MERRILL LYNCH
LARGE CAP
GROWTH FUND
Merrill Lynch
Large Cap Series Funds, Inc.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
October 31, 2000
<PAGE>
MERRILL LYNCH LARGE CAP GROWTH FUND
Officers and Directors/Trustees
Terry K. Glenn, President and Director/Trustee
James H. Bodurtha, Director/Trustee
Herbert I. London, Director/Trustee
Joseph L. May, Director/Trustee
Andre F. Perold, Director/Trustee
Roberta Cooper Ramo, Director/Trustee
Arthur Zeikel, Director/Trustee
Robert C. Doll, Jr., Senior Vice President and
Portfolio Manager
Linda J. Gardner, Vice President
Philip E. Laverson, Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
Portfolio Information As of 10/31/00
Percent of
Ten Largest Equity Holdings Net Assets
General Electric Company ........................................... 5.2%
Intel Corporation .................................................. 4.7
Cisco Systems, Inc. ................................................ 3.5
EMC Corporation .................................................... 3.3
Oracle Corporation ................................................. 2.4
Pfizer Inc. ........................................................ 2.1
Microsoft Corporation .............................................. 2.1
Corning Incorporated ............................................... 1.9
Applied Materials, Inc. ............................................ 1.5
Siebel Systems, Inc. ............................................... 1.4
Percent of
Ten Largest Industries Net Assets
Electronics/Semiconductors ......................................... 19.9%
Communications Equipment ........................................... 9.9
Electrical Equipment ............................................... 9.4
Computer Services/Software ......................................... 9.3
Equipment--Semiconductors .......................................... 4.6
Computers & Peripherals ............................................ 4.3
Software ........................................................... 3.4
Electronic Components .............................................. 3.0
Healthcare--Managed Care ........................................... 2.7
Pharmaceuticals .................................................... 2.2
<PAGE>
Merrill Lynch Large Cap Growth Fund, October 31, 2000
DEAR SHAREHOLDER
During the last 10 years, we have witnessed excellent management from the
executive branch of government and from the Federal Reserve Board. Some believe
that the higher-than-normal price/earnings multiples we are enjoying are a
reflection of the confidence gained through skillful management executed by the
financial regulators of our country. After six interest rate increases in 12
months, the Federal Reserve Board has opted to put monetary policy on hold.
It now appears that interest rates will not be raised unless further increases
in inflation are evident and/or the stock market and economy appear to
re-energize, which would force the Federal Reserve Board to make a preemptive
strike. There is no doubt that the interest rate increases have had an impact on
the growth rate of the economy, which had been reaching boom status. In
particular, interest rate-sensitive consumer areas have all retreated somewhat.
Most important, the NASDAQ went through a major decline in March, falling by
40%, shaking confidence in technology stocks and damaging the psyche for all
investors. With stock options so prevalent in technology stocks, the impact of
that fall was negative for retail consumption.
The rate change in retail sales has been more coincident with the NASDAQ's
volatility in this cycle than in any other cycle since the post World War II
period. The prevalence of stock options and aggressive trading by many has made
the retail sales cycle, and, therefore, the economy, subject to the volatility
that is being witnessed in these markets. However, history shows that retail
sales weakness reflecting stock market declines does not last very long if stock
prices recover.
The Federal Reserve Board faces the same pressures that it was confronted with
at the beginning of the year. If the economy and the markets continue to move
forward in the second half of this year, further interest rate increases will be
necessary. While there has been some slowdown, employment numbers continue to be
healthy, total retail sales trends are still good and many retailers are now
planning an increase in promotions to stimulate sales even further. Underlying
this is that consumer confidence is still near an all-time high. Personal
income is now growing ahead of consumption, indicating that consumers have the
ability to be more aggressive on the retail sales front if the outlook
brightens.
So far this year, the major market averages have been mixed. The market has been
a battleground for old economy stocks relative to new economy stocks, as
witnessed by the shifts between the two groups. Old economy stocks are purchased
gingerly when the market outlook is unfavorable, and new economy stocks are
gobbled up aggressively during periods of optimism and recovery. The tremendous
flow of funds in the early part of the year could not lift stock prices, and now
the flow of funds into equities is starting to recede. The public's enormous
asset allocation shift during the 1990s, which doubled exposure to equities and
reduced exposure to fixed-income and liquid assets, may actually be slowing.
Therefore, the flow of funds going into the market is not likely to be as
powerful as it was during the past decade. This makes the upside potential of
the market somewhat questionable and the potential downside greater if things go
wrong in the Federal Reserve Board's management of the financial arena.
Fiscal Year in Review
The Fund invests primarily in a diversified portfolio of equity securities of
large cap companies that Fund management selects from among those included in
the unmanaged Russell 1000(R) Growth Index. Our investment process attempts to
add value through both security selection and portfolio construction. Security
selection involves the use of quantitative selection criteria including earnings
momentum, earnings surprise and valuation. These criteria are input into a
proprietary quantitative model and are subject to selective fundamental
overrides. Portfolio construction consists of an optimization process with risk
management controlling style, capitalization, sector and individual security
selection.
Since inception (December 22, 1999) through October 31, 2000, the Fund's Class
A, Class B, Class C and Class D Shares had total returns of +13.50%, +12.60%,
+12.50% and +13.20%, respectively. (Fund results shown reflect the effect of fee
waiver and expense reimbursement, but do not reflect sales charges, and would be
lower if sales charges were included. Complete performance information can be
found on pages 3-5 of this report to shareholders.) This compares favorably to
the -3.90% total return of the benchmark unmanaged Russell 1000 Growth Index for
the same period. Our investment outperformance was largely attributable to
contributions from superior stock selection and an overweighted position in the
technology sector. Specific securities contributing positively to performance
included SDL Inc., Network Appliance, Inc., Oxford Health Plans, Inc. and IVAX
Corporation.
