------------------------------------------------------------------------------------------------------------------------------- Account maintenance and distribution fees--Class C ...... 6,021,329 1,140,087 3,155,485 Administration fees ..................................... 5,352,637 1,076,760 2,863,939 Account maintenance and distribution fees--Class B ...... 4,443,683 967,638 2,479,882 Account maintenance fees--Class A ....................... 1,315,292 233,130 696,464 Transfer agent fees--Class C ............................ 966,537 272,485 548,802 Transfer agent fees--Class I ............................ 733,049 229,433 430,008 Transfer agent fees--Class A ............................ 718,974 198,463 435,334 Transfer agent fees--Class B ............................ 703,181 234,837 430,014 Registration fees ....................................... 223,583 90,172 173,615 Account maintenance and distribution fees--Class R ...... 153,849 94,427 143,842 Printing and shareholder reports ........................ 137,825 74,373 110,771 Professional fees ....................................... 43,182 17,846 29,270 Transfer agent fees--Class R ............................ 42,561 40,224 45,015 Other ................................................... 18,212 16,001 15,488 --------------------------------------------------- Total expenses .......................................... 20,873,894 4,685,876 11,557,929 --------------------------------------------------- Investment loss--net .................................... (5,488,189) (3,266,027) (2,354,785) --------------------------------------------------- =================================================================================================================================== Realized & Unrealized Gain Allocated from the Portfolios--Net ---------------------------------------------------------------------------------------------------------------------------------- Realized gain on investments--net ....................... 169,480,673 27,951,501 77,262,988 Change in unrealized appreciation on investments--net ... 148,113,813 17,275,515 112,124,763 --------------------------------------------------- Total realized and unrealized gain--net ................. 317,594,486 45,227,016 189,387,751 --------------------------------------------------- Net Increase in Net Assets Resulting from Operations .... $ 312,106,297 $ 41,960,989 $ 187,032,966 ===================================================
See Notes to Financial Statements. MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 15 Statements of Changes in Net Assets Merrill Lynch Large Cap Core Fund
For the Year Ended October 31, ----------------------------------- Increase (Decrease) in Net Assets: 2005 2004 ================================================================================================================================= Operations -------------------------------------------------------------------------------------------------------------------------------- Investment loss--net .................................................. $ (5,488,189) $ (5,975,718) Realized gain--net .................................................... 169,480,673 176,458,090 Change in unrealized appreciation--net ................................ 148,113,813 (54,503,940) ----------------------------------- Net increase in net assets resulting from operations .................. 312,106,297 115,978,432 ----------------------------------- ================================================================================================================================= Distributions to Shareholders -------------------------------------------------------------------------------------------------------------------------------- Realized gain--net: Class A ............................................................ (3,420,110) -- Class B ............................................................ (3,547,724) -- Class C ............................................................ (3,932,578) -- Class I ............................................................ (3,522,593) -- Class R ............................................................ (154,059) -- ----------------------------------- Net decrease in net assets resulting from distributions to shareholders (14,577,064) -- ----------------------------------- ================================================================================================================================= Capital Share Transactions -------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets derived from capital share transactions .... 496,660,002 309,948,089 ----------------------------------- ================================================================================================================================= Net Assets -------------------------------------------------------------------------------------------------------------------------------- Total increase in net assets .......................................... 794,189,235 425,926,521 Beginning of year ..................................................... 1,666,555,227 1,240,628,706 ----------------------------------- End of year ........................................................... $ 2,460,744,462 $ 1,666,555,227 ===================================
See Notes to Financial Statements. Statements of Changes In Net Assets Merrill Lynch Large Cap Growth Fund
For the Year Ended October 31, ----------------------------------- Increase (Decrease) in Net Assets: 2005 2004 ================================================================================================================================= Operations -------------------------------------------------------------------------------------------------------------------------------- Investment loss--net .................................................. $ (3,266,027) $ (3,345,613) Realized gain--net .................................................... 27,951,501 24,609,663 Change in unrealized appreciation/depreciation--net ................... 17,275,515 (10,279,020) ----------------------------------- Net increase in net assets resulting from operations .................. 41,960,989 10,985,030 ----------------------------------- ================================================================================================================================= Capital Share Transactions -------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets derived from capital share transactions .... 102,839,683 83,194,823 ----------------------------------- ================================================================================================================================= Net Assets -------------------------------------------------------------------------------------------------------------------------------- Total increase in net assets .......................................... 144,800,672 94,179,853 Beginning of year ..................................................... 344,062,721 249,882,868 ----------------------------------- End of year ........................................................... $ 488,863,393 $ 344,062,721 ===================================
See Notes to Financial Statements. 16 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Statements of Changes in Net Assets Merrill Lynch Large Cap Value Fund
For the Year Ended October 31, ----------------------------------- Increase (Decrease) in Net Assets: 2005 2004 ================================================================================================================================= Operations -------------------------------------------------------------------------------------------------------------------------------- Investment loss--net .................................................. $ (2,354,785) $ (1,096,859) Realized gain--net .................................................... 77,262,988 78,138,759 Change in unrealized appreciation--net ................................ 112,124,763 (2,549,598) ----------------------------------- Net increase in net assets resulting from operations .................. 187,032,966 74,492,302 ----------------------------------- ================================================================================================================================= Distributions to Shareholders -------------------------------------------------------------------------------------------------------------------------------- Realized gain--net: Class A ............................................................ (8,283,910) -- Class B ............................................................ (10,290,416) -- Class C ............................................................ (10,721,593) -- Class I ............................................................ (8,685,584) -- Class R ............................................................ (707,934) -- ----------------------------------- Net decrease in net assets resulting from distributions to shareholders (38,689,437) -- ----------------------------------- ================================================================================================================================= Capital Share Transactions -------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets derived from capital share transactions .... 576,505,050 220,472,373 ----------------------------------- ================================================================================================================================= Net Assets -------------------------------------------------------------------------------------------------------------------------------- Total increase in net assets .......................................... 724,848,579 294,964,675 Beginning of year ..................................................... 809,716,103 514,751,428 ----------------------------------- End of year ........................................................... $ 1,534,564,682 $ 809,716,103 ===================================
See Notes to Financial Statements. MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 17 Financial Highlights Class A
Merrill Lynch Large Cap Core Fund ----------------------------------------------------------------- For the Year Ended October 31, The following per share data and ratios have been derived ----------------------------------------------------------------- from information provided in the financial statements. 2005 2004 2003 2002 2001 ================================================================================================================================== Per Share Operating Performance --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ........... $ 11.15 $ 10.23 $ 8.25 $ 9.06 $ 11.74 ----------------------------------------------------------------- Investment income (loss)--net* ............... .01 (.01) (.02) .01 --@ Realized and unrealized gain (loss)--net ..... 1.94 .93 2.00 (.82) (2.68) ----------------------------------------------------------------- Total from investment operations ............. 1.95 .92 1.98 (.81) (2.68) ----------------------------------------------------------------- Less distributions: Realized gain--net ........................ (.09) -- -- -- -- In excess of realized gain--net ........... -- -- -- -- --@ Return of capital ......................... -- -- -- -- -- ----------------------------------------------------------------- Total distributions .......................... (.09) -- -- -- --@ ----------------------------------------------------------------- Net asset value, end of year ................. $ 13.01 $ 11.15 $ 10.23 $ 8.25 $ 9.06 ================================================================= ================================================================================================================================== Total Investment Return+ --------------------------------------------------------------------------------------------------------------------------------- Based on net asset value per share ........... 17.61% 8.99% 24.00% (8.94%) (22.80%) ================================================================= ================================================================================================================================== Ratios to Average Net Assets --------------------------------------------------------------------------------------------------------------------------------- Expenses, net of reimbursement** ............. 1.16% 1.18% 1.23% 1.28% 1.32% ================================================================= Expenses** ................................... 1.16% 1.18% 1.23% 1.28% 1.32% ================================================================= Investment income (loss)--net ................ .05% (.09%) (.21%) .10% (.05%) ================================================================= ================================================================================================================================== Supplemental Data --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (in thousands) ....... $ 629,682 $ 392,896 $ 293,144 $ 136,552 $ 84,891 ================================================================= Portfolio turnover of the Portfolios ......... 93.95% 135.48% 138.73% 150.18% 162.28% =================================================================
* Based on average shares outstanding. ** Includes the Fund's share of the Portfolio's allocated expenses. + Total investment returns exclude the effects of sales charges. @ Amount is less than $(.01) per share. See Notes to Financial Statements. 18 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005
Merrill Lynch Large Cap Growth Fund Merrill Lynch Large Cap Value Fund -------------------------------------------------------------- --------------------------------------------------------------- For the Year Ended October 31, For the Year Ended October 31, -------------------------------------------------------------- --------------------------------------------------------------- 2005 2004 2003 2002 2001 2005 2004 2003 2002 2001 ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- $ 8.26 $ 7.89 $ 6.39 $ 7.47 $ 11.32 $ 14.53 $ 12.77 $ 10.14 $ 10.62 $ 11.61 --------------------------------------------------------------------------------------------------------------------------------- (.04) (.06) (.05) (.06) (.07) .02 .03 .03 .04 .04 1.00 .43 1.55 (1.02) (3.78) 2.97 1.73 2.60 (.52) (1.02) --------------------------------------------------------------------------------------------------------------------------------- .96 .37 1.50 (1.08) (3.85) 2.99 1.76 2.63 (.48) (.98) --------------------------------------------------------------------------------------------------------------------------------- -- -- -- -- -- (.66) -- -- -- -- -- -- -- -- --@ -- -- -- -- -- -- -- -- -- -- -- -- -- -- (.01) --------------------------------------------------------------------------------------------------------------------------------- -- -- -- -- --@ (.66) -- -- -- (.01) --------------------------------------------------------------------------------------------------------------------------------- $ 9.22 $ 8.26 $ 7.89 $ 6.39 $ 7.47 $ 16.86 $ 14.53 $ 12.77 $ 10.14 $ 10.62 ================================================================================================================================== ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- 11.62% 4.69% 23.47% (14.46%) (33.98%) 21.20% 13.78% 25.94% (4.52%) (8.43%) ================================================================================================================================== ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- 1.33% 1.38% 1.46% 1.54% 1.38% 1.23% 1.26% 1.28% 1.28% 1.29% ================================================================================================================================== 1.33% 1.38% 1.46% 1.56% 1.38% 1.23% 1.26% 1.28% 1.28% 1.29% ================================================================================================================================== (.46%) (.69%) (.81%) (.88%) (.90%) .10% .21% .24% .49% .32% ================================================================================================================================== ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- $ 112,887 $ 64,539 $ 27,410 $ 15,874 $ 15,032 $ 371,216 $ 161,867 $ 90,358 $ 46,020 $ 37,190 ================================================================================================================================== 131.79% 164.94% 178.11% 177.46% 230.34% 94.95% 127.59% 157.04% 136.92% 168.54% ==================================================================================================================================
MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 19 Financial Highlights (continued) Class B
Merrill Lynch Large Cap Core Fund ----------------------------------------------------------------- For the Year Ended October 31, The following per share data and ratios have been derived ----------------------------------------------------------------- from information provided in the financial statements. 2005 2004 2003 2002 2001 ================================================================================================================================== Per Share Operating Performance --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ........... $ 10.74 $ 9.93 $ 8.07 $ 8.93 $ 11.67 ----------------------------------------------------------------- Investment loss--net** ....................... (.08) (.09) (.08) (.06) (.08) Realized and unrealized gain (loss)--net ..... 1.86 .90 1.94 (.80) (2.66) ----------------------------------------------------------------- Total from investment operations ............. 1.78 .81 1.86 (.86) (2.74) ----------------------------------------------------------------- Less distributions: Realized gain--net ........................ (.09) -- -- -- -- In excess of realized gain--net ........... -- -- -- -- --+ Return of capital--net .................... -- -- -- -- -- ----------------------------------------------------------------- Total distributions .......................... (.09) -- -- -- --+ ----------------------------------------------------------------- Net asset value, end of year ................. $ 12.43 $ 10.74 $ 9.93 $ 8.07 $ 8.93 ================================================================= ================================================================================================================================== Total Investment Return* --------------------------------------------------------------------------------------------------------------------------------- Based on net asset value per share ........... 16.69% 8.16% 23.05% (9.63%) (23.47%) ================================================================= ================================================================================================================================== Ratios to Average Net Assets --------------------------------------------------------------------------------------------------------------------------------- Expenses, net of reimbursement*** ............ 1.93% 1.95% 2.00% 2.07% 2.06% ================================================================= Expenses*** .................................. 1.93% 1.95% 2.00% 2.07% 2.06% ================================================================= Investment loss--net ......................... (.66%) (.86%) (.96%) (.64%) (.80%) ================================================================= ================================================================================================================================== Supplemental Data --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (in thousands) ....... $ 446,242 $ 412,162 $ 389,598 $ 329,121 $ 159,287 ================================================================= Portfolio turnover of the Portfolios ......... 93.95% 135.48% 138.73% 150.18% 162.28% =================================================================
* Total investment returns exclude the effects of sales charges. ** Based on average shares outstanding. *** Includes the Fund's share of the Portfolio's allocated expenses. + Amount is less than ($.01) per share. See Notes to Financial Statements. 20 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005
