ANNUAL REPORT
OCTOBER 31, 2000
[GRAPHIC OMITTED]
Mercury
Large
Cap Value
Fund OF MERCURY LARGE CAP
SERIES FUNDS, INC.
<PAGE>
MASTER
LARGE CAP VALUE PORTFOLIO
WORLDWIDE INVESTMENTS AS OF OCTOBER 31, 2000
================================================================================
Ten Largest Percent of
Equity Holdings Net Assets
================================================================================
Exxon Mobil Corporation 2.5%
--------------------------------------------------------------------------------
Merck & Co., Inc. 2.2
--------------------------------------------------------------------------------
Philip Morris Companies Inc. 2.0
--------------------------------------------------------------------------------
Chevron Corporation 1.7
--------------------------------------------------------------------------------
The Boeing Company 1.6
--------------------------------------------------------------------------------
Citigroup Inc. 1.5
--------------------------------------------------------------------------------
Bank of America Corporation 1.4
--------------------------------------------------------------------------------
FleetBoston Financial Corporation 1.4
--------------------------------------------------------------------------------
Texaco Inc. 1.2
--------------------------------------------------------------------------------
CIGNA Corporation 1.2
--------------------------------------------------------------------------------
Percent of
Ten Largest Industries Net Assets
================================================================================
Financial Services 6.3%
--------------------------------------------------------------------------------
Oil--Integrated 6.0
--------------------------------------------------------------------------------
Petroleum 5.0
--------------------------------------------------------------------------------
Insurance 4.9
--------------------------------------------------------------------------------
Electronics 4.2
--------------------------------------------------------------------------------
Banking 3.9
--------------------------------------------------------------------------------
Pharmaceuticals 3.1
--------------------------------------------------------------------------------
Oil Services 3.1
--------------------------------------------------------------------------------
Aerospace 2.6
--------------------------------------------------------------------------------
Oil--International Integrated 2.5
--------------------------------------------------------------------------------
October 31, 2000 (2) Mercury Large Cap Value Fund
<PAGE>
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.
October 31, 2000 (3) Mercury Large Cap Value Fund
<PAGE>
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) Value 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
I, Class A, Class B and Class C Shares had total returns of +17.50%, +17.30%,
+16.50% and +16.50%, 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 5-7 of this report to shareholders.) This compares favorably to
the +8.09% total return of the benchmark unmanaged Russell 1000 Value Index for
the same period. Our investment outperformance was largely attributable to
contributions from superior stock selection and sector weightings in technology
and healthcare as well as a significant underweighting in communication
services. Specific securities contributing positively to performance included
Scientific-Atlanta, Inc. and Advanced Micro Devices, Inc.
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 energy and technology, while retaining
underweighted positions in financials and communication services. 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 Mercury Large Cap Value Fund, and we look
forward to reviewing our outlook and strategy with you in our next report to
shareholders.
Sincerely,
/s/ Terry K. Glenn /s/ Robert C. Doll, Jr.
Terry K. Glenn Robert C. Doll, Jr.
President and Director/Trustee Senior Vice President and
Portfolio Manager
December 4, 2000
October 31, 2000 (4) Mercury Large Cap Value Fund
<PAGE>
FUND PERFORMANCE DATA
ABOUT FUND PERFORMANCE
The Fund offers four classes of shares, each with its own sales charge and
expense structure, allowing you to invest in the way that best suits your needs.
CLASS I SHARES incur a maximum initial sales charge of 5.25% and bear no ongoing
distribution and account maintenance fees. Class I Shares are available only to
eligible investors.
CLASS A SHARES incur a maximum initial sales charge of 5.25% and an account
maintenance fee of 0.25% (but no distribution fee).
CLASS B SHARES are subject to a maximum contingent deferred sales charge of 4%
if redeemed during the first two years, decreasing to 3% for each of the next
two years and decreasing 1% each year thereafter to 0% after the sixth 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 A
Shares after approximately 8 years.
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 may be subject to a 1%
contingent deferred sales charge if redeemed within one year after purchase.
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.