We are positioned for some reduction in market uncertainties after the
presidential election, hoping for a year-end rally with some renewed confidence
in the longevity of the business cycle and achievement of a soft landing.
Accordingly, we are overweighted in technology and capital goods, while
retaining underweighted positions in consumer staples and healthcare. We remain
tilted toward the lower end of the permissible capitalization range, as we
anticipate continued outperformance of mid cap and large cap securities relative
to mega cap securities.
In Conclusion
We thank you for your investment in Merrill Lynch Large Cap Growth Fund, and we
look forward to reviewing our outlook and strategy with you in our next report
to shareholders.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director/Trustee
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
Senior Vice President and
Portfolio Manager
November 29, 2000
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select Pricing(SM) System, which offers four pricing alternatives:
o Class A Shares incur a maximum initial sales charge (front-end load) of
5.25% and bear no ongoing distribution or account maintenance fees. Class
A Shares are available only to eligible investors.
o Class B Shares are subject to a maximum contingent deferred sales charge
of 4% if redeemed during the first year, decreasing 1% each year
thereafter to 0% after the fourth year. In addition, Class B Shares are
subject to a distribution fee of 0.75% and an account maintenance fee of
0.25%. These shares automatically convert to Class D Shares after
approximately 8 years. (There is no initial sales charge for automatic
share conversions.)
o Class C Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
o Class D Shares incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation of
future performance. Figures shown in the "Recent Performance Results" and
"Aggregate Total Return" tables assume reinvestment of all dividends and
capital gains distributions at net asset value on the ex-dividend date.
Investment return and principal value of shares will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
Dividends paid to each class of shares will vary because of the different
levels of account maintenance, distribution and transfer agency fees
applicable to each class, which are deducted from the income available to
be paid to shareholders. The Fund's Investment Adviser voluntarily waived
a portion of its management fee. Without such waiver, the Fund's
performance would have been lower.
2 & 3
<PAGE>
Merrill Lynch Large Cap Growth Fund, October 31, 2000
PERFORMANCE DATA (concluded)
Recent Performance Results*
6 Month Since Inception
As of October 31, 2000 Total Return Total Return
================================================================================
ML Large Cap Growth Fund Class A Shares -6.12% +13.50%
--------------------------------------------------------------------------------
ML Large Cap Growth Fund Class B Shares -6.48 +12.60
--------------------------------------------------------------------------------
ML Large Cap Growth Fund Class C Shares -6.56 +12.50
--------------------------------------------------------------------------------
ML Large Cap Growth Fund Class D Shares -6.21 +13.20
================================================================================
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are
based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the ex-dividend date. Performance results are for a limited asset
pool. The Fund's inception date is 12/22/99.
Total Return Based on a $10,000 Investment--Class A Shares and Class B Shares
A line graph depicting the growth of an investment in the Fund's Class A Shares
and Class B Shares compared to growth of an investment in the Russell 1000
Growth Index. Beginning and ending values are:
12/22/99** 10/00
Merrill Lynch Large Cap Growth Fund+--
Class A Shares* $ 9,475 $10,754
Merrill Lynch Large Cap Growth Fund+--
Class B Shares* $10,000 $10,860
Russell 1000 Growth Index++ $10,000 $ 9,610
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
** Commencement of operations.
+ ML Large Cap Growth Fund invests all of its assets in Master Large Cap
Growth Portfolio of Master Large Cap Series Trust. The Portfolio invests
primarily in a diversified portfolio of equity securities of large cap
companies located in the United States that the Investment Adviser
believes have good prospects for earnings growth.
++ This unmanaged broad-based Index is a subset of the Russell 1000 Index
consisting of those Russell 1000 securities with a greater-than-average
growth orientation.
Past performance is not predictive of future performance.
Aggregate Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Inception (12/22/99)
through 9/30/00 +19.60% +13.32%
--------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Inception (12/22/99)
through 9/30/00 +18.70% +14.70%
--------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
** Assuming payment of applicable contingent deferred sales charge.
Total Return Based on a $10,000 Investment--Class C Shares and Class D Shares
A line graph depicting the growth of an investment in the Fund's Class C Shares
and Class D Shares compared to growth of an investment in the Russell 1000
Growth Index. Beginning and ending values are:
12/22/99** 10/00
Merrill Lynch Large Cap Growth Fund+--
Class C Shares* $10,000 $11,150
Merrill Lynch Large Cap Growth Fund+--
Class D Shares* $ 9,475 $10,726
Russell 1000 Growth Index++ $10,000 $ 9,610
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
** Commencement of operations.
+ ML Large Cap Growth Fund invests all of its assets in Master Large Cap
Growth Portfolio of Master Large Cap Series Trust. The Portfolio invests
primarily in a diversified portfolio of equity securities of large cap
companies located in the United States that the Investment Adviser
believes have good prospects for earnings growth.
++ This unmanaged broad-based Index is a subset of the Russell 1000 Index
consisting of those Russell 1000 securities with a greater-than-average
growth orientation.
Past performance is not predictive of future performance.
