<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1998
FILE NOS. 2-69062 AND 811-3091
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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. 20
AND/OR
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 22
(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 LLP
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.
TITLE OF SECURITIES BEING REGISTERED
Money Reserve Portfolio Common Stock, Intermediate Government Bond Portfolio
Common Stock, Long Term Corporate Bond Portfolio Common Stock, High Yield
Portfolio Common Stock, Capital Stock Portfolio Common Stock, Growth Stock
Portfolio Common Stock, Multiple Strategy Portfolio Common Stock, Natural Re-
sources Portfolio Common Stock, Global Strategy Portfolio Common Stock and
Balanced Portfolio Common Stock.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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 23, 1998
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 that 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, which are indirect wholly
owned subsidiaries of Merrill Lynch & Co., Inc. (collectively, the "Merrill
Lynch Insurance Companies"), and Monarch Life Insurance Company ("Monarch"
and, together with the Merrill Lynch Insurance Companies, the "Insurance Com-
panies"). The Accounts invest in shares of the Fund in accordance with alloca-
tion instructions received from Policyowners. Such allocation rights are fur-
ther described in the accompanying prospectus for the Policies. The Insurance
Companies redeem shares to the extent necessary to provide benefits under the
Policies. The investment objectives and certain investment policies of the
Portfolios are summarized 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 COMMISSION PASSED UPON THE ACCURACY OR ADE-
QUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OF-
FENSE.
---------------
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 (the "Commission") in a Statement of Additional
Information, dated April 23, 1998 (the "Statement of Additional Information"),
and can be obtained, without charge, by calling or by writing the Fund at the
above telephone number or address. The Commission maintains a website
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference and other information about the Fund. 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.................................................................. 28
Investment Adviser......................................................... 28
Portfolio Transactions and Brokerage....................................... 30
Purchase of Shares......................................................... 30
Redemption of Shares....................................................... 30
Dividends, Distributions and Taxes......................................... 30
Performance Data........................................................... 31
Additional Information..................................................... 32
Appendix A: Money Market Securities........................................ 34
Appendix B: Description of Corporate Bond Ratings.......................... 36
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the table below, in connection with shares of
the Balanced Portfolio, Capital Stock Portfolio, Global Strategy Portfolio,
Growth Stock Portfolio, High Yield Portfolio, Intermediate Government Bond
Portfolio, Long Term Corporate Bond Portfolio, Money Reserve Portfolio, Multi-
ple Strategy Portfolio and Natural Resources Portfolio, has been audited in
conjunction with the annual audits of the financial statements of the Portfo-
lios by Deloitte & Touche LLP, independent auditors. Financial statements for
the fiscal year ended December 31, 1997 and the independent auditors' report
thereon, are included in the Statement of Additional Information. Further in-
formation about the performance of each Portfolio 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 pro-
vided 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,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
-------- ------- ------- ------- ------- ------- ------- ------- ------- ------------
<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.... $ 15.36 $ 14.86 $ 13.27 $ 14.62 $ 13.70 $ 13.29 $ 11.78 $ 12.25 $ 10.59 $10.00
-------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Investment income--net.. .51 .54 .60 .61 .50 .47 .60 .64 .48 .26
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--
net.................... 1.76 .83 2.07 (1.21) 1.35 .38 1.77 (.47) 1.66 .33
-------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total from investment
operations............. 2.27 1.37 2.67 (.60) 1.85 .85 2.37 .17 2.14 .59
-------- ------- ------- ------- ------- ------- ------- ------- ------- ------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income--net. (.27) (.57) (.62) (.53) (.75) (.26) (.68) (.56) (.48) --
Realized gain on
investments--net...... (1.58) (.30) (.46) (.22) (.18) (.18) (.18) (.08) -- --
-------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total dividends and
distributions.......... (1.85) (.87) (1.08) (.75) (.93) (.44) (.86) (.64) (.48) --
-------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Net asset value, end of
period................. $ 15.78 $ 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.............. 16.93% 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% .39% .38% .40% .43% .48% .50% .50% .50% .50%*
======== ======= ======= ======= ======= ======= ======= ======= ======= ======
Expenses................ .39% .39% .38% .40% .43% .48% .50% .50% .66% .70%*
======== ======= ======= ======= ======= ======= ======= ======= ======= ======
Investment income--net.. 3.40% 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)......... $108,324 $98,853 $97,181 $75,893 $88,018 $56,080 $38,128 $29,065 $27,936 $5,530
======== ======= ======= ======= ======= ======= ======= ======= ======= ======
Portfolio turnover...... 143.20% 234.79% 32.92% 46.94% 25.38% 33.15% 58.77% 26.84% 48.43% 42.49%
======== ======= ======= ======= ======= ======= ======= ======= ======= ======
Average commission rate
paid##................. $ .0607 $ .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 Portfolio is
required 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,
--------------------------------------------------------------------------------------------------
1997+ 1996+ 1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
<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. $ 23.25 $ 23.88 $ 21.64 $ 25.73 $ 23.22 $ 23.39 $ 19.65 $ 20.19 $ 16.07 $ 16.27
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Investment income--
net............... .33 .46 .41 .29 .33 .39 .45 .54 .61 .55
Realized and
unrealized gain
(loss) on invest-
ments
and foreign cur-
rency transac-
tions--net........ 4.57 2.86 3.70 (1.50) 3.41 .16 4.97 (.44) 4.16 1.43
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Total from invest-
ment operations... 4.90 3.32 4.11 (1.21) 3.74 .55 5.42 .10 4.77 1.98
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment in-
come--net........ (.22) (.47) (.34) (.28) (.59) (.20) (.54) (.52) (.65) (.58)
Realized gain on
investments--net. (1.14) (3.48) (1.53) (2.60) (.64) (.52) (1.14) (.12) -- (1.60)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Total dividends and
distributions..... (1.36) (3.95) (1.87) (2.88) (1.23) (.72) (1.68) (.64) (.65) (2.18)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Net asset value,
end of year....... $ 26.79 $ 23.25 $ 23.88 $ 21.64 $ 25.73 $ 23.22 $ 23.39 $ 19.65 $ 20.19 $ 16.07
======== ======== ======== ======== ======== ======== ======== ======== ======== =======
TOTAL INVESTMENT
RETURN:*
Based on net asset
value per share... 22.47% 16.54% 20.73% (5.12)% 17.01% 2.47% 29.05% .61% 30.20% 13.31%
======== ======== ======== ======== ======== ======== ======== ======== ======== =======
RATIOS TO AVERAGE
NET ASSETS:
Expenses........... .41% .40% .41% .39% .38% .41% .40% .40% .41% .40%
======== ======== ======== ======== ======== ======== ======== ======== ======== =======
Investment income--
net............... 1.38% 2.11% 1.98% 1.32% 1.43% 1.89% 2.27% 2.66% 3.45% 3.31%
======== ======== ======== ======== ======== ======== ======== ======== ======== =======
SUPPLEMENTAL DATA:
Net assets, end of
year (in thou-
sands)............ $335,802 $289,696 $252,957 $206,647 $223,971 $202,417 $177,604 $128,511 $137,705 $99,203
======== ======== ======== ======== ======== ======== ======== ======== ======== =======
Portfolio turnover. 90.19% 74.30% 130.54% 71.19% 100.12% 74.89% 63.90% 61.76% 55.41% 32.85%
======== ======== ======== ======== ======== ======== ======== ======== ======== =======
Average commission
rate paid++....... $ .0281 $ .0264 -- -- -- -- -- -- -- --
======== ======== ======== ======== ======== ======== ======== ======== ======== =======
</TABLE>
- -------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
++ For fiscal years beginning on or after September 1, 1995, the Portfolio is
required 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
--------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
1997+ 1996+ 1995+ 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- ------- ------- ------- ------- ------
<S> <C> <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...... $ 16.80 $ 15.25 $ 14.54 $ 15.42 $ 13.23 $ 13.16 $ 12.00 $ 11.68 $ 10.41 $ 9.55
-------- -------- -------- -------- -------- ------- ------- ------- ------- ------
Investment income--net.. .47 .47 .52 .47 .36 .39 .41 .82 .38 .52
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--
net.................... 1.35 1.56 .94 (.71) 2.61 (.01) 1.60 (.14) 1.41 .65
-------- -------- -------- -------- -------- ------- ------- ------- ------- ------
Total from investment
operations............. 1.82 2.03 1.46 (.24) 2.97 .38 2.01 .68 1.79 1.17
-------- -------- -------- -------- -------- ------- ------- ------- ------- ------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income--net. (.55) (.39) (.55) (.41) (.60) (.17) (.85) (.36) (.52) (.31)
Realized gain on
investments--net...... (.63) (.09) (.20) (.23) (.18) (.14) -- -- -- --
-------- -------- -------- -------- -------- ------- ------- ------- ------- ------
Total dividends and
distributions.......... (1.18) (.48) (.75) (.64) (.78) (.31) (.85) (.36) (.52) (.31)
-------- -------- -------- -------- -------- ------- ------- ------- ------- ------
Net asset value, end of
year................... $ 17.44 $ 16.80 $ 15.25 $ 14.54 $ 15.42 $ 13.23 $ 13.16 $ 12.00 $ 11.68 $10.41
======== ======== ======== ======== ======== ======= ======= ======= ======= ======
TOTAL INVESTMENT
RETURN:*
Based on net asset value
per share.............. 11.72% 13.78% 10.44% (1.62)% 23.73% 3.00% 17.50% 6.01% 17.76% 12.50%
======== ======== ======== ======== ======== ======= ======= ======= ======= ======
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement.......... .45% .42% .44% .48% .45% .50% .50% .50% .50% .50%
======== ======== ======== ======== ======== ======= ======= ======= ======= ======
Expenses................ .45% .42% .44% .48% .46% .54% .60% .61% .75% .61%
======== ======== ======== ======== ======== ======= ======= ======= ======= ======
Investment income--net.. 2.69% 3.02% 3.59% 3.22% 3.27% 3.84% 3.86% 8.03% 4.07% 4.90%
======== ======== ======== ======== ======== ======= ======= ======= ======= ======
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $248,505 $232,530 $212,683 $223,493 $182,672 $52,599 $29,893 $22,087 $13,215 $9,176
======== ======== ======== ======== ======== ======= ======= ======= ======= ======
Portfolio turnover...... 108.04% 160.89% 26.81% 27.31% 30.53% 43.56% 93.85% 104.19% 80.25% 131.22%
======== ======== ======== ======== ======== ======= ======= ======= ======= ======
Average commission rate
paid#.................. $ .0155 $ .0160 -- -- -- -- -- -- -- --
======== ======== ======== ======== ======== ======= ======= ======= ======= ======
</TABLE>
- -------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
# For fiscal years beginning on or after September 1, 1995, the Portfolio 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.
5
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
GROWTH STOCK PORTFOLIO
-------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
<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........... $ 27.79 $ 24.06 $ 19.20 $ 24.65 $ 23.98 $ 23.31 $ 16.28 $ 18.95 $ 15.57 $ 14.05
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Investment income--net.. .24 .32 .15 .31 .32 .26 .25 .29 .30 .19
Realized and unrealized
gain (loss) on
investments and foreign
currency
transactions--net...... 8.01 4.24 6.13 (1.81) 1.63 .53 7.06 (2.63) 3.30 1.51
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Total from investment
operations............. 8.25 4.56 6.28 (1.50) 1.95 .79 7.31 (2.34) 3.60 1.70
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
LESS DIVIDENDS AND DIS-
TRIBUTIONS:
Investment income--net. (.18) (.24) (.23) (.30) (.41) (.12) (.28) (.33) (.22) (.18)
Realized gain on
investments--net...... (3.04) (.59) (1.19) (3.65) (.87) -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Total dividends and
distributions.......... (3.22) (.83) (1.42) (3.95) (1.28) (.12) (.28) (.33) (.22) (.18)
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Net asset value, end of
year................... $ 32.82 $ 27.79 $ 24.06 $ 19.20 $ 24.65 $ 23.98 $ 23.31 $ 16.28 $ 18.95 $ 15.57
======== ======== ======== ======== ======== ======== ======== ======= ======= =======
TOTAL INVESTMENT
RETURN:*
Based on net asset value
per share.............. 33.75% 19.57% 35.35% (6.93)% 8.63% 3.40% 45.31% (12.41)% 23.20% 12.13%
======== ======== ======== ======== ======== ======== ======== ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS:
Expenses................ .37% .38% .38% .40% .38% .42% .42% .43% .42% .40%
======== ======== ======== ======== ======== ======== ======== ======= ======= =======
Investment income--net.. .86% 1.25% .82% 1.53% 1.35% 1.32% 1.56% 1.43% 1.69% 1.19%
======== ======== ======== ======== ======== ======== ======== ======= ======= =======
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $333,023 $240,666 $184,152 $101,702 $122,836 $139,062 $113,715 $52,086 $79,109 $64,549
======== ======== ======== ======== ======== ======== ======== ======= ======= =======
Portfolio turnover...... 84.90% 78.04% 87.66% 102.96% 160.29% 87.25% 60.48% 94.54% 78.87% 82.05%
======== ======== ======== ======== ======== ======== ======== ======= ======= =======
Average commission rate
paid**................. $ .0630 $ .0625 -- -- -- -- -- -- -- --
======== ======== ======== ======== ======== ======== ======== ======= ======= =======
</TABLE>
- -------
* Total investment returns exclude insurance-related fees and expenses.
** For fiscal years beginning on or after September 1, 1995, the Portfolio is
required 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,
---------------------------------------------------------------------------------------------
1997+ 1996+ 1995+ 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- ------- ------- ------- ------- ------- ------- -------
<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...... $ 9.15 $ 8.99 $ 8.53 $ 9.68 $ 9.10 $ 8.44 $ 6.98 $ 8.92 $ 9.66 $ 9.40
-------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Investment income--net.. .90 .89 .93 1.00 .94 1.03 1.02 1.24 1.20 1.16
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--
net.................... .04 .16 .46 (1.17) .62 .64 1.47 (1.94) (.73) .15
-------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations............. .94 1.05 1.39 (.17) 1.56 1.67 2.49 (.70) .47 1.31
-------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Less dividends from
investment income--net. (.90) (.89) (.93) (.98) (.98) (1.01) (1.03) (1.24) (1.21) (1.05)
-------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
year................... $ 9.19 $ 9.15 $ 8.99 $ 8.53 $ 9.68 $ 9.10 $ 8.44 $ 6.98 $ 8.92 $ 9.66
======== ======== ======== ======= ======= ======= ======= ======= ======= =======
TOTAL INVESTMENT
RETURN:*
Based on net asset value
per share.............. 10.74% 12.32% 17.12% (1.88)% 18.11% 20.63% 37.77% (8.83)% 5.08% 14.53%
======== ======== ======== ======= ======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement.......... .39% -- -- -- -- -- -- -- -- --
======== ======== ======== ======= ======= ======= ======= ======= ======= =======
Expenses................ .39% .39% .38% .41% .43% .44% .46% .45% .44% .41%
======== ======== ======== ======= ======= ======= ======= ======= ======= =======
Investment income--net.. 9.67% 9.77% 10.25% 10.88% 10.17% 11.45% 12.74% 14.93% 12.64% 12.10%
======== ======== ======== ======= ======= ======= ======= ======= ======= =======
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $143,764 $123,643 $107,378 $82,421 $94,739 $68,034 $51,072 $34,673 $58,910 $78,343
======== ======== ======== ======= ======= ======= ======= ======= ======= =======
Portfolio turnover...... 60.94% 50.48% 63.39% 63.43% 73.01% 83.95% 76.34% 31.01% 70.43% 38.95%
======== ======== ======== ======= ======= ======= ======= ======= ======= =======
</TABLE>
- -------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
7
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
---------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------
1997+ 1996+ 1995+ 1994+ 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of year...... $ 10.93 $ 11.41 $ 10.32 $ 12.02 $ 11.75 $ 11.79 $ 11.04 $ 11.02 $ 10.58 $ 10.78
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income net... .73 .76 .78 .75 .83 .83 .86 .92 .92 .88
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--
net.................... .15 (.49) 1.10 (1.30) .50 (.04) .76 .01 .44 (.27)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. .88 .27 1.88 (.55) 1.33 .79 1.62 .93 1.36 .61
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income--net. (.73) (.75) (.79) (.75) (.84) (.83) (.87) (.91) (.92) (.81)
Realized gain on
investments--net...... -- -- -- (.39) (.22) -- -- -- -- --
In excess of realized
gain on investments--
net................... -- -- -- (.01) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions.......... (.73) (.75) (.79) (1.15) (1.06) (.83) (.87) (.91) (.92) (.81)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year................... $ 11.08 $ 10.93 $ 11.41 $ 10.32 $ 12.02 $ 11.75 $ 11.79 $ 11.04 $ 11.02 $ 10.58
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL INVESTMENT
RETURN:*
Based on net asset value
per share.............. 8.42% 2.61% 18.87% (4.78)% 11.20% 7.03% 15.57% 8.98% 13.46% 5.76%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS:
Expenses................ .37% .38% .38% .37% .36% .40% .39% .40% .41% .40%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Investment income--net.. 6.74% 6.85% 7.22% 6.89% 6.42% 7.03% 7.82% 8.50% 8.53% 8.21%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $222,212 $221,863 $239,340 $218,611 $284,495 $269,254 $261,434 $231,672 $224,531 $194,568
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Portfolio turnover...... 41.23% 29.35% 57.38% 140.55% 113.61% 80.54% 138.41% 129.98% 227.15% 258.98%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
- -------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
8
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
LONG TERM CORPORATE BOND PORTFOLIO
---------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------
1997+ 1996+ 1995+ 1994+ 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<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...... $ 11.53 $ 12.02 $ 10.72 $ 12.59 $ 12.07 $ 12.06 $ 11.21 $ 11.36 $ 10.91 $ 10.93
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income--net.. .79 .80 .83 .81 .83 .90 .96 .98 1.00 .97
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--
net.................... .18 (.50) 1.30 (1.42) .68 .02 .85 (.15) .45 (.10)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. .97 .30 2.13 (.61) 1.51 .92 1.81 .83 1.45 .87
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income--net
...................... (.78) (.79) (.83) (.82) (.83) (.91) (.96) (.98) (1.00) (.89)
Realized gain on in-
vestments--net........ -- -- -- (.44) (.16) -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total dividends and dis-
tributions............. (.78) (.79) (.83) (1.26) (.99) (.91) (.96) (.98) (1.00) (.89)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year................... $ 11.72 $ 11.53 $ 12.02 $ 10.72 $ 12.59 $ 12.07 $ 12.06 $ 11.21 $ 11.36 $ 10.91
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL INVESTMENT
RETURN:*
Based on net asset value
per share.............. 8.80% 2.77% 20.66% (5.13)% 13.01% 8.05% 17.01% 7.83% 13.96% 8.20%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS:
Expenses................ .38% .39% .40% .39% .38% .43% .42% .43% .44% .42%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Investment income--net.. 6.87% 6.90% 7.32% 7.16% 6.65% 7.51% 8.35% 8.81% 9.01% 8.88%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $124,746 $117,988 $125,033 $111,878 $139,321 $126,864 $128,396 $119,237 $126,655 $110,353
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Portfolio turnover...... 107.02% 92.45% 110.49% 134.53% 110.53% 93.10% 124.58% 107.36% 138.89% 175.86%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
- -------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
9
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
MONEY RESERVE PORTFOLIO
--------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
1997+ 1996 1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<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 .05 .06 .04 .03 .04 .06 .08 .09 .07
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. .05 .05 .06 .04 .03 .04 .06 .08 .09 .07
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income--net. (.05) (.05) (.06) (.04) (.03) (.04) (.06) (.08) (.09) (.07)
Realize gain on
investments--net...... -- + -- + -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions:........ (.05) (.05) (.06) (.04) (.03) (.04) (.06) (.08) (.09) (.07)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL INVESTMENT
RETURN:*
Based on net asset value
per share.............. 5.43% 5.33% 5.81% 4.04% 3.08% 3.77% 6.11% 8.26% 9.30% 7.48%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS:
Expenses................ .36% .36% .35% .36% .36% .39% .38% .39% .38% .39%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Investment income--net,
and realized gain on
investments--net....... 5.30% 5.16% 5.67% 4.00% 3.03% 3.77% 5.97% 7.92% 8.93% 7.26%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $525,717 $557,690 $568,439 $583,992 $546,710 $647,190 $798,020 $935,463 $816,661 $806,119
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
</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,
-----------------------------------------------------------------------------------------------------------
1997+ 1996+ 1995+ 1994+ 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<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
year........... $ 17.13 $ 17.24 $ 16.22 $ 19.84 $ 18.70 $ 18.32 $ 15.45 $ 15.56 $ 13.64
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Investment
income--net.... .47 .53 .56 .50 .54 .61 .72 .99 .79
Realized and
unrealized gain
(loss) on
investments and
foreign
currency
transactions--
net............ 2.57 1.63 2.03 (1.39) 2.30 .17 3.13 (.27) 2.02
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from
investment
operations..... 3.04 2.16 2.59 (.89) 2.84 .78 3.85 .72 2.81
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
LESS DIVIDENDS
AND
DISTRIBUTIONS:
Investment
income--net.... (.29) (.60) (.48) (.57) (.88) (.32) (.98) (.83) (.89)
Realized gain on
investments--
net............ (.91) (1.67) (1.09) (2.16) (.82) (.08) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total dividends
and
distributions.. (1.20) (2.27) (1.57) (2.73) (1.70) (.40) (.98) (.83) (.89)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of year.... $ 18.97 $ 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.......... 19.17% 14.32% 17.55% (5.05)% 16.66% 4.35% 25.97% 4.91% 21.31%
========== ========== ========== ========== ========== ========== ========== ========== ==========
RATIOS TO AVERAGE
NET ASSETS:
Expenses........ .39% .39% .38% .38% .36% .40% .39% .41% .39%
========== ========== ========== ========== ========== ========== ========== ========== ==========
Investment
income--net.... 2.65% 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)..... $1,329,531 $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....... 108.41% 143.82% 140.83% 68.12% 91.08% 67.71% 95.48% 106.39% 142.47%
========== ========== ========== ========== ========== ========== ========== ========== ==========
Average
commission rate
paid++......... $ .0233 $ .0246 -- -- -- -- -- -- --
========== ========== ========== ========== ========== ========== ========== ========== ==========
<CAPTION>
1988
-----------
<S> <C>
INCREASE
(DECREASE) IN
NET ASSET
VALUE:
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of
year........... $ 13.01
-----------
Investment
income--net.... .77
Realized and
unrealized gain
(loss) on
investments and
foreign
currency
transactions--
net............ .67
-----------
Total from
investment
operations..... 1.44
-----------
LESS DIVIDENDS
AND
DISTRIBUTIONS:
Investment
income--net.... (.61)
Realized gain on
investments--
net............ (.20)
-----------
Total dividends
and
distributions.. (.81)
-----------
Net asset value,
end of year.... $ 13.64
===========
TOTAL INVESTMENT
RETURN:*
Based on net
asset value per
share.......... 11.49%
===========
RATIOS TO AVERAGE
NET ASSETS:
Expenses........ .40%
===========
Investment
income--net.... 5.23%
===========
SUPPLEMENTAL
DATA:
Net assets, end
of year (in
thousands)..... $1,190,469
===========
Portfolio
turnover....... 147.43%
===========
Average
commission rate
paid++......... --
===========
</TABLE>
- -------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
++ For fiscal years beginning on or after September 1, 1995, the Portfolio 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 YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
1997+ 1996+ 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------ ------ ------- ------- -------
<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...... $ 9.19 $ 8.17 $ 7.43 $ 7.53 $ 7.01 $ 7.04 $ 7.18 $ 7.84 $ 6.43 $ 7.46
------- ------- ------- ------- ------- ------ ------ ------- ------- -------
Investment income--net.. .14 .16 .17 .17 .13 .21 .27 .21 .19 .17
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--
net.................... (1.14) 1.03 .73 (.10) .66 (.12) (.14) (.69) 1.41 (1.06)
------- ------- ------- ------- ------- ------ ------ ------- ------- -------
Total from investment
operations............. (1.00) 1.19 .90 .07 .79 .09 .13 (.48) 1.60 (.89)
------- ------- ------- ------- ------- ------ ------ ------- ------- -------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income--
net................... (.07) (.17) (.16) (.17) (.27) (.12) (.27) (.18) (.19) (.14)
Realized gain on
investments--net...... -- -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------ ------ ------- ------- -------
Total dividends and
distributions.......... (.07) (.17) (.16) (.17) (.27) (.12) (.27) (.18) (.19) (.14)
------- ------- ------- ------- ------- ------ ------ ------- ------- -------
Net asset value, end of
year................... $ 8.12 $ 9.19 $ 8.17 $ 7.43 $ 7.53 $ 7.01 $ 7.04 $ 7.18 $ 7.84 $ 6.43
======= ======= ======= ======= ======= ====== ====== ======= ======= =======
TOTAL INVESTMENT
RETURN:*
Based on net asset value
per share.............. (10.97)% 14.72% 12.22% .88% 11.65% 1.35% 1.67% (6.18)% 25.23% (12.17)%
======= ======= ======= ======= ======= ====== ====== ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement.......... .50% .50% .47% .50% .50% .50% .50% .50% .50% .48%
======= ======= ======= ======= ======= ====== ====== ======= ======= =======
Expenses................ .59% .57% .47% .59% .59% .82% .74% .63% .64% .48%
======= ======= ======= ======= ======= ====== ====== ======= ======= =======
Investment income--net.. 1.65% 1.79% 1.99% 2.23% 2.00% 2.84% 3.12% 2.76% 2.81% 2.22%
======= ======= ======= ======= ======= ====== ====== ======= ======= =======
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $17,352 $25,029 $21,035 $21,455 $18,437 $7,987 $8,030 $11,256 $13,405 $10,007
======= ======= ======= ======= ======= ====== ====== ======= ======= =======
Portfolio turnover...... 24.10% 31.29% 38.50% 48.16% 65.26% 32.14% 30.20% 56.60% 113.38% 45.95%
======= ======= ======= ======= ======= ====== ====== ======= ======= =======
Average commission rate
paid#.................. $ .0283 $ .0231 -- -- -- -- -- -- -- --
======= ======= ======= ======= ======= ====== ====== ======= ======= =======
</TABLE>
- -------
* Total investment returns exclude insurance-related fees and expenses.
# For fiscal years beginning on or after September 1, 1995, the Portfolio is
required 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.
+ Based on average shares outstanding.
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 Accounts as shareholders should be distinguished
from the rights of a Policyowner which are described in the Policies. Refer-
ence to "shareholder" or "shareholders" in this Prospectus shall refer to the
Accounts.
It is possible that differences might arise among the Accounts and that such
differences could be considered material conflicts. Such a material conflict
could arise due to changes in the law (such as state insurance law or federal
tax law) which affect the various Accounts. It could also arise by reason of
differences in voting instructions from Policyowners of one or more of the
Merrill Lynch Insurance Companies or Monarch, or for other reasons. The Insur-
ance Companies will monitor events to identify such conflicts and to determine
how to respond to such conflicts. If such a conflict occurs, an Insurance Com-
pany may be required to eliminate one or more divisions of its Account invest-
ing in the Fund or substitute a new Portfolio for a Portfolio in which a divi-
sion 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, 1997, 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.... 5.49%
Compounded Annualized Yield... 5.64%
Average maturity of portfolio
at end of period............. 71 days
</TABLE>
INVESTMENT OBJECTIVES AND
POLICIES OF THE PORTFOLIOS
INVESTMENT OBJECTIVES
Each Portfolio of the Fund has its own investment objective(s), 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 (the "Investment Com-
pany Act"), except that the Natural Resources Portfolio and Global Strategy
Portfolio are classified as "non-diversified." The classification and the in-
vestment objectives of each Portfolio discussed below may not be changed with-
out the approval of the holders of a majority of the outstanding shares of
each Portfolio affected. Each of the Portfolios may engage in certain of the
portfolio strategies described under "Other Portfolio Strategies" below. There
can be no assurances that any Portfolio will realize its objective(s).
No Portfolio other than the High Yield Portfolio invests in fixed-income se-
curities that are rated below investment grade (i.e., securities rated Ba-1 or
below by Moody's Investors Service, Inc. ("Moody's") or BB+ or below by Stan-
dard & Poor's Ratings Group ("Standard & Poor's") at the time of investment.
However, securities purchased by a Portfolio may subsequently be downgraded.
Such securities may continue to be held and will be sold only if, in the judg-
ment of Merrill Lynch Asset Management, L.P., the Fund's investment adviser
(the "Investment Adviser" or "MLAM"), it is advantageous to do so. Securities
in the lowest category of investment grade debt securities may have specula-
tive characteristics which may lead to weakened capacity to pay interest and
principal during periods of adverse economic conditions.
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 that
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
13
<PAGE>
or insuring securities is treated as a separate issuer for purposes of the di-
versification standards.
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 government agency securities), bank certifi-
cates of deposit, including variable rate certificates of deposit, and bank-
ers' acceptances, short-term corporate debt securities (such as commercial pa-
per), variable amount master demand notes, insurance company funding agree-
ments and repurchase and reverse repurchase agreements. The types of money
market securities in which the Money Reserve Portfolio may invest are de-
scribed 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 Port-folio'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 current income consistent with the protection of capital
afforded by investing in intermediate-term debt securities issued or guaran-
teed by the U.S. Government or its agencies. Accordingly, the Intermediate
Government Bond Portfolio may invest only in securities issued or guaranteed
by the U.S. Government or 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 securities are described in Appendix A hereto. When, in the opinion of
management, prevailing market or economic conditions warrant, a portion of the
Intermediate Government Bond Portfolio may be invested in money market securi-
ties 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 supported only by the credit of the
federal agency or enterprise issuing the security and 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 fluctua-
tions may adversely affect the market value of such securities. As interest
rates rise, the value of fixed-income securities will fall, adversely affect-
ing the net asset value of the Portfolio.
The Portfolio should be considered a long-term investment and a vehicle for
diversification, and not as a balanced
14
<PAGE>
investment program. The Portfolio may not be appropriate as the exclusive in-
vestment to fund a variable life insurance policy ("Policy") for all Policy
owners.
The Intermediate Government Bond Portfolio may invest in securities the po-
tential return of which is based on the change in particular measurements of
value or rate (i.e., indexed securities). See "Transactions in Options,
Futures and Currency."
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
normal circumstances the Portfolio invests at least 80% of the value of its
total assets 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.
The Portfolio should be considered a long-term investment and a vehicle for
diversification, and not as a balanced investment program. The Portfolio may
not be appropriate as the exclusive investment to fund a variable life insur-
ance policy ("Policy") for all Policy owners.
The Long Term Corporate Bond Portfolio may invest in securities the poten-
tial return of which is based on the change in particular measurements of
value or rate (i.e., indexed securities). See "Transactions in Options,
Futures and Currency."
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. Investment in
such high-yield securities entails relatively greater risk of loss of income
or principal. Purchasers should carefully assess the risks associated with an
investment in this Portfolio.
The Portfolio should be considered a long-term investment and a vehicle for
diversification, and not as a balanced investment program. The Portfolio may
not be appropriate as the exclusive investment to fund a variable life insur-
ance policy ("Policy") for all Policy owners.
The High Yield Portfolio anticipates that under normal circumstances more
than 80% of its total assets will be invested in fixed-income securities, in-
cluding convertible and non-convertible debt securities and preferred stock.
15
<PAGE>
The remaining assets of the Portfolio may be held in cash or cash equivalents.
The High Yield Portfolio does not intend to invest in common stocks, rights or
other equity securities, but may acquire or hold such securities (if 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 Investment Ad-
viser's analysis of issuers includes, among other things, historic and current
financial conditions, current and anticipated cash flow and borrowing require-
ments, value of assets in relation to historical cost, strength of management,
responsiveness to business conditions, credit standing, and current and antic-
ipated results of operations. Analysis of general business conditions and
other factors may include anticipated changes in economic activity and inter-
est rates, the availability of new investment opportunities, and the economic
outlook for specific industries. While the Investment Adviser considers as one
factor in its credit analysis the ratings assigned by the rating services, the
Investment Adviser performs its own independent credit analysis of issuers and
consequently, the High Yield Portfolio may invest, without limit, in unrated
securities. As a result, the High Yield Portfolio's ability to achieve its in-
vestment objective may depend on the Investment Adviser's own credit analysis
to a greater extent than the Portfolios that invest in higher-rated securi-
ties. Although the High Yield Portfolio will invest primarily in lower-rated
securities, it will not invest in securities rated at the time of investment
in the lowest rating categories (Ca or below for Moody's and CC or below for
Standard & Poor's) unless the Investment Adviser believes that the financial
condition of the issuer or the protection afforded to the particular securi-
ties is stronger than would otherwise be indicated by such low ratings. Secu-
rities which are subsequently downgraded may continue to be held and will be
sold only if, in the judgment of the Investment Adviser, it is advantageous to
do so.
When changing economic conditions and other factors cause the yield 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
16
<PAGE>
called security with a lower yielding security, thus decreasing the net in-
vestment 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 the junk bond market, which may be less liquid than the market for
higher-rated fixed-income securities, even under normal economic conditions.
Also, there may be significant disparities in the prices quoted for junk bonds
by various dealers. Adverse economic conditions or investor perceptions
(whether or not based on economic fundamentals) may impair the liquidity of
this market, and may cause the prices the High Yield Portfolio receives for
its securities to be reduced, or the Portfolio may experience difficulty in
liquidating a portion of its portfolio when necessary to meet its liquidity
needs or in response to a specific economic event such as a deterioration in
the creditworthiness of the issuer. Under such conditions, judgment may play a
greater role in valuing certain of the Portfolio's securities than in the case
of securities trading in a more liquid market.
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 debt securities held by the Portfolio
during the year ended December 31, 1997.
<TABLE>
<CAPTION>
% MARKET VALUE
DOLLAR-WEIGHTED
RATING % NET ASSETS CORPORATE BONDS
- ------ ------------ ---------------
<S> <C> <C>
AAA -- --
BBB 3.1 3.6
BB 26.9 30.7
B 50.7 58.2
CCC 2.8 3.3
C -- --
D -- --
NR* 3.6 4.2
------
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 such organization. With respect to the
percentage of the Portfolio's assets invested in such securities, the
Investment Adviser believes that 1.0% are of comparable quality to bonds
rated BBB, 1.0% are of comparable quality to bonds rated BB, 0.2% are of
comparable quality to bonds rated B and 1.4% are of comparable quality to
bonds rated CCC. This determination is based on the Investment Adviser's own
internal evaluation and does not necessarily reflect how such securities
would be rated by Standard & Poor's if it were to rate the securities.
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.
The Capital Stock Portfolio may seek to hedge against adverse currency fluc-
tuations of its non-dollar denominated securities and other assets and liabil-
ities by engaging in
17
<PAGE>
currency transactions, such as currency swaps and purchasing and selling op-
tions on currencies. See "Transactions in Options, Futures and Currency."
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 total assets invested in equity secu-
rities 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 the Fund's Money Reserve Portfolio as set
forth in Appendix A hereto. It may also invest in intermediate and long-term
debt securities, including convertible securities, and in preferred and con-
vertible 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 rating agency. The common stocks in which the
Portfolio will invest will be primarily stocks of large-capitalization quality
companies. Generally, the characteristics of such companies include a strong
balance sheet, good financial resources, a satisfactory rate of return on cap-
ital, a good industry position and superior management skills. The Investment
Adviser believes that companies that conform most closely to these character-
istics 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.
The Multiple Strategy Portfolio may seek to hedge against adverse currency
fluctuations of its non-dollar denominated securities and other assets and li-
abilities by engaging in currency transactions, such as currency swaps and
purchasing and selling options on currencies. The Portfolio is also authorized
to purchase and to write (i.e., sell) call and put options on securities held
in its portfolio, securities indicies whose performance is substantially cor-
related with securities held in its portfolio, or on securities it intends to
purchase and to purchase put options on securities held in its portfolio, and
may also invest in futures and in securities the potential return of which is
based on the change in particular measurements of value or rate (i.e., indexed
and inverse securities). See "Transactions in Options, Futures and Currency."
18
<PAGE>
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 may move relatively independently of one another during dif-
ferent stages of inflationary cycles due to different degrees of demand for,
or market values of, their respective natural resource holdings during partic-
ular portions of such inflationary cycles. The Portfolio's fully managed in-
vestment 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 Natural
Resources Portfolio has reserved the right to invest a majority of its assets
in gold-related companies or securities. Based on historic experience, during
periods of economic or financial instability, the securities of such companies
may be subject to extreme price
19
<PAGE>
fluctuations, reflecting the high volatility of gold prices during such peri-
ods. In addition, the instability of gold prices may result in volatile earn-
ings of gold-related companies which, in turn, may affect adversely the finan-
cial 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 Portfolio should be considered a long-term investment and a vehicle for
diversification, and not as a balanced investment program. The Portfolio may
not be appropriate as the exclusive investment to fund a variable life insur-
ance policy ("Policy") for all Policy owners.
The Natural Resources Portfolio may seek to hedge against adverse currency
fluctuations of its non-dollar denominated securities and other assets and li-
abilities by engaging in currency transactions, such as currency swaps and
purchasing and selling options on currencies. The Portfolio is also authorized
to purchase and to write (i.e., sell) call and put options on securities held
in its portfolio, securities indicies whose performance is substantially cor-
related with securities held in its portfolio, or on securities it intends to
purchase and to purchase put options on securities held in its portfolio, and
may also invest in futures and in securities the potential return of which is
based on the change in particular measurements of value or rate (i.e., indexed
and inverse securities). See "Transactions in Options. Futures and Currency."
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 investments of the Portfolio among these
regions. Such allocation will be made primarily on the basis of the antici-
pated total return from investments in the securities of issuers wherever lo-
cated, considering such factors as the condition and growth potential of the
various economies and securities markets and the issuers domiciled therein,
anticipated movements in interest rates in the various capital markets and in
the value of foreign currencies relative to the U.S. dollar, tax considera-
tions and economic, social, financial, national and political factors that may
affect the climate for investing within such securities markets. When, in the
judgment of the Investment Adviser, economic or market conditions warrant, the
Portfolio reserves the right to concentrate its investments in one or more
capital markets, including the United States. For additional information con-
cerning the risks of investing in foreign securities, see "Other Portfolio
Strategies--Foreign Securities."