October 31, 2000 (5) Mercury Large Cap Value Fund
<PAGE>
FUND PERFORMANCE DATA (CONTINUED)
TOTAL RETURN BASED ON A $10,000 INVESTMENT
================================================================================
A line graph depicting the growth of an investment in the Fund's Class I, Class
A, Class B & Class C Shares compared to growth of an investment in the Russell
1000 Value Index. Beginning and ending values are:
12/22/99** 10/00
Mercury Large Cap Value Fund+--
Class I Shares* $ 9,475 $11,133
Mercury Large Cap Value Fund+--
Class A Shares* $ 9,475 $11,114
Mercury Large Cap Value Fund+--
Class B Shares* $10,000 $11,250
Mercury Large Cap Value Fund+--
Class C Shares* $10,000 $11,550
Russell 1000 Value Index++ $10,000 $10,809
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
** Commencement of operations.
+ The Fund invests all of its assets in Master Large Cap Value 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 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 indicative of future results.
October 31, 2000 (6) Mercury Large Cap Value Fund
<PAGE>
FUND PERFORMANCE DATA (CONCLUDED)
AGGREGATE TOTAL RETURN
================================================================================
% Return % Return
Without Sales With Sales
Class I Shares* Charge Charge**
================================================================================
Inception (12/22/99)
through 9/30/00 +14.30% +8.30%
--------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without Sales With Sales
Class A Shares* Charge Charge**
================================================================================
Inception (12/22/99)
through 9/30/00 +14.10% +8.11%
--------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without With
Class B Shares* CDSC CDSC**
================================================================================
Inception (12/22/99)
through 9/30/00 +13.40% +9.40%
--------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
6 years.
** Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without With
Class C Shares* CDSC CDSC**
================================================================================
Inception (12/22/99)
through 9/30/00 +13.40% +12.40%
--------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
RECENT PERFORMANCE RESULTS*
================================================================================
6 Month Since Inception
As of October 31, 2000 Total Return Total Return
================================================================================
Class I +8.39% +17.50%
--------------------------------------------------------------------------------
Class A +8.31 +17.30
--------------------------------------------------------------------------------
Class B +7.87 +16.50
--------------------------------------------------------------------------------
Class C +7.87 +16.50
--------------------------------------------------------------------------------
* 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 the Fund's net asset values for the period shown, and
assume reinvestment of all dividends and capital gains at net asset value
on the ex-dividend date. Performance results are for a limited pool of
assets. The Fund commenced operations on 12/22/99.
October 31, 2000 (7) Mercury Large Cap Value Fund
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
As of October 31, 2000
--------------------------------------------------------------------------------
MERCURY LARGE CAP VALUE FUND
================================================================================
<TABLE>
<S> <C>
Assets:
Investment in a Master Large Cap Value Portfolio, at value (identified
cost--$517,556) $ 585,139
Prepaid registration fees and other assets 7,188
----------
Total assets 592,327
----------
--------------------------------------------------------------------------------------
Liabilities:
Payable to distributor 278
Other liabilities 7,214
----------
Total liabilities 7,492
----------
--------------------------------------------------------------------------------------
Net Assets:
Net assets $ 584,835
==========
--------------------------------------------------------------------------------------
Net Assets Consist of:
Class I Shares of Common Stock, $.10 par value,
100,000,000 shares authorized $ 1,250
Class A Shares of Common Stock, $.10 par value,
100,000,000 shares authorized 1,250
Class B Shares of Common Stock, $.10 par value,
200,000,000 shares authorized 1,250
Class C Shares of Common Stock, $.10 par value,
100,000,000 shares authorized 1,250
Paid-in capital in excess of par 492,106
Undistributed realized capital gains on investments from
the Portfolio--net 20,146
Unrealized appreciation on investments from the Portfolio--net 67,583
----------
Net assets $ 584,835
==========
--------------------------------------------------------------------------------------
Net Asset Value:
Class I--Based on net assets of $146,915 and 12,500 shares
outstanding $ 11.75
==========
Class A--Based on net assets of $146,602 and 12,500 shares
outstanding $ 11.73
==========