Merrill Lynch Large Cap Growth Fund Merrill Lynch Large Cap Value Fund -------------------------------------------------------------- --------------------------------------------------------------- For the Year Ended October 31, For the Year Ended October 31, -------------------------------------------------------------- --------------------------------------------------------------- 2005 2004 2003 2002 2001 2005 2004 2003 2002 2001 ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- $ 7.96 $ 7.66 $ 6.25 $ 7.37 $ 11.26 $ 14.02 $ 12.41 $ 9.93 $ 10.48 $ 11.54 --------------------------------------------------------------------------------------------------------------------------------- (.10) (.12) (.10) (.12) (.14) (.09) (.07) (.05) (.03) (.04) .96 .42 1.51 (1.00) (3.75) 2.85 1.68 2.53 (.52) (1.02) --------------------------------------------------------------------------------------------------------------------------------- .86 .30 1.41 (1.12) (3.89) 2.76 1.61 2.48 (.55) (1.06) --------------------------------------------------------------------------------------------------------------------------------- -- -- -- -- -- (.66) -- -- -- -- -- -- -- -- --+ -- -- -- -- -- -- -- -- -- -- -- -- -- -- --+ --------------------------------------------------------------------------------------------------------------------------------- -- -- -- -- --+ (.66) -- -- -- --+ --------------------------------------------------------------------------------------------------------------------------------- $ 8.82 $ 7.96 $ 7.66 $ 6.25 $ 7.37 $ 16.12 $ 14.02 $ 12.41 $ 9.93 $ 10.48 ================================================================================================================================== ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- 10.80% 3.92% 22.56% (15.20%) (34.54%) 20.29% 12.97% 24.97% (5.25%) (9.18%) ================================================================================================================================== ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- 2.11% 2.16% 2.27% 2.32% 2.17% 2.00% 2.02% 2.05% 2.05% 2.07% ================================================================================================================================== 2.11% 2.16% 2.27% 2.34% 2.17% 2.00% 2.02% 2.05% 2.05% 2.07% ================================================================================================================================== (1.15%) (1.48%) (1.61%) (1.66%) (1.67%) (.60%) (.53%) (.50%) (.28%) (.44%) ================================================================================================================================== ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- $ 95,593 $ 93,382 $ 100,683 $ 83,726 $ 70,428 $ 261,345 $ 222,055 $ 202,190 $ 174,623 $ 167,613 ================================================================================================================================== 131.79% 164.94% 178.11% 177.46% 230.34% 94.95% 127.59% 157.04% 136.92% 168.54% ==================================================================================================================================
MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 21 Financial Highlights (continued) Class C
Merrill Lynch Large Cap Core Fund ----------------------------------------------------------------- For the Year Ended October 31, The following per share data and ratios have been derived ----------------------------------------------------------------- from information provided in the financial statements. 2005 2004 2003 2002 2001 ================================================================================================================================== Per Share Operating Performance --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ........... $ 10.73 $ 9.93 $ 8.07 $ 8.93 $ 11.67 ----------------------------------------------------------------- Investment loss--net* ........................ (.09) (.09) (.08) (.06) (.08) Realized and unrealized gain (loss)--net ..... 1.88 .89 1.94 (.80) (2.66) ----------------------------------------------------------------- Total from investment operations ............. 1.79 .80 1.86 (.86) (2.74) ----------------------------------------------------------------- Less distributions: Realized gain--net ........................ (.09) -- -- -- -- In excess of realized gain--net ........... -- -- -- -- --+ Return of capital--net .................... -- -- -- -- -- ----------------------------------------------------------------- Total distributions .......................... (.09) -- -- -- --+ ----------------------------------------------------------------- Net asset value, end of year ................. $ 12.43 $ 10.73 $ 9.93 $ 8.07 $ 8.93 ================================================================= ================================================================================================================================== Total Investment Return** --------------------------------------------------------------------------------------------------------------------------------- Based on net asset value per share ........... 16.80% 8.06% 23.05% (9.63%) (23.47%) ================================================================= ================================================================================================================================== Ratios to Average Net Assets --------------------------------------------------------------------------------------------------------------------------------- Expenses, net of reimbursement*** ............ 1.94% 1.96% 2.01% 2.07% 2.07% ================================================================= Expenses*** .................................. 1.94% 1.96% 2.01% 2.07% 2.07% ================================================================= Investment loss--net ......................... (.73%) (.86%) (.97%) (.66%) (.81%) ================================================================= ================================================================================================================================== Supplemental Data --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (in thousands) ....... $ 737,063 $ 430,689 $ 250,491 $ 178,459 $ 86,694 ================================================================= Portfolio turnover of the Portfolios ......... 93.95% 135.48% 138.73% 150.18% 162.28% =================================================================
* Based on average shares outstanding. ** Total investment returns exclude the effects of sales charges. *** Includes the Fund's share of the Portfolio's allocated expenses. + Amount is less than $(.01) per share. See Notes to Financial Statements. 22 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005
Merrill Lynch Large Cap Growth Fund Merrill Lynch Large Cap Value Fund -------------------------------------------------------------- --------------------------------------------------------------- For the Year Ended October 31, For the Year Ended October 31, -------------------------------------------------------------- --------------------------------------------------------------- 2005 2004 2003 2002 2001 2005 2004 2003 2002 2001 ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- $ 7.95 $ 7.65 $ 6.25 $ 7.36 $ 11.25 $ 14.01 $ 12.41 $ 9.93 $ 10.48 $ 11.54 --------------------------------------------------------------------------------------------------------------------------------- (.10) (.12) (.10) (.12) (.14) (.10) (.07) (.05) (.03) (.04) .96 .42 1.50 (.99) (3.75) 2.86 1.67 2.53 (.52) (1.02) --------------------------------------------------------------------------------------------------------------------------------- .86 .30 1.40 (1.11) (3.89) 2.76 1.60 2.48 (.55) (1.06) --------------------------------------------------------------------------------------------------------------------------------- -- -- -- -- -- (.66) -- -- -- -- -- -- -- -- --+ -- -- -- -- -- -- -- -- -- -- -- -- -- -- --+ --------------------------------------------------------------------------------------------------------------------------------- -- -- -- -- --+ (.66) -- -- -- --+ --------------------------------------------------------------------------------------------------------------------------------- $ 8.81 $ 7.95 $ 7.65 $ 6.25 $ 7.36 $ 16.11 $ 14.01 $ 12.41 $ 9.93 $ 10.48 ================================================================================================================================== ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- 10.82% 3.92% 22.40% (15.08%) (34.56%) 20.31% 12.89% 24.97% (5.25%) (9.18%) ================================================================================================================================== ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- 2.11% 2.16% 2.27% 2.33% 2.17% 2.00% 2.03% 2.06% 2.05% 2.07% ================================================================================================================================== 2.11% 2.16% 2.27% 2.35% 2.17% 2.00% 2.03% 2.06% 2.05% 2.07% ================================================================================================================================== (1.19%) (1.48%) (1.62%) (1.67%) (1.68%) (.65%) (.54%) (.51%) (.28%) (.45%) ================================================================================================================================== ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- $ 125,150 $ 94,969 $ 68,337 $ 52,872 $ 39,167 $ 409,937 $ 219,806 $ 129,456 $ 95,895 $ 77,901 ================================================================================================================================== 131.79% 164.94% 178.11% 177.46% 230.34% 94.95% 127.59% 157.04% 136.92% 168.54% ==================================================================================================================================
MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 23 Financial Highlights (continued) Class I
Merrill Lynch Large Cap Core Fund ----------------------------------------------------------------- For the Year Ended October 31, The following per share data and ratios have been derived ----------------------------------------------------------------- from information provided in the financial statements. 2005 2004 2003 2002 2001 ================================================================================================================================== Per Share Operating Performance --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ........... $ 11.28 $ 10.33 $ 8.31 $ 9.10 $ 11.77 ----------------------------------------------------------------- Investment income (loss)--net* ............... .04 .02 .01 .03 .02 Realized and unrealized gain (loss)--net ..... 1.97 .93 2.01 (.82) (2.69) ----------------------------------------------------------------- Total from investment operations ............. 2.01 .95 2.02 (.79) (2.67) ----------------------------------------------------------------- Less distributions: Realized gain--net ........................ (.09) -- -- -- -- In excess of realized gain--net ........... -- -- -- -- --+ Return of capital--net .................... -- -- -- -- -- ----------------------------------------------------------------- Total dividends and distributions ............ (.09) -- -- -- --+ ----------------------------------------------------------------- Net asset value, end of year ................. $ 13.20 $ 11.28 $ 10.33 $ 8.31 $ 9.10 ================================================================= ================================================================================================================================== Total Investment Return** --------------------------------------------------------------------------------------------------------------------------------- Based on net asset value per share ........... 17.94% 9.20% 24.31% (8.68%) (22.65%) ================================================================= ================================================================================================================================== Ratios to Average Net Assets --------------------------------------------------------------------------------------------------------------------------------- Expenses, net of reimbursement*** ............ .91% .93% .98% 1.04% 1.05% ================================================================= Expenses*** .................................. .91% .93% .98% 1.04% 1.05% ================================================================= Investment income (loss)--net ................ .31% .17% .06% .33% .21% ================================================================= ================================================================================================================================== Supplemental Data --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (in thousands) ....... $ 601,378 $ 415,647 $ 307,277 $ 214,953 76,674 ================================================================= Portfolio turnover of the Portfolios ......... 93.95% 135.48% 138.73% 150.18% 162.28% =================================================================
* Based on average shares outstanding. ** Total investment returns exclude the effects of sales charges. *** Includes the Fund's share of the Portfolio's allocated expenses. + Amount is less than $(.01) per share. See Notes to Financial Statements. 24 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005
Merrill Lynch Large Cap Growth Fund Merrill Lynch Large Cap Value Fund -------------------------------------------------------------- --------------------------------------------------------------- For the Year Ended October 31, For the Year Ended October 31, -------------------------------------------------------------- --------------------------------------------------------------- 2005 2004 2003 2002 2001 2005 2004 2003 2002 2001 ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- $ 8.36 $ 7.97 $ 6.44 $ 7.50 $ 11.35 $ 14.71 $ 12.89 $ 10.21 $ 10.67 $ 11.64 --------------------------------------------------------------------------------------------------------------------------------- (.02) (.04) (.04) (.05) (.06) .06 .07 .06 .05 .07 1.02 .43 1.57 (1.01) (3.78) 3.01 1.75 2.62 (.51) (1.03) --------------------------------------------------------------------------------------------------------------------------------- 1.00 .39 1.53 (1.06) (3.84) 3.07 1.82 2.68 (.46) (.96) --------------------------------------------------------------------------------------------------------------------------------- -- -- -- -- -- (.66) -- -- -- -- -- -- -- -- (.01) -- -- -- -- -- -- -- -- -- -- -- -- -- -- (.01) --------------------------------------------------------------------------------------------------------------------------------- -- -- -- -- (.01) (.66) -- -- -- (.01) --------------------------------------------------------------------------------------------------------------------------------- $ 9.36 $ 8.36 $ 7.97 $ 6.44 $ 7.50 $ 17.12 $ 14.71 $ 12.89 $ 10.21 $ 10.67 ================================================================================================================================== ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- 11.96% 4.89% 23.76% (14.13%) (33.89%) 21.49% 14.12% 26.25% (4.31%) (8.21%) ================================================================================================================================== ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- 1.08% 1.13% 1.22% 1.29% 1.14% .98% 1.01% 1.03% 1.03% 1.04% ================================================================================================================================== 1.08% 1.13% 1.22% 1.31% 1.14% .98% 1.01% 1.03% 1.03% 1.04% ================================================================================================================================== (.20%) (.45%) (.57%) (.63%) (.65%) .35% .49% .51% .76% .60% ================================================================================================================================== ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- $ 128,667 $ 79,869 $ 53,163 $ 31,989 $ 23,112 $ 446,172 $ 194,625 $ 92,736 $ 66,754 $ 42,641 ================================================================================================================================== 131.79% 164.94% 178.11% 177.46% 230.34% 94.95% 127.59% 157.04% 136.92% 168.54% ==================================================================================================================================
MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 25 Financial Highlights (concluded) Class R
Merrill Lynch Large Cap Core Fund --------------------------------------------------- For the Period For the Year Ended January 3, October 31, 2003+ to The following per share data and ratios have been derived -------------------------------- October 31, from information provided in the financial statements. 2005 2004 2003 ================================================================================================================== Per Share Operating Performance ----------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ..... $ 10.89 $ 10.02 $ 8.12 --------------------------------------------------- Investment income (loss)--net*** ......... (.03) (.03) (.05) Realized and unrealized gain--net ........ 1.91 .90 1.95 --------------------------------------------------- Total from investment operations ......... 1.88 .87 1.90 --------------------------------------------------- Less distributions from realized gain--net (.09) -- -- --------------------------------------------------- Net asset value, end of period ........... $ 12.68 $ 10.89 $ 10.02 ================================================================================================================== Total Investment Return** ----------------------------------------------------------------------------------------------------------------- Based on net asset value per share ....... 17.39% 8.68% 23.40%@ =================================================== ================================================================================================================== Ratios to Average Net Assets ----------------------------------------------------------------------------------------------------------------- Expenses, net of reimbursement++ ......... 1.42% 1.43% 1.48%* =================================================== Expenses++ ............................... 1.42% 1.43% 1.48%* =================================================== Investment income (loss)--net ............ (.28%) (.32%) (.44%)* =================================================== ================================================================================================================== Supplemental Data ----------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) . $ 46,379 $ 15,160 $ 119 =================================================== Portfolio turnover of the Portfolios ..... 93.95% 135.48% 138.73% ===================================================
* Annualized. ** Total investment returns exclude the effects of sales charges. *** Based on average shares outstanding. + Commencement of operations. ++ Includes the Fund's share of the Portfolio's allocated expenses. @ Aggregate total investment return. @@ Amount is less than ($.01) per share. See Notes to Financial Statements. 26 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005
Merrill Lynch Large Cap Growth Fund Merrill Lynch Large Cap Value Fund ------------------------------------------------ ------------------------------------------------- For the Period For the Period For the Year Ended January 3, For the Year Ended January 3, October 31, 2003+ to October 31, 2003+ to ------------------------------ October 31, ------------------------------- October 31, 2005 2004 2003 2005 2004 2003 ===================================================================================================== $ 8.08 $ 7.74 $ 6.16 $ 14.23 $ 12.54 $ 10.12 ---------------------------------------------------------------------------------------------------- (.07) (.06) (.05) (.03) --@@ .01 .99 .40 1.63 2.92 1.69 2.41 ---------------------------------------------------------------------------------------------------- .92 .34 1.58 2.89 1.69 2.42 ---------------------------------------------------------------------------------------------------- -- -- -- (.66) -- -- ---------------------------------------------------------------------------------------------------- $ 9.00 $ 8.08 $ 7.74 $ 16.46 $ 14.23 $ 12.54 ===================================================================================================== ===================================================================================================== ---------------------------------------------------------------------------------------------------- 11.39% 4.39% 25.65%@ 20.93% 13.48% 23.91%@ ===================================================================================================== ===================================================================================================== ---------------------------------------------------------------------------------------------------- 1.58% 1.61% 1.72%* 1.48% 1.53% 1.53%* ===================================================================================================== 1.58% 1.61% 1.72%* 1.48% 1.53% 1.53%* ===================================================================================================== (.75%) (.95%) (.94%)* (.19%) (.03%) .01%* ===================================================================================================== ===================================================================================================== ---------------------------------------------------------------------------------------------------- $ 26,566 $ 11,304 $ 290 $ 45,894 $ 11,362 $ 12 ===================================================================================================== 131.79% 164.94% 178.11% 94.95% 127.59% 157.04% =====================================================================================================
MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 27 Notes to Financial Statements Merrill Lynch Large Cap Series Funds, Inc. 1. Significant Accounting Policies: Merrill Lynch Large Cap Core Fund, Merrill Lynch Large Cap Growth Fund and Merrill Lynch Large Cap Value Fund constituting Merrill Lynch Large Cap Series Funds, Inc. (the "Funds" or individually as the "Fund") are registered under the Investment Company Act of 1940, as amended, as diversified, open-end investment companies. The Funds seek to achieve their investment objective by investing all of their assets in the Master Large Cap Core Portfolio, Master Large Cap Growth Portfolio and Master Large Cap Value Portfolio (the "Portfolios" or individually as the "Portfolio"), respectively, constituting Master Large Cap Series Trust, which have the same investment objective and strategies as the corresponding Funds. The value of the Funds' investment in the Portfolios reflect the Funds' proportionate interest in the net assets of the Portfolios. The performance of the Funds is directly affected by the performance of the Portfolios. The financial statements of the Portfolios, including the Schedules of Investments, are included elsewhere in this report and should be read in conjunction with the Funds' financial statements. The Funds' 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. On October 31, 2005, the percentage of Master Large Cap Core Portfolio owned by Merrill Lynch Large Cap Core Fund was 92.4%, and the percentage of Master Large Cap Growth Portfolio and Master Large Cap Value Portfolio owned by Merrill Lynch Large Cap Growth Fund and Merrill Lynch Large Cap Value Fund, respectively, was 100%. The Funds offer multiple classes of shares. Shares of Class A and Class I are sold with a front-end sales charge. Shares of Class B and Class C may be subject to a contingent deferred sales charge. Class R Shares are sold only to certain retirement plans. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Class A, Class B, Class C and Class R Shares bear certain expenses related to the account maintenance of such shares, and Class B, Class C and Class R Shares also bear certain expenses related to the distribution of such shares. Each class has exclusive voting rights with respect to matters relating to its account maintenance and distribution expenditures (except that Class B shareholders may vote on certain changes to Class A distribution plan). Income, expenses (other than expenses attributable to a specific class) and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets. The following is a summary of significant accounting policies followed by the Funds. (a) Valuation of investments -- Each Fund records its investment in the Portfolio at fair value. Valuation of securities held by the Portfolio is discussed in Note 1(a) of the Portfolios' Notes to Financial Statements, which are included elsewhere in this report. (b) Investment income and expenses -- Each Fund records daily its proportionate share of the Portfolio's income, expenses and realized and unrealized gains and losses. In addition, each Fund accrues its own expenses. (c) Income taxes -- It is each Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. Under the applicable foreign tax law, withholding taxes may be imposed on interest, dividends and capital gains at various rates. (d) Prepaid registration fees -- Prepaid registration fees are charged to expense as the related shares are issued. (e) Dividends and distributions -- Dividends and distributions paid by each Fund are recorded on the ex-dividend dates. (f) Investment transactions -- Investment transactions in each Portfolio are accounted for on a trade date basis. (g) Reclassifications -- Merrill Lynch Large Cap Core Fund 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, $5,488,189 has been reclassified between undistributed net realized capital gains and accumulated net investment loss, and $492,254 has been reclassified between paid-in capital in excess of par and undistributed net realized capital gains as a result of permanent differences attributable to net operating losses and other permanent differences. These reclassifications have no effect on net assets or net asset values per share. Merrill Lynch Large Cap Growth Fund U.S. generally accepted accounting principles require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, during the current year, $3,266,027 has been reclassified between paid-in capital in excess of par and accumulated net investment loss as a result of a permanent difference attributable to net operating losses. This reclassification has no effect on net assets or net asset values per share. 28 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Notes to Financial Statements (continued) Merrill Lynch Large Cap Series Funds, Inc. Merrill Lynch Large Cap Value Fund 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, $2,354,785 has been reclassified between undistributed net realized capital gains and accumulated net investment loss as a result of a permanent difference attributable to net operating loss. This reclassification has no effect on net assets or net asset values per share. 2. Transactions with Affiliates: Each 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. Each 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. Each Fund has also entered into a Distribution Agreement and Distribution Plans with FAM Distributors, Inc. ("FAMD" or the "Distributor"), which is a wholly-owned subsidiary of Merrill Lynch Group, Inc. Pursuant to the Distribution Plans adopted by the Funds in accordance with Rule 12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor ongoing account maintenance and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the shares as follows: ------------------------------------------------------------------------------- Account Distribution Maintenance Fee Fee ------------------------------------------------------------------------------- Class A ................................ .25% -- Class B ................................ .25% .75% Class C ................................ .25% .75% Class R ................................ .25% .25% ------------------------------------------------------------------------------- Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), an affiliate of FAM, also provides account maintenance and distribution services to the Funds. The ongoing account maintenance fee compensates the Distributor and MLPF&S for providing account maintenance services to Class A, Class B, Class C and Class R shareholders. The ongoing distribution fee compensates the Distributor and MLPF&S for providing shareholder and distribution-related services to Class B, Class C and Class R shareholders. For the year ended October 31, 2005, FAMD earned underwriting discounts and MLPF&S earned dealer concessions on sales of the Funds' Class A and Class I Shares as follows: ------------------------------------------------------------------------------- FAMD MLPF&S ------------------------------------------------------------------------------- Merrill Lynch Large Cap Core Fund Class A .................................... $ 97,733 $1,243,371 Class I .................................... $ 2,392 $ 41,878 ------------------------------------------------------------------------------- Merrill Lynch Large Cap Growth Fund Class A .................................... $ 7,233 $ 99,665 Class I .................................... $ 5,310 $ 2,545 ------------------------------------------------------------------------------- Merrill Lynch Large Cap Value Fund Class A .................................... $ 32,572 $ 423,030 Class I .................................... $ 5,388 $ 4,463 ------------------------------------------------------------------------------- For the year ended October 31, 2005, MLPF&S received contingent deferred sales charges relating to transactions in Class B and Class C Shares as follows: ------------------------------------------------------------------------------- Class B Class C ------------------------------------------------------------------------------- Merrill Lynch Large Cap Core Fund .............. $356,271 $ 98,243 Merrill Lynch Large Cap Growth Fund ............ $ 83,289 $ 14,384 Merrill Lynch Large Cap Value Fund ............. $195,016 $ 32,683 ------------------------------------------------------------------------------- Furthermore, MLPF&S received contingent deferred sales charges relating to transactions subject to front-end sales charge waivers as follows: ------------------------------------------------------------------------------- Class A Class I ------------------------------------------------------------------------------- Merrill Lynch Large Cap Core Fund ................ $ 1,362 -- Merrill Lynch Large Cap Growth Fund .............. $ 2,075 $ 937 Merrill Lynch Large Cap Value Fund ............... $ 2,075 $ 200 ------------------------------------------------------------------------------- Financial Data Services, Inc. ("FDS"), an indirect, wholly-owned subsidiary of ML & Co., is the Funds' transfer agent. Certain officers and/or directors of the Funds are officers and/or directors of FAM, FAMD, PSI, FDS, and/or ML & Co. 3. Capital Share Transactions: Merrill Lynch Large Cap Core Fund Net increase in net assets derived from capital share transactions was $496,660,002 and $309,948,089 for the years ended October 31, 2005 and October 31, 2004, respectively. MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 29 Notes to Financial Statements (continued) Merrill Lynch Large Cap Series Funds, Inc. Transactions in capital shares for each class were as follows: ------------------------------------------------------------------------------- Merrill Lynch Large Cap Core Fund ------------------------------------------------------------------------------- Class A Shares for the Year Dollar Ended October 31, 2005 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 21,630,751 $ 269,694,087 Automatic conversion of shares ......... 1,329,966 16,528,220 Shares issued resulting from reinvestment of distributions ....... 276,770 3,252,048 --------------------------------- Total issued ........................... 23,237,487 289,474,355 Shares redeemed ........................ (10,104,529) (126,772,449) --------------------------------- Net increase ........................... 13,132,958 $ 162,701,906 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Core Fund ------------------------------------------------------------------------------- Class A Shares for the Year Dollar Ended October 31, 2004 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 12,310,095 $ 132,734,982 Automatic conversion of shares ......... 699,006 7,570,079 --------------------------------- Total issued ........................... 13,009,101 140,305,061 Shares redeemed ........................ (6,415,802) (69,616,834) --------------------------------- Net increase ........................... 6,593,299 $ 70,688,227 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Core Fund ------------------------------------------------------------------------------- Class B Shares for the Year Dollar Ended October 31, 2005 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 7,261,231 $ 86,386,499 Shares issued resulting from reinvestment of distributions ....... 272,886 3,083,617 --------------------------------- Total issued ........................... 7,534,117 89,470,116 --------------------------------- Automatic conversion of shares ......... (1,386,617) (16,528,220) Shares redeemed ........................ (8,651,655) (102,765,876) --------------------------------- Total redeemed ......................... (10,038,272) (119,294,096) --------------------------------- Net decrease ........................... (2,504,155) $ (29,823,980) ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Core Fund ------------------------------------------------------------------------------- Class B Shares for the Year Dollar Ended October 31, 2004 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 7,493,427 $ 78,234,793 --------------------------------- Automatic conversion of shares ......... (723,121) (7,570,079) Shares redeemed ........................ (7,616,831) (79,533,441) --------------------------------- Total redeemed ......................... (8,339,952) (87,103,520) --------------------------------- Net decrease ........................... (846,525) $ (8,868,727) ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Core Fund ------------------------------------------------------------------------------- Class C Shares for the Year Dollar Ended October 31, 2005 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 26,855,950 $ 320,056,553 Shares issued resulting from reinvestment of distributions ....... 316,872 3,580,652 --------------------------------- Total issued ........................... 27,172,822 323,637,205 Shares redeemed ........................ (8,010,043) (95,860,544) --------------------------------- Net increase ........................... 19,162,779 $ 227,776,661 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Core Fund ------------------------------------------------------------------------------- Class C Shares for the Year Dollar Ended October 31, 2004 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 20,161,028 $ 210,375,936 Shares redeemed ........................ (5,267,640) (54,888,794) --------------------------------- Net increase ........................... 14,893,388 $ 155,487,142 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Core Fund ------------------------------------------------------------------------------- Class I Shares for the Year Dollar Ended October 31, 2005 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 16,652,465 $ 209,256,024 Shares issued resulting from reinvestment of distributions ....... 241,544 2,871,965 --------------------------------- Total issued ........................... 16,894,009 212,127,989 Shares redeemed ........................ (8,200,059) (103,663,058) --------------------------------- Net increase ........................... 8,693,950 $ 108,464,931 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Core Fund ------------------------------------------------------------------------------- Class I Shares for the Year Dollar Ended October 31, 2004 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 13,601,810 $ 149,026,978 Shares redeemed ........................ (6,508,083) (70,950,427) --------------------------------- Net increase ........................... 7,093,727 $ 78,076,551 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Core Fund ------------------------------------------------------------------------------- Class R Shares for the Year Dollar Ended October 31, 2005 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 3,599,772 $ 43,887,267 Shares issued resulting from reinvestment of distributions ....... 13,432 154,059 --------------------------------- Total issued ........................... 3,613,204 44,041,326 Shares redeemed ........................ (1,348,354) (16,500,842) --------------------------------- Net increase ........................... 2,264,850 $ 27,540,484 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Core Fund ------------------------------------------------------------------------------- Class R Shares for the Year Dollar Ended October 31, 2004 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 1,940,287 $ 20,567,859 Shares redeemed ........................ (560,490) (6,002,963) --------------------------------- Net increase ........................... 1,379,797 $ 14,564,896 ================================= Merrill Lynch Large Cap Growth Fund Net increase in net assets derived from capital share transactions was $102,839,683 and $83,194,823 for the years ended October 31, 2005 and October 31, 2004, respectively. 30 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Notes to Financial Statements (continued) Merrill Lynch Large Cap Series Funds, Inc. Transactions in capital shares for each class were as follows: ------------------------------------------------------------------------------- Merrill Lynch Large Cap Growth Fund ------------------------------------------------------------------------------- Class A Shares for the Year Dollar Ended October 31, 2005 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 6,552,650 $ 58,552,118 Automatic conversion of shares ......... 479,396 4,340,086 --------------------------------- Total issued ........................... 7,032,046 62,892,204 Shares redeemed ........................ (2,602,492) (23,247,423) --------------------------------- Net increase ........................... 4,429,554 $ 39,644,781 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Growth Fund ------------------------------------------------------------------------------- Class A Shares for the Year Dollar Ended October 31, 2004 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 5,354,688 $ 43,501,833 Automatic conversion of shares ......... 707,045 5,697,532 --------------------------------- Total issued ........................... 6,061,733 49,199,365 Shares redeemed ........................ (1,722,354) (13,822,082) --------------------------------- Net increase ........................... 4,339,379 $ 35,377,283 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Growth Fund ------------------------------------------------------------------------------- Class B Shares for the Year Dollar Ended October 31, 2005 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 3,379,386 $ 29,012,975 --------------------------------- Automatic conversion of shares ......... (499,699) (4,340,086) Shares redeemed ........................ (3,768,945) (32,206,346) --------------------------------- Total redeemed ......................... (4,268,644) (36,546,432) --------------------------------- Net decrease ........................... (889,258) $ (7,533,457) ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Growth Fund ------------------------------------------------------------------------------- Class B Shares for the Year Dollar Ended October 31, 2004 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 2,656,595 $ 20,970,689 --------------------------------- Automatic conversion of shares ......... (733,375) (5,697,532) Shares redeemed ........................ (3,330,795) (26,194,971) --------------------------------- Total redeemed ......................... (4,064,170) (31,892,503) --------------------------------- Net decrease ........................... (1,407,575) $ (10,921,814) ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Growth Fund ------------------------------------------------------------------------------- Class C Shares for the Year Dollar Ended October 31, 2005 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 5,368,655 $ 45,981,773 Shares redeemed ........................ (3,102,840) (26,622,404) --------------------------------- Net increase ........................... 2,265,815 $ 19,359,369 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Growth Fund ------------------------------------------------------------------------------- Class C Shares for the Year Dollar Ended October 31, 2004 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 5,420,898 $ 42,638,163 Shares redeemed ........................ (2,404,956) (18,800,286) --------------------------------- Net increase ........................... 3,015,942 $ 23,837,877 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Growth Fund ------------------------------------------------------------------------------- Class I Shares for the Year Dollar Ended October 31, 2005 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 7,718,763 $ 69,629,558 Shares redeemed ........................ (3,522,654) (31,902,918) --------------------------------- Net increase ........................... 4,196,109 $ 37,726,640 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Growth Fund ------------------------------------------------------------------------------- Class I Shares for the Year Dollar Ended October 31, 2004 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 5,628,370 $ 46,581,467 Shares redeemed ........................ (2,749,862) (22,603,407) --------------------------------- Net increase ........................... 2,878,508 $ 23,978,060 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Growth Fund ------------------------------------------------------------------------------- Class R Shares for the Year Dollar Ended October 31, 2005 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 2,649,241 $ 23,240,567 Shares redeemed ........................ (1,096,413) (9,598,217) --------------------------------- Net increase ........................... 1,552,828 $ 13,642,350 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Growth Fund ------------------------------------------------------------------------------- Class R Shares for the Year Dollar Ended October 31, 2004 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 1,768,404 $ 14,093,471 Shares redeemed ........................ (407,775) (3,170,054) --------------------------------- Net increase ........................... 1,360,629 $ 10,923,417 ================================= Merrill Lynch Large Cap Value Net increase in net assets derived from capital share transactions was $576,505,050 and $220,472,373 for the years ended October 31, 2005 and October 31, 2004, respectively. Transactions in capital shares for each class were as follows: ------------------------------------------------------------------------------- Merrill Lynch Large Cap Value Fund ------------------------------------------------------------------------------- Class A Shares for the Year Dollar Ended October 31, 2005 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 14,908,526 $ 240,034,025 Automatic conversion of shares ......... 939,374 14,950,013 Shares issued resulting from reinvestment of distributions ....... 493,981 7,315,852 --------------------------------- Total issued ........................... 16,341,881 262,299,890 Shares redeemed ........................ (5,469,730) (88,547,806) --------------------------------- Net increase ........................... 10,872,151 $ 173,752,084 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Value Fund ------------------------------------------------------------------------------- Class A Shares for the Year Dollar Ended October 31, 2004 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 6,851,969 $ 96,047,859 Automatic conversion of shares ......... 