The equity and convertible preferred securities in which the Global Strategy
Portfolio may invest are primarily securities issued by quality companies.
Generally, the characteristics of such companies include a strong balance
sheet, good financial resources, a satisfactory rate of return on capital, a
good industry position and superior management skills. The Investment Adviser
believes that companies that conform most closely to these characteristics
tend to exhibit generally consistent earnings growth.
The corporate debt securities, including convertible debt securities, in
which the Portfolio may invest will be primarily those rated BBB or better by
Standard & Poor's or Baa or better by Moody's or of comparable quality. The
Portfolio may also invest in debt obligations issued or guaranteed by sover-
eign governments, political subdivisions thereof (including states, provinces
and municipalities) or their agencies or instrumentalities or issued or guar-
anteed by international organizations designated or supported by
20
<PAGE>
governmental entities to promote economic reconstruction or development ("su-
pranational entities") such as the International Bank for Reconstruction and
Development (the "World Bank") and the European Coal and Steel Community. In-
vestments 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.
Under unusual market or economic conditions, 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 seek to hedge against adverse currency
fluctuations of its non-dollar denominated securities and other assets and li-
abilities by engaging in currency transactions, such as currency swaps and
purchasing and selling options on currencies. The Portfolio is also authorized
to purchase and to write (i.e., sell) call and put options on securities held
in its portfolio, securities indices whose performance is substantially corre-
lated with securities held in its portfolio, or on securities it intends to
purchase and to purchase put options on securities held in its portfolio, and
may also invest in securities the potential return of which is based on the
change in particular measurements of value or rate (i.e., indexed and inverse
securities). 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 limit its allocation of assets to equity securi-
ties to no more than 65% 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 65% 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. Howev-
er, each Portfolio will have to limit its investments to the extent required
by the diversification requirements applicable to regulated investment compa-
nies under the Code. To qualify as a regulated investment company, a Portfo-
lio, 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. Gov-
ernment, its agencies or instrumentalities) of any one issuer and with respect
to 50% of its assets, (i) may not have more than 5% of its total assets in-
vested in the securities of any one issuer and (ii) may not own more than 10%
of the outstanding voting securities of any one issuer.
INVESTMENT RESTRICTIONS
The Fund has adopted a number of restrictions and policies relating to the
investment of its assets and its activities which are fundamental policies and
may not be changed without the approval of the holders of the Fund's 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.
21
<PAGE>
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
(the "Securities Act"), but that can be offered and sold to "qualified insti-
tutional buyers" under Rule 144A under the Securities Act, provided that the
Fund's Board of Directors continuously determines, based on the trading mar-
kets for the specific Rule 144A security, that it is liquid. The Board of Di-
rectors may adopt guidelines and delegate to the Investment Adviser the daily
function of determining and monitoring the liquidity of restricted securities.
The Board has determined that securities which are freely tradeable in their
primary market offshore should be deemed liquid. The Board, however, will re-
tain sufficient oversight and be ultimately responsible for the determina-
tions.
Forward Commitments. Each Portfolio of the Fund may purchase U.S. Government
securities and corporate debt obligations on a when-issued basis or forward
commitment basis, and may purchase or sell such securities for delayed deliv-
ery. These transactions occur when securities are purchased or sold by the
Portfolio with payment and delivery taking place in the future to secure what
is considered an advantageous yield and price to the Portfolio at the time of
entering into the transaction. The value of the security on the delivery date
may be more or less than its purchase price. The Portfolio will maintain a
segregated account with its custodian of cash or liquid securities in an ag-
gregate equal to the amount of its commitments in connection with such delayed
delivery and purchase transactions. In order for shares of the Portfolios to
remain eligible investments for the Accounts, the Fund has undertaken to com-
ply with certain limits on forward commitments in accordance with state insur-
ance 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 Port-
folio may be paid a commitment fee, regardless of whether or not the security
is ultimately issued, which is typically approximately 0.50% of the aggregate
purchase price of the security which the Portfolio has committed to purchase.
The Portfolio will at all times maintain a segregated account with its custo-
dian of cash or liquid securities in an amount equal to the purchase price of
the securities underlying the commitment. There can be no assurance that the
securities subject to a standby commitment will be issued, and the value of
the security, if issued, on the delivery date may be more or less than its
purchase price. 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 fee will be re-
corded on the date on which the security can reasonably be expected to be is-
sued and the value of the security will thereafter be reflected in the calcu-
lation of the Portfolio's net asset value. 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.
Foreign Securities. No Portfolio, other than the Capital Stock Portfolio,
Multiple Strategy Portfolio, Natural Resources Portfolio and the Global Strat-
egy Portfolio, may invest in securities of foreign issuers if at the time of
acquisition more than 10% of its total assets, taken at market value at the
time of the investment, would be invested in such securities; provided, howev-
er, that up to 25% of the total assets of such Portfolio, other than the Mul-
tiple Strategy Portfolio, Natural Resources Portfolio or Global Strategy Port-
folio, may be invested in securities (i) issued, assumed or guaranteed by for-
eign governments, or political subdivisions or instrumentalities thereof, (ii)
assumed or guaranteed by domestic issuers, including Eurodollar securities, or
(iii)
22
<PAGE>
issued, assumed or guaranteed by foreign issuers having a class of securities
listed for trading on the New York Stock Exchange (the "NYSE"). In order for
shares of the Portfolios to remain eligible investments for the Accounts, the
Fund has undertaken to comply with certain diversification requirements in ac-
cordance with state insurance laws. As a matter of operating policy, the Mul-
tiple 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 in-
vested in such securities, and the Capital Stock Portfolio will not invest in
such securities if at the time of acquisition more than 20% of its total as-
sets would be invested in such securities. In addition, as a matter of operat-
ing 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 Portfolio investing in foreign securities can be ex-
pected to be higher than that of an investment company investing exclusively
in United States securities because the expenses of the Portfolio, such as
custodial and brokerage costs, are higher. Transaction costs in foreign secu-
rities may be higher. In addition, net investment income received by a Portfo-
lio on a foreign security may be subject to withholding and other taxes im-
posed by foreign governments, which will reduce the Portfolio's net investment
income. The Investment Adviser will consider these and other factors before
investing in foreign securities, and will not make such investments unless, in
its opinion, such investments will meet the standards and objectives of a par-
ticular Portfolio. As a matter of operating policy, no Portfolio which may in-
vest in foreign securities (other than the Natural Resources Portfolio, Capi-
tal Stock Portfolio and Global Strategy Portfolio) may concentrate its invest-
ments in any particular foreign country, and each such Portfolio (other than
the Multiple Strategy Portfolio, High Yield Portfolio, Capital Stock Portfo-
lio, 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 en-
hanced 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 Index 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 in-
dices. In addition, the Natural Resources Portfolio, the Global Strategy Port-
folio, and the Multiple Strategy Portfolio may invest in securities the poten-
tial return of which is based inversely on the change in an index. For exam-
ple, these Portfolios may invest in securities that pay a higher rate of in-
terest 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 a
Portfolio invests in such securities, it may be subject to reduced or elimi-
nated interest payments or loss of principal in the event of an adverse move-
ment in the relevant 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 securities may be sub-
stantially more volatile than the market values of other debt securities. The
Fund believes that indexed and inverse securities may provide portfolio man-
agement flexibility that permits Portfolios to seek enhanced returns, hedge
other portfolio positions or vary the degree of portfolio leverage with
greater efficiency than would otherwise be possible under certain market con-
ditions.
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<PAGE>
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 below 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 than the exercise
price, the Portfolio will profit by the amount of the option premium. By writ-
ing a put option, however, the Portfolio will be obligated to purchase the un-
derlying 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 de-
cline in the index, in the case of an option on an index. Accord-
24
<PAGE>
ingly, 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 exercise
price, which loss potentially may substantially exceed the amount of option
premium received by the Portfolio for writing the put option. The Portfolio
will write a put option on a security or a securities index only if the Port-
folio would be willing to purchase the security at the exercise price for in-
vestment 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.
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, "Cur-
25
<PAGE>
rency 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.
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
26
<PAGE>
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
StrategicInstruments
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 Portfolio may use any Strategic Instrument to gain exposure to an asset
or class of assets that it would be 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 Portfo-
27
<PAGE>
lio of the Fund complies with certain investment limitations of the Internal
Revenue Service in order for the Policies to be treated as life insurance un-
der the Code. It is not expected that any such investment limitations will ma-
terially affect the ability of any Portfolio to achieve its investment objec-
tives. 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. The Directors of the Fund are responsible for the overall super-
vision of the operations of the Fund and perform the various duties imposed on
the directors of investment companies by the Investment Company Act. 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--Chairman, Fernwood Advisors (investment adviser) Prin-
cipal of Fernwood Associates (financial consultants).
J. Thomas Touchton--Managing Partner of The Witt-Touchton Company (private
investment partnership).
- -------
* Interested person, as defined in the Investment Company Act of 1940.
CODE OF ETHICS
The Board of Directors of the Fund has adopted a Code of Ethics pursuant to
Rule 17j-1 under the Investment Company Act 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 the Fund's 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" that 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 the Investment Adviser, Merrill Lynch Asset Management, L.P. 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 serv-
ices corporation. The address of the Investment Adviser is P.O. Box 9011,
Princeton, New Jersey 08543-9011. The Asset Management Group of ML & Co.
(which includes the Investment Adviser) presently acts as the investment ad-
viser to more than 100 registered investment companies. The Investment Adviser
also offers portfolio management to individual and institutional accounts. As
of March, 1998, the Asset Management Group had a total of $488 billion in in-
vestment company and other portfolio assets under management. This amount in-
cludes assets managed for certain affiliates of the Investment Adviser.
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
28
<PAGE>
and has responsibility for making decisions to buy, sell or hold any particu-
lar security. The Investment Adviser provides the portfolio managers for each
of the Portfolios, who consider information from various sources, make the
necessary investment decisions and effect transactions accordingly. The In-
vestment Adviser is also obligated to perform certain administrative and man-
agement services for the Fund and is obligated to provide all the office
space, facilities, equipment and personnel necessary to perform its duties un-
der 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, 1997 the advisory fees paid
by the Fund to the Investment Adviser totalled $10,816,978 of which $1,777,662
was paid by the Money Reserve Portfolio, $707,215 by the Intermediate Govern-
ment Bond Portfolio, $389,795 by the Long Term Corporate Bond Portfolio,
$1,059,444 by the Capital Stock Portfolio, $964,928 by the Growth Stock Port-
folio, $4,235,421 by the Multiple Strategy Portfolio, $436,355 by the High
Yield Portfolio, $76,282 by the Natural Resources Portfolio, $831,747 by the
Global Strategy Portfolio, and $338,129 by the Balanced Portfolio. In each
case, the advisory fees represented 0.32% of the Portfolio's net assets. Dur-
ing the Fund's fiscal year ended December 31, 1997, the total operating ex-
penses incurred by the Fund's Portfolios (including the advisory fees paid to
the Investment Adviser), before reimbursement of a portion of such expenses,
were in the following amounts: $1,933,936 by the Money Reserve Portfolio (rep-
resenting 0.36% of its average net assets), $799,276 by the Intermediate Gov-
ernment Bond Portfolio (representing 0.37% of its average net assets),
$453,787 by the Long Term Corporate Bond Portfolio (rep-resenting 0.38% of its
average net assets), $1,258,031 by the Capital Stock Portfolio (representing
0.41% of its average net assets), $1,087,811 by the Growth Stock Portfolio
(representing 0.37% of its average net assets), $4,956,327 by the Multiple
Strategy Portfolio (representing 0.39% of its average net assets), $515,547 by
the High Yield Portfolio (representing 0.39% of its average net assets),
$123,302 by the Natural Resources Portfolio (representing 0.59% of its average
net assets), $1,130,509 by the Global Strategy Portfolio (representing 0.45%
of its average net assets), and $401,072 by the Balanced Portfolio (represent-
ing 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, 1997, Monarch reimbursed a total of $18,204 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 First Vice
President of MLAM since 1997. He was a Vice President of MLAM from 1996 to
1997. Prior thereto, Mr. Robinson was employed by Merrill Lynch & Co.'s Global
Securities Research & Economics Group where he served as Manager of Interna-
tional 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 First Vice President of MLAM since 1997.
He was a Vice President of MLAM from 1992 to 1997.
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. Mr. Harbeck and Co-Portfolio Manager
Christopher G. Ayoub are primarily responsible for each Portfolio's day-to-day
management. Mr. Harbeck has served as First Vice President of MLAM since 1997.
He was a Vice President of MLAM from 1986 to 1997.
Christopher G. Ayoub has served as Co-Portfolio Manager of Intermediate Gov-
ernment Bond Portfolio and the Long Term Corporate Bond Portfolio since April
1998. Mr. Ayoub and Co-Portfolio Manager Jay C. Harbeck are primarily respon-
sible for each Portfolio's day-to-day management. He has served as First Vice
President of MLAM since 1998. He was a Director (Global Fixed Income) of MLAM
from 1997 to 1998. He was a Vice President of MLAM from 1985 to 1997.
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 management with Aldona Schwartz. He has served as First Vice Presi-
dent of MLAM since 1997, Portfolio Manager of MLAM since 1982, and Vice Presi-
dent of MLAM from 1990 to 1997.
29
<PAGE>
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 1986.
Robert M. Shearer has served as the Natural Resources Portfolio's Portfolio
Manager since December, 1997, and is primarily responsible for the Portfolio's
day-to-day management. He has been a First Vice President since 1998. He had
been Associate Portfolio Manager of the Portfolio since September 1997; Vice
President and Assistant Portfolio Manager at David L. Babson and Company, In-
corporated from 1996 to 1997; Vice President and Sector Manager at Concert
Capital Management from 1993 to 1996; and prior to that was a Senior Energy
Analyst at Fiduciary Trust Company International.
PORTFOLIO TRANSACTIONS AND BROKERAGE
None of the Fund's Portfolios has any obligation to deal with any dealer or
group of dealers in the execution of transactions in portfolio securities.
Subject to policy established by the Board of Directors of the Fund, the In-
vestment Adviser is primarily responsible for the Fund's portfolio decisions
and the placing of the Fund's portfolio transactions. In placing orders, it is
the policy of each Portfolio to obtain the most favorable net results, taking
into account various factors, including price, dealer spread or commission, if
any, size of the transactions and difficulty of execution. While the Invest-
ment Adviser generally seeks reasonably competitive spreads or commissions,
the Fund will not necessarily be paying the lowest spread or commission avail-
able.
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, 1997, the Fund engaged in eleven transactions
pursuant to the exemptive order aggregating approximately $59,953,157 million.
For the fiscal year ended December 31, 1997, the Fund paid brokerage commis-
sions of approximately $4,142,987, of which $147,997 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 Strat-
30
<PAGE>
egy, Balanced, Capital Stock, Growth Stock and Multiple Strategy Portfolios
will be declared at least semi-annually and reinvested in additional full and
fractional shares of the respective Portfolios. All net realized long-term or
short-term capital gains of the Fund, if any, other than short-term capital
gains of the Money Reserve Portfolio, are declared and distributed annually
after the close of the Fund's fiscal year to the shareholders of the Fund to
which such gains are attributable. Short-term capital gains are taxable as 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 if it distributes annually a suffi-
cient amount of its net ordinary income and net realized capital gains to
shareholders. If a Portfolio earns original issue discount income in a taxable
year which is not represented by correlative cash income, or if a Portfolio
receives property rather than cash in payment of interest, shareholders will
be allocated income greater than the amount of cash distributed to them. In
addition, the Portfolio may have to dispose of securities and use the proceeds
thereof to make distributions in amounts necessary to satisfy its distribution
requirements under the Code.
TAX TREATMENT OF THE INSURANCE COMPANIES AS SHAREHOLDERS
Dividends paid by each Portfolio from its ordinary income and distributions
of each Portfolio's net realized capital gains are includible in the Insurance
Companies' gross income. Distributions of a Portfolio's net realized long-term
capital gains retain their character as long-term capital gains in the hands
of the Insurance Companies if certain requirements are met. The tax treatment
of such dividends and distributions depends on the Insurance Companies' tax
status. To the extent that income of a Portfolio represents qualified divi-
dends on common or preferred stock and certain holding period requirements are
met, its distributions to the Insurance Companies will be eligible for the
present 70% dividends received deduction applicable in the case of a life in-
surance 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 dis-
tributions 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, 1997 for the Intermediate Government Bond Portfolio was
5.69%, for the Long Term Corporate Bond Portfolio was 6.22%, and for the High
Yield Portfolio was 8.89%. 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
31
<PAGE>
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.
ADDITIONAL INFORMATION
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of each Portfolio is determined once daily
by the Investment Adviser immediately after the declaration of dividends, if
any, and is deter- mined as of 15 minutes after the close of business (gener-
ally 4:00 p.m. New York City time) on the NYSE on each day during which the
NYSE is open for business. The NYSE is open on business days other than na-
tional holidays and Good Friday. Any assets or liabilities initially expressed
in terms of non-U.S. dollar currencies are translated into U.S. dollars at the
prevailing market rates as quoted by one or more banks or dealers on the day
of valuation. A Portfolio's net asset value will be computed only on days on
which there is sufficient trading in portfolio securities that its net asset
value might be materially affected, and only if an order for purchase, redemp-
tion or repurchase of shares is received. The net asset value per share of
each Portfolio other than the Money Reserve Portfolio is computed by dividing
the sum of the value of the securities held by that Portfolio plus any cash or
other assets (including interest and dividends accrued) minus all liabilities
(including accrued expenses) by the total number of shares outstanding of that
Portfolio at such time, rounded to the nearest cent. Expenses, including the
investment advisory fees payable to the Investment Adviser, are accrued daily.
The net asset value of the Money Reserve Portfolio is determined pursuant to
the "penny rounding" method by adding the fair value of all securities and
other assets in the Portfolio, deducting the Portfolio's liabilities, dividing
by the number of shares outstanding and rounding the result to the nearest
whole cent.
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 for long positions and at the
last available ask price for short positions. Long positions in securities
other than money market securities traded in the OTC market are valued at the
last available bid price in the OTC market prior to the time of valuation.
Short positions in securities other than money market securities traded in the
OTC market are valued at the last available ask price in the OTC market prior
to the time of valuation. Portfolio securities that are traded both in the OTC
market and on a stock exchange are valued according to the broadest and most
representative market, and it is expected that for debt securities this ordi-
narily will be the OTC 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
OTC 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 OTC market, the last bid price. Futures con-
tracts 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
32
<PAGE>
Company Act 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 out-
standing liabilities. The shares of each class, when issued, will be fully
paid and nonassessable, have no preference, preemptive, conversion, exchange
or similar rights, and will be freely transferable. Holders of shares of any
class are entitled to redeem their shares as set forth under "Redemption of
Shares." Shares do not have cumulative voting rights and the holders of more
than 50% of the shares of the Fund voting for the election of directors can
elect all of the directors of the Fund if they choose to do so and in such
event the holders of the remaining shares would not be able to elect any di-
rectors. The Fund does not intend to hold meetings of shareholders unless un-
der the Investment Company Act shareholders are required to act on any of the
following matters: (i) election of directors; (ii) approval of an investment
advisory agreement; (iii) approval of a distribution agreement; and (iv) rati-
fication 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 llp, 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 and the Investment Company Act, with respect to the securities
offered hereby, certain portions of which have been omitted pursuant to the
rules and regulations of the Securities and Exchange Commission.
The Statement of Additional Information, dated April 23, 1998, 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 Commission in Washington, D.C.
YEAR 2000 ISSUES
Many computer systems were designed using only two digits to designate
years. These systems may not be able to distinguish the Year 2000 from the
Year 1900 (commonly known as the "Year 2000 Problem"). Like other investment
companies and financial and business organizations, the Fund could be ad-
versely affected if the computer systems used by the Investment Adviser or
other Fund service providers do not properly address this problem prior to
January 1, 2000. The Investment Adviser has established a dedicated group to
analyze these issues and to implement any systems modifications necessary to
prepare for the Year 2000. Currently, the Investment Adviser does not antici-
pate that the transition to the 21st century will have any material impact on
its ability to continue to service the Fund at current levels. In addition,
the Investment Adviser has sought assurances from the Fund's other service
providers that they are taking all necessary steps to ensure that their com-
puter systems will accurately reflect the Year 2000, and the Investment Ad-
viser will continue to monitor the situation. At this time, however, no assur-
ance can be given that the Fund's other service providers have anticipated ev-
ery step necessary to avoid any adverse effect on the Fund attributable to the
Year 2000 Problem.
33
<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-
34
<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. A repurchase agreement is an instrument under which the
purchaser (i.e., the Portfolio) acquires ownership of the obligation (debt se-
curity) and the seller agrees, at the time of the sale, to repurchase the ob-
ligation at a mutually agreed upon time and price, thereby determining the
yield during the purchaser's holding period. This results in a fixed rate of
return for the Portfolio insulated from market fluctuations during such peri-
od. The underlying securities will only consist of U.S. Government or govern-
ment agency securities, certificates of deposit, commercial paper or bankers'
acceptances except that the underlying securities for the Intermediate Govern-
ment 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 collat-
eral 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 de-
fault by the seller under a repurchase agreement, a Portfolio will continue to
hold the seller's securities as collateral but may suffer time delays and in-
cur costs or possible losses in connection with such transactions.
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.
35
<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.
36
<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.
37
<PAGE>
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<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 llp
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 23, 1998
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 23, 1998, 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 DISTRIBUTOR, INC.--DISTRIBUTOR
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies.................................... 2
Investment Restrictions............................................... 2
Portfolio Strategies.................................................. 4
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.................................................. 14
</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 obtain 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 provide 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 princi-
pally in fixed-income securities rated in the lower rating categories of the
established rating services. The Capital Stock Portfolio seeks to attain long-
term growth of capital and income, plus moderate current income, principally
by investing in common stocks which are considered to be of good or improving
quality or which are thought to be undervalued based on criteria such as 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 investment value. The Multiple
Strategy Portfolio seeks the highest total investment return consistent with
prudent risk through a fully managed investment policy utilizing equity secu-
rities, 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 fixed income and eq-
uity securities.
Reference is made to "Investment Objectives and Policies of the Portfolios"
on page 13 of the Prospectus for a more complete discussion of the investment
objectives and policies of the Fund.
INVESTMENT RESTRICTIONS
RESTRICTIONS APPLICABLE TO ALL OF THE PORTFOLIOS
The Fund has adopted the following restrictions and policies relating to the
investment of assets of the Portfolios and their activities. These are 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 (the "Investment
Company Act") means the lesser of (i) 67% of the shares represented at a meet-
ing at which more than 50% of the outstanding shares are represented or (ii)
more than 50% of the outstanding shares). A change in policy affecting only
one Portfolio may be effected with the approval of a majority of the outstand-
ing 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 Re-
serve and Intermediate Government Bond Portfolios may invest as set forth be-
low, 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 of 1986 (the
"Code")
2
<PAGE>
relating to qualification 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 22 of the
Prospectus.
9. Borrow amounts in excess of 10% of its total assets, taken at market
value at the time of the borrowing, and then only from banks as a temporary
measure for extraordinary or emergency purposes.
10. Mortgage, pledge, hypothecate or in any manner transfer, as security
for indebtedness, any securities owned or held by such Portfolio except as
may be necessary in connection with borrowings mentioned in (9) above (and
then such mortgaging, pledging or hypothecating may not exceed 10% of such
Portfolio's total assets, taken at market value at the time thereof), and
except as may be necessary for the Multiple Strategy Portfolio, Natural 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 (the "Securities
Act") in selling portfolio 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, as-
3
<PAGE>
sumed or guaranteed by foreign governments, or po-litical subdivisions or
instrumentalities thereof, (ii) assumed or guaranteed by domestic issuers,
including Eurodollar securities, or (iii) issued, assumed or guaranteed by
foreign issuers having a class of securities listed for trading on the New
York Stock Exchange (the "NYSE"). (As a matter of operating policy, howev-
er, the Multiple Strategy Portfolio will not invest in the securities of
foreign issuers if at the time of acquisition more than 25% of its total
assets would be invested in such securities. In addition, the Balanced
Portfolio, as a matter of operating policy, does not intend to invest any
portion of its assets in the securities of foreign issuers.) See "Other
Portfolio Strategies--Foreign Securities" in the Prospectus. Consistent
with the general policy of the Securities and Exchange Commission, the na-
tionality or domicile of an issuer for determination of foreign issuer sta-
tus 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 Merrill Lynch
Asset Management L.P. ("the Investment Adviser") or any of its affiliates
to reduce brokerage commissions or otherwise to achieve best overall execu-
tion).
15. Purchase or retain the securities of any issuer, if those individual
officers and directors of the Fund, the Investment Adviser or any subsidi-
ary thereof each owning beneficially more than 1/2 of 1% of the securities
of such issuer, own in the aggregate more than 5% of the securities of such
issuer.
RESTRICTIONS APPLICABLE ONLY TO THE MONEY RESERVE AND INTERMEDIATE GOVERNMENT
BOND PORTFOLIOS
The Money Reserve Portfolio may not invest in any security which is not a
short-term money market security as described under "Investment Objectives and
Policies of the Portfolios--Money Reserve Portfolio" in the Prospectus. The
Intermediate Government Bond Portfolio may not invest in any security which is
not issued or guaranteed by the U.S. Government or one of its agencies or
which has a stated maturity greater than fifteen years from the date of pur-
chase.
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 re-
corded 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 es-
tablished 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 Port-
folio will generally enter into forward commitments with the intention of ac-
quiring securities for its portfolio, it may dispose of a commitment prior to
settlement if management of the Fund deems it appropriate to do so. There can,
of course, be no assurance that the judgments upon which these techniques are
based will be accurate or that such techniques when applied will be effective.
The Portfolios will enter into forward commitment arrangements only with re-
spect to securities in which they may otherwise invest as described under "In-
vestment Objectives and Policies of the Portfolios" on page 13 of the Prospec-
tus.
Lending of Portfolio Securities. Subject to investment restriction (8)
above, each Portfolio may from time to time loan securities from its portfolio
to brokers, dealers and financial institutions and receive collateral in cash
or securities issued or guaranteed by the U.S. Government which will be main-
tained in amounts equal to at least 100% of the current market value of the
loaned securities at all times while the loan is outstanding. Any cash collat-
eral will be invested in short-term securities, the income from which
4
<PAGE>
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 securi-
ties, including voting rights and rights to interest or other distributions,
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 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 registra-
tion, such resale may be permissible only in limited quantities. In either
event, the Portfolio may not be able to sell its restricted securities at a
time which, in the judgment of the Investment Adviser, would be most 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
5
<PAGE>
maintain a segregated account with the Fund's Custodian of cash or liquid se-
curities in an amount equal to the purchase price of the securities underlying
the commitment.
There can be no assurance that the securities subject to a standby commit-
ment will be issued, and the value of 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 Portfo-
lio 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 commit-
ment 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 (57)--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 (69)--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 (64)--Director(2)--24 Federal Street, Suite 400, Boston,
Massachusetts 02110. Chairman, Fernwood Advisors (investment adviser) since
1996; Principal, Fernwood Associates (financial consultants) since 1975.
J. Thomas Touchton (59)--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. (pri- vate 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 (64)--Senior Vice President(1)(2)--Senior Vice President of
the Investment Adviser and FAM since 1982.
Joseph T. Monagle, Jr. (49)--Senior Vice President(1)(2)--Senior Vice Presi-
dent and Department Head of the Global Fixed Income Division of the Investment
Adviser and FAM since 1990 and Vice President thereof from 1978 to 1990; Se-
nior Vice President of Princeton Services, Inc.
Donald C. Burke (37)--Vice President(1)(2)--First Vice President of the In-
vestment Adviser since 1997; Vice President of the Investment Adviser from
1990 to 1997.
Vincent T. Lathbury, III (57)--Senior Vice President(1)(2)--First Vice Pres-
ident of the Investment Adviser since 1997. Portfolio Manager of the Invest-
ment Adviser since 1982. Vice President of the Investment Adviser from 1982 to
1997.
Jay C. Harbeck (63)--Senior Vice President(1)(2)--First Vice President of
the Investment Adviser since 1997. Vice President of the Investment Adviser
from 1986 to 1997.
Aldona Schwartz (49)--Vice President(1)(2)--Vice President of the Investment
Adviser since 1991; Employed by the Investment Adviser since 1986.
Kevin J. McKenna (41)--Senior Vice President(1)(2)--First Vice President of
the Investment Adviser since 1997. Vice President of the Investment Adviser
from 1985 to 1997.
Lawrence R. Fuller (57)--Senior Vice President(1)(2)--First Vice President
of the Investment Adviser since 1997. Vice President of the Investment Adviser
from 1992 to 1997.
Thomas R. Robinson (54)--Senior Vice President(1)(2)--First Vice President
of the Investment Adviser since 1997. Vice President of the Investment Adviser
from 1996 to 1997. Manager of International Equity Strategy of Merrill Lynch &
Co.'s Global Securities Research and Economics Group from 1989 to 1995.
Robert M. Shearer (42)--Senior Vice President(1)(2)--First Vice President of
the Investment Adviser since 1998. Vice President of the Investment Adviser
from 1997 to 1998.
6
<PAGE>
Christopher G. Ayoub--(42)--Senior Vice President(1)(2)--First Vice Presi-
dent of the Investment Adviser since 1998. Director (Global Fixed-Income) of
the Investment Adviser from 1997 to 1998. Vice President of the Investment Ad-
viser from 1985 to 1997.
Jacqueline Rogers (40)--Vice President(1)(2)--Vice President of the Invest-
ment Adviser since 1985.
Gerald M. Richard (48)--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.
Jennifer L. Sawin (36)--Secretary(1)(2)--Vice President since 1998 and at-
torney associated with the Investment Adviser and FAM since 1995. Prior to
1995 Ms. Sawin was an attorney in private practice.
- -------
(1) Interested person, as defined in the Investment Company Act, of the Fund.
(2) Mr. Glenn is a director or trustee and officer, Messrs. Sunderland,
Swensrud and Touchton are directors and Messrs. Ayoub, Burke, Fuller,
Harbeck, Harvey, Lathbury, McKenna, Monagle, Richard, Robinson, and
Shearer and Ms. Rogers, Ms. Schwartz, and Ms. Sawin 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, 1997.
<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 $132,600
--------
Stephen B. Swensrud........................ $8,000 None $175,500
------ --------
J. Thomas Touchton......................... $8,000 None $132,100
--------
</TABLE>
- -------
(1) In addition to the Fund, the Directors served on other MLAM/FAM advised
funds as follows: Mr. Sunderland (18 registered investment companies
consisting of 30 portfolios); Mr. Swensrud (21 registered investment
companies consisting of 53 portfolios); Mr. Touchton (18 registered
investment companies consisting of 30 portfolios).
The officers of the Fund owned on February 28, 1998, in the aggregate, less
than 1% of the outstanding Common Stock of Merrill Lynch & Co., Inc. On Febru-
ary 28, 1998, 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-affiliated 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 fiscal year ended December 31, 1997 such fees and expenses
aggregated $24,011.
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 A. Grif-
fin, Senior Vice President; Norman R. Harvey, Senior Vice President; Michael
J. Hennewinkel, Senior Vice President; Philip L. Kirstein, Senior Vice Presi-
dent, General Counsel and Secretary; Ronald M. Kloss, Senior Vice President
and Controller; 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.
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,
7
<PAGE>
transactions in such securities will be made, insofar as feasible, for the re-
spective funds and clients in a manner deemed equitable to all. To the extent
that transactions on behalf of more than one client of the Investment Adviser
or FAM during the same period may increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse ef-
fect 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 with respect to such Portfolios according to the following sched-
ule:
<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, 1997, 1996, and 1995, the advisory
fees paid by the Fund to the Investment Adviser totalled $10,816,978,
$10,000,508, and $9,302,375, 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 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 sharehold-
ers 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, 1997, the amount of such reimbursement was
$597,116. 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
Reference is made to "Additional Information--Determination of Net Asset
Value" on page 31 of the Prospectus.
8
<PAGE>
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.
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
Reference is made to "Portfolio Transactions and Brokerage" on page 30 of
the Prospectus.
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, persons affiliated with the Fund are pro-
hibited 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 trans-
actions is obtained from the Securities and Exchange Commission. Since over-
the-counter transactions are usually principal transactions, affiliated per-
sons 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
9
<PAGE>
from the Securities and Exchange Commission, such as the order described be-
low. However, affiliated persons of the Fund may serve as its broker in over-
the-counter or other transactions conducted on an agency basis, subject to the
Fund's policy of obtaining best price and execution. The Fund may not purchase
securities from any underwriting syndicate of which Merrill Lynch is a member
except in accordance with rules and regulations under the Investment Company
Act.
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, including conditions designed to insure that the prices
to the Portfolio available from GSI and MMI are equal to or better than those
available from other sources. GSI and MMI have informed the Fund that they
will in no way, at any time, attempt to influence or control the activities of
the Fund or the Investment Adviser in placing such principal transactions. The
exemptive order allows GSI and MMI to receive a dealer spread on any transac-
tion with the Fund no greater than their customary dealer spreads for transac-
tions 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, 1997, the Fund paid total brokerage
commissions of $4,142,987, of which $147,997 was paid to Merrill Lynch. For
the fiscal year ended December 31, 1996, the Fund paid total brokerage commis-
sions of $4,018,947, of which $154,459 was paid to Merrill Lynch. For the fis-
cal year ended December 31, 1995, the Fund paid brokerage commissions of
$4,177,039, of which $224,553 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, 1997, the portfolio turnover rates for the Fund's other
Portfolios were as follows: the Intermediate Government Bond Portfolio was
41.23%; the Long Term Corporate Bond Portfolio was 107.02%; the Capital Stock
Portfolio was 90.19%; the Growth Stock Portfolio was 84.90%; the Multiple
Strategy Portfolio was 108.41%; the High Yield Portfolio was 60.94%; the Natu-
ral Resources Portfolio was 24.10%; the Global Strategy Portfolio was 108.04%
and the Balanced Portfolio was 143.20%.
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 NYSE is
restricted as
10
<PAGE>
determined by the Securities and Exchange Commission or such Exchange is
closed (other than customary weekend and holiday closings), for any period
during which an emergency exists as defined by the Securities and Exchange
Commission as a result of which disposal of portfolio securities or determina-
tion of the net asset value of each Portfolio is not reasonably practicable,
and for such other periods as the Securities and Exchange Commission may by
order permit for the protection of shareholders of each Portfolio.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Reference is made to "Dividends, Distributions and Taxes" in the Prospectus.
FEDERAL INCOME TAXES
Under the Code, each Portfolio of the Fund will be treated as a separate
corporation for federal income tax purposes and, thus, each Portfolio is re-
quired to satisfy the qualification requirements under the Code for treatment
as a regulated investment company. There will be no offsetting of capital
gains and losses among the Portfolios.
Each Portfolio intends to continue to qualify as a regulated investment 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, 1997 16.93% $1,169.30
Five Years Ended December 31, 1997 11.29% $1,707.40
Inception* Through December 31, 1997 11.49% $2,861.10
Capital Stock Portfolio:
One Year Ended December 31, 1997 22.47% $1,224.70
Five Years Ended December 31, 1997 13.85% $1,913.00
Ten Years Ended December 31, 1997 14.15% $3,754.80
Global Strategy Portfolio:
One Year Ended December 31, 1997 11.72% $1,117.20
Five Years Ended December 31, 1997 11.31% $1,708.80
Ten Years Ended December 31, 1997 11.25% $2,904.60
Growth Stock Portfolio:
One Year Ended December 31, 1997 33.75% $1,337.50
Five Years Ended December 31, 1997 16.96% $2,188.40
Ten Years Ended December 31, 1997 14.81% $3,978.90
High Yield Portfolio:
One Year Ended December 31, 1997 10.74% $1,107.40
Five Years Ended December 31, 1997 11.04% $1,688.20
Ten Years Ended December 31, 1997 11.90% $3,078.50
Intermediate Government Bond Portfolio:
One Year Ended December 31, 1997 8.42% $1,084.20
Five Years Ended December 31, 1997 6.96% $1,400.20
Ten Years Ended December 31, 1997 8.52% $2,264.90
</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, 1997 8.80% $1,088.00
Five Years Ended December 31, 1997 7.66% $1,446.30
Ten Years Ended December 31, 1997 9.29% $2,431.10
Multiple Strategy Portfolio:
One Year Ended December 31, 1997 19.17% $1,191.70
Five Years Ended December 31, 1997 12.14% $1,773.70
Ten Years Ended December 31, 1997 12.71% $3,308.20
Natural Resources Portfolio:
One Year Ended December 31, 1997 (10.97)% $ 890.30
Five Years Ended December 31, 1997 5.24% $1,291.10
Inception* Through December 31, 1997 3.22% $1,372.90
</TABLE>
- -------
* Inception for Balanced Portfolio, May 1, 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, includ-
ing 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, 1997, 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, 1997 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, 1997, 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 20, 1998
13
<PAGE>
MERRILL LYNCH SERIES FUND, INC.