Class B--Based on net assets of $145,659 and 12,500 shares
outstanding $ 11.65
==========
Class C--Based on net assets of $145,659 and 12,500 shares
outstanding $ 11.65
==========
--------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
October 31, 2000 (8) Mercury Large Cap Value Fund
<PAGE>
STATEMENT OF OPERATIONS
For the Period December 22, 1999+ to October 31, 2000
--------------------------------------------------------------------------------
MERCURY LARGE CAP VALUE FUND
================================================================================
<TABLE>
<S> <C> <C>
Investment Income (Loss):
Investment income allocated from the Portfolio $ 6,682
Expenses allocated from the Portfolio (6,982)
---------
Net investment loss from the Portfolio (300)
---------
-------------------------------------------------------------------------------------------
Expenses:
Registration fees $ 115,698
Offering costs 35,833
Printing and shareholder reports 9,000
Professional fees 8,000
Accounting services 2,120
Account maintenance and distribution fees--Class B 1,142
Account maintenance and distribution fees--Class C 1,142
Transfer agent fees--Class I 813
Transfer agent fees--Class B 813
Transfer agent fees--Class C 813
Transfer agent fees--Class A 812
Account maintenance fees--Class A 286
Other 95
---------
Total expenses before reimbursement 176,567
Reimbursement of expenses (173,973)
---------
Total expenses after reimbursement 2,594
---------
Investment loss--net (2,894)
---------
-------------------------------------------------------------------------------------------
Realized & Unrealized Gain from the
Portfolio--Net:
Realized gain on investments from the Portfolio--net 20,146
Unrealized appreciation on investments from the Portfolio--net 67,583
---------
Net Increase in Net Assets Resulting from Operations $ 84,835
=========
-------------------------------------------------------------------------------------------
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
October 31, 2000 (9) Mercury Large Cap Value Fund
<PAGE>
STATEMENT OF CHANGES
IN NET ASSETS
For the Period December 22, 1999+ to October 31, 2000
-------------------------------------------------------------------------------
MERCURY LARGE CAP VALUE FUND
===============================================================================
Increase (Decrease) in Net Assets:
-------------------------------------------------------------------------------
Operations:
Investment loss--net $ (2,894)
Realized gain on investments from the Portfolio--net 20,146
Unrealized appreciation on investments from the Portfolio--net 67,583
---------
Net increase in net assets resulting from operations 84,835
---------
-------------------------------------------------------------------------------
Net Assets:
Total increase in net assets 84,835
Beginning of period 500,000
---------
End of period $ 584,835
=========
-------------------------------------------------------------------------------
+ Commencement of operations.
See Notes to Financial Statements.
October 31, 2000 (10) Mercury Large Cap Value Fund
<PAGE>
FINANCIAL HIGHLIGHTS
MERCURY LARGE CAP VALUE FUND
================================================================================
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
For the Period December 22, 1999+ to October 31, 2000
-----------------------------------------------------
Increase (Decrease) in Net Asset Value: Class I Class A Class B Class C
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
----------------------------------------------------
Investment loss--net (.01) (.03) (.10) (.10)
Realized and unrealized gain on
investments from the Portfolio--net 1.76 1.76 1.75 1.75
----------------------------------------------------
Total from investment operations 1.75 1.73 1.65 1.65
----------------------------------------------------
Net asset value, end of period $ 11.75 $ 11.73 $ 11.65 $ 11.65
====================================================
----------------------------------------------------------------------------------------------------
Total Investment Return:
Based on net asset value per share 17.50%+++ 17.30%+++ 16.50%+++ 16.50%+++
====================================================
----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, net of reimbursement++ 1.53%* 1.78%* 2.52%* 2.52%*
====================================================
Expenses++ 40.33%* 40.58%* 41.34%* 41.34%*
====================================================
Investment loss--net (.07%)* (.32%)* (1.07%)* (1.07%)*
====================================================
----------------------------------------------------------------------------------------------------
Supplemental Data:
Net assets, end of period (in thousands) $ 147 $ 146 $ 146 $ 146
====================================================
----------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
+ Commencement of operations.
++ Includes the Fund's share of the Series' allocated expenses.
+++ Aggregate total investment return.
See Notes to Financial Statements.
