<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1996
FILE NO. 2-69062
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 18 /X/
AND/OR
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 20 /X/
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
MERRILL LYNCH SERIES FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
P.O. BOX 9011 08543-9011
PRINCETON, NEW JERSEY (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 282-2800
TERRY K. GLENN
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copies to:
PHILIP L. KIRSTEIN, ESQ. LEONARD B. MACKEY, JR., ESQ.
MERRILL LYNCH ASSET MANAGEMENT ROGERS & WELLS
P.O. BOX 9011 200 PARK AVENUE
PRINCETON, NEW JERSEY 08543-9011 NEW YORK, NEW YORK 10166
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX):
/x/ immediately upon filing pursuant to paragraph (b)
/ / on date pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of rule 485.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
/ / this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940. THE NOTICE REQUIRED BY SUCH RULE FOR THE REGISTRANT'S MOST RECENT
FISCAL YEAR WAS FILED ON FEBRUARY 27, 1996.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
(Continued from previous page)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
AMOUNT PROPOSED PROPOSED
OF SHARES MAXIMUM MAXIMUM
TITLE OF SECURITIES BEING OFFERING PRICE AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED PER SHARE OFFERING PRICE* REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(1) Shares of Money Reserve Portfolio
Common Stock, par value $0.10 per share.... 16,528,480 $ 1.00 $58,000 )
)
(2) Shares of Intermediate Government Bond )
Portfolio Common Stock, par value )
$0.10 per share............................ 221,115 $10.85 $57,993.25 )
)
(3) Shares of Long Term Corporate Bond ) $100
Portfolio Common Stock, par value )
$0.10 per share............................ 34,501 $11.44 $57,989.36 )
)
(4) Shares of Natural Resources Portfolio )
Common Stock, par value $0.10 per share.... 318,705 $ 9.03 $57,999.69 )
)
(5) Shares of Global Strategy Portfolio )
Common Stock, par value $0.10 per share.... 1,427,329 $15.24 $57,988.20 )
</TABLE>
*Calculated as of April 24, 1996.
(1) The calculation of the maximum aggregate offering price is made pursuant to
Rule 24e-2 under the Investment Company Act of 1940. The total amount of
Money Reserve Portfolio Common Stock redeemed or repurchased during
Registrant's previous fiscal year was 260,422,324 shares. Of such amount
243,951,844 shares have been used for reductions pursuant to Rule 24e-2(a)
or Rule 24f-2(c) under the Investment Company Act of 1940 in previous
filings during Registrant's current fiscal year. 16,470,480 shares of
Money Reserve Portfolio Common Stock redeemed during Registrant's previous
fiscal year are being used for the reduction of the registration fee in this
post-effective amendment.
(2) The calculation of the maximum aggregate offering price is made pursuant to
Rule 24e-2 under the Investment Company Act of 1940. The total amount of
Intermediate Government Bond Portfolio Common Stock redeemed or repurchased
during Registrant's previous fiscal year was 3,546,978 shares. Of such
amount, 3,331,208 shares have been used for reductions pursuant to Rule
24e-2(a) or Rule 24f-2(c) under the Investment Company Act of 1940 in
previous filings during Registrant's current fiscal year. 215,770 shares of
Intermediate Government Bond Portfolio Common Stock redeemed during
Registrant's previous fiscal year are being used for the reduction of the
registration fee in this post-effective amendment.
(3) The calculation of the maximum aggregate offering price is made pursuant to
Rule 24e-2 under the Investment Company Act of 1940. The total amount of
Long Term Corporate Bond Portfolio Common Stock redeemed or repurchased
during Registrant's previous fiscal year was 1,968,331 shares. Of such
amount, 1,938,899 shares have been used for reductions pursuant to Rule
24e-2(a) or Rule 24f-2(c) under the Investment Company Act of 1940 in
previous filings during Registrant's current fiscal year. 29,432 shares of
Long Term Corporate Bond Portfolio Common Stock redeemed during Registrant's
previous fiscal year are being used for reduction of the registration fee in
this post-effective amendment.
(4) The calculation of the maximum aggregate offering price is made pursuant to
Rule 24e-2 under the Investment Company Act of 1940. The total amount of
Natural Resources Portfolio Common Stock redeemed or repurchased during
Registrant's previous fiscal year was 3,966,476 shares. Of such amount,
3,654,194 shares have been used for reductions pursuant to Rule 24e-2(a) or
Rule 24f-2(c) under the Investment Company Act of 1940 in previous filings
during Registrant's current fiscal year. 312,282 shares of Natural Resources
Portfolio Common Stock redeemed during Registrant's previous fiscal year are
being used for the reduction of the registration fee in this post-effective
amendment.
(5) The calculation of the maximum aggregate offering price is made pursuant to
Rule 24e-2 under the Investment Company Act of 1940. The total amount of
Global Strategy Portfolio Common Stock redeemed or repurchased during
Registrant's previous fiscal year was 4,006,374 shares. Of such amount,
2,582,850 shares have been used for reductions pursuant to Rule 24e-2(a) or
Rule 24f-2(c) under the Investment Company Act of 1940 in previous filings
during Registrant's current fiscal year. 1,423,524 shares of Global
Strategy Portfolio Common Stock redeemed during Registrant's previous fiscal
year are being used for the reduction of the registration fee in this
post-effective amendment.
<PAGE>
MERRILL LYNCH SERIES FUND, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A ITEM LOCATION
- ----------------------------------------------------------- ------------------------------------------------
<S> <C> <C>
PART A
1. Cover Page..................................... Cover Page
2. Fee Table/Synopsis............................. *
3. Financial Highlights........................... Financial Highlights; Performance Data
4. General Description of Registrant.............. Investment Objectives and Policies of the
Portfolios; Additional Information
5. Management of the Fund......................... Investment Adviser; Directors; Portfolio
Transactions and Brokerage; Additional
Information
5A. Management's Discussion of Fund
Performance.................................. Financial Highlights
6. Capital Stock and Other Securities............. Cover Page; Dividends, Distributions and Taxes;
Additional Information
7. Purchase of Securities Being Offered........... Purchase of Shares; Additional Information
8. Redemption or Repurchase....................... Redemption of Shares
9. Pending Legal Proceedings...................... *
PART B
10. Cover Page..................................... Cover Page
11. Table of Contents.............................. Table of Contents
12. General Information and History................ Additional Information
13. Investment Objectives and Policies............. Investment Objectives and Policies; Investment
Restrictions; Portfolio Transactions and
Brokerage
14. Management of the Fund......................... Management of the Fund
15. Control Persons and Principal Holders of
Securities................................... Management of the Fund; Additional Information
16. Investment Advisory and Other Services......... Management of the Fund; Investment Advisory
Arrangements
17. Brokerage Allocation and Other Practices....... Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities............. *
19. Purchase, Redemption and Pricing of Securities
Being Offered................................ Determination of Net Asset Value; Redemption of
Shares
20. Tax Status..................................... Dividends, Distributions and Taxes
21. Underwriters................................... Distribution Arrangements
22. Calculation of Performance Data................ Performance Data
23. Financial Statements........................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered in Part C to this Registration Statement.
- ------------------
* Item inapplicable or answer negative.
<PAGE>
PROSPECTUS
APRIL 29, 1996
MERRILL LYNCH SERIES FUND, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 o PHONE NO. (609) 282-2800
Merrill Lynch Series Fund, Inc. (the 'Fund') is an open-end management
investment company which is intended to meet a wide range of investment
objectives with its ten separate portfolios (hereinafter referred to as the
'Portfolios' or individually as a 'Portfolio'). Each Portfolio is in effect a
separate fund issuing its own shares. The shares of the Fund are sold only to
separate accounts (the 'Separate Accounts') of the Merrill Lynch Insurance
Companies, as defined below, and Monarch Life Insurance Company's Variable
Account A (collectively, the 'Accounts') to fund the benefits under Variable
Life Insurance Policies (the 'Policies') issued by Merrill Lynch Life Insurance
Company and ML Life Insurance Company of New York, indirect wholly owned
subsidiaries of Merrill Lynch & Co., Inc. (collectively, the 'Merrill Lynch
Insurance Companies'), and Monarch Life Insurance Company ('Monarch' and,
together with the Merrill Lynch Insurance Companies, the 'Insurance Companies').
The Accounts invest in shares of the Fund in accordance with allocation
instructions received from Policyowners. Such allocation rights are further
described in the accompanying Prospectus for the Policies. The Insurance
Companies redeem shares to the extent necessary to provide benefits under the
Policies. The investment objectives of the Portfolios are as follows:
Money Reserve Portfolio. Preservation of capital, liquidity and the
highest possible current income consistent with the foregoing objectives by
investing in short-term money market securities.
Intermediate Government Bond Portfolio. Highest possible current
income consistent with the protection of capital afforded by investing in
intermediate-term debt securities issued or guaranteed by the United States
Government or its agencies.
Long Term Corporate Bond Portfolio. As high a level of current income
as is consistent with prudent investment risk by investing primarily in
fixed-income, high quality corporate bonds.
High Yield Portfolio. High current income, consistent with prudent
investment management, by investing principally in fixed-income securities
rated in the lower categories of the established rating services.
Capital Stock Portfolio. Long-term growth of capital and income, plus
moderate current income, principally by investing in common stocks which
are considered to be of good or improving quality or which are thought to
be undervalued based on criteria such as historical price/book value ratios
and price/earnings ratios.
Growth Stock Portfolio. Above average long-term growth of capital by
investing primarily in common stocks of aggressive growth companies that
are considered to have special growth potential.
Multiple Strategy Portfolio. Highest total investment return
consistent with prudent risk through a fully managed investment policy
utilizing equity securities, primarily common stocks of
large-capitalization companies, as well as investment grade intermediate-
and long-term debt securities and money market securities.
Natural Resources Portfolio. Long-term growth of capital and
protection of the purchasing power of shareholders' capital by investing
primarily in equity securities of domestic and foreign companies with
substantial natural resource assets.
Global Strategy Portfolio. High total investment return by investing
primarily in a portfolio of equity and fixed income securities of U.S. and
foreign issuers.
Balanced Portfolio. A level of current income and a degree of
stability of principal not normally available from an investment solely in
equity securities and the opportunity for capital appreciation greater than
that normally available from an investment solely in debt securities by
investing in a balanced portfolio of fixed income and equity securities.
There can be no assurance that the objectives of any Portfolio will be realized.
See 'Investment Objectives and Policies of the Portfolios,' page 13. THE MONEY
RESERVE PORTFOLIO ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE, BUT THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO DO SO. AN
INVESTMENT IN THE MONEY RESERVE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. THE HIGH YIELD PORTFOLIO INVESTS IN HIGH YIELD BONDS
(COMMONLY KNOWN AS 'JUNK BONDS'), WHICH INVOLVE SPECIAL RISKS. SEE 'INVESTMENT
OBJECTIVES AND POLICIES OF THE PORTFOLIOS--HIGH YIELD PORTFOLIO--RISK FACTORS.'
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
MERRILL LYNCH ASSET MANAGEMENT--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
------------------------
This Prospectus sets forth in concise form the information about the Fund that a
prospective investor should know before investing in the Fund. Investors should
read and retain this Prospectus for future reference. A statement containing
additional information about the Fund has been filed with the Securities and
Exchange Commission in a Statement of Additional Information, dated April 29,
1996, and is available upon request and without charge, by calling or writing
the Fund at the address and telephone number set forth above. The Statement of
Additional Information is hereby incorporated by reference into this Prospectus.
------------------------
<PAGE>
MERRILL LYNCH SERIES FUND, INC.
------------------------
PROSPECTUS
------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FUND, THE INVESTMENT ADVISER, OR THE DISTRIBUTOR. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Highlights..................................... 3
The Insurance Companies.................................. 13
Money Reserve Portfolio Yield Information................ 13
Investment Objectives and Policies of the Portfolios..... 13
Directors................................................ 26
Investment Adviser....................................... 27
Portfolio Transactions and Brokerage..................... 28
Purchase of Shares....................................... 28
Redemption of Shares..................................... 28
Dividends, Distributions and Taxes....................... 28
Performance Data......................................... 29
Additional Information................................... 30
Appendix A: Money Market Securities...................... 32
Appendix B: Description of Corporate Bond Ratings........ 34
</TABLE>
2
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the table below has been audited in
conjunction with the annual audits of the financial statements of the Fund by
Deloitte & Touche LLP, Independent Auditors. Financial statements for the year
ended December 31, 1995 and the Independent Auditors' report thereon are
included in the Statement of Additional Information.
The following per share data and ratios have
been derived from information provided in
the financial statements:
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
-----------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
-------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSET
VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 13.27 $ 14.62 $ 13.70 $ 13.29 $ 11.78 $ 12.25 $ 10.59
-------- -------- ------- ------- ------- ------- -------
Investment income--net.................. .60 .61 .50 .47 .60 .64 .48
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net..................... 2.07 (1.21) 1.35 .38 1.77 (.47) 1.66
-------- -------- ------- ------- ------- ------- -------
Total from investment operations........ 2.67 (.60) 1.85 .85 2.37 .17 2.14
-------- -------- ------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net................ (.62) (.53) (.75) (.26) (.68) (.56) (.48)
Realized gain on investments--net..... (.46) (.22) (.18) (.18) (.18) (.08) --
-------- -------- ------- ------- ------- ------- -------
Total dividends and distributions....... (1.08) (.75) (.93) (.44) (.86) (.64) (.48)
-------- -------- ------- ------- ------- ------- -------
Net asset value, end of period.......... $ 14.86 $ 13.27 $ 14.62 $ 13.70 $ 13.29 $ 11.78 $ 12.25
-------- -------- ------- ------- ------- ------- -------
-------- -------- ------- ------- ------- ------- -------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share...... 21.59% (4.28%) 14.31% 6.67% 20.95% 1.57% 20.75%
-------- -------- ------- ------- ------- ------- -------
-------- -------- ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement.......... .38% .40% .43% .48% .50% .50% .50%
-------- -------- ------- ------- ------- ------- -------
-------- -------- ------- ------- ------- ------- -------
Expenses................................ .38% .40% .43% .48% .50% .50% .66%
-------- -------- ------- ------- ------- ------- -------
-------- -------- ------- ------- ------- ------- -------
Investment income--net.................. 4.47% 4.28% 3.72% 4.40% 4.91% 5.56% 5.58%
-------- -------- ------- ------- ------- ------- -------
-------- -------- ------- ------- ------- ------- -------
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)............................ $ 97,181 $ 75,893 $88,018 $56,080 $38,128 $29,065 $27,936
-------- -------- ------- ------- ------- ------- -------
-------- -------- ------- ------- ------- ------- -------
Portfolio turnover...................... 32.92% 46.94% 25.38% 33.15% 58.77% 26.84% 48.43%
-------- -------- ------- ------- ------- ------- -------
-------- -------- ------- ------- ------- ------- -------
<CAPTION>
PERIOD
MAY 2,
1988+ TO
DECEMBER 31,
1988
-------------
<S> <C>
INCREASE (DECREASE) IN NET ASSET
VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 10.00
-----------
Investment income--net.................. .26
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net..................... .33
-----------
Total from investment operations........ .59
-----------
Less dividends and distributions:
Investment income--net................ --
Realized gain on investments--net..... --
-----------
Total dividends and distributions....... --
-----------
Net asset value, end of period.......... $ 10.59
-----------
-----------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share...... 5.90%#
-----------
-----------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement.......... .50%*
-----------
-----------
Expenses................................ .70%*
-----------
-----------
Investment income--net.................. 5.62%*
-----------
-----------
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)............................ $ 5,530
-----------
-----------
Portfolio turnover...................... 42.49%
-----------
-----------
</TABLE>
-----------------
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Commencement of operations.
# Aggregate total investment return.
Further information about the Fund's performance is contained in the
Fund's Annual Report, which can be obtained, without charge, upon request.
3
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
The following per share data and ratios have
been derived from information provided in
the financial statements:
<TABLE>
<CAPTION>
CAPITAL STOCK PORTFOLIO
-----------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
--------- --------- --------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
year........................ $ 21.64 $ 25.73 $ 23.22 $ 23.39 $ 19.65 $ 20.19 $ 16.07
--------- --------- --------- -------- -------- -------- -------
Investment income--net....... .41 .29 .33 .39 .45 .54 .61
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions--net........... 3.70 (1.50) 3.41 .16 4.97 (.44) 4.16
--------- --------- --------- -------- -------- -------- -------
Total from investment
operations.................. 4.11 (1.21) 3.74 .55 5.42 .10 4.77
--------- --------- --------- -------- -------- -------- -------
Less dividends and
distributions:
Investment income--net...... (.34) (.28) (.59) (.20) (.54) (.52) (.65)
Realized gain on
investments--net......... (1.53) (2.60) (.64) (.52) (1.14) (.12) --
--------- --------- --------- -------- -------- -------- -------
Total dividends and
distributions............... (1.87) (2.88) (1.23) (.72) (1.68) (.64) (.65)
--------- --------- --------- -------- -------- -------- -------
Net asset value, end of
year........................ $ 23.88 $ 21.64 $ 25.73 $ 23.22 $ 23.39 $ 19.65 $ 20.19
--------- --------- --------- -------- -------- -------- -------
--------- --------- --------- -------- -------- -------- -------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 20.73% (5.12)% 17.01% 2.47% 29.05% .61% 30.20%
--------- --------- --------- -------- -------- -------- -------
--------- --------- --------- -------- -------- -------- -------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of
reimbursement............... .41% .39% .38% .41% .40% .40% .41%
--------- --------- --------- -------- -------- -------- -------
--------- --------- --------- -------- -------- -------- -------
Expenses..................... .41% .39% .38% .41% .40% .40% .41%
--------- --------- --------- -------- -------- -------- -------
--------- --------- --------- -------- -------- -------- -------
Investment income--net....... 1.98% 1.32% 1.43% 1.89% 2.27% 2.66% 3.45%
--------- --------- --------- -------- -------- -------- -------
--------- --------- --------- -------- -------- -------- -------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $ 252,957 $ 206,647 $ 223,971 $202,417 $177,604 $128,511 $137,705
--------- --------- --------- -------- -------- -------- -------
--------- --------- --------- -------- -------- -------- -------
Portfolio turnover........... 130.54% 71.19% 100.12% 74.89% 63.90% 61.76% 55.41%
--------- --------- --------- -------- -------- -------- -------
--------- --------- --------- -------- -------- -------- -------
<CAPTION>
1988 1987 1986
-------- ------- -------
<S> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
year........................ $ 16.27 $ 18.18 $ 15.49
-------- ------- -------
Investment income--net....... .55 .55 .55
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions--net........... 1.43 (.79) 2.77
-------- ------- -------
Total from investment
operations.................. 1.98 (.24) 3.32
-------- ------- -------
Less dividends and
distributions:
Investment income--net...... (.58) (.48) (.54)
Realized gain on
investments--net......... (1.60) (1.19) (.09)
-------- ------- -------
Total dividends and
distributions............... (2.18) (1.67) (.63)
-------- ------- -------
Net asset value, end of
year........................ $ 16.07 $ 16.27 $ 18.18
-------- ------- -------
-------- ------- -------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 13.31% (2.65)% 21.93%
-------- ------- -------
-------- ------- -------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of
reimbursement............... .40% .38% .46%
-------- ------- -------
-------- ------- -------
Expenses..................... .40% .38% .46%
-------- ------- -------
-------- ------- -------
Investment income--net....... 3.31% 3.16% 3.37%
-------- ------- -------
-------- ------- -------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $ 99,203 $118,984 $94,257
-------- ------- -------
-------- ------- -------
Portfolio turnover........... 32.85% 47.39% 52.65%
-------- ------- -------
-------- ------- -------
</TABLE>
-----------------
* Total investment returns exclude insurance-related fees and expenses.
4
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
The following per share data and ratios have
been derived from information provided in
the financial statements:
GLOBAL STRATEGY PORTFOLIO
--------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
1995++ 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- --------
INCREASE (DECREASE) IN NET ASSET
VALUE:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.......................... $ 14.54 $ 15.42 $ 13.23 $ 13.16 $ 12.00 $ 11.68 $ 10.41 $ 9.55
-------- -------- -------- -------- -------- -------- -------- --------
Investment income--net............ .52 .47 .36 .39 .41 .82 .38 .52
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions--net............... .94 (.71) 2.61 (.01) 1.60 (.14) 1.41 .65
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations...................... 1.46 (.24) 2.97 .38 2.01 .68 1.79 1.17
-------- -------- -------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net.......... (.55) (.41) (.60) (.17) (.85) (.36) (.52) (.31)
Realized gain on
investments--net.............. (.20) (.23) (.18) (.14) -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions................... (.75) (.64) (.78) (.31) (.85) (.36) (.52) (.31)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.... $ 15.25 $ 14.54 $ 15.42 $ 13.23 $ 13.16 $ 12.00 $ 11.68 $ 10.41
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:**
Based on net asset value per
share........................... 10.44% (1.62)% 23.73% 3.00% 17.50% 6.01% 17.76% 12.50%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement.... .44% .48% .45% .50% .50% .50% .50% .50%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Expenses.......................... .44% .48% .46% .54% .60% .61% .75% .61%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Investment income--net............ 3.59% 3.22% 3.27% 3.84% 3.86% 8.03% 4.07% 4.90%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)...................... $212,683 $223,493 $182,672 $ 52,599 $ 29,893 $ 22,087 $ 13,215 $ 9,176
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Portfolio turnover................ 26.81% 27.31% 30.53% 43.56% 93.85% 104.19% 80.25% 131.22%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
<CAPTION>
PERIOD JULY 1,
1987+ TO
DECEMBER 31,
1987
--------------
INCREASE (DECREASE) IN NET ASSET
VALUE:
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.......................... $ 10.00
-------
Investment income--net............ .12
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions--net............... (.57)
-------
Total from investment
operations...................... (.45)
-------
Less dividends and distributions:
Investment income--net.......... --
Realized gain on
investments--net.............. --
-------
Total dividends and
distributions................... --
-------
Net asset value, end of period.... $ 9.55
-------
-------
TOTAL INVESTMENT RETURN:**
Based on net asset value per
share........................... (4.50)%#
-------
-------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement.... .50%*
-------
-------
Expenses.......................... .81%*
-------
-------
Investment income--net............ 3.80%*
-------
-------
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)...................... $ 10,596
-------
-------
Portfolio turnover................ 24.81%
-------
-------
</TABLE>
-----------------
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Commencement of operations.
++ Based on average shares outstanding during the year.
# Aggregate total investment return.
5
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
The following per share data and ratios
have been derived from information provided
in the financial statements:
GROWTH STOCK PORTFOLIO
--------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE
(DECREASE) IN NET
ASSET VALUE:
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of
year............. $ 19.20 $ 24.65 $ 23.98 $ 23.31 $ 16.28 $ 18.95 $ 15.57 $ 14.05 $ 16.19 $ 13.90
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment
income--net...... .15 .31 .32 .26 .25 .29 .30 .19 .14 .21
Realized and
unrealized gain
(loss) on
investments and
foreign currency
transactions--net... 6.13 (1.81) 1.63 .53 7.06 (2.63) 3.30 1.51 (1.10) 2.31
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
investment
operations....... 6.28 (1.50) 1.95 .79 7.31 (2.34) 3.60 1.70 (.96) 2.52
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less dividends and
distributions:
Investment
income--net.... (.23) (.30) (.41) (.12) (.28) (.33) (.22) (.18) (.18) (.20)
Realized gain on
investments--net... (1.19) (3.65) (.87) -- -- -- -- -- (1.00) (.03)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total dividends
and
distributions.... (1.42) (3.95) (1.28) (.12) (.28) (.33) (.22) (.18) (1.18) (.23)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value,
end of year...... $ 24.06 $ 19.20 $ 24.65 $ 23.98 $ 23.31 $ 16.28 $ 18.95 $ 15.57 $ 14.05 $ 16.19
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL INVESTMENT
RETURN:*
Based on net asset
value per
share............ 35.35% (6.93)% 8.63% 3.40% 45.31% (12.41)% 23.20% 12.13% (7.52)% 18.31%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
RATIOS TO AVERAGE
NET ASSETS:
Expenses.......... .38% .40% .38% .42% .42% .43% .42% .40% .40% .47%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment
income--net...... .82% 1.53% 1.35% 1.32% 1.56% 1.43% 1.69% 1.19% .92% 1.53%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of
year (in
thousands)....... $184,152 $101,702 $122,836 $139,062 $113,715 $ 52,086 $ 79,109 $ 64,549 $ 68,027 $ 46,017
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Portfolio
turnover......... 87.66% 102.96% 160.29% 87.25% 60.48% 94.54% 78.87% 82.05% 99.09% 69.38%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
-----------------
* Total investment returns exclude insurance-related fees and expenses.
6
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
The following per share data and ratios have
been derived from information provided in
the financial statements:
HIGH YIELD PORTFOLIO
---------------------------------------------------------------------------------------------
PERIOD
MAY 1,
FOR THE YEAR ENDED DECEMBER 31, 1986+ TO
------------------------------------------------------------------------------ DECEMBER 31,
1995++ 1994 1993 1992 1991 1990 1989 1988 1987 1986
------- ------- ------- ------- ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period..... $ 8.53 $ 9.68 $ 9.10 $ 8.44 $ 6.98 $ 8.92 $ 9.66 $ 9.40 $10.06 $ 10.00
------- ------- ------- ------- ------- ------- ------- ------- ------- ----------
Investment income--net... .93 1.00 .94 1.03 1.02 1.24 1.20 1.16 1.14 .73
Realized and unrealized
gain (loss) on
investments and foreign
currency
transactions--net....... .46 (1.17) .62 .64 1.47 (1.94) (.73) .15 (.66) .06
------- ------- ------- ------- ------- ------- ------- ------- ------- ----------
Total from investment
operations.............. 1.39 (.17) 1.56 1.67 2.49 (.70) .47 1.31 .48 .79
------- ------- ------- ------- ------- ------- ------- ------- ------- ----------
Less dividends:
Investment
income--net........... (.93) (.98) (.98) (1.01) (1.03) (1.24) (1.21) (1.05) (1.14) (.73)
------- ------- ------- ------- ------- ------- ------- ------- ------- ----------
Net asset value, end of
period.................. $ 8.99 $ 8.53 $ 9.68 $ 9.10 $ 8.44 $ 6.98 $ 8.92 $ 9.66 $ 9.40 $ 10.06
------- ------- ------- ------- ------- ------- ------- ------- ------- ----------
------- ------- ------- ------- ------- ------- ------- ------- ------- ----------
TOTAL INVESTMENT
RETURN:**
Based on net asset value
per share............... 17.12% (1.88)% 18.11% 20.63% 37.77% (8.83)% 5.08% 14.53% 4.68% 8.10%#
------- ------- ------- ------- ------- ------- ------- ------- ------- ----------
------- ------- ------- ------- ------- ------- ------- ------- ------- ----------
RATIOS TO AVERAGE NET
ASSETS:
Expenses................. .38% .41% .43% .44% .46% .45% .44% .41% .42% .50%*
-------- ------- ------- ------- ------- ------- ------- ------- ------- ----------
-------- ------- ------- ------- ------- ------- ------- ------- ------- ----------
Investment income--net... 10.25% 10.88% 10.17% 11.45% 12.74% 14.93% 12.64% 12.10% 11.45% 10.43%*
-------- ------- ------- ------- ------- ------- ------- ------- ------- ----------
-------- ------- ------- ------- ------- ------- ------- ------- ------- ----------
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands).......... $107,378 $82,421 $94,739 $68,034 $51,072 $34,673 $58,910 $78,343 $54,173 $ 50,932
-------- ------- ------- ------- ------- ------- ------- ------- ------- ----------
-------- ------- ------- ------- ------- ------- ------- ------- ------- ----------
Portfolio turnover....... 63.39% 63.43% 73.01% 83.95% 76.34% 31.01% 70.43% 38.95% 49.43% 17.39%
-------- ------- ------- ------- ------- ------- ------- ------- ------- ----------
-------- ------- ------- ------- ------- ------- ------- ------- ------- ----------
</TABLE>
-----------------
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Commencement of operations.
++ Based on average shares outstanding during the year.
# Aggregate total investment return.
7
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
The following per share data and ratios have
been derived from information provided in
the financial statements:
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
-----------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------
1995+ 1994+ 1993 1992 1991 1990 1989 1988 1987 1986
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
year............... $ 10.32 $ 12.02 $ 11.75 $ 11.79 $ 11.04 $ 11.02 $ 10.58 $ 10.78 $ 11.67 $ 11.22
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment
income--net........ .78 .75 .83 .83 .86 .92 .92 .88 .87 .95
Realized and
unrealized gain
(loss) on
investments and
foreign currency
transactions--
net................ 1.10 (1.30) .50 (.04) .76 .01 .44 (.27) (.72) .53
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
investment
operations......... 1.88 (.55) 1.33 .79 1.62 .93 1.36 .61 .15 1.48
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less dividends and
distributions:
Investment
income--net...... (.79) (.75) (.84) (.83) (.87) (.91) (.92) (.81) (.87) (.95)
Realized gain on
investments--
net................ -- (.39) (.22) -- -- -- -- -- (.17) (.08)
In excess of
realized gain on
investments--net... -- (.01) -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions...... (.79) (1.15) (1.06) (.83) (.87) (.91) (.92) (.81) (1.04) (1.03)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end
of year............ $ 11.41 $ 10.32 $ 12.02 $ 11.75 $ 11.79 $ 11.04 $ 11.02 $ 10.58 $ 10.78 $ 11.67
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL INVESTMENT
RETURN:*
Based on net asset
value per share.... 18.87% (4.78%) 11.20% 7.03% 15.57% 8.98% 13.46% 5.76% 1.49% 13.81%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
RATIOS TO AVERAGE
NET ASSETS:
Expenses............ .38% .37% .36% .40% .39% .40% .41% .40% .39% .47%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment
income--net........ 7.22% 6.89% 6.42% 7.03% 7.82% 8.50% 8.53% 8.21% 7.89% 8.10%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of
year (in
thousands)......... $239,340 $218,611 $284,495 $269,254 $261,434 $231,672 $224,531 $194,568 $145,525 $166,949
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Portfolio
turnover........... 57.38% 140.55% 113.61% 80.54% 138.41% 129.98% 227.15% 258.98% 256.36% 103.48%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
-----------------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the period.
8
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
The following per share data and ratios have
been derived from information provided in
the financial statements:
LONG TERM CORPORATE BOND PORTFOLIO
---------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------
1995+ 1994+ 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE
(DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of year...... $ 10.72 $ 12.59 $ 12.07 $ 12.06 $ 11.21 $ 11.36 $ 10.91 $ 10.93
-------- -------- -------- -------- -------- -------- -------- --------
Investment income--net... .83 .81 .83 .90 .96 .98 1.00 .97
Realized and unrealized
gain (loss) on
investments and foreign
currency
transactions--net...... 1.30 (1.42) .68 .02 .85 (.15) .45 (.10)
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. 2.13 (.61) 1.51 .92 1.81 .83 1.45 .87
-------- -------- -------- -------- -------- -------- -------- --------
Less dividends and
distributions:
Investment
income--net ........... (.83) (.82) (.83) (.91) (.96) (.98) (1.00) (.89)
Realized gain on
investments--net..... -- (.44) (.16) -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions.......... (.83) (1.26) (.99) (.91) (.96) (.98) (1.00) (.89)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year................... $ 12.02 $ 10.72 $ 12.59 $ 12.07 $ 12.06 $ 11.21 $ 11.36 $ 10.91
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value
per share.............. 20.66% (5.13)% 13.01% 8.05% 17.01% 7.83% 13.96% 8.20%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
RATIOS TO AVERAGE NET
ASSETS:
Expenses................. .40% .39% .38% .43% .42% .43% .44% .42%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Investment income--net... 7.32% 7.16% 6.65% 7.51% 8.35% 8.81% 9.01% 8.88%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $125,033 $111,878 $139,321 $126,864 $128,396 $119,237 $126,655 $110,353
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Portfolio turnover....... 110.49% 134.53% 110.53% 93.10% 124.58% 107.36% 138.89% 175.86%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
<CAPTION>
1987 1986
-------- --------
<S> <C> <C>
INCREASE
(DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of year...... $ 12.27 $ 11.66
-------- --------
Investment income--net... .99 1.09
Realized and unrealized
gain (loss) on
investments and foreign
currency
transactions--net...... (1.00) .66
-------- --------
Total from investment
operations............. (.01) 1.75
-------- --------
Less dividends and
distributions:
Investment
income--net ........... (.99) (1.09)
Realized gain on
investments--net..... (.34) (.05)
-------- --------
Total dividends and
distributions.......... (1.33) (1.14)
-------- --------
Net asset value, end of
year................... $ 10.93 $ 12.27
-------- --------
-------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value
per share.............. 0.00% 15.58%
-------- --------
-------- --------
RATIOS TO AVERAGE NET
ASSETS:
Expenses................. .43% .48%
-------- --------
-------- --------
Investment income--net... 9.53% 8.87%
-------- --------
-------- --------
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $ 76,564 $115,570
-------- --------
-------- --------
Portfolio turnover....... 115.68% 121.03%
-------- --------
-------- --------
</TABLE>
-----------------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average share outstanding during the period.
9
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
The following per share data and ratios have
been derived from information provided in
the financial statements:
MONEY RESERVE PORTFOLIO
---------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of year...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- --------
Investment income--net... .06 .04 .03 .04 .06 .08 .09 .07
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. .06 .04 .03 .04 .06 .08 .09 .07
-------- -------- -------- -------- -------- -------- -------- --------
Less dividends:
Investment income--net... (.06) (.04) (.03) (.04) (.06) (.08) (.09) (.07)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value
per share.............. 5.81% 4.04% 3.08% 3.77% 6.11% 8.26% 9.30% 7.48%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
RATIOS TO AVERAGE NET
ASSETS:
Expenses................. .35% .36% .36% .39% .38% .39% .38% .39%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Investment income--net
and realized gain
(loss) on
investments--net....... 5.67% 4.00% 3.03% 3.77% 5.97% 7.92% 8.93% 7.26%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $568,439 $583,992 $546,710 $647,190 $798,020 $935,463 $816,661 $806,119
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
<CAPTION>
1987 1986
-------- --------
<S> <C> <C>
INCREASE (DECREASE) IN
NET ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of year...... $ 1.00 $ 1.00
-------- --------
Investment income--net... .07 .05
-------- --------
Total from investment
operations............. .07 .05
-------- --------
Less dividends:
Investment income--net... (.07) (.05)
-------- --------
Net asset value, end of
year................... $ 1.00 $ 1.00
-------- --------
-------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value
per share.............. 6.60% 6.70%
-------- --------
-------- --------
RATIOS TO AVERAGE NET
ASSETS:
Expenses................. .38% .45%
-------- --------
-------- --------
Investment income--net
and realized gain
(loss) on
investments--net....... 6.47% 6.46%
-------- --------
-------- --------
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $674,890 $471,367
-------- --------
-------- --------
</TABLE>
-----------------
* Total investment returns exclude insurance-related fees and expenses.
10
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
The following per share data and ratios have
been derived from information provided in
the financial statements:
MULTIPLE STRATEGY PORTFOLIO
---------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
1995+ 1994+ 1993 1992 1991 1990 1989 1988
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
year......................... $ 16.22 $ 19.84 $ 18.70 $ 18.32 $ 15.45 $ 15.56 $ 13.64 $ 13.01
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Investment income--net........ .56 .50 .54 .61 .72 .99 .79 .77
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions--net............ 2.03 (1.39) 2.30 .17 3.13 (.27) 2.02 .67
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations................... 2.59 (.89) 2.84 .78 3.85 .72 2.81 1.44
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Less dividends and
distributions:
Investment
income--net................ (.48) (.57) (.88) (.32) (.98) (.83) (.89) (.61)
Realized gain on
investments--net........... (1.09) (2.16) (.82) (.08) -- -- -- (.20)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total dividends and
distributions................ (1.57) (2.73) (1.70) (.40) (.98) (.83) (.89) (.81)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of
year......................... $ 17.24 $ 16.22 $ 19.84 $ 18.70 $ 18.32 $ 15.45 $ 15.56 $ 13.64
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share........................ 17.55% (5.05)% 16.66% 4.35% 25.97% 4.91% 21.31% 11.49%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... .38% .38% .36% .40% .39% .41% .39% .40%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Investment income--net........ 3.44% 2.97% 2.91% 3.26% 4.17% 6.07% 5.15% 5.23%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands)................... $1,169,357 $1,082,083 $1,237,336 $1,137,022 $1,152,395 $1,018,054 $1,163,578 $1,190,469
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Portfolio turnover............ 140.83% 68.12% 91.08% 67.71% 95.48% 106.39% 142.47% 147.43%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
1987 1986
---------- ---------
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
year......................... $ 13.49 $ 11.38
---------- ---------
Investment income--net........ .50 .26
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions--net............ (.50) 2.06
---------- ---------
Total from investment
operations................... -- 2.32
---------- ---------
Less dividends and
distributions:
Investment
income--net................ (.38) (.20)
Realized gain on
investments--net........... (.10) (.01)
---------- ---------
Total dividends and
distributions................ (.48) (.21)
---------- ---------
Net asset value, end of
year......................... $ 13.01 $ 13.49
---------- ---------
---------- ---------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share........................ (.41)% 20.60%
---------- ---------
---------- ---------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... .38% .45%
---------- ---------
---------- ---------
Investment income--net........ 4.11% 4.64%
---------- ---------
---------- ---------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands)................... $1,557,629 $ 850,609
---------- ---------
---------- ---------
Portfolio turnover............ 123.02% 83.17%
---------- ---------
---------- ---------
</TABLE>
- ------------
* Total investment returns exclude insurance-related fees and
expenses.
+ Based on average shares outstanding during the period.
11
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
The following per share data and ratios have
been derived from information provided
in the financial statements:
NATURAL RESOURCES PORTFOLIO
-------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period..... $ 7.43 $ 7.53 $ 7.01 $ 7.04 $ 7.18 $ 7.84 $ 6.43 $ 7.46
------- ------- ------- ------- ------- ------- ------- -------
Investment income--net... .17 .17 .13 .21 .27 .21 .19 .17
Realized and unrealized
gain (loss) on
investments and foreign
currency
transactions--net....... .73 (.10) .66 (.12) (.14) (.69) 1.41 (1.06)
------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations.............. .90 .07 .79 .09 .13 (.48) 1.60 (.89)
------- ------- ------- ------- ------- ------- ------- -------
Less dividends and
distributions:
Investment
income--net........... (.16) (.17) (.27) (.12) (.27) (.18) (.19) (.14)
Realized gain on
investments--net........ -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total dividends and
distributions........... (.16) (.17) (.27) (.12) (.27) (.18) (.19) (.14)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period.................. $ 8.17 $ 7.43 $ 7.53 $ 7.01 $ 7.04 $ 7.18 $ 7.84 $ 6.43
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
TOTAL INVESTMENT
RETURN:**
Based on net asset value
per share............... 12.22% .88% 11.65% 1.35% 1.67% (6.18)% 25.23% (12.17)%
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement........... .47% .50% .50% .50% .50% .50% .50% .48%
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
Expenses................. .47% .59% .59% .82% .74% .63% .64% .48%
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
Investment income--net... 1.99% 2.23% 2.00% 2.84% 3.12% 2.76% 2.81% 2.22%
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands).......... $21,035 $21,455 $18,437 $ 7,987 $ 8,030 $11,256 $13,405 $10,007
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
Portfolio turnover....... 38.50% 48.16% 65.26% 32.14% 30.20% 56.60% 113.38% 45.95%
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
<CAPTION>
PERIOD JULY 1,
1987+ TO
DECEMBER 31,
1987
---------------
<S> <C>
INCREASE (DECREASE) IN
NET ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period..... $ 10.00
-------
Investment income--net... .06
Realized and unrealized
gain (loss) on
investments and foreign
currency
transactions--net....... (2.60)
-------
Total from investment
operations.............. (2.54)
-------
Less dividends and
distributions:
Investment
income--net........... --
Realized gain on
investments--net........ --
-------
Total dividends and
distributions........... --
-------
Net asset value, end of
period.................. $ 7.46
-------
-------
TOTAL INVESTMENT
RETURN:**
Based on net asset value
per share............... (25.40)%#
-------
-------
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement........... .50%*
-------
-------
Expenses................. .69%*
-------
-------
Investment income--net... 2.03%*
-------
-------
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands).......... $20,476
-------
-------
Portfolio turnover....... 23.46%
-------
-------
</TABLE>
- ------------
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Commencement of operations.
# Aggregate total investment return.
12
<PAGE>
THE INSURANCE COMPANIES
Shares of the Fund are sold only to the Separate Accounts of the Merrill
Lynch Insurance Companies and Variable Account A of Monarch as the investment
base for variable life insurance policies issued by the Merrill Lynch Insurance
Companies and Monarch. Accordingly, the interest of a Policyowner in the shares
is subject to the terms of the Policy and is described in the accompanying
Prospectus for the Policies, which should be reviewed carefully by a person
considering the purchase of a Policy. That Prospectus describes the relationship
between increases or decreases in the net asset value of the Fund's shares and
any distributions in such shares, and the benefits provided under a Policy. The
rights of the Separate Accounts of the Merrill Lynch Insurance Companies and of
Variable Account A of Monarch as shareholders should be distinguished from the
rights of a Policyowner which are described in the Policies. Reference to
'shareholder' or 'shareholders' in this Prospectus shall refer to the Separate
Accounts of the Merrill Lynch Insurance Companies and to Variable Account A of
Monarch.
It is possible that differences might arise among the Separate Accounts and
Variable Account A and that such differences could be considered material
conflicts. Such a material conflict could arise due to changes in the law (such
as state insurance law or federal tax law) which affect the various Separate
Accounts and Variable Account. It could also arise by reason of difference in
voting instructions from Policyowners of one or more of the Merrill Lynch
Insurance Companies or Monarch, or for other reasons. The various insurance
companies will monitor events to identify such conflicts and to determine how to
respond to such conflicts. If such a conflict occurs, an insurance company may
be required to eliminate one or more divisions of its Separate Account or
Variable Account which invests in the Fund or substitute a new portfolio for a
portfolio in which a division invests.
MONEY RESERVE
PORTFOLIO YIELD INFORMATION
Set forth below is yield information for the Money Reserve Portfolio for
the seven-day period ended December 31, 1995, computed to exclude realized and
unrealized gains and losses, and information as to the compounded annualized
yield, excluding gains and losses, for the same period. The yield quotations may
be of limited use for comparative purposes because they do not reflect charges
imposed at the Account level which, if included, would decrease the yield.
<TABLE>
<S> <C>
7-day Annualized Yield:
Excluding gains and losses............ 5.45%
Compounded Annualized Yield............. 5.60%
Average maturity of portfolio at end of
period................................ 79 days
</TABLE>
INVESTMENT OBJECTIVES AND
POLICIES OF THE PORTFOLIOS
INVESTMENT OBJECTIVES
Each Portfolio of the Fund has a different investment objective which it
pursues through separate investment policies as described below. The differences
in objectives and policies among the Portfolios can be expected to affect the
return of each Portfolio and the degree of market and financial risk to which
each Portfolio is subject. Each Portfolio is classified as 'diversified,' as
defined in the Investment Company Act of 1940, as amended, except that the
Natural Resources Portfolio and Global Strategy Portfolio are classified as
'non-diversified.' The classification and the investment objectives of each
Portfolio discussed below may not be changed without the approval of the holders
of a majority of the outstanding shares of each Portfolio affected. Each of the
Portfolios may engage in certain of the portfolio strategies described under
'Other Portfolio Strategies' below. There can be no assurances that the
objectives of any Portfolio will be realized.
No Portfolio other than the High Yield Portfolio invests in fixed-income
securities which are rated below investment grade (i.e., securities rated Ba or
below by Moody's Investors Service, Inc. ('Moody's') or BB or below by Standard
& Poor's Ratings Group ('Standard & Poor's'). However, securities purchased by a
Portfolio may subsequently be downgraded. Such securities may continue to be
held and will be sold only if, in the judgment of Merrill Lynch Asset
Management, L.P., the Fund's investment adviser (the 'Investment Adviser'), it
is advantageous to do so. Securities in the lowest category of investment grade
debt securities may have speculative characteristics which may lead to weakened
capacity to pay interest and principal during periods of adverse economic
conditions.
MONEY RESERVE PORTFOLIO
The investment objectives of the Money Reserve Portfolio are to preserve
shareholder capital, to maintain liquidity and to achieve the highest possible
current income consistent with the foregoing objectives by investing in
short-term money market securities. The Portfolio will invest in short-
13
<PAGE>
term U.S. Government securities (including government agency securities), bank
certificates of deposit, including variable rate certificates of deposit, and
bankers' acceptances, short-term corporate debt securities (such as commercial
paper), variable amount master demand notes, insurance company funding
agreements and repurchase and reverse repurchase agreements. The types of money
market securities in which the Money Reserve Portfolio may invest are described
more fully in Appendix A hereto.
The Money Reserve Portfolio may not invest in any security which is not a
short-term money market security. For purposes of the investment policies of the
Money Reserve Portfolio, the Fund defines short-term money market securities as
securities having a maturity of no more than 762 days (25 months) in the case of
U.S. Government and agency securities and no more than 397 days (13 months) in
the case of all other securities. Management of the Fund expects that
substantially all the assets of the Money Reserve Portfolio will be invested in
securities maturing in less than one year, but at times some portion may have
maturities of up to 25 months. The dollar-weighted average maturity of the Money
Reserve Portfolio's assets will not exceed 90 days. During the year ended
December 31, 1995, the average maturity of the Money Reserve Portfolio's assets
ranged 39 days to 89 days.
The Money Reserve Portfolio's investments in short-term corporate debt and
bank money instruments will be rated, or will be issued by issuers who have been
rated, in one of the two highest rating categories for short-term debt
obligations by a nationally recognized statistical rating organization (an
'NRSRO') or, if not rated, will be of comparable quality as determined by the
Directors of the Fund. The Money Reserve Portfolio's investments in corporate
bonds and debentures (which must have maturities at the date of purchase of 397
days (13 months) or less) will be in issuers who have received from an NRSRO a
rating, with respect to a class of debt obligations that is comparable in
priority and security with the investment, in one of the two highest rating
categories for such obligations or, if not rated, will be of comparable quality
as determined by the Directors of the Fund. Currently, there are six NRSROs:
Duff & Phelps Inc., Fitch Investors Services, Inc., IBCA Limited and its
affiliate IBCA Inc., Moody's, Standard & Poor's and Thomson Bank Watch, Inc.
A regulation of the Securities and Exchange Commission limits investments
by the Money Reserve Portfolio in securities issued by any one issuer (other
than the U.S. Government, its agencies or instrumentalities) ordinarily to not
more than 5% of its total assets, or in the event that such securities do not
have the highest rating, not more than 1% of its total assets. In addition, such
regulation requires that not more than 5% of the Money Reserve Portfolio's total
assets be invested in securities that have a rating lower than the highest
rating.