Balanced Portfolio
Schedule of Investments as of December 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VALUE PERCENT OF
INDUSTRIES FACE AMOUNT BONDS & NOTES COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES $ 1,000,000 General Electric Capital Corp., 8.75%
due 5/21/2007....................... $ 1,124,550 $ 1,175,730 1.1%
- ----------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY 1,482,615 Federal Home Loan Mortgage Corp.,
OBLIGATIONS 7.50% due 6/01/2007++............... 1,510,878 1,522,587 1.4
Federal National Mortgage
Association++:
1,717,778 6% due 11/01/2000................ 1,700,600 1,708,519 1.6
3,730,585 6% due 6/01/2001................. 3,692,696 3,705,105 3.4
2,096,012 6% due 2/01/2004................. 2,071,122 2,081,067 1.9
12,700,000 US Treasury Bonds, 6.625% due
2/15/2027........................... 12,099,016 13,787,374 12.7
US Treasury Notes:
6,000,000 6% due 8/15/1999................. 6,016,406 6,029,040 5.6
9,500,000 6.50% due 5/31/2002.............. 9,563,828 9,777,590 9.0
1,825,000 6.25% due 2/15/2007.............. 1,799,906 1,883,163 1.8
- ----------------------------------------------------------------------------------------------------------------------
TOTAL BONDS & NOTES 39,579,002 41,670,175 38.5
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES
HELD COMMON STOCKS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AEROSPACE & DEFENSE 30,200 AlliedSignal, Inc.................... 1,137,063 1,175,913 1.1
21,000 GenCorp, Inc......................... 613,011 525,000 0.5
5,900 +Orbital Sciences Corp............... 151,326 175,525 0.1
----------- ------------- -----
1,901,400 1,876,438 1.7
- ----------------------------------------------------------------------------------------------------------------------
AIRLINES 21,900 +US Airways Group, Inc............... 807,984 1,368,750 1.3
- ----------------------------------------------------------------------------------------------------------------------
APPLIANCES 26,700 Sunbeam Corp......................... 952,658 1,124,738 1.0
- ----------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS 25,200 Federal-Mogul Corp................... 985,025 1,020,600 0.9
- ----------------------------------------------------------------------------------------------------------------------
AUTOMOBILE RENTAL 27,600 +Avis Rent-A-Car, Inc................ 601,358 881,475 0.8
30,600 Hertz Corp. (Class A)................ 987,581 1,231,650 1.2
----------- ------------- -----
1,588,939 2,113,125 2.0
- ----------------------------------------------------------------------------------------------------------------------
BANKING 26,400 Bank of New York Co., Inc............ 682,144 1,526,250 1.4
18,800 BankAmerica Corp..................... 1,072,739 1,372,400 1.3
23,900 First Union Corporation.............. 1,175,828 1,224,875 1.1
----------- ------------- -----
2,930,711 4,123,525 3.8
- ----------------------------------------------------------------------------------------------------------------------
BROADCASTING-MEDIA 14,100 +Chancellor Media Corp............... 894,326 1,052,213 1.0
- ----------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES 26,700 +Gartner Group, Inc. (Class A)....... 905,885 994,575 0.9
- ----------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 9,750 +Cisco Systems, Inc.................. 555,749 543,563 0.5
- ----------------------------------------------------------------------------------------------------------------------
COMPUTERS 5,600 Compaq Computer Corp................. 207,607 316,050 0.3
4,100 International Business Machines
Corp................................ 275,132 428,706 0.4
20,300 +Quantum Corporation................. 573,272 407,269 0.4
----------- ------------- -----
1,056,011 1,152,025 1.1
- ----------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS 42,400 The Dial Corporation................. 818,701 882,450 0.8
- ----------------------------------------------------------------------------------------------------------------------
CONTAINERS 36,100 +Owens-Illinois, Inc................. 1,076,705 1,369,544 1.3
- ----------------------------------------------------------------------------------------------------------------------
CRUISE LINES 11,800 Royal Caribbean Cruises Ltd.......... 515,187 629,088 0.6
- ----------------------------------------------------------------------------------------------------------------------
DENTAL SUPPLIES & 24,000 DENTSPLY International Inc........... 605,524 732,000 0.7
EQUIPMENT
- ----------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 14,900 General Electric Co.................. 1,046,177 1,093,288 1.0
- ----------------------------------------------------------------------------------------------------------------------
ELECTRONICS 28,000 +National Semiconductor
Corporation......................... 1,134,438 726,250 0.7
- ----------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 7,200 American Express Company............. 450,986 642,600 0.6
22,900 MGIC Investment Corp................. 870,336 1,522,850 1.4
----------- ------------- -----
1,321,322 2,165,450 2.0
- ----------------------------------------------------------------------------------------------------------------------
HARDWARE PRODUCTS 15,600 Black & Decker Corporation........... 532,498 609,375 0.6
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Balanced Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INSURANCE 31,100 Hartford Life, Inc. (Class A)........ $ 1,042,999 $ 1,409,219 1.3%
36,000 Provident Companies, Inc............. 1,189,906 1,390,500 1.3
25,200 Travelers Group, Inc................. 904,068 1,357,650 1.2
9,200 Travelers Property Casualty Corp.
(Class A)........................... 372,264 404,800 0.4
18,500 UNUM Corporation..................... 594,625 1,005,937 0.9
----------- ------------- -----
4,103,862 5,568,106 5.1
- ----------------------------------------------------------------------------------------------------------------------
LEISURE/TOURISM 36,600 Brunswick Corporation................ 940,006 1,109,437 1.0
- ----------------------------------------------------------------------------------------------------------------------
MACHINERY 14,000 Harnischfeger Industries, Inc........ 606,635 494,375 0.4
23,200 Ingersoll-Rand Co.................... 723,185 939,600 0.9
11,000 SPX Corporation...................... 623,984 759,000 0.7
----------- ------------- -----
1,953,804 2,192,975 2.0
- ----------------------------------------------------------------------------------------------------------------------
MEDICAL SERVICES 44,377 +HEALTHSOUTH Corporation............. 1,203,359 1,231,462 1.1
- ----------------------------------------------------------------------------------------------------------------------
NATURAL GAS 19,000 El Paso Natural Gas Co............... 998,878 1,263,500 1.2
11,600 Enron Corp........................... 466,529 482,125 0.4
----------- ------------- -----
1,465,407 1,745,625 1.6
- ----------------------------------------------------------------------------------------------------------------------
OFFICE EQUIPMENT 13,000 Danka Business Systems PLC
(ADR)*(a)........................... 641,353 207,187 0.2
- ----------------------------------------------------------------------------------------------------------------------
OIL SERVICES 16,700 +Smith International, Inc............ 795,718 1,024,962 0.9
- ----------------------------------------------------------------------------------------------------------------------
PETROLEUM 25,700 Unocal Corp.......................... 930,557 997,481 0.9
- ----------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 12,000 Bristol-Myers Squibb Co.............. 1,140,051 1,135,500 1.0
18,000 Lilly (Eli) & Co..................... 1,136,182 1,253,250 1.2
15,000 Pfizer, Inc.......................... 1,097,315 1,118,437 1.0
7,700 Warner-Lambert Company............... 1,101,562 954,800 0.9
----------- ------------- -----
4,475,110 4,461,987 4.1
- ----------------------------------------------------------------------------------------------------------------------
RAILROADS 11,700 Burlington Northern Santa Fe, Inc.... 1,010,347 1,087,369 1.0
- ----------------------------------------------------------------------------------------------------------------------
REAL ESTATE 27,000 Glenborough Realty Trust............. 675,000 799,875 0.8
INVESTMENT TRUSTS 32,000 Prentiss Properties Trust............ 751,272 894,000 0.8
13,000 Starwood Lodging Trust............... 582,360 752,375 0.7
----------- ------------- -----
2,008,632 2,446,250 2.3
- ----------------------------------------------------------------------------------------------------------------------
RESTAURANTS 16,500 +Tricon Global Restaurants, Inc...... 567,440 479,531 0.4
- ----------------------------------------------------------------------------------------------------------------------
RETAIL 22,955 Rite Aid Corporation................. 815,220 1,347,172 1.2
12,500 +Safeway, Inc........................ 686,220 790,625 0.7
16,600 Sears, Roebuck & Co.................. 773,410 751,150 0.7
21,000 Wal-Mart Stores, Inc................. 866,964 828,187 0.8
----------- ------------- -----
3,141,814 3,717,134 3.4
- ----------------------------------------------------------------------------------------------------------------------
SOFTWARE 12,000 +BMC Software, Inc................... 506,821 786,000 0.7
15,500 Computer Associates International,
Inc................................. 455,899 819,562 0.8
6,100 +Microsoft Corp...................... 762,096 788,044 0.7
----------- ------------- -----
1,724,816 2,393,606 2.2
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
TELECOMMUNICATIONS 42,371 +Tele-Communications, Inc. (Class
A).................................. 690,475 1,181,092 1.1
24,229 +Tele-Communications TCI Ventures
Group............................... 394,819 685,984 0.6
37,200 +WorldCom, Inc....................... 975,280 1,125,300 1.1
----------- ------------- -----
2,060,574 2,992,376 2.8
- ----------------------------------------------------------------------------------------------------------------------
TRANSPORT SERVICES 24,000 +OMI Corp............................ 310,830 220,500 0.2
- ----------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 26,500 Carnival Corp. (Class A)............. 784,889 1,467,437 1.4
- ----------------------------------------------------------------------------------------------------------------------
UTILITIES 33,800 Edison International, Inc............ 654,825 918,937 0.9
21,000 Texas Utilities Company.............. 838,049 872,812 0.8
----------- ------------- -----
1,492,874 1,791,749 1.7
- ----------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 49,240,632 58,712,171 54.2
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Balanced Portfolio
Schedule of Investments as of December 31, 1997 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER** $ 5,000,000 AIG Funding, Inc., 6.02% due
1/05/1998........................... $ 4,995,819 $ 4,995,819 4.6%
2,370,000 General Motors Acceptance Corp.,
6.75% due 1/02/1998................. 2,369,111 2,369,111 2.2
- ----------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 7,364,930 7,364,930 6.8
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS.................... $96,184,564 107,747,276 99.5
-----------
-----------
OTHER ASSETS LESS LIABILITIES........ 576,742 0.5
------------- -----
NET ASSETS........................... $ 108,324,018 100.0%
------------- -----
------------- -----
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Consistent with the general policy of the Securities and Exchange
Commission, the nationality or domicile of an issuer for determination of
foreign issuer status may be (i) the country under whose laws the issuer is
organized, (ii) the country in which the issuer's securities are principally
traded, or (iii) the country in which the issuer derives a significant
proportion (at least 50%) of its revenue or profits from goods produced and
sold, investments made, or services performed in the country, or in which at
least 50% of the assets of the issuer are situated.
* American Depositary Receipts (ADR).
** Commercial Paper is traded on a discount basis. The interest rates shown are
the discount rates paid at the time of purchase by the Portfolio.
+ Non-income producing security.
++ Subject to principal paydowns.
See Notes to Financial Statements.
16
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Capital Stock Portfolio
Schedule of Investments as of December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD US STOCKS & WARRANTS COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AEROSPACE & DEFENSE 141,000 AlliedSignal, Inc................. $ 5,141,493 $ 5,490,188 1.6%
90,000 GenCorp, Inc...................... 2,627,014 2,250,000 0.7
28,800 +Orbital Sciences Corp............ 739,683 856,800 0.3
------------- ------------- -----
8,508,190 8,596,988 2.6
- -------------------------------------------------------------------------------------------------------------------
AIRLINES 111,000 +US Airways Group, Inc............ 4,017,754 6,937,500 2.1
- -------------------------------------------------------------------------------------------------------------------
APPLIANCES 122,900 Sunbeam Corp...................... 4,676,121 5,177,163 1.5
- -------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS 119,000 Federal-Mogul Corp................ 4,643,081 4,819,500 1.4
- -------------------------------------------------------------------------------------------------------------------
AUTOMOBILE RENTAL 131,100 +Avis Rent-A-Car, Inc............. 2,858,008 4,187,006 1.2
141,000 Hertz Corp. (Class A)............. 4,731,939 5,675,250 1.7
------------- ------------- -----
7,589,947 9,862,256 2.9
- -------------------------------------------------------------------------------------------------------------------
BANKING 96,000 Bank of New York Co., Inc......... 1,766,630 5,550,000 1.6
15,000 Bank of New York Co., Inc.
(Warrants) (a)................... 168,750 2,538,750 0.8
82,800 BankAmerica Corp.................. 4,291,836 6,044,400 1.8
111,900 First Union Corporation........... 5,504,283 5,734,875 1.7
------------- ------------- -----
11,731,499 19,868,025 5.9
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BROADCASTING-MEDIA 68,000 +Chancellor Media Corp............ 4,313,203 5,074,500 1.5
- -------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES 129,000 +Gartner Group, Inc. (Class A).... 4,377,318 4,805,250 1.4
- -------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 46,050 +Cisco Systems, Inc............... 2,624,905 2,567,288 0.8
- -------------------------------------------------------------------------------------------------------------------
COMPUTERS 27,000 Compaq Computer Corp.............. 808,833 1,523,813 0.4
16,000 International Business Machines
Corp............................. 876,480 1,673,000 0.5
96,000 +Quantum Corporation.............. 2,707,737 1,926,000 0.6
------------- ------------- -----
4,393,050 5,122,813 1.5
- -------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS 200,700 The Dial Corporation.............. 3,875,692 4,177,069 1.2
- -------------------------------------------------------------------------------------------------------------------
CONTAINERS 144,100 +Owens-Illinois, Inc.............. 4,182,158 5,466,794 1.6
- -------------------------------------------------------------------------------------------------------------------
CRUISE LINES 55,500 Royal Caribbean Cruises Ltd....... 2,415,788 2,958,844 0.9
- -------------------------------------------------------------------------------------------------------------------
DENTAL SUPPLIES & 130,000 DENTSPLY International Inc........ 3,330,528 3,965,000 1.2
EQUIPMENT
- -------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 70,000 General Electric Co............... 4,934,036 5,136,250 1.5
- -------------------------------------------------------------------------------------------------------------------
ELECTRONICS 124,000 +National Semiconductor
Corporation...................... 5,032,569 3,216,250 1.0
- -------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 35,000 American Express Company.......... 1,719,517 3,123,750 0.9
126,000 MGIC Investment Corp.............. 4,763,407 8,379,000 2.5
------------- ------------- -----
6,482,924 11,502,750 3.4
- -------------------------------------------------------------------------------------------------------------------
HARDWARE PRODUCTS 73,200 Black & Decker Corporation........ 2,451,987 2,859,375 0.9
- -------------------------------------------------------------------------------------------------------------------
INSURANCE 33,200 Hartford Life, Inc. (Class A)..... 1,077,390 1,504,375 0.4
172,000 Provident Companies, Inc.......... 5,685,891 6,643,500 2.0
136,500 Travelers Group, Inc.............. 4,787,323 7,353,938 2.2
41,400 Travelers Property Casualty Corp.
(Class A)........................ 1,675,529 1,821,600 0.5
109,800 UNUM Corporation.................. 3,505,390 5,970,375 1.8
------------- ------------- -----
16,731,523 23,293,788 6.9
- -------------------------------------------------------------------------------------------------------------------
LEISURE/TOURISM 183,000 Brunswick Corporation............. 4,763,323 5,547,188 1.7
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Capital Stock Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD US STOCKS & WARRANTS COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MACHINERY 67,000 Harnischfeger Industries, Inc..... $ 2,903,369 $ 2,365,938 0.7%
136,500 Ingersoll-Rand Co................. 4,095,877 5,528,250 1.6
52,000 SPX Corporation................... 2,949,980 3,588,000 1.1
------------- ------------- -----
9,949,226 11,482,188 3.4
- -------------------------------------------------------------------------------------------------------------------
MEDICAL SERVICES 225,967 +HEALTHSOUTH Corporation.......... 6,112,619 6,270,584 1.9
- -------------------------------------------------------------------------------------------------------------------
NATURAL GAS 91,000 El Paso Natural Gas Co............ 4,578,330 6,051,500 1.8
53,700 Enron Corp........................ 2,094,624 2,231,906 0.7
------------- ------------- -----
6,672,954 8,283,406 2.5
- -------------------------------------------------------------------------------------------------------------------
OFFICE EQUIPMENT 60,000 Danka Business Systems PLC (ADR)*
(b).............................. 2,957,913 956,250 0.3
- -------------------------------------------------------------------------------------------------------------------
OIL SERVICES 36,000 Schlumberger Ltd.................. 1,519,927 2,898,000 0.9
66,100 +Smith International, Inc......... 3,006,189 4,056,888 1.2
------------- ------------- -----
4,526,116 6,954,888 2.1
- -------------------------------------------------------------------------------------------------------------------
PETROLEUM 160,000 Unocal Corp....................... 6,011,876 6,210,000 1.9
- -------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 56,000 Bristol-Myers Squibb Co........... 5,320,186 5,299,000 1.6
82,000 Lilly (Eli) & Co.................. 5,172,226 5,709,250 1.7
72,000 Pfizer, Inc....................... 5,267,080 5,368,500 1.6
36,000 Warner-Lambert Company............ 5,150,160 4,464,000 1.3
------------- ------------- -----
20,909,652 20,840,750 6.2
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
RAILROADS 62,000 Burlington Northern Santa Fe,
Inc.............................. 5,349,558 5,762,125 1.7
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REAL ESTATE 127,000 Glenborough Realty Trust.......... 3,175,000 3,762,375 1.1
INVESTMENT 117,400 Prentiss Properties Trust......... 2,455,113 3,279,862 1.0
TRUSTS 61,000 Starwood Lodging Trust............ 1,598,323 3,530,375 1.1
------------- ------------- -----
7,228,436 10,572,612 3.2
- -------------------------------------------------------------------------------------------------------------------
RESTAURANTS 79,000 +Tricon Global Restaurants,
Inc.............................. 2,716,662 2,295,937 0.7
- -------------------------------------------------------------------------------------------------------------------
RETAIL 122,215 Rite Aid Corporation.............. 3,987,535 7,172,493 2.1
61,000 +Safeway, Inc..................... 3,375,741 3,858,250 1.1
108,000 Sears, Roebuck & Co............... 4,290,566 4,887,000 1.5
101,000 Wal-Mart Stores, Inc.............. 4,169,794 3,983,187 1.2
------------- ------------- -----
15,823,636 19,900,930 5.9
- -------------------------------------------------------------------------------------------------------------------
SOFTWARE 72,600 +BMC Software, Inc................ 2,712,988 4,755,300 1.4
75,750 Computer Associates International,
Inc.............................. 2,071,480 4,005,281 1.2
28,500 +Microsoft Corp................... 3,554,833 3,681,844 1.1
------------- ------------- -----
8,339,301 12,442,425 3.7
- -------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 204,857 +Tele-Communications, Inc. (Class
A)............................... 3,423,635 5,710,389 1.7
117,143 +Tele-Communications TCI Ventures
Group............................ 1,957,736 3,316,611 1.0
193,000 +WorldCom, Inc.................... 5,306,603 5,838,250 1.7
------------- ------------- -----
10,687,974 14,865,250 4.4
- -------------------------------------------------------------------------------------------------------------------
TRANSPORT SERVICES 110,000 +OMI Corp......................... 1,424,704 1,010,625 0.3
- -------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 123,000 Carnival Corp. (Class A).......... 3,529,627 6,811,125 2.0
- -------------------------------------------------------------------------------------------------------------------
UTILITIES 219,100 Edison International, Inc......... 4,188,269 5,956,781 1.8
97,500 Texas Utilities Company........... 3,890,927 4,052,344 1.2
------------- ------------- -----
8,079,196 10,009,125 3.0
- -------------------------------------------------------------------------------------------------------------------
TOTAL US STOCKS & WARRANTS 231,395,046 285,622,811 85.1
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Capital Stock Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRIES HELD FOREIGN STOCKS++++ COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ARGENTINA 13,800 Yacimientos Petroliferos Fiscales
S.A. (ADR)* (19)................. $ 304,160 $ 471,787 0.1%
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ARGENTINA 304,160 471,787 0.1
- -------------------------------------------------------------------------------------------------------------------
AUSTRALIA 110,000 Broken Hill Proprietary Co., Ltd.
(6).............................. 1,450,439 1,020,442 0.3
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN AUSTRALIA 1,450,439 1,020,442 0.3
- -------------------------------------------------------------------------------------------------------------------
BAHAMAS 71,600 +Sun International Hotels Ltd.
(26)............................. 2,746,494 2,693,950 0.8
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE BAHAMAS 2,746,494 2,693,950 0.8
- -------------------------------------------------------------------------------------------------------------------
BRAZIL 5,000 Telecomunicacoes Brasileiras
S.A.-Telebras (ADR)* (24)........ 279,055 582,187 0.2
9,300 +Uniao de Banco Brasileiros S.A.
(Unibanco) (GDR)** (2)........... 313,962 299,344 0.1
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN BRAZIL 593,017 881,531 0.3
- -------------------------------------------------------------------------------------------------------------------
CANADA 438,000 +Gulf Canada Resources Ltd.
(17)............................. 4,066,909 3,066,000 0.9
62,300 +Imax Corporation (9)............. 1,232,317 1,339,450 0.4
15,500 Magna International Inc. (Class A)
(1).............................. 627,122 973,594 0.3
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN CANADA 5,926,348 5,379,044 1.6
- -------------------------------------------------------------------------------------------------------------------
FINLAND 45,500 +Amer Group Ltd. (6).............. 809,605 872,832 0.3
23,700 Finnlines OY (5).................. 473,846 939,734 0.3
36,960 Orion-Yhtymae OY (Class B) (20)... 996,461 950,545 0.3
55,100 UPM-Kymmene OY (18)............... 1,136,242 1,098,460 0.3
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FINLAND 3,416,154 3,861,571 1.2
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
FRANCE 8,800 +SGS-Thomson Microelectronics N.V.
(NY Registered Shares) (23)...... 335,313 537,350 0.2
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FRANCE 335,313 537,350 0.2
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GERMANY 10,700 Bayerische Vereinsbank AG (2)..... 645,305 700,128 0.2
21,500 Henkel KGaA (Preferred) (4)....... 914,503 1,356,599 0.4
1,900 Mannesmann AG (13)................ 663,326 960,140 0.3
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN GERMANY 2,223,134 3,016,867 0.9
- -------------------------------------------------------------------------------------------------------------------
ITALY 109,000 Arnoldo Mondadori Editore
S.p.A. (21)...................... 920,007 856,376 0.2
170,100 Danieli & Co. Officine Meccaniche
S.p.A. (13)...................... 655,636 611,483 0.2
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ITALY 1,575,643 1,467,859 0.4
- -------------------------------------------------------------------------------------------------------------------
JAPAN 24,000 Amway Japan Ltd. (14)............. 874,029 460,653 0.2
35,000 Bridgestone Corporation (25)...... 610,459 760,461 0.2
7,000 Rohm Co., Ltd. (7)................ 392,198 714,779 0.2
9,000 Sony Corporation (7).............. 664,765 801,536 0.2
43,000 Tokio Marine and Fire Insurance
Co., Ltd. (10)................... 420,696 488,599 0.2
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN JAPAN 2,962,147 3,226,028 1.0
- -------------------------------------------------------------------------------------------------------------------
MEXICO 40,000 Grupo Carso, S.A. de C.V.
(ADR)* (16)...................... 462,500 530,000 0.2
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN MEXICO 462,500 530,000 0.2
- -------------------------------------------------------------------------------------------------------------------
NETHERLANDS 85,000 Royal Dutch Petroleum Co. (NY
Registered Shares) (17).......... 4,642,759 4,605,937 1.4
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
NETHERLANDS 4,642,759 4,605,937 1.4
- -------------------------------------------------------------------------------------------------------------------
NORWAY 203,000 Color Line ASA (5)................ 850,220 786,180 0.2
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN NORWAY 850,220 786,180 0.2
- -------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA 72,600 Sasol Ltd. (6).................... 855,984 761,225 0.2
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SOUTH AFRICA 855,984 761,225 0.2
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Capital Stock Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRIES HELD FOREIGN STOCKS++++ COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SOUTH KOREA 59,700 +Hyundai Engineering &
Construction Co., Ltd. (GDR)**
(8)++............................ $ 766,170 $ 52,237 0.0%
1,167 +Hyundai Engineering &
Construction Co., Ltd. (New
Shares)
(GDR)** (8)++.................... 14,981 1,021 0.0
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SOUTH KOREA 781,151 53,258 0.0
- -------------------------------------------------------------------------------------------------------------------
SPAIN 20,200 Repsol S.A. (ADR)* (19)........... 664,647 859,762 0.2
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SPAIN 664,647 859,762 0.2
- -------------------------------------------------------------------------------------------------------------------
SWEDEN 48,900 Bure Investment AB (11)........... 438,117 643,624 0.2
28,400 +Castellum AB (22)................ 190,519 282,587 0.1
49,000 Perstorp AB (Class B) (4)......... 917,814 876,378 0.3
49,000 Sparbanken Sverige AB (Class A)
(2).............................. 632,647 1,113,987 0.3
19,000 Spectra-Physics AB (Class A)
(12)............................. 579,661 360,161 0.1
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWEDEN 2,758,758 3,276,737 1.0
- -------------------------------------------------------------------------------------------------------------------
SWITZERLAND 644 Novartis AG (Registered Shares)
(20)............................. 559,256 1,045,755 0.3
97 Roche Holding AG (20)............. 814,824 964,018 0.3
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWITZERLAND 1,374,080 2,009,773 0.6
- -------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM 91,600 Diageo PLC (3).................... 633,271 841,785 0.2
370,400 LucasVarity PLC (1)............... 1,232,079 1,308,021 0.4
81,000 Rio Tinto PLC (15)................ 1,208,953 996,488 0.3
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE UNITED
KINGDOM 3,074,303 3,146,294 0.9
- -------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS 36,997,251 38,585,595 11.5
- -------------------------------------------------------------------------------------------------------------------
FACE AMOUNT SHORT-TERM SECURITIES
- -------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER*** $11,759,000 General Motors Acceptance Corp.,
6.75% due 1/02/1998.............. 11,754,590 11,754,590 3.5
- -------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 11,754,590 11,754,590 3.5
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS................. $ 280,146,887 335,962,996 100.1
-------------
-------------
UNREALIZED APPRECIATION ON FORWARD
FOREIGN EXCHANGE CONTRACTS+++.... 5,290 0.0
LIABILITIES IN EXCESS OF OTHER
ASSETS........................... (165,851) (0.1)
------------- -----
NET ASSETS........................ $ 335,802,435 100.0%
------------- -----
------------- -----
- -------------------------------------------------------------------------------------------------------------------
</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) Consistent with the general policy of the Securities and Exchange
Commission, the nationality or domicile of an issuer for determination of
foreign issuer status may be (i) the country under whose laws the issuer is
organized, (ii) the country in which the issuer's securities are
principally traded, or (iii) the country in which the issuer derives a
significant proportion (at least 50%) of its revenue profits from goods
produced and sold, investments made, or services performed in the country,
or in which at least 50% of the assets of the issuer are situated.
* American Depositary Receipts (ADR).
** Global Depositary Receipts (GDR).
*** Commercial Paper is traded on a discount basis; the interest rate shown is
the discount rate paid at the time of purchase by the Portfolio.
+ Non-income producing security.
++ The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
20
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Capital Stock Portfolio
Schedule of Investments as of December 31, 1997 (Concluded)
- --------------------------------------------------------------------------------
+++ Forward foreign exchange contracts as of December 31, 1997 were as follows:
- ------------------------------------------------
UNREALIZED
APPRECIATION
FOREIGN EXPIRATION (DEPRECIATION)
CURRENCY SOLD DATE (NOTE 1F)
- ------------------------------------------------
A$ 1,520,000 January 1998 $ 13,171
C$ 7,900,000 March 1998 33,767
L 2,225,000 January 1998 (58,224)
Y 400,000,000 January 1998 16,576
- ------------------------------------------------
TOTAL UNREALIZED APPRECIATION ON
FORWARD FOREIGN
EXCHANGE CONTRACTS -- NET (US$
COMMITMENT -- $13,255,961) $ 5,290
--------------
--------------
- ------------------------------------------------
++++ Corresponding industry groups for foreign stocks:
(1) Auto-Parts
(2) Banking
(3) Beverages
(4) Chemicals
(5) Cruise Lines
(6) Diversified
(7) Electronics
(8) Engineering & Construction
(9) Entertainment
(10) Insurance
(11) Investment Management
(12) Laser Components
(13) Machinery & Equipment
(14) Merchandising
(15) Mining
(16) Multi-Industry
(17) Oil-Integrated
(18) Paper & Forest Products
(19) Petroleum
(20) Pharmaceuticals
(21) Publishing
(22) Real Estate
(23) Semiconductors
(24) Telecommunications
(25) Tires & Rubber
(26) Hotels & Casinos
See Notes to Financial Statements.
21
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD US STOCKS COST (NOTE 1A) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AEROSPACE & DEFENSE 36,000 AlliedSignal, Inc..................... $ 1,356,212 $ 1,401,750 0.6%
30,000 GenCorp, Inc.......................... 850,080 750,000 0.3
7,200 +Orbital Sciences Corp................ 184,823 214,200 0.1
------------- ------------- ------
2,391,115 2,365,950 1.0.......
- -----------------------------------------------------------------------------------------------------------------------
AIRLINES 24,850 +US Airways Group, Inc................ 1,087,988 1,553,125 0.6
- -----------------------------------------------------------------------------------------------------------------------
APPLIANCES 30,500 Sunbeam Corp.......................... 1,198,841 1,284,813 0.5
- -----------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS 30,000 Federal-Mogul Corp.................... 1,160,955 1,215,000 0.5
- -----------------------------------------------------------------------------------------------------------------------
AUTOMOBILE RENTAL 38,000 +Avis Rent-A-Car, Inc................. 902,560 1,213,625 0.5
35,300 Hertz Corp. (Class A)................. 1,200,731 1,420,825 0.6
------------- ------------- ------
2,103,291 2,634,450 1.1
- -----------------------------------------------------------------------------------------------------------------------
BANKING 30,000 Bank of New York Co., Inc............. 935,740 1,734,375 0.7
20,100 BankAmerica Corp...................... 1,257,926 1,467,300 0.6
33,000 First Union Corporation............... 1,630,013 1,691,250 0.7
------------- ------------- ------
3,823,679 4,892,925 2.0
- -----------------------------------------------------------------------------------------------------------------------
BROADCASTING-MEDIA 14,800 +Chancellor Media Corp................ 938,760 1,104,450 0.4
- -----------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES 28,100 +Gartner Group, Inc. (Class A)........ 953,365 1,046,725 0.4
- -----------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 11,700 +Cisco Systems, Inc................... 670,311 652,275 0.3
- -----------------------------------------------------------------------------------------------------------------------
COMPUTERS 8,300 Compaq Computer Corp.................. 316,567 468,431 0.2
6,000 International Business Machines
Corp................................. 385,175 627,375 0.2
24,000 +Quantum Corporation.................. 656,525 481,500 0.2
------------- ------------- ------
1,358,267 1,577,306 0.6
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS 50,800 The Dial Corporation.................. 983,899 1,057,275 0.4
- -----------------------------------------------------------------------------------------------------------------------
CONTAINERS 45,000 +Owens-Illinois, Inc.................. 1,350,687 1,707,188 0.7
- -----------------------------------------------------------------------------------------------------------------------
CRUISE LINES 14,000 Royal Caribbean Cruises Ltd........... 615,630 746,375 0.3
- -----------------------------------------------------------------------------------------------------------------------
DENTAL SUPPLIES & 28,000 DENTSPLY International Inc............ 706,618 854,000 0.3
EQUIPMENT
- -----------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 18,000 General Electric Co................... 1,275,703 1,320,750 0.5
- -----------------------------------------------------------------------------------------------------------------------
ELECTRONICS 37,200 +National Semiconductor Corporation... 1,436,027 964,875 0.4
- -----------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 13,900 American Express Company.............. 810,776 1,240,575 0.5
20,300 MGIC Investment Corp.................. 786,354 1,349,950 0.5
------------- ------------- ------
1,597,130 2,590,525 1.0
- -----------------------------------------------------------------------------------------------------------------------
HARDWARE PRODUCTS 32,400 Black & Decker Corporation............ 1,115,098 1,265,625 0.5
- -----------------------------------------------------------------------------------------------------------------------
INSURANCE 10,500 Hartford Life, Inc. (Class A)......... 356,699 475,781 0.3
50,500 Provident Companies, Inc.............. 1,692,482 1,950,563 0.8
29,000 Travelers Group, Inc.................. 1,135,476 1,562,375 0.6
13,000 Travelers Property Casualty Corp.
(Class A)............................ 526,489 572,000 0.2
24,500 UNUM Corporation...................... 777,212 1,332,188 0.5
------------- ------------- ------
4,488,358 5,892,907 2.4
- -----------------------------------------------------------------------------------------------------------------------
LEISURE/TOURISM 39,600 Brunswick Corporation................. 1,028,242 1,200,375 0.5
- -----------------------------------------------------------------------------------------------------------------------
MACHINERY 19,700 Harnischfeger Industries, Inc......... 834,368 695,656 0.3
35,000 Ingersoll-Rand Co..................... 1,119,986 1,417,500 0.6
13,000 SPX Corporation....................... 737,680 897,000 0.3
------------- ------------- ------
2,692,034 3,010,156 1.2
- -----------------------------------------------------------------------------------------------------------------------
MEDICAL SERVICES 61,500 +HEALTHSOUTH Corporation.............. 1,667,894 1,706,625 0.7
- -----------------------------------------------------------------------------------------------------------------------
NATURAL GAS 26,400 El Paso Natural Gas Co................ 1,381,552 1,755,600 0.7
16,000 Enron Corp............................ 588,791 665,000 0.3
------------- ------------- ------
1,970,343 2,420,600 1.0
- -----------------------------------------------------------------------------------------------------------------------
OFFICE EQUIPMENT 14,700 Danka Business Systems PLC (ADR)*
(a).................................. 724,661 234,281 0.1
- -----------------------------------------------------------------------------------------------------------------------
OIL SERVICES 12,000 Schlumberger Ltd...................... 567,172 966,000 0.4
21,000 +Smith International, Inc............. 1,049,748 1,288,875 0.5
------------- ------------- ------
1,616,920 2,254,875 0.9
- -----------------------------------------------------------------------------------------------------------------------
PETROLEUM 32,000 Unocal Corp........................... 1,132,893 1,242,000 0.5
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD US STOCKS COST (NOTE 1A) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PHARMACEUTICALS 14,400 Bristol-Myers Squibb Co............... $ 1,369,945 $ 1,362,600 0.6%
21,500 Lilly (Eli) & Co...................... 1,361,257 1,496,938 0.6
18,000 Pfizer, Inc........................... 1,325,870 1,342,125 0.5
9,200 Warner-Lambert Company................ 1,272,652 1,140,800 0.5
------------- ------------- ------
5,329,724 5,342,463 2.2
- -----------------------------------------------------------------------------------------------------------------------
RAILROADS 11,000 Burlington Northern Santa Fe, Inc..... 918,861 1,022,313 0.4
- -----------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT 31,000 Glenborough Realty Trust.............. 775,000 918,375 0.4
TRUSTS 26,700 Prentiss Properties Trust............. 543,761 745,931 0.3
12,950 Starwood Lodging Trust................ 350,270 749,481 0.3
------------- ------------- ------
1,669,031 2,413,787 1.0
- -----------------------------------------------------------------------------------------------------------------------
RESTAURANTS 20,000 +Tricon Global Restaurants, Inc....... 687,878 581,250 0.2
- -----------------------------------------------------------------------------------------------------------------------
RETAIL 23,465 Rite Aid Corporation.................. 799,700 1,377,102 0.6
15,700 +Safeway, Inc......................... 885,298 993,025 0.4
24,000 Sears, Roebuck & Co................... 1,131,720 1,086,000 0.4
26,000 Wal-Mart Stores, Inc.................. 1,073,399 1,025,375 0.4
------------- ------------- ------
3,890,117 4,481,502 1.8
- -----------------------------------------------------------------------------------------------------------------------
SOFTWARE 17,000 +BMC Software, Inc.................... 800,735 1,113,500 0.5
18,850 Computer Associates International,
Inc.................................. 635,220 996,694 0.4
6,000 +Microsoft Corp....................... 724,999 775,125 0.3
------------- ------------- ------
2,160,954 2,885,319 1.2
- -----------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 64,713 +Tele-Communications, Inc. (Class
A)................................... 1,212,101 1,803,875 0.7
37,287 +Tele-Communications TCI Ventures
Group................................ 696,707 1,055,688 0.4
44,000 +WorldCom, Inc........................ 1,171,722 1,331,000 0.6
------------- ------------- ------
3,080,530 4,190,563 1.7
- -----------------------------------------------------------------------------------------------------------------------
TRANSPORT SERVICES 33,000 +OMI Corp............................. 411,960 303,188 0.1
- -----------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 29,000 Carnival Corp. (Class A).............. 948,415 1,605,875 0.6
- -----------------------------------------------------------------------------------------------------------------------
UTILITIES 51,600 Edison International, Inc............. 1,041,178 1,402,875 0.6
25,500 Texas Utilities Company............... 1,019,351 1,059,844 0.4
------------- ------------- ------
2,060,529 2,462,719 1.0
- -----------------------------------------------------------------------------------------------------------------------
TOTAL US STOCKS 61,246,708 72,084,430 29.0
- -----------------------------------------------------------------------------------------------------------------------
COUNTRIES FOREIGN STOCKS++
- -----------------------------------------------------------------------------------------------------------------------
ARGENTINA 32,500 Yacimientos Petroliferos Fiscales S.A.
(ADR)* (24).......................... 703,090 1,111,094 0.4
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ARGENTINA 703,090 1,111,094 0.4
- -----------------------------------------------------------------------------------------------------------------------
AUSTRALIA 226,000 Broken Hill Proprietary Co., Ltd.
(9).................................. 2,933,595 2,096,546 0.8
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN AUSTRALIA 2,933,595 2,096,546 0.8
- -----------------------------------------------------------------------------------------------------------------------
BAHAMAS 18,000 +Sun International Hotels Ltd. (33)... 690,493 677,250 0.3
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE BAHAMAS 690,493 677,250 0.3
- -----------------------------------------------------------------------------------------------------------------------
BRAZIL 8,800 Telecomunicacoes Brasileiras S.A.-
Telebras (ADR)* (31)................. 770,142 1,024,650 0.5
18,500 +Uniao de Bancos Brasileiros S.A.
