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MERRILL LYNCH SERIES FUND, INC.
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THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
US TREASURY SECURITIES, SERIES A, B, C, D, E,
F, G, H, I, J AND K
1998 ANNUAL REPORT
DECEMBER 31, 1998
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MERRILL LYNCH SERIES FUND, INC.
Annual Report
December 31, 1998
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DEAR SHAREHOLDER:
We are pleased to submit this annual report for Merrill Lynch Series Fund, Inc.,
in which we provide a fiscal year in review of each Portfolio and outline our
views on the investment environment. Performance information for each Portfolio
in Merrill Lynch Series Fund, Inc., excluding the Money Reserve Portfolio, can
be found in the tables on pages 11-16 of this report to shareholders.
BALANCED PORTFOLIO
As of December 31, 1998, asset allocation of Balanced Portfolio was: US stocks,
54% of net assets; US bonds, 39%; and cash reserves, 7%.
During the fourth quarter of 1998, a strong rebound in the US equity market
offset the significant correction that took place during the previous three
months. Throughout the fiscal year ended December 31, 1998, the US equity sector
had a positive impact on the Portfolio's total return. However, the US stock
market was characterized by significant outperformance for a narrow group of
large-capitalization equities. Although we increased our representation in
equities of this type during the fourth quarter, the Portfolio was underweighted
for much of 1998 in this narrow group of common stocks that dominated the
performance of the benchmark Standard & Poor's 500 (S&P 500) Index. As a result,
our equity holdings did not perform as well as the S&P 500 Index. While the
total return on US bonds lagged that of US equities for 1998 as a whole, the
Portfolio's fixed-income commitments positively contributed to overall
performance, particularly in the third quarter of 1998 when there was a
significant correction for the US stock market.
Beginning in September 1998, a shift toward an increasingly accommodative
monetary policy by the Federal Reserve Board led us to become more positive
toward US equities. After reducing the Portfolio's allocation to US equities
from 58% of net assets on June 30, 1998 to 46% as of September 30, 1998, the
weighting in US common stocks was expanded to 54% of net assets by December 31,
1998. In increasing our US equity exposure, we emphasized the shares of
companies that we believed offered a high degree of earnings visibility through
1999 despite an expected slowdown in economic activity. New positions included
commitments in the technology sector, such as Intel Corporation, Microsoft
Corporation and Motorola Inc., and in healthcare through Johnson & Johnson. As
of December 31, 1998, consumer staples, technology and financial services
represented the largest sector weightings among our US equity commitments.
Over the six-month period ended December 31, 1998, we expanded the Portfolio's
commitment to US bonds from 31% of net assets to 39%. The duration of the bond
holdings was unchanged, averaging 5.2 years on June 30, 1998 and December 31,
1998. The easing of the crisis atmosphere in global financial markets during the
fourth quarter of 1998 reduced the appeal of US fixed-income securities as
"safe-haven" investments. However, we believe that the overall trend in
intermediate-term and longer-term US interest rates is likely to continue
downward in coming months, reflecting the lack of inflationary pressure in the
US economy.
CAPITAL STOCK PORTFOLIO
As of December 31, 1998, the asset allocation for Capital Stock Portfolio was:
US stocks, 89% of net assets; and foreign stocks, 11%.
The maintenance of a relatively low cash position throughout much of 1998 proved
to be beneficial to the Portfolio's overall performance. Despite a significant
correction in the US stock market during the third quarter of 1998, a strong
rebound during the remainder of the year resulted in the fourth consecutive year
of exceptional returns for US equities. However, the US stock market was
characterized by significant outperformance for a narrow group of
large-capitalization equities. During the fourth quarter, we increased our
representation in equities of this type, although the Portfolio was
underweighted for much of 1998 in this narrow group of common stocks that
dominated the performance of the
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MERRILL LYNCH SERIES FUND, INC.
Annual Report
December 31, 1998 (Continued)
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unmanaged benchmark Standard & Poor's 500 Index. In the foreign equity sector,
the overweighting of European equities had a positive impact on performance,
since European equity markets outperformed Japan and the majority of equity
markets during 1998. However, as was the case in the United States, a narrow
group of larger-capitalization equities significantly outperformed the European
markets as a whole, and the Portfolio was underweighted in these equities during
much of 1998.
With a US equity allocation of 76% of net assets at June 30, 1998, the
Portfolio's weighting in US common stocks was expanded to 89% of net assets by
December 31, 1998. Beginning in September 1998, a shift toward an increasingly
accommodative monetary policy by the Federal Reserve Board led us to become more
positive toward US equities. In increasing our US equity exposure, we emphasized
the shares of companies that we believed offered a high degree of earnings
visibility through 1999 despite an expected slowdown in economic activity. New
positions in the Portfolio included commitments in the technology sector, such
as Intel Corporation, Microsoft Corporation and Motorola Inc., and in healthcare
through Johnson & Johnson. As of December 31, 1998, consumer staples, technology
and financial services represented the largest sector weightings among our US
equity commitments.
Over the six-month period ended December 31, 1998, we reduced the Portfolio's
commitment to foreign equities from 20% of net assets to 11%. We continued to
limit representation to companies that we believe are undervalued based on
criteria such as historical price/book values ratios and price/earnings ratios.
The majority of our equity commitments are in European companies, with a
position in Canada through Teleglobe, Inc. and in Singapore through Flextronics
International Ltd.
GLOBAL STRATEGY PORTFOLIO
As of December 31, 1998, the asset allocation for Global Strategy Portfolio was:
US stocks, 40% of net assets; foreign stocks, 27%; US bonds, 14%; foreign bonds,
18%; and cash reserves, 1%.
During the fourth quarter of 1998, a strong rebound in the US and foreign equity
markets offset the significant corrections that took place in the previous three
months. Throughout the fiscal year ended December 31, 1998, US equities again
provided the highest total returns relative to foreign equities and US and
foreign fixed-income securities. Consequently, our decision to increase US
equity representation during 1998 at the expense of foreign equities and cash
reserves had a positive impact on overall performance. In the foreign equity
sector, the overweighting of Europe relative to Japan and emerging markets had a
favorable effect on performance as European equity markets outperformed Japan
and the majority of emerging markets during the year. However, both the US and
European stock markets were characterized by significant outperformance for a
narrow group of large-capitalization equities. During the fourth quarter of
1998, we increased our representation in equities of this type, although the
Portfolio was underweighted for much of 1998 in those equities that dominated
the performance of the unmanaged benchmark Standard & Poor's 500 Index and the
unmanaged Morgan Stanley Capital International Europe, Australia, Far East Index
(MSCI EAFE) for the year. Our US and foreign bond commitments positively
contributed to overall performance, particularly in the third quarter of 1998
when there was significant US and foreign equity markets weakness.
Beginning in September 1998, a shift toward an increasingly accommodative
monetary policy by the Federal Reserve Board led us to become more positive
toward US equities. Consequently, we increased the Portfolio's allocation to US
common stocks from 30% of net assets to 40% during the six months ended December
31, 1998. In increasing our US equity exposure, we emphasized the shares of
companies that we believed could offer a high degree of earnings visibility
through 1999 despite an expected slowdown in economic activity. New positions in
the Portfolio included commitments in the technology sector, such as Intel
Corporation, Microsoft Corporation and Motorola Inc., and, in healthcare,
through Johnson & Johnson. As of December 31, 1998, consumer staples, technology
and financial services represented the largest sector weightings among our US
equity commitments.
2
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MERRILL LYNCH SERIES FUND, INC.
Annual Report
December 31, 1998 (Continued)
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During the six-month period ended December 31, 1998, we reduced our foreign
equity weighting from 43% of net assets to 27%. Also, we continued to emphasize
European equities as well as focus on companies with predictable earnings
streams where we believed that the risk of earnings disappointment seemed low
despite slower economic growth. In recent months, we increased our
representation in such industries as telecommunications, telecommunications
equipment, food and healthcare. Our commitment to Japanese equities remained
underweighted relative to the MSCI EAFE Index. We remained cautious toward
emerging markets, which led us to eliminate our remaining commitment to Latin
American equities during the second half of 1998.
Within the US bond sector, the average duration was 5.6 years as of December 31,
1998 as compared to 5.3 years as of June 30, 1998. The easing of the crisis
atmosphere in global financial markets during the fourth quarter of 1998 reduced
the appeal of US fixed-income securities as a "safe-haven" investment. However,
we believed that the overall trend in intermediate-term and longer-term US
interest rates is likely to continue downward in the coming months, reflecting
the lack of inflationary pressures in the US economy. Among the Portfolio's
foreign bond commitments, we eliminated a position in Swedish bonds during the
second half of 1998, limiting our foreign bond commitments to Germany and the
United Kingdom. We continued to hedge our UK stock and bond positions back into
US dollars as we look for weakness in the British pound in the coming months.
However, we have eliminated our hedges on Continental European equities and
bonds as well as Japanese equities because we believe an easier monetary policy
by the Federal Reserve Board could lead to near-term weakness in the US dollar
compared to these currencies.
GROWTH STOCK PORTFOLIO
For the fiscal year ended December 31, 1998, Growth Stock Portfolio had a total
return of +38.18%. This compares to total returns of +28.58% for the unmanaged
Standard & Poor's 500 (S&P 500) Index and +23.01% for the unmanaged Lipper
Growth Funds Average for the same 12-month period.
At December 31, 1998, nine of the Portfolio's top ten equity holdings had stock
price appreciation for the fiscal year well in excess of the total returns for
the S&P 500 Index as well as the Lipper Growth Funds Average. The best
comparative investment returns were produced by companies in retail specialty,
telecommunications, communications equipment, computer and pharmaceutical
industries which, as a percentage of net assets at December 31, 1998, were equal
to 9.5%, 11.3%, 5.1%, 4.7% and 8.2%, respectively.
During the 12-month period ended December 31, 1998, the Portfolio's overall
strong absolute and relative performance can be attributed to our industry and
stock selection. Throughout the year, the Portfolio's overweighted positions in
the retailing and specialty retailing sectors reflected our positive outlook
toward real and nominal growth in consumer spending, which proved to be the
leading sector of the US economy in 1998. Also, selective investments in the
communications equipment, telecommunications, computer, electronics, computer
software and pharmaceutical industries contributed meaningfully to our
outperformance relative to the S&P 500 Index. During the 12-month period, we
continued to follow a policy of being fully invested in equities with relatively
low cash reserves.
Looking ahead, our investment focus will continue to be on high-quality,
large-capitalization global growth companies that we anticipate may have
potential for above-average long-term earnings growth and stock valuations that
appear reasonable relative to projected growth rates in earnings.
HIGH YIELD PORTFOLIO
During a year of exceptional gyrations in global financial markets, the
high-yield market fared poorly. Events which contributed to 1998's volatility
included Russia's default on its sovereign debt, the economic meltdown in many
Pacific Rim nations, most notably Indonesia, and the collapse and bailout of a
prominent US hedge fund. After a massive sell-off and flight to quality in the
third quarter of 1998,
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MERRILL LYNCH SERIES FUND, INC.
Annual Report
December 31, 1998 (Continued)
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three successive interest rate cuts by the Federal Reserve Board in the fall
boosted investor confidence in both the equity and fixed-income markets. The
high-yield markets rebounded in the fourth quarter, particularly in the month of
November, but ended up lagging the strong returns posted by the US Treasury and
equity markets. Specifically, the unmanaged Credit Suisse First Boston High
Yield Index registered a total return of +0.58% for the year, compared to the
returns of the US Treasury of +12.25% and the Standard & Poor's 500 Index's
remarkable advance of 28.58%.
During the 12-month period ended December 31, 1998, a record volume of new
issues came to the high-yield market during the year, despite a month-long
hiatus in the third quarter caused by soaring spreads and cash outflows from
mutual funds. New issues totaled $138.9 billion (691 issues) for the year, up
moderately from 1997's total of $126.0 billion (706 issues). Credits in the
media/telecommunications sector were the most active, accounting for close to
40% of new issue volume. Many of the issuers in this capital-hungry sector are
build-out stage enterprises with little or no cash flow.
A recent study of corporate defaults by a major underwriter of high-yield bonds
revealed that the rate rose to 1.16% in 1998, up from 0.99% in 1997, but still
well below the historical 1977-1998 average of 2.30%. We would expect this
upward trend to continue in the new year, as 1998 saw an increasing percentage
of new issuance in the "B-" or lower category. Moreover, it marked the first
year since 1995 that rating-agency downgrades outnumbered upgrades. Finally, our
expectation of a softening economy in 1999 is also likely to contribute to the
uptick in defaults.
During the year ended December 31, 1998, the Portfolio had a total return of
- -5.19%. The Portfolio underperformed the Credit Suisse First Boston High Yield
Index, largely because of the Portfolio's heavier weightings in emerging
markets, which were pummeled by political and economic turmoil in Russia, Asia
and Latin America. Also, the Portfolio's performance was negatively affected by
our overweighted position in the energy sector, the worst-performing sector in
the Index. Deterioration in selected credits was also a factor.
Our holdings in emerging markets are mostly strong corporate credits with
significant positions in their home markets. Accordingly, we believe the default
risk on these securities is low. Oil prices were at a 12-year low in 1998, and
natural gas prices, day rates and rig utilization in the service sector have
also been weak. As a result, several of our energy bonds traded at distressed
levels. However, the number of private equity infusions and mergers that have
been announced in recent months is a positive sign. In that regard, investment
grade-rated Nabors Industries Inc., the largest US driller of land-based oil and
natural gas wells, announced in mid-January 1999 that it would acquire Pool
Energy Services Co., a Portfolio holding. Pool's bond shot up about ten points
on the news.
During the second half of 1998, we were cautious in our purchasing activity
because of liquidity concerns, particularly in the third quarter. In the primary
market, our major purchases included the bonds of Qwest Communications
International Inc., a multimedia communications company building a high-capacity
internet protocol-based fiber-optic network; Orange PLC, operator of a digital
wireless network in the United Kingdom and Ball Corp., the largest beverage can
producer in North America. Given their large equity capitalizations and strong
bond ratings, we view all three of these credits as core holdings. Furthermore,
these issues have performed quite well in the aftermarket.
In the secondary market, we added to our position in Orange PLC and established
positions in Chancellor Media Corp., a diversified media company that owns the
nation's largest group of radio stations, and P&L Coal Holdings Corp., the
largest private sector coal producer in the United States. We also regard these
recession-resistant credits as core holdings. We took advantage of the November
rally by trimming our cyclical holdings, and sold our WCI Steel Inc. and Terex
Corp. positions at attractive prices.
Looking ahead, we believe that the high-yield market in the first half of 1999
will continue to be volatile because of equity market fluctations,
political/economic news in emerging markets, concerns about corporate earnings
in the face of a slowing US economy, and possible supply/demand imbalances.
Nevertheless, we believe high-yield securities remain an attractive asset class.
Moreover, investors
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MERRILL LYNCH SERIES FUND, INC.
Annual Report
December 31, 1998 (Continued)
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appear to be discounting both a dramatic slowdown in the North American economy
and a sharp increase in default statistics. In our view, neither of these is
likely. Accordingly, we believe the high-yield market offers good value at
current levels. With a heavy new-issue calendar looming, we intend to
selectively add higher-quality, recession-resistant credits to the Portfolio.
At year-end 1998, communications and media remained our largest broad industry
category, totaling 36.7% of net assets. Of the more narrowly classified sectors,
the largest industries were: energy, 8.5% of net assets; domestic cable, 7.7%;
wireless communications (international paging and cellular), 5.6%; wireless
communications (domestic paging and cellular), 5.3%; and packaging, 5.2%. Non-US
bonds comprised 21.0% of the Portfolio, with emerging markets issues (primarily
Latin American corporates) accounting for 11.4% of net assets. At December 31,
1998, the average Portfolio maturity was seven years, seven months, and cash and
cash equivalents stood at 2.3% of net assets.
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
Although the overall trend in US interest rates has been toward a downward shift
in the entire Treasury yield curve for the year ended December 31, 1998, the
long end of the curve underperformed the front end with the five-year sector
recording the best overall performance. Specifically, the five-year sector fell
125 basis points (1.25%) during the year, compared to a 105 basis point and 80
basis point decline in the ten-year and 30-year sectors, respectively.
Similarly, all fixed-income markets exhibited a significant degree of
volatility, with yield spread relationships among the various types of bonds
dramatically widening during the third quarter of 1998 only to recoup much of
the widening during the fourth quarter. Federal agency securities likewise
exhibited dramatic swings in yield spread relationships, and agency callable
securities being among the most affected. Mortgage-backed securities (MBS) also
experienced some volatility as the strong performance in the US Treasury market
accelerated prepayment speeds.
For the 12-month period ended December 31, 1998, the Portfolio's total return
was +8.94%, compared to a total return of +9.85% for the unmanaged Merrill Lynch
US Treasury/Agency 3-Year -- 15-Year Index. With respect to overall performance,
the Portfolio fell short of the Index because of the smaller positions of US
Treasury securities and the underperformance of MBS compared to US Treasury
securities. Furthermore, the Portfolio had an overweighted position in agency
issues relative to the Index. Nevertheless, the Portfolio was able to recoup
much of the gap via an overweighted position in Federal National Mortgage
Association obligations and Federal Home Loan Mortgage Corporation reference
notes and an underweighted position in callable securities relative to the
Index.
Going forward, we expect the financial markets to remain extremely volatile with
liquidity remaining at a premium. We believe that the Federal Reserve Board will
not seek to alter monetary policy in the near term despite an economy that
remains extremely strong. Foremost, the Federal Reserve Board remains clearly
concerned about the overall state of the global economy as highlighted by the
difficult situation that Brazil is currently facing and the effect that higher
US interest rates would have on these economies. Furthermore, the inflation
horizon remains very clear, and should remain under control given the extent to
which the economy has evolved into a very efficient, technologically driven
system. One sector which we believe currently offers attractive investment
opportunity in this environment is mortgage-backed securities, and we anticipate
adding to our holdings going forward.
During 1998, the decision was made to change the Portfolio's benchmark to more
appropriately reflect the Portfolio's investment guidelines and management
policy. Specifically, the Portfolio will now follow a blended 3-year -- 15-year
Treasury and agency index that is comprised of 78% in US Treasury securities and
22% in Federal agency securities. The duration of the benchmark currently
approximates 4.0 years. The Portfolio also incorporated the utilization of
mortgage-backed securities into the Portfolio's investment strategy, and it is
anticipated that these securities will continue to play an important role in our
overall investment strategy.
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MERRILL LYNCH SERIES FUND, INC.
Annual Report
December 31, 1998 (Continued)
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LONG TERM CORPORATE BOND PORTFOLIO
Although the overall trend in US interest rates has been toward a downward shift
in the entire Treasury yield curve for the year ended December 31, 1998, the
long end of the curve underperformed the front end with the five-year sector
recording the best overall performance. Similarly, all fixed-income markets
exhibited a significant degree of volatility, with yield spread relationships
among the various types of bonds dramatically widening during the third quarter
of 1998 only to recoup much of the widening during the fourth quarter. With
respect to the investment-grade corporate bond market, yield spreads relative to
US Treasury securities were initially impacted by the significant increase in
new corporate issuance, followed by the overwhelming pressure that arose from
the global liquidity crisis and the deleveraging of financial markets. By
year-end, yield spread relationships had retraced by approximately 50%-75%.
For the 12-month period ended December 31, 1998, the Portfolio's total return
was +8.45%, compared to a total return of +8.72% for the unmanaged Merrill Lynch
Corporate Master Index. During the Portfolio's fiscal year, the Portfolio
maintained a 3%-5% position in US Treasury securities, a sector that
outperformed corporate bonds during the year. Industry selection within the
corporate market benefited the Portfolio as we underweighted those groups that
experienced the greatest amount of spread widening, including brokerage firms,
Yankee issues, money center banks, cyclicals and companies with significant
exposure to the Pacific Basin. During the year, the Portfolio's overall
performance was helped by its limited position (10% underweighted relative to
the Index) in BBB/Baa-rated corporate securities, a sector that produced the
lowest returns within the investment-grade universe. However, by the end of the
third quarter of 1998, the Portfolio increased its allocation to the BBB/Baa
sector given its attractive relative value. Conversely, overall performance was
somewhat negatively impacted by the underperformance of the Portfolio's holdings
of commercial mortgage-backed securities, home equity loans and other
asset-backed securities relative to corporate debt, although these securities
have recently performed better.
Going forward, we expect the financial markets to remain extremely volatile with
liquidity remaining at a premium. We believe that the Federal Reserve Board will
not seek to alter monetary policy in the near term despite an economy that
remains extremely strong. Foremost, the Federal Reserve Board remains clearly
concerned about the overall state of the global economy as highlighted by the
difficult situation that Brazil is currently facing and the effect that higher
US interest rates would have on these economies. Furthermore, the inflation
horizon remains very clear, and should remain under control given the extent to
which the economy has evolved into a very efficient, technologically driven
system. We expect corporate spreads to exhibit modest improvement into the
second quarter of 1999. However, we will hedge our investment outlook by
continuing to emphasize liquidity and high-quality issues in the investment
strategy process.
MONEY RESERVE PORTFOLIO
For the year ended December 31, 1998, Money Reserve Portfolio's net annualized
yield was 5.26%. For the six-month period ended December 31, 1998, Money Reserve
Portfolio's net annualized yield was 5.16%. The Portfolio's 7-day yield as of
December 31, 1998 was 4.95%. The average portfolio maturity was 69 days at
December 31, 1998, compared to 76 days at June 30, 1998.
For the year ended December 31, 1998, Money Reserve Portfolio maintained an
average life ranging from a low of 62 days to a high of 87 days. Throughout most
of the year, the Portfolio maintained an average life toward the higher end of
the allowed band. During the 12-month period, short-term interest rates rallied
over 100 basis points (1.00%).
Our constructive investment strategy that we implemented in early 1998 was based
primarily on the growing crisis in the overseas markets. Despite a relatively
strong domestic economy, we firmly believed that the Federal Reserve Board would
give precedence to the economic turmoil that occurred in Asia and eventually
spread to Russia. We took advantage of this situation by maintaining the
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MERRILL LYNCH SERIES FUND, INC.
Annual Report
December 31, 1998 (Continued)
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Portfolio's average life toward the higher end of our investment horizon. This
strategy proved to be effective as the Federal Reserve Board cut interest rates
in September, in mid-October and again in mid-November, each time by 25 basis
points.
Looking ahead, we believe that monetary policy will be driven more by economic
data than by global market considerations. While the economic picture is not
completely clear at present, we believe the economy is more likely to weaken
than strengthen by year-end 1999.
The Portfolio's composition at the end of December and as of our last report to
shareholders is detailed below.
<TABLE>
<CAPTION>
12/31/98 6/30/98
<S> <C> <C>
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Bank Notes...................................................................................... 15.3% 17.5%
Certificates of Deposit......................................................................... 1.0 0.9
Certificates of Deposit -- Yankee............................................................... -- 1.9
Commercial Paper................................................................................ 35.4 45.7
Corporate Notes................................................................................. 1.1 13.9
Funding Agreements.............................................................................. 3.3 2.6
Master Notes.................................................................................... 1.7 1.8
Medium-Term Notes............................................................................... 19.7 --
Repurchase Agreements........................................................................... 1.6 --
US Government, Agency & Instrumentality Obligations -- Discount................................. 6.7 0.1
US Government, Agency & Instrumentality Obligations -- Non-Discount............................. 14.0 15.2
Other Assets Less Liabilities................................................................... 0.2 0.4
----- -----
Total........................................................................................... 100.0% 100.0%
----- -----
----- -----
</TABLE>
MULTIPLE STRATEGY PORTFOLIO
As of December 31, 1998, the asset allocation for Multiple Strategy Portfolio
was: US stocks, 48% of net assets; foreign stocks, 16%; US bonds, 25%; foreign
bonds, 9%; and cash reserves, 1%.
During the fourth quarter of 1998, a strong rebound in the US and foreign equity
markets offset the significant corrections that took place in the previous three
months. Throughout the fiscal year ended December 31, 1998, US equities again
provided the highest total returns relative to foreign equities and US and
foreign fixed-income securities. Consequently, our decision to increase US
equity representation during 1998 at the expense of foreign equities and cash
reserves had a positive impact on overall performance. In the foreign equity
sector, the overweighting of Europe relative to Japan and emerging markets had a
favorable effect on performance as European equity markets outperformed Japan
and the majority of emerging markets during the year. However, both the US and
European stock markets were characterized by significant outperformance for a
narrow group of large-capitalization equities. During the fourth quarter of
1998, we increased our representation in equities of this type, although the
Portfolio was underweighted for much of 1998 in those equities that dominated
the performance of the unmanaged benchmark Standard & Poor's 500 Index and the
unmanaged Morgan Stanley Capital International Europe, Australia, Far East Index
(MSCI EAFE) for the year. Our US and foreign bond commitments positively
contributed to overall performance, particularly in the third quarter of 1998
when there was significant US and foreign equity markets weakness.
Beginning in September 1998, a shift toward an increasingly accommodative
monetary policy by the Federal Reserve Board led us to become more positive
toward US equities. Consequently, we increased the Portfolio's allocation to US
common stocks from 38% of net assets to 48% during the six months ended December
31, 1998. In increasing our US equity exposure, we emphasized the shares of
companies that we believed could potentially offer a high degree of earnings
visibility through 1999 despite an expected slowdown in economic activity. New
positions in the Portfolio included commitments in the technology sector, such
as Intel Corporation, Microsoft Corporation and
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MERRILL LYNCH SERIES FUND, INC.
Annual Report
December 31, 1998 (Continued)
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Motorola Inc., and, in healthcare, through Johnson & Johnson. As of December 31,
1998, consumer staples, technology and financial services represented the
largest sector weightings among our US equity commitments.
During the six-month period ended December 31, 1998, we reduced our foreign
equity weighting from 20% of net assets to 16%. Also, we continued to emphasize
European equities as well as focus on companies with predictable earnings
streams where the risk of earnings disappointment seemed low despite slower
economic growth. In recent months, we increased our representation in such
industries as telecommunications, telecommunications equipment, food and
healthcare. Our commitment to Japanese equities remained underweighted relative
to the MSCI EAFE Index. We remained cautious toward emerging markets, which led
us to eliminate our remaining commitment to Latin American equities during the
second half of 1998.
Within the US bond sector, the average duration was 5.7 years as of December 31,
1998 as compared to 5.3 years as of June 30, 1998. The easing of the crisis
atmosphere in global financial markets during the fourth quarter of 1998 reduced
the appeal of US fixed-income securities as a "safe-haven" investment. However,
the overall trend in intermediate-term and longer-term US interest rates is
likely to continue downward in coming months, reflecting the lack of
inflationary pressures in the US economy. Among the Portfolio's foreign bond
commitments, we eliminated a position in Swedish bonds during the second half of
1998, limiting our foreign bond commitments to Germany and the United Kingdom.
We continued to hedge our UK stock and bond positions back into US dollars as we
look for weakness in the British pound in the coming months. However, we have
eliminated our hedges on Continental European equities and bonds as well as
Japanese equities because we believe an easier monetary policy by the Federal
Reserve Board could lead to near-term weakness in the US dollar compared to
these currencies.
NATURAL RESOURCES PORTFOLIO
Throughout the six-months ended December 31, 1998, the share prices of natural
resource companies continued to be pressured by eroding commodity prices. In
early December, the CRB Index of 17 commodities reached a 21-year low. This
deflationary environment, now in its seventeenth month, posed continued
challenges for Natural Resources Portfolio. However, the total return generated
by the Portfolio continued to exceed that of the Lipper Natural Resource Funds'
average on a quarter and year-to-date basis. The primary factors driving the
improved relative performance were holdings benefiting from consolidation in the
metals and oil industries, as well as what we believe were higher relative cash
positions in our portfolio compared to other resource funds. The extremely mild
fall resulted in record natural gas storage levels that impacted gas-oriented
exploration and production stocks. In addition, while Asian stock markets have
recovered, we have not seen definitive signs of a rebound in Asian economies.
During the six months ended December 31, 1998, we continued to focus our efforts
on seeking companies with attractive valuations and strong financial positions,
since we believe that this is the best strategy we can follow until economic
conditions improve. At the same time, we hope that these same companies will
prove to be attractive consolidation candidates.
Throughout the six-month period ended December 31, 1998, the energy sector
provided mixed results. Oil prices slumped at the end of November, as
Organization of Petroleum Exporting Countries (OPEC) members failed to make
additional production cuts at their November meeting. In addition, Venezuela
appears to have significantly exceeded its oil production quota prior to its
recent national elections. We believe that industry analysts missed this excess
production as it was shipped in smaller tankers, and not the VLCC (Very Large
Crude Carriers) that are typically monitored. This resulted in crude prices
returning to the lows last seen in 1986. We were able to mitigate some of the
negative oil pricing effects by our sales of positions in British Petroleum, Co.
PLC and Amoco Corp. Index-related buying in Europe, which provided an
opportunity for the Portfolio to reduce these positions, had buoyed the shares
of both companies.
8
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Annual Report
December 31, 1998 (Continued)
- --------------------------------------------------------------------------------
The Portfolio also benefited from the announcement that Exxon Corporation would
seek to merge with Mobil Corporation. We believe that upon regulatory approval,
such a combination will provide substantial cost savings and consolidation
efficiencies. Given these factors and a significant arbitrage discount, we
decided to maintain our entire Mobil Corporation position. In fact, the initial
decline in Exxon Corporation shares brought the stock to a point where it traded
in-line with other major integrated oils in terms of its price/earnings
multiple. Given Exxon's record for capital discipline, we initiated a position
in the company, given the limited downside risk in the shares at that price.
However, the consolidation trend has not been universally favorable for the
Portfolio. Our holding in Total, S.A. suffered a 20% decline after it announced
its intention to acquire Petrofina. While we were disappointed with management's
explanation for the acquisition, the share price decline would seem to discount
any dilution from the transaction. Fortunately, we were able to reduce our
holding by 1% immediately after the acquisition was announced. The Portfolio
also reduced its position in Petro-Canada, and made a profitable trade in the
shares of Valero Energy Corp.
The unseasonably warm weather this fall worked against our positions in natural
gas-leveraged stocks. The industry injected additional gas into storage
throughout the month of November, which is typically the start of the storage
withdrawal season. Natural gas in storage reached levels 600 billion cubic feet
above those of 1997, and peaked at a record level exceeding 3 trillion cubic
feet. This surplus, combined with the delayed onset of the heating season, makes
it highly unlikely that storage will be drawn down to normal levels, or that gas
prices will compare favorably with year-ago levels. The shares of our
gas-leveraged oil and gas production stocks have declined in sympathy and trade
at levels that we believe discount the current environment. We remain committed
to our thesis that the natural gas industry will face increasingly tight
capacity utilization. The dramatically reduced exploration and development
activity expected next year should reinforce this trend, as budgets now being
announced by both major and independent energy concerns are down significantly
from 1998 levels. Given the short life of North American reserves, we believe
there is a high probability that higher gas prices will result by the heating
season of 1999--2000. We have concentrated our holdings in financially strong
companies, with reserve lives that are generally above the average of their
peers. We believe that we are well-positioned for an improved natural gas
environment. We continued to reduce positions in our oil service holdings. While
we had hoped that stocks oriented to deep-water drilling and construction would
be better positioned to weather expectations for low oil prices, the extent of
reduced drilling budgets clearly overwhelmed any positive fundamentals in the
group. They ultimately proved to be detrimental to the Portfolio's total return.
Throughout the period, the Portfolio continued to reduce its exposure to the
metals and mining sector. We reduced our holdings in Savage Resources Ltd. after
Savage received a takeover bid from Pasminco Ltd. The shares immediately rose to
a substantial premium to the offer price in anticipation of a potential higher
bidder, so we chose to sell the majority of our position at this premium price.
We also sold holdings in British Steel PLC and Sumitomo Metal Industries, Ltd.
in the steel sector. Steel order patterns and prices continued to erode with
excess global industry capacity. In addition, we were not optimistic that
recently announced trade sanctions will have a lasting positive impact for steel
companies, given the fungible nature of the commodity. We also sold the
remainder of our Rio Tinto PLC holding as we expected that negative commodity
pricing will ultimately affect the valuation of this bellwether stock in the
mining industry. We did increase our holding in Smurfit-Stone Container
Corporation in the paper and forest product area, since we expect the company to
be a prime beneficiary of reduced containerboard capacity.
The Portfolio continued to carry a high relative weighting in gold stocks,
despite our continued sales of many of the smaller exploration-oriented
holdings. The September rally in gold stocks, on a modest rebound of the gold
price, was sufficient to make gold the best-performing sector in our resource
universe. During the period of appreciation in the group, we sold three-quarters
of our position in Newmont Mining Corporation. Newmont's financial leverage has
been increasing, and some of its mines are nearing the end of their economic
lives. Gold has again failed to act as a safe haven during the recent Brazilian
turmoil. Despite the falling gold price, new supply continues to be developed.
9
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Annual Report
December 31, 1998 (Concluded)
- --------------------------------------------------------------------------------
Our investment in gold-mining stocks is the one exception to our investment
emphasis on industries subject to improving capacity utilization trends.
Moreover, we cannot determine any rational valuation support for gold-mining
stocks. In 1998, we invested in these stocks on the basis that fiscal stimulus
might be necessary to jump start world economies, and that depreciation of world
currencies might result in the reemergence of inflation. Our position in
gold-mining stocks did not materially hurt performance in 1998, since several of
our holdings rebounded from their late-1997 lows. However, our already
lackluster enthusiasm for gold continues to wane. As we find other natural
resource stocks that offer more visible appreciation potential and concrete
valuation support, we may further reduce our gold holdings.
The inability to generate a positive total return for the Portfolio during the
fiscal year was frustrating, but nearly unavoidable in the current environment.
The average total return for all funds in the Lipper Natural Resources universe
was -23.9%. Natural Resources Portfolio was able to exceed this measure by ten
percentage points. After the dismal environment of 1998, we are optimistic that
natural resource stocks are poised to generate positive returns in 1999. We
believe that our focus on seeking financially strong, attractively valued stocks
in industries that we believe are subject to improving capacity trends will
enable our investors to participate should these gains materialize.
IN CONCLUSION
We appreciate your investment in Merrill Lynch Series Fund, Inc., and we look
forward to sharing our investment outlook and strategies with you in our June
semi-annual report to shareholders.