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
The investment objective of the Intermediate Government Bond Portfolio is
to obtain the highest level of current income consistent with the protection of
capital afforded by investing in intermediate-term debt securities issued or
guaranteed by the U.S. Government. Accordingly, the Intermediate Government Bond
Portfolio may only invest in securities issued or guaranteed by the U.S.
Government and its agencies with a maximum maturity not to exceed fifteen years.
Depending on market conditions, an average maturity of six to eight years is
anticipated. U.S. Government and U.S. Government agency securities are described
in Appendix A hereto. When, in the opinion of management, prevailing market or
economic conditions warrant, a portion of the Intermediate Government Bond
Portfolio may be invested in money market securities or a liquid asset fund to
effectively utilize cash reserves.
Certain of the securities in which the Intermediate Government Bond
Portfolio invests are supported by the full faith and credit of the U.S.
Government, such as U.S. Treasury obligations. Other of the securities in which
the Portfolio invests are not supported by the full faith and credit of the U.S.
Government but are issued by U.S. Government agencies or government sponsored
enterprises. Such securities are generally considered to have a low principal
risk. However, because of the longer term maturities of the securities in which
the Portfolio will invest, interest rate fluctuations may adversely affect the
market value of such securities. As interest rates rise, the value of fixed-
income securities will fall, adversely affecting the net asset value of the
Portfolio.
The U.S. Treasury Department has enacted regulations prescribing
diversification standards to be met by investment company portfolios to which
the investment base for any variable life insurance policy has been allocated as
a condition to such policies being treated as life insurance contracts under the
Internal Revenue Code of 1986, as amended (the 'Code'). The regulations limit
the percentage of the total assets of any investment company portfolio which may
be invested in securities of any five or fewer issuers, including a requirement
that no more than 55% of a portfolio's total assets be invested in the
securities of any one issuer. Direct obligations of the U.S. Treasury, however,
are excepted from the diversification requirements. Each government agency or
instrumentality issuing, guaranteeing or insuring securities shall be treated as
a separate issuer for purposes of the diversification standards.
14
<PAGE>
LONG TERM CORPORATE BOND PORTFOLIO
The primary investment objective of the Long Term Corporate Bond Portfolio
is to provide as high a level of current income as is believed to be consistent
with prudent investment risk. An additional objective is to seek preservation of
shareholders' capital. In seeking to achieve these objectives, under usual
circumstances the Portfolio invests at least 80% of the value of its assets in
straight debt securities which have a rating within the three highest grades as
determined by Standard & Poor's (AAA, AA or A) or Moody's (Aaa, Aa or A).
From time to time, up to 20% of the Long Term Corporate Bond Portfolio's
total assets may be invested in straight debt securities which are not rated
within the three highest grades of Standard & Poor's or Moody's as described
above, or in convertible debt securities, convertible preferred and preferred
stocks which have a rating within the three highest grades of Standard & Poor's
or Moody's applicable to such securities.
The Long Term Corporate Bond Portfolio will not directly purchase common
stocks. However, it may retain up to 10% of the value of its total assets in
common stocks acquired either by conversion of fixed-income securities or by the
exercise of warrants attached thereto.
When in the opinion of management prevailing market or economic conditions
warrant, a substantial portion of the Long Term Corporate Bond Portfolio may be
invested in money market securities.
The principal risk of the Portfolio should be minimized by the quality of
the bonds in which it will invest, but the long maturities that typically
provide the best yield will subject the Portfolio to possible substantial price
changes resulting from market yield fluctuations. The market price of
fixed-income securities such as those purchased by the Portfolio is affected by
changes in interest rates generally. As interest rates rise, the market value of
fixed-income securities will fall, adversely affecting the net asset value of
the Portfolio.
HIGH YIELD PORTFOLIO
The primary investment objective of the High Yield Portfolio is to obtain
as high a level of current income as is believed to be consistent with prudent
investment management. As a secondary objective, the High Yield Portfolio seeks
capital appreciation when consistent with its primary objective. The High Yield
Portfolio seeks to achieve its investment objectives by investing principally in
fixed-income securities, including corporate bonds and notes, convertible
securities and preferred stocks, which are rated in the lower rating categories
of the established rating services (Baa or lower by Moody's and BBB or lower by
Standard & Poor's), or in unrated securities of comparable quality. Additional
information regarding various bond ratings is set forth in Appendix B hereto.
Securities rated Ba or lower by Moody's and BB or lower by Standard & Poor's,
commonly known as 'junk bonds', are considered by those rating agencies to have
varying degrees of speculative characteristics. Consequently, although they can
be expected to provide higher yields, such securities may be subject to greater
market fluctuations and risk of loss of income and principal than lower
yielding, higher-rated fixed-income securities. Because investment in such high-
yield securities entails relatively greater risk of loss of income or principal,
an investment in the High Yield Portfolio may not constitute a complete
investment program and may not be appropriate for all investors.
The High Yield Portfolio anticipates that under normal circumstances more
than 80% of its assets will be invested in fixed-income securities, including
convertible and non-convertible debt securities and preferred stock. The
remaining assets of the Portfolio may be held in cash or cash equivalents. The
High Yield Portfolio does not intend to invest in common stocks, rights or other
equity securities, but may acquire or hold such securities (if consistent with
its objectives) when they are acquired in unit offerings with fixed-income
securities or in connection with an actual or proposed conversion, exchange or
restructuring of fixed-income securities.
Selection and supervision by the management of the Fund of investments in
lower-rated fixed-income securities involves continuous analysis of individual
issuers, general business conditions and other factors which may be too
time-consuming or too costly for the average investor. The furnishing of these
services does not, of course, guarantee successful results. The analysis by the
Investment Adviser of issuers includes, among other things, historic and current
financial conditions, current and anticipated cash flow and borrowing
requirements, value of assets in relation to historical cost, strength of
management, responsiveness to business conditions, credit standing, and current
and anticipated results of operations. Analysis of general business conditions
and other factors may include anticipated changes in economic activity and
interest rates, the availability of new investment opportunities, and the
economic outlook for specific industries. While the Investment Adviser considers
as one factor in its credit analysis the ratings assigned by the rating
services, the Investment Adviser performs its own independent credit analysis of
issuers and consequently, the Portfolio may invest, without limit, in unrated
securities. As a result, the High Yield Portfolio's
15
<PAGE>
ability to achieve its investment objective may depend to a greater extent on
the Investment Adviser's own credit analysis than the Portfolios which invest in
higher rated securities. Although the High Yield Portfolio will invest primarily
in lower-rated securities, it will not invest in securities in the lowest rating
categories (Ca for Moody's and CC for Standard & Poor's) unless the Investment
Adviser believes that the financial condition of the issuer or the protection
afforded to the particular securities is stronger than would otherwise be
indicated by such low ratings. Securities which are subsequently downgraded may
continue to be held and will be sold only if, in the judgment of the Investment
Adviser, it is advantageous to do so.
When changing economic conditions and other factors cause the yield
difference between lower-rated and higher-rated securities to narrow, the High
Yield Portfolio may purchase higher-rated securities if the Investment Adviser
believes that the risk of loss of income and principal may be substantially
reduced with only a relatively small reduction in yield. In addition, under
unusual market or economic conditions, the High Yield Portfolio for temporary
defensive purposes may invest up to 100% of its assets in securities issued or
guaranteed by the U.S. Government or its instrumentalities or agencies,
certificates of deposit, bankers' acceptances and other bank obligations,
commercial paper rated in the highest category by an established rating agency,
or other fixed-income securities deemed by the Investment Adviser to be
consistent with a defensive posture, or may hold its assets in cash. The yield
on such securities may be lower than the yield on lower-rated fixed-income
securities.
Risk Factors. Junk bonds are regarded as being predominantly speculative as
to the issuer's ability to make payments of principal and interest. Investment
in such securities involves substantial risk. Issuers of junk bonds may be
highly leveraged and may not have available to them more traditional methods of
financing. Therefore, the risks associated with acquiring the securities of such
issuers generally are greater than is the case with higher-rated securities. For
example, during an economic downturn or a sustained period of rising interest
rates, issuers of junk bonds may be more likely to experience financial stress,
especially if such issuers are highly leveraged. In addition, the market for
junk bonds is relatively new and has not weathered a major economic recession,
and it is unknown what effects such a recession might have on such securities.
During such periods, such issuers may not have sufficient revenues to meet their
interest payment obligations. The issuer's ability to service its debt
obligations also may be adversely affected by specific issuer developments, or
the issuer's inability to meet specific projected business forecasts, or the
unavailability of additional financing. The risk of loss due to default by the
issuer is significantly greater for the holders of junk bonds because such
securities may be unsecured and may be subordinated to other creditors of the
issuer. While the high yield bonds in which the High Yield Portfolio may invest
normally do not include securities which, at the time of investment, are in
default or the issuers of which are in bankruptcy, there can be no assurance
that such events will not occur after the Portfolio purchases a particular
security, in which case the Portfolio may experience losses and incur costs.
Junk bonds frequently have call or redemption features that would permit an
issuer to repurchase the security from the High Yield Portfolio. If a call were
exercised by the issuer during a period of declining interest rates, the High
Yield Portfolio likely would have to replace such called security with a lower
yielding security, thus decreasing the net investment income to the High Yield
Portfolio and dividends to shareholders.
In an effort to minimize the risk of issuer default or bankruptcy, the High
Yield Portfolio diversifies its holdings among many issuers. However, there can
be no assurance that diversification will protect the High Yield Portfolio from
widespread defaults brought about by a sustained economic downturn.
Junk bonds tend to be more volatile than higher-rated fixed-income
securities, so that adverse economic events may have a greater impact on their
prices and yields than on higher-rated fixed-income securities. Zero coupon
bonds and bonds which pay interest and/or principal in additional bonds rather
than in cash are especially volatile. Like higher-rated fixed-income securities,
junk bonds are generally purchased and sold through dealers who make a market in
such securities for their own accounts. However, there are fewer dealers in this
market, which may be less liquid than the market for higher-rated fixed-income
securities, even under normal economic conditions. Also, there may be
significant disparities in the prices quoted for junk bonds by various dealers.
Adverse economic conditions or investor perceptions (whether or not based on
economic fundamentals) may impair the liquidity of this market, and may cause
the prices the High Yield Portfolio receives for its securities to be reduced,
or the Portfolio may experience difficulty in liquidating a portion of its
portfolio when necessary to meet its liquidity needs or in response to a
specific economic event such as a deterioration in the creditworthiness of the
issuer. Under such conditions, judgment may play a greater role in valuing
certain of the Portfolio's securities than in the case of securities trading in
a more liquid market.
16
<PAGE>
Adverse publicity and investor perceptions, which may not be based on
fundamental analysis, also may decrease the value and liquidity of junk bonds,
particularly in a thinly traded market. Factors adversely affecting the market
value of such securities are likely to affect adversely the High Yield
Portfolio's net asset value. In addition, the High Yield Portfolio may incur
additional expenses to the extent that it is required to seek recovery upon a
default on a portfolio holding or to participate in the restructuring of the
obligation. The table below shows the average monthly dollar-weighted market
value, by Standard & Poor's rating category, of the securities held by the
Portfolio during the year ended December 31, 1995.
<TABLE>
<CAPTION>
% MARKET
VALUE
RATING % NET ASSETS CORPORATE BONDS
- ---------------- ------------ ---------------
<S> <C> <C>
BBB 1.90 2.00
BB 29.00 30.40
B 51.10 55.60
CCC 0.70 1.00
NR* 10.40 11.00
-------
100.00%
-------
-------
</TABLE>
- ------------------
* Bonds which are not rated by Standard & Poor's. Such bonds may be rated by an
NRSRO other than Standard & Poor's, or may not be rated by any of such
organizations.
CAPITAL STOCK PORTFOLIO
The Capital Stock Portfolio seeks long-term growth of capital and income,
plus moderate current income. The Capital Stock Portfolio generally invests in
equity securities which are considered to be of good or improving quality or
which are thought to be undervalued based on criteria such as historical
price/book value ratios and price/earnings ratios. When market or financial
conditions warrant, the Capital Stock Portfolio may temporarily make defensive
investments in other securities, including non-convertible, long-term debt
securities, 'deep discount' corporate debt securities of investment grade,
convertible securities or cash or money market securities to produce interest
income.
GROWTH STOCK PORTFOLIO
The investment objective of the Growth Stock Portfolio is to seek long-term
growth of capital by investing in a diversified portfolio of securities,
primarily common stocks, of aggressive growth companies that the Investment
Adviser believes have special investment value. Companies are selected on the
basis of their long-term potential for expanding their earnings, profitability
and size or for gaining increased market recognition for their securities.
Current income is not a factor in the selection of such securities. While
aggressive growth companies may present above-average risks, properly selected
companies of this type also have the potential to increase their earnings at a
rate in excess of the general growth of the economy. The Growth Stock Portfolio
attempts to achieve its objective by focusing on the long-range view of a
company's prospects through a fundamental analysis of its management, financial
structure, product development, marketing ability and other relevant factors.
Full realization of the market potential of these companies frequently takes
time, and for this reason, the Growth Stock Portfolio should be considered as a
long-term investment and not as a vehicle for seeking short-term profits.
The investment emphasis of the Growth Stock Portfolio is on equities,
primarily common stocks and, to a lesser extent, securities convertible into
common stocks and rights to subscribe for common stocks, and the Growth Stock
Portfolio maintains at least 80% of its net assets invested in equity securities
of growth companies except during defensive periods. The Growth Stock Portfolio
may, as a temporary defensive measure and to provide for redemptions, hold other
types of securities including non-convertible preferred stocks and debt
securities, government and money market securities or cash, in such proportions
as, in the opinion of management, prevailing market or economic conditions
warrant.
MULTIPLE STRATEGY PORTFOLIO
The investment objective of the Multiple Strategy Portfolio is to seek a
high total investment return consistent with prudent risk through a fully
managed investment policy utilizing equity, intermediate- and long-term debt and
money market securities. Total investment return consists of current income,
including dividends, interest, and discount accruals, and capital appreciation.
The Investment Adviser may vary the composition of the Portfolio from time to
time based upon an evaluation of economic and market trends and the anticipated
relative total return available from a particular type of security. Accordingly,
the Multiple Strategy Portfolio may, at any given time, be substantially
invested in equity securities, bonds and notes or
17
<PAGE>
money market securities. Achieving this objective depends on management's
abilities to assess the effect of economic and market trends on different
sectors of the market. There can be no assurances that the investment objective
of the Portfolio will be achieved.
The Multiple Strategy Portfolio may invest in those money market securities
which are eligible investments for the Fund's Money Reserve Portfolio as set
forth in Appendix A hereto. It may also invest in intermediate and long-term
debt securities, including convertible securities, and in preferred and
convertible preferred stocks which are rated at the time of purchase BBB or
better by Standard & Poor's or Baa or better by Moody's, or in unrated
securities of comparable quality, and will invest primarily in such securities
which are rated A or better by either rating agency. The common stocks in which
the Portfolio will invest will be primarily stocks of large-capitalization
quality companies. Generally, the characteristics of such companies include a
strong balance sheet, good financial resources, a satisfactory rate of return on
capital, a good industry position and superior management skills. The Investment
Adviser believes that companies that conform most closely to these
characteristics tend to exhibit generally consistent earnings growth.
The Multiple Strategy Portfolio may also invest in equity and debt
securities of foreign issuers, including non-U.S. dollar denominated equity and
debt securities, Eurodollar securities and securities issued, assumed or
guaranteed by foreign governments or political subdivisions or instrumentalities
thereof. As a matter of operating policy, the Multiple Strategy Portfolio will
limit its investment in foreign securities to 25% of its total assets, taken at
market value at the time of each investment.
Because of the fully managed approach of the Portfolio, portfolio turnover
may be greater resulting in increased brokerage charges to the Portfolio.
NATURAL RESOURCES PORTFOLIO
The investment objectives of the Natural Resources Portfolio are to achieve
long-term growth of capital and to protect the purchasing power of shareholders'
capital by investing primarily in a portfolio of equity securities (e.g., common
stocks and securities convertible into common stocks) of domestic and foreign
companies with substantial natural resource assets. The Portfolio also may
invest in debt, preferred or convertible securities, the value of which is
related to the market value of some natural resource asset ('asset-based
securities'). See 'Asset-Based Securities' below. Management of the Fund will
seek to identify companies or asset-based securities it believes are
attractively priced relative to the intrinsic value of the underlying natural
resource assets or are especially well positioned to benefit during particular
portions of inflationary cycles. There can be no assurances that the objectives
of the Portfolio will be realized.
IN SEEKING TO PROTECT THE PURCHASING POWER OF SHAREHOLDERS' CAPITAL, THE
PORTFOLIO HAS RESERVED THE RIGHT, WHEN MANAGEMENT OF THE FUND ANTICIPATES
SIGNIFICANT ECONOMIC, POLITICAL OR FINANCIAL INSTABILITY, SUCH AS HIGH
INFLATIONARY PRESSURES OR UPHEAVAL IN THE FOREIGN CURRENCY EXCHANGE MARKETS, TO
INVEST A MAJORITY OF THE PORTFOLIO'S ASSETS IN COMPANIES THAT EXPLORE FOR,
EXTRACT, PROCESS OR DEAL IN GOLD OR IN ASSET-BASED SECURITIES INDEXED TO THE
VALUE OF GOLD BULLION. Such a switch in investment strategies could require the
Portfolio to liquidate portfolio securities and incur transaction costs. The
Fund has been advised by one of the Insurance Companies that, in the Insurance
Company's opinion, it is uncertain under the current federal tax law whether the
Portfolio may concentrate its investments in gold and gold-related securities
without adversely affecting the federal tax status of the Policies. Accordingly,
the Insurance Company has requested, and management of the Fund has agreed, that
the Natural Resources Portfolio will not concentrate its investments in such
securities until the Insurance Company has advised the Fund that such
uncertainty has been resolved favorably.
Management attempts to achieve the investment objectives of the Portfolio
by seeking to identify securities of companies which, in its opinion, are
undervalued relative to the value of natural resource holdings of such companies
in light of current and anticipated economic or financial conditions. Natural
resource assets are materials derived from natural sources which have economic
value. The Fund will consider a company to have substantial natural resource
assets when, in management's opinion, the company's holdings of the assets are
of such magnitude, when compared to the capitalization, revenues or operating
profits of the company, that changes in the economic value of the assets will
affect the market price of the equity securities of such company. Generally, a
company has substantial natural resource assets when at least 50% of the
non-current assets, capitalization, gross revenues or operating profits of the
company in the most recent or current fiscal year are involved in or result
from, directly or indirectly through subsidiaries, exploring, mining, refining,
processing, fabricating, dealing in or owning natural resource assets. Examples
of natural resource assets include precious metals (e.g., gold, silver and
platinum), ferrous and nonferrous metals (e.g., iron, steel, aluminum and
copper), strategic metals (e.g., uranium and titanium), hydrocarbons (e.g.,
coal, oil and natural gas), timberland, undeveloped real
18
<PAGE>
property and agricultural commodities. The Portfolio presently does not intend
to invest directly in natural resource assets or contracts related thereto.
Management of the Fund believes that, based upon past performance, the
securities of specific companies that hold different types of substantial
natural resource assets may move relatively independently of one another during
different stages of inflationary cycles due to different degrees of demand for,
or market values of, their respective natural resource holdings during
particular portions of such inflationary cycles. The Portfolio's fully managed
investment approach enables it to switch its emphasis among various industry
groups depending upon management's outlook with respect to prevailing trends and
developments.
The Natural Resources Portfolio may seek to hedge its portfolio against
adverse market fluctuations by writing covered call options or purchasing put
options on portfolio securities, writing call options or purchasing put options
on stock indices, or by purchasing or selling stock index futures contracts and
options thereon. The Portfolio may also seek to hedge its portfolio of
non-dollar denominated securities and other assets or liabilities against
adverse currency fluctuations by writing call options and purchasing put options
on currency, by buying or selling futures contracts on currency and options
thereon and by engaging in forward foreign exchange transactions. See
'Transactions in Options, Futures and Currency.'
The Portfolio at all times, except during defensive periods, will maintain
at least 65% of its total assets invested in companies with substantial natural
resource assets or in asset-based securities. Current income from dividends and
interest will not be a primary consideration in selecting securities. The
Portfolio reserves the right, as a temporary defensive measure and to provide
for redemptions, to hold short-term U.S. Government securities, money market
securities, including repurchase agreements, or cash, in such proportions as, in
the opinion of management, prevailing market or economic conditions warrant.
Except during extraordinary periods, the Portfolio would not expect that such
securities or cash held for redemption would exceed 20% of its total assets.
Asset-Based Securities. The Portfolio may invest in debt securities,
preferred stocks or convertible securities, the principal amount, interest rate,
redemption terms or conversion terms of which are related to the market price of
some natural resource asset such as gold bullion. For the purposes of the
Portfolio's investment policies, these securities are referred to as
'asset-based securities.' The Portfolio will purchase only asset-based
securities which are rated, or are issued by issuers that have outstanding debt
obligations rated, investment grade (that is, AAA, AA, A or BBB by Standard &
Poor's or Aaa, Aa, A or Baa by Moody's or commercial paper rated A-1 by Standard
& Poor's or Prime-1 by Moody's) or of issuers that the Investment Adviser has
determined to be of similar creditworthiness. If the asset-based security is
backed by a bank letter of credit or other similar facility, the Investment
Adviser may take such backing into account in determining the creditworthiness
of the issuer. While the market prices for an asset-based security and the
related natural resource asset generally are expected to move in the same
direction, there may not be perfect correlation in the two price movements.
Asset-based securities may not be secured by a security interest in or claim on
the underlying natural resource asset. The asset-based securities in which the
Portfolio may invest may bear interest or pay preferred dividends at below
market (or even relatively nominal) rates. As an example, assume gold is selling
at a market price of $300 per ounce and an issuer sells a $1,000 face amount
gold-related note with a seven-year maturity, payable at maturity at the greater
of either $1,000 in cash or the then market price of three ounces of gold. If,
at maturity, the market price of gold is $400 per ounce, the amount payable on
the note would be $1,200. Certain asset-based securities may be payable at
maturity in cash at the stated principal amount or, at the option of the holder,
directly in a stated amount of the asset to which it is related. In such an
instance, because the Portfolio presently does not intend to invest directly in
natural resource assets, the Portfolio would sell the asset-based security in
the secondary market, to the extent one exists prior to maturity, if the value
of the stated amount of the asset exceeds the stated principal amount, and
thereby realize the appreciation in the underlying asset.
Risk Factors. As indicated above, under certain circumstances, the
Portfolio has reserved the right to invest a majority of its assets in
gold-related companies or securities. Based on historic experience, during
periods of economic or financial instability, the securities of such companies
may be subject to extreme price fluctuations, reflecting the high volatility of
gold prices during such periods. In addition, the instability of gold prices may
result in volatile earnings of gold-related companies which, in turn, may affect
adversely the financial condition of such companies. Gold mining companies also
are subject to the risks generally associated with mining operations.
The major producers of gold include the Republic of South Africa, Russia,
Canada, the United States, the People's Republic of China, the Philippines and
Australia. Sales of gold by Russia and China are largely unpredictable and often
relate to political and economic considerations
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rather than to market forces. Economic, social and political developments within
South Africa may affect significantly South African gold production.
See 'Other Portfolio Strategies--Foreign Securities' for special
considerations in investments in foreign securities.
The Fund and Merrill Lynch Funds Distributor, Inc., the distributor of the
Fund's shares, reserve the right to suspend the sale of shares of the Natural
Resources Portfolio in response to conditions in the securities markets or
otherwise.
GLOBAL STRATEGY PORTFOLIO
The investment objective of the Global Strategy Portfolio is to seek high
total investment return by investing primarily in a portfolio of equity and
fixed-income securities, including convertible securities, of U.S. and foreign
issuers. Total investment return consists of interest, dividends, discount
accruals and capital changes, including changes in the value of non-dollar
denominated securities and other assets and liabilities resulting from currency
fluctuations. Investing on an international basis involves special
considerations. See 'Other Portfolio Strategies--Foreign Securities' below.
The Global Strategy Portfolio seeks to achieve its objective by investing
primarily in the securities of issuers located in the United States, Canada,
Western Europe and the Far East. There are no prescribed limits on the
geographical allocation of the Portfolio among these regions. Such allocation
will be made primarily on the basis of the anticipated total return from
investments in the securities of issuers wherever located, considering such
factors as the condition and growth potential of the various economies and
securities markets and the issuers domiciled therein, anticipated movements in
interest rates in the various capital markets and in the value of foreign
currencies relative to the U.S. dollar, tax considerations and economic, social,
financial, national and political factors which may affect the climate for
investing within such securities markets. When, in the judgment of the
Investment Adviser, economic or market conditions warrant, the Portfolio
reserves the right to concentrate its investments in one or more capital
markets, including the United States. For additional information concerning the
risks of investing in foreign securities, see 'Other Portfolio
Strategies--Foreign Securities.'
The equity and convertible preferred securities in which the Global
Strategy Portfolio may invest are primarily securities issued by quality
companies. Generally, the characteristics of such companies include a strong
balance sheet, good financial resources, a satisfactory rate of return on
capital, a good industry position and superior management skills. The Investment
Adviser believes that companies that conform most closely to these
characteristics tend to exhibit generally consistent earnings growth.
The corporate debt securities, including convertible debt securities, in
which the Portfolio may invest will be primarily those rated BBB or better by
Standard & Poor's or Baa or better by Moody's or of comparable quality. The
Portfolio may also invest in debt obligations issued or guaranteed by sovereign
governments, political subdivisions thereof (including states, provinces and
municipalities) or their agencies or instrumentalities or issued or guaranteed
by international organizations designated or supported by governmental entities
to promote economic reconstruction or development ('supranational entities')
such as the International Bank for Reconstruction and Development (the 'World
Bank') and the European Coal and Steel Community. Investments in securities of
supranational entities are subject to the risk that member governments will fail
to make required capital contributions and that a supranational entity will thus
be unable to meet its obligations.
When market or financial conditions warrant, the Global Strategy Portfolio
may invest as a temporary defensive measure up to 100% of its assets in
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, certificates of deposit, bankers' acceptances and other bank
obligations, commercial paper rated in the highest category by an established
rating agency, or other fixed-income securities deemed by the Investment Adviser
to be consistent with a defensive posture, or may hold its assets in cash.
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The Global Strategy Portfolio may write covered call options and purchase
put options on its portfolio securities for the purpose of generating
incremental income or hedging its securities against market risk. The Portfolio
may seek to hedge its non-dollar denominated securities and other assets and
liabilities against adverse currency fluctuations by writing call options and
purchasing put options on currency, purchasing or selling futures contracts and
futures contract options on currency and entering into forward foreign exchange
transactions in currency. See 'Transactions in Options, Futures and Currency.'
BALANCED PORTFOLIO
The investment objective of the Balanced Portfolio is to seek a level of
current income and a degree of stability of principal not normally available
from an investment solely in equity securities and the opportunity for capital
appreciation greater than that normally available from an investment solely in
debt securities by investing in a balanced portfolio of fixed income and equity
securities. The Portfolio will seek current income by investing a portion of its
assets in a portfolio of intermediate to long-term debt, convertible debt and
money market securities. The Portfolio will seek capital appreciation primarily
by investing a portion of its assets in equity securities, including preferred
and convertible preferred stock. At all times, the Portfolio will maintain at
least 25% of its net assets in senior fixed income securities. There can be no
assurance that the Portfolio's objective will be achieved.
The Portfolio will normally seek to maintain the allocation of its assets
between debt securities and equity securities at approximately equal percentages
of the Portfolio's net asset value. However, the prices of debt and equity
securities will not generally move in the same direction or to the same extent,
and, consequently, the relative percentages of the Portfolio's debt and equity
investments will vary. The Portfolio will seek to reduce such variations by
investing its available cash in securities of the appropriate type. However,
except as discussed below, the Portfolio is not obligated to sell portfolio
securities, including money market securities, in order to reduce such
discrepancies.
The Portfolio will normally limit its allocation of assets to equity
securities to no more than 50% of its net assets. To the extent its equity
position exceeds this limitation, because of changes in the value of portfolio
securities or otherwise, the Portfolio will seek to reduce its equity position
to less than 50% of net assets by selling such securities at such times and in
such amounts as management of the Fund deems appropriate in light of market
conditions and other pertinent factors. See 'Dividends, Distributions and
Taxes--Tax Treatment of the Fund.'
The Portfolio will generally emphasize investment in common stocks of
larger-capitalization issuers and in investment-grade debt obligations. The
Portfolio may also seek to enhance the return on its common stock portfolio by
writing covered call options listed on United States securities exchanges. Under
unusual market or economic conditions, the Portfolio for temporary defensive
purposes may invest up to 100% of its assets in securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities, certificates of
deposit, bankers' acceptances and other bank obligations, commercial paper rated
in the highest category by an established rating agency or other fixed income
securities deemed by the Investment Adviser to be consistent with a defensive
posture or may hold its assets in cash.
NON-DIVERSIFIED PORTFOLIOS
The Natural Resources and Global Strategy Portfolios are each classified as
a non-diversified investment company under the Investment Company Act of 1940.
However, each Portfolio will have to limit its investments to the extent
required by the diversification requirements applicable to regulated investment
companies under the Code. To qualify as a regulated investment company, a
Portfolio, at the close of each fiscal quarter, may not have more than 25% of
its total assets invested in the securities (except obligations of the U.S.
Government, its agencies or instrumentalities) of any one issuer and with
respect to 50% of its assets, (i) may not have more than 5% of its total assets
invested in the securities of any one issuer and (ii) may not own more than 10%
of the outstanding voting securities of any one issuer.
INVESTMENT RESTRICTIONS
The Fund has adopted a number of restrictions and policies relating to the
investment of its assets and its activities which are fundamental policies and
may not be changed without the approval of the holders of the Fund's outstanding
voting securities (including a majority of the shares of each Portfolio).
Investors are referred to the Fund's Statement of Additional Information for a
complete description of such restrictions and policies.
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OTHER PORTFOLIO STRATEGIES
Lending of Portfolio Securities. Each Portfolio of the Fund may from time
to time lend securities (but not in excess of 33 1/3% of its total assets) from
its portfolio to brokers, dealers and financial institutions and receive
collateral in cash or U.S. Treasury securities which while the loan is
outstanding will be maintained at all times in an amount equal to at least 100%
of the current market value of the loaned securities plus accrued interest. Any
such cash collateral will be invested in short-term securities, the income from
which will increase the return to the Portfolio.
Liquidity. In order to assure that each Portfolio of the Fund has
sufficient liquidity, as a matter of operating policy no Portfolio may invest
more than 10% of its net assets in securities for which market disposition is
not readily available. Market disposition may not be readily available for
repurchase agreements maturing in more than seven days and for securities having
restrictions on resale.
While no Portfolio may purchase illiquid securities in an amount exceeding
10% of its net assets, each Portfolio may purchase without regard to that
limitation securities that are not registered under the Securities Act of 1933,
as amended (the 'Securities Act'), but that can be offered and sold to
'qualified institutional buyers' under Rule 144A under the Securities Act,
provided that the Fund's Board of Directors continuously determines, based on
the trading markets for the specific Rule 144A security, that it is liquid. The
Board of Directors may adopt guidelines and delegate to the Investment Adviser
the daily function of determining and monitoring liquidity of restricted
securities. The Board has determined that securities which are freely tradeable
in their primary market offshore should be deemed liquid. The Board, however,
will retain sufficient oversight and be ultimately responsible for the
determinations.
Forward Commitments. Each Portfolio of the Fund may purchase U.S.
Government securities and corporate debt obligations on a when-issued basis, and
it may purchase or sell such securities for delayed delivery. These transactions
occur when securities are purchased or sold by the Portfolio with payment and
delivery taking place in the future to secure what is considered an advantageous
yield and price to the Portfolio at the time of entering into the transaction.
The value of the security on the delivery date may be more or less than its
purchase price. The Portfolio will maintain a segregated account with its
custodian of cash, high-grade debt obligations or other liquid securities in an
aggregate equal to the amount of its commitments in connection with such delayed
delivery and purchase transactions. In order for shares of the Portfolios to
remain eligible investments for the Accounts, the Fund has undertaken to comply
with certain limits on forward commitments in accordance with state insurance
laws.
Standby Commitment Agreements. The High Yield Portfolio may from time to
time enter into standby commitment agreements. Such agreements commit the
Portfolio, for a stated period of time, to purchase a stated amount of a fixed
income security which may be issued and sold to the Portfolio at the option of
the issuer. The price and coupon of the security is fixed at the time of the
commitment. At the time of entering into the agreement the Portfolio is paid a
commitment fee which is typically approximately 0.5% of the aggregate purchase
price of the security which the Portfolio has committed to purchase. The
Portfolio will at all times maintain a segregated account with its custodian of
cash, high-grade debt obligations or other liquid securities in an amount equal
to the purchase price of the securities underlying the commitment. There can be
no assurance that the securities subject to a standby commitment will be issued,
and the value of the security, if issued, on the delivery date may be more or
less than its purchase price.
Foreign Securities. No Portfolio, other than the Capital Stock Portfolio,
Multiple Strategy Portfolio, Natural Resources Portfolio or Global Strategy
Portfolio, may invest in securities of foreign issuers if at the time of
acquisition more than 10% of its total assets, taken at market value at the time
of the investment, would be invested in such securities; provided, however, that
up to 25% of the total assets of such Portfolio, other than the Multiple
Strategy Portfolio, Natural Resources Portfolio or Global Strategy Portfolio,
may be invested in securities (i) issued, assumed or guaranteed by foreign
governments, or political subdivisions or instrumentalities thereof, (ii)
assumed or guaranteed by domestic issuers, including Eurodollar securities, or
(iii) issued, assumed or guaranteed by foreign issuers having a class of
securities listed for trading on the New York Stock Exchange. In order for
shares of the Portfolios to remain eligible investments for the Accounts, the
Fund has undertaken to comply with certain diversification requirements in
accordance with state insurance laws. As a matter of operating policy, the
Multiple Strategy Portfolio will not invest in the securities of foreign issuers
if at the time of acquisition more than 25% of its total assets would be
invested in such securities, and the Capital Stock Portfolio will not invest in
such securities if at the time of acquisition more than 20% of its total assets
would be invested in such securities. In addition, as a matter of operating
policy, the Balanced Portfolio will not invest any portion of its assets in the
securities of foreign issuers.
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Investments in foreign securities, particularly those of non-governmental
issuers, involve considerations and risks which are not ordinarily associated
with investing in domestic issuers. These considerations and risks include
changes in currency rates, currency exchange control regulations, the
possibility of expropriation, the unavailability of financial information or the
difficulty of interpreting financial information prepared under foreign
accounting standards, less liquidity and more volatility in foreign securities
markets, the impact of political, social or diplomatic developments, and the
difficulty of assessing economic trends in foreign countries. If it should
become necessary, the Fund could encounter greater difficulties in invoking
legal processes abroad than would be the case in the United States. The
operating expense ratio of a Fund investing in foreign securities can be
expected to be higher than that of an investment company investing exclusively
in United States securities because the expenses of the Fund, such as custodial
and brokerage costs, are higher. Transaction costs in foreign securities may be
higher. In addition, net investment income received by a Portfolio on a foreign
security may be subject to withholding and other taxes imposed by foreign
governments which will reduce the Portfolio's net investment income. The
Investment Adviser will consider these and other factors before investing in
foreign securities, and will not make such investments unless, in its opinion,
such investments will meet the standards and objectives of a particular
Portfolio. As a matter of operating policy, no Portfolio which may invest in
foreign securities (other than the Natural Resources Portfolio, Capital Stock
Portfolio and Global Strategy Portfolio) may concentrate its investments in any
particular foreign country, and each such Portfolio (other than the Multiple
Strategy Portfolio, High Yield Portfolio, Capital Stock Portfolio, Natural
Resources Portfolio and Global Strategy Portfolio) will purchase only securities
issued in dollar denominations. A Portfolio's return on investments in non-
dollar-denominated securities may be reduced or enhanced as a result of changes
in foreign currency rates during the period in which the Portfolio holds such
investments.
TRANSACTIONS IN OPTIONS, FUTURES AND CURRENCY
The Capital Stock Portfolio, Multiple Strategy Portfolio, Natural Resources
Portfolio, Global Strategy Portfolio and Balanced Portfolio may engage in
certain of the options, futures and currency transactions discussed below. A
Portfolio may engage in transactions in futures contracts, options on futures
contracts, forward foreign exchange contracts, currency options and put options
on portfolio securities and on stock indexes only for hedging purposes and not
for speculation. A Portfolio may write call options on portfolio securities and
on stock indexes for the purpose of achieving, through receipt of premium
income, a greater average total return than it would otherwise realize from
holding portfolio securities alone. There can be no assurance that the
objectives sought to be obtained from the use of these instruments will be
achieved. A Portfolio's use of such instruments may be limited by certain Code
requirements for qualification of the Portfolio for the favorable tax treatment
afforded investment companies.
Options on Portfolio Securities. The Capital Stock Portfolio, Multiple
Strategy Portfolio, Natural Resources Portfolio, Global Strategy Portfolio and
Balanced Portfolio may each, from time to time, sell ('write') exchange-traded
covered call options on portfolio securities. A covered call option is an option
where the Portfolio, in return for a premium, gives another party a right to buy
particular securities held by the Portfolio at a specified price for a certain
period of time. In return for the premium income realized from the sale of the
option, the Portfolio gives up the opportunity to profit from a price increase
in the underlying security above the option exercise price while the option is
in effect. In addition, the Portfolio's ability to sell the underlying security
will be limited until the option is closed or expires. The Portfolio will
attempt to achieve, through the receipt of premiums on covered options, a
greater average total return than it would otherwise realize from holding the
underlying securities alone.
The Multiple Strategy Portfolio, Natural Resources Portfolio and Global
Strategy Portfolio may purchase listed put options on portfolio securities. In
return for payment of a premium, the purchase of a put option gives the holder
thereof the right to sell the security underlying the option to another party at
a specified price until the put option is closed out, expires or is exercised.
The Portfolios will only purchase put options to seek to reduce the risk of a
decline in value of the underlying security. The total return on the security
may be reduced by the amount of the premium paid for the option by the
Portfolio.
Options on Stock Indices. The Multiple Strategy Portfolio and Natural
Resources Portfolio may write call options and purchase put options on stock
indices traded on a national securities exchange to seek to reduce the general
market risk of its portfolio of securities or specific industry sectors thereof.
Options on indices are similar to options on securities except that on exercise
or assignment, the parties to the contract pay or receive an amount of cash
equal to the difference between the closing value of the index and the exercise
price of the option times a specified multiple. The Portfolios may invest in
index options based on a
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broad market index, e.g., the Standard & Poor's 500 Composite Stock Price Index,
or on a narrow index representing an industry or market segment, e.g., the Amex
Oil & Gas Index. The effectiveness of a hedge employing stock index options will
depend primarily on the degree of correlation between movements in the value of
the index underlying the option and in the portion of the portfolio being
hedged. For further discussion concerning such options, see 'Risk Factors in
Options, Futures and Currency Transactions' below and the Fund's Statement of
Additional Information.
Stock Index Futures Contracts. The Multiple Strategy Portfolio and Natural
Resources Portfolio may purchase and sell stock index futures contracts to hedge
its portfolio. The Portfolios may sell stock index futures contracts in
anticipation of or during a market decline to attempt to offset the decrease in
market value of the Portfolios' securities portfolio that might otherwise
result. When a Portfolio is not fully invested in the securities market and
anticipates a significant market advance, it may purchase stock index futures in
order to gain rapid market exposure that may in part or entirely offset
increases in the cost of securities that the Portfolio intends to purchase. A
stock index futures contract is a bilateral agreement pursuant to which a
Portfolio will agree to buy or deliver at settlement an amount of cash equal to
a dollar amount multiplied by the difference between the value of a stock index
at the close of the last trading day of the contract and the price at which the
futures contract is originally entered into. The Portfolios may engage in
transactions in futures contracts based on broad market indexes or on indexes on
industry or market segments. As with stock index options, the effectiveness of
the Portfolios' hedging strategies depends primarily upon the degree of
correlation between movements in the value of the securities subject to the
hedge and the index underlying the futures contract. See 'Risk Factors in
Options, Futures and Currency Transactions' below.
Hedging Foreign Currency Risks. The Multiple Strategy Portfolio, Natural
Resources Portfolio and Global Strategy Portfolio are authorized to deal in
forward foreign exchange between currencies of the different countries in which
they will invest, including multi-national currency units, as a hedge against
possible variations in the foreign exchange rate between these currencies. This
hedging is accomplished through contractual agreements to purchase or sell a
specified currency at a specified future date (up to one year) and price at the
time of the contract. The dealings of a Portfolio in forward foreign exchange
will be limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is the purchase or sale of forward foreign
currency with respect to specific receivables or payables of the Portfolio
accruing in connection with the purchase and sale of its portfolio securities,
the sale and redemption of shares of the Portfolio or the payment of dividends
and distributions by the Portfolio. Position hedging is the sale of forward
foreign currency with respect to portfolio security positions denominated or
quoted in such foreign currency. The Portfolios will not speculate in forward
foreign exchange. Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or prevent losses
if the prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Portfolio to hedge against a devaluation that is so
generally anticipated that the Portfolio is not able to contract to sell the
currency at a price above the devaluation level it anticipates.
Each Portfolio is also authorized to purchase or sell listed foreign
currency options and foreign currency futures contracts as a hedge against
possible adverse variations in foreign exchange rates. Foreign currency options
provide the holder thereof the right to buy or to sell a currency at a fixed
price on or before a future date. A futures contract on a foreign currency is an
agreement between two parties to buy and sell a specified amount of a currency
for a set price on a future date. Such transactions may be effected with respect
to hedges on non-U.S. dollar denominated securities (including securities
denominated in multi-national currency units) owned by a Portfolio, sold by a
Portfolio but not yet delivered, or committed or anticipated to be purchased by
a Portfolio. As an illustration, the Portfolio may use such techniques to hedge
the stated value in United States dollars of an investment in a Japanese
yen-denominated security. In such circumstances, for example, the Portfolio may
purchase a foreign currency put option enabling it to sell a specified amount of
yen for dollars at a specified price by a future date. To the extent the hedge
is successful, a loss in the value of the yen relative to the dollar will tend
to be offset by an increase in the value of the put option. To offset, in whole
or in part, the cost of acquiring such a put option, the Portfolios may also
sell a call option which, if exercised, requires it to sell a specified amount
of yen for dollars at a specified price by a future date (a technique called a
'straddle'). By selling the call option in this illustration, the Portfolio
gives up the opportunity to profit without limit from increases in the relative
value of the yen to the dollar.
The Portfolios will not speculate in foreign currency options or futures.
Accordingly, a Portfolio will not hedge a currency substantially in excess of
the market value of the securities denominated in such currency which it owns,
the
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expected acquisition price of securities which it has committed or anticipates
to purchase which are denominated in such currency, and, in the case of
securities which have been sold by the Portfolio but not yet delivered, the
proceeds thereof in its denominated currency. Further, the Portfolio will direct
its Custodian to segregate liquid, high-grade debt securities having a market
value equal to any subsequent decrease in the value of such hedged security,
less any initial or variation margin held in the account of its broker.
As in the case of forward foreign exchange contracts, employing currency
futures and options in hedging transactions does not eliminate fluctuations in
the market price of a security and such transactions preclude or reduce the
opportunity for gain if the hedged currency should move in a favorable
direction.
Options on Futures Contracts. The Multiple Strategy Portfolio, Natural
Resources Portfolio and Global Strategy Portfolio may also purchase and write
call and put options on futures contracts in connection with their hedging
activities. Generally, these strategies are utilized under the same market
conditions (i.e., conditions relating to specific types of investments) in which
the Portfolios enter into futures transactions. The Portfolios may purchase put
options or write call options on futures contracts rather than selling the
underlying futures contract in anticipation of a decline in the equities markets
or in the value of a foreign currency. Similarly, the Portfolios may purchase
call options, or write put options on futures contracts, as a substitute for the
purchase of such futures to hedge against the increased cost resulting from
appreciation of equity securities or in the currency in which securities which
the Portfolios intend to purchase are denominated. Limitations on transactions
in options on futures contracts are described below.
Over-the-Counter Options. The Multiple Strategy Portfolio, Natural
Resources Portfolio and Global Strategy Portfolio may engage in options
transactions in the over-the-counter markets. In general, over-the-counter
('OTC') options are two-party contracts with price and terms negotiated by the
buyer and seller, whereas exchange-traded options are third-party contracts
(i.e., performance of the parties' obligations is guaranteed by an exchange or
clearing corporation) with standardized strike prices and expiration dates. OTC
options include put and call options on individual securities, cash settlement
options on groups of securities, and options on currency. A Portfolio may engage
in an OTC options transaction only if it is permitted to enter into transactions
in exchange-traded options of the same general type. The Portfolios will engage
in OTC options only with financial institutions which have capital of at least
$50 million or whose obligations are guaranteed by an entity having capital of
at least $50 million.
Restrictions on Use of Futures Transactions. Regulations of the
Commodity Futures Trading Commission ('CFTC') applicable to the Fund require
that each Portfolio's futures transactions constitute bona fide hedging
transactions or, with respect to non-hedging transactions, that a Portfolio not
enter into such transactions, if, immediately thereafter, the sum of the amount
of initial margin deposits on the Portfolio's existing non-hedging futures
positions and premiums paid for related options would exceed 5% of the market
value of the Portfolio's total assets.
When a Portfolio purchases a futures contract, a call option thereon or
writes a put option, an amount of cash and cash equivalents will be deposited in
a segregated account with the Fund's Custodian so that the amount so segregated,
plus the amount of initial and variation margin held in the account of its
broker, equals the market value of the futures contract, thereby insuring that
the use of such futures is unleveraged.
An order has been obtained from the Securities and Exchange Commission
which exempts the Fund from certain provisions of the Investment Company Act of
1940 in connection with transactions involving futures contracts and options
thereon.
Risk Factors in Options, Futures and Currency Transactions. A Portfolio's
ability to effectively hedge all or a portion of its portfolio of securities
through transactions in options on stock indices and stock index futures depends
on the degree to which price movements in the index underlying the hedging
instrument correlates with price movements in the relevant portion of the
securities portfolio. The securities portfolio will not duplicate the components
of the index. As a result, the correlation will not be perfect. Consequently, a
Portfolio bears the risk that the price of the portfolio securities being hedged
will not move in the same amount or direction as the underlying index and that
the Portfolio would experience a loss on one position which is not completely
offset by a gain on the other position. It is also possible that there may be a
negative correlation between the index underlying an option or futures contract
in which a Portfolio has a position and the portfolio securities the Portfolio
is attempting to hedge, which would result in a loss on both the securities and
the hedging instrument. A Portfolio will invest in a hedging instrument only if,
in the judgment of the Investment Adviser, there is expected to be a sufficient
degree of correlation between movements in the value of the instrument and
movements in the value of the relevant portion of the portfolio of securities
for such
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hedge to be effective. There can be no assurance that the judgment will be
accurate.
Investment in stock index and currency futures and options thereon entail
the additional risk of imperfect correlation between movements in the futures
price and the price of the underlying index or currency. The anticipated spread
between the prices may be distorted due to differences in the nature of the
markets, such as differences in margin and maintenance requirements, the
liquidity of such markets and the participation of speculators in the futures
market. However, the risk of imperfect correlation generally tends to diminish
as the maturity date of the futures contract or termination date of the option
approaches.