(Unibanco) (GDR)** (3)............... 624,506 595,469 0.2
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN BRAZIL 1,394,648 1,620,119 0.7
- -----------------------------------------------------------------------------------------------------------------------
CANADA 131,000 +Gulf Canada Resources Ltd. (22)...... 1,216,374 917,000 0.3
66,500 +Imax Corporation (12)................ 1,061,590 1,429,750 0.6
30,700 Magna International Inc. (Class A)
(2).................................. 1,439,990 1,928,344 0.8
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN CANADA 3,717,954 4,275,094 1.7
- -----------------------------------------------------------------------------------------------------------------------
FINLAND 65,000 +Amer Group Ltd. (9).................. 1,181,497 1,246,902 0.5
50,000 Finnlines OY (8)...................... 923,284 1,982,561 0.8
42,000 Orion-Yhtymae OY (Class B) (25)....... 1,178,334 1,080,165 0.4
86,000 UPM-Kymmene OY (23)................... 1,809,817 1,714,475 0.7
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FINLAND 5,092,932 6,024,103 2.4
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRIES HELD FOREIGN STOCKS++ COST (NOTE 1A) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FRANCE 16,600 +SGS-Thomson Microelectronics N.V. (NY
Registered Shares) (30).............. $ 630,256 $ 1,013,637 0.4%
44,000 Scor S.A. (28)........................ 1,707,560 2,103,871 0.9
24,500 Thomson CSF (10)...................... 769,883 772,163 0.3
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FRANCE 3,107,699 3,889,671 1.6
- -----------------------------------------------------------------------------------------------------------------------
GERMANY 20,000 Bayerische Vereinsbank AG (3)......... 1,206,212 1,308,650 0.5
4,000 Henkel KGaA (7)....................... 177,789 224,594 0.1
36,000 Henkel KGaA (Preferred) (7)........... 1,529,763 2,271,514 0.9
4,785 Mannesmann AG (18).................... 1,581,051 2,418,037 1.0
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN GERMANY 4,494,815 6,222,795 2.5
- -----------------------------------------------------------------------------------------------------------------------
INDONESIA 73,250 P.T. Indonesian Satellite Corp. (ADR)*
(31)................................. 1,978,885 1,414,641 0.6
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN INDONESIA 1,978,885 1,414,641 0.6
- -----------------------------------------------------------------------------------------------------------------------
ITALY 246,000 Arnoldo Mondadori Editore S.p.A.
(26)................................. 1,990,308 1,932,738 0.8
431,000 Danieli & Co. Officine Meccaniche
S.p.A. (18).......................... 1,590,085 1,549,378 0.6
46,900 Gucci Group N.V. (NY Registered
Shares) (1).......................... 3,323,687 1,963,937 0.8
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ITALY 6,904,080 5,446,053 2.2
- -----------------------------------------------------------------------------------------------------------------------
JAPAN 50,000 Amway Japan Ltd (19).................. 1,804,119 959,693 0.4
86,000 Bridgestone Corporation (32).......... 1,493,953 1,868,560 0.7
285,000 Maeda Corp. (5)....................... 2,154,382 634,549 0.2
77,000 Matsushita Electric Industrial Co.,
Ltd. (10)............................ 1,225,130 1,129,136 0.5
124,000 Matsushita Electric Works, Ltd. (6)... 1,411,454 1,075,777 0.4
187,000 Okumura Corp. (5)..................... 1,557,500 445,067 0.2
12,000 Rohm Co., Ltd. (10)................... 765,182 1,225,336 0.5
22,000 Sony Corporation (10)................. 1,620,901 1,959,309 0.8
104,000 Tokio Marine and Fire Insurance Co.,
Ltd. (15)............................ 1,072,502 1,181,727 0.5
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN JAPAN 13,105,123 10,479,154 4.2
- -----------------------------------------------------------------------------------------------------------------------
MEXICO 75,000 Grupo Carso, S.A. de C.V. (ADR)*
(21)................................. 1,008,093 993,750 0.4
50,000 +Grupo Financiero Bancomer, S.A. de
C.V. (ADR)* (13)..................... 713,671 625,000 0.2
27,750 Panamerican Beverages, Inc.
(Class A) (4)........................ 697,337 905,344 0.4
12,900 Telefonos de Mexico, S.A. de C.V.
(Telmex) (ADR)* (31)................. 518,725 723,206 0.3
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN MEXICO 2,937,826 3,247,300 1.3
- -----------------------------------------------------------------------------------------------------------------------
NETHERLANDS 20,300 Royal Dutch Petroleum Co. (NY
Registered Shares) (22).............. 1,108,800 1,100,006 0.5
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE NETHERLANDS 1,108,800 1,100,006 0.5
- -----------------------------------------------------------------------------------------------------------------------
NORWAY 212,000 Color Line ASA (8).................... 826,832 821,035 0.3
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN NORWAY 826,832 821,035 0.3
- -----------------------------------------------------------------------------------------------------------------------
PHILIPPINES 431,890 San Miguel Corp. (Class B) (4)........ 815,220 534,464 0.2
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE PHILIPPINES 815,220 534,464 0.2
- -----------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA 86,000 De Beers Consolidated Mines Ltd.
(ADR)* (20).......................... 2,849,152 1,757,625 0.7
176,000 Sasol Ltd. (9)........................ 2,076,635 1,845,395 0.8
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SOUTH AFRICA 4,925,787 3,603,020 1.5
- -----------------------------------------------------------------------------------------------------------------------
SOUTH KOREA 34,000 +Hyundai Engineering & Construction
Co., Ltd. (GDR)** (11) (b)........... 436,344 29,750 0.0
664 +Hyundai Engineering & Construction
Co., Ltd. (New Shares) (GDR)** (11)
(b).................................. 8,522 581 0.0
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SOUTH KOREA 444,866 30,331 0.0
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRIES HELD FOREIGN STOCKS++ COST (NOTE 1A) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SPAIN 46,700 Repsol S.A. (ADR)* (24)............... $ 1,449,107 $ 1,987,669 0.8%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SPAIN 1,449,107 1,987,669 0.8
- -----------------------------------------------------------------------------------------------------------------------
SWEDEN 91,900 Bure Investment AB (16)............... 817,581 1,209,591 0.5
59,800 +Castellum AB (27).................... 401,163 595,025 0.2
156,800 +Nordbanken Holding AB (3)............ 849,521 886,746 0.3
82,000 Perstorp AB (Class B) (7)............. 1,535,983 1,466,591 0.6
94,000 Sparbanken Sverige AB (Class A) (3)... 1,208,588 2,137,036 0.9
39,000 Spectra-Physics AB (Class A) (17)..... 1,190,058 739,278 0.3
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWEDEN 6,002,894 7,034,267 2.8
- -----------------------------------------------------------------------------------------------------------------------
SWITZERLAND 1,303 Novartis AG (Registered Shares)
(25)................................. 1,317,234 2,115,868 0.9
230 Roche Holding AG (25)................. 1,932,056 2,285,817 0.9
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWITZERLAND 3,249,290 4,401,685 1.8
- -----------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM 221,700 Diageo PLC (4)........................ 1,577,114 2,037,376 0.8
167,000 Dixons Group PLC (29)................. 1,752,359 1,675,958 0.7
137,100 Imperial Chemical Industries PLC
(7).................................. 1,778,872 2,141,526 0.9
770,000 LucasVarity PLC (2)................... 2,571,944 2,719,159 1.1
150,000 Rio Tinto PLC (20).................... 2,238,796 1,845,349 0.7
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE UNITED
KINGDOM 9,919,085 10,419,368 4.2
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS 75,803,021 76,435,665 30.8
- -----------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT FOREIGN BONDS++
- ----------------------------------------------------------------------------------------------------------------------
CANADA C$ 2,350,000 Canadian Government Bonds, 7% due
12/01/2006 (14)...................... 1,785,347 1,799,899 0.7
- ----------------------------------------------------------------------------------------------------------------------
DENMARK Dkr 21,500,000 Government of Denmark, 7% due
11/15/2007 (14)...................... 3,434,844 3,448,486 1.4
- ----------------------------------------------------------------------------------------------------------------------
FRANCE Frf 21,200,000 French Government Bonds, 5.50% due
10/25/2007 (14)...................... 3,490,586 3,564,446 1.4
- ----------------------------------------------------------------------------------------------------------------------
GERMANY Bundesrepublik Deutschland (14):
DM 2,400,000 6.50% due 10/14/2005.................. 1,547,155 1,438,426 0.6
9,000,000 6% due 7/04/2007...................... 5,263,778 5,245,997 2.1
2,200,000 6% due 6/20/2016...................... 1,223,974 1,268,045 0.5
2,200,000 Treuhandanstalt, 6.875% due 6/11/2003
(14)................................. 1,463,044 1,333,845 0.5
------------- ------------- ------
9,497,951 9,286,313 3.7
- ----------------------------------------------------------------------------------------------------------------------
ITALY Lit 8,250,000,000 Buoni Poliennali del Tesoro (Italian
Government Bonds), 8.50% due
8/01/2004 (14)....................... 5,369,556 5,430,209 2.2
- ----------------------------------------------------------------------------------------------------------------------
SPAIN Pta 500,000,000 Spanish Government Bonds, 7.90% due
2/28/2002 (14)....................... 4,051,905 3,627,220 1.5
- ----------------------------------------------------------------------------------------------------------------------
SWEDEN Skr 31,500,000 Government of Sweden, 8% due 8/15/2007
(14)................................. 4,600,941 4,541,443 1.8
- ----------------------------------------------------------------------------------------------------------------------
UNITED UK Treasury Gilt, 7.25% due 12/07/2007
KINGDOM L 3,250,000 (14)................................. 5,379,426 5,710,126 2.3
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS 37,610,556 37,408,142 15.0
- ----------------------------------------------------------------------------------------------------------------------
US GOVERNMENT OBLIGATIONS
- ----------------------------------------------------------------------------------------------------------------------
US US$ 16,100,000 US Treasury Bonds, 6.625% due
GOVERNMENT 2/15/2027............................. 16,375,016 17,478,482 7.0
OBLIGATIONS US Treasury Notes:
12,200,000 6% due 8/15/1999...................... 12,222,359 12,259,048 4.9
2,750,000 6.50% due 5/31/2002................... 2,768,477 2,830,355 1.1
2,300,000 6.25% due 2/15/2007................... 2,292,266 2,373,301 1.0
1,775,000 6.625% due 5/15/2007.................. 1,798,574 1,878,731 0.8
- ----------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT OBLIGATIONS 35,456,692 36,819,917 14.8
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1997 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER*** $ 8,627,000 General Motors Acceptance Corp., 6.75%
due 1/02/1998........................ $ 8,625,382 $ 8,625,382 3.5%
- ----------------------------------------------------------------------------------------------------------------------
US 16,000,000 Federal Home Loan Bank, 5.72% due
GOVERNMENT 1/05/1998............................. 15,989,831 15,989,831 6.4
AGENCY
OBLIGATIONS***
- ----------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 24,615,213 24,615,213 9.9
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS..................... $ 234,732,190 247,363,367 99.5
-------------
-------------
UNREALIZED DEPRECIATION ON FORWARD
FOREIGN EXCHANGE CONTRACTS****........ (35,680) 0.0
OTHER ASSETS LESS LIABILITIES......... 1,176,963 0.5
------------- ------
------------- ------
NET ASSETS............................ $ 248,504,650 100.0%
------------- ------
------------- ------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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.
**** Forward foreign exchange contracts as of December 31, 1997 were as follows:
- -------------------------------------------------
UNREALIZED
APPRECIATION
FOREIGN EXPIRATION (DEPRECIATION)
CURRENCY SOLD DATE (NOTE 1F)
- -------------------------------------------------
A$ 3,190,000 January 1998 $ 27,641
C$ 8,900,000 March 1998 38,041
L 5,850,000 January 1998 (153,083)
Y 1,350,000,000 January 1998 51,721
- -------------------------------------------------
TOTAL UNREALIZED DEPRECIATION ON
FORWARD FOREIGN EXCHANGE
CONTRACTS -- NET (US$ COMMITMENT
- -- $28,258,695) $ (35,680)
--------------
--------------
- -------------------------------------------------
(a) Consistent with the general policy of the Securities and Exchange
Commission, the nationality or domicile of an issuer for determination of
foreign issuer status may be (i) the country under whose laws the issuer is
organized, (ii) the country in which the issuer's securities are
principally traded, or (iii) the country in which the issuer derives a
significant proportion (at least 50%) of its revenue or profits from goods
produced and sold, investments made, or services performed in the country,
or in which at least 50% of the assets of the issuer are situated.
(b) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
+ Non-income producing security.
++ Corresponding industry groups for foreign stocks and bonds:
(1) Apparel
(2) Auto-Parts
(3) Banking
(4) Beverages
(5) Building & Construction
(6) Building Products
(7) Chemicals
(8) Cruise Lines
(9) Diversified
(10) Electronics
(11) Engineering & Construction
(12) Entertainment
(13) Financial Services
(14) Government (Bonds)
(15) Insurance
(16) Investment Management
(17) Laser Components
(18) Machinery & Equipment
(19) Merchandising
(20) Mining
(21) Multi-Industry
(22) Oil-Integrated
(23) Paper & Forest Products
(24) Petroleum
(25) Pharmaceuticals
(26) Publishing
(27) Real Estate
(28) Reinsurance
(29) Retail
(30) Semiconductors
(31) Telecommunications
(32) Tires & Rubber
(33) Hotels & Casinos
See Notes to Financial Statements.
26
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Growth Stock Portfolio
Schedule of Investments as of December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRIES SHARES HELD STOCKS COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADVERTISING 60,000 Interpublic Group of Companies,
Inc.............................. $ 1,684,681 $ 2,988,750 0.9%
- ------------------------------------------------------------------------------------------------------------------
BANKING & FINANCIAL 100,000 Banc One Corp..................... 4,578,813 5,431,250 1.6
130,000 BankAmerica Corp.................. 9,408,043 9,490,000 2.8
60,000 Citicorp.......................... 7,775,851 7,586,250 2.3
135,000 Mellon Bank Corporation........... 7,438,646 8,184,375 2.5
80,000 State Street Corporation.......... 3,276,190 4,655,000 1.4
------------- ------------- -----
32,477,543 35,346,875 10.6
- ------------------------------------------------------------------------------------------------------------------
BEVERAGES 50,000 Coca-Cola Co. (The)............... 2,924,111 3,331,250 1.0
- ------------------------------------------------------------------------------------------------------------------
COMMUNICATION 67,500 +Cisco Systems, Inc............... 2,712,058 3,763,125 1.1
EQUIPMENT 225,000 +FORE Systems, Inc................ 5,312,170 3,431,250 1.0
45,000 Lucent Technologies, Inc.......... 2,563,463 3,594,375 1.1
140,000 +Newbridge Networks Corp.......... 5,279,181 4,882,500 1.5
90,000 Northern Telecom Ltd.............. 7,108,939 8,010,000 2.4
130,000 Telefonaktiebolaget LM Ericsson
(ADR)*........................... 4,876,384 4,850,625 1.5
------------- ------------- -----
27,852,195 28,531,875 8.6
- ------------------------------------------------------------------------------------------------------------------
COMPUTERS 215,000 Compaq Computer Corp.............. 7,831,898 12,134,063 3.6
30,000 Hewlett-Packard Co................ 1,674,450 1,875,000 0.6
------------- ------------- -----
9,506,348 14,009,063 4.2
- ------------------------------------------------------------------------------------------------------------------
COMPUTER-SOFTWARE 200,000 +Baan Company, N.V................ 5,054,297 6,550,000 2.0
25,000 +Microsoft Corp................... 2,368,125 3,229,687 1.0
35,000 +Oracle Corp...................... 1,338,648 778,750 0.2
105,000 SAP AG (Systeme, Anwendungen,
Produkte in der
Datenverarbeitung) (ADR)*........ 6,181,875 11,235,000 3.4
------------- ------------- -----
14,942,945 21,793,437 6.6
- ------------------------------------------------------------------------------------------------------------------
COSMETICS 65,000 Gillette Co. (The)................ 5,339,621 6,528,438 2.0
10,000 International Flavors &
Fragrances, Inc.................. 485,470 515,000 0.1
------------- ------------- -----
5,825,091 7,043,438 2.1
- ------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 20,000 Emerson Electric Co............... 658,040 1,128,750 0.4
150,000 General Electric Co............... 5,753,043 11,006,250 3.3
15,000 Honeywell, Inc.................... 1,083,581 1,027,500 0.3
------------- ------------- -----
7,494,664 13,162,500 4.0
- ------------------------------------------------------------------------------------------------------------------
ELECTRONICS 125,000 Intel Corporation................. 8,830,634 8,773,438 2.6
- ------------------------------------------------------------------------------------------------------------------
ENERGY 100,000 El Paso Natural Gas Co............ 4,578,297 6,650,000 2.0
185,000 Enron Corp........................ 7,877,437 7,689,062 2.3
------------- ------------- -----
12,455,734 14,339,062 4.3
- ------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 110,000 +Viacom, Inc. (Class A)........... 5,426,147 4,496,250 1.3
40,000 Walt Disney Co. (The)............. 2,661,838 3,962,500 1.2
------------- ------------- -----
8,087,985 8,458,750 2.5
- ------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 80,000 American Express Company.......... 6,394,871 7,140,000 2.1
235,000 Federal National Mortgage
Association...................... 10,496,280 13,409,688 4.0
250,000 Travelers Group, Inc.............. 10,078,749 13,468,750 4.1
------------- ------------- -----
26,969,900 34,018,438 10.2
- ------------------------------------------------------------------------------------------------------------------
FOOD 50,000 ConAgra, Inc...................... 1,141,500 1,640,625 0.5
25,000 Wrigley (Wm.) Jr. Company
(Class B)........................ 1,504,620 1,989,063 0.6
------------- ------------- -----
2,646,120 3,629,688 1.1
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Growth Stock Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRIES SHARES HELD STOCKS COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOOD MERCHANDISING 100,000 Albertsons, Inc................... $ 3,960,922 $ 4,737,500 1.4%
130,000 +Meyer (Fred), Inc................ 2,514,255 4,728,750 1.4
------------- ------------- -----
6,475,177 9,466,250 2.8
- ------------------------------------------------------------------------------------------------------------------
HOTELS 15,000 Marriott International, Inc....... 703,815 1,038,750 0.3
- ------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS 45,000 Colgate-Palmolive Co.............. 3,153,150 3,307,500 1.0
20,000 Kimberly-Clark Corp............... 1,078,644 986,250 0.3
90,000 Procter & Gamble Co............... 4,844,224 7,183,125 2.2
------------- ------------- -----
9,076,018 11,476,875 3.5
- ------------------------------------------------------------------------------------------------------------------
INFORMATION 180,000 First Data Corp................... 6,701,885 5,265,000 1.6
SERVICES
- ------------------------------------------------------------------------------------------------------------------
INSURANCE 10,000 Aetna, Inc........................ 822,491 705,625 0.2
60,000 American International Group,
Inc.............................. 5,647,140 6,525,000 2.0
------------- ------------- -----
6,469,631 7,230,625 2.2
- ------------------------------------------------------------------------------------------------------------------
LEISURE 105,000 Polygram N.V. (NY Registered
Shares).......................... 5,039,807 5,007,187 1.5
- ------------------------------------------------------------------------------------------------------------------
MEDICAL TECHNOLOGY 90,000 +Boston Scientific Corp........... 4,846,691 4,128,750 1.2
45,000 Guidant Corporation............... 2,917,779 2,801,250 0.8
25,000 Johnson & Johnson................. 1,065,060 1,646,875 0.5
------------- ------------- -----
8,829,530 8,576,875 2.5
- ------------------------------------------------------------------------------------------------------------------
OIL SERVICES 140,000 Baker Hughes, Inc................. 5,327,977 6,107,500 1.8
170,000 Diamond Offshore Drilling, Inc.... 5,827,699 8,181,250 2.5
130,000 Schlumberger Ltd.................. 7,199,778 10,465,000 3.1
------------- ------------- -----
18,355,454 24,753,750 7.4
- ------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 65,000 Amgen, Inc........................ 3,224,464 3,518,125 1.0
45,000 Bristol-Myers Squibb Co........... 3,362,809 4,258,125 1.3
50,000 Merck & Co., Inc.................. 3,384,854 5,312,500 1.6
70,000 Pfizer, Inc....................... 3,314,276 5,219,375 1.6
------------- ------------- -----
13,286,403 18,308,125 5.5
- ------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY 15,000 Eastman Kodak Co.................. 953,578 912,187 0.3
- ------------------------------------------------------------------------------------------------------------------
POLLUTION CONTROL 20,000 Waste Management, Inc............. 591,174 550,000 0.2
- ------------------------------------------------------------------------------------------------------------------
RESTAURANTS 15,000 McDonald's Corp................... 684,747 716,250 0.2
- ------------------------------------------------------------------------------------------------------------------
RETAIL-SPECIALTY 50,000 CVS Corporation................... 2,908,219 3,203,125 1.0
150,000 +Staples, Inc..................... 3,796,310 4,162,500 1.3
105,000 Walgreen Co....................... 2,872,665 3,294,375 1.0
------------- ------------- -----
9,577,194 10,660,000 3.3
- ------------------------------------------------------------------------------------------------------------------
RETAIL-STORES 300,000 Wal-Mart Stores, Inc.............. 9,933,853 11,831,250 3.5
- ------------------------------------------------------------------------------------------------------------------
TOYS 35,000 Mattel, Inc....................... 1,276,170 1,303,750 0.4
- ------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 20,000 Carnival Corp. (Class A).......... 467,500 1,107,500 0.3
- ------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS 260,119,887 313,630,938 94.2
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Growth Stock Portfolio
Schedule of Investments as of December 31, 1997 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER** $ 2,945,000 General Motors Acceptance Corp.,
6.75% due 1/02/1998.............. $ 2,943,896 $ 2,943,896 0.9%
6,000,000 Lexington Parker Capital Co. LLC,
6.05% due 1/14/1998.............. 5,985,883 5,985,883 1.8
10,000,000 Republic Industries, Inc., 6% due
1/07/1998........................ 9,988,333 9,988,333 3.0
- ------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 18,918,112 18,918,112 5.7
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS................. $ 279,037,999 332,549,050 99.9
-------------
-------------
OTHER ASSETS LESS LIABILITIES..... 473,979 0.1
------------- -----
NET ASSETS........................ $ 333,023,029 100.0%
------------- -----
------------- -----
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* American Depositary Receipts (ADR).
** Commercial Paper is traded on a discount basis; the interest rates shown are
the discount rates paid at the time of purchase by the Portfolio.
+ Non-income producing security.
See Notes to Financial Statements.
29
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S FACE VALUE
INDUSTRIES RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AEROSPACE & B- B2 $ 500,000 L-3 Communications Corp., 10.375% due
DEFENSE-0.4% 5/01/2007.............................. $ 500,000 $ 542,500
- ------------------------------------------------------------------------------------------------------------------------
AIRLINES-0.6% B+ B1 750,000 US Airways Group Inc., 10.375% due
3/01/2013.............................. 750,000 839,370
- ------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE-0.7% B+ B2 1,000,000 Venture Holdings Trust, 9.50% due
7/01/2005.............................. 985,539 1,005,000
- ------------------------------------------------------------------------------------------------------------------------
BROADCASTING-RADIO & B- B3 1,000,000 Salem Communications Corp., 9.50% due
TELEVISION-2.1% 10/01/2007 (f)......................... 1,020,000 1,015,000
B B2 2,000,000 Sinclair Broadcast Group, Inc., 8.75%
due 12/15/2007......................... 1,992,160 2,000,000
------------ ------------
3,012,160 3,015,000
- ------------------------------------------------------------------------------------------------------------------------
CABLE- CCC+ Caa 2,075,790 American Telecasting, Inc., 29.862%**
DOMESTIC-5.4% due 6/15/2004.......................... 849,029 685,011
BB- Ba3 2,000,000 Century Communications Corp., 9.50% due
3/01/2005.............................. 1,977,500 2,120,000
B B2 1,500,000 Intermedia Capital Partners, 11.25% due
8/01/2006.............................. 1,493,750 1,642,500
BB+ Ba3 1,000,000 Lenfest Communications, Inc., 8.375% due
11/01/2005............................. 931,250 1,027,500
B B1 1,000,000 Olympus Communications L.P., 10.625% due
11/15/2006............................. 1,000,000 1,107,500
BB+ Ba3 1,000,000 TCI Communications Inc., 9.65% due
3/31/2027.............................. 1,026,250 1,170,620
------------ ------------
7,277,779 7,753,131
- ------------------------------------------------------------------------------------------------------------------------
CABLE- Australis Media Ltd. (a):
INTERNATIONAL-2.7% D C 17,716 1.75%/15.75% due 5/15/2003............. 11,976 7,549
NR* NR* 2,000,000 1.75%/15.75% due 5/15/2003 (g).......... 1,366,087 822,178
B- B3 2,000,000 NTL Incorporated, Series B, 10.688%**
due 2/01/2006.......................... 1,483,252 1,552,500
B+ B1 2,000,000 Telewest Communications PLC, 11.489%**
due 10/01/2007......................... 1,438,580 1,555,000
------------ ------------
4,299,895 3,937,227
- ------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS-1.8% B+ B1 1,000,000 Bucyrus International, Inc., 9.75% due
9/15/2007.............................. 1,000,000 1,010,000
B- B3 1,500,000 International Wire Group, Inc., 11.75%
due 6/01/2005.......................... 1,486,875 1,642,500
------------ ------------
2,486,875 2,652,500
- ------------------------------------------------------------------------------------------------------------------------
CHEMICALS-0.5% BB- Ba3 744,000 ISP Holdings Inc., 9.75% due
2/15/2002.............................. 744,000 785,850
- ------------------------------------------------------------------------------------------------------------------------
COMPUTER BB- Ba1 1,000,000 Advanced Micro Devices, Inc., 11% due
SERVICES-1.4% 8/01/2003.............................. 1,000,000 1,070,000
CCC B3 1,000,000 Dictaphone Corp., 11.75% due
8/01/2005.............................. 968,750 970,000
------------ ------------
1,968,750 2,040,000
- ------------------------------------------------------------------------------------------------------------------------
CONGLOMERATES-1.2% NR* NR* 761,000 MacAndrew & Forbes Group, Inc., 13% due
3/01/1999.............................. 757,195 763,854
B+ B3 1,000,000 Sequa Corp., 9.375% due 12/15/2003...... 1,030,938 1,040,000
------------ ------------
1,788,133 1,803,854
- ------------------------------------------------------------------------------------------------------------------------
CONSUMER B B3 2,000,000 Coleman Escrow Corp., 11.573%** due
PRODUCTS-2.3% 5/15/2001.............................. 1,368,820 1,325,000
B Ba3 1,000,000 Coty Inc., 10.25% due 5/01/2005......... 1,026,250 1,062,500
B+ B1 1,900,000 International Semi-Tech
Microelectronics, Inc., 12.792%** due
8/15/2003.............................. 1,321,416 684,000
B+ B1 181,000 Samsonite Corp., 11.125% due
7/15/2005.............................. 175,344 203,625
------------ ------------
3,891,830 3,275,125
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S FACE VALUE
INDUSTRIES RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DIVERSIFIED-1.4% B- B2 $1,000,000 Koppers Industries, Inc., 9.875% due
12/01/2007 (f)......................... $ 1,000,000 $ 1,030,000
B+ B2 1,000,000 RBX Corp., 12% due 1/15/2003 (f)........ 1,000,000 1,017,500
------------ ------------
2,000,000 2,047,500
- ------------------------------------------------------------------------------------------------------------------------
ENERGY-9.0% B- B3 1,000,000 Bellwether Exploration Co., 10.875% due
4/01/2007.............................. 1,000,000 1,100,000
BB- Ba3 1,000,000 Chesapeake Energy Corporation, 9.125%
due 4/15/2006.......................... 997,550 1,035,000
B B1 1,000,000 Cliffs Drilling Co., 10.25% due
5/15/2003 (f).......................... 1,077,500 1,088,750
B B2 2,000,000 Energy Corp. of America, 9.50% due
5/15/2007.............................. 2,000,000 1,995,000
B+ B1 1,000,000 Parker Drilling Corp., 9.75% due
11/15/2006............................. 992,150 1,072,500
BB- B1 1,500,000 Petroleo Brasileiro S.A. - Petrobras,
10% due 10/17/2006 (f)................. 1,500,000 1,515,000
B B3 1,000,000 Southwest Royalties Inc., 10.50% due
10/15/2004 (f)......................... 987,910 995,000
B+ B3 5,150,000 Transamerican Energy, 13.163%** due
6/15/2002 (f).......................... 4,260,496 4,120,000
------------ ------------
12,815,606 12,921,250
- ------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT-0.7% B- B2 1,252,000 AMF Group Inc., 12.082%** due
3/15/2006.............................. 863,640 976,560
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL BB- B1 1,500,000 Reliance Group Holdings Inc., 9.75% due
SERVICES-1.1% 11/15/2003............................. 1,449,375 1,592,475
- ------------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE-3.2% B+ B1 2,000,000 Chiquita Brands International, 9.125%
due 3/01/2004.......................... 2,001,250 2,080,000
B B2 1,500,000 Colorado Prime Corp., 12.50% due
5/01/2004.............................. 1,469,805 1,507,500
NR* NR* 443,000 Cumberland Farms, Inc., 10.50% due
10/01/2003............................. 433,586 436,355
BB- B2 568,000 Fresh Del Monte Corp., 10% due
5/01/2003.............................. 544,250 590,720
------------ ------------
4,448,891 4,614,575
- ------------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT BB Ba3 1,500,000 Republic of Argentina, Global Bonds, 11%
OBLIGATIONS-1.1% due 10/09/2006......................... 1,543,125 1,601,250
- ------------------------------------------------------------------------------------------------------------------------
GAMING-5.2% B B3 1,000,000 Greate Bay Properties, Inc., 10.875% due
1/15/2004.............................. 845,000 840,000
D Caa 2,000,000 Harrah's Jazz Company, 14.25% due
11/15/2001 (d)......................... 1,971,250 620,000
B+ B2 1,000,000 Hollywood Casino Corp., 12.75% due
11/01/2003............................. 932,816 1,072,500
B+ B2 1,000,000 Station Casinos Inc., 9.75% due
4/15/2007.............................. 970,110 1,035,000
BB- B1 2,000,000 Trump Atlantic City Inc., 11.25% due
5/01/2006.............................. 1,997,500 1,950,000
NR* Caa 1,000,000 Trump Castle Funding, Inc., 11.75% due
11/15/2003............................. 933,514 920,000
B- B3 1,000,000 Venetian Casino Resort LLC, 12.25% due
11/15/2004 (f)......................... 1,011,250 1,001,250
------------ ------------
8,661,440 7,438,750
- ------------------------------------------------------------------------------------------------------------------------
HEALTHCARE-2.2% B+ B1 1,000,000 Beverly Enterprises, Inc., 9% due
2/15/2006.............................. 933,750 1,033,750
B- B3 1,000,000 Paragon Health Network, Inc., 9.50% due
11/01/2007 (f)......................... 995,540 997,500
B+ B2 1,000,000 Quest Diagnostic Inc., 10.75% due
12/15/2006............................. 1,000,000 1,090,000
------------ ------------
2,929,290 3,121,250
- ------------------------------------------------------------------------------------------------------------------------
HOTELS-1.5% BB- Ba3 2,000,000 HMC Acquisition Properties, 9% due
12/15/2007............................. 2,000,000 2,090,000
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S FACE VALUE
INDUSTRIES RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INDEPENDENT POWER B+ Ba1 $1,000,000 AES Corporation, 10.25% due 7/15/2006
PRODUCERS-2.9% (f).................................... $ 1,080,000 $ 1,087,500
BB- Ba3 1,000,000 Calpine Corporation, 8.75% due 7/15/2007
(f).................................... 1,003,177 1,020,000
Midland Cogeneration Venture L.P.:
BB Ba3 676,107 10.33% due 7/23/2002 (e)................ 700,193 726,808
B B2 1,000,000 13.25% due 7/23/2006.................... 1,108,750 1,284,830
------------ ------------
3,892,120 4,119,138
- ------------------------------------------------------------------------------------------------------------------------
MEDIA & BB- B1 500,000 Comtel Brasileira Ltd., 10.75% due
COMMUNICATIONS- 9/26/2004 (f).......................... 500,000 490,000
INTERNATIONAL-3.4% BB- B1 1,000,000 Globo Communicacoes Participacoes,
10.50% due 12/20/2006 (f).............. 1,003,750 950,000
BB Ba2 1,000,000 Grupo Televisa, S.A. de C.V., 11.375%
due 5/15/2003.......................... 1,010,000 1,092,500
BBB- Ba3 2,000,000 Telefonica de Argentina S.A., 11.875%
due 11/01/2004......................... 1,978,830 2,325,000
------------ ------------
4,492,580 4,857,500
- ------------------------------------------------------------------------------------------------------------------------
METAL & MINING-1.8% CCC+ B2 1,000,000 Kaiser Aluminum & Chemical Corp., 12.75%
due 2/01/2003.......................... 1,045,000 1,063,750
CCC+ B3 1,750,000 Maxxam Group, Inc., 12.25%** due
8/01/2003.............................. 1,632,042 1,601,250
------------ ------------
2,677,042 2,665,000
- ------------------------------------------------------------------------------------------------------------------------
PACKAGING-2.1% B B2 1,000,000 AEP Industries, Inc., 9.875% due
11/15/2007 (f)......................... 992,240 1,025,000
B B2 1,000,000 Portola Packaging Inc., 10.75% due
10/01/2005............................. 1,000,000 1,055,000
B B1 1,000,000 Silgan Corp., 9% due 6/01/2009.......... 1,000,000 1,022,500
------------ ------------
2,992,240 3,102,500
- ------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST B B2 500,000 Bear Island Paper Co. LLC, 10% due
PRODUCTS-2.7% 12/01/2007 (f)......................... 500,000 506,250
BB- B1 1,000,000 Doman Industries Ltd., 8.75% due
3/15/2004.............................. 919,000 955,000
B B3 1,500,000 Pacific Lumber Co., 10.50% due
3/01/2003.............................. 1,450,312 1,552,500
BB Ba3 1,000,000 Pindo Deli Finance Mauritius, 10.75% due
10/01/2007 (f)......................... 996,980 860,000
------------ ------------
3,866,292 3,873,750
- ------------------------------------------------------------------------------------------------------------------------
PRINTING & BB- B1 1,000,000 Hollinger International, Inc., 9.25% due
PUBLISHING-0.7% 2/01/2006.............................. 956,250 1,050,000
- ------------------------------------------------------------------------------------------------------------------------
PRODUCT B- B3 1,000,000 AmeriServ Food Company, 10.125% due
DISTRIBUTION-0.7% 7/15/2007.............................. 1,000,000 1,050,000
- ------------------------------------------------------------------------------------------------------------------------
RESTAURANTS & FOOD B Ba3 691,000 Foodmaker, Inc., 9.25% due 3/01/1999.... 692,727 701,365
SERVICES-0.5%
- ------------------------------------------------------------------------------------------------------------------------
RETAIL D Caa 1,000,000 Bradlees, Inc., 11% due 8/01/2002 (d)... 1,023,750 70,000
SPECIALTY-0.1%
- ------------------------------------------------------------------------------------------------------------------------
STEEL-2.6% NR* B1 2,000,000 CSN Iron S.A., 9.125% due 6/01/2007
(f).................................... 1,941,250 1,700,000
B+ B2 1,000,000 WCI Steel Inc., 10% due 12/01/2004...... 1,000,000 1,020,000
BB- B2 1,000,000 Wheeling-Pittsburgh Corp., 9.25% due
11/15/2007 (f)......................... 997,500 965,000
------------ ------------
3,938,750 3,685,000
- ------------------------------------------------------------------------------------------------------------------------
SUPERMARKETS-0.8% B B1 1,000,000 Ralph's Grocery Co., 10.45% due
6/15/2004.............................. 953,344 1,120,000
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S FACE VALUE
INDUSTRIES RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TELECOMMUNI- NR* NR* $2,000,000 Brooks Fiber Properties, Inc., 10.573%**
CATIONS-2.8% due 11/01/2006......................... $ 1,402,521 $ 1,600,000
B+ B2 1,000,000 GCI Inc., 9.75% due 8/01/2007........... 1,000,000 1,032,500
NR* NR* 1,000,000 Ionica PLC, 13.50% due 8/15/2006........ 1,113,750 850,000
B+ B1 500,000 Teleport Communications Group Inc.,
9.875% due 7/01/2006................... 527,750 564,375
------------ ------------
4,044,021 4,046,875
- ------------------------------------------------------------------------------------------------------------------------
TEXTILES-1.9% B+ B1 1,000,000 Tultex Corp., 10.625% due 3/15/2005..... 1,007,500 1,090,000
B+ B2 1,500,000 Westpoint Stevens Industries, Inc.,
9.375% due 12/15/2005.................. 1,465,000 1,575,000
------------ ------------
2,472,500 2,665,000
- ------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION-4.5% BB- NR* 1,000,000 Autopistas del Sol S.A., 10.25% due
8/01/2009 (f).......................... 1,026,250 902,500
BB Ba3 2,000,000 GS Superhighway Holdings, 10.25% due
8/15/2007 (f).......................... 1,973,750 1,750,000
B NR* 1,000,000 MRS Logistica S.A., 10.625% due
8/15/2005 (f).......................... 988,750 900,000
BB- B1 1,000,000 Sea Containers Ltd., 12.50% due
12/01/2004............................. 1,095,000 1,132,500
NR* B3 2,000,000 Transtar Holdings L.P., 11.065%** due
12/15/2003............................. 1,625,965 1,750,000
------------ ------------
6,709,715 6,435,000
- ------------------------------------------------------------------------------------------------------------------------
UTILITIES-3.7% NR* NR* 1,000,000 Companhia de Saneamento Basico do Estado
de Sao-Paulo, 10% due 7/28/2005 (f).... 1,005,000 890,000
BB- B1 1,500,000 Espirito Santo - Escelsa S.A., 10% due
7/15/2007 (f).......................... 1,498,125 1,342,500
BB+ NR* 1,000,000 Inversora de Electrica, 9% due 9/16/2004
(f).................................... 1,000,000 950,000
BBB- Ba3 1,000,000 Metrogas S.A., 12% due 8/15/2000........ 983,750 1,067,500
BBB- Baa3 991,600 Trans Gas de Occidente S.A., 9.79% due
11/01/2010 (e)(f)...................... 991,600 1,064,345
------------ ------------
5,478,475 5,314,345
- ------------------------------------------------------------------------------------------------------------------------
WIRELESS BB+ Ba3 2,000,000 Comcast Cellular Holdings, 9.50% due
COMMUNICATIONS- 5/01/2007.............................. 1,996,740 2,085,000
DOMESTIC-5.0% CCC NR* 1,995,000 McCaw International Ltd., 12.469%** due
4/15/2007.............................. 1,207,226 1,177,050
CCC B3 2,000,000 Nextel Communications, Inc., 14.085%**
due 8/15/2004.......................... 1,406,142 1,780,000
B B2 2,000,000 Paging Network, Inc., 10% due
10/15/2008............................. 1,990,625 2,080,000
------------ ------------
6,600,733 7,122,050
- ------------------------------------------------------------------------------------------------------------------------
WIRELESS B- B3 2,000,000 Millicom International Cellular S.A.,
COMMUNICATIONS- 13.116%** due 6/01/2006................ 1,304,936 1,470,000
INTERNATIONAL-1.0%
- ------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS-81.7% 117,511,803 117,400,690
- ------------------------------------------------------------------------------------------------------------------------
SHARES
HELD COMMON STOCKS & WARRANTS
- ------------------------------------------------------------------------------------------------------------------------
CABLE-DOMESTIC-0.0% 5,000 American Telecasting, Inc. (Warrants)
(b).................................... 4,776 2,000
- ------------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE-0.0% 1,500 Colorado Prime Corp. (Warrants)
(b)(f)................................. 13,095 1,500
- ------------------------------------------------------------------------------------------------------------------------
GAMING-0.0% 1,000 +Goldriver Hotel & Casino Corp.,
Liquidating Trust (d).................. 24,040 0
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
INDUSTRIES HELD ISSUE COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS & WARRANTS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL- 1,036 Thermadyne Industries, Inc. (d)......... $ 15,022 $ 29,267
SERVICES-0.0%
- ------------------------------------------------------------------------------------------------------------------------
SUPERMARKETS-0.0% 17,674 Grand Union Co. (d)..................... 1,000,000 36,452
- ------------------------------------------------------------------------------------------------------------------------
WIRELESS 3,098 Nextel Communications, Inc. (d)......... 49,991 79,773
COMMUNICATIONS-
DOMESTIC-0.1%
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS & WARRANTS-0.1% 1,106,924 148,992
- ------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS
- --------------------------------------------------------------------------------------------------------------------------
CABLE-DOMESTIC-1.0% 11,785 Cablevision Systems Corp. (Series M)
(c).................................... 935,000 1,361,167
- --------------------------------------------------------------------------------------------------------------------------
ENERGY-0.7% 1,000 Clark USA, Inc.