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
Inception (12/22/99)
through 9/30/00 +18.60% +17.60%
--------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class D Shares*
================================================================================
Inception (12/22/99)
through 9/30/00 +19.30% +13.04%
--------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
4 & 5
<PAGE>
Merrill Lynch Large Cap Growth Fund, October 31, 2000
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MERRILL LYNCH
LARGE CAP
GROWTH FUND As of October 31, 2000
===================================================================================================================================
<S> <C> <C>
Assets: Investment in Master Large Cap Growth Portfolio, at value
(identified cost--$96,332,534)...................................................... $97,556,049
Prepaid expenses and other assets .................................................. 47,053
-----------
Total assets ....................................................................... 97,603,102
-----------
===================================================================================================================================
Liabilities: Payable to distributor ............................................................. 29,441
Other liabilities .................................................................. 68,222
-----------
Total liabilities .................................................................. 97,663
-----------
===================================================================================================================================
Net Assets: Net assets ......................................................................... $97,505,439
===========
===================================================================================================================================
Net Assets Class A Shares of Common Stock, $.10 par value, 100,000,000 shares authorized ...... $ 166,100
Consist of: Class B Shares of Common Stock, $.10 par value, 200,000,000 shares authorized ...... 420,800
Class C Shares of Common Stock, $.10 par value, 100,000,000 shares authorized ...... 211,032
Class D Shares of Common Stock, $.10 par value, 100,000,000 shares authorized ...... 66,583
Paid-in capital in excess of par ................................................... 95,377,913
Undistributed realized capital gains on investments from the Portfolio--net ........ 39,496
Unrealized appreciation on investments from the Portfolio--net ..................... 1,223,515
-----------
Net assets ......................................................................... $97,505,439
===========
===================================================================================================================================
Net Asset Class A--Based on net assets of $18,858,486 and 1,661,004 shares outstanding ....... $ 11.35
Value: ===========
Class B--Based on net assets of $47,370,335 and 4,208,004 shares outstanding ....... $ 11.26
===========
Class C--Based on net assets of $23,736,477 and 2,110,323 shares outstanding ....... $ 11.25
===========
Class D--Based on net assets of $7,540,141 and 665,834 shares outstanding .......... $ 11.32
===========
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MERRILL LYNCH
LARGE CAP
GROWTH FUND For the Period December 22, 1999+ to October 31, 2000
===================================================================================================================================
<S> <C> <C> <C>
Investment Investment income allocated from the Portfolio ..................................... $ 41,599
Income (Loss): Expenses allocated from the Portfolio .............................................. (94,057)
-----------
Net investment loss from the Portfolio ............................................. (52,458)
-----------
===================================================================================================================================
Expenses: Registration fees .................................................................. $ 87,845
Offering costs ..................................................................... 35,833
Account maintenance and distribution fees--Class B ................................. 28,109
Account maintenance and distribution fees--Class C ................................. 10,609
Printing and shareholder reports ................................................... 8,544
Professional fees .................................................................. 8,000
Accounting services ................................................................ 2,120
Account maintenance fees--Class D .................................................. 1,372
Transfer agent fees--Class A ....................................................... 578
Transfer agent fees--Class B ....................................................... 430
Transfer agent fees--Class C ....................................................... 162
Transfer agent fees--Class D ....................................................... 71
Other .............................................................................. 5,909
---------
Total expenses before reimbursement ................................................ 189,582
Reimbursement of expenses .......................................................... (135,248)
---------
Total expenses after reimbursement ................................................. 54,334
-----------
Investment loss--net ............................................................... (106,792)
-----------
===================================================================================================================================
Realized & Realized gain on investments from the Portfolio--net ............................... 39,496
Unrealized Unrealized appreciation on investments from the Portfolio--net ..................... 1,223,515
Gain From the -----------
Portfolio--Net: Net Increase in Net Assets Resulting from Operations ............................... $ 1,156,219
===========
===================================================================================================================================
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MERRILL LYNCH For the Period
LARGE CAP Dec. 22, 1999+ to
GROWTH FUND Increase (Decrease) in Net Assets: October 31, 2000
===================================================================================================================================
<S> <C> <C>
Operations: Investment loss--net ............................................................................ $ (106,792)
Realized gain on investments from the Portfolio--net ............................................ 39,496
Unrealized appreciation on investments from the Portfolio--net .................................. 1,223,515
-----------
Net increase in net assets resulting from operations ............................................ 1,156,219
-----------
===================================================================================================================================
Capital Share Net increase in net assets derived from capital share transactions .............................. 95,849,220
Transactions: -----------
===================================================================================================================================
Net Assets: Total increase in net assets .................................................................... 97,005,439
Beginning of period ............................................................................. 500,000
-----------
End of period ................................................................................... $97,505,439
===========
===================================================================================================================================
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
6 & 7
<PAGE>
Merrill Lynch Large Cap Growth Fund, October 31, 2000
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
MERRILL LYNCH from information provided in the financial statements. For the Period Dec. 22, 1999+ to Oct. 31, 2000
LARGE CAP -----------------------------------------------------
GROWTH FUND Increase (Decrease) in Net Asset Value: Class A Class B Class C Class D
================================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period .................. $ 10.00 $ 10.00 $ 10.00 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment loss--net .................................. (.02) (.01) (.01) (.01)
Realized and unrealized gain on investments
from the Portfolio--net................................ 1.37 1.27 1.26 1.33
-------- -------- -------- --------
Total from investment operations ...................... 1.35 1.26 1.25 1.32
-------- -------- -------- --------
Net asset value, end of period ........................ $ 11.35 $ 11.26 $ 11.25 $ 11.32
======== ======== ======== ========
================================================================================================================================
Total Based on net asset value per share .................... 13.50%+++ 12.60%+++ 12.50%+++ 13.20%+++
Investment ======== ======== ======== ========
Return:**
================================================================================================================================
Ratios to Expenses, net of reimbursement++ ...................... 1.38%* 2.56%* 2.56%* 1.74%*
Average ======== ======== ======== ========
Net Assets: Expenses++ ............................................ 4.77%* 4.14%* 4.16%* 3.94%*
======== ======== ======== ========
Investment loss--net .................................. (1.04%)* (1.82%)* (1.83%)* (1.14%)*
======== ======== ======== ========
================================================================================================================================
Supplemental Net assets, end of period (in thousands) .............. $ 18,859 $ 47,370 $ 23,736 $ 7,540
Data: ======== ======== ======== ========
================================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Includes the Fund's share of the Portfolio's allocated expenses.
