<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 1997
FILE NO. 2-69062
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 19
AND/OR
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 21
(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 20, 1997.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
(Continued from previous page)
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
AMOUNT PROPOSED MAXIMUM
OF SHARES MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES BEING OFFERING PRICE OFFERING REGISTRATION
BEING REGISTERED REGISTERED PER SHARE PRICE* FEE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(1) Shares of Money Reserve
Portfolio
Common Stock, par value
$0.10 per share.......... 10,544,219 $1.00 $66,000.00
- -------------------------------------------------------------------------------
(2) Shares of Intermediate
Government Bond Portfolio
Common Stock, par value
$0.10 per share.......... 683,641 $10.63 $65,991.04 $100
- -------------------------------------------------------------------------------
(3) Shares of Long Term Cor-
porate Bond Portfolio Com-
mon Stock, par value $0.10
per share................ 173,853 $11.26 $65,994.86
- -------------------------------------------------------------------------------
(4) Shares of Global Strat-
egy Portfolio Common
Stock, par value $0.10 per
share.................... 113,175 $15.96 $65,994.60
- -------------------------------------------------------------------------------
(5) Shares of Balanced Port-
folio Common Stock, par
value $0.10 per share.... 106,566 $13.32 $65,987.28
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
* Calculated as of April 21, 1997.
(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 236,339,489 shares. Of such amount
225,861,270 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. 10,478,219 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 3,214,088 shares.
Of such amount, 2,536,655 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. 677,433 shares
of Intermediate Government Bond 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 1,689,020 shares. Of such
amount, 1,521,028 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. 167,992 shares
of Long Term Corporate Bond 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 Global Strategy Portfolio Common Stock redeemed or repurchased during
Registrant's previous fiscal year was 2,401,439 shares. Of such amount,
2,292,399 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. 109,040 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.
(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 Balanced Portfolio Common Stock redeemed or repurchased during
Registrant's previous fiscal year was 1,336,006 shares. Of such amount,
1,234,394 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. 101,612 shares of
Balanced 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
--------- --------
<C> <S> <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.... *
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
PART C
</TABLE>
Information required to be included in Part C is set forth under the appro-
priate Item, so numbered in Part C to this Registration Statement.
- --------
* Item inapplicable or answer negative.
<PAGE>
PROSPECTUS
APRIL 25, 1997
MERRILL LYNCH SERIES FUND, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
Merrill Lynch Series Fund, Inc. (the "Fund") is an open-end management in-
vestment company which is intended to meet a wide range of investment objec-
tives with its ten separate portfolios (hereinafter referred to as the "Port-
folios" or individually as a "Portfolio"). Each Portfolio is in effect a sepa-
rate fund issuing its own shares. The shares of the Fund are sold only to sep-
arate accounts (the "Separate Accounts") of the Merrill Lynch Insurance Compa-
nies, as defined below, and Monarch Life Insurance Company's Variable Account
A (collectively, the "Accounts") to fund the benefits under Variable Life In-
surance Policies (the "Policies") issued by Merrill Lynch Life Insurance Com-
pany and ML Life Insurance Company of New York, indirect wholly owned subsidi-
aries 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 Ac-
counts 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 in-
vestment objectives and certain investment policies of the Portfolios are sum-
marized as follows:
Money Reserve Portfolio. Preservation of capital, liquidity and the high-
est possible current income consistent with the foregoing objectives by in-
vesting in short-term money market securities.
Intermediate Government Bond Portfolio. Highest possible current income
consistent with the protection of capital afforded by investing in interme-
diate-term debt securities issued or guaranteed by the United States Gov-
ernment 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 in-
vestment 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 in-
vesting primarily in common stocks of aggressive growth companies that are
considered to have special investment value.
Multiple Strategy Portfolio. Highest total investment return consistent
with prudent risk through a fully managed investment policy utilizing eq-
uity 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 natu-
ral resource assets.
Global Strategy Portfolio. High total investment return by investing pri-
marily 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 se-
curities and the opportunity for capital appreciation greater than that
normally available from an investment solely in debt securities by invest-
ing in a balanced portfolio of fixed income and equity securities.
There can be no assurance that the objectives of any Portfolio will be real-
ized. 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 IN-
VESTMENT 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 FAC-
TORS."
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CON-
TRARY 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 con-
taining additional information about the Fund has been filed with the Securi-
ties and Exchange Commission in a Statement of Additional Information, dated
April 25, 1997, 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 REPRE-
SENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH
THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER IN-
FORMATION 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 LAW-
FULLY 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.................................................................. 27
Investment Adviser......................................................... 27
Portfolio Transactions and Brokerage....................................... 28
Purchase of Shares......................................................... 29
Redemption of Shares....................................................... 29
Dividends, Distributions and Taxes......................................... 29
Performance Data........................................................... 30
Additional Information..................................................... 31
Appendix A: Money Market Securities........................................ 33
Appendix B: Description of Corporate Bond Ratings.......................... 35
</TABLE>
<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 fiscal year
ended December 31, 1996 and the Independent Auditors' report thereon are in-
cluded in the Statement of Additional Information.
Further information about the Fund's performance is contained in the Fund's
Annual Report, which can be obtained, without charge, upon request.
The following per share data and ratios have been derived from information
provided in the Fund's audited financial statements:
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
-------------------------------------------------------------------------------------
FOR THE
PERIOD
MAY 1,
FOR THE YEAR ENDED DECEMBER 31, 1988+ TO
----------------------------------------------------------------------- DECEMBER 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- ------- ------------
<S> <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.... $ 14.86 $ 13.27 $ 14.62 $ 13.70 $ 13.29 $ 11.78 $ 12.25 $ 10.59 $10.00
------- ------- ------- ------- ------- ------- ------- ------- ------
Investment income--net.. .54 .60 .61 .50 .47 .60 .64 .48 .26
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--
net.................... .83 2.07 (1.21) 1.35 .38 1.77 (.47) 1.66 .33
------- ------- ------- ------- ------- ------- ------- ------- ------
Total from investment
operations............. 1.37 2.67 (.60) 1.85 .85 2.37 .17 2.14 .59
------- ------- ------- ------- ------- ------- ------- ------- ------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income--net. (.57) (.62) (.53) (.75) (.26) (.68) (.56) (.48) --
Realized gain on
investments--net...... (.30) (.46) (.22) (.18) (.18) (.18) (.08) -- --
------- ------- ------- ------- ------- ------- ------- ------- ------
Total dividends and
distributions.......... (.87) (1.08) (.75) (.93) (.44) (.86) (.64) (.48) --
------- ------- ------- ------- ------- ------- ------- ------- ------
Net asset value, end of
period................. $ 15.36 $ 14.86 $ 13.27 $ 14.62 $ 13.70 $ 13.29 $ 11.78 $ 12.25 $10.59
======= ======= ======= ======= ======= ======= ======= ======= ======
TOTAL INVESTMENT
RETURN:**
Based on net asset value
per share.............. 9.76% 21.59% (4.28)% 14.31% 6.67% 20.95% 1.57% 20.75% 5.90%#
======= ======= ======= ======= ======= ======= ======= ======= ======
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement.......... .39% .38% .40% .43% .48% .50% .50% .50% .50%*
======= ======= ======= ======= ======= ======= ======= ======= ======
Expenses................ .39% .38% .40% .43% .48% .50% .50% .66% .70%*
======= ======= ======= ======= ======= ======= ======= ======= ======
Investment income--net.. 3.63% 4.47% 4.28% 3.72% 4.40% 4.91% 5.56% 5.58% 5.62%*
======= ======= ======= ======= ======= ======= ======= ======= ======
SUPPLEMENTAL DATA:
Net assets, end of
period
(in thousands)......... $98,853 $97,181 $75,893 $88,018 $56,080 $38,128 $29,065 $27,936 $5,530
======= ======= ======= ======= ======= ======= ======= ======= ======
Portfolio turnover...... 234.79% 32.92% 46.94% 25.38% 33.15% 58.77% 26.84% 48.43% 42.49%
======= ======= ======= ======= ======= ======= ======= ======= ======
Average commission rate
paid##................. $ .0611 -- -- -- -- -- -- -- --
======= ======= ======= ======= ======= ======= ======= ======= ======
</TABLE>
- --------
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Commencement of operations.
# Aggregate total investment return.
## For fiscal years beginning on or after September 1, 1995, the Fund is re-
quired to disclose its average commission rate per share for purchases and
sales of equity securities.
3
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
CAPITAL STOCK PORTFOLIO
--------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
1996+ 1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, begin-
ning of year........... $ 23.88 $ 21.64 $ 25.73 $ 23.22 $ 23.39 $ 19.65 $ 20.19 $ 16.07 $ 16.27 $ 18.18
-------- -------- -------- -------- -------- -------- -------- -------- ------- --------
Investment income--net.. .46 .41 .29 .33 .39 .45 .54 .61 .55 .55
Realized and unrealized
gain (loss) on
investments and foreign
currency
transactions--net...... 2.86 3.70 (1.50) 3.41 .16 4.97 (.44) 4.16 1.43 (.79)
-------- -------- -------- -------- -------- -------- -------- -------- ------- --------
Total from investment
operations............. 3.32 4.11 (1.21) 3.74 .55 5.42 .10 4.77 1.98 (.24)
-------- -------- -------- -------- -------- -------- -------- -------- ------- --------
LESS DIVIDENDS AND DIS-
TRIBUTIONS:
Investment income--net. (.47) (.34) (.28) (.59) (.20) (.54) (.52) (.65) (.58) (.48)
Realized gain on in-
vestments--net........ (3.48) (1.53) (2.60) (.64) (.52) (1.14) (.12) -- (1.60) (1.19)
-------- -------- -------- -------- -------- -------- -------- -------- ------- --------
Total dividends and dis-
tributions............. (3.95) (1.87) (2.88) (1.23) (.72) (1.68) (.64) (.65) (2.18) (1.67)
-------- -------- -------- -------- -------- -------- -------- -------- ------- --------
Net asset value, end of
year................... $ 23.25 $ 23.88 $ 21.64 $ 25.73 $ 23.22 $ 23.39 $ 19.65 $ 20.19 $ 16.07 $ 16.27
======== ======== ======== ======== ======== ======== ======== ======== ======= ========
TOTAL INVESTMENT RE-
TURN:*
Based on net asset value
per share.............. 16.54% 20.73% (5.12)% 17.01% 2.47% 29.05% .61% 30.20% 13.13% (2.65)%
======== ======== ======== ======== ======== ======== ======== ======== ======= ========
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of reim-
bursement.............. .40% .41% .39% .38% .41% .40% .40% .41% .40% .38%
======== ======== ======== ======== ======== ======== ======== ======== ======= ========
Expenses................ .40% .41% .39% .38% .41% .40% .40% .41% .40% .38%
======== ======== ======== ======== ======== ======== ======== ======== ======= ========
Investment income--net.. 2.11% 1.98% 1.32% 1.43% 1.89% 2.27% 2.66% 3.45% 3.31% 3.16%
======== ======== ======== ======== ======== ======== ======== ======== ======= ========
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $289,696 $252,957 $206,647 $223,971 $202,417 $177,604 $128,511 $137,705 $99,203 $118,984
======== ======== ======== ======== ======== ======== ======== ======== ======= ========
Portfolio turnover...... 74.30% 130.54% 71.19% 100.12% 74.89% 63.90% 61.76% 55.41% 32.85% 47.39%
======== ======== ======== ======== ======== ======== ======== ======== ======= ========
Average commission rate
paid++................. $ .0264 -- -- -- -- -- -- -- -- --
======== ======== ======== ======== ======== ======== ======== ======== ======= ========
</TABLE>
- -------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the year.
++ For fiscal years beginning on or after September 1, 1995, the Fund is re-
quired to disclose its average commission rate per share for purchases and
sales of equity securities. The "Average Commission Rate Paid" includes com-
missions paid in foreign currencies, which have been converted into U.S. dol-
lars using the prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
4
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
GLOBAL STRATEGY PORTFOLIO
---------------------------------------------------------------------------------------------------
PERIOD JULY 1,
FOR THE YEAR ENDED DECEMBER 31, 1987+ TO
----------------------------------------------------------------------------------- DECEMBER 31,
1996++ 1995++ 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- ------- ------- ------- ------- ------ --------------
<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.... $ 15.25 $ 14.54 $ 15.42 $ 13.23 $ 13.16 $ 12.00 $ 11.68 $ 10.41 $ 9.55 $ 10.00
-------- -------- -------- -------- ------- ------- ------- ------- ------ -------
Investment income--net.. .47 .52 .47 .36 .39 .41 .82 .38 .52 .12
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--
net.................... 1.56 .94 (.71) 2.61 (.01) 1.60 (.14) 1.41 .65 (.57)
-------- -------- -------- -------- ------- ------- ------- ------- ------ -------
Total from investment
operations............. 2.03 1.46 (.24) 2.97 .38 2.01 .68 1.79 1.17 (.45)
-------- -------- -------- -------- ------- ------- ------- ------- ------ -------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income--net. (.39) (.55) (.41) (.60) (.17) (.85) (.36) (.52) (.31) --
Realized gain on
investments--net...... (.09) (.20) (.23) (.18) (.14) -- -- -- -- --
-------- -------- -------- -------- ------- ------- ------- ------- ------ -------
Total dividends and
distributions.......... (.48) (.75) (.64) (.78) (.31) (.85) (.36) (.52) (.31) --
-------- -------- -------- -------- ------- ------- ------- ------- ------ -------
Net asset value, end of
period................. $ 16.80 $ 15.25 $ 14.54 $ 15.42 $ 13.23 $ 13.16 $ 12.00 $ 11.68 $10.41 $ 9.55
======== ======== ======== ======== ======= ======= ======= ======= ====== =======
TOTAL INVESTMENT
RETURN:**
Based on net asset value
per share.............. 13.78% 10.44% (1.62)% 23.73% 3.00% 17.50% 6.01% 17.76% 12.50% (4.50)%#
======== ======== ======== ======== ======= ======= ======= ======= ====== =======
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement.......... .42% .44% .48% .45% .50% .50% .50% .50% .50% .50%*
======== ======== ======== ======== ======= ======= ======= ======= ====== =======
Expenses................ .42% .44% .48% .46% .54% .60% .61% .75% .61% .81%*
======== ======== ======== ======== ======= ======= ======= ======= ====== =======
Investment income--net.. 3.02% 3.59% 3.22% 3.27% 3.84% 3.86% 8.03% 4.07% 4.90% 3.80%*
======== ======== ======== ======== ======= ======= ======= ======= ====== =======
SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands) $232,530 $212,683 $223,493 $182,672 $52,599 $29,893 $22,087 $13,215 $9,176 $10,596
======== ======== ======== ======== ======= ======= ======= ======= ====== =======
Portfolio turnover...... 160.89% 26.81% 27.31% 30.53% 43.56% 93.85% 104.19% 80.25% 131.22% 24.81%
======== ======== ======== ======== ======= ======= ======= ======= ====== =======
Average commission rate
paid##................. $ .0160 -- -- -- -- -- -- -- -- --
======== ======== ======== ======== ======= ======= ======= ======= ====== =======
</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.
## For fiscal years beginning on or after September 1, 1995, the Fund is re-
quired to disclose its average commission rate per share for purchases and
sales of equity securities. The "Average Commission Rate Paid" includes com-
missions paid in foreign currencies, which have been converted into U.S. dol-
lars using the prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
5
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
GROWTH STOCK PORTFOLIO
------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, begin-
ning of year........... $ 24.06 $ 19.20 $ 24.65 $ 23.98 $ 23.31 $ 16.28 $ 18.95 $ 15.57 $ 14.05 $ 16.19
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
Investment income--net.. .32 .15 .31 .32 .26 .25 .29 .30 .19 .14
Realized and unrealized
gain (loss) on
investments and foreign
currency
transactions--net...... 4.24 6.13 (1.81) 1.63 .53 7.06 (2.63) 3.30 1.51 (1.10)
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
Total from investment
operations............. 4.56 6.28 (1.50) 1.95 .79 7.31 (2.34) 3.60 1.70 (.96)
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
LESS DIVIDENDS AND DIS-
TRIBUTIONS:
Investment income--net. (.24) (.23) (.30) (.41) (.12) (.28) (.33) (.22) (.18) (.18)
Realized gain on in-
vestments--net........ (.59) (1.19) (3.65) (.87) -- -- -- -- -- (1.00)
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
Total dividends and dis-
tributions............. (.83) (1.42) (3.95) (1.28) (.12) (.28) (.33) (.22) (.18) (1.18)
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
Net asset value, end of
year................... $ 27.79 $ 24.06 $ 19.20 $ 24.65 $ 23.98 $ 23.31 $ 16.28 $ 18.95 $ 15.57 $ 14.05
======== ======== ======== ======== ======== ======== ======= ======= ======= =======
TOTAL INVESTMENT RE-
TURN:*
Based on net asset value
per share.............. 19.57% 35.35% (6.93)% 8.63% 3.40% 45.31% (12.41)% 23.20% 12.13% (7.52)%
======== ======== ======== ======== ======== ======== ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS:
Expenses................ .38% .38% .40% .38% .42% .42% .43% .42% .40% .40%
======== ======== ======== ======== ======== ======== ======= ======= ======= =======
Investment income--net.. 1.25% .82% 1.53% 1.35% 1.32% 1.56% 1.43% 1.69% 1.19% .92%
======== ======== ======== ======== ======== ======== ======= ======= ======= =======
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $240,666 $184,152 $101,702 $122,836 $139,062 $113,715 $52,086 $79,109 $64,549 $68,027
======== ======== ======== ======== ======== ======== ======= ======= ======= =======
Portfolio turnover...... 78.04% 87.66% 102.96% 160.29% 87.25% 60.48% 94.54% 78.87% 82.05% 99.09%
======== ======== ======== ======== ======== ======== ======= ======= ======= =======
Average commission rate
paid**................. $ .0625 -- -- -- -- -- -- -- -- --
======== ======== ======== ======== ======== ======== ======= ======= ======= =======
</TABLE>
- -------
* Total investment returns exclude insurance-related fees and expenses.
** For fiscal years beginning on or after September 1, 1995, the Fund is re-
quired to disclose its average commission rate per share for purchases and
sales of equity securities.
6
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
HIGH YIELD PORTFOLIO
--------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
1996+ 1995+ 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- ------- ------- ------- ------- ------- ------- ------- -------
<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...... $ 8.99 $ 8.53 $ 9.68 $ 9.10 $ 8.44 $ 6.98 $ 8.92 $ 9.66 $ 9.40 $ 10.06
-------- -------- ------- ------- ------- ------- ------- ------- ------- -------
Investment income--net.. .89 .93 1.00 .94 1.03 1.02 1.24 1.20 1.16 1.14
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--
net.................... .16 .46 (1.17) .62 .64 1.47 (1.94) (.73) .15 (.66)
-------- -------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations............. 1.05 1.39 (.17) 1.56 1.67 2.49 (.70) .47 1.31 .48
-------- -------- ------- ------- ------- ------- ------- ------- ------- -------
Less dividends:
Investment income--net. (.89) (.93) (.98) (.98) (1.01) (1.03) (1.24) (1.21) (1.05) (1.14)
-------- -------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
year................... $ 9.15 $ 8.99 $ 8.53 $ 9.68 $ 9.10 $ 8.44 $ 6.98 $ 8.92 $ 9.66 $ 9.40
======== ======== ======= ======= ======= ======= ======= ======= ======= =======
TOTAL INVESTMENT
RETURN:*
Based on net asset value
per share.............. 12.32% 17.12% (1.88)% 18.11% 20.63% 37.77% (8.83)% 5.08% 14.53% 4.68%
======== ======== ======= ======= ======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS:
Expenses................ .39% .38% .41% .43% .44% .46% .45% .44% .41% .42%
======== ======== ======= ======= ======= ======= ======= ======= ======= =======
Investment income--net.. 9.77% 10.25% 10.88% 10.17% 11.45% 12.74% 14.93% 12.64% 12.10% 11.45%
======== ======== ======= ======= ======= ======= ======= ======= ======= =======
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $123,643 $107,378 $82,421 $94,739 $68,034 $51,072 $34,673 $58,910 $78,343 $54,173
======== ======== ======= ======= ======= ======= ======= ======= ======= =======
Portfolio turnover...... 50.48% 63.39% 63.43% 73.01% 83.95% 76.34% 31.01% 70.43% 38.95% 49.43%
======== ======== ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
- -------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the year.
7
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
---------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------
1996+ 1995+ 1994+ 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<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...... $ 11.41 $ 10.32 $ 12.02 $ 11.75 $ 11.79 $ 11.04 $ 11.02 $ 10.58 $ 10.78 $ 11.67
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income net... .76 .78 .75 .83 .83 .86 .92 .92 .88 .87
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--
net.................... (.49) 1.10 (1.30) .50 (.04) .76 .01 .44 (.27) (.72)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. .27 1.88 (.55) 1.33 .79 1.62 .93 1.36 .61 .15
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income--net. (.75) (.79) (.75) (.84) (.83) (.87) (.91) (.92) (.81) (.87)
Realized gain on
investments--net...... -- -- (.39) (.22) -- -- -- -- -- (.17)
In excess of realized
gain on investments--
net................... -- -- (.01) -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions.......... (.75) (.79) (1.15) (1.06) (.83) (.87) (.91) (.92) (.81) (1.04)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year................... $ 10.93 $ 11.41 $ 10.32 $ 12.02 $ 11.75 $ 11.79 $ 11.04 $ 11.02 $ 10.58 $ 10.78
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL INVESTMENT
RETURN:*
Based on net asset value
per share.............. 2.61% 18.87% (4.78%) 11.20% 7.03% 15.57% 8.98% 13.46% 5.76% 1.49%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS:
Expenses................ .38% .38% .37% .36% .40% .39% .40% .41% .40% .39%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Investment income--net.. 6.85% 7.22% 6.89% 6.42% 7.03% 7.82% 8.50% 8.53% 8.21% 7.89%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $221,863 $239,340 $218,611 $284,495 $269,254 $261,434 $231,672 $224,531 $194,568 $145,525
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Portfolio turnover...... 29.35% 57.38% 140.55% 113.61% 80.54% 138.41% 129.98% 227.15% 258.98% 256.36%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
</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>
LONG TERM CORPORATE BOND PORTFOLIO
--------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
1996+ 1995+ 1994+ 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, begin-
ning of year........... $ 12.02 $ 10.72 $ 12.59 $ 12.07 $ 12.06 $ 11.21 $ 11.36 $ 10.91 $ 10.93 $ 12.27
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Investment income--net.. .80 .83 .81 .83 .90 .96 .98 1.00 .97 .99
Realized and unrealized
gain (loss) on
investments and foreign
currency
transactions--net...... (.50) 1.30 (1.42) .68 .02 .85 (.15) .45 (.10) (1.00)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Total from investment
operations............. .30 2.13 (.61) 1.51 .92 1.81 .83 1.45 .87 (0.01)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
LESS DIVIDENDS AND DIS-
TRIBUTIONS:
Investment income--net
...................... (.79) (.83) (.82) (.83) (.91) (.96) (.98) (1.00) (.89) (.99)
Realized gain on in-
vestments--net........ -- -- (.44) (.16) -- -- -- -- -- (.34)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Total dividends and dis-
tributions............. (.79) (.83) (1.26) (.99) (.91) (.96) (.98) (1.00) (.89) (1.33)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Net asset value, end of
year................... $ 11.53 $ 12.02 $ 10.72 $ 12.59 $ 12.07 $ 12.06 $ 11.21 $ 11.36 $ 10.91 $ 10.93
======== ======== ======== ======== ======== ======== ======== ======== ======== =======
TOTAL INVESTMENT RE-
TURN:*
Based on net asset value
per share.............. 2.77% 20.66% (5.14)% 13.01% 8.05% 17.01% 7.83% 13.96% 8.20% 0.00%
======== ======== ======== ======== ======== ======== ======== ======== ======== =======
RATIOS TO AVERAGE NET
ASSETS:
Expenses................ .39% .40% .39% .38% .43% .42% .43% .44% .42% .43%
======== ======== ======== ======== ======== ======== ======== ======== ======== =======
Investment income--net.. 6.90% 7.32% 7.16% 6.65% 7.51% 8.35% 8.81% 9.01% 8.88% 9.53%
======== ======== ======== ======== ======== ======== ======== ======== ======== =======
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $117,988 $125,033 $111,878 $139,321 $126,864 $128,396 $119,237 $126,655 $110,353 $76,564
======== ======== ======== ======== ======== ======== ======== ======== ======== =======
Portfolio turnover...... 92.45% 110.49% 134.53% 110.53% 93.10% 124.58% 107.36% 138.89% 175.86% $115.68%
======== ======== ======== ======== ======== ======== ======== ======== ======== =======
</TABLE>
- -------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the period.
9
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
MONEY RESERVE PORTFOLIO
--------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<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...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income--net.. .05 .06 .04 .03 .04 .06 .08 .09 .07 .07
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. .05 .06 .04 .03 .04 .06 .08 .09 .07 0.7
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income--net. (.05) (.06) (.04) (.03) (.04) (.06) (.08) (.09) (.07) (.07)
Realize gain on
investments--net...... -- + -- -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions:........ (.05) (.06) (.04) (.03) (.04) (.06) (.08) (.09) (.07) (.07)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year................... $ 1.00 $ 1.00 $ 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.............. 5.33% 5.81% 4.04% 3.08% 3.76% 6.11% 8.21% 9.33% 7.48% 6.60%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS:
Expenses................ .36% .35% .36% .36% .39% .38% .39% .38% .39% .38%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Investment income--net
and realized gain
(loss) on investments--
net.................... 5.16% 5.67% 4.00% 3.03% 3.77% 5.97% 7.92% 8.93% 7.26% 6.47%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $557,690 $568,439 $583,992 $546,710 $647,190 $798,020 $935,463 $816,661 $806,119 $674,890
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
- -------
* Total investment returns exclude insurance-related fees and expenses.
+ Amount is less then $.01 per share.
10
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
MULTIPLE STRATEGY PORTFOLIO
-------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------
1996+ 1995+ 1994+ 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DE-
CREASE) IN NET
ASSET VALUE:
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of
year............ $ 17.24 $ 16.22 $ 19.84 $ 18.70 $ 18.32 $ 15.45 $ 15.56 $ 13.64
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Investment
income--net..... .53 .56 .50 .54 .61 .72 .99 .79
Realized and
unrealized gain
(loss) on
invest- ments
and foreign
currency
transactions--
net............. 1.63 2.03 (1.39) 2.30 .17 3.13 (.27) 2.02
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from
investment
operations...... 2.16 2.59 (.89) 2.84 .78 3.85 .72 2.81
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
LESS DIVIDENDS
AND
DISTRIBUTIONS:
Investment
income--net..... (.60) (.48) (.57) (.88) (.32) (.98) (.83) (.89)
Realized gain on
investments--
net............. (1.67) (1.09) (2.16) (.82) (.08) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total dividends
and
distributions... (2.27) (1.57) (2.73) (1.70) (.40) (.98) (.83) (.89)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of year..... $ 17.13 $ 17.24 $ 16.22 $ 19.84 $ 18.70 $ 18.32 $ 15.45 $ 15.56
========== ========== ========== ========== ========== ========== ========== ==========
TOTAL INVESTMENT
RETURN:*
Based on net
asset value per
share........... 14.32% 17.55% (5.05)% 16.66% 4.35% 25.97% 4.91% 21.31% %
========== ========== ========== ========== ========== ========== ========== ==========
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... .39% .38% .38% .36% .40% .39% .41% .39%
========== ========== ========== ========== ========== ========== ========== ==========
Investment
income--net..... 3.26% 3.44% 2.97% 2.91% 3.26% 4.17% 6.07% 5.15%
========== ========== ========== ========== ========== ========== ========== ==========
SUPPLEMENTAL
DATA:
Net assets, end
of year (in
thousands)...... $1,211,185 $1,169,357 $1,082,083 $1,237,336 $1,137,022 $1,152,395 $1,018,054 $1,163,578
========== ========== ========== ========== ========== ========== ========== ==========
Portfolio
turnover........ 143.82% 140.83% 68.12% 91.08% 67.71% 95.48% 106.39% 142.47%
========== ========== ========== ========== ========== ========== ========== ==========
Average
commission rate
paid++.......... $ .0246 -- -- -- -- -- -- --
========== ========== ========== ========== ========== ========== ========== ==========
<CAPTION>
MULTIPLE STRATEGY PORTFOLIO
------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------
1988 1987
------------ ----------
<S> <C> <C>
INCREASE (DE-
CREASE) IN NET
ASSET VALUE:
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of
year............ $ 13.01 $ 13.49
---------- ----------
Investment
income--net..... .77 .50
Realized and
unrealized gain
(loss) on
invest- ments
and foreign
currency
transactions--
net............. .67 (.50)
---------- ----------
Total from
investment
operations...... 1.44 --
---------- ----------
LESS DIVIDENDS
AND
DISTRIBUTIONS:
Investment
income--net..... (.61) (.38)
Realized gain on
investments--
net............. (.20) (.10)
---------- ----------
Total dividends
and
distributions... (.81) (.48)
---------- ----------
Net asset value,
end of year..... $ 13.64 $ 13.01
========== ==========
TOTAL INVESTMENT
RETURN:*
Based on net
asset value per
share........... 11.49% (.41)%
========== ==========
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... .40% .38%
========== ==========
Investment
income--net..... 5.23% 4.11%
========== ==========
SUPPLEMENTAL
DATA:
Net assets, end
of year (in
thousands)...... $1,190,469 $1,557,629
========== ==========
Portfolio
turnover........ 147.43% 123.02%
========== ==========
Average
commission rate
paid++.......... -- --
========== ==========
</TABLE>
- -------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the period.
++ For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for purchases and
sales of equity securities. The "Average Commission Rate Paid" includes
commissions paid in foreign currencies, which have been converted into U.S.
dollars using the prevailing exchange rate on the date of the transaction.
Such conversions may significantly affect the rate shown.
11
<PAGE>
FINANCIAL HIGHLIGHTS (CONCLUDED)
<TABLE>
<CAPTION>
NATURAL RESOURCES PORTFOLIO
-----------------------------------------------------------------------------------------------
FOR THE
PERIOD JULY 1,
FOR THE YEAR ENDED DECEMBER 31, 1987+ TO
------------------------------------------------------------------------------ DECEMBER 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------ ------ ------- ------- ------- --------------
<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.... $ 8.17 $ 7.43 $ 7.53 $ 7.01 $ 7.04 $ 7.18 $ 7.84 $ 6.43 $ 7.46 $ 10.00
------- ------- ------- ------- ------ ------ ------- ------- ------- -------
Investment income--net.. .16 .17 .17 .13 .21 .27 .21 .19 .17 .06
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--
net.................... 1.03 .73 (.10) .66 (.12) (.14) (.69) 1.41 (1.06) (2.60)
------- ------- ------- ------- ------ ------ ------- ------- ------- -------
Total from investment
operations............. 1.19 .90 .07 .79 .09 .13 (.48) 1.60 (.89) (2.54)
------- ------- ------- ------- ------ ------ ------- ------- ------- -------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income--
net................... (.17) (.16) (.17) (.27) (.12) (.27) (.18) (.19) (.14) --
Realized gain on
investments--net...... -- -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------ ------ ------- ------- ------- -------
Total dividends and
distributions.......... (.17) (.16) (.17) (.27) (.12) (.27) (.18) (.19) (.14) --
------- ------- ------- ------- ------ ------ ------- ------- ------- -------
Net asset value, end of
period................. $ 9.19 $ 8.17 $ 7.43 $ 7.53 $ 7.01 $ 7.04 $ 7.18 $ 7.84 $ 6.43 $ 7.46
======= ======= ======= ======= ====== ====== ======= ======= ======= =======
TOTAL INVESTMENT
RETURN:**
Based on net asset value
per share.............. 14.72% 12.22% .88% 11.65% 1.35% 1.67% (6.18)% 25.23% (12.17)% (25.40)%#
======= ======= ======= ======= ====== ====== ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement.......... .50% .47% .50% .50% .50% .50% .50% .50% .48% .50%*
======= ======= ======= ======= ====== ====== ======= ======= ======= =======
Expenses................ .57% .47% .59% .59% .82% .74% .63% .64% .48% .69%*
======= ======= ======= ======= ====== ====== ======= ======= ======= =======
Investment income--net.. 1.79% 1.99% 2.23% 2.00% 2.84% 3.12% 2.76% 2.81% 2.22% 2.03%*
======= ======= ======= ======= ====== ====== ======= ======= ======= =======
SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands).. $25,029 $21,035 $21,455 $18,437 $7,987 $8,030 $11,256 $13,405 $10,007 $20,476
======= ======= ======= ======= ====== ====== ======= ======= ======= =======
Portfolio turnover...... 31.29% 38.50% 48.16% 65.26% 32.14% 30.20% 56.60% 113.38% 45.95% 23.46%
======= ======= ======= ======= ====== ====== ======= ======= ======= =======
Average commission rate
paid##................. $ .0231 -- -- -- -- -- -- -- -- --
======= ======= ======= ======= ====== ====== ======= ======= ======= =======
</TABLE>
- -------
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Commencement of operations.
# Aggregate total investment return.
## For fiscal years beginning on or after September 1, 1995, the Fund is re-
quired to disclose its average commission rate per share for purchases and
sales of equity securities. The "Average Commission Rate Paid" includes com-
missions paid in foreign currencies, which have been converted into U.S. dol-
lars using the prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
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 Insur-
ance 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 accompa-
nying Prospectus for the Policies, which should be reviewed carefully by a
person considering the purchase of a Policy. That Prospectus describes the re-
lationship 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 dis-
tinguished from the rights of a Policyowner which are described in the Poli-
cies. 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 con-
flicts. 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 In-
surance Companies or Monarch, or for other reasons. The various insurance com-
panies 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, 1996, 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.... 5.24%
Compounded Annualized Yield... 5.38%
Average maturity of portfolio
at end of period............. 72 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 differ-
ences in objectives and policies among the Portfolios can be expected to af-
fect the return of each Portfolio and the degree of market and financial risk
to which each Portfolio is subject. Each Portfolio is classified as "diversi-
fied," as defined in the Investment Company Act of 1940, as amended, except
that the Natural Resources Portfolio and Global Strategy Portfolio are classi-
fied 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 de-
scribed 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 se-
curities 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 Stan-
dard & Poor's Ratings Group ("Standard & Poor's"). However, securities pur-
chased by a Portfolio may subsequently be downgraded. Such securities may con-
tinue 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 Advis-
er"), it is advantageous to do so. Securities in the lowest category of in-
vestment grade debt securities may have speculative characteristics which may
lead to weakened capacity to pay interest and principal during periods of ad-
verse 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-term U.S.
Government securities (including govern-
13
<PAGE>
ment 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 that 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 securi-
ties 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 ex-
pects 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 por-
tion may have maturities of up to 25 months. The dollar-weighted average matu-
rity of the Money Reserve Portfolio's assets will not exceed 90 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 qual-
ity 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 high-
est 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 invest only 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 portfolio maturity of six to
eight years is anticipated. U.S. Government and U.S. Government agency securi-
ties are described in Appendix A hereto. When, in the opinion of management,
prevailing market or economic conditions warrant, a portion of the Intermedi-
ate 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 Portfo-
lio 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 Port-
folio invests are not supported by the full faith and credit of the U.S. Gov-
ernment but are issued by U.S. Government agencies or government sponsored en-
terprises. 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 af-
fect 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 diversifi-
cation standards to be met by investment company portfolios to which the in-
vestment 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 re-
quirement 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 consis-
tent with prudent investment risk. An additional objective is to seek preser-
vation of shareholders' capital. In seeking to achieve these objectives, under
usual circumstances the Portfolio invests at least 80% of the value of its as-
sets in straight debt securities that 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 to-
tal assets may be invested in straight debt securities that 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 that 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 pro-
vide 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, that are rated in the lower rat-
ing categories of the established rating services (Baa or lower by Moody's and
BBB or lower by Standard & Poor's), or, if unrated, are 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 agen-
cies to have varying degrees of speculative characteristics. Consequently, al-
though they can be expected to provide higher yields, such securities may be
subject to greater market fluctuations and risk of loss of income and princi-
pal than lower yielding, higher-rated fixed-income securities. Because invest-
ment in such high-yield securities entails relatively greater risk of loss of
income or principal, an investment in the High Yield Portfolio may not consti-
tute a complete investment program and may not be appropriate for all invest-
ors.
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 re-
maining 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 consis-
tent with its objectives) when they are acquired in unit offerings with fixed-
income securities or in connection with an actual or proposed conversion, ex-
change 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 man-
agement, 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 in-
terest rates, the availability of new investment opportunities, and the eco-
nomic outlook for specific industries. While the Investment Adviser considers
as one factor in its credit analysis the ratings assigned by the rating serv-
ices, the Investment Adviser performs its own independent credit analysis of
issuers and consequently, the Portfolio may invest, without limit, in
15
<PAGE>
unrated securities. As a result, the High Yield Portfolio's ability to achieve
its investment objective may depend to a greater extent on the Investment Ad-
viser'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 cate-
gories (Ca for Moody's and CC for Standard & Poor's) unless the Investment Ad-
viser believes that the financial condition of the issuer or the protection
afforded to the particular securities is stronger than would otherwise be in-
dicated 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 Invest-
ment Adviser, it is advantageous to do so.
When changing economic conditions and other factors cause the yield differ-
ence between lower-rated and higher-rated securities to narrow, the High Yield
Portfolio may purchase higher-rated securities if the Investment Adviser be-
lieves that the risk of loss of income and principal may be substantially re-
duced with only a relatively small reduction in yield. In addition, under unu-
sual market or economic conditions, the High Yield Portfolio for temporary de-
fensive purposes may invest up to 100% of its assets in securities issued or
guaranteed by the U.S. Government or its instrumentalities or agencies, cer-
tificates of deposit, bankers' acceptances and other bank obligations, commer-
cial paper rated in the highest category by an established rating agency, or
other fixed-income securities deemed by the Investment Adviser to be consis-
tent 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 secu-
rities.
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 securi-
ties. For example, during an economic downturn or a sustained period of rising
interest rates, issuers of junk bonds may be more likely to experience finan-
cial 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 devel-
opments, or the issuer's inability to meet specific projected business fore-
casts, 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 claims of
other creditors of the issuer. While the High Yield Portfolio does not nor-
mally invest in high-yield securities that, 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 se-
curity, 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 securi-
ties, 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 securi-
ties, 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 mar-
ket, and may cause the prices the High Yield Portfolio receives for its secu-
rities to be reduced, or the Portfolio may experience difficulty in liquidat-
ing 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 cred-
itworthiness 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 se-
curities trading in a more liquid market.
16
<PAGE>
Adverse publicity and investor perceptions, which may not be based on funda-
mental analysis, also may decrease the value and liquidity of junk bonds, par-
ticularly in a thinly traded market. Factors adversely affecting the market
value of such securities are likely to affect adversely the High Yield Portfo-
lio's net asset value. In addition, the High Yield Portfolio may incur addi-
tional expenses to the extent that it is required to seek recovery upon a de-
fault on a portfolio holding or to participate in the restructuring of the ob-
ligation. 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, 1996.
<TABLE>
<CAPTION>
% MARKET VALUE
RATING % NET ASSETS CORPORATE BONDS
- ------ ------------ ---------------
<S> <C> <C>
BBB .80 1.00
BB 30.30 35.50
B 45.50 53.30
CCC 3.60 4.50
Not Rated* 4.70 5.70
------
100.00%
======
</TABLE>
- -------
* Bonds which are not rated by Standard & Poor's. Such bonds may be rated by
nationally recognized statistical rating organizations 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 that 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 se-
curities, "deep discount" corporate debt securities of investment grade, con-
vertible 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, pri-
marily common stocks, of aggressive growth companies that the Investment Ad-
viser 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 ag-
gressive 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 Portfo-
lio attempts to achieve its objective by focusing on the long-range view of a
company's prospects through a fundamental analysis of its management, finan-
cial structure, product development, marketing ability and other relevant fac-
tors. Full realization of the market potential of these companies frequently
takes time, and for this reason, the Growth Stock Portfolio should be consid-
ered 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, pri-
marily common stocks and, to a lesser extent, securities convertible into com-
mon stocks and rights to subscribe for common stocks, and the Growth Stock
Portfolio maintains at least 80% of its net assets invested in equity securi-
ties of growth companies except during defensive periods. The Growth Stock
Portfolio may, as a temporary defensive measure and to provide for redemp-
tions, 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 eco-
nomic 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 man-
aged 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 apprecia-
tion. 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 securi-
ty. Accordingly, the Multiple Strategy Portfolio may, at any given time, be
substantially invested in equity securities, bonds and notes or money market
securities. Achieving this objective depends on management's abilities to as-
sess the effect of economic and market trends on different sectors of the mar-
ket.
The Multiple Strategy Portfolio may invest in those money market securities
that are eligible investments for
17
<PAGE>
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 convert-
ible securities, and in preferred and convertible preferred stocks that 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 that are rated A or better by either rat-
ing agency. The common stocks in which the Portfolio will invest will be pri-
marily stocks of large-capitalization quality companies. Generally, the char-
acteristics 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 securi-
ties 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 mar-
ket 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 sharehold-
ers' 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 secu-
rities"). 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 as-
sets or are especially well positioned to benefit during particular portions
of inflationary cycles.
IN SEEKING TO PROTECT THE PURCHASING POWER OF SHAREHOLDERS' CAPITAL, THE
PORTFOLIO HAS RESERVED THE RIGHT, WHEN MANAGEMENT OF THE FUND ANTICIPATES SIG-
NIFICANT ECONOMIC, POLITICAL OR FINANCIAL INSTABILITY, SUCH AS HIGH INFLATION-
ARY 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 Portfo-
lio 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 securi-
ties without adversely affecting the federal tax status of the Policies. Ac-
cordingly, the Insurance Company has requested, and management of the Fund has
agreed, that the Natural Resources Portfolio will not concentrate its invest-
ments 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 that, in its opinion, are under-
valued relative to the value of natural resource holdings of such companies in
light of current and anticipated economic or financial conditions. Natural re-
source assets are materials derived from natural sources that 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, refin-
ing, processing, fabricating, dealing in or owning natural resource assets.
Examples of natural resource assets include precious metals (e.g., gold, sil-
ver 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 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 secu-
rities of specific companies that hold different types of substantial natural
resource assets
18
<PAGE>
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 Portfolio at all times, except during defensive periods, will maintain
at least 65% of its total assets invested in companies with substantial natu-
ral resource assets or in asset-based securities. Current income from divi-
dends and interest will not be a primary consideration in selecting securi-
ties. 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.
Risk Factors. As indicated above, under certain circumstances, the Portfolio
has reserved the right to invest a majority of its assets in gold-related com-
panies 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 dur-
ing such periods. In addition, the instability of gold prices may result in
volatile earnings of gold-related companies which, in turn, may affect ad-
versely 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 of-
ten relate to political and economic considerations 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 considera-
tions 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 de-
nominated securities and other assets and liabilities resulting from currency
fluctuations. Investing on an international basis involves special considera-
tions. See "Other Portfolio Strategies--Foreign Securities."