(Convertible) (c)(f)................... 1,000,000 1,060,000
- --------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT-1.4% 1,782 Time Warner Inc. (Series M) (c)......... 1,799,895 2,000,295
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL 40,000 California Federal Preferred Capital
SERVICES-0.7% Corp. (Series A)....................... 1,010,000 1,050,000
- --------------------------------------------------------------------------------------------------------------------------
PRINTING & 11,457 Primedia Inc............................ 1,157,781 1,234,533
PUBLISHING-0.9%
- --------------------------------------------------------------------------------------------------------------------------
WIRELESS 1,030 Nextel Communications, Inc. (a)......... 1,033,975 1,174,200
COMMUNICATIONS-
DOMESTIC-0.8%
- --------------------------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS-5.5% 6,936,651 7,880,195
- --------------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT SHORT-TERM SECURITES
- --------------------------------------------------------------------------------------------------------------------------
COMMERCIAL $ 4,515,000 General Motors Acceptance Corp., 6.75%
PAPER***-6.6% due 1/02/1998.......................... 4,513,307 4,513,307
5,000,000 Lexington Parker Capital Co. LLC, 5.88%
due 1/05/1998.......................... 4,995,917 4,995,917
------------ ------------
9,509,224 9,509,224
- --------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT AGENCY 7,800,000 Federal Home Loan Bank, 5.58% due
OBLIGATIONS***-5.4% 1/15/1998.............................. 7,781,865 7,781,865
- --------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES-12.0% 17,291,089 17,291,089
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-99.3%................. $142,846,467 142,720,966
------------
------------
OTHER ASSETS LESS LIABILITIES-0.7%...... 1,043,412
------------
NET ASSETS-100.0%....................... $143,764,378
------------
------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1997 (Concluded)
- --------------------------------------------------------------------------------
* 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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
VALUE (NOTE
ISSUE ACQUISITION DATE COST 1A)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Goldriver Hotel & Casino Corp., Liquidating Trust.............................. 8/31/1992 $ 24,040 $ 0
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 24,040 $ 0
--------- -------------
--------- -------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Represents a step bond. Coupon payments are paid-in-kind, in which the
Portfolio receives additional face at an annual rate of 1.75% until May 15,
2000. Subsequently, the Portfolio will receive cash coupon payments at an
annual rate of 15.75% until maturity.
(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) Represents a pay-in-kind security which may pay interest/dividends in
additional face amount/shares.
(d) Non-income producing security.
(e) Subject to principal paydowns.
( f ) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(g) Each $1,000 face amount contains one warrant of Australis Media Ltd.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
35
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Intermediate Government Bond Portfolio
Schedule of Investments as of December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT ISSUE COST (NOTE 1A)
- ----------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY OBLIGATIONS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL FARM CREDIT $ 1,500,000 Federal Farm Credit Bank,
BANK-0.7% 6.43% due 7/23/2007.................................. $ 1,537,350 $ 1,537,350
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FEDERAL FARM CREDIT BANK 1,537,350 1,537,350
- ----------------------------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN 5,000,000 Federal Home Loan Mortgage Corporation:
MORTGAGE 1,685,000 7.90% due 9/19/2001.................................. 5,000,000 5,325,000
CORPORATION-4.6% 3,100,000 6.42% due 10/03/2005................................. 1,710,802 1,723,704
6.40% due 12/13/2006................................. 3,149,817 3,166,371
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION 9,860,619 10,215,075
- ----------------------------------------------------------------------------------------------------------------------
FEDERAL NATIONAL 5,000,000 Federal National Mortgage Association:
MORTGAGE 6,000,000 7.55% due 4/22/2002.................................. 5,226,550 5,300,000
ASSOCIATION-20.4% 7.40% due 7/01/2004.................................. 6,248,520 6,455,640
10,000,000 7.85% due 9/10/2004.............................. 9,824,469 10,301,600
9,000,000 7.65% due 3/10/2005.............................. 8,990,156 9,832,500
10,000,000 6.35% due 6/10/2005.............................. 10,000,000 10,179,700
3,000,000 7.12% due 7/03/2006.............................. 3,198,840 3,210,000
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION 43,488,535 45,279,440
- ----------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED 348,487 Federal National Mortgage Association, 9% due
SECURITIES-0.2% 1/01/2002 (a)........................................ 336,290 358,238
- ----------------------------------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES 336,290 358,238
- ----------------------------------------------------------------------------------------------------------------------
PRIVATE EXPORT 7,000,000 Private Export Funding Corporation:
FUNDING 11,500,000 8.35% due 1/31/2001.............................. 7,083,590 7,487,830
CORPORATION-8.7% 6.49% due 7/15/2007.............................. 11,500,000 11,909,860
- ----------------------------------------------------------------------------------------------------------------------
TOTAL PRIVATE EXPORT FUNDING CORPORATION 18,583,590 19,397,690
- ----------------------------------------------------------------------------------------------------------------------
STUDENT LOAN 13,000,000 Student Loan Marketing Association,
MARKETING 7.50% due 3/08/2000.................................. 13,176,719 13,442,780
ASSOCIATION-6.0%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL STUDENT LOAN MARKETING ASSOCIATION 13,176,719 13,442,780
- ----------------------------------------------------------------------------------------------------------------------
US TREASURY BONDS & 16,000,000 US Treasury Bonds:
NOTES-55.5% 12% due 5/15/2005................................ 22,772,500 21,882,560
10,000,000 10.75% due 8/15/2005............................. 13,385,937 13,009,400
US Treasury Notes:
2,000,000 6.75% due 4/30/2000.............................. 2,014,062 2,045,620
24,000,000 6.625% due 6/30/2001............................. 24,030,000 24,663,840
15,000,000 6.375% due 8/15/2002............................. 15,025,615 15,386,700
5,500,000 6.25% due 2/15/2003.............................. 5,479,805 5,624,630
5,000,000 5.75% due 8/15/2003.............................. 4,969,141 5,003,100
12,000,000 6.50% due 5/15/2005.............................. 11,914,750 12,510,000
11,000,000 7% due 7/15/2006................................. 11,652,500 11,873,070
8,000,000 6.25% due 2/15/2007.............................. 8,107,500 8,254,960
3,000,000 6.125% due 8/15/2007............................. 2,979,570 3,082,980
- ----------------------------------------------------------------------------------------------------------------------
TOTAL US TREASURY BONDS & NOTES 122,331,380 123,336,860
- ----------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY
OBLIGATIONS-96.1% 209,314,483 213,567,433
- ----------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
- ----------------------------------------------------------------------------------------------------------------------
REPURCHASE 6,346,000 HSBC Securities, Inc., purchased on 12/31/1997
AGREEMENTS*-2.9% to yield 6.57% to 1/02/1998.......................... 6,346,000 6,346,000
- ----------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES-2.9% 6,346,000 6,346,000
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-99.0%.............................. $ 215,660,483 219,913,433
-------------
-------------
OTHER ASSETS LESS LIABILITIES-1.0%................... 2,298,102
-------------
NET ASSETS-100.0%.................................... $ 222,211,535
-------------
-------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) US Government Agency Mortgage-Backed Obligations are subject to principal
paydowns as a result of prepayments or refinancings of the underlying
mortgage instrument. As a result, the average life may be substantially less
than the original maturity.
* Repurchase Agreements are fully collateralized by US Government Obligations.
See Notes to Financial Statements.
36
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Long Term Corporate Bond Portfolio
Schedule of Investments as of December 31, 1997
- --------------------------------------------------------------------------------
<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 BONDS & AAA Aaa $1,000,000 US Treasury Bonds, 6.50% due
NOTES-18.8% 11/15/2026................... $ 988,203 $ 1,067,500
US Treasury Notes:
AAA Aaa 1,500,000 6.375% due 5/15/2000......... 1,523,555 1,522,500
AAA Aaa 3,500,000 5.75% due 11/15/2000......... 3,502,422 3,506,545
AAA Aaa 500,000 6.375% due 9/30/2001......... 510,547 510,310
AAA Aaa 1,750,000 5.75% due 11/30/2002......... 1,741,914 1,751,365
AAA Aaa 3,250,000 5.75% due 8/15/2003.......... 3,239,062 3,252,015
AAA Aaa 500,000 7.25% due 8/15/2004.......... 538,750 540,390
AAA Aaa 500,000 7.50% due 2/15/2005.......... 536,211 549,530
AAA Aaa 3,200,000 6.50% due 5/15/2005.......... 3,169,070 3,336,000
AAA Aaa 750,000 6.50% due 10/15/2006......... 775,547 785,273
AAA Aaa 6,500,000 6.125% due 8/15/2007......... 6,643,945 6,679,790
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT
OBLIGATIONS-18.8% 23,169,226 23,501,218
- ------------------------------------------------------------------------------------------------------------------------------
INDUSTRIES CORPORATE BONDS & NOTES
- ------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED AAA Aaa 1,944,863 Arcadia, 6.10% due 6/15/2000..... 1,944,485 1,946,400
SECURITIES*-5.6% Citibank, Credit Card Master
Trust I:
AAA Aaa 1,000,000 6.35% due 8/15/2002.......... 999,200 1,006,094
AAA Aaa 1,000,000 6.057% due 12/10/2008........ 999,610 995,000
AAA Aaa 2,500,000 First Bank, Corporate Card Master
Trust, 6.40% due 2/15/2003...... 2,496,931 2,520,300
AAA Aaa 526,642 GMAC Grantor Trust, 6.50% due
4/15/2002....................... 526,495 528,954
------------- -------------
6,966,721 6,996,748
- ------------------------------------------------------------------------------------------------------------------------------
BANKING-8.6% BBB+ A3 1,250,000 BB&T Corporation, 7.25% due
6/15/2007....................... 1,244,163 1,314,087
A A2 1,000,000 Bank of New York Co., Inc.,
7.625% due 7/15/2002............ 1,076,500 1,053,790
A+ Aa3 1,000,000 BankAmerica Corp., 7.125% due
5/12/2005....................... 985,500 1,037,510
A- A2 2,000,000 First Interstate Bancorp, 9.90%
due 11/15/2001.................. 2,270,480 2,244,920
A- A3 1,000,000 HSBC Americas Inc., 7% due
11/01/2006...................... 991,600 1,017,370
A- A3 2,000,000 Mellon Bank Corp., 6.875% due
3/01/2003....................... 1,822,480 2,044,580
BBB+ A2 1,000,000 Mellon Capital II, 7.995% due
1/15/2027....................... 953,470 1,073,620
AA- Aa3 1,000,000 Norwest Financial, Inc., 6.625%
due 7/15/2004................... 995,590 1,012,190
------------- -------------
10,339,783 10,798,067
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES- General Motors Acceptance Corp.:
CAPTIVE-1.9% A- A3 1,000,000 7.125% due 5/01/2003......... 994,890 1,035,840
A- A3 1,250,000 7.70% due 4/15/2016.......... 1,363,937 1,369,812
------------- -------------
2,358,827 2,405,652
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES- A A2 1,000,000 Beneficial Corp., 6.80% due
CONSUMER-4.1% 9/16/2003....................... 1,000,000 1,014,631
A Aa3 1,000,000 CIT Capital Trust I, 7.70% due
2/15/2027....................... 995,440 1,025,823
A+ Aa3 3,000,000 CIT Group Holdings, Inc., 6.625%
due 6/15/2005................... 3,010,170 3,022,830
------------- -------------
5,005,610 5,063,284
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Long Term Corporate Bond Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S FACE VALUE
INDUSTRIES S&P RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL SERVICES- A A2 $ 500,000 Bear Stearns Companies, Inc.,
OTHER-13.1% 6.50% due 7/05/2000............. $ 499,090 $ 503,020
A+ A1 750,000 Commercial Credit Co., 6.75% due
7/01/2007....................... 760,748 761,865
A- A3 1,000,000 Donaldson, Lufkin & Jenrette,
Inc., 6.875% due 11/01/2005..... 999,050 1,016,850
A A2 1,000,000 ++Equitable Life Assurance
Society of the US, 7.70% due
12/01/2015...................... 993,160 1,070,719
AAA Aaa 500,000 General Electric Capital Corp.,
8.125% due 5/15/2012............ 531,640 576,900
A Baa1 3,000,000 Lehman Brothers Holdings, Inc.,
6.50% due 10/01/2002............ 2,997,150 2,996,100
AA Aa2 2,350,000 MBIA, Inc., 7.15% due
7/15/2027....................... 2,344,242 2,492,762
A+ A1 1,000,000 Morgan Stanley Group, Inc.,
6.875% due 3/01/2007............ 996,410 1,021,750
BBB+ Baa1 2,500,000 PaineWebber Group, Inc., 7.99%
due 6/09/2017................... 2,500,000 2,666,537
A+ Aa3 2,000,000 Travelers Capital II, 7.75% due
12/01/2036...................... 2,003,400 2,074,060
AA- Aa3 1,000,000 Travelers Group, Inc., 7.875% due
5/15/2025....................... 999,420 1,118,270
------------- -------------
15,624,310 16,298,833
- ------------------------------------------------------------------------------------------------------------------------------
FOREIGN+-6.0% A+ A3 1,000,000 ++Hutchison Whampoa Ltd., 6.95%
due 8/01/2007 (1)............... 1,000,610 942,260
A Aa3 1,000,000 Midland Bank PLC, 7.625% due
6/15/2006 (3)................... 992,340 1,062,580
A A2 1,000,000 ++Petroliam Nasional BHD, 6.875%
due 7/01/2003 (4)............... 988,840 949,533
Province of Quebec (Canada) (2):
A+ A2 1,000,000 8.80% due 4/15/2003.......... 1,129,480 1,108,760
A+ A2 1,500,000 13% due 10/01/2013........... 1,959,060 1,641,825
A+ A2 1,000,000 7.125% due 2/09/2024......... 902,520 1,029,910
AA Aa2 750,000 Swiss Bank Corp.-New York, 7.375%
due 6/15/2017 (3)............... 803,280 802,320
------------- -------------
7,776,130 7,537,188
- ------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL- Archer-Daniels-Midland Company:
CONSUMER-9.7% AA- Aa3 500,000 7.125% due 3/01/2013......... 523,280 528,485
AA- Aa3 1,000,000 6.75% due 12/15/2027......... 988,720 1,001,533
A+ A1 3,500,000 Bass America, Inc., 8.125% due
3/31/2002....................... 3,532,070 3,744,790
A A2 962,525 ++Disney Enterprises, Inc., 6.85%
due 1/10/2007*.................. 961,861 978,715
A+ A1 1,000,000 Hershey Foods Corporation, 7.20%
due 8/15/2027................... 1,053,910 1,063,100
AAA Aaa 2,000,000 Johnson & Johnson, 8.72% due
11/01/2024...................... 2,019,140 2,298,800
A A2 500,000 Philip Morris Companies, Inc.,
7.25% due 1/15/2003............. 503,440 515,450
BBB Baa2 800,000 Safeway, Inc., 7% due
9/15/2007....................... 799,640 822,896
BBB- Baa3 1,000,000 Time Warner Entertainment Co.,
8.375% due 3/15/2023............ 1,070,290 1,141,180
------------- -------------
11,452,351 12,094,949
- ------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL-ENERGY-3.0% AA Aa2 2,000,000 BP America, Inc., 10% due
7/01/2018....................... 2,156,880 2,126,060
AA- A1 1,000,000 Consolidated Natural Gas Company,
6.80% due 12/15/2027............ 991,900 1,008,130
A Aa3 500,000 Dresser Industries, Inc., 7.60%
due 8/15/2096................... 498,545 560,660
------------- -------------
3,647,325 3,694,850
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Long Term Corporate Bond Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S FACE VALUE
INDUSTRIES S&P RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INDUSTRIAL- BBB+ A3 $ 500,000 Applied Materials, Inc., 6.75%
OTHER-13.4% due 10/15/2007.................. $ 499,675 $ 501,930
A A3 1,000,000 Chrysler Corporation, 7.45% due
3/01/2027....................... 995,140 1,069,060
AA- Aa3 3,250,000 duPont(E.I.) de Nemours & Co.,
6.75% due 9/01/2007............. 3,356,477 3,362,872
A+ A1 1,000,000 ++Electronic Data Systems, Inc.,
6.85% due 5/15/2000............. 999,210 1,017,158
BBB Baa2 2,500,000 Federal Express Corp., 9.65% due
6/15/2012....................... 2,758,750 3,123,800
A A2 1,000,000 First Data Corp., 6.375% due
12/15/2007...................... 997,430 994,980
Martin Marietta Corp.:
BBB+ A3 1,000,000 6.50% due 4/15/2003.......... 1,006,130 1,005,700
BBB+ A3 500,000 7.375% due 4/15/2013......... 480,805 530,110
McDonnell Douglas Corp.,
AA+ Baa2 1,000,000 6.13% due 12/23/1998......... 997,940 988,320
AA+ A2 1,000,000 6.875% due 11/01/2006........ 1,037,450 1,036,720
A A1 1,000,000 PPG Industries, Inc., 6.50% due
11/01/2007...................... 996,940 1,009,740
BBB Baa3 2,000,000 Seagate Technology, Inc., 7.125%
due 3/01/2004................... 1,996,500 2,015,900
------------- -------------
16,122,447 16,656,290
- ------------------------------------------------------------------------------------------------------------------------------
TRANSPORT SERVICES-3.1% BBB+ Baa1 500,000 Norfolk Southern Corp., 7.80% due
5/15/2027....................... 499,370 562,020
Southwest Airlines, Inc.:
A- A3 2,000,000 9.40% due 7/01/2001.......... 2,407,120 2,196,380
A- A3 1,000,000 7.875% due 9/01/2007......... 998,750 1,101,570
------------- -------------
3,905,240 3,859,970
- ------------------------------------------------------------------------------------------------------------------------------
UTILITIES- A+ A2 1,000,000 ALLTEL Corporation, 6.75% due
COMMUNICATIONS-6.6% 9/15/2005....................... 984,600 1,022,820
AAA Aaa 1,000,000 BellSouth Telecommunications,
Inc., 7% due 10/01/2025......... 1,040,700 1,049,660
GTE Corp.:
A Baa1 1,000,000 8.85% due 3/01/1998.......... 1,027,000 1,003,680
A Baa1 2,000,000 9.375% due 12/01/2000........ 2,189,690 2,166,380
Southwestern Bell
Telecommunications Co.:
AA Aa3 1,000,000 6.125% due 3/01/2000......... 978,880 1,001,780
AA Aa3 2,000,000 6.375% due 11/15/2007........ 2,009,520 2,008,760
------------- -------------
8,230,390 8,253,080
- ------------------------------------------------------------------------------------------------------------------------------
UTILITIES-ELECTRIC-2.9% AAA Aaa 750,000 Cleveland Electric/Toledo Edison,
7.13% due 7/01/2007............. 786,817 798,697
Pennsylvania Power & Light Co.:
A- A3 1,500,000 5.50% due 4/01/1998.......... 1,493,055 1,498,710
A- A3 1,000,000 6.875% due 2/01/2003......... 1,016,290 1,028,990
AAA Aaa 300,000 ++Texas Utilities Company, 6.375%
due 10/01/2004.................. 301,545 301,630
------------- -------------
3,597,707 3,628,027
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS &
NOTES-78.0% 95,026,841 97,286,938
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Long Term Corporate Bond Portfolio
Schedule of Investments as of December 31, 1997 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT ISSUE COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REPURCHASE $1,925,000 HSBC Securities, Inc., purchased
AGREEMENTS**-1.6% on 12/31/1997 to yield 6.57% to
1/02/1998....................... $ 1,925,000 $ 1,925,000
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS-1.6% 1,925,000 1,925,000
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-98.4%.......... $ 120,121,067 122,713,156
-------------
-------------
OTHER ASSETS
LESS LIABILITIES-1.6%............ 2,032,942
-------------
NET ASSETS-100.0%................ $ 124,746,098
-------------
-------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Subject to principal paydowns.
** Repurchase Agreements are fully collateralized by US Government Obligations.
+ Corresponding industry groups for foreign bonds:
(1) Investment Holding Company.
(2) Government Entity.
(3) Banking.
(4) Industry-Energy.
++ The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
Ratings of issue shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
40
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Money Reserves Portfolio
Schedule of Investments as of December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE
AMOUNT ISSUE RATE* DATE (NOTE 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BANK NOTES-10.3% $ 2,650,000 Bank of America N.T. & S.A..................... 5.93% 6/24/98 $ 2,649,977
2,800,000 Bank of America N.T. & S.A.+................... 6.10 6/30/98 2,798,899
3,000,000 Bank of New York, The.......................... 5.85 8/20/98 2,998,572
6,000,000 FNB of Chicago................................. 6.02 6/11/98 6,001,895
2,850,000 FNB of Chicago................................. 5.89 8/26/98 2,849,417
1,800,000 KeyBank National Association+.................. 5.64 5/06/98 1,799,703
3,800,000 KeyBank National Association+.................. 5.62 8/20/98 3,798,249
7,500,000 KeyBank National Association+.................. 5.62 8/28/98 7,496,694
1,800,000 LaSalle National Bank, Chicago................. 5.75 10/08/98 1,797,323
4,000,000 Morgan Guaranty Trust Co. of NY+............... 5.615 2/19/98 3,999,720
2,300,000 Northern Trust Company......................... 5.96 6/17/98 2,300,212
1,500,000 Northern Trust Company......................... 5.95 6/24/98 1,500,123
9,400,000 PNC Bank N.A.+................................. 5.60 10/01/98 9,395,262
4,000,000 US Bank N.A.+.................................. 5.855 8/28/98 3,998,592
1,000,000 US National Bank of Oregon+.................... 5.665 4/14/98 999,850
- -----------------------------------------------------------------------------------------------------------------------
TOTAL BANK NOTES (COST-$54,382,213) 54,384,488
- -----------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF 4,000,000 Chase Manhattan Bank USA, N.A.................. 5.87 7/21/98 3,999,172
DEPOSIT-2.5% 1,000,000 Chase Manhattan Bank USA, N.A.................. 5.75 10/06/98 998,658
7,500,000 Morgan Guaranty Trust Co. of NY................ 5.71 1/06/98 7,499,722
500,000 Morgan Guaranty Trust Co. of NY................ 5.94 3/20/98 499,966
- -----------------------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT 12,997,518
(COST-$12,999,929)
- -----------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF 1,000,000 ABN-AMRO Bank N.V., Chicago.................... 6.03 6/11/98 1,000,447
DEPOSIT- 2,900,000 ABN-AMRO Bank N.V., Chicago.................... 5.77 7/28/98 2,897,972
YANKEE-3.9% 3,000,000 ABN-AMRO Bank N.V., Chicago.................... 5.92 8/14/98 3,000,108
2,000,000 Barclays Bank PLC, NY.......................... 5.94 6/30/98 2,000,330
4,750,000 Bayerische Vereinsbank AG, NY.................. 5.71 10/06/98 4,742,248
5,000,000 Deutsche Bank AG, NY........................... 5.63 2/26/98 4,995,291
1,900,000 Westdeutsche Landesbank Girozentrale, NY....... 5.94 6/29/98 1,900,286
- -----------------------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT-YANKEE
(COST-$20,544,427) 20,536,682
- -----------------------------------------------------------------------------------------------------------------------
COMMERCIAL 6,662,000 AESOP Funding Corp............................. 5.77 1/16/98 6,647,051
PAPER-48.9% 10,000,000 AESOP Funding Corp............................. 5.85 1/16/98 9,977,250
5,000,000 AESOP Funding Corp............................. 5.85 2/13/98 4,965,875
6,159,000 Atlantic Asset Securitization Corp............. 5.90 1/13/98 6,147,897
1,321,000 Atlantic Asset Securitization Corp............. 5.93 1/16/98 1,317,954
3,489,000 Atlantic Asset Securitization Corp............. 5.89 1/20/98 3,478,725
14,000,000 Block Financial Corp........................... 5.67 4/03/98 13,800,053
7,672,000 CSW Credit, Inc................................ 5.75 1/13/98 7,658,521
14,000,000 CSW Credit, Inc................................ 5.62 2/13/98 13,904,123
7,060,000 Centric Capital Corp........................... 6.50 1/07/98 7,053,626
10,500,000 Centric Capital Corp........................... 5.80 1/16/98 10,476,317
10,000,000 Countrywide Home Loans, Inc.................... 5.87 1/14/98 9,980,433
10,000,000 Countrywide Home Loans, Inc.................... 5.75 3/06/98 9,901,125
4,500,000 Finova Capital Corp............................ 5.74 2/17/98 4,466,247
15,000,000 Finova Capital Corp............................ 5.74 3/13/98 14,835,208
4,945,000 Finova Capital Corp............................ 5.73 3/18/98 4,886,793
1,550,000 Finova Capital Corp............................ 5.63 4/21/98 1,523,484
7,750,000 Ford Motor Credit Co........................... 5.60 3/30/98 7,644,180
8,000,000 General Electric Capital Corp.................. 5.545 3/17/98 7,907,089
4,000,000 General Electric Capital Corp.................. 5.55 3/23/98 3,949,778
7,000,000 General Motors Acceptance Corp................. 5.59 3/02/98 6,935,182
5,000,000 Goldman Sachs Group, L.P....................... 5.71 4/17/98 4,917,604
7,400,000 International Securitization Corp.............. 5.80 3/20/98 7,310,573
10,000,000 Lehman Brothers Holdings, Inc.................. 5.90 1/15/98 9,978,694
3,035,000 Lehman Brothers Holdings, Inc.................. 5.78 1/21/98 3,025,790
5,000,000 Lehman Brothers Holdings, Inc.................. 5.91 1/27/98 4,979,479
3,980,000 Lehman Brothers Holdings, Inc.................. 5.60 1/29/98 3,962,747
5,000,000 Lexington Parker Capital Co. LLC............... 5.63 2/02/98 4,975,157
20,000,000 Lexington Parker Capital Co. LLC............... 5.92 2/20/98 19,840,206
15,000,000 New Center Asset Trust......................... 5.68 3/18/98 14,823,438
</TABLE>
41
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Money Reserves Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE
AMOUNT ISSUE RATE* DATE (NOTE 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL $11,290,000 Park Avenue Receivables Corp................... 5.90% 1/23/98 $ 11,251,144
PAPER 264,000 Twin Towers Inc................................ 5.80 1/27/98 262,937
(CONCLUDED) 14,670,000 Windmill Funding Corp.......................... 5.77 2/20/98 14,552,791
- -----------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (COST-$257,338,269) 257,337,471
- -----------------------------------------------------------------------------------------------------------------------
CORPORATE 5,060,408 LABS Trust Series 1996-4 Senior Notes+++....... 6.00 12/28/98 5,060,408
NOTES-5.3% 2,914,970 LABS Trust Series 1997-6 Senior Notes+++....... 5.968 10/21/98 2,914,970
5,000,000 Republic Mase Australia, Ltd.++................ 5.945 6/30/98 5,000,605
15,000,000 SMM Trust 1997-Q+.............................. 5.98 1/15/98 14,999,994
- -----------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE NOTES (COST-$27,975,373) 27,975,977
- -----------------------------------------------------------------------------------------------------------------------
FUNDING 9,000,000 Jackson National Life Insurance Co.+........... 5.72 5/01/98 9,000,000
AGREEMENTS--1.7%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FUNDING AGREEMENTS (COST-$9,000,000) 9,000,000
- -----------------------------------------------------------------------------------------------------------------------
MASTER 10,000,000 Goldman Sachs Group, L.P.+..................... 5.968 5/29/98 10,000,000
NOTES-1.9%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL MASTER NOTES (COST-$10,000,000) 10,000,000
- -----------------------------------------------------------------------------------------------------------------------
MEDIUM-TERM 5,000,000 Abbey National Treasury Services PLC+.......... 5.59 2/25/98 4,999,428
NOTES-7.5% 1,750,000 Bank of Scotland Treasury Services PLC......... 5.95 6/18/98 1,749,790
5,000,000 CIT Group Holdings, Inc. (The)................. 6.50 7/13/98 5,016,500
1,000,000 CIT Group Holdings, Inc. (The)................. 5.58 8/17/98 999,460
1,000,000 Goldman Sachs Group, L.P....................... 6.10 4/15/98 1,000,432
6,000,000 IBM Credit Corp................................ 5.868 8/13/98 5,999,604
3,000,000 IBM Credit Corp.+.............................. 5.635 11/23/98 2,998,840
4,000,000 International Business Machines Corp........... 5.67 1/28/98 3,999,652
7,000,000 International Business Machines Corp........... 5.93 3/18/98 7,002,506
1,814,843 Newcourt Receivables Asset Trust 1997-1........ 5.815 12/21/98 1,814,480
4,000,000 Norwest Corporation............................ 6.00 10/13/98 4,003,080
- -----------------------------------------------------------------------------------------------------------------------
TOTAL MEDIUM-TERM NOTES (COST-$39,577,269) 39,583,772
- -----------------------------------------------------------------------------------------------------------------------
US GOVERNMENT, 10,000,000 Federal National Mortgage Association.......... 5.44 8/04/98 9,677,878
AGENCY & 6,000,000 US Treasury Bills.............................. 5.08 1/15/98 5,988,842
INSTRUMENTALITY
OBLIGATIONS-
DISCOUNT-3.0%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT, AGENCY & INSTRUMENTALITY
OBLIGATIONS-DISCOUNT (COST-$15,665,615) 15,666,720
- -----------------------------------------------------------------------------------------------------------------------
US GOVERNMENT, 5,000,000 Federal Home Loan Bank+........................ 5.899 10/20/98 4,998,840
AGENCY & 2,000,000 Federal Home Loan Bank+........................ 5.99 8/11/99 1,998,120
INSTRUMENTALITY 2,000,000 Federal Home Loan Mortgage Corp.+.............. 5.58 4/15/98 1,999,727
OBLIGATIONS-NON- 2,000,000 Federal Home Loan Mortgage Corp.+.............. 5.57 4/20/98 1,999,653
DISCOUNT-13.7% 4,000,000 Federal Home Loan Mortgage Corp................ 5.685 8/21/98 3,996,240
1,200,000 Federal Home Loan Mortgage Corp................ 6.36 5/20/99 1,202,352
1,000,000 Federal Home Loan Mortgage Corp................ 6.10 9/10/99 1,000,500
4,000,000 Federal National Mortgage Association.......... 5.19 1/08/98 3,999,528
4,000,000 Federal National Mortgage Association+......... 5.57 3/26/98 3,999,466
5,000,000 Federal National Mortgage Association+......... 5.629 3/27/98 4,999,220
10,000,000 Federal National Mortgage Association+......... 5.669 4/24/98 9,998,826
6,000,000 Federal National Mortgage Association+......... 6.00 5/14/98 6,000,000
4,700,000 Federal National Mortgage Association+......... 5.894 10/20/98 4,698,366
1,200,000 Federal National Mortgage Association.......... 6.375 5/21/99 1,202,400
600,000 Federal National Mortgage Association.......... 5.88 8/10/99 598,902
3,700,000 Federal National Mortgage Association+......... 5.929 10/27/99 3,696,838
3,000,000 Student Loan Marketing Association+............ 5.877 10/06/98 2,998,566
3,000,000 Student Loan Marketing Association+............ 5.909 11/25/98 2,999,221
2,000,000 Student Loan Marketing Association............. 5.80 12/18/98 1,997,068
2,920,000 US Treasury Notes.............................. 5.00 1/31/98 2,918,265
2,000,000 US Treasury Notes.............................. 7.875 4/15/98 2,013,124
2,600,000 US Treasury Notes.............................. 5.625 11/30/98 2,600,000
- -----------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT, AGENCY & INSTRUMENTALITY
OBLIGATIONS-NON-DISCOUNT (COST-$71,905,223) 71,915,222
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
42
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Money Reserves Portfolio
Schedule of Investments as of December 31, 1997 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT ISSUE (NOTE 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE $12,360,000 HSBC Securities, Inc. purchased on 12/31/1997
AGREEMENTS**-2.4% to yield 6.25% to 1/02/1998................... $ 12,360,000
- -----------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS (COST-$12,360,000) 12,360,000
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST-$ 531,757,850
531,748,318)-101.1%...........................
LIABILITIES IN EXCESS OF OTHER ASSETS-(1.1%)... (6,040,489)
-------------
NET ASSETS-100.0%.............................. $ 525,717,361
-------------
-------------
- -----------------------------------------------------------------------------------------------------------------------
</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,
1997.
** Repurchase Agreements are fully collateralized by US Government
Obligations.
+ Variable Rate Notes.
++ Guarantor Republic NB of New York.
+++ Subject to principal paydowns.
See Notes to Financial Statements.
43
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD US STOCKS & WARRANTS COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AEROSPACE & 336,000 AlliedSignal, Inc.............. $ 12,455,063 $ 13,083,000 1.0%
DEFENSE 240,000 GenCorp, Inc................... 7,004,945 6,000,000 0.5
67,200 +Orbital Sciences Corp......... 1,725,761 1,999,200 0.1
-------------- -------------- -----
21,185,769 21,082,200 1.6
- ------------------------------------------------------------------------------------------------------------------
AIRLINES 251,000 +US Airways Group, Inc......... 9,299,154 15,687,500 1.2
- ------------------------------------------------------------------------------------------------------------------
APPLIANCES 267,000 Sunbeam Corp................... 10,423,247 11,247,375 0.8
- ------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS 281,000 Federal-Mogul Corp............. 10,926,243 11,380,500 0.9
- ------------------------------------------------------------------------------------------------------------------
AUTOMOBILE RENTAL 316,900 +Avis Rent-A-Car, Inc.......... 6,897,547 10,120,994 0.8
334,600 Hertz Corp. (Class A).......... 11,188,009 13,467,650 1.0
-------------- -------------- -----
18,085,556 23,588,644 1.8
- ------------------------------------------------------------------------------------------------------------------
BANKING 165,000 Bank of New York Co., Inc...... 3,539,931 9,539,063 0.7
57,000 Bank of New York Co., Inc.