Sincerely,
[SIGNATURE]
Terry K. Glenn
PRESIDENT
February 17, 1999
10
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Performance Information
December 31, 1998
- --------------------------------------------------------------------------------
RECENT PERFORMANCE RESULTS*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12 MONTH 6 MONTH
TOTAL RETURN TOTAL RETURN
<S> <C> <C>
- -------------------------------------------------------------------------------
BALANCED PORTFOLIO +13.45% + 2.21%
- -------------------------------------------------------------------------------
CAPITAL STOCK PORTFOLIO +15.56 + 0.75
- -------------------------------------------------------------------------------
GLOBAL STRATEGY PORTFOLIO + 9.49 - 1.23
- -------------------------------------------------------------------------------
GROWTH STOCK PORTFOLIO +38.18 +11.69
- -------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO - 5.19 - 7.88
- -------------------------------------------------------------------------------
INTERMEDIATE GOVERNMENT BOND PORTFOLIO + 8.94 + 5.47
- -------------------------------------------------------------------------------
LONG TERM CORPORATE BOND PORTFOLIO + 8.45 + 4.14
- -------------------------------------------------------------------------------
MULTIPLE STRATEGY PORTFOLIO +10.83 - 0.44
- -------------------------------------------------------------------------------
NATURAL RESOURCES PORTFOLIO -13.57 -11.37
- -------------------------------------------------------------------------------
</TABLE>
* Total investment returns are based on changes in net asset value for the
periods shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend/payable date.
Insurance-related fees and expenses are not reflected in these returns.
Past results shown should not be considered a representation of future
performance.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIVE YEARS TEN YEARS
YEAR ENDED ENDED ENDED
12/31/98 12/31/98 12/31/98
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
BALANCED PORTFOLIO +13.45% +11.13% +11.85%
- ----------------------------------------------------------------------------------------------
CAPITAL STOCK PORTFOLIO +15.56 +13.57 +14.37
- ----------------------------------------------------------------------------------------------
GLOBAL STRATEGY PORTFOLIO + 9.49 + 8.62 +10.95
- ----------------------------------------------------------------------------------------------
GROWTH STOCK PORTFOLIO +38.18 +22.72 +17.23
- ----------------------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO - 5.19 + 6.27 + 9.81
- ----------------------------------------------------------------------------------------------
INTERMEDIATE GOVERNMENT BOND PORTFOLIO + 8.94 + 6.53 + 8.84
- ----------------------------------------------------------------------------------------------
LONG TERM CORPORATE BOND PORTFOLIO + 8.45 + 6.78 + 9.32
- ----------------------------------------------------------------------------------------------
MULTIPLE STRATEGY PORTFOLIO +10.83 +11.00 +12.64
- ----------------------------------------------------------------------------------------------
NATURAL RESOURCES PORTFOLIO -13.57 - 0.01 + 3.05
- ----------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Total Investment Return Based on a $10,000 Investment
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund compared to
growth of an investment in the S&P 500 Index and a Weighted Index. Beginning and
ending values are:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STANDARD & POOR'S WEIGHTED
<S> <C> <C> <C>
Balanced Portfolio+ 500 Index++ Index+++
Dec-88 $10,000 $10,000 $10,000
Dec-89 $12,075 $13,168 $11,808
Dec-90 $12,265 $12,760 $12,372
Dec-91 $14,834 $16,647 $14,531
Dec-92 $15,823 $17,915 $15,469
Dec-93 $18,088 $19,721 $16,721
Dec-94 $17,314 $19,982 $16,855
Dec-95 $21,052 $27,490 $20,274
Dec-96 $23,106 $33,802 $22,338
Dec-97 $27,018 $45,079 $25,875
Dec-98 $30,652 $57,962 $29,664
</TABLE>
+ Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses. Balanced
Portfolio invests in a balanced portfolio of fixed-income and equity
securities.
++ This unmanaged broad-based index is comprised of common stocks.
+++ This unmanaged index, which is an equally weighted blend of the Three-Month
US Treasury Bill Index, the Merrill Lynch US Corporate & Government Master
Bond Index and the Standard & Poor's 500 Index, is comprised of US Treasury
bills maturing in up to 3 months, investment-grade bonds and common stocks.
Past performance is not predictive of future performance.
CAPITAL STOCK PORTFOLIO
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund compared to
growth of an investment in the S&P 500 Index. Beginning and ending values are:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STANDARD & POOR'S
CAPITAL STOCK PORTFOLIO+ 500 INDEX++
<S> <C> <C>
Dec-88 $10,000 $10,000
Dec-89 $13,020 $13,168
Dec-90 $13,099 $12,760
Dec-91 $16,905 $16,647
Dec-92 $17,322 $17,915
Dec-93 $20,269 $19,721
Dec-94 $19,231 $19,982
Dec-95 $23,218 $27,490
Dec-96 $27,058 $33,802
Dec-97 $33,138 $45,079
Dec-98 $38,294 $57,962
</TABLE>
+ Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses. 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.
++ This unmanaged broad-based index is comprised of common stocks.
Past performance is not predictive of future performance.
12
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Total Investment Return Based on a $10,000 Investment (Continued)
- --------------------------------------------------------------------------------
GLOBAL STRATEGY PORTFOLIO
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund compared to
growth of an investment in the Morgan Stanley World Index and a Weighted Index.
Beginning and ending values are:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MORGAN STANLEY WEIGHTED
<S> <C> <C> <C>
Capital International
Global Strategy Portfolio+ World Index++ Index+++
Dec-88 $10,000 $10,000 $10,000
Dec-89 $11,776 $11,661 $10,952
Dec-90 $12,484 $9,676 $11,527
Dec-91 $14,668 $11,446 $13,180
Dec-92 $15,108 $10,848 $13,236
Dec-93 $18,694 $13,269 $14,977
Dec-94 $18,391 $13,963 $15,981
Dec-95 $20,311 $16,856 $18,642
Dec-96 $23,110 $19,128 $19,628
Dec-97 $25,818 $22,143 $20,302
Dec-98 $28,268 $27,533 $23,680
</TABLE>
+ Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses. Global Strategy
Portfolio invests primarily in equity and fixed-income securities of issuers
located in the United States, Canada, Western Europe, the Far East and Latin
America.
++ This unmanaged market capitalization-weighted index, calculated by Morgan
Stanley Capital International, is comprised of a representative sampling of
stocks of large-, medium-, and small-capitalization companies in 22
countries, including the United States.
+++ This unmanaged index, which is an equally weighted blend of the MSCI World
Index, the Salomon Brothers World Government Bond Index, and the Salomon
Brothers World Money Market Index, is comprised of a representative sampling
of stocks of large-, medium-, and small-capitalization companies in 22
countries, and government bonds and money market securities in the major
markets, including the United States.
Past performance is not predictive of future performance.
GROWTH STOCK PORTFOLIO
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund compared to
growth of an investment in the S&P 500 Index. Beginning and ending values are:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STANDARD & POOR'S
GROWTH STOCK PORTFOLIO+ 500 INDEX++
<S> <C> <C>
Dec-88 $10,000 $10,000
Dec-89 $12,320 $13,168
Dec-90 $10,791 $12,760
Dec-91 $15,681 $16,647
Dec-92 $16,214 $17,915
Dec-93 $17,613 $19,721
Dec-94 $16,392 $19,982
Dec-95 $22,187 $27,490
Dec-96 $26,529 $33,802
Dec-97 $35,483 $45,079
Dec-98 $49,030 $57,962
</TABLE>
+ Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses. Growth Stock
Portfolio invests in a diversified portfolio of securities, primarily common
stocks, of aggressive growth companies that the Investment Adviser believes
have special investment value.
++ This unmanaged broad-based index is comprised of common stocks.
Past performance is not predictive of future performance.
13
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Total Investment Return Based on a $10,000 Investment (Continued)
- --------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund compared to
growth of an investment in the First Boston High Yield Index. Beginning and
ending values are:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CREDIT SUISSE
FIRST BOSTON
<S> <C> <C>
High Yield
High Yield Portfolio+ Index++
Dec-88 $10,000 $10,000
Dec-89 $10,508 $10,039
Dec-90 $9,580 $9,399
Dec-91 $13,199 $13,511
Dec-92 $15,921 $15,761
Dec-93 $18,805 $18,742
Dec-94 $18,451 $18,559
Dec-95 $21,610 $21,786
Dec-96 $24,272 $24,491
Dec-97 $26,879 $27,584
Dec-98 $25,484 $27,744
</TABLE>
+ Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses. High Yield
Portfolio invests principally in fixed-income securities, including corporate
bonds and notes, convertible securities and preferred stocks, that are rated
in the lower rating categories of the established rating services (Baa or
lower by Moody's and BBB or lower by S&P), or in unrated securities of
comparable quality.
++ This unmanaged market-weighted index is comprised of high-yield debt
securities rated BBB or lower.
Past performance in not predictive of future performance.
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund compared to
growth of an investment in the ML G402 Index. Beginning and ending values are:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT MERRILL LYNCH US TREASURY COMPOSITE
BOND PORTFOLIO+ 7-10 YEARS INDEX++ INDEX+++
DEC-88 $10,000 $10,000 $10,000
<S> <C> <C> <C>
Dec-89 $11,346 $11,621 $11,440
Dec-90 $12,365 $12,583 $12,504
Dec-91 $14,290 $14,786 $14,543
Dec-92 $15,295 $15,931 $15,831
Dec-93 $17,008 $17,962 $17,287
Dec-94 $16,195 $16,949 $16,676
Dec-95 $19,251 $20,848 $19,731
Dec-96 $19,753 $21,132 $20,325
Dec-97 $21,416 $23,347 $22,141
Dec-98 $23,331 $26,240 $24,351
</TABLE>
+ Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses. Intermediate
Government Bond Portfolio invests only in securities issued or guaranteed by
the US Government and its agencies with a maximum maturity not to exceed 15
years.
++ This unmanaged index is comprised of intermediate-term US Government bond
and US Treasury securities maturing in 7 years-10 years.
+++ This unmanaged market-weighted composite index is a blended 3-year --
15-year Treasury and Agency Index comprised of Merrill Lynch US
Treasury/Agency 3-5 Years Index, Merrill Lynch US Treasury/Agency 5-10 Years
Index and Merrill Lynch US Treasury/Agency 10-15 Years Index.
Past performance is not predictive of future performance.
14
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Total Investment Return Based on a $10,000 Investment (Continued)
- --------------------------------------------------------------------------------
LONG TERM CORPORATE BOND PORTFOLIO
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund compared to
growth of an investment in the ML C0A0 Corporate Master Index. Beginning and
ending values are:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LONG TERM CORPORATE MERRILL LYNCH CORPORATE MASTER
BOND PORTFOLIO+ INDEX++
<S> <C> <C>
Dec-88 $10,000 $10,000
Dec-89 $11,396 $11,412
Dec-90 $12,288 $12,253
Dec-91 $14,379 $14,488
Dec-92 $15,536 $15,809
Dec-93 $17,557 $17,773
Dec-94 $16,657 $17,179
Dec-95 $20,098 $20,882
Dec-96 $20,655 $21,590
Dec-97 $22,472 $23,832
Dec-98 $24,371 $25,910
</TABLE>
+ Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses. Long Term
Corporate Bond Portfolio normally invests at least 80% of the value of its
assets in straight debt securities which have a rating within the three
highest grades as determined by Standard & Poor's Ratings Group (AAA, AA or
A) or Moody's Investors Service, Inc. (Aaa, Aa or A).
++ This unmanaged index is comprised of all corporate bonds rated BBB3 or
higher, of all maturities.
Past performance is not predictive of future performance.
MULTIPLE STRATEGY PORTFOLIO
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund compared to
growth of an investment in the S&P 500 Index and a Weighted Index. Beginning and
ending values are:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MULTIPLE STRATEGY STANDARD & POOR'S WEIGHTED
PORTFOLIO+ 500 INDEX++ INDEX+++
<S> <C> <C> <C>
Dec-88 $10,000 $10,000 $10,000
Dec-89 $12,131 $13,168 $12,282
Dec-90 $12,727 $12,760 $12,627
Dec-91 $16,032 $16,647 $15,564
Dec-92 $16,729 $17,915 $16,764
Dec-93 $19,516 $19,721 $18,543
Dec-94 $18,531 $19,982 $18,372
Dec-95 $21,783 $27,490 $23,527
Dec-96 $24,902 $33,802 $26,500
Dec-97 $29,676 $45,079 $32,144
Dec-98 $32,890 $57,962 $38,402
</TABLE>
+ Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses. Multiple
Strategy Portfolio, which uses a fully managed investment policy, invests in
equity, intermediate- and long-term debt and money market securities.
++ This unmanaged broad-based index is comprised of common stocks.
+++ This unmanaged index, which is an equally weighted blend of the S&P 500
Index and the Merrill Lynch US Corporate & Government Master Index, is
comprised of common stocks as well as investment-grade bonds.
Past performance is not predictive of future performance.
15
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Total Investment Return Based on a $10,000 Investment (Concluded)
- --------------------------------------------------------------------------------
NATURAL RESOURCES PORTFOLIO
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund compared to
growth of an investment in the S&P Industrials Index, the Consumer Price Index,
and the Lipper Natural Resources Average. Beginning and ending values are:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NATURAL RESOURCES STANDARD & POOR'S CONSUMER PRICE LIPPER NATURAL
PORTFOLIO+ INDUSTRIALS INDEX++ INDEX+++ RESOURCES AVERAGE++++
<S> <C> <C> <C> <C>
Dec-88 $10,000 $10,000 $10,000 $10,000
Dec-89 $12,523 $12,944 $10,464 $13,286
Dec-90 $11,749 $12,825 $11,118 $12,251
Dec-91 $11,945 $16,783 $11,449 $12,374
Dec-92 $12,107 $17,754 $11,788 $12,507
Dec-93 $13,517 $19,368 $12,119 $15,885
Dec-94 $13,636 $20,104 $12,442 $15,317
Dec-95 $15,302 $27,066 $12,757 $17,891
Dec-96 $17,555 $33,305 $13,129 $24,005
Dec-97 $15,629 $43,643 $13,353 $24,269
Dec-98 $13,508 $58,368 $13,618 $18,464
</TABLE>
+ Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses. Natural
Resources Portfolio invests 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 may also invest in debt.
++ This unmanaged index measures the pattern of movements of the common stocks
of large industrial companies and their weighting by capitalization.
+++ This unmanaged index is the most widely used index of price changes over
time and is designed to measure changes in the typical market basket of
purchases by urban consumers.
++++ This unmanaged index is comprised of all US mutual funds classified by
Lipper Analytical Services Inc. as natural resource-related funds.
Past performance is not predictive of future performance.
16
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Balanced Portfolio
Schedule of Investments as of December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRIES FACE AMOUNT BONDS & NOTES COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES $ 2,000,000 General Electric Capital Corp.,
8.75% due 5/21/2007................ $ 2,306,650 $ 2,441,480 2.0%
- -----------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY 1,049,223 Federal Home Loan Mortgage
OBLIGATIONS Corporation, 7.50% due
6/01/2007++........................ 1,069,224 1,079,700 0.9
Federal National Mortgage
Association:
4,770,000 5.625% due 3/15/2001............ 4,785,177 4,840,071 4.1
4,940,000 5.75% due 4/15/2003............. 4,969,655 5,071,207 4.3
6,410,000 5.75% due 2/15/2008............. 6,374,091 6,637,363 5.6
11,095,000 US Treasury Bonds, 6.625% due
2/15/2027.......................... 12,653,711 13,123,277 11.0
US Treasury Notes:
4,900,000 6% due 8/15/1999................ 4,913,398 4,939,788 4.1
8,000,000 6.125% due 9/30/2000............ 8,172,500 8,196,240 6.9
------------- ------------- -----
42,937,756 43,887,646 36.9
- -----------------------------------------------------------------------------------------------------------------------
TOTAL BONDS & NOTES 45,244,406 46,329,126 38.9
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES
HELD COMMON STOCKS
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE 23,600 GenCorp Inc......................... 687,133 588,525 0.5
3,300 United Technologies Corporation..... 258,411 358,875 0.3
------------- ------------- -----
945,544 947,400 0.8
- -----------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS 17,700 Federal-Mogul Corporation........... 781,374 1,053,150 0.9
- -----------------------------------------------------------------------------------------------------------------------
AUTOMOBILE RENTAL 24,200 +Avis Rent A Car, Inc............... 576,277 585,337 0.5
12,350 The Hertz Corporation (Class A)..... 447,293 563,469 0.5
------------- ------------- -----
1,023,570 1,148,806 1.0
- -----------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE 8,000 General Motors Corporation.......... 561,175 572,500 0.5
- -----------------------------------------------------------------------------------------------------------------------
BANKING 34,600 The Bank of New York Company, Inc... 516,428 1,392,650 1.2
7,750 BankAmerica Corporation............. 441,243 465,969 0.4
------------- ------------- -----
957,671 1,858,619 1.6
- -----------------------------------------------------------------------------------------------------------------------
BANKING & FINANCIAL 18,700 First Union Corporation............. 937,487 1,137,194 1.0
10,800 Mellon Bank Corporation............. 692,383 742,500 0.6
------------- ------------- -----
1,629,870 1,879,694 1.6
- -----------------------------------------------------------------------------------------------------------------------
BEVERAGES 22,700 PepsiCo, Inc........................ 872,386 929,281 0.8
- -----------------------------------------------------------------------------------------------------------------------
BROADCAST-MEDIA 7,400 +Fox Entertainment Group, Inc.
(Class A).......................... 166,500 186,387 0.2
- -----------------------------------------------------------------------------------------------------------------------
BROADCASTING-RADIO 45,700 +Capstar Broadcasting Corporation
(Class A).......................... 868,300 1,045,388 0.9
- -----------------------------------------------------------------------------------------------------------------------
CHEMICALS 6,550 du Pont (E.I.) de Nemours and
Company............................ 408,342 347,559 0.3
9,700 Morton International, Inc........... 272,200 237,650 0.2
------------- ------------- -----
680,542 585,209 0.5
- -----------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 15,300 +Cisco Systems, Inc................. 629,755 1,420,031 1.2
- -----------------------------------------------------------------------------------------------------------------------
COMPUTERS 41,100 COMPAQ Computer Corporation......... 1,291,517 1,723,631 1.4
6,300 +Dell Computer Corporation.......... 397,384 461,081 0.4
2,750 +EMC Corporation.................... 191,840 233,750 0.2
7,000 International Business Machines
Corporation........................ 739,977 1,293,250 1.1
6,400 Tandy Corporation................... 254,647 263,600 0.2
------------- ------------- -----
2,875,365 3,975,312 3.3
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER-PRODUCTS 44,300 The Dial Corporation................ 915,010 1,279,162 1.1
- -----------------------------------------------------------------------------------------------------------------------
DATA PROCESSING 4,500 +Keane, Inc......................... 158,127 179,719 0.1
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Balanced Portfolio
Schedule of Investments as of December 31, 1998 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ELECTRICAL EQUIPMENT 5,900 General Electric Company............ $ 455,930 $ 602,169 0.5%
- -----------------------------------------------------------------------------------------------------------------------
ELECTRONICS 8,800 Intel Corporation................... 1,007,399 1,042,800 0.9
9,700 +Micron Technology, Inc............. 368,590 490,456 0.4
------------- ------------- -----
1,375,989 1,533,256 1.3
- -----------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 54,800 +Premier Parks Inc.................. 1,541,749 1,657,700 1.4
- -----------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 8,000 Associates First Capital Corporation
(Class A).......................... 275,380 339,000 0.3
31,100 Heller Financial, Inc............... 875,837 913,562 0.8
------------- ------------- -----
1,151,217 1,252,562 1.1
- -----------------------------------------------------------------------------------------------------------------------
FOOD DISTRIBUTION 11,050 Nabisco Holdings Corp. (Class A).... 395,578 458,575 0.4
- -----------------------------------------------------------------------------------------------------------------------
FOODS 23,800 +Keebler Foods Company.............. 676,933 895,475 0.7
- -----------------------------------------------------------------------------------------------------------------------
HARDWARE PRODUCTS 16,300 The Black & Decker Corporation...... 757,404 913,819 0.8
- -----------------------------------------------------------------------------------------------------------------------
INSURANCE 12,400 Allmerica Financial Corporation..... 780,398 717,650 0.6
19,900 The Equitable Companies
Incorporated....................... 1,075,119 1,151,712 1.0
18,450 Providian Financial Corporation..... 800,994 1,383,750 1.2
17,500 UNUM Corporation.................... 693,417 1,021,563 0.8
------------- ------------- -----
3,349,928 4,274,675 3.6
- -----------------------------------------------------------------------------------------------------------------------
MACHINERY 5,200 Case Corporation.................... 139,095 113,425 0.1
22,700 Ingersoll-Rand Company.............. 808,376 1,065,481 0.9
------------- ------------- -----
947,471 1,178,906 1.0
- -----------------------------------------------------------------------------------------------------------------------
MANUFACTURING 17,600 Tyco International Ltd.............. 924,302 1,327,700 1.1
- -----------------------------------------------------------------------------------------------------------------------
MEDICAL 17,500 Beckman Coulter Inc................. 1,043,802 949,375 0.8
- -----------------------------------------------------------------------------------------------------------------------
MEDICAL SERVICES 35,500 +HEALTHSOUTH Corporation............ 605,775 548,031 0.5
- -----------------------------------------------------------------------------------------------------------------------
MEDICAL TECHNOLOGY 8,550 Johnson & Johnson................... 680,930 717,131 0.6
- -----------------------------------------------------------------------------------------------------------------------
METALS 3,350 Aluminum Co. of America............. 259,840 249,784 0.2
- -----------------------------------------------------------------------------------------------------------------------
NATURAL GAS 24,000 Enron Corporation................... 1,138,048 1,369,500 1.1
- -----------------------------------------------------------------------------------------------------------------------
NETWORKING PRODUCTS 3,500 +3Com Corporation................... 139,160 156,844 0.1
- -----------------------------------------------------------------------------------------------------------------------
OIL-INTEGRATED 6,500 Mobil Corporation................... 509,064 566,313 0.5
14,200 Shell Transport & Trading Company
(ADR)(a)........................... 521,692 528,063 0.4
------------- ------------- -----
1,030,756 1,094,376 0.9
- -----------------------------------------------------------------------------------------------------------------------
OIL SERVICE 9,570 Schlumberger Limited................ 685,230 441,416 0.4
- -----------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS 6,650 Kimberly-Clark Corporation.......... 305,744 362,425 0.3
- -----------------------------------------------------------------------------------------------------------------------
PETROLEUM 18,800 Unocal Corporation.................. 706,194 548,725 0.5
- -----------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 13,000 Bristol-Myers Squibb Company........ 1,257,877 1,739,563 1.4
16,900 Warner-Lambert Company.............. 828,853 1,270,669 1.1
------------- ------------- -----
2,086,730 3,010,232 2.5
- -----------------------------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING 30,600 +World Color Press, Inc............. 969,719 931,388 0.8
- -----------------------------------------------------------------------------------------------------------------------
RAILROADS 33,800 Burlington Northern Santa Fe
Corp............................... 992,586 1,140,750 1.0
- -----------------------------------------------------------------------------------------------------------------------
RETAIL 30,210 Rite Aid Corporation................ 638,892 1,497,283 1.3
15,800 +Safeway Inc........................ 506,864 962,813 0.8
12,500 Wal-Mart Stores, Inc................ 536,203 1,017,969 0.8
------------- ------------- -----
1,681,959 3,478,065 2.9
- -----------------------------------------------------------------------------------------------------------------------
RETAIL SPECIALTY 23,200 Lowe's Companies, Inc............... 844,434 1,187,550 1.0
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Balanced Portfolio
Schedule of Investments as of December 31, 1998 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SAVINGS & LOAN 32,800 GreenPoint Financial Corp........... $ 1,316,195 $ 1,152,100 1.0%
ASSOCIATIONS
- -----------------------------------------------------------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS 12,600 Millipore Corporation............... 268,549 358,312 0.3
- -----------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS 17,200 Motorola Inc........................ 910,854 1,050,275 0.9
- -----------------------------------------------------------------------------------------------------------------------
SERVICES 14,500 +Quintiles Transnational Corp....... 674,752 773,031 0.6
- -----------------------------------------------------------------------------------------------------------------------
SOFTWARE 14,800 +BMC Software, Inc.................. 380,056 659,525 0.5
3,950 +Microsoft Corporation.............. 461,395 547,322 0.5
------------- ------------- -----
841,451 1,206,847 1.0
- -----------------------------------------------------------------------------------------------------------------------
STEEL 13,400 +Bethlehem Steel Corporation........ 141,820 112,225 0.1
4,900 USX-U.S. Steel Group................ 134,002 112,700 0.1
------------- ------------- -----
275,822 224,925 0.2
- -----------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 19,700 GTE Corporation..................... 995,075 1,328,519 1.1
25,100 +MCI WorldCom Inc................... 769,122 1,800,925 1.5
30,100 +Tele-Communications, Inc. (Class
A)................................. 774,212 1,664,906 1.4
62,200 +Tele-Communications TCI Ventures
Group (Class A).................... 737,037 1,465,588 1.2
------------- ------------- -----
3,275,446 6,259,938 5.2
- -----------------------------------------------------------------------------------------------------------------------
TOYS 6,500 Mattel, Inc......................... 150,513 148,281 0.1
- -----------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 13,600 Royal Caribbean Cruises Ltd......... 315,971 503,200 0.4
- -----------------------------------------------------------------------------------------------------------------------
UTILITIES- 21,200 Ameritech Corporation............... 1,016,052 1,343,550 1.1
COMMUNICATION
- -----------------------------------------------------------------------------------------------------------------------
UTILITIES-ELECTRIC 15,000 PECO Energy Company................. 512,425 624,375 0.5
13,200 Public Service Enterprise Group
Incorporated....................... 512,908 528,000 0.4
11,400 Texas Utilities Company............. 510,193 532,238 0.5
------------- ------------- -----
1,535,526 1,684,613 1.4
- -----------------------------------------------------------------------------------------------------------------------
UTILITIES-GAS 28,900 El Paso Energy Corporation.......... 805,547 1,006,081 0.8
- -----------------------------------------------------------------------------------------------------------------------
WASTE MANAGEMENT 16,000 Waste Management, Inc............... 686,731 746,000 0.6
- -----------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 49,886,006 63,798,240 53.6
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT SHORT-TERM SECURITIES
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER* $ 5,153,000 General Motors Acceptance Corp.,
5.13% due 1/04/1999................ 5,150,063 5,150,063 4.3
3,000,000 Lexington Parker Capital Company,
LLC, 5.62% due 1/04/1999........... 2,998,126 2,998,126 2.5
- -----------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 8,148,189 8,148,189 6.8
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS................... $ 103,278,601 118,275,555 99.3
-------------
-------------
OTHER ASSETS LESS LIABILITIES....... 798,930 0.7
------------- -----
NET ASSETS.......................... $ 119,074,485 100.0%
------------- -----
------------- -----
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) American Depositary Receipts (ADR).
* Commercial Paper is traded on a discount basis; the interest rates shown
reflect the discount rate paid at the time of purchase by the Portfolio.
+ Non-income producing security.
++ Subject to principal paydowns.
See Notes to Financial Statements.
19
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Capital Stock Portfolio
Schedule of Investments as of December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD US STOCKS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE 106,300 GenCorp Inc....................... $ 3,027,067 $ 2,650,856 0.7%
15,400 United Technologies Corporation... 1,216,762 1,674,750 0.5
------------- ------------- -----
4,243,829 4,325,606 1.2
- -------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS 82,000 Federal-Mogul Corporation......... 3,562,581 4,879,000 1.4
- -------------------------------------------------------------------------------------------------------------------
AUTOMOBILE RENTAL 122,500 +Avis Rent A Car, Inc............. 2,876,140 2,962,969 0.8
49,350 The Hertz Corporation (Class A)... 1,908,905 2,251,594 0.7
------------- ------------- -----
4,785,045 5,214,563 1.5
- -------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE 76,800 General Motors Corporation........ 5,396,448 5,496,000 1.5
- -------------------------------------------------------------------------------------------------------------------
BANKING 156,800 The Bank of New York Company,
Inc.............................. 1,618,066 6,311,200 1.8
49,369 BankAmerica Corporation........... 2,359,585 2,968,311 0.8
89,500 First Union Corporation........... 4,432,425 5,442,719 1.5
61,400 Mellon Bank Corporation........... 3,828,193 4,221,250 1.2
------------- ------------- -----
12,238,269 18,943,480 5.3
- -------------------------------------------------------------------------------------------------------------------
BEVERAGES 119,600 PepsiCo, Inc...................... 4,480,086 4,896,125 1.4
- -------------------------------------------------------------------------------------------------------------------
BROADCAST-MEDIA 34,900 +Fox Entertainment Group, Inc.
(Class A)........................ 785,250 879,044 0.2
- -------------------------------------------------------------------------------------------------------------------
BROADCASTING-RADIO 249,700 +Capstar Broadcasting Corporation
(Class A)........................ 4,701,425 5,711,887 1.6
- -------------------------------------------------------------------------------------------------------------------
CHEMICALS 31,000 du Pont (E.I.) de Nemours and
Company.......................... 1,932,044 1,644,937 0.5
93,000 Morton International, Inc......... 2,681,827 2,278,500 0.6
------------- ------------- -----
4,613,871 3,923,437 1.1
- -------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS 121,200 +MCI WorldCom Inc................. 3,936,938 8,696,100 2.4
EQUIPMENT
- -------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 80,500 +Cisco Systems, Inc............... 3,466,406 7,471,406 2.1
- -------------------------------------------------------------------------------------------------------------------
COMPUTERS 177,100 COMPAQ Computer Corporation....... 5,734,273 7,427,131 2.1
21,150 +EMC Corporation.................. 1,511,503 1,797,750 0.5
28,700 International Business Machines
Corporation...................... 3,167,163 5,302,325 1.5
------------- ------------- -----
10,412,939 14,527,206 4.1
- -------------------------------------------------------------------------------------------------------------------
CONSUMER- 45,900 +Dell Computer Corporation........ 2,891,313 3,359,306 0.9
ELECTRONICS
- -------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS 211,300 The Dial Corporation.............. 4,308,964 6,101,288 1.7
- -------------------------------------------------------------------------------------------------------------------
DATA PROCESSING 22,700 +Keane, Inc....................... 797,662 906,581 0.3
- -------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 28,000 General Electric Company.......... 2,126,853 2,857,750 0.8
- -------------------------------------------------------------------------------------------------------------------
ELECTRONICS 45,000 Intel Corporation................. 5,017,311 5,332,500 1.5
49,700 +Micron Technology, Inc........... 1,909,837 2,512,956 0.7
------------- ------------- -----
6,927,148 7,845,456 2.2
- -------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 247,900 +Premier Parks Inc................ 6,865,705 7,498,975 2.1
- -------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 95,200 Associates First Capital
Corporation (Class A)............ 3,473,274 4,034,100 1.2
148,900 Heller Financial, Inc............. 4,156,132 4,373,938 1.2
------------- ------------- -----
7,629,406 8,408,038 2.4
- -------------------------------------------------------------------------------------------------------------------
FOOD DISTRIBUTION 62,550 Nabisco Holdings Corp. (Class
A)............................... 2,286,996 2,595,825 0.7
- -------------------------------------------------------------------------------------------------------------------
FOODS 109,800 +Keebler Foods Company............ 3,097,956 4,131,225 1.2
- -------------------------------------------------------------------------------------------------------------------
HARDWARE PRODUCTS 90,300 The Black & Decker Corporation.... 3,759,296 5,062,444 1.4
- -------------------------------------------------------------------------------------------------------------------
INSURANCE 59,300 Allmerica Financial Corporation... 3,691,526 3,431,987 1.0
94,200 The Equitable Companies
Incorporated..................... 4,977,212 5,451,825 1.5
106,650 Providian Financial Corporation... 4,871,033 7,998,750 2.3
81,900 UNUM Corporation.................. 2,994,340 4,780,913 1.3
------------- ------------- -----
16,534,111 21,663,475 6.1
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Capital Stock Portfolio
Schedule of Investments as of December 31, 1998 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD US STOCKS COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MACHINERY 29,500 Case Corporation.................. $ 788,811 $ 643,469 0.2%
108,900 Ingersoll-Rand Company............ 3,518,001 5,111,494 1.4
------------- ------------- -----
4,306,812 5,754,963 1.6
- -------------------------------------------------------------------------------------------------------------------
MANUFACTURING 93,800 Tyco International Ltd............ 5,016,294 7,076,038 2.0
- -------------------------------------------------------------------------------------------------------------------
MEDICAL 97,400 Beckman Coulter Inc............... 5,787,787 5,283,950 1.5
- -------------------------------------------------------------------------------------------------------------------
MEDICAL SERVICES 162,000 +HEALTHSOUTH Corporation.......... 2,892,644 2,500,875 0.7
- -------------------------------------------------------------------------------------------------------------------
MEDICAL TECHNOLOGY 46,400 Johnson & Johnson................. 3,747,873 3,891,800 1.1
- -------------------------------------------------------------------------------------------------------------------
METALS 21,300 Aluminum Co. of America........... 1,660,813 1,588,181 0.5
- -------------------------------------------------------------------------------------------------------------------
NATURAL GAS 96,400 Enron Corporation................. 4,290,639 5,500,825 1.5
- -------------------------------------------------------------------------------------------------------------------
NETWORK PRODUCTS 78,000 +3Com Corporation................. 3,142,566 3,495,375 1.0
- -------------------------------------------------------------------------------------------------------------------
OIL-INTEGRATED 26,000 Mobil Corporation................. 2,024,697 2,265,250 0.6
- -------------------------------------------------------------------------------------------------------------------
OIL SERVICES 41,200 Schlumberger Limited.............. 2,373,291 1,900,350 0.5
- -------------------------------------------------------------------------------------------------------------------
PAPER & FOREST 78,400 Kimberly-Clark Corporation........ 3,871,159 4,272,800 1.2
PRODUCTS
- -------------------------------------------------------------------------------------------------------------------
PETROLEUM 81,300 Unocal Corporation................ 3,360,947 2,372,944 0.7
- -------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 61,500 Bristol-Myers Squibb Company...... 5,897,573 8,229,469 2.3
80,200 Warner-Lambert Company............ 3,889,149 6,030,038 1.7
------------- ------------- -----
9,786,722 14,259,507 4.0
- -------------------------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING 146,500 +World Color Press, Inc........... 4,523,377 4,459,094 1.3
- -------------------------------------------------------------------------------------------------------------------
RAILROADS 149,900 Burlington Northern Santa Fe
Corp............................. 4,743,331 5,059,125 1.4
- -------------------------------------------------------------------------------------------------------------------
RETAIL 143,500 Rite Aid Corporation.............. 2,662,461 7,112,219 2.0
76,300 +Safeway Inc...................... 2,458,458 4,649,531 1.3
66,100 Wal-Mart Stores, Inc.............. 2,795,690 5,383,019 1.5
------------- ------------- -----
7,916,609 17,144,769 4.8
- -------------------------------------------------------------------------------------------------------------------
RETAIL SPECIALTY 115,000 Lowe's Companies, Inc............. 4,134,565 5,886,563 1.7
- -------------------------------------------------------------------------------------------------------------------
SAVINGS & LOAN 156,500 GreenPoint Financial Corp......... 6,222,443 5,497,063 1.5
ASSOCIATIONS
- -------------------------------------------------------------------------------------------------------------------
SCIENTIFIC 51,550 Millipore Corporation.............