The Portfolios intend to enter into exchange-traded options and futures
transactions only if there appears to be a liquid secondary market for such
options or futures. However, there can be no assurance that a liquid secondary
market will exist at any specific time. Thus, it may not be possible to close an
options or futures transaction. The inability to close options and futures
positions could have an adverse impact on a Portfolio's ability to effectively
hedge its portfolio. There is also the risk of loss by a Portfolio of margin
deposits or collateral in the event of bankruptcy of a broker with whom a
Portfolio has an open position in an option or futures contract.
OTHER CONSIDERATIONS
The Investment Adviser has agreed with the Insurance Companies to use its
best efforts to assure that each Portfolio of the Fund complies with certain
investment limitations of the Internal Revenue Service in order for the Policies
to be treated as life insurance under the Code. It is not expected that any such
investment limitations will materially affect the ability of any Portfolio to
achieve its investment objectives. See 'Investment Objectives and Policies of
the Portfolios,' page 13.
The New York insurance law requires that investments of the Fund be made
with the degree of care of an 'ordinarily prudent person.' In addition, the Fund
has undertaken, at the request of the State of California Department of
Insurance, to observe certain investment related requirements of the Insurance
Code of the State of California. The Investment Adviser believes that compliance
with these standards will not have any negative impact on the performance of any
of the Portfolios.
In order for shares of the Portfolios to remain eligible investments for
the Accounts, it may be necessary, from time to time, for a Portfolio to limit
its investments in certain types of securities and in certain markets in
accordance with the insurance laws or regulations of the various states in which
the Policies are sold.
DIRECTORS
The Directors of the Fund are four individuals, three of whom are not
considered to be 'interested persons' of the Fund as defined in the Investment
Company Act of 1940. The Directors of the Fund are responsible for the overall
supervision of the operations of the Fund and perform the various duties imposed
on the directors of investment companies by the Investment Company Act of 1940.
The Board of Directors elects officers of the Fund annually.
The Directors of the Fund and their principal employment are as follows:
TERRY K. GLENN* --Executive Vice President of the Investment Adviser and
Fund Asset Management, L.P. ('FAM') and President and Director of the
Distributor.
JACK B. SUNDERLAND--President and Director of American Independent Oil
Company, Inc. (energy company).
STEPHEN B. SWENSRUD--Principal of Fernwood Associates (financial
consultants).
J. THOMAS TOUCHTON--Managing Partner of The Witt-Touchton Company (private
investment partnership).
CODE OF ETHICS
The Board of Directors of the Fund has adopted a Code of Ethics under Rule
17j-1 of the Investment Company Act of 1940 which incorporates the Code of
Ethics of the Investment Adviser (together, the 'Codes'). The Codes
significantly restrict the personal investing activities of all employees of the
Investment Adviser and, as described below, impose additional, more onerous,
restrictions on fund investment personnel.
The Codes require that all employees of the Investment Adviser preclear any
personal securities investment (with limited exceptions, such as U.S. Government
securities). The preclearance requirement and associated procedures are designed
to identify any substantive prohibition or limitation applicable to the proposed
investment. The
- ------------------
* Interested person, as defined in the Investment Company
Act of 1940, of the Fund.
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substantive restrictions applicable to all employees of the Investment Adviser
include a ban on acquiring any securities in a 'hot' initial public offering and
a prohibition from profiting on short-term trading in securities. In addition,
no employee may purchase or sell any security which at the time is being
purchased or sold (as the case may be), or to the knowledge of the employee is
being considered for purchase or sale, by any fund advised by the Investment
Adviser. Furthermore, the Codes provide for trading 'blackout periods' which
prohibit trading by investment personnel of the Fund within periods of trading
by the Fund in the same (or equivalent) security (15 or 30 days depending upon
the transaction).
INVESTMENT ADVISER
The Fund has entered into an Investment Advisory Agreement, dated August 7,
1985, with Merrill Lynch Asset Management, L.P. (the 'Investment Adviser'). The
Investment Adviser is a wholly-owned subsidiary of ML Group, Inc., a
wholly-owned subsidiary of Merrill Lynch & Co., Inc., a publicly-held financial
services corporation. The address of the Investment Adviser is P.O. Box 9011,
Princeton, New Jersey 08543-9011. The Investment Adviser or its affiliate, FAM,
presently acts as the investment adviser to over 130 other registered investment
companies.
While the Investment Adviser is at all times subject to the direction of
the Board of Directors of the Fund, the Investment Advisory Agreement provides
that the Investment Adviser, subject to review by the Board of Directors, is
responsible for the actual management of the Portfolios and has responsibility
for making decisions to buy, sell or hold any particular security. The
Investment Adviser provides the portfolio managers for each of the Portfolios,
who consider information from various sources, make the necessary investment
decisions and effect transactions accordingly. The Investment Adviser is also
obligated to perform certain administrative and management services for the Fund
and is obligated to provide all the office space, facilities, equipment and
personnel necessary to perform its duties under the Agreement. The Investment
Adviser has access to the full range of the securities and economic research
facilities of Merrill Lynch.
During the Fund's fiscal year ended December 31, 1995, the advisory fees
paid by the Fund to the Investment Adviser totalled $9,302,375 of which
$1,870,186 was paid by the Money Reserve Portfolio, $749,536 by the Intermediate
Government Bond Portfolio, $388,836 by the Long Term Corporate Bond Portfolio,
$747,388 by the Capital Stock Portfolio, $453,314 by the Growth Stock Portfolio,
$3,721,295 by the Multiple Strategy Portfolio, $314,393 by the High Yield
Portfolio, $80,401 by the Natural Resources Portfolio, $691,473 by the Global
Strategy Portfolio, and $285,553 by the Balanced Portfolio. In each case, the
advisory fees represented 0.33% of the Portfolio's net assets. During the Fund's
fiscal year ended December 31, 1995, the total operating expenses incurred by
the Fund's Portfolios (including the advisory fees paid to the Investment
Adviser), before reimbursement of a portion of such expenses, were in the
following amounts: $2,003,234 by the Money Reserve Portfolio (representing 0.35%
of its average net assets), $866,185 by the Intermediate Government Bond
Portfolio (representing 0.38% of its average net assets), $465,532 by the Long
Term Corporate Bond Portfolio (representing 0.40% of its average net assets),
$889,597 by the Capital Stock Portfolio (representing 0.41% of its average net
assets), $521,427 by the Growth Stock Portfolio (representing 0.38% of its
average net assets), $4,299,533 by the Multiple Strategy Portfolio (representing
0.38% of its average net assets), $365,716 by the High Yield Portfolio
(representing 0.38% of its average net assets), $113,154 by the Natural
Resources Portfolio (representing 0.47% of its average net assets), $912,445 by
the Global Strategy Portfolio (representing 0.44% of its average net assets),
and $329,816 by the Balanced Portfolio (representing 0.38% of its average net
assets).
Pursuant to an amended Reimbursement Agreement among Monarch, the
Investment Adviser and Merrill Lynch Life Agency, Inc., Monarch reimburses the
expenses of each Portfolio which exceed 0.50% of its average net assets. For the
fiscal year ended December 31, 1995, Monarch did not reimburse any expenses
which are attributed to the Portfolios.
Thomas R. Robinson has been responsible for the day-to-day management of
the Balanced Portfolio, Capital Stock Portfolio, Global Strategy Portfolio and
Multiple Strategy Portfolio since November 1995. Mr. Robinson has been a Senior
Portfolio Manager of the Investment Adviser since 1995. Prior thereto, Mr.
Robinson was employed by Merrill Lynch & Co.'s Global Securities Research &
Economics Group where he served as Manager of International Equity Strategy from
1989 to 1995.
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<PAGE>
Lawrence Fuller has served as the Growth Stock Portfolio's Portfolio
Manager since August 1993, and is primarily responsible for the Portfolio's
day-to-day management. He has served as Vice-President of MLAM since 1992.
Aldona Schwarz has served as the High Yield Portfolio's Co-Portfolio
Manager since July 1993, and shares responsibility for the Portfolio's
day-to-day management with Vincent T. Lathbury. She has served as Vice-President
of MLAM since 1991 and as an employee of the Investment Adviser since 1986.
Jay Harbeck has served as the Intermediate Government Bond Portfolio's
Portfolio Manager since July 1992, and as the Long Term Corporate Bond
Portfolio's Portfolio Manager since July 1992. He is primarily responsible for
each Portfolio's day-to-day management. He has served as Vice-President of MLAM
since 1986.
Vincent T. Lathbury, III has served as the High Yield Portfolio's
Co-Portfolio Manager since July 1993, and shares responsibility for the
Portfolio's day-to-day management with Aldona Schwarz. He has served as Vice-
President of MLAM and FAM since 1990 and Portfolio Manager of MLAM and FAM since
1982.
Jacqueline Rogers has served as the Money Reserve Portfolio's Portfolio
Manager since June 1992, and is primarily responsible for the Portfolio's
day-to-day management. She has served as Vice-President of MLAM since 1985.
Peter Lehman has served as the Natural Resources Portfolio's Portfolio
Manager since January 1994, and is primarily responsible for the Portfolio's
day-to-day management. He has served as Vice-President of MLAM since 1994;
Senior Fund Analyst for an international fund managed by the Investment Advisor
from 1992 to 1994; and Director and Senior Portfolio Manager for Prudential
Insurance Company of America from 1989 to 1991.
PORTFOLIO TRANSACTIONS AND BROKERAGE
None of the Fund's Portfolios has any obligation to deal with any dealer or
group of dealers in the execution of transactions in portfolio securities.
Subject to policy established by the Board of Directors of the Fund, the
Investment Adviser is primarily responsible for the Fund's portfolio decisions
and the placing of the Fund's portfolio transactions. In placing orders, it is
the policy of each Portfolio to obtain the most favorable net results, taking
into account various factors, including price, dealer spread or commission, if
any, size of the transactions and difficulty of execution. While the Investment
Adviser generally seeks reasonably competitive spreads or commissions, the Fund
will not necessarily be paying the lowest spread or commission available.
Under the Investment Company Act of 1940, persons affiliated with the Fund
are prohibited from dealing with the Fund as a principal in the purchase and
sale of the Fund's portfolio securities unless an exemptive order allowing such
transactions is obtained from the Securities and Exchange Commission. Affiliated
persons of the Fund may serve as its broker in over-the-counter transactions
conducted on an agency basis. The Securities and Exchange Commission has issued
an order permitting the Fund to conduct certain principal transactions with
respect to the Money Reserve Portfolio with Merrill Lynch Government Securities
Inc. ('GSI') and Merrill Lynch Money Markets Inc. ('MMI') in U.S. Government and
government agency securities, and certain other money market securities, subject
to certain terms and conditions. During the year ended December 31, 1995, the
Fund engaged in 19 transactions pursuant to the exemptive order aggregating
approximately $197.6 million.
For the year ended December 31, 1995, the Fund paid brokerage commissions
of approximately $4,177,039, of which $224,553 was paid to Merrill Lynch.
PURCHASE OF SHARES
The Fund is offering its shares, without sales charge, only for purchase by
the Accounts as an investment medium for the Policies. The Fund continuously
offers shares in each of its Portfolios to the Insurance Companies at prices
equal to the respective per share net asset value of the Portfolios. Merrill
Lynch Funds Distributor, Inc., a wholly-owned subsidiary of the Investment
Adviser, acts as the distributor of the shares. Net asset value is determined in
the manner set forth below under 'Determination of Net Asset Value.'
REDEMPTION OF SHARES
The Fund is required to redeem all full and fractional shares of the
Portfolios for cash. The redemption price is the net asset value per share next
determined after the initial receipt of proper notice of redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the Fund's intention to distribute substantially all the net
investment income, if any, of each Portfolio. For dividend purposes, net
investment income of each Portfolio, other than the Money Reserve Portfolio,
will consist of all payments of dividends or interest received by such Portfolio
less the estimated expenses of such Portfolio (including fees payable to the
Investment Adviser). Net investment income of the Money Reserve Portfolio (from
the time of the immediate preceding determination thereof) consists of (i)
interest accrued and/or discount earned (including both original issue and
market discount), (ii) plus or minus all realized gains and losses on its
portfolio securities, (iii) less the estimated expenses of the Money
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<PAGE>
Reserve Portfolio (including the fees payable to the Investment Adviser)
applicable to that dividend period.
Dividends on the Money Reserve Portfolio are declared daily and paid and
reinvested monthly in additional full and fractional shares of the Portfolio.
Dividends from investment income of the Intermediate Government Bond, High Yield
and Long Term Corporate Bond Portfolios are declared and reinvested monthly in
additional full and fractional shares of the respective Portfolios. Dividends
from investment income of the Natural Resources, Global Strategy, Balanced,
Capital Stock, Growth Stock and Multiple Strategy Portfolios will be declared at
least semi-annually and reinvested in additional full and fractional shares of
the respective Portfolios. All net realized long-term or short-term capital
gains of the Fund, if any, other than short-term capital gains of the Money
Reserve Portfolio, are declared and distributed annually after the close of the
Fund's fiscal year to the shareholders of the Fund to which such gains are
attributable. Short-term capital gains are taxable as ordinary income.
TAX TREATMENT OF THE FUND
Each Portfolio intends to continue to qualify as a regulated investment
company under certain provisions of the Code. Under such provisions, a Portfolio
will not be subject to federal income tax on such part of its net ordinary
income and net realized capital gains which it distributes to shareholders. One
of the requirements to qualify for treatment as a regulated investment company
under the Code is that a Portfolio, among other things, derive less than 30% of
its gross income in each taxable year from gains (without deduction for losses)
from the sale or other disposition of stock, securities and certain options,
futures or forward contracts held for less than three months. This requirement
may limit the ability of certain Portfolios, including the Balanced Portfolio,
to dispose of certain securities at times when management of the Fund deems such
disposition appropriate or desirable. If a Portfolio earns original issue
discount income in a taxable year which is not represented by correlative cash
income, or if a Portfolio receives property rather than cash in payment of
interest, shareholders will be allocated income greater than the amount of cash
distributed to them. In addition, the Portfolio may have to dispose of
securities and use the proceeds thereof to make distributions in amounts
necessary to satisfy its distribution requirements under the Code.
TAX TREATMENT OF THE INSURANCE COMPANIES AS SHAREHOLDERS
Dividends paid by each Portfolio from its ordinary income and distributions
of each Portfolio's net realized capital gains are includible in the Insurance
Companies' gross income. Distributions of a Portfolio's net realized long-term
capital gains retain their character as long-term capital gains in the hands of
the Insurance Companies if certain requirements are met. The tax treatment of
such dividends and distributions depends on the Insurance Companies' tax status.
To the extent that income of a Portfolio represents qualified dividends on
common or preferred stock, its distributions to the Insurance Companies will be
eligible for the present 70% dividends received deduction applicable in the case
of a life insurance company as provided in the Code. Not later than 60 days
after the end of each calendar year, the Fund will send to the Insurance
Companies a written notice required by the Code designating the amount and
character of any distributions made during such year.
PERFORMANCE DATA
From time to time one or more of the Fund's Portfolios may include its
average annual total return and yield for various specified time periods in
advertisements or information furnished to present or prospective shareholders.
Average annual total return and yield are computed in accordance with formulas
specified by the Securities and Exchange Commission.
Average annual total return quotations for the specified periods will be
computed by finding the average annual compounded rates of return (based on net
investment income and any realized and unrealized capital gains or losses on
portfolio investments over such periods) that would equate the initial amount
invested to the redeemable value of such investment at the end of each period.
Average annual total return will be computed assuming all dividends and
distributions are reinvested and taking into account all applicable recurring
and nonrecurring expenses. Average annual total return quotations may be of
limited use for comparative purposes because they do not reflect charges imposed
at the Account level which, if included, would decrease total return.
Yield quotations will be computed based on a 30-day period by dividing (a)
the net income based on the yield to maturity of each security earned during the
period by (b) the average daily number of shares outstanding during the period
that were entitled to receive dividends multiplied by the offering price per
share on the last day of the period. The yield for the 30-day period ending
December 31, 1995 for the Intermediate Government Bond Portfolio was 5.44%, for
the Long Term Corporate Bond Portfolio was 6.21%, and for the High Yield
Portfolio was 10.25%. The yield quotations may be of limited use for comparative
purposes because they do not reflect charges imposed at the Account level which,
if included, would decrease the yield.
Total return and yield figures are based on a Portfolio's historical
performance and are not intended to indicate future performance. The Portfolio's
total return and yield will vary depending on market conditions, the securities
comprising the Portfolio's portfolio, the Portfolio's operating expenses and
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<PAGE>
the amount of realized and unrealized net capital gains or losses during the
period. The value of an investment in the Portfolio will fluctuate and an
investor's shares, when redeemed, may be worth more or less than their original
cost.
On occasion, one or more of the Fund's Portfolios may compare its
performance to that of the Standard & Poor's 500 Composite Stock Price Index,
the Value Line Composite Index, the Dow Jones Industrial Average, or performance
data published by Lipper Analytical Services, Inc., Morningstar Publications,
Inc., Money Magazine, U.S. News & World Report, Business Week, CDA Investment
Technology, Inc., Forbes Magazine, Fortune Magazine, Chase Investment
Performance Digest, Financial Services Weekly, Kiplinger Personal Finance, The
Wall Street Journal, USA Today, Barron's, Strategic Insight, Donaghues, Investor
Business Daily and Ibbotson Associates. As with other performance data,
performance comparisons should not be considered indicative of the Portfolio's
relative performance for any future period.
ADDITIONAL INFORMATION
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of each Portfolio is determined once
daily by the Investment Adviser immediately after the declaration of dividends,
if any, and is determined as of 15 minutes after the close of business on the
New York Stock Exchange on each day during which the New York Stock Exchange is
open for business. The New York Stock Exchange is open on business days other
than national holidays (except for Martin Luther King Day, when it is open) and
Good Friday. Any assets or liabilities initially expressed in terms of non-U.S.
dollar currencies are translated into U.S. dollars at the prevailing market
rates as quoted by one or more banks or dealers on the day of valuation. A
Portfolio's net asset value will be computed only on days on which there is
sufficient trading in portfolio securities that its net asset value might be
materially affected, and only if an order for purchase, redemption or repurchase
of securities is received. The net asset value per share of each Portfolio other
than the Money Reserve Portfolio is computed by dividing the sum of the value of
the securities held by that Portfolio plus any cash or other assets (including
interest and dividends accrued) minus all liabilities (including accrued
expenses) by the total number of shares outstanding of that Portfolio at such
time, rounded to the nearest cent. Expenses, including the investment advisory
fees payable to the Investment Adviser, are accrued daily. The net asset value
of the Money Reserve Portfolio is determined pursuant to the 'penny rounding'
method by adding the fair value of all securities and other assets in the
Portfolio, deducting the Portfolio's liabilities, dividing by the number of
shares outstanding and rounding the result to the nearest whole cent.
Except with respect to securities held by the Money Reserve and Multiple
Strategy Portfolios having a remaining maturity of 60 days or less, securities
held by each Portfolio will be valued as follows: Portfolio securities which 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 last available bid price. Securities other than money market securities
traded in the over-the-counter market are valued at the last available bid price
in the over-the-counter market prior to the time of valuation. Portfolio
securities which are traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representative market,
and it is expected that for debt securities this ordinarily will be the
over-the-counter market. When a Portfolio writes a call option, the amount of
the premium received is recorded on the books as an asset and an equivalent
liability. The amount of the liability is subsequently valued to reflect the
current market value of the option written, based upon the last sale price in
the case of exchange-traded options or, in the case of options being traded in
the over-the-counter market, the last asked price. Options purchased by a
Portfolio are valued at their last sale price in the case of exchange-traded
options or, in the case of options traded in the over-the-counter market, the
last bid price. Futures contracts are valued at settlement price at the close of
the applicable exchange. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund. Securities with a
remaining maturity of 60 days or less may be valued on an amortized cost basis,
unless particular circumstances dictate otherwise.
ORGANIZATION OF THE FUND
The Fund was incorporated on September 4, 1980 as the Merrill Lynch
Investment Series Fund, Inc. On January 16, 1981, the Fund changed its name to
Merrill Lynch Series Fund, Inc. The authorized capital stock of the Fund
consists of 4,100,000,000 shares of Common Stock, par value $0.10 per share. The
shares of Common Stock are divided into twenty classes, Money Reserve Portfolio
Common Stock, Intermediate Government Bond Portfolio Common Stock, Long Term
Corporate Bond Portfolio Common Stock, High Yield Portfolio Common Stock,
Capital Stock Portfolio Common Stock, Growth Stock Portfolio Common Stock,
Multiple Strategy Portfolio Common Stock, Natural Resources Portfolio Common
Stock, Global Strategy Portfolio Common Stock, Balanced Portfolio Common Stock
and ten classes of Common Stock that have been designated classes A, B, C, D, E,
F, G, H, I and J, respectively. The Fund has no present plan to issue shares of
classes A,
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B, C, D, E, F, G, H, I or J Common Stock. Each class of Common Stock consists of
100,000,000 shares except for the Money Reserve Portfolio which has
2,000,000,000 authorized shares and the Multiple Strategy Portfolio which has
300,000,000 authorized shares. All shares of Common Stock have equal voting
rights, except that only shares of the respective Portfolios are entitled to
vote on matters concerning only that Portfolio. Pursuant to the Investment
Company Act of 1940 and the rules and regulations thereunder, certain matters
approved by a vote of all shareholders of the Fund may not be binding on a class
whose shareholders have not approved such matter. Each issued and outstanding
share of a class is entitled to one vote and to participate equally in dividends
and distributions declared with respect to such class and in net assets of such
class upon liquidation or dissolution remaining after satisfaction of
outstanding liabilities. The shares of each class, when issued, will be fully
paid and nonassessable, have no preference, preemptive, conversion, exchange or
similar rights, and will be freely transferable. Holders of shares of any class
are entitled to redeem their shares as set forth under 'Redemption of Shares.'
Shares do not have cumulative voting rights and the holders of more than 50% of
the shares of the Fund voting for the election of directors can elect all of the
directors of the Fund if they choose to do so and in such event the holders of
the remaining shares would not be able to elect any directors. The Fund does not
intend to hold meetings of shareholders unless under the Investment Company Act
of 1940 shareholders are required to act on any of the following matters: (i)
election of directors; (ii) approval of an investment advisory agreement; (iii)
approval of a distribution agreement; and (iv) ratification of the selection of
independent accountants.
Monarch provided the initial capital for each of the Fund's Portfolios and
the Investment Adviser paid the initial organizational expenses of each
Portfolio. The Investment Adviser was reimbursed by Monarch for all such
expenses over a five-year period.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, Princeton, New Jersey, has been selected as the
independent auditors of the Fund. The selection of independent auditors is
subject to annual ratification by the Fund's shareholders.
CUSTODIAN
The Bank of New York, 90 Washington Street, New York, New York 10286, acts
as custodian (the 'Custodian') of the Fund's assets.
TRANSFER AND DIVIDEND DISBURSING AGENT
Merrill Lynch Financial Data Services, Inc. ('MLFDS'), which is a
wholly-owned subsidiary of Merrill Lynch & Co., Inc., acts as the Fund's
transfer agent and is responsible for the issuance, transfer and redemption of
shares and the opening and maintenance of shareholder accounts. MLFDS will
receive an annual fee of $5,000 per Portfolio and will be entitled to
reimbursement of out-of-pocket expenses. Prior to June 1, 1990, the Custodian
was the Fund's transfer agent.
LEGAL COUNSEL
Rogers & Wells, New York, New York, is counsel for the Fund.
REPORTS TO SHAREHOLDERS
The fiscal year of the Fund ends on December 31 of each year. The Fund will
send to its shareholders at least semi-annually reports showing the securities
of the Fund's Portfolios and other information. An annual report, containing
financial statements, audited by independent auditors, will be sent to
shareholders each year.
ADDITIONAL INFORMATION
This Prospectus does not contain all the information included in the
Registration Statement filed with the Securities and Exchange Commission under
the Securities Act of 1933 and the Investment Company Act of 1940, with respect
to the securities offered hereby, certain portions of which have been omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
The Statement of Additional Information, dated April 29, 1996, which forms
a part of the Registration Statement, is incorporated by reference into this
Prospectus. The Statement of Additional Information may be obtained without
charge as provided on the cover page of this Prospectus. The Registration
Statement, including the exhibits filed therewith, may be examined at the office
of the Securities and Exchange Commission in Washington, D.C.
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APPENDIX A: MONEY MARKET SECURITIES
U.S. Government Securities. The Money Reserve, Intermediate Government
Bond, Multiple Strategy and Balanced Portfolios (and, for temporary or defensive
purposes, each other Portfolio) may invest in the various types of marketable
securities issued by or guaranteed as to principal and interest by the U.S.
Government and supported by the full faith and credit of the U.S. Treasury. U.S.
Treasury obligations differ mainly in the length of their maturity. Treasury
bills, the most frequently issued marketable government security, have a
maturity of up to one year and are issued on a discount basis.
Government Agency Securities. The Money Reserve, Intermediate Government
Bond, Multiple Strategy and Balanced Portfolios (and, for temporary or defensive
purposes, each other Portfolio) may invest in government agency securities,
which are debt securities issued by government-sponsored enterprises, federal
agencies and international institutions. Such securities are not direct
obligations of the Treasury but involve government sponsorship or guarantees by
government agencies or enterprises. These Portfolios may invest in all types of
government agency securities currently outstanding or to be issued in the
future, including Government National Mortgage Association mortgage-backed
certificates and other mortgage-backed government agency securities.
Bank Money Instruments. The Money Reserve, Multiple Strategy and Balanced
Portfolios (and, for temporary or defensive purposes, each other Portfolio) may
invest in bank money instruments, such as certificates of deposit, including
variable-rate certificates of deposit, and bankers' acceptances. Certificates of
deposit are generally short-term, interest-bearing negotiable certificates
issued by commercial banks or savings and loan associations against funds
deposited in the issuing institution. Variable-rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity, usually at 30, 90 or 180 day intervals ('coupon
dates'), based upon a specified market rate. As a result of these adjustments,
the interest rate on these obligations may be increased or decreased
periodically. Typically, dealers selling variable-rate certificates of deposit
to the Money Reserve, Multiple Strategy or Balanced Portfolios agree to
repurchase such instruments, at the Portfolios' option, at par on the coupon
dates. The dealers' obligations to repurchase these instruments are subject to
conditions imposed by the various dealers; such conditions typically are the
continued credit standing of the issuer and the existence of reasonably orderly
market conditions. The Money Reserve, Multiple Strategy or Balanced Portfolios
are also able to sell variable-rate certificates of deposit in the secondary
market. Variable-rate certificates of deposit normally carry a higher interest
rate than comparable fixed-rate certificates of deposit because variable-rate
certificates of deposit generally have a longer stated maturity than comparable
fixed-rate certificates of deposit.
A bankers' acceptance is a time draft drawn on a commercial bank by a
borrower usually in connection with an international commercial transaction (to
finance the import, export, transfer or storage of goods). The borrower is
liable for payment as well as the bank, which unconditionally guarantees to pay
the draft at its face amount on the maturity date. Most acceptances have
maturities of six months or less and are traded in secondary markets prior to
maturity.
The Money Reserve Portfolio may invest in certificates of deposit and
bankers' acceptances issued by foreign banks or branches or subsidiaries of U.S.
or foreign banks ('Eurodollar' obligations) or U.S. branches or subsidiaries of
foreign banks ('Yankeedollar' obligations).
The obligations of such foreign branches and subsidiaries may be the
general obligation of the parent bank or may be limited to the issuing branch or
subsidiary by the terms of the specific obligation or by government regulation.
Such investments will only be made if determined to be of comparable quality to
other investments permissible for the Money Reserve Portfolio.
Except as otherwise provided above with respect to investment in Eurodollar
or Yankeedollar obligations, the Money Reserve Portfolio may not invest in any
security issued by a commercial bank or a savings and loan association unless
the bank or association is organized and operating in the United States, has
total assets of at least one billion dollars and has its deposits insured by the
Federal Deposit Insurance Corporation.
Short-Term Debt Instruments. The Money Reserve Portfolio (and, for
temporary or defensive purposes, each other Portfolio) may invest in commercial
paper (including variable amount master demand notes and insurance company
funding agreements), which refers to short-term, unsecured promissory notes
issued by U.S. or foreign corporations, trusts or partnerships to finance
short-term credit needs. Investments in foreign entities in general involve the
same risks as those described in 'Investment Restrictions--Portfolio
Strategies--Investment in Eurodollar and Yankeedollar Obligations' in the
Statement of Additional Information. Commercial paper is usually sold on a
discount basis and has a maturity at the time of issuance not exceeding nine
months. Variable amount master demand
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notes are demand obligations that permit the investment of fluctuating amounts
at varying market rates of interest pursuant to arrangements between the issuer
and a commercial bank acting as agent for the payees of such notes, whereby both
parties have the right to vary the amount of the outstanding indebtedness on the
notes. Insurance company funding agreements are demand obligations that permit
the investment of a fixed amount at rates of interest which are either fixed or
which reset periodically to match fluctuations in a short-term money market
rate, such as federal funds or LIBOR, agreed upon as a benchmark by the Fund and
the insurance company. Because variable amount master notes and insurance
company funding agreements are direct lending arrangements between the lender
and borrower, it is not generally contemplated that such instruments will be
traded and there is no secondary market for such instruments. Typically,
agreements relating to such instruments provide that the lender may not sell or
otherwise transfer the instrument without the borrower's consent. Such
instruments provide that the interest rate on the amount outstanding is adjusted
periodically, in accordance with a stated short-term interest rate benchmark.
Since the interest rate of such instruments are adjusted no less often than
every 60 days and since repayment may be demanded at any time, the Investment
Adviser values such instruments in accordance with the amortized cost basis
described under 'Determination of Net Asset Value' in the Statement of
Additional Information.
The Money Reserve Portfolio (and, for temporary or defensive purposes, each
other Portfolio) may also invest in non-convertible debt securities (e.g., bonds
and debentures) with no more than 397 days (13 months) remaining to maturity at
date of settlement. Debt securities with a remaining maturity of less than one
year tend to become extremely liquid and are traded as money market securities.
Repurchase Agreements. Each Portfolio may invest in securities subject to
repurchase agreements with any member bank of the Federal Reserve System or
primary dealer in U.S. Government securities, or affiliates thereof. A
repurchase agreement is an instrument under which the purchaser (i.e., the
Portfolio) acquires ownership of the obligation (debt security) and the seller
agrees, at the time of the sale, to repurchase the obligation at a mutually
agreed upon time and price, thereby determining the yield during the purchaser's
holding period. This results in a fixed rate of return insulated from market
fluctuations during such period. The underlying securities will only consist of
U.S. Government or government agency securities, certificates of deposit,
commercial paper or bankers' acceptances except that the underlying securities
for the Intermediate Government Bond Portfolio will only consist of U.S.
Government or government agency securities. Repurchase agreements usually are
for short periods, such as under one week. Each Portfolio will require the
seller to provide additional collateral if the market value of the securities
falls below the repurchase price any time during the term of the repurchase
agreement. In the event of a default by the seller because of bankruptcy or
otherwise, the Portfolio may suffer time delays and incur costs or losses in
connection with the disposition of the collateral.
Reverse Repurchase Agreements. Each Portfolio may enter into reverse
repurchase agreements, which involve the sale of money market securities held by
the Portfolio with an agreement to repurchase the securities at an agreed upon
price, date and interest payment. The Portfolio will use the proceeds of the
reverse repurchase agreements to purchase other money market securities either
maturing, or under an agreement to resell, at a date simultaneous with or prior
to the expiration of the reverse repurchase agreement. The Portfolio will
utilize reverse repurchase agreements when the interest income to be earned from
the investment of the proceeds of the transaction is greater than the interest
expense of the reverse repurchase transaction. A separate account of each
Portfolio will be established with the Custodian consisting of cash or U.S.
Government securities having a market value at all times at least equal in value
to the proceeds received on any sale subject to repurchase plus accrued
interest.
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APPENDIX B
DESCRIPTION OF
CORPORATE BOND RATINGS
RATINGS OF CORPORATE BONDS
Description of Corporate Bond Ratings of Moody's Investors Service, Inc.:
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge'. Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payment and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other market
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Con. (...)--Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
NOTE: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa1,
A1, Baa1, Ba1 and B1.
Description of Corporate Bond Ratings of Standard & Poor's Ratings Group:
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC--Debt rated BB, B, CCC and CC is regarded on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in
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accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are out-weighed
by large uncertainties or major risk exposures to adverse conditions.
C--The rating C is reserved for income bonds on which no interest is being
paid.
D--Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
PLUS (+) OR MINUS (--): The ratings from 'AA' to 'B' may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
PROVISIONAL RATINGS: The letter 'P' indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the debt being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. The rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of such completion. The
investor should exercise his own judgment with respect to such likelihood and
risk.
L--letter 'L' indicates that the rating pertains to the principal amount of
those bonds where the underlying deposit collateral is fully insured by the
Federal Savings & Loan Insurance Corp. or the Federal Deposit Insurance Corp.
*Continuance of the rating is contingent upon S&P's receipt of an executed
copy of the escrow agreement or closing documentation confirming investments and
cash flows.
NR--indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
35
<PAGE>
DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
P.O. Box 9081
Princeton, New Jersey 08543-9081
INVESTMENT ADVISER
Merrill Lynch Asset Management, L.P.
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
CUSTODIAN
The Bank of New York
90 Washington Street
12th Floor
New York, New York 10286
TRANSFER AND DIVIDEND DISBURSING AGENT
Merrill Lynch Financial Data Services, Inc.
Administrative Offices:
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Mailing Address:
P.O. Box 45289
Jacksonville, Florida 32232-5289
LEGAL COUNSEL
Rogers & Wells
200 Park Avenue
New York, New York 10166
INDEPENDENT AUDITORS
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540
36
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
APRIL 29, 1996
MERRILL LYNCH SERIES FUND, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 o (609) 282-2800
Merrill Lynch Series Fund, Inc. (the 'Fund') is an open-end management
investment company which has a wide range of investment objectives among its ten
separate Portfolios: Money Reserve Portfolio, Intermediate Government Bond
Portfolio, Long Term Corporate Bond Portfolio, High Yield Portfolio, Capital
Stock Portfolio, Growth Stock Portfolio, Multiple Strategy Portfolio, Natural
Resources Portfolio, Global Strategy Portfolio and Balanced Portfolio. Each
Portfolio is in effect a separate fund issuing its own shares.
The shares of the Portfolios will be sold only to separate accounts (the
'Separate Accounts') of the Merrill Lynch Insurance Companies, as defined below,
and Monarch Life Insurance Company's Variable Account A (collectively, the
'Accounts') to fund benefits under Variable Life Insurance Policies (the
'Policies') issued by Merrill Lynch Life Insurance Company and ML Life Insurance
Company of New York, indirect wholly owned subsidiaries of Merrill Lynch & Co.,
Inc. (collectively, the 'Merrill Lynch Insurance Companies'), and Monarch Life
Insurance Company ('Monarch' and, together with the Merrill Lynch Insurance
Companies, the 'Insurance Companies'). The Accounts invest in shares of the Fund
in accordance with allocation instructions received from Policyowners. Such
allocation rights are further described in the accompanying Prospectus for the
Policies. The Insurance Companies redeem shares to the extent necessary to
provide benefits under the Policies.
------------------------------
This Statement of Additional Information of the Fund is not a prospectus
and should be read in conjunction with the Prospectus of the Fund (the
'Prospectus') dated April 29, 1996, which has been filed with the Securities and
Exchange Commission and is available upon oral or written request without
charge. Copies of the Prospectus can be obtained by calling or by writing the
Fund at the above telephone number or address. This Statement of Additional
Information has been incorporated by reference into the Prospectus.
------------------------------
MERRILL LYNCH ASSET MANAGEMENT--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies................ 2
Investment Restrictions........................... 2
Management of the Fund............................ 9
Investment Advisory Arrangements.................. 10
Determination of Net Asset Value.................. 11
Portfolio Transactions and Brokerage.............. 12
Redemption of Shares.............................. 13
Dividends, Distributions and Taxes................ 14
Distribution Arrangements......................... 14
Performance Data.................................. 14
Additional Information............................ 15
Independent Auditors' Report...................... 16
Financial Statements.............................. 17
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Money Reserve Portfolio are the
preservation of capital, liquidity and the highest possible current income
consistent with the foregoing objectives by investing in short-term money market
securities. The Intermediate Government Bond Portfolio seeks to attain the
highest possible current income consistent with the protection of capital
afforded by investing in intermediate-term debt securities issued or guaranteed
by the U.S. Government or its agencies. The investment objective of the Long
Term Corporate Bond Portfolio is to attain as high a level of current income as
is consistent with prudent investment risk, by investing primarily in
fixed-income, high quality corporate bonds. The High Yield Portfolio seeks high
current income consistent with prudent investment management by investing
primarily in fixed-income securities rated in the lower rating categories of the
established rating services. The Capital Stock Portfolio seeks to attain
long-term growth of capital and income, plus moderate current income,
principally by investing in common stocks which are considered to be of good or
improving quality or which are thought to be undervalued based on criteria such
as historical price/book value ratios and price/earnings ratios. The investment
objective of the Growth Stock Portfolio is to attain above average long-term
growth of capital by investing primarily in common stocks of aggressive growth
companies that are considered to have special growth potential. The Multiple
Strategy Portfolio seeks a high total investment return consistent with prudent
risk through a fully managed investment policy utilizing equity securities,
primarily common stocks of large-capitalization companies, as well as investment
grade intermediate- and long-term debt securities and money market securities.
The Natural Resources Portfolio seeks to attain long-term growth of capital and
the protection of the purchasing power of shareholders' capital by investing in
equity securities of domestic and foreign companies with substantial natural
resource assets. The investment objective of the Global Strategy Portfolio is
high total investment return by investing primarily in a portfolio of equity and
fixed income securities of U.S. and foreign issuers. The investment objective of
the Balanced Portfolio is to seek a level of current income and a degree of
stability of principal not normally available from an investment solely in
equity securities and the opportunity for capital appreciation greater than that
normally available from an investment solely in debt securities by investing in
a balanced portfolio of debt and equity securities.
Reference is made to 'Investment Objectives and Policies of the Portfolios'
on page 13 of the Prospectus for a more complete discussion of the investment
objectives and policies of the Fund.
INVESTMENT RESTRICTIONS
RESTRICTIONS APPLICABLE TO ALL OF THE PORTFOLIOS
The Fund has adopted the following restrictions and policies relating to
the investment of assets of the Portfolios and their activities. These are
fundamental policies and may not be changed without the approval of the holders
of a majority of the outstanding voting shares of each Portfolio affected (which
for this purpose and under the Investment Company Act of 1940 means the lesser
of (i) 67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the outstanding
shares). A change in policy affecting only one Portfolio may be effected with
the approval of a majority of the outstanding shares of such Portfolio. The Fund
may not issue senior securities (except to the extent that borrowings under item
(9) below exceeding 5% may be deemed to be senior securities under the
Investment Company Act of 1940) and, subject to the separate restrictions on the
types of securities in which the Money Reserve and Intermediate Government Bond
Portfolios may invest as set forth below, each Portfolio of the Fund may not:
1. Except with respect to the Natural Resources and Global Strategy
Portfolios, (a) invest more than 5% of its total assets (taken at market
value at the time of each investment) in the securities (other than U.S.
Government or government agency securities) of any one issuer (including
repurchase agreements with any one bank) and (b) purchase more than either
(i) 10% in principal amount of the outstanding debt securities of an
issuer, or (ii) 10% of the outstanding voting securities of an issuer,
except that such restrictions shall not apply to securities issued or
guaranteed by the U.S. Government or its agencies, bank money instruments
or bank repurchase agreements.
2. Invest more than 25% of its total assets (taken at market value at
the time of each investment) in the securities of issuers primarily engaged
in the same industry (utilities will be divided according to their
services; for example, gas, gas transmission, electric and telephone each
will be considered a separate industry for purposes of this restriction),
except for the Natural Resources Portfolio, which when management
anticipates significant economic, political or financial instability, may,
subject to the diversification requirements of the Internal Revenue Code
relating to qualification under the Code as a regulated investment
2
<PAGE>
company, invest more than 25% of its total assets in gold-related
companies.
3. Alone, or together with any other Portfolio or Portfolios, make
investments for the purpose of exercising control over, or management of,
any issuer.
4. Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization, or
by purchase in the open market of securities of closed-end investment
companies where no underwriter or dealer's commission or profit, other than
customary broker's commission, is involved, and only if immediately
thereafter not more than 10% of such Portfolio's total assets, taken at
market value, would be invested in such securities.
5. Purchase or sell interests in oil, gas or other mineral exploration
or development programs, commodities, commodity contracts or real estate,
except that any Portfolio may purchase securities of issuers which invest
or deal in any of the above and the Multiple Strategy, Natural Resources
and Global Strategy Portfolios may engage in transactions in currency,
forward currency contracts, futures contracts and options thereon and the
Natural Resources Portfolio may purchase, sell or otherwise invest or deal
in commodities or commodity contracts. (As a matter of operating policy,
however, the Natural Resources Portfolio at present does not intend to
engage in transactions in commodities or commodity contracts, other than
foreign currency, futures contracts and options on futures.)
6. Purchase any securities on margin (except that the Fund may obtain
such short-term credit as may be necessary for the clearance of purchases
and sales of portfolio securities and the Multiple Strategy, Natural
Resources and Global Strategy Portfolios may make margin payments in
connection with transactions in options, forward currency contracts,
futures contracts and options on futures contracts) or make short sales of
securities or maintain a short position (except that the Multiple Strategy
Portfolio, Natural Resources and Global Strategy Portfolios may maintain
short positions in forward currency contracts, options, futures contracts
and options on futures contracts).
7. Make loans, except as provided in (8) below and except through the
purchase of obligations in private placements (the purchase of
publicly-traded obligations not being considered the making of a loan).
8. Lend its portfolio securities in excess of 33-1/3% of its total
assets, taken at market value at the time of the loan, and provided that
such loan shall be made in accordance with the guidelines set forth under
'Other Portfolio Strategies--Lending of Portfolio Securities' on page 22 of
the Prospectus.
9. Borrow amounts in excess of 10% of its total assets, taken at
market value at the time of the borrowing, and then only from banks as a
temporary measure for extraordinary or emergency purposes.
10. Mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by such Portfolio
except as may be necessary in connection with borrowings mentioned in (9)
above (and then such mortgaging, pledging or hypothecating may not exceed
10% of such Portfolio's total assets, taken at market value at the time
thereof), and except as may be necessary for the Multiple Strategy
Portfolio, Natural Resources Portfolio or Global Strategy Portfolio in
connection with transactions in options, forward currency contracts,
futures contracts and options on futures contracts. In order to comply with
certain state statutes, each Portfolio, other than the Multiple Strategy
Portfolio, Natural Resources Portfolio or Global Strategy Portfolio, will
not, as a matter of operating policy, mortgage, pledge or hypothecate its
portfolio securities to the extent that at any time the percentage of the
value of pledged securities plus the maximum sales charge will exceed 10%
of the value of such Portfolio's shares at the maximum offering price.
11. Underwrite securities of other issuers except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in selling
portfolio securities.
12. Except for the Multiple Strategy Portfolio, Natural Resources and
Global Strategy Portfolios, write, purchase or sell puts, calls or
combinations thereof, except that the Capital Stock Portfolio and the
Balanced Portfolio may write covered call options.
13. Except with respect to the Capital Stock Portfolio, the Natural
Resources Portfolio, the Global Strategy Portfolio and the Multiple
Strategy Portfolio, invest in securities of foreign issuers if at the time
of acquisition more than 10% of its total assets, and in the case of the
Capital Stock Portfolio 20% of its total assets, taken at market value at
the time of the investment, would be invested in such securities; provided,
however, that up to 25% of the total assets of such Portfolio may be
invested in securities (i) issued, assumed or guaranteed by foreign
governments, or political subdivisions or instrumentalities thereof, (ii)
assumed or guaranteed by domestic issuers,
3
<PAGE>
including Eurodollar securities, or (iii) issued, assumed or guaranteed by
foreign issuers having a class of securities listed for trading on the New
York Stock Exchange. (As a matter of operating policy, however, the
Multiple Strategy Portfolio will not invest in the securities of foreign
issuers if at the time of acquisition more than 25% of its total assets
would be invested in such securities. In addition, the Balanced Portfolio,
as a matter of operating policy, does not intend to invest any portion of
its assets in the securities of foreign issuers.) See 'Other Portfolio
Strategies--Foreign Securities' in the Prospectus. Consistent with the
general policy of the Securities and Exchange Commission, the nationality
or domicile of an issuer for determination of foreign issuer status may be
(i) the country under whose laws the issuer is organized, (ii) the country
in which the issuer's securities are principally traded, or (iii) a country
in which the issuer derives a significant proportion (at least 50%) of its
revenues or profits from goods produced or sold, investments made, or
services performed in the country, or in which at least 50% of the assets
of the issuer are situated.
14. Participate on a joint (or a joint and several) basis in any
trading account in securities (but this does not include the 'bunching' of
orders for the sale or purchase of portfolio securities with the other
Portfolios or with individually managed accounts advised or sponsored by
the Investment Adviser or any of its affiliates to reduce brokerage
commissions or otherwise to achieve best overall execution).
15. Purchase or retain the securities of any issuer, if those
individual officers and directors of the Fund, Merrill Lynch Asset
Management or any subsidiary thereof each owning beneficially more than
1/2 of 1% of the securities of such issuer, own in the aggregate more than
5% of the securities of such issuer.
RESTRICTIONS APPLICABLE ONLY TO THE MONEY RESERVE AND INTERMEDIATE GOVERNMENT
BOND PORTFOLIOS
The Money Reserve Portfolio may not invest in any security which is not a
short-term money market security as described under 'Investment Objectives and
Policies of the Portfolios--Money Reserve Portfolio' in the Prospectus. The
Intermediate Government Bond Portfolio may not invest in any security which is
not issued or guaranteed by the U.S. Government or one of its agencies or which
has a stated maturity greater than fifteen years from the date of purchase.
SPECIAL CONSIDERATIONS WITH RESPECT TO THE NATURAL RESOURCES PORTFOLIO
In determining compliance by the Natural Resources Portfolio with its
policy on investing in the securities of issuers primarily engaged in the same
industry, management will rely on the industrial classifications contained in
the Standard & Poor's Register of Corporations, Directors and Executives.
PORTFOLIO STRATEGIES
Forward Commitments. Portfolios may purchase U.S. Government securities
and corporate bonds on a forward commitment basis at fixed purchase terms with
periods of up to 45 days or, in the case of the Money Reserve Portfolio, 95 days
between the commitment and settlement dates. The purchase will be recorded on
the date a Portfolio enters into the commitment and the value of the security
will thereafter be reflected in the calculation of the Portfolio's net asset
value. The value of the security on the delivery date may be more or less than
its purchase price. A separate account of the Portfolio will be established with
The Bank of New York, Custodian of the Fund, consisting of cash or liquid, high
grade debt obligations having a market value at all times until the delivery
date at least equal to the amount of the forward commitment. Although a
Portfolio will generally enter into forward commitments with the intention of
acquiring securities for its portfolio, it may dispose of a commitment prior to
settlement if management of the Fund deems it appropriate to do so. There can,
of course, be no assurance that the judgments upon which these techniques are
based will be accurate or that such techniques when applied will be effective.