(Warrants) (c)................ 521,250 9,647,250 0.7
222,000 BankAmerica Corp............... 11,804,920 16,206,000 1.2
276,300 First Union Corporation........ 13,590,574 14,160,375 1.1
-------------- -------------- -----
29,456,675 49,552,688 3.7
- ------------------------------------------------------------------------------------------------------------------
BROADCASTING-MEDIA 160,300 +Chancellor Media Corp......... 10,167,750 11,962,388 0.9
- ------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES 304,200 +Gartner Group, Inc. (Class
A)............................ 10,321,701 11,331,450 0.9
- ------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 109,500 +Cisco Systems, Inc............ 6,241,649 6,104,625 0.5
- ------------------------------------------------------------------------------------------------------------------
COMPUTERS 63,000 Compaq Computer Corp........... 1,886,595 3,555,563 0.3
52,000 International Business Machines
Corp.......................... 3,794,075 5,437,250 0.4
225,000 +Quantum Corporation........... 6,355,152 4,514,063 0.3
-------------- -------------- -----
12,035,822 13,506,876 1.0
- ------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS 476,400 The Dial Corporation........... 9,192,341 9,915,075 0.7
- ------------------------------------------------------------------------------------------------------------------
CONTAINERS 385,300 +Owens-Illinois, Inc........... 11,153,944 14,617,319 1.1
- ------------------------------------------------------------------------------------------------------------------
CRUISE LINES 133,000 Royal Caribbean Cruises Ltd.... 5,777,740 7,090,563 0.5
- ------------------------------------------------------------------------------------------------------------------
DENTAL SUPPLIES & 268,000 DENTSPLY International Inc..... 6,763,568 8,174,000 0.6
EQUIPMENT
- ------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 167,000 General Electric Co............ 11,763,351 12,253,625 0.9
- ------------------------------------------------------------------------------------------------------------------
ELECTRONICS 294,000 +National Semiconductor
Corporation................... 11,942,678 7,625,625 0.6
- ------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 109,500 American Express Company....... 5,282,318 9,772,875 0.8
265,000 MGIC Investment Corp........... 10,142,687 17,622,500 1.3
-------------- -------------- -----
15,425,005 27,395,375 2.1
- ------------------------------------------------------------------------------------------------------------------
HARDWARE PRODUCTS 175,700 Black & Decker Corporation..... 5,890,960 6,863,281 0.5
- ------------------------------------------------------------------------------------------------------------------
INSURANCE 89,460 Hartford Life, Inc. (Class
A)............................ 2,902,425 4,053,656 0.3
424,000 Provident Companies, Inc....... 14,015,762 16,377,000 1.2
339,000 Travelers Group, Inc........... 12,032,427 18,263,625 1.4
107,800 Travelers Property Casualty
Corp. (Class A)............... 4,363,088 4,743,200 0.4
248,800 UNUM Corporation............... 7,906,559 13,528,500 1.0
-------------- -------------- -----
41,220,261 56,965,981 4.3
- ------------------------------------------------------------------------------------------------------------------
LEISURE/TOURISM 387,000 Brunswick Corporation.......... 9,628,968 11,730,938 0.9
- ------------------------------------------------------------------------------------------------------------------
MACHINERY 165,000 Harnischfeger Industries,
Inc........................... 7,149,998 5,826,562 0.4
300,100 Ingersoll-Rand Co.............. 9,013,935 12,154,050 0.9
130,800 SPX Corporation................ 7,436,281 9,025,200 0.7
-------------- -------------- -----
23,600,214 27,005,812 2.0
- ------------------------------------------------------------------------------------------------------------------
MEDICAL SERVICES 508,513 +HEALTHSOUTH Corporation....... 13,786,004 14,111,236 1.1
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD US STOCKS & WARRANTS COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NATURAL GAS 238,000 El Paso Natural Gas Co......... $ 12,196,998 $ 15,827,000 1.2%
132,000 Enron Corp..................... 5,203,694 5,486,250 0.4
-------------- -------------- -----
17,400,692 21,313,250 1.6
- ------------------------------------------------------------------------------------------------------------------
OFFICE EQUIPMENT 148,000 Danka Business Systems PLC
(ADR) (a) (d)................. 7,296,105 2,358,750 0.2
- ------------------------------------------------------------------------------------------------------------------
OIL SERVICES 100,000 Schlumberger Ltd............... 4,211,528 8,050,000 0.6
162,600 +Smith International, Inc...... 7,428,829 9,979,575 0.7
-------------- -------------- -----
11,640,357 18,029,575 1.3
- ------------------------------------------------------------------------------------------------------------------
PETROLEUM 298,000 Unocal Corp.................... 10,663,313 11,566,125 0.9
- ------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 132,000 Bristol-Myers Squibb Co........ 12,540,404 12,490,500 0.9
200,000 Lilly (Eli) & Co............... 12,624,240 13,925,000 1.0
170,000 Pfizer, Inc.................... 12,436,157 12,675,625 1.0
86,000 Warner-Lambert Company......... 12,303,160 10,664,000 0.8
-------------- -------------- -----
49,903,961 49,755,125 3.7
- ------------------------------------------------------------------------------------------------------------------
RAILROADS 111,000 Burlington Northern Santa Fe,
Inc........................... 9,335,621 10,316,062 0.8
- ------------------------------------------------------------------------------------------------------------------
REAL ESTATE 310,000 Glenborough Realty Trust....... 7,750,000 9,183,750 0.7
INVESTMENT TRUSTS 284,100 Prentiss Properties Trust...... 5,999,193 7,937,044 0.6
145,000 Starwood Lodging Trust......... 3,875,614 8,391,875 0.6
-------------- -------------- -----
17,624,807 25,512,669 1.9
- ------------------------------------------------------------------------------------------------------------------
RESTAURANTS 185,000 +Tricon Global Restaurants,
Inc........................... 6,361,725 5,376,562 0.4
- ------------------------------------------------------------------------------------------------------------------
RETAIL 266,350 Rite Aid Corporation........... 8,938,064 15,631,416 1.2
140,000 +Safeway, Inc.................. 7,765,881 8,855,000 0.7
211,000 Sears, Roebuck & Co............ 8,083,394 9,547,750 0.7
240,000 Wal-Mart Stores, Inc........... 9,908,429 9,465,000 0.7
-------------- -------------- -----
34,695,768 43,499,166 3.3
- ------------------------------------------------------------------------------------------------------------------
SOFTWARE 144,900 +BMC Software, Inc............. 5,686,093 9,490,950 0.7
180,500 Computer Associates
International, Inc............ 4,936,682 9,543,937 0.7
68,000 +Microsoft Corp................ 8,164,579 8,784,750 0.7
-------------- -------------- -----
18,787,354 27,819,637 2.1
- ------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 561,766 +Tele-Communications, Inc.
(Class A)..................... 9,589,134 15,659,227 1.1
321,234 +Tele-Communications TCI
Ventures Group................ 5,483,350 9,094,938 0.7
388,000 +WorldCom, Inc................. 9,728,048 11,737,000 0.9
-------------- -------------- -----
24,800,532 36,491,165 2.7
- ------------------------------------------------------------------------------------------------------------------
TRANSPORT SERVICES 271,000 +OMI Corp...................... 3,509,962 2,489,812 0.2
- ------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 309,000 Carnival Corp. (Class A)....... 8,926,288 17,110,875 1.3
- ------------------------------------------------------------------------------------------------------------------
UTILITIES 461,100 Edison International, Inc...... 8,780,865 12,536,156 0.9
232,500 Texas Utilities Company........ 9,278,311 9,663,281 0.7
-------------- -------------- -----
18,059,176 22,199,437 1.6
- ------------------------------------------------------------------------------------------------------------------
TOTAL US STOCKS & WARRANTS 543,294,261 673,031,286 50.6
- ------------------------------------------------------------------------------------------------------------------
US CORPORATE BONDS
- ------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES US$ 3,000,000 General Electric Capital Corp.,
8.75% due 5/21/2007........... 3,373,650 3,527,190 0.3
- ------------------------------------------------------------------------------------------------------------------
TOTAL US CORPORATE BONDS 3,373,650 3,527,190 0.3
- ------------------------------------------------------------------------------------------------------------------
COUNTRIES FOREIGN STOCKS+++++
- ------------------------------------------------------------------------------------------------------------------
ARGENTINA 62,000 Yacimientos Petroliferos
Fiscales S.A. (ADR) (a)
(23).......................... 1,267,795 2,119,625 0.2
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ARGENTINA 1,267,795 2,119,625 0.2
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRIES HELD FOREIGN STOCKS+++++ COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AUSTRALIA 363,000 Broken Hill Proprietary Co.,
Ltd. (8)...................... $ 4,776,103 $ 3,367,460 0.2%
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN AUSTRALIA 4,776,103 3,367,460 0.2
- ------------------------------------------------------------------------------------------------------------------
BAHAMAS 31,400 +Sun International Hotels Ltd.
(32).......................... 1,204,528 1,181,425 0.1
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
BAHAMAS 1,204,528 1,181,425 0.1
- ------------------------------------------------------------------------------------------------------------------
BRAZIL 16,500 Telecomunicacoes Brasileiras
S.A.-Telebras (ADR) (a)
(30).......................... 857,119 1,921,219 0.1
37,000 +Uniao de Bancos Brasileiros
S.A. (Unibanco) (GDR) (b)
(3)........................... 1,249,011 1,190,937 0.1
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN BRAZIL 2,106,130 3,112,156 0.2
- ------------------------------------------------------------------------------------------------------------------
CANADA 230,000 +Gulf Canada Resources Ltd.
(21).......................... 2,135,596 1,610,000 0.1
111,800 +Imax Corporation (11)......... 1,784,440 2,403,700 0.2
60,000 Magna International Inc.
(Class A) (2)................. 2,817,014 3,768,750 0.3
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN CANADA 6,737,050 7,782,450 0.6
- ------------------------------------------------------------------------------------------------------------------
FINLAND 130,000 +Amer Group Ltd. (8)........... 2,362,805 2,493,804 0.2
101,000 Finnlines OY (7)............... 2,019,754 4,004,773 0.3
91,000 Orion-Yhtymae OY (Class B)
(24).......................... 2,552,981 2,340,358 0.2
162,000 UPM-Kymmene OY (22)............ 3,368,121 3,229,592 0.2
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FINLAND 10,303,661 12,068,527 0.9
- ------------------------------------------------------------------------------------------------------------------
FRANCE 35,300 +SGS-Thompson Microelectronics
N.V. (NY Registered Shares)
(29).......................... 1,348,823 2,155,506 0.2
79,800 Scor S.A. (27)................. 3,078,175 3,815,657 0.3
43,000 Thomson CSF (9)................ 1,351,200 1,355,225 0.1
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FRANCE 5,778,198 7,326,388 0.6
- ------------------------------------------------------------------------------------------------------------------
GERMANY 35,000 Bayerische Vereinsbank AG (3).. 2,111,030 2,290,138 0.2
14,000 Henkel KGaA (6)................ 622,324 786,080 0.0
59,000 Henkel KGaA (Preferred) (6).... 2,514,746 3,722,760 0.3
7,900 Mannesmann AG (17)............. 2,758,040 3,992,161 0.3
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN GERMANY 8,006,140 10,791,139 0.8
- ------------------------------------------------------------------------------------------------------------------
INDONESIA 124,700 PT Indonesian Satellite Corp.
(ADR) (a) (30)................ 4,497,647 2,408,269 0.2
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN INDONESIA 4,497,647 2,408,269 0.2
- ------------------------------------------------------------------------------------------------------------------
ITALY 450,000 Arnoldo Mondadori Editore
S.p.A. (25)................... 3,797,870 3,535,496 0.2
306,100 Danieli & Co. Officine
Meccaniche S.p.A. (17)........ 1,203,809 1,100,382 0.1
92,000 Gucci Group N.V. (NY Registered
Shares) (1)................... 6,457,732 3,852,500 0.3
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ITALY 11,459,411 8,488,378 0.6
- ------------------------------------------------------------------------------------------------------------------
JAPAN 71,000 Amway Japan Ltd. (18).......... 2,723,787 1,362,764 0.1
147,000 Bridgestone Corporation (31)... 2,560,492 3,193,935 0.2
128,000 Matsushita Electric Industrial
Co., Ltd. (9)................. 2,027,385 1,877,006 0.1
235,000 Matsushita Electric Works, Ltd.
(5)........................... 2,674,886 2,038,772 0.2
29,000 Rohm Co., Ltd. (9)............. 1,624,819 2,961,228 0.2
38,000 Sony Corporation (9)........... 2,808,187 3,384,261 0.3
174,000 Tokio Marine and Fire Insurance
Co., Ltd. (14)................ 1,654,407 1,977,121 0.2
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN JAPAN 16,073,963 16,795,087 1.3
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRIES HELD FOREIGN STOCKS+++++ COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MEXICO 129,100 Grupo Carso, S.A. de C.V.
(ADR) (a) (20)................ $ 1,178,898 $ 1,710,575 0.1%
96,500 +Grupo Financiero Bancomer,
S.A. de C.V. (ADR) (a) (12)... 1,377,402 1,206,250 0.1
52,500 Panamerican Beverages, Inc.
(Class A) (4).................. 1,036,269 1,712,812 0.1
33,750 Telefonos de Mexico, S.A. de
C.V. (Telmex) (ADR) (a)
(30).......................... 1,351,764 1,892,109 0.2
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN MEXICO 4,944,333 6,521,746 0.5
- ------------------------------------------------------------------------------------------------------------------
NETHERLANDS 37,000 Royal Dutch Petroleum Co. (NY
Registered Shares) (21)....... 2,020,966 2,004,937 0.1
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
NETHERLANDS 2,020,966 2,004,937 0.1
- ------------------------------------------------------------------------------------------------------------------
NORWAY 469,000 Color Line ASA (7)............. 1,829,151 1,816,347 0.1
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN NORWAY 1,829,151 1,816,347 0.1
- ------------------------------------------------------------------------------------------------------------------
PHILIPPINES 850,000 San Miguel Corp. (Class B)
(4)........................... 2,515,659 1,051,875 0.1
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
PHILIPPINES 2,515,659 1,051,875 0.1
- ------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA 127,500 De Beers Consolidated Mines
Ltd. (ADR) (a) (19)........... 4,249,507 2,605,781 0.2
302,800 Sasol Ltd. (8)................. 3,569,892 3,174,918 0.2
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SOUTH AFRICA 7,819,399 5,780,699 0.4
- ------------------------------------------------------------------------------------------------------------------
SOUTH KOREA 158,900 +Hyundai Engineering &
Construction Co., Ltd.
(GDR) (b) (10)++.............. 2,039,265 139,037 0.0
3,102 +Hyundai Engineering &
Construction Co., Ltd. (New
Shares) (GDR) (b) (10)++...... 39,823 2,714 0.0
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SOUTH KOREA 2,079,088 141,751 0.0
- ------------------------------------------------------------------------------------------------------------------
SPAIN 81,800 Repsol S.A. (ADR) (a) (23)..... 3,016,794 3,481,612 0.3
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SPAIN 3,016,794 3,481,612 0.3
- ------------------------------------------------------------------------------------------------------------------
SWEDEN 161,200 Bure Investment AB (15)........ 1,454,626 2,121,721 0.2
117,200 +Castellum AB (26)............. 786,225 1,166,169 0.1
266,000 +Nordbanken Holding AB (3)..... 1,441,274 1,504,301 0.1
161,000 Perstorp AB
(Class B) (6)................. 3,015,682 2,879,526 0.2
121,500 Sparbanken Sverige AB (Class A)
(3)........................... 1,566,053 2,762,233 0.2
68,000 Spectra-Physics AB
(Class A) (16)................ 2,074,676 1,288,998 0.1
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWEDEN 10,338,536 11,722,948 0.9
- ------------------------------------------------------------------------------------------------------------------
SWITZERLAND 2,460 Novartis AG (Registered
Shares) (24).................. 2,136,289 3,994,656 0.3
400 Roche Holding AG (24).......... 3,360,098 3,975,334 0.3
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SWITZERLAND 5,496,387 7,969,990 0.6
- ------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM 372,400 Diageo PLC (4)................. 2,574,340 3,422,277 0.2
266,000 Dixons Group PLC (28).......... 2,801,047 2,669,490 0.2
235,800 Imperial Chemical Industries
PLC (6)....................... 3,164,839 3,683,237 0.3
1,377,900 LucasVarity PLC (2)............ 4,851,875 4,865,882 0.4
335,000 Rio Tinto PLC (19)............. 4,999,987 4,121,279 0.3
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE UNITED
KINGDOM 18,392,088 18,762,165 1.4
- ------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS 130,663,027 134,694,974 10.1
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
COUNTRIES AMOUNT FOREIGN BONDS+++++ COST (NOTE 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CANADA C$ 11,200,000 Canadian Government Bonds, 7% due $ 8,511,722 $ 8,578,241 0.6%
12/01/2006 (13).................
- ----------------------------------------------------------------------------------------------------------------------------
DENMARK Dkr 20,000,000 Government of Denmark, 7% due 3,195,204 3,207,894 0.2
11/15/2007 (13).................
- ----------------------------------------------------------------------------------------------------------------------------
FRANCE Frf 20,800,000 French Government Bonds, 5.50% 3,424,726 3,497,192 0.3
due 10/25/2007 (13).............
- ----------------------------------------------------------------------------------------------------------------------------
GERMANY DM 33,000,000 Bundesrepublik Deutschland, 6% 19,300,518 19,235,324 1.5
due 7/04/2007 (13)..............
- ----------------------------------------------------------------------------------------------------------------------------
ITALY Lit 5,450,000,000 Buoni Poliennali del Tesoro 3,861,100 3,562,585 0.3
(Italian Government Bonds),
8.50% due 1/01/2004 (13)........
- ----------------------------------------------------------------------------------------------------------------------------
SWEDEN Skr 49,400,000 Government of Sweden, 8% due 7,207,737 7,122,137 0.5
8/15/2007 (13)..................
- ----------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM L 3,550,000 UK Treasury Gilt, 7.25% due 5,875,988 6,237,214 0.5
12/07/2007 (13).................
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS 51,376,995 51,440,587 3.9
- ----------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY OBLIGATIONS
- ----------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT US$ 5,786,201 Federal National Mortgage 5,728,339 5,755,013 0.4
AGENCY 12,849,791 Association+++: 12,719,285 12,762,027 1.0
OBLIGATIONS 7,297,226 6% due 11/01/2000............ 7,210,572 7,245,197 0.5
6% due 6/01/2001.............
6% due 2/01/2004.............
-------------- -------------- -----
25,658,196 25,762,237 1.9
- ----------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT 117,500,000 US Treasury Bonds, 6.625% due 114,362,578 127,560,350 9.6
OBLIGATIONS 3,000,000 2/15/2027....................... 2,973,516 2,998,110 0.2
92,000,000 US Treasury Notes: 92,107,188 92,445,280 7.0
50,000,000 5% due 1/31/1998............. 50,335,938 51,461,000 3.9
34,000,000 6% due 8/15/1999............. 33,836,563 35,083,580 2.6
17,750,000 6.50% due 5/31/2002.......... 17,950,742 18,787,310 1.4
6.25% due 2/15/2007..........
6.625% due 5/15/2007.........
-------------- -------------- -----
311,566,525 328,335,630 24.7
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY
OBLIGATIONS 337,224,721 354,097,867 26.6
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1997 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMERCIAL US$ 58,919,000 General Motors Acceptance Corp.,
PAPER* 6.75% due 1/02/1998............. $ 58,907,953 $ 58,907,953 4.4%
- ----------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT 27,000,000 Federal Home Loan Mortgage Corp.,
AGENCY 5.75% due 1/06/1998............. 26,978,437 26,978,437 2.1
OBLIGATIONS* 20,000,000 Federal National Mortgage 19,987,178 19,987,178 1.5
Association, 5.77% due
1/05/1998.......................
-------------- -------------- -----
46,965,615 46,965,615 3.6
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 105,873,568 105,873,568 8.0
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS................ $1,171,806,222 1,322,665,472 99.5
--------------
--------------
UNREALIZED DEPRECIATION ON
FORWARD FOREIGN EXCHANGE
CONTRACTS++++.................... (35,645) 0.0
OTHER ASSETS LESS LIABILITIES.... 6,901,177 0.5
-------------- -----
NET ASSETS....................... $1,329,531,004 100.0%
-------------- -----
-------------- -----
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commercial Paper and certain US Government Agency Obligations are traded on
a discount basis; the interest rates shown are the discount rates paid at
the time of purchase by the Portfolio.
(a) American Depositary Receipts (ADR).
(b) Global Depositary Receipts (GDR).
(c) Warrants entitle the Portfolio to purchase a predetermined number of shares
of Common Stock. The purchase price and number of shares are subject to
adjustment under certain conditions until the expiration date.
(d) Consistent with the general policy of the Securities and Exchange
Commission, the nationality or domicile of an issuer for determination of
foreign issuer status may be (i) the country under whose laws the issuer is
organized, (ii) the country in which the issuer's securities are
principally traded, or (iii) the country in which the issuer derives a
significant proportion (at least 50%) of its revenue or profits from goods
produced and sold, investments made, or services performed in the country,
or in which at least 50% of the assets of the issuer are situated.
+ Non-income producing security.
++ The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
+++ Subject to principal paydowns.
++++ Forward foreign exchange contracts as of December 31, 1997 were as follows:
- --------------------------------------------------------
UNREALIZED
APPRECIATION
FOREIGN EXPIRATION (DEPRECIATION)
CURRENCY SOLD DATE (NOTE 1F)
- --------------------------------------------------------
A$ 5,000,000 January 1998 $ 43,325
C$ 24,000,000 March 1998 102,583
Y 2,100,000,000 January 1998 76,202
L 9,850,000 January 1998 (257,755)
- --------------------------------------------------------
<TABLE>
<S> <C>
TOTAL UNREALIZED DEPRECIATION ON FORWARD FOREIGN
EXCHANGE CONTRACTS -- NET (US$ COMMITMENT-$52,345,580) $ (35,645)
--------------
--------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
+++++ Corresponding industry groups for foreign stocks and bonds:
<TABLE>
<S> <C> <C>
(1) Apparel (11) Entertainment (21) Oil-Integrated
(2) Auto-Parts (12) Financial Services (22) Paper & Forest Products
(3) Banking (13) Government (Bonds) (23) Petroleum
(4) Beverages (14) Insurance (24) Pharmaceuticals
(5) Building Products (15) Investment Management (25) Publishing
(6) Chemicals (16) Laser Components (26) Real Estate
(7) Cruise Lines (17) Machinery & Equipment (27) Reinsurance
(8) Diversified (18) Merchandising (28) Retail
(9) Electronics (19) Mining (29) Semiconductors
(10) Engineering & Construction (20) Multi-Industry (30) Telecommunications
(31) Tires & Rubber
(32) Hotels & Casinos
</TABLE>
See Notes to Financial Statements.
49
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Natural Resources Portfolio
Schedule of Investments as of December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
INDUSTRIES HELD STOCKS COST 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALUMINUM 6,100 +Alumax, Inc......................... $ 214,289 $ 207,400 1.2%
2,100 Aluminum Co. of America.............. 115,567 147,788 0.9
3,600 Pechiney, S.A........................ 143,626 142,110 0.8
------------- ----------- -----
473,482 497,298 2.9
- -------------------------------------------------------------------------------------------------------------------
CHEMICALS 1,800 Air Products & Chemicals, Inc........ 102,951 148,050 0.9
3,100 BASF AG.............................. 77,701 109,865 0.6
1,000 Dow Chemical Co...................... 68,909 101,500 0.6
4,000 duPont (E.I.) de Nemours & Co........ 129,005 240,250 1.4
------------- ----------- -----
378,566 599,665 3.5
- -------------------------------------------------------------------------------------------------------------------
DIAMONDS 8,600 +Aber Resources, Ltd................. 141,731 90,741 0.5
14,000 +SouthernEra Resources Ltd........... 86,682 139,892 0.8
------------- ----------- -----
228,413 230,633 1.3
- -------------------------------------------------------------------------------------------------------------------
DIVERSIFIED RESOURCES 10,000 Asahi Glass Co., Ltd................. 120,000 47,601 0.3
COMPANIES 3,300 Ashland Inc.......................... 139,803 177,169 1.0
2,700 Coastal Corp......................... 78,702 167,231 1.0
10,800 Norcen Energy Resources, Ltd......... 87,553 123,765 0.7
44,500 North Ltd............................ 166,919 117,095 0.7
27,400 RGC Ltd.............................. 108,532 41,740 0.2
------------- ----------- -----
701,509 674,601 3.9
- -------------------------------------------------------------------------------------------------------------------
GOLD 117,000 +Acacia Resources Ltd................ 196,599 106,634 0.6
16,900 +Amax Gold, Inc...................... 99,076 39,081 0.2
9,700 Ashanti Goldfields Co. Ltd.
(GDR)**............................. 237,979 79,540 0.5
12,500 Cambior, Inc......................... 170,092 73,807 0.4
13,500 +Casmyn Corp......................... 124,286 23,625 0.1
125,000 Delta Gold N.L....................... 225,322 131,502 0.8
15,500 Driefontein Consolidated Ltd......... 239,913 105,160 0.6
3,800 Freeport-McMoRan Copper & Gold, Inc.
(Class B)........................... 130,928 59,850 0.3
9,900 +Getchell Gold Corp.................. 394,741 237,600 1.4
102,000 Great Central Mines N.L.............. 282,869 109,563 0.6
44,900 +Miramar Mining Corp................. 225,975 89,417 0.5
9,013 Newmont Mining Corp.................. 363,410 264,757 1.5
108,000 Normandy Mining Ltd.................. 122,071 104,759 0.6
27,000 Placer Dome, Inc..................... 618,688 342,563 2.0
13,100 Prime Resource Group, Inc............ 128,069 86,961 0.5
128,000 Resolute Ltd......................... 267,743 93,327 0.5
14,200 +Sutton Resources Ltd................ 127,816 95,752 0.6
17,300 +TVX Gold, Inc....................... 138,365 58,388 0.3
57,166 +William Resources Inc............... 100,312 13,981 0.1
------------- ----------- -----
4,194,254 2,116,267 12.1
- -------------------------------------------------------------------------------------------------------------------
METALS & MINING 3,600 ASARCO, Inc.......................... 93,631 80,775 0.5
170,000 +Centaur Mining & Exploration Ltd.... 256,033 59,762 0.3
9,100 Falconbridge Ltd..................... 201,777 115,729 0.7
2,800 Inco Ltd............................. 92,526 47,600 0.3
34,200 Industrias Penoles, S.A. de C.V...... 148,340 154,914 0.9
278,000 M.I.M. Holdings Ltd.................. 543,339 170,119 1.0
17,188 Minsur S.A........................... 55,784 36,723 0.2
23,000 Mitsubishi Materials Corp............ 113,395 37,083 0.2
9,300 Noranda, Inc......................... 167,291 159,863 0.9
9,500 Outokumpu OYJ........................ 175,414 112,483 0.6
5,400 P.T. Tambang Timah (GDR)** (a)....... 66,782 58,050 0.3
33,600 Pasminco Ltd......................... 52,120 38,498 0.2
1,900 Phelps Dodge Corp.................... 138,934 118,275 0.7
61,000 QNI Ltd.............................. 122,703 40,505 0.2
3,100 Rio Algom Ltd........................ 60,087 52,313 0.3
23,900 Rio Tinto PLC........................ 312,197 294,026 1.7
205,000 Savage Resources Ltd................. 158,284 96,088 0.6
20,500 Savage Resources Ltd. (Warrants)
(b)................................. 2,720 467 0.0
</TABLE>
50
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Natural Resources Portfolio
Schedule of Investments as of December 31, 1997 (Continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SHARES VALUE (NOTE PERCENT OF
INDUSTRIES HELD STOCKS COST 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
METALS & MINING 13,000 Sumitomo Metal Mining Co., Ltd....... $ 108,254 $ 42,917 0.3%
(CONCLUDED) 7,400 Trelleborg `B' Fria.................. 93,589 93,205 0.5
80,600 WMC Ltd.............................. 467,844 280,718 1.6
------------- ----------- -----
3,431,044 2,090,113 12.0
- -------------------------------------------------------------------------------------------------------------------
OIL & GAS PRODUCERS 9,900 Apache Corp.......................... 264,664 347,119 2.0
7,700 +Baytex Energy Ltd. (Class A)........ 108,911 80,707 0.5
8,400 +Benton Oil & Gas Corp............... 128,100 108,675 0.6
2,440 Burlington Resources, Inc............ 63,423 109,343 0.6
12,000 +Chauvco Resources International
Ltd................................. 5,441 10,062 0.1
5,600 +Chieftain International, Inc........ 126,099 119,000 0.7
19,300 +EEX Corp............................ 187,297 174,906 1.0
22,400 Enterprise Oil PLC................... 149,053 213,394 1.2
40,800 +Gulf Canada Resources Ltd.
(Ordinary).......................... 305,195 285,600 1.6
3,900 +Houston Exploration Co.............. 89,295 71,662 0.4
7,000 Mitchell Energy & Development Corp.
(Class B)........................... 122,020 203,875 1.2
15,000 +Northrock Resources Ltd............. 119,611 233,212 1.3
10,300 +Oryx Energy Co...................... 171,762 262,650 1.5
4,200 PanCanadian Petroleum Ltd............ 79,720 67,501 0.4
5,925 Pioneer Natural Resources Co......... 159,234 171,455 1.0
26,400 Ranger Oil Ltd....................... 178,376 181,500 1.1
4,800 Sonat, Inc........................... 210,335 219,600 1.3
------------- ----------- -----
2,468,536 2,860,261 16.5
- -------------------------------------------------------------------------------------------------------------------
OIL-INTEGRATED 4,300 Amerada Hess Corp.................... 230,276 235,962 1.3
2,600 Amoco Corp........................... 143,530 221,325 1.3
7,400 British Petroleum Co. PLC (ADR)*..... 282,347 589,687 3.4
6,700 ENI S.p.A. (ADR)*.................... 313,225 382,319 2.2
5,000 Elf Aquitaine S.A. (ADR)*............ 183,332 293,125 1.7
1,200 OMV AG............................... 128,441 166,284 1.0
14,600 Petro-Canada......................... 159,357 268,275 1.5
4,300 Total, S.A. (Class B)................ 269,000 467,935 2.7
5,100 YPF Sociedad Anonima S.A. (ADR)*..... 124,901 174,356 1.0
------------- ----------- -----
1,834,409 2,799,268 16.1
- -------------------------------------------------------------------------------------------------------------------
OIL SERVICES 5,700 Coflexip Stena Offshore, Inc.
(ADR)*.............................. 117,182 316,350 1.8
5,200 McDermott International, Inc......... 195,841 190,450 1.1
4,400 +Petroleum Geo-Services ASA (ADR)*... 131,275 284,900 1.6
2,300 Schlumberger Ltd..................... 74,818 185,150 1.1
5,300 Smedvig ASA (ADR)*................... 112,625 111,300 0.6
1,600 +Stolt Comex Seaway, S.A............. 96,800 77,600 0.5
7,800 +TransCoastal Marine Services,
Inc................................. 148,395 107,250 0.6
5,400 Transocean Offshore, Inc............. 167,054 260,212 1.5
------------- ----------- -----
1,043,990 1,533,212 8.8
- -------------------------------------------------------------------------------------------------------------------
PAPER & PULP 5,400 Aracruz Celulose S.A. (ADR)*......... 86,629 77,625 0.5
21,000 Avenor, Inc.......................... 410,812 299,350 1.7
2,700 Champion International Corp.......... 140,847 122,344 0.7
1,800 Georgia-Pacific Corp................. 101,736 109,350 0.6
1,800 +Georgia-Pacific Timber Group
Corp................................ 42,390 40,837 0.2
3,200 International Paper Co............... 107,512 138,000 0.8
16,400 Metsa Serla OY `B'................... 141,828 127,949 0.8
3,900 Mo Och Domsjo AB Co.................. 89,671 100,699 0.6
27,000 Slocan Forest Products Ltd........... 272,565 144,330 0.8
7,500 Stone Container Corp................. 92,300 78,281 0.5
5,800 Weyerhaeuser Co...................... 247,621 284,562 1.6
5,000 Willamette Industries, Inc........... 127,062 160,937 0.9
------------- ----------- -----
1,860,973 1,684,264 9.7
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Natural Resources Portfolio
Schedule of Investments as of December 31, 1997 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
INDUSTRIES HELD STOCKS COST 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PLANTATIONS 73,000 Golden Hope Plantations BHD.......... $ 131,880 $ 84,556 0.5%
70,000 Kuala Lumpur Kepong BHD.............. 111,705 150,450 0.9
------------- ----------- -----
243,585 235,006 1.4
- -------------------------------------------------------------------------------------------------------------------
REFINING 6,800 Sun Co., Inc......................... 186,935 286,025 1.7
3,245 Ultramar Diamond Shamrock Corp....... 149,467 103,434 0.6
------------- ----------- -----
336,402 389,459 2.3
- -------------------------------------------------------------------------------------------------------------------
STEEL 66,000 British Steel PLC.................... 174,814 141,469 0.8
2,500 Koninklijke Nederlandsche Hoogovens
en Staalfabrienken N.V.............. 95,875 102,461 0.6
83,000 Nippon Steel Corp.................... 281,181 122,987 0.7
56,000 Sumitomo Metal Industries, Ltd....... 170,252 71,800 0.4
------------- ----------- -----
722,122 438,717 2.5
- -------------------------------------------------------------------------------------------------------------------
WOOD 6,600 Louisiana-Pacific Corp............... 155,496 125,400 0.7
13,900 Riverside Forest Products Ltd........ 183,006 109,269 0.7
------------- ----------- -----
338,502 234,669 1.4
- -------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS 18,255,787 16,383,433 94.4
- -------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT SHORT-TERM SECURITIES
- -------------------------------------------------------------------------------------------------------------------
COMMERCIAL $ 789,000 General Motors Acceptance Corp.,
PAPER*** 6.75% due 1/02/1998................. 788,704 788,704 4.6
- -------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 788,704 788,704 4.6
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS.................... $ 19,044,491 17,172,137 99.0
-------------
-------------
OTHER ASSETS LESS LIABILITIES........ 179,802 1.0
----------- -----
NET ASSETS........................... $17,351,939 100.0%
----------- -----
----------- -----
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Non-income producing security.
* American Depositary Receipts (ADR).
** Global Depositary Receipts (GDR).
*** Commercial Paper is traded on a discount basis; the interest rate shown is
the discount rate paid at the time of the purchase by the Portfolio.
(a) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(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.
See Notes to Financial Statements.
40 52
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Statements of Assets and Liabilities as of December 31, 1997
- --------------------------------------------------------------------------------
CAPITAL GLOBAL
BALANCED STOCK STRATEGY
PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value* (Note
1a)......................... $ 107,747,276 $ 335,962,996 $ 247,363,367
Unrealized appreciation on
forward foreign exchange
contracts (Note 1f)......... -- 5,290 --
Cash.......................... 713 99 16,168
Foreign cash (Note 1g)........ -- 34,257 69,516
Interest receivable........... 601,019 -- 1,680,637
Receivable for capital shares
sold........................ 5,407 208,954 71,173
Dividends receivable.......... 64,919 398,731 235,757
Receivable for securities
sold........................ -- -- --
Receivable from investment
adviser (Note 2)............ -- -- --
Receivable for loaned
securities (Note 7)......... -- -- --
Prepaid expenses and other
assets (Note 1e)............ 5,054 13,073 9,959
------------- ------------- -------------
Total assets................ 108,424,388 336,623,400 249,446,577
------------- ------------- -------------
LIABILITIES:
Unrealized depreciation on
forward foreign exchange
contracts (Note 1f)......... -- -- 35,680
Payable for securities
purchased................... 34,841 511,352 122,418
Payable for capital shares
redeemed.................... 8,899 432 144,958
Payable for forward foreign
exchange contracts (Note
1f)......................... -- 136,372 433,361
Payable to investment adviser
(Note 2).................... 31,546 97,184 73,065
Payable for dividends to
shareholders (Note 1h)...... -- -- --
Accrued expenses and other
liabilities................. 25,084 75,625 132,445
------------- ------------- -------------
Total liabilities........... 100,370 820,965 941,927
------------- ------------- -------------
NET ASSETS.................... $ 108,324,018 $ 335,802,435 $ 248,504,650
------------- ------------- -------------
------------- ------------- -------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par
value+...................... $ 686,648 $ 1,253,253 $ 1,424,695
Paid-in capital in excess of
par......................... 85,718,430 236,230,841 197,805,534
Undistributed investment
income -- net............... 3,524,791 6,263,968 9,377,194
Undistributed (accumulated)
realized capital gains
(losses) on investments and
foreign currency
transactions -- net (Note
5).......................... 6,831,437 36,235,843 27,330,077
Unrealized appreciation
(depreciation) on
investments and foreign
currency transactions --
net......................... 11,562,712 55,818,530 12,567,150
------------- ------------- -------------
NET ASSETS.................... $ 108,324,018 $ 335,802,435 $ 248,504,650
------------- ------------- -------------
------------- ------------- -------------
Capital shares outstanding.... 6,866,481 12,532,532 14,246,948
------------- ------------- -------------
------------- ------------- -------------
Net asset value, offering and
redemption price per
share....................... $ 15.78 $ 26.79 $ 17.44
------------- ------------- -------------
------------- ------------- -------------
*Identified cost.............. $ 96,184,564 $ 280,146,887 $ 234,732,190
------------- ------------- -------------
------------- ------------- -------------
+Authorized shares............ 100,000,000 100,000,000 100,000,000
------------- ------------- -------------
------------- ------------- -------------
See Notes to Financial Statements.