617,127 8,580,936 --------------------------------- Total issued ........................... 7,469,096 104,628,795 Shares redeemed ........................ (3,406,539) (46,365,233) --------------------------------- Net increase ........................... 4,062,557 $ 58,263,562 ================================= MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 31 Notes to Financial Statements (continued) Merrill Lynch Large Cap Series Funds, Inc. ------------------------------------------------------------------------------- Merrill Lynch Large Cap Value Fund ------------------------------------------------------------------------------- Class B Shares for the Year Dollar Ended October 31, 2005 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 4,746,786 $ 72,547,018 Shares issued resulting from reinvestment of distributions ....... 645,906 9,204,154 --------------------------------- Total issued ........................... 5,392,692 81,751,172 --------------------------------- Automatic conversion of shares ......... (978,449) (14,950,013) Shares redeemed ........................ (4,040,521) (61,542,283) --------------------------------- Total redeemed ......................... (5,018,970) (76,492,296) --------------------------------- Net increase ........................... 373,722 $ 5,258,876 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Value Fund ------------------------------------------------------------------------------- Class B Shares for the Year Dollar Ended October 31, 2004 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 3,414,404 $ 46,104,000 --------------------------------- Automatic conversion of shares ......... (637,251) (8,580,936) Shares redeemed ........................ (3,226,808) (43,435,015) --------------------------------- Total redeemed ......................... (3,864,059) (52,015,951) --------------------------------- Net decrease ........................... (449,655) $ (5,911,951) ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Value Fund ------------------------------------------------------------------------------- Class C Shares for the Year Dollar Ended October 31, 2005 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 12,540,291 $ 192,758,758 Shares issued resulting from reinvestment of distributions ....... 699,915 9,966,785 --------------------------------- Total issued ........................... 13,240,206 202,725,543 Shares redeemed ........................ (3,482,254) (53,395,043) --------------------------------- Net increase ........................... 9,757,952 $ 149,330,500 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Value Fund ------------------------------------------------------------------------------- Class C Shares for the Year Dollar Ended October 31, 2004 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 7,243,397 $ 98,014,167 Shares redeemed ........................ (1,990,871) (26,850,346) --------------------------------- Net increase ........................... 5,252,526 $ 71,163,821 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Value Fund ------------------------------------------------------------------------------- Class I Shares for the Year Dollar Ended October 31, 2005 Shares Amount ------------------------------------------------------------------------------- Total sold ............................. 17,058,691 $ 286,306,800 Shares issued resulting from reinvestment of distributions ....... 549,731 8,245,964 --------------------------------- Total issued ........................... 17,608,422 294,552,764 Shares redeemed ........................ (4,781,111) (77,304,760) --------------------------------- Net increase ........................... 12,827,311 $ 217,248,004 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Value Fund ------------------------------------------------------------------------------- Class I Shares for the Year Dollar Ended October 31, 2004 Shares Amount ------------------------------------------------------------------------------- Total sold ............................. 8,635,426 $ 122,477,143 Shares redeemed ........................ (2,595,641) (36,662,508) --------------------------------- Net increase ........................... 6,039,785 $ 85,814,635 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Value Fund ------------------------------------------------------------------------------- Class R Shares for the Year Dollar Ended October 31, 2005 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 2,583,162 $ 40,275,219 Shares issued resulting from reinvestment of distributions ....... 48,890 707,934 --------------------------------- Total issued ........................... 2,632,052 40,983,153 Shares redeemed ........................ (641,770) (10,067,567) --------------------------------- Net increase ........................... 1,990,282 $ 30,915,586 ================================= ------------------------------------------------------------------------------- Merrill Lynch Large Cap Value Fund ------------------------------------------------------------------------------- Class R Shares for the Year Dollar Ended October 31, 2004 Shares Amount ------------------------------------------------------------------------------- Shares sold ............................ 949,150 $ 13,228,217 Shares redeemed ........................ (151,527) (2,085,911) --------------------------------- Net increase ........................... 797,623 $ 11,142,306 ================================= 4. Distributions to Shareholders: Merrill Lynch Large Cap Core Fund The tax character of distributions paid during the fiscal years ended October 31, 2005 and October 31, 2004 was as follows: ------------------------------------------------------------------------------- 10/31/2005 10/31/2004 ------------------------------------------------------------------------------- Distributions paid from: Net long-term capital gains ................. $14,577,064 -- ----------------------- Total taxable distributions ................... $14,577,064 -- ======================= As of October 31, 2005, the components of accumulated earnings on a tax basis were as follows: ---------------------------------------------------------------------------- Undistributed ordinary income -- net ................... $ 31,667,861 Undistributed long-term capital gains -- net ........... 114,529,208 ------------- Total undistributed earnings -- net .................... 146,197,069 Capital loss carryforward .............................. (68,267,289)* Unrealized gains -- net ................................ 318,836,142** ------------- Total accumulated earnings -- net ...................... $ 396,765,922 ============= * On October 31, 2005, the Fund had a net capital loss carryforward of $68,267,289, of which $43,009,464 expires in 2008, $14,159,796 expires in 2009 and $11,098,029 expires in 2010. This amount will be available to offset like amounts of any future taxable gains. ** The difference between book-basis and tax-basis net unrealized gains is attributable primarily to the tax deferral of losses on wash sales and a limitation on the utilization of capital loss carryforwards for tax purposes. 32 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Notes to Financial Statements (concluded) Merrill Lynch Large Cap Series Funds, Inc. Merrill Lynch Large Cap Growth Fund As of October 31, 2005, the components of accumulated losses on a tax basis were as follows: ---------------------------------------------------------------------------- Undistributed ordinary income--net ...................... $ -- Undistributed long-term capital gains--net .............. -- ------------ Total undistributed earnings--net ....................... -- Capital loss carryforward ............................... (55,312,594)* Unrealized gains--net ................................... 44,278,720** ------------ Total accumulated losses--net ........................... $(11,033,874) ============ * On October 31, 2005, the Fund had a net capital loss carryforward of $55,312,594, of which $5,224,996 expires in 2007, $2,705,691 expires in 2008, $6,931,833 expires in 2009 and $40,450,074 expires in 2010. This amount will be available to offset like amounts of any future taxable gains. ** The difference between book-basis and tax-basis net unrealized gains is attributable primarily to the tax deferral of losses on wash sales. Merrill Lynch Large Cap Value Fund The tax character of distributions paid during the fiscal years ended October 31, 2005 and October 31, 2004 was as follows: ------------------------------------------------------------------------------- 10/31/2005 10/31/2004 ------------------------------------------------------------------------------- Distributions paid from: Net long-term capital gains ............. $38,689,437 $ -- ----------------------------- Total taxable distributions ............... $38,689,437 $ -- ============================= As of October 31, 2005, the components of accumulated earnings on a tax basis were as follows: ---------------------------------------------------------------------------- Undistributed ordinary income--net ..................... $ 26,422,162 Undistributed long-term capital gains--net ............. 48,314,141 ------------- Total undistributed earnings--net ...................... 74,736,303 Capital loss carryforward .............................. (191,235)* Unrealized gains--net .................................. 199,447,924** ------------- Total accumulated earnings--net ........................ $ 273,992,992 ============= * On October 31, 2005, the Fund had a net capital loss carryforward of $191,235, all of which expires in 2010. This amount, subject to limitation, will be available to offset like amounts of any future taxable gains. ** The difference between book-basis and tax-basis net unrealized gains is attributable primarily to the tax deferral of losses on wash sales and a limitation on the utilization of capital loss carryforwards for tax purposes. Report of Independent Registered Public Accounting Firm Merrill Lynch Large Cap Series Funds, Inc. To the Shareholders and Board of Directors of Merrill Lynch Large Cap Series Funds, Inc.: We have audited the accompanying statements of assets and liabilities of Merrill Lynch Large Cap Series Funds, Inc. (the "Fund"), comprising Merrill Lynch Large Cap Core Fund, Merrill Lynch Large Cap Growth Fund and Merrill Lynch Large Cap Value Fund, as of October 31, 2005, and the related statements 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 each of the funds constituting Merrill Lynch Large Cap Series Funds, Inc. as of October 31, 2005, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their 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 December 19, 2005 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 33 Portfolio Information as of October 31, 2005 Master Large Cap Series Trust Sector Representation Percent of Master Large Cap Core Portfolio Total Investments ------------------------------------------------------------------------------- Information Technology ......................................... 24.2% Energy ......................................................... 18.2 Health Care .................................................... 17.8 Financials ..................................................... 10.8 Consumer Discretionary ......................................... 10.6 Industrials .................................................... 5.7 Materials ...................................................... 2.9 Consumer Staples ............................................... 2.8 Utilities ...................................................... 2.0 Other* ......................................................... 5.0 ------------------------------------------------------------------------------- Percent of Master Large Cap Growth Portfolio Total Investments ------------------------------------------------------------------------------- Information Technology ......................................... 33.8% Health Care .................................................... 20.7 Consumer Discretionary ......................................... 14.8 Industrials .................................................... 9.2 Energy ......................................................... 4.8 Financials ..................................................... 3.8 Consumer Staples ............................................... 3.6 Materials ...................................................... 2.5 Other* ......................................................... 6.8 ------------------------------------------------------------------------------- Percent of Master Large Cap Value Portfolio Total Investments ------------------------------------------------------------------------------- Financials ..................................................... 25.0% Energy ......................................................... 23.0 Information Technology ......................................... 13.8 Consumer Discretionary ......................................... 10.2 Health Care .................................................... 10.0 Industrials .................................................... 3.5 Materials ...................................................... 3.2 Consumer Staples ............................................... 2.7 Utilities ...................................................... 2.6 Other* ......................................................... 6.0 ------------------------------------------------------------------------------- Five Largest Industries Percent of Master Large Cap Core Portfolio Net Assets ------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels .................................... 18.6% Health Care Providers & Services ............................... 10.9 Software ....................................................... 9.0 Insurance ...................................................... 8.4 Semiconductors & Semiconductor Equipment ....................... 6.4 ------------------------------------------------------------------------------- Percent of Master Large Cap Growth Portfolio Net Assets ------------------------------------------------------------------------------- Software ....................................................... 12.8% Health Care Providers & Services ............................... 11.5 Semiconductors & Semiconductor Equipment ....................... 10.4 Specialty Retail ............................................... 6.8 Computers & Peripherals ........................................ 5.9 ------------------------------------------------------------------------------- Percent of Master Large Cap Value Portfolio Net Assets ------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels .................................... 24.4% Insurance ...................................................... 15.1 Health Care Providers & Services ............................... 7.2 Software ....................................................... 6.1 Computers & Peripherals ........................................ 4.0 ------------------------------------------------------------------------------- * Includes portfolio holdings in short-term investments. For Portfolio compliance purposes, sector and industries classifications refer to any one or more of the sector and industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Portfolio management. This definition may not apply for purposes of this report, which may combine sector and industry sub-classifications for reporting ease. 34 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Ten Largest Equity Holdings Percent of Master Large Cap Core Portfolio Net Assets ------------------------------------------------------------------------------- Exxon Mobil Corp. .............................................. 3.8% General Electric Co. ........................................... 2.0 ConocoPhillips ................................................. 1.8 Hewlett-Packard Co. ............................................ 1.7 Pfizer, Inc. ................................................... 1.7 UnitedHealth Group, Inc. ....................................... 1.6 Intel Corp. .................................................... 1.6 Motorola, Inc. ................................................. 1.4 Texas Instruments, Inc. ........................................ 1.4 Dell, Inc. ..................................................... 1.3 ------------------------------------------------------------------------------- Percent of Master Large Cap Growth Portfolio Net Assets ------------------------------------------------------------------------------- Intel Corp. .................................................... 3.3% Amgen, Inc. .................................................... 2.5 General Electric Co. ........................................... 2.5 UnitedHealth Group, Inc. ....................................... 2.2 Dell, Inc. ..................................................... 2.2 Microsoft Corp. ................................................ 1.9 Motorola, Inc. ................................................. 1.8 Texas Instruments, Inc. ........................................ 1.8 Apple Computer, Inc. ........................................... 1.8 Aetna, Inc. New Shares ......................................... 1.4 ------------------------------------------------------------------------------- Percent of Master Large Cap Value Portfolio Net Assets ------------------------------------------------------------------------------- Exxon Mobil Corp. .............................................. 6.8% ConocoPhillips ................................................. 2.6 Hewlett-Packard Co. ............................................ 2.4 Citigroup, Inc. ................................................ 2.0 Goldman Sachs Group, Inc. ...................................... 1.8 Lehman Brothers Holdings, Inc. ................................. 1.6 Occidental Petroleum Corp. ..................................... 1.6 Valero Energy Corp. ............................................ 1.6 Prudential Financial, Inc. ..................................... 1.6 The St. Paul Travelers Cos., Inc. .............................. 1.6 ------------------------------------------------------------------------------- MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 35 Schedule of Investments Master Large Cap Core Portfolio
Shares Sector Industry Common Stocks Held Value =================================================================================== Consumer Discretionary--11.2% Auto Components--1.0% The Goodyear Tire & Rubber Co. (c)(d) 1,610,000 $ 25,180,400 ----------------------------------------------------------------------- Hotels, Restaurants & Leisure--1.1% Darden Restaurants, Inc. 880,000 28,529,600 ----------------------------------------------------------------------- Household Durables--1.7% NVR, Inc. (c) 30,000 20,565,000 Ryland Group, Inc. 380,000 25,574,000 -------------- 46,139,000 ----------------------------------------------------------------------- Multiline Retail--2.2% JC Penney Co., Inc. 580,000 29,696,000 Nordstrom, Inc. 870,000 30,145,500 -------------- 59,841,500 ----------------------------------------------------------------------- Specialty Retail--5.2% Advance Auto Parts (c) 450,000 16,875,000 American Eagle Outfitters 1,090,000 25,669,500 AutoNation, Inc. (c) 420,000 8,349,600 Best Buy Co., Inc. 370,000 16,376,200 Circuit City Stores, Inc. 1,230,000 21,881,700 Office Depot, Inc. (c) 780,000 21,473,400 Staples, Inc. 1,190,000 27,048,700 -------------- 137,674,100 ----------------------------------------------------------------------- Total Consumer Discretionary 297,364,600 =================================================================================== Consumer Staples--2.9% Food & Staples Retailing--1.0% The Kroger Co. (c) 1,380,000 27,462,000 ----------------------------------------------------------------------- Food Products--0.8% Archer-Daniels-Midland Co. 690,000 16,815,300 Pilgrim's Pride Corp. 190,000 5,981,200 -------------- 22,796,500 ----------------------------------------------------------------------- Household Products--0.8% Energizer Holdings, Inc. (c) 90,000 4,544,100 Procter & Gamble Co. 280,000 15,677,200 -------------- 20,221,300 ----------------------------------------------------------------------- Tobacco--0.3% Altria Group, Inc. 100,000 7,505,000 ----------------------------------------------------------------------- Total Consumer Staples 77,984,800 =================================================================================== Energy--19.1% Energy Equipment & Services--0.5% Cooper Cameron Corp. (c) 180,000 13,271,400 ----------------------------------------------------------------------- Oil, Gas & Consumable Fuels--18.6% Amerada Hess Corp. (d) 220,000 27,522,000 Anadarko Petroleum Corp. 350,000 31,748,500 Apache Corp. 260,000 16,595,800 Burlington Resources, Inc. 480,000 34,665,600 Chevron Corp. 80,000 4,565,600 ConocoPhillips 740,000 48,381,200 Devon Energy Corp. 550,000 33,209,000 Exxon Mobil Corp. 1,820,000 102,174,800 Forest Oil Corp. (c) 540,000 23,587,200 Kerr-McGee Corp. 340,000 28,913,600 Marathon Oil Corp. 530,000 31,884,800 Newfield Exploration Co. (c) 100,000 4,533,000 Occidental Petroleum Corp. (d) 450,000 35,496,000 Sunoco, Inc. 400,000 29,800,000 Tesoro Corp. 150,000 9,172,500 Valero Energy Corp. 320,000 33,676,800 -------------- 495,926,400 ----------------------------------------------------------------------- Total Energy 509,197,800 =================================================================================== Financials--11.3% Capital Markets--1.5% Goldman Sachs Group, Inc. 50,000 6,318,500 Lehman Brothers Holdings, Inc. 280,000 33,507,600 -------------- 39,826,100 ----------------------------------------------------------------------- Commercial Banks--0.4% Bank of America Corp. 270,000 11,809,800 ----------------------------------------------------------------------- Diversified Financial Services--1.0% Citigroup, Inc. 560,000 25,636,800 ----------------------------------------------------------------------- Insurance--8.4% AON Corp. 760,000 25,726,000 The Allstate Corp. 490,000 25,867,100 American International Group, Inc. 90,000 5,832,000 Metlife, Inc. 650,000 32,116,500 The Progressive Corp. (d) 90,000 10,422,900 Prudential Financial, Inc. 470,000 34,211,300 Safeco Corp. 410,000 22,837,000 The St. Paul Travelers Cos., Inc. (d) 740,000 33,322,200 UnumProvident Corp. 1,240,000 25,159,600 W.R. Berkley Corp. 225,000 9,832,500 -------------- 225,327,100 ----------------------------------------------------------------------- Total Financials 302,599,800 =================================================================================== Health Care--18.7% Biotechnology--2.2% Amgen, Inc. (c) 330,000 25,000,800 Invitrogen Corp. (c) 310,000 19,712,900 Techne Corp. (c) 260,000 14,097,200 -------------- 58,810,900 ----------------------------------------------------------------------- Health Care Equipment & Supplies--0.8% Becton Dickinson & Co. 430,000 21,822,500 ----------------------------------------------------------------------- Health Care Providers & Services--10.9% Aetna, Inc. New Shares 380,000 33,652,800 AmerisourceBergen Corp. 390,000 29,745,300 Caremark Rx, Inc. (c) 650,000 34,060,000 Cigna Corp. 260,000 30,126,200 Express Scripts, Inc. (c)(d) 380,000 28,655,800 HCA, Inc. 600,000 28,914,000 Humana, Inc. (c) 600,000 26,634,000 McKesson Corp. 660,000 29,983,800 Quest Diagnostics, Inc. 150,000 7,006,500 UnitedHealth Group, Inc. 750,000 43,417,500 -------------- 292,195,900 ----------------------------------------------------------------------- Pharmaceuticals--4.8% Allergan, Inc. (d) 330,000 29,469,000 Barr Pharmaceuticals, Inc. (c) 470,000 27,001,500 Johnson & Johnson 240,000 15,028,800