The Portfolios will enter into forward commitment arrangements only with respect
to securities in which they may otherwise invest as described under 'Investment
Objectives and Policies of the Portfolios' on page 13 of the Prospectus.
Lending of Portfolio Securities. Subject to investment restriction (8)
above, each Portfolio may from time to time loan securities from its portfolio
to brokers, dealers and financial institutions and receive collateral in cash or
securities issued or guaranteed by the U.S. Government which will be maintained
in amounts equal to at least 100% of the current market value of the loaned
securities at all times while the loan is outstanding. Any cash collateral will
be invested in short-term securities, the income from which will increase the
return to the Portfolio. Such loans, which will not have terms longer than 30
days, will be terminable at any time. The Portfolio will retain all rights of
beneficial ownership as to the loaned portfolio securities, including voting
rights and rights to interest or other distributions, and will have the right to
regain record ownership of loaned
4
<PAGE>
securities to exercise such beneficial rights. Such loans will be terminable at
any time. The Portfolio may pay reasonable finders', administrative and
custodial fees to persons unaffiliated with the Portfolio in connection with the
arranging of such loans. The dividends, interest, and other distributions
received by the Portfolio on loaned securities may, for tax purposes, be treated
as income other than qualified income for the 90% test discussed under
'Dividends, Distributions and Taxes--Federal Income Taxes.' The Fund's
Portfolios intend to lend portfolio securities only to the extent that such
activity does not jeopardize the Fund's qualification as a regulated investment
company under Subchapter M of the Code.
Investment in Eurodollar and Yankeedollar Obligations. As is discussed in
the Prospectus, the Money Reserve Portfolio may invest in U.S.
dollar-denominated obligations issued by foreign banks or branches or
subsidiaries of U.S. or foreign banks ('Eurodollar' obligations) or U.S.
branches or subsidiaries of foreign banks ('Yankeedollar' obligations).
Investment in Eurodollar and Yankeedollar obligations may involve different
risks from the risks of investing in obligations of U.S. banks. See 'Other
Portfolio Strategies--Foreign Securities' in the Prospectus. Such risks include
adverse political and economic developments, the possible imposition of
withholding taxes on interest income payable on such obligations, the possible
seizure or nationalization of foreign deposits and the possible establishment of
exchange controls or other foreign governmental laws or restrictions which might
adversely affect the payment of principal and interest. Generally the issuers of
such obligations are subject to fewer U.S. regulatory requirements than are
applicable to U.S. banks. Foreign branches or subsidiaries of U.S. banks may be
subject to less stringent reserve requirements than U.S. banks. U.S. branches or
subsidiaries of foreign banks are subject to the reserve requirements of the
state in which they are located. There may be less publicly available
information about a U.S. branch or subsidiary of a foreign bank than about a
U.S. bank, and such branches or subsidiaries may not be subject to the same
accounting, auditing and financial record keeping standards and requirements as
U.S. banks. Evidence of ownership of Eurodollar obligations may be held outside
of the United States, and the Money Reserve Portfolio may be subject to the
risks associated with the holding of such property overseas. Eurodollar
obligations of the Money Reserve Portfolio held overseas will be held by foreign
branches of the Custodian for the Money Reserve Portfolio or by other U.S. or
foreign banks under subcustodian arrangements complying with the requirements of
the Investment Company Act of 1940.
The Investment Adviser will consider the above factors in making
investments in Eurodollar and Yankeedollar obligations and will not knowingly
purchase obligations which, at the time of purchase, are subject to exchange
controls or withholding taxes. Generally, the Money Reserve Portfolio will limit
its Eurodollar and Yankeedollar investments to obligations of banks organized in
Canada, France, Germany, Japan, the Netherlands, Switzerland, the United Kingdom
and other western industrialized nations.
Restricted Securities. From time to time the High Yield Portfolio may
invest up to 10% of its assets in securities the disposition of which is subject
to legal restrictions, such as restrictions imposed by the Securities Act of
1933 on the resale of securities acquired in private placements. If registration
of such securities under the Securities Act is required, such registration may
not be readily accomplished, and if such securities may be resold without
registration, such resale may be permissible only in limited quantities. In
either event, the Portfolio may not be able to sell its restricted securities at
a time which, in the judgment of the Investment Adviser, would be most
opportune.
Standby Commitment Agreements. The High Yield Portfolio may from time to
time enter into standby commitment agreements. Such agreements commit the
Portfolio, for a stated period of time, to purchase a stated amount of a fixed
income security which may be issued and sold to the Portfolio at the option of
the issuer. The price and coupon of the security is fixed at the time of the
commitment. At the time of entering into the agreement the Portfolio is paid a
commitment fee, regardless of whether or not the security is ultimately issued,
which is typically approximately 0.5% of the aggregate purchase price of the
security which the Portfolio has committed to purchase. The Portfolio will enter
into such agreements only for the purpose of investing in the security
underlying the commitment at a yield and price which is considered advantageous
to the Portfolio. The Portfolio will not enter into a standby commitment with a
remaining term in excess of 45 days and will limit its investment in such
commitments so that the aggregate purchase price of the securities subject to
such commitments, together with the value of the portfolio securities subject to
legal restrictions on resale, will not exceed 10% of its assets taken at the
time of acquisition of such commitment or security. The Portfolio will at all
times maintain a segregated account with the Fund's Custodian of cash or liquid,
high-grade debt obligations in an amount equal to the purchase price of the
securities underlying the commitment.
There can be no assurance that the securities subject to a standby
commitment will be issued, and the value of the security, if issued, on the
delivery date may be more or less
5
<PAGE>
than its purchase price. Since the issuance of the security underlying the
commitment is at the option of the issuer, the Portfolio may bear the risk of a
decline in the value of such security and may not benefit from an appreciation
in the value of the security during the commitment period.
The purchase of a security subject to a standby commitment agreement and
the related commitment fee will be recorded on the date on which the security
can reasonably be expected to be issued and the value of the security will
thereafter be reflected in the calculation of the Portfolio's net asset value.
If the security is issued, the cost basis of the security will be adjusted by
the amount of the commitment fee. In the event the security is not issued, the
commitment fee will be recorded as income on the expiration date of the standby
commitment.
Asset-Based Securities. As described in the Prospectus, the Natural
Resources Portfolio may invest in debt securities, preferred stocks or
convertible securities, the principal amount, redemption terms or conversion
terms of which are related to the market price of some natural resource asset
such as gold bullion. These securities are referred to as 'asset-based
securities.'
The Portfolio will not acquire asset-based securities for which no
established secondary trading market exists if at the time of acquisition more
than 5% of its total assets are invested in securities which are not readily
marketable. The Portfolio may invest in asset-based securities without limit
when it has the option to put such securities to the issuer or a stand-by bank
or broker and receive the principal amount or redemption price thereof less
transaction costs on no more than seven days notice or when the Portfolio has
the right to convert such securities into a readily marketable security in which
it could otherwise invest upon not less than seven days' notice.
The asset-based securities in which the Portfolio may invest may bear
interest or pay preferred dividends at below market (or even relatively nominal)
rates. The Portfolio's holdings of such securities therefore may not generate
appreciable current income, and the return from such securities primarily will
be from any profit on the sale, maturity or conversion thereof at a time when
the price of the related asset is higher than it was when the Portfolio
purchased such securities.
Writing of Covered Call Options. Each of the Capital Stock, Multiple
Strategy, Natural Resources, Global Strategy and Balanced Portfolios may from
time to time write covered call options on its portfolio securities. A covered
call option is an option where the Portfolio owns the underlying securities. By
writing a covered call option, the Portfolio, in return for the premium income
realized from the sale of the option, may give up the opportunity to profit from
a price increase in the underlying security above the option exercise price. In
addition, the Portfolio will not be able to sell the underlying security until
the option expires or is exercised or the Portfolio effects a closing purchase
transaction as described below. If the option expires unexercised, or is closed
out at a profit, the Portfolio realizes a gain (short-term capital gain for
federal income tax purposes) on the option which may offset all or a part of a
decline in the market price of the underlying security during the option period.
Exchange-traded options are issued by The Options Clearing Corporation (the
'Clearing Corporation'). The option gives the purchaser of an option the right
to buy, and obligates the writer (seller) to sell, the underlying security at
the exercise price during the option period. The maximum term of an option is
nine months. For writing an option, the Portfolios receive a premium, which is
the price of such option on the exchange on which it is traded. The exercise
price of the option may be below, equal to or above the current market value of
the underlying security at the time the option was written.
A Portfolio may terminate its obligation prior to the expiration date of
the option by executing a closing purchase transaction which is effected by
purchasing on an exchange an option of the same series (i.e., same underlying
security, exercise price and expiration date) as the option previously written.
The cost of such closing purchase transaction may be greater than the premium
received upon the original option, in which case a Portfolio will have incurred
a loss in the transaction. An option may be closed out only on an exchange which
provides a secondary market for an option of the same series and there is no
assurance that a secondary market will exist for any particular option at any
specific time. In the event the Portfolio is unable to effect a closing purchase
transaction, it will not be able to sell the underlying security until the
option expires or the underlying security is delivered upon exercise, with the
result that the Portfolio will be subject to the risk of market decline in the
underlying security during such period. The Portfolio will write an
exchange-traded option on a particular security only if management believes that
a secondary market will exist on an exchange for options of the same series
which will permit the Portfolio to make a closing purchase transaction in order
to close out its position.
Writing options involves risks of possible unforeseen events which can be
disruptive to the option markets or could result in the institution of certain
procedures including restriction of certain types of orders.
Purchase of Put Options. The Global Strategy, Multiple Strategy and
Natural Resources Portfolios may purchase put options in connection with their
hedging
6
<PAGE>
activities. By buying a put, a Portfolio has the right to sell the underlying
securities at the exercise price, thus limiting the Portfolio's risk of loss
through a decline in the market value of the security until the put expires.
Stock Index Options. The Natural Resources Portfolio and Multiple Strategy
Portfolio each may write exchange-traded call options and may purchase put
options on stock indices for the purpose of hedging the Portfolio's investment
portfolio. As stated in the Prospectus, the effectiveness of this hedging
technique will depend upon the extent to which price movements in the portion of
the Portfolio's investment portfolio being hedged correlate with price movements
of the stock index selected. Because the value of an index option depends upon
movements in the level of the index rather than the price of a particular stock,
whether the Portfolio will realize a gain or loss on the purchase or sale of an
option on an index depends upon movements in the level of prices in the stock
market generally or in an industry or market segment rather than movements in
the price of a particular stock. Accordingly, successful use by the Portfolio of
options on indices will be subject to the Investment Adviser's ability to
correctly predict movements in the direction of the stock market generally or of
a particular industry or market segment. This requires different skills and
techniques than predicting changes in the price of individual stocks.
Stock Index Futures. The Multiple Strategy Portfolio and Natural Resources
Portfolio will only engage in transactions in stock index futures to hedge its
investment portfolio. The Portfolios may sell stock index futures contracts in
anticipation of or during a market decline in an endeavor to offset the decrease
in market value of the Portfolio's securities portfolio that would otherwise
result from a market decline. When a Portfolio is not fully invested in the
securities market and anticipates a significant market advance, it may purchase
stock index futures in order to gain rapid market exposure that may in part or
entirely offset increases in the cost of the securities that the Portfolio
intends to purchase. No purchase of stock index futures will be made, however,
unless the Portfolio intends to purchase securities in approximately the amount
of the market value of the stocks represented by the index futures purchased and
the Portfolio has identified the cash or cash equivalents needed to make such a
purchase. An amount of cash and cash equivalents will be deposited in a
segregated account with the Fund's Custodian so that the amount so segregated,
plus the initial and variation margin held in the account of its broker, will
collateralize the Portfolio's position in stock index futures.
Forward Foreign Exchange Transactions. The Multiple Strategy, Natural
Resources and Global Strategy Portfolios may engage in forward foreign exchange
transactions. Generally, the foreign exchange transactions of a Portfolio will
be conducted on a spot, i.e., cash, basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market. This rate under
normal market conditions differs from the prevailing exchange rate in an amount
generally less than one-tenth of one percent due to the costs of converting from
one currency to another. However, the Portfolios have authority to deal in
forward foreign exchange between currencies of the different countries in whose
securities they will invest as a hedge against possible variations in the
foreign exchange rates between these currencies. This is accomplished through
contractual agreements to purchase or sell a specified currency at a specified
future date and price set at the time of the contract. A Portfolio's dealings in
forward foreign exchange will be limited to hedging involving either specific
transactions or portfolio positions. Transaction hedging is the purchase or sale
of forward foreign currency with respect to specific receivables or payables of
a Portfolio accruing in connection with the purchase and sale of its portfolio
securities, the sale and redemption of shares of a Portfolio or the payment of
dividends and distributions by a Portfolio. Position hedging is the sale of
forward foreign currency with respect to portfolio security positions
denominated or quoted in such foreign currency. The Portfolios may not speculate
in forward foreign exchange. A Portfolio may not hedge a position with respect
to the currency of a particular country to an extent greater than the aggregate
market value (at the time of making such sale) of the securities held in its
portfolio denominated or quoted in that particular foreign currency. If a
Portfolio enters into a position hedging transaction, the Fund's Custodian will
place cash or liquid securities in a separate account of the Portfolio in an
amount equal to the value of the Portfolio's total assets committed to the
consummation of such forward contract. If the value of the securities placed in
the separate account declines, additional cash or securities will be placed in
the account so that the value of the account will equal the amount of the
Portfolio's commitment with respect to such contract. A Portfolio may not enter
into a forward contract with a term of more than one year.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Portfolio to hedge against
7
<PAGE>
a devaluation that is so generally anticipated that the Portfolio is not able to
contract to sell the currency at a price above the devaluation level it
anticipates. The cost to a Portfolio of engaging in foreign currency
transactions varies with such factors as the currency involved, the length of
the contract period and the market conditions then prevailing. Since
transactions in foreign currency exchange are usually conducted on a principal
basis, no fees or commissions are involved.
Call Options on Futures Contracts. A call option on a futures contract
provides the purchaser with the right, but not the obligation, to enter into a
'long' position in the underlying futures contract at any time up to the
expiration of the option. The purchase of an option on a futures contract
presents more limited risk than purchasing the underlying futures contract.
Depending on the price of the option compared to either the futures contract
upon which it is based, or the underlying securities or currency, exercise of
the option may or may not be less risky than ownership of the futures contract
or underlying securities or currency. Like the purchase of a futures contract, a
Portfolio will purchase a call option on a futures contract to hedge against the
appreciation of equity securities resulting from a market advance or
appreciation of securities denominated in foreign currencies resulting from a
strengthening of the currency which the Portfolios intend to purchase.
The writing of a call option on a futures contract may constitute a partial
hedge against a decline in the equities market or drop in the value of a foreign
currency, if the futures price at expiration is below the exercise price of the
option. In such event, a Portfolio will retain the full amount of the option
premium, which provides a partial hedge against any decline that may have
occurred in the Portfolio's equity security investments or investments
denominated in foreign currencies. Conversely, if the futures price is above the
exercise price at any point prior to expiration, the option may be exercised and
the Portfolio would be required to enter into the underlying futures contract at
an unfavorable price.
Put Options on Futures Contracts. A put option on a futures contract
provides the purchaser with the right, but not the obligation, to enter into a
'short' position in the futures contract at any time up to the expiration of the
option. A Portfolio will purchase a put option on a futures contract to hedge
its securities against the risk of a decline in the equities markets or drop in
the value of a foreign currency.
The writing of a put option on a futures contract may constitute a partial
hedge against increasing prices of equity securities or securities denominated
in foreign currencies which a Portfolio intends to purchase, if the futures
price at expiration is higher than the exercise price. In such event, the
Portfolio will retain the full amount of the option premium, which provides a
partial hedge against any increase in the price of the securities which the
Portfolio intends to purchase. Conversely, if the futures price is below the
exercise price at any point prior to expiration, the option may be exercised and
the Portfolio would be required to enter into the underlying futures contract at
an unfavorable price.
Risk Factors in Transactions in Futures and Options Thereon. A Portfolio
may purchase futures contracts or purchase call or write put options thereon to
hedge against a possible increase in the price of securities before the
Portfolio is able to invest its cash in such securities. In such instances, it
is possible that the market may instead decline. If the Portfolio does not then
invest in such securities because of concern as to possible further market
decline or for other reasons, the Portfolio may realize a loss on the futures or
option contract that is not offset by a reduction in the price of securities
purchased.
Because of low initial margin deposits made upon the opening of a futures
position, futures transactions involve substantial leverage. As a result,
relatively small movements in the price of the futures contract can result in
substantial unrealized gains or losses. Because the Portfolios will engage in
the purchase and sale of stock index and currency contracts solely for hedging
purposes, however, any losses incurred in connection therewith should, if the
hedging strategy is successful, be offset in whole or in part by increases in
the value of securities held by the Portfolios or decreases in the price of
securities the Portfolios intend to acquire.
The anticipated offsetting movements between the price of the futures or
option contracts and the hedged security may be distorted due to differences in
the nature of the markets, such as differences in initial and variation margin
requirements, the liquidity of such markets and the participation of speculators
in such markets.
The amount of risk a Portfolio assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In order to profit from an option purchased, however, it may be necessary
to exercise the option and to liquidate the underlying futures contract, subject
to the risks of the availability of a liquid offset market. In addition to the
correlation risks discussed above, the purchase of an option also entails the
risk that changes in the value of the underlying futures contract will not be
fully reflected in the value of the option purchased. The writer of an option on
a futures contract is subject to the risks of commodity futures trading,
including the requirement of variation margin payments, as well as the
additional risk that movements in the price of the option may not correlate with
movements in the price of the underlying security or futures contract.
8
<PAGE>
The trading of futures contracts and options thereon also is subject to
certain market risks, such as trading halts, suspensions, exchange or clearing
house equipment failures, government intervention, insolvency of a brokerage
firm or clearing corporation or other disruptions of normal trading activity,
which could at times make it difficult or impossible to liquidate existing
positions.
MANAGEMENT OF THE FUND
The directors and executive officers of the Fund and their principal
occupations for at least the last five years, their ages and the public
companies for which they serve as directors are set forth below. Unless
otherwise noted, the address of each executive officer and director is P.O. Box
9011, Princeton, New Jersey 08543-9011.
TERRY K. GLENN (55)--President and Director(1)(2)--Executive Vice President
of MLAM and Fund Asset Management, L.P. ('FAM') since 1983; Executive Vice
President and Director of Princeton Services, Inc. since 1993; President of
Merrill Lynch Funds Distributor, Inc. (the 'Distributor') since 1986 and
Director thereof since 1991; President of Princeton Administrators, L.P. since
1988; and Director of Merrill Lynch Financial Data Services, Inc. since 1985.
JACK B. SUNDERLAND (67)--Director(2)--P.O. Box 7, West Cornwall,
Connecticut, 06796. President and Director of American Independent Oil Company,
Inc. (energy company) since 1987; Member of Council on Foreign Relations since
1971.
STEPHEN B. SWENSRUD (62)--Director(2)--24 Federal Street, Suite 400,
Boston, Massachusetts 02110. Principal of Fernwood Associates (financial
consultants).
J. THOMAS TOUCHTON (57)--Director(2)--Suite 3405, One Tampa City Center,
Tampa, Florida 33602. Managing Partner of The Witt-Touchton Company and its
predecessor The Witt Co. (private investment partnership) since 1972; Trustee
Emeritus of Washington and Lee University; Director of TECO Energy, Inc.
(electric utility holding company).
N. JOHN HEWITT (61)--Senior Vice President(1)(2)-- Senior Vice President of
the Investment Adviser since 1980.
NORMAN R. HARVEY (62)--Senior Vice President(1)(2)--Senior Vice President
of MLAM and FAM since 1982.
JOSEPH T. MONAGLE, JR. (47)--Senior Vice President(1)(2)--Senior Vice
President of MLAM since 1990; Vice President of MLAM from 1978 to 1990.
DONALD C. BURKE (35)--Vice President(1)(2)--Vice President of MLAM since
1990 and an employee of Deloitte & Touche LLP from 1982 to 1990.
VINCENT T. LATHBURY, III (55)--Vice President(1)(2)--Vice President of the
Investment Adviser and FAM and Portfolio Manager of the Investment Adviser and
FAM since 1982.
JAY C. HARBECK (61)--Vice President(1)(2)--Vice President of the Investment
Adviser and FAM since 1986.
ALDONA SCHWARTZ (47)--Vice President(1)(2)--Vice President of the
Investment Adviser since 1991; Employed by the Investment Adviser since 1986.
JOEL HEYMSFELD (51)--Vice President(1)(2)--Vice President of the Investment
Adviser since 1978.
LAWRENCE R. FULLER (55)--Vice President(1)(2)-- Vice President of the
Investment Adviser since 1992; Senior Vice President of Benefit Capital
Management Corporation from 1984 to 1992.
THOMAS R. ROBINSON (52)--Senior Portfolio Manager(1) of the Investment
Adviser since 1995; Manager of International Equity Strategy of Merrill Lynch &
Co.'s Global Securities Research & Economics Group from 1989 to 1995.
JACQUELINE ROGERS (38)--Vice President(1)(2)--Vice President of the
Investment Adviser since 1985.
PETER LEHMAN (37)--Vice President(1)(2)--Vice President of the Investment
Adviser since 1994; Employed by the Investment Adviser since 1992. Portfolio
manager of the Prudential Insurance Company of America from 1985 to 1991.
GERALD M. RICHARD (46)--Treasurer(1)(2)--Senior Vice President and
Treasurer of the Investment Adviser since 1984; Senior Vice President and
Treasurer of FAM since 1984; Treasurer of the Distributor since 1984 and Vice
President since 1981.
IRA P. SHAPIRO (33)--Secretary(1)(2)--attorney associated with the
Investment Adviser and FAM since 1993. Prior to 1993 Mr. Shapiro was an
attorney in private practice.
- ---------------
(1) Interested person, as defined in the Investment Company Act of 1940, of the
Fund.
(2) Mr. Glenn is a director or trustee and officer, Messrs. Sunderland, Swensrud
and Touchton are directors and Messrs. Burke, Harbeck, Shapiro, Harvey,
Monagle, Fuller, Hewitt, Heymsfeld, Lathbury, Lehman and Richard, and Ms.
Rogers and Ms. Schwartz are officers of certain other investment companies
for which the Investment Adviser or FAM acts as investment adviser (see
'Investment Advisory Arrangements').
9
<PAGE>
Set forth below is a chart showing the aggregate compensation paid by the
Fund to each of its directors, as well as the total compensation paid to each
director of the Fund by the Fund and by other investment companies advised by
the Investment Adviser or FAM (collectively, the 'Fund Complex') for their
services as directors or trustees of such investment companies for the fiscal
year ended December 31, 1995.
<TABLE>
<CAPTION>
PENSIONS
OR
RETIREMENT TOTAL
BENEFITS COMPENSATION
AGGREGATE ACCRUED AS FROM FUND
COMPENSATION PART OF AND FUND
FROM THE FUND COMPLEX PAID
NAME OF DIRECTOR FUND EXPENSES TO DIRECTORS
- ------------------------------ ------------ ---------- ------------
<S> <C> <C> <C>
Jack B. Sunderland............ $8,000 None $ 134,600
Stephen B. Swensrud........... $8,000 None $ 161,883
J. Thomas Touchton............ $8,000 None $ 134,600
</TABLE>
- ------------------
(1) In addition to the Fund, the Directors serve on the boards of other MLAM/FAM
advised funds as follows: Mr. Sunderland (28 funds and portfolios); Mr.
Swensrud (48 funds and portfolios); and Mr. Touchton (28 funds and
portfolios).
The officers of the Fund owned on February 28, 1996, in the aggregate, less
than 1% of the outstanding Common Stock of Merrill Lynch & Co., Inc. On February
28, 1996, the officers and directors of the Fund owned an aggregate of less than
1/4 of 1% of its outstanding shares. The Fund has an Audit Committee consisting
of all of the directors of the Fund who are not interested persons of the Fund.
Pursuant to the terms of the Investment Advisory Agreement, the Investment
Adviser pays all compensation of officers and employees of the Fund as well as
the fees of all directors of the Fund who are affiliated persons of Merrill
Lynch & Co., Inc. or its subsidiaries. The Fund pays each non-interested
director an annual fee of $5,000 plus $500 per quarterly meeting attended and an
annual fee of $1,000 for membership on the Audit Committee, and pays all of the
actual out-of-pocket expenses of such directors relating to attendance at
meetings. For the year ended December 31, 1995, such fees and expenses
aggregated $25,962.
INVESTMENT ADVISORY ARRANGEMENTS
The Fund has entered into an Investment Advisory Agreement with the
Investment Adviser. The Investment Adviser is a wholly-owned subsidiary of ML
Group, Inc., a wholly-owned subsidiary of Merrill Lynch & Co., Inc. The
principal business address of the Investment Adviser is P.O. Box 9011,
Princeton, New Jersey 08543-9011.
The principal executive officers and directors of the Investment Adviser
are Arthur Zeikel, President and Director; Terry K. Glenn, Director and
Executive Vice President; Robert W. Crook, Senior Vice President; Vincent R.
Giordano, Senior Vice President; Norman R. Harvey, Senior Vice President; Philip
L. Kirstein, Director, Senior Vice President, General Counsel and Secretary;
Ronald M. Kloss, Senior Vice President and Controller; Joseph T. Monagle, Senior
Vice President; Gerald M. Richard, Senior Vice President and Treasurer; Stephen
M.M. Miller, Senior Vice President; Ronald L. Wellburn, Senior Vice President;
and Anthony Wiseman, Senior Vice President.
Securities held by any Portfolio may also be held by other funds for which
the Investment Adviser or FAM acts as an adviser, or by investment advisory
clients of the Investment Adviser. Because of different investment objectives or
other factors, a particular security may be bought for one or more clients when
one or more clients are selling the same security. If purchases or sales of
securities for any Portfolio or other funds for which the Investment Adviser or
FAM acts as investment adviser or for their advisory clients arise for
consideration at or about the same time, transactions in such securities will be
made, insofar as feasible, for the respective funds and clients in a manner
deemed equitable to all. To the extent that transactions on behalf of more than
one client of the Investment Adviser or FAM during the same period may increase
the demand for securities being purchased or the supply of securities being
sold, there may be an adverse effect on price.
Advisory Fee. The Investment Advisory Agreement provides that as
compensation for its services to the Fund, the Investment Adviser receives
monthly compensation with respect to such Portfolios according to the following
schedule:
<TABLE>
<CAPTION>
AGGREGATE OF AVERAGE DAILY NET ASSETS
OF THE TEN COMBINED PORTFOLIOS ADVISORY FEE
<S> <C>
Not exceeding $250 million................... 0.50%
In excess of $250 million
but not exceeding $300 million............. 0.45%
In excess of $300 million
but not exceeding $400 million............. 0.40%
In excess of $400 million
but not exceeding $800 million............. 0.35%
In excess of $800 million.................... 0.30%
</TABLE>
These fee rates are applied to the average daily net assets of each
Portfolio, with the reduced rates applicable to portions of the assets of each
Portfolio to the extent that the aggregate of the average daily net assets of
the ten combined Portfolios exceeds $250 million, $300 million,
10
<PAGE>
$400 million and $800 million (each such amount being a 'breakpoint level'). The
portion of the assets of a Portfolio to which the rate at each breakpoint level
applies will be determined on a 'uniform percentage' basis. The uniform
percentage applicable to a breakpoint level is determined by dividing the amount
of the aggregate of the average daily net assets of the ten combined Portfolios
that falls within that breakpoint level by the aggregate of the average daily
net assets of the ten combined Portfolios. The amount of the fee for a Portfolio
at each breakpoint level is determined by multiplying the average daily net
assets of that Portfolio by the uniform percentage applicable to that breakpoint
level and multiplying the product by the advisory fee rate.
The Investment Advisory Agreement provides that the Investment Adviser will
reimburse the Fund if and to the extent that in any year the aggregate ordinary
operating expenses of any Portfolio exceed the most restrictive expense
limitations then in effect under any state securities law or the regulations
thereunder. Under the most restrictive state regulations presently in effect,
the Investment Adviser is required to reimburse each Portfolio (up to the amount
of the advisory fee received by it from the Fund with respect to such Portfolio)
to the extent that such Portfolio's aggregate ordinary operating expenses
(excluding interest, taxes, brokerage fees and commissions and extraordinary
charges such as litigation costs) exceed in any fiscal year 2.5% of the
Portfolio's first $30,000,000 of average daily net assets, 2.0% of average daily
net assets in excess of $30,000,000 but less than $100,000,000, and 1.5% of its
average daily net assets in excess of $100,000,000 for such year.
For the fiscal years ended December 31, 1995, 1994 and 1993, the advisory
fees paid by the Fund to the Investment Adviser totalled $9,302,375, $9,287,259
and $9,252,881, respectively.
The Investment Advisory Agreement with respect to the Fund's Portfolios was
approved by the Fund's Board of Directors, including a majority of the Directors
who are not interested persons of the Investment Adviser, on May 5, 1995. The
Agreement was last approved by the Fund's shareholders in accordance with
instructions from Policyowners at the Annual Meeting of Shareholders held on
January 31, 1992. The Agreement will continue in effect from year to year if
approved annually (a) by the Board of Directors of the Fund or by a majority of
the outstanding shares of the respective Portfolios, and (b) by a majority of
the Directors who are not parties to such contract or interested persons (as
defined in the Investment Company Act of 1940) of any such party. The Agreement
is not assignable and may be terminated without penalty on 60 days' written
notice at the option of either party or by the vote of the shareholders of the
Fund.
Payment of Expenses. The Investment Advisory Agreement obligates the
Investment Adviser to provide investment advisory services and to pay all
compensation of and furnish office space for officers and employees of the Fund
connected with investment and economic research, trading and investment
management of the Portfolios, as well as the fees of all directors of the Fund
who are affiliated persons of Merrill Lynch & Co., Inc. or any of its
subsidiaries. Each Portfolio will pay all other expenses incurred in its
operation, including a portion of the Fund's general administrative expenses
allocated on the basis of the Portfolio's asset size. Expenses that will be
borne directly by the Portfolios include redemption expenses, expenses of
portfolio transactions, shareholder servicing costs, expenses of registering the
shares under Federal and state securities laws, pricing costs (including the
daily calculation of net asset value), interest, certain taxes, charges of the
Custodian and Transfer Agent and other expenses attributable to a particular
Portfolio. Expenses which will be allocated on the basis of size of the
respective Portfolios include directors' fees, legal expenses, state franchise
taxes, auditing services, costs of printing proxies, stock certificates,
shareholder reports and prospectuses and statements of additional information
(to the extent not paid for by the Distributor), Securities and Exchange
Commission fees, accounting costs and other expenses properly payable by the
Fund and allocable on the basis of size of the respective Portfolios. Accounting
services are provided for the Fund by the Investment Adviser, and the Fund
reimburses the Investment Adviser for its costs in connection with such
services. For the year ended December 31, 1995, the amount of such reimbursement
was $444,162. Depending upon the nature of the lawsuit, litigation costs may be
directly applicable to the Portfolios or allocated on the basis of the size of
the respective Portfolios. The Board of Directors has determined that this is an
appropriate method of allocation of expenses.
DETERMINATION OF NET ASSET VALUE
The net asset value of each Portfolio (other than the Money Reserve
Portfolio) is determined by adding the value of all securities and other assets
in its portfolio, deducting the portfolio's liabilities, dividing by the number
of shares outstanding and rounding the result to the nearest whole cent. The net
asset value of the Money Reserve Portfolio is determined pursuant to the 'penny
rounding method' under a rule of the Securities and Exchange Commission
described below by adding the value of all securities and other assets in its
portfolio, deducting the
11
<PAGE>
portfolio's liabilities, dividing by the number of shares outstanding and
rounding the result to the nearest whole cent.
In accordance with the Securities and Exchange Commission rule applicable
to the valuation of the portfolio securities of the Money Reserve Portfolio and
consistent with its operating policies, the Money Reserve Portfolio will
maintain a dollar-weighted average portfolio maturity of 90 days or less,
purchase instruments having remaining maturities of 397 calendar days (or 762
calendar days in the case of U.S. Government securities) or less only, and
invest only in securities determined by the directors to be of high quality with
minimal credit risks and which meet certain credit standards prescribed by the
rule. In addition, the directors have established procedures designed to
stabilize, to the extent reasonably possible, the Portfolio's price per share as
computed for the purpose of sales and redemptions at $1.00. Deviations of more
than an insignificant amount between the net asset value calculated using market
quotations and that calculated pursuant to the penny rounding method will be
reported to the directors by MLAM. In the event the directors determine that a
deviation exists which may result in material dilution or other unfair results
to investors or existing shareholders, the Portfolio will take such corrective
action as it regards as necessary and appropriate, including the sale of
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity; withholding dividends; or establishing a net
asset value per share by using available market quotations.
If in the view of the Board of Directors of the Fund it is inadvisable to
continue the practice of maintaining the net asset value of the Money Reserve
Portfolio at $1.00 per share, the Board of Directors of the Fund reserves the
right to alter the procedure. The Fund will notify the Accounts of any such
alteration.
Securities held by the Money Reserve Portfolio and the Multiple Strategy
Portfolio with a remaining maturity of 60 days or less are valued on an
amortized cost basis, unless particular circumstances dictate otherwise. Under
this method of valuation, the security is initially valued at cost on the date
of purchase (or in the case of securities purchased with more than 60 days
remaining to maturity, the market value on the 61st day prior to maturity); and
thereafter the Portfolios assume a constant proportionate amortization in value
until maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the security. For purposes of
this method of valuation, the maturity of a variable rate certificate of deposit
and variable amount master demand note is deemed to be the next coupon date on
which the interest rate is to be adjusted. If, due to the impairment of the
creditworthiness of the issuer of a security held by a Portfolio or to other
factors with respect to such security, the fair value of such security is not
fairly reflected through the amortized cost method of valuation, such security
will be valued at fair value as determined in good faith by the Board of
Directors. Any assets or liabilities initially expressed in terms of non-U.S.
dollar currencies are translated into U.S. dollars at the prevailing market
rates as quoted by one or more banks or dealers on the day of valuation.
PORTFOLIO TRANSACTIONS AND
BROKERAGE
If the securities in which a particular Portfolio of the Fund invests are
traded primarily in the over-the-counter market, where possible the Portfolio
will deal directly with the dealers who make a market in the securities involved
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principals for their own account.
On occasion, securities may be purchased directly from the issuer. Bonds and
money market securities are generally traded on a net basis and do not normally
involve either brokerage commission or transfer taxes. The cost of executing
portfolio securities transactions of each Fund will primarily consist of
brokerage commissions or underwriter or dealer spreads.
Under the Investment Company Act of 1940, persons affiliated with the Fund
are prohibited from dealing with the Fund as a principal in the purchase and
sale of the Fund's portfolio securities unless an exemptive order allowing such
transactions is obtained from the Securities and Exchange Commission. Since
over-the-counter transactions are usually principal transactions, affiliated
persons of the Fund, including Merrill Lynch Government Securities Inc. ('GSI'),
Merrill Lynch Money Markets Inc. ('MMI') and Merrill Lynch, Pierce, Fenner &
Smith Incorporated ('Merrill Lynch'), may not serve as dealers in connection
with such transactions except pursuant to exemptive orders from the Securities
and Exchange Commission, such as the order described below. However, affiliated
persons of the Fund may serve as its broker in over-the-counter or other
transactions conducted on an agency basis, subject to the Fund's policy of
obtaining best price and execution. The Fund may not purchase securities from
any underwriting syndicate of which Merrill Lynch is a member except in
accordance with rules and regulations under the Investment Company Act of 1940.
The Securities and Exchange Commission has issued an exemptive order
permitting the Fund to conduct principal transactions with respect to the Money
Reserve Portfolio with GSI and MMI in United States Government
12
<PAGE>
and government agency securities, and certain other money market securities,
subject to a number of conditions, including conditions designed to insure that
the prices to the Portfolio available from GSI and MMI are equal to or better
than those available from other sources. GSI and MMI have informed the Fund
that they will in no way, at any time, attempt to influence or control the
activities of the Fund or the Investment Adviser in placing such principal
transactions. The exemptive order allows GSI and MMI to receive a dealer spread
on any transaction with the Fund no greater than their customary dealer spreads
for transactions of the type involved.
Certain court decisions have raised questions as to whether investment
companies should seek to 'recapture' brokerage commissions and underwriting and
dealer spreads by effecting their purchases and sales through affiliated
entities. In order to effect such an arrangement, the Fund would be required to
seek an exemption from the Investment Company Act so that it could engage in
principal transactions with affiliates. The Board of Directors has considered
the possibilities of seeking to recapture spreads for the benefit of the Fund
and, after reviewing all factors deemed relevant, has made a determination not
to seek such recapture at this time. The Board will reconsider this matter from
time to time. The Fund will take such steps as may be necessary to effect
recapture, including the filing of applications for exemption under the
Investment Company Act, if the Directors should determine that recapture is in
the best interests of the Fund or otherwise required by developments in the law.
The Investment Adviser has arranged for the Fund's Custodian to receive on
behalf of the Fund any tender offer solicitation fees payable with respect to
portfolio securities of the Fund.
While the Investment Adviser seeks to obtain the most favorable net results
in effecting transactions in the Fund's portfolio securities, dealers who
provide supplemental investment research to the Investment Adviser may receive
orders for transactions by the Fund. Such supplemental research services
ordinarily consist of assessments and analyses of the business or prospects of a
company, industry or economic sector. If, in the judgment of the Investment
Adviser, a particular Portfolio or Portfolios will be benefited by such
supplemental research services, the Investment Adviser is authorized to pay
commissions to brokers furnishing such services which are in excess of
commissions which another broker may charge for the same transaction.
Information so received will be in addition to and not in lieu of the services
required to be performed by the Investment Adviser under the Investment Advisory
Agreement. The expenses of the Investment Adviser will not necessarily be
reduced as a result of the receipt of such supplemental information. In some
cases, the Investment Adviser may use such supplemental research in providing
investment advice to its other investment advisory accounts.
For the year ended December 31, 1995, the Fund paid total brokerage
commissions of approximately $4,177,039, of which $224,553 was paid to Merrill
Lynch. For the year ended December 31, 1994, the Fund paid brokerage commissions
of approximately $2,432,600, of which $201,911 was paid to Merrill Lynch. For
the year ended December 31, 1993, the Fund paid brokerage commissions of
approximately $3,518,138, of which $271,137 was paid to Merrill Lynch.
PORTFOLIO TURNOVER
Each Portfolio has a different expected rate of portfolio turnover;
however, rate of portfolio turnover will not be a limiting factor when
management of the Fund deems it appropriate to purchase or sell securities for a
Portfolio. Because of the short-term nature of the securities in which the Money
Reserve Portfolio will invest, and because such Portfolio's investments will be
constantly changing in response to market conditions, no portfolio turnover rate
may be accurately stated for the Money Reserve Portfolio. For the year ended
December 31, 1995, the portfolio turnover rates for the Fund's Portfolios were
as follows: the Money Reserve Portfolio was 0%, the Intermediate Government Bond
Portfolio was 57.38%; the Long Term Corporate Bond Portfolio was 110.49%; the
Capital Stock Portfolio was 130.54%; the Growth Stock Portfolio was 87.66%; the
Multiple Strategy Portfolio was 140.83%; the High Yield Portfolio was 63.39%;
the Natural Resources Portfolio was 38.50%; the Global Strategy Portfolio was
26.81% and the Balanced Portfolio was 32.92%.
REDEMPTION OF SHARES
The right to redeem shares or to receive payment with respect to any
redemption may only be suspended for any period during which trading on the New
York Stock Exchange is restricted as determined by the Securities and Exchange
Commission or such Exchange is closed (other than customary weekend and holiday
closings), for any period during which an emergency exists as defined by the
Securities and Exchange Commission as a result of which disposal of portfolio
securities or determination of the net asset value of each Portfolio is not
reasonably practicable, and for such other periods as the Securities and
Exchange Commission may by order permit for the protection of shareholders of
each Portfolio.
13
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Reference is made to 'Dividends, Distributions and Taxes' in the
Prospectus.
FEDERAL INCOME TAXES
Under the Internal Revenue Code of 1986, as amended (the 'Code'), each
Portfolio of the Fund will be treated as a separate corporation for federal
income tax purposes and, thus, each Portfolio is required to satisfy the
qualification requirements under the Code for treatment as a regulated
investment company. There will be no offsetting of capital gains and losses
among the Portfolios.
Each Portfolio intends to continue to qualify as a regulated investment
company under the Code. Under such provisions, a Portfolio will not be subject
to federal income tax on such part of its net ordinary income and net realized
capital gains which it distributes to shareholders. To qualify for treatment as
a regulated investment company, a Portfolio must, among other things, derive in
each taxable year at least 90% of its gross income from dividends, interest and
gains from the sale or other disposition of securities and derive less than 30%
of its gross income in each taxable year from the gains (without deduction for
losses) from the sale or other disposition of securities and certain options,
futures or forward contracts held for less than three months.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury Regulations promulgated thereunder. The Code and these Regulations
are subject to change by legislative or administrative action.
DISTRIBUTION ARRANGEMENTS
The Fund has entered into a distribution agreement (the 'Distribution
Agreement') with the Distributor with respect to the sale of the Fund's shares
to the Distributor for resale to the Accounts. Such shares will be sold at their
respective net asset values and therefore will involve no sales charge. The
Distributor is a wholly-owned subsidiary of the Investment Adviser. The
continuance of the Distribution Agreement through May 31, 1996 was approved by
the Board of Directors, including a majority of the directors who are not
interested persons of the Fund, on May 3, 1995.
The Distribution Agreement is subject to the same renewal requirements and
termination provisions as the Investment Advisory Agreement described above.
PERFORMANCE DATA
From time to time one or more of the Fund's Portfolios may include its
average annual total return, as well as yield, in advertisements or information
furnished to present or prospective shareholders. Average annual total return
and yield figures are based on the Portfolio's historical performance and are
not intended to indicate future performance. Average annual total return and
yield are determined in accordance with formulas specified by the Securities and
Exchange Commission.
Average annual total return quotations for the specified periods are
computed by finding the average annual compounded rates of return (based on net
investment income and any realized and unrealized capital gains or losses on
portfolio investments over such periods) that would equate the initial amount
invested to the redeemable value of such investment at the end of each period.
Average annual total return is computed assuming all dividends and distributions
are reinvested and taking into account all applicable recurring and nonrecurring
expenses.
The Fund's Money Reserve Portfolio normally computes its annualized yield
by determining the net change for a seven-day base period, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one share at the beginning of the period, dividing the net change in account
value by the value of the account at the beginning of the base period to obtain
the base period return, and multiplying the base period return by 365 and then
dividing by seven. Under this calculation, the yield does not reflect realized
and unrealized gains and losses on portfolio securities. The Securities and
Exchange Commission also permits the calculation of a standardized effective or
compounded yield. This is computed by compounding the unannualized base period
return by dividing the base period by seven, adding one to the quotient, raising
the sum to the 365th power, and subtracting one from the result. This compounded
yield calculation also excludes realized or unrealized gains or losses on
portfolio securities.
Set forth below is average annual total return information for the shares
of each of the Fund's Portfolios, other than the Money Reserve Portfolio. The
average annual total return quotations may be of limited use for comparative
purposes because they do not reflect charges imposed at the Account level
which, if included, would decrease average annual total return.
14
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
REDEEMABLE VALUE
EXPRESSED AS A OF A HYPOTHETICAL
PERCENTAGE BASED $1,000 INVESTMENT
ON A HYPOTHETICAL AT THE END OF THE
$1,000 INVESTMENT PERIOD
----------------- -----------------
<S> <C> <C>
Balanced Portfolio:
One Year Ended December
31, 1995 21.59% $1,215.90
Five Years Ended
December 31, 1995 11.41% $1,716.40
Inception* Through
December 31, 1995 11.02% $2,229.30
Capital Stock Portfolio:
One Year Ended December
31, 1995 20.73% $1,207.30
Five Years Ended
December 31, 1995 12.13% $ 772.50
Ten Years Ended December
31, 1995 12.06% $3,123.00
Global Strategy Portfolio:
One Year Ended December
31, 1995 10.44% $1,104.40
Five Years Ended
December 31, 1995 10.22% $1,627.00
Inception* Through
December 31, 1995 9.61% $2,182.20
Growth Stock Portfolio:
One Year Ended December
31, 1995 35.35% $1,353.50
Five Years Ended
December 31, 1995 15.51% $2,056.10
Ten Years Ended December
31, 1995 10.53% $2,722.20
High Yield Portfolio:
One Year Ended December
31, 1995 17.12% $1,171.20
Five Years Ended
December 31, 1995 17.67% $2,255.70
Inception* Through
December 31, 1995 11.23% $2,800.90
Intermediate
Government Bond
Portfolio:
One Year Ended December
31, 1995 18.87% $1,188.70
Five Years Ended
December 31, 1995 9.26% $1,556.80
Ten Years Ended December
31, 1995 8.93% $2,351.60
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
REDEEMABLE VALUE
EXPRESSED AS A OF A HYPOTHETICAL
PERCENTAGE BASED $1,000 INVESTMENT
ON A HYPOTHETICAL AT THE END OF THE
$1,000 INVESTMENT PERIOD
----------------- -----------------
<S> <C> <C>
Long Term Corporate Bond
Portfolio:
One Year Ended December
31, 1995 20.66% $1,206.60
Five Years Ended
December 31, 1995 10.34% $1,635.30
Ten Years Ended December
31, 1995 9.65% $2,513.10
Multiple Strategy
Portfolio:
One Year Ended December
31, 1995 17.55% $1,175.50
Five Years Ended
December 31, 1995 11.35% $1,711.50
Ten Years Ended December
31, 1995 11.30% $2,916.70
Natural Resources
Portfolio:
One Year Ended December
31, 1995 12.22% $1,122.20
Five Years Ended
December 31, 1995 5.43% $1,302.50
Inception* Through
December 31, 1995 0.03% $1,002.70
</TABLE>
- ---------------
* Inception for High Yield Portfolio, May 1, 1986, for Natural Resources
Portfolio and Global Strategy Portfolio, July 1, 1987, and for Balanced
Portfolio, May 2, 1988.
ADDITIONAL INFORMATION
Under a separate agreement Merrill Lynch has granted the Fund the right to
use the 'Merrill Lynch' name and has reserved the right to withdraw its consent
to the use of such name by the Fund at any time, or to grant the use of such
name to any other company, and the Fund has granted Merrill Lynch, under certain
conditions, the use of any other name it might assume in the future, with
respect to any corporation organized by Merrill Lynch.