INSTRUMENTS 1,098,152 1,465,953 0.4
- -------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS 71,100 Motorola, Inc..................... 3,758,667 4,341,544 1.2
- -------------------------------------------------------------------------------------------------------------------
SERVICES 72,200 +Quintiles Transnational Corp..... 3,359,028 3,849,163 1.1
- -------------------------------------------------------------------------------------------------------------------
SOFTWARE 70,200 +BMC Software, Inc................ 1,431,467 3,128,287 0.9
19,600 +Microsoft Corporation............ 2,291,489 2,715,825 0.7
------------- ------------- -----
3,722,956 5,844,112 1.6
- -------------------------------------------------------------------------------------------------------------------
STEEL 74,400 +Bethlehem Steel Corporation...... 784,887 623,100 0.2
23,100 USX-U.S. Steel Group.............. 631,725 531,300 0.1
------------- ------------- -----
1,416,612 1,154,400 0.3
- -------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 94,300 GTE Corporation................... 4,798,659 6,359,356 1.8
128,000 +Tele-Communications, Inc. (Class
A)............................... 2,397,109 7,080,000 2.0
297,200 +Tele-Communications TCI Ventures
Group (Class A).................. 3,212,411 7,002,775 2.0
------------- ------------- -----
10,408,179 20,442,131 5.8
- -------------------------------------------------------------------------------------------------------------------
TOYS 32,900 Mattel, Inc....................... 761,829 750,531 0.2
- -------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 64,500 Royal Caribbean Cruises Ltd....... 1,484,938 2,386,500 0.7
- -------------------------------------------------------------------------------------------------------------------
UTILITIES- 101,500 Ameritech Corporation............. 4,892,153 6,432,562 1.8
COMMUNICATION
- -------------------------------------------------------------------------------------------------------------------
UTILITIES-ELECTRIC 72,500 PECO Energy Company............... 2,476,711 3,017,813 0.8
79,600 Public Service Enterprise Group
Incorporated..................... 3,087,017 3,184,000 0.9
64,900 Texas Utilities Company........... 2,908,217 3,030,019 0.8
------------- ------------- -----
8,471,945 9,231,832 2.5
- -------------------------------------------------------------------------------------------------------------------
UTILITIES-GAS 155,400 El Paso Energy Corporation........ 5,615,271 5,409,862 1.5
- -------------------------------------------------------------------------------------------------------------------
WASTE MANAGEMENT 76,600 Waste Management, Inc............. 3,276,179 3,571,475 1.0
- -------------------------------------------------------------------------------------------------------------------
TOTAL US STOCKS 247,916,975 318,483,754 89.3
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Capital Stock Portfolio
Schedule of Investments as of December 31, 1998 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRIES HELD FOREIGN STOCKS+++ COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CANADA 134,500 Teleglobe Inc. (9)................ $ 3,638,273 $ 4,842,000 1.4%
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN CANADA 3,638,273 4,842,000 1.4
- -------------------------------------------------------------------------------------------------------------------
FINLAND 18,200 Nokia Oyj (Class A) (9)........... 1,670,920 2,214,068 0.6
55,000 UPM-Kymmene OYJ (7)............... 1,422,770 1,532,424 0.4
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FINLAND 3,093,690 3,746,492 1.0
- -------------------------------------------------------------------------------------------------------------------
FRANCE 5,600 Cap Gemini S.A. (3)............... 854,205 898,814 0.2
27,300 +STMicroelectronics N.V. (NY
Registered Shares) (8)........... 2,311,879 2,131,106 0.6
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FRANCE 3,166,084 3,029,920 0.8
- -------------------------------------------------------------------------------------------------------------------
IRELAND 45,000 Bank of Ireland (1)............... 823,832 985,636 0.3
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN IRELAND 823,832 985,636 0.3
- -------------------------------------------------------------------------------------------------------------------
SINGAPORE 26,200 +Flextronics International Ltd. 1,832,077 2,240,100 0.6
(4)..............................
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SINGAPORE 1,832,077 2,240,100 0.6
- -------------------------------------------------------------------------------------------------------------------
SWEDEN 232,000 Telefonaktiebolaget LM Ericsson
(ADR)(a) (9)..................... 5,691,647 5,539,000 1.6
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWEDEN 5,691,647 5,539,000 1.6
- -------------------------------------------------------------------------------------------------------------------
SWITZERLAND 1,721 Novartis AG (Registered Shares)
(5).............................. 3,210,532 3,385,574 0.9
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWITZERLAND 3,210,532 3,385,574 0.9
- -------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM 83,200 Bank of Scotland (1).............. 809,478 992,112 0.3
303,400 British Petroleum Company PLC
(6).............................. 4,410,885 4,528,646 1.3
56,900 Diageo PLC (ADR)(a) (2)........... 2,744,594 2,631,625 0.7
51,300 Glaxo Wellcome PLC (5)............ 1,622,872 1,764,356 0.5
74,400 Shell Transport & Trading Company
(ADR)(a) (6)..................... 2,722,265 2,766,750 0.8
41,900 Zeneca Group PLC (5).............. 1,657,397 1,823,627 0.5
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE UNITED
KINGDOM 13,967,491 14,507,116 4.1
- -------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS 35,423,626 38,275,838 10.7
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS................. $ 283,340,601 356,759,592 100.0
-------------
-------------
UNREALIZED DEPRECIATION ON FORWARD
FOREIGN EXCHANGE CONTRACTS++..... (54,411) 0.0
LIABILITIES IN EXCESS OF OTHER
ASSETS........................... (107,733) 0.0
------------- -----
NET ASSETS........................ $ 356,597,448 100.0%
------------- -----
------------- -----
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) American Depositary Receipts (ADR).
+ Non-income producing security.
++ Forward foreign exchange contracts as of December 31, 1998 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------
UNREALIZED
FOREIGN EXPIRATION APPRECIATION
CURRENCY SOLD DATE (DEPRECIATION)
- --------------------------------------------------
<S> <C> <C>
C$ 6,650,000 February 1999 $ (35,906)
L 6,300,000 January 1999 (29,263)
L 640,000 February 1999 10,758
- --------------------------------------------------
TOTAL UNREALIZED DEPRECIATION ON
FORWARD FOREIGN
EXCHANGE CONTRACTS (US$ COMMITMENT
- -- $15,817,516) $ (54,411)
--------------
--------------
- --------------------------------------------------
</TABLE>
+++ Corresponding industry groups for foreign stocks:
(1) Banking
(2) Beverages
(3) Computer Services
(4) Electronic Components
(5) Medical-Drugs
(6) Oil-Integrated
(7) Paper & Forest Products
(8) Semiconductors
(9) Telecommunications Equipment
See Notes to Financial Statements.
22
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD US STOCKS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE 34,100 GenCorp Inc........................... $ 933,351 $ 850,369 0.4%
4,400 United Technologies Corporation....... 346,894 478,500 0.2
------------- ------------- ------
1,280,245 1,328,869 0.6
- ------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS 25,000 Federal-Mogul Corporation............. 1,096,224 1,487,500 0.7
- ------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE RENTAL 30,750 +Avis Rent A Car, Inc................. 779,310 743,766 0.3
14,270 The Hertz Corporation (Class A)....... 567,894 651,069 0.3
------------- ------------- ------
1,347,204 1,394,835 0.6
- ------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE 12,400 General Motors Corporation............ 872,890 887,375 0.4
- ------------------------------------------------------------------------------------------------------------------------
BANKING 45,900 The Bank of New York Company, Inc..... 828,501 1,847,475 0.8
13,416 BankAmerica Corporation............... 868,335 806,637 0.3
25,800 First Union Corporation............... 1,291,206 1,568,962 0.7
34,400 Mellon Bank Corporation............... 2,208,662 2,365,000 1.0
------------- ------------- ------
5,196,704 6,588,074 2.8
- ------------------------------------------------------------------------------------------------------------------------
BEVERAGES 34,800 PepsiCo, Inc.......................... 1,275,282 1,424,625 0.6
- ------------------------------------------------------------------------------------------------------------------------
BROADCASTING-MEDIA 10,300 +Fox Entertainment Group, Inc. (Class
A)................................... 231,750 259,431 0.1
- ------------------------------------------------------------------------------------------------------------------------
CHEMICALS 9,000 du Pont (E.I.) de Nemours and Company 560,870 477,562 0.2
26,800 Morton International, Inc............. 772,771 656,600 0.3
------------- ------------- ------
1,333,641 1,134,162 0.5
- ------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES 23,000 +Quintiles Transnational Corp......... 1,068,421 1,226,188 0.5
- ------------------------------------------------------------------------------------------------------------------------
COMMUNICATION EQUIPMENT 34,500 +MCI WorldCom, Inc.................... 1,101,043 2,475,375 1.1
- ------------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 21,150 +Cisco Systems, Inc................... 899,647 1,962,984 0.9
- ------------------------------------------------------------------------------------------------------------------------
COMPUTERS 57,000 COMPAQ Computer Corporation........... 1,995,104 2,390,437 1.0
5,950 +EMC Corporation...................... 425,237 505,750 0.2
9,800 International Business Machines
Corporation.......................... 1,041,401 1,810,550 0.8
------------- ------------- ------
3,461,742 4,706,737 2.0
- ------------------------------------------------------------------------------------------------------------------------
CONSUMER-ELECTRONICS 12,450 +Dell Computer Corporation............ 784,347 911,184 0.4
- ------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS 61,500 The Dial Corporation.................. 1,262,673 1,775,812 0.8
- ------------------------------------------------------------------------------------------------------------------------
DATA PROCESSING 6,500 +Keane, Inc........................... 228,405 259,594 0.1
- ------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 8,100 General Electric Company.............. 627,489 826,706 0.3
- ------------------------------------------------------------------------------------------------------------------------
ELECTRONICS 12,900 Intel Corporation..................... 1,420,680 1,528,650 0.6
21,100 +Micron Technology, Inc............... 727,505 1,066,869 0.5
------------- ------------- ------
2,148,185 2,595,519 1.1
- ------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 70,900 +Premier Parks Inc.................... 1,893,029 2,144,725 0.9
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 34,800 Associates First Capital Corporation
(Class A)............................ 1,284,209 1,474,650 0.6
43,500 Heller Financial, Inc................. 1,190,630 1,277,812 0.6
------------- ------------- ------
2,474,839 2,752,462 1.2
- ------------------------------------------------------------------------------------------------------------------------
FOOD DISTRIBUTION 17,300 Nabisco Holdings Corp. (Class A)...... 628,877 717,950 0.3
- ------------------------------------------------------------------------------------------------------------------------
FOODS 32,700 +Keebler Foods Company................ 912,482 1,230,337 0.5
- ------------------------------------------------------------------------------------------------------------------------
HARDWARE PRODUCTS 24,300 The Black & Decker Corporation........ 1,034,931 1,362,319 0.6
- ------------------------------------------------------------------------------------------------------------------------
INSURANCE 17,100 Allmerica Financial Corporation....... 1,054,237 989,662 0.4
27,200 The Equitable Companies
Incorporated......................... 1,422,465 1,574,200 0.7
28,650 Providian Financial Corporation....... 1,272,343 2,148,750 0.9
23,700 UNUM Corporation...................... 930,435 1,383,488 0.6
------------- ------------- ------
4,679,480 6,096,100 2.6
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1998 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD US STOCKS COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MACHINERY 7,200 Case Corporation...................... $ 192,601 $ 157,050 0.1%
31,500 Ingersoll-Rand Company................ 1,065,389 1,478,531 0.6
------------- ------------- ------
1,257,990 1,635,581 0.7
- ------------------------------------------------------------------------------------------------------------------------
MANUFACTURING 25,000 Tyco International Ltd................ 1,300,040 1,885,938 0.8
- ------------------------------------------------------------------------------------------------------------------------
MEDICAL EQUIPMENT 17,300 Beckman Coulter Inc................... 1,034,511 938,525 0.4
- ------------------------------------------------------------------------------------------------------------------------
MEDICAL SERVICES 42,300 +HEALTHSOUTH Corporation.............. 746,788 653,006 0.3
- ------------------------------------------------------------------------------------------------------------------------
MEDICAL TECHNOLOGY 9,350 Johnson & Johnson..................... 735,479 784,231 0.3
- ------------------------------------------------------------------------------------------------------------------------
METALS 4,700 Aluminum Co. of America............... 364,428 350,444 0.2
- ------------------------------------------------------------------------------------------------------------------------
NATURAL GAS 25,700 Enron Corporation..................... 1,060,626 1,466,506 0.6
- ------------------------------------------------------------------------------------------------------------------------
NETWORKING PRODUCTS 22,350 +3Com Corporation..................... 900,635 1,001,559 0.4
- ------------------------------------------------------------------------------------------------------------------------
OIL-INTEGRATED 9,100 Mobil Corporation..................... 712,673 792,838 0.3
- ------------------------------------------------------------------------------------------------------------------------
OIL SERVICES 14,900 Schlumberger Limited.................. 923,802 687,263 0.3
- ------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS 9,450 Kimberly-Clark Corporation............ 434,410 515,025 0.2
- ------------------------------------------------------------------------------------------------------------------------
PETROLEUM 27,900 Unocal Corporation.................... 990,628 814,331 0.4
- ------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 17,900 Bristol-Myers Squibb Company.......... 1,737,541 2,395,244 1.0
23,000 Warner-Lambert Company................ 1,109,886 1,729,313 0.8
------------- ------------- ------
2,847,427 4,124,557 1.8
- ------------------------------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING 42,500 +World Color Press, Inc............... 1,282,612 1,293,594 0.6
- ------------------------------------------------------------------------------------------------------------------------
RADIO & TELEVISION 58,800 +Capstar Broadcasting Corporation
(Class A)............................ 1,117,200 1,345,050 0.6
- ------------------------------------------------------------------------------------------------------------------------
RAILROADS 43,000 Burlington Northern Santa Fe Corp..... 1,226,278 1,451,250 0.6
- ------------------------------------------------------------------------------------------------------------------------
RETAIL 41,300 Rite Aid Corporation.................. 844,619 2,046,931 0.9
21,800 +Safeway Inc.......................... 762,589 1,328,438 0.6
17,400 Wal-Mart Stores, Inc.................. 772,590 1,417,013 0.6
------------- ------------- ------
2,379,798 4,792,382 2.1
- ------------------------------------------------------------------------------------------------------------------------
RETAIL SPECIALTY 35,500 Lowe's Companies, Inc................. 1,270,660 1,817,156 0.8
- ------------------------------------------------------------------------------------------------------------------------
SAVINGS & LOAN 45,200 Green Point Financial Corp............ 1,760,092 1,587,650 0.7
ASSOCIATIONS
- ------------------------------------------------------------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS 13,600 Millipore Corporation................. 289,820 386,750 0.2
- ------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS 19,950 Motorola, Inc......................... 1,064,281 1,218,197 0.5
- ------------------------------------------------------------------------------------------------------------------------
SOFTWARE 20,100 +BMC Software, Inc.................... 630,712 895,706 0.4
5,500 +Microsoft Corporation................ 643,245 762,094 0.3
------------- ------------- ------
1,273,957 1,657,800 0.7
- ------------------------------------------------------------------------------------------------------------------------
STEEL 23,000 +Bethlehem Steel Corporation.......... 235,506 192,625 0.1
6,800 USX-U.S. Steel Group.................. 185,962 156,400 0.1
------------- ------------- ------
421,468 349,025 0.2
- ------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 27,200 GTE Corporation....................... 1,385,403 1,834,300 0.8
41,300 +Tele-Communications, Inc. (Class
A)................................... 931,290 2,284,406 1.0
86,900 +Tele-Communications TCI Ventures
Group (Class A)...................... 907,394 2,047,581 0.9
------------- ------------- ------
3,224,087 6,166,287 2.7
- ------------------------------------------------------------------------------------------------------------------------
TOYS 9,500 Mattel, Inc........................... 219,981 216,719 0.1
- ------------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 25,020 Royal Caribbean Cruises Ltd........... 620,980 925,740 0.4
- ------------------------------------------------------------------------------------------------------------------------
UTILITIES-COMMUNICATION 29,300 Ameritech Corporation................. 1,412,026 1,856,887 0.8
- ------------------------------------------------------------------------------------------------------------------------
UTILITIES-ELECTRIC 20,900 PECO Energy Company................... 713,981 869,963 0.4
20,300 Public Service Enterprise Group
Incorporated......................... 788,727 812,000 0.4
15,800 Texas Utilities Company............... 707,109 737,663 0.3
------------- ------------- ------
2,209,817 2,419,626 1.1
- ------------------------------------------------------------------------------------------------------------------------
UTILITIES-GAS 48,600 El Paso Energy Corporation............ 1,301,291 1,691,887 0.7
- ------------------------------------------------------------------------------------------------------------------------
WASTE MANAGEMENT 22,100 Waste Management, Inc................. 961,059 1,030,413 0.4
- ------------------------------------------------------------------------------------------------------------------------
TOTAL US STOCKS 71,184,374 91,405,080 39.5
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1998 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRIES HELD FOREIGN STOCKS+++ COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AUSTRIA 12,100 Mayr-Melnhof Karton AG (28)........... $ 609,368 $ 565,286 0.2%
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN AUSTRIA 609,368 565,286 0.2
- ------------------------------------------------------------------------------------------------------------------------
CANADA 5,200 Magna International, Inc. (Class A)
(2).................................. 380,819 322,400 0.2
66,300 Teleglobe Inc. (36)................... 1,793,383 2,386,800 1.0
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN CANADA 2,174,202 2,709,200 1.2
- ------------------------------------------------------------------------------------------------------------------------
DENMARK 1,800 ISS International Service System A/S
(Class B) (8)........................ 117,455 117,133 0.0
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN DENMARK 117,455 117,133 0.0
- ------------------------------------------------------------------------------------------------------------------------
FINLAND 35,100 +Amer Group Ltd. (2).................. 670,527 362,949 0.1
10,600 Nokia Oyj (Class A) (9)............... 1,062,053 1,289,512 0.6
21,600 Orion-Yhtyma OY (Class B) (29)........ 608,300 518,756 0.2
23,000 Sampro Insurance Company PLC (Class A)
(20)................................. 1,063,535 873,246 0.4
76,940 +Sponda OYJ (32)...................... 531,230 448,370 0.2
10,000 UPM-Kymmene OYJ (28).................. 223,275 278,623 0.1
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FINLAND 4,158,920 3,771,456 1.6
- ------------------------------------------------------------------------------------------------------------------------
FRANCE 13,700 AXA (20).............................. 1,553,876 1,985,614 0.9
960 Cap Gemini S.A (19)................... 146,435 154,082 0.1
12,700 Elf Aquitaine S.A. (26)............... 1,542,229 1,467,998 0.6
10,400 France Telecom S.A. (36).............. 730,077 826,239 0.4
2,700 Groupe Danone (17).................... 708,863 772,988 0.3
21,500 +STMicroelectronics N.V. (NY
Registered Shares) (35).............. 1,374,706 1,678,344 0.7
22,800 Scor S.A. (33)........................ 896,880 1,507,435 0.7
18,800 Thomson-CSF S.A. (15)................. 708,861 807,343 0.3
4,800 Vivendi (39).......................... 990,861 1,245,370 0.5
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FRANCE 8,652,788 10,445,413 4.5
- ------------------------------------------------------------------------------------------------------------------------
GERMANY 6,300 +DaimlerChrysler AG (2)............... 492,823 622,059 0.3
15,400 Henkel KGaA (Preferred) (7)........... 656,391 1,377,311 0.6
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN GERMANY 1,149,214 1,999,370 0.9
- ------------------------------------------------------------------------------------------------------------------------
IRELAND 53,500 Bank of Ireland (3)................... 1,131,535 1,171,812 0.5
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN IRELAND 1,131,535 1,171,812 0.5
- ------------------------------------------------------------------------------------------------------------------------
ITALY 821,000 +Banca di Roma (3).................... 1,807,501 1,390,684 0.6
136,600 +Mondadori (Arnoldo) Editore S.p.A.
(31)................................. 1,065,609 1,805,632 0.8
130,200 Telecom Italia S.p.A. (37)............ 987,498 1,110,599 0.5
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ITALY 3,860,608 4,306,915 1.9
- ------------------------------------------------------------------------------------------------------------------------
JAPAN 11,000 Fuji Photo Film (30).................. 409,133 409,756 0.2
70,000 Fujikura Ltd. (15).................... 406,230 376,231 0.2
34,000 Fujitsu Limited (15).................. 386,559 453,836 0.2
12,000 Ito-Yokado Co., Ltd. (34)............. 663,828 840,798 0.4
20,000 Kao Corporation (11).................. 398,027 452,328 0.2
21,000 Marui Co., Ltd. (28).................. 402,970 405,100 0.2
43,000 Matsushita Electric Industrial
Company, Ltd. (15)................... 677,278 762,368 0.3
72,000 Minebea Co., Ltd. (23)................ 753,986 826,324 0.3
190 NTT Mobile Communication Network, Inc.
(a) (36)............................. 626,957 783,592 0.3
85 +Nippon Telegraph & Telephone
Corporation (36)..................... 718,820 657,384 0.2
37,000 Olympus Optical Co., Ltd. (12)........ 416,931 426,279 0.2
5,000 Orix Corporation (16)................. 367,656 374,279 0.2
7,000 Rohm Company Ltd. (15)................ 614,057 638,847 0.3
62,000 Tokio Marine & Fire Insurance Co.,
Ltd. (20)............................ 678,166 742,350 0.3
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN JAPAN 7,520,598 8,149,472 3.5
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1998 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRIES HELD FOREIGN STOCKS+++ COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NETHERLANDS 9,600 Unilever N.V. (26).................... $ 688,658 $ 820,229 0.4%
7,800 Wolters Kluwer N.V. (25).............. 1,192,734 1,668,374 0.7
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE NETHERLANDS 1,881,392 2,488,603 1.1
- ------------------------------------------------------------------------------------------------------------------------
NORWAY 30,500 Merkantildata ASA (10)................ 233,193 300,335 0.1
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN NORWAY 233,193 300,335 0.1
- ------------------------------------------------------------------------------------------------------------------------
SINGAPORE 5,000 +Flextronics International Ltd.
(14)................................. 349,633 427,500 0.2
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SINGAPORE 349,633 427,500 0.2
- ------------------------------------------------------------------------------------------------------------------------
SPAIN 51,000 +Dinamia Capital Privado-Sociedad de
Capital Riesgo, S.A. (40)............ 958,809 583,339 0.3
39,200 Endesa S.A. (39)...................... 1,027,231 1,037,460 0.4
25,900 Metrovacesa, S.A. (32)................ 807,264 782,086 0.3
23,600 Telefonica S.A. (36).................. 1,028,435 1,048,188 0.5
23,600 Telefonica S.A. (Rights) (b) (36)..... 0 20,931 0.0
79,200 Uralita, S.A. (6)..................... 1,109,687 880,805 0.4
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SPAIN 4,931,426 4,352,809 1.9
- ------------------------------------------------------------------------------------------------------------------------
SWEDEN 17,200 Autoliv, Inc. (2)..................... 575,639 619,164 0.3
37,700 Bure Investment AB (21)............... 345,447 536,320 0.2
48,400 Castellum AB (32)..................... 521,674 526,881 0.2
4,900 Custos AB (Class A) (12).............. 126,204 96,984 0.0
19,100 Custos AB (Class B) (12).............. 503,438 374,496 0.2
38,600 Fastighets AB Tornet (32)............. 635,452 565,835 0.3
19,600 ForeningsSparbanken AB (3)............ 250,439 509,166 0.2
63,000 Haldex AB (2)......................... 1,114,031 639,056 0.3
95,400 Nordbanken Holding AB (3)............. 647,233 613,672 0.3
39,000 Spectra-Physics AB (Class A) (22)..... 1,190,058 460,736 0.2
60,600 Telefonaktiebolaget LM Ericsson (ADR)*
(36)................................. 1,547,476 1,446,825 0.6
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWEDEN 7,457,091 6,389,135 2.8
- ------------------------------------------------------------------------------------------------------------------------
SWITZERLAND 336 Nestle S.A. (Registered Shares)
(17)................................. 691,362 731,978 0.3
558 Novartis AG (Registered Shares)
(13)................................. 1,030,289 1,097,705 0.5
3,500 +Swisscom AG (Registered) (37)........ 939,582 1,466,302 0.7
2,000 Valora Holding AG (24)................ 540,904 541,348 0.2
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWITZERLAND 3,202,137 3,837,333 1.7
- ------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM 76,500 Bank of Scotland (3).................. 847,646 912,219 0.4
179,400 Billiton PLC (12)..................... 433,337 355,794 0.1
102,600 British Aerospace PLC (1)............. 818,366 869,381 0.4
30,200 British Petroleum Company PLC (27).... 432,041 450,775 0.2
131,500 Devro PLC (17)........................ 881,268 378,347 0.2
137,548 Diageo PLC (4)........................ 1,552,132 1,564,692 0.7
31,600 Glaxo Wellcome PLC (29)............... 1,009,753 1,086,816 0.5
32,400 HSBC Holdings PLC (3)................. 858,938 878,316 0.4
62,500 Lloyds TSB Group PLC (3).............. 830,142 888,719 0.4
166,100 LucasVarity PLC (2)................... 536,174 553,863 0.2
45,900 National Westminster Bank PLC
(Ordinary) (3)....................... 831,564 884,738 0.4
36,800 Rio Tinto PLC (Registered) (25)....... 454,002 427,803 0.2
19,700 Shell Transport & Trading Company
(ADR)* (27).......................... 723,714 732,594 0.3
587,000 Thomson Travel Group PLC (38)......... 1,830,269 1,601,033 0.7
25,800 Zeneca Group PLC (13)................. 1,037,033 1,122,902 0.4
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE UNITED
KINGDOM 13,076,379 12,707,992 5.5
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS 60,505,939 63,739,764 27.6
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT FOREIGN BONDS+++
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
GERMANY Bundesrepublik Deutschland (18):
DM 22,900,000 4.75% due 11/20/2001................ 14,212,049 14,331,056 6.2
14,300,000 6% due 9/15/2003.................... 9,474,731 9,565,378 4.1
7,500,000 4.75% due 7/04/2008................. 4,855,529 4,811,074 2.1
4,700,000 5.625% due 1/04/2028................ 2,679,635 3,176,026 1.4
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN GERMANY 31,221,944 31,883,534 13.8
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Strategy Portfolio
Schedule of Investments as of December 31, 1998 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
COUNTRIES AMOUNT FOREIGN BONDS+++ COST (NOTE 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
UNITED UK Treasury Gilt (18):
KINGDOM L1,300,000 8% due 12/07/2000................... $ 2,196,880 $ 2,283,536 1.0%
3,850,000 7.25% due 12/07/2007................ 6,520,990 7,747,551 3.3
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE UNITED
KINGDOM 8,717,870 10,031,087 4.3
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS 39,939,814 41,914,621 18.1
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
US GOVERNMENT & AGENCY OBLIGATIONS
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
US Federal National Mortgage Association:
GOVERNMENT US$4,280,000 5.625% due 3/15/2001................ 4,295,577 4,342,873 1.9
& AGENCY 5,110,000 5.75% due 4/15/2003................. 5,144,083 5,245,722 2.3
OBLIGATIONS 7,700,000 5.75% due 2/15/2008................. 7,675,902 7,973,119 3.4
5,090,000 US Treasury Bonds, 6.625% due
2/15/2027........................... 5,800,377 6,020,503 2.6
US Treasury Notes:
1,700,000 6% due 8/15/1999.................... 1,704,648 1,713,804 0.7
1,700,000 6.125% due 9/30/2000................ 1,742,234 1,741,701 0.8
4,740,000 6.50% due 5/31/2002................. 4,888,866 5,004,397 2.2
- ----------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY
OBLIGATIONS 31,251,687 32,042,119 13.9
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHORT-TERM SECURITIES
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER** 614,000 The CIT Group Holdings, Inc., 5.10%
due 1/04/1999........................ 613,739 613,739 0.3
- ----------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 613,739 613,739 0.3
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS..................... $ 203,495,553 229,715,323 99.4
-------------
-------------
UNREALIZED APPRECIATION ON FORWARD
FOREIGN EXCHANGE CONTRACTS++........ 46,058 0.0
OTHER ASSETS LESS LIABILITIES......... 1,382,691 0.6
------------- ------
NET ASSETS............................ $ 231,144,072 100.0%
------------- ------
------------- ------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* American Depositary Receipts (ADR).
** Commercial Paper is traded on a discount basis; the interest rate shown
reflects the discount rates paid at the time of 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) The rights may be exercised until 1/30/1999.
+ Non-income producing security.
++ Forward foreign exchange contracts as of December 31, 1998 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------
UNREALIZED
FOREIGN EXPIRATION APPRECIATION
CURRENCY SOLD DATE (DEPRECIATION)
- --------------------------------------------------
<S> <C> <C>
C$ 3,800,000 February 1999 $ (20,517)
L 7,200,000 January 1999 (33,444)
L 5,950,000 February 1999 100,019
- --------------------------------------------------
TOTAL UNREALIZED APPRECIATION ON
FORWARD FOREIGN EXCHANGE CONTRACTS
(US$ COMMITMENT -- $24,377,505) $ 46,058
--------------
--------------
- --------------------------------------------------
</TABLE>
+++ Corresponding industry groups for foreign stocks and bonds:
<TABLE>
<C> <S>
(1) Aerospace
(2) Auto-Parts
(3) Banking
(4) Beverages
(5) Broadcasting & Publishing
(6) Building Products
(7) Chemicals
(8) Commercial Services
(9) Communication Equipment
(10) Computer Software
(11) Cosmetics & Toiletries
(12) Diversified
(13) Drugs
(14) Electronic Components
(15) Electronics
(16) Finance
(17) Food
(18) Government (Bonds)
(19) Information Processing
(20) Insurance
(21) Investment Management
(22) Laser Components
(23) Machine Tools & Machinery
(24) Merchandising
(25) Metals & Mining
(26) Multi-Industry
(27) Oil-Integrated
(28) Paper & Forest Products
(29) Pharmaceuticals
(30) Photography
(31) Publishing
(32) Real Estate
(33) Reinsurance
(34) Retail
(35) Semiconductors
(36) Telephone-Integrated
(37) Telecommunications
(38) Travel & Lodging
(39) Utilities
(40) Venture Capital
</TABLE>
See Notes to Financial Statements.
27
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Growth Stock Portfolio
Schedule of Investments as of December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRIES SHARES HELD STOCKS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
ADVERTISING 50,000 The Interpublic Group of
Companies, Inc................... $ 1,418,134 $ 3,987,500 0.9%
- ------------------------------------------------------------------------------------------------------------------
BANKING & FINANCIAL 110,000 Bank One Corporation.............. 5,114,378 5,616,875 1.2
200,000 BankAmerica Corporation........... 13,075,412 12,025,000 2.6
115,000 Citigroup Inc..................... 5,831,312 5,692,500 1.3
100,000 Mellon Bank Corporation........... 5,582,673 6,875,000 1.5
70,000 State Street Corporation.......... 3,613,537 4,869,375 1.1
------------- ------------- -----
33,217,312 35,078,750 7.7
- ------------------------------------------------------------------------------------------------------------------
BEVERAGES 126,000 The Coca-Cola Company............. 9,910,105 8,426,250 1.8
- ------------------------------------------------------------------------------------------------------------------
BROADCASTING-MEDIA 50,000 CBS Corporation................... 1,261,119 1,637,500 0.4
80,000 +Chancellor Media Corporation..... 3,787,238 3,825,000 0.8
150,000 +Clear Channel Communications,
Inc.............................. 6,659,651 8,175,000 1.8
100,000 +Infinity Broadcasting Corp.
(Class A)........................ 2,187,889 2,737,500 0.6
------------- ------------- -----
13,895,897 16,375,000 3.6
- ------------------------------------------------------------------------------------------------------------------
CHEMICALS 125,000 du Pont (E.I.) de Nemours and
Company.......................... 8,773,237 6,632,813 1.5
- ------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS 18,000 +Ascend Communications, Inc....... 845,465 1,183,500 0.3
EQUIPMENT 190,000 +Cisco Systems, Inc............... 8,061,200 17,634,375 3.9
20,000 +FORE Systems, Inc................ 427,702 365,000 0.1
10,000 Lucent Technologies Inc........... 724,975 1,100,000 0.2
40,000 +Newbridge Networks Corporation... 1,642,081 1,215,000 0.3
30,000 Northern Telecom Limited.......... 1,480,653 1,503,750 0.3
10,000 Telefonaktiebolaget LM Ericsson
(ADR)*........................... 229,375 238,750 0.0
------------- ------------- -----
13,411,451 23,240,375 5.1
- ------------------------------------------------------------------------------------------------------------------
COMPUTER-SOFTWARE 25,000 +Baan Company N.V. (NY Registered
Shares).......................... 800,303 260,938 0.1
125,000 +Microsoft Corporation............ 10,506,247 17,320,313 3.8
200,000 +PeopleSoft, Inc.................. 8,128,404 3,775,000 0.8
260,000 SAP AG (Systeme, Anwendungen,
Produkte in der
Datenverarbeitung)(ADR)*......... 4,022,500 9,376,250 2.0
------------- ------------- -----
23,457,454 30,732,501 6.7
- ------------------------------------------------------------------------------------------------------------------
COMPUTERS 360,000 COMPAQ Computer Corporation....... 6,631,665 15,097,500 3.3
60,000 +Dell Computer Corporation........ 2,162,922 4,391,250 1.0
40,000 +Network Appliance, Inc........... 1,098,858 1,790,000 0.4
------------- ------------- -----
9,893,445 21,278,750 4.7
- ------------------------------------------------------------------------------------------------------------------
COSMETICS 100,000 The Gillette Company.............. 4,548,970 4,831,250 1.1
10,000 International Flavors & Fragrances
Inc.............................. 485,470 441,875 0.1
------------- ------------- -----
5,034,440 5,273,125 1.2
- ------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 20,000 Emerson Electric Co............... 658,040 1,251,250 0.3
149,000 General Electric Company.......... 8,090,944 15,207,312 3.3
7,000 Honeywell Inc..................... 505,671 527,188 0.1
------------- ------------- -----
9,254,655 16,985,750 3.7
- ------------------------------------------------------------------------------------------------------------------
ELECTRONICS 121,000 Intel Corporation................. 9,245,286 14,338,500 3.1
10,000 +STMicroelectronics N.V. (NY
Registered Shares)............... 784,287 780,625 0.2
25,000 Texas Instruments Incorporated.... 1,494,825 2,139,062 0.5
------------- ------------- -----
11,524,398 17,258,187 3.8
- ------------------------------------------------------------------------------------------------------------------
ENERGY 100,000 El Paso Energy Corporation........ 3,341,065 3,481,250 0.8
10,000 Enron Corporation................. 439,371 570,625 0.1
------------- ------------- -----
3,780,436 4,051,875 0.9
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Growth Stock Portfolio
Schedule of Investments as of December 31, 1998 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRIES SHARES HELD STOCKS COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ENTERTAINMENT 50,000 +Viacom, Inc. (Class A)........... $ 2,468,540 $ 3,678,125 0.8%
270,000 The Walt Disney Company........... 8,254,765 8,100,000 1.8
------------- ------------- -----
10,723,305 11,778,125 2.6
- ------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 20,000 American Express Company.......... 1,773,450 2,045,000 0.5
30,000 Federal Home Loan Mortgage Corp... 1,758,990 1,933,125 0.4
50,000 Federal National Mortgage
Association...................... 2,512,330 3,700,000 0.8
50,000 Franklin Resources, Inc........... 2,832,854 1,600,000 0.4
80,000 Morgan Stanley Dean Witter & Co... 5,177,813 5,680,000 1.2
------------- ------------- -----
14,055,437 14,958,125 3.3
- ------------------------------------------------------------------------------------------------------------------
FOOD 25,000 ConAgra, Inc...................... 553,250 787,500 0.2
25,000 Wrigley (Wm.) Jr. Company......... 1,504,620 2,239,062 0.5
------------- ------------- -----
2,057,870 3,026,562 0.7
- ------------------------------------------------------------------------------------------------------------------
FOOD MERCHANDISING 17,000 Albertson's, Inc.................. 699,916 1,082,688 0.2
35,000 +Fred Meyer, Inc.................. 823,550 2,108,750 0.5
25,000 +Safeway Inc...................... 1,140,220 1,523,437 0.3
------------- ------------- -----
2,663,686 4,714,875 1.0
- ------------------------------------------------------------------------------------------------------------------
HOME FURNISHINGS 121,000 Ethan Allen Interiors, Inc........ 6,458,966 4,961,000 1.1
- ------------------------------------------------------------------------------------------------------------------
HOTELS 65,000 Marriott International, Inc.