October 31, 2000 (11) Mercury Large Cap Value Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MERCURY LARGE CAP VALUE FUND
================================================================================
(1) Significant Accounting Policies:
Mercury Large Cap Value Fund (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 Value 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. Class I and Class A Shares are sold with a front-end sales
charge. Class B and Class C Shares 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 A, Class B and Class C 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 (except that Class B
Shares have certain voting rights with respect to Class A 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.
October 31, 2000 (12) Mercury Large Cap Value Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
(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 $2,894 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"), 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 A .25% --
--------------------------------------------------------------------------
Class B .25% .75%
--------------------------------------------------------------------------
Class C .25% .75%
--------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co. and
selected dealers also provide account maintenance and distribution
services to the Fund. The ongoing account maintenance fee compensates the
Distributor, MLPF&S and selected dealers for providing account maintenance
services to Class A, Class B and Class C shareholders. The ongoing
distribution fee compensates the Distributor, MLPF&S and selected dealers
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 of $173,973.
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 $579,857 and $82,148,
respectively.
October 31, 2000 (13) Mercury Large Cap Value Fund
<PAGE>
INDEPENDENT AUDITORS' REPORT
MERCURY LARGE CAP VALUE FUND
================================================================================
The Board of Directors and Shareholders,
Mercury Large Cap Value Fund
(One of the Series constituting Mercury Large Cap Series Funds, Inc.):
We have audited the accompanying statement of assets and liabilities of Mercury
Large Cap Value 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 Mercury Large Cap
Value 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 11, 2000
October 31, 2000 (14) Mercury Large Cap Value Fund
<PAGE>
SCHEDULE OF INVESTMENTS
MASTER LARGE CAP VALUE PORTFOLIO
================================================================================
<TABLE>
<CAPTION>
In US Dollars
----------------------
Shares Percent of
Industry Held Common Stocks Value Net Assets
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aerospace 18,400 The Boeing Company $1,247,750 1.6%
21,600 Lockheed Martin Corporation 774,360 1.0
----------------------
2,022,110 2.6
--------------------------------------------------------------------------------------------------
Aerospace & 6,100 Northrop Grumman Corporation 512,400 0.7
Defense
--------------------------------------------------------------------------------------------------
Banking 22,900 Bank of America Corporation 1,100,631 1.4
11,700 Capital One Financial Corporation 738,562 1.0
26,800 Golden State Bancorp Inc. 700,150 0.9
5,800 Northern Trust Corporation 495,175 0.6
----------------------
3,034,518 3.9
--------------------------------------------------------------------------------------------------
Building Products 22,400 Valero Energy Corporation 740,600 1.0
--------------------------------------------------------------------------------------------------
Commercial Services 14,200 +Quanta Services, Inc. 441,088 0.6
--------------------------------------------------------------------------------------------------
Communications 12,200 SBC Communications Inc. 703,788 0.9
--------------------------------------------------------------------------------------------------
Computer Services 2,400 Electronic Data Systems Corporation 112,650 0.1
Electronics
--------------------------------------------------------------------------------------------------
Computer 1,000 International Business
Services/Software Machines Corporation 98,500 0.1
8,100 +NCR Corporation 349,312 0.5
14,700 Steelcase Inc. (Class A) 259,088 0.3
18,300 +Tech Data Corporation 761,738 1.0
----------------------
1,468,638 1.9
--------------------------------------------------------------------------------------------------
Computer Software 10,200 +Intuit Inc. 626,662 0.8
--------------------------------------------------------------------------------------------------
Computer 15,200 +Solectron Corporation 668,800 0.9
Technology
--------------------------------------------------------------------------------------------------
Computers & 10,700 +Apple Computer, Inc. 209,319 0.3
Peripherals 14,500 +SanDisk Corporation 779,148 1.0
----------------------
988,467 1.3
--------------------------------------------------------------------------------------------------