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, the Far East and Latin America. There are no prescribed limits
on the geographical allocation of the Portfolio among these regions. Such al-
location 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 move-
ments in interest rates in the various capital markets and in the value of
foreign currencies relative to the U.S. dollar, tax considerations and econom-
ic, social, financial, national and political factors that may affect the cli-
mate 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 mar-
kets, 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
19
<PAGE>
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 obli-
gations 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 des-
ignated or supported by governmental entities to promote economic reconstruc-
tion 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 secu-
rities issued or guaranteed by the U.S. Government or its agencies or instru-
mentalities, certificates of deposit, bankers' acceptances and other bank ob-
ligations, commercial paper rated in the highest category by an established
rating agency, or other fixed-income securities deemed by the Investment Ad-
viser to be consistent with a defensive posture, or may hold its assets in
cash.
The Global Strategy Portfolio may write covered call options and purchase
put options on its portfolio securities for the purpose of generating incre-
mental income or hedging its securities against market risk. The Portfolio may
seek to hedge its non-dollar denominated securities and other assets and lia-
bilities 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 ex-
change 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 eq-
uity 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.
The Portfolio will normally seek to maintain the allocation of its assets
between debt securities and equity securities at approximately equal percent-
ages of the Portfolio's net asset value. However, the prices of debt and eq-
uity 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 vari-
ations 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 securi-
ties 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 securi-
ties 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 Tax-
es--Tax Treatment of the Fund."
The Portfolio will generally emphasize investment in common stocks of larg-
er-capitalization issuers and in investment-grade debt obligations. The Port-
folio may also seek to enhance the return on its common stock portfolio by
writing covered call options listed on United States securities exchanges. Un-
der unusual market or economic conditions, the Portfolio for temporary defen-
sive purposes may invest up to 100% of its assets in securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, cer-
tificates of deposit, bankers' acceptances and other bank obligations, commer-
cial paper rated in the highest category by an established rating agency or
other fixed income securities deemed by the Investment Adviser to be consis-
tent 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 re-
quired by the diversification requirements applicable to regulated investment
companies under the Code. To
20
<PAGE>
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 instru-
mentalities) 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 secu-
rities 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 outstand-
ing 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.
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 col-
lateral in cash or U.S. Treasury securities which while the loan is outstand-
ing 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 read-
ily available. Market disposition may not be readily available for repurchase
agreements maturing in more than seven days and for securities having restric-
tions 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 lim-
itation securities that are not registered under the Securities Act of 1933,
as amended (the "Securities Act"), but that can be offered and sold to "quali-
fied institutional buyers" under Rule 144A under the Securities Act, provided
that the Fund's Board of Directors continuously determines, based on the trad-
ing 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 securi-
ties. 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 deter-
minations.
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 oc-
cur when securities are purchased or sold by the Portfolio with payment and
delivery taking place in the future to secure what is considered an advanta-
geous yield and price to the Portfolio at the time of entering into the trans-
action. 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 or 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 invest-
ments 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 Port-
folio will at all times maintain a segregated account with its custodian of
cash or liquid securities in an amount equal to the purchase price of the se-
curities underlying the commitment. There can be no as-surance that the secu-
rities 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 pur-
chase 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 ac-
quisition more than 10% of its total assets, taken at market value at the time
of the investment, would be invested in such
21
<PAGE>
securities; provided, however, that up to 25% of the total assets of such
Portfolio, other than the Multiple Strategy Portfolio, Natural Resources Port-
folio or Global Strategy Portfolio, may be invested in securities (i) issued,
assumed or guaranteed by foreign governments, or political subdivisions or in-
strumentalities thereof, (ii) assumed or guaranteed by domestic issuers, in-
cluding Eurodollar securities, or (iii) issued, assumed or guaranteed by for-
eign 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 in-
vestments for the Accounts, the Fund has undertaken to comply with certain di-
versification requirements in accordance with state insurance laws. As a mat-
ter 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 acquisi-
tion 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.
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 possi-
bility of expropriation, the unavailability of financial information or the
difficulty of interpreting financial information prepared under foreign ac-
counting 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 be-
come necessary, the Fund could encounter greater difficulties in invoking le-
gal processes abroad than would be the case in the United States. The operat-
ing 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 bro-
kerage costs, are higher. Transaction costs in foreign securities may be high-
er. In addition, net investment income received by a Portfolio on a foreign
security may be subject to withholding and other taxes imposed by foreign gov-
ernments, which will reduce the Portfolio's net investment income. The Invest-
ment 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 se-
curities (other than the Natural Resources Portfolio, Capital Stock Portfolio
and Global Strategy Portfolio) may concentrate its investments in any particu-
lar 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 U.S. dollar denominations. A Portfolio's return on investments in non-U.S.
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
Certain Portfolios of the Fund are authorized to use derivative instruments,
including indexed and inverse securities, options, and futures, and to pur-
chase and sell foreign exchange, as described below. Such instruments are re-
ferred to collectively herein as "Strategic Instruments."
Indexed and Inverse Securities. The Money Reserve Portfolio, the Long Term
Corporate Bond Portfolio, the Natural Resources Portfolio, the Global Strategy
Portfolio, the Intermediate Government Bond Portfolio and the Multiple Strat-
egy Portfolio may invest in securities the potential return of which is based
on the change in particular measurements of value or rate (an "index"). As an
illustration, a Portfolio may invest in a debt security that pays interest and
returns principal based on the change in the value of an interest rate index
(such as the prime rate or federal funds rate), a securities index (such as
the S&P 500 or a more narrowly-focused index such as the AMEX Oil & Gas Index)
or a basket of securities, or based on the relative changes of two indices. In
addition, the Natural Resources Portfolio, the Global Strategy Portfolio, and
the Multiple Strategy Portfolio may invest in securities the potential return
of which is based inversely on the change in an index. For example, these
Portfolios may invest in securities that pay a higher rate of interest when a
particular index decreases and pay a lower rate of interest (or do not fully
return principal) when the value of the index increases. If the Portfolio in-
vests in such securities, it may be subject to reduced or eliminated interest
payments or loss of principal in the event of an adverse movement in the rele-
vant index or indices.
Certain indexed and inverse securities may have the effect of providing in-
vestment leverage because the rate of interest or amount of principal payable
increases or decreases at a rate that is a multiple of the changes in the rel-
evant index. As a consequence, the market value of such
22
<PAGE>
securities may be substantially more volatile than the market values of other
debt securities. The Fund believes that indexed and inverse securities may
provide portfolio management flexibility that permits Portfolios to seek
enhanced returns, hedge other portfolio positions or vary the degree of port-
folio leverage with greater efficiency than would otherwise be possible under
certain market conditions.
Options on Securities and Securities Indices
Purchasing Options. The Natural Resources Portfolio, the Global Strategy
Portfolio and the Multiple Strategy Portfolio are each authorized to purchase
put options on securities held in its portfolio or securities indices the per-
formance of which is substantially correlated with securities held in its
portfolio. When a Portfolio purchases a put option, in consideration for an
upfront payment (the "option premium") the Portfolio acquires a right to sell
to another party specified securities owned by the Portfolio at a specified
price (the "exercise price") on or before a specified date (the "expiration
date"), in the case of an option on securities, or to receive from another
party a payment based on the amount a specified securities index declines be-
low a specified level on or before the expiration date, in the case of an op-
tion on a securities index. The purchase of a put option limits the Portfo-
lio's risk of loss in the event of a decline in the market value of the port-
folio holdings underlying the put option prior to the option's expiration
date. If the market value of the portfolio holdings associated with the put
option increases rather than decreases, however, the Portfolio will lose the
option premium and will consequently realize a lower return on the portfolio
holdings than would have been realized with the purchase of the put.
The Natural Resources Portfolio, the Global Strategy Portfolio and the Mul-
tiple Strategy Portfolio are each also authorized to purchase call options on
securities it intends to purchase or securities indices the performance of
which are substantially correlated with the performance of the types of secu-
rities it intends to purchase. When a Portfolio purchases a call option, in
consideration for the option premium the Portfolio acquires a right to pur-
chase from another party specified securities at the exercise price on or be-
fore the expiration date, in the case of an option on securities, or to re-
ceive from another party a payment based on the amount a specified securities
index increases beyond a specified level on or before the expiration date, in
the case of an option on a securities index. The purchase of a call option may
protect the Portfolio from having to pay more for a security as a consequence
of increases in the market value for the security during a period when the
Portfolio is contemplating its purchase, in the case of an option on a securi-
ty, or attempting to identify specific securities in which to invest in a mar-
ket the Portfolio believes to be attractive, in the case of an option on an
index (an "anticipatory hedge"). In the event the Portfolio determines not to
purchase a security underlying a call option, however, the Portfolio may lose
the entire option premium.
Each of the Natural Resources Portfolio, the Global Strategy Portfolio and
the Multiple Strategy Portfolio also is authorized to purchase put or call op-
tions in connection with closing out put or call options it has previously
sold.
Writing Options. The Natural Resources Portfolio, the Global Strategy Port-
folio and the Multiple Strategy Portfolio are each authorized to write (i.e.,
sell) call options on securities held in its portfolio or securities indices
the performance of which is substantially correlated with securities held in
its portfolio. When a Portfolio writes a call option, in return for an option
premium the Portfolio gives another party the right to buy specified securi-
ties owned by the Portfolio at the exercise price on or before the expiration
date, in the case of an option on securities, or agrees to pay to another
party an amount based on any gain in a specified securities index beyond a
specified level on or before the expiration date, in the case of an option on
a securities index. The Portfolio may write call options to earn income,
through the receipt of option premiums. In the event the party to which the
Portfolio has written an option fails to exercise its rights under the option
because the value of the underlying securities is less than the exercise
price, the Portfolio will partially offset any decline in the value of the un-
derlying securities through the receipt of the option premium. By writing a
call option, however, the Portfolio limits its ability to sell the underlying
securities, and gives up the opportunity to profit from any increase in the
value of the underlying securities beyond the exercise price, while the option
remains outstanding.
The Natural Resources Portfolio, the Global Strategy Portfolio and the Mul-
tiple Strategy Portfolio each may also write put options on securities or se-
curities indices. When a Portfolio writes a put option, in return for an op-
tion premium the Portfolio gives another party the right to sell to the Port-
folio a specified security at the exercise price on or before the expiration
date, in the case of an option on a security, or agrees to pay to another
party an amount based on any decline in a specified securities index be-
low a specified level on or before the expiration date, in the case of an
option on a securities index. The Portfolio may write put options to earn
income, through the receipt of option premiums. In the event the party to which
the Portfolio has written an option fails to exercise its rights under the
option because the value of the underlying securities is greater
23
<PAGE>
than the exercise price, the Portfolio will profit by the amount of the option
premium. By writing a put option, however, the Portfolio will be obligated to
purchase the underlying security at a price that may be higher than the market
value of the security at the time of exercise as long as the put option is
outstanding, in the case of an option on a security, or make a cash payment
reflecting any decline in the index, in the case of an option on an index. Ac-
cordingly, when the Portfolio writes a put option it is exposed to a risk of
loss in the event the value of the underlying securities falls below the exer-
cise price, which loss potentially may substantially exceed the amount of op-
tion premium received by the Portfolio for writing the put option. The Portfo-
lio will write a put option on a security or a securities index only if the
Portfolio would be willing to purchase the security at the exercise price for
investment purposes (in the case of an option on a security) or is writing the
put in connection with trading strategies involving combinations of options--
for example, the sale and purchase of options with identical expiration dates
on the same security or index but different exercise prices (a technique
called a "spread").
Each of these Portfolios also is authorized to sell call or put options in
connection with closing out call or put options it has previously purchased.
Other than with respect to closing transactions, a Portfolio will only write
call or put options that are "covered." A call or put option will be consid-
ered covered if the Portfolio has segregated assets with respect to such op-
tion in the manner described in "Risk Factors in Options, Futures and Currency
Instruments" below. A call option will also be considered covered if a Portfo-
lio owns the securities it would be required to deliver upon exercise of the
option (or, in the case of option on a securities index, securities which are
substantially correlated with the performance of such index) or owns a call
option, warrant or convertible instrument which is immediately exercisable
for, or convertible into, such security.
Types of Options. A Portfolio may engage in transactions in options on secu-
rities or securities indices on exchanges and in the over-the-counter ("OTC")
markets. In general, exchange-traded options have standardized exercise prices
and expiration dates and require the parties to post margin against their ob-
ligations, and the performance of the parties' obligations in connection with
such options is guaranteed by the exchange or a related clearing corporation.
OTC options have more flexible terms negotiated between the buyer and the
seller, but generally do not require the parties to post margin and are sub-
ject to greater risk of counterparty default. See "Additional Risk Factors of
OTC Transactions; Limitations on the Use of OTC Strategic Instruments" below.
Futures
The Natural Resources Portfolio and the Multiple Strategy Portfolio may en-
gage in transactions in futures and options thereon. Futures are standardized,
exchange-traded contracts which obligate a purchaser to take delivery, and a
seller to make delivery, of a specific amount of a commodity at a specified
future date at a specified price. No price is paid upon entering into a
futures contract. Rather, upon purchasing or selling a futures contract the
Portfolio is required to deposit collateral ("margin") equal to a percentage
(generally less than 10%) of the contract value. Each day thereafter until the
futures position is closed, the Portfolio will pay additional margin repre-
senting any loss experienced as a result of the futures position the prior day
or be entitled to a payment representing any profit experienced as a result of
the futures position the prior day.
The sale of a futures contract limits a Portfolio's risk of loss through a
decline in the market value of portfolio holdings correlated with the futures
contract prior to the futures contract's expiration date. In the event the
market value of the portfolio holdings correlated with the futures contract
increases rather than decreases, however, the Portfolio will realize a loss on
the futures position and a lower return on the portfolio holdings than would
have been realized without the purchase of the futures contract.
The purchase of a futures contract may protect a Portfolio from having to
pay more for securities as a consequence of increases in the market value for
such securities during a period when the Portfolio was attempting to identify
specific securities in which to invest in a market the Portfolio believes to
be attractive. In the event that such securities decline in value or the Port-
folio determines not to complete an anticipatory hedge transaction relating to
a futures contract, however, the Portfolio may realize a loss relating to the
futures position.
A Portfolio will limit transactions in futures and options on futures to fi-
nancial futures contracts (i.e. contracts for which the underlying commodity
is a currency or securities or interest rate index) purchased or sold for
hedging purposes (including anticipatory hedges). Each of the Natural Re-
sources Portfolio and the Multiple Strategy Portfolio will further limit
transactions in futures and options on futures to the extent necessary to pre-
vent the Portfolio from being deemed a "commodity pool" under regulations of
the Commodity Futures Trading Commission.
24
<PAGE>
Foreign Exchange Transactions
The Natural Resources Portfolio, the Global Strategy Portfolio, the Capital
Stock Portfolio and the Multiple Strategy Portfolio may engage in spot and
forward foreign exchange transactions and currency swaps, purchase and sell
options on currencies and purchase and sell currency futures and related op-
tions thereon (collectively, "Currency Instruments") for purposes of hedging
against the decline in the value of currencies in which its portfolio holdings
are denominated against the U.S. dollar.
Forward foreign exchange transactions are OTC contracts to purchase or sell
a specified amount of a specified currency or multinational currency unit at a
price and future date set at the time of the contract. Spot foreign exchange
transactions are similar but require current, rather than future, settlement.
A Portfolio will enter into foreign exchange transactions only for purposes of
hedging either a specific transaction or a portfolio position. A Portfolio may
enter into a foreign exchange transaction for purposes of hedging a specific
transaction by, for example, purchasing a currency needed to settle a security
transaction or selling a currency in which the Portfolio has received or an-
ticipates receiving a dividend or distribution. A Portfolio may enter into a
foreign exchange transaction for purposes of hedging a portfolio position by
selling forward a currency in which a portfolio position of the Portfolio is
denominated or by purchasing a currency in which the Portfolio anticipates ac-
quiring a portfolio position in the near future. A Portfolio may also hedge
portfolio positions through currency swaps, which are transactions in which
one currency is simultaneously bought for a second currency on a spot basis
and sold for the second currency on a forward basis.
The Portfolios authorized to engage in Currency Instrument transactions may
also hedge against the decline in the value of a currency against the U.S.
dollar through use of currency, futures or options thereon. Currency futures
are similar to forward foreign exchange transactions except that futures are
standardized, exchange-traded contracts. See "Futures" above.
The Portfolios authorized to engage in Currency Instrument transactions may
also hedge against the decline in the value of a currency against the U.S.
dollar through the use of currency options. Currency options are similar to
options in securities, but in consideration for an option premium the writer
of a currency option is obligated to sell (in the case of a call option) or
purchase (in the case of a put option) a specified amount of a specified cur-
rency on or before the expiration date for a specified amount of another cur-
rency. The Portfolio may engage in transactions in options on currencies ei-
ther on exchanges or OTC markets. See "Options on Securities and Securities
Indices--Types of Options" above and "Additional Risk Factors of OTC Transac-
tions; Limitations on the Use of OTC Strategic Instruments" below.
No Portfolio will speculate in Currency Instruments. Accordingly, a Portfo-
lio will not hedge a currency in excess of the aggregate market value of the
securities which it owns (including receivables for unsettled securities
sales), or has committed to or anticipates purchasing, which are denominated
in such currency. A Portfolio may, however, hedge a currency by entering into
a transaction in a Currency Instrument denominated in a currency other than
the currency being hedged (a "cross-hedge"). The Portfolio will only enter
into a cross-hedge if the Investment Adviser believes that (i) there is a de-
monstrable high correlation between the currency in which the cross-hedge is
denominated and the currency being hedged, and (ii) executing a cross-hedge
through the currency in which the cross-hedge is denominated will be signifi-
cantly more cost-effective or provide substantially greater liquidity than ex-
ecuting a similar hedging transaction by means of the currency being hedged.
Risk Factors in Hedging Foreign Currency Risks. While a Portfolio's use of
Currency Instruments to effect hedging strategies is intended to reduce the
volatility of the net asset value of the Portfolio's shares, the net asset
value of the Portfolio's shares will fluctuate. Moreover, although Currency
Instruments will be used with the intention of hedging against adverse cur-
rency movements, transactions in Currency Instruments involve the risk that
anticipated currency movements will not be accurately predicted and that the
Portfolio's hedging strategies will be ineffective. To the extent that a Port-
folio hedges against anticipated currency movements which do not occur, the
Portfolio may realize losses, and decrease its total return, as the result of
its hedging transactions. Furthermore, a Portfolio will only engage in hedging
activities from time to time and may not be engaging in hedging activities
when movements in currency exchange rates occur. It may not be possible for a
Portfolio to hedge against currency exchange rate movements, even if correctly
anticipated, in the event that (i) the currency exchange rate movement is so
generally anticipated that the Portfolio is not able to enter into a hedging
transaction at an effective price, or (ii) the currency exchange rate movement
relates to a market with respect to which Currency Instruments are not avail-
able (such as certain developing markets) and it is not possible to engage in
effective foreign currency hedging.
25
<PAGE>
Risk Factors in Options, Futures and Currency Instruments
Use of Strategic Instruments for hedging purposes involves the risk of
imperfect correlation in movements in the value of the Strategic Instruments
and the value of the instruments being hedged. If the value of the Strategic
Instruments moves more or less than the value of the hedged instruments, a
Portfolio will experience a gain or loss which will not be completely offset
by movements in the value of the hedged instruments.
Each Portfolio intends to enter into transactions involving Strategic
Instruments only if there appears to be a liquid secondary market for such
instruments or, in the case of illiquid instruments traded in OTC
transactions, such instruments satisfy the criteria set forth below under
"Additional Risk Factors of OTC Transactions; Limitations on the Use of OTC
Strategic Instruments." However, there can be no assurance that, at any
specific time, either a liquid secondary market will exist for a Strategic
Instrument or the Portfolio will otherwise be able to sell such instrument at
an acceptable price. It may therefore not be possible to close a position in a
Strategic Instrument without incurring substantial losses, if at all.
Certain transactions in Strategic Instruments (e.g., forward foreign
exchange transactions, futures transactions, sales of put options) may expose
a Portfolio to potential losses which exceed the amount originally invested by
the Portfolio in such instruments. When a Portfolio engages in such a
transaction, the Portfolio will deposit in a segregated account at its
custodian liquid securities with a value at least equal to the Portfolio's
exposure, on a mark-to-market basis, to the transaction (as calculated
pursuant to requirements of the Securities and Exchange Commission). Such
segregation will ensure that the Portfolio has assets available to satisfy its
obligations with respect to the transaction, but will not limit the
Portfolio's exposure to loss.
Additional Risk Factors of OTC Transactions; Limitations on the Use of OTC
Strategic Instruments
Certain Strategic Instruments traded in OTC markets, including indexed
securities and OTC options, may be substantially less liquid than other
instruments in which a Portfolio may invest. The absence of liquidity may make
it difficult or impossible for the Portfolio to sell such instruments promptly
at an acceptable price. The absence of liquidity may also make it more
difficult for the Portfolio to ascertain a market value for such instruments. A
Portfolio will therefore acquire illiquid OTC instruments (i) if the agreement
pursuant to which the instrument is purchased contains a formula price at which
the instrument may be terminated or sold, or (ii) for which the Investment
Adviser anticipates the Portfolio can receive on each business day at least two
independent bids or offers, unless a quotation from only one dealer is
available, in which case that dealer's quotation may be used.
The staff of the Securities and Exchange Commission has taken the position
that purchased OTC options and the assets underlying written OTC options are
illiquid securities. Each Portfolio has therefore adopted an investment policy
pursuant to which it will not purchase or sell OTC options (including OTC
options on futures contracts) if, as a result of such transactions, the sum of
the market value of OTC options currently outstanding which are held by the
Portfolio, the market value of the securities underlying OTC call options
currently outstanding which have been sold by the Portfolio and margin
deposits on the Portfolio's outstanding OTC options exceeds 10% of the total
assets of the Portfolio, taken at market value, together with all other assets
of the Portfolio which are deemed to be illiquid or are otherwise not readily
marketable. However, if an OTC option is sold by the Portfolio to a dealer in
U.S. government securities recognized as a "primary dealer" by the Federal
Reserve Bank of New York and the Portfolio has the unconditional contractual
right to repurchase such OTC option at a predetermined price, then the
Portfolio will treat as illiquid such amount of the underlying securities as
is equal to the repurchase price less the amount by which the option is "in-
the-money" (i.e., current market value of the underlying security minus the
option's exercise price).
Because Strategic Instruments traded in OTC markets are not guaranteed by an
exchange or clearing corporation and generally do not require payment of mar-
gin, to the extent that a Portfolio has unrealized gains in such instruments
or has deposited collateral with its counterparty the Portfolio is at risk
that its counterparty will become bankrupt or otherwise fail to honor its ob-
ligations. A Portfolio will attempt to minimize the risk that a counterparty
will become bankrupt or otherwise fail to honor its obligations by engaging in
transactions in Strategic Instruments traded in OTC markets only with finan-
cial institutions which have substantial capital or which have provided the
Portfolio with a third-party guaranty or other credit enhancement.
Additional Limitations on the Use of Strategic Instruments
No Fund may use any Strategic Instrument to gain exposure to an asset or
class of assets that it would be
26
<PAGE>
prohibited by its investment restrictions from purchasing directly, except
that the Natural Resources Portfolio may acquire securities indexed to a
precious metal or other natural resource index.
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 Poli-
cies 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." The Investment Ad-
viser believes that compliance with this standard 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 accor-
dance 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 con-
sidered 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 im-
posed 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 Com-
pany, Inc. (energy company).
Stephen B. Swensrud--Principal of Fernwood Associates (financial consul-
tants).
J. Thomas Touchton--Managing Partner of The Witt-Touchton Company (private
investment partnership).
- -------
* Interested person, as defined in the Investment Company Act of 1940, of the
Fund.
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 signifi-
cantly restrict the personal investing activities of all employees of the In-
vestment Adviser and, as described below, impose additional, more onerous, re-
strictions 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. Govern-
ment securities). The preclearance requirement and associated procedures are
designed to identify any substantive prohibition or limitation applicable to
the proposed investment. The substantive restrictions applicable to all em-
ployees 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 secu-
rity 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) se-
curity (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" or
"MLAM"). 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 af-
filiate, FAM, presently acts as the investment adviser to over 130 other reg-
istered 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 Invest-
ment Adviser provides the portfolio managers for each of the Portfolios, who
27
<PAGE>
consider information from various sources, make the necessary investment deci-
sions and effect transactions accordingly. The Investment Adviser is also ob-
ligated 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, 1996 the advisory fees paid
by the Fund to the Investment Adviser totalled $10,000,508 of which $1,854,767
was paid by the Money Reserve Portfolio, $750,063 by the Intermediate Govern-
ment Bond Portfolio, $396,219 by the Long Term Corporate Bond Portfolio,
$892,477 by the Capital Stock Portfolio, $711,667 by the Growth Stock Portfo-
lio, $3,883,306 by the Multiple Strategy Portfolio, $367,927 by the High Yield
Portfolio, $78,349 by the Natural Resources Portfolio, $741,975 by the Global
Strategy Portfolio, and $323,758 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, 1996, the total operating expenses in-
curred by the Fund's Portfolios (including the advisory fees paid to the In-
vestment Adviser), before reimbursement of a portion of such expenses, were in
the following amounts: $2,057,965 by the Money Reserve Portfolio (representing
0.36% of its average net assets), $858,514 by the Intermediate Government Bond
Portfolio (representing 0.38% of its average net assets), $473,124 by the Long
Term Corporate Bond Portfolio (rep-resenting 0.39% of its average net assets),
$1,092,759 by the Capital Stock Portfolio (representing 0.40% of its average
net assets), $826,421 by the Growth Stock Portfolio (representing 0.38% of its
average net assets), $4,556,471 by the Multiple Strategy Portfolio (represent-
ing 0.39% of its average net assets), $433,090 by the High Yield Portfolio
(representing 0.39% of its average net assets), $135,630 by the Natural Re-
sources Portfolio (representing 0.57% of its average net assets), $949,419 by
the Global Strategy Portfolio (representing 0.42% of its average net assets),
and $380,131 by the Balanced Portfolio (representing 0.39% 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, 1996, Monarch reimbursed a total of $16,501 in ex-
penses, all of which were attributed to the Natural Resources Portfolio.
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 Se-
nior Portfolio Manager of the Investment Adviser since 1995 and a Vice Presi-
dent of MLAM since 1996. 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.
Lawrence R. Fuller has served as the Growth Stock Portfolio's Portfolio Man-
ager 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 Schwartz has served as the High Yield Portfolio's Co-Portfolio Man-
ager 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 C. Harbeck has served as the Intermediate Government Bond Portfolio's
Portfolio Manager since July 1992, and as the Long Term Corporate Bond Portfo-
lio'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-Portfo-
lio Manager since July 1993, and shares responsibility for the Portfolio's
day-to-day manage-ment with Aldona Schwartz. 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 Man-
ager 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 Man-
ager 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 Insur-
ance 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
28
<PAGE>
transactions in portfolio securities. Subject to policy established by the
Board of Directors of the Fund, the Investment Adviser is primarily responsi-
ble 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 dif-
ficulty 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. Af-
filiated persons of the Fund may serve as its broker in over-the-counter
transactions conducted on an agency basis. The Securities and Exchange Commis-
sion 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
fiscal year ended December 31, 1996, the Fund engaged in 141 transactions pur-
suant to the exemptive order aggregating approximately $183.4 million.
For the fiscal year ended December 31, 1996, the Fund paid brokerage commis-
sions of approximately $4,018,947, of which $154,459 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 Ad-
viser, 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 Portfo-
lios for cash. The redemption price is the net asset value per share next de-
termined 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 invest-
ment 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 ac-
crued and/or discount earned (including both original issue and market dis-
count), (ii) plus or minus all realized gains and losses on its portfolio se-
curities, (iii) less the estimated expenses of the Money Reserve Portfolio
(including the fees payable to the Investment Adviser) applicable to that div-
idend period.
Dividends on the Money Reserve Portfolio are declared daily and paid and re-
invested 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 frac-
tional 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 or-
dinary income.
TAX TREATMENT OF THE FUND
Each Portfolio intends to continue to qualify as a regulated investment com-
pany 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 in-
come 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
29
<PAGE>
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 de-
sirable. If a Portfolio earns original issue discount income in a taxable year
which is not represented by correlative cash income, or if a Portfolio re-
ceives property rather than cash in payment of interest, shareholders will be
allocated income greater than the amount of cash distributed to them. In addi-
tion, 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 divi-
dends on common or preferred stock, its distributions to the Insurance Compa-
nies will be eligible for the present 70% dividends received deduction appli-
cable 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 aver-
age annual total return and yield for various specified time periods in adver-
tisements or information furnished to present or prospective shareholders. Av-
erage 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 recur-
ring 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, 1996 for the Intermediate Government Bond Portfolio was
5.94%, for the Long Term Corporate Bond Portfolio was 6.63%, and for the High
Yield Portfolio was 9.37%. The yield quotations may be of limited use for com-
parative 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 perfor-
mance and are not intended to indicate future performance. The Portfolio's to-
tal return and yield will vary depending on market conditions, the securities
comprising the Portfolio's portfolio, the Portfolio's operating expenses and
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 in-
vestor'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 perfor-
mance 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 Perfor-
mance 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, per-
formance comparisons should not be considered indicative of the Portfolio's
relative performance for any future period.
30
<PAGE>
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 immedi-ately after the declaration of dividends, if
any, and is deter- mined 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 prevail-
ing market rates as quoted by one or more banks or dealers on the day of valu-
ation. 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 shares is received. The net asset value per share of each Port-
folio 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 (in-
cluding 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.
Securities held by each Portfolio will be valued as follows: portfolio secu-
rities that are traded on stock exchanges are valued at the last sale price as
of the close of business on the day the securities are being valued, or, lack-
ing 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 valua-
tion. Portfolio securities which are traded both in the over-the-counter mar-
ket and on a stock exchange are valued according to the broadest and most rep-
resentative market, and it is expected that for debt securities this ordinar-
ily will be the over-the-counter market. When a Portfolio writes an 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
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 mar-
ket, 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 Invest-
ment Series Fund, Inc. On January 16, 1981, the Fund changed its name to Mer-
rill 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 Com-
mon Stock, Intermediate Government Bond Portfolio Common Stock, Long Term Cor-
porate 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, 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 enti-
tled to vote on matters concerning only that Portfolio. Pursuant to the In-
vestment 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 is-
sued, will be fully paid and nonassessable, have no preference, preemptive,
conversion, exchange or similar rights,
31
<PAGE>
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 Com-
pany Act of 1940 shareholders are required to act on any of the following mat-
ters: (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 Port-
folio. 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 inde-
pendent 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 share-
holders each year.
ADDITIONAL INFORMATION
This Prospectus does not contain all the information included in the Regis-
tration 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 Commis-
sion.
The Statement of Additional Information, dated April 25, 1997, 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 of-
fice of the Securities and Exchange Commission in Washington, D.C.
32
<PAGE>
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. Trea-
sury 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 defen-
sive purposes, each other Portfolio) may invest in government agency securi-
ties, which are debt securities issued by government-sponsored enterprises,
federal agencies and international institutions. Such securities are not di-
rect obligations of the Treasury but involve government sponsorship or guaran-
tees 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, includ-
ing variable-rate certificates of deposit, and bankers' acceptances. Certifi-
cates of deposit are generally short-term, interest-bearing negotiable certif-
icates issued by commercial banks or savings and loan associations against
funds deposited in the issuing institution. Variable-rate certificates of de-
posit are certificates of deposit on which the interest rate is periodically
adjusted prior to their stated maturity, usually at 30, 90 or 180 day inter-
vals ("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.
A bankers' acceptance is a time draft drawn on a commercial bank by a bor-
rower usually in connection with an international commercial transaction (to
finance the import, export, transfer or storage of goods). The borrower is li-
able 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 matu-
rities of six months or less and are traded in secondary markets prior to ma-
turity.
The Money Reserve Portfolio may invest in certificates of deposit and bank-
ers' 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 sub-
sidiary 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, promissory notes issued by U.S. or
foreign corporations, trusts, partnerships, or other entities 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 notes are demand obligations that permit
the investment of fluctuating amounts at varying market rates of interest pur-
suant 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. Be-
cause variable amount master notes and insurance company fund-
33
<PAGE>
ing agreements are direct lending arrangements between the lender and borrow-
er, it is not generally contemplated that such instruments will be traded and
there is no secondary market for such instruments. Typically, agreements re-
lating to such instruments provide that the lender may not sell or otherwise
transfer the instrument without the borrower's consent. Such instruments pro-
vide that the interest rate on the amount outstanding is adjusted periodical-
ly, 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 Infor-
mation.
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 ma-
turity 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 repur-
chase agreement is an instrument under which the purchaser (i.e., the Portfo-
lio) 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 purchas-
er'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 repur-
chase 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
liquid 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 inter-
est.
34
<PAGE>
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 stan-
dards. 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 protec-
tive elements may be of greater amplitude or there may be other elements pres-
ent which make the long term risks appear somewhat larger than in Aaa securi-
ties.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving secu-
rity 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 char-
acterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of a desirable in-
vestment. 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 shortcom-
ings.
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 fa-
cilities 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 prin-
cipal 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 inter-
est and repay principal. Whereas it normally exhibits adequate protection pa-
rameters, 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 pre-
dominantly speculative with respect to capacity to pay interest and repay
principal in 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 con-
ditions.
35
<PAGE>
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 provision-
al. A provisional rating assumes the successful completion of the project be-
ing financed by the debt being rated and indicates that payment of debt serv-
ice 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 like-
lihood of, or the risk of default upon failure of such completion. The in-
vestor 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.
36
<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
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
APRIL 25, 1997
MERRILL LYNCH SERIES FUND, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
Merrill Lynch Series Fund, Inc. (the "Fund") is an open-end management in-
vestment 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 be-
low, 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 Insur-
ance Company of New York, indirect wholly owned subsidiaries of Merrill Lynch
& Co., Inc. (collectively, the "Merrill Lynch Insurance Companies"), and Mon-
arch 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 ex-
tent 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 "Prospec-
tus") dated April 25, 1997, which has been filed with the Securities and Ex-
change 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 DISTRIBUTORS, INC.--DISTRIBUTOR
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies.................................... 2
Investment Restrictions............................................... 2
Management of the Fund................................................ 6
Investment Advisory Arrangements...................................... 7
Determination of Net Asset Value...................................... 8
Portfolio Transactions and Brokerage.................................. 9
Redemption of Shares.................................................. 10
Dividends, Distributions and Taxes.................................... 11
Distribution Arrangements............................................. 11
Performance Data...................................................... 11
Additional Information................................................ 12
Independent Auditors' Report.......................................... 13
Financial Statements.................................................. 15
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Money Reserve Portfolio are the preserva-
tion of capital, liquidity and the highest possible current income consistent
with the foregoing objectives by investing in short-term money market securi-
ties. 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-in-
come, high quality corporate bonds. The High Yield Portfolio seeks high cur-
rent income consistent with prudent investment management by investing primar-
ily in fixed-income securities rated in the lower rating categories of the es-
tablished 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 his-
torical price/book value ratios and price/earnings ratios. The investment ob-
jective 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 pru-
dent risk through a fully managed investment policy utilizing equity securi-
ties, 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 sub-
stantial 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 cur-
rent income and a degree of stability of principal not normally available from
an investment solely in equity securities and the opportunity for capital ap-
preciation greater than that normally available from an investment solely in
debt securities by investing in a balanced portfolio of debt and equity secu-
rities.
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 funda-
mental 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 outstand-
ing 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 Govern-
ment 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 Port-
folios, (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. Govern-
ment or government agency securities) of any one issuer (including repur-
chase 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 sig-
nificant economic, political or financial instability, may, subject to the
diversification requirements of the Internal Revenue Code relating to qual-
ification
2
<PAGE>
under the Code as a regulated investment company, invest more than 25% of
its total assets in gold-related companies.
3. Alone, or together with any other Portfolio or Portfolios, make in-
vestments for the purpose of exercising control over, or management of, any
issuer.
4. Purchase securities of other investment companies, except in connec-
tion with a merger, consolidation, acquisition or reorganization, or by
purchase in the open market of securities of closed-end investment compa-
nies where no underwriter or dealer's commission or profit, other than cus-
tomary 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, ex-
cept 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 com-
modities 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 cur-
rency, 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 Re-
sources and Global Strategy Portfolios may make margin payments in connec-
tion with transactions in options, forward currency contracts, futures con-
tracts 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 posi-
tions 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 as-
sets, 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 21 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 Re-
sources Portfolio or Global Strategy Portfolio in connection with transac-
tions 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 ex-
tent 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 Portfo-
lio'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 port-
folio securities.
12. Except for the Multiple Strategy, Natural Resources and Global Strat-
egy Portfolios, write, purchase or sell puts, calls or combinations there-
of, 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 Re-
sources Portfolio, the Global Strategy Portfolio and the Multiple Strategy
Portfolio, invest in securities of foreign issuers if at the time of acqui-
sition 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 se-
curities (i) issued, assumed or guaranteed by foreign governments, or po-
3
<PAGE>
litical subdivisions or instrumentalities thereof, (ii) assumed or guaran-
teed 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. (As a matter of operat-
ing 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 in-
vest any portion of its assets in the securities of foreign issuers.) See
"Other Portfolio Strategies--Foreign Securities" in the Prospectus. Consis-
tent 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, invest-
ments 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 Invest-
ment 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 se-
curities of such issuer, own in the aggregate more than 5% of the securi-
ties 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 In-
termediate 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 indus-
try, 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 pe-
riods of up to 45 days or, in the case of the Money Reserve Portfolio, 180 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
securities 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 gener-
ally enter into forward commitments with the intention of acquiring securities
for its portfolio, it may dispose of a commitment prior to settlement if man-
agement 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 ac-
curate 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 bro-
kers, dealers and financial institutions and receive collateral in cash or se-
curities 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 se-
curities 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,
4
<PAGE>
and will have the right to regain record ownership of loaned securities to ex-
ercise 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, Dis-
tributions and Taxes--Federal Income Taxes." The Fund's Portfolios intend to
lend portfolio securities only to the extent that such activity does not jeop-
ardize 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-denomi-
nated 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 invest-
ing in obligations of U.S. banks. See "Other Portfolio Strategies--Foreign Se-
curities" 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 for-
eign 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. Evi-
dence 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 Invest-
ment 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 ob-
ligations which, at the time of purchase, are subject to exchange controls or
withholding taxes. Generally, the Money Reserve Portfolio will limit its Euro-
dollar and Yankeedollar investments to obligations of banks organized in Cana-
da, France, Germany, Japan, the Netherlands, Switzerland, the United Kingdom
and other 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 reg-
istration, such resale may be permissible only in limited quantities. In ei-
ther 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 oppor-
tune.
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 is-
sued, 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 advanta-
geous 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 sub-
ject 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 securities in an amount equal to the purchase price of the se-
curities underlying the commitment.
There can be no assurance that the securities subject to a standby commit-
ment will be issued, and the value of
5
<PAGE>
the security, if issued, on the delivery date may be more or less 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 there-
after 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.
MANAGEMENT OF THE FUND
The directors and executive officers of the Fund and their principal occupa-
tions 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, Prince-
ton, New Jersey 08543-9011.
Terry K. Glenn (56)--President and Director(1)(2)--Executive Vice President
of the Investment Adviser 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 (68)--Director(2)--P.O. Box 7, West Cornwall, Connecticut
06796. President and Director of American Independent Oil Company, Inc. (en-
ergy company) since 1987; Member of Council on Foreign Relations since 1971.
Stephen B. Swensrud (63)--Director(2)--24 Federal Street, Suite 400, Boston,
Massachusetts 02110. Chairman of Fernwood Associates (financial consultants)
since 1975.
J. Thomas Touchton (58)--Director(2)--Suite 3405, One Tampa City Center, 201
North Franklin Street, Tampa, Florida 33602. Managing Partner of The Witt-
Touchton Company and its predecessor The Witt Co. (private investment part-
nership) since 1972; Trustee Emeritus of Washington and Lee University; Direc-
tor of TECO Energy, Inc. (electric utility holding company).
Norman R. Harvey (63)--Senior Vice President(1)(2)--Senior Vice President of
the Investment Adviser and FAM since 1982.
Joseph T. Monagle, Jr. (48)--Senior Vice President(1)(2)--Senior Vice Presi-
dent of the Investment Adviser and FAM since 1990 and Vice President thereof
from 1978 to 1990; Senior Vice President of Princeton Services, Inc.
Donald C. Burke (36)--Vice President(1)(2)--Vice President of the Investment
Adviser since 1990.
Vincent T. Lathbury, III (56)--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 (62)--Vice President(1)(2)--Vice President of the Investment
Adviser and FAM since 1986.
Aldona Schwartz (48)--Vice President(1)(2)--Vice President of the Investment
Adviser since 1991; Employed by the Investment Adviser since 1986.
Kevin J. McKenna (39)--Vice President(1)(2)--Vice President of the Invest-
ment Adviser since 1985.
Lawrence R. Fuller (56)--Vice President(1)(2)-- Vice President of the In-
vestment Adviser since 1992; Senior Vice President of Benefit Capital Manage-
ment Corporation from 1984 to 1992.
Thomas R. Robinson (53)--Vice President(1)(2)--Vice President of the Invest-
ment Adviser since 1996; Manager of International Equity Strategy of Merrill
Lynch & Co.'s Global Securities Research & Economics Group from 1989 to 1995.
Jacqueline Rogers (39)--Vice President(1)(2)--Vice President of the Invest-
ment Adviser since 1985.
Peter Lehman (38)--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 (47)--Treasurer(1)(2)--Senior Vice President and Treasurer
of the Investment Adviser and FAM since 1984; Treasurer of the Distributor
since 1984 and Vice President since 1981.
6
<PAGE>
Ira P. Shapiro (34)--Secretary(1)(2)--Vice President since 1997 and 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, Fuller, Harbeck,
Heymsfeld, Harvey, McKenna, Monagle, Lathbury, Lehman, Richard, Robinson
and Shapiro 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").
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, 1996.
<TABLE>
<CAPTION>
PENSIONS
OR
RETIREMENT TOTAL
BENEFITS COMPENSATION
AGGREGATE ACCRUED FROM FUND
COMPENSATION AS 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 $128,100
--------
Stephen B. Swensrud........................ $7,500 None $154,250
------ --------
J. Thomas Touchton......................... $8,000 None $128,100
--------
</TABLE>
- -------
(1) In addition to the Fund, the Directors served on other MLAM/FAM advised
funds as follows: Mr. Sunderland (20 registered investment companies
consisting of 29 portfolios); Mr. Swensrud (20 registered investment
companies consisting of 49 portfolios); Mr. Touchton (20 registered
investment companies consisting of 29 portfolios).