53
<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)......................... $ 332,549,050 $ 142,720,966 $ 219,913,433 $ 122,713,156 $ 531,757,850
Unrealized appreciation on
forward foreign exchange
contracts (Note 1f)......... -- -- -- -- --
Cash.......................... 286 494 22 280 21,517
Foreign cash (Note 1g)........ -- -- -- -- --
Interest receivable........... -- 2,230,991 3,933,201 2,080,987 3,839,264
Receivable for capital shares
sold........................ 339,818 186,775 43,684 26,539 1,318,387
Dividends receivable.......... 274,871 -- -- -- --
Receivable for securities
sold........................ -- -- -- -- --
Receivable from investment
adviser (Note 2)............ -- -- -- -- --
Receivable for loaned
securities (Note 7)......... -- -- 408 741 --
Prepaid expenses and other
assets (Note 1e)............ 12,174 6,133 10,553 5,848 8,808
------------- ------------- ------------- ------------- --------------
Total assets................ 333,176,199 145,145,359 223,901,301 124,827,551 536,945,826
------------- ------------- ------------- ------------- --------------
<CAPTION>
LIABILITIES:
<S> <C> <C> <C> <C> <C>
Unrealized depreciation on
forward foreign exchange
contracts (Note 1f)......... -- -- -- -- --
Payable for securities
purchased................... -- -- 1,579,949 -- 9,676,622
Payable for capital shares
redeemed.................... 401 1,306,641 1,910 16,936 1,311,267
Payable for forward foreign
exchange contracts (Note
1f)......................... -- -- -- -- --
Payable to investment adviser
(Note 2).................... 97,593 41,787 65,120 36,704 149,794
Payable for dividends to
shareholders (Note 1h)...... -- -- -- -- 681
Accrued expenses and other
liabilities................. 55,176 32,553 42,787 27,813 90,101
------------- ------------- ------------- ------------- --------------
Total liabilities........... 153,170 1,380,981 1,689,766 81,453 11,228,465
------------- ------------- ------------- ------------- --------------
NET ASSETS.................... $ 333,023,029 $ 143,764,378 $ 222,211,535 $ 124,746,098 $ 525,717,361
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par
value+...................... $ 1,014,644 $ 1,564,257 $ 2,005,038 $ 1,064,347 $ 52,570,783
Paid-in capital in excess of
par......................... 214,452,646 144,770,702 223,698,166 121,917,031 473,137,046
Undistributed investment
income -- net............... 2,482,094 1,154,388 1,285,094 812,664 --
Undistributed (accumulated)
realized capital gains
(losses) on investments and
foreign currency
transactions -- net (Note
5).......................... 61,562,594 (3,599,468) (9,029,713) (1,640,033) --
Unrealized appreciation
(depreciation) on
investments and foreign
currency transactions --
net......................... 53,511,051 (125,501) 4,252,950 2,592,089 9,532
------------- ------------- ------------- ------------- --------------
NET ASSETS.................... $ 333,023,029 $ 143,764,378 $ 222,211,535 $ 124,746,098 $ 525,717,361
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
Capital shares outstanding.... 10,146,437 15,642,567 20,050,384 10,643,469 525,707,829
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
Net asset value, offering and
redemption price per
share....................... $ 32.82 $ 9.19 $ 11.08 $ 11.72 $ 1.00
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
*Identified cost.............. $ 279,037,999 $ 142,846,467 $ 215,660,483 $ 120,121,067 $ 531,748,318
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
+Authorized shares............ 100,000,000 100,000,000 100,000,000 100,000,000 2,000,000,000
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
</TABLE>
MULTIPLE NATURAL
STRATEGY RESOURCES
PORTFOLIO PORTFOLIO
- ------------------------------
ASSETS:
Investments, at value* (Note
1a)......................... $ 1,322,665,472 $ 17,172,137
Unrealized appreciation on
forward foreign exchange
contracts (Note 1f)......... -- --
Cash.......................... 722 656
Foreign cash (Note 1g)........ 121,460 --
Interest receivable........... 7,701,230 --
Receivable for capital shares
sold........................ 162,617 --
Dividends receivable.......... 1,052,557 23,882
Receivable for securities
sold........................ -- 334,291
Receivable from investment
adviser (Note 2)............ -- 6,980
Receivable for loaned
securities (Note 7)......... -- --
Prepaid expenses and other
assets (Note 1e)............ 53,102 794
--------------- ------------
Total assets................ 1,331,757,160 17,538,740
--------------- ------------
LIABILITIES:
Unrealized depreciation on
forward foreign exchange
contracts (Note 1f)......... 35,645 --
Payable for securities
purchased................... 555,000 164,675
Payable for capital shares
redeemed.................... 227,347 4,808
Payable for forward foreign
exchange contracts (Note
1f)......................... 745,503 --
Payable to investment adviser
(Note 2).................... 388,033 --
Payable for dividends to
shareholders (Note 1h)...... -- --
Accrued expenses and other
liabilities................. 274,628 17,318
--------------- ------------
Total liabilities........... 2,226,156 186,801
--------------- ------------
NET ASSETS.................... $ 1,329,531,004 $ 17,351,939
--------------- ------------
--------------- ------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par
value+...................... $ 7,010,254 $ 213,783
Paid-in capital in excess of
par......................... 992,195,281 20,544,481
Undistributed investment
income -- net............... 39,812,711 339,424
Undistributed (accumulated)
realized capital gains
(losses) on investments and
foreign currency
transactions -- net (Note
5).......................... 139,724,425 (1,873,044)
Unrealized appreciation
(depreciation) on
investments and foreign
currency transactions --
net......................... 150,788,333 (1,872,705)
--------------- ------------
NET ASSETS.................... $ 1,329,531,004 $ 17,351,939
--------------- ------------
--------------- ------------
Capital shares outstanding.... 70,102,544 2,137,834
--------------- ------------
--------------- ------------
Net asset value, offering and
redemption price per
share....................... $ 18.97 $ 8.12
--------------- ------------
--------------- ------------
*Identified cost.............. $ 1,171,806,222 $ 19,044,491
--------------- ------------
--------------- ------------
+Authorized shares............ 300,000,000 100,000,000
--------------- ------------
--------------- ------------
54
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Statements of Operations for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
CAPITAL GLOBAL
BALANCED STOCK STRATEGY
PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------
INVESTMENT INCOME (NOTES 1C &
1D):
Interest and discount
earned*..................... $ 3,255,480 $ 780,567 $ 4,228,618
Dividends*.................... 670,385 4,740,233 3,736,314
Other income.................. -- -- --
------------ ------------ ------------
Total income.................. 3,925,865 5,520,800 7,964,932
------------ ------------ ------------
EXPENSES:
Investment advisory fees (Note
2).......................... 338,129 1,059,444 831,747
Custodian fees................ 22,885 87,252 201,882
Professional fees............. 8,071 15,804 13,832
Printing and shareholder
reports..................... 1,724 8,466 5,143
Accounting services (Note
2).......................... 20,109 59,115 46,074
Pricing services.............. 360 10,801 6,740
Transfer agent fees (Note
2).......................... 5,007 5,014 5,010
Directors' fees and
expenses.................... 770 1,445 1,983
Registration fees (Note 1e)... 1,292 -- --
Interest expense.............. -- -- --
Other......................... 2,725 10,690 18,098
------------ ------------ ------------
Total expenses before
reimbursement............... 401,072 1,258,031 1,130,509
Reimbursement of expenses
(Note 2).................... -- -- --
------------ ------------ ------------
Expenses after
reimbursement............... 401,072 1,258,031 1,130,509
------------ ------------ ------------
Investment income -- net...... 3,524,793 4,262,769 6,834,423
------------ ------------ ------------
REALIZED & UNREALIZED GAIN
(LOSS) ON INVESTMENTS &
FOREIGN CURRENCY
TRANSACTIONS -- NET (NOTES
1D, 1F, 1G & 3):
Realized gain on investments
-- net...................... 6,863,677 36,429,868 27,348,113
Realized gain (loss) on
foreign currency
transactions -- net......... -- 1,669,308 2,105,174
Change in unrealized
appreciation/depreciation on
investments -- net.......... 5,814,120 21,484,742 (9,812,644)
Change in unrealized
appreciation/depreciation on
foreign currency
transactions -- net......... -- 337,475 771,019
------------ ------------ ------------
Total realized and unrealized
gain (loss) on investments
and foreign currency
transactions -- net......... 12,677,797 59,921,393 20,411,662
------------ ------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS.................. $ 16,202,590 $ 64,184,162 $ 27,246,085
------------ ------------ ------------
------------ ------------ ------------
*Net of withholding tax....... -- $ 163,601 $ 335,057
------------ ------------ ------------
------------ ------------ ------------
See Notes to Financial Statements.
55
<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 1C &
1D):
Interest and discount
earned*..................... $ 773,393 $ 12,726,990 $15,233,865 $ 8,606,736 $ 30,761,655 $ 24,322,209
Dividends*.................... 2,819,347 559,550 -- -- -- 14,690,338
Other income.................. -- 152,279 46,440 10,737 -- 40,997
------------ ------------ ------------ ------------ ------------ -------------
Total income.................. 3,592,740 13,438,819 15,280,305 8,617,473 30,761,655 39,053,544
------------ ------------ ------------ ------------ ------------ -------------
EXPENSES:
Investment advisory fees (Note
2).......................... 964,928 436,355 707,215 389,795 1,777,662 4,235,421
Custodian fees................ 29,670 23,709 24,885 17,564 24,225 349,038
Professional fees............. 15,067 9,053 13,431 8,998 7,085 61,985
Printing and shareholder
reports..................... 4,361 2,371 3,430 1,880 10,636 22,218
Accounting services (Note
2).......................... 52,073 26,527 38,615 21,456 98,067 229,239
Pricing services.............. 248 7,209 1,368 5,931 -- 8,673
Transfer agent fees (Note
2).......................... 5,009 5,007 5,009 5,009 4,966 5,009
Directors' fees and
expenses.................... 2,129 1,001 1,796 948 4,160 9,468
Registration fees (Note 1e)... 8,220 2,251 10 10 -- --
Interest expense.............. -- -- -- -- 166 --
Other......................... 6,106 2,064 3,517 2,196 6,969 35,276
------------ ------------ ------------ ------------ ------------ -------------
Total expenses before
reimbursement............... 1,087,811 515,547 799,276 453,787 1,933,936 4,956,327
Reimbursement of expenses
(Note 2).................... -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ -------------
Expenses after
reimbursement............... 1,087,811 515,547 799,276 453,787 1,933,936 4,956,327
------------ ------------ ------------ ------------ ------------ -------------
Investment income -- net...... 2,504,929 12,923,272 14,481,029 8,163,686 28,827,719 34,097,217
------------ ------------ ------------ ------------ ------------ -------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
REALIZED & UNREALIZED GAIN
(LOSS) ON INVESTMENTS &
FOREIGN CURRENCY
TRANSACTIONS -- NET (NOTES
1D, 1F, 1G & 3):
Realized gain on investments
-- net...................... 61,578,644 2,071,929 1,693,013 280,864 25,403 140,368,645
Realized gain (loss) on
foreign currency
transactions -- net......... -- -- -- -- -- 4,345,152
Change in unrealized
appreciation/depreciation on
investments -- net.......... 17,653,072 (1,170,500) 1,323,117 1,666,005 39,664 44,433,197
Change in unrealized
appreciation/depreciation on
foreign currency
transactions -- net......... -- -- -- -- -- 1,635,298
------------ ------------ ------------ ------------ ------------ -------------
Total realized and unrealized
gain (loss) on investments
and foreign currency
transactions -- net......... 79,231,716 901,429 3,016,130 1,946,869 65,067 190,782,292
------------ ------------ ------------ ------------ ------------ -------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS.................. $ 81,736,645 $ 13,824,701 $17,497,159 $ 10,110,555 $ 28,892,786 $ 224,879,509
------------ ------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ ------------ -------------
*Net of withholding tax....... $ 22,302 -- -- -- -- $ 671,382
------------ ------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ ------------ -------------
</TABLE>
NATURAL
RESOURCES
PORTFOLIO
- ------------------------------
INVESTMENT INCOME (NOTES 1C &
1D):
Interest and discount
earned*..................... $ 59,274
Dividends*.................... 392,030
Other income.................. --
------------
Total income.................. 451,304
------------
EXPENSES:
Investment advisory fees (Note
2).......................... 76,282
Custodian fees................ 17,211
Professional fees............. 5,005
Printing and shareholder
reports..................... 41
Accounting services (Note
2).......................... 5,841
Pricing services.............. 12,860
Transfer agent fees (Note
2).......................... 5,010
Directors' fees and
expenses.................... 311
Registration fees (Note 1e)... --
Interest expense.............. --
Other......................... 741
------------
Total expenses before
reimbursement............... 123,302
Reimbursement of expenses
(Note 2).................... (18,204)
------------
Expenses after
reimbursement............... 105,098
------------
Investment income -- net...... 346,206
------------
REALIZED & UNREALIZED GAIN
(LOSS) ON INVESTMENTS &
FOREIGN CURRENCY
TRANSACTIONS -- NET (NOTES
1D, 1F, 1G & 3):
Realized gain on investments
-- net...................... 1,508,773
Realized gain (loss) on
foreign currency
transactions -- net......... (6,614)
Change in unrealized
appreciation/depreciation on
investments -- net.......... (3,952,460)
Change in unrealized
appreciation/depreciation on
foreign currency
transactions -- net......... (428)
------------
Total realized and unrealized
gain (loss) on investments
and foreign currency
transactions -- net......... (2,450,729)
------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS.................. $ (2,104,523)
------------
------------
*Net of withholding tax....... $ 27,915
------------
------------
56
<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: 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income -- net...... $ 3,524,793 $ 3,578,627 $ 4,262,769 $ 5,747,305
Realized gain (loss) on
investments and foreign
currency transactions --
net......................... 6,863,677 10,123,967 38,099,176 14,653,340
Change in unrealized
appreciation/depreciation on
investments -- net.......... 5,814,120 (4,709,010) 21,484,742 21,343,267
Change in unrealized
appreciation/depreciation on
foreign currency
transactions -- net......... -- -- 337,475 (334,683)
------------ ------------ ------------- -------------
Net increase in net assets
resulting from operations... 16,202,590 8,993,584 64,184,162 41,409,229
------------ ------------ ------------- -------------
DIVIDENDS & DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 1H):
Investment income -- net...... (1,769,755) (3,754,719) (2,802,893) (5,548,969)
Realized gain on investments
-- net...................... (10,156,193) (1,979,516) (14,170,818) (36,850,216)
------------ ------------ ------------- -------------
Net decrease in net assets
resulting from dividends and
distributions to
shareholders................ (11,925,948) (5,734,235) (16,973,711) (42,399,185)
------------ ------------ ------------- -------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4):
Net increase (decrease) in net
assets derived from capital
share transactions.......... 5,194,624 (1,587,274) (1,104,085) 37,729,131
------------ ------------ ------------- -------------
NET ASSETS:
Total increase in net
assets...................... 9,471,266 1,672,075 46,106,366 36,739,175
Beginning of year............. 98,852,752 97,180,677 289,696,069 252,956,894
------------ ------------ ------------- -------------
End of year*.................. $108,324,018 $ 98,852,752 $ 335,802,435 $ 289,696,069
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
*Undistributed investment
income -- net (Note 1i)..... $ 3,524,791 $ 1,769,753 $ 6,263,968 $ 2,458,189
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
</TABLE>
See Notes to Financial Statements.
57
<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,
------------------------------ ------------------------------ ------------------------------
1997 1996 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Investment income -- net...... $ 6,834,423 $ 6,775,983 $ 2,504,929 $ 2,721,855 $ 12,923,272 $ 10,963,073
Realized gain (loss) on
investments and foreign
currency transactions --
net......................... 29,453,287 17,848,788 61,578,644 26,418,543 2,071,929 (2,249,032)
Change in unrealized
appreciation/depreciation on
investments -- net.......... (9,812,644) 8,986,014 17,653,072 8,765,971 (1,170,500) 4,434,110
Change in unrealized
appreciation/depreciation on
foreign currency
transactions -- net......... 771,019 (4,745,969) -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations... 27,246,085 28,864,816 81,736,645 37,906,369 13,824,701 13,148,151
------------- ------------- ------------- ------------- ------------- -------------
DIVIDENDS & DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 1H):
Investment income -- net...... (7,598,726) (5,458,261) (1,545,546) (1,964,991) (12,749,959) (10,832,795)
Realized gain on investments
-- net...................... (8,739,339) (1,312,483) (26,338,683) (4,499,465) -- --
------------- ------------- ------------- ------------- ------------- -------------
Net decrease in net assets
resulting from dividends and
distributions to
shareholders................ (16,338,065) (6,770,744) (27,884,229) (6,464,456) (12,749,959) (10,832,795)
------------- ------------- ------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4):
Net increase (decrease) in net
assets derived from capital
share transactions.......... 5,067,046 (2,247,227) 38,504,908 25,071,360 19,046,241 13,949,891
------------- ------------- ------------- ------------- ------------- -------------
NET ASSETS:
Total increase in net
assets...................... 15,975,066 19,846,845 92,357,324 56,513,273 20,120,983 16,265,247
Beginning of year............. 232,529,584 212,682,739 240,665,705 184,152,432 123,643,395 107,378,148
------------- ------------- ------------- ------------- ------------- -------------
End of year*.................. $ 248,504,650 $ 232,529,584 $ 333,023,029 $ 240,665,705 $ 143,764,378 $ 123,643,395
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
*Undistributed investment
income -- net (Note 1i)..... $ 9,377,194 $ 8,036,323 $ 2,482,094 $ 1,522,711 $ 1,154,388 $ 1,062,860
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
58
<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: 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income -- net...... $ 14,481,029 $ 15,660,907 $ 8,163,686 $ 8,329,370
Realized gain (loss) on
investments and foreign
currency transactions --
net......................... 1,693,013 (1,979,485) 280,864 920,219
Change in unrealized
appreciation/depreciation on
investments -- net.......... 1,323,117 (8,361,032) 1,666,005 (6,179,230)
Change in unrealized
appreciation/depreciation on
foreign currency
transactions -- net......... -- -- -- --
------------- ------------- ------------- -------------
Net increase (decrease) in net
assets resulting from
operations.................. 17,497,159 5,320,390 10,110,555 3,070,359
------------- ------------- ------------- -------------
DIVIDENDS & DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 1H):
Investment income -- net...... (14,518,659) (15,606,904) (8,076,935) (8,263,502)
Realized gain on investments
-- net...................... -- -- -- --
------------- ------------- ------------- -------------
Net decrease in net assets
resulting from dividends and
distributions to
shareholders................ (14,518,659) (15,606,904) (8,076,935) (8,263,502)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4):
Net increase (decrease) in net
assets derived from capital
share transactions.......... (2,629,974) (7,190,485) 4,724,500 (1,851,763)
------------- ------------- ------------- -------------
NET ASSETS:
Total increase (decrease) in
net assets.................. 348,526 (17,476,999) 6,758,120 (7,044,906)
Beginning of year............. 221,863,009 239,340,008 117,987,978 125,032,884
------------- ------------- ------------- -------------
End of year*.................. $ 222,211,535 $ 221,863,009 $ 124,746,098 $ 117,987,978
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
*Undistributed investment
income -- net (Note 1i)..... $ 1,285,094 $ 1,322,724 $ 812,664 $ 725,913
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
See Notes to Financial Statements.
59
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY RESERVE PORTFOLIO MULTIPLE STRATEGY PORTFOLIO NATURAL RESOURCES PORTFOLIO
----------------------------- --------------------------------- ---------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31, ENDED DECEMBER 31,
----------------------------- --------------------------------- ---------------------------
1997 1996 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Investment income -- net...... $ 28,827,719 $ 29,126,650 $ 34,097,217 $ 38,414,192 $ 346,206 $ 427,894
Realized gain (loss) on
investments and foreign
currency transactions --
net......................... 25,403 32,716 144,713,797 67,574,916 1,502,159 1,250,205
Change in unrealized
appreciation/depreciation on
investments -- net.......... 39,664 (271,048) 44,433,197 53,357,529 (3,952,460) 1,446,535
Change in unrealized
appreciation/depreciation on
foreign currency
transactions -- net......... -- -- 1,635,298 (1,704,878) (428) (407)
------------- ------------- --------------- --------------- ------------ ------------
Net increase (decrease) in net
assets resulting from
operations.................. 28,892,786 28,888,318 224,879,509 157,641,759 (2,104,523) 3,124,227
------------- ------------- --------------- --------------- ------------ ------------
DIVIDENDS & DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 1H):
Investment income -- net...... (28,827,719) (29,126,650) (20,339,088) (42,049,050) (188,225) (441,716)
Realized gain on investments
-- net...................... (25,403) (32,716) (64,589,169) (113,303,779) -- --
------------- ------------- --------------- --------------- ------------ ------------
Net decrease in net assets
resulting from dividends and
distributions to
shareholders................ (28,853,122) (29,159,366) (84,928,257) (155,352,829) (188,225) (441,716)
------------- ------------- --------------- --------------- ------------ ------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4):
Net increase (decrease) in net
assets derived from capital
share transactions.......... (32,011,967) (10,478,219) (21,605,127) 39,539,413 (5,384,753) 1,312,192
------------- ------------- --------------- --------------- ------------ ------------
NET ASSETS:
Total increase (decrease) in
net assets.................. (31,972,303) (10,749,267) 118,346,125 41,828,343 (7,677,501) 3,994,703
Beginning of year............. 557,689,664 568,438,931 1,211,184,879 1,169,356,536 25,029,440 21,034,737
------------- ------------- --------------- --------------- ------------ ------------
End of year*.................. $ 525,717,361 $ 557,689,664 $ 1,329,531,004 $ 1,211,184,879 $ 17,351,939 $ 25,029,440
------------- ------------- --------------- --------------- ------------ ------------
------------- ------------- --------------- --------------- ------------ ------------
*Undistributed investment
income -- net (Note 1i)..... -- -- $ 39,812,711 $ 21,709,430 $ 339,424 $ 188,057
------------- ------------- --------------- --------------- ------------ ------------
------------- ------------- --------------- --------------- ------------ ------------
</TABLE>
60
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
INCREASE (DECREASE) IN NET ------------------------------------------------
ASSET VALUE: 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
<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........................ $ 15.36 $ 14.86 $ 13.27 $ 14.62 $ 13.70
-------- -------- -------- -------- --------
Investment income -- net...... .51 .54 .60 .61 .50
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... 1.76 .83 2.07 (1.21) 1.35
-------- -------- -------- -------- --------
Total from investment
operations.................. 2.27 1.37 2.67 (.60) 1.85
-------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.27) (.57) (.62) (.53) (.75)
Realized gain on investments
-- net...................... (1.58) (.30) (.46) (.22) (.18)
-------- -------- -------- -------- --------
Total dividends and
distributions............... (1.85) (.87) (1.08) (.75) (.93)
-------- -------- -------- -------- --------
Net asset value, end of
year........................ $ 15.78 $ 15.36 $ 14.86 $ 13.27 $ 14.62
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 16.93% 9.76% 21.59% (4.28%) 14.31%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of
reimbursement............... .39% .39% .38% .40% .43%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Expenses...................... .39% .39% .38% .40% .43%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Investment income -- net...... 3.40% 3.63% 4.47% 4.28% 3.72%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $108,324 $ 98,853 $ 97,181 $ 75,893 $ 88,018
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Portfolio turnover............ 143.20% 234.79% 32.92% 46.94% 25.38%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Average commission rate
paid++...................... $ .0607 $ .0611 -- -- --
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
- ---------------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
++ For fiscal years beginning on or after September 1, 1995, a Portfolio is
required to disclose its average commission rate per share for purchases
and sales of equity securities. For certain Portfolios, 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.
61
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL STOCK PORTFOLIO GLOBAL STRATEGY PORTFOLIO
------------------------------------------------ ------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------ ------------------------------------------------
1997+ 1996+ 1995 1994 1993 1997+ 1996+ 1995+ 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <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........................ $ 23.25 $ 23.88 $ 21.64 $ 25.73 $ 23.22 $ 16.80 $ 15.25 $ 14.54 $ 15.42 $ 13.23
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income -- net...... .33 .46 .41 .29 .33 .47 .47 .52 .47 .36
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... 4.57 2.86 3.70 (1.50) 3.41 1.35 1.56 .94 (.71) 2.61
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations.................. 4.90 3.32 4.11 (1.21) 3.74 1.82 2.03 1.46 (.24) 2.97
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.22) (.47) (.34) (.28) (.59) (.55) (.39) (.55) (.41) (.60)
Realized gain on investments
-- net...................... (1.14) (3.48) (1.53) (2.60) (.64) (.63) (.09) (.20) (.23) (.18)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions............... (1.36) (3.95) (1.87) (2.88) (1.23) (1.18) (.48) (.75) (.64) (.78)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year........................ $ 26.79 $ 23.25 $ 23.88 $ 21.64 $ 25.73 $ 17.44 $ 16.80 $ 15.25 $ 14.54 $ 15.42
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 22.47% 16.54% 20.73% (5.12%) 17.01% 11.72% 13.78% 10.44% (1.62%) 23.73%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of
reimbursement............... .41% .40% .41% .39% .38% .45% .42% .44% .48% .45%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Expenses...................... .41% .40% .41% .39% .38% .45% .42% .44% .48% .46%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income -- net...... 1.38% 2.11% 1.98% 1.32% 1.43% 2.69% 3.02% 3.59% 3.22% 3.27%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $335,802 $289,696 $252,957 $206,647 $223,971 $248,505 $232,530 $212,683 $223,493 $182,672
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Portfolio turnover............ 90.19% 74.30% 130.54% 71.19% 100.12% 108.04% 160.89% 26.81% 27.31% 30.53%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Average commission rate
paid++...................... $ .0281 $ .0264 -- -- -- $ .0155 $ .0160 -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
++ For fiscal years beginning on or after September 1, 1995, a Portfolio is
required to disclose its average commission rate per share for purchases
and sales of equity securities. For certain Portfolios, 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.
62
<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: 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
<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........................ $ 27.79 $ 24.06 $ 19.20 $ 24.65 $ 23.98
-------- -------- -------- -------- --------
Investment income -- net...... .24 .32 .15 .31 .32
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... 8.01 4.24 6.13 (1.81) 1.63
-------- -------- -------- -------- --------
Total from investment
operations.................. 8.25 4.56 6.28 (1.50) 1.95
-------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.18) (.24) (.23) (.30) (.41)
Realized gain on investments
-- net...................... (3.04) (.59) (1.19) (3.65) (.87)
-------- -------- -------- -------- --------
Total dividends and
distributions............... (3.22) (.83) (1.42) (3.95) (1.28)
-------- -------- -------- -------- --------
Net asset value, end of
year........................ $ 32.82 $ 27.79 $ 24.06 $ 19.20 $ 24.65
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 33.75% 19.57% 35.35% (6.93%) 8.63%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... .37% .38% .38% .40% .38%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Investment income -- net...... .86% 1.25% .82% 1.53% 1.35%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $333,023 $240,666 $184,152 $101,702 $122,836
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Portfolio turnover............ 84.90% 78.04% 87.66% 102.96% 160.29%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Average commission rate
paid++...................... $ .0630 $ .0625 -- -- --
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
- ---------------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
++ For fiscal years beginning on or after September 1, 1995, a Portfolio is
required to disclose its average commission rate per share for purchases
and sales of equity securities. For certain Portfolios, 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.
63
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD PORTFOLIO
------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------
1997+ 1996+ 1995+ 1994 1993
- --------------------------------------------------------------------------------
<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........................ $ 9.15 $ 8.99 $ 8.53 $ 9.68 $ 9.10
-------- -------- -------- -------- --------
Investment income -- net...... .90 .89 .93 1.00 .94
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... .04 .16 .46 (1.17) .62
-------- -------- -------- -------- --------
Total from investment
operations.................. .94 1.05 1.39 (.17) 1.56
-------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.90) (.89) (.93) (.98) (.98)
Realized gain on investments
-- net...................... -- -- -- -- --
-------- -------- -------- -------- --------
Total dividends and
distributions............... (.90) (.89) (.93) (.98) (.98)
-------- -------- -------- -------- --------
Net asset value, end of
year........................ $ 9.19 $ 9.15 $ 8.99 $ 8.53 $ 9.68
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 10.74% 12.32% 17.12% (1.88%) 18.11%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... .39% .39% .38% .41% .43%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Investment income -- net...... 9.67% 9.77% 10.25% 10.88% 10.17%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $143,764 $123,643 $107,378 $ 82,421 $ 94,739
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Portfolio turnover............ 60.94% 50.48% 63.39% 63.43% 73.01%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Average commission rate
paid++...................... -- -- -- -- --
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
++ For fiscal years beginning on or after September 1, 1995, a Portfolio is
required to disclose its average commission rate per share for purchases
and sales of equity securities. For certain Portfolios, 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.
64
<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: 1997+ 1996+ 1995+ 1994+ 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE FOLLOWING PER SHARE DATA
AND RATIOS HAVE BEEN DERIVED
FROM INFORMATION PROVIDED IN
THE FINANCIAL STATEMENTS.
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
year........................ $ 10.93 $ 11.41 $ 10.32 $ 12.02 $ 11.75
-------- -------- -------- -------- --------
Investment income -- net...... .73 .76 .78 .75 .83
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... .15 (.49) 1.10 (1.30) .50
-------- -------- -------- -------- --------
Total from investment
operations.................. .88 .27 1.88 (.55) 1.33
-------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.73) (.75) (.79) (.75) (.84)
Realized gain on investments
-- net...................... -- -- -- (.39) (.22)
In excess of realized gain on
investments -- net.......... -- -- -- (.01) --
-------- -------- -------- -------- --------
Total dividends and
distributions............... (.73) (.75) (.79) (1.15) (1.06)
-------- -------- -------- -------- --------
Net asset value, end of
year........................ $ 11.08 $ 10.93 $ 11.41 $ 10.32 $ 12.02
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 8.42% 2.61% 18.87% (4.78%) 11.20%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... .37% .38% .38% .37% .36%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Investment income -- net...... 6.74% 6.85% 7.22% 6.89% 6.42%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Investment income -- net, and
realized gain on investments
-- net...................... -- -- -- -- --
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $222,212 $221,863 $239,340 $218,611 $284,495
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Portfolio turnover............ 41.23% 29.35% 57.38% 140.55% 113.61%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
- ---------------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
++ Amount is less than $.01 per share.
See Notes to Financial Statements.
65
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG TERM CORPORATE BOND PORTFOLIO MONEY RESERVE PORTFOLIO
------------------------------------------------ ------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------ ------------------------------------------------
1997+ 1996+ 1995+ 1994+ 1993 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <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........................ $ 11.53 $ 12.02 $ 10.72 $ 12.59 $ 12.07 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income -- net...... .79 .80 .83 .81 .83 .05 .05 .06 .04 .03
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... .18 (.50) 1.30 (1.42) .68 -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations.................. .97 .30 2.13 (.61) 1.51 .05 .05 .06 .04 .03
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.78) (.79) (.83) (.82) (.83) (.05) (.05) (.06) (.04) (.03)
Realized gain on investments
-- net...................... -- -- -- (.44) (.16) --++ --++ -- -- --
In excess of realized gain on
investments -- net.......... -- -- -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions............... (.78) (.79) (.83) (1.26) (.99) (.05) (.05) (.06) (.04) (.03)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year........................ $ 11.72 $ 11.53 $ 12.02 $ 10.72 $ 12.59 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 8.80% 2.77% 20.66% (5.13%) 13.01% 5.43% 5.33% 5.81% 4.04% 3.08%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... .38% .39% .40% .39% .38% .36% .36% .35% .36% .36%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income -- net...... 6.87% 6.90% 7.32% 7.16% 6.65% -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income -- net, and
realized gain on investments
-- net...................... -- -- -- -- -- 5.30% 5.16% 5.67% 4.00% 3.03%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $124,746 $117,988 $125,033 $111,878 $139,321 $525,717 $557,690 $568,439 $583,992 $546,710
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Portfolio turnover............ 107.02% 92.45% 110.49% 134.53% 110.53% -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
++ Amount is less than $.01 per share.
66
<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: 1997+ 1996+ 1995+ 1994+ 1993
- ------------------------------------------------------------------------------------------
<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........................ $ 17.13 $ 17.24 $ 16.22 $ 19.84 $ 18.70
---------- ---------- ---------- ---------- ----------
Investment income -- net...... .47 .53 .56 .50 .54
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... 2.57 1.63 2.03 (1.39) 2.30
---------- ---------- ---------- ---------- ----------
Total from investment
operations.................. 3.04 2.16 2.59 (.89) 2.84
---------- ---------- ---------- ---------- ----------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.29) (.60) (.48) (.57) (.88)
Realized gain on investments
-- net...................... (.91) (1.67) (1.09) (2.16) (.82)
---------- ---------- ---------- ---------- ----------
Total dividends and
disatributions.............. (1.20) (2.27) (1.57) (2.73) (1.70)
---------- ---------- ---------- ---------- ----------
Net asset value, end of
year........................ $ 18.97 $ 17.13 $ 17.24 $ 16.22 $ 19.84
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
<CAPTION>
<S> <C> <C> <C> <C> <C>
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 19.17% 14.32% 17.55% (5.05%) 16.66%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of
reimbursement............... .39% .39% .38% .38% .36%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Expenses...................... .39% .39% .38% .38% .36%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Investment income -- net...... 2.65% 3.26% 3.44% 2.97% 2.91%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $1,329,531 $1,211,185 $1,169,357 $1,082,083 $1,237,336
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Portfolio turnover............ 108.41% 143.82% 140.83% 68.12% 91.08%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Average commission rate
paid++...................... $ .0233 $ .0246 -- -- --
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
- ---------------
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
++ For fiscal years beginning on or after September 1, 1995, a Portfolio is
required to disclose its average commission rate per share for purchases
and sales of equity securities. For certain Portfolios, 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.
67
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATURAL RESOURCES PORTFOLIO
------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------
1997+ 1996+ 1995 1994 1993
- --------------------------------------------------------------------------------
<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........................ $ 9.19 $ 8.17 $ 7.43 $ 7.53 $ 7.01
-------- -------- -------- -------- --------
Investment income -- net...... .14 .16 .17 .17 .13
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... (1.14) 1.03 .73 (.10) .66
-------- -------- -------- -------- --------
Total from investment
operations.................. (1.00) 1.19 .90 .07 .79
-------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.07) (.17) (.16) (.17) (.27)
Realized gain on investments
-- net...................... -- -- -- -- --
-------- -------- -------- -------- --------
Total dividends and
disatributions.............. (.07) (.17) (.16) (.17) (.27)
-------- -------- -------- -------- --------
Net asset value, end of
year........................ $ 8.12 $ 9.19 $ 8.17 $ 7.43 $ 7.53
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... (10.97%) 14.72% 12.22% .88% 11.65%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
<CAPTION>
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of
reimbursement............... .50% .50% .47% .50% .50%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Expenses...................... .59% .57% .47% .59% .59%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Investment income -- net...... 1.65% 1.79% 1.99% 2.23% 2.00%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $ 17,352 $ 25,029 $ 21,035 $ 21,455 $ 18,437
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Portfolio turnover............ 24.10% 31.29% 38.50% 48.16% 65.26%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Average commission rate
paid++...................... $ .0283 $ .0231 -- -- --
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
++ For fiscal years beginning on or after September 1, 1995, a Portfolio is
required to disclose its average commission rate per share for purchases
and sales of equity securities. For certain Portfolios, 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.
68
<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) REPURCHASE AGREEMENTS -- The Fund invests in US Government securities
pursuant to repurchase agreements with a member bank of the Federal Reserve
System or a primary dealer in US Government securities. Under such agreements,
the bank or primary dealer agrees to repurchase the security at a mutually
agreed upon time and price. The Fund takes possession of the underlying
securities, marks to market such securities and, if necessary, receives
additional securities daily to ensure that the contract is fully collateralized.
(C) INCOME TAXES -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to 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.
(D) 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
69
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
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.
(E) PREPAID REGISTRATION FEES -- Prepaid registration fees are charged to
expense as the related shares are issued.
(F) 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 Portfolios are authorized to write and purchase call and
put options. When a Portfolio writes an option, an amount equal to the premium
received by the Portfolio is reflected as an asset and an equivalent liability.
The amount of the liability is subsequently marked to market to reflect the
current market value of the option written. When a security is purchased or sold
through an exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option expires (or the
Portfolio enters into a closing transaction), the Portfolio realizes a gain or
loss on the option to the extent of the premiums received or paid (or gain or
loss to the extent the cost of the closing transaction exceeds the premium paid
or received).
Written and purchased options are non-income producing investments.
- - FINANCIAL FUTURES CONTRACTS -- Multiple Strategy and Natural Resources
Portfolios may purchase or sell interest rate futures contracts and options on
such futures contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts are
contracts for delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Portfolio deposits
and maintains as collateral such initial margin as required by the exchange on
which the transaction is effected. Pursuant to the contract, the Portfolio
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are known as
variation margin and are recorded by the Portfolio as unrealized gains or
losses. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(G) 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.
70
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
(H) DIVIDENDS AND DISTRIBUTIONS -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(I) 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, 1997, the Natural Resources Portfolio was
reimbursed in the amount of $18,204.
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
earned commissions on the execution of portfolio security transactions
aggregating $3,327 in the Balanced Portfolio, $29,260 in the Capital Stock
Portfolio, $27,742 in the Global Strategy Portfolio, $9,420 in the Growth Stock
Portfolio, $75,578 in the Multiple Strategy Portfolio, and $2,670 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, 1997, Merrill Lynch Security Pricing Service,
an affiliate of MLPF&S, was paid by Balanced Portfolio $260; Global Strategy
$112; Growth Stock Portfolio $18; High Yield Portfolio $5,515; Intermediate
Government Portfolio $1,643; Long Term Corporate Bond Portfolio $5,345; and
Multiple Strategy Portfolio $272 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, PSI, and/or ML & Co.