Drugs & Hospital 3,100 Hillenbrand Industries, Inc. 143,375 0.2
Supplies
--------------------------------------------------------------------------------------------------
Electric & Gas 28,400 PG&E Corporation 765,025 1.0
--------------------------------------------------------------------------------------------------
Electrical Equipment 27,400 AVX Corporation 784,325 1.0
--------------------------------------------------------------------------------------------------
Electronic 13,400 Avnet, Inc. 360,125 0.5
Components
--------------------------------------------------------------------------------------------------
Electronics 23,300 +Arrow Electronics, Inc. 745,600 1.0
27,800 +Lattice Semiconductor Corporation 811,412 1.0
12,200 +SCI Systems, Inc. 524,600 0.7
5,400 +Tektronix, Inc. 384,750 0.5
26,200 +Vishay Intertechnology, Inc. 786,000 1.0
----------------------
3,252,362 4.2
--------------------------------------------------------------------------------------------------
</TABLE>
October 31, 2000 (15) Mercury Large Cap Value Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
----------------------
Shares Percent of
Industry Held Common Stocks Value Net Assets
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Electronics/ 27,800 +Kemet Corp. $ 774,925 1.0%
Electrical
Components
--------------------------------------------------------------------------------------------------
Energy 20,100 Noble Affiliates, Inc. 737,419 1.0
--------------------------------------------------------------------------------------------------
Financial Services 21,600 Citigroup Inc. 1,136,700 1.5
27,500 FleetBoston Financial Corporation 1,045,000 1.4
18,200 +GreenPoint Financial Corp. 541,450 0.7
13,600 Lehman Brothers Holdings, Inc. 877,200 1.1
11,200 MBNA Corporation 420,700 0.5
18,900 Washington Mutual, Inc. 831,600 1.1
----------------------
4,852,650 6.3
--------------------------------------------------------------------------------------------------
Financial Services-- 12,800 Household International, Inc. 644,000 0.8
Consumer
--------------------------------------------------------------------------------------------------
Food Services 36,900 +The Kroger Co. 832,556 1.1
--------------------------------------------------------------------------------------------------
Foods 30,200 ConAgra, Inc. 645,525 0.8
--------------------------------------------------------------------------------------------------
Health Care 9,900 +Trigon Healthcare, Inc. 709,706 0.9
7,700 UnitedHealth Group Incorporated 842,188 1.1
----------------------
1,551,894 2.0
--------------------------------------------------------------------------------------------------
Health Maintenance 6,500 +Wellpoint Health Networks Inc. 760,094 1.0
Organizations
--------------------------------------------------------------------------------------------------
Health Services 8,100 +Express Scripts, Inc. (Class A) 544,219 0.7
--------------------------------------------------------------------------------------------------
Healthcare-- 22,900 HCA--The Healthcare Corporation 914,569 1.2
Products & Services
--------------------------------------------------------------------------------------------------
Home--Builders 16,300 +International Rectifier Corp. 727,387 0.9
--------------------------------------------------------------------------------------------------
Hospital 21,400 +Tenet Healthcare Corporation 841,288 1.1
Management
--------------------------------------------------------------------------------------------------
Hospital Supplies 14,000 Abbott Laboratories 739,375 0.9
10,900 Baxter International Inc. 895,844 1.2
----------------------
1,635,219 2.1
--------------------------------------------------------------------------------------------------
Hotels & Casinos 9,200 MGM Grand, Inc. 317,975 0.4
35,500 +Mandalay Resort Group 738,844 1.0
----------------------
1,056,819 1.4
--------------------------------------------------------------------------------------------------
Information 14,900 First Data Corporation 746,862 1.0
Processing
--------------------------------------------------------------------------------------------------
Insurance 9,600 AFLAC Incorporated 701,400 0.9
7,200 American International Group, Inc. 705,600 0.9
7,700 CIGNA Corporation 939,015 1.2
33,300 KeyCorp 822,094 1.1
8,500 The PMI Group, Inc. 627,938 0.8
----------------------
3,796,047 4.9
--------------------------------------------------------------------------------------------------
</TABLE>
October 31, 2000 (16) Mercury Large Cap Value Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
-----------------------
Shares Percent of
Industry Held Common Stocks Value Net Assets
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insurance-- 26,900 Old Republic International Corporation $ 699,400 0.9%
Multiline 5,800 The St. Paul Companies, Inc. 297,250 0.4
-----------------------
996,650 1.3