36 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Schedule of Investments (continued) Master Large Cap Core Portfolio
Shares Sector Industry Common Stocks Held Value =================================================================================== Health Care (concluded) Pharmaceuticals (concluded) King Pharmaceuticals, Inc. (c) 740,000 $ 11,418,200 Pfizer, Inc. 2,030,000 44,132,200 -------------- 127,049,700 ----------------------------------------------------------------------- Total Health Care 499,879,000 =================================================================================== Industrials--6.0% Aerospace & Defense--0.7% Precision Castparts Corp. 90,000 4,262,400 Raytheon Co. 390,000 14,410,500 -------------- 18,672,900 ----------------------------------------------------------------------- Airlines--0.2% AMR Corp. (c)(d) 430,000 5,809,300 ----------------------------------------------------------------------- Commercial Services & Supplies--0.2% Corporate Executive Board Co. 70,000 5,784,800 ----------------------------------------------------------------------- Electrical Equipment--0.8% Rockwell Automation, Inc. 410,000 21,791,500 ----------------------------------------------------------------------- Industrial Conglomerates--2.0% General Electric Co. 1,530,000 51,882,300 ----------------------------------------------------------------------- Machinery--1.0% Cummins, Inc. 210,000 17,927,700 Joy Global, Inc. 180,000 8,256,600 -------------- 26,184,300 ----------------------------------------------------------------------- Road & Rail--1.1% CSX Corp. 640,000 29,318,400 ----------------------------------------------------------------------- Total Industrials 159,443,500 =================================================================================== Information Technology--25.5% Communications Equipment--1.4% Motorola, Inc. 1,730,000 38,336,800 ----------------------------------------------------------------------- Computers & Peripherals--5.7% Dell, Inc. (c) 1,150,000 36,662,000 Hewlett-Packard Co. 1,590,000 44,583,600 International Business Machines Corp. 40,000 3,275,200 NCR Corp. (c) 650,000 19,643,000 QLogic Corp. (c) 680,000 20,508,800 Western Digital Corp. (c)(d) 2,190,000 26,499,000 -------------- 151,171,600 ----------------------------------------------------------------------- Electronic Equipment & Instruments--0.5% Jabil Circuit, Inc. (c)(d) 430,000 12,835,500 ----------------------------------------------------------------------- IT Services--2.5% CheckFree Corp. (c) 530,000 22,525,000 Computer Sciences Corp. (c) 140,000 7,175,000 Fiserv, Inc. (c)(d) 590,000 25,771,200 Sabre Holdings Corp. Class A 640,000 12,499,200 -------------- 67,970,400 ----------------------------------------------------------------------- Semiconductors & Semiconductor Equipment--6.4% Broadcom Corp. Class A (c) 260,000 11,039,600 Intel Corp. 1,840,000 43,240,000 LSI Logic Corp. (c)(d) 3,100,000 25,141,000 Lam Research Corp. (c) 780,000 26,317,200 Nvidia Corp. (c) 810,000 27,175,500 Texas Instruments, Inc. 1,300,000 37,115,000 -------------- 170,028,300 ----------------------------------------------------------------------- Software--9.0% Autodesk, Inc. (c) 620,000 27,980,600 BEA Systems, Inc. (c) 2,960,000 26,107,200 BMC Software, Inc. (c) 1,100,000 21,549,000 Citrix Systems, Inc. (c) 1,010,000 27,845,700 Compuware Corp. (c) 1,110,000 8,979,900 Intuit, Inc. (c) 590,000 27,098,700 McAfee, Inc. (c) 910,000 27,327,300 Mercury Interactive Corp. (c) 650,000 22,613,500 Microsoft Corp. 1,010,000 25,957,000 Red Hat, Inc. (c) 1,060,000 24,613,200 -------------- 240,072,100 ----------------------------------------------------------------------- Total Information Technology 680,414,700 =================================================================================== Materials--3.1% Chemicals--0.6% Eastman Chemical Co. (d) 270,000 14,245,200 ----------------------------------------------------------------------- Containers & Packaging--0.6% Crown Holdings, Inc. (c) 930,000 15,084,600 ----------------------------------------------------------------------- Metals & Mining--1.5% Freeport-McMoRan Copper & Gold, Inc. Class B (d) 240,000 11,860,800 Nucor Corp. (d) 480,000 28,728,000 -------------- 40,588,800 ----------------------------------------------------------------------- Paper & Forest Products--0.4% MeadWestvaco Corp. 440,000 11,536,800 ----------------------------------------------------------------------- Total Materials 81,455,400 =================================================================================== Utilities--2.1% Electric Utilities--1.4% American Electric Power Co., Inc. 110,000 4,175,600 Edison International 630,000 27,568,800 Northeast Utilities 360,000 6,548,400 -------------- 38,292,800 ----------------------------------------------------------------------- Multi-Utilities--0.7% CMS Energy Corp. (c)(d) 1,190,000 17,742,900 ----------------------------------------------------------------------- Total Utilities 56,035,700 ----------------------------------------------------------------------- Total Common Stocks (Cost--$2,304,822,230)--99.9% 2,664,375,300 =================================================================================== Short-Term Beneficial Securities Interest =================================================================================== Merrill Lynch Liquidity Series, LLC Cash Sweep Series I (a) $ 4,121,341 4,121,341 Merrill Lynch Liquidity Series, LLC Money Market Series (a)(b) 136,792,200 136,792,200 ----------------------------------------------------------------------- Total Short-Term Securities (Cost--$140,913,541)--5.3% 140,913,541 =================================================================================== Total Investments (Cost--$2,445,735,771*)--105.2% 2,805,288,841 Liabilities in Excess of Other Assets--(5.2%) (138,590,095) -------------- Net Assets--100.0% $2,666,698,746 ==============
MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 37 Schedule of Investments (concluded) Master Large Cap Core Portfolio For Portfolio compliance purposes, the Portfolio's sector and industry classifications refer to any one or more of the sector and industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Portfolio management. This definition may not apply for purposes of this report, which may combine sector and industry sub-classifications for reporting ease. Sectors and industries are shown as a percent of net assets. These sector and industry classifications are unaudited. * The cost and unrealized appreciation (depreciation) of investments as of October 31, 2005, as computed for federal income tax purposes, were as follows: Aggregate cost ......................................... $2,459,099,961 ============== Gross unrealized appreciation .......................... $ 440,422,571 Gross unrealized depreciation .......................... (94,233,691) -------------- Net unrealized appreciation ............................ $ 346,188,880 ============== (a) Investments in companies considered to be an affiliate of the Portfolio, 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 $1,766,173 $125,703 Merrill Lynch Liquidity Series, LLC Money Market Series $1,214,900 $176,578 -------------------------------------------------------------------------- (b) Security was purchased with the cash proceeds from securities loans. (c) Non-income producing security. (d) Security, or a portion of security, is on loan. See Notes to Financial Statements. 38 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Schedule of Investments Master Large Cap Growth Portfolio
Shares Sector Industry Common Stocks Held Value =================================================================================== Consumer Discretionary--15.9% Auto Components--1.0% The Goodyear Tire & Rubber Co. (a) 321,000 $ 5,020,440 ----------------------------------------------------------------------- Diversified Consumer Services--1.0% Apollo Group, Inc. Class A (a) 20,000 1,260,400 Weight Watchers International, Inc. (a) 70,000 3,679,900 -------------- 4,940,300 ----------------------------------------------------------------------- Hotels, Restaurants & Leisure--1.2% Darden Restaurants, Inc. 175,000 5,673,500 ----------------------------------------------------------------------- Household Durables--0.9% NVR, Inc. (a) 6,000 4,113,000 ----------------------------------------------------------------------- Media--1.1% Viacom, Inc. Class B 174,000 5,388,780 ----------------------------------------------------------------------- Multiline Retail--2.3% JC Penney Co., Inc. 108,000 5,529,600 Nordstrom, Inc. 168,000 5,821,200 -------------- 11,350,800 ----------------------------------------------------------------------- Specialty Retail--6.8% Advance Auto Parts (a) 118,500 4,443,750 American Eagle Outfitters 215,000 5,063,250 Best Buy Co., Inc. 139,000 6,152,140 Chico's FAS, Inc. (a) 135,000 5,337,900 Circuit City Stores, Inc. 264,000 4,696,560 Staples, Inc. (b) 268,000 6,091,640 Tiffany & Co. 41,000 1,615,400 -------------- 33,400,640 ----------------------------------------------------------------------- Textiles, Apparel & Luxury Goods--1.6% Polo Ralph Lauren Corp. 88,000 4,329,600 Timberland Co. Class A (a) 128,000 3,603,200 -------------- 7,932,800 ----------------------------------------------------------------------- Total Consumer Discretionary 77,820,260 =================================================================================== Consumer Staples--3.8% Beverages--0.6% Pepsi Bottling Group, Inc. 114,000 3,241,020 ----------------------------------------------------------------------- Food & Staples Retailing--1.2% Whole Foods Market, Inc. (b) 40,000 5,765,200 ----------------------------------------------------------------------- Household Products--2.0% Energizer Holdings, Inc. (a) 90,000 4,544,100 Procter & Gamble Co. 93,000 5,207,070 -------------- 9,751,170 ----------------------------------------------------------------------- Total Consumer Staples 18,757,390 =================================================================================== Energy--5.2% Energy Equipment & Services--1.1% Cooper Cameron Corp. (a) 76,000 5,603,480 ----------------------------------------------------------------------- Oil, Gas & Consumable Fuels--4.1% Anadarko Petroleum Corp. 47,000 4,263,370 Burlington Resources, Inc. 62,000 4,477,640 Newfield Exploration Co. (a) 114,000 5,167,620 Sunoco, Inc. 79,000 5,885,500 -------------- 19,794,130 ----------------------------------------------------------------------- Total Energy 25,397,610 =================================================================================== Financials--4.1% Capital Markets--1.2% Goldman Sachs Group, Inc. 46,000 5,813,020 ----------------------------------------------------------------------- Insurance--2.9% Allmerica Financial Corp. 90,000 3,429,000 Prudential Financial, Inc. (b) 71,000 5,168,090 W.R. Berkley Corp. 124,000 5,418,800 -------------- 14,015,890 ----------------------------------------------------------------------- Total Financials 19,828,910 =================================================================================== Health Care--22.2% Biotechnology--5.6% Amgen, Inc. (a) 162,000 12,273,120 Gilead Sciences, Inc. (a) 135,000 6,378,750 Invitrogen Corp. (a) 61,000 3,878,990 Techne Corp. (a) 92,000 4,988,240 -------------- 27,519,100 ----------------------------------------------------------------------- Health Care Equipment & Supplies--1.0% Becton Dickinson & Co. 98,000 4,973,500 ----------------------------------------------------------------------- Health Care Providers & Services--11.5% Aetna, Inc. New Shares 77,000 6,819,120 AmerisourceBergen Corp. 64,000 4,881,280 Caremark Rx, Inc. (a) 125,000 6,550,000 Community Health Systems, Inc. (a) 127,000 4,712,970 Express Scripts, Inc. (a) 75,000 5,655,750 HCA, Inc. (b) 131,000 6,312,890 Humana, Inc. (a) 113,000 5,016,070 McKesson Corp. 119,000 5,406,170 UnitedHealth Group, Inc. (b) 188,000 10,883,320 -------------- 56,237,570 ----------------------------------------------------------------------- Pharmaceuticals--4.1% Allergan, Inc. 66,000 5,893,800 Barr Pharmaceuticals, Inc. (a) 91,000 5,227,950 Johnson & Johnson 85,000 5,322,700 Pfizer, Inc. 156,000 3,391,440 -------------- 19,835,890 ----------------------------------------------------------------------- Total Health Care 108,566,060 =================================================================================== Industrials--9.9% Aerospace & Defense--2.0% Boeing Co. 75,000 4,848,000 Precision Castparts Corp. 100,000 4,736,000 -------------- 9,584,000 ----------------------------------------------------------------------- Airlines--1.1% AMR Corp. (a)(b) 386,000 5,214,860 ----------------------------------------------------------------------- Commercial Services & Supplies--1.2% Corporate Executive Board Co. 63,000 5,206,320 HNI Corp. 13,000 635,700 -------------- 5,842,020 ----------------------------------------------------------------------- Electrical Equipment--1.1% Rockwell Automation, Inc. 103,000 5,474,450 ----------------------------------------------------------------------- Industrial Conglomerates--2.4% General Electric Co. 354,000 12,004,140 -----------------------------------------------------------------------
MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 39 Schedule of Investments (concluded) Master Large Cap Growth Portfolio
Shares Sector Industry Common Stocks Held Value =================================================================================== Industrials (concluded) Machinery--2.1% Cummins, Inc. 60,000 $ 5,122,200 Joy Global, Inc. 117,000 5,366,790 -------------- 10,488,990 ----------------------------------------------------------------------- Total Industrials 48,608,460 =================================================================================== Information Technology--36.3% Communications Equipment--2.3% Cisco Systems, Inc. (a) 88,000 1,535,600 Motorola, Inc. 391,000 8,664,560 Scientific-Atlanta, Inc. 23,000 815,120 -------------- 11,015,280 ----------------------------------------------------------------------- Computers & Peripherals--5.9% Apple Computer, Inc. (a) 150,000 8,638,500 Dell, Inc. (a) 336,000 10,711,680 NCR Corp. (a) 140,000 4,230,800 Western Digital Corp. (a) 437,000 5,287,700 -------------- 28,868,680 ----------------------------------------------------------------------- Electronic Equipment & Instruments--1.8% Agilent Technologies, Inc. (a) 116,000 3,713,160 Jabil Circuit, Inc. (a) 166,000 4,955,100 -------------- 8,668,260 ----------------------------------------------------------------------- IT Services--3.1% Ceridian Corp. (a) 219,000 4,798,290 CheckFree Corp. (a) 118,000 5,015,000 Fiserv, Inc. (a) 126,000 5,503,680 -------------- 15,316,970 ----------------------------------------------------------------------- Semiconductors & Semiconductor Equipment--10.4% Broadcom Corp. Class A (a) 125,000 5,307,500 Intel Corp. 691,000 16,238,500 Intersil Corp. Class A 200,000 4,552,000 LSI Logic Corp. (a) 626,000 5,076,860 Lam Research Corp. (a)(b) 163,000 5,499,620 Nvidia Corp. (a) 163,000 5,468,650 Texas Instruments, Inc. (b) 303,000 8,650,650 -------------- 50,793,780 ----------------------------------------------------------------------- Software--12.8% Autodesk, Inc. (a) 129,000 5,821,770 BEA Systems, Inc. (a) 577,000 5,089,140 BMC Software, Inc. (a) 259,000 5,073,810 Cadence Design Systems, Inc. (a) 318,000 5,081,640 Citrix Systems, Inc. (a) 28,000 771,960 Compuware Corp. (a) 645,000 5,218,050 Fair Isaac Corp. (b) 120,000 5,011,200 Intuit, Inc. (a) 113,000 5,190,090 McAfee, Inc. (a) 173,000 5,195,190 Mercury Interactive Corp. (a) 160,000 5,566,400 Microsoft Corp. 365,000 9,380,500 Red Hat, Inc. (a)(b) 231,000 5,363,820 -------------- 62,763,570 ----------------------------------------------------------------------- Total Information Technology 177,426,540 =================================================================================== Materials--2.7% Containers & Packaging--1.0% Crown Holdings, Inc. (a) 308,000 4,995,760 ----------------------------------------------------------------------- Metals & Mining--1.7% Freeport-McMoRan Copper & Gold, Inc. Class B 65,000 3,212,300 Nucor Corp. 82,000 4,907,700 -------------- 8,120,000 ----------------------------------------------------------------------- Total Materials 13,115,760 ----------------------------------------------------------------------- Total Common Stocks (Cost--$442,393,001)--100.1% 489,520,990 =================================================================================== Short-Term Beneficial Securities Interest =================================================================================== Merrill Lynch Liquidity Series, LLC Cash Sweep Series I (c) $ 184,446 184,446 Merrill Lynch Liquidity Series, LLC Money Market Series (c)(d) 35,699,400 35,699,400 ----------------------------------------------------------------------- Total Short-Term Securities (Cost--$35,883,846)--7.3% 35,883,846 =================================================================================== Total Investments (Cost--$478,276,847*)--107.4% 525,404,836 Liabilities in Excess of Other Assets--(7.4%) (36,006,714) -------------- Net Assets--100.0% $ 489,398,122 ==============
For Portfolio compliance purposes, the Portfolio's sector and industry classifications refer to any one or more of the sector and industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Portfolio management. This definition may not apply for purposes of this report, which may combine sector and industry sub-classifications for reporting ease. Sectors and industries are shown as a percent of net assets. These sector and industry classifications are unaudited. * The cost and unrealized appreciation (depreciation) of investments as of October 31, 2005, as computed for federal income tax purposes, were as follows: Aggregate cost ............................................ $481,126,764 ============ Unrealized appreciation ................................... $ 58,089,507 Unrealized depreciation ................................... (13,811,435) ------------ Net unrealized appreciation ............................... $ 44,278,072 ============ (a) Non-income producing security. (b) Security, or a portion of security, is on loan. (c) Investments in companies considered to be an affiliate of the Portfolio 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 $ 167,724 $34,055 Merrill Lynch Liquidity Series, LLC Money Market Series $12,849,500 $35,059 -------------------------------------------------------------------------- (d) Security was purchased with the cash proceeds from securities loans. See Notes to Financial Statements. 40 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Schedule of Investments Master Large Cap Value Portfolio