(Class A)........................ 1,853,742 1,885,000 0.4
- ------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS 15,000 Colgate-Palmolive Company......... 1,051,050 1,393,125 0.3
40,000 Kimberly-Clark Corporation........ 2,083,098 2,180,000 0.5
120,000 The Procter & Gamble Company...... 8,503,420 10,957,500 2.4
90,000 Unilever N.V. (NY Registered
Shares).......................... 6,246,939 7,464,375 1.6
------------- ------------- -----
17,884,507 21,995,000 4.8
- ------------------------------------------------------------------------------------------------------------------
INFORMATION SERVICES 60,000 +America Online, Inc.............. 3,736,962 8,685,000 1.9
150,000 First Data Corporation............ 5,680,095 4,753,125 1.0
------------- ------------- -----
9,417,057 13,438,125 2.9
- ------------------------------------------------------------------------------------------------------------------
INSURANCE 10,000 Aetna Inc......................... 822,491 786,250 0.2
75,000 American International Group,
Inc.............................. 4,820,344 7,246,875 1.6
------------- ------------- -----
5,642,835 8,033,125 1.8
- ------------------------------------------------------------------------------------------------------------------
MEDICAL TECHNOLOGY 10,000 +Boston Scientific Corporation.... 249,280 268,125 0.0
7,000 Guidant Corporation............... 440,436 771,750 0.2
10,000 Johnson & Johnson................. 471,880 838,750 0.2
------------- ------------- -----
1,161,596 1,878,625 0.4
- ------------------------------------------------------------------------------------------------------------------
OIL SERVICES 20,000 Baker Hughes Incorporated......... 831,632 353,750 0.1
10,000 Diamond Offshore Drilling, Inc.... 282,113 236,875 0.0
10,000 Schlumberger Limited.............. 574,036 461,250 0.1
------------- ------------- -----
1,687,781 1,051,875 0.2
- ------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 15,000 +Amgen Inc........................ 961,875 1,567,500 0.3
80,000 Bristol-Myers Squibb Company...... 7,513,085 10,705,000 2.4
60,000 Merck & Co., Inc.................. 4,430,891 8,861,250 1.9
130,000 Pfizer Inc........................ 9,637,042 16,306,875 3.6
------------- ------------- -----
22,542,893 37,440,625 8.2
- ------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY 5,000 Eastman Kodak Company............. 323,425 360,000 0.1
- ------------------------------------------------------------------------------------------------------------------
POLLUTION CONTROL 14,500 Waste Management, Inc............. 591,174 676,063 0.1
- ------------------------------------------------------------------------------------------------------------------
PUBLISHING 55,000 Gannett Co., Inc.................. 3,918,423 3,640,312 0.8
- ------------------------------------------------------------------------------------------------------------------
RESTAURANTS 15,000 McDonald's Corporation............ 684,747 1,149,375 0.2
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Growth Stock Portfolio
Schedule of Investments as of December 31, 1998 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRIES SHARES HELD STOCKS COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RETAIL SPECIALTY 60,000 +Abercrombie & Fitch Co. (Class
A)............................... $ 2,860,947 $ 4,245,000 0.9%
160,000 CVS Corporation................... 5,064,802 8,800,000 1.9
120,000 The Gap, Inc...................... 3,228,836 6,750,000 1.5
50,000 Lowe's Companies, Inc............. 1,768,896 2,559,375 0.6
315,000 +Staples, Inc..................... 5,911,139 13,761,562 3.0
20,000 +Tommy Hilfiger Corporation....... 1,080,294 1,200,000 0.3
105,000 Walgreen Co....................... 2,872,665 6,149,062 1.3
------------- ------------- -----
22,787,579 43,464,999 9.5
- ------------------------------------------------------------------------------------------------------------------
RETAIL STORES 100,000 +Federated Department Stores,
Inc.............................. 4,964,120 4,356,250 0.9
200,000 Wal-Mart Stores, Inc.............. 7,511,290 16,287,500 3.6
------------- ------------- -----
12,475,410 20,643,750 4.5
- ------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS 75,000 +Applied Materials, Inc........... 2,767,610 3,201,563 0.7
- ------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 120,000 +AT&T Corp........................ 7,826,062 9,030,000 2.0
55,000 Ameritech Corporation............. 3,141,286 3,485,625 0.8
50,000 Cable & Wireless PLC (ADR)*....... 2,014,324 1,837,500 0.4
190,000 GTE Corporation................... 10,842,177 12,813,125 2.8
20,000 +NEXTEL Communications, Inc....... 452,923 472,500 0.1
100,000 +MCI WorldCom, Inc................ 4,392,316 7,175,000 1.6
157,000 Sprint Corporation (Fon Group).... 8,669,763 13,207,625 2.9
150,000 Sprint Corporation (PCS Group).... 2,318,982 3,468,750 0.7
------------- ------------- -----
39,657,833 51,490,125 11.3
- ------------------------------------------------------------------------------------------------------------------
TOYS 35,000 Mattel, Inc....................... 1,276,170 798,438 0.2
- ------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 130,000 Carnival Corporation (Class A).... 3,057,700 6,240,000 1.4
- ------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS 327,260,710 446,146,563 97.8
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT SHORT-TERM SECURITIES
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER** $ 3,024,000 General Motors Acceptance Corp.,
5.13% due 1/04/1999.............. 3,022,276 3,022,276 0.7
- ------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 3,022,276 3,022,276 0.7
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS................. $ 330,282,986 449,168,839 98.5
-------------
-------------
OTHER ASSETS LESS LIABILITIES..... 7,059,471 1.5
------------- -----
NET ASSETS........................ $ 456,228,310 100.0%
------------- -----
------------- -----
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* American Depositary Receipts (ADR).
** Commercial Paper is traded on a discount basis; the interest rate shown
reflects the discount rates paid at the time of purchase by the Fund.
+ Non-income producing security.
See Notes to Financial Statements.
30
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1998
- --------------------------------------------------------------------------------
<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>
- ------------------------------------------------------------------------------------------------------------------------
AIRLINES-0.8% BB Ba2 $ 750,000 US Air Inc., 10.375% due 3/01/2013...... $ 750,000 $ 868,268
- ------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE-1.6% B+ B3 1,000,000 Breed Technologies Inc., 9.25% due
4/15/2008 (b).......................... 1,000,000 875,000
B+ B2 1,000,000 Venture Holdings Trust, 9.50% due
7/01/2005.............................. 986,904 995,000
------------ ------------
1,986,904 1,870,000
- ------------------------------------------------------------------------------------------------------------------------
BROADCASTING RADIO & B B1 2,000,000 Chancellor Media Corp., 9% due
TELEVISION-6.2% 10/01/2008 (b)......................... 1,990,000 2,110,000
CCC+ B3 1,000,000 Cumulus Media, Inc., 10.375% due
7/01/2008.............................. 1,000,000 1,060,000
CCC+ B3 1,000,000 Paxson Communications Corporation,
11.625% due 10/01/2002................. 1,073,750 1,015,000
B- B3 1,000,000 Salem Communications Corp., 9.50% due
10/01/2007............................. 1,020,000 1,030,000
B B2 2,000,000 Sinclair Broadcast Group Inc., 8.75% due
12/15/2007............................. 1,992,160 2,020,000
------------ ------------
7,075,910 7,235,000
- ------------------------------------------------------------------------------------------------------------------------
CABLE-DOMESTIC-6.4% CCC Ca 1,173,139 American Telecasting, Inc., 30.325%**
due 6/15/2004.......................... 594,523 199,434
B- B3 500,000 Avalon Cable of Michigan, 9.375% due
12/01/2008 (b)......................... 500,000 511,250
BB- Ba3 2,000,000 Century Communications Corporation,
9.50% due 3/01/2005.................... 1,977,500 2,260,000
B B2 1,500,000 Intermedia Capital Partners L.P., 11.25%
due 8/01/2006.......................... 1,493,750 1,687,500
BB+ Ba3 1,000,000 Lenfest Communications, Inc., 8.375% due
11/01/2005............................. 931,250 1,080,000
B B1 1,000,000 Olympus Communications L.P., Capital
Corp., Series B, 10.625% due
11/15/2006............................. 1,000,000 1,100,000
BB+ Ba2 500,000 TCI Communications Finance Inc., 9.65%
due 3/31/2027.......................... 513,125 617,420
------------ ------------
7,010,148 7,455,604
- ------------------------------------------------------------------------------------------------------------------------
CABLE-INTERNATIONAL-1.4% Australis Media Ltd. (h):
D NR* 2,000,000 1.75%/15.75% due 5/15/2003 (g)......... 1,366,087 20,000
D NR* 34,214 1.75%/15.75% due 5/15/2003 ............ 18,823 342
B- B3 2,000,000 NTL, Inc., Series B, 10.688%** due
2/01/2006.............................. 1,631,564 1,640,000
------------ ------------
3,016,474 1,660,342
- ------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS-3.6% B+ B1 1,000,000 Bucyrus International, 9.75% due
9/15/2007.............................. 1,000,000 742,500
B B2 1,000,000 Columbus McKinnon Corp., 8.50% due
4/01/2008.............................. 997,340 940,000
B- B3 1,500,000 International Wire Group, Inc., 11.75%
due 6/01/2005.......................... 1,486,875 1,578,750
B B3 1,250,000 Morris Materials Handling, 9.50% due
4/01/2008.............................. 1,235,000 925,000
------------ ------------
4,719,215 4,186,250
- ------------------------------------------------------------------------------------------------------------------------
CHEMICALS-0.7% BB- Ba3 744,000 ISP Holdings Inc., 9.75% due
2/15/2002.............................. 744,000 790,500
- ------------------------------------------------------------------------------------------------------------------------
COMPUTER B- B3 1,000,000 PSINet, Inc., 10% due 2/15/2005......... 1,000,000 990,000
SERVICES-0.8%
- ------------------------------------------------------------------------------------------------------------------------
CONGLOMERATES-0.9% B+ B1 1,000,000 Sequa Corp., 9.375% due 12/15/2003...... 1,030,937 1,017,500
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1998 (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-1.5% B- B2 $1,000,000 Koppers Industries, Inc., 9.875% due
12/01/2007............................. $ 1,000,000 $ 980,000
B+ B3 1,000,000 RBX Corp, 12% due 1/15/2003............. 1,000,000 810,000
------------ ------------
2,000,000 1,790,000
- ------------------------------------------------------------------------------------------------------------------------
ENERGY-7.3% B- B3 500,000 Bellwether Exploration, 10.875% due
4/01/2007.............................. 500,000 505,000
B B3 1,000,000 Chesapeake Energy Corp., 9.125% due
4/15/2006.............................. 997,550 740,000
B B2 2,000,000 Energy Corp. of America, 9.50% due
5/15/2007.............................. 2,000,000 1,850,000
B- B3 1,000,000 Ocean Rig Norway AS, 10.25% due
6/01/2008.............................. 953,750 800,000
B+ B1 1,000,000 Parker Drilling Co., 9.75% due
11/15/2006............................. 992,150 900,000
NR* B2 1,500,000 Petroleo Brasileiro S.A., 10% due
10/17/2006 (b)......................... 1,500,000 1,387,500
B+ B2 500,000 Pool Energy Services Co., 8.625% due
4/01/2008.............................. 500,000 472,500
CCC Caa2 1,000,000 Southwest Royalties Inc., 10.50% due
10/15/2004............................. 987,910 400,000
CCC Caa2 5,150,000 TransAmerican Energy Corp., Series B,
13.163%** due 6/15/2002................ 4,834,819 1,442,000
------------ ------------
13,266,179 8,497,000
- ------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT-0.6% CCC+ B3 1,252,000 AMF Bowling Worldwide Inc., Series B,
12.082%** due 3/15/2006................ 969,372 676,080
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL NR* Baa2 1,000,000 IBJ Preferred Capital Co. LLC, 8.79% due
SERVICES-0.7% 12/29/2049 (b)......................... 996,250 860,000
- ------------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE-1.4% B+ B1 1,000,000 Chiquita Brands International Inc.,
9.125% due 3/01/2004................... 1,002,500 1,022,500
B B3 1,500,000 Colorado Prime Corp., 12.50% due
5/01/2004.............................. 1,469,804 600,000
------------ ------------
2,472,304 1,622,500
- ------------------------------------------------------------------------------------------------------------------------
GAMING-3.4% D Caa1 1,000,000 GB Property Funding Corp., 10.875% due
1/15/2004 (e).......................... 845,000 620,000
B+ B2 1,000,000 Hollywood Casino Corp., 12.75% due
11/01/2003............................. 937,592 1,060,000
NR* NR* 862,000 Jazz Casino Co. LLC, 5.867% due
11/15/2009 (a)......................... 412,099 400,830
NR* NR* 84,000 Jazz Casino Co. LLC, New Contingent
Notes, due 11/15/2007 (f).............. -- --
B B2 1,000,000 Trump Atlantic City Associates/ Funding
Inc., 11.25% due 5/01/2006............. 988,750 880,000
B- B3 1,000,000 Venetian Casino/LV Sands, 12.25% due
11/15/2004............................. 1,011,250 945,000
------------ ------------
4,194,691 3,905,830
- ------------------------------------------------------------------------------------------------------------------------
HEALTHCARE-4.0% B+ Ba3 1,000,000 Beverly Enterprises Inc., 9% due
2/15/2006.............................. 933,750 1,020,000
BBB Ba2 750,000 Columbia HCA/Healthcare Corp., 7.15% due
3/30/2004.............................. 720,000 731,340
B+ Ba3 1,000,000 Fresenius Medical Capital Trust II,
7.875% due 2/01/2008................... 1,000,000 990,000
B- B3 1,000,000 Mariner Post-Acute Network, 9.50% due
11/01/2007............................. 995,540 770,000
B+ B2 1,000,000 Quest Diagnostic Inc., 10.75% due
12/15/2006............................. 1,000,000 1,110,000
------------ ------------
4,649,290 4,621,340
- ------------------------------------------------------------------------------------------------------------------------
HOTELS-1.7% BB Ba2 2,000,000 HMH Properties, 7.875% due 8/01/2008.... 1,930,000 1,930,000
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1998 (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 BB- Ba2 $2,000,000 Calpine Corporation, 8.75% due
PRODUCERS-3.5% 7/15/2007.............................. $ 2,030,677 $ 2,020,000
B B2 1,000,000 Midland Funding II, 13.25% due
7/23/2006.............................. 1,108,750 1,281,030
BB Ba2 1,000,000 Monterrey Power, S.A. de C.V., 9.625%
due 11/15/2009 (b)..................... 998,160 780,000
------------ ------------
4,137,587 4,081,030
- ------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL- B B3 2,000,000 Anthony Crane Rentals, 10.375% due
SERVICES-2.7% 8/01/2008 (b).......................... 2,000,000 1,920,000
B B3 1,000,000 Neff Corp., 10.25% due 6/01/2008 (b).... 985,160 980,000
CCC+ Caa1 500,000 Thermadyne Holdings Corp., 12.50%** due
6/01/2008.............................. 292,726 237,500
------------ ------------
3,277,886 3,137,500
- ------------------------------------------------------------------------------------------------------------------------
MACHINERY-0.8% B- B3 1,000,000 Numatics Inc., 9.625% due 4/01/2008..... 1,000,000 935,000
- ------------------------------------------------------------------------------------------------------------------------
MEDIA & NR* NR* 500,000 Comtel Brasileira Ltd., 10.75% due
COMMUNICATIONS- 9/26/2004 (b).......................... 500,000 392,500
INTERNATIONAL-3.5% B+ B2 1,000,000 Globo Communicacoes e Participacoes,
Ltd., 10.50% due 12/20/2006 (b)........ 1,003,750 642,500
BB Ba2 1,000,000 Grupo Televisa, S.A. de C.V., Series A,
11.375% due 5/15/2003.................. 1,010,000 987,500
BBB- Ba3 2,000,000 Telefonica de Argentina S.A., 11.875%
due 11/01/2004......................... 1,978,830 2,100,000
------------ ------------
4,492,580 4,122,500
- ------------------------------------------------------------------------------------------------------------------------
METALS & MINING-2.6% CCC+ B2 1,000,000 Kaiser Aluminum & Chemical Corp., 12.75%
due 2/01/2003.......................... 1,045,000 980,000
B B2 2,000,000 P & L Coal Holdings Corp., 9.625% due
5/15/2008.............................. 1,971,250 2,020,000
------------ ------------
3,016,250 3,000,000
- ------------------------------------------------------------------------------------------------------------------------
PACKAGING-5.2% BB- B1 1,500,000 Ball Corp, 8.25% due 8/01/2008 (b)...... 1,500,000 1,560,000
B- B3 1,500,000 Indesco International, 9.75% due
4/15/2008.............................. 1,495,625 1,410,000
B B2 1,000,000 Portola Packaging Inc., 10.75% due
10/01/2005............................. 1,000,000 1,025,000
B B1 1,000,000 Silgan Corp., 9% due 6/01/2009.......... 1,000,000 1,012,500
B- B3 1,000,000 Tekni-Plex, Inc., 9.25% due 3/01/2008... 1,000,000 1,045,000
------------ ------------
5,995,625 6,052,500
- ------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST B B3 1,000,000 Ainsworth Lumber Company, 12.50% due
PRODUCTS-2.0% 7/15/2007 (a).......................... 1,005,000 995,000
B+ B1 1,000,000 Doman Industries Ltd., 8.75% due
3/15/2004.............................. 919,000 790,000
CCC+ Caa1 1,000,000 Pindo Deli Financial Mauritius, 10.75%
due 10/01/2007......................... 996,980 543,750
------------ ------------
2,920,980 2,328,750
- ------------------------------------------------------------------------------------------------------------------------
PRINTING & BB- B1 1,000,000 Hollinger International Publishing,
PUBLISHING-1.5% 9.25% due 2/01/2006.................... 956,250 1,050,000
BB- Ba3 750,000 Primedia, Inc., 7.625% due 4/01/2008.... 745,687 735,000
------------ ------------
1,701,937 1,785,000
- ------------------------------------------------------------------------------------------------------------------------
PRODUCT B- B3 1,000,000 AmeriServ Food Company, 10.125% due
DISTRIBUTION-0.7% 7/15/2007.............................. 1,000,000 865,000
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1998 (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>
- ------------------------------------------------------------------------------------------------------------------------
RETAIL NR* NR* $1,000,000 Bradlees, Inc., 11%
SPECIALTY-0.3% due 8/01/2002 (e)...................... $ 1,023,750 $ 20,000
NR* NR* 397,000 Cumberland Farms, Inc., 10.50%
due 10/01/2003......................... 388,564 393,030
------------ ------------
1,412,314 413,030
- ------------------------------------------------------------------------------------------------------------------------
STEEL-1.6% BB- B2 2,000,000 Wheeling Pittsburgh Corp., 9.25% due
11/15/2007............................. 1,980,000 1,870,000
- ------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICA- B+ B2 1,000,000 GCI Inc., 9.75% due 8/01/2007........... 1,000,000 990,000
TIONS-1.1% B B3 500,000 Metronet Communications, 9.95%** due
6/15/2008.............................. 324,374 306,250
------------ ------------
1,324,374 1,296,250
- ------------------------------------------------------------------------------------------------------------------------
TELEPHONY-COMPETITIVE BB+ Ba1 2,500,000 Qwest Communications
LOCAL EXCHANGE International Inc., 7.50%
CARRIERS-3.1% due 11/01/2008 (b)..................... 2,483,100 2,581,250
B- B2 1,000,000 Time Warner Telecom LLC, 9.75% due
7/15/2008.............................. 1,000,000 1,050,000
------------ ------------
3,483,100 3,631,250
- ------------------------------------------------------------------------------------------------------------------------
TEXTILES-0.5% B+ B3 1,000,000 Anvil Knitwear Inc., Series B, 10.875%
due 3/15/2007.......................... 1,041,250 600,000
- ------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION-4.5% BB- NR* 1,000,000 Autopistas del Sol S.A., 10.25% due
8/01/2009 (b).......................... 1,026,250 757,500
BB Ba3 2,000,000 GS Superhighway Holdings, 10.25% due
8/15/2007.............................. 1,973,750 940,000
B NR* 1,000,000 MRS Logistica SA, 10.625% due 8/15/2005
(b).................................... 988,750 507,500
BB- B1 1,000,000 Sea Containers Ltd., Series A, 12.50%
due 12/01/2004......................... 1,095,000 1,072,500
B- B3 2,000,000 Transtar Holdings L.P., Series B,
11.376%** due 12/15/2003............... 1,805,247 1,920,000
------------ ------------
6,888,997 5,197,500
- ------------------------------------------------------------------------------------------------------------------------
UTILITIES-3.6% NR* NR* 1,000,000 CIA Saneamento Basico, 10% due 7/28/2005
(b).................................... 1,005,000 680,000
B+ B2 1,500,000 +Espirito Santo-Escelsa, 10% due
7/15/2007.............................. 1,498,125 918,750
BB NR* 1,000,000 Inversora de Electrica, 9% due 9/16/2004
(b).................................... 1,000,000 737,500
BBB- Ba3 1,000,000 Metrogas S.A., 12% due 8/15/2000........ 983,750 1,032,500
BBB- Baa3 981,200 TransGas de Occidente S.A., 9.79% due
11/01/2010 (b)(d)...................... 981,200 807,461
------------ ------------
5,468,075 4,176,211
- ------------------------------------------------------------------------------------------------------------------------
WASTE B+ B2 500,000 Safety-Kleen Services, 9.25% due
MANAGEMENT-0.4% 6/01/2008.............................. 500,000 515,000
- ------------------------------------------------------------------------------------------------------------------------
WIRELESS CCC+ B2 1,000,000 Cencall Communications
COMMUNICATION- Corporation, 8.803%**
DOMESTIC-4.3% due 1/15/2004.......................... 998,670 980,000
BB+ Ba3 2,000,000 Comcast Cellular Holdings, Series B,
9.50% due 5/01/2007.................... 1,996,740 2,120,000
CCC+ B2 2,000,000 NEXTEL Communications Inc., 14.085%**
due 8/15/2004.......................... 1,585,609 1,940,000
------------ ------------
4,581,019 5,040,000
- ------------------------------------------------------------------------------------------------------------------------
WIRELESS CCC+ Caa1 1,995,000 McCaw International Ltd., 12.469%** due
COMMUNICATION- 4/15/2007.............................. 1,349,975 1,082,287
INTERNATIONAL-5.6% B- Caa1 2,000,000 Millicom International Cellular S.A.,
13.116%** due 6/01/2006................ 1,477,294 1,400,000
B+ Ba3 4,000,000 Orange PLC, 8% due 8/01/2008............ 3,882,440 4,040,000
------------ ------------
6,709,709 6,522,287
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN CORPORATE
BONDS-90.5% 118,743,357 105,545,022
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1998 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
INDUSTRIES HELD ISSUE COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS & WARRANTS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
CABLE-DOMESTIC-0.0% 5,000 American Telecasting, Inc. (Warrants)
(c).................................... $ 4,776 $ 50
- ------------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE-0.0% 1,500 Colorado Prime Corporation
(Warrants) (b)(c)...................... 13,096 1,500
- ------------------------------------------------------------------------------------------------------------------------
GAMING-0.1% 1,000 +Goldriver Hotel & Casino Corp.,
Liquidating Trust (e).................. 24,040 --
24,357 JCC Holding Company (e)................. 97,428 82,205
------------ ------------
121,468 82,205
- ------------------------------------------------------------------------------------------------------------------------
SUPERMARKETS-0.0% 936 Grand Union Co. (Warrants) (c).......... 9 2,281
- ------------------------------------------------------------------------------------------------------------------------
WIRELESS COMMUNICATION- 3,098 NEXTEL Communications, Inc. (e).........
DOMESTIC PAGING &
CELLULAR-0.0% 49,991 73,190
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN COMMON STOCKS &
WARRANTS-0.1% 189,340 159,226
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCKS
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
CABLE-DOMESTIC-1.3% 13,149 CSC Holdings Inc. (a)(e)................ 935,000 1,466,113
- --------------------------------------------------------------------------------------------------------------------------
ENERGY-1.2% 1,117 +Clark USA Inc. (a)(e).................. 1,113,880 938,280
20,000 Coastal Finance I....................... 500,000 492,500
8,273 +TCR Holdings (Class B)................. 496 496
4,550 +TCR Holdings (Class C)................. 255 255
11,996 +TCR Holdings (Class D)................. 636 636
24,819 +TCR Holdings (Class E)................. 1,563 1,564
------------ ------------
1,616,830 1,433,731
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES-0.9% 40,000 California Federal Bank
(Series A)............................. 1,010,000 1,012,500
- --------------------------------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING-0.6% 7,500 Primedia, Inc. (e)...................... 745,500 721,875
- --------------------------------------------------------------------------------------------------------------------------
WIRELESS COMMUNICATION- 1,168 NEXTEL Communications Inc. (Series D)
DOMESTIC PAGING & (a)(e)................................. 1,183,325 1,191,360
CELLULAR-1.0%
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN PREFERRED
STOCKS-5.0% 5,490,655 5,825,579
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT SHORT-TERM SECURITES
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER***-2.3% $ 2,667,000 General Motors Acceptance Corp., 5.13%
due 1/04/1999.......................... 2,665,480 2,665,480
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SHORT-TERM
SECURITIES-2.3% 2,665,480 2,665,480
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-97.9%................. $127,088,832 114,195,307
------------
------------
OTHER ASSETS LESS LIABILITIES-2.1%...... 2,415,044
------------
NET ASSETS-100.0%....................... $116,610,351
------------
------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 1998 (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 Fund.
*** Commercial Paper is traded on a discount basis; the interest rate shown
reflects the discount rate 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>
Clark USA Inc................................................................ 9/26/1997 $ 1,113,880 $ 938,280
Goldriver Hotel & Casino Corp., Liquidating Trust............................ 8/31/1992 24,040 --
TCR Holdings (Class B)....................................................... 12/10/1998 496 496
TCR Holdings (Class C)....................................................... 12/10/1998 255 255
TCR Holdings (Class D)....................................................... 12/10/1998 636 636
TCR Holdings (Class E)....................................................... 12/10/1998 1,563 1,564
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 1,140,870 $ 941,231
------------ ------------
------------ ------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Represents a pay-in-kind security which may pay interest/dividends in
additional face amount/shares.
(b) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(c) Warrants entitle the Portfolio to purchase a predetermined number of shares
of Common Stock and are non-income producing. The purchase price and number
of shares are subject to adjustment under certain conditions until the
expiration date.
(d) Subject to principal paydowns.
(e) Non-income producing security.
(f) Represents an obligation by Jazz Casino Co. LLC to pay a semi-annual amount
to the Portfolio through 11/15/2009. The payments are based upon varying
interest rates and the amounts, which may be paid-in-kind, are contingent
upon the earnings before income taxes, depreciation and amortization of
Jazz Casino Co. LLC on a fiscal year basis.
(g) Each $1,000 face amount contains one warrant of Australia Media Ltd.
(h) Represents a step bond. Coupon payments are paid-in-kind, in which the
Portfolio receives additional face amount at an annual rate of 1.75% until
5/15/2000. Subsequently, the Portfolio will receive cash coupon payments at
an annual rate of 15.75% until maturity.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
36
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Intermediate Government Bond Portfolio
Schedule of Investments as of December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
US GOVERNMENT & AGENCY OBLIGATIONS
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN $ 8,600,000 Federal Home Loan Bank,
BANK-3.6% 5.40% due 1/15/2003.................................. $ 8,752,478 $ 8,673,874
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FEDERAL HOME LOAN BANK 8,752,478 8,673,874
- ----------------------------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN Federal Home Loan Mortgage Corporation:
MORTGAGE 5,000,000 7.90% due 9/19/2001.............................. 5,000,000 5,356,250
CORPORATION-6.7% 1,685,000 6.42% due 10/03/2005............................. 1,710,802 1,793,733
3,100,000 6.40% due 12/13/2006............................. 3,149,817 3,310,707
5,500,000 5.75% due 4/15/2008.............................. 5,671,985 5,686,505
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION 15,532,604 16,147,195
- ----------------------------------------------------------------------------------------------------------------------
FEDERAL NATIONAL Federal National Mortgage Association:
MORTGAGE 5,000,000 7.55% due 4/22/2002.............................. 5,226,550 5,376,550
ASSOCIATION-13.4% 6,000,000 7.40% due 7/01/2004.............................. 6,248,520 6,611,220
10,000,000 7.85% due 9/10/2004.............................. 9,824,469 10,182,800
9,000,000 7.65% due 3/10/2005.............................. 8,990,156 10,112,310
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION 30,289,695 32,282,880
- ----------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED Federal Home Loan Mortgage Corporation (a):
SECURITIES-21.8% 10,000,000 6.50% due 1/15/2009.............................. 10,229,688 10,284,300
7,525,000 6% due 3/15/2009................................. 7,463,271 7,572,031
Federal National Mortgage Association (a):
188,985 9% due 1/01/2002................................. 182,370 192,719
5,500,000 6.50% due 10/25/2003............................. 5,594,531 5,748,490
3,279,739 6.48% due 6/01/2005.............................. 3,302,287 3,388,207
1,958,368 6.40% due 1/01/2006.............................. 1,977,416 2,035,906
18,433,834 6.27% due 11/01/2007............................. 18,405,031 19,134,352
1,634,419 6.105% due 8/01/2008............................. 1,630,078 1,681,041
2,241,993 6.175% due 8/01/2008............................. 2,250,489 2,316,423
- ----------------------------------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES 51,035,161 52,353,469
- ----------------------------------------------------------------------------------------------------------------------
PRIVATE EXPORT 7,000,000 Private Export Funding Co.,
FUNDING 8.35% due 1/31/2001................................. 7,083,590 7,458,290
CORPORATION-3.1%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL PRIVATE EXPORT FUNDING CORPORATION 7,083,590 7,458,290
- ----------------------------------------------------------------------------------------------------------------------
US TREASURY US Treasury Bonds:
BONDS & NOTES-48.4% 5,000,000 11.875% due 11/15/2003........................... 6,547,656 6,525,800
16,000,000 12% due 5/15/2005................................ 22,772,500 22,260,000
10,000,000 10.75% due 8/15/2005............................. 13,385,937 13,337,500
US Treasury Notes:
9,000,000 6.625% due 4/30/2002............................. 9,313,594 9,524,520
10,000,000 7.50% due 5/15/2002.............................. 10,852,344 10,857,800
15,000,000 6.375% due 8/15/2002............................. 15,045,994 15,822,600
1,500,000 5.875% due 9/30/2002............................. 1,517,344 1,559,055
4,500,000 5.75% due 4/30/2003.............................. 4,739,063 4,684,230
7,000,000 5.25% due 8/15/2003.............................. 7,043,437 7,178,290
1,000,000 5.75% due 8/15/2003.............................. 993,828 1,044,220
4,500,000 7% due 7/15/2006................................. 4,927,148 5,123,655
1,500,000 5.50% due 2/15/2008.............................. 1,492,617 1,589,535
16,000,000 5.625% due 5/15/2008............................. 16,507,969 17,072,480
- ----------------------------------------------------------------------------------------------------------------------
TOTAL US TREASURY BONDS & NOTES 115,139,431 116,579,685
- ----------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY OBLIGATIONS-97.0% 227,832,959 233,495,393
- ----------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
- ----------------------------------------------------------------------------------------------------------------------
REPURCHASE 3,751,000 Warburg Dillon Read LLC, purchased on 12/31/1998 to
AGREEMENTS*-1.6% yield 4.75% to 1/04/1999............................ 3,751,000 3,751,000
- ----------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 3,751,000 3,751,000
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-98.6%.............................. $ 231,583,959 237,246,393
-------------
-------------
OTHER ASSETS LESS LIABILITIES-1.4%................... 3,336,228
-------------
NET ASSETS-100.0%.................................... $ 240,582,621
-------------
-------------
- ----------------------------------------------------------------------------------------------------------------------
</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.