The officers of the Fund owned on February 28, 1997, in the aggregate, less
than 1% of the outstanding Common Stock of Merrill Lynch & Co., Inc. On Febru-
ary 28, 1997, 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 di-
rector 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, 1996 such fees and expenses aggre-
gated $20,126.
INVESTMENT ADVISORY ARRANGEMENTS
The Fund has entered into an Investment Advisory Agreement with the Invest-
ment 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; Vincent R. Giordano, Senior Vice President; Elizabeth Griffin,
Senior Vice President; Norman R. Harvey, Senior Vice President; Michael J.
Hennewinkel, Senior Vice President; Philip L. Kirstein, Senior Vice President,
General Counsel and Secretary; Ronald M. Kloss, Senior Vice President and Con-
troller; Stephen M.M. Miller, Senior Vice President; Joseph T. Monagle, Senior
Vice President; Richard L. Reller, Senior Vice President; Gerald M. Richard,
Senior Vice President and Treasurer; Ronald L. Welburn, 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 Ad-
viser 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 secu-
rities being sold, there may be an adverse effect on price.
Advisory Fee. The Investment Advisory Agreement provides that as compensa-
tion for its services to the Fund, the Investment Adviser receives monthly
compensation
7
<PAGE>
with respect to such Portfolios according to the following schedule:
<TABLE>
<S> <C>
AGGREGATE OF AVERAGE DAILY NET ASSETS OF THE TEN COMBINED
PORTFOLIOS ADVISORY FEE
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 Portfo-
lio, with the reduced rates above applicable to portions of each Portfolio to
the extent that the aggregate of the average daily net assets of the combined
Portfolios exceed $250 million, $300 million, $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 deter-
mined 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 combined Portfolios that falls within that
breakpoint level by the aggregate of the average daily net assets of the com-
bined Portfolios. The amount of the fee for a Portfolio at each breakpoint
level is determined by multiplying the average daily net assets of that Port-
folio by the uniform percentage applicable to that breakpoint level and multi-
plying the product by the advisory fee rate.
For the fiscal years ended December 31, 1996, 1995 and 1994, the advisory
fees paid by the Fund to the Investment Adviser totalled $10,000,508,
$9,302,375 and $9,287,259, 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 Direc-
tors who are not interested persons of the Investment Adviser, on February 3,
1997. 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 major-
ity of the outstanding shares of the respective Portfolios, and (b) by a ma-
jority 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 Invest-
ment Adviser to provide investment advisory services and to pay all compensa-
tion of and furnish office space for officers and employees of the Fund con-
nected with investment and economic research, trading and investment manage-
ment 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 subsidiar-
ies. Each Portfolio will pay all other expenses incurred in its operation, in-
cluding 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 transac-
tions, shareholder servicing costs, expenses of registering the shares under
Federal and state securities laws, pricing costs (including the daily calcula-
tion 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 Port-
folios include directors' fees, legal expenses, state franchise taxes, audit-
ing services, costs of printing proxies, stock certificates, shareholder re-
ports and prospectuses and statements of additional information (to the extent
not paid for by the Distributor), Securities and Exchange Commission fees, ac-
counting 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
fiscal year ended December 31, 1996, the amount of such reimbursement was
$644,661. 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 Portfo-
lio) 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 portfolio's liabilities, dividing by the number of
shares outstanding and rounding the result to the nearest whole cent.
8
<PAGE>
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 main-
tain 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 quo-
tations and that calculated pursuant to the penny rounding method will be re-
ported to the directors by the Investment Adviser. 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, in-
cluding the sale of portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity; withholding divi-
dends; 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 each 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 propor-
tionate amortization in value until maturity of any discount or premium, re-
gardless 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 adjust-
ed. If, due to the impairment of the creditworthiness of the issuer of a secu-
rity 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 deter-
mined in good faith by the Board of Directors. Any assets or liabilities ini-
tially 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 in-
volved 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 issu-
er. 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 primar-
ily 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, affil-
iated 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. Howev-
er, 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 pol-
icy of obtaining best price and execution. The Fund may not purchase securi-
ties 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 permit-
ting the Fund to conduct principal transactions with respect to the Money Re-
serve Portfolio with GSI and MMI in United States Government and government
agency securities, and certain other money market securities, subject to a
number of conditions, includ-
9
<PAGE>
ing 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 sourc-
es. 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 com-
panies should seek to "recapture" brokerage commissions and underwriting and
dealer spreads by effecting their purchases and sales through affiliated enti-
ties. 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 In-
vestment 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 pro-
vide supplemental investment research to the Investment Adviser may receive
orders for transactions by the Fund. Such supplemental research services ordi-
narily 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 sup-
plemental research services, the Investment Adviser is authorized to pay com-
missions to brokers furnishing such services which are in excess of commis-
sions 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 In-
vestment Adviser may use such supplemental research in providing investment
advice to its other investment advisory accounts.
For the fiscal year ended December 31, 1996, the Fund paid total brokerage
commissions of approximately $4,018,947, of which $154,459 was paid to Merrill
Lynch. For the fiscal year ended December 31, 1995, the Fund paid brokerage
commissions of approximately $4,177,039, of which $224,553 was paid to Merrill
Lynch. For the fiscal year ended December 31, 1994, the Fund paid brokerage
commissions of approximately $2,432,600, of which $201,911 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 con-
stantly changing in response to market conditions, no portfolio turnover rate
may be accurately stated for the Money Reserve Portfolio. For the fiscal year
ended December 31, 1996, the portfolio turnover rates for the Fund's other
Portfolios were as follows: the Intermediate Government Bond Portfolio was
29.35%; the Long Term Corporate Bond Portfolio was 92.45%; the Capital Stock
Portfolio was 74.30%; the Growth Stock Portfolio was 78.04%; the Multiple
Strategy Portfolio was 143.82%; the High Yield Portfolio was 50.48%; the Natu-
ral Resources Portfolio was 31.29%; the Global Strategy Portfolio was 160.89%
and the Balanced Portfolio was 234.79%.
REDEMPTION OF SHARES
The right to redeem shares or to receive payment with respect to any redemp-
tion 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 Com-
mission 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 Ex-
change Commission may by order permit for the protection of shareholders of
each Portfolio.
10
<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 Port-
folio of the Fund will be treated as a separate corporation for federal income
tax purposes and, thus, each Portfolio is required to satisfy the qualifica-
tion requirements under the Code for treatment as a regulated investment com-
pany. There will be no offsetting of capital gains and losses among the Port-
folios.
Each Portfolio intends to continue to qualify as a regulated investment com-
pany 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, de-
rive in each taxable year at least 90% of its gross income from dividends, in-
terest 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 provi-
sions of the Code and Treasury Regulations presently in effect. For the com-
plete provisions, reference should be made to the pertinent Code sections and
the Treasury Regulations promulgated thereunder. The Code and these Regula-
tions are subject to change by legislative or administrative action.
DISTRIBUTION ARRANGEMENTS
The Fund has entered into a distribution agreement (the "Distribution Agree-
ment") 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 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 aver-
age 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 com-
puted 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 distribu-
tions are reinvested and taking into account all applicable recurring and non-
recurring 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 ac-
count 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 Securi-
ties 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 av-
erage 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.
11
<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, 1996 9.76% $1,097.60
Five Years Ended December 31, 1996 9.27% $1,557.60
Inception* Through December 31, 1996 10.88% $2,446.90
Capital Stock Portfolio:
One Year Ended December 31, 1996 16.54% $1,165.40
Five Years Ended December 31, 1996 9.87% $1,600.50
Ten Years Ended December 31, 1996 11.56% $2,984.80
Global Strategy Portfolio:
One Year Ended December 31, 1996 13.78% $1,137.80
Five Years Ended December 31, 1996 9.52% $1,575.40
Inception* Through December 31, 1996 10.04% $2,482.80
Growth Stock Portfolio:
One Year Ended December 31, 1996 19.57% $1,195.70
Five Years Ended December 31, 1996 11.09% $1,691.90
Ten Years Ended December 31, 1996 10.65% $2,751.20
High Yield Portfolio:
One Year Ended December 31, 1996 12.32% $1,123.20
Five Years Ended December 31, 1996 12.96% $1,839.10
Ten Years Ended December 31, 1996 11.27% $2,910.20
Intermediate Government Bond Portfolio:
One Year Ended December 31, 1996 2.61% $1,026.10
Five Years Ended December 31, 1996 6.69% $1,382.30
Ten Years Ended December 31, 1996 7.80% $2,120.20
</TABLE>
<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>
Long Term Corporate Bond Portfolio:
One Year Ended December 31, 1996 2.77% $1.027.70
Five Years Ended December 31, 1996 7.51% $1,436.30
Ten Years Ended December 31, 1996 8.37% $2,234.60
Multiple Strategy Portfolio:
One Year Ended December 31, 1996 14.32% $1,143.20
Five Years Ended December 31, 1996 9.21% $1,553.20
Ten Years Ended December 31, 1996 10.70% $2,764.80
Natural Resources Portfolio:
One Year Ended December 31, 1996 14.72% $1,147.20
Five Years Ended December 31, 1996 8.01% $1.469.70
Inception* Through December 31, 1996 1.49% $1,150.40
</TABLE>
- -------
* Inception 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 con-
sent 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.
12
<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 statements of assets and liabilities, in-
cluding 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 Port-
folios of Merrill Lynch Series Fund, Inc. as of December 31, 1996, 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 fi-
nancial statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these finan-
cial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. 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 Decem-
ber 31, 1996 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 pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
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 Govern-
ment Bond, Long Term Corporate Bond, Money Reserve, Multiple Strategy, and
Natural Resources Portfolios of Merrill Lynch Series Fund, Inc. as of December
31, 1996, 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 14, 1997
13
<PAGE>
[This Page Intentionally Left Blank]
14
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Balanced Portfolio
Schedule of Investments as of December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PERCENT OF
FACE AMOUNT US GOVERNMENT & AGENCY OBLIGATIONS COST (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
US GOVERNMENT & AGENCY $ 2,033,567 Federal National Mortgage
OBLIGATIONS 4,428,907 Association++:
2,662,871 6% due 11/01/2000..................... $ 2,013,231 $ 2,008,783 2.0%
6% due 6/01/2001...................... 4,383,926 4,368,702 4.4
6% due 2/01/2004...................... 2,631,250 2,622,096 2.7
US Treasury Notes:
5,900,000 5% due 1/31/1998.................. 5,847,914 5,858,523 5.9
16,075,000 6.25% due 4/30/2001............... 16,247,172 16,110,204 16.3
10,000,000 7.25% due 5/15/2004............... 10,575,781 10,521,900 10.6
11,675,000 7% due 7/15/2006.................. 12,154,611 12,129,274 12.3
- ---------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY
OBLIGATIONS 53,853,885 53,619,482 54.2
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
INDUSTRIES SHARES HELD COMMON STOCKS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AEROSPACE & DEFENSE 5,500 AlliedSignal Inc...................... 404,266 368,500 0.4
18,600 +Gulfstream Aerospace Corp............ 460,252 451,050 0.4
12,200 Northrop Grumman Corp................. 807,514 1,009,550 1.0
10,100 United Technologies Corp.............. 230,166 666,600 0.7
----------- ----------- -----
1,902,198 2,495,700 2.5
- ---------------------------------------------------------------------------------------------------------------------
AUTO & TRUCK 12,200 General Motors Corp................... 668,532 680,150 0.7
- ---------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS 27,000 +Lear Corporation..................... 904,500 921,375 0.9
- ---------------------------------------------------------------------------------------------------------------------
BANKING 27,000 Bank of New York Co., Inc............. 637,987 911,250 0.9
4,000 BankAmerica Corp...................... 409,258 399,000 0.4
9,000 Citicorp.............................. 657,240 927,000 1.0
----------- ----------- -----
1,704,485 2,237,250 2.3
- ---------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS 16,100 Oakwood Homes Corporation............. 366,804 368,288 0.4
- ---------------------------------------------------------------------------------------------------------------------
CHEMICALS 11,000 +FMC Corporation...................... 779,645 771,375 0.8
15,000 PPG Industries, Inc................... 742,927 841,875 0.8
----------- ----------- -----
1,522,572 1,613,250 1.6
- ---------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 13,300 +cisco Systems, Inc................... 596,555 846,212 0.8
24,200 First Data Corp....................... 852,153 883,300 0.9
----------- ----------- -----
1,448,708 1,729,512 1.7
- ---------------------------------------------------------------------------------------------------------------------
COMPUTERS 10,800 +Compaq Computer Corp................. 798,392 801,900 0.8
5,600 International Business Machines
Corp................................. 615,417 845,600 0.9
----------- ----------- -----
1,413,809 1,647,500 1.7
- ---------------------------------------------------------------------------------------------------------------------
DIVERSIFIED 20,000 Corning, Inc.......................... 566,137 925,000 0.9
- ---------------------------------------------------------------------------------------------------------------------
ELECTRONICS 6,500 General Electric Co................... 493,323 642,688 0.7
4,700 Linear Technology Corporation......... 192,747 205,625 0.2
----------- ----------- -----
686,070 848,313 0.9
- ---------------------------------------------------------------------------------------------------------------------
ENGINEERING & 17,900 Foster Wheeler Corp................... 753,906 664,538 0.7
CONSTRUCTION
- ---------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 26,617 +Viacom, Inc. (Class B)............... 973,828 928,268 0.9
- ---------------------------------------------------------------------------------------------------------------------
FERTILIZERS 10,000 IMC Global, Inc....................... 387,604 391,250 0.4
- ---------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 16,800 American Express Company.............. 785,795 949,200 1.0
- ---------------------------------------------------------------------------------------------------------------------
FOODS 24,000 H.J Heinz Company..................... 786,326 858,000 0.9
- ---------------------------------------------------------------------------------------------------------------------
INSURANCE 7,000 Aetna Inc............................. 520,947 560,000 0.6
15,500 Allstate Corp......................... 634,449 897,062 0.9
13,000 UNUM Corporation...................... 830,276 939,250 0.9
----------- ----------- -----
1,985,672 2,396,312 2.4
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Balanced Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRIES SHARES HELD COMMON STOCKS (CONCLUDED) COST (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LEISURE/TOURISM 29,000 Brunswick Corporation................. $ 717,620 $ 696,000 0.7%
5,045 TCI Pacific Communications
(Convertible Preferred).............. 477,711 457,834 0.5
----------- ----------- -----
1,195,331 1,153,834 1.2
- ---------------------------------------------------------------------------------------------------------------------
MACHINERY 15,000 +American Standard Companies, Inc..... 489,476 573,750 0.6
22,500 Deere & Co............................ 937,004 914,062 0.9
----------- ----------- -----
1,426,480 1,487,812 1.5
- ---------------------------------------------------------------------------------------------------------------------
MEDICAL 28,700 +Health Management Associates, Inc.
(Class A)............................ 648,536 645,750 0.6
- ---------------------------------------------------------------------------------------------------------------------
NATURAL GAS 8,000 El Paso Natural Gas Co................ 392,123 404,000 0.4
20,000 Enron Corp............................ 781,311 862,500 0.9
----------- ----------- -----
1,173,434 1,266,500 1.3
- ---------------------------------------------------------------------------------------------------------------------
OIL SERVICES 28,000 Dresser Industries, Inc............... 555,727 868,000 0.9
- ---------------------------------------------------------------------------------------------------------------------
PAPER 10,000 Kimberly-Clark Corp................... 768,612 952,500 1.0
- ---------------------------------------------------------------------------------------------------------------------
PETROLEUM 15,900 Pennzoil Co........................... 642,571 898,350 0.9
22,000 Unocal Corp........................... 740,427 893,750 0.9
----------- ----------- -----
1,382,998 1,792,100 1.8
- ---------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 16,000 Abbott Laboratories................... 497,301 812,000 0.8
11,000 Merck & Co., Inc...................... 336,160 871,750 0.9
----------- ----------- -----
833,461 1,683,750 1.7
- ---------------------------------------------------------------------------------------------------------------------
RAILROADS 8,500 Burlington Northern Santa Fe, Inc..... 689,026 734,187 0.7
- ---------------------------------------------------------------------------------------------------------------------
REAL ESTATE 18,800 Prentiss Properties Trust............. 384,633 470,000 0.5
INVESTMENT TRUST 28,800 Spieker Properties, Inc............... 775,777 1,036,800 1.0
----------- ----------- -----
1,160,410 1,506,800 1.5
- ---------------------------------------------------------------------------------------------------------------------
RETAIL 14,755 Rite Aid Corporation.................. 439,611 586,511 0.6
18,000 Sears, Roebuck & Co................... 717,557 830,250 0.8
31,500 +Toys 'R' Us, Inc..................... 980,055 945,000 1.0
----------- ----------- -----
2,137,223 2,361,761 2.4
- ---------------------------------------------------------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS 10,000 Fisher Scientific International,
Inc.................................. 313,564 471,250 0.5
- ---------------------------------------------------------------------------------------------------------------------
SOFTWARE 20,800 +BMC Software, Inc.................... 775,641 860,600 0.8
18,375 +Oracle Corp.......................... 597,838 764,859 0.8
----------- ----------- -----
1,373,479 1,625,459 1.6
- ---------------------------------------------------------------------------------------------------------------------
STEEL 24,000 AK Steel Holding Corp................. 990,584 951,000 1.0
- ---------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 35,000 +Airtouch Communications, Inc......... 1,002,020 883,750 0.9
14,400 Bell Atlantic Corp.................... 735,756 932,400 0.9
----------- ----------- -----
1,737,776 1,816,150 1.8
- ---------------------------------------------------------------------------------------------------------------------
TOBACCO 6,000 Philip Morris Companies, Inc.......... 594,955 675,750 0.7
- ---------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 27,000 Carnival Corp. (Class A).............. 763,149 891,000 0.9
- ---------------------------------------------------------------------------------------------------------------------
UTILITIES 38,000 Edison International, Inc............. 708,073 755,250 0.8
- ---------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 35,309,764 41,292,759 41.8
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Balanced Portfolio
Schedule of Investments as of December 31, 1996 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PERCENT OF
FACE AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER* $ 466,000 General Electric Capital Corp.,
7.10% due 1/02/1997.............. $ 465,816 $ 465,816 0.5%
- ---------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY 2,740,000 Federal Home Loan Mortgage Corp.,
OBLIGATIONS* 5.42% due 1/22/1997.............. 2,730,925 2,730,925 2.7
- ---------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 3,196,741 3,196,741 3.2
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS..................... $92,360,390 98,108,982 99.2
-----------
-----------
OTHER ASSETS LESS LIABILITIES......... 743,770 0.8
----------- -----
NET ASSETS............................ $98,852,752 100.0%
----------- -----
----------- -----
- ---------------------------------------------------------------------------------------------------------------------
</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.
++ Subject to principal paydowns.
See Notes to Financial Statements.
17
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Capital Stock Portfolio
Schedule of Investments as of December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRIES SHARES HELD US STOCKS & WARRANTS COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AEROSPACE & 31,000 AlliedSignal Inc.................. $ 2,278,704 $ 2,077,000 0.7%
DEFENSE 98,000 +Gulfstream Aerospace Corp........ 2,413,030 2,376,500 0.8
59,200 Northrop Grumman Corp............. 3,878,250 4,898,800 1.7
58,800 United Technologies Corp.......... 2,433,293 3,880,800 1.4
------------- ------------- -----
11,003,277 13,233,100 4.6
- -------------------------------------------------------------------------------------------------------------------
AUTO & TRUCK 70,000 General Motors Corp............... 3,724,178 3,902,500 1.3
- -------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS 116,000 +Lear Corporation................. 3,886,000 3,958,500 1.4
- -------------------------------------------------------------------------------------------------------------------
BANKING 156,500 Bank of New York Co., Inc......... 2,720,756 5,281,875 1.8
15,000 Bank of New York Co., Inc.
(Warrants) (a)................... 168,750 1,111,875 0.4
21,900 BankAmerica Corp.................. 2,240,704 2,184,525 0.8
45,000 Citicorp.......................... 3,282,385 4,635,000 1.6
------------- ------------- -----
8,412,595 13,213,275 4.6
- -------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS 89,600 Oakwood Homes Corporation......... 2,041,536 2,049,600 0.7
- -------------------------------------------------------------------------------------------------------------------
CHEMICALS 54,000 +FMC Corporation.................. 3,827,309 3,786,750 1.3
82,000 PPG Industries, Inc............... 4,069,924 4,602,250 1.6
------------- ------------- -----
7,897,233 8,389,000 2.9
- -------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 77,000 +cisco Systems, Inc............... 3,672,758 4,899,125 1.7
88,000 Electronic Data Systems Corp...... 3,822,060 3,806,000 1.3
103,800 First Data Corp................... 3,736,613 3,788,700 1.3
------------- ------------- -----
11,231,431 12,493,825 4.3
- -------------------------------------------------------------------------------------------------------------------
COMPUTERS 61,000 +Compaq Computer Corp............. 4,523,322 4,529,250 1.6
28,000 International Business Machines
Corp............................. 3,073,726 4,228,000 1.4
------------- ------------- -----
7,597,048 8,757,250 3.0
- -------------------------------------------------------------------------------------------------------------------
DIVERSIFIED 115,000 Corning, Inc...................... 3,208,600 5,318,750 1.8
- -------------------------------------------------------------------------------------------------------------------
ELECTRONICS 35,000 General Electric Co............... 2,697,323 3,460,625 1.2
23,500 Linear Technology Corporation..... 964,041 1,028,125 0.3
------------- ------------- -----
3,661,364 4,488,750 1.5
- -------------------------------------------------------------------------------------------------------------------
ENGINEERING & 76,700 Foster Wheeler Corp...............
CONSTRUCTION 3,176,071 2,847,487 1.0
- -------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 1,500 +Imax Corporation................. 46,397 46,125 0.0
82,484 +Viacom, Inc. (Class B)........... 3,187,878 2,876,629 1.0
------------- ------------- -----
3,234,275 2,922,754 1.0
- -------------------------------------------------------------------------------------------------------------------
FERTILIZERS 55,000 IMC Global, Inc................... 2,131,787 2,151,875 0.7
- -------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 90,500 American Express Company.......... 4,239,137 5,113,250 1.8
- -------------------------------------------------------------------------------------------------------------------
FOODS 121,000 H.J. Heinz Company................ 3,979,027 4,325,750 1.5
- -------------------------------------------------------------------------------------------------------------------
INSURANCE 34,500 Aetna Inc......................... 2,225,492 2,760,000 1.0
93,000 Allstate Corp..................... 3,037,045 5,382,375 1.9
66,000 UNUM Corporation.................. 4,211,989 4,768,500 1.6
------------- ------------- -----
9,474,526 12,910,875 4.5
- -------------------------------------------------------------------------------------------------------------------
LEISURE/TOURISM 139,000 Brunswick Corporation............. 3,439,390 3,336,000 1.2
32,697 TCI Pacific Communications
(Convertible Preferred).......... 3,317,815 2,967,253 1.0
------------- ------------- -----
6,757,205 6,303,253 2.2
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Capital Stock Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRIES SHARES HELD US STOCKS & WARRANTS (CONCLUDED) COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MACHINERY 71,000 +American Standard Companies,
Inc.............................. $ 2,353,124 $ 2,715,750 0.9%
103,000 Deere & Co........................ 4,279,435 4,184,375 1.5
------------- ------------- -----
6,632,559 6,900,125 2.4
- -------------------------------------------------------------------------------------------------------------------
MEDICAL 137,000 +Health Management Associates,
Inc. (Class A)................... 3,088,067 3,082,500 1.1
- -------------------------------------------------------------------------------------------------------------------
NATURAL GAS 46,000 El Paso Natural Gas Co............ 2,254,653 2,323,000 0.8
112,700 Enron Corp........................ 4,326,642 4,860,187 1.7
------------- ------------- -----
6,581,295 7,183,187 2.5
- -------------------------------------------------------------------------------------------------------------------
OIL SERVICES 120,000 Dresser Industries, Inc........... 2,812,419 3,720,000 1.3
34,000 Schlumberger Ltd., Inc............ 2,877,326 3,395,750 1.2
------------- ------------- -----
5,689,745 7,115,750 2.5
- -------------------------------------------------------------------------------------------------------------------
PAPER 50,000 Kimberly-Clark Corp............... 3,844,967 4,762,500 1.6
- -------------------------------------------------------------------------------------------------------------------
PETROLEUM 79,400 Pennzoil Co....................... 3,187,715 4,486,100 1.6
122,000 Unocal Corp....................... 4,101,835 4,956,250 1.7
------------- ------------- -----
7,289,550 9,442,350 3.3
- -------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 95,000 Abbott Laboratories............... 3,890,031 4,821,250 1.7
66,300 Merck & Co., Inc.................. 4,024,293 5,254,275 1.8
------------- ------------- -----
7,914,324 10,075,525 3.5
- -------------------------------------------------------------------------------------------------------------------
RAILROADS 52,000 Burlington Northern Santa Fe,
Inc.............................. 4,270,775 4,491,500 1.6
- -------------------------------------------------------------------------------------------------------------------
REAL ESTATE 97,400 Prentiss Properties Trust......... 1,996,124 2,435,000 0.8
INVESTMENT TRUST 45,800 Starwood Lodging Trust............ 1,795,042 2,524,725 0.9
------------- ------------- -----
3,791,166 4,959,725 1.7
- -------------------------------------------------------------------------------------------------------------------
RETAIL 210,000 Limited, Inc. (The)............... 4,525,822 3,858,750 1.3
111,215 Rite Aid Corporation.............. 3,563,747 4,420,796 1.5
108,000 Sears, Roebuck & Co............... 4,290,566 4,981,500 1.7
141,000 +Toys 'R' Us, Inc................. 4,381,946 4,230,000 1.5
------------- ------------- -----
16,762,081 17,491,046 6.0
- -------------------------------------------------------------------------------------------------------------------
SCIENTIFIC 75,000 Fisher Scientific International,
INSTRUMENTS Inc.............................. 2,477,538 3,534,375 1.2
- -------------------------------------------------------------------------------------------------------------------
SOFTWARE 104,600 +BMC Software, Inc................ 3,878,245 4,327,825 1.5
88,750 +Oracle Corp...................... 2,890,668 3,694,219 1.3
------------- ------------- -----
6,768,913 8,022,044 2.8
- -------------------------------------------------------------------------------------------------------------------
STEEL 91,000 AK Steel Holding Corp............. 3,755,163 3,605,875 1.2
- -------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 145,000 +Airtouch Communications, Inc..... 4,151,148 3,661,250 1.3
55,000 Bell Atlantic Corp................ 3,457,791 3,561,250 1.2
------------- ------------- -----
7,608,939 7,222,500 2.5
- -------------------------------------------------------------------------------------------------------------------
TOBACCO 24,000 Philip Morris Companies, Inc...... 2,340,784 2,703,000 0.9
- -------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 150,000 Carnival Corp. (Class A).......... 4,272,624 4,950,000 1.7
- -------------------------------------------------------------------------------------------------------------------
UTILITIES 240,100 Edison International, Inc......... 4,578,019 4,771,987 1.6
- -------------------------------------------------------------------------------------------------------------------
TOTAL US STOCKS & WARRANTS 193,321,799 222,693,783 76.9
- -------------------------------------------------------------------------------------------------------------------
COUNTRY FOREIGN STOCKS++++
- -------------------------------------------------------------------------------------------------------------------
ARGENTINA 50,000 Yacimientos Petroliferos Fiscales
S.A. (ADR)* (31)................. 1,102,030 1,262,500 0.4
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ARGENTINA 1,102,030 1,262,500 0.4
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Capital Stock Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PERCENT OF
COUNTRY SHARES HELD FOREIGN STOCKS++++ (CONTINUED) COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BRAZIL 1,650,000 Companhia Cervejaria Brahma S.A.
PN (Preferred) (4)............... $ 943,548 $ 902,108 0.3%
8,700,000 Petroleo Brasileiro S.A.-Petrobras
(Preferred) (16)................. 1,030,100 1,385,937 0.5
12,300 Telecomunicacoes Brasileiras
S.A.-Telebras (ADR)* (21)........ 678,698 940,950 0.3
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN BRAZIL 2,652,346 3,228,995 1.1
- -------------------------------------------------------------------------------------------------------------------
CANADA 47,400 Canadian Pacific, Ltd. (15)....... 971,396 1,256,100 0.4
22,800 Magna International Inc. (Class A)
(2).............................. 922,477 1,271,100 0.4
15,500 Potash Corp. of Saskatchewan, Inc.
(41)............................. 1,075,274 1,317,500 0.5
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN CANADA 2,969,147 3,844,700 1.3
- -------------------------------------------------------------------------------------------------------------------
FINLAND 27,000 Finnlines OY (22)................. 540,042 662,958 0.2
21,500 Nokia Corp. (ADR)* (6)............ 777,943 1,238,937 0.4
55,100 +UPM-Kymmene OY (b) (42).......... 1,136,242 1,137,416 0.4
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FINLAND 2,454,227 3,039,311 1.0
- -------------------------------------------------------------------------------------------------------------------
FRANCE 27,000 Michelin (C.G.D.E.) S.A. (Class B)
(46)............................. 1,127,133 1,457,729 0.5
20,700 +SGS-Thomson Microelectronics N.V.
(NY Registered Shares) (19)...... 767,931 1,449,000 0.5
29,000 Scor S.A. (48).................... 1,128,335 1,020,143 0.4
77,000 Usinor-Sacilor S.A. (26).......... 1,313,544 1,120,567 0.3
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FRANCE 4,336,943 5,047,439 1.7
- -------------------------------------------------------------------------------------------------------------------
GERMANY 3,000 +Henkel KGaA (5).................. 133,334 143,906 0.0
27,000 +Henkel KGaA (Preferred) (5)...... 1,147,254 1,356,581 0.5
3,000 Mannesmann AG (43)................ 1,047,357 1,300,617 0.4
6,300 +Puma AG (1)...................... 207,091 213,754 0.1
24,000 Siemens AG (9).................... 1,348,146 1,130,972 0.4
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN GERMANY 3,883,182 4,145,830 1.4
- -------------------------------------------------------------------------------------------------------------------
HONG KONG 64,400 HSBC Holdings PLC (3)............. 1,036,470 1,378,097 0.5
600,000 Hong Kong Telecommunications, Ltd.
(ADR)* (21)...................... 1,062,716 965,865 0.3
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN HONG KONG 2,099,186 2,343,962 0.8
- -------------------------------------------------------------------------------------------------------------------
INDONESIA 31,600 PT Indonesian Satellite Corp.
(ADR)* (21)...................... 1,274,981 865,050 0.3
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN INDONESIA 1,274,981 865,050 0.3
- -------------------------------------------------------------------------------------------------------------------
ITALY 89,100 Danieli & Co. Officine Meccaniche
S.p.A. (43)...................... 350,452 372,656 0.1
230,000 Societa Finanziaria Telefonica
S.p.A. (STET) (21)............... 717,560 1,045,282 0.4
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ITALY 1,068,012 1,417,938 0.5
- -------------------------------------------------------------------------------------------------------------------
JAPAN 65,000 Bridgestone Corporation (46)...... 1,127,619 1,234,888 0.4
56,000 Canon, Inc. (9)................... 1,027,555 1,237,997 0.4
72,000 Eisai Co., Ltd. (37).............. 1,272,640 1,417,617 0.5
73,000 Matsushita Electric Industrial
Co., Ltd. (9).................... 1,157,435 1,191,451 0.4
160,000 Mistubishi Electric Corp. (8)..... 1,157,192 953,368 0.3
125,000 Mistubishi Heavy Industries, Ltd.
(9).............................. 1,021,115 993,092 0.4
89,000 Mitsui Soko Co., Ltd. (24)........ 789,786 581,805 0.2
70,000 Nomura Securities Co., Ltd.
(10)............................. 1,389,864 1,051,813 0.4
</TABLE>
20
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Capital Stock Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PERCENT OF
COUNTRY SHARES HELD FOREIGN STOCKS++++ (CONCLUDED) COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JAPAN
(CONCLUDED) 14,000 Rohm Co., Ltd. (9)................ $ 779,601 $ 918,826 0.3%
102,000 Tokio Marine & Fire Insurance Co.,
Ltd. (13)........................ 1,214,789 960,104 0.3
156,000 Toray Industries, Inc. (23)....... 1,087,555 963,212 0.4
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN JAPAN 12,025,151 11,504,173 4.0
- -------------------------------------------------------------------------------------------------------------------
MEXICO 80,000 +Carso Global Telecom, S.A. de
C.V. (ADR)* (21)................. 380,000 360,000 0.1
80,000 Grupo Carso, S.A. de C.V. (ADR)*
(15)............................. 981,625 830,000 0.3
1,116 Grupo Financiero Inbursa, S.A. de
C.V. (ADR)* (10)................. 22,400 18,972 0.0
48,000 Kimberly-Clark de Mexico, S.A. de
C.V. (42)........................ 816,855 948,291 0.3
22,800 Panamerican Beverages, Inc. (Class
A) (4)........................... 893,104 1,068,750 0.4
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN MEXICO 3,093,984 3,226,013 1.1
- -------------------------------------------------------------------------------------------------------------------
NETHERLANDS 18,000 ABN AMRO Holding N.V. (3)......... 1,008,500 1,172,190 0.4
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
NETHERLANDS 1,008,500 1,172,190 0.4
- -------------------------------------------------------------------------------------------------------------------
NORWAY 106,000 Color Line ASA (22)............... 413,416 493,475 0.2
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN NORWAY 413,416 493,475 0.2
- -------------------------------------------------------------------------------------------------------------------
PHILIPPINES 385,000 San Miguel Corp. (Class B) (4).... 1,338,245 1,700,685 0.6
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
PHILIPPINES 1,338,245 1,700,685 0.6
- -------------------------------------------------------------------------------------------------------------------
SOUTH KOREA 76,300 +Hyundai Engineering &
Construction Co., Ltd. (GDR)**
(40)++........................... 994,189 476,875 0.2
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SOUTH KOREA 994,189 476,875 0.2
- -------------------------------------------------------------------------------------------------------------------
SPAIN 40,000 Repsol S.A. (ADR)* (31)........... 1,316,132 1,525,000 0.5
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SPAIN 1,316,132 1,525,000 0.5
- -------------------------------------------------------------------------------------------------------------------
SWEDEN 95,100 Bure Investment AB (45)........... 829,105 1,130,315 0.4
49,000 Sparbanken Sverige AB (Class A)
(3).............................. 632,647 841,233 0.3
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWEDEN 1,461,752 1,971,548 0.7
- -------------------------------------------------------------------------------------------------------------------
SWITZERLAND 1,000 ABB AG (44)....................... 1,214,108 1,243,651 0.4
900 +Novartis AG (Registered Shares)
(37)............................. 781,569 1,030,550 0.4
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWITZERLAND 1,995,677 2,274,201 0.8
- -------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM 108,000 Boots Company PLC (18)............ 1,023,921 1,113,218 0.4
415,000 British Steel PLC (20)............ 1,101,757 1,143,071 0.4
195,000 General Electric PLC (Ordinary)
(9).............................. 1,088,607 1,277,711 0.5
78,000 Glaxo Wellcome PLC (37)........... 1,061,058 1,265,034 0.4
159,000 Grand Metropolitan PLC (11)....... 1,097,453 1,251,279 0.4
111,000 Imperial Chemical Industries PLC
(16)............................. 1,564,470 1,459,372 0.5
101,000 National Westminster Bank PLC
(3).............................. 1,080,151 1,185,345 0.4
315,000 Vodafone Group PLC (21)........... 1,102,103 1,331,088 0.5
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE UNITED
KINGDOM 9,119,520 10,026,118 3.5
- -------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS 54,606,620 59,566,003 20.5
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Capital Stock Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PERCENT OF
FACE AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER*** $ 3,703,000 General Motors Acceptance Corp.,
7.50% due 1/02/1997.............. $ 3,701,457 $ 3,701,457 1.3%
- -------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & 3,500,000 Federal Home Loan Mortgage Corp., 3,492,623 3,492,623 1.2
AGENCY OBLIGATIONS*** 5.42% due 1/14/1997..............
- -------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES....... 7,194,080 7,194,080 2.5
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS................. $ 255,122,499 289,453,866 99.9
-------------
-------------
UNREALIZED DEPRECIATION ON FORWARD
FOREIGN EXCHANGE CONTRACTS+++.... (335,948) (0.1)
OTHER ASSETS LESS LIABILITIES..... 578,151 0.2
------------- -----
NET ASSETS........................ $ 289,696,069 100.0%
------------- -----
------------- -----
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(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.
(b) Name changed as a result of the merger of Kymmene Corporation and Repola
Ltd.
* American Depositary Receipts (ADR).
** Global Depositary Receipts (GDR).
*** 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 $477,000, representing 0.2% of
net assets.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
ACQUISITION VALUE
ISSUE DATE COST (NOTE 1A)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hyundai Engineering & Construction Co., Ltd. (GDR).......................... 3/19/1996 $ 994,189 $ 476,875
- -----------------------------------------------------------------------------------------------------------------
TOTAL $ 994,189 $ 476,875
--------- -----------
--------- -----------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
+++ Forward foreign exchange contracts as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------
UNREALIZED
FOREIGN CURRENCY EXPIRATION APPRECIATION
SOLD DATE (DEPRECIATION)
- ------------------------------------------------
<C> <S> <C>
Chf 2,875,000 January 1997 $ 44,304
DM 7,100,000 February 1997 111,705
Frf 18,000,000 January 1997 (21,251)
L 5,700,000 January 1997 (451,018)
Y 1,330,000,000 February 1997 (19,688)
- ------------------------------------------------
TOTAL UNREALIZED DEPRECIATION ON
FORWARD FOREIGN
EXCHANGE CONTRACTS -- NET (US$
COMMITMENT -- $31,199,454) $ (335,948)
--------------
--------------
- ------------------------------------------------
</TABLE>
22
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Capital Stock Portfolio
Schedule of Investments as of December 31, 1996 (Concluded)
- --------------------------------------------------------------------------------
++++ Corresponding industry groups for foreign stocks and warrants:
<TABLE>
<S> <C> <C>
(1) Footwear (17) Real Estate (33) Automotive
(2) Auto-Parts (18) Retail (34) Leisure & Entertainment
(3) Banking (19) Semiconductors (35) Office Equipment
(4) Beverages (20) Steel (36) Industrial Services
(5) Chemicals (21) Telecommunications (37) Pharmaceuticals
(6) Telecommunications & Equipment (22) Cruise Lines (38) Photography
(7) Computers (23) Textiles (39) Commercial Design
(8) Electrical Equipment (24) Warehouse & Storage (40) Engineering & Construction
(9) Electronics (25) Food Processing (41) Mining
(10) Financial Services (26) Metals (42) Paper & Forest Products
(11) Diversified (27) Advertising (43) Machinery & Equipment
(12) Industrial Components (28) Tobacco (44) Capital Goods
(13) Insurance (29) Industrials (45) Investment Management
(14) Media /Publishing (30) Containers (46) Tires & Rubber
(15) Multi-Industry (31) Petroleum (47) Merchandising
(16) Oil-Integrated (32) Railroads (48) Reinsurance
</TABLE>
See Notes to Financial Statements.
23
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD US STOCKS COST (NOTE 1A) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AEROSPACE & DEFENSE 10,000 AlliedSignal Inc. .................... $ 735,089 $ 670,000 0.3%
31,000 +Gulfstream Aerospace Corp. .......... 765,646 751,750 0.3
17,000 Northrop Grumman Corp. ............... 1,128,898 1,406,750 0.6
17,000 United Technologies Corp. ............ 533,814 1,122,000 0.5
------------- ------------- -----------
3,163,447 3,950,500 1.7
- --------------------------------------------------------------------------------------------------------------------
AUTO & TRUCK 19,000 General Motors Corp. ................. 1,037,747 1,059,250 0.5
- --------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS 41,000 +Lear Corporation .................... 1,373,500 1,399,125 0.6
- --------------------------------------------------------------------------------------------------------------------
BANKING 38,000 Bank of New York Co., Inc. ........... 987,758 1,282,500 0.6
7,000 BankAmerica Corp. .................... 716,177 698,250 0.3
14,400 Citicorp ............................. 1,142,253 1,483,200 0.6
------------- ------------- -----------
2,846,188 3,463,950 1.5
- --------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS 28,700 Oakwood Homes Corporation ............ 653,908 656,513 0.3
- --------------------------------------------------------------------------------------------------------------------
CHEMICALS 19,000 +FMC Corporation ..................... 1,346,648 1,332,375 0.6
25,000 PPG Industries, Inc. ................. 1,237,314 1,403,125 0.6
------------- ------------- -----------
2,583,962 2,735,500 1.2
- --------------------------------------------------------------------------------------------------------------------
COMPUTER 22,000 +cisco Systems, Inc. ................. 1,000,847 1,399,750 0.6
SERVICES 36,000 First Data Corp. ..................... 1,289,781 1,314,000 0.6
------------- ------------- -----------
2,290,628 2,713,750 1.2
- --------------------------------------------------------------------------------------------------------------------
COMPUTERS 16,000 +Compaq Computer Corp. ............... 1,186,463 1,188,000 0.5
9,000 International Business Machines
Corp. ............................... 989,063 1,359,000 0.6
------------- ------------- -----------
2,175,526 2,547,000 1.1
- --------------------------------------------------------------------------------------------------------------------
DIVERSIFIED 36,800 Corning, Inc. ........................ 1,134,539 1,702,000 0.7
- --------------------------------------------------------------------------------------------------------------------
ELECTRONICS 11,200 General Electric Co. ................. 883,768 1,107,400 0.5
8,000 Linear Technology Corporation ........ 328,049 350,000 0.1
------------- ------------- -----------
1,211,817 1,457,400 0.6
- --------------------------------------------------------------------------------------------------------------------
ENGINEERING & 33,000 Foster Wheeler Corp. ................. 1,399,233 1,225,125 0.5
CONSTRUCTION
- --------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 2,800 +Imax Corporation .................... 86,527 86,100 0.0
36,479 +Viacom, Inc. (Class B)............... 1,338,930 1,272,205 0.6
------------- ------------- -----------
1,425,457 1,358,305 0.6
- --------------------------------------------------------------------------------------------------------------------
FERTILIZERS 17,500 IMC Global, Inc. ..................... 678,325 684,688 0.3
- --------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 28,000 American Express Company ............. 1,340,030 1,582,000 0.7
- --------------------------------------------------------------------------------------------------------------------
FOODS 40,000 H.J. Heinz Company ................... 1,310,357 1,430,000 0.6
- --------------------------------------------------------------------------------------------------------------------
INSURANCE 12,000 Aetna Inc. ........................... 904,500 960,000 0.4
24,800 Allstate Corp. ....................... 1,083,168 1,435,300 0.6
21,000 UNUM Corporation ..................... 1,340,583 1,517,250 0.7
------------- ------------- -----------
3,328,251 3,912,550 1.7
- --------------------------------------------------------------------------------------------------------------------
LEISURE/TOURISM 50,000 Brunswick Corporation ................ 1,237,238 1,200,000 0.5
14,284 TCI Pacific Communications
(Convertible Preferred) ............. 1,336,589 1,296,273 0.6
------------- ------------- -----------
2,573,827 2,496,273 1.1
- --------------------------------------------------------------------------------------------------------------------
MACHINERY 29,000 +American Standard Companies, Inc. ... 946,413 1,109,250 0.5
36,500 Deere & Co. .......................... 1,542,480 1,482,813 0.6
------------- ------------- -----------
2,488,893 2,592,063 1.1
- --------------------------------------------------------------------------------------------------------------------
MEDICAL 49,000 +Health Management Associates, Inc.