+++ Aggregate total investment return.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
MERRILL LYNCH LARGE CAP GROWTH FUND
1. Significant Accounting Policies:
Merrill Lynch Large Cap Growth Fund of Merrill Lynch Large Cap Series Funds,
Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a
diversified mutual fund. The Fund seeks to achieve its investment objective by
investing all of its assets in the Master Large Cap Growth Portfolio (the
"Portfolio"), which is a portfolio of Master Large Cap Series Trust that has the
same investment objective as the Fund. The value of the Fund's investment in the
Portfolio reflects the Fund's proportionate interest in the net assets of the
Portfolio. The performance of the Fund is directly affected by the performance
of the Portfolio. The financial statements of the Portfolio, including the
Schedule of Investments, are included elsewhere in this report and should be
read in conjunction with the Fund's financial statements. The Fund's financial
statements are prepared in conformity with accounting principles generally
accepted in the United States of America, which may require the use of
management accruals and estimates. Prior to commencement of operations on
December 22, 1999, the Fund had no operations other than those relating to
organizational matters and the issuance of 50,000 capital shares of the Fund on
October 20, 1999 to Fund Asset Management, L.P. ("FAM") for $500,000. The Fund
offers four classes of shares under the Merrill Lynch Select Pricing(sm) System.
Shares of Class A and Class D are sold with a front-end sales charge. Shares of
Class B and Class C may be subject to a contingent deferred sales charge. All
classes of shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that Class B, Class C and Class D
Shares bear certain expenses related to the account maintenance of such shares,
and Class B and Class C 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.
The following is a summary of significant accounting policies followed by the
Fund.
(a) Valuation of investments--Valuation of securities is discussed in Note 1a of
the Portfolio's Notes to Financial Statements, which are included elsewhere in
this report.
(b) Income--The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and accrued
expenses of the Fund determined in conformity with accounting principles
generally accepted in the United States of America.
(c) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to shareholders. Therefore,
no Federal income tax provision is required. Under the applicable foreign tax
law, a withholding tax may be imposed on interest, dividends and capital gains
at various rates.
(d) Prepaid registration fees--Prepaid registration fees are charged to expense
as the related shares are issued.
(e) Dividends and distributions--Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(f) Investment transactions--Investment transactions are accounted for on a
trade date basis.
(g) Reclassification--Accounting principles generally accepted in the United
States of America require that certain components of net assets be adjusted to
reflect permanent differences between financial and tax reporting. Accordingly,
the current year's permanent book/tax differences of $106,792 have been
reclassified between paid-in capital in excess of par and accumulated net
investment loss. These reclassifications have no effect on net assets or net
asset values per share.
2. Transactions with Affiliates:
The Fund has entered into a Distribution Agreement and Distribution Plans with
FAM Distributors, Inc. ("FAMD" or the "Distributor"), which is a wholly-owned
subsidiary of Merrill Lynch Group, Inc. Pursuant to the Distribution Plans
adopted by the Fund in accordance with Rule 12b-1 under the Investment Company
Act of 1940, the Fund pays the Distributor ongoing account maintenance and
distribution fees. The fees 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 B .................................. .25% .75%
Class C .................................. .25% .75%
Class D .................................. .25% --
--------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the period December 22, 1999 to October 31, 2000, FAM reimbursed the Fund
for expenses in the amount of $135,248.
For the period December 22, 1999 to October 31, 2000, FAMD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the Fund's Class D
Shares as follows:
--------------------------------------------------------------------------------
FAMD MLPF&S
--------------------------------------------------------------------------------
Class D ............................ $1,540 $215,945
--------------------------------------------------------------------------------
For the period December 22, 1999 to October 31, 2000, MLPF&S received contingent
deferred sales charges of $795
8 & 9
<PAGE>
Merrill Lynch Large Cap Growth Fund, October 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
MERRILL LYNCH LARGE CAP GROWTH FUND
and $1 relating to transactions in Class B and Class C Shares, respectively.
Financial Data Services, Inc. ("FDS"), an indirect wholly-owned subsidiary of ML
& Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, FAMD, FDS, and/or ML & Co.
3. Investments:
Increases and decreases in the Fund's investment in the Portfolio for the period
December 22, 1999 to October 31, 2000 were $96,558,509 and $213,014,
respectively.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$95,849,220 for the period December 22, 1999 to October 31, 2000.
Transactions in capital shares for each class were as follows:
-------------------------------------------------------------------------------
Class A Shares for the Period Dollar
December 22, 1999+ to October 31, 2000 Shares Amount
-------------------------------------------------------------------------------
Shares sold ...................... 1,676,232 $ 18,616,315
Shares redeemed .................. (27,728) (309,471)
--------- ------------
Net increase ..................... 1,648,504 $ 18,306,844
========= ============
-------------------------------------------------------------------------------
+ Prior to December 22, 1999 (commencement of operations), the Fund issued
12,500 shares to FAM for $125,000.
-------------------------------------------------------------------------------
Class B Shares for the Period Dollar
December 22, 1999+ to October 31, 2000 Shares Amount
-------------------------------------------------------------------------------
Shares sold ...................... 4,259,809 $ 47,630,738
Shares redeemed .................. (64,305) (714,238)
--------- ------------
Net increase ..................... 4,195,504 $ 46,916,500
========= ============
-------------------------------------------------------------------------------
+ Prior to December 22, 1999 (commencement of operations), the Fund issued
12,500 shares to FAM for $125,000.