Shares Sector Industry Common Stocks Held Value =================================================================================== Consumer Discretionary--10.8% Auto Components--1.0% The Goodyear Tire & Rubber Co. (c)(d) 1,010,000 $ 15,796,400 ----------------------------------------------------------------------- Hotels, Restaurants & Leisure--0.8% Darden Restaurants, Inc. 380,000 12,319,600 ----------------------------------------------------------------------- Household Durables--0.3% Ryland Group, Inc. 60,000 4,038,000 ----------------------------------------------------------------------- Leisure Equipment & Products--1.0% Hasbro, Inc. 830,000 15,637,200 ----------------------------------------------------------------------- Media--1.1% Viacom, Inc. Class B 550,000 17,033,500 ----------------------------------------------------------------------- Multiline Retail--2.0% JC Penney Co., Inc. 360,000 18,432,000 Nordstrom, Inc. 340,000 11,781,000 -------------- 30,213,000 ----------------------------------------------------------------------- Specialty Retail--3.6% American Eagle Outfitters 390,000 9,184,500 AutoNation, Inc. (c)(d) 860,000 17,096,800 Circuit City Stores, Inc. 480,000 8,539,200 Office Depot, Inc. (c) 670,000 18,445,100 Tiffany & Co. 50,000 1,970,000 -------------- 55,235,600 ----------------------------------------------------------------------- Textiles, Apparel & Luxury Goods--1.0% Polo Ralph Lauren Corp. 320,000 15,744,000 ----------------------------------------------------------------------- Total Consumer Discretionary 166,017,300 =================================================================================== Consumer Staples--2.9% Beverages--0.9% Pepsi Bottling Group, Inc. 470,000 13,362,100 ----------------------------------------------------------------------- Food & Staples Retailing--0.2% The Kroger Co. (c) 130,000 2,587,000 ----------------------------------------------------------------------- Food Products--0.9% Pilgrim's Pride Corp. 430,000 13,536,400 ----------------------------------------------------------------------- Household Products--0.9% Energizer Holdings, Inc. (c) 290,000 14,642,100 ----------------------------------------------------------------------- Total Consumer Staples 44,127,600 =================================================================================== Energy--24.4% Oil, Gas & Consumable Fuels--24.4% Amerada Hess Corp. 116,000 14,511,600 Anadarko Petroleum Corp. 230,000 20,863,300 Apache Corp. 150,000 9,574,500 Burlington Resources, Inc. 330,000 23,832,600 Chevron Corp. 90,000 5,136,300 ConocoPhillips 610,000 39,881,800 Devon Energy Corp. 380,000 22,944,400 Exxon Mobil Corp. 1,870,000 104,981,800 Forest Oil Corp. (c) 380,000 16,598,400 Kerr-McGee Corp. 210,000 17,858,400 Marathon Oil Corp. 360,000 21,657,600 Occidental Petroleum Corp. 310,000 24,452,800 Sunoco, Inc. 220,000 16,390,000 Valero Energy Corp. 230,000 24,205,200 Williams Cos., Inc. 520,000 11,596,000 ----------------------------------------------------------------------- Total Energy 374,484,700 =================================================================================== Financials--26.5% Capital Markets--3.4% Goldman Sachs Group, Inc. 220,000 27,801,400 Lehman Brothers Holdings, Inc. 210,000 25,130,700 -------------- 52,932,100 ----------------------------------------------------------------------- Commercial Banks--0.9% Bank of America Corp. 330,000 14,434,200 ----------------------------------------------------------------------- Diversified Financial Services--3.4% Citigroup, Inc. 670,000 30,672,600 JPMorgan Chase & Co. 60,000 2,197,200 Principal Financial Group, Inc. 390,000 19,355,700 -------------- 52,225,500 ----------------------------------------------------------------------- Insurance--15.0% AON Corp. 570,000 19,294,500 Allmerica Financial Corp. 340,000 12,954,000 The Allstate Corp. 430,000 22,699,700 American Financial Group, Inc. 270,000 9,228,600 Cincinnati Financial Corp. 140,000 5,957,000 Hartford Financial Services Group, Inc. 60,000 4,785,000 Lincoln National Corp. 360,000 18,219,600 Metlife, Inc. 430,000 21,246,300 Nationwide Financial Services, Inc. Class A 170,000 6,866,300 The Progressive Corp. (d) 140,000 16,213,400 Prudential Financial, Inc. 330,000 24,020,700 Safeco Corp. 210,000 11,697,000 The St. Paul Travelers Cos., Inc. 530,000 23,865,900 UnumProvident Corp. 780,000 15,826,200 W.R. Berkley Corp. 390,000 17,043,000 -------------- 229,917,200 ----------------------------------------------------------------------- Thrifts & Mortgage Finance--3.8% Astoria Financial Corp. 160,000 4,472,000 Countrywide Financial Corp. 260,000 8,260,200 Downey Financial Corp. 190,000 11,580,500 MGIC Investment Corp. (d) 290,000 17,179,600 The PMI Group, Inc. 420,000 16,749,600 -------------- 58,241,900 ----------------------------------------------------------------------- Total Financials 407,750,900 =================================================================================== Health Care--10.6% Biotechnology--1.4% Applera Corp.--Applied Biosystems Group 480,000 11,649,600 Invitrogen Corp. (c) 160,000 10,174,400 -------------- 21,824,000 ----------------------------------------------------------------------- Health Care Providers & Services--7.2% Aetna, Inc. New Shares 200,000 17,712,000 AmerisourceBergen Corp. 230,000 17,542,100 Caremark Rx, Inc. (c)(d) 310,000 16,244,000 Cigna Corp. 130,000 15,063,100 HCA, Inc. 210,000 10,119,900 Humana, Inc. (c) 340,000 15,092,600 McKesson Corp. 400,000 18,172,000 -------------- 109,945,700 -----------------------------------------------------------------------
MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 41 Schedule of Investments (concluded) Master Large Cap Value Portfolio
Shares Sector Industry Common Stocks Held Value =================================================================================== Health Care (concluded) Pharmaceuticals--2.0% King Pharmaceuticals, Inc. (c) 1,100,000 $ 16,973,000 Pfizer, Inc. 660,000 14,348,400 -------------- 31,321,400 ----------------------------------------------------------------------- Total Healthcare 163,091,100 =================================================================================== Industrials--3.7% Aerospace & Defense--1.9% Precision Castparts Corp. 320,000 15,155,200 Raytheon Co. 370,000 13,671,500 -------------- 28,826,700 ----------------------------------------------------------------------- Electrical Equipment--0.6% Rockwell Automation, Inc. 190,000 10,098,500 ----------------------------------------------------------------------- Road & Rail--1.2% CSX Corp. 400,000 18,324,000 ----------------------------------------------------------------------- Total Industrials 57,249,200 =================================================================================== Information Technology--14.6% Communications Equipment--1.1% Motorola, Inc. 750,000 16,620,000 ----------------------------------------------------------------------- Computers & Peripherals--4.0% Hewlett-Packard Co. 1,310,000 36,732,400 NCR Corp. (c) 290,000 8,763,800 QLogic Corp. (c) 180,000 5,428,800 Western Digital Corp. (c)(d) 930,000 11,253,000 -------------- 62,178,000 ----------------------------------------------------------------------- Electronic Equipment & Instruments--1.1% Arrow Electronics, Inc. (c) 510,000 15,050,100 Avnet, Inc. (c) 70,000 1,613,500 -------------- 16,663,600 ----------------------------------------------------------------------- IT Services--1.1% CheckFree Corp. (c) 180,000 7,650,000 Sabre Holdings Corp. Class A 490,000 9,569,700 -------------- 17,219,700 ----------------------------------------------------------------------- Semiconductors & Semiconductor Equipment--1.1% LSI Logic Corp. (c) 2,030,000 16,463,300 ----------------------------------------------------------------------- Software--6.2% Autodesk, Inc. 245,000 11,056,850 BEA Systems, Inc. (c)(d) 1,100,000 9,702,000 BMC Software, Inc. (c) 830,000 16,259,700 Cadence Design Systems, Inc. (c) 890,000 14,222,200 Compuware Corp. (c) 1,980,000 16,018,200 Fair Isaac Corp. 40,000 1,670,400 McAfee, Inc. (c)(d) 410,000 12,312,300 Sybase, Inc. (c) 640,000 14,240,000 -------------- 95,481,650 ----------------------------------------------------------------------- Total Information Technology 224,626,250 =================================================================================== Materials--3.4% Chemicals--1.4% Eastman Chemical Co. 120,000 6,331,200 FMC Corp. (c) 270,000 14,698,800 -------------- 21,030,000 ----------------------------------------------------------------------- Metals & Mining--0.9% Nucor Corp. 240,000 14,364,000 ----------------------------------------------------------------------- Paper & Forest Products--1.1% MeadWestvaco Corp. 630,000 16,518,600 ----------------------------------------------------------------------- Total Materials 51,912,600 =================================================================================== Utilities--2.8% Electric Utilities--1.7% American Electric Power Co., Inc. 210,000 7,971,600 Edison International 308,000 13,478,080 Northeast Utilities 250,000 4,547,500 -------------- 25,997,180 ----------------------------------------------------------------------- Multi-Utilities--1.1% CMS Energy Corp. (c)(d) 1,120,000 16,699,200 ----------------------------------------------------------------------- Total Utilities 42,696,380 ----------------------------------------------------------------------- Total Common Stocks (Cost--$1,327,844,902)--99.7% 1,531,956,030 =================================================================================== Short-Term Beneficial Securities Interest =================================================================================== Merrill Lynch Liquidity Series, LLC Cash Sweep Series I (a) $ 8,523,929 8,523,929 Merrill Lynch Liquidity Series, LLC Money Market Series (a)(b) 88,287,000 88,287,000 ----------------------------------------------------------------------- Total Short-Term Securities (Cost--$96,810,929)--6.3% 96,810,929 =================================================================================== Total Investments (Cost--$1,424,655,831*)--106.0% 1,628,766,959 Liabilities in Excess of Other Assets--(6.0%) (92,778,897) -------------- Net Assets--100.0% $1,535,988,062 ==============
For Portfolio compliance purposes, the Portfolio's sector and industry classifications refer to any one or more of the sector or industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Portfolio management. This definition may not apply for purposes of this report, which may combine sector and industry sub-classifications for reporting ease. Sectors and industries are shown as a percent of net assets. These sector and industry classifications are unaudited. * The cost and unrealized appreciation (depreciation) of investments as of October 31, 2005, as computed for federal income tax purposes, were as follows: Aggregate cost .......................................... $1,429,319,035 ============== Gross unrealized appreciation ........................... $ 234,612,696 Gross unrealized depreciation ........................... (35,164,772) -------------- Net unrealized appreciation ............................. $ 199,447,924 ============== (a) Investments in companies considered to be an affiliate of the Portfolio, 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 $ 7,320,828 $156,787 Merrill Lynch Liquidity Series, LLC Money Market Series $53,063,800 $ 43,166 -------------------------------------------------------------------------- (b) Security was purchased with the cash proceeds from securities loans. (c) Non-income producing security. (d) Security, or a portion of security, is on loan. See Notes to Financial Statements. 42 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Statements of Assets and Liabilities Master Large Cap Series Trust
Master Large Master Large Master Large As of October 31, 2005 Cap Core Cap Growth Cap Value =================================================================================================================================== Assets ---------------------------------------------------------------------------------------------------------------------------------- Investments in unaffiliated securities, at value*+ ...... $2,664,375,300 $ 489,520,990 $1,531,956,030 Investments in affiliated securities, at value** ........ 140,913,541 35,883,846 96,810,929 Cash .................................................... -- 4,414 -- Receivables: Securities sold ...................................... 40,078,661 14,751,864 46,036,925 Contributions ........................................ 7,000,055 708,181 7,717,641 Dividends ............................................ 1,092,450 149,170 822,450 Securities lending ................................... 36,194 4,912 7,734 Prepaid expenses ........................................ 42,281 8,841 22,579 --------------------------------------------------- Total assets ............................................ 2,853,538,482 541,032,218 1,683,374,288 --------------------------------------------------- =================================================================================================================================== Liabilities ---------------------------------------------------------------------------------------------------------------------------------- Collateral on securities loaned, at value ............... 136,792,200 35,699,400 88,287,000 Payables: Securities purchased ................................. 41,896,996 14,668,749 22,593,297 Withdrawals .......................................... 3,536,420 996,361 2,656,539 Custodian bank ....................................... 3,401,802 -- 33,099,435 Investment adviser ................................... 1,040,392 203,546 645,607 Other affiliates ..................................... 30,062 5,510 15,282 Accrued expenses ........................................ 141,864 60,530 89,066 --------------------------------------------------- Total liabilities ....................................... 186,839,736 51,634,096 147,386,226 --------------------------------------------------- =================================================================================================================================== Net Assets ---------------------------------------------------------------------------------------------------------------------------------- Net assets .............................................. $2,666,698,746 $ 489,398,122 $1,535,988,062 =================================================== =================================================================================================================================== Net Assets Consist of ---------------------------------------------------------------------------------------------------------------------------------- Investors' capital ...................................... $2,307,145,676 $ 442,270,133 $1,331,876,934 Unrealized appreciation--net ............................ 359,553,070 47,127,989 204,111,128 --------------------------------------------------- Net Assets .............................................. $2,666,698,746 $ 489,398,122 $1,535,988,062 =================================================== * Identified cost for unaffiliated securities .......... $2,304,822,230 $ 442,393,001 $1,327,844,902 =================================================== ** Identified cost for affiliated securities ........... $ 140,913,541 $ 35,883,846 $ 96,810,929 =================================================== + Securities loaned for unaffiliated securities ........ $ 133,121,337 $ 35,545,473 $ 86,496,299 ===================================================
See Notes to Financial Statements. MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 43 Statements of Operations Master Large Cap Series Trust
Master Large Master Large Master Large For the Year Ended October 31, 2005 Cap Core Cap Growth Cap Value =================================================================================================================================== Investment Income ---------------------------------------------------------------------------------------------------------------------------------- Dividends ............................................... $ 28,489,172 $ 3,809,535 $ 15,255,855 Securities lending--net ................................. 176,578 35,059 43,166 Interest from affiliates ................................ 125,703 34,055 156,787 --------------------------------------------------- Total income ............................................ 28,791,453 3,878,649 15,455,808 --------------------------------------------------- =================================================================================================================================== Expenses ---------------------------------------------------------------------------------------------------------------------------------- Investment advisory fees ................................ 11,047,046 2,154,995 5,732,081 Accounting services ..................................... 501,657 181,359 333,894 Custodian fees .......................................... 128,210 44,021 69,158 Professional fees ....................................... 68,428 42,134 51,429 Trustees' fees and expenses ............................. 65,144 22,106 37,850 Printing and shareholder reports ........................ 6,773 1,227 2,349 Pricing fees ............................................ 1,193 1,164 1,181 Other ................................................... 46,948 11,794 24,722 --------------------------------------------------- Total expenses .......................................... 11,865,399 2,458,800 6,252,664 --------------------------------------------------- Investment income--net .................................. 16,926,054 1,419,849 9,203,144 --------------------------------------------------- =================================================================================================================================== Realized & Unrealized Gain--Net ---------------------------------------------------------------------------------------------------------------------------------- Realized gain on investments--net ....................... 185,237,400 27,951,501 77,262,988 Change in unrealized appreciation on investments--net ... 159,284,150 17,275,515 112,124,763 --------------------------------------------------- Total realized and unrealized gain--net ................. 344,521,550 45,227,016 189,387,751 --------------------------------------------------- Net Increase in Net Assets Resulting from Operations .... $ 361,447,604 $ 46,646,865 $ 198,590,895 ===================================================
See Notes to Financial Statements. 44 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Statements of Changes in Net Assets Master Large Cap Series Trust
Master Large Cap Core ----------------------------------- For the Year Ended October 31, ----------------------------------- Increase (Decrease) in Net Assets: 2005 2004 ================================================================================================================================= Operations -------------------------------------------------------------------------------------------------------------------------------- Investment income--net ............................................ $ 16,926,054 $ 9,256,200 Realized gain--net ................................................ 185,237,400 199,493,500 Change in unrealized appreciation--net ............................ 159,284,150 (68,627,985) ----------------------------------- Net increase in net assets resulting from operations .............. 361,447,604 140,121,715 ----------------------------------- ================================================================================================================================= Capital Transactions -------------------------------------------------------------------------------------------------------------------------------- Proceeds from contributions ....................................... 1,040,896,976 751,429,058 Fair value of withdrawals ......................................... (566,946,131) (514,359,352) ----------------------------------- Net increase in net assets derived from capital transactions ...... 473,950,845 237,069,706 ----------------------------------- ================================================================================================================================= Net Assets -------------------------------------------------------------------------------------------------------------------------------- Total increase in net assets ...................................... 835,398,449 377,191,421 Beginning of year ................................................. 1,831,300,297 1,454,108,876 ----------------------------------- End of year ....................................................... $ 2,666,698,746 $ 1,831,300,297 ===================================
See Notes to Financial Statements. MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 45 Statements of Changes in Net Assets Master Large Cap Series Trust