37
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Long Term Corporate Bond Portfolio
Schedule of Investments as of December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S FACE VALUE
INDUSTRIES S&P RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT OBLIGATIONS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
US TREASURY US Treasury Notes:
NOTES-1.8% AAA Aaa $1,000,000 5.875% due 2/15/2004......... $ 1,022,188 $ 1,055,000
AAA Aaa 750,000 7.25% due 5/15/2004.......... 819,199 840,585
AAA Aaa 500,000 4.75% due 11/15/2008......... 496,563 503,905
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT
OBLIGATIONS-1.8% 2,337,950 2,399,490
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CORPORATE BONDS & NOTES
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED NR* Baa2 3,500,000 ++Bistro Trust 1998-1000, 6.58%
COMMERCIAL due 3/26/2001................... 3,499,860 3,551,380
MORTGAGE-BACKED AA Aa2 1,000,000 CIT Group Home Equity Loan Trust,
SECURITIES**-12.2% 6.44% due 11/15/2027............ 999,620 1,004,720
AAA Aaa 1,000,000 Citibank Credit Card Master Trust
I, Class A, 5.363% due
12/10/2008...................... 999,610 973,020
AAA Aaa 1,000,000 Federal Home Loan Mortgage
Corporation, Series 2063, Class
PN, 6% due 10/15/2018........... 1,015,859 1,005,620
AAA Aaa 997,005 Federal National Mortgage
Association, 6.448% due
12/25/2012...................... 999,498 987,659
AAA Aaa 1,000,000 First Bank, Corporate Card
MasterTrust, 6.40% due
2/15/2003....................... 998,772 1,027,600
AAA Aaa 929,087 First Greensboro Home Equity Loan
Trust, Series 1998-1, Class A2,
6.55% due 12/25/2029............ 929,087 923,861
AAA Aaa 263,048 General Motors Acceptance Corp.
Grantor Trust, Series 1997-A,
Class A, 6.50% due 4/15/2002.... 262,975 265,329
AAA Aaa 2,000,000 Government National Mortgage
Association, Series 1998-14,
6.375% due 11/20/2026........... 1,984,688 2,018,740
AAA Aaa 1,500,000 IMC Home Equity Loan Trust,
Series 1998-3, Class A5, 6.36%
due 8/20/2022................... 1,499,709 1,514,130
AAA Aaa 1,000,000 The Money Store, Series 1998-B,
6.225% due 9/15/2023............ 999,851 1,006,230
NR* A2 1,000,000 Mortgage Capital Funding, Inc.,
Series 1998-MC2, Class C, 6.726%
due 6/18/2008................... 1,010,000 1,021,797
BBB- Baa1 1,000,000 ++York Funding Ltd., Series
1998-1A, Class III, 6.50% due
6/15/2005....................... 999,375 810,000
------------- -------------
16,198,904 16,110,086
- ------------------------------------------------------------------------------------------------------------------------------
BANKING-11.4% BBB+ A3 1,250,000 BB&T Corporation, 7.25% due
6/15/2007....................... 1,244,162 1,363,512
A A2 1,000,000 The Bank of New York Company,
Inc., 7.625% due 7/15/2002...... 1,076,500 1,069,170
A A2 2,000,000 First Interstate/Wells Fargo
Company, 9.90% due 11/15/2001... 2,270,480 2,237,640
A- A2 1,000,000 First Union Corporation, 6.30%
due 4/15/2028................... 996,220 1,013,891
BBB+ A3 1,000,000 Great Western Bank, 9.875% due
6/15/2001....................... 1,108,450 1,093,150
A- A3 1,000,000 HSBC Americas Inc., 7% due
11/01/2006...................... 991,600 1,047,180
BBB A1 2,000,000 KeyCorp Capital I, 6.427% due
7/01/2028....................... 1,979,880 1,928,400
BBB+ Baa1 1,000,000 MBNA America Bank NA, 5.543% due
6/10/2004....................... 984,570 951,350
A- A2 1,000,000 Mellon Capital II, 7.995% due
1/15/2027....................... 953,470 1,111,860
Mellon Financial Co.:
A A3 2,000,000 6.875% due 3/01/2003......... 1,822,480 2,094,400
A A3 1,000,000 6.375% due 2/15/2010......... 1,001,550 1,050,740
------------- -------------
14,429,362 14,961,293
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Long Term Corporate Bond Portfolio
Schedule of Investments as of December 31, 1998 (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 A1 $ 500,000 Ford Motor Credit Company, 5.35%
CAPTIVE - 2.3% due 8/27/2006................... $ 499,653 $ 498,750
General Motors Acceptance Corp.:
A A2 1,000,000 7.125% due 5/01/2003......... 994,890 1,058,770
A A2 1,250,000 7.70% due 4/15/2016.......... 1,363,938 1,427,862
------------- -------------
2,858,481 2,985,382
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES- AA- Aa3 1,000,000 Associates Corp. of North
CONSUMER-5.5% America, 6.95% due 11/01/2018... 994,120 1,065,580
A A2 1,000,000 Beneficial Corporation, Series I,
6.80% due 9/16/2003............. 1,000,000 1,036,888
A aa3 1,000,000 CIT Capital Trust I, 7.70% due
2/15/2027....................... 995,440 1,044,913
A+ Aa3 2,000,000 CIT Group Holdings, Inc., 6.625%
due 6/15/2005................... 2,006,780 2,095,560
A- Baa1 2,000,000 Finova Capital Corp., 6.25% due
11/01/2002...................... 1,992,340 2,017,760
------------- -------------
6,988,680 7,260,701
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL A+ A1 1,000,000 Allstate Corp., 6.75% due
SERVICES- 5/15/2018....................... 999,710 1,039,330
OTHER-12.6% A A2 500,000 Bear Stearns Companies, Inc.,
6.50% due 7/05/2000............. 499,090 505,085
A+ aa3 2,000,000 Citigroup Capital II, 7.75% due
12/01/2036...................... 2,003,400 2,147,606
A+ Aa3 750,000 Commercial Credit Co., 6.75% due
7/01/2007....................... 771,555 800,167
BBB- Baa2 500,000 Commercial Net Lease Realty,
7.125% due 3/15/2008............ 498,645 462,660
A- A3 1,000,000 Donaldson, Lufkin & Jenrette
Inc., 6.875% due 11/01/2005..... 999,050 1,043,910
A A2 1,000,000 ++Equitable Life Assurance
Society of the US, 7.70% due
12/01/2015...................... 993,160 1,096,950
AAA Aaa 500,000 General Electric Capital Corp.,
8.125% due 5/15/2012............ 531,640 617,605
BBB- Baa3 1,000,000 Hospitality Properties Trust, 7%
due 3/01/2008................... 998,200 923,660
A Baa1 1,000,000 Lehman Brothers Holdings, Inc.,
6.50% due 10/01/2002............ 999,050 1,000,113
AA Aa2 2,350,000 MBIA, Inc., 7.15% due
7/15/2027....................... 2,344,243 2,517,555
BBB+ Baa1 2,500,000 PaineWebber Group Inc., 7.99% due
6/09/2017....................... 2,500,000 2,523,775
BBB+ Baa1 1,000,000 Simon Debartolo Group LP, 7.375%
due 6/15/2018................... 993,420 931,700
BBB Baa2 1,000,000 Spieker Properties LP, 7.35% due
12/01/2017...................... 999,950 945,546
------------- -------------
16,131,113 16,555,662
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Long Term Corporate Bond Portfolio
Schedule of Investments as of December 31, 1998 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S FACE VALUE
INDUSTRIES S&P RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INDUSTRIAL- Anheuser-Busch Companies, Inc.:
CONSUMER-11.6% A+ A1 $1,000,000 5.65% due 9/15/2008.......... $ 996,610 $ 1,019,250
A+ A1 1,560,000 6.50% due 1/01/2028.......... 1,564,696 1,648,452
A A2 3,500,000 Bass America, Inc., 8.125% due
3/31/2002....................... 3,532,070 3,730,335
A A2 891,175 ++Disney-Crave-403, 6.85% due
1/10/2007**..................... 890,559 924,594
BBB- Baa3 1,000,000 Flowers Industries Inc., 7.15%
due 4/15/2028................... 994,700 959,480
A+ A1 500,000 Hershey Foods Co., 8.80% due
2/15/2021....................... 670,105 659,515
AAA Aaa 2,000,000 Johnson & Johnson, 8.72% due
11/01/2024...................... 2,019,140 2,388,540
AA Aa2 410,000 McDonald's Corp, 6.375% due
1/08/2028....................... 423,592 426,211
A A2 1,000,000 Nordstrom, Inc., 6.95% due
3/15/2028....................... 1,012,960 1,052,700
A A1 750,000 Pepsico, Inc., 5.75% due
1/02/2003....................... 746,205 757,450
A A2 500,000 Phillip Morris Companies, Inc.,
7.25% due 1/15/2003............. 503,440 529,380
BBB Baa2 1,000,000 Time Warner Entertainment Co.,
8.375% due 3/15/2023............ 1,070,290 1,213,980
------------- -------------
14,424,367 15,309,887
- ------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL-ENERGY- 0.4% AA- Aa3 500,000 Dresser Industries, Inc., 7.60%
due 8/15/2096................... 498,545 589,640
- ------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL- BBB+ A3 500,000 Applied Materials Inc., 6.75% due
OTHER-13.0% 10/15/2007...................... 499,675 503,230
A+ A2 1,000,000 Chrysler Corp., 7.45% due
3/01/2027....................... 995,140 1,147,870
A+ A1 1,000,000 ++Electronic Data Systems Corp.,
6.85% due 5/15/2000............. 999,210 1,020,525
BBB Baa2 2,500,000 Federal Express Corporation,
9.65% due 6/15/2012............. 2,758,750 3,105,325
First Data Corporation:
A A2 1,000,000 6.75% due 7/15/2005.......... 1,035,820 1,039,450
A A2 1,000,000 6.375% due 12/15/2007........ 997,430 1,036,130
BBB- Baa2 500,000 Georgia-Pacific Group, 7.25% due
6/01/2028....................... 497,515 503,710
A- Baa1 1,000,000 Goodrich (BF) Co., 7% due
4/15/2038....................... 994,110 1,000,910
A+ A1 1,000,000 International Business Machines
Corp., 6.50% due 1/15/2028...... 1,031,340 1,049,590
Martin Marietta Corp.:
BBB+ A3 1,000,000 6.50% due 4/15/2003.......... 1,006,130 1,026,700
BBB+ A3 500,000 7.375% due 4/15/2013......... 480,805 550,070
A A1 1,000,000 PPG Industries Inc., 6.50% due
11/01/2007...................... 996,940 1,044,210
BBB- Baa3 800,000 Royal Caribbean Cruises Ltd.,
6.75% due 3/15/2008............. 792,896 787,320
BBB- Baa3 1,000,000 TCI Communications Inc., 8.75%
due 8/01/2015................... 1,173,060 1,242,290
Tyco International Group S.A.:
A- Baa1 1,000,000 ++5.875% due 11/01/2004...... 999,590 993,835
A- Baa1 1,000,000 7% due 6/15/2028............. 992,790 1,020,250
------------- -------------
16,251,201 17,071,415
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Long Term Corporate Bond Portfolio
Schedule of Investments as of December 31, 1998 (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>
- ------------------------------------------------------------------------------------------------------------------------------
SOVEREIGNS+- 4.6% AA+ Aa2 $1,000,000 Canada Government Bond, 5.25% due
11/05/2008 (1).................. $ 999,770 $ 1,001,250
BBB+ A3 500,000 Peoples Republic of China, 7.30%
due 12/15/2008 (1).............. 499,300 497,600
AA- A1 1,000,000 Province of Manitoba, 5.50% due
10/01/2008 (1).................. 993,620 1,009,210
AA- Aa3 1,300,000 Province of Ontario, 5.50% due
10/01/2008 (1).................. 1,292,304 1,305,005
A+ A2 1,000,000 Province of Quebec, 8.80% due
4/15/2003 (1)................... 1,129,480 1,122,130
------------- -------------
4,914,474 4,935,195
- ------------------------------------------------------------------------------------------------------------------------------
TRANSPORT Southwest Airlines Co.:
SERVICES - 2.4% A- A3 2,000,000 9.40% due 7/01/2001.......... 2,407,120 2,166,540
A- A3 1,000,000 7.375% due 3/01/2027......... 1,119,060 1,053,100
------------- -------------
3,526,180 3,219,640
- ------------------------------------------------------------------------------------------------------------------------------
UTILITIES- A- A2 1,000,000 ALLTEL Corporation, 6.75% due
COMMUNICATION-9.5% 9/15/2005....................... 984,600 1,052,220
AA- A2 2,000,000 GTE California, Inc., Series C,
8.07% due 4/15/2024............. 2,137,460 2,220,240
A Baa1 2,000,000 GTE Corp., 9.375% due
12/01/2000...................... 2,189,690 2,145,140
A A2 1,000,000 Lucent Technologies Inc., 6.50%
due 1/15/2028................... 1,036,180 1,062,170
MCI WorldCom Inc.:
BBB+ Baa2 1,000,000 7.75% due 4/01/2007.......... 1,088,940 1,129,650
BBB+ Baa2 500,000 6.125% due 4/15/2012......... 498,665 507,610
Southwestern Bell
Telecommunications Corp.:
AA Aa3 1,000,000 6.125% due 3/01/2000......... 978,880 1,009,960
AA Aa3 1,000,000 6.375% due 11/15/2007........ 1,004,760 1,064,730
A- Baa1 1,000,000 Sprint Capital Corporation,
6.875% due 11/15/2028........... 1,016,270 1,039,300
A- A3 1,200,000 US West Capital Funding Inc.,
6.50% due 11/15/2018............ 1,193,112 1,227,960
------------- -------------
12,128,557 12,458,980
- ------------------------------------------------------------------------------------------------------------------------------
UTILITIES-ELECTRIC-5.7% A A3 500,000 Central Power & Light Co., Series
KK, 6.625% due 7/01/2005........ 522,905 526,810
AAA Aaa 750,000 Cleveland Electric/Toledo Edison
, Series B, 7.13% due
7/01/2007....................... 786,817 813,510
A+ A1 785,000 Consolidated Edison, Inc., 6.25%
due 2/01/2008................... 785,000 824,062
A A1 1,000,000 Mississippi Power Co., Series B,
6.05% due 5/01/2003............. 1,022,480 1,027,240
AA- A1 1,500,000 Pacific Gas and Electric Company,
Series 93C, 6.25% due
8/01/2003....................... 1,527,975 1,552,065
A- A3 1,000,000 Pennsylvania Power & Light Co.,
6.125% due 5/01/2006............ 999,400 1,014,870
A- A3 1,500,000 Rochester Gas & Electric, Series
B, 5.84% due 12/22/2008......... 1,500,000 1,490,157
AAA Aaa 300,000 Texas Utilities Electric Company,
6.375% due 10/01/2004........... 301,545 314,527
------------- -------------
7,446,122 7,563,241
- ------------------------------------------------------------------------------------------------------------------------------
YANKEE CORPORATES-3.1% AAA Aaa 1,000,000 Banco Santander-Chile, 6.50% due
11/01/2005...................... 995,290 1,013,595
BBB Baa2 1,000,000 Canadian National Railway Co.,
6.90% due 7/15/2028............. 995,700 1,039,800
A Aa3 1,000,000 Midland Bank PLC, 7.65% due
5/01/2025....................... 1,095,840 1,072,210
A+ Aa3 1,000,000 Sony Corporation, 6.125% due
3/04/2003....................... 997,880 1,021,540
BBB+ Baa2 1,000,000 WPP Finance (USA) Corp., 6.625%
due 7/15/2005................... 993,090 1,014,486
------------- -------------
5,077,800 5,161,631
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS &
NOTES-94.3% 120,873,786 124,182,753
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Long Term Corporate Bond Portfolio
Schedule of Investments as of December 31, 1998 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS
- ------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS***-2.3% $2,978,000 Warburg Dillon Read LLC,
purchased on 12/31/1998 to yield
4.75% to 1/04/1999.............. $ 2,978,000 $ 2,978,000
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS-2.3% 2,978,000 2,978,000
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-98.4%.......... $ 126,189,736 129,560,243
-------------
-------------
OTHER ASSETS
LESS LIABILITIES-1.6%............ 2,168,852
-------------
NET ASSETS-100.0%................ $ 131,729,095
-------------
-------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not Rated.
** Subject to principal paydowns.
*** Repurchase Agreements are fully collateralized by US Government Obligations.
+ Corresponding industry group for sovereigns:
(1) Government Entity.
++ The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
42
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Money Reserve Portfolio
Schedule of Investments as of December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE
AMOUNT ISSUE RATE* DATE (NOTE 1A)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
BANK NOTES-15.3% $ 7,000,000 American Express Centurion Bank+............. 5.504% 2/12/1999 $ 7,000,000
1,500,000 American Express Centurion Bank+............. 5.511 3/19/1999 1,500,000
3,000,000 Comerica Bank+............................... 5.531 2/02/1999 2,999,908
2,000,000 Comerica Bank+............................... 5.457 2/09/1999 1,999,905
3,000,000 FCC National Bank............................ 5.65 3/03/1999 2,998,067
2,800,000 First National Bank of Chicago............... 5.52 2/16/1999 2,798,931
6,000,000 First National Bank of Chicago............... 5.63 3/16/1999 6,004,443
3,000,000 First Tennessee Bank N.A..................... 5.82 4/30/1999 3,005,886
1,000,000 First USA Bank N.A........................... 6.50 12/23/1999 1,012,770
2,200,000 First Union National Bank+................... 4.91 8/30/1999 2,200,000
6,000,000 First Union National Bank+................... 4.71 9/01/1999 6,000,000
1,900,000 Huntington National Bank+.................... 5.451 1/20/1999 1,899,959
3,000,000 LaSalle National Bank........................ 5.55 2/05/1999 2,999,364
10,000,000 LaSalle National Bank........................ 5.55 2/08/1999 9,997,576
4,000,000 LaSalle National Bank........................ 5.55 2/16/1999 3,996,014
1,900,000 LaSalle National Bank........................ 5.55 2/22/1999 1,899,232
6,000,000 NationsBank N.A.+............................ 4.83 8/24/1999 5,998,511
15,000,000 PNC Bank N.A.+............................... 4.82 1/29/1999 14,999,283
8,500,000 PNC Bank N.A.+............................... 5.235 11/03/1999 8,494,475
1,000,000 Wachovia Bank N.A............................ 5.625 3/02/1999 997,124
- ----------------------------------------------------------------------------------------------------------------------
TOTAL BANK NOTES (COST-$88,805,850) 88,801,448
- ----------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF 3,000,000 Abbey National Treasury Services Plc+........ 5.25 10/29/1999 2,997,000
DEPOSIT-1.0% 3,000,000 Abbey National Treasury Services Plc+........ 5.577 11/01/1999 3,000,000
- ----------------------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATE OF DEPOSIT 5,997,000
(COST-$6,000,000)
- ----------------------------------------------------------------------------------------------------------------------
COMMERCIAL 5,000,000 Apreco, Inc.................................. 5.10 2/10/1999 4,972,507
PAPER-35.4% 3,546,000 Apreco, Inc.................................. 5.13 3/15/1999 3,511,939
9,750,000 Asset Securitization Cooperative Corp........ 5.15 3/05/1999 9,669,725
5,973,000 Asset Securitization Cooperative Corp........ 5.10 4/16/1999 5,888,890
5,610,000 Atlantis One Funding Corp.................... 5.45 2/11/1999 5,578,319
4,800,000 Atlantis One Funding Corp.................... 5.31 2/12/1999 4,772,180
6,000,000 Atlantis One Funding Corp.................... 5.35 3/15/1999 5,942,367
10,500,000 Atlantis One Funding Corp.................... 5.30 4/30/1999 10,331,848
3,000,000 Avco Financial Services Inc.................. 5.07 4/05/1999 2,962,311
10,000,000 Bankers Trust New York Corporation........... 5.50 1/15/1999 9,981,819
10,110,000 Concord Minutemen Capital Co. LLC............ 5.26 1/22/1999 10,081,945
15,450,000 Countrywide Home Loans, Inc.................. 5.30 2/11/1999 15,363,038
6,000,000 Cregem North America, Inc.................... 5.49 1/05/1999 5,999,100
5,000,000 Edison Asset Securitization, LLC............. 5.10 3/17/1999 4,950,600
5,000,000 Edison Asset Securitization, LLC............. 5.40 3/19/1999 4,949,228
7,000,000 Finova Capital Corp.......................... 5.53 2/04/1999 6,967,751
5,850,000 General Electric Capital Corp................ 5.47 2/18/1999 5,810,878
794,000 General Motors Acceptance Corp............... 5.49 1/26/1999 791,307
5,000,000 General Motors Acceptance Corp............... 5.49 1/27/1999 4,982,271
667,000 Greenwich Funding Corp....................... 5.20 3/03/1999 661,691
8,000,000 Greyhawk Capital Corp........................ 5.12 2/12/1999 7,953,633
1,459,000 Greyhawk Capital Corp........................ 5.41 2/12/1999 1,450,544
10,000,000 Greyhawk Capital Corp........................ 5.20 2/25/1999 9,922,722
8,000,000 International Securitization Corp............ 5.45 2/04/1999 7,962,456
5,000,000 Knight-Ridder, Inc........................... 5.15 4/20/1999 4,926,831
5,000,000 Lehman Brothers Holdings Inc................. 5.51 2/16/1999 4,963,510
6,000,000 Lehman Brothers Holdings Inc................. 5.50 2/25/1999 5,947,047
5,000,000 Lexington Parker Capital Company, LLC........ 5.20 3/04/1999 4,959,519
7,000,000 Mont Blanc Capital Corp...................... 5.30 2/26/1999 6,944,865
3,800,000 Morgan Stanley, Dean Witter & Co.+........... 5.584 1/22/1999 3,800,000
1,500,000 Morgan Stanley, Dean Witter & Co.+........... 5.52 2/08/1999 1,500,000
3,223,000 Park Avenue Receivables Corp................. 5.48 2/12/1999 3,204,320
5,883,000 Park Avenue Receivables Corp................. 5.20 2/19/1999 5,842,783
7,102,000 Park Avenue Receivables Corp................. 5.15 3/19/1999 7,029,883
3,782,000 Sunkyong America, Inc........................ 5.25 3/09/1999 3,748,786
375,000 Windmill Funding Corp........................ 5.13 3/04/1999 371,964
- ----------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (COST-$204,674,780) 204,698,577
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Money Reserve Portfolio
Schedule of Investments as of December 31, 1998 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE
AMOUNT ISSUE RATE* DATE (NOTE 1A)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CORPORATE $ 650,000 Associates Corp. of North America+........... 6.75% 6/28/99 $ 654,206
NOTES-1.1% 2,500,000 Restructured Asset Securities with Enhanced 5.534 8/13/99 2,500,000
Returns, Series 1998-MM-7-1+................
2,900,000 Restructured Asset Securities with Enhanced
Returns, Series 1998-MM-7-1+................ 5.675 1/21/00 2,900,000
- ----------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE NOTES (COST-$6,052,557) 6,054,206
- ----------------------------------------------------------------------------------------------------------------------
FUNDING 9,000,000 Jackson National Life Insurance Co........... 5.567 5/03/99 9,000,000
AGREEMENTS-3.3% 5,000,000 John Hancock Mutual Life Insurance Co........ 5.384 7/30/99 5,000,000
5,000,000 Travelers Insurance Company.................. 5.577 1/21/99 5,000,000
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FUNDING AGREEMENTS (COST-$19,000,000) 19,000,000
- ----------------------------------------------------------------------------------------------------------------------
MASTER 10,000,000 Goldman Sachs Group, L.P.+................... 5.547 2/22/99 10,000,000
NOTES-1.7%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL MASTER NOTES (COST-$10,000,000) 10,000,000
- ----------------------------------------------------------------------------------------------------------------------
MEDIUM-TERM 14,000,000 Abbey National Treasury Services Plc+........ 4.83 8/17/99 13,993,182
NOTES-19.7% 2,000,000 American Honda Finance Corp.+................ 5.357 5/07/99 1,997,400
2,140,000 Associates Corp. of North America............ 6.25 3/15/99 2,144,580
2,900,000 Associates Corp. of North America............ 6.625 7/15/99 2,921,924
1,500,000 Associates Corp. of North America............ 6.75 10/15/99 1,517,880
1,000,000 Beneficial Corp.............................. 8.17 11/10/99 1,023,840
4,000,000 Beneficial Corp.............................. 8.375 12/29/99 4,118,000
2,100,000 The CIT Group Holdings, Inc.+................ 4.89 1/12/99 2,099,978
5,900,000 The CIT Group Holdings, Inc.................. 6.25 3/22/99 5,913,865
2,000,000 The CIT Group Holdings, Inc.+................ 4.80 5/24/99 1,999,476
4,000,000 The CIT Group Holdings, Inc.+................ 4.79 6/28/99 3,998,474
3,100,000 Chase Manhattan Corp.+....................... 5.16 3/25/99 3,099,933
2,400,000 General Electric Capital Corp.+.............. 4.82 6/03/99 2,399,516
3,000,000 General Electric Capital Corp.+.............. 5.594 9/03/99 3,000,870
3,625,000 General Motors Acceptance Corp............... 7.75 1/15/99 3,630,722
1,300,000 General Motors Acceptance Corp............... 7.375 5/26/99 1,310,790
6,400,000 General Motors Acceptance Corp............... 6.55 6/04/99 6,434,240
2,000,000 General Motors Acceptance Corp............... 7.375 6/09/99 2,017,920
2,549,000 General Motors Acceptance Corp............... 8.625 6/15/99 2,586,368
1,000,000 General Motors Acceptance Corp............... 7.25 6/22/99 1,009,100
2,000,000 General Motors Acceptance Corp.+............. 5.411 12/01/00 2,000,000
2,000,000 General Motors Acceptance Corp.+............. 5.28 2/27/01 1,999,400
10,000,000 Goldman Sachs Group, L.P.+................... 5.25 3/26/99 10,002,000
1,200,000 Goldman Sachs Group, L.P.+................... 5.348 1/12/00 1,198,800
2,395,000 Household Finance Corp....................... 6.58 5/17/99 2,406,640
1,500,000 Household Finance Corp.+..................... 5.352 9/13/99 1,498,755
3,795,000 IBM Credit Corp.............................. 6.625 4/19/99 3,810,711
10,000,000 Liberty Lighthouse US Capital Co. LLC+....... 5.30 10/08/99 9,977,500
1,000,000 Morgan Stanley, Dean Witter & Co.+........... 5.298 1/15/99 1,000,000
6,000,000 National Rural Utilities Cooperative Finance
Corp.+...................................... 5.608 9/21/99 5,997,120
5,000,000 PepsiCo, Inc.+............................... 5.209 8/19/99 4,989,000
87,834 Premier Auto Trust 1998-3.................... 5.62 2/08/99 87,835
500,000 Toyota Motor Credit Corp.+................... 5.545 9/23/99 499,544
1,400,000 Xerox Capital (Europe) Plc+.................. 5.578 8/20/99 1,397,480
- ----------------------------------------------------------------------------------------------------------------------
MEDIUM-TERM NOTES (COST-$114,072,301) 114,082,843
- ----------------------------------------------------------------------------------------------------------------------
US GOVERNMENT, 1,643,000 Federal Home Loan Mortgage Corporation....... 4.86 3/22/99 1,626,062
AGENCY & 5,800,000 Federal National Mortgage Association........ 4.68 6/09/99 5,681,119
INSTRUMENTALITY 5,800,000 Federal National Mortgage Association........ 4.59 7/08/99 5,659,020
OBLIGATIONS- 2,542,000 Federal National Mortgage Association........ 4.69 8/13/99 2,468,344
DISCOUNT-6.7% 2,900,000 Federal National Mortgage Association........ 4.54 9/09/99 2,805,905
3,900,000 Student Loan Marketing Association........... 4.62 6/30/99 3,809,302
7,500,000 US Treasury Bills............................ 3.69 4/22/99 7,401,225
9,750,000 US Treasury Bills............................ 3.80 10/14/99 9,415,824
- ----------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT, AGENCY & INSTRUMENTALITY
OBLIGATIONS-DISCOUNT (COST-$38,936,582) 38,866,801
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Money Reserve Portfolio
Schedule of Investments as of December 31, 1998 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE
AMOUNT ISSUE RATE* DATE (NOTE 1A)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
US GOVERNMENT, $13,500,000 Federal Home Loan Bank+...................... 5.168% 9/02/99 $ 13,495,543
AGENCY & 2,500,000 Federal Home Loan Bank....................... 5.705 3/23/00 2,502,000
INSTRUMENTALITY 1,000,000 Federal Home Loan Mortgage Corporation....... 5.875 5/19/00 1,002,000
OBLIGATIONS-NON- 1,000,000 Federal Home Loan Mortgage Corporation....... 5.05 11/17/00 993,960
DISCOUNT-14.0% 1,700,000 Federal Home Loan Mortgage Corporation....... 5.18 11/24/00 1,693,574
9,000,000 Federal National Mortgage Association+....... 5.028 1/21/99 8,999,790
20,000,000 Federal National Mortgage Association+....... 5.028 3/03/99 19,998,649
5,000,000 Federal National Mortgage Association+....... 5.108 4/09/99 4,999,349
6,000,000 Federal National Mortgage Association+....... 5.043 7/30/99 5,997,169
5,000,000 Federal National Mortgage Association+....... 5.103 8/19/99 4,997,714
2,900,000 Federal National Mortgage Association........ 5.08 9/24/99 2,901,160
3,700,000 Federal National Mortgage Association+....... 5.138 10/27/99 3,698,588
2,800,000 Federal National Mortgage Association........ 5.07 12/14/00 2,787,960
5,150,000 Student Loan Marketing Association+.......... 5.083 2/04/00 5,148,659
900,000 US Treasury Notes............................ 4.50 9/30/00 898,313
800,000 US Treasury Notes............................ 4.625 11/30/00 800,750
- ----------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT, AGENCY & INSTRUMENTALITY
OBLIGATIONS-NON-DISCOUNT (COST-$80,937,699) 80,915,178
- ----------------------------------------------------------------------------------------------------------------------
REPURCHASE 9,360,000 Nomura Securities International, Inc.,
AGREEMENTS**-1.6% purchased on 12/31/1998 to yield 5.10% to 9,360,000
1/04/1999...................................
- ----------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS (COST-$9,360,000) 9,360,000
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS 577,776,053
(COST-$577,839,769)-99.8%...................
OTHER ASSETS LESS LIABILITIES-0.2%........... 1,026,375
-------------
NET ASSETS-100.0%............................ $ 578,802,428
-------------
-------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commercial Paper and certain US Government, Agency & Instrumentality
Obligations are traded on a discount basis; the interest rates shown reflect
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, 1998.
** Repurchase Agreements are fully collateralized by US Government & Agency
Obligations.
+ Variable Rate Notes.
See Notes to Financial Statements.
45
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD US STOCKS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
AEROSPACE & 201,600 GenCorp Inc.................. $ 5,952,527 $ 5,027,400 0.4%
DEFENSE 31,600 United Technologies
Corporation................ 2,474,479 3,436,500 0.3
-------------- -------------- -----
8,427,006 8,463,900 0.7
- --------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS 172,700 Federal-Mogul Corporation.... 7,398,582 10,275,650 0.8
- --------------------------------------------------------------------------------------------------------------------
AUTOMOBILE RENTAL 216,800 +Avis Rent A Car, Inc. 5,075,566 5,243,850 0.4
124,500 The Hertz Corporation (Class
A)......................... 4,918,486 5,680,312 0.4
-------------- -------------- -----
9,994,052 10,924,162 0.8
- --------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE 99,000 General Motors Corporation... 6,967,486 7,084,688 0.5
- --------------------------------------------------------------------------------------------------------------------
BANKING 309,600 The Bank of New York Company,
Inc........................ 2,856,008 12,461,400 0.9
93,488 BankAmerica Corporation...... 4,585,971 5,620,966 0.4
177,400 First Union Corporation...... 8,806,286 10,788,138 0.8
153,700 Mellon Bank Corporation...... 9,729,798 10,566,875 0.8
-------------- -------------- -----
25,978,063 39,437,379 2.9
- --------------------------------------------------------------------------------------------------------------------
BEVERAGES 218,400 PepsiCo, Inc................. 8,395,894 8,940,750 0.7
- --------------------------------------------------------------------------------------------------------------------
BROADCASTING MEDIA 70,900 +Fox Entertainment Group,
Inc. (Class A)............. 1,595,250 1,785,794 0.1
- --------------------------------------------------------------------------------------------------------------------
CHEMICALS 60,700 du Pont (E.I.) de Nemours and
Company.................... 3,782,923 3,220,894 0.2
180,400 Morton International, Inc.... 5,202,145 4,419,800 0.3
-------------- -------------- -----
8,985,068 7,640,694 0.5
- --------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 161,550 +Cisco Systems, Inc.......... 7,165,350 14,993,859 1.1
- --------------------------------------------------------------------------------------------------------------------
COMPUTERS 372,400 COMPAQ Computer
Corporation................ 12,634,889 15,617,525 1.2
54,000 +EMC Corporation............. 3,996,524 4,590,000 0.3
67,200 International Business
Machines Corporation....... 6,997,461 12,415,200 0.9
146,000 Tandy Corporation............ 5,849,831 6,013,375 0.5
-------------- -------------- -----
29,478,705 38,636,100 2.9
- --------------------------------------------------------------------------------------------------------------------
CONSUMER ELECTRONICS 73,200 +Dell Computer Corporation... 4,613,462 5,357,325 0.4
- --------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS 413,000 The Dial Corporation......... 8,107,368 11,925,375 0.9
- --------------------------------------------------------------------------------------------------------------------
DATA PROCESSING 46,100 +Keane, Inc.................. 1,619,922 1,841,119 0.1
- --------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 55,000 General Electric Company..... 4,171,894 5,613,437 0.4
- --------------------------------------------------------------------------------------------------------------------
ELECTRONICS/ 89,600 Intel Corporation............ 9,996,418 10,617,600 0.8
INSTRUMENTS 102,100 +Micron Technology, Inc...... 3,987,523 5,162,431 0.4
-------------- -------------- -----
13,983,941 15,780,031 1.2
- --------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 486,000 +Premier Parks Inc........... 13,798,234 14,701,500 1.1
- --------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 267,800 Associates First Capital
Corporation (Class A)...... 9,967,222 11,348,025 0.8
302,600 Heller Financial, Inc........ 8,586,001 8,888,875 0.7
-------------- -------------- -----
18,553,223 20,236,900 1.5
- --------------------------------------------------------------------------------------------------------------------
FOOD DISTRIBUTION 128,950 Nabisco Holdings Corp. (Class
A)......................... 4,739,542 5,351,425 0.4
- --------------------------------------------------------------------------------------------------------------------
FOODS 195,100 +Keebler Foods Company....... 5,642,794 7,340,638 0.5
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1998 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD US STOCKS COST (NOTE 1A) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HARDWARE PRODUCTS 172,700 The Black & Decker
Corporation................ $ 7,155,127 $ 9,681,994 0.7%
- --------------------------------------------------------------------------------------------------------------------
INSURANCE 117,900 Allmerica Financial
Corporation.................. 7,238,357 6,823,462 0.5
189,200 The Equitable Companies
Incorporated............... 10,072,571 10,949,950 0.8
205,050 Providian Financial
Corporation.................. 9,523,699 15,378,750 1.1
161,700 UNUM Corporation............. 5,682,001 9,439,237 0.7
-------------- -------------- -----
32,516,628 42,591,399 3.1
- --------------------------------------------------------------------------------------------------------------------
MACHINERY 48,600 Case Corporation............. 1,300,060 1,060,088 0.1
234,900 Ingersoll-Rand Company....... 7,436,195 11,025,619 0.8
-------------- -------------- -----
8,736,255 12,085,707 0.9
- --------------------------------------------------------------------------------------------------------------------
MANUFACTURING 180,200 Tyco International Ltd....... 9,623,133 13,593,837 1.0
- --------------------------------------------------------------------------------------------------------------------
MEDICAL 111,700 Beckman Coulter Inc.......... 6,766,889 6,059,725 0.5
- --------------------------------------------------------------------------------------------------------------------
MEDICAL SERVICES 299,300 +HEALTHSOUTH Corporation..... 5,786,111 4,620,444 0.3
- --------------------------------------------------------------------------------------------------------------------
MEDICAL TECHNOLOGY 114,700 Johnson & Johnson............ 9,214,251 9,620,462 0.7
- --------------------------------------------------------------------------------------------------------------------
METALS 31,450 Aluminum Co. of America...... 2,439,169 2,344,991 0.2
- --------------------------------------------------------------------------------------------------------------------
NATURAL GAS 207,430 Enron Corporation............ 9,046,370 11,836,474 0.9
- --------------------------------------------------------------------------------------------------------------------
NETWORKING PRODUCTS 164,400 +3Com Corporation............ 6,673,479 7,367,175 0.6
- --------------------------------------------------------------------------------------------------------------------
OIL-INTEGRATED 61,700 Mobil Corporation............ 4,832,165 5,375,612 0.4
- --------------------------------------------------------------------------------------------------------------------
OIL SERVICES 93,000 Schlumberger Limited......... 5,623,738 4,289,625 0.3
- --------------------------------------------------------------------------------------------------------------------
PAPER & FOREST 126,600 Kimberly-Clark Corporation... 6,214,301 6,899,700 0.5
PRODUCTS
- --------------------------------------------------------------------------------------------------------------------
PETROLEUM 198,300 Unocal Corporation........... 7,248,595 5,787,881 0.4
- --------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 122,600 Bristol-Myers Squibb
Company...................... 11,731,453 16,405,412 1.2
160,400 Warner-Lambert Company....... 7,648,941 12,060,075 0.9
-------------- -------------- -----
19,380,394 28,465,487 2.1
- --------------------------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING 291,900 +World Color Press, Inc...... 9,175,701 8,884,706 0.7
- --------------------------------------------------------------------------------------------------------------------
RADIO & TELEVISION 480,900 +Capstar Broadcasting
Corporation (Class A)...... 9,094,246 11,000,587 0.8
- --------------------------------------------------------------------------------------------------------------------
RAILROADS 307,700 Burlington Northern Santa Fe
Corp....................... 8,818,773 10,384,875 0.8
- --------------------------------------------------------------------------------------------------------------------
RETAIL 287,800 Rite Aid Corporation......... 5,029,208 14,264,087 1.1
150,300 +Safeway Inc................. 4,716,983 9,158,906 0.7
118,100 Wal-Mart Stores, Inc......... 4,875,010 9,617,769 0.7
-------------- -------------- -----
14,621,201 33,040,762 2.5
- --------------------------------------------------------------------------------------------------------------------
RETAIL-SPECIALTY 229,800 Lowe's Companies, Inc........ 8,311,752 11,762,887 0.9
- --------------------------------------------------------------------------------------------------------------------
SAVINGS & LOAN 341,900 GreenPoint Financial Corp.... 13,608,625 12,009,238 0.9
ASSOCIATIONS
- --------------------------------------------------------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS 128,400 Millipore Corporation........ 2,735,812 3,651,375 0.3
- --------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS 191,950 Motorola, Inc................ 10,568,834 11,720,947 0.9
- --------------------------------------------------------------------------------------------------------------------
SERVICES 154,000 +Quintiles Transnational
Corp......................... 7,156,575 8,210,125 0.6
- --------------------------------------------------------------------------------------------------------------------
SOFTWARE 140,000 +BMC Software, Inc........... 2,869,536 6,238,750 0.5
49,400 +Microsoft Corporation....... 5,965,733 6,844,987 0.5
-------------- -------------- -----
8,835,269 13,083,737 1.0
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1998 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES HELD US STOCKS COST (NOTE 1A) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STEEL 185,900 +Bethlehem Steel
Corporation.................. $ 1,860,783 $ 1,556,912 0.1%
45,900 USX-U.S. Steel Group......... 1,255,246 1,055,700 0.1
-------------- -------------- -----
3,116,029 2,612,612 0.2
- --------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 186,800 GTE Corporation.............. 9,397,744 12,597,325 0.9
233,200 +MCI WorldCom, Inc........... 6,476,342 16,732,100 1.2
279,300 +Tele-Communications, Inc.