---------------------------------------------------------------------------------------------------------
Internet Software 7,500 +Network Associates, Inc. 144,375 0.2
---------------------------------------------------------------------------------------------------------
Internetworking 20,700 +CNET Networks, Inc. 652,050 0.8
---------------------------------------------------------------------------------------------------------
Leisure 33,300 Brunswick Corporation 647,269 0.8
---------------------------------------------------------------------------------------------------------
Medical 4,200 Beckman Coulter Inc. 294,262 0.4
1,600 +Lincare Holdings Inc. 67,300 0.1
-----------------------
361,562 0.5
---------------------------------------------------------------------------------------------------------
Medical Services 6,000 +HEALTHSOUTH Corporation 72,000 0.1
8,100 +Quest Diagnostics Incorporated 779,625 1.0
8,700 +Universal Health Services, Inc. (Class B) 729,713 0.9
-----------------------
1,581,338 2.0
---------------------------------------------------------------------------------------------------------
Medical Supplies 17,900 DENTSPLY International Inc. 620,906 0.8
---------------------------------------------------------------------------------------------------------
Medical Technology 6,500 Johnson & Johnson 598,812 0.8
---------------------------------------------------------------------------------------------------------
Oil 20,500 Ashland Inc. 671,375 0.9
5,100 Conoco Inc. (Class B) 138,656 0.2
-----------------------
810,031 1.1
---------------------------------------------------------------------------------------------------------
Oil & Gas Producers 52,300 +Ocean Energy Inc. 725,663 0.9
27,300 Questar Corporation 738,806 1.0
-----------------------
1,464,469 1.9
---------------------------------------------------------------------------------------------------------
Oil--Integrated 12,400 Amerada Hess Corporation 768,800 1.0
15,700 Chevron Corporation 1,289,362 1.7
13,800 Phillips Petroleum Company 852,150 1.1
25,200 Sunoco, Inc. 754,425 1.0
16,300 Texaco Inc. 962,719 1.2
-----------------------
4,627,456 6.0
---------------------------------------------------------------------------------------------------------
Oil--International 21,700 Exxon Mobil Corporation 1,935,369 2.5
Integrated
---------------------------------------------------------------------------------------------------------
Oil Services 23,100 Baker Hughes Incorporated 794,062 1.0
12,100 Kerr-McGee Corporation 790,281 1.0
29,500 USX-Marathon Group 802,031 1.1
-----------------------
2,386,374 3.1
---------------------------------------------------------------------------------------------------------
Petroleum 13,100 Anadarko Petroleum Corporation 839,055 1.1
12,000 Helmerich & Payne, Inc. 377,250 0.5
12,700 Murphy Oil Corporation 735,806 1.0
39,300 Occidental Petroleum Corporation 781,087 1.0
28,300 Ultramar Diamond Shamrock Corporation 742,875 1.0
10,100 Unocal Corporation 344,663 0.4
-----------------------
3,820,736 5.0
---------------------------------------------------------------------------------------------------------
</TABLE>
October 31, 2000 (17) Mercury Large Cap Value Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
In US Dollars
------------------------
Shares Percent of
Industry Held Common Stocks Value Net Assets
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pharmaceuticals 7,700 Cardinal Health, Inc. $ 729,575 0.9%
18,700 Merck & Co., Inc. 1,681,831 2.2
------------------------
2,411,406 3.1
---------------------------------------------------------------------------------------------------
Retail 5,000 +Safeway Inc. 273,438 0.3
25,100 Sears, Roebuck & Co. 746,223 1.0
------------------------
1,019,661 1.3
---------------------------------------------------------------------------------------------------
Semiconductor 21,700 +KLA-Tencor Corporation 733,731 0.9
Production
Equipment
---------------------------------------------------------------------------------------------------
Semiconductors 21,100 +Cypress Semiconductor Corporation 789,931 1.0
10,600 Dallas Semiconductor Corporation 420,025 0.6
------------------------
1,209,956 1.6
---------------------------------------------------------------------------------------------------
Services 8,400 Loews Corporation 763,875 1.0
---------------------------------------------------------------------------------------------------
Software 5,300 +Advanced Micro Devices, Inc. 119,912 0.2
13,000 +PeopleSoft, Inc. 567,328 0.7
------------------------
687,240 0.9
---------------------------------------------------------------------------------------------------
Strategic Growth 14,200 +Toys 'R' Us, Inc. 244,063 0.3
Opportunities
---------------------------------------------------------------------------------------------------
Technology 30,100 +Sybase, Inc. 630,219 0.8
---------------------------------------------------------------------------------------------------