(Class A) ........................... 1,104,800 1,102,500 0.5
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD US STOCKS (CONCLUDED) COST (NOTE 1A) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NATURAL GAS 14,000 El Paso Natural Gas Co. .............. $ 686,247 $ 707,000 0.3%
33,300 Enron Corp. .......................... 1,251,808 1,436,063 0.6
------------- ------------- -----------
1,938,055 2,143,063 0.9
- --------------------------------------------------------------------------------------------------------------------
OIL SERVICES 44,000 Dresser Industries, Inc. ............. 931,971 1,364,000 0.6
16,000 Schlumberger Ltd., Inc. .............. 1,111,655 1,598,000 0.7
------------- ------------- -----------
2,043,626 2,962,000 1.3
- --------------------------------------------------------------------------------------------------------------------
PAPER 17,800 Kimberly-Clark Corp. ................. 1,368,004 1,695,450 0.7
- --------------------------------------------------------------------------------------------------------------------
PETROLEUM 27,000 Pennzoil Co. ......................... 1,074,720 1,525,500 0.7
36,000 Unocal Corp. ......................... 1,210,303 1,462,500 0.6
------------- ------------- -----------
2,285,023 2,988,000 1.3
- --------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 24,000 Abbott Laboratories .................. 944,407 1,218,000 0.5
18,200 Merck & Co., Inc. .................... 653,692 1,442,350 0.6
------------- ------------- -----------
1,598,099 2,660,350 1.1
- --------------------------------------------------------------------------------------------------------------------
RAILROADS 14,000 Burlington Northern Santa Fe, Inc. ... 1,134,788 1,209,250 0.5
- --------------------------------------------------------------------------------------------------------------------
REAL ESTATE 32,700 Prentiss Properties Trust ............ 668,479 817,500 0.4
INVESTMENT 18,100 Starwood Lodging Trust ............... 709,645 997,763 0.4
------------- ------------- -----------
TRUST 1,378,124 1,815,263 0.8
- --------------------------------------------------------------------------------------------------------------------
RETAIL 23,465 Rite Aid Corporation ................. 699,121 932,734 0.4
34,000 Sears, Roebuck & Co. ................. 1,535,019 1,568,250 0.7
50,500 +Toys 'R' Us, Inc. ................... 1,572,295 1,515,000 0.6
------------- ------------- -----------
3,806,435 4,015,984 1.7
- --------------------------------------------------------------------------------------------------------------------
SCIENTIFIC 32,000 Fisher Scientific International,
INSTRUMENTS Inc. ................................ 991,105 1,508,000 0.6
- --------------------------------------------------------------------------------------------------------------------
SOFTWARE 33,800 +BMC Software, Inc. .................. 1,262,412 1,398,475 0.6
28,750 +Oracle Corp. ........................ 910,470 1,196,719 0.5
------------- ------------- -----------
2,172,882 2,595,194 1.1
- --------------------------------------------------------------------------------------------------------------------
STEEL 39,000 AK Steel Holding Corp. ............... 1,605,755 1,545,375 0.7
- --------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 55,000 +Airtouch Communications, Inc. ....... 1,574,588 1,388,750 0.6
17,000 Bell Atlantic Corp. .................. 923,440 1,100,750 0.5
------------- ------------- -----------
2,498,028 2,489,500 1.1
- --------------------------------------------------------------------------------------------------------------------
TOBACCO 9,000 Philip Morris Companies, Inc. ........ 897,742 1,013,625 0.4
- --------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 50,000 Carnival Corp. (Class A) ............. 1,413,255 1,650,000 0.7
- --------------------------------------------------------------------------------------------------------------------
UTILITIES 64,000 Edison International, Inc. ........... 1,192,546 1,272,000 0.5
- --------------------------------------------------------------------------------------------------------------------
TOTAL US STOCKS 60,443,902 69,631,546 29.9
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
COUNTRY FOREIGN STOCKS+++
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
ARGENTINA 95,539 Banco de Galicia y Buenos Aires S.A.
(ADR)* (4)........................... 1,531,620 2,304,878 1.0
90,677 Banco Frances del Rio de la Plata S.A.
(ADR)* (5)........................... 1,956,213 2,493,617 1.1
90,000 Yaciementos Petroliferos Fiscales S.A.
(ADR)* (29).......................... 2,029,393 2,272,500 1.0
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ARGENTINA 5,517,226 7,070,995 3.1
- --------------------------------------------------------------------------------------------------------------------
BRAZIL 3,500,000 Companhia Cervejaria Brahma S.A. PN
(Preferred) (14)..................... 1,997,953 1,913,562 0.8
14,600,000 Petroleo Brasileiro S.A.-Petrobras
(Preferred) (28)..................... 1,723,453 2,325,825 1.0
26,500 Telecomunicacoes Brasileiras S.A.-
Telebras (ADR)* (35)................. 1,424,602 2,027,250 0.9
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN BRAZIL 5,146,008 6,266,637 2.7
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRY HELD FOREIGN STOCKS+++ (CONTINUED) COST (NOTE 1A) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CANADA 85,000 Canadian Pacific, Ltd. (25)........... $ 1,473,190 $ 2,252,500 1.0%
45,000 Magna International Inc. (Class A)
(17)................................. 2,019,240 2,508,750 1.1
26,900 Potash Corp of Saskatchewan, Inc.
(44)................................. 1,899,766 2,286,500 1.0
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN CANADA 5,392,196 7,047,750 3.1
- --------------------------------------------------------------------------------------------------------------------
FINLAND 50,000 Finnlines OY (50)..................... 923,284 1,227,700 0.5
40,700 Nokia Corp. (ADR)* (45)............... 1,422,164 2,345,337 1.0
81,000 +UPM-Kymmene OY (a)(46)............... 1,669,997 1,672,063 0.7
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FINLAND 4,015,445 5,245,100 2.2
- --------------------------------------------------------------------------------------------------------------------
FRANCE 43,300 Michelin (C.G.D.E.) S.A. (Class B)
(18)................................. 1,956,423 2,337,766 1.0
42,600 +SGS-Thomson Microelectronics N.V.
(NY Registered Shares) (39).......... 1,563,091 2,982,000 1.3
51,000 Scor S.A. (51)........................ 1,987,106 1,794,044 0.8
120,000 Usinor-Sacilor S.A. (22).............. 1,909,976 1,746,338 0.7
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FRANCE 7,416,596 8,860,148 3.8
- --------------------------------------------------------------------------------------------------------------------
GERMANY 4,000 +Henkel KGaA (11)..................... 177,789 191,875 0.1
36,000 +Henkel KGaA (Preferred) (11)......... 1,529,763 1,808,775 0.8
5,600 Mannesmann AG (21).................... 1,476,775 2,427,819 1.0
12,060 +Puma AG (1).......................... 396,360 409,186 0.2
40,600 Siemens AG (13)....................... 1,889,641 1,913,227 0.8
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN GERMANY 5,470,328 6,750,882 2.9
- --------------------------------------------------------------------------------------------------------------------
HONG KONG 112,800 HSBC Holdings PLC (4)................. 1,767,488 2,413,809 1.0
1,168,000 Hong Kong Telecommunications, Ltd.
(35)................................. 2,074,055 1,880,217 0.8
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN HONG KONG 3,841,543 4,294,026 1.8
- --------------------------------------------------------------------------------------------------------------------
INDONESIA 59,450 P.T. Indonesian Satellite Corp. (ADR)*
(35)................................. 2,169,118 1,627,444 0.7
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN INDONESIA 2,169,118 1,627,444 0.7
- --------------------------------------------------------------------------------------------------------------------
ITALY 431,000 Danieli & C. Officine Meccaniche
S.p.A. (21).......................... 1,590,085 1,802,635 0.8
554,000 Societa Finanziara Telefonica S.p.A.
(STET) (35).......................... 1,581,727 2,517,767 1.1
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ITALY 3,171,812 4,320,402 1.9
- --------------------------------------------------------------------------------------------------------------------
JAPAN 124,000 Bridgestone Corporation (18).......... 2,149,127 2,355,786 1.0
103,000 Canon, Inc. (13)...................... 1,733,499 2,277,029 1.0
117,000 Eisai Co., Ltd. (30).................. 2,156,580 2,303,627 1.0
165,000 Maeda Corp. (6)....................... 1,668,260 1,221,114 0.5
124,000 Matsushita Electric Industrial Co.,
Ltd. (13)............................ 2,001,160 2,023,834 0.9
318,000 Mitsubishi Electric Corp. (12)........ 2,087,710 1,894,819 0.8
265,000 Mitsubishi Heavy Industries, Ltd.
(13)................................. 1,705,608 2,105,354 0.9
245,000 Mitsui-Soko Co., Ltd. (24)............ 2,105,369 1,601,598 0.7
81,000 Nomura Securities Co., Ltd. (43)...... 1,661,741 1,217,098 0.5
187,000 Okumura Corp. (6)..................... 1,557,500 1,136,857 0.5
34,000 Rohm Co. Ltd. (13).................... 1,915,392 2,231,434 1.0
187,000 Tokio Marine and Fire Insurance Co.,
Ltd. (19)............................ 2,316,039 1,760,190 0.7
343,000 Toray Industries, Inc. (36)........... 2,337,746 2,117,832 0.9
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN JAPAN 25,395,731 24,246,572 10.4
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRY HELD FOREIGN STOCKS+++ (CONCLUDED) COST (NOTE 1A) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MEXICO 105,000 +Carso Global Telecom, S.A. de C.V.
(ADR)* (35).......................... $ 498,750 $ 472,500 0.2%
105,000 Grupo Carso, S.A. de C.V. (ADR)*
(25)................................. 1,670,406 1,089,375 0.5
1,465 Grupo Financiero Inbursa, S.A. de C.V.
(ADR)* (43).......................... 29,400 24,905 0.0
91,000 Kimberly-Clark de Mexico, S.A. de C.V.
(46)................................. 1,633,917 1,797,802 0.8
47,500 Panamerican Beverages, Inc. (Class A)
(14)................................. 1,944,520 2,226,562 0.9
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN MEXICO 5,776,993 5,611,144 2.4
- --------------------------------------------------------------------------------------------------------------------
NETHERLANDS 31,000 ABN AMRO Holding N.V. (4)............. 1,738,232 2,018,772 0.9
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE NETHERLANDS 1,738,232 2,018,772 0.9
- --------------------------------------------------------------------------------------------------------------------
NORWAY 212,000 Color Line ASA (50)................... 826,832 986,949 0.4
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN NORWAY 826,832 986,949 0.4
- --------------------------------------------------------------------------------------------------------------------
PHILIPPINES 533,500 San Miguel Corp. (Class B) (14)....... 1,764,310 2,356,664 1.0
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE PHILIPPINES 1,764,310 2,356,664 1.0
- --------------------------------------------------------------------------------------------------------------------
SOUTH KOREA 43,400 +Hyundai Engineering & Construction
Co., Ltd.(GDR)** (48)++.............. 565,502 271,250 0.1
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SOUTH KOREA 565,502 271,250 0.1
- --------------------------------------------------------------------------------------------------------------------
SPAIN 58,300 Repsol S.A. (ADR)* (29)............... 1,720,869 2,222,687 1.0
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SPAIN 1,720,869 2,222,687 1.0
- --------------------------------------------------------------------------------------------------------------------
SWEDEN 139,600 Bure Investment AB (49)............... 1,217,290 1,659,222 0.7
94,000 Sparbanken Sverige AB (Class A) (4)... 1,208,588 1,613,793 0.7
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWEDEN 2,425,878 3,273,015 1.4
- --------------------------------------------------------------------------------------------------------------------
SWITZERLAND 1,680 ABB AG (9)............................ 1,384,282 2,089,334 0.9
1,800 +Novartis AG (Registered Shares)
(30)................................. 1,748,593 2,061,099 0.9
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWITZERLAND 3,132,875 4,150,433 1.8
- --------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM 183,000 Boots Company PLC (33)................ 1,734,918 1,886,285 0.8
610,000 British Steel PLC (40)................ 1,619,397 1,680,177 0.7
366,000 General Electric PLC (13)............. 1,800,848 2,398,165 1.0
134,700 Glaxo Wellcome PLC (30)............... 1,882,922 2,184,616 0.9
275,700 Grand Metropolitan PLC (34)........... 1,946,319 2,169,671 0.9
209,000 Imperial Chemical Industries PLC
(28)................................. 2,740,964 2,747,827 1.2
168,000 National Westminster Bank PLC (4)..... 1,796,776 1,971,663 0.9
538,000 Vodafone Group PLC (35)............... 1,884,137 2,273,414 1.0
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE UNITED
KINGDOM 15,406,281 17,311,818 7.4
- --------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS 100,893,775 113,932,688 49.0
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT*** FOREIGN BONDS+++
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DENMARK Dkr 20,750,000 Government of Denmark, 8% due
3/15/2006 (16)....................... 3,800,226 3,876,199 1.7
- --------------------------------------------------------------------------------------------------------------------
GERMANY DM 2,750,000 Bundesrepublik Deutschland, 7.125% due
12/20/2002 (16)...................... 1,909,822 1,962,626 0.8
- --------------------------------------------------------------------------------------------------------------------
ITALY Lit 10,680,000,000 Buoni Poliennali del Tesoro (Italian
Government Bonds), 8.50% due
1/01/2004 (16)....................... 7,560,872 7,534,913 3.2
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
COUNTRY AMOUNT*** FOREIGN BONDS+++ (CONCLUDED) COST (NOTE 1A) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SWEDEN Government of Sweden:
Skr 13,100,000 10.25% due 5/05/2000 (16)............. $ 2,240,194 $ 2,217,639 1.0%
38,700,000 8% due 8/15/2007 (16)................. 6,075,168 6,198,474 2.7
------------- ------------- -----------
8,315,362 8,416,113 3.7
- --------------------------------------------------------------------------------------------------------------------
UNITED UK Treasury Gilt:
KINGDOM L 1,000,000 7% due 11/06/2001 (16)................ 1,648,098 1,692,088 0.7
2,100,000 7.50% due 12/07/2006 (16)............. 3,533,147 3,588,189 1.5
------------- ------------- -----------
5,181,245 5,280,277 2.2
- --------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS 26,767,527 27,070,128 11.6
- --------------------------------------------------------------------------------------------------------------------
US GOVERNMENT OBLIGATIONS
- --------------------------------------------------------------------------------------------------------------------
US US Treasury Notes:
GOVERNMENT US$ 1,700,000 5% due 1/31/1998...................... 1,684,992 1,688,049 0.7
OBLIGATIONS 3,500,000 5.50% due 4/15/2000................... 3,448,594 3,437,665 1.5
4,000,000 6.25% due 4/30/2001................... 4,022,188 4,008,760 1.7
7,300,000 7% due 7/15/2006...................... 7,648,080 7,584,043 3.3
- --------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT OBLIGATIONS 16,803,854 16,718,517 7.2
- --------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
- --------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER**** 4,148,000 Three Rivers Funding Corp., 5.72% due
1/21/1997............................ 4,134,819 4,134,819 1.8
- --------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 4,134,819 4,134,819 1.8
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS..................... $ 209,043,877 231,487,698 99.5
-------------
-------------
UNREALIZED DEPRECIATION ON FORWARD
FOREIGN EXCHANGE CONTRACTS*****....... (823,288) (0.3)
OTHER ASSETS LESS LIABILITIES......... 1,865,174 0.8
------------- -----------
NET ASSETS............................ $ 232,529,584 100.0%
------------- -----------
------------- -----------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Name changed as a result of the merger of Kymmene Corporation and Repola
Ltd.
* American Depositary Receipts (ADR).
** Global Depositary Receipts (GDR).
*** Denominated in US dollars unless otherwise indicated.
**** 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.
***** Forward foreign exchange contracts as of December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------
UNREALIZED
APPRECIATION
FOREIGN EXPIRATION (DEPRECIATION)
CURRENCY SOLD DATES (NOTES 1C & 1E)
- -----------------------------------------------------
<S> <C> <C>
Chf 5,250,000 January 1997 $ 80,904
DM 21,180,625 February 1997 186,477
Frf 29,500,000 January 1997 (34,828)
L 12,800,000 January 1997 (1,014,393)
Y 2,800,000,000 February 1997 (41,448)
- -----------------------------------------------------
TOTAL UNREALIZED DEPRECIATION ON
FORWARD FOREIGN
EXCHANGE CONTRACTS -- NET (US$
COMMITMENT -- $68,779,740) $ (823,288)
----------------
----------------
- -----------------------------------------------------
</TABLE>
+ Non-income producing security.
28
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1996 (Concluded)
- --------------------------------------------------------------------------------
++ Restricted security as to resale. The value of the Portfolio's
investments in restricted securities was approximately $271,000,
representing 0.1% of net assets.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
ACQUISITION VALUE
ISSUE DATE COST (NOTE 1A)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hyundai Engineering & Construction Co., Ltd. (GDR)....................... 3/19/1996 $ 565,502 $ 271,250
- --------------------------------------------------------------------------------------------------------------
TOTAL $ 565,502 $ 271,250
--------- -----------
--------- -----------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
+++ Corresponding industry groups for foreign stocks and bonds:
(1) Footwear
(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) Beverages
(15) Food
(16) Government (Bonds)
(17) Auto-Parts
(18) Tires & Rubber
(19) Insurance
(20) Machinery
(21) Machinery & Equipment
(22) Metals
(23) Miscellaneous
(24) Warehouse & Storage
(25) Multi-Industry
(26) Natural Gas
(27) Oil & Gas Producers
(28) Oil-Integrated
(29) Petroleum
(30) Pharmaceuticals
(31) Printing & Publishing
(32) Real Estate
(33) Retail
(34) Diversified
(35) Telecommunications
(36) Textiles
(37) Toys
(38) Travel & Lodging
(39) Semiconductors
(40) Steel
(41) Utilities-Electric
(42) Utilities-Water
(43) Financial Services
(44) Mining
(45) Telecommunications &
Equipment
(46) Paper & Forest Products
(47) Photography
(48) Engineering & Construction
(49) Investment Management
(50) Cruise Lines
(51) Reinsurance
See Notes to Financial Statements.
29
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Growth Stock Portfolio
Schedule of Investments as of December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRIES SHARES HELD STOCKS COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADVERTISING 80,000 Interpublic Group of Companies,
Inc.............................. $ 3,083,566 $ 3,800,000 1.6%
- -------------------------------------------------------------------------------------------------------------------
BANKING 110,000 State Street Boston Corp.......... 5,460,474 7,095,000 3.0
50,000 USBANCORP, Inc.................... 2,163,334 2,243,750 0.9
25,000 Wells Fargo & Company............. 6,175,537 6,743,750 2.8
------------- ------------- -----
13,799,345 16,082,500 6.7
- -------------------------------------------------------------------------------------------------------------------
BEVERAGES 140,000 Coca-Cola Co...................... 5,451,486 7,367,500 3.1
- -------------------------------------------------------------------------------------------------------------------
COMPUTERS 5,000 +Compaq Computer Corp............. 255,300 371,250 0.1
- -------------------------------------------------------------------------------------------------------------------
COSMETICS 105,000 Gillette Co. (The)................ 4,458,301 8,163,750 3.4
10,000 International Flavors &
Fragrances, Inc.................. 485,470 450,000 0.2
------------- ------------- -----
4,943,771 8,613,750 3.6
- -------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 10,000 Emerson Electric Co............... 658,040 967,500 0.4
80,000 General Electric Co............... 5,815,364 7,910,000 3.3
------------- ------------- -----
6,473,404 8,877,500 3.7
- -------------------------------------------------------------------------------------------------------------------
ELECTRONICS 5,000 Intel Corp........................ 302,268 654,375 0.3
- -------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 110,000 +Viacom, Inc. (Class A)........... 5,426,147 3,795,000 1.6
90,000 Walt Disney Co.................... 5,447,494 6,266,250 2.6
------------- ------------- -----
10,873,641 10,061,250 4.2
- -------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 200,000 Ahmanson (H.F.) & Company......... 6,059,722 6,500,000 2.7
200,000 Federal National Mortgage
Association...................... 6,298,051 7,450,000 3.1
140,000 Travelers Group, Inc.............. 4,317,153 6,352,500 2.6
------------- ------------- -----
16,674,926 20,302,500 8.4
- -------------------------------------------------------------------------------------------------------------------
FOOD 100,000 ConAgra, Inc...................... 4,417,688 4,975,000 2.1
90,000 RJR Nabisco Holdings Corp. (Class
A)............................... 3,357,859 3,498,750 1.4
180,000 Sara Lee Corporation.............. 5,956,599 6,705,000 2.8
5,000 Wrigley (Wm.) Jr. Company (Class
B)............................... 213,220 281,250 0.1
------------- ------------- -----
13,945,366 15,460,000 6.4
- -------------------------------------------------------------------------------------------------------------------
FOOD MERCHANDISING 100,000 Albertson's Inc................... 3,960,922 3,562,500 1.5
- -------------------------------------------------------------------------------------------------------------------
HOTELS 15,000 Marriott International, Inc....... 703,815 828,750 0.3
- -------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS 5,000 Colgate-Palmolive Co.............. 374,261 461,250 0.2
15,000 Kimberly-Clark Corp............... 1,139,898 1,428,750 0.6
55,000 Procter & Gamble Co............... 4,921,907 5,912,500 2.4
------------- ------------- -----
6,436,066 7,802,500 3.2
- -------------------------------------------------------------------------------------------------------------------
INFORMATION SERVICES 50,000 Electronic Data Systems Corp...... 2,844,580 2,162,500 0.9
170,000 First Data Corp................... 5,479,413 6,205,000 2.6
------------- ------------- -----
8,323,993 8,367,500 3.5
- -------------------------------------------------------------------------------------------------------------------
INSURANCE 85,000 Aetna, Inc........................ 6,070,240 6,800,000 2.8
55,000 American International Group,
Inc.............................. 5,188,058 5,953,750 2.5
175,000 Travelers/Aetna Property Casualty
Corp. (Class A).................. 4,630,910 6,190,625 2.6
------------- ------------- -----
15,889,208 18,944,375 7.9
- -------------------------------------------------------------------------------------------------------------------
LEISURE 105,000 PolyGram N.V. (ADR)*.............. 5,039,807 5,223,750 2.2
- -------------------------------------------------------------------------------------------------------------------
MEDICAL TECHNOLOGY 20,000 +Boston Scientific Corp........... 1,113,700 1,200,000 0.5
150,000 Johnson & Johnson................. 5,582,549 7,462,500 3.1
------------- ------------- -----
6,696,249 8,662,500 3.6
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Growth Stock Portfolio
Schedule of Investments as of December 31, 1996 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRIES SHARES HELD STOCKS (CONCLUDED) COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NATURAL GAS 125,000 El Paso Natural Gas Co............ $ 5,682,670 $ 6,312,500 2.6%
185,000 Enron Corp........................ 7,877,437 7,978,125 3.3
------------- ------------- -----
13,560,107 14,290,625 5.9
- -------------------------------------------------------------------------------------------------------------------
OIL SERVICES 20,000 Schlumberger Ltd., Inc............ 2,033,450 1,997,500 0.8
- -------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 130,000 +Amgen, Inc....................... 4,833,492 7,068,750 2.9
65,000 Bristol-Myers Squibb Co........... 6,197,947 7,068,750 2.9
115,000 Merck & Co., Inc.................. 6,291,279 9,113,750 3.8
105,000 Pfizer, Inc....................... 4,445,538 8,701,875 3.7
------------- ------------- -----
21,768,256 31,953,125 13.3
- -------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY 15,000 Eastman Kodak Co.................. 953,578 1,203,750 0.5
- -------------------------------------------------------------------------------------------------------------------
POLLUTION CONTROL 20,000 WMX Technologies, Inc............. 591,174 652,500 0.3
- -------------------------------------------------------------------------------------------------------------------
RESTAURANTS 90,000 McDonald's Corp................... 4,089,869 4,072,500 1.7
- -------------------------------------------------------------------------------------------------------------------
RETAIL-SPECIALTY 90,000 Rite Aid Corporation.............. 3,176,287 3,577,500 1.5
5,000 +Staples Inc...................... 79,583 90,000 0.0
------------- ------------- -----
3,255,870 3,667,500 1.5
- -------------------------------------------------------------------------------------------------------------------
RETAIL-STORES 65,000 +Meyer (Fred), Inc................ 2,197,130 2,307,500 1.0
100,000 Wal-Mart Stores, Inc.............. 2,422,563 2,287,500 0.9
------------- ------------- -----
4,619,693 4,595,000 1.9
- -------------------------------------------------------------------------------------------------------------------
SOFTWARE 105,000 Computer Associates International,
Inc.............................. 5,288,873 5,223,750 2.2
10,000 +Microsoft Corp................... 459,375 826,250 0.3
45,000 +Oracle Corp.(a).................. 1,548,990 1,873,125 0.8
------------- ------------- -----
7,297,238 7,923,125 3.3
- -------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 180,000 MCI Communications Corp........... 4,627,132 5,872,500 2.4
- -------------------------------------------------------------------------------------------------------------------
TOYS 160,000 Hasbro, Inc....................... 6,115,646 6,220,000 2.6
- -------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 20,000 Carnival Corp. (Class A).......... 467,500 660,000 0.3
- -------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS 192,232,646 228,090,625 94.8
- -------------------------------------------------------------------------------------------------------------------
FACE AMOUNT SHORT-TERM SECURITIES
- -------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER** $11,078,000 General Motors Acceptance Corp.,
7.50% due 1/02/1997.............. 11,073,384 11,073,384 4.6
- -------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & 3,000,000 Federal Home Loan Mortgage Corp.,
AGENCY OBLIGATIONS** 5.36% due 2/20/1997.............. 2,977,220 2,977,220 1.2
- -------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 14,050,604 14,050,604 5.8
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS................. $ 206,283,250 242,141,229 100.6
-------------
-------------
LIABILITIES IN EXCESS OF OTHER
ASSETS............................ (1,475,524) (0.6)
------------- -----
NET ASSETS........................ $ 240,665,705 100.0%
------------- -----
------------- -----
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Formerly Oracle Systems Corp.
* 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.
See Notes to Financial Statements.
31
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S
INDUSTRIES S&P RATINGS RATINGS FACE AMOUNT ISSUE COST
- ---------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AIRLINES-0.6% B+ B1 $ 750,000 USAir, Inc., 10.375% due 3/01/2013.. $ 750,000
- ---------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE-0.7% B B2 1,000,000 Exide Corp., 11.635%** due
12/15/2004......................... 911,315
- ---------------------------------------------------------------------------------------------------------------------
BROADCASTING & BB Ba3 1,000,000 Grupo Televisa, S.A. de C.V.,
PUBLISHING-4.7% 11.375% due 5/15/2003.............. 1,010,000
BB- B1 1,000,000 Hollinger International, Inc., 9.25%
due 2/01/2006...................... 956,250
B B3 1,000,000 MDC Communications Corp., 10.50% due
12/01/2006......................... 1,000,000
B Caa 2,000,000 NWCG Holding Corp., 13.947%** due
6/15/1999.......................... 1,432,560
B B2 1,000,000 Sinclair Broadcasting Group Inc.,
10% due 12/15/2003................. 935,000
--------------
5,333,810
- ---------------------------------------------------------------------------------------------------------------------
BROADCASTING/ CCC+ Caa 75,790 American Telecasting, Inc.,
CABLE-7.9% 17.631%** due 6/15/2004............ 44,288
CCC+ Caa 2,000,000 Australis Media Ltd., 8.45%** due
5/15/2003.......................... 1,212,729
BB- B2 1,850,000 Bell Cablemedia PLC, 11.875%** due
9/15/2005.......................... 1,206,665
BB- Ba3 2,000,000 Century Communications Corp., 9.50%
due 3/01/2005...................... 1,977,500
NR* NR* 500,000 +Globo Communicacoes Participacoes,
10.50% due 12/20/2006.............. 501,250
B B2 1,500,000 +Intermedia Capital Partners, 11.25%
due 8/01/2006...................... 1,493,750
BB+ Ba3 1,000,000 Lenfest Communications, Inc., 8.375%
due 11/01/2005..................... 931,250
B B1 1,000,000 +Olympus Communications L.P.,
10.625% due 11/15/2006............. 1,000,000
BB+ Ba3 1,000,000 Videotron Holdings PLC, 10.625% due
2/15/2005.......................... 1,023,750
--------------
9,391,182
- ---------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS-1.2% B+ B3 1,500,000 Pacific Lumber Co., 10.50% due
3/01/2003.......................... 1,450,313
- ---------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS-1.3% B- B3 1,500,000 International Wire Group, Inc.,
11.75% due 6/01/2005............... 1,486,875
- ---------------------------------------------------------------------------------------------------------------------
CHEMICALS-0.6% B+ Ba3 744,000 +ISP Holdings Inc., 9.75% due
2/15/2002.......................... 744,000
- ---------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS- NR* NR* 500,000 +Comtel Brasileira Ltd., 10.75% due
8.7% 9/26/2004.......................... 500,000
B- B3 2,000,000 Millicom International Cellular
S.A., 13.116%** due 6/01/2006...... 1,153,686
CCC- B3 2,000,000 Nextel Communications, Inc.
14.085%** due 8/15/2004............ 1,242,971
B B2 1,000,000 +Paging Network, Inc., 10% due
10/15/2008......................... 1,001,250
B B3 1,000,000 PanAmSat L.P., 12.301%** due
8/01/2003.......................... 797,742
BB- B2 1,000,000 Rogers Communications Inc., 10.875%
due 4/15/2004...................... 1,007,500
BB- B1 2,000,000 Telefonica de Argentina S.A.,
11.875% due 11/01/2004............. 1,978,830
BB B1 2,000,000 TeleWest Communications PLC,
11.489%** due 10/01/2007........... 1,287,292
B+ B1 1,000,000 Vanguard Cellular Systems, Inc.,
9.375% due 4/15/2006............... 1,000,000
--------------
9,969,271
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
VALUE
INDUSTRIES (NOTE 1A)
- ---------------------------------------
- -----------------------
<S> <C>
AIRLINES-0.6% $ 783,750
- -----------------------
AUTOMOTIVE-0.7%
920,000
- -----------------------
BROADCASTING &
PUBLISHING-4.7% 1,073,750
990,000
1,030,000
1,650,000
1,015,000
--------------
5,758,750
- -----------------------
BROADCASTING/
CABLE-7.9% 31,074
1,050,000
1,484,625
2,050,000
503,125
1,543,125
966,250
1,023,750
1,100,000
--------------
9,751,949
- -----------------------
BUILDING MATERIALS-1.2%
1,522,500
- -----------------------
CAPITAL GOODS-1.3%
1,605,000
- -----------------------
CHEMICALS-0.6%
762,600
- -----------------------
COMMUNICATIONS-
8.7% 513,750
1,240,000
1,365,000
1,013,750
930,000
1,050,000
2,210,000
1,395,000
1,015,000
--------------
10,732,500
- ---------------------------------------
</TABLE>
32
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S
INDUSTRIES S&P RATINGS RATINGS FACE AMOUNT ISSUE COST
- ---------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMPUTER SERVICES-2.1% BB- Ba1 $ 1,500,000 Advanced Micro Devices, Inc., 11%
due 8/01/2003,..................... $ 1,500,000
B- B3 1,000,000 Dictaphone Corp., 11.75% due
8/01/2005.......................... 968,750
--------------
2,468,750
- ---------------------------------------------------------------------------------------------------------------------
CONGLOMERATES-3.0% CCC+ B3 750,000 The Interlake Corp., 12.125% due
3/01/2002.......................... 706,000
B+ B2 1,000,000 J.B. Poindexter & Co., Inc., 12.50%
due 5/15/2004...................... 955,000
NR* NR* 1,000,000 MacAndrew & Forbes Group, Inc., 13%
due 3/01/1999...................... 995,000
B+ B3 1,000,000 Sequa Corp., 9.375% due
12/15/2003......................... 1,030,938
--------------
3,686,938
- ---------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS-5.9% B NR* 1,500,000 Coleman Holdings, Inc., 11.981%**
due 5/27/1998...................... 1,012,500
B+ Ba3 500,000 Coty Inc., 10.25% due 5/01/2005..... 500,000
B+ Ba2 1,900,000 International Semi-Tech
Microelectronics, Inc. 12.792%**
due 8/15/2003...................... 1,171,927
B- B2 683,000 Polymer Group Inc., 12.25% due
7/15/2002.......................... 683,000
B- B2 2,000,000 Samsonite Corp., 11.125% due
7/15/2005.......................... 1,935,625
B+ B1 1,400,000 Sealy Corp., 9.50% due 5/01/2003.... 1,424,500
--------------
6,727,552
- ---------------------------------------------------------------------------------------------------------------------
ENERGY-5.3% BB B2 500,000 California Energy Company, Inc.,
9.875% due 6/30/2003............... 500,000
B+ B1 1,000,000 +Parker Drilling Co., 9.75% due
11/15/2006......................... 992,150
NR* NR* 1,500,000 +Petroleo Brasileiro S.A.-Petrobras,
10% due 10/17/2006................. 1,500,000
CCC+ Caa 1,700,000 Transamerican Refining Corp.,
19.571%** due 2/15/2002............ 1,354,618
BB- B2 1,000,000 TransTexas Gas Corp., 11.50% due
6/15/2002.......................... 1,000,000
BB- B1 1,000,000 Yacimientos Petroliferos Fiscales
S.A., 8% due 2/15/2004............. 710,000
--------------
6,056,768
- ---------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT-1.1% B- B2 2,000,000 AMF Group Inc., 12.082%** due
3/15/2006.......................... 1,229,648
- ---------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES-1.3% BB- B1 1,500,000 Reliance Group Holdings Inc., 9.75%
due 11/15/2003..................... 1,449,375
- ---------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE-4.7% B+ B1 2,000,000 Chiquita Brands International,
9.125% due 3/01/2004............... 2,001,250
NR* NR* 466,000 Cumberland Farms, Inc., 10.50% due
10/01/2003......................... 456,097
B- B3 500,000 Envirodyne Industries Inc., 10.25%
due 12/01/2001..................... 509,375
CCC+ Caa 1,000,000 Fresh Del Monte Corp., 10% due
5/01/2003.......................... 976,250
B B3 2,000,000 Specialty Foods Corp., 11.125% due
10/01/2002......................... 1,990,000
--------------
5,932,972
- ---------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT BB- B1 1,500,000 Republic of Argentina, 8.375% due
OBLIGATIONS-1.1% 12/20/2003......................... 1,128,750
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
VALUE
INDUSTRIES (NOTE 1A)
- ---------------------------------------
- ------------------------
<S> <C>
COMPUTER SERVICES-2.1%
$ 1,627,500
920,000
--------------
2,547,500
- -----------------------
CONGLOMERATES-3.0%
776,250
975,000
1,000,000
1,020,000
--------------
3,771,250
- -----------------------
CONSUMER PRODUCTS-5.9%
1,245,000
542,500
1,225,500
746,178
2,190,000
1,414,000
--------------
7,363,178
- -----------------------
ENERGY-5.3%
525,000
1,055,000
1,516,875
1,402,500
1,080,000
965,000
--------------
6,544,375
- -----------------------
ENTERTAINMENT-1.1%
1,322,500
- -----------------------
FINANCIAL SERVICES-1.3%
1,560,000
- -----------------------
FOOD & BEVERAGE-4.7%
2,020,000
445,030
478,750
955,000
1,900,000
--------------
5,798,780
- -----------------------
FOREIGN GOVERNMENT
OBLIGATIONS-1.1% 1,411,875
- -----------------------
</TABLE>
33
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S
INDUSTRIES S&P RATINGS RATINGS FACE AMOUNT ISSUE COST
- ---------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GAMING-3.9% B B3 $ 1,000,000 Greate Bay Properties, Inc., 10.875%
due 1/15/2004...................... $ 845,000
D Caa 2,000,000 Harrah's Jazz Company, 14.25% due
11/15/2001 (d)..................... 1,971,250
B+ B2 1,000,000 Hollywood Casino Corp., 12.75% due
11/01/2003......................... 928,635
BB- B1 2,000,000 Trump Atlantic City, 11.25% due
5/01/2006.......................... 1,997,500
--------------
5,742,385
- ---------------------------------------------------------------------------------------------------------------------
HEALTHCARE-1.7% B+ B1 1,000,000 Beverly Enterprises, Inc., 9% due
2/15/2006.......................... 933,750
B+ B2 1,000,000 Quest Diagnostic Inc., 10.75% due
12/15/2006......................... 1,000,000
--------------
1,933,750
- ---------------------------------------------------------------------------------------------------------------------
HOTELS-1.6% BB- Ba3 2,000,000 HMC Acquisition Properties, 9% due
12/15/2007......................... 2,000,000
- ---------------------------------------------------------------------------------------------------------------------
METAL & MINING-2.1% B- B2 1,000,000 Kaiser Aluminum & Chemical Corp.,
12.75% due 2/01/2003............... 1,045,000
B- B3 1,750,000 Maxxam Group, Inc., 12.25%** due
8/01/2003.......................... 1,449,099
--------------
2,494,099
- ---------------------------------------------------------------------------------------------------------------------
PACKAGING-2.1% B+ B2 1,500,000 Owens-Illinois, Inc., 9.95% due
10/15/2004......................... 1,488,750
B B2 1,000,000 Portola Packaging Inc., 10.75% due
10/01/2005......................... 1,000,000
--------------
2,488,750
- ---------------------------------------------------------------------------------------------------------------------
PAPER-5.2% B B3 1,000,000 Crown Paper Co., 11% due
9/01/2005.......................... 923,750
BB- Ba3 1,000,000 Doman Industries Ltd., 8.75% due
3/15/2004.......................... 919,000
B B2 1,000,000 Fort Howard Corp., 9% due
2/01/2006.......................... 930,000
B+ B3 1,000,000 Repap New Brunswick, Inc., 10.625%
due 4/15/2005...................... 1,008,750
BB- B2 1,000,000 Repap Wisconsin, Inc., 9.25% due
2/01/2002.......................... 900,000
B B3 1,000,000 Riverwood International Corp.,
10.875% due 4/01/2008.............. 973,750
B+ B1 500,000 S.D. Warren Co., 12% due
12/15/2004......................... 500,000
--------------
6,155,250
- ---------------------------------------------------------------------------------------------------------------------
REAL ESTATE-1.0% NR* NR* 2,000,000 Rockefeller Center Properties, Inc.
(Convertible), 11.04%** due
12/31/2000......................... 1,312,995
- ---------------------------------------------------------------------------------------------------------------------
RESTAURANTS-0.8% B B1 1,000,000 Foodmaker, Inc., 9.25% due
3/01/1999.......................... 1,002,500
- ---------------------------------------------------------------------------------------------------------------------
RETAIL SPECIALTY-0.1% D Caa 1,000,000 Bradlees, Inc., 11% due 8/01/2002
(d)................................ 1,023,750
- ---------------------------------------------------------------------------------------------------------------------
STEEL-0.8% B+ B2 1,000,000 +WCI Steel Inc., 10% due
12/01/2004......................... 1,000,000
- ---------------------------------------------------------------------------------------------------------------------
SUPERMARKETS-2.2% B- B3 1,137,000 Grand Union Co., 12% due
9/01/2004.......................... 1,099,324
B B2 500,000 Penn Traffic Co., 8.625% due
12/15/2003......................... 417,500
B B1 1,000,000 Ralph's Grocery Co., 10.45% due
6/15/2004.......................... 948,679
--------------
2,465,503
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
VALUE
INDUSTRIES (NOTE 1A)
- ---------------------------------------
- -----------------------
<S> <C>
GAMING-3.9%
$ 840,000
982,500
960,000
1,980,000
--------------
4,762,500
- -----------------------
HEALTHCARE-1.7%
1,005,000
1,050,000
--------------
2,055,000
- -----------------------
HOTELS-1.6%
2,030,000
- -----------------------
METAL & MINING-2.1%
1,075,000
1,491,875
--------------
2,566,875
- -----------------------
PACKAGING-2.1%
1,590,000
1,042,500
--------------
2,632,500
- -----------------------
PAPER-5.2%
940,000
935,000
1,010,000
1,040,000
1,007,500
915,000
540,000
--------------
6,387,500
- -----------------------
REAL ESTATE-1.0%
1,235,000
- -----------------------
RESTAURANTS-0.8%
1,022,500
- -----------------------
RETAIL SPECIALTY-0.1%
105,000
- -----------------------
STEEL-0.8%
1,015,000
- -----------------------
SUPERMARKETS-2.2%
1,199,535
411,250
1,062,500
--------------
2,673,285
- -----------------------
</TABLE>
34
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S
INDUSTRIES S&P RATINGS RATINGS FACE AMOUNT ISSUE COST
- ---------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (CONCLUDED)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TEXTILES-2.7% B- Caa $ 1,000,000 Decorative Home Accents, Inc., 13%
due 6/30/2002...................... $ 992,336
BB- Ba3 1,000,000 Tultex Corp., 10.625% due
3/15/2005.......................... 1,007,500
B+ B2 1,500,000 Westpoint Stevens Industries, Inc.,
9.375% due 12/15/2005.............. 1,465,000
--------------
3,464,836
- ---------------------------------------------------------------------------------------------------------------------
TRANSPORTATION-3.1% BB- B1 1,000,000 Sea Containers Ltd., 12.50% due
12/01/2004......................... 1,095,000
BB- Ba2 1,200,000 Maritima Mexicana Transportacion,
S.A. de C.V., 9.25% due
5/15/2003.......................... 978,000
B- B3 2,000,000 Transtar Holdings L.P., 11.065%**
due 12/15/2003..................... 1,468,641
--------------
3,541,641
- ---------------------------------------------------------------------------------------------------------------------
UTILITIES-4.9% B+ B1 980,000 Beaver Valley Funding Corp., 9% due
6/01/2017.......................... 924,875
B+ Ba3 1,000,000 CTC Mansfield Funding, Inc., 11.125%
due 9/30/2016...................... 1,076,250
BB- B1 1,000,000 Metrogas S.A., 12% due 8/15/2000.... 983,750
Midland Cogeneration Venture L.P.:
BB- Ba3 775,818 10.33% due 7/23/2002(e)......... 803,457
B- B2 1,000,000 13.25% due 7/23/2006............ 1,108,750
BBB- NR* 1,000,000 +Trans Gas de Occidente S.A., 9.79%
due 11/01/2010..................... 1,000,000
--------------
5,897,082
- ---------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS-82.4% 99,240,060
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES
HELD COMMON STOCKS & WARRANTS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BROADCASTING/ 5,000 American Telecasting, Inc.