(Class A).................. 5,052,204 15,448,781 1.2
603,968 +Tele-Communications TCI
Ventures Group (Class A)... 6,243,799 14,230,996 1.1
-------------- -------------- -----
27,170,089 59,009,202 4.4
- --------------------------------------------------------------------------------------------------------------------
TOYS 72,300 Mattel, Inc.................. 1,675,189 1,649,344 0.1
- --------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 132,200 Royal Caribbean Cruises
Ltd.......................... 3,106,749 4,891,400 0.4
- --------------------------------------------------------------------------------------------------------------------
UTILITIES- 201,100 Ameritech Corporation........
COMMUNICATIONS 9,607,578 12,744,712 1.0
- --------------------------------------------------------------------------------------------------------------------
UTILITIES-ELECTRIC 142,500 PECO Energy Company.......... 4,868,026 5,931,562 0.4
150,200 Public Service Enterprise
Group Incorporated......... 5,835,372 6,008,000 0.5
138,000 Texas Utilities Company...... 6,244,119 6,442,875 0.5
-------------- -------------- -----
16,947,517 18,382,437 1.4
- --------------------------------------------------------------------------------------------------------------------
UTILITIES-GAS 332,600 El Paso Energy Corporation... 8,690,610 11,578,638 0.9
- --------------------------------------------------------------------------------------------------------------------
WASTE MANAGEMENT 150,100 Waste Management, Inc........ 6,394,559 6,998,412 0.5
- --------------------------------------------------------------------------------------------------------------------
TOTAL US STOCKS 500,507,549 648,567,235 48.4
- --------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT US CORPORATE BONDS
- --------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES US$ 3,000,000 General Electric Capital
Corp., 8.75% due
5/21/2007.................. 3,373,650 3,662,220 0.3
- --------------------------------------------------------------------------------------------------------------------
TOTAL US CORPORATE BONDS 3,373,650 3,662,220 0.3
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES
COUNTRIES HELD FOREIGN STOCKS++++
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
AUSTRIA 41,300 Mayr-Melnhof Karton AG (29).. 2,079,634 1,929,446 0.1
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN AUSTRIA 2,079,634 1,929,446 0.1
- --------------------------------------------------------------------------------------------------------------------
CANADA 18,000 Magna International, Inc.
(Class A) (2).............. 1,298,178 1,116,000 0.1
169,500 Teleglobe Inc. (37).......... 4,584,980 6,102,000 0.4
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN CANADA 5,883,158 7,218,000 0.5
- --------------------------------------------------------------------------------------------------------------------
DENMARK 6,100 ISS International Service
System A/S (Class B) (7)... 398,044 396,951 0.0
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN DENMARK 398,044 396,951 0.0
- --------------------------------------------------------------------------------------------------------------------
FINLAND 134,800 +Amer Group Ltd. (12)........ 2,517,131 1,393,890 0.1
35,900 Nokia Oyj (Class A) (9)...... 3,598,126 4,367,311 0.3
74,200 Orion-Yhtyma OY (Class B)
(30)....................... 2,114,892 1,782,023 0.1
55,000 Sampro Insurance Company PLC
(Class A) (20)............. 2,543,141 2,088,198 0.2
201,850 +Sponda OYJ (33)............. 1,395,162 1,176,287 0.1
33,600 UPM-Kymmene OYJ (29)......... 750,204 936,172 0.1
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FINLAND 12,918,656 11,743,881 0.9
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1998 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRIES HELD FOREIGN STOCKS++++ COST (NOTE 1A) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FRANCE 64,800 AXA (20)..................... $ 7,412,810 $ 9,391,808 0.7%
3,200 Cap Gemini S.A. (19)......... 488,117 513,608 0.0
51,600 Elf Aquitaine S.A. (27)...... 6,149,421 5,964,464 0.5
35,000 France Telecom S.A. (37)..... 2,456,894 2,780,611 0.2
9,000 Groupe Danone (17)........... 2,362,876 2,576,628 0.2
58,400 Scor S.A. (34)............... 3,157,204 3,861,148 0.3
72,600 +STMicroelectronics N.V. (NY
Registered Shares) (36).... 4,339,101 5,667,337 0.4
62,800 Thomson-CSF S.A. (15)........ 2,292,838 2,696,870 0.2
15,400 Vivendi (40)................. 3,250,423 3,995,562 0.3
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FRANCE 31,909,684 37,448,036 2.8
- --------------------------------------------------------------------------------------------------------------------
GERMANY 21,200 +DaimlerChrysler AG (2)...... 1,658,387 2,093,277 0.2
59,000 Henkel KGaA (Preferred)
(7).......................... 2,514,746 5,276,711 0.4
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN GERMANY 4,173,133 7,369,988 0.6
- --------------------------------------------------------------------------------------------------------------------
IRELAND 131,000 Bank of Ireland (3).......... 2,770,717 2,869,297 0.2
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN IRELAND 2,770,717 2,869,297 0.2
- --------------------------------------------------------------------------------------------------------------------
ITALY 2,663,000 +Banca di Roma (3)........... 5,822,946 4,510,829 0.3
450,000 +Mondadori (Arnoldo) Editore
S.p.A. (32)................ 3,797,870 5,948,276 0.5
445,700 Telecom Italia S.p.A. (38)... 3,380,400 3,801,797 0.3
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ITALY 13,001,216 14,260,902 1.1
- --------------------------------------------------------------------------------------------------------------------
JAPAN 36,000 Fuji Photo Film (31)......... 1,338,980 1,341,020 0.1
236,000 Fujikura Ltd. (15)........... 1,369,746 1,268,435 0.1
115,000 Fujitsu Limited (15)......... 1,307,477 1,535,033 0.1
41,000 Ito-Yokado Co., Ltd. (35).... 2,174,694 2,872,727 0.2
66,000 Kao Corporation (11)......... 1,313,489 1,492,683 0.1
70,000 Marui Co., Ltd. (24)......... 1,343,234 1,350,333 0.1
179,000 Matsushita Electric
Industrial Company, Ltd.
(15)....................... 2,796,501 3,173,579 0.2
248,000 Minebea Co., Ltd. (23)....... 2,617,318 2,846,226 0.2
66 NTT Mobile Communication
Network, Inc.(c) (37)...... 2,177,849 2,721,951 0.2
289 +Nippon Telegraph & Telephone
Corporation (c)(37)........ 2,453,236 2,235,104 0.2
121,000 Olympus Optical Co., Ltd.
(12)......................... 1,362,830 1,394,049 0.1
18,000 Orix Corporation (16)........ 1,323,509 1,347,406 0.1
24,000 Rohm Company Ltd. (15)....... 2,350,008 2,190,333 0.2
211,000 Tokio Marine & Fire Insurance
Co., Ltd. (20)............. 2,208,056 2,526,386 0.2
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN JAPAN 26,136,927 28,295,265 2.1
- --------------------------------------------------------------------------------------------------------------------
NETHERLANDS 32,100 Unilever N.V. (26)........... 2,302,700 2,742,640 0.2
35,800 Wolters Kluwer N.V. (5)...... 5,477,098 7,657,408 0.6
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
NETHERLANDS 7,779,798 10,400,048 0.8
- --------------------------------------------------------------------------------------------------------------------
NORWAY 103,200 Merkantildata ASA (10)....... 789,033 1,016,215 0.1
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN NORWAY 789,033 1,016,215 0.1
- --------------------------------------------------------------------------------------------------------------------
SINGAPORE 19,200 +Flextronics International
Ltd. (14).................... 1,354,873 1,641,600 0.1
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SINGAPORE 1,354,873 1,641,600 0.1
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1998 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRIES HELD FOREIGN STOCKS++++ COST (NOTE 1A) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SPAIN 167,000 +Dinamia Capital Privado-
Sociedad de Capital Riesgo,
S.A. (41).................. $ 3,090,997 $ 1,910,150 0.1%
132,000 Endesa S.A. (40)............. 3,459,044 3,493,489 0.2
89,400 Metrovacesa, S.A. (32)....... 2,789,966 2,699,557 0.2
79,600 Telefonica S.A. (37)......... 3,468,790 3,535,412 0.3
79,600 Telefonica S.A. (Rights) (b)
(37)......................... -- 70,596 0.0
201,600 Uralita, S.A. (6)............ 2,825,478 2,242,050 0.2
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SPAIN 15,634,275 13,951,254 1.0
- --------------------------------------------------------------------------------------------------------------------
SWEDEN 58,100 Autoliv, Inc. (2)............ 1,886,650 2,091,479 0.2
128,700 Bure Investment AB (21)...... 1,424,916 1,830,884 0.1
162,200 Castellum AB (33)............ 1,835,601 1,765,704 0.1
38,700 Custos AB (Class A) (12)..... 996,756 765,976 0.1
42,000 Custos AB (Class B) (12)..... 1,107,064 823,499 0.1
79,200 Fastighets AB Tornet (33).... 1,303,852 1,160,989 0.1
69,500 ForeningsSparbanken AB (3)... 1,852,452 1,805,463 0.1
160,200 Haldex AB (2)................ 2,833,165 1,625,028 0.1
254,800 Nordbanken Holding AB (3).... 1,489,785 1,639,031 0.1
168,000 Spectra-Physics AB (Class A)
(22)....................... 4,169,959 1,984,710 0.2
172,600 Telefonaktiebolaget LM
Ericsson (ADR) (a) (37).... 4,430,727 4,120,825 0.3
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWEDEN 23,330,927 19,613,588 1.5
- --------------------------------------------------------------------------------------------------------------------
SWITZERLAND 1,137 Nestle S.A. (Registered
Shares) (17)............... 2,339,520 2,476,962 0.2
1,880 Novartis AG (Registered
Shares) (13)............... 3,471,223 3,698,361 0.3
11,700 +Swisscom AG (Registered)
(38)......................... 3,138,208 4,901,639 0.3
4,900 Valora Holding AG (24)....... 1,324,473 1,326,302 0.1
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SWITZERLAND 10,273,424 12,403,264 0.9
- --------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM 259,000 Bank of Scotland (3)......... 2,871,282 3,088,427 0.2
604,800 Billiton PLC (12)............ 1,460,882 1,199,468 0.1
344,500 British Aerospace PLC (1).... 2,796,837 2,919,119 0.2
101,600 British Petroleum Company PLC
(27)....................... 1,453,489 1,516,514 0.1
349,100 Devro PLC (17)............... 2,557,767 1,004,418 0.1
647,753 Diageo PLC (4)............... 7,362,016 7,368,582 0.6
106,600 Glaxo Wellcome PLC (30)...... 3,406,317 3,666,284 0.3
109,300 HSBC Holdings PLC (3)........ 2,896,747 2,962,962 0.2
210,600 Lloyds TSB Group PLC (3)..... 2,798,079 2,994,628 0.2
561,200 LucasVarity PLC (2).......... 2,148,372 1,871,330 0.1
155,800 National Westminster Bank PLC
(Ordinary) (3)............. 2,824,317 3,003,096 0.2
124,000 Rio Tinto PLC (Registered)
(25)......................... 1,529,788 1,441,509 0.1
133,500 Shell Transport & Trading
Company (ADR)(a) (27)...... 4,904,521 4,964,531 0.4
2,028,000 Thomson Travel Group PLC
(39)....................... 6,124,443 5,531,338 0.4
87,200 Zeneca Group PLC (13)........ 3,505,009 3,795,234 0.3
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
UNITED KINGDOM 48,639,866 47,327,440 3.5
- --------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS 207,073,365 217,885,175 16.2
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
50
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1998 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
AMOUNT FOREIGN BONDS++++ COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
GERMANY Bundesrepublik Deutschland
(18):
DM 72,000,000 6% due 7/04/2007.......... $ 46,408,397 $ 49,704,202 3.7%
17,000,000 4.75% due 7/04/2008....... 11,221,352 10,905,102 0.8
6,400,000 5.625% due 1/04/2028...... 3,653,905 4,324,802 0.4
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN GERMANY 61,283,654 64,934,106 4.9
- -------------------------------------------------------------------------------------------------------------------
UNITED United Kingdom Treasury
KINGDOM Gilt (18):
L 2,500,000 8% due 12/07/2000......... 4,224,770 4,391,416 0.3
24,050,000 7.25% due 12/07/2007...... 44,879,431 48,397,042 3.6
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
UNITED KINGDOM 49,104,201 52,788,458 3.9
- -------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS 110,387,855 117,722,564 8.8
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
US GOVERNMENT & AGENCY OBLIGATIONS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
US GOVERNMENT Federal National
AGENCY OBLIGATIONS Mortgage Association:
US$ 43,530,000 5.625% due 3/15/2001...... 43,643,926 44,169,456 3.3
49,950,000 5.75% due 4/15/2003....... 50,242,891 51,276,672 3.8
64,330,000 5.75% due 2/15/2008++..... 63,999,698 66,611,785 5.0
-------------- -------------- -----
157,886,515 162,057,913 12.1
- -------------------------------------------------------------------------------------------------------------------
US GOVERNMENT US Treasury Bonds,
OBLIGATIONS 74,610,000 6.625% due 2/15/2027......... 85,274,501 88,249,454 6.6
US Treasury Notes:
61,300,000 6% due 8/15/1999.......... 61,496,641 61,797,756 4.6
15,000,000 6.125% due 9/30/2000...... 15,372,656 15,367,950 1.1
-------------- -------------- -----
162,143,798 165,415,160 12.3
- -------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY
OBLIGATIONS 320,030,313 327,473,073 24.4
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1998 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER* US$ 16,049,000 General Motors Acceptance
Corp., 5.13% due 1/04/1999... $ 16,042,139 $ 16,042,139 1.2%
- -------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM
SECURITIES 16,042,139 16,042,139 1.2
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS............. $1,157,414,871 1,331,352,406 99.3
--------------
--------------
UNREALIZED APPRECIATION
ON FORWARD FOREIGN
EXCHANGE CONTRACTS+++ 38,823 0.0
OTHER ASSETS LESS
LIABILITIES................... 8,861,463 0.7
-------------- -----
NET ASSETS.................... $1,340,252,692 100.0%
-------------- -----
-------------- -----
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commercial Paper is traded on a discount basis; the interest rate shown
reflects the discount rates paid at the time of purchase by the Portfolio.
(a) American Depositary Receipts (ADR).
(b) The rights may be exercised until 1/30/1999.
(c) The security may be offered and sold to qualified institutional buyers
under Rule 144A of the Securities Act of 1933.
+ Non-income producing security.
++ Subject to principal paydowns.
52
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Multiple Strategy Portfolio
Schedule of Investments as of December 31, 1998 (Concluded)
- --------------------------------------------------------------------------------
+++ Forward foreign exchange contracts as of December 31, 1998 were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------
UNREALIZED
FOREIGN EXPIRATION APPRECIATION
CURRENCY SOLD DATE (DEPRECIATION)
- -----------------------------------------------------
<S> <C> <C> <C>
C$ 10,100,000 February 1999 $ (54,533)
L 40,700,000 January 1999 (189,052)
L 16,800,000 February 1999 282,408
- -----------------------------------------------------
TOTAL UNREALIZED APPRECIATION ON FORWARD FOREIGN
EXCHANGE CONTRACTS (US$ COMMITMENT-$102,202,926) $ 38,823
--------------
--------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
++++ Corresponding industry groups for foreign stocks and bonds:
<TABLE>
<S> <C> <C>
(1) Aerospace (15) Electronics (28) Oil & Related
(2) Auto-Parts (16) Finance (29) Paper & Forest Products
(3) Banking (17) Food (30) Pharmaceuticals
(4) Beverages (18) Government (Bonds) (31) Photography
(5) Broadcasting & Publishing (19) Information Processing (32) Publishing
(6) Building Products (20) Insurance (33) Real Estate
(7) Chemicals (21) Investment Management (34) Reinsurance
(8) Commercial Services (22) Laser Components (35) Retail
(9) Communication Equipment (23) Machine Tools & Machinery (36) Semiconductor
(10) Computer Software (24) Merchandising (37) Telephone-Integrated
(11) Cosmetics & Toiletries (25) Metals & Mining (38) Telecommunications
(12) Diversified (26) Multi-Industry (39) Travel & Lodging
(13) Drugs (27) Oil-Integrated (40) Utilities
(14) Electronic Components (41) Venture Capital
</TABLE>
See Notes to Financial Statements.
53
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Natural Resources Portfolio
Schedule of Investments as of December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
INDUSTRIES HELD STOCKS COST 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
ALUMINUM 1,944 Aluminum Co. of America............ $ 109,921 $ 144,949 1.2%
2,500 Pechiney, S.A. (A Shares).......... 100,925 81,638 0.7
------------- ----------- -----
210,846 226,587 1.9
- ------------------------------------------------------------------------------------------------------------------
CHEMICALS 3,600 Air Products and Chemicals, Inc.... 102,951 144,000 1.2
2,200 du Pont (E.I.) de Nemours and
Company........................... 85,404 116,737 1.0
4,000 Imperial Chemical Industries PLC
(ADR)*............................ 195,558 139,750 1.2
------------- ----------- -----
383,913 400,487 3.4
- ------------------------------------------------------------------------------------------------------------------
DIVERSIFIED RESOURCES 10,000 Asahi Glass Company, Limited....... 120,000 62,173 0.5
COMPANIES 3,300 Ashland Inc........................ 139,803 159,637 1.4
------------- ----------- -----
259,803 221,810 1.9
- ------------------------------------------------------------------------------------------------------------------
GOLD 93,100 Acacia Resources Limited........... 142,651 137,892 1.2
9,700 Ashanti Goldfields Company Ltd.
(GDR)**........................... 237,979 85,603 0.7
12,500 Cambior Inc........................ 170,092 61,063 0.5
71,300 Delta Gold NL...................... 126,915 108,446 0.9
3,000 +Getchell Gold Corporation......... 104,994 81,750 0.7
39,280 Great Central Mines Limited........ 88,187 28,186 0.2
44,900 +Miramar Mining Corporation........ 225,975 38,019 0.3
2,313 Newmont Mining Corporation......... 85,142 41,779 0.4
108,000 Normandy Mining Limited............ 122,071 100,017 0.9
27,000 Placer Dome Inc.................... 618,688 310,500 2.6
128,000 Resolute Limited................... 267,743 90,278 0.8
------------- ----------- -----
2,190,437 1,083,533 9.2
- ------------------------------------------------------------------------------------------------------------------
METALS & MINING 218,698 +Centaur Mining and Exploration
Limited........................... 280,055 49,627 0.4
21,300 Industrias Penoles S.A............. 91,801 63,781 0.5
105,700 M.I.M. Holdings Limited............ 161,049 46,675 0.4
22,162 Minsur S.A......................... 55,784 34,560 0.3
23,000 Mitsubishi Materials Corporation... 113,395 38,758 0.3
4,055 Nexfor Inc......................... 21,560 15,978 0.1
9,300 Noranda, Inc....................... 125,720 92,376 0.8
9,500 Outokumpu OYJ...................... 175,414 87,236 0.7
1,200 Phelps Dodge Corporation........... 88,734 61,050 0.5
100 +Stillwater Mining Company......... 3,368 4,100 0.0
13,000 Sumitomo Metal Mining Co........... 108,254 42,315 0.4
7,400 Trelleborg AB (Class B)............ 93,589 60,417 0.5
80,600 WMC Limited........................ 467,844 243,205 2.1
14,260 +Zimbabwe Platinum Mines Limited... 7,892 2,799 0.0
------------- ----------- -----
1,794,459 842,877 7.0
- ------------------------------------------------------------------------------------------------------------------
OIL & GAS PRODUCERS 7,400 Alberta Energy Company Ltd......... 160,995 159,057 1.4
4,100 Anadarko Petroleum Corporation..... 109,789 126,587 1.1
5,000 Apache Corporation................. 133,094 126,562 1.1
3,340 Burlington Resources Inc........... 93,402 119,614 1.0
10,100 Cabot Oil & Gas Corporation........ 157,126 151,500 1.3
9,625 +Canadian Hunter Exploration
Ltd............................... 65,527 62,691 0.5
5,600 +Chieftan International, Inc....... 126,099 80,500 0.7
3,875 Devon Energy Corporation........... 129,255 118,914 1.0
10,300 Enron Oil & Gas Company............ 211,485 177,675 1.5
22,600 +Gulf Canada Resources Limited
(Ordinary)........................ 177,122 66,387 0.6
</TABLE>
54
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Natural Resources Portfolio
Schedule of Investments as of December 31, 1998 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
INDUSTRIES HELD STOCKS COST 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OIL & GAS PRODUCERS 9,700 +Northrock Resources Ltd........... $ 78,984 $ 74,236 0.6%
(CONCLUDED) 9,700 +Oryx Energy Company............... 159,885 130,344 1.1
9,400 Snyder Oil Corporation............. 185,542 125,137 1.1
3,000 Texaco Inc......................... 176,586 158,625 1.3
4,900 Unocal Corporation................. 173,226 143,019 1.2
5,200 Vastar Resources, Inc.............. 219,437 224,575 1.9
------------- ----------- -----
2,357,554 2,045,423 17.4
- ------------------------------------------------------------------------------------------------------------------
OIL-INTEGRATED 2,100 Amerada Hess Corporation........... 117,007 104,475 0.9
3,900 Amoco Corporation.................. 108,793 235,462 2.0
2,100 +British Petroleum Company PLC
(ADR)*............................ 80,126 188,213 1.6
2,500 Chevron Corporation................ 192,451 207,344 1.8
5,300 ENI (ADR)*......................... 254,169 359,075 3.1
5,000 Elf Aquitaine S.A. (ADR)*.......... 183,332 283,125 2.4
1,600 Exxon Corporation.................. 114,174 117,000 1.0
2,900 Mobile Corporation................. 228,499 252,662 2.1
12,700 Petro-Canada....................... 138,926 134,938 1.1
2,600 Phillips Petroleum Company......... 119,490 110,825 0.9
3,200 Total S.A. (Class B)............... 200,508 324,083 2.8
5,400 USX-Marathon Group................. 170,100 162,675 1.4
4,900 YPF Sociedad Anonima (ADR)*........ 120,061 136,894 1.2
------------- ----------- -----
2,027,636 2,616,771 22.3
- ------------------------------------------------------------------------------------------------------------------
OIL SERVICES 3,500 Coflexip S.A. (ADR)*............... 69,882 112,875 1.0
3,600 McDermott International, Inc....... 125,973 88,875 0.8
4,400 +Noble Drilling Corporation........ 138,911 56,925 0.5
5,500 +Stolt Comex Seaway, S.A........... 136,371 36,438 0.3
2,750 +Stolt Comex Seaway, S.A. (ADR)*... 33,867 15,125 0.1
8,500 +Trans Coastal Marine Services
Inc............................... 155,045 25,234 0.2
3,100 Transocean Offshore Inc............ 98,253 83,119 0.7
4,200 +Weatherford International, Inc.... 180,865 81,375 0.7
------------- ----------- -----
939,167 499,966 4.3
- ------------------------------------------------------------------------------------------------------------------
PAPER & PULP 5,400 Aracruz Celulose S.A. (ADR)*....... 86,629 43,200 0.4
3,100 Bowater Incorporated............... 141,988 128,456 1.1
2,700 Champion International
Corporation....................... 140,847 109,350 0.9
27,000 +Slocan Forest Products Ltd........ 272,565 66,827 0.6
11,125 +Smurfit-Stone Container
Corporation....................... 139,475 175,219 1.5
------------- ----------- -----
781,504 523,052 4.5
- ------------------------------------------------------------------------------------------------------------------
PLANTATIONS 73,000 Golden Hope Plantations Berhad..... 131,880 72,065 0.6
70,000 Kuala Lumpur Kepong Bld............ 111,705 109,554 0.9
------------- ----------- -----
243,585 181,619 1.5
- ------------------------------------------------------------------------------------------------------------------
REFINING 3,245 Ultramar Diamond Shamrock
Corporation....................... 149,467 78,691 0.7
4,800 Sunoco, Inc........................ 133,901 173,100 1.5
------------- ----------- -----
283,368 251,791 2.2
- ------------------------------------------------------------------------------------------------------------------
STEEL 1,600 Koninklijke Hoogovens N.V.......... 61,287 44,291 0.4
42,000 Nippon Steel Corporation........... 142,367 76,364 0.7
------------- ----------- -----
203,654 120,655 1.1
- ------------------------------------------------------------------------------------------------------------------
WOOD 13,900 +Riverside Forest Products
Limited........................... 183,006 72,429 0.6
- ------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS 11,858,932 9,087,000 77.3
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
55
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Natural Resources Portfolio
Schedule of Investments as of December 31, 1998 (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE (NOTE PERCENT OF
AMOUNT SHORT-TERM SECURITIES COST 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL $ 488,000 General Electric Capital Corp., 5%
PAPER*** due 1/04/1999..................... $ 487,729 $ 487,729 4.1%
- ------------------------------------------------------------------------------------------------------------------
US GOVERNMENT AGENCY 2,100,000 Federal National Mortgage 2,097,807 2,097,807 17.8
OBLIGATIONS*** Association, 4.70% due
1/08/1999.........................
- ------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 2,585,536 2,585,536 21.9
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS.................. $ 14,444,468 11,672,536 99.2
-------------
-------------
OTHER ASSETS LESS LIABILITIES...... 91,793 0.8
----------- -----
NET ASSETS......................... $11,764,329 100.0%
----------- -----
----------- -----
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* American Depositary Receipts (ADR).
** Global Depositary Receipts (GDR).
*** Commercial Paper and certain US Government, Agency are traded on a discount
basis; the interest rates shown reflect the discount rates paid at the time
of purchase by the Portfolio.
+ Non-income producing security.
See Notes to Financial Statements.
56
<PAGE>
(This page has been left blank intentionally.)
57
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Statements of Assets and Liabilities as of December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL GLOBAL
BALANCED STOCK STRATEGY
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value* (Note
1a)......................... $ 118,275,555 $ 356,759,592 $ 229,715,323
Cash.......................... 956 -- 515
Foreign cash (Note 1g)........ -- -- 258,061
Unrealized appreciation on
forward foreign exchange
contracts (Note 1f)......... -- -- 46,058
Interest receivable........... 813,061 -- 1,056,662
Receivable for securities
sold........................ -- -- --
Receivable for capital shares
sold........................ -- 597,455 70,603
Dividends receivable.......... 52,820 415,711 273,733
Receivable for loaned
securities (Note 7)......... -- -- --
Prepaid expenses and other
assets (Note 1e)............ 5,763 14,079 11,950
------------- ------------- -------------
Total assets................ 119,148,155 357,786,837 231,432,905
------------- ------------- -------------
LIABILITIES:
Unrealized depreciation on
forward foreign exchange
contracts (Note 1f)......... -- 54,411 --
Payable for capital shares
redeemed.................... 15,888 73 117,228
Payable to investment adviser
(Note 2).................... 31,883 94,012 62,154
Payable for custodian bank
(Note 1i)................... -- 969,573 --
Payable for securities
purchased................... -- -- --
Payable for dividends to
shareholders (Note 1h)...... -- -- --
Accrued expenses and other
liabilities................. 25,899 71,320 109,451
------------- ------------- -------------
Total liabilities........... 73,670 1,189,389 288,833
------------- ------------- -------------
NET ASSETS.................... $ 119,074,485 $ 356,597,448 $ 231,144,072
------------- ------------- -------------
------------- ------------- -------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par
value+...................... $ 736,095 $ 1,319,278 $ 1,444,431
Paid-in capital in excess of
par......................... 92,477,610 251,182,148 199,538,334
Undistributed investment
income -- net............... 3,102,581 2,970,349 178,304
Undistributed (accumulated)
realized capital gains
(losses) on investments and
foreign currency
transactions -- net (Note
5).......................... 7,761,245 27,753,586 3,697,699
Unrealized appreciation
(depreciation) on
investments and foreign
currency transactions --
net......................... 14,996,954 73,372,087 26,285,304
------------- ------------- -------------
NET ASSETS.................... $ 119,074,485 $ 356,597,448 $ 231,144,072
------------- ------------- -------------
------------- ------------- -------------
Capital shares outstanding.... 7,360,947 13,192,780 14,444,308
------------- ------------- -------------
------------- ------------- -------------
Net asset value, offering and
redemption price per
share....................... $ 16.18 $ 27.03 $ 16.00
------------- ------------- -------------
------------- ------------- -------------
*Identified cost.............. $ 103,278,601 $ 283,340,601 $ 203,495,553
------------- ------------- -------------
------------- ------------- -------------
+Authorized shares............ 100,000,000 100,000,000 100,000,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See Notes to Financial Statements.