Telecommunications 20,700 +Advanced Fibre Communications, Inc. 674,044 0.9
30,200 +Andrew Corporation 794,637 1.0
3,700 Verizon Communications 213,906 0.3
------------------------
1,682,587 2.2
---------------------------------------------------------------------------------------------------
Telecommunications 10,600 +Adtran, Inc. 402,800 0.5
& Equipment
---------------------------------------------------------------------------------------------------
Tobacco 43,000 Philip Morris Companies Inc. 1,574,875 2.0
---------------------------------------------------------------------------------------------------
Transportation 28,700 Southwest Airlines Co. 817,950 1.1
---------------------------------------------------------------------------------------------------
Utilities--Electric 28,500 The Southern Company 837,188 1.1
---------------------------------------------------------------------------------------------------
Waste Disposal 10,300 Equitable Resources, Inc. 597,400 0.8
Services
---------------------------------------------------------------------------------------------------
Total Common Stocks
(Cost--$68,699,600) 71,946,754 93.3
---------------------------------------------------------------------------------------------------
</TABLE>
October 31, 2000 (18) Mercury Large Cap Value Fund
<PAGE>
SCHEDULE OF INVESTMENTS (CONCLUDED)
<TABLE>
<CAPTION>
In US Dollars
--------------------------
Face Percent of
Amount Short-Term Securities Value Net Assets
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
US Government $1,100,000 Fannie Mae, 6.40% due 11/03/2000 $ 1,099,609 1.4%
Agency 3,812,000 Student Loan Marketing Association,
Obligations* 6.45% due 11/01/2000 3,812,000 4.9
--------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost--$4,911,609) 4,911,609 6.3
--------------------------------------------------------------------------------------------------------
Total Investments
(Cost--$73,611,209) 76,858,363 99.6
Other Assets Less Liabilities 279,978 0.4
--------------------------
Net Assets $77,138,341 100.0%
==========================
--------------------------------------------------------------------------------------------------------
</TABLE>
* 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.
October 31, 2000 (19) Mercury Large Cap Value Fund
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
As of October 31, 2000
--------------------------------------------------------------------------------
MASTER LARGE CAP VALUE PORTFOLIO
================================================================================
<TABLE>
<S> <C> <C>
Assets:
Investments, at value (identified cost--$73,611,209) $76,858,363
Receivables:
Contributions $10,765,284
Securities sold 564,669
Dividends 23,717 11,353,670
-----------
Prepaid expenses and other assets 17,081
-----------
Total assets 88,229,114
-----------
-------------------------------------------------------------------------------------
Liabilities:
Payables:
Securities purchased 10,774,636
Withdrawals 36,218
Investment adviser 15,640 10,826,494
-----------
Accrued expenses and other liabilities 264,279
-----------
Total liabilities 11,090,773
-----------
-------------------------------------------------------------------------------------
Net Assets:
Net assets $77,138,341
===========
-------------------------------------------------------------------------------------
Net Assets Consist of:
Partners' capital $73,891,187
Unrealized appreciation on investments--net 3,247,154
-----------
Net assets $77,138,341
===========
-------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
October 31, 2000 (20) Mercury Large Cap Value Fund
<PAGE>
STATEMENT OF OPERATIONS
For the Period December 22, 1999+ to October 31, 2000
--------------------------------------------------------------------------------
MASTER LARGE CAP VALUE PORTFOLIO
================================================================================
Investment Income:
Dividends (net of $51 foreign withholding tax) $ 66,745
Interest and discount earned 26,009
-----------
Total income 92,754
-----------
-------------------------------------------------------------------------------
Expenses:
Investment advisory fees $ 49,466
Accounting services 21,369
Custodian fees 13,637
Trustees' fees and expenses 9,223
Professional fees 8,000
Offering costs 5,556
Pricing fees 307
Other 350
-----------
Total expenses before reimbursement 107,908
Reimbursement of expenses (26,072)
-----------
Total expenses after reimbursement 81,836
-----------
Investment income--net 10,918
-----------
-------------------------------------------------------------------------------
Realized & Unrealized Gain (Loss) on
Investments--Net:
Realized loss on investments--net (231,704)
Unrealized appreciation on investments--net 3,247,154
-----------
Net Increase in Net Assets Resulting from Operations $ 3,026,368
===========
-------------------------------------------------------------------------------
+ Commencement of operations.