-------------------------------------------------------------------------------
Class C Shares for the Period Dollar
December 22, 1999+ to October 31, 2000 Shares Amount
-------------------------------------------------------------------------------
Shares sold ...................... 2,118,468 $ 23,486,603
Shares redeemed .................. (20,645) (229,433)
--------- ------------
Net increase ..................... 2,097,823 $ 23,257,170
========= ============
-------------------------------------------------------------------------------
+ Prior to December 22, 1999 (commencement of operations), the Fund issued
12,500 shares to FAM for $125,000.
-------------------------------------------------------------------------------
Class D Shares for the Period Dollar
December 22, 1999+ to October 31, 2000 Shares Amount
-------------------------------------------------------------------------------
Shares sold ...................... 663,067 $ 7,478,004
Shares redeemed .................. (9,733) (109,298)
------- ------------
Net increase ..................... 653,334 $ 7,368,706
======= ============
-------------------------------------------------------------------------------
+ Prior to December 22, 1999 (commencement of operations), the Fund issued
12,500 shares to FAM for $125,000.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders Merrill Lynch Large Cap Growth Fund (One
of the Series constituting Merrill Lynch Large Cap Series Funds, Inc.):
We have audited the accompanying statement of assets and liabilities of Merrill
Lynch Large Cap Growth Fund as of October 31, 2000, the related statements of
operations and changes in net assets, and the financial highlights for the
period December 22, 1999 (commencement of operations) to October 31, 2000. These
financial statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch Large
Cap Growth Fund as of October 31, 2000, the results of its operations, the
changes in its net assets, and the financial highlights for the period December
22, 1999 (commencement of operations) to October 31, 2000 in conformity with
accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
December 8, 2000
SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
Master Large Cap Growth Portfolio
========================================================================================================
Shares Percent of
Industry Held Common Stocks Value Net Assets
========================================================================================================
<S> <C> <C> <C> <C>
Application Development 13,400 +Siebel Systems, Inc. $1,406,163 1.4%
Software
--------------------------------------------------------------------------------------------------------
Biotechnology 2,500 +Techne Corporation 281,875 0.3
--------------------------------------------------------------------------------------------------------
Commercial Services 19,000 +Quanta Services, Inc. 590,188 0.6
--------------------------------------------------------------------------------------------------------
Communications 28,000 +Advanced Fibre Communications, Inc. 911,750 0.9
Equipment 36,500 +Andrew Corporation 960,406 1.0
4,600 +CIENA Corporation 483,575 0.5
63,900 +Cisco Systems, Inc. 3,442,612 3.5
24,300 Corning Incorporated 1,858,950 1.9
18,400 +Sawtek Inc. 936,100 1.0
16,100 Scientific-Atlanta, Inc. 1,101,844 1.1
--------- ---
9,695,237 9.9
--------------------------------------------------------------------------------------------------------
Computer 11,200 Autodesk, Inc. 247,100 0.3
Services/Software 7,500 +BEA Systems, Inc 538,125 0.6
29,900 +CNET Networks, Inc. 941,850 1.0
7,900 +Cadence Design Systems, Inc. 202,931 0.2
13,300 +DST Systems, Inc. 819,612 0.8
6,800 +i2 Technologies, Inc. 1,156,000 1.2
3,800 +Mercury Interactive Corp. 421,800 0.4
14,200 +NCR Corporation 612,375 0.6
47,000 +Network Associates, Inc. 904,750 0.9
72,300 +Oracle Corporation 2,385,900 2.4
23,800 +Symantec Corporation 929,688 0.9
--------- ---
9,160,131 9.3
--------------------------------------------------------------------------------------------------------
</TABLE>
10 & 11
<PAGE>
Merrill Lynch Large Cap Growth Fund, October 31, 2000
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<TABLE>
<CAPTION>
Master Large Cap Growth Portfolio (continued)
===========================================================================================================
Shares Percent of
Industry Held Common Stocks Value Net Assets
===========================================================================================================
<S> <C> <C> <C> <C>
Computers 11,900 +Apple Computer, Inc. $ 232,794 0.2%
11,700 +Gateway Inc. 603,837 0.6
5,900 +Sun Microsystems, Inc. 654,163 0.7
----------- ----
1,490,794 1.5
-----------------------------------------------------------------------------------------------------------
Computers & 36,900 +EMC Corporation 3,286,406 3.3
Peripherals 18,000 +SanDisk Corporation 967,219 1.0
----------- ----
4,253,625 4.3
-----------------------------------------------------------------------------------------------------------
Consumer & 17,100 +Rambus Inc. 768,431 0.8
Commercial Services
-----------------------------------------------------------------------------------------------------------
Electrical Equipment 93,400 General Electric Company 5,119,487 5.2
23,000 +SCI Systems, Inc. 989,000 1.0
10,600 +Sanmina Corporation 1,211,713 1.2
43,300 +Silicon Storage Technology, Inc. 985,075 1.0
31,200 +Vishay Intertechnology, Inc. 936,000 1.0
----------- ----
9,241,275 9.4
-----------------------------------------------------------------------------------------------------------
Electrical Instruments 9,300 Newport Corporation 1,062,089 1.1
12,400 +Solectron Corporation 545,600 0.5
----------- ----
1,607,689 1.6
-----------------------------------------------------------------------------------------------------------
Electronic Components 33,000 AVX Corporation 944,625 1.0
9,300 +Cree, Inc. 923,025 0.9
32,000 +LSI Logic Corporation 1,052,000 1.1
----------- ----
2,919,650 3.0
-----------------------------------------------------------------------------------------------------------
Electronics-- 11,400 +Waters Corporation 827,213 0.8
Instruments
-----------------------------------------------------------------------------------------------------------
Electronics/ 6,500 +Advanced Micro Devices, Inc. 147,063 0.2
Semiconductors 28,700 +Altera Corporation 1,174,906 1.2
14,600 +Applied Micro Circuits Corporation 1,115,075 1.1
67,400 +Atmel Corporation 1,006,787 1.0
26,500 +Cypress Semiconductor Corporation 992,094 1.0
13,000 Dallas Semiconductor Corporation 515,125 0.5
18,400 +Integrated Device Technology, Inc. 1,036,150 1.1
102,900 Intel Corporation 4,630,500 4.7