Master Large Cap Growth ----------------------------------- For the Year Ended October 31, ----------------------------------- Increase (Decrease) in Net Assets: 2005 2004 ================================================================================================================================= Operations -------------------------------------------------------------------------------------------------------------------------------- Investment income--net ................................................ $ 1,419,849 $ 281,254 Realized gain--net .................................................... 27,951,501 24,609,718 Change in unrealized appreciation/depreciation--net ................... 17,275,515 (10,279,183) ----------------------------------- Net increase in net assets resulting from operations .................. 46.646,865 14,611,789 ----------------------------------- ================================================================================================================================= Capital Transactions -------------------------------------------------------------------------------------------------------------------------------- Proceeds from contributions ........................................... 226,416,991 167,785,623 Fair value of withdrawals ............................................. (128,065,615) (88,163,265) ----------------------------------- Net increase in net assets derived from capital transactions .......... 98,351,376 79,622,358 ----------------------------------- ================================================================================================================================= Net Assets -------------------------------------------------------------------------------------------------------------------------------- Total increase in net assets .......................................... 144,998,241 94,234,147 Beginning of year ..................................................... 344,399,881 250,165,734 ----------------------------------- End of year ........................................................... $ 489,398,122 $ 344,399,881 ===================================
See Notes to Financial Statements. 46 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Statements of Changes in Net Assets Master Large Cap Series Trust
Master Large Cap Value ----------------------------------- For the Year Ended October 31, ----------------------------------- Increase (Decrease) in Net Assets: 2005 2004 ================================================================================================================================= Operations -------------------------------------------------------------------------------------------------------------------------------- Investment income--net ................................................ $ 9,203,144 $ 6,104,616 Realized gain--net .................................................... 77,262,988 78,138,823 Change in unrealized appreciation--net ................................ 112,124,763 (2,549,830) ----------------------------------- Net increase in net assets resulting from operations .................. 198,590,895 81,693,609 ----------------------------------- ================================================================================================================================= Capital Transactions -------------------------------------------------------------------------------------------------------------------------------- Proceeds from contributions ........................................... 831,921,820 375,871,386 Fair value of withdrawals ............................................. (305,014,008) (162,332,461) ----------------------------------- Net increase in net assets derived from capital transactions .......... 526,907,812 213,538,925 ----------------------------------- ================================================================================================================================= Net Assets -------------------------------------------------------------------------------------------------------------------------------- Total increase in net assets .......................................... 725,498,707 295,232,534 Beginning of year ..................................................... 810,489,355 515,256,821 ----------------------------------- End of year ........................................................... $ 1,535,988,062 $ 810,489,355 ===================================
See Notes to Financial Statements. MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 47 Financial Highlights Master Large Cap Series Trust
Master Large Cap Core Portfolio ----------------------------------------------------------------- For the Year Ended October 31, The following ratios have been derived from information ----------------------------------------------------------------- provided in the financial statements. 2005 2004 2003 2002 2001 ================================================================================================================================== Total Investment Return* --------------------------------------------------------------------------------------------------------------------------------- Total investment return ...................... 18.35% 9.61% 25.11% (8.13%) -- ================================================================= ================================================================================================================================== Ratios to Average Net Assets --------------------------------------------------------------------------------------------------------------------------------- Expenses ..................................... .51% .52% .54% .57% .67% ================================================================= Investment income--net ....................... .72% .57% .48% .83% .59% ================================================================= ================================================================================================================================== Supplemental Data --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (in thousands) ....... $2,666,699 $1,831,300 $1,454,109 $ 873,704 $ 412,836 ================================================================= Portfolio turnover ........................... 93.95% 135.48% 138.73% 150.18% 162.28% =================================================================
* Total investment return is required to be disclosed for fiscal years beginning after December 15, 2000. See Notes to Financial Statements. 48 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005
Master Large Cap Growth Portfolio Master Large Cap Value Portfolio -------------------------------------------------------------- --------------------------------------------------------------- For the Year Ended October 31, For the Year Ended October 31, -------------------------------------------------------------- --------------------------------------------------------------- 2005 2004 2003 2002 2001 2005 2004 2003 2002 2001 ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- 12.47% 5.42% 25.01% (13.56%) -- 21.93% 14.57% 27.05% (3.40%) -- ================================================================================================================================== ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- .57% .59% .61% .67% .73% .55% .56% .57% .60% .67% ================================================================================================================================== .33% .09% .04% (.01%) (.24%) .80% .93% .97% 1.17% .96% ================================================================================================================================== ================================================================================================================================== --------------------------------------------------------------------------------------------------------------------------------- $ 489,398 $ 344,400 $ 250,166 $ 185,676 $ 148,652 $1,535,988 $ 810,489 $ 515,257 $ 386,918 $ 328,219 ================================================================================================================================== 131.79% 164.94% 178.11% 177.46% 230.34% 94.95% 127.59% 157.04% 136.92% 168.54% ==================================================================================================================================
MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 49 Notes to Financial Statements Master Large Cap Series Trust 1. Significant Accounting Policies: Master Large Cap Core Portfolio, Master Large Cap Growth Portfolio and Master Large Cap Value Portfolio (the "Portfolios" or individually as the "Portfolio") constitute the Master Large Cap Series Trust (the "Trust"). The Trust is registered under the Investment Company Act of 1940, as amended, and is organized as a Delaware statutory trust. The Declaration of Trust permits the Trustees to issue nontransferable interests in the Portfolio, subject to certain limitations. The Portfolios' financial statements are prepared in conformity with U.S. generally accepted accounting principles, which may require the use of management accruals and estimates. Actual results may differ from these estimates. The following is a summary of significant accounting policies followed by the Portfolio. (a) Valuation of investments -- Equity securities that are held by each Portfolio that are traded on stock exchanges or the Nasdaq National Market are valued at the last sale price or official close price on the exchange, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price for long positions, and at the last available asked price for short positions. In cases where equity securities are traded on more than one exchange, the securities are valued on the exchange designated as the primary market by or under the authority of the Board of Trustees of the Trust. Long positions traded in the over-the-counter ("OTC") market, Nasdaq Small Cap or Bulletin Board are valued at the last available bid price or yield equivalent obtained from one or more dealers or pricing services approved by the Board of Trustees of the Trust. Short positions traded in the OTC market are valued at the last available asked price. Portfolio securities that are traded both in the OTC market and on a stock exchange are valued according to the broadest and most representative market. Options written are valued at the last sale price in the case of exchange-traded options or, in the case of options traded in the OTC market, the last ask price. Options purchased are valued at their last sale price in the case of exchange-traded options or, in the case of options traded in the OTC market, the last bid price. Swap agreements are valued based upon quoted fair valuations received daily by the Portfolios 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. Repurchase agreements are valued at cost plus accrued interest. Each Portfolio employs pricing services to provide certain securities prices for the Portfolio. Securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of the Board of Trustees of the Trust, including valuations furnished by the pricing services retained by each Portfolio, which may use a matrix system for valuations. The procedures of a pricing service and its valuations are reviewed by the officers of the Trust under the general supervision of the 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 each Portfolio are determined as of such times. Foreign currency exchange rates also are generally determined prior to the close of business on the NYSE. Occasionally, events affecting the values of such securities and such exchange rates may occur between the times at which they are determined and the close of business on the NYSE that may not be reflected in the computation of each Portfolio's net assets. If events (for example, a company announcement, market volatility or a natural disaster) occur during such periods that are expected to materially affect the value of such securities, those securities may be valued at their fair value as determined in good faith by the Trust's Board of Trustees or by the Investment Adviser using a pricing service and/or procedures approved by the Trust's Board of Trustees. (b) Derivative financial instruments -- Each Portfolio may engage in various portfolio investment strategies both to increase the return of the Portfolio and to hedge, or protect, its exposure to interest rate movements and movements in the securities markets. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. o Financial futures contracts -- Each Portfolio may purchase or sell financial futures contracts and options on such futures contracts. Futures contracts are contracts for delayed delivery of securities at a specific date and at a specific price or yield. Upon entering into a contract, the Portfolio deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Portfolio 50 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Notes to Financial Statements (continued) Master Large Cap Series 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 Portfolio as unrealized gains or losses. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. o Options -- Each Portfolio may purchase and write call and put options. When the Portfolio writes an option, an amount equal to the premium received by the Portfolio is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Portfolio enters into a closing transaction), the Portfolio realizes a gain or loss on the option to the extent of the premiums received or paid (or a gain or loss to the extent that the cost of the closing transaction exceeds the premium paid or received). Written and purchased options are non-income producing investments. (c) Income taxes -- Each Portfolio is considered as a "pass through" entity for federal income tax purposes. As such, each investor in the Portfolio is treated as owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. Therefore, no federal income tax provision is required. It is intended that the Portfolio's assets will be managed so an investor in the Portfolio can satisfy the requirements of subchapter M of the Internal Revenue Code. (d) Security transactions and investment income -- Security transactions are accounted for on the date the securities are purchased or sold (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Portfolio has determined the ex-dividend date. Interest income is recognized on the accrual basis. (e) Securities lending -- Each Portfolio may lend securities to financial institutions that provide cash or securities issued or guaranteed by the U.S. government as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Portfolio and any additional required collateral is delivered to the Portfolio on the next business day. Where the Portfolio receives securities as collateral for the loaned securities, it receives a fee from the borrower. The Portfolio typically receives the income on the loaned securities, but does not receive the income on the collateral. Where the Portfolio receives cash collateral, it may invest such collateral and retain the amount earned on such investment, net of any amount rebated to the borrower. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within five business days. The Portfolio may pay reasonable finders, lending agent, administrative and custodial fees in connection with its loans. In the event that the borrower defaults on its obligation to return borrowed securities because of insolvency or for any other reason, the Portfolio could experience delays and costs in gaining access to the collateral. The Portfolio also could suffer a loss where the value of the collateral falls below the market value of the borrowed securities, in the event of borrower default or in the event of losses on investments made with cash collateral. (f) Custodian bank -- Master Large Cap Core Portfolio The Portfolio recorded an amount payable to the custodian bank reflecting an overnight overdraft, which resulted from a failed trade that settled the next day. Master Large Cap Value Portfolio The Portfolio recorded an amount payable to the custodian bank resulting from a timing difference of security transaction settlements. 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 each Portfolio's investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Portfolio. For such services the Master Large Cap Core Portfolio pays a monthly fee at an annual rate of .50% of the average daily value of the Portfolio's net assets not MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 51 Notes to Financial Statements (concluded) Master Large Cap Series Trust exceeding $1 billion and .45% of average daily net assets in excess of $1 billion. Master Large Cap Growth Portfolio and Master Large Cap Value Portfolio each pay a monthly fee at an annual rate of .50% of the average daily value of the Portfolio's net assets. FAM has entered into a Sub-Advisory Agreement with Merrill Lynch Asset Management U.K. Limited ("MLAM U.K."), an affiliate of FAM, pursuant to which MLAM U.K. provides investment advisory services to FAM with respect to the Portfolio. There is no increase in the aggregate fees paid by the Portfolio for these services. Each Portfolio has received an exemptive order from the Securities and Exchange Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), an affiliate of FAM, or its affiliates. As of October 31, 2005, the Master Large Cap Core Portfolio, Master Large Cap Growth Portfolio and Master Large Cap Value Portfolio lent securities with values of $11,244,452, $5,680,227 and $11,554,200, respectively, to MLPF&S or its affiliates. Pursuant to that order, the Portfolios also have 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 Portfolios, invest cash collateral received by the Portfolios for such loans, among other things, in a private investment company managed by MLIM, LLC or in registered money market Portfolios advised by FAM or its affiliates. For the year ended October 31, 2005, MLIM, LLC received $77,387, $15,406 and $18,950 in securities lending agent fees for Master Large Cap Core Portfolio, Master Large Cap Growth Portfolio and Master Large Cap Value Portfolio, respectively. For the year ended October 31, 2005, the Portfolios reimbursed FAM for certain accounting services as follows: ------------------------------------------------------------------------------- Reimbursement ------------------------------------------------------------------------------- Master Large Cap Core Portfolio ................................ $53,670 Master Large Cap Growth Portfolio .............................. $10,598 Master Large Cap Value Portfolio ............................... $27,301 ------------------------------------------------------------------------------- Certain officers and/or trustees of the Trust are officers and/or directors of FAM, PSI, MLAM U.K., ML & Co., and/or MLIM, LLC. 3. Investments: Purchases and sales of investments, excluding short-term securities, for the year ended October 31, 2005 were as follows: ------------------------------------------------------------------------------- Total Purchases Total Sales ------------------------------------------------------------------------------- Master Large Cap Core Portfolio ...................... $2,674,748,983 $2,184,746,762 Master Large Cap Growth Portfolio .................... $ 664,219,773 $ 562,936,365 Master Large Cap Value Portfolio ..................... $1,616,512,846 $1,082,971,746 ------------------------------------------------------------------------------- 4. Short-Term Borrowings: Each Portfolio, along with certain other funds managed by FAM and its affiliates, is party to a $500,000,000 credit agreement with a group of lenders, which expires November 2005 and was subsequently renewed for one year under substantially the same terms. The Portfolio may borrow under the credit agreement to fund shareholder redemptions and for other lawful purposes other than for leverage. The Portfolio may borrow up to the maximum amount allowable under the Portfolio's current prospectus and statement of additional information, subject to various other legal, regulatory or contractual limits. The Portfolio pays a commitment fee of .07% per annum based on the Portfolio's pro rata share of the unused portion of the credit agreement. Amounts borrowed under the credit agreement bear interest at a rate equal to, at each Portfolio's election, the federal funds rate plus .50% or a base rate as defined in the credit agreement. None of the Portfolios borrowed under the credit agreement during the year ended October 31, 2005. 