See Notes to Financial Statements.
October 31, 2000 (21) Mercury Large Cap Value Fund
<PAGE>
STATEMENT OF CHANGES
IN NET ASSETS
For the Period December 22, 1999+ to October 31, 2000
-------------------------------------------------------------------------------
MASTER LARGE CAP VALUE PORTFOLIO
===============================================================================
Increase (Decrease) in Net Assets:
-------------------------------------------------------------------------------
Operations:
Investment income--net $ 10,918
Realized loss on investments--net (231,704)
Unrealized appreciation on investments--net 3,247,154
------------
Net increase in net assets resulting from operations 3,026,368
------------
-------------------------------------------------------------------------------
Net Capital Contributions:
Increase in net assets derived from net capital contributions 73,111,973
------------
-------------------------------------------------------------------------------
Net Assets:
Total increase in net assets 76,138,341
Beginning of period 1,000,000
------------
End of period $ 77,138,341
============
-------------------------------------------------------------------------------
+ Commencement of operations.
See Notes to Financial Statements.
October 31, 2000 (22) Mercury Large Cap Value Fund
<PAGE>
FINANCIAL HIGHLIGHTS
MASTER LARGE CAP VALUE PORTFOLIO
================================================================================
The following ratios have been derived from information For the Period
provided in the financial statements. Dec. 22, 1999+
to Oct. 31, 2000
--------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, net of reimbursement 1.24%*
==========
Expenses 1.63%*
==========
Investment income--net .17%*
==========
--------------------------------------------------------------------------------
Supplemental Data:
Net assets, end of period (in thousands) $ 77,138
==========
Portfolio turnover 81.99%
==========
--------------------------------------------------------------------------------
* Annualized.
+ Commencement of operations.
See Notes to Financial Statements.
October 31, 2000 (23) Mercury Large Cap Value Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MASTER LARGE CAP VALUE PORTFOLIO
================================================================================
(1) Significant Accounting Policies:
Master Large Cap Value Portfolio (the "Portfolio") is part of Master Large
Cap Series Trust (the "Trust"). The Trust is registered under the
Investment Company Act of 1940 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 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
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.
October 31, 2000 (24) Mercury Large Cap Value Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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, withholding
taxes may be imposed on interest, dividends and capital gains at various
rates.
October 31, 2000 (25) Mercury Large Cap Value Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
(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:
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 $49,466, of which $26,072 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 $77,151,067 and
$8,219,759, respectively.
Net realized gains (losses) 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 (Losses) Gains
--------------------------------------------------------------------------
Long-term Investments $ (231,708) $3,247,154
Short-term Investments 4 --
-----------------------------
Total $ (231,704) $3,247,154
=============================
--------------------------------------------------------------------------
As of October 31, 2000, net unrealized appreciation for Federal income tax
purposes aggregated $3,140,178, of which $4,504,475 related to appreciated
securities and $1,364,297 related to depreciated securities. At October
31, 2000, the aggregate cost of investments for Federal income tax
purposes was $73,718,185.
October 31, 2000 (26) Mercury Large Cap Value Fund
<PAGE>
INDEPENDENT AUDITORS' REPORT
MASTER LARGE CAP VALUE PORTFOLIO
================================================================================
The Board of Trustees and Investors,
Master Large Cap Value 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 Value 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 of 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
Value 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 11, 2000
October 31, 2000 (27) Mercury Large Cap Value Fund
<PAGE>
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
(888) 763-2260
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.
Mercury Large Cap Value Fund of
Mercury Large Cap Series Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
[RECYCLE LOGO] Printed on post-consumer recycled paper MERCLCV--10/00