CABLE-0.0% (Warrants) (b)..................... 4,776
- ---------------------------------------------------------------------------------------------------------------------
ENERGY-0.1% 29,058 Transamerica Refining Corp.
(Warrants) (b)..................... 67,742
- ---------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE-0.2% 18,878 FoodBrands America, Inc. (d)........ 1,066,813
- ---------------------------------------------------------------------------------------------------------------------
GAMING-0.0% 10,000 Goldriver Hotel & Casino Corp.
(Class B) (c)(d)................... 65,657
1,000 +Goldriver Hotel & Casino Corp.,
Liquidating Trust (d).............. 24,040
--------------
89,697
- ---------------------------------------------------------------------------------------------------------------------
HOTELS-0.0% 804 Buckhead America Corp. (d).......... 4,321
- ---------------------------------------------------------------------------------------------------------------------
INDUSTRIAL 1,036 Thermadyne Industries, Inc. (d)..... 15,022
SERVICES-0.0%
- ---------------------------------------------------------------------------------------------------------------------
SUPERMARKETS-0.1% 17,674 Grand Union Co. (d)................. 1,000,000
- ---------------------------------------------------------------------------------------------------------------------
TEXTILES-0.0% 1,000 +Decorative Home Accents, Inc.
(Class F) (d)...................... 7,664
- ---------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS & WARRANTS-0.4% 2,256,035
- ---------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS
- ---------------------------------------------------------------------------------------------------------------------
BROADCASTING & 11,134 K-III Communications Corp. (Series
PUBLISHING-0.9% B) (a)............................. 1,125,264
- ---------------------------------------------------------------------------------------------------------------------
BROADCASTING/ 10,563 Cablevision Systems Corp. (Series M)
CABLE-0.8% (a)................................ 935,000
- ---------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS-0.8% 1,000 +Paxson Communications Corp.
(Convertible) (a).................. 945,000
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
VALUE
INDUSTRIES (NOTE 1A)
- ---------------------------------------
- -----------------------
<S> <C>
TEXTILES-2.7%
$ 650,000
1,090,000
1,545,000
--------------
3,285,000
- -----------------------
TRANSPORTATION-3.1%
1,100,000
1,173,000
1,600,000
--------------
3,873,000
- -----------------------
UTILITIES-4.9%
935,890
1,055,000
1,097,500
826,247
1,155,330
1,035,000
--------------
6,104,967
- -----------------------
101,904,634
- -----------------------
- -----------------------
BROADCASTING/
CABLE-0.0% 11,250
- -----------------------
ENERGY-0.1%
58,116
- -----------------------
FOOD & BEVERAGE-0.2% 259,572
- -----------------------
GAMING-0.0%
0
8,564
--------------
8,564
- -----------------------
HOTELS-0.0% 4,824
- -----------------------
INDUSTRIAL 27,454
SERVICES-0.0%
- -----------------------
SUPERMARKETS-0.1% 86,161
- -----------------------
TEXTILES-0.0%
5,500
- -----------------------
461,441
- -----------------------
- -----------------------
BROADCASTING &
PUBLISHING-0.9% 1,118,950
- -----------------------
BROADCASTING/
CABLE-0.8% 971,796
- -----------------------
COMMUNICATIONS-0.8%
952,500
- -----------------------
</TABLE>
35
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1996 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRIES SHARES HELD ISSUE COST
- ---------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS (CONCLUDED)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ENTERTAINMENT-1.4% 1,612 Time Warner Inc. (Series M) (a)..... $ 1,611,983
- ---------------------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS-3.9% 4,617,247
- ---------------------------------------------------------------------------------------------------------------------
FACE AMOUNT SHORT-TERM SECURITES
- ---------------------------------------------------------------------------------------------------------------------
COMMERCIAL $ 4,037,000 General Motors Acceptance Corp.,
PAPER***-3.2% 7.50% due 1/02/1997................ 4,035,318
- ---------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY 5,000,000 Federal Home Loan Mortgage Corp.,
5.22% due 1/03/1997................ 4,997,825
OBLIGATIONS***-9.4% Federal National Mortgage
Association:
2,625,000 5.21% due 1/17/1997............. 2,618,542
4,000,000 5.50% due 1/22/1997............. 3,986,555
--------------
11,602,922
- ---------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES-12.6% 15,638,240
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-99.3%............. $ 121,751,582
--------------
--------------
OTHER ASSETS LESS
LIABILITIES-0.7%....................
NET ASSETS-100.0%...................
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
VALUE
INDUSTRIES (NOTE 1A)
- ---------------------------------------
- -----------------------
<S> <C>
ENTERTAINMENT-1.4% $ 1,749,020
- -----------------------
4,792,266
- -----------------------
- -----------------------
COMMERCIAL
PAPER***-3.2% 4,035,318
- -----------------------
US GOVERNMENT & AGENCY
4,997,825
OBLIGATIONS***-9.4%
2,618,542
3,986,555
--------------
11,602,922
- -----------------------
15,638,240
- -----------------------
122,796,581
846,814
--------------
$ 123,643,395
--------------
--------------
- -----------------------
</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.
+ Restricted securities as to resale. The value of the Portfolio's investments
in restricted securities was approximately $10,949,000, representing 8.9% of
net assets.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
VALUE (NOTE
ISSUE ACQUISITION DATE(S) COST 1A)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Comtel Brasileira Ltd., 10.75% due 9/26/2004............................ 9/18/1996 $ 500,000 $ 513,750
Decorative Home Accents, Inc. (Class F)................................. 6/30/1995 7,664 5,500
Globo Communicacoes Participacoes, 10.50% due 12/20/2006................ 12/10/1996 501,250 503,125
Goldriver Hotel & Casino Liquidating Trust.............................. 8/31/1992 24,040 8,564
ISP Holdings Inc., 9.75% due 2/15/2002.................................. 10/21/1996 744,000 762,600
Intermedia Capital Partners, 11.25% due 8/01/2006....................... 11/08/1996-11/13/1996 1,493,750 1,543,125
Olympus Communications L.P., 10.625% due 11/15/2006..................... 11/06/1996 1,000,000 1,023,750
Paging Network, Inc., 10% due 10/15/2008................................ 11/22/1996 1,001,250 1,013,750
Parker Drilling Co., 9.75% due 11/15/2006............................... 11/05/1996 992,150 1,055,000
Paxson Communications Corp. (Convertible)............................... 12/19/1996 945,000 952,500
Petroleo Brasileiro S.A.-Petrobras, 10% due 10/17/2006.................. 11/15/1996 1,500,000 1,516,875
Trans Gas de Occidente S.A., 9.79% due 11/01/2010....................... 11/02/1995 1,000,000 1,035,000
WCI Steel Inc. 10% due 12/01/2004....................................... 11/22/1996 1,000,000 1,015,000
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 10,709,104 $ 10,948,539
------------- -------------
------------- -------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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.
(e) Subject to principal paydowns.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
36
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Intermediate Government Bond Portfolio
Schedule of Investments as of December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
FACE AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
US GOVERNMENT & AGENCY OBLIGATIONS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL HOME LOAN $ 5,000,000 Federal Home Loan Mortgage Corporation,
MORTGAGE 7.90% due 9/19/2001 (a).............................. $ 5,000,000 $ 5,300,000
CORPORATION-2.4%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION 5,000,000 5,300,000
- ----------------------------------------------------------------------------------------------------------------------
FEDERAL NATIONAL 5,000,000 Federal National Mortgage Association:
MORTGAGE 6,000,000 7.55% due 4/22/2002.................................. 5,226,550 5,247,650
ASSOCIATION-18.5% 7.40% due 7/01/2004.................................. 6,248,520 6,287,820
10,000,000 7.85% due 9/10/2004.............................. 9,824,469 10,234,400
9,000,000 7.65% due 3/10/2005.............................. 8,990,156 9,563,940
10,000,000 6.35% due 6/10/2005.............................. 10,000,000 9,795,300
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION 40,289,695 41,129,110
- ----------------------------------------------------------------------------------------------------------------------
MORTGAGE BACKED 524,843 Federal National Mortgage Association, 9% due
SECURITIES-0.3% 1/01/2002 (a)....................................... 506,474 547,018
- ----------------------------------------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED SECURITIES 506,474 547,018
- ----------------------------------------------------------------------------------------------------------------------
PRIVATE EXPORT 7,000,000 Private Export Funding Corporation:
FUNDING 10,000,000 8.35% due 1/31/2001.............................. 7,083,590 7,480,760
CORPORATION-8.4% 8.75% due 6/30/2003.............................. 10,410,680 11,148,600
- ----------------------------------------------------------------------------------------------------------------------
TOTAL PRIVATE EXPORT FUNDING CORPORATION 17,494,270 18,629,360
- ----------------------------------------------------------------------------------------------------------------------
STUDENT LOAN 13,000,000 Student Loan Marketing Association,
MARKETING 7.50% due 3/08/2000................................. 13,176,719 13,469,170
ASSOCIATION-6.1%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL STUDENT LOAN MARKETING ASSOCIATION 13,176,719 13,469,170
- ----------------------------------------------------------------------------------------------------------------------
US TREASURY BONDS 16,000,000 US Treasury Bond, 12% due 5/15/2005.................. 22,772,500 21,724,960
& NOTES-61.2% US Treasury Notes:
15,000,000 6.375% due 8/15/2002............................. 15,006,577 15,098,400
5,500,000 6.25% due 2/15/2003.............................. 5,479,805 5,493,125
26,000,000 7.25% due 5/15/2004.............................. 26,328,906 27,356,940
5,000,000 7.875% due 11/15/2004............................ 5,246,875 5,456,250
21,500,000 6.50% due 5/15/2005.............................. 21,097,070 21,644,480
10,000,000 10.75% due 8/15/2005............................. 13,385,937 12,829,700
10,500,000 6.875% due 5/15/2006............................. 10,534,219 10,819,935
9,000,000 7% due 7/15/2006................................. 9,562,500 9,350,190
6,000,000 6.50% due 10/15/2006............................. 6,070,078 6,032,820
- ----------------------------------------------------------------------------------------------------------------------
TOTAL US TREASURY BONDS & NOTES 135,484,467 135,806,800
- ----------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY
OBLIGATIONS-96.9% 211,951,625 214,881,458
- ----------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
- ----------------------------------------------------------------------------------------------------------------------
REPURCHASE 3,659,000 UBS Securities Funding Corp., purchased on 12/31/1996
AGREEMENT*-1.6% to yield 6.75% to 1/02/1997.......................... 3,659,000 3,659,000
- ----------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES-1.6% 3,659,000 3,659,000
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-98.5%.............................. $ 215,610,625 218,540,458
-------------
-------------
OTHER ASSETS LESS LIABILITIES-1.5%................... 3,322,551
-------------
NET ASSETS-100.0%.................................... $ 221,863,009
-------------
-------------
- ----------------------------------------------------------------------------------------------------------------------
</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 Agreement is fully collateralized by US Government Obligations.
See Notes to Financial Statements.
37
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Long Term Corporate Bond Portfolio
Schedule of Investments as of December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S FACE VALUE
S&P RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT OBLIGATIONS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
US TREASURY US Treasury Notes:
NOTES-5.6% AAA Aaa $2,000,000 7.25% due 2/15/1998.......... $ 1,994,440 $ 2,032,820
AAA Aaa 500,000 6.25% due 8/31/2000.......... 500,195 501,875
AAA Aaa 4,000,000 6.50% due 5/15/2005.......... 3,869,375 4,026,880
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT OBLIGATIONS-5.6% 6,364,010 6,561,575
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
INDUSTRIES CORPORATE BONDS & NOTES
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSET BACKED AAA Aaa 2,000,000 Banc One, Credit Card Master
SECURITIES**-3.3% Trust, 7.55% due 12/15/1999..... 2,037,110 2,028,740
AAA Aaa 1,000,000 Citibank, Credit Card Master
Trust I, 5.62% due 12/10/2008... 999,610 999,060
AAA Aaa 892,492 Fifth Third Auto Grantor Trust,
6.45% due 3/15/2002............. 892,143 896,954
------------- -------------
3,928,863 3,924,754
- ------------------------------------------------------------------------------------------------------------------------------
BANKING-14.0% A- A2 1,000,000 Bank of New York Co., Inc.,
7.625% due 7/15/2002............ 1,076,500 1,039,790
A+ A1 1,000,000 BankAmerica Corp., 7.125% due
5/12/2005....................... 985,500 1,007,540
A+ A1 2,000,000 Citicorp., 8.80% due 2/01/2000... 2,000,000 2,003,900
BBB+ A3 2,000,000 First Interstate Bancorp, 9.90%
due 11/15/2001.................. 2,270,480 2,263,940
BBB+ A1 1,250,000 ++First Union Capital Corp.,
7.85% due 1/01/2027............. 1,247,825 1,247,825
BBB+ A3 1,000,000 HSBC Americas Inc., 7% due
11/01/2006...................... 991,600 987,200
AA- Aa2 2,000,000 JPM Capital Trust I, 7.54% due
1/15/2027....................... 2,000,000 1,954,580
A- A3 2,000,000 Mellon Bank Corp., 6.875% due
3/01/2003....................... 1,822,480 2,000,240
A A2 2,000,000 NationsBank Corp., 7.50% due
2/15/1997....................... 1,998,280 2,003,740
A+ A1 1,000,000 Norwest Corp., 6.625% due
3/15/2003....................... 1,003,060 982,650
BBB A1 1,000,000 Wells Fargo Capital I, 7.96% due
12/15/2026...................... 983,170 999,570
------------- -------------
16,378,895 16,490,975
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES- A- A3 2,000,000 Chrysler Financial Corp., 10.95%
CAPTIVE-7.4% due 8/01/2017................... 2,202,640 2,156,080
A+ A1 2,500,000 Ford Motor Credit Co., 7% due
9/25/2001....................... 2,490,050 2,537,275
General Motors Acceptance Corp.:
A- A3 2,000,000 7.125% due 5/11/1998......... 2,022,560 2,030,440
A- A3 1,000,000 7.125% due 5/01/2003......... 994,890 1,014,290
A- A3 1,000,000 7.40% due 9/01/2025.......... 991,940 988,940
------------- -------------
8,702,080 8,727,025
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES- A+ A1 2,000,000 American General Finance Corp.,
CONSUMER-8.7% 7.70% due 11/15/1997............ 1,977,660 2,026,800
Associates Corp. of North
America:
AA- Aa3 2,300,000 5.25% due 9/01/1998.......... 2,230,057 2,266,397
AA- Aa3 1,000,000 7.25% due 9/01/1999.......... 987,620 1,021,960
A+ Aa3 2,000,000 CIT Group Holdings, Inc., 5.764%
due 2/28/1997................... 1,998,680 2,000,100
BBB+ Baa1 2,000,000 Crown Cork & Seal Financial PLC,
6.75% due 12/15/2003............ 1,989,260 1,976,020
A+ A2 1,000,000 Transamerica Financial Corp.,
6.80% due 3/15/1999............. 999,730 1,010,520
------------- -------------
10,183,007 10,301,797
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Long Term Corporate Bond Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S FACE VALUE
INDUSTRIES S&P RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL SERVICES- A A2 $1,000,000 Dean Witter, Discover & Co.,
OTHER-11.0% 6.30% due 1/15/2006............. $ 995,600 $ 944,672
A+ A2 1,000,000 Equitable Companies, Inc., 9% due
12/15/2004...................... 1,104,050 1,119,700
A A2 1,000,000 Equitable Life Assurance Society
of the US, 7.70% due
12/01/2015...................... 993,160 999,580
AAA Aaa 500,000 General Electric Capital Corp.,
8.125% due 5/15/2012............ 531,640 552,750
BBB+ Baa1 3,500,000 PaineWebber Group Inc., 7.625%
due 2/15/2014................... 3,342,430 3,428,320
A- A2 3,000,000 Smith Barney Holdings, Inc.,
6.50% due 10/15/2002............ 2,987,520 2,950,260
A A1 2,000,000 Travelers Capital II, 7.75% due
12/01/2036...................... 2,003,400 1,923,120
A+ A1 1,000,000 Travelers Group, Inc., 7.875% due
5/15/2025....................... 999,420 1,044,490
------------- -------------
12,957,220 12,962,892
- ------------------------------------------------------------------------------------------------------------------------------
FOREIGN+-12.9% BBB+ A3 1,000,000 ++Bangkok Bank Public Company
Ltd., 7.25% due 9/15/2005 (4)... 990,920 977,740
AA- Aa3 2,000,000 CRA Finance Ltd., 6.50% due
12/01/2003 (1).................. 2,006,950 1,948,780
A A3 1,000,000 China Light & Power Co., Ltd.,
7.50% due 4/15/2006 (6)......... 993,630 1,008,320
AA- A1 1,000,000 Korea Development Bank, 6.625%
due 11/21/2003 (4).............. 995,280 990,000
A A1 1,000,000 Midland Bank PLC, 7.625% due
6/15/2006 (4)................... 992,340 1,035,460
A+ A1 2,000,000 ++Petroliam Nasional BHD, 6.875%
due 7/01/2003 (5)............... 1,977,680 2,002,860
Pohang Iron & Steel Co. Ltd. (3):
A+ A2 1,000,000 7.375% due 5/15/2005......... 1,018,160 1,013,710
A+ A2 1,000,000 7.125% due 11/01/2006........ 998,870 997,270
Province of Quebec (Canada) (2):
A+ A2 1,000,000 8.80% due 4/15/2003.......... 1,129,480 1,100,610
A+ A2 1,500,000 13% due 10/01/2013........... 1,959,060 1,725,075
A+ A2 1,000,000 7.125% due 2/09/2024......... 902,520 960,340
A A2 1,500,000 Western Mining Corp. Holdings
Ltd., 7.25% due 11/15/2013
(1)............................. 1,519,575 1,486,425
------------- -------------
15,484,465 15,246,590
- ------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL-CONSUMER- A+ A1 3,500,000 Bass America, Inc., 8.125% due
9.7% 3/31/2002....................... 3,532,070 3,719,555
Grand Metropolitan Investment
Corp.:
A+ A2 1,000,000 6.50% due 9/15/1999.......... 1,000,000 1,000,580
A+ A2 1,000,000 8.625% due 8/15/2001......... 1,047,750 1,079,190
A- A3 1,000,000 IBP, Inc., 6.125% due
2/01/2006....................... 918,780 942,930
AAA Aaa 2,000,000 Johnson & Johnson, 8.72% due
11/01/2024...................... 2,019,140 2,225,360
A A2 500,000 Philip Morris Companies, Inc.,
7.25% due 1/15/2003............. 503,440 505,555
BBB- Baa3 1,000,000 RJR Nabisco, Inc., 8.75% due
8/15/2005....................... 963,120 1,004,500
A A2 1,000,000 ++Disney Enterprises, Inc., 6.85%
due 1/10/2007................... 999,320 999,290
------------- -------------
10,983,620 11,476,960
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Long Term Corporate Bond Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S FACE VALUE
INDUSTRIES S&P RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES (CONCLUDED)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INDUSTRIAL- AA Aa3 $2,000,000 BP America Inc., 10% due
ENERGY-3.6% 7/01/2018....................... $ 2,156,880 $ 2,181,740
A- A1 500,000 Dresser Industries, Inc., 7.60%
due 8/15/2096................... 498,545 510,465
BBB Baa3 500,000 Husky Oil Ltd., 7.125% due
11/15/2006...................... 497,765 500,020
A+ A1 1,000,000 Texaco Capital Inc., 6.875% due
7/15/1999....................... 998,060 1,009,280
------------- -------------
4,151,250 4,201,505
- ------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL- Columbia/HCA Healthcare Corp.:
OTHER-9.4% A- A2 500,000 6.41% due 6/15/2000.......... 499,700 498,740
A- A2 1,000,000 7.75% due 7/15/2036.......... 992,280 1,019,500
A+ A1 1,000,000 ++Electronic Data Systems, Inc.,
6.85% due 5/15/2000............. 999,210 1,012,221
BBB Baa2 2,500,000 Federal Express Corp., 9.65% due
6/15/2012....................... 2,758,750 2,975,475
BBB+ A3 1,000,000 Lockheed Martin Corp., 6.625% due
6/15/1998....................... 999,870 1,007,710
BBB+ A3 500,000 Martin Marietta Corp., 7.375% due
4/15/2013....................... 480,805 506,165
A A2 1,000,000 May Department Stores Co., 6.875%
due 11/01/2005.................. 996,950 994,840
A- Baa2 1,000,000 McDonnell Douglas Corp., 8.625%
due 4/01/1997................... 1,016,670 1,006,570
BBB+ A3 1,000,000 Philips Electronics N.V., 7.20%
due 6/01/2026................... 997,740 1,013,750
BBB- Baa3 1,000,000 Royal Caribbean Cruises Ltd.,
7.25% due 8/15/2006............. 963,700 984,850
------------- -------------
10,705,675 11,019,821
- ------------------------------------------------------------------------------------------------------------------------------
SUPRANATIONAL-1.3% AAA Aaa 1,500,000 Asian Development Bank, 10.75%
due 6/01/1997................... 1,580,525 1,528,755
- ------------------------------------------------------------------------------------------------------------------------------
TRANSPORT SERVICES- Southwest Airlines, Inc.:
2.7% A- A3 2,000,000 9.40% due 7/01/2001.......... 2,407,120 2,174,000
A- A3 1,000,000 7.875% due 9/01/2007......... 998,750 1,032,790
------------- -------------
3,405,870 3,206,790
- ------------------------------------------------------------------------------------------------------------------------------
UTILITIES- GTE Corp.:
COMMUNICATIONS-4.0% BBB+ A3 2,000,000 9.375% due 12/01/2000........ 2,189,690 2,197,740
BBB+ A3 500,000 9.10% due 6/01/2003.......... 548,730 557,745
AAA Aaa 1,000,000 Indiana Bell Telephone Co. Inc.,
7.30% due 8/15/2026............. 998,290 1,014,840
AA Aa3 1,000,000 Southwestern Bell
Telecommunications Co., 6.125%
due 3/01/2000................... 978,880 993,580
------------- -------------
4,715,590 4,763,905
- ------------------------------------------------------------------------------------------------------------------------------
UTILITIES-GAS-2.2% AA- A1 2,500,000 Consolidated Natural Gas Co.,
8.75% due 6/01/1999............. 2,575,440 2,629,250
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS &
NOTES-90.2% 105,752,500 106,481,019
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Long Term Corporate Bond Portfolio
Schedule of Investments as of December 31, 1996 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT ISSUE COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REPURCHASE $3,087,000 UBS Securities Inc., purchased on
AGREEMENT*-2.6% 12/31/96 to yield 6.75% on
1/02/1997....................... $ 3,087,000 $ 3,087,000
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS-
2.6%............................. 3,087,000 3,087,000
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-98.4%.......... $ 115,203,510 116,129,594
-------------
-------------
OTHER ASSETS LESS
LIABILITIES-1.6%................. 1,858,384
-------------
NET ASSETS-100.0%................ $ 117,987,978
-------------
-------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Repurchase Agreement is fully collateralized by US Government Obligations.
** Subject to principal paydowns.
+ Corresponding industry groups for foreign bonds:
(1) Industrial Mining.
(2) Government Entity.
(3) Iron/Steel.
(4) Banking.
(5) Industry-Energy.
(6) Utilities-Electric.
++ Restricted securities as to resale. The value of the Portfolio's investment
in restricted securities was approximately $6,240,000, representing 5.3% of
net assets.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
ISSUE ACQUISITION DATE COST (NOTE 1A)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Bangkok Bank Public Company Ltd., 7.25% due 9/15/2005................ 9/27/1995 $ 990,920 $ 977,740
Disney Enterprises, Inc., 6.85% due 1/10/2007........................ 12/23/1996 999,320 999,290
Electronic Data Systems, Inc., 6.85% due 5/15/2000................... 5/26/1995 999,210 1,012,221
First Union Capital Corp., 7.85% due 1/01/2027....................... 12/27/1996 1,247,825 1,247,825
Petroliam Nasional BHD, 6.875% due 7/01/2003......................... 7/28/1995 1,977,680 2,002,860
- ---------------------------------------------------------------------------------------------------------------
TOTAL $6,214,955 $6,239,936
---------- ----------
---------- ----------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
41
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Money Reserve Portfolio
Schedule of Investments as of December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY VALUE
FACE AMOUNT ISSUE RATE* DATE (NOTE 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BANK NOTES-1.1% $ 6,200,000 Bank of America, Illinois...................... 5.63% 12/30/97 $ 6,196,894
- -----------------------------------------------------------------------------------------------------------------------
TOTAL BANK NOTES (COST-$6,199,410) 6,196,894
- -----------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF 9,500,000 Chase Manhattan Bank USA (Delaware)............ 5.60 4/01/97 9,501,904
DEPOSIT-1.7%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT (COST-$9,500,000) 9,501,904
- -----------------------------------------------------------------------------------------------------------------------
COMMERCIAL 4,000,000 ABN-AMRO North America Finance Inc............. 5.45 2/28/97 3,965,737
PAPER-49.7% 4,885,000 Allomon Funding Corp........................... 5.34 1/21/97 4,871,336
4,920,000 Allomon Funding Corp........................... 5.32 2/10/97 4,891,351
7,000,000 Alpine Securitization Corp..................... 5.34 1/16/97 6,985,463
7,287,000 American Home Products Corporation............. 5.33 1/28/97 7,259,107
5,000,000 Bank of Scotland Treasury Services PLC......... 5.29 5/09/97 4,904,750
16,945,000 Bear Stearns Companies, Inc.................... 5.35 1/31/97 16,871,631
10,000,000 Beta Finance Inc............................... 5.44 3/28/97 9,872,028
4,000,000 Beta Finance Inc............................... 5.35 4/07/97 3,942,789
4,500,000 Beta Finance Inc............................... 5.32 5/01/97 4,419,675
4,166,000 CSW Credit, Inc................................ 5.35 1/15/97 4,157,952
6,053,000 CSW Credit, Inc................................ 5.32 1/17/97 6,039,633
5,250,000 Caisse des Depots et Consignations............. 5.30 2/03/97 5,224,917
2,000,000 Corporate Receivables Corp..................... 5.35 1/17/97 1,995,583
16,000,000 Eureka Securitization Inc...................... 5.33 1/17/97 15,964,667
7,005,000 Eureka Securitization Inc...................... 5.35 1/28/97 6,978,186
7,185,000 Finova Capital Corp............................ 5.38 2/24/97 7,127,773
9,404,000 Finova Capital Corp............................ 5.48 3/20/97 9,294,982
2,550,000 Finova Capital Corp............................ 5.42 6/25/97 2,483,445
10,000,000 Ford Motor Credit Co........................... 5.30 2/07/97 9,946,250
10,000,000 General Electric Capital Corp.................. 5.55 1/10/97 9,988,178
5,000,000 General Electric Capital Corp.................. 5.50 3/03/97 4,954,833
11,090,000 General Electric Capital Corp.................. 5.64 3/05/97 10,986,481
15,400,000 General Motors Acceptance Corp................. 5.34 1/23/97 15,352,388
1,177,000 General Motors Acceptance Corp................. 5.32 2/05/97 1,171,025
8,000,000 General Motors Acceptance Corp................. 5.34 5/14/97 7,841,600
5,000,000 Goldman Sachs Group, L.P....................... 5.68 1/06/97 4,997,044
3,561,000 International Securitization Corp.............. 5.35 1/29/97 3,546,645
3,937,000 Korea Development Bank......................... 5.32 1/23/97 3,924,828
3,937,000 Korea Development Bank......................... 5.35 1/23/97 3,924,828
5,000,000 Lehman Brothers Holdings, Inc.................. 5.50 1/24/97 4,983,194
4,000,000 Lehman Brothers Holdings, Inc.................. 5.50 1/27/97 3,984,722
11,000,000 Lehman Brothers Holdings, Inc.................. 5.40 3/03/97 10,900,633
3,260,000 Morgan Stanley Group Inc....................... 5.41 1/27/97 3,248,001
8,000,000 New Center Asset Trust......................... 5.43 1/29/97 7,967,750
8,000,000 New Center Asset Trust......................... 5.40 2/07/97 7,957,000
10,000,000 New Center Asset Trust......................... 5.46 3/24/97 9,878,050
5,000,000 Old Line Funding Corp.......................... 5.75 1/30/97 4,977,639
7,000,000 Sweden, Kingdom of............................. 5.34 3/27/97 6,911,473
1,800,000 Toshiba International Finance (UK) PLC......... 5.35 1/17/97 1,796,025
632,000 Toshiba International Finance (UK) PLC......... 5.37 1/27/97 629,674
800,000 Toshiba International Finance (UK) PLC......... 5.37 2/05/97 795,939
9,218,000 Transamerica Finance Corp...................... 5.60 3/11/97 9,123,628
- -----------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (COST-$277,034,353) 277,038,833
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
42
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Money Reserve Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY VALUE
FACE AMOUNT ISSUE RATE* DATE (NOTE 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CORPORATE $ 9,000,000 Asset-Backed Securities Investment Trust 5.605% 10/15/97 $ 9,000,000
NOTES-7.5% 1,000,000 1996-M+....................................... 5.625 3/03/97 1,000,000
Ford Motor Credit Co...........................
7,000,000 LABS Trust Series 1996-C Senior Notes+......... 5.625 12/29/97 7,000,000
20,000,000 SMM Trust 1995-Q+.............................. 5.605 1/08/97 19,999,969
5,000,000 Short-Term Card Account Trust 1995-1+.......... 5.615 1/15/97 5,000,000
- -----------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE NOTES (COST-$41,999,608) 41,999,969
- -----------------------------------------------------------------------------------------------------------------------
MASTER NOTES-3.4% 10,000,000 Goldman Sachs Group, L.P.+..................... 5.88 5/01/97 10,000,000
9,000,000 Jackson National Life Insurance Co.+........... 5.41 4/08/97 9,000,000
- -----------------------------------------------------------------------------------------------------------------------
TOTAL MASTER NOTES (COST-$19,000,000) 19,000,000
- -----------------------------------------------------------------------------------------------------------------------
MEDIUM-TERM 10,000,000 CIT Group Holdings, Inc. (The)+................ 5.36 10/27/97 10,000,000
NOTES-1.8%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL MEDIUM-TERM NOTES (COST-$9,994,316) 10,000,000
- -----------------------------------------------------------------------------------------------------------------------
US GOVERNMENT, 215,000 Federal National Mortgage Association.......... 5.30 3/17/97 212,627
AGENCY &
INSTRUMENTATLITY
OBLIGATIONS-
DISCOUNT-0.0%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT, AGENCY & INSTRUMENTALITY
OBLIGATIONS-DISCOUNT (COST-$212,658) 212,627
- -----------------------------------------------------------------------------------------------------------------------
US GOVERNMENT, 3,500,000 Federal Farm Credit Bank....................... 5.85 10/01/97 3,506,020
AGENCY & 10,000,000 Federal Farm Credit Bank+...................... 5.38 11/25/97 9,998,124
INSTRUMENTALITY 8,000,000 Federal Home Loan Bank+........................ 5.41 12/10/97 7,996,382
OBLIGATIONS-NON- 3,000,000 Federal Home Loan Bank......................... 6.12 4/15/98 2,999,061
DISCOUNT-34.9% 2,000,000 Federal Home Loan Bank......................... 6.17 11/06/98 1,998,750
15,000,000 Federal National Mortgage Association+......... 5.44 2/21/97 15,000,000
4,000,000 Federal National Mortgage Association+......... 5.455 5/14/97 3,998,730
8,000,000 Federal National Mortgage Association+......... 5.70 5/19/97 8,000,000
15,000,000 Federal National Mortgage Association+......... 5.521 5/22/97 14,996,092
8,000,000 Federal National Mortgage Association+......... 5.40 7/16/97 7,997,110
4,000,000 Federal National Mortgage Association+......... 5.42 8/01/97 3,998,994
3,000,000 Federal National Mortgage Association+......... 5.405 9/03/97 2,998,534
2,000,000 Federal National Mortgage Association+......... 5.41 9/09/97 1,999,066
3,000,000 Federal National Mortgage Association+......... 5.41 9/29/97 2,998,676
6,500,000 Federal National Mortgage Association.......... 5.47 12/30/97 6,490,055
4,000,000 Federal National Mortgage Association.......... 5.19 1/08/98 3,982,760
10,000,000 Federal National Mortgage Association+......... 5.46 4/24/98 9,995,001
6,000,000 Federal National Mortgage Association+......... 5.75 5/14/98 6,000,000
5,000,000 Student Loan Marketing Association+............ 5.58 1/14/97 5,000,000
10,000,000 Student Loan marketing Association+............ 5.62 1/23/97 10,000,497
10,000,000 Student Loan Marketing Association+............ 5.57 10/30/97 10,001,748
5,000,000 US Treasury Notes.............................. 6.625 3/31/97 5,014,060
4,000,000 US Treasury Notes.............................. 8.50 4/15/97 4,034,372
3,250,000 US Treasury Notes.............................. 6.50 4/30/97 3,262,188
3,250,000 US Treasury Notes.............................. 6.50 5/15/97 3,263,201
3,300,000 US Treasury Notes.............................. 6.125 5/31/97 3,308,250
4,600,000 US Treasury Notes.............................. 8.50 7/15/97 4,674,028
3,000,000 US Treasury Notes.............................. 6.00 8/31/97 3,008,436
6,750,000 US Treasury Notes.............................. 5.75 9/30/97 6,762,123
5,800,000 US Treasury Notes.............................. 5.625 10/31/97 5,803,625
6,500,000 US Treasury Notes.............................. 5.375 11/30/97 6,486,792
1,650,000 US Treasury Notes.............................. 5.25 12/31/97 1,644,713
2,920,000 US Treasury Notes.............................. 5.00 1/31/98 2,899,467
2,600,000 US Treasury Notes.............................. 5.625 11/30/98 2,589,031
2,000,000 US Treasury Notes.............................. 5.75 12/31/98 1,996,718
- -----------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT, AGENCY & INSTRUMENTALITY
OBLIGATIONS-NON-DISCOUNT (COST-$194,742,618) 194,702,604
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Money Reserve Portfolio
Schedule of Investments as of December 31, 1996 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
FACE AMOUNT ISSUE (NOTE 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE $ 1,500,000 Lehman Brothers Inc., purchased on 12/31/1996
AGREEMENT**-0.3% to yield 7.10% on 1/02/1997................... $ 1,500,000
- -----------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT (COST-$1,500,000) 1,500,000
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST-$560,182,963)-100.4%... 560,152,831
LIABILITIES IN EXCESS OF OTHER ASSETS-(0.4)%... (2,463,167)
-------------
NET ASSETS-100.0%.............................. $ 557,689,664
-------------
-------------
- -----------------------------------------------------------------------------------------------------------------------
</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 rates 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,
1996.
** Repurchase Agreement is fully collateralized by US Government Obligations.
+ Variable Rate Notes.
See Notes to Financial Statements.
44
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD US STOCKS & WARRANTS COST (NOTE 1A) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AEROSPACE & 85,000 AlliedSignal Inc.............. $ 6,247,940 $ 5,695,000 0.5%
DEFENSE 280,000 +Gulfstream Aerospace Corp.... 6,919,174 6,790,000 0.5
185,000 Northrop Grumman Corp......... 12,121,532 15,308,750 1.3
150,000 United Technologies Corp...... 6,259,501 9,900,000 0.8
-------------- -------------- -----
31,548,147 37,693,750 3.1
- -----------------------------------------------------------------------------------------------------------------
AUTO & TRUCK 175,000 General Motors Corp........... 9,125,697 9,756,250 0.8
- -----------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS 364,000 +Lear Corporation............. 12,194,000 12,421,500 1.0
- -----------------------------------------------------------------------------------------------------------------
BANKING 278,000 Bank of New York Co., Inc..... 5,436,911 9,382,500 0.8
65,000 Bank of New York Co., Inc.
(Warrants) (c)............... 581,250 4,818,125 0.4
60,000 BankAmerica Corp.............. 6,138,870 5,985,000 0.5
125,000 Citicorp...................... 9,466,326 12,875,000 1.0
-------------- -------------- -----
21,623,357 33,060,625 2.7
- -----------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS 251,000 Oakwood Homes Corporation..... 5,718,888 5,741,625 0.5
- -----------------------------------------------------------------------------------------------------------------
CHEMICALS 171,000 +FMC Corporation.............. 12,105,120 11,991,375 1.0
220,000 PPG Industries, Inc........... 10,906,249 12,347,500 1.0
-------------- -------------- -----
23,011,369 24,338,875 2.0
- -----------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 198,000 +cisco Systems, Inc........... 9,005,877 12,597,750 1.0
330,000 First Data Corp............... 11,684,495 12,045,000 1.0
-------------- -------------- -----
20,690,372 24,642,750 2.0
- -----------------------------------------------------------------------------------------------------------------
COMPUTERS 190,000 +Compaq Computer Corp......... 14,088,819 14,107,500 1.2
85,000 International Business
Machines Corp................ 9,350,839 12,835,000 1.0
-------------- -------------- -----
23,439,658 26,942,500 2.2
- -----------------------------------------------------------------------------------------------------------------
DIVERSIFIED 326,000 Corning, Inc.................. 10,220,442 15,077,500 1.2
- -----------------------------------------------------------------------------------------------------------------
ELECTRONICS 100,000 General Electric Co........... 7,868,685 9,887,500 0.8
70,700 Linear Technology
Corporation.................. 2,900,739 3,093,125 0.3
-------------- -------------- -----
10,769,424 12,980,625 1.1
- -----------------------------------------------------------------------------------------------------------------
ENGINEERING & 276,600 Foster Wheeler Corp........... 11,662,487 10,268,775 0.9
CONSTRUCTION
- -----------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 6,200 +Imax Corporation............. 191,708 190,650 0.0
263,875 +Viacom, Inc. (Class B)....... 9,664,844 9,202,641 0.8
-------------- -------------- -----
9,856,552 9,393,291 0.8
- -----------------------------------------------------------------------------------------------------------------
FERTILIZERS 150,000 IMC Global, Inc............... 5,813,989 5,868,750 0.5
- -----------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 256,500 American Express Company...... 11,922,063 14,492,250 1.2
- -----------------------------------------------------------------------------------------------------------------
FOODS 350,000 H.J. Heinz Company............ 11,497,655 12,512,500 1.0
- -----------------------------------------------------------------------------------------------------------------
INSURANCE 108,000 Aetna Inc..................... 6,946,584 8,640,000 0.7
217,500 Allstate Corp................. 7,457,254 12,587,813 1.0
211,000 UNUM Corporation.............. 13,465,471 15,244,750 1.3
-------------- -------------- -----
27,869,309 36,472,563 3.0
- -----------------------------------------------------------------------------------------------------------------
LEISURE/TOURISM 444,000 Brunswick Corporation......... 10,986,645 10,656,000 0.9
118,620 TCI Pacific Communications
(Convertible Preferred)...... 11,049,794 10,764,765 0.9
-------------- -------------- -----
22,036,439 21,420,765 1.8
- -----------------------------------------------------------------------------------------------------------------
MACHINERY 206,000 +American Standard Companies,
Inc.......................... 6,730,117 7,879,500 0.6
355,200 Deere & Co.................... 14,846,602 14,430,000 1.2
-------------- -------------- -----
21,576,719 22,309,500 1.8
- -----------------------------------------------------------------------------------------------------------------
MEDICAL 435,000 +Health Management Associates,
Inc. (Class A)............... 9,804,996 9,787,500 0.8
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES US STOCKS & WARRANTS VALUE PERCENT OF
INDUSTRIES HELD (CONCLUDED) COST (NOTE 1A) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NATURAL GAS 128,000 El Paso Natural Gas Co........ $ 6,273,189 $ 6,464,000 0.5%
295,000 Enron Corp.................... 11,333,631 12,721,875 1.1
-------------- -------------- -----
17,606,820 19,185,875 1.6
- -----------------------------------------------------------------------------------------------------------------
OIL SERVICES 350,000 Dresser Industries, Inc....... 8,202,997 10,850,000 0.9
106,000 Schlumberger Ltd., Inc........ 8,941,977 10,586,750 0.9
-------------- -------------- -----
17,144,974 21,436,750 1.8
- -----------------------------------------------------------------------------------------------------------------
PAPER 140,000 Kimberly-Clark Corp........... 10,729,054 13,335,000 1.1
- -----------------------------------------------------------------------------------------------------------------
PETROLEUM 261,000 Pennzoil Co................... 10,781,453 14,746,500 1.2
327,000 Unocal Corp................... 11,002,058 13,284,375 1.1
-------------- -------------- -----
21,783,511 28,030,875 2.3
- -----------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 240,000 Abbott Laboratories........... 9,859,343 12,180,000 1.0
160,000 Merck & Co., Inc.............. 9,648,894 12,680,000 1.1
-------------- -------------- -----
19,508,237 24,860,000 2.1
- -----------------------------------------------------------------------------------------------------------------
RAILROADS 154,000 Burlington Northern Santa Fe,
Inc.......................... 12,647,474 13,301,750 1.1
- -----------------------------------------------------------------------------------------------------------------
REAL ESTATE 296,100 Prentiss Properties Trust..... 6,061,043 7,402,500 0.6
INVESTMENT TRUST 58,100 Spieker Properties, Inc....... 1,601,236 2,091,600 0.2
152,100 Starwood Lodging Trust........ 5,971,521 8,384,513 0.7
-------------- -------------- -----
13,633,800 17,878,613 1.5
- -----------------------------------------------------------------------------------------------------------------
RETAIL 363,350 Rite Aid Corporation.......... 11,659,587 14,443,162 1.2
300,000 Sears, Roebuck & Co........... 10,450,028 13,837,500 1.1
445,000 +Toys 'R' Us, Inc............. 13,829,157 13,350,000 1.1
-------------- -------------- -----
35,938,772 41,630,662 3.4
- -----------------------------------------------------------------------------------------------------------------
SCIENTIFIC 170,000 Fisher Scientific
INSTRUMENTS International, Inc........... 5,615,810 8,011,250 0.7
- -----------------------------------------------------------------------------------------------------------------
SOFTWARE 296,400 +BMC Software, Inc............ 11,025,364 12,263,550 1.0
268,500 +Oracle Corp.................. 8,843,279 11,176,312 0.9
-------------- -------------- -----
19,868,643 23,439,862 1.9
- -----------------------------------------------------------------------------------------------------------------
STEEL 282,000 AK Steel Holding Corp......... 11,642,900 11,174,250 0.9
- -----------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 460,000 +Airtouch Communications,
184,000 Inc.......................... 13,169,327 11,615,000 1.0
Bell Atlantic Corporation..... 11,567,913 11,914,000 1.0
-------------- -------------- -----
24,737,240 23,529,000 2.0
- -----------------------------------------------------------------------------------------------------------------
TOBACCO 76,000 Philip Morris Companies,
Inc.......................... 7,376,567 8,559,500 0.7
- -----------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 443,800 Carnival Corp. (Class A)...... 12,671,600 14,645,400 1.2
- -----------------------------------------------------------------------------------------------------------------
UTILITIES 569,100 Edison International.......... 10,597,694 11,310,862 0.9
- -----------------------------------------------------------------------------------------------------------------
TOTAL US STOCKS & WARRANTS 541,884,659 625,511,543 51.6
- -----------------------------------------------------------------------------------------------------------------
COUNTRIES FOREIGN STOCKS+++++
- -----------------------------------------------------------------------------------------------------------------
ARGENTINA 238,000 Banco de Galicia y Buenos
Aires S.A. (ADR) (a) (3)..... 4,886,190 5,741,750 0.5
212,750 Banco Frances del Rio de la
Plata S.A. (ADR) (a) (3)..... 5,169,793 5,850,625 0.5
171,000 Yacimientos Petroliferos
Fiscales S.A. (ADR) (a)
(30)......................... 3,530,098 4,317,750 0.3
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ARGENTINA 13,586,081 15,910,125 1.3
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES FOREIGN STOCKS+++++ VALUE PERCENT OF
COUNTRIES HELD (CONTINUED) COST (NOTE 1A) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BRAZIL 7,000,000 Companhia Cervejaria Brahma
S.A. PN (Preferred) (4)...... $ 4,004,177 $ 3,827,125 0.3%
38,200,000 Petroleo Brasileiro S.A.-
Petrobras (Preferred) (16)... 4,512,649 6,085,379 0.5
60,000 Telecomunicacoes Brasileiras
S.A.-Telebras (ADR) (a)
(26)......................... 3,116,796 4,590,000 0.4
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN BRAZIL 11,633,622 14,502,504 1.2
- -----------------------------------------------------------------------------------------------------------------
CANADA 208,300 Canadian Pacific, Ltd. (15)... 4,268,930 5,519,950 0.5
109,000 Magna International Inc.