15
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders,
Merrill Lynch Series Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedules of investments, of the Balanced, Capital Stock, Global Strategy,
Growth Stock, High Yield, Intermediate Government Bond, Long Term Corporate
Bond, Money Reserve, Multiple Strategy, and Natural Resources Portfolios of
Merrill Lynch Series Fund, Inc. as of December 31, 1995, the related statements
of operations for the year then ended and changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 December
31, 1995 by correspondence with the custodian and brokers. 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 audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial positions of the Balanced,
Capital Stock, Global Strategy, Growth Stock, High Yield, Intermediate
Government Bond, Long Term Corporate Bond, Money Reserve, Multiple Strategy, and
Natural Resources Portfolios of Merrill Lynch Series Fund, Inc. as of December
31, 1995, the results of their operations, the changes in their net assets, and
the financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
February 15, 1996
16
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Balanced Portfolio
Schedule of Investments as of December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
VALUE (NOTE OF NET
FACE AMOUNT US GOVERNMENT OBLIGATIONS COST 1A) ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
US TREASURY NOTES US Treasury Notes:
$ 8,200,000 6.25% due 2/15/2003.................... $ 8,397,250 $ 8,554,896 8.8%
4,400,000 5.75% due 8/15/2003.................... 4,418,578 4,452,932 4.6
11,000,000 7.25% due 8/15/2004.................... 11,107,500 12,232,330 12.6
9,000,000 7.875% due 11/15/2004.................. 9,011,250 10,417,500 10.7
7,500,000 6.50% due 8/15/2005.................... 7,500,063 7,989,825 8.2
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT OBLIGATIONS 40,434,641 43,647,483 44.9
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES
INDUSTRY HELD COMMON STOCKS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AEROSPACE 10,000 Boeing Co. (The) ...................... 732,539 783,750 0.8
19,000 United Technologies Corp. ............. 913,577 1,802,625 1.9
------------ ------------ ------
1,646,116 2,586,375 2.7
- ----------------------------------------------------------------------------------------------------------------------------
ALUMINUM 15,000 Aluminum Co. of America................ 863,124 793,125 0.8
- ----------------------------------------------------------------------------------------------------------------------------
APPLIANCES 15,000 Whirlpool Corp. ....................... 868,387 798,750 0.8
- ----------------------------------------------------------------------------------------------------------------------------
AUTO & TRUCK 40,000 Ford Motor Co. ........................ 1,073,776 1,160,000 1.2
- ----------------------------------------------------------------------------------------------------------------------------
BANKING 20,000 Bank of New York, Inc. (The)........... 945,166 975,000 1.0
- ----------------------------------------------------------------------------------------------------------------------------
CHEMICALS 26,250 Eastman Chemical Co. .................. 1,101,188 1,643,906 1.7
- ----------------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 20,000 General Motors Corp. (Class E) ........ 1,029,407 1,040,000 1.1
- ----------------------------------------------------------------------------------------------------------------------------
ELECTRONIC INSTRUMENTS 26,800 Corning Inc. .......................... 739,900 857,600 0.9
12,000 Texas Instruments Inc. ................ 720,840 621,000 0.6
------------ ------------ ------
1,460,740 1,478,600 1.5
- ----------------------------------------------------------------------------------------------------------------------------
ENERGY-RELATED 7,000 +California Energy Co., Inc. .......... 127,777 136,500 0.1
- ----------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL CONTROL 78,256 Wheelabrator Technologies Inc. ........ 1,276,578 1,310,788 1.4
- ----------------------------------------------------------------------------------------------------------------------------
HARDWARE PRODUCTS 34,000 Stanley Works Co. ..................... 1,340,289 1,751,000 1.8
- ----------------------------------------------------------------------------------------------------------------------------
HEALTHCARE 65,000 +Humana Inc. .......................... 516,047 1,779,375 1.8
- ----------------------------------------------------------------------------------------------------------------------------
INSURANCE 15,000 Aetna Life & Casualty Co. ............. 1,116,315 1,038,750 1.1
25,000 Allstate Corp. ........................ 1,023,305 1,028,125 1.0
17,200 National Re Corp. ..................... 557,741 653,600 0.7
------------ ------------ ------
2,697,361 2,720,475 2.8
- ----------------------------------------------------------------------------------------------------------------------------
NATURAL GAS 14,100 Enron Corp. ........................... 533,018 537,562 0.6
- ----------------------------------------------------------------------------------------------------------------------------
OIL SERVICES 69,500 Dresser Industries, Inc. .............. 1,346,534 1,694,062 1.7
- ----------------------------------------------------------------------------------------------------------------------------
PETROLEUM 12,000 Pennzoil Co. .......................... 474,355 507,000 0.5
- ----------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 25,000 Abbott Laboratories.................... 777,352 1,043,750 1.1
33,000 Merck & Co., Inc. ..................... 1,092,980 2,169,750 2.2
------------ ------------ ------
1,870,332 3,213,500 3.3
- ----------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY 36,000 Eastman Kodak Co. ..................... 1,491,356 2,412,000 2.5
- ----------------------------------------------------------------------------------------------------------------------------
RETAIL 18,000 Sears, Roebuck & Co. .................. 717,557 702,000 0.7
- ----------------------------------------------------------------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS 40,000 Fisher Scientific International,
Inc. ................................. 1,234,274 1,335,000 1.4
- ----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 35,700 AT&T Corp. ............................ 1,522,784 2,311,575 2.4
27,600 Bell Atlantic Corp. ................... 1,351,417 1,845,750 1.9
------------ ------------ ------
2,874,201 4,157,325 4.3
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 25,487,583 32,732,343 33.7
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Balanced Portfolio
Schedule of Investments as of December 31, 1995 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
VALUE (NOTE OF NET
FACE AMOUNT SHORT-TERM SECURITIES COST 1A) ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER* $ 3,291,000 General Electric Capital Corp., 5.90%
due 1/02/1996......................... $ 3,288,843 $ 3,288,843 3.4%
- ----------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & Federal National Mortgage Association:
AGENCY OBLIGATIONS* 6,000,000 5.62% due 1/16/1996.................... 5,983,140 5,983,140 6.2
6,000,000 5.59% due 1/18/1996.................... 5,981,367 5,981,367 6.1
3,000,000 5.44% due 1/23/1996.................... 2,988,667 2,988,667 3.1
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 18,242,017 18,242,017 18.8
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS...................... $ 84,164,241 94,621,843 97.4
===========
OTHER ASSETS LESS LIABILITIES.......... 2,558,834 2.6
------------ ------
NET ASSETS............................. $ 97,180,677 100.0%
=========== =====
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commercial Paper and certain US Government & Agency Obligations are traded on
a discount basis. The interest rates shown are the discount rates paid at the
time of purchase by the Portfolio.
+ Non-income producing security.
See Notes to Financial Statements.
18
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Capital Stock Portfolio
Schedule of Investments as of December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD US STOCKS & WARRANTS COST (NOTE 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AEROSPACE 75,000 Boeing Co. (The)................... $ 4,766,122 $ 5,878,125 2.3%
75,000 United Technologies Corp. ......... 5,999,109 7,115,625 2.8
------------- ------------- --------
10,765,231 12,993,750 5.1
- --------------------------------------------------------------------------------------------------------------------------
ALUMINUM 75,000 Aluminum Co. of America............ 4,158,046 3,965,625 1.6
- --------------------------------------------------------------------------------------------------------------------------
APPLIANCES 45,000 Whirlpool Corp. ................... 2,453,031 2,396,250 0.9
- --------------------------------------------------------------------------------------------------------------------------
AUTO & TRUCK 170,000 Ford Motor Co. .................... 5,047,712 4,930,000 1.9
- --------------------------------------------------------------------------------------------------------------------------
BANKING 145,000 Bank of New York, Inc. ............ 4,614,783 7,068,750 2.8
15,000 Bank of New York,
Inc. (Warrants) (a)............... 168,750 541,875 0.2
------------- ------------- --------
4,783,533 7,610,625 3.0
- --------------------------------------------------------------------------------------------------------------------------
CHEMICALS 40,000 Eastman Chemical Co. .............. 2,449,403 2,505,000 1.0
- --------------------------------------------------------------------------------------------------------------------------
COMMUNICATION 25,600 +ADC Telecommunications Inc. ...... 767,813 928,000 0.4
EQUIPMENT
- --------------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 145,000 General Motors Corp. (Class E)..... 6,051,177 7,540,000 3.0
- --------------------------------------------------------------------------------------------------------------------------
ELECTRONIC INSTRUMENTS 102,400 Corning Inc. ...................... 2,827,119 3,276,800 1.3
50,000 Texas Instruments Inc. ............ 3,513,717 2,587,500 1.0
------------- ------------- --------
6,340,836 5,864,300 2.3
- --------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL CONTROL 300,000 Wheelabrator Technologies Inc. .... 4,242,288 5,025,000 2.0
- --------------------------------------------------------------------------------------------------------------------------
HARDWARE PRODUCTS 46,200 Stanley Works Co. ................. 2,294,682 2,379,300 0.9
- --------------------------------------------------------------------------------------------------------------------------
HEALTHCARE 165,000 +Humana Inc. ...................... 3,434,418 4,516,875 1.8
- --------------------------------------------------------------------------------------------------------------------------
INSURANCE 80,000 Aetna Life & Casualty Co. ......... 4,664,235 5,540,000 2.2
95,000 Allstate Corp. .................... 3,091,710 3,906,875 1.5
40,000 National Re Corp. ................. 1,156,735 1,520,000 0.6
------------- ------------- --------
8,912,680 10,966,875 4.3
- --------------------------------------------------------------------------------------------------------------------------
NATURAL GAS 33,800 Enron Corp. ....................... 1,277,730 1,288,625 0.5
- --------------------------------------------------------------------------------------------------------------------------
OIL SERVICES 120,000 Dresser Industries, Inc. .......... 2,812,419 2,925,000 1.2
- --------------------------------------------------------------------------------------------------------------------------
PETROLEUM 48,000 Pennzoil Co. ...................... 1,897,297 2,028,000 0.8
- --------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 120,000 Abbott Laboratories................ 4,913,838 5,010,000 2.0
100,000 Merck & Co., Inc. ................. 6,022,360 6,575,000 2.6
------------- ------------- --------
10,936,198 11,585,000 4.6
- --------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY 100,000 Eastman Kodak Co. ................. 5,518,202 6,700,000 2.7
- --------------------------------------------------------------------------------------------------------------------------
RETAIL 150,000 Sears, Roebuck & Co. .............. 5,440,572 5,850,000 2.3
- --------------------------------------------------------------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS 62,900 Fisher Scientific International,
Inc. ............................. 2,057,297 2,099,288 0.8
- --------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 90,000 AT&T Corp. ........................ 5,917,533 5,827,500 2.3
- --------------------------------------------------------------------------------------------------------------------------
TOTAL US STOCKS & WARRANTS 97,558,098 109,925,013 43.4
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COUNTRY FOREIGN STOCKS+
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
<CAPTION>
CANADA 45,000 Magna International, Inc. (Class A)
(ADR)*(2)......................... 1,785,816 1,946,250 0.8
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TOTAL INVESTMENTS IN CANADA 1,785,816 1,946,250 0.8
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Capital Stock Portfolio
Schedule of Investments as of December 31, 1995 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRY HELD FOREIGN STOCKS+ (CONCLUDED) COST (NOTE 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HONG KONG 3,000,000 Hong Kong Telecommunications, Ltd.
(ADR)* (21)....................... $ 5,306,140 $ 5,354,371 2.1%
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN HONG KONG 5,306,140 5,354,371 2.1
- --------------------------------------------------------------------------------------------------------------------------
INDONESIA 1,600 PT Indonesian Satellite Corp.
(ADR)* (21)....................... 57,496 58,400 0.0
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN INDONESIA 57,496 58,400 0.0
- --------------------------------------------------------------------------------------------------------------------------
JAPAN 100,000 Canon, Inc. (38)................... 1,834,920 1,811,313 0.7
200,000 +Nomura Securities Co.,
Ltd. (10)......................... 3,929,508 4,358,776 1.7
150,000 Tokio Marine & Fire Insurance
Co. (13).......................... 1,786,071 1,961,449 0.8
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN JAPAN 7,550,499 8,131,538 3.2
- --------------------------------------------------------------------------------------------------------------------------
MEXICO 150,000 +Grupo Carso, S.A. de C.V.
(ADR)* (15)++..................... 1,923,125 1,518,750 0.6
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN MEXICO 1,923,125 1,518,750 0.6
- --------------------------------------------------------------------------------------------------------------------------
NETHERLANDS 35,000 Royal Dutch Petroleum Co. N.V.
(ADR)* (16)....................... 4,677,014 4,939,375 2.0
150,000 Singer Co. N.V. (1)................ 4,380,891 4,181,250 1.7
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
NETHERLANDS 9,057,905 9,120,625 3.7
- --------------------------------------------------------------------------------------------------------------------------
SPAIN 40,000 Repsol S.A. (ADR)* (31)............ 1,316,132 1,315,000 0.5
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SPAIN 1,316,132 1,315,000 0.5
- --------------------------------------------------------------------------------------------------------------------------
SWITZERLAND 3,500 Sandoz AG (37)..................... 3,038,594 3,211,958 1.3
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWITZERLAND 3,038,594 3,211,958 1.3
- --------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS 30,035,707 30,656,892 12.2
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT SHORT-TERM SECURITIES
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL $ 10,000,000 Commerzbank US Finance Inc.,
PAPER** 5.77% due 1/11/1996............... 9,979,164 9,979,164 4.0
10,000,000 Corporate Asset Funding Co. Inc.,
5.60% due 2/02/1996............... 9,945,556 9,945,556 3.9
11,916,000 General Electric Capital Corp.,
5.90% due 1/02/1996............... 11,908,188 11,908,188 4.7
10,000,000 Goldman Sachs Group L.P.,
5.75% due 1/03/1996............... 9,992,014 9,992,014 4.0
12,000,000 Morgan Stanley Group, Inc.,
5.65% due 1/24/1996............... 11,951,033 11,951,033 4.7
13,000,000 National Fleet Funding Corp.,
5.76% due 1/30/1996............... 12,933,440 12,933,440 5.1
12,000,000 Preferred Receivable Funding Corp.,
5.90% due 1/18/1996............... 11,960,667 11,960,667 4.7
13,000,000 Riverwoods Funding Corp., 5.85% due
1/17/1996......................... 12,959,863 12,959,863 5.1
12,000,000 Xerox Corp., 5.75% due
1/26/1996......................... 11,946,333 11,946,333 4.7
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Capital Stock Portfolio
Schedule of Investments as of December 31, 1995 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
FACE VALUE OF NET
AMOUNT SHORT-TERM SECURITIES (CONCLUDED) COST (NOTE 1A) ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
US GOVERNMENT & AGENCY $ 10,000,000 Federal Home Loan Mortgage Corp.,
OBLIGATIONS** 5.66% due 1/16/1996.............. $ 9,971,700 $ 9,971,700 4.0%
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 113,547,958 113,547,958 44.9
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS................. $ 241,141,763 254,129,863 100.5
=============
LIABILITIES IN EXCESS OF OTHER
ASSETS........................... (1,172,969) (0.5)
------------- ------
NET ASSETS........................ $ 252,956,894 100.0%
============= =====
- ----------------------------------------------------------------------------------------------------------------------------
(a) Warrants entitle the Portfolio to purchase a predetermined number of shares of common stock. The purchase
price and number of shares are subject to adjustment under certain conditions until the expiration date.
* American Depositary Receipts (ADR).
** Commercial Paper and certain US Government & Agency Obligations are traded on a discount basis; the interest
rates shown are the discount rates paid at the time of purchase by the Portfolio.
+ Non-income producing security.
++ Restricted securities as to resale. The value of the Portfolio's investment in restricted securities was
approximately $1,519,000, representing 0.6% of net assets.
----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ACQUISITION VALUE
ISSUE DATES COST (NOTE 1A)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Grupo Carso, S.A. de C.V. (ADR)............................. 1/16/1995-1/31/1995 $ 1,923,125 $ 1,518,750
---------------------------------------------------------------------------------------------------------------
TOTAL $ 1,923,125 $ 1,518,750
========== ==========
---------------------------------------------------------------------------------------------------------------
+ Corresponding industry groups for foreign stocks:
</TABLE>
(1) Appliances
(2) Auto-Parts
(3) Banking
(4) Beverages
(5) Chemicals
(6) Communications Equipment
(7) Computers
(8) Electrical Equipment
(9) Electronics
(10) Financial Services
(11) Furniture
(12) Industrial Components
(13) Insurance
(14) Media/Publishing
(15) Multi-Industry
(16) Oil-Integrated
(17) Real Estate
(18) Retail
(19) Semiconductors
(20) Soap
(21) Telecommunications
(22) Utilities-Communications
(23) Utilities-Electric
(24) Utilities-Water
(25) Food Processing
(26) Metals
(27) Advertising
(28) Tobacco
(29) Industrials
(30) Containers
(31) Petroleum
(32) Railroads
(33) Automotive
(34) Leisure & Entertainment
(35) Office Equipment
(36) Industrial Services
(37) Pharmaceuticals
(38) Photography
(39) Commercial Design
See Notes to Financial Statements.
21
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
INDUSTRY HELD US STOCKS COST 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AEROSPACE 10,000 Boeing Co. (The)...................... $ 732,539 $ 783,750 0.4%
16,600 United Technologies Corp. ............ 1,005,542 1,574,925 0.7
------------- ------------- ----------
1,738,081 2,358,675 1.1
- ----------------------------------------------------------------------------------------------------------------------------
ALUMINUM 15,000 Aluminum Co. of America............... 863,124 793,125 0.4
- ----------------------------------------------------------------------------------------------------------------------------
APPLIANCES 18,000 Whirlpool Corp. ...................... 1,042,065 958,500 0.4
- ----------------------------------------------------------------------------------------------------------------------------
AUTO & TRUCK 60,000 Ford Motor Co. ....................... 1,610,668 1,740,000 0.8
- ----------------------------------------------------------------------------------------------------------------------------
BANKING 20,000 Bank of New York, Inc. ............... 945,166 975,000 0.5
- ----------------------------------------------------------------------------------------------------------------------------
CHEMICALS 28,750 Eastman Chemical Co. ................. 1,275,464 1,800,469 0.8
- ----------------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 17,000 General Motors Corp. (Class E)........ 874,993 884,000 0.4
- ----------------------------------------------------------------------------------------------------------------------------
ELECTRONIC INSTRUMENTS 31,300 Corning Inc. ......................... 864,229 1,001,600 0.5
12,000 Texas Instruments Inc. ............... 720,840 621,000 0.3
------------- ------------- ----------
1,585,069 1,622,600 0.8
- ----------------------------------------------------------------------------------------------------------------------------
ENERGY-RELATED 6,500 +California Energy Co., Inc. ......... 111,703 126,750 0.1
- ----------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL CONTROL 115,000 Wheelabrator Technologies Inc. ....... 2,095,840 1,926,250 0.9
- ----------------------------------------------------------------------------------------------------------------------------
HARDWARE PRODUCTS 44,500 Stanley Works Co. .................... 1,821,901 2,291,750 1.1
- ----------------------------------------------------------------------------------------------------------------------------
HEALTHCARE 60,000 +Humana Inc. ......................... 1,424,460 1,642,500 0.8
- ----------------------------------------------------------------------------------------------------------------------------
INSURANCE 12,000 Aetna Life & Casualty Co. ............ 893,052 831,000 0.4
20,000 Allstate Corp. ....................... 818,644 822,500 0.4
17,200 National Re Corp. .................... 557,741 653,600 0.3
------------- ------------- ----------
2,269,437 2,307,100 1.1
- ----------------------------------------------------------------------------------------------------------------------------
NATURAL GAS 11,300 Enron Corp. .......................... 427,171 430,812 0.2
- ----------------------------------------------------------------------------------------------------------------------------
OIL SERVICES 68,000 Dresser Industries, Inc. ............. 1,425,430 1,657,500 0.8
17,000 Schlumberger Ltd., Inc. .............. 1,023,053 1,177,250 0.5
------------- ------------- ----------
2,448,483 2,834,750 1.3
- ----------------------------------------------------------------------------------------------------------------------------
PETROLEUM 19,000 Pennzoil Co. ......................... 751,432 802,750 0.4
- ----------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 39,000 Abbott Laboratories................... 1,106,235 1,628,250 0.8
42,000 Merck & Co., Inc. .................... 1,449,465 2,761,500 1.3
------------- ------------- ----------
2,555,700 4,389,750 2.1
- ----------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY 24,000 Eastman Kodak Co. .................... 1,086,485 1,608,000 0.8
- ----------------------------------------------------------------------------------------------------------------------------
RETAIL 18,000 Sears, Roebuck & Co. ................. 717,557 702,000 0.3
- ----------------------------------------------------------------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS 40,000 Fisher Scientific International,
Inc. ................................ 1,234,274 1,335,000 0.6
- ----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 32,000 AT&T Corp. ........................... 1,689,860 2,072,000 1.0
33,000 Bell Atlantic Corp. .................. 1,773,280 2,206,875 1.0
------------- ------------- ----------
3,463,140 4,278,875 2.0
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL US STOCKS 30,342,213 35,808,656 16.9
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
COUNTRY FOREIGN STOCKS++
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ARGENTINA 55,285 Banco de Galicia y Buenos Aires S.A.
(ADR)* (4)........................... 920,890 1,133,342 0.5
44,850 Banco Frances del Rio de la Plata S.A.
(ADR)* (5)........................... 1,010,936 1,205,344 0.6
50,000 Yacimientos Petroliferos Fiscales S.A.
(Sponsored) (ADR)* (29).............. 1,172,941 1,081,250 0.5
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ARGENTINA 3,104,767 3,419,936 1.6
- ----------------------------------------------------------------------------------------------------------------------------
CANADA 59,000 Canadian Pacific Ltd. (25)............ 948,380 1,069,375 0.5
25,000 Northern Telecommunications
Ltd. (35)............................ 619,973 1,075,000 0.5
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN CANADA 1,568,353 2,144,375 1.0
- ----------------------------------------------------------------------------------------------------------------------------
GERMANY 3,800 Mannesmann AG (20).................... 791,059 1,212,337 0.6
4,400 Preussag S.A. (25).................... 1,073,571 1,232,553 0.6
2,500 Siemens AG (13)....................... 1,056,555 1,370,940 0.6
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN GERMANY 2,921,185 3,815,830 1.8
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1995 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
COUNTRY HELD FOREIGN STOCKS++ COST 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HONG KONG 700,000 +Hong Kong Telecommunications,
Ltd. (35)............................ $ 1,248,721 $ 1,249,353 0.6%
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN HONG KONG 1,248,721 1,249,353 0.6
- ----------------------------------------------------------------------------------------------------------------------------
INDONESIA 33,450 PT Indonesian Satellite Corp.
(ADR)* (35).......................... 1,293,001 1,220,925 0.6
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN INDONESIA 1,293,001 1,220,925 0.6
- ----------------------------------------------------------------------------------------------------------------------------
ITALY 370,000 Danieli & Co. (20).................... 1,361,249 1,003,785 0.5
200,000 Societa Finanziara Telefonica S.p.A.
(STET) (35).......................... 606,877 566,561 0.3
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ITALY 1,968,126 1,570,346 0.8
- ----------------------------------------------------------------------------------------------------------------------------
JAPAN 56,000 Canon, Inc. (13)...................... 756,641 1,014,336 0.5
77,000 Dai Nippon Printing Co., Ltd. (31).... 1,140,324 1,305,211 0.6
160,000 Hitachi Cable, Ltd. (13).............. 1,075,162 1,132,894 0.5
25,000 Ito-Yokado Co., Ltd. (33)............. 1,063,360 1,540,101 0.7
143,000 Kamigumi Co. (38)..................... 1,611,230 1,372,656 0.6
105,000 Maeda Corp. (6)....................... 1,059,809 1,027,218 0.5
170,000 Mitsubishi Electric Corp. (12)........ 1,080,460 1,223,460 0.6
180,000 Mitsubishi Heavy Industries,
Ltd. (13)............................ 1,018,102 1,434,909 0.7
90,000 Mitsubishi Trust & Banking
Corp. (5)............................ 1,513,607 1,499,419 0.7
60,000 +Nomura Securities Co., Ltd. (43)..... 1,239,679 1,307,633 0.6
139,000 Okumura Corp. (6)..................... 1,141,245 1,265,595 0.6
21,000 Rohm Company Ltd. (13)................ 1,081,959 1,185,878 0.6
20,000 SMC Corporation (20).................. 1,181,123 1,447,114 0.7
55,000 Sanwa Bank, Ltd. (5).................. 1,116,889 1,118,752 0.5
115,000 Sumitomo Corp. (38)................... 977,016 1,169,605 0.5
120,000 Tokio Marine and Fire Insurance Co.,
Ltd. (19)............................ 1,536,571 1,569,159 0.7
200,000 Toray Industries, Ltd. (36)........... 1,413,536 1,317,319 0.6
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN JAPAN 20,006,713 21,931,259 10.2
- ----------------------------------------------------------------------------------------------------------------------------
NETHERLANDS 10,400 Royal Dutch Petroleum Co., N.V.
(ADR)* (29).......................... 1,142,821 1,467,700 0.7
50,000 Singer Co. N.V. (44).................. 1,339,345 1,393,750 0.6
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE NETHERLANDS 2,482,166 2,861,450 1.3
- ----------------------------------------------------------------------------------------------------------------------------
PHILIPPINES 16,000 Philippine Long Distance Telephone Co.
(ADR)* (35).......................... 1,135,073 866,000 0.4
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE PHILIPPINES 1,135,073 866,000 0.4
- ----------------------------------------------------------------------------------------------------------------------------
SPAIN 36,000 Repsol S.A. (ADR)* (29)............... 935,136 1,183,500 0.6
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SPAIN 935,136 1,183,500 0.6
- ----------------------------------------------------------------------------------------------------------------------------
SWITZERLAND 1,050 BBC Brown Boveri & Cie (24)........... 611,386 1,222,734 0.6
1,000 Sandoz AG (Registered) (30)........... 868,170 917,702 0.4
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWITZERLAND 1,479,556 2,140,436 1.0
- ----------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM 74,000 GKN PLC (8)........................... 621,161 894,781 0.4
230,000 General Electric PLC (13)............. 1,035,268 1,267,371 0.6
88,000 Imperial Chemical Industries
PLC (28)............................. 1,137,770 1,041,526 0.5
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE UNITED KINGDOM 2,794,199 3,203,678 1.5
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS 40,936,996 45,607,088 21.4
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1995 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
OF
FACE VALUE NET
COUNTRY AMOUNT** FOREIGN BONDS++ COST (NOTE 1A) ASSETS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CANADA C$ 5,900,000 Government of Canada,
7.25% due 6/01/2003 (16)............. $ 4,749,162 $ 4,403,165 2.1%
- --------------------------------------------------------------------------------------------------------------------------
UNITED UK Treasury Gilt (16):
KINGDOM L 2,900,000 7.25% due 3/30/1998............... 4,477,495 4,584,376 2.1
350,000 9.75% due 8/27/2002............... 697,240 617,291 0.3
1,000,000 8% due 6/10/2003.................. 1,668,701 1,622,535 0.8
------------- ------------- ------
6,843,436 6,824,202 3.2
- --------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS 11,592,598 11,227,367 5.3
- --------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY OBLIGATIONS
- --------------------------------------------------------------------------------------------------------------------------
GOVERNMENT $ 64,465 Government National Mortgage
NATIONAL Association, 9% due
MORTGAGE 8/15/2016 (a)........................ 63,840 68,826 0.0
ASSOCIATION
- --------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT US Treasury Notes:
OBLIGATIONS 8,800,000 5.75% due 8/15/2003............... 8,851,937 8,905,864 4.2
7,200,000 7.25% due 8/15/2004............... 7,215,187 8,006,616 3.8
16,000,000 7.875% due 11/15/2004............. 15,993,125 18,520,000 8.7
4,500,000 6.50% due 8/15/2005............... 4,484,609 4,793,895 2.2
------------- ------------- ------
36,544,858 40,226,375 18.9
- --------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY
OBLIGATIONS 36,608,698 40,295,201 18.9
- --------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
- --------------------------------------------------------------------------------------------------------------------------
COMMERCIAL 9,000,000 Ciesco L.P., 5.70% due 1/19/1996...... 8,971,500 8,971,500 4.2
PAPER*** 8,000,000 du Pont (E.I.) de Nemours & Co, 5.71%
due 1/05/1996........................ 7,992,387 7,992,387 3.8
10,734,000 General Electric Capital Corp., 5.90%
due 1/02/1996........................ 10,728,722 10,728,722 5.0
6,000,000 National Fleet Funding Corp., 5.75%
due 2/01/1996........................ 5,968,375 5,968,375 2.8
============= ============= =====
33,660,984 33,660,984 15.8
- --------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT 4,000,000 Federal Home Loan Bank, 5.63% due
& AGENCY 1/16/1996............................. 3,989,366 3,989,366 1.9
OBLIGATIONS*** 9,000,000 Federal Home Loan Mortgage Corp.,
5.45% due 1/12/1996.................. 8,982,288 8,982,288 4.2
Federal National Mortgage Association:
8,000,000 5.65% due 1/11/1996............... 7,984,933 7,984,933 3.8
18,000,000 5.64% due 1/29/1996............... 17,915,400 17,915,400 8.4
============= ============= =====
38,871,987 38,871,987 18.3
- --------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 72,532,971 72,532,971 34.1
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS..................... $ 192,013,476 205,471,283 96.6
=============
UNREALIZED APPRECIATION ON FORWARD
FOREIGN EXCHANGE CONTRACTS+++......... 3,911,706 1.8
OTHER ASSETS LESS LIABILITIES......... 3,299,750 1.6
------------- ------
NET ASSETS............................ $ 212,682,739 100.0%
============= =====
- --------------------------------------------------------------------------------------------------------------------------
* American Depositary Receipts (ADR).
** Denominated in US dollars unless otherwise indicated.
*** Commercial Paper and certain US Government & Agency Obligations are traded on a discount basis; the interest
rates shown are the discount rates paid at the time of purchase by the Portfolio.
(a) Mortgage-backed bonds; original face amounts and related costs are reduced by principal payment pass-throughs.
+ Non-income producing security.
</TABLE>
24
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1995 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
++ Corresponding industry groups for foreign stocks and bonds:
</TABLE>
(1) Apparel
(2) Automobile
(3) Automotive & Equipment
(4) Banking
(5) Banking-International
(6) Building & Construction
(7) Building Materials
(8) Business Services
(9) Capital Goods
(10) Cement
(11) Chemicals
(12) Electrical Equipment
(13) Electronics
(14) Food & Beverage
(15) Food
(16) Government (Bonds)
(17) Glass
(18) Industrials
(19) Insurance
(20) Machinery
(21) Machinery and Equipment
(22) Metal Fabricating
(23) Miscellaneous
(24) Miscellaneous-Capital Goods
(25) Multi-Industry
(26) Natural Gas
(27) Oil & Gas Producers
(28) Oil-Integrated
(29) Petroleum
(30) Pharmaceutical
(31) Printing & Publishing
(32) Real Estate
(33) Retail
(34) Shipping
(35) Telecommunications
(36) Textiles
(37) Toys
(38) Trading
(39) Trucking
(40) Utilities
(41) Utilities-Electric
(42) Utilities-Water
(43) Financial Services
(44) Appliances
<TABLE>
<S> <C>
+++ Forward foreign exchange contracts as of December 31, 1995 were as follows:
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------
<S> <C> <C> <C>
UNREALIZED
FOREIGN EXPIRATION APPRECIATION
CURRENCY SOLD DATE (NOTE 1E)
--------------------------------------------------------------------
Y 1,947,120,000 January 1996 $3,911,706
--------------------------------------------------------------------
TOTAL (US
COMMITMENT -- $22,810,684) $3,911,706
============
--------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
25
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Growth Stock Portfolio
Schedule of Investments as of December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
SHARES VALUE (NOTE OF NET
INDUSTRY HELD STOCKS COST 1A) ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADVERTISING 70,000 Interpublic Group of Companies,
Inc. ........................... $ 2,454,905 $ 3,036,250 1.6%
- ---------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE 40,000 Ek Chor China Motorcycle Co.,
Ltd. ........................... 894,381 465,000 0.2
- ---------------------------------------------------------------------------------------------------------------------------
BANKING 10,000 State Street Boston Corp. ....... 397,500 450,000 0.2
- ---------------------------------------------------------------------------------------------------------------------------
BEVERAGES 75,000 Coca-Cola Co. ................... 3,964,500 5,568,750 3.0
100,000 PepsiCo., Inc. .................. 4,056,159 5,587,500 3.0
------------- ------------- ------
8,020,659 11,156,250 6.0
- ---------------------------------------------------------------------------------------------------------------------------
CHEMICAL PRODUCERS 100,000 Duracell International, Inc. .... 4,386,878 5,175,000 2.8
20,000 Great Lakes Chemical Corp. ...... 1,523,285 1,440,000 0.8
------------- ------------- ------
5,910,163 6,615,000 3.6
- ---------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS 20,000 +Nextel Communications, Inc.
(Class A)....................... 905,000 295,000 0.2
- ---------------------------------------------------------------------------------------------------------------------------
COMPUTERS 110,000 +Compaq Computer Corp. .......... 4,255,954 5,280,000 2.9
- ---------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS & 150,000 +CUC International, Inc. ........ 4,129,012 5,118,750 2.8
SERVICES
- ---------------------------------------------------------------------------------------------------------------------------
COSMETICS 100,000 Gillette Co., (The).............. 3,832,420 5,212,500 2.8
10,000 International Flavors &
Fragrances,
Inc. ........................... 485,470 480,000 0.3
------------- ------------- ------
4,317,890 5,692,500 3.1
- ---------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 10,000 Emerson Electric Co. ............ 658,040 817,500 0.4
- ---------------------------------------------------------------------------------------------------------------------------
ELECTRONICS 90,000 General Electric Co. PLC......... 6,133,315 6,480,000 3.5
30,000 Intel Corp. ..................... 1,940,000 1,702,500 0.9
------------- ------------- ------
8,073,315 8,182,500 4.4
- ---------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 20,000 Walt Disney Co................... 1,141,200 1,180,000 0.6
100,000 +Viacom, Inc. ................... 5,086,797 4,587,500 2.5
------------- ------------- ------
6,227,997 5,767,500 3.1
- ---------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 110,000 +Travelers Corp.................. 4,919,118 6,916,250 3.8
- ---------------------------------------------------------------------------------------------------------------------------
FOOD 10,000 Wrigley (Wm.) Jr. Company
(Class B)....................... 426,440 525,000 0.3
- ---------------------------------------------------------------------------------------------------------------------------
FOOD MERCHANDISING 20,000 Albertson's Inc. ................ 615,126 657,500 0.4
- ---------------------------------------------------------------------------------------------------------------------------
HOTELS 25,000 Marriott International, Inc. .... 925,240 956,250 0.5
- ---------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS 5,000 Colgate-Palmolive Co. ........... 322,638 351,250 0.2
70,000 Procter & Gamble Co. ............ 4,589,963 5,810,000 3.2
------------- ------------- ------
4,912,601 6,161,250 3.4
- ---------------------------------------------------------------------------------------------------------------------------
INFORMATION 85,000 First Data Corp. ................ 3,422,542 5,684,375 3.1
PROCESSING 25,000 General Motors Corp. (Class E)... 1,141,500 1,300,000 0.7
75,000 +Primark Corp. .................. 2,034,375 2,250,000 1.2
------------- ------------- ------
6,598,417 9,234,375 5.0
- ---------------------------------------------------------------------------------------------------------------------------
INSURANCE 70,000 American International Group,
Inc. ........................... 5,142,862 6,475,000 3.5
- ---------------------------------------------------------------------------------------------------------------------------
LEISURE 70,000 PolyGram N.V. (ADR)*............. 3,041,535 3,675,000 2.0
- ---------------------------------------------------------------------------------------------------------------------------
MEDICAL TECHNOLOGY 80,000 Johnson & Johnson................ 5,807,519 6,850,000 3.7
- ---------------------------------------------------------------------------------------------------------------------------
NATURAL ENERGY 100,000 Enron Corp. ..................... 3,806,500 3,812,500 2.1
- ---------------------------------------------------------------------------------------------------------------------------
OIL SERVICES 10,000 Schlumberger Ltd. ............... 599,370 692,500 0.4
- ---------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICAL 100,000 +Amgen, Inc. .................... 3,090,992 5,925,000 3.2
100,000 Merck & Co., Inc. ............... 5,232,300 6,575,000 3.6
100,000 Pfizer, Inc. .................... 3,622,776 6,300,000 3.4
165,000 +Pharmacia & Upjohn Inc. ........ 4,902,245 6,393,750 3.5
110,000 Schering-Plough Corp. ........... 5,723,607 6,022,500 3.3
------------- ------------- ------
22,571,920 31,216,250 17.0
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Growth Stock Portfolio
Schedule of Investments as of December 31, 1995 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
SHARES VALUE (NOTE OF NET
INDUSTRY HELD STOCKS COST 1A) ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PHOTOGRAPHY 90,000 Eastman Kodak Co. ............... $ 4,948,935 $ 6,030,000 3.3%
- ---------------------------------------------------------------------------------------------------------------------------
POLLUTION CONTROL 35,000 WMX Technologies, Inc. .......... 1,034,554 1,045,625 0.6
- ---------------------------------------------------------------------------------------------------------------------------
RESTAURANTS 10,000 McDonald's Corp. ................ 335,600 451,250 0.2
- ---------------------------------------------------------------------------------------------------------------------------
RETAIL-SPECIALTY 200,000 +Staples Inc. ................... 3,565,188 4,875,000 2.6
150,000 +Toys 'R' Us, Inc. .............. 3,794,885 3,262,500 1.8
------------- ------------- ------
7,360,073 8,137,500 4.4
- ---------------------------------------------------------------------------------------------------------------------------
RETAIL-STORES 100,000 Wal-Mart Stores, Inc. ........... 2,271,630 2,237,500 1.2
- ---------------------------------------------------------------------------------------------------------------------------
SOFTWARE-COMPUTER 70,000 Computer Associates
International, Inc. ............ 4,380,213 3,981,250 2.2
60,000 +Microsoft Corp. ................ 5,479,912 5,265,000 2.9
------------- ------------- ------
9,860,125 9,246,250 5.1
- ---------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 250,000 MCI Communications Corp. ........ 6,276,035 6,531,250 3.5
- ---------------------------------------------------------------------------------------------------------------------------
TOYS 170,000 Mattel, Inc. .................... 3,912,180 5,227,500 2.8
- ---------------------------------------------------------------------------------------------------------------------------
TRAVEL AND LODGING 45,000 Carnival Corp. (Class A)......... 1,005,771 1,096,875 0.6
- ---------------------------------------------------------------------------------------------------------------------------
UTILITIES-ELECTRIC 40,000 +AES China Generating Co.
Ltd. ........................... 643,500 300,000 0.2
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS 143,259,867 170,351,875 92.5
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE AMOUNT SHORT-TERM SECURITIES
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER** $ 6,774,000 Associates Corp. of North
America,
6% due 1/02/1996................ 6,769,484 6,769,484 3.7
5,000,000 Corporate Asset Funding Co. Inc.,
5.60% due 1/29/1996............. 4,975,889 4,975,889 2.7
4,646,000 Riverwoods Funding Corp.,
5.77% due 1/10/1996............. 4,637,064 4,637,064 2.5
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 16,382,437 16,382,437 8.9
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS................ $ 159,642,304 186,734,312 101.4
=============
LIABILITIES IN EXCESS OF OTHER
ASSETS.......................... (2,581,880) (1.4)
------------- ------
NET ASSETS....................... $ 184,152,432 100.0%
============= =====
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* American Depositary Receipts (ADR).
** Commercial Paper is traded on a discount basis; the interest rates shown are
the discount rates paid at the time of purchase by the Portfolio.
+ Non-income producing security.
See Notes to Financial Statements.
27
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S VALUE
INDUSTRY RATINGS RATINGS FACE AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS
- ------------------------------------------------------------------------------------------------------------------------------
AEROSPACE-1.0% B B3 $ 1,000,000 +Howmet Corp., 10% due
12/01/2003.................... $ 1,000,000 $ 1,050,000
- ------------------------------------------------------------------------------------------------------------------------------
AIRLINES-0.6% BB- B1 750,000 USAir, Inc., 10.375% due
3/01/2013..................... 750,000 697,500
- ------------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE PARTS-0.9% B+ Ba3 1,000,000 Walbro Corp., 9.875% due
7/15/2005..................... 996,500 997,500
- ------------------------------------------------------------------------------------------------------------------------------
BROADCASTING & BB- B3 2,000,000 ACT III Broadcasting Inc.,
PUBLISHING-4.1% 10.25% due 12/15/2005......... 2,000,000 2,042,500
B Caa 2,000,000 NWCG Holding Corp., 13.947%**
due 6/15/1999................. 1,253,922 1,380,000
B+ B3 1,000,000 Sinclair Broadcast Group Inc.,
10% due 12/15/2003............ 935,000 1,020,000
------------- -------------
4,188,922 4,442,500
- ------------------------------------------------------------------------------------------------------------------------------
BROADCASTING/ CCC+ Caa 75,790 American Telecasting, Inc.,
CABLE-5.0% 17.631%** due 6/15/2004....... 37,829 52,106
BB- B2 1,850,000 +Bell Cablemedia PLC, 11.875%**
due 9/15/2005................. 1,074,316 1,160,875
B- B3 2,000,000 Diamond Cable Communications
PLC, 11.75%** due
12/15/2005.................... 1,134,986 1,175,000
BB+ Ba3 1,000,000 Videotron Holdings PLC, 10.625%
due 2/15/2005................. 1,023,750 1,072,500
B+ B3 3,000,000 Videotron Holdings PLC,
11.034%** due 8/15/2005....... 1,824,016 1,860,000
------------- -------------
5,094,897 5,320,481
- ------------------------------------------------------------------------------------------------------------------------------
BUILDING B+ B3 1,500,000 Pacific Lumber Co., 10.50% due
MATERIALS-1.3% 3/01/2003..................... 1,450,313 1,421,250
- ------------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS-1.3% B- B3 1,500,000 International Wire Group, Inc.,
11.75% due 6/01/2005.......... 1,486,875 1,425,000
- ------------------------------------------------------------------------------------------------------------------------------
CHEMICALS-1.2% B+ Ba3 1,717,000 G-I Holdings Inc., 11.15%** due
10/01/1998.................... 1,272,747 1,330,675
- ------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS- CCC+ B3 2,000,000 Nextel Communications, Inc.,
5.6% 14.085%** due 8/15/2004....... 1,093,849 1,085,000
B- B3 1,000,000 Panamsat L.P., 12.301%** due
8/01/2003..................... 709,424 820,000
BB- B2 1,000,000 Rogers Communications Inc.,
10.875% due 4/15/2004......... 1,007,500 1,045,000
BB- B1 1,000,000 Telecom Argentina S.A., 8.375%
due 10/18/2000................ 825,000 947,500
BB- B1 2,000,000 Telefonica de Argentina S.A.,
11.875% due 11/01/2004........ 1,978,830 2,070,000
------------- -------------
5,614,603 5,967,500
- ------------------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES-1.0% CCC+ B3 1,000,000 ComputerVision Corp., 11.375%
due 8/15/1999................. 937,500 1,040,000
- ------------------------------------------------------------------------------------------------------------------------------
CONGLOMERATES- BB- B3 2,000,000 Coltec Industries Inc., 10.25%
10.0% due 4/01/2002................. 2,060,000 2,055,000
CCC+ B3 1,000,000 Interlake Corp., 12.125% due
3/01/2002..................... 941,625 950,000
B+ B2 1,000,000 J.B. Poindexter & Co., Inc.,
12.50% due 5/15/2004.......... 955,000 802,500
B+ B3 950,000 Jordan Industries Inc., 10.375%
due 8/01/2003................. 950,000 845,500
</TABLE>
28
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1995 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S VALUE
INDUSTRY RATINGS RATINGS FACE AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------
CONGLOMERATES NR* NR* $ 1,000,000 MacAndrew & Forbes Group, Inc.,
(CONCLUDED) 13% due 3/01/1999............. $ 995,000 $ 1,010,000
B+ B3 1,000,000 Sequa Corp., 9.375% due
12/15/2003.................... 1,030,938 930,000
BB- B1 2,000,000 Sherritt Gordon, Ltd., 9.75%
due
4/01/2003..................... 1,946,250 2,130,000
NR* NR* 2,000,000 +Walter Industries Inc., 12.19%
due 3/15/2000................. 2,030,000 2,022,500
------------- -------------
10,908,813 10,745,500
- ------------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS-7.2% B NR* 1,500,000 Coleman Holdings, Inc.,
11.981%** due 5/27/1998....... 1,012,500 1,215,000
B+ Ba3 500,000 Coty Inc., 10.25% due
5/01/2005..................... 500,000 530,000
NR* B2 1,000,000 Herff Jones Inc., 11% due
8/15/2005..................... 1,000,000 1,062,500
B+ Ba2 1,900,000 International Semi-Tech
Microelectronics, Inc.,
12.792%** due 8/15/2003....... 1,037,507 997,500
B- Caa 1,000,000 Polymer Group Inc., 12.25% due
7/15/2002..................... 1,000,000 1,030,000
B B2 1,000,000 Revlon Consumer Products Corp.,
9.375% due 4/01/2001.......... 872,167 1,012,500
B- B3 2,000,000 Samsonite Corp., 11.125% due
7/15/2005..................... 1,935,625 1,920,000
------------- -------------
7,357,799 7,767,500
- ------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED-0.9% B B1 1,000,000 Foamex Capital Corp., 11.25%
due 10/01/2002................ 989,063 1,000,000
- ------------------------------------------------------------------------------------------------------------------------------
ENERGY-7.7% BB- Ba3 500,000 California Energy Company,
Inc., 9.875% due 6/30/2003.... 500,000 525,000
B+ B1 2,000,000 Clark R & M Holdings, Inc.,
11.016%** due 2/15/2000....... 1,286,314 1,330,000
BB B1 850,000 Gulf Canada Resources, Ltd., 9%
due 8/15/1999................. 789,281 896,750
NR* B3 460,000 Tesoro Petroleum Corp., 12.75%
due 3/15/2001................. 417,835 473,800
B- Caa 1,700,000 Transamerica Refining Corp.,
19.571%** due 2/15/2002....... 1,107,561 1,028,500
BB+ B2 1,000,000 TransTexas Gas Corp., 11.50%
due 6/15/2002................. 1,000,000 1,032,500
B+ B1 2,000,000 Vintage Petroleum Inc., 9% due
12/15/2005.................... 1,994,560 2,017,500
BB- B1 1,000,000 Yacimientos Petroliferos
Fiscales S.A., 8% due
2/15/2004..................... 710,000 940,000
------------- -------------
7,805,551 8,244,050
- ------------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT-1.7% B- Caa 2,000,000 Marvel Holdings Inc., 9.125%
due 2/15/1998................. 1,797,500 1,840,000
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL BB- B1 1,500,000 Reliance Group Holdings Inc.,
SERVICES-1.4% 9.75% due 11/15/2003.......... 1,449,375 1,545,000
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1995 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S VALUE
INDUSTRY RATINGS RATINGS FACE AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------
FOOD & CCC+ Caa $ 1,000,000 Del Monte Corp., 10% due
BEVERAGE-3.3% 5/01/2003..................... $ 976,250 $ 905,000
B- B2 1,000,000 Envirodyne Industries Inc.,
10.25% due 12/01/2001......... 1,018,750 735,000
B B3 2,000,000 Specialty Foods Corp., 11.125%
due 10/01/2002................ 1,990,000 1,940,000
------------- -------------
3,985,000 3,580,000
- ------------------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT BB- B1 1,500,000 Republic of Argentina, 8.375%
OBLIGATIONS-1.2% due 12/20/2003................ 1,128,750 1,263,750
- ------------------------------------------------------------------------------------------------------------------------------
GAMING-3.9% BB B1 1,000,000 Bally's Park Place Funding
Corp., 9.25% due 3/15/2004.... 920,000 1,017,500
D NR* 635,000 Goldriver Hotel & Casino Corp.,
13.375% due 8/31/1999......... 790,072 298,450
B+ B2 1,000,000 Greate Bay Properties Inc.,
10.875% due 1/15/2004......... 845,000 877,500
D Caa 2,000,000 Harrah's Jazz Company, 14.25%
due 11/15/2001................ 1,971,250 550,000
B- B3 750,000 Pioneer Finance Corp., 13.50%
due 12/01/1998................ 792,187 585,000
B B2 750,000 Showboat Inc., 13% due
8/01/2009..................... 727,500 843,750
------------- -------------
6,046,009 4,172,200
- ------------------------------------------------------------------------------------------------------------------------------
HOTELS-2.8% BB- Ba3 2,000,000 +HMC Acquisition Properties, 9%
due 12/15/2007................ 2,000,000 2,025,000
BB- B1 1,000,000 John Q. Hammons Hotel, Inc.,
8.875% due 2/15/2004.......... 887,500 990,000
------------- -------------
2,887,500 3,015,000
- ------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL B- Caa 629,000 Southeastern Public Service
SERVICES-0.6% Co., 11.875% due 2/01/1998.... 470,807 633,718
- ------------------------------------------------------------------------------------------------------------------------------
METAL & MINING-2.1% B- B2 1,000,000 Kaiser Aluminum Corp., 12.75%
due 2/01/2003................. 1,045,000 1,095,000
B- B3 1,750,000 Maxxam Group, Inc., 12.25%**
due 8/01/2003................. 1,285,831 1,198,750
------------- -------------
2,330,831 2,293,750
- ------------------------------------------------------------------------------------------------------------------------------
PACKAGING-3.6% CCC+ Ca 2,000,000 Anchor Glass Container Co.,
9.875% due 12/15/2008......... 1,736,875 1,180,000
B+ B2 1,500,000 Owens-Illinois, Inc., 9.95% due
10/15/2004.................... 1,488,750 1,593,750
B B2 1,000,000 Portola Packaging Inc., 10.75%
due 10/01/2005................ 1,000,000 1,035,000
------------- -------------
4,225,625 3,808,750
- ------------------------------------------------------------------------------------------------------------------------------
PAPER-4.0% B B2 1,000,000 Fort Howard Corp., 9% due
2/01/2006..................... 930,000 980,000
B+ B2 1,000,000 Repap New Brunswick, Inc.,
10.625% due 4/15/2005......... 1,008,750 980,000
B+ B1 1,000,000 Repap Wisconsin Finance, Inc.,
9.25% due 2/01/2002........... 900,000 950,000
B B1 750,000 Riverwood International, Corp.,
11.25% due 6/15/2002.......... 750,000 813,750
B+ B1 500,000 S.D. Warren Co., 12% due
12/15/2004.................... 500,000 551,250
------------- -------------
4,088,750 4,275,000
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1995 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S VALUE
INDUSTRY RATINGS RATINGS FACE AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (CONCLUDED)
- ------------------------------------------------------------------------------------------------------------------------------
RESTAURANTS-0.7% CCC+ Caa $ 1,000,000 Flagstar Corp., 11.375% due
9/15/2003..................... $ 935,000 $ 710,000
- ------------------------------------------------------------------------------------------------------------------------------
RETAIL SPECIALITY D Caa 1,000,000 Bradlees, Inc., 11% due
- -0.7% 8/01/2002..................... 1,023,750 250,000
NR* NR* 484,000 +Cumberland Farms, Inc., 10.50%
due 10/01/2003................ 473,715 445,280
------------- -------------
1,497,465 695,280
- ------------------------------------------------------------------------------------------------------------------------------
STEEL-2.6% B B1 1,000,000 Gulf States Steel Acquisition
Corp., 13.50% due 4/15/2003
(e)........................... 989,000 882,500
B+ B1 1,000,000 WCI Steel Inc., 10.50% due
3/01/2002..................... 995,000 972,500
B B2 1,000,000 Weirton Steel Corp., 10.75% due
6/01/2005..................... 925,000 942,500
------------- -------------
2,909,000 2,797,500
- ------------------------------------------------------------------------------------------------------------------------------
SUPERMARKETS-0.9% B- B3 1,137,000 Grand Union Co., 12% due
9/01/2004..................... 1,096,842 983,505
- ------------------------------------------------------------------------------------------------------------------------------
TEXTILES-3.3% B+ B2 1,000,000 Decorative Home Accents, Inc.,
13% due 6/30/2002 (f)......... 992,336 990,000
BB- Ba3 1,000,000 Tultex Corp., 10.625% due
3/15/2005..................... 1,007,500 1,017,500
B+ B3 1,500,000 Westpoint Stevens Industries,
Inc., 9.375% due 12/15/2005... 1,465,000 1,481,250
------------- -------------
3,464,836 3,488,750
- ------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION-3.9% BB- Ba2 1,200,000 Mexican Maritime
Transportation, S.A. de C.V.,
9.25% due 5/15/2003........... 978,000 1,056,000
B- B3 2,000,000 Transtar Holdings L.P.,
11.065%** due 12/15/2003...... 1,329,850 1,320,000
B+ Ba3 1,750,000 Viking Star Shipping Co.,
9.625% due 7/15/2003.......... 1,735,000 1,793,750
------------- -------------
4,042,850 4,169,750
- ------------------------------------------------------------------------------------------------------------------------------
UTILITIES-6.3% B+ B1 980,000 Beaver Valley Funding Co., 9%
due 6/01/2017................. 924,875 826,610
B+ Ba3 1,000,000 CTC Mansfield Funding, Inc.,
11.125% due 9/30/2016......... 1,076,250 1,064,600
NR* NR* 1,000,000 Gas Argentino S.A., 7.25% due
12/07/1998.................... 884,050 905,000
BB- B1 1,000,000 Metrogas, Inc., 12% due
8/15/2000..................... 983,750 1,012,500
Midland Cogeneration Venture
L.P.