20,100 +International Rectifier Corp. 896,962 0.9
34,400 +Lattice Semiconductor Corporation 1,004,050 1.0
15,600 +Micrel, Inc. 705,900 0.7
4,800 +Microchip Technology 151,800 0.2
33,700 +Micron Technology, Inc. 1,171,075 1.2
39,500 +National Semiconductor Corporation 1,027,000 1.1
6,600 +PMC--Sierra, Inc. 1,118,700 1.1
10,100 +TranSwitch Corporation 583,275 0.6
15,700 +Vitesse Semiconductor Corporation 1,098,019 1.1
15,600 +Xilinx, Inc. 1,130,025 1.2
----------- ----
19,504,506 19.9
-----------------------------------------------------------------------------------------------------------
Equipment-- 28,400 +Applied Materials, Inc. 1,508,750 1.5
Semiconductors 30,000 +KLA-Tencor Corporation 1,014,375 1.0
49,700 +LAM Research Corp. 962,937 1.0
25,300 +Novellus Systems, Inc. 1,035,719 1.1
----------- ----
4,521,781 4.6
-----------------------------------------------------------------------------------------------------------
Financial-- 9,300 Capital One Financial Corporation 587,062 0.6
Diversified 10,300 SEI Investments Company 934,725 1.0
----------- ----
1,521,787 1.6
-----------------------------------------------------------------------------------------------------------
Gaming, Lottery & 24,700 MGM Grand, Inc. 853,694 0.9
Parimutuel
-----------------------------------------------------------------------------------------------------------
Healthcare-- 21,400 +IVAX Corporation 930,900 0.9
Diversified
-----------------------------------------------------------------------------------------------------------
Healthcare-- 32,000 +Health Management Associates, Inc. (Class A) 634,000 0.6
Hospital 10,400 +Universal Health Services, Inc. (Class B) 872,300 0.9
Management ----------- ----
1,506,300 1.5
-----------------------------------------------------------------------------------------------------------
Healthcare-- 12,000 +Express Scripts, Inc. (Class A) 806,250 0.8
Managed Care 25,700 +Oxford Health Plans, Inc. 867,375 0.9
8,500 +PacifiCare Health Systems, Inc. 88,719 0.1
7,700 UnitedHealth Group Incorporated 842,188 0.9
----------- ----
2,604,532 2.7
-----------------------------------------------------------------------------------------------------------
Healthcare-- 48,700 Pfizer Inc. 2,103,231 2.1
Pharmaceuticals
-----------------------------------------------------------------------------------------------------------
Healthcare--Special 9,700 +Quest Diagnostics Incorporated 933,625 1.0
Services
-----------------------------------------------------------------------------------------------------------
Healthcare 5,900 Beckman Coulter Inc. 413,369 0.4
Equipment &
Supplies
-----------------------------------------------------------------------------------------------------------
Manufacturing-- 18,300 +Jabil Circuit, Inc. 1,044,244 1.1
Specialized
-----------------------------------------------------------------------------------------------------------
Medical 4,700 +MiniMed Inc. 342,806 0.3
-----------------------------------------------------------------------------------------------------------
Miscellaneous 34,400 +KEMET Corporation 958,900 1.0
Materials &
Commodities
-----------------------------------------------------------------------------------------------------------
Oil & Gas-- 27,400 Helmerich & Payne, Inc. 861,387 0.9
Drilling/Equipment
-----------------------------------------------------------------------------------------------------------
Oil & Gas-- 14,200 Anadarko Petroleum Corporation 909,510 0.9
Exploration/Production 15,300 Murphy Oil Corporation 886,444 0.9
----------- ----
1,795,954 1.8
-----------------------------------------------------------------------------------------------------------
</TABLE>
12 & 13
<PAGE>
Merrill Lynch Large Cap Growth Fund, October 31, 2000
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
Master Large Cap Growth Portfolio (concluded)
=======================================================================================================================
Shares Percent of
Industry Held Common Stocks Value Net Assets
=======================================================================================================================
<S> <C> <C> <C> <C>
Pharmaceuticals 11,400 Cardinal Health, Inc. $ 1,080,150 1.1%
3,800 +IDEC Pharmaceuticals Corporation 745,275 0.8
3,400 Merck & Co., Inc. 305,787 0.3
----------- ----
2,131,212 2.2
-----------------------------------------------------------------------------------------------------------------------
Retail 3,400 +Jones Apparel Group, Inc. 94,562 0.1
11,400 The Talbots, Inc. 901,313 0.9
----------- ----
995,875 1.0
-----------------------------------------------------------------------------------------------------------------------
Retail--Computers & 22,700 +Tech Data Corporation 944,888 1.0
Electronics
-----------------------------------------------------------------------------------------------------------------------
Software 7,000 Adobe Systems Incorporated 532,437 0.6
10,800 +Intuit Inc. 663,525 0.7
30,500 +Microsoft Corporation 2,100,687 2.1
----------- ----
3,296,649 3.4
-----------------------------------------------------------------------------------------------------------------------
Telecommunications 15,900 +Adtran, Inc. 604,200 0.6
& Equipment
-----------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost--$88,862,024) 90,112,111 91.8
=======================================================================================================================
<CAPTION>
Face
Amount Short-Term Securities
=======================================================================================================================
<S> <C> <C> <C> <C>
Commercial Paper* $1,141,000 General Motors Acceptance Corp., 6.63% due 11/01/2000 1,141,000 1.2
1,000,000 Paccar Financial Corp., 6.47% due 11/10/2000 998,382 1.0
----------- -----
2,139,382 2.2
-----------------------------------------------------------------------------------------------------------------------
US Government 2,000,000 Federal Farm Credit Bank, 6.38% due 11/02/2000 1,999,646 2.1
Agency Obligations* 1,200,000 Federal Home Loan Bank, 6.41% due 11/01/2000 1,200,000 1.2
----------- -----
3,199,646 3.3
-----------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities (Cost--$5,339,028) 5,339,028 5.5
-----------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$94,201,052) 95,451,139 97.3
Other Assets Less Liabilities 2,674,022 2.7
----------- -----
Net Assets $98,125,161 100.0%
=========== =====
=======================================================================================================================
</TABLE>
* Commercial Paper and certain US Government Agency Obligations are traded
on a discount basis; the interest rates shown reflect the discount rates
paid at the time of purchase by the Portfolio.