(Class A) (2)................ 5,055,992 6,076,750 0.5
61,000 Potash Corp. of Saskatchewan,
Inc. (39).................... 4,262,368 5,185,000 0.4
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN CANADA 13,587,290 16,781,700 1.4
- -----------------------------------------------------------------------------------------------------------------
FINLAND 115,000 Finnlines OY (46)............. 2,300,583 2,823,711 0.2
90,600 Nokia Corp. (ADR) (a) (6)..... 3,306,582 5,220,825 0.5
192,000 +UPM-Kymmene OY (d) (40)...... 3,972,208 3,963,408 0.3
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FINLAND 9,579,373 12,007,944 1.0
- -----------------------------------------------------------------------------------------------------------------
FRANCE 98,000 Michelin (C.G.D.E.) S.A.
(Class B) (44)............... 4,084,876 5,291,018 0.4
85,300 +SGS-Thomson Microelectronics
N.V. (NY Registered Shares)
(19)......................... 3,170,007 5,971,000 0.5
122,000 Scor S.A. (47)................ 4,751,120 4,291,635 0.4
294,000 Usinor-Sacilor S.A. (13)...... 4,946,286 4,278,527 0.3
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FRANCE 16,952,289 19,832,180 1.6
- -----------------------------------------------------------------------------------------------------------------
GERMANY 14,000 +Henkel KGaA (5).............. 622,324 671,563 0.1
101,000 +Henkel KGaA (Preferred)
(5).......................... 4,296,760 5,074,618 0.4
12,500 Mannesmann AG (41)............ 4,363,987 5,419,240 0.4
26,900 +Puma AG (11)................. 884,219 912,694 0.1
85,000 Siemens AG (9)................ 4,774,685 4,005,525 0.3
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN GERMANY 14,941,975 16,083,640 1.3
- -----------------------------------------------------------------------------------------------------------------
HONG KONG 265,200 HSBC Holdings PLC (3)......... 4,271,374 5,675,019 0.5
2,650,000 Hong Kong Telecommunications,
Ltd. (26).................... 4,687,736 4,265,904 0.3
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN HONG KONG 8,959,110 9,940,923 0.8
- -----------------------------------------------------------------------------------------------------------------
INDONESIA 149,400 PT Indonesian Satellite Corp.
(ADR) (a) (26)............... 5,500,790 4,089,825 0.3
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN INDONESIA 5,500,790 4,089,825 0.3
- -----------------------------------------------------------------------------------------------------------------
ITALY 306,100 Danieli & Co. Officine
Meccaniche S.p.A. (41)....... 1,203,809 1,280,247 0.1
1,308,000 Societa Finanziara Telefonica
S.p.A. (STET) (26)........... 3,804,727 5,944,476 0.5
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ITALY 5,008,536 7,224,723 0.6
- -----------------------------------------------------------------------------------------------------------------
JAPAN 278,000 Bridgestone Corporation
(44)......................... 4,818,776 5,281,520 0.4
239,000 Canon, Inc. (9)............... 4,385,459 5,283,592 0.4
255,000 Eisai Co., Ltd. (38).......... 4,505,820 5,020,725 0.4
256,000 Matsushita Electric Industrial
Co., Ltd. (9)................ 4,058,469 4,178,238 0.4
725,000 Mitsubishi Electric Corp.
(8).......................... 5,240,071 4,319,948 0.4
541,000 Mitsubishi Heavy Industries,
Ltd. (9)..................... 4,419,386 4,298,100 0.4
386,000 Mitsui-Soko Co., Ltd. (43).... 3,426,243 2,523,333 0.2
253,000 Nomura Securities Co., Ltd.
(10)......................... 5,023,241 3,801,554 0.3
</TABLE>
47
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES FOREIGN STOCKS+++++ VALUE PERCENT OF
COUNTRIES HELD (CONCLUDED) COST (NOTE 1A) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JAPAN 80,000 Rohm Co., Ltd. (9)............ $ 4,447,327 $ 5,250,432 0.4%
(CONCLUDED) 400,000 Tokio Marine & Fire Insurance
Co., Ltd. (14)............... 4,762,511 3,765,112 0.3
675,000 Toray Industries, Inc. (21)... 4,704,797 4,167,746 0.4
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN JAPAN 49,792,100 47,890,300 4.0
- -----------------------------------------------------------------------------------------------------------------
MEXICO 633,200 +Carso Global Telecom, S.A. de
C.V. (ADR) (a) (26).......... 3,007,700 2,849,400 0.3
433,200 Grupo Carso, S.A. de C.V.
(ADR) (a) (15)............... 3,851,655 4,494,450 0.4
8,837 Grupo Financiero Inbursa, S.A.
de C.V. (ADR) (a) (10)....... 177,296 150,229 0.0
196,000 Kimberly-Clark de Mexico, S.A.
de C.V. (40)................. 3,349,463 3,872,189 0.3
110,000 Panamerican Beverages, Inc.
(Class A) (4)................ 4,307,032 5,156,250 0.4
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN MEXICO 14,693,146 16,522,518 1.4
- -----------------------------------------------------------------------------------------------------------------
NETHERLANDS 82,000 ABN AMRO Holding N.V. (3)..... 4,598,704 5,339,977 0.5
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
NETHERLANDS 4,598,704 5,339,977 0.5
- -----------------------------------------------------------------------------------------------------------------
NORWAY 469,000 Color Line ASA (46)........... 1,829,151 2,183,393 0.2
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN NORWAY 1,829,151 2,183,393 0.2
- -----------------------------------------------------------------------------------------------------------------
PHILIPPINES 1,210,000 San Miguel Corp. (Class B)
(4).......................... 4,205,227 5,345,011 0.5
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
PHILIPPINES 4,205,227 5,345,011 0.5
- -----------------------------------------------------------------------------------------------------------------
SOUTH KOREA 202,800 +Hyundai Engineering &
Construction Co., Ltd. (GDR)
(b) (29)+++.................. 2,642,484 1,267,500 0.1
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SOUTH
KOREA 2,642,484 1,267,500 0.1
- -----------------------------------------------------------------------------------------------------------------
SPAIN 139,000 Repsol S.A. (ADR) (a) (30).... 4,898,863 5,299,375 0.4
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SPAIN 4,898,863 5,299,375 0.4
- -----------------------------------------------------------------------------------------------------------------
SWEDEN 409,200 Bure Investment AB (37)....... 3,563,162 4,863,566 0.4
209,000 Sparbanken Sverige AB (Class
A) (3)....................... 2,691,626 3,588,114 0.3
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWEDEN 6,254,788 8,451,680 0.7
- -----------------------------------------------------------------------------------------------------------------
SWITZERLAND 3,700 ABB AG (20)................... 4,492,198 4,601,509 0.4
3,900 +Novartis AG (Registered
Shares) (38)................. 3,386,800 4,465,716 0.3
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SWITZERLAND 7,878,998 9,067,225 0.7
- -----------------------------------------------------------------------------------------------------------------
UNITED KINGDOM 475,000 Boots Company PLC (18)........ 4,502,607 4,896,096 0.4
1,420,000 British Steel PLC (28)........ 3,780,164 3,911,231 0.3
800,000 General Electric PLC (9)...... 4,460,523 5,241,891 0.4
268,000 Glaxo Wellcome PLC (38)....... 3,645,688 4,346,527 0.4
557,400 Grand Metropolitan PLC (45)... 3,858,615 4,386,560 0.4
465,900 Imperial Chemical Industries
PLC (16)..................... 6,436,340 6,125,419 0.5
440,000 National Westminster Bank PLC
(3).......................... 4,705,708 5,163,879 0.4
1,350,000 Vodafone Group PLC (26)....... 4,723,894 5,704,663 0.5
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
UNITED KINGDOM 36,113,539 39,776,266 3.3
- -----------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS 232,656,066 257,516,809 21.3
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
COUNTRIES AMOUNT FOREIGN BONDS+++++ COST (NOTE 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DENMARK Dkr 84,500,000 Government of Denmark, 8% due $ 15,525,850 $ 15,785,005 1.3%
3/15/2006 (12)..................
- ----------------------------------------------------------------------------------------------------------------------------
GERMANY DM 12,500,000 Bundesrepublik Deutschland, 8,815,113 8,921,027 0.7
7.125% due 12/20/2002 (12)......
- ----------------------------------------------------------------------------------------------------------------------------
ITALY Lit 10,900,000,000 Buoni Poliennali del Tesoro 7,722,200 7,690,127 0.7
(Italian Government Bonds),
8.50% due 1/01/2004 (12)........
- ----------------------------------------------------------------------------------------------------------------------------
SWEDEN Government of Sweden (12):
Skr 35,400,000 10.25% due 5/05/2000......... 6,001,621 5,992,703 0.5
112,000,000 8% due 8/15/2007............. 17,581,880 17,938,735 1.5
-------------- -------------- -----
23,583,501 23,931,438 2.0
- ----------------------------------------------------------------------------------------------------------------------------
UNITED UK Treasury Gilt (12):
KINGDOM L 750,000 7% due 11/06/2001............ 1,236,073 1,269,066 0.1
1,400,000 7.50% due 12/07/2006......... 2,337,601 2,392,126 0.2
-------------- -------------- -----
3,573,674 3,661,192 0.3
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS 59,220,338 59,988,789 5.0
- ----------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT US$ 6,849,910 Federal National Mortgage 6,781,411 6,689,348 0.6
OBLIGATIONS 15,255,124 Association++: 15,100,189 15,047,750 1.2
9,270,737 6% due 11/01/2000............ 9,160,646 9,128,778 0.8
6% due 6/01/2001.............
6% due 2/01/2004.............
-------------- -------------- -----
31,042,246 30,865,876 2.6
- ----------------------------------------------------------------------------------------------------------------------------
US Treasury Notes:
18,000,000 5% due 1/31/1998............. 17,841,094 17,873,460 1.5
30,000,000 5.50% due 4/15/2000.......... 29,559,375 29,465,700 2.4
40,300,000 6.25% due 4/30/2001.......... 40,797,766 40,388,257 3.3
15,000,000 7.25% due 5/15/2004.......... 15,863,672 15,782,850 1.3
118,925,000 7% due 7/15/2006............. 125,654,387 123,552,372 10.2
-------------- -------------- -----
229,716,294 227,062,639 18.7
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT OBLIGATIONS 260,758,540 257,928,515 21.3
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM SECURITIES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER* 2,707,000 General Motors Acceptance Corp.,
7.50% due 1/02/1997............ 2,706,436 2,706,436 0.2
16,074,000 Lehman Brothers Holdings, 5.70%
due 1/22/1997.................. 16,020,554 16,020,554 1.3
- -------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 18,726,990 18,726,990 1.5
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS............... $1,113,246,593 1,219,672,646 100.7
--------------
--------------
UNREALIZED DEPRECIATION ON
FORWARD FOREIGN EXCHANGE
CONTRACTS++++................... (1,677,215) (0.1)
LIABILITIES IN EXCESS OF OTHER
ASSETS.......................... (6,810,552) (0.6)
-------------- -----
NET ASSETS...................... $1,211,184,879 100.0%
-------------- -----
-------------- -----
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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) Global Depositary Receipts (GDR).
(c) 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.
(d) Created as a result of the merger of Kymmene Corporation and Repola Ltd.
+ Non-income producing security.
++ Subject to principal paydowns.
49
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1996 (Concluded)
- --------------------------------------------------------------------------------
+++ Restricted securities as to resale. The value of the Portfolio's
investment in restricted securities was approximately $1,268,000,
representing 0.1% of net assets.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
VALUE
ISSUE ACQUISITION DATE COST (NOTE 1A)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hyundai Engineering & Construction Co., Ltd. (GDR)............... 3/19/1996 $2,642,484 $1,267,500
- --------------------------------------------------------------------------------------------------------------
TOTAL $2,642,484 $1,267,500
---------- ----------
---------- ----------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
++++ Forward foreign exchange contracts as of December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------
UNREALIZED
FOREIGN EXPIRATION APPRECIATION
CURRENCY SOLD DATE (DEPRECIATION)
- --------------------------------------------------------
<S> <C> <C> <C>
Chf 11,500,000 January 1997 $ 177,218
DM 22,237,000 January 1997 (139,796)
DM 39,695,469 February 1997 368,956
Frf 70,000,000 January 1997 (82,643)
L 24,115,000 January 1997 (1,909,209)
Y 5,522,000,000 February 1997 (81,741)
- --------------------------------------------------------
TOTAL UNREALIZED DEPRECIATION ON FORWARD FOREIGN
EXCHANGE CONTRACTS -- NET (US$ COMMITMENT-$149,913,071) $ (1,667,215)
--------------
--------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
+++++ Corresponding industry groups for foreign stocks and bonds:
<TABLE>
<S> <C> <C>
(1) Appliances (17) Real Estate (33) Railroads
(2) Auto-Parts (18) Retail (34) Automotive
(3) Banking (19) Semiconductors (35) Containers
(4) Beverages (20) Capital Goods (36) Leisure & Entertainment
(5) Chemicals (21) Textiles (37) Investment Management
(6) Telecommunications & Equipment (22) Utilities-Communications (38) Pharmaceuticals
(7) Containers (23) Utilities-Electric (39) Mining
(8) Electrical Equipment (24) Utilities-Water (40) Paper & Forest Products
(9) Electronics (25) Media-Publishing (41) Machinery & Equipment
(10) Financial Services (26) Telecommunications (42) Transportation
(11) Footwear (27) Food Processing (43) Warehouse & Storage
(12) Government (Bonds) (28) Steel (44) Tires & Rubber
(13) Metals (29) Engineering & Construction (45) Diversified
(14) Insurance (30) Petroleum (46) Cruise Lines
(15) Multi-Industry (31) Computers (47) Reinsurance
(16) Oil-Integrated (32) Tobacco
</TABLE>
See Notes to Financial Statements.
50
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Natural Resources Portfolio
Schedule of Investments as of December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
INDUSTRIES HELD STOCKS COST 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALUMINUM 6,000 Alcan Aluminium, Ltd................. $ 148,420 $ 201,750 0.8%
3,900 +Alumax, Inc......................... 128,552 130,163 0.5
2,100 Aluminum Co. of America.............. 115,567 133,875 0.6
------------- ----------- -----
392,539 465,788 1.9
- -------------------------------------------------------------------------------------------------------------------
CHEMICALS 2,300 Air Products & Chemicals, Inc........ 131,548 158,988 0.6
40,000 Asahi Chemical Industry Co., Ltd..... 295,909 226,598 0.9
10,000 BASF AG.............................. 243,405 385,310 1.6
3,300 Dow Chemical Co...................... 227,401 258,638 1.0
4,000 duPont (E.I.) de Nemours & Co........ 227,270 377,500 1.5
------------- ----------- -----
1,125,533 1,407,034 5.6
- -------------------------------------------------------------------------------------------------------------------
DIVERSIFIED RESOURCES 10,000 Asahi Glass Co., Ltd................. 120,000 94,128 0.4
COMPANIES 6,700 Canadian Pacific, Ltd................ 119,319 177,550 0.7
2,700 Coastal Corp......................... 78,702 131,963 0.5
16,000 Cyprus Amax Minerals Co.............. 448,817 374,000 1.5
13,400 Norcen Energy Resources Ltd.......... 215,162 297,343 1.2
11,500 Occidental Petroleum Corp............ 237,878 268,813 1.1
27,400 RGC Ltd.............................. 108,532 121,644 0.5
------------- ----------- -----
1,328,410 1,465,441 5.9
- -------------------------------------------------------------------------------------------------------------------
GOLD 64,000 +....................................
Acacia Resources Ltd. 131,456 124,531 0.5
22,900 +Amax Gold, Inc...................... 136,859 145,988 0.6
9,700 Ashanti Goldfields Co. Ltd.
(GDR)**............................. 237,979 120,038 0.5
12,500 Cambior, Inc......................... 170,092 184,307 0.7
88,000 +Delta Gold N.L...................... 172,875 164,939 0.6
15,500 Driefontein Consolidated Ltd......... 239,913 163,254 0.6
69,000 Great Central Mines N.L.............. 213,855 196,183 0.8
29,900 +Miramar Mining Corp................. 154,324 130,949 0.5
22,000 Newcrest Mining Ltd.................. 94,671 87,362 0.3
10,513 Newmont Mining Corp.................. 447,210 470,457 1.9
22,500 Placer Dome Inc...................... 544,234 489,375 2.0
13,100 Prime Resources Group, Inc........... 128,069 92,752 0.4
51,000 Resolute Ltd......................... 109,929 106,121 0.4
24,000 Santa Fe Pacific Gold Corp........... 295,612 369,000 1.5
10,000 +TVX Gold Inc........................ 81,425 77,500 0.3
------------- ----------- -----
3,158,503 2,922,756 11.6
- -------------------------------------------------------------------------------------------------------------------
METALS & MINING 5,800 ASARCO Inc........................... 155,180 144,275 0.6
135,000 +Centaur Mining & Exploration Ltd.... 202,962 209,073 0.8
14,100 Falconbridge Ltd. (Installment
Receipts) (d)....................... 211,625 201,723 0.8
3,600 Inco Ltd............................. 119,083 114,750 0.5
26,200 Industrias Penoles, S.A. de C.V...... 117,370 92,870 0.4
238,000 M.I.M. Holdings Ltd.................. 487,323 332,674 1.3
17,185 Minsur S.A........................... 55,784 59,771 0.3
54,000 Mitsubishi Materials Corp............ 273,415 218,238 0.9
17,000 Noranda Inc.......................... 317,713 379,088 1.5
19,000 Outokumpu OY......................... 347,398 324,091 1.3
75,600 Pasminco Ltd......................... 102,704 118,882 0.5
5,400 PT Tambang Timah (GDR)** (a)......... 66,782 97,605 0.4
3,600 Phelps Dodge Corp.................... 238,088 243,000 1.0
61,000 QNI Ltd.............................. 122,703 122,569 0.5
26,900 RTZ Corp. PLC (The).................. 350,458 431,672 1.7
3,100 Rio Algom Ltd........................ 60,087 69,241 0.3
205,000 Savage Resources Ltd................. 154,791 224,679 0.9
20,500 Savage Resources Ltd. (Warrants)
(b)................................. 2,720 5,210 0.0
26,000 Sumitomo Metal Mining Co., Ltd....... 216,870 175,354 0.7
19,500 Trelleborg 'B' Fria.................. 254,451 258,951 1.0
80,600 WMC Ltd.............................. 467,844 507,619 2.0
12,000 Westmin Resources Ltd................ 62,778 58,248 0.2
------------- ----------- -----
4,388,129 4,389,583 17.6
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Natural Resources Portfolio
Schedule of Investments as of December 31, 1996 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
INDUSTRIES HELD STOCKS (CONTINUED) COST 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OIL & GAS PRODUCERS 11,100 Apache Corp.......................... $ 297,018 $ 392,662 1.6%
23,000 +Chauvco Resources Ltd............... 271,708 236,715 1.0
5,400 +Chieftain International, Inc........ 120,561 140,400 0.6
12,300 +Enserch Exploration, Inc............ 122,971 144,525 0.6
35,000 Enterprise Oil PLC................... 228,179 386,213 1.5
20,800 +....................................
Gulf Canada Resources, Ltd. 147,695 151,825 0.6
3,800 Louisiana Land and Exploration Co.
(The)............................... 149,992 203,775 0.8
11,100 Mitchell Energy & Development Corp.
(Class B)........................... 193,975 245,587 1.0
15,000 +Northrock Resources Ltd............. 119,611 134,672 0.5
12,000 +Oryx Energy Co...................... 199,885 297,000 1.2
2,100 PanCanadian Petroleum Ltd............ 79,720 82,927 0.3
49,000 Ranger Oil Ltd....................... 332,530 483,875 1.9
4,300 Sonat, Inc........................... 136,166 221,450 0.9
5,300 Vastar Resources, Inc................ 143,763 201,400 0.8
------------- ----------- -----
2,543,774 3,323,026 13.3
- -------------------------------------------------------------------------------------------------------------------
OIL-INTEGRATED 6,400 Amerada Hess Corp.................... 335,064 370,400 1.5
3,900 Amoco Corp........................... 214,784 313,950 1.3
4,200 British Petroleum Co. PLC (ADR)*..... 320,502 593,775 2.4
8,000 ENI Societa per Azioni (ADR)*........ 374,000 413,000 1.6
10,600 Elf Aquitaine S.A. (ADR)*............ 382,621 479,650 1.9
1,200 OMV AG............................... 128,441 135,328 0.6
14,600 Petro-Canada (Installment Receipts)
(e)................................. 114,275 158,775 0.6
6,900 Repsol, S.A.......................... 199,089 264,588 1.1
7,200 Total, S.A. (Class B)................ 443,124 585,659 2.3
10,200 YPF, S.A. (ADR)*..................... 250,146 257,550 1.0
------------- ----------- -----
2,762,046 3,572,675 14.3
- -------------------------------------------------------------------------------------------------------------------
OIL SERVICES 6,700 +Coflexip Stena Offshore, Inc.
(ADR)*.............................. 138,682 175,037 0.7
5,000 IHC Caland N.V....................... 112,286 285,921 1.1
5,500 +Petroleum Geo-Services ASA (ADR)*... 161,250 213,812 0.9
3,200 Schlumberger Ltd., Inc............... 206,483 319,600 1.3
5,300 +Smedvig ASA (ADR)*.................. 112,625 106,662 0.4
3,700 Transocean Offshore Inc.............. 226,546 231,712 0.9
------------- ----------- -----
957,872 1,332,744 5.3
- -------------------------------------------------------------------------------------------------------------------
PAPER & PULP 14,400 Aracruz Celulose S.A. (ADR)*......... 115,506 118,800 0.5
17,400 Avenor Inc........................... 346,730 257,825 1.0
8,100 Empresa Nacional de Cellulosas S.A... 119,536 96,985 0.4
4,500 Georgia-Pacific Corp................. 352,572 324,000 1.3
5,000 International Paper Co............... 167,987 201,875 0.8
30,000 Metsa Serla OY 'B'................... 262,339 224,897 0.9
8,600 Mo Och Domsjo AB Co.................. 184,768 242,289 1.0
27,000 Slocan Forest Products Ltd........... 272,565 305,474 1.2
4,620 +UPM-Kymmene Corp. (c)............... 82,074 95,370 0.4
9,100 Weyerhaeuser Co...................... 388,514 431,112 1.7
4,000 Willamette Industries, Inc........... 189,875 278,500 1.1
------------- ----------- -----
2,482,466 2,577,127 10.3
- -------------------------------------------------------------------------------------------------------------------
PLANTATIONS 73,000 Golden Hope Plantations BHD.......... 131,880 124,317 0.5
70,000 Kuala Lumpur Kepong BHD.............. 111,705 177,426 0.7
------------- ----------- -----
243,585 301,743 1.2
- -------------------------------------------------------------------------------------------------------------------
REFINING 22,500 Total Petroleum (North America),
Ltd................................. 331,454 233,437 0.9
- -------------------------------------------------------------------------------------------------------------------
STEEL 41,000 British Steel PLC.................... 107,778 112,930 0.5
69,000 +Kobe Steel Ltd...................... 200,421 145,389 0.6
6,900 Koninklijke Nederlandsche Hoogovens
en Staalfabrienken N.V.............. 275,496 287,833 1.1
</TABLE>
52
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Natural Resources Portfolio
Schedule of Investments as of December 31, 1996 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
INDUSTRIES HELD STOCKS (CONCLUDED) COST 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STEEL 83,000 Nippon Steel Corp.................... $ 281,181 $ 245,130 1.0%
(CONCLUDED) 127,000 Sumitomo Metal Industries, Ltd....... 396,360 312,565 1.2
------------- ----------- -----
1,261,236 1,103,847 4.4
- -------------------------------------------------------------------------------------------------------------------
WOOD 8,600 Louisiana-Pacific Corp............... 218,816 181,675 0.7
13,900 Riverside Forest Products Ltd........ 183,006 180,599 0.7
------------- ----------- -----
401,822 362,274 1.4
- -------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS 21,377,369 23,457,475 93.7
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT SHORT-TERM SECURITIES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER*** $ 882,000 General Electric Capital Corp., 7.10%
due 1/02/1997....................... 881,652 881,652 3.5
- -------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY 700,000 Federal Home Loan Mortgage
OBLIGATIONS*** Obligations Corp., 5.60% due
1/07/1997........................... 699,238 699,238 2.8
- -------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 1,580,890 1,580,890 6.3
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS.................... $ 22,958,259 25,038,365 100.0
-------------
-------------
LIABILITIES IN EXCESS OF OTHER
ASSETS.............................. (8,925) 0.0
----------- -----
NET ASSETS........................... $25,029,440 100.0%
----------- -----
----------- -----
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Non-income producing security.
* American Depositary Receipts (ADR).
** Global Depositary Receipts (GDR).
*** 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 the purchase by the Portfolio
(a) Restricted securities as to resale. The value of the Portfolio's investment
in restricted securities was approximately $98,000, representing 0.4% of
net assets.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
VALUE (NOTE
ISSUE ACQUISITION DATES COST 1A)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PT Tambang Timah (GDR)................................................ 10/6/95 - 11/22/95 $ 66,782 $ 97,605
- ------------------------------------------------------------------------------------------------------------------
TOTAL $ 66,782 $ 97,605
--------- -----------
--------- -----------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(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.
(c) Created as a result of the merger of Kymmene Corporation and Repola Ltd.
(d) Receipts evidence payment by the Fund of 67% of the purchase price of
common stock of Falconbridge Ltd. The Fund is obligated to pay the
remaining 33%, approximately $97,774, over the next year.
(e) Receipts evidence payment by the Fund of 71% of the purchase price of
common stock of Petro-Canada. The Fund is obligated to pay the remaining
29%, approximately $45,292, over the next year.
See Notes to Financial Statements.
53
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Statements of Assets and Liabilities as of December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL GLOBAL
BALANCED STOCK STRATEGY
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value* (Note
1a)......................... $ 98,108,982 $ 289,453,866 $ 231,487,698
Cash.......................... 39 871 44,610
Foreign cash (Note 1f)........ -- 26,842 52,256
Interest receivable........... 803,543 -- 1,187,194
Receivable for securities
sold........................ -- -- --
Receivable for forward foreign
exchange contracts (Note
1e)......................... -- 590,113 1,255,751
Dividends receivable.......... 69,906 492,549 288,981
Receivable for capital shares
sold........................ 27,195 151,517 39,473
Receivable for loaned
securities (Note 7)......... -- -- --
Prepaid registration fees and
other assets (Note 1d)...... 4,978 11,474 9,315
------------ ------------- -------------
Total assets................ 99,014,643 290,727,232 234,365,278
------------ ------------- -------------
LIABILITIES:
Unrealized depreciation on
forward foreign exchange
contracts (Note 1e)......... -- 335,948 823,288
Payable for securities
purchased................... 70,784 441,373 166,746
Payable for capital shares
redeemed.................... 37,614 76,808 423,793
Payable to investment adviser
(Note 2).................... 28,542 83,505 66,621
Payable for forward foreign
exchange contracts (Note
1e)......................... -- -- 48,323
Accrued expenses and other
liabilities................. 24,951 93,529 306,923
------------ ------------- -------------
Total liabilities........... 161,891 1,031,163 1,835,694
------------ ------------- -------------
NET ASSETS.................... $ 98,852,752 $ 289,696,069 $ 232,529,584
------------ ------------- -------------
------------ ------------- -------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par
value+...................... $ 643,746 $ 1,245,741 $ 1,383,886
Paid-in capital in excess of
par......................... 80,566,708 237,342,506 192,779,297
Undistributed investment
income -- net............... 1,769,753 2,458,189 8,036,323
Undistributed (accumulated)
realized capital gains
(losses) on investments and
foreign currency
transactions -- net (Note
5).......................... 10,123,953 14,653,320 8,721,303
Unrealized appreciation
(depreciation) on
investments and foreign
currency transactions --
net......................... 5,748,592 33,996,313 21,608,775
------------ ------------- -------------
NET ASSETS.................... $ 98,852,752 $ 289,696,069 $ 232,529,584
------------ ------------- -------------
------------ ------------- -------------
Capital shares outstanding.... 6,437,463 12,457,413 13,838,863
------------ ------------- -------------
------------ ------------- -------------
Net asset value, offering and
redemption price per
share....................... $ 15.36 $ 23.25 $ 16.80
------------ ------------- -------------
------------ ------------- -------------
*Identified cost.............. $ 92,360,390 $ 255,122,499 $ 209,043,877
------------ ------------- -------------
------------ ------------- -------------
+Authorized shares............ 100,000,000 100,000,000 100,000,000
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
See Notes to Financial Statements.
54
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE LONG TERM
GROWTH HIGH GOVERNMENT CORPORATE MONEY
STOCK YIELD BOND BOND RESERVE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value* (Note
1a)......................... $ 242,141,229 $ 122,796,581 $ 218,540,458 $ 116,129,594 $ 560,152,831
Cash.......................... 853 8,092 592 577 15,365
Foreign cash (Note 1f)........ -- -- -- -- --
Interest receivable........... -- 1,905,039 3,517,469 1,921,338 2,246,144
Receivable for securities
sold........................ 2,266,882 -- -- 1,273,300 --
Receivable for forward foreign
exchange contracts (Note
1e)......................... -- -- -- -- --
Dividends receivable.......... 313,511 42,000 -- -- --
Receivable for capital shares
sold........................ 7,091 138 -- -- 2,038,425
Receivable for loaned
securities (Note 7)......... -- -- 200 146 --
Prepaid registration fees and
other assets (Note 1d)...... 9,472 5,482 11,295 6,013 7,183
------------- ------------- ------------- ------------- --------------
Total assets................ 244,739,038 124,757,332 222,070,014 119,330,968 564,459,948
------------- ------------- ------------- ------------- --------------
LIABILITIES:
Unrealized depreciation on
forward foreign exchange
contracts (Note 1e)......... -- -- -- -- --
Payable for securities
purchased................... 2,185,862 987,000 -- 1,249,188 6,494,870
Payable for capital shares
redeemed.................... 1,769,553 52,837 90,836 25,372 78
Payable to investment adviser
(Note 2).................... 70,165 35,169 64,278 34,104 154,592
Payable for forward foreign
exchange contracts (Note
1e)......................... -- -- -- -- --
Accrued expenses and other
liabilities................. 47,753 38,931 51,891 34,326 120,744
------------- ------------- ------------- ------------- --------------
Total liabilities........... 4,073,333 1,113,937 207,005 1,342,990 6,770,284
------------- ------------- ------------- ------------- --------------
NET ASSETS.................... $ 240,665,705 $ 123,643,395 $ 221,863,009 $ 117,987,978 $ 557,689,664
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par
value+...................... $ 866,032 $ 1,351,153 $ 2,029,906 $ 1,023,440 $ 55,771,980
Paid-in capital in excess of
par......................... 176,096,350 125,937,565 226,303,272 117,233,438 501,947,816
Undistributed investment
income -- net............... 1,522,711 1,062,860 1,322,724 725,913 --
Undistributed (accumulated)
realized capital gains
(losses) on investments and
foreign currency
transactions -- net (Note
5).......................... 26,322,633 (5,753,182) (10,722,726) (1,920,897) --
Unrealized appreciation
(depreciation) on
investments and foreign
currency transactions --
net......................... 35,857,979 1,044,999 2,929,833 926,084 (30,132)
------------- ------------- ------------- ------------- --------------
NET ASSETS.................... $ 240,665,705 $ 123,643,395 $ 221,863,009 $ 117,987,978 $ 557,689,664
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
Capital shares outstanding.... 8,660,317 13,511,531 20,299,063 10,234,402 557,719,795
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
Net asset value, offering and
redemption price per
share....................... $ 27.79 $ 9.15 $ 10.93 $ 11.53 $ 1.00
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
*Identified cost.............. $ 206,283,250 $ 121,751,582 $ 215,610,625 $ 115,203,510 $ 560,182,963
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
+Authorized shares............ 100,000,000 100,000,000 100,000,000 100,000,000 2,000,000,000
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
<CAPTION>
MULTIPLE NATURAL
STRATEGY RESOURCES
PORTFOLIO PORTFOLIO
<S> <C> <C>
- ------------------------------
ASSETS:
Investments, at value* (Note
1a)......................... $ 1,219,672,646 $ 25,038,365
Cash.......................... -- 1,245
Foreign cash (Note 1f)........ 118,555 --
Interest receivable........... 7,385,689 --
Receivable for securities
sold........................ 3,392,437 16,943
Receivable for forward foreign
exchange contracts (Note
1e)......................... 2,553,284 --
Dividends receivable.......... 1,540,300 31,062
Receivable for capital shares
sold........................ -- 9,844
Receivable for loaned
securities (Note 7)......... -- --
Prepaid registration fees and
other assets (Note 1d)...... 50,127 1,011
--------------- ------------
Total assets................ 1,234,713,038 25,098,470
--------------- ------------
LIABILITIES:
Unrealized depreciation on
forward foreign exchange
contracts (Note 1e)......... 1,667,215 --
Payable for securities
purchased................... 18,887,159 --
Payable for capital shares
redeemed.................... 425,990 40,324
Payable to investment adviser
(Note 2).................... 349,675 4,194
Payable for forward foreign
exchange contracts (Note
1e)......................... 37,744 --
Accrued expenses and other
liabilities................. 2,160,376 24,512
--------------- ------------
Total liabilities........... 23,528,159 69,030
--------------- ------------
NET ASSETS.................... $ 1,211,184,879 $ 25,029,440
--------------- ------------
--------------- ------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par
value+...................... $ 7,070,555 $ 272,407
Paid-in capital in excess of
par......................... 1,013,740,107 26,192,157
Undistributed investment
income -- net............... 21,709,430 188,057
Undistributed (accumulated)
realized capital gains
(losses) on investments and
foreign currency
transactions -- net (Note
5).......................... 63,944,949 (3,703,364)
Unrealized appreciation
(depreciation) on
investments and foreign
currency transactions --
net......................... 104,719,838 2,080,183
--------------- ------------
NET ASSETS.................... $ 1,211,184,879 $ 25,029,440
--------------- ------------
--------------- ------------
Capital shares outstanding.... 70,705,552 2,724,074
--------------- ------------
--------------- ------------
Net asset value, offering and
redemption price per
share....................... $ 17.13 $ 9.19
--------------- ------------
--------------- ------------
*Identified cost.............. $ 1,113,246,593 $ 22,958,259
--------------- ------------
--------------- ------------
+Authorized shares............ 300,000,000 100,000,000
--------------- ------------
--------------- ------------
</TABLE>
55
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Statements of Operations for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL GLOBAL
BALANCED STOCK STRATEGY
PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (NOTES 1B &
1C):
Interest and discount
earned*..................... $ 3,133,072 $ 2,178,088 $ 4,480,761
Dividends*.................... 824,264 4,661,976 3,244,486
Other income.................. 1,422 -- 155
------------ ------------ ------------
Total income.................. 3,958,758 6,840,064 7,725,402
------------ ------------ ------------
EXPENSES:
Investment advisory fees (Note
2).......................... 323,758 892,477 741,975
Custodian fees................ 20,229 98,790 120,662
Accounting services (Note
2).......................... 16,093 58,735 50,654
Professional fees............. 7,753 14,246 12,790
Printing and shareholder
reports..................... 3,069 5,176 6,047
Registration fees (Note 1d)... 36 11,608 41
Transfer agent fees (Note
2).......................... 5,011 5,008 5,479
Pricing services.............. 715 -- 4,318
Directors' fees and
expenses.................... 975 2,079 1,787
Interest expense.............. -- -- --
Other......................... 2,492 4,640 5,666
------------ ------------ ------------
Total expenses before
reimbursement............... 380,131 1,092,759 949,419
Reimbursement of expenses
(Note 2).................... -- -- --
------------ ------------ ------------
Expenses after
reimbursement............... 380,131 1,092,759 949,419
------------ ------------ ------------
Investment income -- net...... 3,578,627 5,747,305 6,775,983
------------ ------------ ------------
REALIZED & UNREALIZED GAIN
(LOSS) ON INVESTMENTS &
FOREIGN CURRENCY
TRANSACTIONS -- NET (NOTES
1C, 1E, 1F & 3):
Realized gain (loss) on
investments -- net.......... 10,123,967 13,976,813 12,130,844
Realized gain (loss) on
foreign currency
transactions -- net......... -- 676,527 5,717,944
Change in unrealized
appreciation/depreciation on
investments -- net.......... (4,709,010) 21,343,267 8,986,014
Change in unrealized
appreciation/depreciation on
foreign currency
transactions................ -- (334,683) (4,745,969)
------------ ------------ ------------
Total realized and unrealized
gain (loss) on investments
and foreign currency
transactions -- net......... 5,414,957 35,661,924 22,088,833
------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS... $ 8,993,584 $ 41,409,229 $ 28,864,816
------------ ------------ ------------
------------ ------------ ------------
*Net of withholding tax....... $ 405 $ 131,902 $ 218,800
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See Notes to Financial Statements.
56
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE LONG TERM
GROWTH HIGH GOVERNMENT CORPORATE MONEY MULTIPLE
STOCK YIELD BOND BOND RESERVE STRATEGY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (NOTES 1B &
1C):
Interest and discount
earned*..................... $ 768,720 $ 11,093,052 $ 16,493,411 $ 8,778,765 $ 31,184,615 $ 25,208,412
Dividends*.................... 2,779,556 232,057 -- -- -- 17,663,164
Other income.................. -- 71,054 26,010 23,729 -- 99,087
------------ ------------ ------------- ------------ ------------ -------------
Total income.................. 3,548,276 11,396,163 16,519,421 8,802,494 31,184,615 42,970,663
------------ ------------ ------------- ------------ ------------ -------------
EXPENSES:
Investment advisory fees (Note
2).......................... 711,667 367,927 750,063 396,219 1,854,767 3,883,306
Custodian fees................ 24,778 21,258 26,644 23,432 28,337 290,727
Accounting services (Note
2).......................... 49,914 14,144 49,074 27,031 115,232 258,256
Professional fees............. 11,644 9,068 13,545 9,175 43,607 51,299
Printing and shareholder
reports..................... 6,061 3,727 6,938 3,708 15,568 15,789
Registration fees (Note 1d)... 13,187 3,527 43 38 -- 19,004
Transfer agent fees (Note
2).......................... 5,009 4,594 5,009 5,009 -- 5,008
Pricing services.............. 229 6,183 1,675 5,109 -- 2,530
Directors' fees and
expenses.................... 1,557 951 1,803 1,204 -- 9,455
Interest expense.............. -- -- -- -- 454 --
Other......................... 2,375 1,711 3,720 2,199 -- 21,097
------------ ------------ ------------- ------------ ------------ -------------
Total expenses before
reimbursement............... 826,421 433,090 858,514 473,124 2,057,965 4,556,471
Reimbursement of expenses
(Note 2).................... -- -- -- -- -- --
------------ ------------ ------------- ------------ ------------ -------------
Expenses after
reimbursement............... 826,421 433,090 858,514 473,124 2,057,965 4,556,471
------------ ------------ ------------- ------------ ------------ -------------
Investment income -- net...... 2,721,855 10,963,073 15,660,907 8,329,370 29,126,650 38,414,192
------------ ------------ ------------- ------------ ------------ -------------
REALIZED & UNREALIZED GAIN
(LOSS) ON INVESTMENTS &
FOREIGN CURRENCY
TRANSACTIONS -- NET (NOTES
1C, 1E, 1F & 3):
Realized gain (loss) on
investments -- net.......... 26,418,543 (2,249,032) (1,979,485) 920,219 32,716 63,945,017
Realized gain (loss) on
foreign currency
transactions -- net......... -- -- -- -- -- 3,629,899
Change in unrealized
appreciation/depreciation on
investments -- net.......... 8,765,971 4,434,110 (8,361,032) (6,179,230) (271,048) 53,357,529
Change in unrealized
appreciation/depreciation on
foreign currency
transactions................ -- -- -- -- -- (1,704,878)
------------ ------------ ------------- ------------ ------------ -------------
Total realized and unrealized
gain (loss) on investments
and foreign currency
transactions -- net......... 35,184,514 2,185,078 (10,340,517) (5,259,011) (238,332) 119,227,567
------------ ------------ ------------- ------------ ------------ -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS... $ 37,906,369 $ 13,148,151 $ 5,320,390 $ 3,070,359 $ 28,888,318 $ 157,641,759
------------ ------------ ------------- ------------ ------------ -------------
------------ ------------ ------------- ------------ ------------ -------------
*Net of withholding tax....... $ 24,922 -- -- -- -- $ 696,875
------------ ------------ ------------- ------------ ------------ -------------
------------ ------------ ------------- ------------ ------------ -------------
<CAPTION>
NATURAL
RESOURCES
PORTFOLIO
- -------------------------------------------
<S> <C>
INVESTMENT INCOME (NOTES 1B &
1C):
Interest and discount
earned*..................... $ 83,947
Dividends*.................... 463,076
Other income.................. --
-----------
Total income.................. 547,023
-----------
EXPENSES:
Investment advisory fees (Note
2).......................... 78,349
Custodian fees................ 35,312
Accounting services (Note
2).......................... 5,528
Professional fees............. 4,709
Printing and shareholder
reports..................... 745
Registration fees (Note 1d)... 331
Transfer agent fees (Note
2).......................... 5,010
Pricing services.............. 4,452
Directors' fees and
expenses.................... 315
Interest expense.............. --
Other......................... 879
-----------
Total expenses before
reimbursement............... 135,630
Reimbursement of expenses
(Note 2).................... (16,501)
-----------
Expenses after
reimbursement............... 119,129
-----------
Investment income -- net...... 427,894
-----------
REALIZED & UNREALIZED GAIN
(LOSS) ON INVESTMENTS &
FOREIGN CURRENCY
TRANSACTIONS -- NET (NOTES
1C, 1E, 1F & 3):
Realized gain (loss) on
investments -- net.......... 1,257,109
Realized gain (loss) on
foreign currency
transactions -- net......... (6,904)
Change in unrealized
appreciation/depreciation on
investments -- net.......... 1,446,535
Change in unrealized
appreciation/depreciation on
foreign currency
transactions................ (407)
-----------
Total realized and unrealized
gain (loss) on investments
and foreign currency
transactions -- net......... 2,696,333
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS... $3,124,227
-----------
-----------
*Net of withholding tax....... $ 40,756
-----------
-----------
</TABLE>
57
<PAGE>
- --------------------------------------------------------------------------------
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: 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income -- net...... $ 3,578,627 $ 3,855,679 $ 5,747,305 $ 4,310,132
Realized gain (loss) on
investments and foreign
currency transactions --
net......................... 10,123,967 1,979,502 14,653,340 36,802,837
Change in unrealized
appreciation/depreciation on
investments................. (4,709,010) 10,823,009 21,343,267 1,642,669
Change in unrealized
appreciation/depreciation on
foreign currency
transactions................ -- -- (334,683) (941)
------------ ------------ ------------- -------------
Net increase in net assets
resulting from operations... 8,993,584 16,658,190 41,409,229 42,754,697
------------ ------------ ------------- -------------
DIVIDENDS & DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 1G):
Investment income -- net...... (3,754,719) (3,730,461) (5,548,969) (3,382,544)
Realized gain on investments
-- net...................... (1,979,516) (2,637,146) (36,850,216) (14,631,128)
------------ ------------ ------------- -------------
Net decrease in net assets
resulting from dividends and
distributions to
shareholders................ (5,734,235) (6,367,607) (42,399,185) (18,013,672)
------------ ------------ ------------- -------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4):
Net increase (decrease) in net
assets derived from capital
share transactions.......... (1,587,274) 10,996,845 37,729,131 21,568,591
------------ ------------ ------------- -------------
NET ASSETS:
Total increase (decrease) in
net assets.................. 1,672,075 21,287,428 36,739,175 46,309,616
Beginning of year............. 97,180,677 75,893,249 252,956,894 206,647,278
------------ ------------ ------------- -------------
End of year*.................. $ 98,852,752 $ 97,180,677 $ 289,696,069 $ 252,956,894
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
*Undistributed investment
income -- net (Note 1h)..... $ 1,769,753 $ 1,945,845 $ 2,458,189 $ 2,259,853
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
</TABLE>
See Notes to Financial Statements.