58
<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)......................... $ 449,168,839 $ 114,195,307 $ 237,246,393 $ 129,560,243 $ 577,776,053
Cash.......................... 822 482 601 631 13,632
Foreign cash (Note 1g)........ -- -- -- -- --
Unrealized appreciation on
forward foreign exchange
contracts (Note 1f)......... -- -- -- -- --
Interest receivable........... -- 2,538,482 3,458,533 1,920,415 3,992,646
Receivable for securities
sold........................ 5,142,654 -- -- -- --
Receivable for capital shares
sold........................ 1,749,828 4,127 -- 323,047 325,765
Dividends receivable.......... 353,359 16,172 -- -- --
Receivable for loaned
securities (Note 7)......... -- -- 7,111 -- --
Prepaid expenses and other
assets (Note 1e)............ 15,642 6,439 12,431 6,697 30,747
------------- ------------- ------------- ------------- --------------
Total assets................ 456,431,144 116,761,009 240,725,069 131,811,033 582,138,843
------------- ------------- ------------- ------------- --------------
LIABILITIES:
Unrealized depreciation on
forward foreign exchange
contracts (Note 1f)......... -- -- -- -- --
Payable for capital shares
redeemed.................... 545 80,983 29,141 17,301 3,069,262
Payable to investment adviser
(Note 2).................... 120,248 33,144 66,577 36,202 171,528
Payable for custodian bank
(Note 1i)................... -- -- -- -- --
Payable for securities
purchased................... -- -- -- -- --
Payable for dividends to
shareholders (Note 1h)...... -- -- -- -- 477
Accrued expenses and other
liabilities................. 82,041 36,531 46,730 28,435 95,148
------------- ------------- ------------- ------------- --------------
Total liabilities........... 202,834 150,658 142,448 81,938 3,336,415
------------- ------------- ------------- ------------- --------------
NET ASSETS.................... $ 456,228,310 $ 116,610,351 $ 240,582,621 $ 131,729,095 $ 578,802,428
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par
value+...................... $ 1,243,200 $ 1,476,666 $ 2,126,005 $ 1,106,071 $ 57,886,614
Paid-in capital in excess of
par......................... 276,320,618 133,448,349 237,201,029 126,814,296 520,979,530
Undistributed investment
income -- net............... 2,331,545 1,053,662 1,271,009 690,657 --
Undistributed (accumulated)
realized capital gains
(losses) on investments and
foreign currency
transactions -- net (Note
5).......................... 57,447,094 (6,474,801) (5,677,856) (252,436) --
Unrealized appreciation
(depreciation) on
investments and foreign
currency transactions --
net......................... 118,885,853 (12,893,525) 5,662,434 3,370,507 (63,716)
------------- ------------- ------------- ------------- --------------
NET ASSETS.................... $ 456,228,310 $ 116,610,351 $ 240,582,621 $ 131,729,095 $ 578,802,428
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
Capital shares outstanding.... 12,431,997 14,766,656 21,260,055 11,060,707 578,866,144
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
Net asset value, offering and
redemption price per
share....................... $ 36.70 $ 7.90 $ 11.32 $ 11.91 $ 1.00
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
*Identified cost.............. $ 330,282,986 $ 127,088,832 $ 231,583,959 $ 126,189,736 $ 577,839,769
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
+Authorized shares............ 100,000,000 100,000,000 100,000,000 100,000,000 2,000,000,000
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
<CAPTION>
MULTIPLE NATURAL
STRATEGY RESOURCES
PORTFOLIO PORTFOLIO
<S> <C> <C>
- ------------------------------
ASSETS:
Investments, at value* (Note
1a)......................... $ 1,331,352,406 $ 11,672,536
Cash.......................... 641 191
Foreign cash (Note 1g)........ 433,561 --
Unrealized appreciation on
forward foreign exchange
contracts (Note 1f)......... 38,823 --
Interest receivable........... 8,221,636 --
Receivable for securities
sold........................ -- 18,041
Receivable for capital shares
sold........................ 4,500 123,186
Dividends receivable.......... 1,028,518 17,100
Receivable for loaned
securities (Note 7)......... -- --
Prepaid expenses and other
assets (Note 1e)............ 66,463 578
--------------- ------------
Total assets................ 1,341,146,548 11,831,632
--------------- ------------
LIABILITIES:
Unrealized depreciation on
forward foreign exchange
contracts (Note 1f)......... -- --
Payable for capital shares
redeemed.................... 253,727 34
Payable to investment adviser
(Note 2).................... 359,955 1,639
Payable for custodian bank
(Note 1i)................... -- --
Payable for securities
purchased................... -- 45,573
Payable for dividends to
shareholders (Note 1h)...... -- --
Accrued expenses and other
liabilities................. 280,174 20,057
--------------- ------------
Total liabilities........... 893,856 67,303
--------------- ------------
NET ASSETS.................... $ 1,340,252,692 $ 11,764,329
--------------- ------------
--------------- ------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par
value+...................... $ 7,377,644 $ 171,583
Paid-in capital in excess of
par......................... 1,046,743,951 16,118,381
Undistributed investment
income -- net............... 24,235,725 254,080
Undistributed (accumulated)
realized capital gains
(losses) on investments and
foreign currency
transactions -- net (Note
5).......................... 87,867,340 (2,007,993)
Unrealized appreciation
(depreciation) on
investments and foreign
currency transactions --
net......................... 174,028,032 (2,771,722)
--------------- ------------
NET ASSETS.................... $ 1,340,252,692 $ 11,764,329
--------------- ------------
--------------- ------------
Capital shares outstanding.... 73,776,435 1,715,832
--------------- ------------
--------------- ------------
Net asset value, offering and
redemption price per
share....................... $ 18.17 $ 6.86
--------------- ------------
--------------- ------------
*Identified cost.............. $ 1,157,414,871 $ 14,444,468
--------------- ------------
--------------- ------------
+Authorized shares............ 300,000,000 100,000,000
--------------- ------------
--------------- ------------
</TABLE>
59
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Statements of Operations for the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL GLOBAL
BALANCED STOCK STRATEGY
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
- -----------------------------------------------------------------------------
INVESTMENT INCOME (NOTES 1C &
1D):
Interest and discount
earned*..................... $ 3,000,432 $ 999,586 $ 4,689,591
Dividends*.................... 537,402 3,854,263 2,991,226
Other income.................. -- -- --
------------ ------------ ------------
Total income.................. 3,537,834 4,853,849 7,680,817
------------ ------------ ------------
EXPENSES:
Investment advisory fees (Note
2).......................... 369,503 1,120,415 790,734
Custodian fees................ 23,434 69,729 128,989
Accounting services (Note
2).......................... 22,375 65,747 43,748
Professional fees............. 8,884 19,306 14,149
Printing and shareholder
reports..................... 2,350 13,868 1,893
Transfer agent fees (Note
2).......................... 5,008 5,004 5,010
Pricing services.............. 633 3,588 4,082
Directors' fees and
expenses.................... 761 2,452 1,704
Registration fees (Note 1e)... 537 4,760 --
Other......................... 1,767 5,037 10,922
------------ ------------ ------------
Total expenses before
reimbursement............... 435,252 1,309,906 1,001,231
Reimbursement of expenses
(Note 2).................... -- -- --
------------ ------------ ------------
Expenses after
reimbursement............... 435,252 1,309,906 1,001,231
------------ ------------ ------------
Investment income -- net...... 3,102,582 3,543,943 6,679,586
------------ ------------ ------------
REALIZED & UNREALIZED GAIN
(LOSS) ON INVESTMENTS &
FOREIGN CURRENCY
TRANSACTIONS -- NET (NOTES
1D, 1F, 1G & 3):
Realized gain (loss) on
investments -- net.......... 7,853,487 27,933,232 4,788,199
Realized loss on foreign
currency transactions --
net......................... -- (568,288) (3,865,147)
Change in unrealized
appreciation/depreciation on
investments -- net.......... 3,434,242 17,602,882 13,588,593
Change in unrealized
appreciation/depreciation on
foreign currency
transactions -- net......... -- (49,325) 129,561
------------ ------------ ------------
Total realized and unrealized
gain (loss) on investments
and foreign currency
transactions -- net......... 11,287,729 44,918,501 14,641,206
------------ ------------ ------------
NET INCREASE/DECREASE IN NET
ASSETS RESULTING FROM
OPERATIONS.................. $ 14,390,311 $ 48,462,444 $ 21,320,792
------------ ------------ ------------
------------ ------------ ------------
*Net of foreign withholding
tax......................... $ 245 $ 154,774 $ 245,497
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See Notes to Financial Statements.
60
<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*..................... $ 604,199 $ 13,071,341 $15,276,793 $ 8,581,793 $ 30,975,518 $ 26,855,734
Dividends*.................... 3,148,788 582,019 -- -- -- 10,760,753
Other income.................. 0 111,362 102,071 14,814 -- 149,631
------------- ------------- ------------ ------------ ------------ -------------
Total income.................. 3,752,987 13,764,722 15,378,864 8,596,607 30,975,518 37,766,118
------------- ------------- ------------ ------------ ------------ -------------
EXPENSES:
Investment advisory fees (Note
2).......................... 1,249,344 440,541 740,976 412,796 1,800,355 4,338,104
Custodian fees................ 34,705 21,478 27,627 21,629 21,618 310,920
Accounting services (Note
2).......................... 82,036 26,024 40,378 23,085 93,363 248,007
Professional fees............. 18,603 10,528 13,643 9,359 14,208 59,666
Printing and shareholder
reports..................... 7,799 3,115 5,603 3,079 24,076 66,610
Transfer agent fees (Note
2).......................... 5,011 5,008 5,008 5,008 5,003 5,007
Pricing services.............. 435 9,804 2,309 6,685 -- 7,564
Directors' fees and
expenses.................... 2,388 892 1,549 841 3,535 9,383
Registration fees (Note 1e)... 11,467 -- -- 31 -- --
Other......................... 7,718 1,711 3,906 2,751 8,170 19,301
------------- ------------- ------------ ------------ ------------ -------------
Total expenses before
reimbursement............... 1,419,506 519,101 840,999 485,264 1,970,328 5,064,562
Reimbursement of expenses
(Note 2).................... -- -- -- -- -- --
------------- ------------- ------------ ------------ ------------ -------------
Expenses after
reimbursement............... 1,419,506 519,101 840,999 485,264 1,970,328 5,064,562
------------- ------------- ------------ ------------ ------------ -------------
Investment income -- net...... 2,333,481 13,245,621 14,537,865 8,111,343 29,005,190 32,701,556
------------- ------------- ------------ ------------ ------------ -------------
REALIZED & UNREALIZED GAIN
(LOSS) ON INVESTMENTS &
FOREIGN CURRENCY
TRANSACTIONS -- NET (NOTES
1D, 1F, 1G & 3):
Realized gain (loss) on
investments -- net.......... 57,447,732 (5,883,144) 3,351,865 1,387,596 96,424 88,771,024
Realized loss on foreign
currency transactions --
net......................... -- -- -- -- -- (7,996,030)
Change in unrealized
appreciation/depreciation on
investments -- net.......... 65,374,802 (12,768,024) 1,409,484 778,418 (73,248) 23,078,285
Change in unrealized
appreciation/depreciation on
foreign currency
transactions -- net......... -- -- -- -- -- 161,413
------------- ------------- ------------ ------------ ------------ -------------
Total realized and unrealized
gain (loss) on investments
and foreign currency
transactions -- net......... 122,822,534 (18,651,168) 4,761,349 2,166,014 23,176 104,014,692
------------- ------------- ------------ ------------ ------------ -------------
NET INCREASE/DECREASE IN NET
ASSETS RESULTING FROM
OPERATIONS.................. $ 125,156,015 $ (5,405,547) $19,299,214 $ 10,277,357 $ 29,028,366 $ 136,716,248
------------- ------------- ------------ ------------ ------------ -------------
------------- ------------- ------------ ------------ ------------ -------------
*Net of foreign withholding
tax......................... $ 48,386 $ -- $ -- $ -- $ -- $ 557,780
------------- ------------- ------------ ------------ ------------ -------------
------------- ------------- ------------ ------------ ------------ -------------
<CAPTION>
NATURAL
RESOURCES
PORTFOLIO
<S> <C>
- ------------------------------
INVESTMENT INCOME (NOTES 1C &
1D):
Interest and discount
earned*..................... $ 101,166
Dividends*.................... 254,716
Other income.................. --
------------
Total income.................. 355,882
------------
EXPENSES:
Investment advisory fees (Note
2).......................... 47,330
Custodian fees................ 19,125
Accounting services (Note
2).......................... 2,847
Professional fees............. 4,948
Printing and shareholder
reports..................... 1,048
Transfer agent fees (Note
2).......................... 5,008
Pricing services.............. 10,265
Directors' fees and
expenses.................... 203
Registration fees (Note 1e)... --
Other......................... 1,456
------------
Total expenses before
reimbursement............... 92,230
Reimbursement of expenses
(Note 2).................... (19,449)
------------
Expenses after
reimbursement............... 72,781
------------
Investment income -- net...... 283,101
------------
REALIZED & UNREALIZED GAIN
(LOSS) ON INVESTMENTS &
FOREIGN CURRENCY
TRANSACTIONS -- NET (NOTES
1D, 1F, 1G & 3):
Realized gain (loss) on
investments -- net.......... (1,293,734)
Realized loss on foreign
currency transactions --
net......................... (3,844)
Change in unrealized
appreciation/depreciation on
investments -- net.......... (899,578)
Change in unrealized
appreciation/depreciation on
foreign currency
transactions -- net......... 561
------------
Total realized and unrealized
gain (loss) on investments
and foreign currency
transactions -- net......... (2,196,595)
------------
NET INCREASE/DECREASE IN NET
ASSETS RESULTING FROM
OPERATIONS.................. $ (1,913,494)
------------
------------
*Net of foreign withholding
tax......................... $ 21,450
------------
------------
</TABLE>
61
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED PORTFLOIO CAPITAL STOCK PORTFOLIO
------------------------------ ------------------------------
FOR THE YEAR FOR THE YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31,
INCREASE (DECREASE) IN NET ------------------------------ ------------------------------
ASSETS: 1998 1997 1998 1997
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income -- net...... $ 3,102,582 $ 3,524,793 $ 3,543,943 $ 4,262,769
Realized gain (loss) on
investments and foreign
currency transactions --
net......................... 7,853,487 6,863,677 27,364,944 38,099,176
Change in unrealized
appreciation/depreciation on
investments -- net.......... 3,434,242 5,814,120 17,602,882 21,484,742
Change in unrealized
appreciation/depreciation on
foreign currency
transactions -- net......... -- -- (49,325) 337,475
------------- ------------- ------------- -------------
Net increase (decrease) in net
assets resulting from
operations.................. 14,390,311 16,202,590 48,462,444 64,184,162
------------- ------------- ------------- -------------
DIVIDENDS & DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 1H):
Investment income -- net...... (3,524,792) (1,769,755) (6,269,261) (2,802,893)
Realized gain on investments
-- net...................... (6,923,679) (10,156,193) (36,415,502) (14,170,818)
------------- ------------- ------------- -------------
Net decrease in net assets
resulting from dividends
and distributions to
shareholders................ (10,448,471) (11,925,948) (42,684,763) (16,973,711)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4):
Net increase (decrease) in net
assets derived from
capital share
transactions................ 6,808,627 5,194,624 15,017,332 (1,104,085)
------------- ------------- ------------- -------------
NET ASSETS:
Total increase (decrease) in
net assets.................. 10,750,467 9,471,266 20,795,013 46,106,366
Beginning of year............. 108,324,018 98,852,752 335,802,435 289,696,069
------------- ------------- ------------- -------------
End of year*.................. $ 119,074,485 $ 108,324,018 $ 356,597,448 $ 335,802,435
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
*Undistributed investment
income -- net (Note 1j)..... $ 3,102,581 $ 3,524,791 $ 2,970,349 $ 6,263,968
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
See Notes to Financial Statements.
62
<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,
------------------------------ ------------------------------ ------------------------------
1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income -- net...... $ 6,679,586 $ 6,834,423 $ 2,333,481 $ 2,504,929 $ 13,245,621 $ 12,923,272
Realized gain (loss) on
investments and foreign
currency transactions --
net......................... 923,052 29,453,287 57,447,732 61,578,644 (5,883,144) 2,071,929
Change in unrealized
appreciation/depreciation on
investments -- net.......... 13,588,593 (9,812,644) 65,374,802 17,653,072 (12,768,024) (1,170,500)
Change in unrealized
appreciation/depreciation on
foreign currency
transactions -- net......... 129,561 771,019 -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) in net
assets resulting from
operations.................. 21,320,792 27,246,085 125,156,015 81,736,645 (5,405,547) 13,824,701
------------- ------------- ------------- ------------- ------------- -------------
DIVIDENDS & DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 1H):
Investment income -- net...... (9,908,154) (7,598,726) (2,484,030) (1,545,546) (13,357,566) (12,749,959)
Realized gain on investments
-- net...................... (30,525,752) (8,739,339) (61,563,233) (26,338,683) -- --
------------- ------------- ------------- ------------- ------------- -------------
Net decrease in net assets
resulting from dividends
and distributions to
shareholders................ (40,433,906) (16,338,065) (64,047,263) (27,884,229) (13,357,566) (12,749,959)
------------- ------------- ------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4):
Net increase (decrease) in net
assets derived from
capital share
transactions................ 1,752,536 5,067,046 62,096,529 38,504,908 (8,390,914) 19,046,241
------------- ------------- ------------- ------------- ------------- -------------
NET ASSETS:
Total increase (decrease) in
net assets.................. (17,360,578) 15,975,066 123,205,281 92,357,324 (27,154,027) 20,120,983
Beginning of year............. 248,504,650 232,529,584 333,023,029 240,665,705 143,764,378 123,643,395
------------- ------------- ------------- ------------- ------------- -------------
End of year*.................. $ 231,144,072 $ 248,504,650 $ 456,228,310 $ 333,023,029 $ 116,610,351 $ 143,764,378
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
*Undistributed investment
income -- net (Note 1j)..... $ 178,304 $ 9,377,194 $ 2,331,545 $ 2,482,094 $ 1,053,662 $ 1,154,388
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
63
<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: 1998 1997 1998 1997
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
OPERATIONS:
Investment income -- net...... $ 14,537,865 $ 14,481,029 $ 8,111,343 $ 8,163,686
Realized gain (loss) on
investments and foreign
currency transactions --
net......................... 3,351,865 1,693,013 1,387,596 280,864
Change in unrealized
appreciation/depreciation on
investments -- net.......... 1,409,484 1,323,117 778,418 1,666,005
Change in unrealized
appreciation/depreciation on
foreign currency
transactions -- net......... -- -- -- --
------------- ------------- ------------- -------------
Net increase (decrease) in net
assets resulting from
operations.................. 19,299,214 17,497,159 10,277,357 10,110,555
------------- ------------- ------------- -------------
DIVIDENDS & DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 1H):
Investment income -- net...... (14,551,966) (14,518,659) (8,233,350) (8,076,935)
Realized gain on investments
-- net...................... -- -- -- --
------------- ------------- ------------- -------------
Net decrease in net assets
resulting from dividends
and distributions to
shareholders................ (14,551,966) (14,518,659) (8,233,350) (8,076,935)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4):
Net increase (decrease) in net
assets derived from
capital share
transactions................ 13,623,838 (2,629,974) 4,938,990 4,724,500
------------- ------------- ------------- -------------
NET ASSETS:
Total increase (decrease) in
net assets.................. 18,371,086 348,526 6,982,997 6,758,120
Beginning of year............. 222,211,535 221,863,009 124,746,098 117,987,978
------------- ------------- ------------- -------------
End of year*.................. $ 240,582,621 $ 222,211,535 $ 131,729,095 $ 124,746,098
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
*Undistributed investment
income -- net (Note 1j)..... $ 1,271,009 $ 1,285,094 $ 690,657 $ 812,664
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
See Notes to Financial Statements.
64
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATURAL RESOURCES
MONEY RESERVE PORTFOLIO MULTIPLE STRATEGY PORTFOLIO PORTFOLIO
---------------------------- ------------------------------- --------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31, ENDED DECEMBER 31,
---------------------------- ------------------------------- --------------------------
1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income -- net...... $ 29,005,190 $ 28,827,719 $ 32,701,556 $ 34,097,217 $ 283,101 $ 346,206
Realized gain (loss) on
investments and foreign
currency transactions --
net......................... 96,424 25,403 80,774,994 144,713,797 (1,297,578) 1,502,159
Change in unrealized
appreciation/depreciation on
investments -- net.......... (73,248) 39,664 23,078,285 44,433,197 (899,578) (3,952,460)
Change in unrealized
appreciation/depreciation on
foreign currency
transactions -- net......... -- -- 161,413 1,635,298 561 (428)
------------- ------------- -------------- --------------- ------------ ------------
Net increase (decrease) in net
assets resulting from
operations.................. 29,028,366 28,892,786 136,716,248 224,879,509 (1,913,494) (2,104,523)
------------- ------------- -------------- --------------- ------------ ------------
DIVIDENDS & DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 1H):
Investment income -- net...... (29,005,190) (28,827,719) (40,282,464) (20,339,088) (392,711) (188,225)
Realized gain on investments
-- net...................... (96,424) (25,403) (140,628,156) (64,589,169) -- --
------------- ------------- -------------- --------------- ------------ ------------
Net decrease in net assets
resulting from dividends
and distributions to
shareholders................ (29,101,614) (28,853,122) (180,910,620) (84,928,257) (392,711) (188,225)
------------- ------------- -------------- --------------- ------------ ------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4):
Net increase (decrease) in net
assets derived from
capital share
transactions................ 53,158,315 (32,011,967) 54,916,060 (21,605,127) (3,281,405) (5,384,753)
------------- ------------- -------------- --------------- ------------ ------------
NET ASSETS:
Total increase (decrease) in
net assets.................. 53,085,067 (31,972,303) 10,721,688 118,346,125 (5,587,610) (7,677,501)
Beginning of year............. 525,717,361 557,689,664 1,329,531,004 1,211,184,879 17,351,939 25,029,440
------------- ------------- -------------- --------------- ------------ ------------
End of year*.................. $ 578,802,428 $ 525,717,361 $1,340,252,692 $ 1,329,531,004 $ 11,764,329 $ 17,351,939
------------- ------------- -------------- --------------- ------------ ------------
------------- ------------- -------------- --------------- ------------ ------------
*Undistributed investment
income -- net (Note 1j)..... -- -- $ 24,235,725 $ 39,812,711 $ 254,080 $ 339,424
------------- ------------- -------------- --------------- ------------ ------------
------------- ------------- -------------- --------------- ------------ ------------
</TABLE>
65
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
INCREASE (DECREASE) IN NET ------------------------------------------------
ASSET VALUE: 1998 1997 1996 1995 1994
<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........................ $ 15.78 $ 15.36 $ 14.86 $ 13.27 $ 14.62
-------- -------- -------- -------- --------
Investment income -- net...... .42 .51 .54 .60 .61
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... 1.52 1.76 .83 2.07 (1.21)
-------- -------- -------- -------- --------
Total from investment
operations.................. 1.94 2.27 1.37 2.67 (.60)
-------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.51) (.27) (.57) (.62) (.53)
Realized gain on investments
-- net...................... (1.03) (1.58) (.30) (.46) (.22)
-------- -------- -------- -------- --------
Total dividends and
distributions............... (1.54) (1.85) (.87) (1.08) (.75)
-------- -------- -------- -------- --------
Net asset value, end of
year........................ $ 16.18 $ 15.78 $ 15.36 $ 14.86 $ 13.27
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 13.45% 16.93% 9.76% 21.59% (4.28%)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... .38% .39% .39% .38% .40%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Investment income -- net...... 2.73% 3.40% 3.63% 4.47% 4.28%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $119,074 $108,324 $ 98,853 $ 97,181 $ 75,893
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Portfolio turnover............ 106.73% 143.20% 234.79% 32.92% 46.94%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
See Notes to Financial Statements.
66
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL STOCK PORTFOLIO GLOBAL STRATEGY PORTFOLIO
------------------------------------------------ ------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------ ------------------------------------------------
1998+ 1997+ 1996+ 1995 1994 1998+ 1997+ 1996+ 1995+ 1994
<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........................ $ 26.79 $ 23.25 $ 23.88 $ 21.64 $ 25.73 $ 17.44 $ 16.80 $ 15.25 $ 14.54 $ 15.42
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income -- net...... .26 .33 .46 .41 .29 .43 .47 .47 .52 .47
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... 3.39 4.57 2.86 3.70 (1.50) .97 1.35 1.56 .94 (.71)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations.................. 3.65 4.90 3.32 4.11 (1.21) 1.40 1.82 2.03 1.46 (.24)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.50) (.22) (.47) (.34) (.28) (.70) (.55) (.39) (.55) (.41)
Realized gain on investments
-- net...................... (2.91) (1.14) (3.48) (1.53) (2.60) (2.14) (.63) (.09) (.20) (.23)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions............... (3.41) (1.36) (3.95) (1.87) (2.88) (2.84) (1.18) (.48) (.75) (.64)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year........................ $ 27.03 $ 26.79 $ 23.25 $ 23.88 $ 21.64 $ 16.00 $ 17.44 $ 16.80 $ 15.25 $ 14.54
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 15.56% 22.47% 16.54% 20.73% (5.12%) 9.49% 11.72% 13.78% 10.44% (1.62%)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... .38% .41% .40% .41% .39% .41% .45% .42% .44% .48%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income -- net...... 1.03% 1.38% 2.11% 1.98% 1.32% 2.75% 2.69% 3.02% 3.59% 3.22%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $356,597 $335,802 $289,696 $252,957 $206,647 $231,144 $248,505 $232,530 $212,683 $223,493
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Portfolio turnover............ 110.95% 90.19% 74.30% 130.54% 71.19% 124.92% 108.04% 160.89% 26.81% 27.31%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
67
<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: 1998 1997 1996 1995 1994
<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........................ $ 32.82 $ 27.79 $ 24.06 $ 19.20 $ 24.65
-------- -------- -------- -------- --------
Investment income -- net...... .19 .24 .32 .15 .31
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... 10.00 8.01 4.24 6.13 (1.81)
-------- -------- -------- -------- --------
Total from investment
operations.................. 10.19 8.25 4.56 6.28 (1.50)
-------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.24) (.18) (.24) (.23) (.30)
Realized gain on investments
-- net...................... (6.07) (3.04) (.59) (1.19) (3.65)
-------- -------- -------- -------- --------
Total dividends and
distributions............... (6.31) (3.22) (.83) (1.42) (3.95)
-------- -------- -------- -------- --------
Net asset value, end of
year........................ $ 36.70 $ 32.82 $ 27.79 $ 24.06 $ 19.20
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 38.18% 33.75% 19.57% 35.35% (6.93%)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... .37% .37% .38% .38% .40%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Investment income -- net...... .61% .86% 1.25% .82% 1.53%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $456,228 $333,023 $240,666 $184,152 $101,702
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Portfolio turnover............ 60.69% 84.90% 78.04% 87.66% 102.96%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
See Notes to Financial Statements.
68
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD PORTFOLIO
------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------
1998+ 1997+ 1996+ 1995+ 1994
<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 $ 9.15 $ 8.99 $ 8.53 $ 9.68
-------- -------- -------- -------- --------
Investment income -- net...... .85 .90 .89 .93 1.00
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... (1.29) .04 .16 .46 (1.17)
-------- -------- -------- -------- --------
Total from investment
operations.................. (.44) .94 1.05 1.39 (.17)
-------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.85) (.90) (.89) (.93) (.98)
Realized gain on investments
-- net...................... -- -- -- -- --
-------- -------- -------- -------- --------
Total dividends and
distributions............... (.85) (.90) (.89) (.93) (.98)
-------- -------- -------- -------- --------
Net asset value, end of
year........................ $ 7.90 $ 9.19 $ 9.15 $ 8.99 $ 8.53
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... (5.19%) 10.74% 12.32% 17.12% (1.88%)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... .39% .39% .39% .38% .41%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Investment income -- net...... 9.86% 9.67% 9.77% 10.25% 10.88%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $116,610 $143,764 $123,643 $107,378 $ 82,421
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Portfolio turnover............ 47.69% 60.94% 50.48% 63.39% 63.43%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
69
<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: 1998+ 1997+ 1996+ 1995+ 1994+
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
THE FOLLOWING PER SHARE DATA
AND RATIOS HAVE BEEN DERIVED
FROM INFORMATION PROVIDED IN
THE FINANCIAL STATEMENTS.
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
year........................ $ 11.08 $ 10.93 $ 11.41 $ 10.32 $ 12.02
-------- -------- -------- -------- --------
Investment income -- net...... .71 .73 .76 .78 .75
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... .25 .15 (.49) 1.10 (1.30)
-------- -------- -------- -------- --------
Total from investment
operations.................. .96 .88 .27 1.88 (.55)
-------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.72) (.73) (.75) (.79) (.75)
Realized gain on investments
-- net...................... -- -- -- -- (.39)
In excess of realized gain on
investments -- net.......... -- -- -- -- (.01)
-------- -------- -------- -------- --------
Total dividends and
distributions............... (.72) (.73) (.75) (.79) (1.15)
-------- -------- -------- -------- --------
Net asset value, end of
year........................ $ 11.32 $ 11.08 $ 10.93 $ 11.41 $ 10.32
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 8.94% 8.42% 2.61% 18.87% (4.78%)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... .37% .37% .38% .38% .37%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Investment income -- net...... 6.44% 6.74% 6.85% 7.22% 6.89%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Investment income -- net, and
realized gain (loss) on
investments -- net.......... -- -- -- -- --
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $240,583 $222,212 $221,863 $239,340 $218,611
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Portfolio turnover............ 65.67% 41.23% 29.35% 57.38% 140.55%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</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.
70
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG TERM CORPORATE BOND PORTFOLIO MONEY RESERVE PORTFOLIO
------------------------------------------------ ------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------ ------------------------------------------------
1998+ 1997+ 1996+ 1995+ 1994+ 1998 1997 1996 1995 1994
<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........................ $ 11.72 $ 11.53 $ 12.02 $ 10.72 $ 12.59 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income -- net...... .75 .79 .80 .83 .81 .05 .05 .05 .06 .04
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... .21 .18 (.50) 1.30 (1.42) -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations.................. .96 .97 .30 2.13 (.61) .05 .05 .05 .06 .04
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.77) (.78) (.79) (.83) (.82) (.05) (.05) (.05) (.06) (.04)
Realized gain on investments
-- net...................... -- -- -- -- (.44) --++ --++ --++ -- --
In excess of realized gain on
investments -- net.......... -- -- -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions............... (.77) (.78) (.79) (.83) (1.26) (.05) (.05) (.05) (.06) (.04)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year........................ $ 11.91 $ 11.72 $ 11.53 $ 12.02 $ 10.72 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 8.45% 8.80% 2.77% 20.66% (5.13%) 5.42% 5.43% 5.33% 5.81% 4.04%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... .38% .38% .39% .40% .39% .36% .36% .36% .35% .36%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income -- net...... 6.39% 6.87% 6.90% 7.32% 7.16% -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income -- net, and
realized gain (loss) on
investments -- net.......... -- -- -- -- -- 5.26% 5.30% 5.16% 5.67% 4.00%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $131,729 $124,746 $117,988 $125,033 $111,878 $578,802 $525,717 $557,690 $568,439 $583,992
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Portfolio turnover............ 106.93% 107.02% 92.45% 110.49% 134.53% -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
++ Amount is less than $.01 per share.
71
<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: 1998+ 1997+ 1996+ 1995+ 1994+
<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........................ $ 18.97 $ 17.13 $ 17.24 $ 16.22 $ 19.84
---------- ---------- ---------- ---------- ----------
Investment income -- net...... .43 .47 .53 .56 .50
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... 1.35 2.57 1.63 2.03 (1.39)
---------- ---------- ---------- ---------- ----------
Total from investment
operations.................. 1.78 3.04 2.16 2.59 (.89)
---------- ---------- ---------- ---------- ----------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.57) (.29) (.60) (.48) (.57)
Realized gain on investments
-- net...................... (2.01) (.91) (1.67) (1.09) (2.16)
---------- ---------- ---------- ---------- ----------
Total dividends and
distributions............... (2.58) (1.20) (2.27) (1.57) (2.73)
---------- ---------- ---------- ---------- ----------
Net asset value, end of
year........................ $ 18.17 $ 18.97 $ 17.13 $ 17.24 $ 16.22
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... 10.83% 19.17% 14.32% 17.55% (5.05%)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of
reimbursement............... .38% .39% .39% .38% .38%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Expenses...................... .38% .39% .39% .38% .38%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Investment income -- net...... 2.45% 2.65% 3.26% 3.44% 2.97%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $1,340,253 $1,329,531 $1,211,185 $1,169,357 $1,082,083
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Portfolio turnover............ 110.08% 108.41% 143.82% 140.83% 68.12%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
See Notes to Financial Statements.
72
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATURAL RESOURCES PORTFOLIO
------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------
1998+ 1997+ 1996+ 1995 1994
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
THE FOLLOWING PER SHARE DATA
AND RATIOS HAVE BEEN DERIVED
FROM INFORMATION PROVIDED IN
THE FINANCIAL STATEMENTS.
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
year........................ $ 8.12 $ 9.19 $ 8.17 $ 7.43 $ 7.53
-------- -------- -------- -------- --------
Investment income -- net...... .15 .14 .16 .17 .17
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net......... (1.23) (1.14) 1.03 .73 (.10)
-------- -------- -------- -------- --------
Total from investment
operations.................. (1.08) (1.00) 1.19 .90 .07
-------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income -- net...... (.18) (.07) (.17) (.16) (.17)
Realized gain on investments
-- net...................... -- -- -- -- --
-------- -------- -------- -------- --------
Total dividends and
distributions............... (.18) (.07) (.17) (.16) (.17)
-------- -------- -------- -------- --------
Net asset value, end of
year........................ $ 6.86 $ 8.12 $ 9.19 $ 8.17 $ 7.43
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share....................... (13.57%) (10.97%) 14.72% 12.22% .88%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of
reimbursement............... .50% .50% .50% .47% .50%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Expenses...................... .63% .59% .57% .47% .59%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Investment income -- net...... 1.94% 1.65% 1.79% 1.99% 2.23%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).................. $ 11,764 $ 17,352 $ 25,029 $ 21,035 $ 21,455
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Portfolio turnover............ 29.62% 24.10% 31.29% 38.50% 48.16%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
73
<PAGE>
(This page has been left blank intentionally.)
74
<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's financial
statements are prepared in accordance with generally accepted accounting
principles which may require the use of management accruals and estimates. 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 or purchased are valued at the last sale price in the case of
exchange-traded options. In the case of options traded in the over-the-counter
market, valuation is the last asked price (options written) or the last bid
price (options purchased). 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. Under such agreements, the counterparty
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 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.
75
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
(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 -- Capital Stock, 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.
- - 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 financial futures contracts and options on such
futures contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. 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.
(h) DIVIDENDS AND DISTRIBUTIONS -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(i) CUSTODIAN BANK -- The Capital Stock Portfolio recorded an amount payable to
the Custodian Bank reflecting an overnight overdraft as a result of unprojected
capital share transactions.
76
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
(j) 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 ("MLFD" or
"Distributor"), a division of Princeton Funds Distributor, Inc. ("PFD"), which
is 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 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, 1998, the Natural Resources Portfolio was
reimbursed in the amount of $19,449.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of
ML & Co., earned commissions on the execution of portfolio security transactions
aggregating $15,808 in the Balanced Portfolio, $95,589 in the Capital Stock
Portfolio, $46,139 in the Global Strategy Portfolio, $27,278 in the Growth Stock
Portfolio, $1,250 in the High Yield Portfolio, $249,758 in the Multiple Strategy
Portfolio, and $1,690 in the Natural Resources Portfolio.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
During the year ended December 31, 1998, Merrill Lynch Security Pricing Service,
an affiliate of MLPF&S, was paid by Balanced Portfolio $410; Global Strategy
Portfolio $218; High Yield Portfolio $3,277; Intermediate Government Bond
Portfolio $1,456; Long Term Corporate Bond Portfolio $4,363; and Multiple
Strategy Portfolio $275 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, FDS, PSI, PFD, and/or ML & Co.