+ Non-income producing security.
See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MASTER LARGE CAP
GROWTH PORTFOLIO As of October 31, 2000
==========================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$94,201,052) $ 95,451,139
Receivables:
Contributions .................................... $ 14,890,371
Securities sold .................................. 1,703,823
Dividends ........................................ 1,039 16,595,233
------------
Prepaid expenses ................................... 17,104
------------
Total assets ....................................... 112,063,476
------------
==========================================================================================================
Liabilities: Payables:
Securities purchased ............................. 13,351,962
Withdrawals ...................................... 293,116
Investment adviser ............................... 8,348 13,653,426
------------
Accrued expenses and other liabilities ............. 284,889
------------
Total liabilities .................................. 13,938,315
------------
==========================================================================================================
Net Assets: Net assets ......................................... $ 98,125,161
============
==========================================================================================================
Net Assets Partners' capital .................................. $ 96,875,074
Consist of: Unrealized appreciation on investments--net ........ 1,250,087
------------
Net assets ......................................... $ 98,125,161
============
==========================================================================================================
</TABLE>
See Notes to Financial Statements.
14 & 15
<PAGE>
Merrill Lynch Large Cap Growth Fund, October 31, 2000
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MASTER LARGE CAP
GROWTH PORTFOLIO For the Period December 22, 1999+ to October 31, 2000
===========================================================================================================
<S> <C> <C> <C>
Investment Interest and discount earned ....................... $ 33,878
Income: Dividends .......................................... 9,610
-----------
Total income ....................................... 43,488
-----------
===========================================================================================================
Expenses: Investment advisory fees ........................... $ 58,385
Accounting services ................................ 38,579
Custodian fees ..................................... 19,226
Professional fees .................................. 8,000
Trustees' fees and expenses ........................ 7,269
Offering costs ..................................... 5,556
Pricing fees ....................................... 4,100
Other .............................................. 1,195
---------
Total expenses before reimbursement ................ 142,310
Reimbursement of expenses .......................... (40,528)
---------
Total expenses after reimbursement ................. 101,782
-----------
Investment loss--net ............................... (58,294)
-----------
===========================================================================================================
Realized & Realized gain on investments--net .................. 93,566
Unrealized Gain Unrealized appreciation on investments--net ........ 1,250,087
On Investments--Net: -----------
Net Increase in Net Assets Resulting from Operations $ 1,285,359
===========
===========================================================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
MASTER LARGE CAP Dec. 22, 1999+ to
GROWTH PORTFOLIO Increase (Decrease) in Net Assets: October 31, 2000
============================================================================================================
<S> <C> <C>
Operations: Investment loss--net ........................................ $ (58,294)
Realized gain on investments--net ........................... 93,566
Unrealized appreciation on investments--net ................. 1,250,087
------------
Net increase in net assets resulting from operations ........ 1,285,359
------------
============================================================================================================
Net Capital Increase in net assets derived from net capital contributions 95,839,802
Contributions: ------------
============================================================================================================
Net Assets: Total increase in net assets ................................ 97,125,161
Beginning of period ......................................... 1,000,000
------------
End of period ............................................... $ 98,125,161
============
============================================================================================================
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the Period
MASTER LARGE CAP The following ratios have been derived from Dec. 22, 1999+ to
GROWTH PORTFOLIO information provided in the financial statements. October 31, 2000
============================================================================================================
<S> <C> <C>
Ratios to Average Expenses, net of reimbursement .............................. 1.30%*
Net Assets: ============
Expenses .................................................... 1.82%*
============
Investment loss--net ........................................ (.75%)*
============
============================================================================================================
Supplemental Net assets, end of period (in thousands) .................... $ 98,125
Data: ============
Portfolio turnover .......................................... 94.75%
============
============================================================================================================
</TABLE>
* Annualized.
+ Commencement of operations.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
MASTER LARGE CAP GROWTH PORTFOLIO
1. Significant Accounting Policies:
Master Large Cap Growth Portfolio (the "Portfolio") is part of Master Large Cap
Series Trust (the "Trust"). The Portfolio is registered under the Investment
Company Act of 1940 and is organized as a Delaware business trust. The
Portfolio's financial statements are prepared in conformity with accounting
principles generally accepted in the United States of America, which may require
the use of management accruals and estimates. The following is a summary of
significant accounting policies followed by the Portfolio.