BB Ba3 865,832 10.33% due 7/23/2002....... 896,677 913,096
B- B2 1,000,000 13.25% due 7/23/2006....... 1,108,750 1,050,330
BBB- NR* 1,000,000 +Trans Gas de Occidente S.A.,
9.79% due 11/01/2010.......... 1,000,000 990,000
------------- -------------
6,874,352 6,762,136
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS-90.8% 99,084,075 97,483,545
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES COMMON STOCKS,
HELD RIGHTS & WARRANTS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
BROADCASTING/ 5,000 American Telecasting, Inc.
CABLE-0.0% (Warrants) (b)................ 4,776 31,250
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1995 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
INDUSTRY SHARES HELD ISSUE COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS, RIGHTS & WARRANTS
(CONCLUDED)
- ------------------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES-0.0% 30,351 Anacomp, Inc. (Warrants) (b)... $ 40,000 $ 950
- ------------------------------------------------------------------------------------------------------------------------------
ENERGY-0.1% 29,058 Transamerica Refining Corp.
(Warrants) (b)................ 67,742 72,645
- ------------------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE-0.2% 18,488 FoodBrands America, Inc. (d)... 1,061,305 212,612
- ------------------------------------------------------------------------------------------------------------------------------
GAMING-0.1% 10,000 Goldriver Hotel & Casino Corp.
(Class B) (c)(d).............. 65,657 10,000
1,000 +Goldriver Hotel & Casino
Liquidating Trust............. 24,040 8,564
2,000 Trump Taj Mahal Holding Corp.
(Class A) (d)................. 1,000 36,000
------------- -------------
90,697 54,564
- ------------------------------------------------------------------------------------------------------------------------------
HOTELS-0.0% 804 Buckhead America Corp. (d)..... 4,321 4,824
- ------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL 1,036 Thermadyne Industries, Inc.
SERVICES-0.0% (Warrants) (b)................ 15,022 18,777
- ------------------------------------------------------------------------------------------------------------------------------
STEEL-0.0% 1,000 Gulf States Steel Acquisition
Corp. (Warrants) (b).......... 11,000 250
- ------------------------------------------------------------------------------------------------------------------------------
SUPERMARKETS-0.1% 17,674 Grand Union Co. (d)............ 1,000,000 130,346
- ------------------------------------------------------------------------------------------------------------------------------
TEXTILES-0.0% 1,000 +Decorative Home Accents, Inc.
(Class F) (d)................. 7,664 10,000
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS, RIGHTS
& WARRANTS-0.5% 2,302,527 536,218
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PREFERRED STOCKS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BROADCASTING & 9,928 K-III Communications Corp.
PUBLISHING-0.9% (a)........................... 1,005,190 982,918
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS-0.9% 1,005,190 982,918
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM SECURITIES
- ------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL $ 2,000,000 Ciesco L.P., 5.75% due
PAPER***-2.5% 1/09/1996..................... 1,996,486 1,996,486
769,000 General Electric Capital Corp.,
5.90% due 1/02/1996........... 768,496 768,496
------------- -------------
2,764,982 2,764,982
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1995 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES (CONCLUDED)
- ------------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & $ 2,660,000 Federal Home Loan Bank, 5.52%
AGENCY due 2/01/1996................. $ 2,646,133 $ 2,646,133
OBLIGATIONS***-2.5%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM
SECURITIES-5.0% 5,411,115 5,411,115
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-97.2%........ $ 107,802,907 104,413,796
=============
OTHER ASSETS LESS
LIABILITIES-2.8%.............. 2,964,352
-------------
NET ASSETS-100.0%.............. $ 107,378,148
=============
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not Rated.
** Represents a zero coupon or step bond; the interest rate shown is the
effective yield at the time of purchase by the Portfolio.
*** Commercial Paper and certain US Government & Agency Obligations are traded
on a discount basis; the interest rates shown are the discount rates paid at
the time of purchase by the Portfolio.
(a) Represents a pay-in-kind security which may pay interest/dividends in
additional face amount/shares.
(b) Warrants entitle the Portfolio to purchase a predetermined number of shares
of common stock/face amount of bonds. The purchase price and number of
shares/face amount are subject to adjustments under certain conditions until
the expiration date.
(c) Each share contains a right which entitles the Portfolio to purchase a
predetermined number of shares of preferred stock. The purchase price and
number of shares are subject to adjustment.
(d) Non-income producing security.
+ Restricted securities as to resale. The value of the Portfolio's investment
in restricted securities was approximately $7,712,000, representing 7.2% of
<TABLE>
<CAPTION>
net assets.
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VALUE
ISSUE ACQUISITION DATES COST (NOTE 1A)
----------------------------------------------------------------------------------------------------------------
Bell Cablemedia PLC, 11.875% due 9/15/2005................ 9/13/1995 $1,074,316 $1,160,875
Cumberland Farms, Inc., 10.50% due 10/01/2003............. 2/18/1994 473,715 445,280
Decorative Home Accents, Inc., (Class F).................. 10/26/1995 7,664 10,000
Goldriver Hotel & Casino Liquidating Trust................ 8/31/1992 24,040 8,564
HMC Acquisition Properties, 9% due 12/15/2007............. 12/15/1995-12/18/1995 2,000,000 2,025,000
Howmet Corp., 10% due 12/01/2003.......................... 11/22/1995 1,000,000 1,050,000
Trans Gas de Occidente S.A., 9.79% due 11/01/2010......... 11/02/1995 1,000,000 990,000
Walter Industries Inc., 12.19% due 3/15/2000.............. 10/20/1995 2,030,000 2,022,500
----------------------------------------------------------------------------------------------------------------
TOTAL $7,609,735 $7,712,219
========== ==========
----------------------------------------------------------------------------------------------------------------
</TABLE>
(e) Each $1,000 face amount contains one warrant of Gulf States Steel
Acquisition Corp.
(f) Each $1,000 face amount contains one share of Class F common stock of
Decorative Home Accents, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
33
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Intermediate Government Bond Portfolio
Schedule of Investments as of December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY OBLIGATIONS
- ---------------------------------------------------------------------------------------------------------------------------
FEDERAL FARM CREDIT $ 5,000,000 Federal Farm Credit Bank, 8.65% due 10/01/1999.... $ 5,113,650 $ 5,521,100
BANK-2.3%
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL FEDERAL FARM CREDIT BANK 5,113,650 5,521,100
- ---------------------------------------------------------------------------------------------------------------------------
FEDERAL HOME Federal Home Loan Mortgage Corporation:
LOAN MORTGAGE 6,000,000 6.55% due 1/04/2000............................... 6,102,840 6,213,720
CORPORATION-4.9% 5,000,000 7.90% due 9/19/2001............................... 5,000,000 5,535,950
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION 11,102,840 11,749,670
- ---------------------------------------------------------------------------------------------------------------------------
FEDERAL NATIONAL Federal National Mortgage Association:
MORTGAGE 7,000,000 8.35% due 11/10/1999.............................. 7,650,000 7,673,750
ASSOCIATION-16.2% 10,000,000 7.85% due 9/10/2004............................... 9,824,469 10,635,900
9,000,000 7.65% due 3/10/2005............................... 8,990,156 10,080,000
10,000,000 6.35% due 6/10/2005............................... 10,000,000 10,332,800
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION 36,464,625 38,722,450
- ---------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED 686,236 Federal National Mortgage Association,
SECURITIES-0.3% 9% due 1/01/2002 (a)............................. 662,218 722,477
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES 662,218 722,477
- ---------------------------------------------------------------------------------------------------------------------------
PRIVATE EXPORT Private Export Funding Corporation:
FUNDING 7,000,000 8.35% due 1/31/2001............................... 7,083,590 7,811,370
CORPORATION-8.2% 10,000,000 8.75% due 6/30/2003............................... 10,410,681 11,744,300
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL PRIVATE EXPORT FUNDING CORPORATION 17,494,271 19,555,670
- ---------------------------------------------------------------------------------------------------------------------------
STUDENT LOAN Student Loan Marketing Association,
MARKETING 13,000,000 7.50% due 3/08/2000............................... 13,176,719 13,926,250
ASSOCIATION-5.8%
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL STUDENT LOAN MARKETING ASSOCIATION 13,176,719 13,926,250
- ---------------------------------------------------------------------------------------------------------------------------
US TREASURY US Treasury Notes:
NOTES-56.8% 5,000,000 8.875% due 11/15/1997............................. 5,160,938 5,321,850
13,000,000 8.875% due 2/15/1999.............................. 14,712,344 14,332,500
6,000,000 7.50% due 10/31/1999.............................. 6,376,680 6,441,540
10,000,000 8.75% due 8/15/2000............................... 11,795,312 11,357,800
10,000,000 6.375% due 8/15/2002.............................. 10,000,417 10,485,900
20,000,000 7.25% due 5/15/2004............................... 20,214,531 22,200,000
5,000,000 7.875% due 11/15/2004............................. 5,246,875 5,787,500
21,500,000 6.50% due 5/15/2005............................... 21,097,070 22,874,065
16,000,000 12% due 5/15/2005................................. 22,772,500 23,329,920
10,000,000 10.75% due 8/15/2005.............................. 13,385,937 13,739,100
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL US TREASURY NOTES 130,762,604 135,870,175
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY
OBLIGATIONS-94.5% 214,776,927 226,067,792
- ---------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
- ---------------------------------------------------------------------------------------------------------------------------
REPURCHASE 9,332,000 Morgan Stanley Group Inc., purchased on 12/29/1995
AGREEMENT*-3.9% to yield 5.87% to 1/02/1996...................... 9,332,000 9,332,000
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES-3.9% 9,332,000 9,332,000
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-98.4%........................... $ 224,108,927 235,399,792
=============
OTHER ASSETS LESS LIABILITIES-1.6%................ 3,940,216
-------------
NET ASSETS-100.0%................................. $ 239,340,008
=============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) US Government Agency Mortgage-Backed Obligations are subject to principal
paydowns as a result of prepayments or refinancings of the underlying
mortgage instrument. As a result, the average life may be substantially less
than the original maturity.
* Repurchase Agreements are fully collateralized by US Government Obligations.
See Notes to Financial Statements.
34
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Long Term Corporate Bond Portfolio
Schedule of Investments as of December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S FACE VALUE (NOTE
RATINGS RATINGS AMOUNT ISSUE COST 1A)
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT OBLIGATIONS
- ----------------------------------------------------------------------------------------------------------------------------
US TREASURY NOTES US Treasury Notes & Bonds:
& BONDS-12.4% AAA Aaa $2,000,000 7.25% due 2/15/1998......... $ 1,994,440 $ 2,079,680
AAA Aaa 1,500,000 5.50% due 4/15/2000......... 1,418,906 1,512,420
AAA Aaa 500,000 5.875% due 6/30/2000........ 500,405 510,155
NR* Aaa 1,000,000 8% due 5/15/2001............ 1,112,656 1,119,370
AAA Aaa 1,000,000 7.875% due 11/15/2004....... 1,149,688 1,157,500
AAA Aaa 4,000,000 6.50% due 5/15/2005......... 3,869,375 4,255,640
AAA Aaa 500,000 5.875% due 11/15/2005....... 508,125 511,250
AAA Aaa 1,000,000 8% due 11/15/2021........... 1,010,937 1,251,250
AAA Aaa 2,500,000 7.625% due 2/15/2025........ 2,976,641 3,057,025
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT
OBLIGATIONS-12.4% 14,541,173 15,454,290
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
INDUSTRY CORPORATE BONDS & NOTES
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
BANKING-10.1% A+ Aa2 2,000,000 ABN AMRO Bank, 7.25% due
5/31/2005...................... 2,043,620 2,147,160
A A2 1,000,000 BankAmerica Corp., 7.125% due
5/12/2005...................... 985,500 1,058,670
A+ A2 2,000,000 Citicorp., 8.80% due
2/01/2000...................... 2,000,000 2,064,700
A- A3 2,000,000 Mellon Bank Corp., 6.875% due
3/01/2003...................... 1,822,480 2,074,240
NationsBank Corp.:
A A2 2,000,000 7.50% due 2/15/1997......... 1,998,280 2,041,240
A- A3 2,000,000 7.75% due 8/15/2015......... 2,000,000 2,190,700
A+ A1 1,000,000 Norwest Corp., 6.625% due
3/15/2003...................... 1,003,060 1,025,750
------------- -------------
11,852,940 12,602,460
- ----------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES- Chrysler Financial Corp.:
CAPTIVE-5.1% A- A3 1,000,000 7.13% due 9/30/1996......... 985,130 1,010,680
A- A3 2,000,000 10.95% due 8/01/2017........ 2,202,640 2,244,160
BBB+ A3 2,000,000 General Motors Acceptance Corp.,
7.125% due 5/11/1998........... 2,022,560 2,065,060
BBB+ A3 1,000,000 General Motors Corp., 7.40% due
9/01/2025...................... 991,940 1,066,920
------------- -------------
6,202,270 6,386,820
- ----------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES- A+ A1 2,000,000 American General Finance Corp.,
CONSUMER-8.3% 7.70% due 11/15/1997............ 1,977,660 2,070,680
Associates Corp. of North
America:
AA- Aa3 2,300,000 5.25% due 9/01/1998......... 2,230,057 2,279,760
AA- Aa3 1,000,000 7.25% due 9/01/1999......... 987,620 1,047,740
A A2 2,000,000 Beneficial Corp., 5.41% due
10/14/1997..................... 2,000,000 1,990,918
A+ Aa3 2,000,000 CIT Group Holdings, Inc., 5.787%
due 2/28/1997.................. 1,998,680 2,004,060
A+ A2 1,000,000 Transamerica Financial Corp.,
6.80% due 3/15/1999............ 999,730 1,030,810
------------- -------------
10,193,747 10,423,968
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
35
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Long Term Corporate Bond Portfolio
Schedule of Investments as of December 31, 1995 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S FACE VALUE (NOTE
INDUSTRY RATINGS RATINGS AMOUNT ISSUE COST 1A)
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES- A A2 $1,000,000 Dean Witter, Discover & Co.,
OTHER-7.9% 6.50% due 11/01/2005........... $ 988,450 $ 1,010,400
AAA Aaa 1,000,000 General Electric Capital Corp.,
8.125% due 5/15/2012........... 1,018,330 1,167,910
A+ A1 3,500,000 Morgan Stanley Group, Inc., 7%
due 10/01/2013................. 3,021,480 3,535,770
A- A3 3,000,000 Smith Barney Holdings, Inc.,
6.50% due 10/15/2002........... 2,987,520 3,052,170
A+ A2 1,000,000 Travelers Group, Inc., 7.875%
due 5/15/2025.................. 999,420 1,119,450
------------- -------------
9,015,200 9,885,700
- ----------------------------------------------------------------------------------------------------------------------------
FOREIGN+-10.3% AA- A1 1,000,000 AEGON, N.V., 8% due
8/15/2006(2)................... 990,870 1,132,160
BBB+ A3 1,000,000 ++Bangkok Bank Public Company
Ltd., 7.25% due 9/15/2005(5)... 990,920 1,037,590
A+ A2 2,000,000 CRA Finance Ltd., 6.50% due
12/01/2003(1).................. 2,006,950 2,027,640
A+ A1 2,000,000 ++Petroliam Nasional BHD, 6.875%
due 7/01/2003(6)............... 1,977,680 2,074,540
A+ A2 1,000,000 Pohang Iron & Steel Co. Ltd.,
7.375% due 5/15/2005(4)........ 1,018,160 1,062,390
Province of Quebec (Canada)(3):
A+ A2 1,000,000 8.80% due 4/15/2003......... 1,129,480 1,145,010
A+ A2 1,500,000 13% due 10/01/2013.......... 1,959,060 1,828,950
AA A1 1,000,000 Republic of Italy, 6.875% due
9/27/2023(3)................... 972,070 976,550
A A2 1,500,000 Western Mining Corp. Holdings
Ltd., 7.25% due
11/15/2013(1).................. 1,519,575 1,585,365
------------- -------------
12,564,765 12,870,195
- ----------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL- A- A2 1,500,000 American Home Products Corp.,
CONSUMER-13.1% 7.90% due 2/15/2005 1,497,075 1,687,110
A+ A1 3,500,000 Bass America, Inc., 8.125% due
3/31/2002...................... 3,532,070 3,898,090
Grand Metropolitan Investment Corp:
A+ A2 1,000,000 6.50% due 9/15/1999......... 1,000,000 1,022,710
A+ A2 1,000,000 8.625% due 8/15/2001........ 1,047,750 1,127,530
A+ A1 2,000,000 JC Penney Co., Inc., 6.875% due
10/15/2015..................... 1,979,420 2,057,800
AAA Aaa 2,000,000 Johnson & Johnson Co., 8.72% due
11/01/2024..................... 2,019,140 2,325,460
A A2 1,000,000 Philip Morris Companies, Inc.,
7.25% due 1/15/2003............ 1,006,880 1,056,600
BBB- Baa3 2,000,000 RJR Nabisco, Inc., 8.75% due
8/15/2005...................... 1,931,540 2,048,620
A A2 1,000,000 Weyerhaeuser Co., 7.95% due
3/15/2025...................... 989,040 1,162,360
------------- -------------
15,002,915 16,386,280
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Long Term Corporate Bond Portfolio
Schedule of Investments as of December 31, 1995 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S FACE VALUE (NOTE
INDUSTRY RATINGS RATINGS AMOUNT ISSUE COST 1A)
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES (CONCLUDED)
- ----------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL- AA- A1 $2,000,000 BP America Inc., 10% due
ENERGY-3.6% 7/01/2018...................... $ 2,156,880 $ 2,266,160
Texaco Capital Inc.:
A+ A1 1,000,000 6.875% due 7/15/1999........ 998,060 1,033,390
A+ A1 1,000,000 8.625% due 11/15/2031....... 1,045,390 1,258,850
------------- -------------
4,200,330 4,558,400
- ----------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL- A A3 500,000 Alco Standard Corp., 6.75% due
OTHER-12.1% 12/01/2025..................... 492,400 495,126
BBB Baa2 1,000,000 Applied Materials, Inc., 8% due
9/01/2004...................... 992,690 1,109,440
AA- Aa2 2,000,000 Archer-Daniels-Midland Co.,
8.125% due 6/01/2012........... 2,181,250 2,298,800
A A1 1,000,000 ++Electronic Data Systems, Inc.,
6.85% due 5/15/2000............ 999,210 1,038,750
BBB Baa2 2,500,000 Federal Express Corp., 9.65% due
6/15/2012...................... 2,758,750 3,085,325
AA Aa2 1,000,000 Kaiser Foundation Hospital,
9.55% due 7/15/2005............ 1,124,850 1,236,340
BBB+ A3 1,000,000 Philips Electronics N.V., 7.75%
due 5/15/2025.................. 996,610 1,110,990
BBB- Baa3 4,000,000 Tele-Communications Inc., 9.80%
due 2/01/2012.................. 4,201,240 4,796,680
------------- -------------
13,747,000 15,171,451
- ----------------------------------------------------------------------------------------------------------------------------
SUPRANATIONAL-3.5% AAA Aaa 1,500,000 Asian Development Bank, 10.75%
due 6/01/1997.................. 1,580,525 1,603,935
AAA Aaa 2,000,000 International Bank for
Reconstruction & Development,
12.375% due 10/15/2002......... 2,432,280 2,726,860
------------- -------------
4,012,805 4,330,795
- ----------------------------------------------------------------------------------------------------------------------------
TRANSPORT Southwest Airlines, Inc.:
SERVICES-2.7% A- Baa1 2,000,000 9.40% due 7/01/2001......... 2,407,120 2,300,100
A- Baa1 1,000,000 7.875% due 9/01/2007........ 998,750 1,089,000
------------- -------------
3,405,870 3,389,100
- ----------------------------------------------------------------------------------------------------------------------------
UTILITIES- AA Aa3 1,000,000 AT&T Corp., 8.35% due
COMMUNICATIONS-1.8% 1/15/2025...................... 982,270 1,143,950
AAA Aaa 1,000,000 BellSouth Corp.
Telecommunications, 7% due
10/01/2025..................... 990,680 1,062,860
------------- -------------
1,972,950 2,206,810
- ----------------------------------------------------------------------------------------------------------------------------
UTILITIES-GAS-2.2% AA- A1 2,500,000 Consolidated Natural Gas Co.,
8.75% due 6/01/1999............ 2,575,440 2,726,450
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS &
NOTES-80.7% 94,746,232 100,938,429
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Long Term Corporate Bond Portfolio
Schedule of Investments as of December 31, 1995 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE (NOTE
AMOUNT ISSUE COST 1A)
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------------------
COMMERCIAL $2,000,000 General Electric Capital Corp.,
PAPER**-1.6% 5.90% due 1/03/1996............ $ 1,998,361 $ 1,998,361
- ----------------------------------------------------------------------------------------------------------------------------
REPURCHASE 4,475,000 Morgan Stanley Group, Inc.,
AGREEMENT***-3.6% purchased on 12/29/95 to yield
5.87% to 1/02/1996............. 4,475,000 4,475,000
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM
INVESTMENTS-5.2% 6,473,361 6,473,361
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-98.3%......... $ 115,760,766 122,866,080
=============
OTHER ASSETS LESS
LIABILITIES-1.7%................ 2,166,804
-------------
NET ASSETS-100.0%............... $ 125,032,884
=============
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not Rated.
** Commercial Paper is traded on a discount basis; the interest rate shown is
the discount rate paid at the time of purchase by the Portfolio.
*** Repurchase Agreements are fully collateralized by US Government Obligations.
+ Corresponding industry groups for foreign bonds:
(1) Industrial Mining.
(2) Insurance.
(3) Government Entity.
(4) Iron/Steel.
(5) Banking.
(6) Industrial-Energy.
++ Restricted securities are to resale. The value of the Portfolio's
investment in restricted securities was approximately $4,151,000,
representing 3.3% net assets.
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUE ACQUISITION DATE COST VALUE (NOTE 1A)
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------
Bangkok Bank Public Company Ltd., 7.25% due 9/15/2005............ 9/27/1995 $ 990,920 $ 1,037,590
Electronic Data Systems, Inc., 6.85% due 5/15/2000............... 5/26/1995 999,210 1,038,750
Petroliam Nasional BHD, 6.875% due 7/01/2003..................... 7/28/1995 1,977,680 2,074,540
----------------------------------------------------------------------------------------------------------------------------
$ 3,967,810 $ 4,150,880
========== ==========
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
38
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Money Reserve Portfolio
Schedule of Investments as of December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY VALUE
FACE AMOUNT ISSUE RATE* DATE (NOTE 1A)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
CERTIFICATE OF $ 6,000,000 Abbey National Treasury Services PLC........ 6.54% 4/09/96 $ 6,012,675
DEPOSIT-EUROPEAN-1.1%
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATE OF DEPOSIT-EUROPEAN
(COST-$6,000,159) 6,012,675
- ---------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER- 16,000,000 Abbey National N.A. Corp. .................. 5.44 5/30/96 15,634,160
40.9% 6,590,000 Allomon Funding Corp. ...................... 6.00 1/19/96 6,566,935
15,000,000 American Express Credit Corp. .............. 5.62 4/11/96 14,762,533
3,132,000 Asset Securitization Cooperative Corp. ..... 5.70 2/02/96 3,114,644
4,500,000 Beta Finance Inc. .......................... 5.65 2/23/96 4,460,240
1,907,000 CSW Credit, Inc. ........................... 5.75 1/18/96 1,900,876
25,000,000 CXC Inc. ................................... 5.66 2/23/96 24,779,111
10,748,000 Ford Motor Credit Co. ...................... 5.62 3/27/96 10,601,857
10,000,000 General Electric Capital Corp............... 5.59 4/22/96 9,824,944
24,000,000 General Motors Acceptance Corp. ............ 5.80 2/01/96 23,868,533
7,000,000 Goldman Sachs Group, L.P. .................. 5.60 4/12/96 6,888,117
13,000,000 International Nederlanden (US) Funding
Corp. ...................................... 5.65 2/23/96 12,885,138
7,228,000 Korea Development Bank ..................... 5.68 2/20/96 7,167,558
5,924,000 McKenna Triangle National Corp. ............ 5.74 1/16/96 5,906,880
5,000,000 Oesterreichische Kontrollbank
Aktiengesellschaft ......................... 5.59 3/27/96 4,932,014
17,000,000 Sandoz Corp. ............................... 5.65 2/21/96 16,855,160
2,310,000 Svenska Handelsbanken, Inc. ................ 5.75 2/01/96 2,297,565
2,000,000 Svenska Handelsbanken, Inc.................. 5.68 2/16/96 1,984,429
8,000,000 Sweden, Kingdom of ......................... 5.68 2/20/96 7,933,102
19,000,000 Sweden, Kingdom of ......................... 5.60 3/11/96 18,788,097
10,000,000 Transamerica Finance Corp................... 5.73 2/01/96 9,945,883
13,000,000 Transamerica Finance Corp................... 5.68 2/23/96 12,885,138
1,028,000 Windmill Funding Corp. ..................... 5.77 1/17/96 1,024,864
5,133,000 Windmill Funding Corp. ..................... 5.70 1/19/96 5,115,693
2,157,000 Windmill Funding Corp. ..................... 5.75 1/26/96 2,147,303
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (COST-$232,249,313) 232,270,774
- ---------------------------------------------------------------------------------------------------------------------------
CORPORATE 16,000,000 Beta Finance Inc.+.......................... 5.88 9/16/96 16,000,000
NOTES-7.7% 5,000,000 Beta Finance Inc.+.......................... 5.825 9/25/96 5,000,000
3,000,000 SMM Trust 1995-K+........................... 5.833 6/14/96 3,000,000
20,000,000 SMM Trust 1995-Q+........................... 5.938 1/08/97 19,998,072
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE NOTES (COST-$43,997,709) 43,998,072
- ---------------------------------------------------------------------------------------------------------------------------
MASTER NOTES-3.7% 8,000,000 Goldman Sachs Group, L.P.+ ................. 5.89 2/14/96 8,000,000
10,000,000 Goldman Sachs Group, L.P.+ ................. 5.82 8/09/96 10,000,000
3,000,000 Toyota Motor Credit Corp.+ ................. 5.847 9/13/96 2,998,559
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL MASTER NOTES (COST-$20,998,559) 20,998,559
- ---------------------------------------------------------------------------------------------------------------------------
MEDIUM-TERM 5,000,000 Abbey National Treasury Services PLC........ 6.45 5/15/96 5,015,500
NOTES-4.4% 5,000,000 Bear Stearns Companies, Inc. ............... 6.083 5/24/96 5,003,639
10,000,000 CIT Group Holdings, Inc., The .............. 5.81 9/12/96 9,993,850
5,000,000 General Electric Capital Corp............... 7.625 7/30/96 5,058,950
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL MEDIUM-TERM NOTES (COST-$25,046,634) 25,071,939
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Money Reserve Portfolio
Schedule of Investments as of December 31, 1995 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY VALUE
FACE AMOUNT ISSUE RATE* DATE (NOTE 1A)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT, $ 940,000 Federal Home Loan Bank...................... 6.09 % 3/08/96 $ 930,221
AGENCY & 9,550,000 Federal National Mortgage Association....... 5.34 4/05/96 9,412,735
INSTRUMENTALITY 5,000,000 Federal National Mortgage Association....... 5.11 10/30/96 4,784,950
OBLIGATIONS- 3,000,000 US Treasury Bills........................... 6.59 2/08/96 2,981,772
DISCOUNT-3.2%
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT, AGENCY & INSTRUMENTALITY
OBLIGATIONS-DISCOUNT (COST-$18,100,353) 18,109,678
- ---------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT, 10,000,000 Federal Farm Credit Bank+................... 5.88 11/25/97 9,996,001
AGENCY & 6,000,000 Federal Home Loan Bank+..................... 6.21 6/17/96 6,000,000
INSTRUMENTALITY 2,000,000 Federal Home Loan Bank+..................... 6.21 6/21/96 2,000,000
OBLIGATIONS- 8,000,000 Federal Home Loan Bank+..................... 5.15 9/12/96 7,997,017
NON-DISCOUNT-40.1% 3,000,000 Federal Home Loan Bank...................... 5.983 12/01/97 3,000,936
4,000,000 Federal Home Loan Bank+..................... 6.20 10/11/00 4,000,000
20,000,000 Federal National Mortgage Association+...... 5.15 2/07/96 20,000,000
21,000,000 Federal National Mortgage Association....... 6.86 2/28/96 21,039,375
10,000,000 Federal National Mortgage Association+...... 5.15 5/10/96 9,998,246
8,000,000 Federal National Mortgage Association+...... 6.08 5/13/96 8,000,000
5,000,000 Federal National Mortgage Association+...... 6.08 5/24/96 5,000,000
25,000,000 Federal National Mortgage Association+...... 5.593 10/11/96 25,000,000
4,400,000 Federal National Mortgage Association....... 6.18 11/04/96 4,391,200
15,000,000 Federal National Mortgage Association+...... 5.27 2/21/97 15,000,000
8,000,000 Federal National Mortgage Association+...... 6.20 5/19/97 8,000,000
8,000,000 Federal National Mortgage Association+...... 6.25 5/14/98 8,000,000
15,000,000 Student Loan Marketing Association+......... 5.23 5/14/96 15,004,307
6,000,000 Student Loan Marketing Association.......... 5.97 10/04/96 5,998,200
5,000,000 Student Loan Marketing Association+......... 5.41 1/14/97 5,000,000
10,000,000 Student Loan Marketing Association+......... 5.45 1/23/97 10,009,259
1,000,000 US Treasury Notes........................... 4.25 12/31/95 999,939
1,500,000 US Treasury Notes........................... 4.00 1/31/96 1,497,717
500,000 US Treasury Notes........................... 5.875 5/31/96 501,250
5,000,000 US Treasury Notes........................... 6.875 2/28/97 5,092,185
3,300,000 US Treasury Notes........................... 6.125 5/31/97 3,339,188
3,000,000 US Treasury Notes........................... 6.00 8/31/97 3,036,093
2,300,000 US Treasury Notes........................... 5.625 10/31/97 2,316,530
9,000,000 US Treasury Notes........................... 5.375 11/30/97 9,025,308
8,750,000 US Treasury Notes........................... 5.25 12/31/97 8,759,564
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT, AGENCY & INSTRUMENTALITY
OBLIGATIONS-NON-DISCOUNT (COST-$227,830,369) 228,002,315
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST-$574,223,096)-101.1%.................. 574,464,012
LIABILITIES IN EXCESS OF OTHER
ASSETS-(1.1)%............................... (6,025,081)
------------
NET ASSETS-100.0%........................... $568,438,931
============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commercial Paper and certain US Government & Agency Obligations are traded on
a discount basis; the interest rates shown are the discount rates paid at the
time of purchase by the Portfolio. Other securities bear interest at the rates
shown, payable at fixed dates or upon maturity. Interest rates on variable
rate securities are adjusted periodically based on appropriate indexes; the
interest rates shown are the rates in effect at December 31, 1995.
+ Variable Rate Notes.
See Notes to Financial Statements.
40
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD US STOCKS & WARRANTS COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AEROSPACE 260,000 Boeing Co. (The)................ $ 16,742,836 $ 20,377,500 1.7%
225,000 United Technologies Corp. ...... 18,033,674 21,346,875 1.8
-------------- -------------- --------
34,776,510 41,724,375 3.5
- ------------------------------------------------------------------------------------------------------------------------
ALUMINUM 275,000 Aluminum Co. of America......... 15,471,164 14,540,625 1.3
- ------------------------------------------------------------------------------------------------------------------------
APPLIANCES 100,000 Whirlpool Corp. ................ 5,451,101 5,325,000 0.5
- ------------------------------------------------------------------------------------------------------------------------
AUTO & TRUCK 560,000 Ford Motor Co. ................. 16,660,018 16,240,000 1.4
- ------------------------------------------------------------------------------------------------------------------------
BANKING 450,000 Bank of New York, Inc. ......... 13,748,785 21,937,500 1.9
65,000 Bank of New York, Inc.
(Warrants) (b)................. 581,250 2,348,125 0.2
-------------- -------------- --------
14,330,035 24,285,625 2.1
- ------------------------------------------------------------------------------------------------------------------------
CHEMICALS 120,000 Eastman Chemical Co. ........... 7,419,729 7,515,000 0.6
- ------------------------------------------------------------------------------------------------------------------------
COMMUNICATION 75,000 +ADC Telecommunications Inc. ... 1,327,146 2,718,750 0.2
EQUIPMENT
- ------------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 430,000 General Motors Corp. (Class
E)............................. 17,666,287 22,360,000 1.9
- ------------------------------------------------------------------------------------------------------------------------
ELECTRONIC 255,800 Corning Inc. ................... 7,062,483 8,185,600 0.7
INSTRUMENTS 130,000 Texas Instruments Inc. ......... 9,340,387 6,727,500 0.6
-------------- -------------- --------
16,402,870 14,913,100 1.3
- ------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL CONTROL 900,000 Wheelabrator Technologies
Inc. .......................... 12,685,898 15,075,000 1.3
- ------------------------------------------------------------------------------------------------------------------------
HARDWARE PRODUCTS 113,600 Stanley Works Co. .............. 5,642,265 5,850,400 0.5
- ------------------------------------------------------------------------------------------------------------------------
HEALTHCARE 500,000 +Humana Inc. ................... 10,126,461 13,687,500 1.2
- ------------------------------------------------------------------------------------------------------------------------
INSURANCE 240,000 Aetna Life & Casualty Co. ...... 14,142,864 16,620,000 1.4
290,000 Allstate Corp. ................. 9,530,478 11,926,250 1.0
136,000 National Re Corp. .............. 3,925,962 5,168,000 0.4
-------------- -------------- --------
27,599,304 33,714,250 2.8
- ------------------------------------------------------------------------------------------------------------------------
NATURAL GAS 93,100 Enron Corp. .................... 3,519,437 3,549,437 0.3
- ------------------------------------------------------------------------------------------------------------------------
OIL SERVICES 350,000 Dresser Industries, Inc. ....... 8,202,997 8,531,250 0.7
- ------------------------------------------------------------------------------------------------------------------------
PETROLEUM 125,000 Pennzoil Co. ................... 4,942,988 5,281,250 0.5
- ------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 280,000 Abbott Laboratories............. 11,465,549 11,690,000 1.0
200,000 Merck & Co., Inc. .............. 12,022,994 13,150,000 1.2
-------------- -------------- --------
23,488,543 24,840,000 2.2
- ------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY 300,000 Eastman Kodak Co. .............. 16,545,792 20,100,000 1.7
- ------------------------------------------------------------------------------------------------------------------------
RETAIL 300,000 Sears, Roebuck & Co. ........... 10,450,028 11,700,000 1.0
- ------------------------------------------------------------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS 142,500 Fisher Scientific International,
Inc ........................... 4,660,834 4,755,937 0.4
- ------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 200,000 AT&T Corp. ..................... 13,137,910 12,950,000 1.1
- ------------------------------------------------------------------------------------------------------------------------
TOTAL US STOCKS & WARRANTS 270,507,317 309,657,499 26.5
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
COUNTRY FOREIGN STOCKS++++
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CANADA 135,000 Magna International Inc. (2).... 5,358,058 5,838,750 0.5
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN CANADA 5,358,058 5,838,750 0.5
- ------------------------------------------------------------------------------------------------------------------------
CHILE 71,600 Cristalerias de Chile S.A.
(ADR) (a)(7)................... 1,514,450 1,593,100 0.1
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN CHILE 1,514,450 1,593,100 0.1
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
41
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1995 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRY HELD FOREIGN STOCKS++++ COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HONG KONG 3,000,000 +Hong Kong Telecommunications,
Ltd. (26)...................... $ 5,306,140 $ 5,354,371 0.5%
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN HONG KONG 5,306,140 5,354,371 0.5
- ------------------------------------------------------------------------------------------------------------------------
INDONESIA 4,400 PT Indonesian Satellite Corp.
(ADR) (a)(26).................. 141,020 160,600 0.0
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN INDONESIA 141,020 160,600 0.0
- ------------------------------------------------------------------------------------------------------------------------
JAPAN 300,000 Canon, Inc. (37)................ 5,504,760 5,433,940 0.5
600,000 +Nomura Securities Co.,
Ltd. (10)...................... 11,802,137 13,076,327 1.1
450,000 Tokio Marine & Fire Insurance
Co. (14)....................... 5,357,596 5,884,347 0.5
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN JAPAN 22,664,493 24,394,614 2.1
- ------------------------------------------------------------------------------------------------------------------------
MEXICO 633,200 +Grupo Carso, S.A. de C.V.
(ADR) (a)(15)++................ 5,523,580 6,411,150 0.5
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN MEXICO 5,523,580 6,411,150 0.5
- ------------------------------------------------------------------------------------------------------------------------
NETHERLANDS 80,000 Royal Dutch Petroleum Co. N.V.
(ADR) (a)(16).................. 10,689,870 11,290,000 1.0
450,000 Singer Co. N.V. (1)............. 12,592,274 12,543,750 1.1
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
NETHERLANDS 23,282,144 23,833,750 2.1
- ------------------------------------------------------------------------------------------------------------------------
SPAIN 130,000 Repsol S.A. (ADR) (a)(30)....... 4,277,429 4,273,750 0.4
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SPAIN 4,277,429 4,273,750 0.4
- ------------------------------------------------------------------------------------------------------------------------
SWITZERLAND 8,000 Sandoz AG (Registered) (38)..... 6,945,256 7,341,618 0.6
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWITZERLAND 6,945,256 7,341,618 0.6
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS 75,012,570 79,201,703 6.8
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE US & FOREIGN GOVERNMENT & AGENCY
AMOUNT* OBLIGATIONS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOREIGN GOVERNMENT $ 5,000,000 Republic of Italy, 8.75% due
OBLIGATIONS 2/08/2001...................... 5,373,050 5,582,820 0.5
- ------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT AGENCY 10,000,000 Federal Home Loan Mortgage
OBLIGATIONS Corp., 6.30% due 5/15/2008..... 9,210,937 9,826,562 0.8
Federal National Mortgage
Association:
10,000,000 7.85% due 9/10/2004......... 9,985,937 10,635,900 0.9
29,628,729 6.50% due 12/15/2010........ 29,573,175 29,813,908 2.6
13,877,931 8% due 10/01/2024........... 13,251,256 14,372,263 1.2
-------------- -------------- --------
62,021,305 64,648,633 5.5
- ------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT US Treasury Notes:
OBLIGATIONS 40,000,000 7.875% due 8/15/2001........ 39,230,800 44,674,800 3.8
6,000,000 7.50% due 11/15/2001........ 6,023,437 6,608,460 0.6
25,000,000 6.25% due 2/15/2003......... 25,710,937 26,082,000 2.2
15,000,000 US Treasury STRIPS+++, 6.35%**
due 5/15/2000.................. 11,418,575 11,910,600 1.0
-------------- -------------- --------
82,383,749 89,275,860 7.6
- ------------------------------------------------------------------------------------------------------------------------
TOTAL US & FOREIGN
GOVERNMENT &
AGENCY OBLIGATIONS 149,778,104 159,507,313 13.6
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
42
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1995 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
AMOUNT* SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL $ 50,000,000 ANZ (Delaware), Inc., 5.70% due
PAPER*** 1/19/1996...................... $ 49,841,667 $ 49,841,667 4.3%
44,458,000 Associates Corp. of North
America, 6% due 1/02/1996...... 44,435,771 44,435,771 3.8
Corporate Asset Funding Co.
Inc.:
45,000,000 5.75% due 1/05/1996......... 44,956,875 44,956,875 3.8
15,000,000 5.60% due 2/02/1996......... 14,920,667 14,920,667 1.3
General Motors Acceptance Corp.:
10,000,000 5.72% due 1/19/1996......... 9,968,222 9,968,222 0.9
25,000,000 5.77% due 1/22/1996......... 24,907,840 24,907,840 2.1
50,000,000 Goldman Sachs Group L.P., 5.75%
due 1/12/1996.................. 49,896,181 49,896,181 4.3
15,000,000 Kimberly-Clark Corp., 5.60% due
1/30/1996...................... 14,927,667 14,927,667 1.3
30,000,000 Morgan (J.P.) & Company, Inc.,
5.63% due 2/02/1996............ 29,840,483 29,840,483 2.6
40,000,000 Morgan Stanley Group,
Incorporated, 5.65% due
1/24/1996...................... 39,843,056 39,843,056 3.4
National Fleet Funding Corp.:
15,000,000 5.77% due 1/17/1996......... 14,956,725 14,956,725 1.3
45,000,000 5.77% due 2/02/1996......... 44,754,775 44,754,775 3.8
40,000,000 PHH Corp., 5.78% due
1/10/1996...................... 39,929,356 39,929,356 3.4
30,000,000 Preferred Receivable Funding
Corp., 5.80% due 1/24/1996..... 29,879,167 29,879,167 2.6
31,500,000 Raytheon Company, 5.73% due
1/08/1996...................... 31,454,876 31,454,876 2.7
45,000,000 Riverwoods Funding Corp., 5.77%
due 1/10/1996.................. 44,920,663 44,920,663 3.8
45,000,000 Transamerica Finance Corp.,
5.73% due 1/25/1996............ 44,813,775 44,813,775 3.8
25,000,000 Westpac Banking Corporation,
5.82% due 1/11/1996............ 24,951,500 24,951,500 2.1
25,000,000 Xerox Corp., 5.75% due
1/26/1996...................... 24,892,188 24,892,188 2.1
- ------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 624,091,454 624,091,454 53.4
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS............... $1,119,389,445 1,172,457,969 100.3
==============
LIABILITIES IN EXCESS OF OTHER
ASSETS.......................... (3,101,433) (0.3)
-------------- --------
NET ASSETS...................... $1,169,356,536 100.0%
============== ========
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Denominated in US dollars unless otherwise indicated.