58
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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,
------------------------------ ------------------------------ ------------------------------
1996 1995 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Investment income -- net...... $ 6,775,983 $ 7,504,068 $ 2,721,855 $ 1,128,152 $ 10,963,073 $ 9,814,780
Realized gain (loss) on
investments and foreign
currency transactions --
net......................... 17,848,788 (4,123,221) 26,418,543 4,620,788 (2,249,032) 706,980
Change in unrealized
appreciation/depreciation on
investments................. 8,986,014 13,582,800 8,765,971 35,345,568 4,434,110 4,364,959
Change in unrealized
appreciation/depreciation on
foreign currency
transactions................ (4,745,969) 3,657,038 -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations... 28,864,816 20,620,685 37,906,369 41,094,508 13,148,151 14,886,719
------------- ------------- ------------- ------------- ------------- -------------
DIVIDENDS & DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 1G):
Investment income -- net...... (5,458,261) (8,032,457) (1,964,991) (1,291,070) (10,832,795) (9,775,052)
Realized gain on investments
-- net...................... (1,312,483) (3,043,742) (4,499,465) (6,299,419) -- --
------------- ------------- ------------- ------------- ------------- -------------
Net decrease in net assets
resulting from dividends and
distributions to
shareholders................ (6,770,744) (11,076,199) (6,464,456) (7,590,489) (10,832,795) (9,775,052)
------------- ------------- ------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4):
Net increase (decrease) in net
assets derived from capital
share transactions.......... (2,247,227) (20,354,990) 25,071,360 48,946,799 13,949,891 19,845,461
------------- ------------- ------------- ------------- ------------- -------------
NET ASSETS:
Total increase (decrease) in
net assets.................. 19,846,845 (10,810,504) 56,513,273 82,450,818 16,265,247 24,957,128
Beginning of year............. 212,682,739 223,493,243 184,152,432 101,701,614 107,378,148 82,421,020
------------- ------------- ------------- ------------- ------------- -------------
End of year*.................. $ 232,529,584 $ 212,682,739 $ 240,665,705 $ 184,152,432 $ 123,643,395 $ 107,378,148
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
*Undistributed investment
income -- net (Note 1h)..... $ 8,036,323 $ 1,000,662 $ 1,522,711 $ 765,847 $ 1,062,860 $ 932,582
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
59
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Statements of Changes in Net Assets (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT LONG TERM CORPORATE
BOND PORTFOLIO BOND PORTFOLIO
------------------------------ ------------------------------
FOR THE YEAR FOR THE YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31,
INCREASE (DECREASE) IN NET ------------------------------ ------------------------------
ASSETS: 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income -- net...... $ 15,660,907 $ 16,310,570 $ 8,329,370 $ 8,599,710
Realized gain (loss) on
investments and foreign
currency transactions --
net......................... (1,979,485) 791,779 920,219 2,060,856
Change in unrealized
appreciation/depreciation on
investments................. (8,361,032) 22,085,928 (6,179,230) 11,337,819
Change in unrealized
appreciation/depreciation on
foreign currency
transactions................ -- -- -- --
------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations... 5,320,390 39,188,277 3,070,359 21,998,385
------------- ------------- ------------- -------------
DIVIDENDS & DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 1G):
Investment income -- net...... (15,606,904) (16,342,303) (8,263,502) (8,570,923)
Realized gain on investments
-- net...................... -- -- -- --
------------- ------------- ------------- -------------
Net decrease in net assets
resulting from dividends and
distributions to
shareholders................ (15,606,904) (16,342,303) (8,263,502) (8,570,923)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4):
Net increase (decrease) in net
assets derived from capital
share transactions.......... (7,190,485) (2,116,693) (1,851,763) (272,791)
------------- ------------- ------------- -------------
NET ASSETS:
Total increase (decrease) in
net assets.................. (17,476,999) 20,729,281 (7,044,906) 13,154,671
Beginning of year............. 239,340,008 218,610,727 125,032,884 111,878,213
------------- ------------- ------------- -------------
End of year*.................. $ 221,863,009 $ 239,340,008 $ 117,987,978 $ 125,032,884
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
*Undistributed investment
income -- net (Note 1h)..... $ 1,322,724 $ 1,268,721 $ 725,913 $ 660,045
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
See Notes to Financial Statements.
60
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATURAL
RESOURCES
PORTFOLIO
MONEY RESERVE PORTFOLIO MULTIPLE STRATEGY PORTFOLIO ------------
------------------------------ ---------------------------------- FOR THE YEAR
FOR THE YEAR FOR THE YEAR ENDED
ENDED DECEMBER 31, ENDED DECEMBER 31, DECEMBER 31,
------------------------------ ---------------------------------- ------------
1996 1995 1996 1995 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Investment income -- net...... $ 29,126,650 $ 31,760,188 $ 38,414,192 $ 38,707,984 $ 427,894
Realized gain (loss) on
investments and foreign
currency transactions --
net......................... 32,716 271,802 67,574,916 117,255,473 1,250,205
Change in unrealized
appreciation/depreciation on
investments................. (271,048) 916,942 53,357,529 25,713,410 1,446,535
Change in unrealized
appreciation/depreciation on
foreign currency
transactions................ -- -- (1,704,878) (20,714) (407)
------------- ------------- --------------- --------------- ------------
Net increase in net assets
resulting from operations... 28,888,318 32,948,932 157,641,759 181,656,153 3,124,227
------------- ------------- --------------- --------------- ------------
DIVIDENDS & DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 1G):
Investment income -- net...... (29,126,650) (31,760,188) (42,049,050) (32,928,344) (441,716)
Realized gain on investments
-- net...................... (32,716) (271,802) (113,303,779) (72,889,967) --
------------- ------------- --------------- --------------- ------------
Net decrease in net assets
resulting from dividends and
distributions to
shareholders................ (29,159,366) (32,031,990) (155,352,829) (105,818,311) (441,716)
------------- ------------- --------------- --------------- ------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4):
Net increase (decrease) in net
assets derived from capital
share transactions.......... (10,478,219) (16,470,480) 39,539,413 11,435,787 1,312,192
------------- ------------- --------------- --------------- ------------
NET ASSETS:
Total increase (decrease) in
net assets.................. (10,749,267) (15,553,538) 41,828,343 87,273,629 3,994,703
Beginning of year............. 568,438,931 583,992,469 1,169,356,536 1,082,082,907 21,034,737
------------- ------------- --------------- --------------- ------------
End of year*.................. $ 557,689,664 $ 568,438,931 $ 1,211,184,879 $ 1,169,356,536 $ 25,029,440
------------- ------------- --------------- --------------- ------------
------------- ------------- --------------- --------------- ------------
*Undistributed investment
income -- net (Note 1h)..... -- -- $ 21,709,430 $ 21,714,389 $ 188,057
------------- ------------- --------------- --------------- ------------
------------- ------------- --------------- --------------- ------------
<CAPTION>
1995
- --------------------------------------------
<S> <C>
OPERATIONS:
Investment income -- net...... $ 484,231
Realized gain (loss) on
investments and foreign
currency transactions --
net......................... 767,873
Change in unrealized
appreciation/depreciation on
investments................. 1,550,026
Change in unrealized
appreciation/depreciation on
foreign currency
transactions................ 440
------------
Net increase in net assets
resulting from operations... 2,802,570
------------
DIVIDENDS & DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 1G):
Investment income -- net...... (474,128)
Realized gain on investments
-- net...................... --
------------
Net decrease in net assets
resulting from dividends and
distributions to
shareholders................ (474,128)
------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4):
Net increase (decrease) in net
assets derived from capital
share transactions.......... (2,748,349)
------------
NET ASSETS:
Total increase (decrease) in
net assets.................. (419,907)
Beginning of year............. 21,454,644
------------
End of year*.................. $ 21,034,737
------------
------------
*Undistributed investment
income -- net (Note 1h)..... $ 208,783
------------
------------
</TABLE>
61
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
---------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
INCREASE (DECREASE) IN NET ---------------------------------------------------------------------------------------------
ASSET VALUE: 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
<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........................ $ 14.86 $ 13.27 $ 14.62 $ 13.70 $ 13.29
----------------- -------------- -------- -------- --------
Investment income -- net...... .54 .60 .61 .50 .47
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... .83 2.07 (1.21) 1.35 .38
----------------- -------------- -------- -------- --------
Total from investment
operations.................. 1.37 2.67 (.60) 1.85 .85
----------------- -------------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.57) (.62) (.53) (.75) (.26)
Realized gain on investments
-- net...................... (.30) (.46) (.22) (.18) (.18)
----------------- -------------- -------- -------- --------
Total dividends and
distributions............... (.87) (1.08) (.75) (.93) (.44)
----------------- -------------- -------- -------- --------
Net asset value, end of
year........................ $ 15.36 $ 14.86 $ 13.27 $ 14.62 $ 13.70
----------------- -------------- -------- -------- --------
----------------- -------------- -------- -------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 9.76% 21.59% (4.28%) 14.31% 6.67%
----------------- -------------- -------- -------- --------
----------------- -------------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of
reimbursement............... .39% .38% .40% .43% .48%
----------------- -------------- -------- -------- --------
----------------- -------------- -------- -------- --------
Expenses...................... .39% .38% .40% .43% .48%
----------------- -------------- -------- -------- --------
----------------- -------------- -------- -------- --------
Investment income -- net...... 3.63% 4.47% 4.28% 3.72% 4.40%
----------------- -------------- -------- -------- --------
----------------- -------------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $ 98,853 $ 97,181 $ 75,893 $ 88,018 $ 56,080
----------------- -------------- -------- -------- --------
----------------- -------------- -------- -------- --------
Portfolio turnover............ 234.79% 32.92% 46.94% 25.38% 33.15%
----------------- -------------- -------- -------- --------
----------------- -------------- -------- -------- --------
Average commission rate
paid++...................... $ .0611 -- -- -- --
----------------- -------------- -------- -------- --------
----------------- -------------- -------- -------- --------
</TABLE>
- ---------------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the year.
++ For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for purchases
and sales of equity securities. The "Average Commission Rate Paid" includes
commissions paid in foreign currencies, which have been converted into US
dollars using the prevailing exchange rate on the date of the transaction.
Such conversions may significantly affect the rate shown.
See Notes to Financial Statements.
62
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL STOCK PORTFOLIO
-------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1996+ 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
<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........................ $ 23.88 $ 21.64 $ 25.73 $ 23.22 $ 23.39
----------------- ------------- ----------------- --------------- -----------------
Investment income -- net...... .46 .41 .29 .33 .39
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... 2.86 3.70 (1.50) 3.41 .16
----------------- ------------- ----------------- --------------- -----------------
Total from investment
operations.................. 3.32 4.11 (1.21) 3.74 .55
----------------- ------------- ----------------- --------------- -----------------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.47) (.34) (.28) (.59) (.20)
Realized gain on investments
-- net...................... (3.48) (1.53) (2.60) (.64) (.52)
----------------- ------------- ----------------- --------------- -----------------
Total dividends and
distributions............... (3.95) (1.87) (2.88) (1.23) (.72)
----------------- ------------- ----------------- --------------- -----------------
Net asset value, end of
year........................ $ 23.25 $ 23.88 $ 21.64 $ 25.73 $ 23.22
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 16.54% 20.73% (5.12%) 17.01% 2.47%
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of
reimbursement............... .40% .41% .39% .38% .41%
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
Expenses...................... .40% .41% .39% .38% .41%
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
Investment income -- net...... 2.11% 1.98% 1.32% 1.43% 1.89%
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $ 289,696 $ 252,957 $ 206,647 $ 223,971 $ 202,417
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
Portfolio turnover............ 74.30% 130.54% 71.19% 100.12% 74.89%
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
Average commission rate
paid++...................... $ .0264 -- -- -- --
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
<CAPTION>
-----------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1996+ 1995+ 1994 1993 1992
<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........................ $ 15.25 $ 14.54 $ 15.42 $ 13.23 $ 13.16
------------- ------------- ------------- ------------- -------------
Investment income -- net...... .47 .52 .47 .36 .39
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... 1.56 .94 (.71) 2.61 (.01)
------------- ------------- ------------- ------------- -------------
Total from investment
operations.................. 2.03 1.46 (.24) 2.97 .38
------------- ------------- ------------- ------------- -------------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.39) (.55) (.41) (.60) (.17)
Realized gain on investments
-- net...................... (.09) (.20) (.23) (.18) (.14)
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions............... (.48) (.75) (.64) (.78) (.31)
------------- ------------- ------------- ------------- -------------
Net asset value, end of
year........................ $ 16.80 $ 15.25 $ 14.54 $ 15.42 $ 13.23
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 13.78% 10.44% (1.62%) 23.73% 3.00%
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of
reimbursement............... .42% .44% .48% .45% .50%
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Expenses...................... .42% .44% .48% .46% .54%
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Investment income -- net...... 3.02% 3.59% 3.22% 3.27% 3.84%
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $ 232,530 $ 212,683 $ 223,493 $ 182,672 $ 52,599
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Portfolio turnover............ 160.89% 26.81% 27.31% 30.53% 43.56%
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Average commission rate
paid++...................... $ .0160 -- -- -- --
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the year.
++ For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for purchases
and sales of equity securities. The "Average Commission Rate Paid" includes
commissions paid in foreign currencies, which have been converted into US
dollars using the prevailing exchange rate on the date of the transaction.
Such conversions may significantly affect the rate shown.
63
<PAGE>
- --------------------------------------------------------------------------------
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: 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
<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........................ $ 24.06 $ 19.20 $ 24.65 $ 23.98 $ 23.31
----------------- -------------- ----------------- ----------------- -----------------
Investment income -- net...... .32 .15 .31 .32 .26
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... 4.24 6.13 (1.81) 1.63 .53
----------------- -------------- ----------------- ----------------- -----------------
Total from investment
operations.................. 4.56 6.28 (1.50) 1.95 .79
----------------- -------------- ----------------- ----------------- -----------------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.24) (.23) (.30) (.41) (.12)
Realized gain on investments
-- net...................... (.59) (1.19) (3.65) (.87) --
----------------- -------------- ----------------- ----------------- -----------------
Total dividends and
distributions............... (.83) (1.42) (3.95) (1.28) (.12)
----------------- -------------- ----------------- ----------------- -----------------
Net asset value, end of
year........................ $ 27.79 $ 24.06 $ 19.20 $ 24.65 $ 23.98
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 19.57% 35.35% (6.93%) 8.63% 3.40%
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... .38% .38% .40% .38% .42%
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
Investment income -- net...... 1.25% .82% 1.53% 1.35% 1.32%
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $ 240,666 $ 184,152 $ 101,702 $ 122,836 $ 139,062
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
Portfolio turnover............ 78.04% 87.66% 102.96% 160.29% 87.25%
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
Average commission rate
paid++...................... $ .0625 -- -- -- --
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
</TABLE>
- ---------------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the year.
++ For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for purchases
and sales of equity securities. The "Average Commission Rate Paid" includes
commissions paid in foreign currencies, which have been converted into US
dollars using the prevailing exchange rate on the date of the transaction.
Such conversions may significantly affect the rate shown.
See Notes to Financial Statements.
64
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD PORTFOLIO
-------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1996+ 1995+ 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
<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........................ $ 8.99 $ 8.53 $ 9.68 $ 9.10 $ 8.44
----------------- ------------- -------- --------------- --------
Investment income -- net...... .89 .93 1.00 .94 1.03
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... .16 .46 (1.17) .62 .64
----------------- ------------- -------- --------------- --------
Total from investment
operations.................. 1.05 1.39 (.17) 1.56 1.67
----------------- ------------- -------- --------------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.89) (.93) (.98) (.98) (1.01)
Realized gain on investments
-- net...................... -- -- -- -- --
----------------- ------------- -------- --------------- --------
Total dividends and
distributions............... (.89) (.93) (.98) (.98) (1.01)
----------------- ------------- -------- --------------- --------
Net asset value, end of
year........................ $ 9.15 $ 8.99 $ 8.53 $ 9.68 $ 9.10
----------------- ------------- -------- --------------- --------
----------------- ------------- -------- --------------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 12.32% 17.12% (1.88%) 18.11% 20.63%
----------------- ------------- -------- --------------- --------
----------------- ------------- -------- --------------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... .39% .38% .41% .43% .44%
----------------- ------------- -------- --------------- --------
----------------- ------------- -------- --------------- --------
Investment income -- net...... 9.77% 10.25% 10.88% 10.17% 11.45%
----------------- ------------- -------- --------------- --------
----------------- ------------- -------- --------------- --------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $ 123,643 $ 107,378 $ 82,421 $ 94,739 $ 68,034
----------------- ------------- -------- --------------- --------
----------------- ------------- -------- --------------- --------
Portfolio turnover............ 50.48% 63.39% 63.43% 73.01% 83.95%
----------------- ------------- -------- --------------- --------
----------------- ------------- -------- --------------- --------
Average commission rate
paid++...................... -- -- -- -- --
----------------- ------------- -------- --------------- --------
----------------- ------------- -------- --------------- --------
</TABLE>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the year.
++ For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for purchases
and sales of equity securities. The "Average Commission Rate Paid" includes
commissions paid in foreign currencies, which have been converted into US
dollars using the prevailing exchange rate on the date of the transaction.
Such conversions may significantly affect the rate shown.
65
<PAGE>
- --------------------------------------------------------------------------------
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: 1996+ 1995+ 1994+ 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
<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........................ $ 11.41 $ 10.32 $ 12.02 $ 11.75 $ 11.79
----------------- -------------- ----------------- ----------------- -----------------
Investment income -- net...... .76 .78 .75 .83 .83
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... (.49) 1.10 (1.30) .50 (.04)
----------------- -------------- ----------------- ----------------- -----------------
Total from investment
operations.................. .27 1.88 (.55) 1.33 .79
----------------- -------------- ----------------- ----------------- -----------------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.75) (.79) (.75) (.84) (.83)
Realized gain on investments
-- net...................... -- -- (.39) (.22) --
In excess of realized gain on
investments -- net.......... -- -- (.01) -- --
----------------- -------------- ----------------- ----------------- -----------------
Total dividends and
distributions............... (.75) (.79) (1.15) (1.06) (.83)
----------------- -------------- ----------------- ----------------- -----------------
Net asset value, end of
year........................ $ 10.93 $ 11.41 $ 10.32 $ 12.02 $ 11.75
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 2.61% 18.87% (4.78%) 11.20% 7.03%
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... .38% .38% .37% .36% .40%
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
Investment income -- net...... 6.85% 7.22% 6.89% 6.42% 7.03%
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
Investment income -- net, and
realized gain on investments
-- net...................... -- -- -- -- --
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $ 221,863 $ 239,340 $ 218,611 $ 284,495 $ 269,254
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
Portfolio turnover............ 29.35% 57.38% 140.55% 113.61% 80.54%
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
</TABLE>
- ---------------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the year.
++ Amount less than $.01 per share.
See Notes to Financial Statements.
66
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG TERM CORPORATE BOND PORTFOLIO
-------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1996+ 1995+ 1994+ 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
<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........................ $ 12.02 $ 10.72 $ 12.59 $ 12.07 $ 12.06
----------------- ------------- ----------------- --------------- -----------------
Investment income -- net...... .80 .83 .81 .83 .90
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... (.50) 1.30 (1.42) .68 .02
----------------- ------------- ----------------- --------------- -----------------
Total from investment
operations.................. .30 2.13 (.61) 1.51 .92
----------------- ------------- ----------------- --------------- -----------------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.79) (.83) (.82) (.83) (.91)
Realized gain on investments
-- net...................... -- -- (.44) (.16) --
In excess of realized gain on
investments -- net.......... -- -- -- -- --
----------------- ------------- ----------------- --------------- -----------------
Total dividends and
distributions............... (.79) (.83) (1.26) (.99) (.91)
----------------- ------------- ----------------- --------------- -----------------
Net asset value, end of
year........................ $ 11.53 $ 12.02 $ 10.72 $ 12.59 $ 12.07
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 2.77% 20.66% (5.14%) 13.01% 8.05%
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... .39% .40% .39% .38% .43%
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
Investment income -- net...... 6.90% 7.32% 7.16% 6.65% 7.51%
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
Investment income -- net, and
realized gain on investments
-- net...................... -- -- -- -- --
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $ 117,988 $ 125,033 $ 111,878 $ 139,321 $ 126,864
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
Portfolio turnover............ 92.45% 110.49% 134.53% 110.53% 93.10%
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
<CAPTION>
-------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
<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........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------- ------------- ----------------- --------------- -----------------
Investment income -- net...... .05 .06 .04 .03 .04
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... -- -- -- -- --
----------------- ------------- ----------------- --------------- -----------------
Total from investment
operations.................. .05 .06 .04 .03 .04
----------------- ------------- ----------------- --------------- -----------------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.05) (.06) (.04) (.03) (.04)
Realized gain on investments
-- net...................... +--+ -- -- -- --
In excess of realized gain on
investments -- net.......... -- -- -- -- --
----------------- ------------- ----------------- --------------- -----------------
Total dividends and
distributions............... (.05) (.06) (.04) (.03) (.04)
----------------- ------------- ----------------- --------------- -----------------
Net asset value, end of
year........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 5.33% 5.81% 4.04% 3.08% 3.77%
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... .36% .35% .36% .36% .39%
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
Investment income -- net...... -- -- -- -- --
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
Investment income -- net, and
realized gain on investments
-- net...................... 5.16% 5.67% 4.00% 3.03% 3.77%
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $ 557,690 $ 568,439 $ 583,992 $ 546,710 $ 647,190
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
Portfolio turnover............ -- -- -- -- --
----------------- ------------- ----------------- --------------- -----------------
----------------- ------------- ----------------- --------------- -----------------
</TABLE>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the year.
++ Amount less than $.01 per share.
67
<PAGE>
- --------------------------------------------------------------------------------
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: 1996+ 1995+ 1994+ 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
<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........................ $ 17.24 $ 16.22 $ 19.84 $ 18.70 $ 18.32
----------------- -------------- ----------------- ----------------- -----------------
Investment income -- net...... .53 .56 .50 .54 .61
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... 1.63 2.03 (1.39) 2.30 .17
----------------- -------------- ----------------- ----------------- -----------------
Total from investment
operations.................. 2.16 2.59 (.89) 2.84 .78
----------------- -------------- ----------------- ----------------- -----------------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.60) (.48) (.57) (.88) (.32)
Realized gain on investments
-- net...................... (1.67) (1.09) (2.16) (.82) (.08)
----------------- -------------- ----------------- ----------------- -----------------
Total dividends and
distributions............... (2.27) (1.57) (2.73) (1.70) (.40)
----------------- -------------- ----------------- ----------------- -----------------
Net asset value, end of
year........................ $ 17.13 $ 17.24 $ 16.22 $ 19.84 $ 18.70
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 14.32% 17.55% (5.05%) 16.66% 4.35%
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of
reimbursement............... .39% .38% .38% .36% .40%
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
Expenses...................... .39% .38% .38% .36% .40%
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
Investment income -- net...... 3.26% 3.44% 2.97% 2.91% 3.26%
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $ 1,211,185 $ 1,169,357 $ 1,082,083 $ 1,237,336 $ 1,137,022
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
Portfolio turnover............ 143.82% 140.83% 68.12% 91.08% 67.71%
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
Average commission rate
paid++...................... $ .0246 -- -- -- --
----------------- -------------- ----------------- ----------------- -----------------
----------------- -------------- ----------------- ----------------- -----------------
</TABLE>
- ---------------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the year.
++ For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for purchases
and sales of equity securities. The "Average Commission Rate Paid" includes
commissions paid in foreign currencies, which have been converted into US
dollars using the prevailing exchange rate on the date of the transaction.
Such conversions may significantly affect the rate shown.
See Notes to Financial Statements.
68
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATURAL RESOURCES PORTFOLIO
-------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1996+ 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
<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........................ $ 8.17 $ 7.43 $ 7.53 $ 7.01 $ 7.04
-------- ------------- -------- --------------- --------
Investment income -- net...... .16 .17 .17 .13 .21
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... 1.03 .73 (.10) .66 (.12)
-------- ------------- -------- --------------- --------
Total from investment
operations.................. 1.19 .90 .07 .79 .09
-------- ------------- -------- --------------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.17) (.16) (.17) (.27) (.12)
Realized gain on investments
-- net...................... -- -- -- -- --
-------- ------------- -------- --------------- --------
Total dividends and
distributions............... (.17) (.16) (.17) (.27) (.12)
-------- ------------- -------- --------------- --------
Net asset value, end of
year........................ $ 9.19 $ 8.17 $ 7.43 $ 7.53 $ 7.01
-------- ------------- -------- --------------- --------
-------- ------------- -------- --------------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 14.72% 12.22% .88% 11.65% 1.35%
-------- ------------- -------- --------------- --------
-------- ------------- -------- --------------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of
reimbursement............... .50% .47% .50% .50% .50%
-------- ------------- -------- --------------- --------
-------- ------------- -------- --------------- --------
Expenses...................... .57% .47% .59% .59% .82%
-------- ------------- -------- --------------- --------
-------- ------------- -------- --------------- --------
Investment income -- net...... 1.79% 1.99% 2.23% 2.00% 2.84%
-------- ------------- -------- --------------- --------
-------- ------------- -------- --------------- --------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $ 25,029 $ 21,035 $ 21,455 $ 18,437 $ 7,987
-------- ------------- -------- --------------- --------
-------- ------------- -------- --------------- --------
Portfolio turnover............ 31.29% 38.50% 48.16% 65.26% 32.14%
-------- ------------- -------- --------------- --------
-------- ------------- -------- --------------- --------
Average commission rate
paid++...................... $ .0231 -- -- -- --
-------- ------------- -------- --------------- --------
-------- ------------- -------- --------------- --------
</TABLE>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the year.
++ For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for purchases
and sales of equity securities. The "Average Commission Rate Paid" includes
commissions paid in foreign currencies, which have been converted into US
dollars using the prevailing exchange rate on the date of the transaction.
Such conversions may significantly affect the rate shown.
69
<PAGE>
[This Page Intentionally Left Blank]
70
<PAGE>
- --------------------------------------------------------------------------------
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 last available bid price 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. 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. Dividends from foreign
securities where the ex-dividend date may have passed are subsequently recorded
when the Portfolios have determined 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.
71
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
(E) DERIVATIVE FINANCIAL INSTRUMENTS -- The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio 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.
- - FOREIGN CURRENCY OPTIONS AND FUTURES -- Certain Portfolios may also purchase
or sell listed or over-the-counter foreign currency options, foreign currency
futures and related options on foreign currency futures as a short or long hedge
against possible variations in foreign exchange rates. Such transactions may be
effected with respect to hedges on non-US dollar denominated securities owned by
the Portfolio, sold by the Portfolio but not yet delivered, or committed or
anticipated to be purchased by the Portfolio.
- - 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 Portolios 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.
72
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
(H) RECLASSIFICATION -- Generally accepted accounting principles require that
certain components of net assets be adjusted to reflect permanent differences
between financial and tax reporting. 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 aggregate average daily value of the ten combined Portfolios' 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.
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
expenses with respect to each Portfolio, to the extent that these expenses
exceed 0.50% of the Portfolio's average daily net assets.
For the year ended December 31, 1996, the Natural Resources Portfolio was
reimbursed in the amount of $16,501.
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
earned commissions on the execution of portfolio security transactions
aggregating $2,313 in the Balanced Portfolio, $30,249 in the Capital Stock
Portfolio, $17,809 in the Global Strategy Portfolio, $10,800 in the Growth Stock
Portfolio, $3,750 in the High Yield Portfolio, $87,552 in the Multiple Strategy
Portfolio, and $1,986 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, 1996, Merrill Lynch Security Pricing Service,
an affiliate of MLPF&S, was paid by Balanced Portfolio $303; Global Strategy
Portfolio $123; High Yield Portfolio $3,739; Intermediate Government Portfolio
$1,250; Long-Term Corporate Bond Portfolio $2,381; and Multiple Strategy
Portfolio $360 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, 1996 were as follows:
<TABLE>
<CAPTION>
INTERMEDIATE
GLOBAL GOVERNMENT LONG TERM
BALANCED CAPITAL STOCK STRATEGY GROWTH STOCK HIGH YIELD BOND CORPORATE BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Total Purchases..... $ 214,837,063 $ 282,527,196 $ 386,989,471 $ 180,400,616 $ 54,096,546 $63,609,640 $ 104,610,164
-------------- -------------- -------------- -------------- ------------ ------------- --------------
-------------- -------------- -------------- -------------- ------------ ------------- --------------
Total Sales......... $ 201,782,433 $ 176,180,450 $ 313,649,795 $ 157,376,222 $ 50,230,717 $64,473,336 $ 102,742,329
-------------- -------------- -------------- -------------- ------------ ------------- --------------
-------------- -------------- -------------- -------------- ------------ ------------- --------------
<CAPTION>
MULTIPLE NATURAL
STRATEGY RESOURCES
PORTFOLIO PORTFOLIO
<S> <C> <C>
- --------------------
Total Purchases..... $ 1,941,739,661 $8,096,252
--------------- ------------
--------------- ------------
Total Sales......... $ 1,407,181,483 $6,962,971
--------------- ------------
--------------- ------------
</TABLE>
73
<PAGE>
- --------------------------------------------------------------------------------
Merrill Lynch Series Fund, Inc.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
As of December 31, 1996, unrealized appreciation/depreciation for Federal income
<TABLE>
<CAPTION>
tax purposes were as follows:
CAPITAL GLOBAL GROWTH HIGH
BALANCED STOCK STRATEGY STOCK YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Appreciated securities........ $ 6,452,163 $ 40,356,226 $ 28,243,695 $ 38,843,203 $ 5,679,695
Depreciated securities........ (735,801) (6,218,877) (5,817,899) (3,001,166) (4,656,912)
------------ ------------- ------------- ------------- -------------
Net unrealized appreciation
(depreciation).............. $ 5,716,362 $ 34,137,349 $ 22,425,796 $ 35,842,037 $ 1,022,783
------------ ------------- ------------- ------------- -------------
------------ ------------- ------------- ------------- -------------
Cost for Federal income tax
purposes.................... $ 92,392,620 $ 255,316,517 $ 209,061,902 $ 206,299,192 $ 121,773,798
------------ ------------- ------------- ------------- -------------
------------ ------------- ------------- ------------- -------------
Net realized and unrealized gains (losses) as of December 31, 1996 were as follows:
</TABLE>
<TABLE>
<CAPTION>
BALANCED PORTFOLIO CAPITAL STOCK PORTFOLIO GLOBAL STRATEGY PORTFOLIO
--------------------------- ---------------------------- ----------------------------
REALIZED REALIZED UNREALIZED REALIZED UNREALIZED
GAINS UNREALIZED GAINS GAINS GAINS GAINS
(LOSSES) GAINS (LOSSES) (LOSSES) (LOSSES) (LOSSES)
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Long-term securities.......... $ 10,126,080 $5,748,592 $ 13,976,669 $ 34,331,367 $ 12,131,634 $ 22,443,821
Short-term securities......... (2,113) -- 144 -- (790) --
Forward foreign exchange
contracts................... -- -- 744,534 (335,948) 5,915,293 (823,288)
Foreign currency
transactions................ -- -- (68,007) 894 (197,349) (11,758)
------------ ----------- ------------ ------------ ------------ ------------
Total......................... $ 10,123,967 $5,748,592 $ 14,653,340 $ 33,996,313 $ 17,848,788 $ 21,608,775
------------ ----------- ------------ ------------ ------------ ------------
------------ ----------- ------------ ------------ ------------ ------------
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares were as follows:
<CAPTION>
---------------------------- ---------------------------
REALIZED
REALIZED UNREALIZED GAINS UNREALIZED
GAINS GAINS (LOSSES) GAINS
<S> <C> <C> <C> <C>
Long-term securities.......... $ 26,279,641 $ 35,857,979 $ (2,249,459) $ 1,044,999
Short-term securities......... 138,902 -- 427 --
Forward foreign exchange
contracts................... -- -- -- --
Foreign currency
transactions................ -- -- -- --
------------ ------------ ------------ -----------
Total......................... $ 26,418,543 $ 35,857,979 $ (2,249,032) $ 1,044,999
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares
</TABLE>
<TABLE>
<CAPTION>
BALANCED PORTFOLIO CAPITAL STOCK PORTFOLIO GLOBAL STRATEGY PORTFOLIO
---------------------------- ---------------------------- ----------------------------
FOR THE YEAR ENDED DOLLAR DOLLAR DOLLAR
DECEMBER 31, 1996 SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................... 831,685 $ 12,144,003 1,760,273 $ 37,721,110 1,834,916 $ 28,028,627
Shares issued to shareholders
in reinvestment of dividends
and distributions........... 402,709 5,734,235 2,087,885 42,399,185 457,483 6,770,744
----------- ------------- ----------- ------------- ----------- -------------
Total issued.................. 1,234,394 17,878,238 3,848,158 80,120,295 2,292,399 34,799,371
Shares redeemed............... (1,336,006) (19,465,512) (1,982,012) (42,391,164) (2,401,439) (37,046,598)
----------- ------------- ----------- ------------- ----------- -------------
Net increase (decrease)....... (101,612) $ (1,587,274) 1,866,146 $ 37,729,131 (109,040) $ (2,247,227)
----------- ------------- ----------- ------------- ----------- -------------
----------- ------------- ----------- ------------- ----------- -------------
<CAPTION>
----------------------------
FOR THE YEAR ENDED DOLLAR
DECEMBER 31, 1996 SHARES AMOUNT
<S> <C> <C>
- ------------------------------
Shares sold................... 4,026,810 $ 102,339,591
Shares issued to shareholders
in reinvestment of dividends
and distributions........... 272,693 6,464,456
----------- -------------
Total issued.................. 4,299,503 108,804,047
Shares redeemed............... (3,294,306) (83,732,687)
----------- -------------
Net increase (decrease)....... 1,005,197 $ 25,071,360
----------- -------------
----------- -------------
</TABLE>
<TABLE>
<CAPTION>
BALANCED PORTFOLIO CAPITAL STOCK PORTFOLIO GLOBAL STRATEGY 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)
----------- ------------- ----------- ------------- ----------- -------------
----------- ------------- ----------- ------------- ----------- -------------
<CAPTION>
----------------------------
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>
74
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE LONG TERM
GOVERNMENT CORPORATE MONEY MULTIPLE NATURAL
BOND BOND RESERVE STRATEGY RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Appreciated securities........ $ 4,987,878 $ 1,956,527 $ 62,655 $ 125,972,422 $ 3,471,448
Depreciated securities........ (2,058,045) (1,030,443) (94,362) (20,190,534) (1,393,112)
------------- ------------- ------------- --------------- ------------
Net unrealized appreciation
(depreciation).............. $ 2,929,833 $ 926,084 $ (31,707) $ 105,781,888 $ 2,078,336
------------- ------------- ------------- --------------- ------------
------------- ------------- ------------- --------------- ------------
Cost for Federal income tax
purposes.................... $ 215,610,625 $ 115,203,510 $ 560,184,538 $ 1,113,890,758 $ 22,960,029
------------- ------------- ------------- --------------- ------------
------------- ------------- ------------- --------------- ------------
Net realized and unrealized gains (losses) as of December 31, 1996 were as follows:
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE
INTERMEDIATE GOVERNMENT LONG TERM CORPORATE STRATEGY
BOND PORTFOLIO BOND PORTFOLIO MONEY RESERVE PORTFOLIO PORTFOLIO
--------------------------- ---------------------- ----------------------- ------------
REALIZED
REALIZED UNREALIZED REALIZED UNREALIZED REALIZED UNREALIZED GAINS
LOSSES GAINS GAINS GAINS GAINS LOSSES (LOSSES)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term securities.......... $ (1,979,485) $2,929,833 $ 920,219 $926,084 -- -- $ 63,953,817
Short-term securities......... -- -- -- -- $32,716 $ (30,132) (8,800)
Forward foreign exchange
contracts................... -- -- -- -- -- -- 3,472,157
Foreign currency
transactions................ -- -- -- -- -- -- 157,742
------------ ----------- --------- --------- -------- ----------- ------------
Total......................... $ (1,979,485) $2,929,833 $ 920,219 $926,084 $32,716 $ (30,132) $ 67,574,916
------------ ----------- --------- --------- -------- ----------- ------------
------------ ----------- --------- --------- -------- ----------- ------------
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares were as follows:
<CAPTION>
NATURAL RESOURCES PORTFOLIO
---------------------------
UNREALIZED REALIZED
GAINS GAINS UNREALIZED
(LOSSES) (LOSSES) GAINS
<S> <C> <C> <C>
- ------------------------------
Long-term securities.......... $ 106,426,053 $ 1,257,109 $ 2,080,106
Short-term securities......... -- -- --
Forward foreign exchange
contracts................... (1,667,215) -- --
Foreign currency
transactions................ (39,000) (6,904) 77
------------- ----------- ------------
Total......................... $ 104,719,838 $ 1,250,205 $ 2,080,183
------------- ----------- ------------
------------- ----------- ------------
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT BOND LONG TERM CORPORATE BOND
HIGH YIELD PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------- ---------------------------- ----------------------------
DOLLAR DOLLAR DOLLAR
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................... 6,533,467 $ 58,786,187 1,107,678 $ 12,231,009 801,725 $ 9,239,683
Shares issued to shareholders
in reinvestment of dividends
and distributions........... 1,207,222 10,832,795 1,428,977 15,606,904 719,303 8,263,502
----------- ------------- ----------- ------------- ----------- -------------
Total issued.................. 7,740,689 69,618,982 2,536,655 27,837,913 1,521,028 17,503,185
Shares redeemed............... (6,167,098) (55,669,091) (3,214,088) (35,028,398) (1,689,020) (19,354,948)
----------- ------------- ----------- ------------- ----------- -------------
Net increase (decrease)....... 1,573,591 $ 13,949,891 (677,433) $ (7,190,485) (167,992) $ (1,851,763)
----------- ------------- ----------- ------------- ----------- -------------
----------- ------------- ----------- ------------- ----------- -------------
<CAPTION>
MONEY RESERVE PORTFOLIO
------------------------------- ----------------------------- ----------------------------
DOLLAR DOLLAR DOLLAR
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------
Shares sold................... 196,701,637 $ 196,701,637 604,939 $ 9,547,441 1,934,193 $ 16,931,833
Shares issued to shareholders
in reinvestment of dividends
and distributions........... 29,159,633 29,159,633 10,145,152 155,352,829 52,331 441,716
------------- -------------- ----------- -------------- ----------- -------------
Total issued.................. 225,861,270 225,861,270 10,750,091 164,900,270 1,986,524 17,373,549
Shares redeemed............... (236,339,489) (236,339,489) (7,880,674) (125,360,857) (1,838,510) (16,061,357)
------------- -------------- ----------- -------------- ----------- -------------
Net increase (decrease)....... (10,478,219) $ (10,478,219) 2,869,417 $ 39,539,413 148,014 $ 1,312,192
------------- -------------- ----------- -------------- ----------- -------------
------------- -------------- ----------- -------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT BOND LONG TERM CORPORATE BOND
HIGH YIELD PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------- ---------------------------- ----------------------------
DOLLAR DOLLAR DOLLAR
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................... 8,479,805 $ 75,386,693 1,820,237 $ 19,784,758 1,179,723 $ 13,430,499
Shares issued to shareholders
in reinvestment of dividends
and distributions........... 1,107,700 9,775,052 1,510,971 16,342,302 759,176 8,570,923
----------- ------------- ----------- ------------- ----------- -------------
Total issued.................. 9,587,505 85,161,745 3,331,208 36,127,060 1,938,899 22,001,422
Shares redeemed............... (7,315,179) (65,316,284) (3,546,978) (38,243,753) (1,968,331) (22,274,213)
----------- ------------- ----------- ------------- ----------- -------------
Net increase (decrease)....... 2,272,326 $ 19,845,461 (215,770) $ (2,116,693) (29,432) $ (272,791)
----------- ------------- ----------- ------------- ----------- -------------
----------- ------------- ----------- ------------- ----------- -------------
<CAPTION>
MONEY RESERVE PORTFOLIO
------------------------------- ----------------------------- ----------------------------
DOLLAR DOLLAR DOLLAR
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------
Shares sold................... 211,919,729 $ 211,919,729 979,588 $ 15,902,035 3,592,635 $ 27,917,420
Shares issued to shareholders
in reinvestment of dividends
and distributions........... 32,032,115 32,032,115 7,012,948 105,818,311 61,559 474,128
------------- -------------- ----------- -------------- ----------- -------------
Total issued.................. 243,951,844 243,951,844 7,992,536 121,720,346 3,654,194 28,391,548
Shares redeemed............... (260,422,324) (260,422,324) (6,852,014) (110,284,559) (3,966,476) (31,139,897)
------------- -------------- ----------- -------------- ----------- -------------
Net increase (decrease)....... (16,470,480) $ (16,470,480) 1,140,522 $ 11,435,787 (312,282) $ (2,748,349)
------------- -------------- ----------- -------------- ----------- -------------
------------- -------------- ----------- -------------- ----------- -------------
</TABLE>
75
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Concluded)
- --------------------------------------------------------------------------------
5. CAPITAL LOSS CARRYFORWARDS:
At December 31, 1996, the Fund had capital loss carryforwards of approximately
$3,368,000 in the High Yield Portfolio, of which $3,019,000 expires in 1998, and
$349,000 expires in 1999; $10,426,000 in the Intermediate Government Bond
Portfolio, of which $7,516,000 expires in 2002, $1,088,000 expires in 2003, and
$1,822,000 expires in 2004; $1,921,000 in the Long Term Corporate Bond
Portfolio, all of which expires in 2002; $3,702,000 in the Natural Resources
Portfolio, of which $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. Expired
capital loss carryforward in the amount of $6,550,142 in the Natural Resources
Portfolio has been reclassified to paid-in capital in excess of par.