(a) Valuation of investments--Portfolio securities that are traded on stock
exchanges are valued at the last sale price as of the close of business on the
day the securities are being valued or, lacking any sales, at the closing bid
price. Securities traded in the over-the-counter market are valued at the last
available bid price prior to the time of valuation. Portfolio securities that
are traded both in the over-the-counter market and on a stock exchange are
valued according to the broadest and most representative market. Options written
or purchased are valued at the last sale price in the case of exchange-traded
options. In the case of options traded in the over-the-counter market, valuation
is the last asked price (options written) or the last bid price (options
purchased). Short-term securities are valued at amortized cost, which
approximates market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets for which
market quotations are not readily available are valued at fair market value, as
determined in good faith by or under the direction of the Trust's Board of
Trustees.
(b) Derivative financial instruments--The Portfolio may engage in various
portfolio investment techniques to increase or decrease the level of risk to
which the Portfolio is exposed more quickly and efficiently than transactions in
other types of investments. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
o Financial futures contracts--The Portfolio may purchase or sell financial
futures contracts and options on such futures contracts for the purpose of
hedging the market risk on existing securities or the intended purchase of
securities. Upon entering into a contract, the Portfolio deposits and maintains
as collateral such initial margin as required by the exchange on which the
transaction is effected. Pursuant to the contract, the Portfolio agrees to
receive from or pay to the broker an
16 & 17
<PAGE>
Merrill Lynch Large Cap Growth Fund, October 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
MASTER LARGE CAP GROWTH PORTFOLIO
amount of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as variation margin and are recorded by the
Portfolio as unrealized gains or losses. When the contract is closed, the
Portfolio records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed.
o Options--The Portfolio is authorized to purchase and write call and put
options. When the Portfolio writes an option, an amount equal to the premium
received by the Portfolio is reflected as an asset and an equivalent liability.
The amount of the liability is subsequently marked to market to reflect the
current market value of the option written. When a security is purchased or sold
through an exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option expires (or the
Portfolio enters into a closing transaction), the Portfolio realizes a gain or
loss on the option to the extent of the premiums received or paid (or a gain or
loss to the extent that the cost of the closing transaction exceeds the premium
paid or received).
Written and purchased options are non-income producing investments.
o Forward foreign exchange contracts--The Portfolio is authorized to enter into
forward foreign exchange contracts as a hedge against either specific
transactions or portfolio positions. Such contracts are not entered on the
Portfolio's records. However, the effect on operations is recorded from the date
the Portfolio enters into such contracts.
o Foreign currency options and futures--The Portfolio may also purchase or sell
listed or over-the-counter foreign currency options, foreign currency futures
and related options on foreign currency futures as a short or long hedge against
possible variations in foreign exchange rates. Such transactions may be effected
with respect to hedges on non-US dollar denominated securities owned by the
Portfolio, sold by the Portfolio but not yet delivered, or committed or
anticipated to be purchased by the Portfolio.
(c) Foreign currency transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into US dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on investments.
(d) Income taxes--The Portfolio is classified as a partnership for Federal
income tax purposes. As a partnership for Federal income tax purposes, the
Portfolio will not incur Federal income tax liability. Items of partnership
income, gain, loss and deduction will pass through to investors as partners in
the Portfolio. Therefore, no Federal income tax provision is required. Under the
applicable foreign tax law, a withholding tax may be imposed on interest,
dividends and capital gains at various rates.
(e) Security transactions and investment income--Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). 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
(including amortization of discount) is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on the
identified cost basis.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Portfolio's investments and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Portfolio. For such services, the
Portfolio pays a monthly fee at an annual rate of .75% of the average daily
value of the Portfolio's net assets. For the period December 22, 1999 to October
31,2000, FAM earned fees of $58,385, of which $40,528 was waived.
Accounting services are provided to the Portfolio by FAM.
Certain officers and/or trustees of the Trust are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
period December 22, 1999 to October 31, 2000 were $100,150,434 and $11,381,976,
respectively.
Net realized gains for the period December 22, 1999 to October 31, 2000 and net
unrealized gains as of October 31, 2000 were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
--------------------------------------------------------------------------------
Long-term investments .............. $ 93,566 $1,250,087
---------- ----------
Total .............................. $ 93,566 $1,250,087
========== ==========
--------------------------------------------------------------------------------
As of October 31, 2000, net unrealized appreciation for Federal income tax
purposes aggregated $1,207,003, of which $4,155,881 related to appreciated
securities and $2,948,878 related to depreciated securities. At October 31,
2000, the aggregate cost of investments for Federal income tax purposes was
$94,244,136.
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Investors, Master Large Cap Growth Portfolio (One of
the Series constituting Master Large Cap Series Trust):
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Master Large Cap Growth Portfolio as of October
31, 2000, the related statements of operations and changes in net assets, and
the financial highlights for the period December 22, 1999 (commencement of
operations) to October 31, 2000. These financial statements and the financial
highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free from material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned at October 31, 2000 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Master Large Cap
Growth Portfolio as of October 31, 2000, the results of its operations, the
changes in its net assets, and the financial highlights for the period December
22, 1999 (commencement of operations) to October 31, 2000 in conformity with
accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
December 8, 2000
18 & 19
<PAGE>
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
Merrill Lynch Large Cap Growth
Fund of Merrill Lynch
Large Cap Series Funds, Inc.
Box 9011
Princeton, NJ
08543-9011 CAPGROW--10/00
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