** Represents a zero coupon bond; the interest rate shown is the effective
yield at the time of purchase by the Portfolio.
*** Commercial paper is traded on a discount basis; the interest rates shown are
discount rates paid at the time of purchase by the Portfolio.
(a) American Depositary Receipts (ADR).
(b) Warrants entitle the Portfolio to purchase a predetermined number of shares
of Common Stock. The purchase price and number of shares are subject to
adjustment under certain conditions until the expiration date.
+ Non-income producing security.
43
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1995 (Concluded)
- --------------------------------------------------------------------------------
++ Restricted securities as to resale. The value of the Portfolio's investment
in restricted securities was approximately $6,411,000, representing 0.5% of
net assets.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
VALUE
ISSUE ACQUISITION DATE COST (NOTE 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Grupo Carso, S.A. de C.V. (ADR)..................................... 11/27/1991 $5,523,580 $6,411,150
- -----------------------------------------------------------------------------------------------------------------------
TOTAL $5,523,580 $6,411,150
========== ==========
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
+++ STRIPS--Separate Trading of Registered Interest and Principal of
Securities.
++++ Corresponding industry groups for foreign stocks and bonds.
(1) Appliances
(2) Auto Parts
(3) Banking
(4) Beverages
(5) Chemicals
(6) Communication Equipment
(7) Containers
(8) Electrical Equipment
(9) Electronics
(10) Financial Services
(11) Energy-Related
(12) Government Entities
(13) Industrial Components
(14) Insurance
(15) Multi-Industry
(16) Oil-Integrated
(17) Real Estate
(18) Retail
(19) Semiconductors
(20) Soap
(21) Tools
(22) Utilities-Communications
(23) Utilities-Electric
(24) Utilities-Water
(25) Media-Publishing
(26) Telecommunications
(27) Food Processing
(28) Metals
(29) Advertising
(30) Petroleum
(31) Computers
(32) Tobacco
(33) Railroads
(34) Automotive
(35) Containers
(36) Leisure & Entertainment
(37) Photography
(38) Pharmaceuticals
See Notes to Financial Statements.
44
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Natural Resources Portfolio
Schedule of Investments as of December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS COST (NOTE 1A) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALUMINUM 6,000 Alcan Aluminium, Ltd. ................. $ 125,670 $ 186,750 0.9%
2,400 Aluminum Co. of America................ 125,210 126,900 0.6
10,800 Comalco Ltd. .......................... 38,884 57,903 0.3
------------ ------------ -----------
289,764 371,553 1.8
- -----------------------------------------------------------------------------------------------------------------------------
CHEMICALS 50,000 Asahi Chemical Industry Co., Ltd. ..... 368,524 382,604 1.8
3,300 Dow Chemical Co. ...................... 227,401 232,238 1.1
3,700 du Pont (E.I.) de Nemours & Co......... 180,684 258,538 1.3
------------ ------------ -----------
776,609 873,380 4.2
- -----------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED RESOURCES 13,500 Canadian Pacific, Ltd. ................ 213,480 244,688 1.2
COMPANIES 8,100 Coastal Corp. ......................... 229,504 301,725 1.4
13,000 Cyprus Amax Minerals Co. .............. 366,857 339,625 1.6
3,333 Freeport-McMoRan Inc................... 80,935 123,321 0.6
2,400 Magma Copper Co. ...................... 39,060 66,900 0.3
20,400 Norcen Energy Resources Ltd. .......... 334,743 306,531 1.5
11,500 Occidental Petroleum Corp. ............ 237,877 245,813 1.2
25,500 RGC Ltd. .............................. 98,847 127,044 0.6
------------ ------------ -----------
1,601,303 1,755,647 8.4
- -----------------------------------------------------------------------------------------------------------------------------
GOLD 50,210 +Acacia Resources Ltd. ................ 86,202 90,354 0.4
10,000 +Amax Gold, Inc. ...................... 62,953 72,500 0.3
96,800 +Delta Gold N.L........................ 187,358 234,656 1.1
9,000 Driefontein Consolidated Ltd. ......... 137,395 114,213 0.6
30,000 +Newcrest Mining Ltd. ................. 127,314 126,263 0.5
10,513 Newmont Mining Corp. .................. 447,210 475,713 2.3
19,000 Placer Dome Inc. ...................... 445,989 458,375 2.2
43,000 Santa Fe Pacific Gold Corp. ........... 582,630 521,375 2.5
------------ ------------ -----------
2,077,051 2,093,449 9.9
- -----------------------------------------------------------------------------------------------------------------------------
METALS & MINING 7,000 ASARCO Inc. ........................... 188,753 224,000 1.1
8,922 CRA Ltd. .............................. 106,677 130,963 0.6
15,400 Falconbridge Ltd. (Installment
Receipts) (b)......................... 124,459 134,043 0.6
1,375 Freeport-McMoRan Copper & Gold Inc.
(Class A)............................. 31,861 38,500 0.2
7,034 Freeport-McMoRan Copper & Gold Inc. ... 151,325 197,831 1.0
188,000 M.I.M. Holdings Ltd. .................. 417,352 260,022 1.2
54,000 +Mitsubishi Materials Corp. ........... 273,415 279,833 1.3
22,000 Nippon Light Metal Co., Ltd. .......... 130,910 126,153 0.6
14,000 Noranda Inc. .......................... 258,833 288,610 1.4
19,000 Outokumpu OY........................... 347,398 302,053 1.5
5,400 +PT Tambang Timah (GDR)**(a)........... 66,782 62,802 0.3
3,500 Phelps Dodge Corp. .................... 199,622 217,875 1.0
61,000 QNI Ltd. .............................. 122,703 128,821 0.6
30,000 The RTZ Corp. PLC...................... 385,579 435,858 2.1
175,000 +Savage Resources Ltd. ................ 132,811 121,021 0.6
33,000 Sumitomo Metal Mining Co., Ltd. ....... 275,497 296,629 1.4
19,500 Trelleborg 'B' Fria.................... 254,451 210,386 1.0
69,800 WMC Ltd. .............................. 398,407 448,444 2.1
------------ ------------ -----------
3,866,835 3,903,844 18.6
- -----------------------------------------------------------------------------------------------------------------------------
OIL & GAS PRODUCERS 90,100 +Ampolex Ltd........................... 280,111 196,975 0.9
5,500 Anadarko Petroleum Corp. .............. 268,607 297,688 1.4
9,500 Apache Corp. .......................... 253,921 280,250 1.3
23,000 +Chauvco Resources Ltd. ............... 271,708 206,516 1.0
10,200 Enron Oil & Gas Co. ................... 218,353 244,800 1.2
45,700 Enterprise Oil PLC..................... 294,330 280,905 1.3
5,000 Louisiana Land and Exploration
Co. (The)............................. 194,446 214,375 1.0
</TABLE>
45
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Natural Resources Portfolio
Schedule of Investments as of December 31, 1995 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS (CONCLUDED) COST (NOTE 1A) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OIL & GAS PRODUCERS 15,000 Mitchell Energy & Development Corp.
(CONCLUDED) (Class B)............................. $ 262,459 $ 281,250 1.4%
12,000 +Oryx Energy Co. ...................... 199,885 160,500 0.8
57,000 Ranger Oil Ltd. ....................... 385,100 356,250 1.7
9,000 Sonat Inc. ............................ 286,305 320,625 1.5
1,900 Triton Energy Corp. ................... 63,563 109,012 0.5
8,200 Vastar Resources, Inc. ................ 224,963 260,350 1.2
------------ ------------ -----------
3,203,751 3,209,496 15.2
- -----------------------------------------------------------------------------------------------------------------------------
OIL-INTEGRATED 3,900 Amoco Corp............................. 214,784 280,312 1.3
4,200 British Petroleum Co. PLC (ADR)*....... 320,502 428,925 2.0
800 Mobil Corp. ........................... 77,890 89,600 0.4
1,200 OMV AG................................. 128,441 104,384 0.5
14,600 Petro-Canada (Installment Receipts).... 68,851 83,950 0.4
6,900 Repsol, S.A. .......................... 199,089 226,206 1.1
6,400 +Societe Nationale Elf Aquitaine (ADR)* 227,337 235,200 1.1
6,200 +Total, S.A. (Class B)................. 377,052 418,885 2.0
14,500 Unocal Corp. .......................... 409,628 422,312 2.0
13,000 YPF, S.A. (ADR)*....................... 321,087 281,125 1.4
------------ ------------ -----------
2,344,661 2,570,899 12.2
- -----------------------------------------------------------------------------------------------------------------------------
OIL SERVICE 4,100 +Coflexip Stena Offshore, Inc.
(ADR)*................................ 88,150 76,875 0.4
9,100 IHC Caland N.V......................... 204,733 306,837 1.4
5,200 Schlumberger Ltd. ..................... 331,634 360,100 1.7
------------ ------------ -----------
624,517 743,812 3.5
- -----------------------------------------------------------------------------------------------------------------------------
PAPER & PULP 14,400 Aracruz Celulose S.A. (ADR)*........... 115,506 111,600 0.5
17,400 Avenor Inc. ........................... 346,730 298,120 1.4
6,700 Georgia-Pacific Corp. ................. 513,239 459,787 2.2
7,000 International Paper Co. ............... 235,182 265,125 1.3
2,716 Kimberly-Clark Corp. .................. 68,869 224,749 1.1
6,000 Metsa Serla OY 'B'..................... 262,339 185,241 0.9
6,600 Mo Och Domsjo AB Co. .................. 278,259 281,843 1.3
9,600 Weyerhaeuser Co. ...................... 401,338 415,200 1.9
4,000 Willamette Industries, Inc. ........... 167,500 224,000 1.1
------------ ------------ -----------
2,388,962 2,465,665 11.7
- -----------------------------------------------------------------------------------------------------------------------------
PLANTATIONS 59,000 Golden Hope Plantations BHD............ 109,022 98,546 0.4
38,000 Kuala Lumpur Kepong BHD................ 77,755 120,504 0.6
------------ ------------ -----------
186,777 219,050 1.0
- -----------------------------------------------------------------------------------------------------------------------------
REFINING 22,500 Total Petroleum (North America),
Ltd. ................................. 331,454 219,375 1.1
- -----------------------------------------------------------------------------------------------------------------------------
STEEL 6,300 +Koninklijke Nederlansche Hoogovens en
Staalfabrienken N.V. ................. 252,640 211,246 1.0
103,000 Nippon Steel Corp. .................... 351,861 353,177 1.7
123,000 +Sumitomo Metal Industries, Ltd. ...... 389,809 372,908 1.8
------------ ------------ -----------
994,310 937,331 4.5
- -----------------------------------------------------------------------------------------------------------------------------
WOOD 10,600 Louisiana-Pacific Corp. ............... 300,986 257,050 1.2
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS 18,986,980 19,620,551 93.3
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
46
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Natural Resources Portfolio
Schedule of Investments as of December 31, 1995 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE (NOTE PERCENT OF
AMOUNT SHORT-TERM SECURITIES COST 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
US GOVERNMENT & $ 305,000 Federal Home Loan Bank, 5.66% due
AGENCY 1/18/1996............................. $ 304,041 $ 304,041 1.4%
OBLIGATIONS*** 1,161,000 Federal Home Loan Mortgage Corp., 5.75%
due 1/02/1996......................... 1,160,258 1,160,258 5.5
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 1,464,299 1,464,299 6.9
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS...................... $ 20,451,279 21,084,850 100.2
===========
LIABILITIES IN EXCESS OF OTHER
ASSETS................................ (50,113) (0.2)
------------ ---------
NET ASSETS............................. $ 21,034,737 100.0%
=========== =========
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Non-income producing security.
* American Depositary Receipts (ADR).
** Global Depositary Receipts (GDR).
*** Certain US Government & Agency Obligations are traded on a discount basis;
the interest rates shown are the discount rates paid at the time of the
purchase by the Portfolio.
(a) Restricted securities as to resale. The value of the Portfolio's investment
in restricted securities was approximately $63,000, representing 0.3% of net
assets.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
VALUE
ISSUE ACQUISITION DATES COST (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PT Tambang Timah (GDR)........................................ 10/6/95 - 11/22/95 $66,782 $62,802
- ---------------------------------------------------------------------------------------------------------------------
TOTAL $66,782 $62,802
======== ========
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
47
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Statements of Assets and Liabilities as of December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL GLOBAL
BALANCED STOCK STRATEGY
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value* (Note 1a)........................................ $ 94,621,843 $ 254,129,863 $ 205,471,283
Cash.................................................................... 224,144 31,700 68,483
Foreign cash (Note 1f).................................................. -- -- 31,590
Interest receivable..................................................... 843,467 -- 779,040
Receivable for securities sold.......................................... 1,811,685 150,632 261,530
Receivable for capital shares sold...................................... 212,587 501,790 2,532,919
Dividends receivable.................................................... 60,506 212,471 201,706
Receivable for loaned securities (Note 7)............................... -- -- --
Unrealized appreciation on forward foreign exchange contracts (Note
1e)................................................................... -- -- 3,911,706
Prepaid registration fees and other assets (Note 1d).................... 4,248 10,118 8,317
------------ ------------- -------------
Total assets.......................................................... 97,778,480 255,036,574 213,266,574
------------ ------------- -------------
LIABILITIES:
Payable for securities purchased........................................ 533,018 1,277,731 427,171
Payable for capital shares redeemed..................................... 16,974 681,505 41,447
Payable to investment adviser (Note 2).................................. 25,133 65,784 53,852
Accrued expenses and other liabilities.................................. 22,678 54,660 61,365
------------ ------------- -------------
Total liabilities..................................................... 597,803 2,079,680 583,835
------------ ------------- -------------
NET ASSETS.............................................................. $ 97,180,677 $ 252,956,894 $ 212,682,739
=========== ============= =============
NET ASSETS CONSIST OF:
Common Stock, $0.10 par value+.......................................... $ 653,908 $ 1,059,127 $ 1,394,790
Paid-in capital in excess of par........................................ 82,143,820 199,799,989 195,015,620
Undistributed investment income -- net.................................. 1,945,845 2,259,853 1,000,662
Undistributed (accumulated) realized capital gains (losses) on
investments and foreign currency transactions -- net (Note 5)......... 1,979,502 36,850,196 (2,097,063)
Unrealized appreciation (depreciation) on investments and foreign
currency transactions -- net.......................................... 10,457,602 12,987,729 17,368,730
------------ ------------- -------------
NET ASSETS.............................................................. $ 97,180,677 $ 252,956,894 $ 212,682,739
=========== ============= =============
Capital shares outstanding.............................................. 6,539,075 10,591,267 13,947,903
=========== ============= =============
Net asset value, offering and redemption price per share................ $ 14.86 $ 23.88 $ 15.25
=========== ============= =============
*Identified cost........................................................ $ 84,164,241 $ 241,141,763 $ 192,013,476
=========== ============= =============
+Authorized shares...................................................... 100,000,000 100,000,000 100,000,000
=========== ============= =============
</TABLE>
See Notes to Financial Statements.
48
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE LONG TERM
GROWTH HIGH GOVERNMENT CORPORATE MONEY MULTIPLE NATURAL
STOCK YIELD BOND BOND RESERVE STRATEGY RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$186,734,312 $104,413,796 $235,399,792 $122,866,080 $ 574,464,012 $1,172,457,969 $21,084,850
82 17,181 832 1,200 26,063 80,267 3,413
-- -- -- -- -- -- 419
-- 2,055,051 4,072,147 2,146,821 2,954,460 2,725,168 --
-- -- -- -- 10,012,109 509,031 116,579
179,706 1,404,502 150,588 202,192 -- 115,037 14,735
169,823 -- -- -- -- 604,768 26,318
-- -- 3,941 574 -- -- --
-- -- -- -- -- -- --
6,801 4,941 10,973 5,687 7,342 46,960 885
------------ ------------ ------------ ------------ -------------- -------------- -----------
187,090,724 107,895,471 239,638,273 125,222,554 587,463,986 1,176,539,200 21,247,199
------------ ------------ ------------ ------------ -------------- -------------- -----------
2,271,630 -- -- -- 18,765,612 3,519,437 76,002
590,036 460,433 194,772 133,800 -- 3,153,791 117,789
47,906 26,966 62,334 32,386 151,170 305,844 6,028
28,720 29,924 41,159 23,484 108,273 203,592 12,643
------------ ------------ ------------ ------------ -------------- -------------- -----------
2,938,292 517,323 298,265 189,670 19,025,055 7,182,664 212,462
------------ ------------ ------------ ------------ -------------- -------------- -----------
$184,152,432 $107,378,148 $239,340,008 $125,032,884 $ 568,438,931 $1,169,356,536 $21,034,737
============= ============= ============= ============= ============== ============== ===========
$ 765,512 $ 1,193,794 $ 2,097,650 $ 1,040,239 $ 56,819,802 $ 6,783,614 $ 257,606
151,125,510 112,145,033 233,426,013 119,068,403 511,378,213 974,487,635 31,444,908
765,847 932,582 1,268,721 660,045 -- 21,714,389 208,783
4,403,555 (3,504,150) (8,743,241) (2,841,117) -- 113,303,711 (11,510,615)
27,092,008 (3,389,111) 11,290,865 7,105,314 240,916 53,067,187 634,055
------------ ------------ ------------ ------------ -------------- -------------- -----------
$184,152,432 $107,378,148 $239,340,008 $125,032,884 $ 568,438,931 $1,169,356,536 $21,034,737
============= ============= ============= ============= ============== ============== ===========
7,655,120 11,937,940 20,976,496 10,402,394 568,198,015 67,836,135 2,576,060
============= ============= ============= ============= ============== ============== ===========
$ 24.06 $ 8.99 $ 11.41 $ 12.02 $ 1.00 $ 17.24 $ 8.17
============= ============= ============= ============= ============== ============== ===========
$159,642,304 $107,802,907 $224,108,927 $115,760,766 $ 574,223,096 $1,119,389,445 $20,451,279
============= ============= ============= ============= ============== ============== ===========
100,000,000 100,000,000 100,000,000 100,000,000 2,000,000,000 300,000,000 100,000,000
============= ============= ============= ============= ============== ============== ===========
</TABLE>
49
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Statements of Operations for the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL GLOBAL
BALANCED STOCK STRATEGY
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (NOTES 1B & 1C):
Interest and discount earned*......................................... $ 3,188,164 $ 1,699,063 $ 5,606,948
Dividends*............................................................ 997,331 3,493,084 2,809,565
Other income.......................................................... -- 7,582 --
----------- ----------- -----------
Total income.......................................................... 4,185,495 5,199,729 8,416,513
----------- ----------- -----------
EXPENSES:
Investment advisory fees (Note 2)..................................... 285,553 747,388 691,473
Custodian fees........................................................ 12,750 56,650 138,692
Accounting services (Note 2).......................................... 10,085 44,428 41,602
Professional fees..................................................... 7,408 12,657 13,123
Printing and shareholder reports...................................... 5,593 8,662 12,316
Transfer agent fees (Note 2).......................................... 5,010 5,010 5,010
Pricing services...................................................... 374 2,535 6,540
Directors' fees and expenses.......................................... 856 2,041 2,185
Registration fees (Note 1d)........................................... 995 2,251 --
Other................................................................. 1,192 7,975 1,504
----------- ----------- -----------
Total expenses........................................................ 329,816 889,597 912,445
----------- ----------- -----------
Investment income -- net.............................................. 3,855,679 4,310,132 7,504,068
----------- ----------- -----------
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS & FOREIGN CURRENCY
TRANSACTIONS -- NET (NOTES 1C, 1E, 1F & 3):
Realized gain (loss) on investments -- net............................ 1,979,502 36,850,212 (2,097,019)
Realized gain (loss) on foreign currency transactions -- net.......... -- (47,375) (2,026,202)
Change in unrealized appreciation/depreciation on
investments -- net.................................................. 10,823,009 1,642,669 13,582,800
Change in unrealized appreciation/depreciation on foreign currency
transactions -- net................................................. -- (941) 3,657,038
----------- ----------- -----------
Total realized and unrealized gain on investments and foreign currency
transactions -- net................................................. 12,802,511 38,444,565 13,116,617
----------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $16,658,190 $42,754,697 $20,620,685
=========== =========== ===========
*Net of withholding tax............................................... $ -- $ 97,258 $ 240,084
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
50
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE LONG TERM
GROWTH HIGH GOVERNMENT CORPORATE MONEY MULTIPLE NATURAL
STOCK YIELD BOND BOND RESERVE STRATEGY RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 311,462 $ 9,932,375 $16,838,602 $ 8,927,728 $33,763,422 $ 32,123,120 $ 127,569
1,338,117 101,126 -- -- -- 10,803,309 469,816
-- 146,995 338,153 137,514 -- 81,088 --
----------- ----------- ----------- ----------- ----------- ------------ ----------
1,649,579 10,180,496 17,176,755 9,065,242 33,763,422 43,007,517 597,385
----------- ----------- ----------- ----------- ----------- ------------ ----------
453,314 314,393 749,536 388,836 1,870,186 3,721,295 80,401
13,017 16,712 30,707 24,341 31,303 198,862 24,907
29,623 10,672 43,992 23,656 9,763 230,341 --
8,510 7,721 14,080 9,011 44,135 52,027 --
5,485 5,563 14,161 7,349 28,961 55,732 1,256
4,593 5,011 5,009 5,010 5,010 5,010 --
270 4,445 1,077 2,776 -- 5,540 5,663
1,115 840 2,164 1,143 5,256 9,947 415
4,565 11 28 15 73 140 --
935 348 5,431 3,395 8,547 20,639 512
----------- ----------- ----------- ----------- ----------- ------------ ----------
521,427 365,716 866,185 465,532 2,003,234 4,299,533 113,154
----------- ----------- ----------- ----------- ----------- ------------ ----------
1,128,152 9,814,780 16,310,570 8,599,710 31,760,188 38,707,984 484,231
----------- ----------- ----------- ----------- ----------- ------------ ----------
4,620,788 706,980 791,779 2,060,856 271,802 113,605,660 769,515
-- -- -- -- -- 3,649,813 (1,642)
35,345,568 4,364,959 22,085,928 11,337,819 916,942 25,713,410 1,550,026
-- -- -- -- -- (20,714) 440
----------- ----------- ----------- ----------- ----------- ------------ ----------
39,966,356 5,071,939 22,877,707 13,398,675 1,188,744 142,948,169 2,318,339
----------- ----------- ----------- ----------- ----------- ------------ ----------
$41,094,508 $14,886,719 $39,188,277 $21,998,385 $32,948,932 $181,656,153 $2,802,570
=========== =========== =========== =========== =========== ============ ==========
$ 3,651 $ -- $ -- $ -- $ -- $ 345,324 $ 34,894
=========== =========== =========== =========== =========== ============ ==========
</TABLE>
51
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED PORTFOLIO CAPITAL STOCK PORTFOLIO
------------------------------ --------------------------------
FOR THE YEAR FOR THE YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31,
------------------------------ --------------------------------
INCREASE (DECREASE) IN NET ASSETS: 1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income -- net............................ $ 3,855,679 $ 3,495,455 $ 4,310,132 $ 2,850,892
Realized gain (loss) on investments and foreign
currency transactions -- net...................... 1,979,502 2,638,524 36,802,837 14,627,590
Change in unrealized appreciation/depreciation on
investments....................................... 10,823,009 (9,897,682) 1,642,669 (29,422,358)
Change in unrealized appreciation/depreciation on
foreign currency transactions..................... -- -- (941) 1,038
------------ ------------ ------------- -------------
Net increase (decrease) in net assets resulting from
operations........................................ 16,658,190 (3,763,703) 42,754,697 (11,942,838)
------------ ------------ ------------- -------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS
(NOTE 1G):
Investment income -- net............................ (3,730,461) (3,126,480) (3,382,544) (2,631,150)
Realized gain on investments -- net................. (2,637,146) (1,294,833) (14,631,128) (22,655,649)
------------ ------------ ------------- -------------
Net decrease in net assets resulting from dividends
and distributions to shareholders................. (6,367,607) (4,421,313) (18,013,672) (25,286,799)
------------ ------------ ------------- -------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase (decrease) in net assets derived from
capital share transactions........................ 10,996,845 (3,940,079) 21,568,591 19,906,036
------------ ------------ ------------- -------------
NET ASSETS:
Total increase (decrease) in net assets............. 21,287,428 (12,125,095) 46,309,616 (17,323,601)
Beginning of year................................... 75,893,249 88,018,344 206,647,278 223,970,879
------------ ------------ ------------- -------------
End of year*........................................ $ 97,180,677 $ 75,893,249 $ 252,956,894 $ 206,647,278
=========== =========== ============= =============
*Undistributed investment income -- net (Note 1h)... $ 1,945,845 $ 1,820,627 $ 2,259,853 $ 1,452,601
=========== =========== ============= =============
</TABLE>
See Notes to Financial Statements.
52
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL STRATEGY PORTFOLIO GROWTH STOCK PORTFOLIO HIGH YIELD PORTFOLIO
------------------------------- ------------------------------- ------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31, ENDED DECEMBER 31,
------------------------------- ------------------------------- ------------------------------
1995 1994 1995 1994 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 7,504,068 $ 6,790,200 $ 1,128,152 $ 1,604,226 $ 9,814,780 $ 8,884,353
(4,123,221) 2,882,617 4,620,788 6,082,192 706,980 (221,579)
13,582,800 (14,859,909) 35,345,568 (16,062,225) 4,364,959 (9,621,977)
3,657,038 267,487 -- -- -- --
------------- ------------- ------------- ------------- ------------- ------------
20,620,685 (4,919,605) 41,094,508 (8,375,807) 14,886,719 (959,203)
------------- ------------- ------------- ------------- ------------- ------------
(8,032,457) (5,377,946) (1,291,070) (1,529,012) (9,775,052) (8,745,213)
(3,043,742) (2,701,303) (6,299,419) (18,174,826) -- --
------------- ------------- ------------- ------------- ------------- ------------
(11,076,199) (8,079,249) (7,590,489) (19,703,838) (9,775,052) (8,745,213)
------------- ------------- ------------- ------------- ------------- ------------
(20,354,990) 53,820,053 48,946,799 6,944,971 19,845,461 (2,613,948)
------------- ------------- ------------- ------------- ------------- ------------
(10,810,504) 40,821,199 82,450,818 (21,134,674) 24,957,128 (12,318,364)
223,493,243 182,672,044 101,701,614 122,836,288 82,421,020 94,739,384
------------- ------------- ------------- ------------- ------------- ------------
$ 212,682,739 $ 223,493,243 $ 184,152,432 $ 101,701,614 $ 107,378,148 $ 82,421,020
============= ============= ============= ============= ============= ===========
$ 1,000,662 $ 3,473,834 $ 765,847 $ 928,765 $ 932,582 $ 838,476
============= ============= ============= ============= ============= ===========
</TABLE>
53
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Statements of Changes in Net Assets (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT LONG TERM CORPORATE BOND
BOND PORTFOLIO PORTFOLIO
-------------------------------- --------------------------------
FOR THE YEAR FOR THE YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31,
-------------------------------- --------------------------------
INCREASE (DECREASE) IN NET ASSETS: 1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income -- net.......................... $ 16,310,570 $ 16,728,923 $ 8,599,710 $ 8,794,942
Realized gain (loss) on investments and foreign
currency transactions -- net.................... 791,779 (9,210,294) 2,060,856 (4,901,953)
Change in unrealized appreciation/depreciation on
investments..................................... 22,085,928 (20,469,569) 11,337,819 (10,846,549)
Change in unrealized appreciation/depreciation on
foreign currency transactions................... -- -- -- --
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations................................. 39,188,277 (12,950,940) 21,998,385 (6,953,560)
------------- ------------- ------------- -------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS
(NOTE 1G):
Investment income -- net.......................... (16,342,303) (16,934,443) (8,570,923) (8,923,319)
Realized gain on investments -- net............... -- (9,062,228) -- (4,821,218)
In excess of realized gain in
investments -- net.............................. -- (324,731) -- --
------------- ------------- ------------- -------------
Net decrease in net assets resulting from
dividends and distributions to shareholders..... (16,342,303) (26,321,402) (8,570,923) (13,744,537)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase (decrease) in net assets derived from
capital share transactions...................... (2,116,693) (26,611,957) (272,791) (6,744,452)
------------- ------------- ------------- -------------
NET ASSETS:
Total increase (decrease) in net assets........... 20,729,281 (65,884,299) 13,154,671 (27,442,549)
Beginning of year................................. 218,610,727 284,495,026 111,878,213 139,320,762
------------- ------------- ------------- -------------
End of year*...................................... $ 239,340,008 $ 218,610,727 $ 125,032,884 $ 111,878,213
============= ============= ============= =============
*Undistributed investment income -- net........... $ 1,268,721 $ 1,300,454 $ 660,045 $ 631,258
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
54
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY RESERVE PORTFOLIO MULTIPLE STRATEGY PORTFOLIO NATURAL RESOURCES PORTFOLIO
----------------------------------- ------------------------------------- ---------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31, ENDED DECEMBER 31,
----------------------------------- ------------------------------------- ---------------------------------
1995 1994 1995 1994 1995 1994
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 31,760,188 $ 22,412,034 $ 38,707,984 $ 34,291,112 $ 484,231 $ 477,313
271,802 1,825 117,255,473 67,745,547 767,873 (165,775)
916,942 (687,566) 25,713,410 (163,387,087) 1,550,026 (494,368)
-- -- (20,714) 106,729 440 45
-------------- -------------- --------------- --------------- ------------- -------------
32,948,932 21,726,293 181,656,153 (61,243,699) 2,802,570 (182,785)
-------------- -------------- --------------- --------------- ------------- -------------
(31,760,188) (22,412,034) (32,928,344) (36,928,856) (474,128) (444,638)
(271,802) (1,825) (72,889,967) (134,514,526) -- --
-- -- -- -- -- --
-------------- -------------- --------------- --------------- ------------- -------------
(32,031,990) (22,413,859) (105,818,311) (171,443,382) (474,128) (444,638)
-------------- -------------- --------------- --------------- ------------- -------------
(16,470,480) 37,969,893 11,435,787 77,433,705 (2,748,349) 3,645,242
-------------- -------------- --------------- --------------- ------------- -------------
(15,553,538) 37,282,327 87,273,629 (155,253,376) (419,907) 3,017,819
583,992,469 546,710,142 1,082,082,907 1,237,336,283 21,454,644 18,436,825
-------------- -------------- --------------- --------------- ------------- -------------
$ 568,438,931 $ 583,992,469 $1,169,356,536 $1,082,082,907 $ 21,034,737 $ 21,454,644
============== ============== =============== =============== ============= ============
$ -- $ -- $ 21,714,389 $ 13,610,733 $ 208,783 $ 203,891
============== ============== =============== =============== ============= ============
</TABLE>
55
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
----------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL
STATEMENTS.
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year...................... $ 13.27 $ 14.62 $ 13.70 $ 13.29 $ 11.78
-------- -------- -------- -------- --------
Investment income -- net................................ .60 .61 .50 .47 .60
Realized and unrealized gain (loss) on investments
and foreign currency transactions -- net.............. 2.07 (1.21) 1.35 .38 1.77
-------- -------- -------- -------- --------
Total from investment operations........................ 2.67 (.60) 1.85 .85 2.37
-------- -------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS:
Investment income -- net................................ (.62) (.53) (.75) (.26) (.68)
Realized gain on investments -- net..................... (.46) (.22) (.18) (.18) (.18)
-------- -------- -------- -------- --------
Total dividends and distributions....................... (1.08) (.75) (.93) (.44) (.86)
-------- -------- -------- -------- --------
Net asset value, end of year............................ $ 14.86 $ 13.27 $ 14.62 $ 13.70 $ 13.29
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN:*
Based on net asset value per share...................... 21.59% (4.28%) 14.31% 6.67% 20.95%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement.......................... .38% .40% .43% .48% .50%
======== ======== ======== ======== ========
Expenses................................................ .38% .40% .43% .48% .50%
======== ======== ======== ======== ========
Investment income -- net................................ 4.47% 4.28% 3.72% 4.40% 4.91%
======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of year (in thousands).................. $ 97,181 $ 75,893 $ 88,018 $ 56,080 $ 38,128
======== ======== ======== ======== ========
Portfolio turnover...................................... 32.92% 46.94% 25.38% 33.15% 58.77%
======== ======== ======== ======== ========
</TABLE>
- ------------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the year.
See Notes to Financial Statements.
56
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL STOCK PORTFOLIO
-----------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 21.64 $ 25.73 $ 23.22 $ 23.39 $ 19.65
--------- --------- --------- --------- ---------
.41 .29 .33 .39 .45
3.70 (1.50) 3.41 .16 4.97
--------- --------- --------- --------- ---------
4.11 (1.21) 3.74 .55 5.42
--------- --------- --------- --------- ---------
(.34) (.28) (.59) (.20) (.54)
(1.53) (2.60) (.64) (.52) (1.14)
--------- --------- --------- --------- ---------
(1.87) (2.88) (1.23) (.72) (1.68)
--------- --------- --------- --------- ---------
$ 23.88 $ 21.64 $ 25.73 $ 23.22 $ 23.39
========= ========= ========= ========= =========
20.73% (5.12%) 17.01% 2.47% 29.05%
========= ========= ========= ========= =========
.41% .39% .38% .41% .40%
========= ========= ========= ========= =========
.41% .39% .38% .41% .40%
========= ========= ========= ========= =========
1.98% 1.32% 1.43% 1.89% 2.27%
========= ========= ========= ========= =========
$ 252,957 $ 206,647 $ 223,971 $ 202,417 $ 177,604
========= ========= ========= ========= =========
130.54% 71.19% 100.12% 74.89% 63.90%
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
GLOBAL STRATEGY PORTFOLIO
----------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1995+ 1994 1993 1992 1991
----------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 14.54 $ 15.42 $ 13.23 $ 13.16 $ 12.00
--------- --------- --------- -------- --------
.52 .47 .36 .39 .41
.94 (.71) 2.61 (.01) 1.60
--------- --------- --------- -------- --------
1.46 (.24) 2.97 .38 2.01
--------- --------- --------- -------- --------
(.55) (.41) (.60) (.17) (.85)
(.20) (.23) (.18) (.14) --
--------- --------- --------- -------- --------
(.75) (.64) (.78) (.31) (.85)
--------- --------- --------- -------- --------
$ 15.25 $ 14.54 $ 15.42 $ 13.23 $ 13.16
========= ========= ========= ======== ========
10.44% (1.62%) 23.73% 3.00% 17.50%
========= ========= ========= ======== ========
.44% .48% .45% .50% .50%
========= ========= ========= ======== ========
.44% .48% .46% .54% .60%
========= ========= ========= ======== ========
3.59% 3.22% 3.27% 3.84% 3.86%
========= ========= ========= ======== ========
$ 212,683 $ 223,493 $ 182,672 $ 52,599 $ 29,893
========= ========= ========= ======== ========
26.81% 27.31% 30.53% 43.56% 93.85%
========= ========= ========= ======== ========
</TABLE>
57
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH STOCK PORTFOLIO
---------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN
DERIVED FROM INFORMATION PROVIDED IN
THE FINANCIAL STATEMENTS.
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year................ $ 19.20 $ 24.65 $ 23.98 $ 23.31 $ 16.28
--------- --------- --------- --------- ---------
Investment income -- net.......................... .15 .31 .32 .26 .25
Realized and unrealized gain (loss) on investments
and foreign currency transactions -- net........ 6.13 (1.81) 1.63 .53 7.06
--------- --------- --------- --------- ---------
Total from investment operations.................. 6.28 (1.50) 1.95 .79 7.31
--------- --------- --------- --------- ---------
LESS DIVIDENDS AND DISTRIBUTIONS:
Investment income -- net.......................... (.23) (.30) (.41) (.12) (.28)
Realized gain on investments -- net............... (1.19) (3.65) (.87) -- --
--------- --------- --------- --------- ---------
Total dividends and distributions................. (1.42) (3.95) (1.28) (.12) (.28)
--------- --------- --------- --------- ---------
Net asset value, end of year...................... $ 24.06 $ 19.20 $ 24.65 $ 23.98 $ 23.31
========= ========= ========= ========= =========
TOTAL INVESTMENT RETURN:*
Based on net asset value per share................ 35.35% (6.93%) 8.63% 3.40% 45.31%
========= ========= ========= ========= =========
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... .38% .40% .38% .42% .42%
========= ========= ========= ========= =========
Investment income -- net.......................... .82% 1.53% 1.35% 1.32% 1.56%
========= ========= ========= ========= =========
SUPPLEMENTAL DATA:
Net assets, end of year (in thousands)............ $ 184,152 $ 101,702 $ 122,836 $ 139,062 $ 113,715
========= ========= ========= ========= =========
Portfolio turnover................................ 87.66% 102.96% 160.29% 87.25% 60.48%
========= ========= ========= ========= =========
</TABLE>
- ------------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the year.
See Notes to Financial Statements.
58
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD PORTFOLIO
-----------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1995+ 1994 1993 1992 1991
<S> <C> <C> <C> <C>
-----------------------------------------------------------------
$ 8.53 $ 9.68 $ 9.10 $ 8.44 $ 6.98
--------- -------- -------- -------- --------
.93 1.00 .94 1.03 1.02
.46 (1.17) .62 .64 1.47
--------- -------- -------- -------- --------
1.39 (.17) 1.56 1.67 2.49
--------- -------- -------- -------- --------
(.93) (.98) (.98) (1.01) (1.03)
-- -- -- -- --
--------- -------- -------- -------- --------
(.93) (.98) (.98) (1.01) (1.03)
--------- -------- -------- -------- --------
$ 8.99 $ 8.53 $ 9.68 $ 9.10 $ 8.44
========= ======== ======== ======== ========
17.12% (1.88%) 18.11% 20.63% 37.77%
========= ======== ======== ======== ========
.38% .41% .43% .44% .46%
========= ======== ======== ======== ========
10.25% 10.88% 10.17% 11.45% 12.74%
========= ======== ======== ======== ========
$ 107,378 $ 82,421 $ 94,739 $ 68,034 $ 51,072
========= ======== ======== ======== ========
63.39% 63.43% 73.01% 83.95% 76.34%
========= ======== ======== ======== ========
</TABLE>
59
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT PORTFOLIO
---------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1995+ 1994+ 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE FOLLOWING PER SHARE DATA AND RATIOS
HAVE BEEN DERIVED FROM INFORMATION
PROVIDED IN THE FINANCIAL STATEMENTS.
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year...... $ 10.32 $ 12.02 $ 11.75 $ 11.79 $ 11.04
--------- --------- --------- --------- ---------
Investment income -- net................ .78 .75 .83 .83 .86
Realized and unrealized gain (loss) on
investments and foreign currency
transactions -- net................... 1.10 (1.30) .50 (.04) .76
--------- --------- --------- --------- ---------
Total from investment operations........ 1.88 (.55) 1.33 .79 1.62
--------- --------- --------- --------- ---------
LESS DIVIDENDS AND DISTRIBUTIONS:
Investment income -- net................ (.79) (.75) (.84) (.83) (.87)
Realized gain on investments -- net..... -- (.39) (.22) -- --
In excess of realized gain on
investments -- net.................... -- (.01) -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions....... (.79) (1.15) (1.06) (.83) (.87)
--------- --------- --------- --------- ---------
Net asset value, end of year............ $ 11.41 $ 10.32 $ 12.02 $ 11.75 $ 11.79
========= ========= ========= ========= =========
TOTAL INVESTMENT RETURN:*
Based on net asset value per share...... 18.87% (4.78%) 11.20% 7.03% 15.57%
========= ========= ========= ========= =========
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ .38% .37% .36% .40% .39%
========= ========= ========= ========= =========
Investment income -- net................ 7.22% 6.89% 6.42% 7.03% 7.82%
========= ========= ========= ========= =========
Investment income -- net, and realized
gain on investments -- net............ -- -- -- -- --
========= ========= ========= ========= =========
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands)............................ $ 239,340 $ 218,611 $ 284,495 $ 269,254 $ 261,434
========= ========= ========= ========= =========
Portfolio turnover...................... 57.38% 140.55% 113.61% 80.54% 138.41%
========= ========= ========= ========= =========
</TABLE>
- ------------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the year.
See Notes to Financial Statements.
60
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG TERM CORPORATE BOND PORTFOLIO
-----------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1995+ 1994+ 1993 1992 1991
------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 10.72 $ 12.59 $ 12.07 $ 12.06 $ 11.21
--------- --------- --------- --------- ---------
.83 .81 .83 .90 .96
1.30 (1.42) .68 .02 .85
--------- --------- --------- --------- ---------
2.13 (.61) 1.51 .92 1.81
--------- --------- --------- --------- ---------
(.83) (.82) (.83) (.91) (.96)
-- (.44) (.16) -- --
-- -- -- -- --
--------- --------- --------- --------- ---------
(.83) (1.26) (.99) (.91) (.96)
--------- --------- --------- --------- ---------
$ 12.02 $ 10.72 $ 12.59 $ 12.07 $ 12.06
========= ========= ========= ========= =========
20.66% (5.13%) 13.01% 8.05% 17.01%
========= ========= ========= ========= =========
.40% .39% .38% .43% .42%
========= ========= ========= ========= =========
7.32% 7.16% 6.65% 7.51% 8.35%
========= ========= ========= ========= =========
-- -- -- -- --
========= ========= ========= ========= =========
$ 125,033 $ 111,878 $ 139,321 $ 126,864 $ 128,396
========= ========= ========= ========= =========
110.49% 134.53% 110.53% 93.10% 123.58%
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
MONEY RESERVE PORTFOLIO
----------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1995 1994 1993 1992 1991
----------------------------------------------------------------
<C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
.06 .04 .03 .04 .06
-- -- -- -- --
--------- --------- --------- --------- ---------
.06 .04 .03 .04 .06
--------- --------- --------- --------- ---------
(.06) (.04) (.03) (.04) (.06)
-- -- -- -- --
-- -- -- -- --
--------- --------- --------- --------- ---------
(.06) (.04) (.03) (.04) (.06)
--------- --------- --------- --------- ---------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
5.81% 4.04% 3.08% 3.77% 6.11%
========= ========= ========= ========= =========
.35% .36% .36% .39% .38%
========= ========= ========= ========= =========
-- -- -- -- --
========= ========= ========= ========= =========
5.67% 4.00% 3.03% 3.77% 5.97%
========= ========= ========= ========= =========
$ 568,439 $ 583,992 $ 546,710 $ 647,190 $ 798,020
========= ========= ========= ========= =========
-- -- -- -- --
========= ========= ========= ========= =========
</TABLE>
61
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Financial Highlights (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MULTIPLE STRATEGY PORTFOLIO
---------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1995+ 1994+ 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE
BEEN DERIVED FROM INFORMATION PROVIDED IN
THE FINANCIAL STATEMENTS.
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year............. $ 16.22 $ 19.84 $ 18.70 $ 18.32 $ 15.45
----------- ----------- ----------- ----------- -----------
Investment income -- net....................... .56 .50 .54 .61 .72
Realized and unrealized gain (loss) on
investments and foreign currency
transactions -- net.......................... 2.03 (1.39) 2.30 .17 3.13
----------- ----------- ----------- ----------- -----------
Total from investment operations............... 2.59 (.89) 2.84 .78 3.85
----------- ----------- ----------- ----------- -----------
LESS DIVIDENDS AND DISTRIBUTIONS:
Investment income -- net....................... (.48) (.57) (.88) (.32) (.98)
Realized gain on investments -- net............ (1.09) (2.16) (.82) (.08) --
----------- ----------- ----------- ----------- -----------
Total dividends and distributions.............. (1.57) (2.73) (1.70) (.40) (.98)
----------- ----------- ----------- ----------- -----------
Net asset value, end of year................... $ 17.24 $ 16.22 $ 19.84 $ 18.70 $ 18.32
========== ========== ========== ========== ==========
TOTAL INVESTMENT RETURN:*
Based on net asset value per share............. 17.55% (5.05%) 16.66% 4.35% 25.97%
========== ========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement................. .38% .38% .36% .40% .39%
========== ========== ========== ========== ==========
Expenses....................................... .38% .38% .36% .40% .39%
========== ========== ========== ========== ==========
Investment income -- net....................... 3.44% 2.97% 2.91% 3.26% 4.17%
========== ========== ========== ========== ==========
SUPPLEMENTAL DATA:
Net assets, end of year (in thousands)......... $ 1,169,357 $ 1,082,083 $ 1,237,336 $ 1,137,022 $ 1,152,395
========== ========== ========== ========== ==========
Portfolio turnover............................. 140.83% 68.12% 91.08% 67.71% 95.48%
========== ========== ========== ========== ==========
</TABLE>
- ------------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the year.
See Notes to Financial Statements.
62
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATURAL RESOURCES PORTFOLIO
-----------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1995 1994 1993 1992 1991
-----------------------------------------------------------
<S> <C> <C> <C> <C>
$ 7.43 $ 7.53 $ 7.01 $ 7.04 $ 7.18
------- ------- ------- ------- -------
.17 .17 .13 .21 .27
.73 (.10) .66 (.12) (.14)
------- ------- ------- ------- -------
.90 .07 .79 .09 .13
------- ------- ------- ------- -------
(.16) (.17) (.27) (.12) (.27)
-- -- -- -- --
------- ------- ------- ------- -------
(.16) (.17) (.27) (.12) (.27)
------- ------- ------- ------- -------
$ 8.17 $ 7.43 $ 7.53 $ 7.01 $ 7.04
======= ======= ======= ======= =======
12.22% .88% 11.65% 1.35% 1.67%
======= ======= ======= ======= =======
.47% .50% .50% .50% .50%
======= ======= ======= ======= =======
.47% .59% .59% .82% .74%
======= ======= ======= ======= =======
1.99% 2.23% 2.00% 2.84% 3.12%
======= ======= ======= ======= =======
$21,035 $21,455 $18,437 $ 7,987 $ 8,030
======= ======= ======= ======= =======
38.50% 48.16% 65.26% 32.14% 30.20%
======= ======= ======= ======= =======
</TABLE>
63
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES:
Merrill Lynch Series Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company,
with the exceptions of Global Strategy Portfolio and Natural Resources
Portfolio, which are classified as non-diversified. The Fund offers its shares
to Merrill Lynch Life Insurance Company, ML Life Insurance Company of New York
(indirect wholly-owned subsidiaries of Merrill Lynch & Co., Inc. ("ML & Co.")
and Monarch Life Insurance Company (an insurance company not affiliated with ML
& Co.) separate accounts to fund benefits under certain variable life insurance
contracts. The following is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments -- Money Reserve and Multiple Strategy Portfolios:
Investments maturing more than sixty days after the valuation date are valued at
the most recent bid price or yield equivalent as obtained from dealers that make
markets in such securities. When such securities are valued with sixty days or
less to maturity, the difference between the valuation existing on the
sixty-first day before maturity and maturity value is amortized on a
straight-line basis to maturity. Investments maturing within sixty days from
their date of acquisition are valued at amortized cost, which approximates
market value. For the purpose of valuation, the maturity of a variable rate
certificate of deposit is deemed to be the next coupon date on which the
interest rate is to be adjusted.