3. INVESTMENTS:
Purchases and sales of investments, excluding short-term securities, for the
year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
INTERMEDIATE LONG TERM
CAPITAL GLOBAL GOVERNMENT CORPORATE
BALANCED STOCK STRATEGY GROWTH STOCK HIGH YIELD BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Purchases.......... $130,591,531 $285,722,765 $255,359,036 $243,597,732 $84,911,075 $84,345,742 $122,434,380
------------ ------------ ------------ ------------ ----------- ----------- ------------
------------ ------------ ------------ ------------ ----------- ----------- ------------
Total Sales.............. $137,805,003 $301,600,490 $274,278,401 $237,206,207 $70,693,088 $88,622,245 $116,780,323
------------ ------------ ------------ ------------ ----------- ----------- ------------
------------ ------------ ------------ ------------ ----------- ----------- ------------
</TABLE>
MULTIPLE NATURAL
STRATEGY RESOURCES
PORTFOLIO PORTFOLIO
- -------------------------
Total Purchases.......... $1,293,919,258 $ 5,298,768
-------------- --------------
-------------- --------------
Total Sales.............. $1,457,152,261 $ 9,926,287
-------------- --------------
-------------- --------------
71
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
As of December 31, 1997, unrealized appreciation/depreciation for Federal income
tax purposes were as follows:
<TABLE>
<CAPTION>
CAPITAL GLOBAL GROWTH HIGH
BALANCED STOCK STRATEGY STOCK YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Appreciated securities........ $13,155,017 $ 66,616,484 $ 25,641,042 $ 60,390,717 $ 6,279,075
Depreciated securities........ (1,684,535) (10,979,995) (13,123,087) (6,880,207) (6,449,923)
----------- ------------ ------------ ------------ ------------
Net unrealized appreciation
(depreciation).............. $11,470,482 $ 55,636,489 $ 12,517,955 $ 53,510,510 $ (170,848)
----------- ------------ ------------ ------------ ------------
----------- ------------ ------------ ------------ ------------
Cost for Federal income tax
purposes.................... $96,276,794 $280,326,507 $234,845,412 $279,038,540 $142,891,814
----------- ------------ ------------ ------------ ------------
----------- ------------ ------------ ------------ ------------
<CAPTION>
Net realized and unrealized gains (losses) as of December 31, 1997 were as follows:
GLOBAL STRATEGY
BALANCED PORTFOLIO CAPITAL STOCK PORTFOLIO 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.......... $6,863,685 $11,562,712 $36,429,868 $55,816,109 $27,348,043 $12,631,177
Short-term securities......... (8) -- -- -- 70 --
Forward foreign exchange
contracts................... -- -- 1,774,524 5,290 5,609,608 (35,680)
Foreign currency
transactions................ -- -- (105,216) (2,869) (3,504,434) (28,347)
---------- ----------- ----------- ----------- ----------- -----------
Total......................... $6,863,677 $11,562,712 $38,099,176 $55,818,530 $29,453,287 $12,567,150
---------- ----------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
GROWTH STOCK PORTFOLIO HIGH YIELD PORTFOLIO
------------------------ ---------------------
REALIZED
REALIZED UNREALIZED GAINS UNREALIZED
GAINS GAINS (LOSSES) LOSSES
- ------------------------------
<S> <C> <C> <C> <C>
long-term securities.......... $61,578,489 $53,511,051 $2,073,470 $(125,501)
Short-term securities......... 155 -- (1,541) --
Forward foreign exchange
contracts................... -- -- -- --
Foreign currency
transactions................ -- -- -- --
----------- ----------- ---------- ---------
Total......................... $61,578,644 $53,511,051 $2,071,929 $(125,501)
----------- ----------- ---------- ---------
----------- ----------- ---------- ---------
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares were as follows:
<CAPTION>
GLOBAL STRATEGY
BALANCED PORTFOLIO CAPITAL STOCK PORTFOLIO PORTFOLIO
------------------------ ------------------------ ------------------------
FOR THE YEAR ENDED DOLLAR DOLLAR DOLLAR
DECEMBER 31, 1997 SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................... 568,078 $ 8,310,784 1,321,032 $ 33,221,813 1,636,636 $ 28,134,560
Shares issued to shareholders
in reinvestment of dividends
and distributions........... 889,333 11,925,948 782,920 16,973,711 1,054,749 16,338,065
---------- ------------ ---------- ------------ ---------- ------------
Total issued.................. 1,457,411 20,236,732 2,103,952 50,195,524 2,691,385 44,472,625
Shares redeemed............... (1,028,393) (15,042,108) (2,028,833) (51,299,609) (2,283,300) (39,405,579)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease)....... 429,018 $ 5,194,624 75,119 $ (1,104,085) 408,085 $ 5,067,046
---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------
</TABLE>
GROWTH STOCK PORTFOLIO
------------------------
FOR THE YEAR ENDED DOLLAR
DECEMBER 31, 1997 SHARES AMOUNT
- ------------------------------
Shares sold................... 2,701,024 $ 78,345,898
Shares issued to shareholders
in reinvestment of dividends
and distributions........... 1,147,972 27,884,229
---------- ------------
Total issued.................. 3,848,996 106,230,127
Shares redeemed............... (2,362,876) (67,725,219)
---------- ------------
Net increase (decrease)....... 1,486,120 $ 38,504,908
---------- ------------
---------- ------------
<TABLE>
<CAPTION>
GLOBAL STRATEGY
BALANCED PORTFOLIO CAPITAL STOCK PORTFOLIO 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)
---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------
</TABLE>
GROWTH STOCK PORTFOLIO
------------------------
FOR THE YEAR ENDED DOLLAR
DECEMBER 31, 1996 SHARES AMOUNT
- ------------------------------
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
---------- ------------
---------- ------------
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
72
<PAGE>
<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........ $ 5,519,428 $ 3,386,063 $ 53,409 $ 186,037,091 $ 2,715,802
Depreciated securities........ (1,266,478) (793,974) (45,452) (36,081,433) (4,641,366)
------------ ------------ ------------ -------------- -----------
Net unrealized appreciation
(depreciation).............. $ 4,252,950 $ 2,592,089 $ 7,957 $ 149,955,658 $(1,925,564)
------------ ------------ ------------ -------------- -----------
------------ ------------ ------------ -------------- -----------
Cost for Federal income tax
purposes.................... $215,660,483 $120,121,067 $531,749,893 $1,172,709,814 $19,097,701
------------ ------------ ------------ -------------- -----------
------------ ------------ ------------ -------------- -----------
<CAPTION>
Net realized and unrealized gains (losses) as of December 31, 1997 were as follows:
INTERMEDIATE GOVERNMENT LONG TERM CORPORATE MONEY RESERVE
BOND PORTFOLIO BOND PORTFOLIO PORTFOLIO
------------------------ ---------------------- ----------------------
REALIZED UNREALIZED REALIZED UNREALIZED REALIZED UNREALIZED
GAINS GAINS GAINS GAINS GAINS GAINS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Long-term securities.......... $ 1,693,013 $4,252,950 $ 280,864 $2,592,089 -- --
Short-term securities......... -- -- -- -- $ 25,403 $ 9,532
Forward foreign exchange
contracts................... -- -- -- -- -- --
Foreign currency
transactions................ -- -- -- -- -- --
----------- ----------- --------- ----------- ---------- ----------
Total......................... $ 1,693,013 $4,252,950 $ 280,864 $2,592,089 $ 25,403 $ 9,532
----------- ----------- --------- ----------- ---------- ----------
----------- ----------- --------- ----------- ---------- ----------
<CAPTION>
MULTIPLE STRATEGY PORTFOLIO NATURAL RESOURCES PORTFOLIO
------------------------------ ------------------------------
REALIZED UNREALIZED REALIZED
GAINS GAINS GAINS UNREALIZED
(LOSSES) (LOSSES) (LOSSES) LOSSES
- ------------------------------
<S> <C> <C> <C> <C>
Long-term securities.......... $140,366,273 $150,859,250 $ 1,508,765 $(1,872,354)
Short-term securities......... 2,372 -- 8 --
Forward foreign exchange
contracts................... 10,586,086 (35,645)
Foreign currency
transactions................ (6,240,934) (35,272) (6,614) (351)
------------- ------------- ------------- -------------
Total......................... $144,713,797 $150,788,333 $ 1,502,159 $(1,872,705)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
<CAPTION>
CLASS
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares were as follows:
INTERMEDIATE GOVERNMENT LONG TERM CORPORATE BOND
HIGH YIELD PORTFOLIO BOND PORTFOLIO PORTFOLIO
------------------------ ------------------------ ------------------------
FOR THE YEAR ENDED DOLLAR DOLLAR DOLLAR
DECEMBER 31, 1997 SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................... 9,413,507 $ 86,287,875 1,009,170 $ 11,017,560 1,068,327 $ 12,304,021
Shares issued to shareholders
in reinvestment of dividends
and distributions........... 1,394,196 12,749,959 1,343,712 14,518,659 705,889 8,076,935
---------- ------------ ---------- ------------ ---------- ------------
Total issued.................. 10,807,703 99,037,834 2,352,882 25,536,219 1,774,216 20,380,956
Shares redeemed............... (8,676,667) (79,991,593) (2,601,561) (28,166,193) (1,365,149) (15,656,456)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease)....... 2,131,036 $ 19,046,241 (248,679) $ (2,629,974) 409,067 $ 4,724,500
---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------
<CAPTION>
MULTIPLE STRATEGY NATURAL RESOURCES
MONEY RESERVE PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------ ------------------------------ ------------------------------
FOR THE YEAR ENDED DOLLAR DOLLAR DOLLAR
DECEMBER 31, 1997 SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................... 233,564,379 $ 233,564,379 812,025 $ 14,159,217 808,890 $ 7,579,209
Shares issued to shareholders
in reinvestment of dividends
and distributions........... 28,853,463 28,853,463 5,378,611 84,928,257 20,775 188,225
------------- ------------- ------------- ------------- ------------- -------------
Total issued.................. 262,417,842 262,417,842 6,190,636 99,087,474 829,665 7,767,434
Shares redeemed............... (294,429,809) (294,429,809) (6,793,644) (120,692,601) (1,415,905) (13,152,187)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease)....... (32,011,967) $ (32,011,967) (603,008) $ (21,605,127) (586,240) $ (5,384,753)
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
<CAPTION>
INTERMEDIATE GOVERNMENT LONG TERM CORPORATE BOND
HIGH YIELD PORTFOLIO BOND PORTFOLIO 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................... 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>
MULTIPLE STRATEGY NATURAL RESOURCES
MONEY RESERVE PORTFOLIO PORTFOLIO 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................... 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>
73
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Concluded)
- --------------------------------------------------------------------------------
5. CAPITAL LOSS CARRYFORWARDS:
At December 31, 1997, the Fund had capital loss carryforwards of approximately
$3,599,000 in the High Yield Portfolio, of which $3,019,000 expires in 1998,
$349,000 expires in 1999 and $231,000 expires in 2005; $9,030,000 in the
Intermediate Government Bond Portfolio, of which $6,120,000 expires in 2002,
$1,088,000 expires in 2003, $1,822,000 expires in 2004; $1,640,000 in the Long
Term Corporate Bond Portfolio, all of which expires in 2002; $1,638,000 in the
Natural Resources Portfolio, of which $1,187,000 expires in 1998, $155,000
expires in 1999, and $296,000 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 $321,547 in the Natural Resources Portfolio has
been reclassified to paid-in capital in excess of par.
6. COMMITMENTS:
At December 31, 1997, the Natural Resources Portfolio had entered into forward
foreign exchange contracts under which it agreed to sell various foreign
currencies with values of approximately $35,000.
7. LOANED SECURITIES:
At December 31, 1997, the Intermediate Government Bond Portfolio held US
Treasury Notes having an aggregate value of approximately $3,200,000 as
collateral for portfolio securities loaned having a market value of
approximately $3,083,000; the Long Term Corporate Bond Portfolio held US
Treasury Notes having an aggregate value of approximately $4,984,375 as
collateral for portfolio securities loaned having a market value of
approximately $4,834,000; the Multiple Strategy Portfolio held US Treasury Notes
having an aggregate value of approximately $8,429,000 as collateral for
portfolio securities loaned having a market value of approximately $8,392,000.
8. SUBSEQUENT EVENTS:
On January 2, 1998, the Board of Directors declared dividends and distributions
per share payable on January 2, 1998 and January 9, 1998 to shareholders of
record as of December 31, 1997 as follows:
ORDINARY LONG-TERM
INCOME CAPITAL GAINS
- ----------------------------------------------------------------------------
PORTFOLIO
Balanced.......................................... $ .656062 $ .865601
Capital Stock..................................... .764485 2.641432
Global Strategy................................... 1.462785 1.375290
Growth Stock...................................... 3.057979 3.254312
High Yield........................................ .079026 --
Intermediate Government Bond...................... .064093 --
Long Term Corporate Bond.......................... .076353 --
Multiple Strategy................................. 1.164900 1.415757
Natural Resources................................. .183696 --
- ----------------------------------------------------------------------------
74
<PAGE>
[This page intentionally left blank]
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements contained in Part A:
Financial Highlights:
Balanced Portfolio for each of the years in the nine year period ended
December 31, 1997 and the period May 1, 1988* to December 31, 1988.
Capital Stock Portfolio for each of the years in the ten year period
ended December 31, 1997.
Global Strategy Portfolio for each of the years in the ten year period
ended December 31, 1997.
Growth Stock Portfolio for each of the years in the ten year period
ended December 31, 1997.
High Yield Portfolio for each of the years in the ten year period ended
December 31, 1997.
Intermediate Government Bond Portfolio for each of the years in the ten
year period ended December 31, 1997.
Long Term Corporate Bond Portfolio for each of the years in the ten
year period ended December 31, 1997.
Money Reserve Portfolio for each of the years in the ten year period
ended December 31, 1997.
Multiple Strategy Portfolio for each of the years in the ten year
period ended December 31, 1997.
Natural Resources Portfolio for each of the years in the ten year
period ended December 31, 1997.
Contained in Part B:
With respect to each of the Fund's Portfolios:
Schedules of Investments as of December 31, 1997.
Statements of Assets and Liabilities as of December 31, 1997.
Statements of Operations for the year ended December 31, 1997.
Statements of Changes in Net Assets for each of the years in the two-
year period ended December 31, 1997.
Financial Highlights for each of the years in the five year period
ended December 31, 1997.
- --------
* 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 (incorporated by reference to Registrant's
Rule 24f-2 notice of 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(a) filed with Post-Effective
Amendment No. 2.
Incorporated by reference to Exhibit 5(b) filed with Post-Effective
Amendment No. 19.
(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
AT FEBRUARY 28,
TITLE OF CLASS 1998
-------------- -----------------
<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 registered 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 Convertible 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 Growth 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 Real Estate Fund, Inc., Merrill Lynch
C-4
<PAGE>
Retirement Series 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 Funds, Inc; and the following closed-end
registered investment companies: Merrill Lynch High Income Municipal Bond
Fund, Inc. and Merrill Lynch Senior Floating Rate Fund, Inc. MLAM also acts as
subadviser to Merrill Lynch World Strategy Portfolio and Merrill Lynch Basic
Value Equity Portfolio, two investment portfolios of EQ Advisors Trust.
Fund Asset Management, L.P. ("FAM"), an affiliate of the Investment Adviser,
acts as the investment adviser for the following open-end registered
investment companies: 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
Fund, Inc., and The Municipal Fund Accumulation Program, Inc., and the
following closed-end registered investment companies: Apex Municipal Fund,
Inc., Corporate High Yield Fund, Inc., Corporate High Yield Fund II, Inc.,
Corporate High Yield Fund III, Inc., Debt Strategies Fund, Inc., Debt
Strategies Fund II, Inc., Income Opportunities Fund 1999, Inc., Income
Opportunities Fund 2000, Inc., Merrill Lynch Municipal Strategy Fund, Inc.,
MuniAssets Fund, MuniEnhanced Fund, Inc., MuniHoldings Fund, Inc.,
MuniHoldings Fund II, Inc., MuniHoldings California Insured Fund, Inc.,
MuniHoldings California Insured Fund II, Inc., MuniHoldings Florida Insured
Fund, MuniHoldings Florida Insured Fund II, MuniHoldings New Jersey Insured
Fund, Inc., MuniHoldings New York Fund, Inc., MuniHoldings New York Insured
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, 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, 23rd 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.
C-5
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
POSITION WITH PROFESSION, VOCATION OR
NAME INVESTMENT ADVISER EMPLOYMENT
---- ------------------ ---------------------------
<C> <C> <S>
Arthur Zeikel......... Chairman and Director Chairman and Director of FAM;
President of MLAM and FAM
(from 1977 to 1997); Chairman
and Director of Princeton
Services, Inc.; President of
Princeton Services (from
1993 to 1997); 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")
Linda L. Federici..... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
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 A. Griffin.. Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services, Inc.
Norman R. Harvey...... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services, Inc.
Michael J.
Hennewinkel........... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services, Inc.
Philip L. Kirstein.... Senior Vice President, Senior Vice President, General
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 of FAM;
Senior Vice President of
Princeton Services, Inc.
Deborah W. Landsman-
Yaros................. Senior Vice President Senior Vice President of FAM;
Vice President of MLFD;
Senior Vice President of
Princeton Services
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
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
POSITION WITH PROFESSION, VOCATION OR
NAME INVESTMENT ADVISER EMPLOYMENT
---- ------------------ ---------------------------
<C> <C> <S>
Gregory D. Upah....... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Ronald Welburn........ 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: Corporate High
Yield Fund, Inc., Corporate High Yield Fund II, Inc., Corporate High Yield
Fund III, Inc., Income Opportunities Fund 1999, Inc., Income Opportunities
Fund 2000, 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 Basic Value Fund, Inc., Merrill Lynch
Capital Fund, Inc., Merrill Lynch Consults International Portfolio, Merrill
Lynch Convertible Fund, Inc., Merrill Lynch Corporate Bond Fund, Inc., Merrill
Lynch Developing Capital Markets, Inc., Merrill Lynch Dragon Fund, Inc.,
Merrill Lynch Emerging Tigers 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 Growth 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 International Equity Fund, 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 Real Estate Fund, Inc.,
Merrill Lynch Series Fund, Inc., Merrill Lynch Short-Term Global Income Fund,
Inc., Merrill Lynch Special Value Fund, Inc., Merrill Lynch Strategic Dividend
Fund, Merrill Lynch Technology Fund, Inc., Merrill Lynch Utility Income Fund,
Inc., Merrill Lynch Variable Series Funds, Inc., Merrill Lynch World Income
Fund, Inc. and Worldwide DollarVest Fund, Inc. The address of each of these
registered 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 October
31, 1995, for his or her own account or in the capacity of director, officer,
partner or trustee. In addition, Messrs. Zeikel, Albert and Richard 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
---- ------------- ----------------------------------
<C> <C> <S>
Arthur Zeikel........... Director and Chairman Chairman of the Manager and FAM; President
of the Manager and FAM (from 1977 to
1997); Chairman and Director of Princeton
Services; President of Princeton Services
(from 1993 to 1997); Executive Vice
President of ML & Co.
Alan J. Albert.......... Senior Managing Vice President of the Manager.
Director
Nicholas C. D. Hall..... Director Director of Merrill Lynch Europe PLC;
General Counsel of Merrill Lynch
International Private Banking Group.
Gerald M. Richard....... Senior Vice President Senior Vice President and Treasurer of the
Manager and FAM; Senior Vice President and
Treasurer of Princeton Services; Vice
President and Treasurer of MLFD.
Carol Ann Langham....... Company Secretary None
Debra Anne Searle....... Assistant Company None
Secretary
</TABLE>
C-7
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) MLFD acts as the principal underwriter for the Registrant and for each
of the open-end investment companies referred to in the first two paragraphs
of Item 28 except 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., and MLFD also
acts as principal underwriter for the following closed-end funds: Merrill
Lynch High Income Municipal Bond Fund, Inc., Merrill Lynch Municipal Strategy
Fund, Inc. and Merrill Lynch Senior Floating Rate Fund, 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, 23rd 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
Richard L. Reller................... Director None
Thomas J. Verage.................... Director None
William E. Aldrich.................. Senior Vice President None
Robert W. Crook..................... Senior Vice President None
Michael J. Brady.................... Vice President None
William M. Breen.................... Vice President None
Michael G. Clark.................... 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 and the Rules thereunder will be
maintained at the offices of the Registrant, 800 Scudders Mill Road,
Plainsboro, New Jersey 08536, its custodian, The Bank of New York, 90
Washington Street, 12th Floor, New York, New York 10286, and its transfer
agent, Merrill Lynch Financial Data Services, Inc., 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption "Management of the Fund--
Management and Advisory Arrangements" in the Prospectus constituting Part A of
the Registration Statement and under the caption "Management of the Fund--
Management and Advisory Arrangements" in the Statement of Additional
Information constituting Part B of the Registration Statement, Registrant is
not a party to any management-related service contract.
ITEM 32. UNDERTAKINGS.
The Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to
shareholders, upon request, and without charge.
C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Township of Plainsboro, and State of New Jersey, on the
23rd day of April, 1998.
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.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
/s/ Terry K. Glenn President and April 23, 1997
- ------------------------------------- Director (Principal
(Terry K. Glenn) Executive Officer)
Treasurer (Principal
Gerald M. Richard* Financial and
- ------------------------------------- Accounting Officer)
Gerald M. Richard
Jack B. Sunderland* Director
- -------------------------------------
(Jack B. Sunderland)
Stephen B. Swensrud* Director
- -------------------------------------
(Stephen B. Swensrud)
J. Thomas Touchton* Director
- -------------------------------------
(J. Thomas Touchton)
/s/ Terry K. Glenn
*By _________________________________ April 23, 1997
Terry K. Glenn
Attorney-in-Fact
</TABLE>
C-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
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> 001
<NAME> MERRILL LYNCH SERIES FUND - BALANCED PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 96184564
<INVESTMENTS-AT-VALUE> 107747276
<RECEIVABLES> 671345
<ASSETS-OTHER> 5767
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 108424388
<PAYABLE-FOR-SECURITIES> 34841
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 65529
<TOTAL-LIABILITIES> 100370
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 86405078
<SHARES-COMMON-STOCK> 6866481
<SHARES-COMMON-PRIOR> 6437463
<ACCUMULATED-NII-CURRENT> 3524791
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6831437
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11562712
<NET-ASSETS> 108324018
<DIVIDEND-INCOME> 670385
<INTEREST-INCOME> 3255480
<OTHER-INCOME> 0
<EXPENSES-NET> (401072)
<NET-INVESTMENT-INCOME> 3524793
<REALIZED-GAINS-CURRENT> 6863677
<APPREC-INCREASE-CURRENT> 5814120
<NET-CHANGE-FROM-OPS> 16202590
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1769755)
<DISTRIBUTIONS-OF-GAINS> (10156193)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 568078
<NUMBER-OF-SHARES-REDEEMED> (1028393)
<SHARES-REINVESTED> 889333
<NET-CHANGE-IN-ASSETS> 9471266
<ACCUMULATED-NII-PRIOR> 1769753
<ACCUMULATED-GAINS-PRIOR> 10123953
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 338129
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 401072
<AVERAGE-NET-ASSETS> 103595511
<PER-SHARE-NAV-BEGIN> 15.36
<PER-SHARE-NII> .51
<PER-SHARE-GAIN-APPREC> 1.76
<PER-SHARE-DIVIDEND> (.27)
<PER-SHARE-DISTRIBUTIONS> (1.58)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.78
<EXPENSE-RATIO> .39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> MERRILL LYNCH SERIES FUND - CAPITAL STOCK PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 280146887
<INVESTMENTS-AT-VALUE> 335962996
<RECEIVABLES> 607685
<ASSETS-OTHER> 52719
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 336623400
<PAYABLE-FOR-SECURITIES> 511352
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 309613
<TOTAL-LIABILITIES> 820965
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 237484094
<SHARES-COMMON-STOCK> 12532532
<SHARES-COMMON-PRIOR> 12457413
<ACCUMULATED-NII-CURRENT> 6263968
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 36235843
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 55818530
<NET-ASSETS> 335802435
<DIVIDEND-INCOME> 4740233
<INTEREST-INCOME> 780567
<OTHER-INCOME> 0
<EXPENSES-NET> (1258031)
<NET-INVESTMENT-INCOME> 4262769
<REALIZED-GAINS-CURRENT> 38099176
<APPREC-INCREASE-CURRENT> 21822217
<NET-CHANGE-FROM-OPS> 64184162
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2802893)
<DISTRIBUTIONS-OF-GAINS> (14170818)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1321032
<NUMBER-OF-SHARES-REDEEMED> (2028833)
<SHARES-REINVESTED> 782920
<NET-CHANGE-IN-ASSETS> 46106366
<ACCUMULATED-NII-PRIOR> 2458189
<ACCUMULATED-GAINS-PRIOR> 14653320
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1059444
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1258031
<AVERAGE-NET-ASSETS> 309111186
<PER-SHARE-NAV-BEGIN> 23.25
<PER-SHARE-NII> .33
<PER-SHARE-GAIN-APPREC> 4.57
<PER-SHARE-DIVIDEND> (.22)
<PER-SHARE-DISTRIBUTIONS> (1.14)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 26.79
<EXPENSE-RATIO> .41
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 003
<NAME> MERRILL LYNCH SERIES FUND - GLOBAL STRATEGY PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 234732190
<INVESTMENTS-AT-VALUE> 247363367
<RECEIVABLES> 1987567
<ASSETS-OTHER> 95643
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 249446577
<PAYABLE-FOR-SECURITIES> 122418
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 819509
<TOTAL-LIABILITIES> 941927
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 199230229
<SHARES-COMMON-STOCK> 14246948
<SHARES-COMMON-PRIOR> 13838863
<ACCUMULATED-NII-CURRENT> 9377194
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 27330077
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12567150
<NET-ASSETS> 248504650
<DIVIDEND-INCOME> 3736314
<INTEREST-INCOME> 4228618
<OTHER-INCOME> 0
<EXPENSES-NET> (1130509)
<NET-INVESTMENT-INCOME> 6834423
<REALIZED-GAINS-CURRENT> 29453287
<APPREC-INCREASE-CURRENT> (9041625)
<NET-CHANGE-FROM-OPS> 27246085
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7598726)
<DISTRIBUTIONS-OF-GAINS> (8739339)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1636636
<NUMBER-OF-SHARES-REDEEMED> (2283300)
<SHARES-REINVESTED> 1054749
<NET-CHANGE-IN-ASSETS> 15975066
<ACCUMULATED-NII-PRIOR> 8036323
<ACCUMULATED-GAINS-PRIOR> 8721303
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 831747
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1130509
<AVERAGE-NET-ASSETS> 254041904
<PER-SHARE-NAV-BEGIN> 16.80
<PER-SHARE-NII> .47
<PER-SHARE-GAIN-APPREC> 1.35
<PER-SHARE-DIVIDEND> (.55)
<PER-SHARE-DISTRIBUTIONS> (.63)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.44
<EXPENSE-RATIO> .45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 004
<NAME> MERRILL LYNCH SERIES FUND - GROWTH STOCK PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 279037999
<INVESTMENTS-AT-VALUE> 332549050
<RECEIVABLES> 614689
<ASSETS-OTHER> 12460
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 333176199
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 153170
<TOTAL-LIABILITIES> 153170
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 215467290
<SHARES-COMMON-STOCK> 10146437
<SHARES-COMMON-PRIOR> 8660317
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 53511051
<NET-ASSETS> 333023029
<DIVIDEND-INCOME> 2819347
<INTEREST-INCOME> 773393
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<EXPENSES-NET> (1087811)
<NET-INVESTMENT-INCOME> 2504929
<REALIZED-GAINS-CURRENT> 61578644
<APPREC-INCREASE-CURRENT> 17653072
<NET-CHANGE-FROM-OPS> 81736645
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<DISTRIBUTIONS-OF-INCOME> (1545546)
<DISTRIBUTIONS-OF-GAINS> (26338683)
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<NUMBER-OF-SHARES-SOLD> 2701024
<NUMBER-OF-SHARES-REDEEMED> (2362876)
<SHARES-REINVESTED> 1147972
<NET-CHANGE-IN-ASSETS> 92357324
<ACCUMULATED-NII-PRIOR> 1522711
<ACCUMULATED-GAINS-PRIOR> 26322633
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 1087811
<AVERAGE-NET-ASSETS> 291846225
<PER-SHARE-NAV-BEGIN> 27.79
<PER-SHARE-NII> .24
<PER-SHARE-GAIN-APPREC> 8.01
<PER-SHARE-DIVIDEND> (.18)
<PER-SHARE-DISTRIBUTIONS> (3.04)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 32.82
<EXPENSE-RATIO> .37
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 005
<NAME> MERRILL LYNCH SERIES FUND - HIGH YIELD PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 142846467
<INVESTMENTS-AT-VALUE> 142720966
<RECEIVABLES> 2417766
<ASSETS-OTHER> 6627
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<TOTAL-ASSETS> 145145359
<PAYABLE-FOR-SECURITIES> 0
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<OTHER-ITEMS-LIABILITIES> 1380981
<TOTAL-LIABILITIES> 1380981
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<PAID-IN-CAPITAL-COMMON> 146334959
<SHARES-COMMON-STOCK> 15642567
<SHARES-COMMON-PRIOR> 13511531
<ACCUMULATED-NII-CURRENT> 1154388
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<ACCUMULATED-NET-GAINS> (3599468)
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<ACCUM-APPREC-OR-DEPREC> (125501)
<NET-ASSETS> 143764378
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<NUMBER-OF-SHARES-SOLD> 9413507
<NUMBER-OF-SHARES-REDEEMED> (8676667)
<SHARES-REINVESTED> 1394196
<NET-CHANGE-IN-ASSETS> 20120983
<ACCUMULATED-NII-PRIOR> 1062860
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<GROSS-EXPENSE> 515547
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<PER-SHARE-NAV-BEGIN> 9.15
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<PER-SHARE-NAV-END> 9.19
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 006
<NAME> MERRILL LYNCH SERIES FUND - INTERMEDIATE GOVERNMENT BOND PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-01-1997
<INVESTMENTS-AT-COST> 215660483
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<RECEIVABLES> 3977293
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 223901301
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<OTHER-ITEMS-LIABILITIES> 109817
<TOTAL-LIABILITIES> 1689766
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<PAID-IN-CAPITAL-COMMON> 225703204
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<ACCUMULATED-NII-CURRENT> 1285094
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<ACCUMULATED-NET-GAINS> (9029713)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4252950
<NET-ASSETS> 222211535
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15233865
<OTHER-INCOME> 46440
<EXPENSES-NET> (799276)
<NET-INVESTMENT-INCOME> 14481029
<REALIZED-GAINS-CURRENT> 1693013
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<NET-CHANGE-FROM-OPS> 17497159
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<DISTRIBUTIONS-OF-INCOME> (14518659)
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<NUMBER-OF-SHARES-SOLD> 1009170
<NUMBER-OF-SHARES-REDEEMED> (2601561)
<SHARES-REINVESTED> 1343712
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<ACCUMULATED-NII-PRIOR> 1322724
<ACCUMULATED-GAINS-PRIOR> (10722726)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 707215
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<GROSS-EXPENSE> 799276
<AVERAGE-NET-ASSETS> 214893432
<PER-SHARE-NAV-BEGIN> 10.93
<PER-SHARE-NII> .73
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<PER-SHARE-DIVIDEND> (.73)
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<PER-SHARE-NAV-END> 11.08
<EXPENSE-RATIO> .37
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 007
<NAME> MERRILL LYNCH SERIES FUND - LONG TERM CORPORATE BOND PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 120121067
<INVESTMENTS-AT-VALUE> 122713156
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<OTHER-ITEMS-LIABILITIES> 81453
<TOTAL-LIABILITIES> 81453
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<SHARES-COMMON-PRIOR> 10234402
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<ACCUMULATED-NET-GAINS> (1640033)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2592089
<NET-ASSETS> 124746098
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8606736
<OTHER-INCOME> 10737
<EXPENSES-NET> (453787)
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<REALIZED-GAINS-CURRENT> 280864
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<NET-CHANGE-FROM-OPS> 10110555
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8076935)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1068327
<NUMBER-OF-SHARES-REDEEMED> (1365149)
<SHARES-REINVESTED> 705889
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<ACCUMULATED-NII-PRIOR> 725913
<ACCUMULATED-GAINS-PRIOR> (1920897)
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<GROSS-ADVISORY-FEES> 389795
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<GROSS-EXPENSE> 453787
<AVERAGE-NET-ASSETS> 118762067
<PER-SHARE-NAV-BEGIN> 11.53
<PER-SHARE-NII> .79
<PER-SHARE-GAIN-APPREC> .18
<PER-SHARE-DIVIDEND> (.78)
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<PER-SHARE-NAV-END> 11.72
<EXPENSE-RATIO> .38
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 008
<NAME> MERRILL LYNCH SERIES FUND- MONEY RESERVE PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 531748318
<INVESTMENTS-AT-VALUE> 531757850
<RECEIVABLES> 5157651
<ASSETS-OTHER> 30325
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 536945826
<PAYABLE-FOR-SECURITIES> 9676622
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1551843
<TOTAL-LIABILITIES> 11228465
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 525707829
<SHARES-COMMON-STOCK> 525707829
<SHARES-COMMON-PRIOR> 557719795
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9532
<NET-ASSETS> 525717361
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30761655
<OTHER-INCOME> 0
<EXPENSES-NET> (1933936)
<NET-INVESTMENT-INCOME> 28827719
<REALIZED-GAINS-CURRENT> 25403
<APPREC-INCREASE-CURRENT> 39664
<NET-CHANGE-FROM-OPS> 28892786
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (28827719)
<DISTRIBUTIONS-OF-GAINS> (25403)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 233564379
<NUMBER-OF-SHARES-REDEEMED> (294429809)
<SHARES-REINVESTED> 28853463
<NET-CHANGE-IN-ASSETS> (31972303)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1777662
<INTEREST-EXPENSE> 166
<GROSS-EXPENSE> 1933936
<AVERAGE-NET-ASSETS> 544475727
<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> 009
<NAME> MERRILL LYNCH SERIES FUND - MULTIPLE STRATEGY PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1171806222
<INVESTMENTS-AT-VALUE> 1322665472
<RECEIVABLES> 8916404
<ASSETS-OTHER> 175284
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1331757160
<PAYABLE-FOR-SECURITIES> 555000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1671156
<TOTAL-LIABILITIES> 2226156
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 999205535
<SHARES-COMMON-STOCK> 70102544
<SHARES-COMMON-PRIOR> 70705552
<ACCUMULATED-NII-CURRENT> 39812711
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 139724425
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 150788333
<NET-ASSETS> 1329531004
<DIVIDEND-INCOME> 14690338
<INTEREST-INCOME> 24322209
<OTHER-INCOME> 40997
<EXPENSES-NET> (4956327)
<NET-INVESTMENT-INCOME> 34097217
<REALIZED-GAINS-CURRENT> 144713797
<APPREC-INCREASE-CURRENT> 46068495
<NET-CHANGE-FROM-OPS> 224879509
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (20339088)
<DISTRIBUTIONS-OF-GAINS> (64589169)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 812025
<NUMBER-OF-SHARES-REDEEMED> (6793644)
<SHARES-REINVESTED> 5378611
<NET-CHANGE-IN-ASSETS> 118346125
<ACCUMULATED-NII-PRIOR> 21709430
<ACCUMULATED-GAINS-PRIOR> 63944949
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4235421
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4956327
<AVERAGE-NET-ASSETS> 1286358606
<PER-SHARE-NAV-BEGIN> 17.13
<PER-SHARE-NII> .47
<PER-SHARE-GAIN-APPREC> 2.57
<PER-SHARE-DIVIDEND> (.29)
<PER-SHARE-DISTRIBUTIONS> (.91)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.97
<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 - NATURAL RESOURCES PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 19044491
<INVESTMENTS-AT-VALUE> 17172137
<RECEIVABLES> 365153
<ASSETS-OTHER> 1450
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17538740
<PAYABLE-FOR-SECURITIES> 164675
<SENIOR-LONG-TERM-DEBT> 22126
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 186801
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20758264
<SHARES-COMMON-STOCK> 2137834
<SHARES-COMMON-PRIOR> 2724074
<ACCUMULATED-NII-CURRENT> 339424
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1873044)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1872705)
<NET-ASSETS> 17351939
<DIVIDEND-INCOME> 392030
<INTEREST-INCOME> 59274
<OTHER-INCOME> 0
<EXPENSES-NET> (105098)
<NET-INVESTMENT-INCOME> 346206
<REALIZED-GAINS-CURRENT> 1502159
<APPREC-INCREASE-CURRENT> (3952888)
<NET-CHANGE-FROM-OPS> (2104523)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (188225)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 808890
<NUMBER-OF-SHARES-REDEEMED> (1415905)
<SHARES-REINVESTED> 20775
<NET-CHANGE-IN-ASSETS> (7677501)
<ACCUMULATED-NII-PRIOR> 188057
<ACCUMULATED-GAINS-PRIOR> (3703364)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 76282
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 123302
<AVERAGE-NET-ASSETS> 21006243
<PER-SHARE-NAV-BEGIN> 9.19
<PER-SHARE-NII> .14
<PER-SHARE-GAIN-APPREC> (1.14)
<PER-SHARE-DIVIDEND> (.07)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.12
<EXPENSE-RATIO> .59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
Exhibit 99.5b
SUB - ADVISORY AGREEMENT
AGREEMENT made as of the 28 day of January, 1997, by and between FUND ASSET
MANAGEMENT, L.P., a Delaware limited partnership (hereinafter referred to as
"FAM"), 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.").
WITNESSETH:
WHEREAS, MERRILL LYNCH SERIES FUND, INC. (the "Fund") is a Maryland
corporation engaged in business as a diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended
(hereinafter referred to as the "Investment Company Act"); and
WHEREAS, FAM 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 regulated by 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, FAM has entered into an Investment Advisory Agreement (the
"Agreement") dated September 8, 1980, pursuant to which FAM provides management
and investment and advisory services to the Fund; and
<PAGE>
WHEREAS, MLAM U.K. is willing to provide investment advisory services to
FAM 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 FAM hereby agree as follows:
ARTICLE I
Duties of MLAM U.K.
-------------------
FAM hereby employs MLAM U.K. to act as investment adviser to FAM and to
furnish, or arrange for affiliates to furnish, the investment advisory services
described below, subject to the broad supervision of FAM 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. FAM
and its affiliates shall for all purposes herein be deemed a Non-private
Customer 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 FAM and shall
provide FAM 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 make recommendations from time to time as to which
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund shall be held in the various securities in which the
2
<PAGE>
Fund 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
Fund's investment objective, 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 FAM or the Fund, nor will MLAM
U.K. be the registered holder of the registered investments of FAM 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 and shall
3
<PAGE>
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., FAM shall pay to MLAM U.K. a fee in an amount to be determined from
time to time by FAM and MLAM U.K. but in no event in excess of the amount that
FAM actually receives for providing services to the Fund pursuant to the
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 FAM contemplated hereby and directors,
officers and employees of MLAM U.K. and such affiliates.
4
<PAGE>
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 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. FAM has the right to obtain
from MLAM U.K. a copy of the IMRO complaints procedure and to approach IMRO and
the Investment Ombudsman 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
5
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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 of 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.
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 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 FAM 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 Agreement. Any termination shall be
without prejudice to the completion of transactions already initiated.
6
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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 or voting on
such approval.
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.
7
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
FUND ASSET MANAGEMENT, L.P.
By
--------------------------
Title
MERRILL LYNCH ASSET MANAGEMENT U.K.
LIMITED
By
--------------------------
Title
8
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EXHIBIT 99.11
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Series Fund, Inc.:
We consent to the use in Post-Effective Amendment No. 20 to Registration
Statement No. 2-69062 of our report dated February 20, 1998 appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the caption "Financial Highlights"
appearing in the Prospectus, which also is a part of such Registration
Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Princeton, New Jersey
April 23, 1998