52 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Report of Independent Registered Public Accounting Firm Master Large Cap Series Trust To the Investors and Board of Trustees of Master Large Cap Series Trust: We have audited the accompanying statements of assets and liabilities, including the schedules of investments of Master Large Cap Series Trust (the "Trust"), comprising Master Large Cap Core Portfolio, Master Large Cap Growth Portfolio and Master Large Cap Value Portfolio, as of October 31, 2005, the related statements 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 of 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 October 31, 2005, 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 each of the portfolios constituting Master Large Cap Series Trust, as of October 31, 2005, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their 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 December 19, 2005 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 53 Disclosure of Investment Advisory Agreement Activities of and Composition of the Board of Directors. All but one member of each Fund's Board of Directors is an independent director whose only association with the Investment Adviser or other Merrill Lynch affiliates is as a director of the Funds and certain other funds advised by the Investment Adviser or its affiliates. The Co-chairmen of the Board are also independent directors. New director nominees are chosen as nominees by a Nominating Committee comprised of independent directors. All independent directors also are members of each Board's Audit Committee and the independent directors meet in executive session at each regular Board meeting. Each Board and the Audit Committee meet in person for at least two days each quarter and conduct other in-person and telephone meetings throughout the year, some of which are formal board meetings and some of which are informational meetings. The independent counsel to the independent directors attends all in-person Board and Audit Committee meetings and other meetings at the independent directors' request. Investment Advisory Agreements -- Matters Considered by the Board Every year, the Board considers approval of the Investment Advisory Agreements with respect to each Fund and throughout each year, reviews and evaluates the performance of and services provided by the Investment Adviser. Each Board assesses the nature, scope and quality of the services provided to the Trust and/or the Fund by the personnel of the Investment Adviser, and its affiliates, including administrative services, shareholder services, oversight of fund accounting, marketing services and assistance in meeting legal and regulatory requirements. Each Board also receives and assesses information regarding the services provided to the Trust and the Fund by certain unaffiliated service providers. At various times throughout the year, each Board also considers a range of information in connection with its oversight of the services provided by the Investment Adviser and its affiliates. Among the matters considered with respect to each Fund are: (a) fees (in addition to management fees) paid to the Investment Adviser and its affiliates by the Trust and/or the Fund, such as transfer agency fees and fees for marketing and distribution; (b) Trust or Fund operating expenses paid to third parties; (c) the resources devoted to and compliance reports relating to the Trust's and the Fund's investment objective, policies and restrictions, and its compliance with its Code of Ethics and the Investment Adviser's compliance policies and procedures; and (d) the nature, cost and character of non-investment management services provided by the Investment Adviser and its affiliates. Each Board believes that the Investment Adviser is one of the most experienced global asset management firms and considers the overall quality of services provided by the Investment Adviser to be generally of high quality. Each Board also believes that the Investment Adviser is financially sound and well managed and notes that the Investment Adviser is affiliated with one of America's largest financial firms. Each Board works closely with the Investment Adviser in overseeing the Investment Adviser's efforts to achieve good performance. As part of this effort, each Board discusses portfolio manager effectiveness and, when performance is not satisfactory, discusses with the Investment Adviser taking steps such as changing investment personnel. Annual Consideration of Approval by the Board of Directors. In the period prior to the Board meeting to consider renewal of the Investment Advisory Agreements, each Board requests and receives materials specifically relating to the Investment Advisory Agreements. These materials are prepared separately with respect to each Fund, and include (a) information compiled by Lipper Inc. ("Lipper") on the fees and expenses and the investment performance of the Fund as compared to a comparable group of funds as classified by Lipper; (b) sales and redemption data for the Fund; (c) a discussion by the Trust's/Fund's portfolio management team regarding investment strategies used by the Trust/Fund during its most recent fiscal year; (d) information on the profitability to the Investment Adviser and its affiliates of the Investment Advisory Agreements and other relationships with the Trust/Fund; and (e) information provided by the Investment Adviser concerning investment advisory fees charged to other clients, such as other mutual funds and offshore funds under similar investment mandates and generally to institutional clients. The Board also considers other matters it deems important to the approval process such as payments made to the Investment Adviser or its affiliates relating to the distribution of Fund shares, services related to the valuation and pricing of Trust/Fund portfolio holdings, allocation of Trust/Fund brokerage fees, the Trust's/Fund's portfolio turnover statistics, and direct and indirect benefits to the Investment Adviser and its affiliates from their relationship with the Trust/Fund. Certain Specific Renewal Data In connection with the most recent renewal of the Trust's Investment Advisory Agreements, which occurred in May 54 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 2005, the independent Directors' and Board's review included the following: The Investment Adviser's Services and Fund Performance -- Each Board reviewed the nature, extent and quality of services provided by the Investment Adviser, including the investment advisory services and the resulting performance of the Fund. Each Board focused primarily on the Investment Adviser's investment advisory services and the Fund's investment performance. Each Board compared the Fund's performance -- both including and excluding the effects of the Trust's/Fund's fees and expenses -- to the performance of a comparable group of mutual funds, and the performance of a relevant index or combination of indexes. While each Board reviews performance data at least quarterly, consistent with the Investment Adviser's investment goals, the Board attaches more importance to performance over relatively long periods of time, typically three to five years. The Board noted that the Large Cap Growth Fund's performance within the group compared for each of the one, three, and five year periods ended March 31, 2005 was in the second quartile. The Board noted that the Large Cap Core Fund's performance within the group compared for each of the one and three year periods ended March 31, 2005 was in the first quartile and in the second quartile for the five year period ended March 31, 2005. The Board noted that the Large Cap Value Fund's performance within the group compared for each of the one-, three- and five-year periods ended March 31, 2005 was in the first quartile. Considering these factors, each Board concluded that the nature and quality of the services provided supported continuation of the Investment Advisory Agreements. The Investment Adviser's Personnel and Investment Process -- Each Board reviewed the investment objectives and strategies of the Trust and the Fund. Each Board discussed with senior management of the Investment Adviser responsible for investment operations and the senior management of the Investment Adviser's equity investing group the strategies being used to achieve the stated objectives. Among other things, each Board considered the size, education and experience of the Investment Adviser's investment staff, its use of technology, and the Investment Adviser's approach to training and retaining portfolio managers and other research, advisory and management personnel. Each Board also reviewed the Investment Adviser's compensation policies and practices with respect to the Trust's/Fund's portfolio manager. Each Board considered the experience of the Trust's/Fund's portfolio manager and noted that Mr. Doll has over twenty years experience in portfolio management. The Board concluded that the Investment Adviser and its investment staff and the Trust's/Fund's portfolio managers have extensive experience in analyzing and managing the types of investments used by the Trust and the Fund and that the Trust and the Fund benefit from that expertise. Management Fees and Other Expenses -- Each Board reviewed the Trust's/Fund's contractual management fee rate and actual management fee rate as a percentage of total assets at common asset levels -- the actual rate includes advisory and administrative service fees and the effects of any fee waivers -- compared to the other funds in its Lipper category. It also compared the Trust's/Fund's total expenses to those of other comparable funds. Each Board considered the services provided to and the fees charged by the Investment Adviser to other types of clients such as other mutual funds and off-shore funds, with similar investment mandates and noted that the fees charged by the Investment Adviser in those cases typically exceeded those being charged to the Trust/Fund. Each Board also noted that, as a general matter, fees charged to institutional clients were lower than the fees charged to the Trust/Fund, but determined that the Investment Adviser provided less extensive services to such clients. The Board noted that the Large Cap Growth Fund's contractual management fee rates for the Fund was equal to the median fee rate charged by its peer group, as determined by Lipper, while the Fund's actual management fee rate and total expenses were below the median fees and expenses charged by its peers. The Board noted that the Large Cap Core Fund's contractual and actual management fee rates for the Fund, as well as its total expenses, were above the median fee rates charged by its peer group as determined by Lipper. The Board noted that the Large Cap Value Fund's contractual and actual management fee rates for the Fund, as well as its total expenses, were below the median fee rates charged by its peer group as determined by Lipper. Each Board has concluded that each Fund's management fee and fee rate and overall expense ratio are reasonable compared to those of other comparable funds. Profitability -- The Boards considered the cost of the services provided to the Trust and/or the Fund by the Investment Adviser and the Investment Adviser's and its affiliates' profits relating to the management and distribution of the Fund and the MLIM/FAM-advised funds. As part of its analysis, the Boards reviewed the Investment Adviser's methodology in allocating its costs to the management of the Trust and the Fund and concluded that there was a reasonable basis for the allocation. The Boards also considered federal court decisions discussing an investment adviser's profitability and MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 55 Disclosure of Investment Advisory Agreement (concluded) profitability levels considered to be reasonable in those decisions. The Boards believe the Investment Adviser's profits are reasonable in relation to the nature and quality of the services provided. Economies of Scale -- The Boards considered the extent to which economies of scale might be realized as the assets of the Trust and Fund increase and whether there should be changes in the management fee rate or structure in order to enable the Trust and the Funds to participate in these economies of scale. The Boards determined that the current management fee structure was reasonable and that no changes were currently necessary. Conclusion After the independent Directors deliberated in executive session, each entire Board including all of the independent Directors, approved the renewal of the existing Investment Advisory Agreements, concluding that the advisory fee was reasonable in relation to the services provided and that a contract renewal was in the best interests of the shareholders. Important Tax Information Merrill Lynch Large Cap Core Fund of Merrill Lynch Large Cap Series Funds, Inc. distributed long-term capital gains of $0.093584 per share to shareholders of record on December 6, 2004. Merrill Lynch Large Cap Value Fund of Merrill Lynch Large Cap Series Funds, Inc. distributed long-term capital gains of $0.0658491 per share to shareholders of record on December 6, 2004. 56 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 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 Funds/Trust Served Principal Occupation(s) During Past 5 Years Trustee Trustee ==================================================================================================================================== Interested Director or 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 Director present President of MLIM and FAM since 2001; Co-Head 177 Portfolios 08543-9011 or Trustee (Americas Region) thereof from 2000 to 2001 and Age: 51 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 described in the Investment Company Act, of the Fund based on his current 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 President, Mr. Doll serves at the pleasure of the Board of Directors/Trustees. ==================================================================================================================================== Independent Directors/Trustees* ----------------------------------------------------------------------------------------------------------------------------------- James H. P.O. Box 9095 Director/ 1999 to Director, The China Business Group, Inc. since 39 Funds None Bodurtha** Princeton, NJ Trustee present 1996 and Executive Vice President thereof from 59 Portfolios 08543-9095 1996 to 2003; Chairman of the Board, Berkshire Age: 61 Holding Corporation since 1980; Partner, Squire, Sanders & Dempsey from 1980 to 1993. ----------------------------------------------------------------------------------------------------------------------------------- Kenneth A. P.O. Box 9095 Director/ 2005 to Professor, Harvard University since 1992; Professor, 39 Funds None Froot Princeton, NJ Trustee present Massachusetts Institute of Technology from 59 Portfolios 08543-9095 1986 to 1992. Age: 48 ----------------------------------------------------------------------------------------------------------------------------------- Joe P.O. Box 9095 Director/ 2002 to Member of the Committee of Investment of 39 Funds Kimco Grills** Princeton, NJ Trustee present Employee Benefit Assets of the Association of 59 Portfolios Realty 08543-9095 Financial Professionals ("CIEBA") since 1986; Corporation Age: 70 Member of CIEBA's Executive Committee since 1988 and its Chairman from 1991 to 1992; Assistant Treasurer of International Business Machines Corporation ("IBM") and Chief Investment Officer of IBM Retirement Funds from 1986 to 1993; Member of the Investment Advisory Committee of the State of New York Common Retirement Fund since 1989; Member of the Investment Advisory Committee of the Howard Hughes Medical Institute from 1997 to 2000; Director, Duke University Management Company from 1992 to 2004, Vice Chairman thereof from 1998 to 2004, and Director Emeritus thereof since 2004; Director, LaSalle Street Fund from 1995 to 2001; Director, Kimco Realty Corporation since 1997; Member of the Investment Advisory Committee of the Virginia Retirement System since 1998, Vice Chairman thereof from 2002 to 2005, and Chairman thereof since 2005; Director, Montpelier Foundation since 1998 and its Vice Chairman since 2000; Member of the Investment Committee of the Woodberry School since 2000; Member of the Investment Committee of the National Trust for Historic Preservation since 2000.
MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 57 Officers and Directors/Trustees (continued)
Number of Portfolios in Other Public Fund Complex Directorships Position(s) Length of Overseen by Held by Held with Time Director/ Director/ Name Address & Age Funds/Trust Served Principal Occupation(s) During Past 5 Years Trustee Trustee ==================================================================================================================================== Independent Directors/Trustees* (concluded) ----------------------------------------------------------------------------------------------------------------------------------- Herbert I. P.O. Box 9095 Director/ 1999 to John M. Olin Professor of Humanities, New York 39 Funds None London Princeton, NJ Trustee present University since 1993 and Professor thereof since 59 Portfolios 08543-9095 1980; President, Hudson Institute since 1997 Age: 66 and Trustee thereof since 1980; Dean, Gallatin Division of New York University from 1976 to 1993; Distinguished Fellow, Herman Kahn Chair, Hudson Institute from 1984 to 1985; Director, Damon Corp. from 1991 to 1995; Overseer, Center for Naval Analyses from 1983 to 1993. ----------------------------------------------------------------------------------------------------------------------------------- Roberta P.O. Box 9095 Director/ 1999 to Shareholder, Modrall, Sperling, Roehl, Harris & 39 Funds None Cooper Princeton, NJ Trustee present Sisk, P.A. since 1993; President, American Bar 59 Portfolios Ramo 08543-9095 Association from 1995 to 1996 and Member of Age: 63 the Board of Governors thereof from 1994 to 1997; Shareholder, Poole, Kelly & Ramo, Attorneys at Law, P.C. from 1977 to 1993; Director of ECMC Group (service provider to students, schools and lenders) since 2001; Director, United New Mexico Bank (now Wells Fargo) from 1983 to 1988; Director, First National Bank of New Mexico (now Wells Fargo) from 1975 to 1976; Vice President, American Law Institute since 2004. ----------------------------------------------------------------------------------------------------------------------------------- Robert S. P.O. Box 9095 Director/ 2002 to Principal of STI Management (investment adviser) 39 Funds None Salomon, Princeton, NJ Trustee present since 1994; Chairman and CEO of Salomon 59 Portfolios Jr. 08543-9095 Brothers Asset Management Inc. from 1992 to Age: 68 1995; Chairman of Salomon Brothers Equity Mutual Funds from 1992 to 1995; regular columnist with Forbes Magazine from 1992 to 2002; Director of Stock Research and U.S. Equity Strategist at Salomon Brothers Inc. from 1975 to 1991; Trustee, Commonfund from 1980 to 2001. ----------------------------------------------------------------------------------------------------------------------------------- Stephen B. P.O. Box 9095 Director/ 2002 to Chairman of Fernwood Advisors, Inc. (investment 40 Funds None Swensrud Princeton, NJ Trustee present adviser) since 1996; Principal, Fernwood 60 Portfolios 08543-9095 Associates (financial consultants) since 1975; Age: 72 Chairman of R.P.P. Corporation (manufacturing company) since 1978; Director of International Mobile Communications, Inc. (telecommunications) since 1998. ------------------------------------------------------------------------------------------------------------------------ * Directors/Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. ** Co-Chairman of the Board and the Audit Committee.
58 MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 Officers and Directors/Trustees (concluded)
Position(s) Length of Held with Time Name Address & Age Funds/Trust Served Principal Occupation(s) During Past 5 Years ==================================================================================================================================== Fund/Trust Officers* ----------------------------------------------------------------------------------------------------------------------------------- Donald C. P.O. Box 9011 Vice 1999 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof since 1999; Burke Princeton, NJ President present Senior Vice President and Treasurer of Princeton Services since 1999 and Director 08543-9011 and since 2004; Vice President of FAM Distributors, Inc. ("FAMD") since 1999; Vice Age: 45 Treasurer President of MLIM and FAM from 1990 to 1997; Director of Taxation of MLIM from 1990 to 2001; Vice President, Treasurer and Secretary of the IQ Funds since 2004. ----------------------------------------------------------------------------------------------------------------------------------- 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 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: 45 ------------------------------------------------------------------------------------------------------------------------ * Officers of the Funds/Trust serve at the pleasure of the Board of Directors/Trustees. ----------------------------------------------------------------------------------------------------------------------------------- Further information about the Funds' Officers and Directors/Trustees is available in the Fund's Statement of Additional Information, which can be obtained without charge by calling 1-800-MER-FUND. -----------------------------------------------------------------------------------------------------------------------------------
Custodian Brown Brothers Harriman & Co. 40 Water Street Boston, MA 02109-3661 Transfer Agent Financial Data Services, Inc. 4800 Deer Lake Drive East Jacksonville, FL 32246-6484 800-637-3863 Availability of Quarterly Schedule of Investments The Funds file their 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 Funds' Forms N-Q are available on the SEC's Web site at http://www.sec.gov. The Funds' Forms N-Q may also be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Electronic Delivery The Fund offers electronic delivery of communications to its shareholders. In order to receive this service, you must register your account and provide us with e-mail information. To sign up for this service, simply access this Web site at http://www.icsdelivery.com/live and follow the instructions. When you visit this site, you will obtain a personal identification number (PIN). You will need this PIN should you wish to update your e-mail address, choose to discontinue this service and/or make any other changes to the service. This service is not available for certain retirement accounts at this time. MERRILL LYNCH LARGE CAP SERIES FUNDS, INC. OCTOBER 31, 2005 59 [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 Funds unless accompanied or preceded by the Funds' 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 Funds use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2) at www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's Web site at http://www.sec.gov. Information about how each Fund voted proxies relating to securities held in the Funds' portfolios during the most recent 12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2) on the Securities and Exchange Commission's Web site at http://www.sec.gov. Merrill Lynch Large Cap Series Funds, Inc. Box 9011 Princeton, NJ 08543-9011 #CAPSERIES -- 10/05