Balanced, Capital Stock, Global Strategy, Growth Stock, High Yield, Intermediate
Government Bond, Long Term Corporate Bond, Multiple Strategy and Natural
Resources Portfolios: Portfolio securities which 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 other than money market securities traded in the over-the-counter
market are valued at the bid or yield equivalent as obtained from one or more
dealers that make markets in the securities. Portfolio securities which are
traded both in the over-the-counter market and on a stock exchange are valued
according to the broadest and most representative market, and it is expected
that for debt securities this ordinarily will be the over-the-counter market.
Short-term securities are valued at amortized cost, which approximates market
value.
Options written are valued at the last sale price in the case of exchange-traded
options or, in the case of options traded in the over-the-counter market, the
last asked price. Options purchased are valued at the last sale price in the
case of exchange-traded options or, in the case of options traded in the
over-the-counter market, the last bid price. Futures contracts are valued at
settlement price at the close of the applicable exchange. Securities and assets
for which market quotations are not readily available are valued at fair value
as determined in good faith by or under the direction of the Board of Directors
of the Fund.
(b) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends and
capital gains at various rates.
(c) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Dividend income is recorded on the ex-dividend dates, except that if the
ex-dividend date has passed, certain dividends from foreign securities are
recorded as soon as the Portfolios are informed of the ex-dividend date.
Interest income (including amortization of premium and discount) is recognized
on the accrual basis. Realized gains and losses on security transactions are
determined on the identified cost basis.
(d) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.
(e) Derivative financial instruments -- The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolios against
adverse movements in the equity, debt and currency markets. Losses may arise due
to changes in the value of the contract or if the counterparty does not perform
under the contract.
64
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- - Foreign currency options and futures -- Certain Portfolios may purchase or
sell listed or over-the-counter foreign currency options, foreign currency
futures and related options on foreign currency futures as a short or long hedge
against possible variations in foreign exchange rates. Such transactions may be
effected with respect to hedges on non-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.
- - Forward foreign exchange contracts -- Global Strategy, Multiple Strategy and
Natural Resources Portfolios are 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. Premium or discount is amortized over the life of the contracts.
- - Options -- Certain Portfolios are authorized to write and purchase call and
put options. When a 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 gain or
loss to the extent the cost of the closing transaction exceeds the premium paid
or received).
Written and purchased options are non-income producing investments.
- - Financial futures contracts -- Multiple Strategy and Natural Resources
Portfolios may purchase or sell interest rate 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. Futures contracts are
contracts for delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the 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 the 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.
(f) 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.
(g) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(h) Reclassifications -- Generally accepted accounting principles require that
certain components of net assets be reclassified to reflect permanent
differences between financial reporting and tax purposes. These
reclassifications have no effect on net assets or net asset value per share.
2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES:
The Fund has entered into an Investment Advisory Agreement with Merrill Lynch
Asset Management, L.P. ("MLAM"). The general partner of MLAM is Princeton
Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of ML & Co., which
is the limited partner. The Fund has also entered into a Distribution Agreement
and Distribution Plan with Merrill Lynch Funds Distributor, Inc. ("MLFD" or
"Distributor"), a wholly-owned subsidiary of Merrill Lynch Group, Inc. MLAM is
responsible for the management of the Fund's portfolios and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee
based upon the
65
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
aggregate average daily value of the ten combined Portfolio's net assets at the
following annual rates: 0.50% of the Fund's average daily net assets not
exceeding $250 million, 0.45% of the next $50 million, 0.40% of the next $100
million, 0.35% of the next $400 million, and 0.30% of average daily net assets
in excess of $800 million.
The Investment Advisory Agreement obligates MLAM to reimburse the Fund, if in
any year the aggregate ordinary operating expenses of any Portfolio exceed the
most restrictive expense limitations then in effect under any state securities
law or the regulations thereunder. Under the most restrictive state regulations
presently in effect, MLAM is required to reimburse each Portfolio for advisory
fees received by it from the Fund, to the extent that such Portfolio's aggregate
ordinary operating expenses (excluding interest, taxes, brokerage fees and
commissions, and extraordinary items) exceed in any fiscal year 2.5% of the
Portfolio's first $30 million of average daily net assets, 2.0% of the next $70
million of average daily net assets and 1.5% of the average daily net assets in
excess thereof. In addition, MLAM, Merrill Lynch Life Agency, Inc. and Monarch
Life Insurance Co. ("Monarch") entered into an agreement which provided that
Monarch will reimburse the Fund's operating expenses other than interest, taxes,
brokerage fees and commissions and extraordinary items, with respect to each
Portfolio, to the extent that these expenses exceed 0.50% of the Portfolio's
average daily net assets. Monarch will also reimburse MLAM for any amount MLAM
is required to pay to the Fund by reduction of its fee pursuant to the expense
limitation provisions of the Investment Advisory Agreement.
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
earned commissions on the execution of portfolio security transactions
aggregating $3,685 in the Balanced Portfolio, $52,307 in the Capital Stock
Portfolio, $43,271 in the Global Strategy Portfolio, $21,300 in the Growth Stock
Portfolio, $625 in the High Yield Portfolio, $100,566 in the Multiple Strategy
Portfolio, and $924 in the Natural Resources Portfolio.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-owned subsidiary
of ML & Co., is the Fund's transfer agent.
During the year ended December 31, 1995, Merrill Lynch Security Pricing Service,
an affiliate of MLPF&S, was paid by Intermediate Government Bond Portfolio
$1,832; Growth Stock Portfolio $75; Balanced Portfolio $470; High Yield
Portfolio $4,159; and Long-Term Corporate Bond Portfolio $4,335 for security
price quotations to compute the net asset value of the Portfolios.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or directors of
MLAM, MLFDS, MLPF&S, PSI, and/or ML & Co.
3. INVESTMENTS:
Purchases and sales of investments, excluding short-term securities, for the
year ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
INTERMEDIATE
CAPITAL GLOBAL GROWTH HIGH GOVERNMENT
BALANCED STOCK STRATEGY STOCK YIELD BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Purchases........ $ 25,390,712 $ 251,255,646 $ 51,176,154 $ 151,487,690 $ 78,179,420 $124,613,641
=========== ============ ============ ============ =========== ============
Total Sales............ $ 33,840,350 $ 338,195,016 $ 145,031,433 $ 114,566,023 $ 55,052,347 $126,371,050
=========== ============ ============ ============ =========== ============
<CAPTION>
LONG TERM
CORPORATE MULTIPLE NATURAL
BOND STRATEGY RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
- -----------------------
Total Purchases........ $125,501,729 $1,233,364,788 $ 8,452,750
============ ============== ===========
Total Sales............ $121,811,083 $1,737,655,335 $11,568,605
============ ============== ===========
</TABLE>
In the Capital Stock Portfolio, transactions in call options written for the
year ended December 31, 1995 were as follows:
66
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES
CALL OPTIONS WRITTEN COVERED PREMIUMS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding call options, beginning of year............................................. 10,000 $12,096
Options written......................................................................... 81,500 104,669
Options terminated in closing purchase transactions..................................... (48,000) (52,435)
Options exercised....................................................................... (43,500) (64,330)
--------- --------
Outstanding call options, end of year................................................... -- $ --
========= ========
</TABLE>
In the Multiple Strategy Portfolio, transactions in call options written for the
year ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
CALL OPTIONS WRITTEN COVERED PREMIUMS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding call options, beginning of year............................................. 65,000 $ 77,475
Options written......................................................................... 268,000 483,048
Options terminated in closing purchase transactions..................................... (138,000) (152,628)
Options exercised....................................................................... (175,000) (378,036)
Options expired......................................................................... (20,000) (29,859)
--------- ---------
Outstanding call options, end of year................................................... -- $ --
========= =========
</TABLE>
As of December 31, 1995, unrealized appreciation/depreciation for Federal income
tax purposes were as follows:
<TABLE>
<CAPTION>
CAPITAL GLOBAL
BALANCED STOCK STRATEGY
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Appreciated securities........................................................... $ 10,790,201 $ 15,000,019 $ 15,738,957
Depreciated securities........................................................... (332,599) (2,011,919) (2,281,150)
=========== ============ ============
Net unrealized appreciation (depreciation)....................................... $ 10,457,602 $ 12,988,100 $ 13,457,807
=========== ============ ============
Cost for Federal income tax purposes............................................. $ 84,164,241 $ 241,141,763 $ 192,013,476
=========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
GROWTH HIGH
STOCK YIELD
PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Appreciated securities........................................................... $ 30,385,020 $ 3,785,673
Depreciated securities........................................................... (3,388,824) (7,172,627)
============ ============
Net unrealized appreciation (depreciation)....................................... $ 26,996,196 $ (3,386,954)
============ ============
Cost for Federal income tax purposes............................................. $ 159,738,116 $ 107,800,749
============ ============
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE LONG TERM
GOVERNMENT CORPORATE MONEY
BOND BOND RESERVE
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Appreciated securities......................................................... $ 12,108,221 $ 7,351,526 $ 258,229
Depreciated securities......................................................... (817,356) (246,212) (17,313)
============ ============ ============
Net unrealized appreciation.................................................... $ 11,290,865 $ 7,105,314 $ 240,916
============ ============ ============
Cost for Federal income tax purposes........................................... $224,108,927 $115,760,766 $574,223,096
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE NATURAL
STRATEGY RESOURCES
PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Appreciated securities......................................................... $ 57,469,002 $ 1,754,903
Depreciated securities......................................................... (4,400,478) (1,121,332)
============== ===========
Net unrealized appreciation.................................................... $ 53,068,524 $ 633,571
============== ===========
Cost for Federal income tax purposes........................................... $1,119,389,445 $20,451,279
============== ===========
</TABLE>
67
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
Net realized and unrealized gains (losses) as of December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
CAPITAL STOCK GLOBAL STRATEGY
BALANCED PORTFOLIO PORTFOLIO
PORTFOLIO ------------------------- -------------------------
------------------------ REALIZED UNREALIZED REALIZED UNREALIZED
REALIZED UNREALIZED GAINS GAINS GAINS GAINS
GAINS GAINS (LOSSES) (LOSSES) (LOSSES) (LOSSES)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Long-term securities......... $1,979,500 $10,457,602 $36,815,279 $12,988,100 $(2,097,000) $13,457,807
Short-term securities........ 2 -- (387) -- (19) --
Options...................... -- -- 35,320 -- -- --
Forward foreign exchange
contracts................... -- -- -- -- (2,565,755) 3,911,706
Foreign currency
transactions................ -- -- (47,375) (371) 539,553 (783)
---------- ----------- ----------- ----------- ----------- -----------
Total........................ $1,979,502 $10,457,602 $36,802,837 $12,987,729 $(4,123,221) $17,368,730
========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
GROWTH STOCK
PORTFOLIO HIGH YIELD
------------------------- PORTFOLIO
REALIZED ----------------------
GAINS UNREALIZED REALIZED UNREALIZED
(LOSSES) GAINS GAINS LOSSES
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term securities........ $ 4,620,804 $27,092,008 $706,740 $(3,389,111)
Short-term securities....... (16) -- 240 --
Options..................... -- -- -- --
Forward foreign exchange
contracts.................. -- -- -- --
Foreign currency
transactions............... -- -- -- --
----------- ----------- -------- -----------
Total....................... $ 4,620,788 $27,092,008 $706,980 $(3,389,111)
========== =========== ======== ===========
</TABLE>
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
CAPITAL STOCK GLOBAL STRATEGY
BALANCED PORTFOLIO PORTFOLIO PORTFOLIO
------------------------ ------------------------- -------------------------
FOR THE YEAR ENDED DOLLAR DOLLAR DOLLAR
DECEMBER 31, 1995 SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------- ---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold...................................... 1,291,948 $ 18,030,554 2,407,839 $ 51,660,671 1,806,490 $ 26,674,612
Shares issued to shareholders in reinvestment of
dividends and distributions..................... 494,385 6,367,607 337,836 6,916,386 776,360 11,076,199
--------- ------------ ---------- ------------ ---------- ------------
Total issued..................................... 1,786,333 24,398,161 2,745,675 58,577,057 2,582,850 37,750,811
Shares redeemed.................................. (965,851) (13,401,316) (1,704,354) (37,008,466) (4,006,374) (58,105,801)
--------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease).......................... 820,482 $ 10,996,845 1,041,321 $ 21,568,591 (1,423,524) $(20,354,990)
========= ============ ========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
GROWTH STOCK PORTFOLIO
-------------------------
FOR THE YEAR ENDED DOLLAR
DECEMBER 31, 1995 SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C>
Shares sold...................................... 5,020,010 $105,384,779
Shares issued to shareholders in reinvestment of
dividends and distributions..................... 426,119 7,590,489
---------- ------------
Total issued..................................... 5,446,129 112,975,268
Shares redeemed.................................. (3,086,712) (64,028,469)
---------- ------------
Net increase (decrease).......................... 2,359,417 $ 48,946,799
========== ============
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DOLLAR DOLLAR
DECEMBER 31, 1994 SHARES AMOUNT SHARES AMOUNT SHARES
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares sold...................................... 796,517 $ 10,927,406 3,132,708 $ 70,162,822 5,777,347
Shares issued to shareholders in reinvestment of
dividends and distributions..................... 321,722 4,421,313 1,116,160 25,286,799 541,326
----------- ------------- ----------- ------------- -----------
Total issued..................................... 1,118,239 15,348,719 4,248,868 95,449,621 6,318,673
Shares redeemed.................................. (1,418,737) (19,288,798) (3,403,477) (75,543,585) (2,796,991)
----------- ------------- ----------- ------------- -----------
Net increase (decrease).......................... (300,498) $ (3,940,079) 845,391 $ 19,906,036 3,521,682
========== ============ ========== ============ ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DOLLAR DOLLAR
DECEMBER 31, 1994 AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares sold...................................... $ 87,535,692 3,016,630 $ 57,816,537
Shares issued to shareholders in reinvestment of
dividends and distributions..................... 8,079,249 967,756 19,703,838
------------- ----------- -------------
Total issued..................................... 95,614,941 3,984,386 77,520,375
Shares redeemed.................................. (41,794,888) (3,671,567) (70,575,404)
------------- ----------- -------------
Net increase (decrease).......................... $ 53,820,053 312,819 $ 6,944,971
============ ========== ============
</TABLE>
68
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE LONG TERM
GOVERNMENT CORPORATE MONEY RESERVE
BOND PORTFOLIO BOND PORTFOLIO PORTFOLIO
------------------------ ------------------------- -----------------------
REALIZED UNREALIZED REALIZED UNREALIZED REALIZED UNREALIZED
GAINS GAINS GAINS GAINS GAINS GAINS
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$791,779 $11,290,865 $2,060,856 $7,105,314 -- --
-- -- -- -- $271,802 $240,916
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-------- ----------- ---------- ---------- -------- ---------
$791,779 $11,290,865 $2,060,856 $7,105,314 $271,802 $240,916
======== =========== ========== ========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE STRATEGY NATURAL RESOURCES
PORTFOLIO PORTFOLIO
--------------------------- -----------------------
REALIZED UNREALIZED REALIZED
GAINS GAINS GAINS UNREALIZED
(LOSSES) (LOSSES) (LOSSES) GAINS
-------------------------------------------------------
<S> <C> <C> <C>
$113,461,770 $53,068,524 $769,577 $633,571
(4,716) -- (62) --
148,606 -- -- --
-- -- -- --
3,649,813 (1,337) (1,642) 484
----------- ----------- -------- ---------
$117,255,473 $53,067,187 $767,873 $634,055
============ =========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE
GOVERNMENT BOND LONG TERM CORPORATE
HIGH YIELD PORTFOLIO PORTFOLIO BOND PORTFOLIO
--------------------------- --------------------------- ---------------------------
DOLLAR DOLLAR DOLLAR
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
8,479,805 $ 75,386,693 1,820,237 $ 19,784,758 1,179,723 $ 13,430,499
1,107,700 9,775,052 1,510,971 16,342,302 759,176 8,570,923
---------- ------------ ---------- ------------ ---------- ------------
9,587,505 85,161,745 3,331,208 36,127,060 1,938,899 22,001,422
(7,315,179) (65,316,284) (3,546,978) (38,243,753) (1,968,331) (22,274,213)
---------- ------------ ---------- ------------ ---------- ------------
2,272,326 $ 19,845,461 (215,770) $ (2,116,693) (29,432) $ (272,791)
========= =========== ========= =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE STRATEGY NATURAL RESOURCES
MONEY RESERVE PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------- ---------------------------- ---------------------------
DOLLAR DOLLAR DOLLAR
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
211,919,729 $ 211,919,729 979,588 $ 15,902,035 3,592,635 $ 27,917,420
32,032,115 32,032,115 7,012,948 105,818,311 61,559 474,128
------------ ------------- ---------- ------------- ---------- ------------
243,951,844 243,951,844 7,992,536 121,720,346 3,654,194 28,391,548
(260,422,324) (260,422,324) (6,852,014) (110,284,559) (3,966,476) (31,139,897)
------------ ------------- ---------- ------------- ---------- ------------
(16,470,480) $ (16,470,480) 1,140,522 $ 11,435,787 (312,282) $ (2,748,349)
============ ============ ========= ============ ========= ===========
</TABLE>
<TABLE>
<CAPTION>
DOLLAR DOLLAR DOLLAR DOLLAR
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6,957,804 $62,994,131 1,145,062 $ 12,193,233 617,781 $ 7,030,745 268,477,395 $268,477,395
965,110 8,745,213 2,387,827 26,321,402 1,196,731 13,744,537 22,352,889 22,352,889
---------- ----------- ---------- ------------ ---------- ----------- ------------ ------------
7,922,914 71,739,344 3,532,889 38,514,635 1,814,512 20,775,282 290,830,284 290,830,284
(8,047,084) (74,353,292) (6,015,949) (65,126,592) (2,448,292) (27,519,734) (252,860,391) (252,860,391)
---------- ----------- ---------- ------------ ---------- ----------- ------------ ------------
(124,170) $(2,613,948) (2,483,060) $ (26,611,957) (633,780) $(6,744,452) 37,969,893 $ 37,969,893
========== =========== ========== ============ ========== =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
DOLLAR DOLLAR
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------
<S> <C> <C> <C>
1,343,178 $ 22,804,677 3,662,455 $28,114,107
10,026,362 171,443,382 60,496 444,638
---------- ------------ ---------- -----------
11,369,540 194,248,059 3,722,951 28,558,745
(7,035,582) (116,814,354) (3,282,644) (24,913,503)
---------- ------------ ---------- -----------
4,333,958 $ 77,433,705 440,307 $ 3,645,242
========== ============ ========== ===========
</TABLE>
69
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Concluded)
- --------------------------------------------------------------------------------
5. CAPITAL LOSS CARRYFORWARD:
At December 31, 1995, the Fund had capital loss carryforwards of approximately
$3,503,000 in the High Yield Portfolio, of which $3,154,000 expires in 1998, and
$349,000 expires in 1999; $8,604,000 in the Intermediate Government Bond
Portfolio, of which $7,516,000 expires in 2002 and $1,088,000 expires in 2003;
$2,841,000 in the Long Term Corporate Bond Portfolio, all of which expires in
2002; $11,511,000 in the Natural Resources Portfolio, of which $7,809,000
expires in 1996, $2,063,000 expires in 1997, $1,187,000 expires in 1998,
$155,000 expires in 1999, and $297,000 expires in 2000. These amounts will be
available to offset like amounts of any future taxable capital gains.
6. COMMITMENTS:
At December 31, 1995, the Natural Resources Portfolio had entered into foreign
exchange contracts under which it agreed to purchase various foreign currencies
with values of approximately $75,500. The Capital Stock Portfolio, the Global
Strategy Portfolio and the Multiple Strategy Portfolio had entered into foreign
exchange contracts under which it agreed to sell various foreign currencies with
values of approximately $149,800, $129,200, and $506,400, respectively.
7. LOANED SECURITIES:
At December 31, 1995, the Intermediate Government Bond Portfolio held US
Treasury Notes having an aggregate value of approximately $23,578,000 as
collateral for portfolio securities loaned having a market value of
approximately $23,045,000; the Long Term Corporate Bond Portfolio held US
Treasury Notes having an aggregate value of approximately $1,824,000 as
collateral for portfolio securities loaned having a market value of
approximately $1,766,000.
8. SUBSEQUENT EVENT:
On January 2, 1996, the Board of Directors declared dividends and distributions
per share payable on January 2, 1996 to shareholders of record as of December
29, 1995 as follows:
<TABLE>
<CAPTION>
NET INVESTMENT REALIZED
INCOME CAPITAL GAINS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PORTFOLIO
Balanced Portfolio............................................................... $.297572 $ .302721
Capital Stock Portfolio.......................................................... .216003 3.479302
Global Strategy Portfolio........................................................ .391332 .094099
Growth Stock Portfolio........................................................... .100032 .587772
Multiple Strategy Portfolio...................................................... .320185 1.670257
Natural Resources Portfolio...................................................... .081190 --
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
70
<PAGE>
[SAI BACK COVER TO COME]
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
No statement of sources of net assets is included because the full amount
of net assets at December 31, 1995 represents cash received from issuance of
shares (less cost of capital shares redeemed).
(a) Financial Statements contained in Part A:
Financial Highlights:
Balanced Portfolio for the period May 1, 1988* to December 31, 1988 and
each of the years in the seven year period ended December 31, 1995.
Capital Stock Portfolio for each of the years in the ten year period
ended December 31, 1995.
Global Strategy Portfolio for the period July 1, 1987* to December 31,
1987 and each of the years in the eight year period ended December
31, 1995.
Growth Stock Portfolio for each of the years in the ten year period
ended December 31, 1995.
High Yield Portfolio for the period May 1, 1986* to December 31, 1986
and each of the years in the nine year period ended December 31,
1995.
Intermediate Government Bond Portfolio for each of the years in the ten
year period ended December 31, 1995.
Long Term Corporate Bond Portfolio for each of the years in the ten
year period ended December 31, 1995.
Money Reserve Portfolio for each of the years in the ten year period
ended December 31, 1995.
Multiple Strategy Portfolio for each of the years in the ten year
period ended December 31, 1995.
Natural Resources Portfolio for the period July 1, 1987* to December
31, 1987 and each of the years in the eight year period ended
December 31, 1995.
Contained in Part B:
With respect to each of the Fund's Portfolios:
Schedules of Investments as of December 31, 1995.
Statements of Assets and Liabilities as of December 31, 1995.
Statements of Operations for the year ended December 31, 1995.
Statements of Changes in Net Assets for the years ended December 31,
1995 and 1994.
Financial Highlights for each of the years in the five year period
ended December 31, 1995.
- ------------------
* Commencement of operations.
C-1
<PAGE>
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------------
<S> <C>
1 (a) Articles of Incorporation of Registrant (a)
1 (b) Articles of Amendment to Registrant's Articles of Incorporation (b)
1 (c) Articles of Amendment to Registrant's Articles of Incorporation
increasing the number of authorized shares of Registrant (c)
1 (d) Certificate of Correction of Articles of Amendment of Registrant (d)
1 (e) Articles Supplementary to Registrant's Articles of Incorporation
relating to the redesignation of shares of common stock as Multiple
Strategy Portfolio Common Stock (e)
1 (f) Articles Supplementary to Registrant's Articles of Incorporation
relating to the redesignation of shares of common stock as High Yield
Portfolio Common Stock (f)
1 (g) Form of Articles Supplementary to Registrant's Articles of
Incorporation relating to the redesignation of shares of common stock
as Natural Resources Portfolio Common Stock and Global Strategy
Portfolio Common Stock (g)
1 (h) Form of Articles of Amendment to Registrant's Articles of
Incorporation increasing the number of authorized shares of Registrant
(h)
1 (i) Articles Supplementary to Registrant's Articles of Incorporation
relating to the redesignation of shares of common stock as Balanced
Portfolio Common Stock and increasing the authorized number of shares
of Money Reserve Portfolio Common Stock (i)
2 By-Laws of Registrant (j)
3 None
4 Specimen certificate for shares of common stock of Registrant (k)
5 Investment Advisory Agreement (l)
6 Form of Amended Distribution Agreement (m)
7 None
8 Form of Custodian Agreement (n)
9 (a) Form of Transfer Agency, and Dividend Disbursing Agreement (o)
9 (b) Form of Agreement relating to the use of the 'Merrill Lynch' name (p)
9 (c) Form of Amendment to Reimbursement Agreement (q)
10 Opinion of Rogers & Wells (filed with Rule 24f-2 notice on February
27, 1996)
11 Consent of Deloitte & Touche LLP
12 None
13 None
14 None
15 None
16 Calculation of Performance Data (r)
27(a) Financial Data Schedule--Balanced Portfolio
27(b) Financial Data Schedule--Capital Stock Portfolio
27(c) Financial Data Schedule--Global Strategy Portfolio
27(d) Financial Data Schedule--Growth Stock Portfolio
27(e) Financial Data Schedule--High Yield Portfolio
27(f) Financial Data Schedule--Intermediate Government Bond Portfolio
27(g) Financial Data Schedule--Long Term Corporate Bond Portfolio
27(h) Financial Data Schedule--Money Reserve Portfolio
</TABLE>
C-2
<PAGE>
<TABLE>
<S> <C>
27(i) Financial Data Schedule--Multiple Strategy Portfolio
27(j) Financial Data Schedule--Natural Resources Portfolio
</TABLE>
- ------------------
(a) Incorporated by reference to Exhibit 1(a) filed with Pre-Effective Amendment
No. 2 to Registrant's Registration Statement on Form N-1 ('Amendment No.
2').
(b) Incorporated by reference to Exhibit 1(b) filed with Amendment No. 2.
(c) Incorporated by reference to Exhibit 1(c) filed with Post-Effective
Amendment No. 4 to Registrant's Registration Statement on Form N-1A
('Post-Effective Amendment No. 4').
(d) Incorporated by reference to Exhibit 1(d) filed with Post-Effective
Amendment No. 4.
(e) Incorporated by reference to Exhibit 1(e) filed with Post-Effective
Amendment No. 4.
(f) Incorporated by reference to Exhibit 1(f) filed with Post-Effective
Amendment No. 5 to Registrant's Registration Statement on Form N-1A
('Post-Effective Amendment No. 5').
(g) Incorporated by reference to Exhibit 1(g) filed with Post-Effective
Amendment No. 6 to Registrant's Registration Statement on Form N-1A.
(h) Incorporated by reference to Exhibit 1(h) filed with Post-Effective
Amendment No. 9 to Registrant's Registration Statement on Form N-1A
('Post-Effective Amendment No. 9').
(i) Incorporated by reference to Exhibit 1(i) filed with Post-Effective
Amendment No. 9.
(j) Incorporated by reference to Exhibit 2 filed with Post-Effective Amendment
No. 15.
(k) Incorporated by reference to Exhibit 4 filed with Post-Effective Amendment
No. 5.
(l) Incorporated by reference to Exhibit 5 filed with Post-Effective Amendment
No. 2.
(m) Incorporated by reference to Exhibit 6 filed with Post-Effective Amendment
No. 5.
(n) Incorporated by reference to Exhibit 8 filed with Post-Effective Amendment
No. 1 to Registrant's Registration Statement on Form N-1 ('Post-Effective
Amendment No. 1').
(o) Incorporated by reference to Exhibit 9(a) filed with Post-Effective
Amendment No. 1.
(p) Incorporated by reference to Exhibit 9(b) filed with Amendment No. 2.
(q) Incorporated by reference to Exhibit 9(c) filed with Post-Effective
Amendment No. 5.
(r) Incorporated by reference to Exhibit 16 filed with Post-Effective Amendment
No. 10.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Registrant does not control any other person. Except that all of
Registrant's issued and outstanding shares are and will be held by Monarch Life
Insurance Company for its Variable Account A and by separate accounts of Merrill
Lynch Life Insurance Company and ML Life Insurance Company of New York, the
Registrant is not under common control with any other person.
C-3
<PAGE>
ITEM 26. NUMBERS OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF HOLDERS
TITLE OF CLASS AT FEBRUARY 29, 1996
- ---------------------------------------- --------------------
<S> <C>
Common Stock, par value $0.10 per share
Balanced Portfolio.................... 6
Capital Stock Portfolio............... 6
Global Strategy Portfolio............. 6
Growth Stock Portfolio................ 6
High Yield Portfolio.................. 6
Intermediate Government Bond
Portfolio.......................... 6
Long Term Corporate Bond Portfolio.... 6
Money Reserve Portfolio............... 6
Multiple Strategy Portfolio........... 6
Natural Resources Portfolio........... 6
</TABLE>
- ------------------
Note: The number of holders shown above includes holders of record plus
beneficial owners, whose shares are held of record by Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
ITEM 27. INDEMNIFICATION.
Under Section 2-418 of the Maryland General Corporation Law, with respect
to any proceedings against a present or former director, officer, agent or
employee (a 'corporate representative') of the Registrant, except a proceeding
brought by or on behalf of the Registrant, the Registrant may indemnify the
corporate representative against expenses, including attorneys' fees and
judgments, fines and amounts paid in settlement actually and reasonably incurred
by the corporate representative in connection with the proceeding, if: (i) he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Registrant; and (ii) with respect to any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. The Registrant is also authorized under Section 2-418 of the Maryland
General Corporation Law to indemnify a corporate representative under certain
circumstances against expenses incurred in connection with the defense of a suit
or action by or in the right of the Registrant. Under the Distribution
Agreement, the Registrant has agreed to indemnify the Distributor against any
loss, liability, claim, damage or expense arising out of any untrue statement of
a material fact, or an omission to state a material fact, in any registration
statement, prospectus or report to shareholders of the Registrant. Reference is
made to Article VI of Registrant's Certificate of Incorporation, Article VI of
Registrant's By-Laws, Section 2-418 of the Maryland General Corporation Law and
Section 9 of the Distribution Agreement. The Registrant has obtained an
officers' and directors' liability insurance policy for its officers and
directors.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Merrill Lynch Asset Management, L.P., doing business as Merrill Lynch Asset
Management ('MLAM' or the 'Investment Adviser') acts as the investment adviser
for the following open-end investment companies: Merrill Lynch Adjustable Rate
Securities Fund, Inc., Merrill Lynch Americas Income Fund, Inc., Merrill Lynch
Asset Builder Program, Inc., Merrill Lynch Asset Growth Fund, Inc., Merrill
Lynch Asset Income Fund, Inc., Merrill Lynch U.S. Treasury Money Fund, Merrill
Lynch Utility Income Fund, Inc., Merrill Lynch Growth Fund for Investment and
Retirement, Merrill Lynch Capital Fund, Inc., Merrill Lynch Developing Capital
Markets Fund, Inc., Merrill Lynch Dragon Fund, Inc., Merrill Lynch EuroFund,
Merrill Lynch Fund for Tomorrow, Inc., Merrill Lynch Pacific Fund, Inc., Merrill
Lynch Ready Assets Trust, Merrill Lynch Retirement Series Trust, Merrill Lynch
Series Fund, Inc., Merrill Lynch Variable Series Funds, Inc., Merrill Lynch
Municipal Series Trust, Merrill Lynch Global Convertible Fund, Merrill Lynch
Global Allocation Fund, Inc., Merrill Lynch Global Holdings, Inc., Merrill Lynch
Global Small Cap Fund, Inc., Merrill Lynch Strategic Dividend Fund, Merrill
Lynch U.S.A. Government Reserves, Merrill Lynch Global Bond Fund for Investment
and Retirement, Merrill Lynch Short-Term Global Income Fund, Inc., Merrill Lynch
Global Resources Trust, Merrill Lynch Global
C-4
<PAGE>
Utility Fund, Inc., Merrill Lynch Institutional Intermediate Fund, Inc., Merrill
Lynch International Equity Fund, Merrill Lynch Fundamental Growth Fund, Inc.,
Merrill Lynch Healthcare Fund, Inc., Merrill Lynch Latin America Fund, Inc.,
Merrill Lynch Middle East/Africa Fund, Inc. and Merrill Lynch Technology Fund;
and the following closed-end investment companies: Convertible Holdings, Inc.,
Merrill Lynch High Income Municipal Bond Fund, Inc. and Merrill Lynch Senior
Floating Rate Fund.
Fund Asset Management, L.P. ('FAM'), an affiliate of the Investment
Adviser, acts as the investment adviser for the following open-end registered
investment companies: Merrill Lynch Basic Value Fund, Inc., CBA Money Fund, CMA
Money Fund, CMA Tax-Exempt Fund, CMA Government Securities Fund, CMA Multi-State
Municipal Series Trust, CMA Treasury Fund, Merrill Lynch World Income Fund,
Inc., Merrill Lynch Federal Securities Trust, Merrill Lynch Corporate Bond Fund,
Inc., Merrill Lynch Phoenix Fund, Inc., Merrill Lynch Municipal Bond Fund, Inc.,
Merrill Lynch Special Value Fund, Inc., The Corporate Fund Accumulation Program,
Inc., The Municipal Fund Accumulation Program, Inc., Merrill Lynch California
Municipal Series Trust, Merrill Lynch Multi-State Municipal Series Trust,
Merrill Lynch Multi-State Limited Maturity Municipal Series Trust, Financial
Institutions Series Trust and the Merrill Lynch Funds for Institutions Series
and the following closed-end investment companies: Corporate High Yield Fund,
Inc., Corporate High Yield Fund II, Inc., Emerging Tigers Fund, Inc., MuniAssets
Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest California
Insured Fund II, Inc., MuniVest California Insured Fund, Inc., MuniVest Florida
Fund, MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey Fund, Inc.,
MuniVest New York Insured Fund, Inc., MuniVest Pennsylvania Insured Fund, Inc.,
MuniYield Arizona Fund, Inc., MuniYield California Insured Fund II, Senior High
Income Portfolio, Inc., Senior High Income Portfolio II, Inc., Senior Strategic
Income Fund, Inc., MuniEnhanced Fund, Inc., MuniInsured Fund, Inc., Apex
Municipal Fund, Inc., and Taurus MuniCalifornia Holdings, Inc., Taurus MuniNew
York Holdings, Inc., Income Opportunities Fund 1999, Inc., Income Opportunities
Fund 2000, Inc., MuniYield California Fund, Inc., MuniYield California Insured
Fund, Inc., MuniYield Florida Fund, MuniYield Florida Insured Fund, MuniYield
Insured Fund, Inc., MuniYield Insured Fund II, Inc., MuniYield Michigan Fund,
Inc., MuniYield Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc.,
MuniYield New Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc.,
MuniYield New York Insured Fund II, Inc., MuniYield New York Insured Fund, III,
Inc., MuniYield Pennsylvania Fund, Inc., MuniYield Fund, Inc., MuniYield Quality
Fund, Inc., MuniYield Quality Fund II, Inc., and Worldwide Dollar Vest Fund,
Inc. The address of each of these investment companies is P.O. Box 9011,
Princeton, New Jersey 08543-9011, except that the address of Merrill Lynch Funds
For Institutions Series and Merrill Lynch Institutional Intermediate Fund is One
Financial Center, 15th Floor, Boston, Massachusetts 02111-2646. The address of
Merrill Lynch Funds Distributor, Inc. ('MLFD') is P.O. Box 9081, Princeton, New
Jersey 08543-9081. The address of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ('Merrill Lynch') and Merrill Lynch & Co., Inc. ('ML & Co.') is
World Financial Center, North Tower, 250 Vesey Street, New York, New York 10281.
Set forth below is a list of each executive officer and director of the
Investment Adviser indicating each business, profession, vocation or employment
of a substantial nature in which each such person has been engaged since
November 1, 1993 for his own account or in the capacity of director, officer,
partner or trustee. In addition, Mr. Zeikel is President and Mr. Richard is
Treasurer of all or substantially all of the investment companies
C-5
<PAGE>
described in the preceding paragraph. Messrs. Giordano, Glenn, Harvey, Hewitt,
Kirstein and Monagle are directors or officers of one or more of such companies.
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL
BUSINESS,
POSITION WITH PROFESSION, VOCATION OR
NAME INVESTMENT ADVISER EMPLOYMENT
- ------------------------- ------------------------- -------------------------
<S> <C> <C>
Arthur Zeikel............ President and Director President and Director of
FAM since 1977;
President of the
Investment Adviser
since 1977 and Director
since 1976; President
and Director of
Princeton Services,
Inc.; Director of MLFD;
Executive Vice
President of ML & Co.,
Inc.
Terry K. Glenn........... Executive Vice President Executive Vice President
and Director and Director of FAM;
President and Director
of MLFD; Executive Vice
President of Princeton
Services, Inc.;
President of Princeton
Administrators, L.P.
and Director of Merrill
Lynch Financial Data
Services, Inc.
('MLFDS')
Robert W. Crook.......... Senior Vice President Senior Vice President of
MLFD since 1990 and Vice
President of MLAM and
MLFD prior thereto.
Vincent R. Giordano...... Senior Vice President Senior Vice President of
FAM; Senior Vice
President of Princeton
Services, Inc.
Elizabeth Griffin........ Senior Vice President Senior Vice President of
FAM
Norman R. Harvey......... Senior Vice President Senior Vice President of
FAM; Senior Vice
President of Princeton
Services, Inc.
N. John Hewitt........... Senior Vice President Senior Vice President of
FAM; Senior Vice
President of Princeton
Services, Inc.
Philip L. Kirstein....... Senior Vice President, Senior Vice President,
General Counsel, General Counsel and
Secretary and Director Secretary of FAM;
Senior Vice President
of Princeton Services,
Inc.
Ronald M. Kloss.......... Senior Vice President Senior Vice President and
Controller of FAM;
Senior Vice President
of Princeton Services,
Inc.
Stephen M. M. Miller..... Senior Vice President Executive Vice President
of Princeton
Administrators, L.P.
since 1989; Senior Vice
President of Princeton
Services, Inc.
Joseph T. Monagle, Jr.... Senior Vice President Senior Vice President of
FAM; Senior Vice
President of Princeton
Services, Inc.
Gerald M. Richard........ Senior Vice President and Senior Vice President and
Treasurer Treasurer of FAM; Senior
Vice President of
Princeton Services,
Inc.; Vice President of
MLFD since 1981 and
Treasurer since 1984.
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL
BUSINESS,
POSITION WITH PROFESSION, VOCATION OR
NAME INVESTMENT ADVISER EMPLOYMENT
- ------------------------- ------------------------- -------------------------
<S> <C> <C>
Ronald Welburn........... Senior Vice President Senior Vice President of
FAM; Senior Vice
President of Princeton
Services, Inc.
Anthony Wiseman.......... Senior Vice President Senior Vice President of
FAM; Senior Vice
President of Princeton
Services, Inc.
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) MLFD acts as the principal underwriter for the Registrant and for each
of the investment companies referred to in the first paragraph of Item 28 except
Apex Municipal Fund, Inc., CBA Money Fund, CMA Government Securities Fund, CMA
Money Fund, CMA Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, CMA
Treasury Fund, Convertible Holdings, Inc., The Corporate Fund Accumulation
Program, Inc., Corporate High Yield Fund, Inc., Corporate High Yield Fund II,
Inc., Emerging Tigers Fund, Inc., Income Opportunities Fund 1999, Inc., Income
Opportunities Fund 2000, Inc., MuniAssets Fund, Inc., MuniBond Income Fund,
Inc., The Municipal Fund Accumulation Program, Inc., MuniEnhanced Fund, Inc.,
MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest
California Insured Fund, Inc., MuniVest Florida Fund, MuniVest Michigan Insured
Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest New York Insured Fund,
Inc., MuniVest Pennsylvania Fund, MuniYield Arizona Fund, MuniYield Arizona Fund
II, Inc., MuniYield California Fund, Inc., MuniYield California Insured Fund,
Inc., MuniYield Florida Fund, MuniYield Florida Insured Fund, MuniYield Fund,
Inc., MuniYield Insured Fund, Inc., MuniYield Insured Fund II, Inc., MuniYield
Michigan Fund, Inc., MuniYield Michigan Insured Fund, Inc., MuniYield New Jersey
Fund, Inc., MuniYield New Jersey Insured Fund, Inc., MuniYield New York Insured
Fund, Inc., MuniYield New York Insured Fund II, Inc., MuniYield New York Insured
Fund III, Inc., MuniYield Pennsylvania Fund, MuniYield Quality Fund, Inc.,
MuniYield Quality Fund II, Inc., Senior High Income Portfolio Inc., Taurus
MuniCalifornia Holdings, Inc., Taurus MuniNew York Holdings, Inc., and Worldwide
DollarVest, Inc.
(b) Set forth below is information concerning each director and officer of
MLFD. The principal business address of each such person is P.O. Box 9011,
Princeton, New Jersey 08543-9011, except that the address of Officers Crook,
Aldrich, Breen, Fatseas, Wasel is One Financial Center, Boston, Massachusetts
02111-2646.
<TABLE>
<CAPTION>
(2) (3)
(1) POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- -------------------- ------------------------- -------------------------
<S> <C> <C>
Terry K. Glenn...... President President and Director
Arthur Zeikel....... Director None
Philip L.
Kirstein............ Director None
William E.
Aldrich............. Senior Vice President None
Robert W. Crook..... Senior Vice President None
Kevin P. Boman...... Vice President None
Gerald M. Richard... Vice President
and Treasurer Treasurer
Salvatore Venezia... Vice President None
Sharon Creveling.... Vice President and
Assistant Treasurer None
Mark A. DeSario..... Vice President None
Michelle T. Lau..... Vice President None
Michael J. Brady.... Vice President None
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
(2) (3)
(1) POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- -------------------- ------------------------- -------------------------
<S> <C> <C>
William M. Breen.... Vice President None
James T. Fatseas.... Vice President None
William Wasel....... Vice President None
Debra W.
Landsman-Yaros...... Vice President None
Robert Harris....... Secretary None
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
will be maintained at the offices of the Registrant, 800 Scudders Mill Road,
Plainsboro, New Jersey 08536, its custodian, The Bank of New York, 90 Washington
Street, 12th Floor, New York, New York 10286 and its transfer agent, Merrill
Lynch Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville,
Florida 32246-6484.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption 'Management of the
Fund--Management and Advisory Arrangements' in the Prospectus constituting Part
A of the Registration Statement and under the caption 'Management of the
Fund--Management and Advisory Arrangements' in the Statement of Additional
Information constituting Part B of the Registration Statement, Registrant is not
a party to any management-related service contract.
ITEM 32. UNDERTAKINGS.
The Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request, and without charge.
C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to its Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
Township of Plainsboro, and State of New Jersey, on the 26th day of April, 1996.
MERRILL LYNCH SERIES FUND, INC.
By /s/ TERRY K. GLENN
----------------------------------
(Terry K. Glenn, President)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------ ------------------------- ---------------
<S> <C> <C>
/s/ TERRY K. GLENN President and Director April 26, 1996
- ------------------------------ (Principal Executive
(Terry K. Glenn) Officer)
/s/ GERALD M. RICHARD Treasurer (Principal April 26, 1996
- ------------------------------ Financial and
(Gerald M. Richard) Accounting Officer)
/s/ JACK B. SUNDERLAND* Director
- ------------------------------
(Jack B. Sunderland)
/s/ STEPHEN B. SWENSRUD* Director
- ------------------------------
(Stephen B. Swensrud)
/s/ J. THOMAS TOUCHTON* Director
- ------------------------------
(J. Thomas Touchton)
*By /s/ TERRY K. GLENN April 26, 1996
- ------------------------------
Terry K. Glenn,
Attorney-in-Fact
</TABLE>
C-9
<PAGE>
INDEPENDENT AUDITORS' CONSENT
MERRILL LYNCH SERIES FUND, INC.
We consent to the use in Post-Effective Amendment No. 18 to Registration
Statement No. 2-69062 of our report dated February 15, 1995 appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the caption 'Financial Highlights'
appearing in the Prospectus, which also is a part of such Registration
Statement.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
April 25, 1996
C-10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- ------- -------------------------------------------------- --------
<S> <C> <C>
11 Consent of Deloitte & Touche LLP Independent
Auditors (incorporated by reference as C-10)......
27(a) Financial Data Schedule--Balanced Portfolio.......
27(b) Financial Data Schedule--Capital Stock
Portfolio.........................................
27(c) Financial Data Schedule--Global Strategy
Portfolio.........................................
27(d) Financial Data Schedule--Growth Stock Portfolio...
27(e) Financial Data Schedule--High Yield Portfolio.....
27(f) Financial Data Schedule--Intermediate Government
Bond Portfolio....................................
27(g) Financial Data Schedule--Long Term Corporate Bond
Portfolio.........................................
27(h) Financial Data Schedule--Money Reserve
Portfolio.........................................
27(i) Financial Data Schedule--Multiple Strategy
Portfolio.........................................
27(j) Financial Data Schedule--Natural Resources
Portfolio.........................................
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000319108
<NAME> MERRILL LYNCH SERIES FUND, INC.
<SERIES>
<NUMBER> 10
<NAME> BALANCED PORTFOLIO
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000319108
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<SERIES>
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<NAME> CAPITAL STOCK PORTFOLIO
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000319108
<NAME> MERRILL LYNCH SERIES FUND, INC.
<SERIES>
<NUMBER> 9
<NAME> GLOBAL STRATEGY PORTFOLIO
<S> <C>
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<ACCUMULATED-NET-GAINS> (2097063)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17368730
<NET-ASSETS> 212682739
<DIVIDEND-INCOME> 2809565
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<EXPENSES-NET> 912445
<NET-INVESTMENT-INCOME> 7504068
<REALIZED-GAINS-CURRENT> (4123221)
<APPREC-INCREASE-CURRENT> 17239838
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<NUMBER-OF-SHARES-SOLD> 1806490
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000319108
<NAME> MERRILL LYNCH SERIES FUND, INC.
<SERIES>
<NUMBER> 5
<NAME> GROWTH STOCK PORTFOLIO
<S> <C>
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<PERIOD-END> DEC-31-1995
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<INVESTMENTS-AT-VALUE> 186734312
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 187090724
<PAYABLE-FOR-SECURITIES> 2271630
<SENIOR-LONG-TERM-DEBT> 0
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<SHARES-COMMON-PRIOR> 5295703
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4403555
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 27092008
<NET-ASSETS> 184152432
<DIVIDEND-INCOME> 1338117
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