6. COMMITMENTS:
At December 31, 1996, the Multiple Strategy Portfolio had entered into forward
foreign exchange contracts, in addition to the contracts listed on the Schedule
of Investments, under which it agreed to purchase various foreign currencies
with values of approximately $17,790,000; the Natural Resources Portfolio had
entered into forward foreign exchange contracts, in addition to the contracts
listed on the Schedule of Investments, under which it agreed to sell various
foreign currencies with a value of approximately $17,000.
7. LOANED SECURITIES:
At December 31, 1996, the Intermediate Government Bond Portfolio held US
Treasury Notes having an aggregate value of approximately $6,275,000 as
collateral for portfolio securities loaned having a market value of
approximately $6,033,000; the Long Term Corporate Bond Portfolio held US
Treasury Notes having an aggregate value of approximately $1,046,000 as
collateral for portfolio securities loaned having a market value of
approximately $1,000,000; the Multiple Strategy Portfolio held US Treasury Notes
having an aggregate value of approximately $10,665,000 as collateral for
portfolio securities loaned having a market value of approximately $10,902,000.
8. SUBSEQUENT EVENTS:
On January 2, 1997, the Board of Directors declared dividends and distributions
per share payable on January 2, 1997 and January 9, 1997 to shareholders of
record as of December 31, 1996 and January 2, 1997 as follows:
<TABLE>
<CAPTION>
ORDINARY LONG-TERM
INCOME CAPITAL GAINS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PORTFOLIO
Balanced................................................................................. $ .581556 $ 1.271029
Capital Stock............................................................................ .801789 .560750
Global Strategy.......................................................................... .718377 .462216
Growth Stock............................................................................. 1.143922 2.075848
High Yield............................................................................... .078663 --
Intermediate Government Bond............................................................. .065161 --
Long Term Corporate Bond................................................................. .070928 --
Multiple Strategy........................................................................ .684557 .516597
Natural Resources........................................................................ .069097 --
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
76
<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, 1996 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 eight year period ended December 31, 1996.
Capital Stock Portfolio for each of the years in the ten year period
ended December 31, 1996.
Global Strategy Portfolio for the period July 1, 1987* to December 31,
1987 and each of the years in the nine year period ended December 31,
1996.
Growth Stock Portfolio for each of the years in the ten year period
ended December 31, 1996.
High Yield Portfolio for each of the years in the ten year period ended
December 31, 1996.
Intermediate Government Bond Portfolio for each of the years in the ten
year period ended December 31, 1996.
Long Term Corporate Bond Portfolio for each of the years in the ten
year period ended December 31, 1996.
Money Reserve Portfolio for each of the years in the ten year period
ended December 31, 1996.
Multiple Strategy Portfolio for each of the years in the ten year
period ended December 31, 1996.
Natural Resources Portfolio for the period July 1, 1987* to December
31, 1987 and each of the years in the nine year period ended December
31, 1996.
Contained in Part B:
With respect to each of the Fund's Portfolios:
Schedules of Investments as of December 31, 1996.
Statements of Assets and Liabilities as of December 31, 1996.
Statements of Operations for the year ended December 31, 1996.
Statements of Changes in Net Assets for each of the years in the two-
year period ended December 31, 1996.
Financial Highlights for each of the years in the five year period
ended December 31, 1996.
- --------
* Commencement of operations.
C-1
<PAGE>
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
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(a) Investment Advisory Agreement (l)
5(b) Sub-Advisory Agreement
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
20, 1997)
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
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
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>
- --------
(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 MARCH 31, 1997
-------------- -----------------
<S> <C>
Common Stock, par value $0.10 per share
Balanced Portfolio................... 5
Capital Stock Portfolio.............. 5
Global Strategy Portfolio............ 5
Growth Stock Portfolio............... 5
High Yield Portfolio................. 5
Intermediate Government Bond Portfo-
lio................................. 5
Long Term Corporate Bond Portfolio... 5
Money Reserve Portfolio.............. 5
Multiple Strategy Portfolio.......... 5
Natural Resources Portfolio.......... 5
</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 Capital Fund,
Inc., Merrill Lynch Developing Capital Markets Fund, Inc., Merrill Lynch
Dragon Fund, Inc., Merrill Lynch EuroFund, Merrill Lynch Fundamental Growth
Fund, Inc., Merrill Lynch Fund For Tomorrow, Inc., Merrill Lynch Global
Allocation Fund, Inc., Merrill Lynch Global Bond Fund for Investment and
Retirement, Merrill Lynch Global Convertible Fund, Inc., Merrill Lynch Global
Holdings, Inc., Merrill Lynch Global Resources Trust, Merrill Lynch Global
SmallCap Fund, Inc., Merrill Lynch Global Utility Fund, Inc., Merrill Lynch
Global Value Fund, Inc., Merrill Lynch Growth Fund, Merrill Lynch Healthcare
Fund, Inc., Merrill Lynch Intermediate Government Bond Fund, Inc., Merrill
Lynch International Equity Fund, Merrill Lynch Latin America Fund, Inc.,
Merrill Lynch Middle East/Africa Fund, Inc., Merrill Lynch Municipal Series
Trust, Merrill Lynch Pacific Fund, Inc., Merrill Lynch Ready Assets Trust,
Merrill Lynch Retirement Series
C-4
<PAGE>
Trust, Merrill Lynch Series Fund, Inc., Merrill Lynch Short-Term Global Income
Fund, Inc., Merrill Lynch Strategic Dividend Fund, Merrill Lynch Technology
Fund, Inc., Merrill Lynch U.S.A. Government Reserves, Merrill Lynch U.S.
Treasury Money Fund, Merrill Lynch Utility Income Fund, Inc. and Merrill Lynch
Variable Series 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, Inc.
Fund Asset Management, L.P. ("FAM"), an affiliate of the Investment Adviser,
acts as the investment adviser for the following open-end investment
companies: CBA Money Fund, CMA Government Securities Fund, CMA Money Fund, CMA
Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, CMA Treasury Fund,
The Corporate Fund Accumulation Program, Inc., Financial Institutions Series
Trust, Merrill Lynch Basic Value Fund, Inc., Merrill Lynch California
Municipal Series Trust, Merrill Lynch Corporate Bond Fund, Inc., Merrill Lynch
Emerging Tigers Fund, Inc., Merrill Lynch Federal Securities Trust, Merrill
Lynch Funds For Institutions Series, Merrill Lynch Multi-State Limited
Maturity Municipal Series Trust, Merrill Lynch Multi-State Municipal Series
Trust, Merrill Lynch Municipal Bond Fund, Inc., Merrill Lynch Phoenix Fund,
Inc., Merrill Lynch Special Value Fund, Inc., Merrill Lynch World Income,
Inc., and The Municipal Fund Accumulation Program, Inc., and the following
closed-end investment companies: Apex Municipal Fund, Inc., Corporate High
Yield Fund, Inc., Corporate High Yield Fund II, Inc., Income Opportunities
Fund 1999, Inc., Income Opportunities Fund 2000, Inc., Merrill Lynch Municipal
Strategy Fund, Inc., MuniAssets Fund, Inc., MuniEnhanced Fund, Inc.,
MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest
Florida Fund, MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey Fund,
Inc., MuniVest Pennsylvania Insured Fund, MuniYield Arizona Fund, Inc.,
MuniYield California Fund, Inc., MuniYield California Insured Fund, Inc.,
MuniYield California Insured Fund II, Inc., MuniYield Florida Fund, MuniYield
Florida Insured Fund, MuniYield Fund, Inc., MuniYield Insured Fund, 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 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 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 is One Financial
Center, 22nd Floor, Boston, Massachusetts 02111. 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 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, Mr. Richard is Treasurer and
Mr. Glenn is Executive Vice President of all or substantially all of the
investment companies described in the preceding paragraph. Messrs. Giordano,
Glenn, Harvey, 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
---- ------------------ ---------------------------
<C> <C> <S>
Arthur Zeikel......... President and Director President and Director of FAM;
President and Director of
Princeton Services, Inc.;
Director of MLFD; Executive
Vice President of ML & Co.,
Inc.
Terry K. Glenn........ Executive Vice Executive Vice President and
President and Director of FAM; President
Director and Director of MLFD;
Executive Vice President and
Director of Princeton
Services, Inc.; President of
Princeton Administrators,
L.P. and Director of Merrill
Lynch Financial Data
Services, Inc. ("MLFDS")
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
POSITION WITH PROFESSION, VOCATION OR
NAME INVESTMENT ADVISER EMPLOYMENT
---- ------------------ ---------------------------
<C> <C> <S>
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.
Michael J. Senior Vice President Senior Vice President of FAM;
Hennewinkel........... Senior Vice President of
Princeton Services, Inc.
Philip L. Kirstein.... Senior Vice President, Senior Vice President, General
General Counsel and Counsel and Secretary of FAM;
Secretary Senior Vice President,
General Counsel, Director and
Secretary of Princeton
Services, Inc.; Director of
MLFD
Ronald M. Kloss....... Senior Vice President Senior Vice President and
and Controller 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.; 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.
Michael L. Quinn...... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services, Inc.;
Managing Director and First
Vice President of Merrill
Lynch, Pierce, Fenner & Smith
Incorporated from 1989-1995
Richard L. Reller..... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services, Inc.
Gerald M. Richard..... Senior Vice President Senior Vice President and
and Treasurer Treasurer of FAM; Senior Vice
President and Treasurer of
Princeton Services, Inc.;
Vice President and Treasurer
of MLFD
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>
Merrill Lynch Asset Management U.K. Limited ("MLAM U.K.") acts as sub-
adviser for the following registered investment companies: Merrill Lynch
EuroFund, Merrill Lynch Global Allocation Fund, Inc., Merrill Lynch Global
SmallCap Fund, Inc., Merrill Lynch International Equity Fund, 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 Basic Value Fund, Inc., Merrill Lynch Capital Fund, Inc., Merrill Lynch
Corporate Bond Fund, Inc., Corporate High Yield Fund, Inc., Corporate High
Yield Fund II, Inc., Convertible Holdings, Inc., Merrill Lynch Consults
International Portfolio, Merrill Lynch Developing Capital Markets Fund, Inc.,
Merrill Lynch Dragon Fund, Inc., Merrill Lynch Emerging Tigers Fund, Inc.,
Merrill Lynch Fundamental Growth Fund, Inc., Merrill Lynch Fund For Tomorrow,
Inc. Merrill Lynch Global Bond Fund for Investment and Retirement, Merrill
Lynch Global Utility Fund, Inc., Merrill Lynch Global Value Fund, Inc.,
Merrill Lynch Global Holdings, Merrill Lynch Growth Fund, Merrill Lynch Global
Resources Trust, Merrill Lynch Healthcare Fund, Inc., Income Opportunities
Fund 1999, Inc., Income Opportunities Fund 2000, Inc., Merrill Lynch Latin
America Fund, Inc., Merrill Lynch Middle East/Africa Fund, Inc., Merrill Lynch
Pacific Fund, Inc., Merrill Lynch Phoenix Fund, Inc., Merrill Lynch Series
Fund, Inc., Merrill Lynch Special Value Fund, Inc., Merrill Lynch Strategic
Dividend Fund, Merrill Lynch Technology Fund, Inc., Merrill Lynch Utility
Income Fund, Inc.,
C-6
<PAGE>
Merrill Lynch Variable Series Funds, Inc., Merrill Lynch World Income Fund,
Inc., Worldwide DollarVest Fund, Inc., and Merrill Lynch Short-Term Global
Income Fund, Inc. The address of each of these investment companies is P.O.
Box 9011, Princeton, New Jersey 08543-9011. The address of MLAM U.K. is Milton
Gate, 1 Moor Lane, London EC2Y 9HA, England.
Set forth below is a list of each executive officer and director of MLAM
U.K. indicating each business, profession, vocation or employment of a
substantial nature in which each such person has been engaged since July 1,
1994, for his or her own account or in the capacity of director, officer,
partner or trustee. In addition, Messrs. Zeikel, Albert, Bascand, Glenn,
Richard and Yardley are officers of one or more of the registered investment
companies listed in the first two paragraphs of this Item 28:
<TABLE>
<CAPTION>
POSITION WITH OTHER SUBSTANTIAL BUSINESS,
NAME MLAM U.K. PROFESSION, VOCATION OR EMPLOYMENT
---- ------------------------ ----------------------------------
<S> <C> <C>
Arthur Zeikel........... Director and Chairman President and Director of the
Investment Adviser and FAM;
President and Director of
Princeton Services, Inc.;
Director of MLFD; Executive Vice
President of ML&Co.
Alan J. Albert.......... Senior Managing Director Vice President of the Investment
Adviser
Terry K. Glenn.......... Director Executive Vice President and
Director of the Investment
Adviser and FAM; Executive Vice
President and Director of
Princeton Services, Inc.;
President and Director of MLFD;
Director of MLFDS; President of
Princeton Administrators, L. P.
Adrian Holmes........... Managing Director Director of Merrill Lynch Global
Asset Management
Andrew John Bascand..... Director Director of Merrill Lynch Global
Asset Management
Edward Gobora........... Director Director of Merrill Lynch Global
Asset Management
Richard Kilbride........ Director Managing Director of Merrill
Lynch Global Asset Management
Robert M. Ryan.......... Director Vice President, Institutional
Marketing Debt and Equity Group,
Merrill Lynch Capital Markets
from 1989 to 1994
Gerald M. Richard....... Senior Vice President Senior Vice President and
Treasurer of the Investment
Adviser and FAM; Senior Vice
President and Treasurer of
Princeton Services, Inc.; Vice
President and Treasurer of MLFD
Stephen J. Yardley...... Director Director of Merrill Lynch Global
Asset Management
Carol Ann Langham....... Secretary None
Debra Anne Scarle....... Assistant Secretary None
</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
C-7
<PAGE>
Fund, CMA Treasury Fund, Convertible Holdings, Inc., The Corporate Fund
Accumulation Program, Inc., Corporate High Yield Fund, Inc., Corporate High
Yield Fund II, Inc., Income Opportunities Fund 1999, Inc., Income
Opportunities Fund 2000, Inc., MuniAssets Fund, Inc., The Municipal Fund
Accumulation Program, Inc., MuniEnhanced Fund, Inc., MuniInsured Fund, Inc.,
MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest Florida Fund, MuniVest
Michigan Insured Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest
Pennsylvania Fund, MuniYield Arizona Fund, MuniYield California Fund, Inc.,
MuniYield California Insured Fund, Inc., MuniYield Florida Fund, MuniYield
Florida Insured Fund, MuniYield Fund, Inc., MuniYield Insured Fund, 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 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 and Wasel is One Financial Center, 22nd Floor, Boston,
Massachusetts 02111.
<TABLE>
<CAPTION>
(2) (3)
(1) POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
---- --------------------- ----------------------
<C> <S> <C>
Terry K. Glenn...................... President and Director 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
Michael J. Brady.................... Vice President None
William M. Breen.................... Vice President None
Michael G. Clark.................... Vice President None
Mark A. DeSario..................... Vice President None
James T. Fatseas.................... Vice President None
Debra W. Landsman-Yaros............. Vice President None
Michelle T. Lau..................... Vice President None
Gerald M. Richard................... Vice President and Treasurer
Treasurer
Salvatore Venezia................... Vice President None
William Wasel....................... 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
C-8
<PAGE>
"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-9
<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
25th day of April, 1997.
Merrill Lynch Series Fund, Inc.
/s/ Terry K. Glenn
By__________________________________
(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.
SIGNATURES TITLE DATE
/s/ Terry K. Glenn President and
- ------------------------------------- Director (Principal April 25, 1997
(Terry K. Glenn) Executive Officer)
Treasurer (Principal
/s/ Gerald M. Richard* Financial and
- ------------------------------------- Accounting Officer)
Gerald M. Richard
/s/ Jack B. Sunderland* Director
- -------------------------------------
(Jack B. Sunderland)
/s/ Stephen B. Swensrud* Director
- -------------------------------------
(Stephen B. Swensrud)
/s/ J. Thomas Touchton* Director
- -------------------------------------
(J. Thomas Touchton)
/s/ Terry K. Glenn
*By _________________________________ April 25, 1997
Terry K. Glenn
Attorney-in-Fact
C-10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
------- ----------- --------
<C> <S> <C>
5(b) Sub-Advisory Agreement by and between Merrill Lynch Asset
Management, L.P. and Merrill Lynch Asset Management U.K.
Limited.....................................................
11 Consent of Deloitte & Touche LLP Independent Auditors
(Incorporated by reference as
C-11).......................................................
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>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> MERRILL LYNCH SERIES FUND, INC. - BALANCED PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 92360390
<INVESTMENTS-AT-VALUE> 98108982
<RECEIVABLES> 900644
<ASSETS-OTHER> 5017
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 99014643
<PAYABLE-FOR-SECURITIES> 70784
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 91107
<TOTAL-LIABILITIES> 161891
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 81210454
<SHARES-COMMON-STOCK> 6437463
<SHARES-COMMON-PRIOR> 6539075
<ACCUMULATED-NII-CURRENT> 1769753
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 10123953
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5748592
<NET-ASSETS> 98852752
<DIVIDEND-INCOME> 824264
<INTEREST-INCOME> 3133072
<OTHER-INCOME> 1422
<EXPENSES-NET> (380131)
<NET-INVESTMENT-INCOME> 3578627
<REALIZED-GAINS-CURRENT> 10123967
<APPREC-INCREASE-CURRENT> (4709010)
<NET-CHANGE-FROM-OPS> 8993584
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3754719)
<DISTRIBUTIONS-OF-GAINS> (1979516)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 831685
<NUMBER-OF-SHARES-REDEEMED> (1336006)
<SHARES-REINVESTED> 402709
<NET-CHANGE-IN-ASSETS> 1672075
<ACCUMULATED-NII-PRIOR> 1945845
<ACCUMULATED-GAINS-PRIOR> 1979502
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 323758
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 380131
<AVERAGE-NET-ASSETS> 97880581
<PER-SHARE-NAV-BEGIN> 14.86
<PER-SHARE-NII> .54
<PER-SHARE-GAIN-APPREC> .83
<PER-SHARE-DIVIDEND> (.57)
<PER-SHARE-DISTRIBUTIONS> (.30)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.36
<EXPENSE-RATIO> .39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> MERRILL LYNCH SERIES FUND, INC. - CAPITAL STOCK PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 255122499
<INVESTMENTS-AT-VALUE> 289453866
<RECEIVABLES> 1234179
<ASSETS-OTHER> 39187
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 290727232
<PAYABLE-FOR-SECURITIES> 441373
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 589790
<TOTAL-LIABILITIES> 1031163
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 238588247
<SHARES-COMMON-STOCK> 12457413
<SHARES-COMMON-PRIOR> 10591267
<ACCUMULATED-NII-CURRENT> 2458189
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14653320
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33996313
<NET-ASSETS> 289696069
<DIVIDEND-INCOME> 4661976
<INTEREST-INCOME> 2178088
<OTHER-INCOME> 0
<EXPENSES-NET> (1092759)
<NET-INVESTMENT-INCOME> 5747305
<REALIZED-GAINS-CURRENT> 14653340
<APPREC-INCREASE-CURRENT> 21008584
<NET-CHANGE-FROM-OPS> 41409229
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5548969)
<DISTRIBUTIONS-OF-GAINS> (36850216)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1760273
<NUMBER-OF-SHARES-REDEEMED> (1982012)
<SHARES-REINVESTED> 2087885
<NET-CHANGE-IN-ASSETS> 36739175
<ACCUMULATED-NII-PRIOR> 2259853
<ACCUMULATED-GAINS-PRIOR> 36850196
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 892477
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1092759
<AVERAGE-NET-ASSETS> 269695274
<PER-SHARE-NAV-BEGIN> 23.88
<PER-SHARE-NII> .46
<PER-SHARE-GAIN-APPREC> 2.86
<PER-SHARE-DIVIDEND> (.47)
<PER-SHARE-DISTRIBUTIONS> (3.48)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.25
<EXPENSE-RATIO> .40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> MERRILL LYNCH SERIES FUND, INC. - GLOBAL STRATEGY PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 209043877
<INVESTMENTS-AT-VALUE> 231487698
<RECEIVABLES> 2771399
<ASSETS-OTHER> 106181
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 234365278
<PAYABLE-FOR-SECURITIES> 166746
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1668948
<TOTAL-LIABILITIES> 1835694
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 194163183
<SHARES-COMMON-STOCK> 13838863
<SHARES-COMMON-PRIOR> 13947903
<ACCUMULATED-NII-CURRENT> 8036323
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8721303
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 21608775
<NET-ASSETS> 232529584
<DIVIDEND-INCOME> 3244486
<INTEREST-INCOME> 4480761
<OTHER-INCOME> 155
<EXPENSES-NET> (949419)
<NET-INVESTMENT-INCOME> 6775983
<REALIZED-GAINS-CURRENT> 17848788
<APPREC-INCREASE-CURRENT> 4240045
<NET-CHANGE-FROM-OPS> 28864816
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5458261)
<DISTRIBUTIONS-OF-GAINS> (1312483)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1834916
<NUMBER-OF-SHARES-REDEEMED> (2401439)
<SHARES-REINVESTED> 457483
<NET-CHANGE-IN-ASSETS> 19865653
<ACCUMULATED-NII-PRIOR> 1000662
<ACCUMULATED-GAINS-PRIOR> (2097063)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 741975
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 949419
<AVERAGE-NET-ASSETS> 222741691
<PER-SHARE-NAV-BEGIN> 15.25
<PER-SHARE-NII> .47
<PER-SHARE-GAIN-APPREC> 1.56
<PER-SHARE-DIVIDEND> (.39)
<PER-SHARE-DISTRIBUTIONS> (.09)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.80
<EXPENSE-RATIO> .42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> MERRILL LYNCH SERIES FUND, INC. - GROWTH STOCK PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 206283250
<INVESTMENTS-AT-VALUE> 242141229
<RECEIVABLES> 2587484
<ASSETS-OTHER> 10325
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 244739038
<PAYABLE-FOR-SECURITIES> 2185862
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1887471
<TOTAL-LIABILITIES> 4073333
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 176962382
<SHARES-COMMON-STOCK> 8660317
<SHARES-COMMON-PRIOR> 7655120
<ACCUMULATED-NII-CURRENT> 1522711
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 26322633
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 35857979
<NET-ASSETS> 240665705
<DIVIDEND-INCOME> 2779556
<INTEREST-INCOME> 768720
<OTHER-INCOME> 0
<EXPENSES-NET> (826421)
<NET-INVESTMENT-INCOME> 2721855
<REALIZED-GAINS-CURRENT> 26418543
<APPREC-INCREASE-CURRENT> 8765971
<NET-CHANGE-FROM-OPS> 37906369
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1964991)
<DISTRIBUTIONS-OF-GAINS> (4499465)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4026810
<NUMBER-OF-SHARES-REDEEMED> (3294306)
<SHARES-REINVESTED> 272693
<NET-CHANGE-IN-ASSETS> 56513273
<ACCUMULATED-NII-PRIOR> 765847
<ACCUMULATED-GAINS-PRIOR> 4403555
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 711667
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 826421
<AVERAGE-NET-ASSETS> 215184610
<PER-SHARE-NAV-BEGIN> 24.06
<PER-SHARE-NII> .32
<PER-SHARE-GAIN-APPREC> 4.24
<PER-SHARE-DIVIDEND> (.24)
<PER-SHARE-DISTRIBUTIONS> (.59)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 27.79
<EXPENSE-RATIO> .38
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 05
<NAME> MERRILL LYNCH SERIES FUND, INC. - HIGH YIELD PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 121751582
<INVESTMENTS-AT-VALUE> 122796581
<RECEIVABLES> 1947177
<ASSETS-OTHER> 13574
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 124757332
<PAYABLE-FOR-SECURITIES> 987000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 126937
<TOTAL-LIABILITIES> 1113937
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 127288718
<SHARES-COMMON-STOCK> 13511531
<SHARES-COMMON-PRIOR> 11937940
<ACCUMULATED-NII-CURRENT> 1062860
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5753182)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1044999
<NET-ASSETS> 123643395
<DIVIDEND-INCOME> 303111
<INTEREST-INCOME> 11093052
<OTHER-INCOME> 0
<EXPENSES-NET> (433090)
<NET-INVESTMENT-INCOME> 10963073
<REALIZED-GAINS-CURRENT> (2249032)
<APPREC-INCREASE-CURRENT> 4434110
<NET-CHANGE-FROM-OPS> 13148151
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10832795)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6533467
<NUMBER-OF-SHARES-REDEEMED> (6167098)
<SHARES-REINVESTED> 1207222
<NET-CHANGE-IN-ASSETS> 16265247
<ACCUMULATED-NII-PRIOR> 932582
<ACCUMULATED-GAINS-PRIOR> (3504150)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 367927
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 433090
<AVERAGE-NET-ASSETS> 111244382
<PER-SHARE-NAV-BEGIN> 8.99
<PER-SHARE-NII> .89
<PER-SHARE-GAIN-APPREC> .16
<PER-SHARE-DIVIDEND> (.89)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.15
<EXPENSE-RATIO> .39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 06
<NAME> MERRILL LYNCH SERIES FUND, INC. - INTERMEDIATE GOVERNMENT BOND PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 215610625
<INVESTMENTS-AT-VALUE> 218540458
<RECEIVABLES> 3517669
<ASSETS-OTHER> 11887
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 222070014
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 207005
<TOTAL-LIABILITIES> 207005
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 228333178
<SHARES-COMMON-STOCK> 20299063
<SHARES-COMMON-PRIOR> 20976496
<ACCUMULATED-NII-CURRENT> 1322724
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (10722726)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2929833
<NET-ASSETS> 221863009
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16493411
<OTHER-INCOME> 26010
<EXPENSES-NET> (858514)
<NET-INVESTMENT-INCOME> 15660907
<REALIZED-GAINS-CURRENT> (1979485)
<APPREC-INCREASE-CURRENT> (8361032)
<NET-CHANGE-FROM-OPS> 5320390
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (15606904)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1107678
<NUMBER-OF-SHARES-REDEEMED> (3214088)
<SHARES-REINVESTED> 1428977
<NET-CHANGE-IN-ASSETS> (17476999)
<ACCUMULATED-NII-PRIOR> 1268721
<ACCUMULATED-GAINS-PRIOR> (8743241)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 750063
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 858514
<AVERAGE-NET-ASSETS> 226767631
<PER-SHARE-NAV-BEGIN> 11.41
<PER-SHARE-NII> .76
<PER-SHARE-GAIN-APPREC> (.49)
<PER-SHARE-DIVIDEND> (.75)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.93
<EXPENSE-RATIO> .38
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 07
<NAME> MERRILL LYNCH SERIES FUND, INC. - LONG TERM CORPORATE BOND PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 115203510
<INVESTMENTS-AT-VALUE> 116129594
<RECEIVABLES> 3194784
<ASSETS-OTHER> 6590
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 119330968
<PAYABLE-FOR-SECURITIES> 1249188
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93802
<TOTAL-LIABILITIES> 1342990
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 118256878
<SHARES-COMMON-STOCK> 10234402
<SHARES-COMMON-PRIOR> 10402394
<ACCUMULATED-NII-CURRENT> 725913
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1920897)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 926084
<NET-ASSETS> 117987978
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8778765
<OTHER-INCOME> 23729
<EXPENSES-NET> (473124)
<NET-INVESTMENT-INCOME> 8329370
<REALIZED-GAINS-CURRENT> 920219
<APPREC-INCREASE-CURRENT> (6179230)
<NET-CHANGE-FROM-OPS> 3070359
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8263502)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 801725
<NUMBER-OF-SHARES-REDEEMED> (1689020)
<SHARES-REINVESTED> 719303
<NET-CHANGE-IN-ASSETS> (7044906)
<ACCUMULATED-NII-PRIOR> 660045
<ACCUMULATED-GAINS-PRIOR> (2841117)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 396219
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 473124
<AVERAGE-NET-ASSETS> 119809778
<PER-SHARE-NAV-BEGIN> 12.02
<PER-SHARE-NII> .80
<PER-SHARE-GAIN-APPREC> (.50)
<PER-SHARE-DIVIDEND> (.79)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.53
<EXPENSE-RATIO> .39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 08
<NAME> MERRILL LYNCH SERIES FUND, INC. - MONEY RESERVE PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 560182963
<INVESTMENTS-AT-VALUE> 560152831
<RECEIVABLES> 4284569
<ASSETS-OTHER> 22548
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 564459948
<PAYABLE-FOR-SECURITIES> 6494870
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 275414
<TOTAL-LIABILITIES> 6770284
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 557719796
<SHARES-COMMON-STOCK> 557719795
<SHARES-COMMON-PRIOR> 568198015
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (30132)
<NET-ASSETS> 557689664
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 31184615
<OTHER-INCOME> 0
<EXPENSES-NET> (2057965)
<NET-INVESTMENT-INCOME> 29126650
<REALIZED-GAINS-CURRENT> 32716
<APPREC-INCREASE-CURRENT> (271048)
<NET-CHANGE-FROM-OPS> 28888318
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (29126650)
<DISTRIBUTIONS-OF-GAINS> (32716)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 196701637
<NUMBER-OF-SHARES-REDEEMED> (236339489)
<SHARES-REINVESTED> 29159633
<NET-CHANGE-IN-ASSETS> (10749267)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1854767
<INTEREST-EXPENSE> 454
<GROSS-EXPENSE> 2057965
<AVERAGE-NET-ASSETS> 559232332
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 09
<NAME> MERRILL LYNCH SERIES FUND, INC. - MULTIPLE STRATEGY PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1113246593
<INVESTMENTS-AT-VALUE> 1219672646
<RECEIVABLES> 14871710
<ASSETS-OTHER> 168682
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1234713038
<PAYABLE-FOR-SECURITIES> 18887159
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4641000
<TOTAL-LIABILITIES> 23528159
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1020810662
<SHARES-COMMON-STOCK> 70705552
<SHARES-COMMON-PRIOR> 67836135
<ACCUMULATED-NII-CURRENT> 21709430
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 63944949
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 104719838
<NET-ASSETS> 1211184879
<DIVIDEND-INCOME> 17663164
<INTEREST-INCOME> 25208412
<OTHER-INCOME> 99087
<EXPENSES-NET> (4556471)
<NET-INVESTMENT-INCOME> 38414192
<REALIZED-GAINS-CURRENT> 67574916
<APPREC-INCREASE-CURRENT> 51652651
<NET-CHANGE-FROM-OPS> 157641759
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (42049050)
<DISTRIBUTIONS-OF-GAINS> (113303779)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 604939
<NUMBER-OF-SHARES-REDEEMED> (7880674)
<SHARES-REINVESTED> 10145152
<NET-CHANGE-IN-ASSETS> 41828343
<ACCUMULATED-NII-PRIOR> 21714389
<ACCUMULATED-GAINS-PRIOR> 113303711
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3883306
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4556471
<AVERAGE-NET-ASSETS> 1167752283
<PER-SHARE-NAV-BEGIN> 17.24
<PER-SHARE-NII> .53
<PER-SHARE-GAIN-APPREC> 1.63
<PER-SHARE-DIVIDEND> (.60)
<PER-SHARE-DISTRIBUTIONS> (1.67)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.13
<EXPENSE-RATIO> .39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 010
<NAME> MERRILL LYNCH SERIES FUND, INC. - NATURAL RESOURCES PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 22958259
<INVESTMENTS-AT-VALUE> 25038365
<RECEIVABLES> 57849
<ASSETS-OTHER> 2256
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25098470
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 69030
<TOTAL-LIABILITIES> 69030
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 26464564
<SHARES-COMMON-STOCK> 2724074
<SHARES-COMMON-PRIOR> 2576060
<ACCUMULATED-NII-CURRENT> 188057
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3703364)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2080183
<NET-ASSETS> 25029440
<DIVIDEND-INCOME> 463076
<INTEREST-INCOME> 83947
<OTHER-INCOME> 0
<EXPENSES-NET> (119129)
<NET-INVESTMENT-INCOME> 427894
<REALIZED-GAINS-CURRENT> 1250205
<APPREC-INCREASE-CURRENT> 1446128
<NET-CHANGE-FROM-OPS> 3124227
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (441716)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1934193
<NUMBER-OF-SHARES-REDEEMED> (1838510)
<SHARES-REINVESTED> 52331
<NET-CHANGE-IN-ASSETS> 3994703
<ACCUMULATED-NII-PRIOR> 208783
<ACCUMULATED-GAINS-PRIOR> (11510615)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 78349
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 135630
<AVERAGE-NET-ASSETS> 23688602
<PER-SHARE-NAV-BEGIN> 8.17
<PER-SHARE-NII> .16
<PER-SHARE-GAIN-APPREC> 1.03
<PER-SHARE-DIVIDEND> (.17)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.19
<EXPENSE-RATIO> .57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 99.5b
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the ____ day of February, 1997, by and between
MERRILL LYNCH ASSET MANAGEMENT, L.P., a Delaware limited partnership
(hereinafter referred to as "MLAM"), and MERRILL LYNCH ASSET MANAGEMENT U.K.
LIMITED, a corporation organized under the laws of England and Wales
(hereinafter referred to as "MLAM U.K.").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, MERRILL LYNCH SERIES FUND, INC. (the "Fund") is a Maryland
corporation engaged in business as an open-end management investment company
with ten separate portfolios (the "Portfolios") and is registered under the
Investment Company Act of 1940, as amended (hereinafter referred to as the
"Investment Company Act"); and
WHEREAS, MLAM and MLAM U.K. are engaged principally in rendering
investment advisory services and are registered as investment advisers under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, MLAM U.K. is a member of the Investment Management Regulatory
Organization, a self-regulating organization recognized under the Financial
Services Act of 1986 of the United Kingdom (hereinafter referred to as "IMRO"),
and the conduct of its investment business is regulated by IMRO; and
WHEREAS, MLAM has entered into an investment advisory agreement (the
"Advisory Agreement") dated August 7, 1985, pursuant to which MLAM provides
management and investment and advisory services to the Fund; and
<PAGE>
WHEREAS, MLAM U.K. is willing to provide investment advisory services
to MLAM in connection with the Fund's operations on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, MLAM U.K. and MLAM hereby agree as follows:
ARTICLE I
---------
Duties of MLAM U.K.
-------------------
MLAM hereby employs MLAM U.K. to act as investment adviser to MLAM and
to furnish, or arrange for affiliates to furnish, the investment advisory
services described below, subject to the broad supervision of MLAM and the Fund,
for the period and on the terms and conditions set forth in this Agreement.
MLAM U.K. hereby accepts such employment and agrees during such period, at its
own expense, to render, or arrange for the rendering of, such services and to
assume the obligations herein set forth for the compensation provided for
herein. MLAM and its affiliates shall for all purposes herein be deemed a
Professional Investor as defined under the rules promulgated by IMRO
(hereinafter referred to as the "IMRO Rules"). MLAM U.K. and its affiliates
shall for all purposes herein be deemed to be an independent contractor and
shall, unless otherwise expressly provided or authorized, have no authority to
act for or represent the Fund in any way or otherwise be deemed an agent of the
Fund.
MLAM U.K. shall have the right to make unsolicited calls on MLAM and
shall provide MLAM with such investment research, advice and supervision as the
latter may from time to time consider necessary for the proper supervision of
the assets of the Fund; shall furnish continuously an investment program for the
Fund and shall make recommendations from time to time as to which securities
shall be purchased, sold or exchanged and what portion of the
<PAGE>
assets of each Portfolio of the Fund shall be held in the various securities in
which the Portfolio invests, options, futures, options on futures or cash; all
of the foregoing subject always to the restrictions of the Articles of
Incorporation and By-Laws of the Fund, as they may be amended and/or restated
from time to time, the provisions of the Investment Company Act and the
statements relating to the Portfolio's investment objective(s), investment
policies and investment restrictions as the same are set forth in the currently
effective prospectus and statement of additional information relating to the
shares of the Fund under the Securities Act of 1933, as amended (the
"Prospectus" and "Statement of Additional Information", respectively). MLAM
U.K. shall make recommendations and effect transactions with respect to foreign
currency matters, including foreign exchange contracts, foreign currency
options, foreign currency futures and related options on foreign currency
futures and forward foreign currency transactions. MLAM U.K. shall also make
recommendations or take action as to the manner in which voting rights, rights
to consent to corporate action and any other rights pertaining to the portfolio
securities of the Fund shall be exercised.
MLAM U.K. will not hold money on behalf of MLAM or the Fund, nor will
MLAM U.K. be the registered holder of the registered investments of MLAM or the
Fund or be the custodian of documents or other evidence of title.
ARTICLE II
----------
Allocation of Charges and Expenses
----------------------------------
MLAM U.K. assumes and shall pay for maintaining the staff and
personnel necessary to perform its obligations under this Agreement and shall at
its own expense provide the office space, equipment and facilities which it is
obligated to provide under Article I hereof
<PAGE>
and shall pay all compensation of officers of the Fund and all Directors of the
Fund who are affiliated persons of MLAM U.K.
ARTICLE III
-----------
Compensation of MLAM U.K.
-------------------------
For the services rendered, the facilities furnished and expenses
assumed by MLAM U.K., MLAM shall pay to MLAM U.K. a fee in an amount to be
determined from time to time by MLAM and MLAM U.K. but in no event in excess of
the amount that MLAM actually receives for providing services to the Fund
pursuant to the Advisory Agreement.
ARTICLE IV
----------
Limitation of Liability of MLAM U.K.
------------------------------------
MLAM U.K. shall not be liable for any error of judgment or mistake of
law or for any loss arising out of any investment or for any act or omission in
the performance of sub-advisory services rendered with respect to the Fund,
except for willful misfeasance, bad faith or gross negligence in the performance
of its duties, or by reason of reckless disregard of its obligations and duties
hereunder. As used in this Article IV, MLAM U.K. shall include any affiliates
of MLAM U.K. performing services for MLAM contemplated hereby and directors,
officers and employees of MLAM U.K. and such affiliates.
ARTICLE V
---------
Activities of MLAM U.K.
-----------------------
The services of MLAM U.K. to the Fund are not to be deemed to be
exclusive, MLAM U.K. and any person controlled by or under common control with
MLAM U.K. (for purposes of this Article V referred to as "affiliates") being
free to render services to others. It
<PAGE>
is understood that Directors, officers, employees and shareholders of the Fund
are or may become interested in MLAM U.K. and its affiliates, as directors,
officers, employees and shareholders or otherwise and that directors, officers,
employees and shareholders of MLAM U.K. and its affiliates are or may become
similarly interested in the Fund, and that MLAM U.K. and directors, officers,
employees, partners and shareholders of its affiliates may become interested in
the Fund as shareholders or otherwise.
ARTICLE VI
----------
MLAM U.K. Statements Pursuant to IMRO Rules
-------------------------------------------
Any complaints concerning MLAM U.K. should be in writing addressed to
the attention of the Managing Director of MLAM U.K. MLAM has the right to
obtain from MLAM U.K. a copy of the IMRO complaints procedure and to approach
IMRO directly.
MLAM U.K. may make recommendations, subject to the investment
restrictions referred to in Article I herein, regarding Investments Not Readily
Realisable (as that term is used in the IMRO Rules) or investments denominated
in a currency other than British pound sterling. There can be no certainty that
market makers will be prepared to deal in unlisted or thinly traded securities
and an accurate valuation may be hard to obtain. The value of investments
recommended by MLAM U.K. may be subject to exchange rate fluctuations which may
have favorable or unfavorable effects on investments.
MLAM U.K. may make recommendations, subject to the investment
restrictions referred to in Article I herein, regarding options, futures or
contracts for differences. Markets can be highly volatile and such investments
carry a high degree of risk of loss exceeding the original investment and any
margin on deposit.
<PAGE>
ARTICLE VII
-----------
Duration and Termination of this Agreement
------------------------------------------
This Agreement shall become effective as of the date first above
written and shall remain in force until the date of termination of the Advisory
Agreement (but not later than two years after the date hereof) and thereafter,
but only so long as such continuance is specifically approved at least annually
by (i) the Directors of the Fund or by the vote of a majority of the outstanding
voting securities of the Fund and (ii) a majority of those Directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of
any penalty, by MLAM or by vote of a majority of the outstanding voting
securities of the Fund, or by MLAM U.K., on sixty days' written notice to the
other party. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Advisory Agreement. Any
termination shall be without prejudice to the completion of transactions already
initiated.
ARTICLE VIII
------------
Amendments of this Agreement
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the Directors of the Fund or by the vote of a
majority of outstanding voting securities of the Fund and (ii) a majority of
those Directors who are not parties to this Agreement or interested persons of
any such party cast in person at a meeting called for the purpose of voting on
such approval.
<PAGE>
ARTICLE IX
----------
Definitions of Certain Terms
----------------------------
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the rules and regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act.
ARTICLE X
---------
Governing Law
-------------
This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Investment Company Act.
To the extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
MERRILL LYNCH ASSET MANAGEMENT, L.P.
By: Princeton Services, Inc.,
its General Partner
By: ________________________________________
Name:
Title:
MERRILL LYNCH ASSET MANAGEMENT U.K. LIMITED
By: ________________________________________
Name:
Title:
<PAGE>
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Series Fund, Inc.
We consent to the use in Post-Effective Amendment No. 19 to Registration
Statement No. 2-69062 of our report dated February 14, 1997 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 State-
ment.
Deloitte & Touche LLP
Princeton, New Jersey April 25, 1997