3. INVESTMENTS:
Purchases and sales of investments, excluding short-term securities, for the
year ended December 31, 1998 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.......... $109,114,809 $362,579,166 $287,454,440 $235,902,895 $62,295,124 $161,320,181 $134,306,571
------------ ------------ ------------ ------------ ----------- ----------- ------------
------------ ------------ ------------ ------------ ----------- ----------- ------------
Total Sales.............. $110,656,157 $375,541,016 $299,224,866 $226,209,745 $59,835,366 $146,188,674 $130,700,020
------------ ------------ ------------ ------------ ----------- ----------- ------------
------------ ------------ ------------ ------------ ----------- ----------- ------------
<CAPTION>
MULTIPLE NATURAL
STRATEGY RESOURCES
PORTFOLIO PORTFOLIO
<S> <C> <C>
- -------------------------
Total Purchases.......... $1,378,301,891 $ 3,937,747
-------------- --------------
-------------- --------------
Total Sales.............. $1,391,535,791 $ 9,022,581
-------------- --------------
-------------- --------------
</TABLE>
77
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
As of December 31, 1998, 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........ $ 16,078,207 $ 79,015,717 $ 31,878,250 $135,154,405 $ 3,664,788
Depreciated securities........ (1,144,020) (6,096,880) (5,798,016) (16,268,552) (16,768,589)
------------ ------------ ------------ ------------ ------------
Net unrealized appreciation
(depreciation).............. $ 14,934,187 $ 72,918,837 $ 26,080,234 $118,885,853 $(13,103,801)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Cost for Federal income tax
purposes.................... $103,341,368 $283,840,755 $203,635,089 $330,282,986 $127,299,108
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Net realized gains (losses) for the year ended December 31, 1998 and net unrealized gains (losses)
as of December 31, 1998 were as follows:
</TABLE>
<TABLE>
<CAPTION>
GLOBAL STRATEGY
BALANCED PORTFOLIO CAPITAL STOCK PORTFOLIO PORTFOLIO
----------------------- ------------------------ ------------------------
REALIZED REALIZED UNREALIZED REALIZED
GAINS UNREALIZED GAINS GAINS GAINS UNREALIZED
(LOSSES) GAINS (LOSSES) (LOSSES) (LOSSES) GAINS
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Long-term securities.......... $7,853,690 $14,996,954 $27,931,742 $73,418,991 $ 4,788,290 $26,219,770
Short-term securities......... (203) -- 1,490 -- (91) --
Options....................... -- -- -- -- -- --
Financial futures contracts... -- -- -- -- -- --
Forward foreign exchange
contracts................... -- -- (483,911) (54,411) (3,537,015) 46,058
Foreign currency
transactions................ -- -- (84,377) 7,507 (328,132) 19,476
---------- ----------- ----------- ----------- ----------- -----------
Total......................... $7,853,487 $14,996,954 $27,364,944 $73,372,087 $ 923,052 $26,285,304
---------- ----------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- ----------- -----------
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares were as follows:
<CAPTION>
GROWTH STOCK PORTFOLIO HIGH YIELD PORTFOLIO
------------------------- --------------------------
REALIZED UNREALIZED REALIZED UNREALIZED
GAINS GAINS LOSSES LOSSES
<S> <C> <C> <C> <C>
- ------------------------------
Long-term securities.......... $57,447,673 $118,885,853 $(5,882,770) $ (12,893,525)
Short-term securities......... 59 -- (374) --
Options....................... -- -- -- --
Financial futures contracts... -- -- -- --
Forward foreign exchange
contracts................... -- -- -- --
Foreign currency
transactions................ -- -- -- --
----------- ------------ ----------- -------------
Total......................... $57,447,732 $118,885,853 $(5,883,144) $ (12,893,525)
----------- ------------ ----------- -------------
----------- ------------ ----------- -------------
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares
</TABLE>
<TABLE>
<CAPTION>
GLOBAL STRATEGY
BALANCED PORTFOLIO CAPITAL STOCK PORTFOLIO PORTFOLIO
------------------------ ------------------------ ------------------------
FOR THE YEAR ENDED DOLLAR DOLLAR DOLLAR
DECEMBER 31, 1998 SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Shares sold................... 778,807 $ 11,679,510 1,114,323 $ 27,803,421 1,072,544 $ 16,568,269
Shares issued to shareholders
in reinvestment of dividends
and distributions........... 731,174 10,448,471 1,821,223 42,684,763 2,756,231 40,433,906
---------- ------------ ---------- ------------ ---------- ------------
Total issued.................. 1,509,981 22,127,981 2,935,546 70,488,184 3,828,775 57,002,175
Shares redeemed............... (1,015,515) (15,319,354) (2,275,298) (55,470,852) (3,631,415) (55,249,639)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease)....... 494,466 $ 6,808,627 660,248 $ 15,017,332 197,360 $ 1,752,536
---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------
<CAPTION>
GROWTH STOCK PORTFOLIO
------------------------
FOR THE YEAR ENDED DOLLAR
DECEMBER 31, 1998 SHARES AMOUNT
<S> <C> <C>
- ------------------------------
Shares sold................... 2,365,185 $ 73,180,705
Shares issued to shareholders
in reinvestment of dividends
and distributions........... 2,391,608 64,047,263
---------- ------------
Total issued.................. 4,756,793 137,227,968
Shares redeemed............... (2,471,233) (75,131,439)
---------- ------------
Net increase (decrease)....... 2,285,560 $ 62,096,529
---------- ------------
---------- ------------
</TABLE>
<TABLE>
<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
---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------
<CAPTION>
GROWTH STOCK PORTFOLIO
------------------------
FOR THE YEAR ENDED DOLLAR
DECEMBER 31, 1997 SHARES AMOUNT
<S> <C> <C>
- ------------------------------
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>
78
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE LONG TERM
GOVERNMENT CORPORATE MONEY MULTIPLE NATURAL
BOND BOND RESERVE STRATEGY RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Appreciated securities........ $ 6,378,664 $ 4,432,253 $ 120,817 $ 197,582,184 $ 915,806
Depreciated securities........ (716,230) (1,061,746) (184,533) (24,315,967) (3,687,738)
------------ ------------ ------------ -------------- -----------
Net unrealized appreciation
(depreciation).............. $ 5,662,434 $ 3,370,507 $ (63,716) $ 173,266,217 $(2,771,932)
------------ ------------ ------------ -------------- -----------
------------ ------------ ------------ -------------- -----------
Cost for Federal income tax
purposes.................... $231,583,959 $126,189,736 $577,839,769 $1,158,086,189 $14,444,468
------------ ------------ ------------ -------------- -----------
------------ ------------ ------------ -------------- -----------
Net realized gains (losses) for the year ended December 31, 1998 and net unrealized gains (losses) as
of December 31, 1998 were as follows:
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT LONG TERM CORPORATE BOND MONEY RESERVE
BOND PORTFOLIO PORTFOLIO PORTFOLIO
------------------------ ------------------------ -----------------
REALIZED UNREALIZED REALIZED UNREALIZED REALIZED UNREALIZED
GAINS GAINS GAINS GAINS GAINS LOSSES
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Long-term securities.......... $ 3,351,855 $5,662,434 $ 1,387,596 $3,370,507 -- --
Short-term securities......... 10 -- -- -- $96,424 $(63,716)
Options....................... -- -- -- -- -- --
Financial futures contracts... -- -- -- -- -- --
Forward foreign exchange
contracts................... -- -- -- -- -- --
Foreign currency
transactions................ -- -- -- -- -- --
----------- ----------- ----------- ----------- ------- --------
Total......................... $ 3,351,865 $5,662,434 $ 1,387,596 $3,370,507 $96,424 $(63,716)
----------- ----------- ----------- ----------- ------- --------
----------- ----------- ----------- ----------- ------- --------
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares were as follows:
<CAPTION>
MULTIPLE STRATEGY PORTFOLIO
------------------------------ ------------------------------
GAINS UNREALIZED REALIZED GAINS
(LOSSES) GAINS LOSSES (LOSSES)
<S> <C> <C> <C> <C>
- ------------------------------
Long-term securities.......... $ 88,781,310 $173,937,535 $ (1,293,734) $(2,771,932)
Short-term securities......... (10,286) -- -- --
Options....................... -- -- -- --
Financial futures contracts... -- -- -- --
Forward foreign exchange
contracts................... (8,280,551) 38,823 -- --
Foreign currency
transactions................ 284,521 51,674 (3,844) 210
------------- ------------- ------------- -------------
Total......................... $ 80,774,994 $174,028,032 $ (1,297,578) $(2,771,722)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT LONG TERM CORPORATE BOND
HIGH YIELD PORTFOLIO BOND PORTFOLIO PORTFOLIO
------------------------ ------------------------ ------------------------
DOLLAR DOLLAR DOLLAR
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Shares sold................... 7,507,390 $ 63,434,459 2,645,259 $ 29,677,244 1,377,909 $ 16,238,970
Shares issued to shareholders
in reinvestment of dividends
and distributions........... 1,541,379 13,357,566 1,307,193 14,551,966 702,078 8,233,350
---------- ------------ ---------- ------------ ---------- ------------
Total issued.................. 9,048,769 76,792,025 3,952,452 44,229,210 2,079,987 24,472,320
Shares redeemed............... (9,924,680) (85,182,939) (2,742,781) (30,605,372) (1,662,749) (19,533,330)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease)....... (875,911) $ (8,390,914) 1,209,671 $ 13,623,838 417,238 $ 4,938,990
---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------
<CAPTION>
MONEY RESERVE PORTFOLIO
------------------------------ ------------------------------ ------------------------------
DOLLAR DOLLAR DOLLAR
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------
Shares sold................... 284,303,867 $ 284,303,867 633,962 $ 10,885,213 710,396 $ 5,326,430
Shares issued to shareholders
in reinvestment of dividends
and distributions........... 29,096,871 29,096,871 11,010,994 180,910,620 49,398 392,711
------------- ------------- ------------- ------------- ------------- -------------
Total issued.................. 313,400,738 313,400,738 11,644,956 191,795,833 759,794 5,719,141
Shares redeemed............... (260,242,423) (260,242,423) (7,971,065) (136,879,773) (1,181,796) (9,000,546)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease)....... 53,158,315 $ 53,158,315 3,673,891 $ 54,916,060 (422,002) $ (3,281,405)
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT LONG TERM CORPORATE BOND
HIGH YIELD PORTFOLIO BOND PORTFOLIO PORTFOLIO
------------------------ ------------------------ ------------------------
DOLLAR DOLLAR DOLLAR
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>
MONEY RESERVE PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------- ------------------------ ------------------------
DOLLAR DOLLAR DOLLAR
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)
------------ ------------ ---------- ------------ ---------- ------------
------------ ------------ ---------- ------------ ---------- ------------
</TABLE>
79
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Concluded)
- --------------------------------------------------------------------------------
5. CAPITAL LOSS CARRYFORWARDS:
At December 31, 1998, the Fund had capital loss carryforwards of approximately
$3,820,000 in the High Yield Portfolio, of which $349,000 expires in 1999,
$231,000 expires in 2005 and $3,240,000 expires in 2006; $5,678,000 in the
Intermediate Government Bond Portfolio, of which $2,768,000 expires in 2002,
$1,088,000 expires in 2003, and $1,822,000 expires in 2004; $252,000 in the Long
Term Corporate Bond Portfolio, all of which expires in 2002; $1,782,000 in the
Natural Resources Portfolio, of which $155,000 expires in 1999, $297,000 expires
in 2000, and $1,330,000 expires in 2006. These amounts will be available to
offset like amounts of any future taxable capital gains. Expired capital loss
carryforward in the amount of $3,019,030 and $1,186,895 in the High Yield and
Natural Resources Portfolios, respectively, has been reclassified to paid-in
capital in excess of par.
6. COMMITMENTS:
At December 31, 1998, the Natural Resources Portfolio entered into foreign
exchange contracts, under which they agreed to purchase and sell various foreign
currencies with values of approximately $45,681 and $18,123, respectively.
7. LOANED SECURITIES:
At December 31, 1998, the Intermediate Government Bond Portfolio held US
Treasury Notes having an aggregate value of approximately $17,505,000 as
collateral for portfolio securities loaned having a market value of
approximately $17,072,000.
8. SUBSEQUENT EVENTS:
On January 4, 1999, the Board of Directors declared dividends and distributions
per share payable on January 11, 1999 to shareholders of record as of December
31, 1998 as follows:
<TABLE>
<CAPTION>
ORDINARY LONG-TERM
PORTFOLIO INCOME CAPITAL GAINS
<S> <C> <C>
- ----------------------------------------------------------------------------
Balanced.......................................... $ .546325 $ .938077
Capital Stock..................................... .223905 2.187640
Global Strategy................................... .231236 .119393
Growth Stock...................................... 1.297697 3.510755
High Yield........................................ .070594 --
Intermediate Government Bond...................... .059783 --
Long Term Corporate Bond.......................... .062442 --
Multiple Strategy................................. .351386 1.199727
Natural Resources................................. .148438 --
- ----------------------------------------------------------------------------
</TABLE>
80
<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, including
the schedules of investments, of Merrill Lynch Series Fund, Inc. (comprising,
respectively, the Balanced, Capital Stock, Global Strategy, Growth Stock, High
Yield, Intermediate Government Bond, Long Term Corporate Bond, Money Reserve,
Multiple Strategy, and Natural Resources Portfolios) as of December 31, 1998,
and the related statements of operations for the year then ended, the statements
of changes in net assets for each of the years in the two-year period then
ended, and the financial highlights for each of the years in the five-year
period then ended. These financial statements and the financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1998 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
respective portfolios constituting the Merrill Lynch Series Fund, Inc. as of
December 31, 1998, the results of their operations, the changes in their net
assets, and their financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
February 20, 1999
81
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Directors and Officers
- --------------------------------------------------------------------------------
TERRY K. GLENN-President and Director
JACK B. SUNDERLAND-Director
STEPHEN B. SWENSRUD-Director
J. THOMAS TOUCHTON-Director
CHRISTOPHER G. AYOUB-Senior Vice President
LAWRENCE R. FULLER-Senior Vice President
JAY C. HARBECK-Senior Vice President
NORMAN R. HARVEY-Senior Vice President
VINCENT T. LATHBURY III-Senior Vice President
KEVIN J. MCKENNA-Senior Vice President
JOSEPH T. MONAGLE JR.-Senior Vice President
THOMAS R. ROBINSON-Senior Vice President
ROBERT M. SHEARER-Senior Vice President
JOEL HEYMSFELD-Vice President
ROBERT F. MURRAY-Vice President
JACQUELINE L. ROGERS-Vice President
DONALD C. BURKE-Treasurer
PRINCIPAL OFFICE OF THE FUND
Box 9011
Princeton, New Jersey 08453-9011
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
- --------------------------------------------------------------------------------
On January 29, 1999, Jay C. Harbeck retired as Senior Vice President and
Portfolio Manager of Intermediate Government Bond and Long Term Corporate Bond
Portfolios. His colleagues at Merrill Lynch Asset Management, L.P. join the
Fund's Board of Directors in wishing Mr. Harbeck well in his retirement.
- --------------------------------------------------------------------------------
82
<PAGE>
This report is authorized for distribution only to Policyowners of certain
variable life insurance policies which are funded by shares of Merrill Lynch
Series Fund, Inc. This report is not authorized for use as an offer of sale or
solicitation of an offer to buy shares of the Fund or the policies. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost. An investment in Money Reserve Portfolio is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
Government agency. For Money Reserve Portfolio, although the Portfolio seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Portfolio. Statements and other information herein are
as dated and are subject to change.
59828-12/98
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
REPORT OF INDEPENDENT ACCOUNTANTS
The Sponsor, Trustee and Holders
of The Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A (2003 Trust),
Series B (2001 and 2005 Trusts), Series C (2006 Trust),
Series D (2007 Trust), Series E (2008 Trust),
Series F (1999 and 2009 Trusts), Series G (2000 and
2010 Trusts), Series H (2011 Trust),
Series I (2002 Trust), Series J (2013 Trust) and
Series K (2004 and 2014 Trusts) (the Funds):
We have audited the accompanying statements of condition of the Funds,
including the portfolios, as of December 31, 1998 and the related statements
of operations and of changes in net assets for the years ended December 31,
1998, 1997 and 1996. These financial statements are the responsibility of the
Trustee. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Securities owned at December 31, 1998, as shown in such portfolios, were
confirmed to us by The Chase Manhattan Bank, the Trustee. An audit also
includes assessing the accounting principles used and significant estimates
made by the Trustee, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Funds at December 31,
1998 and the results of their operations and changes in their net assets for
the above-stated years in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New York, N.Y.
February 16, 1999
D-1
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES A
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2003 TRUST
<S> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1).......................................... $48,504,172
Other................................................................. 87,722
-----------
Total trust property........................................ 48,591,894
LESS LIABILITY - Other.................................................. 4,093
-----------
NET ASSETS (Note 2)..................................................... $48,587,801
-----------
-----------
UNITS OUTSTANDING....................................................... 59,850,919
-----------
-----------
UNIT VALUE.............................................................. $.81181
-----------
-----------
</TABLE>
See Notes to Financial Statements.
D-2
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES A
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2003 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income.......................................................... $ 22,308 $ 24,902 $ 27,183
Accretion of original issue discount..................................... 3,487,242 3,628,183 3,638,172
Trustee's fees and expenses.............................................. (15,733) (16,828) (18,146)
---------- --------- -----------
Net investment income.................................................... 3,493,817 3,636,257 3,647,209
---------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold......................................... 732,262 818,013 828,620
Unrealized appreciation (depreciation) of investments.................... 893,998 31,844 (4,351,762)
---------- ---------- -----------
Realized and unrealized gain (loss) on investments....................... 1,626,260 849,857 (3,523,142)
---------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............ $5,120,077 $4,486,114 $ 124,067
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See Notes to Financial Statements.
D-3
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES A
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2003 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
OPERATIONS:
Net investment income................................................ $ 3,493,817 $ 3,636,257 $ 3,647,209
Realized gain on securities sold..................................... 732,262 818,013 828,620
Unrealized appreciation (depreciation) of investments................ 893,998 31,844 (4,351,762)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations...... 5,120,077 4,486,114 124,067
----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units......................................... 199,957 213,357
Redemptions of units................................................. (4,447,838) (5,561,092) (4,579,226)
----------- ----------- -----------
Net capital share transactions....................................... (4,447,838) (5,361,135) (4,365,869)
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS.................................. 672,239 (875,021) (4,241,802)
NET ASSETS, BEGINNING OF YEAR.......................................... 47,915,562 48,790,583 53,032,385
----------- ----------- -----------
NET ASSETS, END OF YEAR................................................ $48,587,801 $47,915,562 $48,790,583
----------- ----------- -----------
----------- ----------- -----------
UNIT VALUE, END OF YEAR................................................ $.81181 $.72956 $.66428
----------- ----------- -----------
----------- ----------- -----------
UNITS OUTSTANDING, END OF YEAR......................................... 59,850,919 65,677,446 73,448,689
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
D-4
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES B
STATEMENTS OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2001 TRUST 2005 TRUST
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1)......................................................... $48,742,160 $25,628,714
Other................................................................................ 72,932 28,713
----------- -----------
Total trust property........................................................ 48,815,092 25,657,427
LESS LIABILITY - Other................................................................. 3,926 6,209
----------- -----------
NET ASSETS (Note 2).................................................................... $48,811,166 $25,651,218
----------- -----------
----------- -----------
UNITS OUTSTANDING...................................................................... 53,520,078 33,867,164
----------- -----------
----------- -----------
UNIT VALUE............................................................................. $.91202 $.75741
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements.
D-5
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES B
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2001 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income........................................................ $ 19,477 $ 21,215 $ 23,315
Accretion of original issue discount................................... 3,908,822 3,964,020 4,052,834
Trustee's fees and expenses............................................ (14,505) (15,315) (16,333)
---------- ---------- ----------
Net investment income.................................................. 3,913,794 3,969,920 4,059,816
---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold....................................... 320,464 444,680 729,602
Unrealized appreciation (depreciation) of
investments.......................................................... (413,110) (876,128) (3,688,347)
---------- ---------- ----------
Realized and unrealized gain (loss) on
investments.......................................................... (92,646) (431,448) (2,958,745)
---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS........................................................ $3,821,148 $3,538,472 $1,101,071
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
D-6
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES B
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2005 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income........................................................ $ 11,497 $ 12,069 $ 12,909
Accretion of original issue discount................................... 1,509,134 1,503,945 1,507,646
Trustee's fees and expenses............................................ (10,112) (10,338) (10,945)
---------- ---------- ----------
Net investment income.................................................. 1,510,519 1,505,676 1,509,610
---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain on securities sold....................................... 287,941 202,442 239,717
Unrealized appreciation (depreciation) of
investments.......................................................... 911,552 648,748 (1,944,792)
---------- ---------- ----------
Realized and unrealized gain (loss) on
investments.......................................................... 1,199,493 851,190 (1,705,075)
---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS........................................................ $2,710,012 $2,356,866 $ (195,465)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
D-7
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES B
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2001 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
OPERATIONS:
Net investment income................................................ $ 3,913,794 $ 3,969,920 $ 4,059,816
Realized gain on securities sold..................................... 320,464 444,680 729,602
Unrealized appreciation (depreciation)
of investments..................................................... (413,110) (876,128) (3,688,347)
----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations.......................................... 3,821,148 3,538,472 1,101,071
----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units......................................... 647,129 397,111 809,728
Redemptions of units................................................. (4,102,436) (4,861,241) (6,094,730)
----------- ----------- -----------
Net capital share transactions....................................... (3,455,307) (4,464,130) (5,285,002)
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS.................................. 365,841 (925,658) (4,183,931)
NET ASSETS, BEGINNING OF YEAR ........................................ 48,445,325 49,370,983 53,554,914
----------- ----------- -----------
NET ASSETS, END OF YEAR .............................................. $48,811,166 $48,445,325 $49,370,983
----------- ----------- -----------
----------- ----------- -----------
UNIT VALUE, END OF YEAR .............................................. $.91202 $.84350 $.78459
----------- ----------- -----------
----------- ----------- -----------
UNITS OUTSTANDING, END OF YEAR......................................... 53,520,078 57,433,435 62,925,765
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
D-8
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES B
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2005 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
OPERATIONS:
Net investment income................................................ $ 1,510,519 $ 1,505,676 $ 1,509,610
Realized gain on securities sold..................................... 287,941 202,442 239,717
Unrealized appreciation (depreciation)
of investments..................................................... 911,552 648,748 (1,944,792)
----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations.......................................... 2,710,012 2,356,866 (195,465)
----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units......................................... 2,239,894 743,426 1,171,904
Redemptions of units................................................. (1,664,525) (1,854,199) (2,282,137)
----------- ----------- -----------
Net capital share transactions....................................... 575,369 (1,110,773) (1,110,233)
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS.................................. 3,285,381 1,246,093 (1,305,698)
NET ASSETS, BEGINNING OF YEAR ........................................ 22,365,837 21,119,744 22,425,442
----------- ----------- -----------
NET ASSETS, END OF YEAR ............................................... $25,651,218 $22,365,837 $21,119,744
----------- ----------- -----------
----------- ----------- -----------
UNIT VALUE, END OF YEAR ............................................... $.75741 $.67280 $.60348
----------- ----------- -----------
----------- ----------- -----------
UNITS OUTSTANDING, END OF YEAR......................................... 33,867,164 33,242,884 34,996,785
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
D-9
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES C
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2006 TRUST
<S> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1)....................................... $8,903,785
Other.............................................................. 2,288
----------
Total trust property...................................... 8,906,073
LESS LIABILITY - Other............................................... 72
----------
NET ASSETS (Note 2).................................................. $8,906,001
----------
----------
UNITS OUTSTANDING.................................................... 12,116,560
----------
----------
UNIT VALUE........................................................... $.73503
----------
----------
</TABLE>
See Notes to Financial Statements.
D-10
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES C
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2006 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income.......................................................... $ 3,561 $ 3,792 $ 4,065
Accretion of original issue discount..................................... 466,132 485,166 467,093
Trustee's fees and expenses.............................................. (3,510) (3,683) (3,738)
---------- ---------- --------
Net investment income.................................................... 466,183 485,275 467,420
---------- ---------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold......................................... 245,706 406,791 78,989
Unrealized appreciation (depreciation) of investments.................... 415,809 152,479 (488,521)
---------- ---------- --------
Realized and unrealized gain (loss) on investments....................... 661,515 559,270 (409,532)
---------- ---------- --------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............ $1,127,698 $1,044,545 $ 57,888
---------- ---------- --------
---------- ---------- --------
</TABLE>
See Notes to Financial Statements.
D-11
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES C
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2006 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
OPERATIONS:
Net investment income.................................................... $ 466,183 $ 485,275 $ 467,420
Realized gain on securities sold......................................... 245,706 406,791 78,989
Unrealized appreciation (depreciation) of investments.................... 415,809 152,479 (488,521)
---------- ---------- ----------
Net increase (decrease) in net assets resulting from operations.......... 1,127,698 1,044,545 57,888
---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units............................................. 1,237,586 245,845 2,799,053
Redemptions of units..................................................... (697,866) (1,459,989) (582,696)
---------- ---------- ----------
Net capital share transactions........................................... 539,720 (1,214,144) 2,216,357
---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS...................................... 1,667,418 (169,599) 2,274,245
NET ASSETS, BEGINNING OF YEAR.............................................. 7,238,583 7,408,182 5,133,937
---------- ---------- ----------
NET ASSETS, END OF YEAR.................................................... $8,906,001 $7,238,583 $7,408,182
---------- ---------- ----------
---------- ---------- ----------
UNIT VALUE, END OF YEAR.................................................... $.73503 $.64467 $.57315
---------- ---------- ----------
---------- ---------- ----------
UNITS OUTSTANDING, END OF YEAR............................................. 12,116,560 11,228,372 12,925,437
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
D-12
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES D
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2007 TRUST
<S> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1)........................................... $15,078,605
Other.................................................................. 2,963
-----------
Total trust property......................................... 15,081,568
LESS LIABILITY - Other................................................... 1,514
-----------
NET ASSETS (Note 2)...................................................... $15,080,054
-----------
-----------
UNITS OUTSTANDING........................................................ 21,715,233
-----------
-----------
UNIT VALUE............................................................... $.69445
-----------
-----------
</TABLE>
See Notes to Financial Statements.
D-13
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES D
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2007 TRUST
YEARS ENDED DECEMBER 31
1998 1997 1996
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income.......................................................... $ 7,329 $ 7,314 $ 6,683
Accretion of original issue discount..................................... 884,318 826,932 701,298
Trustee's fees and expenses.............................................. (7,337) (7,325) (6,675)
---------- ---------- ----------
Net investment income.................................................... 884,310 826,921 701,306
---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold......................................... 75,524 59,353 137,187
Unrealized appreciation (depreciation) of investments.................... 953,956 674,748 (1,039,668)
---------- ---------- ----------
Realized and unrealized gain (loss) on investments....................... 1,029,480 734,101 (902,481)
---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............ $1,913,790 $1,561,022 $ (201,175)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
D-14
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2007 TRUST
YEARS ENDED DECEMBER 31
1998 1997 1996
<S> <C> <C> <C>
OPERATIONS:
Net investment income................................................ $ 884,310 $ 826,921 $ 701,306
Realized gain on securities sold..................................... 75,524 59,353 137,187
Unrealized appreciation (depreciation) of investments................ 953,956 674,748 (1,039,668)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations...... 1,913,790 1,561,022 (201,175)
----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units......................................... 318,728 1,541,671 198,530
Redemptions of units................................................. (327,475) (300,187) (557,763)
----------- ----------- -----------
Net capital share transactions....................................... (8,747) 1,241,484 (359,233)
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS.................................. 1,905,043 2,802,506 (560,408)
NET ASSETS, BEGINNING OF YEAR.......................................... 13,175,011 10,372,505 10,932,913
----------- ----------- -----------
NET ASSETS, END OF YEAR................................................ $15,080,054 $13,175,011 $10,372,505
----------- ----------- -----------
----------- ----------- -----------
UNIT VALUE, END OF YEAR................................................ $.69445 $.60479 $.53353
----------- ----------- -----------
----------- ----------- -----------
UNITS OUTSTANDING, END OF YEAR......................................... 21,715,233 21,784,452 19,441,293
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
D-15
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES E
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2008 TRUST
<S> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1)......................................................................... $23,705,568
Other................................................................................................ 34,594
-----------
Total trust property....................................................................... 23,740,162
LESS LIABILITY - Other................................................................................. 9,272
-----------
NET ASSETS (Note 2).................................................................................... $23,730,890
-----------
-----------
UNITS OUTSTANDING...................................................................................... 36,757,279
-----------
-----------
UNIT VALUE............................................................................................. $.64561
-------
-------
</TABLE>
See Notes to Financial Statements.
D-16
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES E
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2008 TRUST
YEARS ENDED DECEMBER 31
1998 1997 1996
<S> <C> <C> <C>
INVESTMENT INCOME
Interest income....................................................... $ 14,231 $ 15,421 $ 17,094
Accretion of original issue
discount............................................................ 1,483,819 1,504,333 1,566,068
Trustee's fees and expenses........................................... (11,317) (11,957) (12,920)
---------- ---------- ----------
Net investment income................................................. 1,486,733 1,507,797 1,570,242
---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain on securities sold...................................... 783,621 288,696 535,460
Unrealized appreciation (depreciation)
of investments...................................................... 1,129,509 1,163,882 (2,866,638)
---------- ---------- ----------
Realized and unrealized gain (loss)
on investments...................................................... 1,913,130 1,452,578 (2,331,178)
---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............................................. $3,399,863 $2,960,375 $ (760,936)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
D-17
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES E
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2008 TRUST
YEARS ENDED DECEMBER 31
1998 1997 1996
<S> <C> <C> <C>
OPERATIONS:
Net investment income............................................. $ 1,486,733 $ 1,507,797 $ 1,570,242
Realized gain on securities sold.................................. 783,621 288,696 535,460
Unrealized appreciation (depreciation) of
investments..................................................... 1,129,509 1,163,882 (2,866,638)
----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations....................................... 3,399,863 2,960,375 (760,936)
----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional Units...................................... 447,496 1,102,323
Redemptions of Units.............................................. (2,925,925) (2,064,469) (3,669,808)
----------- ----------- -----------
Net capital share transactions.................................... (2,478,429) (2,064,469) (2,567,485)
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS............................... 921,434 895,906 (3,328,421)
NET ASSETS, BEGINNING OF YEAR....................................... 22,809,456 21,913,550 25,241,971
----------- ----------- -----------
NET ASSETS, END OF YEAR............................................. $23,730,890 $22,809,456 $21,913,550
----------- ----------- -----------
----------- ----------- -----------
UNIT VALUE, END OF YEAR............................................. $.64561 $.55850 $.48816
------- ------- -------
------- ------- -------
UNITS OUTSTANDING, END OF YEAR...................................... 36,757,279 40,840,808 44,890,165
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
D-18
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES F
STATEMENTS OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1999 TRUST 2009 TRUST
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1)......................................................... $25,618,114 $ 9,958,384
Other................................................................................ 5,456 15,125
----------- ----------
Total trust property....................................................... 25,623,570 9,973,509
LESS LIABILITY - Other................................................................. 3,193 7,379
----------- ----------
NET ASSETS (Note 2).................................................................... $25,620,377 $ 9,966,130
----------- ----------
----------- ----------
UNITS OUTSTANDING...................................................................... 25,751,924 16,350,375
----------- ----------
----------- ----------
UNIT VALUE............................................................................. $.99489 $.60954
------- -------
------- -------
</TABLE>
See Notes to Financial Statements.
D-19
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES F
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1999 TRUST
YEARS ENDED DECEMBER 31
1998 1997 1996
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income....................................................... $ 9,166 $ 9,282 $ 9,455
Accretion of original issue discount.................................. 1,669,699 1,645,711 1,585,052
Trustee's fees and expenses........................................... (8,840) (8,856) (8,928)
---------- ---------- ----------
Net investment income................................................. 1,670,025 1,646,137 1,585,579
---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) on securities sold............................... (14,374) 33,432 102,339
Unrealized appreciation (depreciation) of
investments......................................................... (214,206) (233,179) (767,906)
---------- ---------- ----------
Realized and unrealized gain (loss) on
investments......................................................... (228,580) (199,747) (665,567)
---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS....................................................... $1,441,445 $1,446,390 $ 920,012
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
D-20
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES F
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2009 TRUST
YEARS ENDED DECEMBER 31
1998 1997 1996
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income....................................................... $ 6,487 $ 7,191 $ 7,951
Accretion of original issue discount.................................. 614,533 639,710 643,976
Trustee's fees and expenses........................................... (6,485) (7,105) (7,936)
---------- ---------- -----------
Net investment income................................................. 614,535 639,796 643,991
---------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold...................................... 299,484 220,815 130,319
Unrealized appreciation (depreciation) of
investments......................................................... 576,107 471,994 (1,124,284)
---------- ---------- -----------
Realized and unrealized gain (loss) on
investments......................................................... 875,591 692,809 (993,965)
---------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS....................................................... $1,490,126 $1,332,605 $ (349,974)
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See Notes to Financial Statements.
D-21
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES F
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
1999 TRUST
YEARS ENDED DECEMBER 31
1998 1997 1996
<S> <C> <C> <C>
OPERATIONS:
Net investment income............................................. $ 1,670,025 $ 1,646,137 $ 1,585,579
Realized gain (loss) on securities sold........................... (14,374) 33,432 102,339
Unrealized appreciation (depreciation) of
investments..................................................... (214,206) (233,179) (767,906)
----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations....................................... 1,441,445 1,446,390 920,012
----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units...................................... 2,335,674 1,189,918 803,103
Redemptions of units.............................................. (1,997,695) (2,571,494) (1,764,394)
----------- ----------- -----------
Net capital share transactions.................................... 337,979 (1,381,576) (961,291)
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS............................... 1,779,424 64,814 (41,279)
NET ASSETS, BEGINNING OF YEAR....................................... 23,840,953 23,776,139 23,817,418
----------- ----------- -----------
NET ASSETS, END OF YEAR............................................. $25,620,377 $23,840,953 $23,776,139
----------- ----------- -----------
----------- ----------- -----------
UNIT VALUE, END OF YEAR............................................. $.99489 $.93975 $.88498
----------- ----------- -----------
----------- ----------- -----------
UNITS OUTSTANDING, END OF YEAR...................................... 25,751,924 25,369,560 26,866,164
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
D-22
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES F
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2009 TRUST
YEARS ENDED DECEMBER 31
1998 1997 1996
<S> <C> <C> <C>
OPERATIONS:
Net investment income............................................. $ 614,535 $ 639,796 $ 643,991
Realized gain on securities sold.................................. 299,484 220,815 130,319
Unrealized appreciation (depreciation) of
investments..................................................... 576,107 471,994 (1,124,284)
---------- ---------- -----------
Net increase (decrease) in net assets
resulting from operations....................................... 1,490,126 1,332,605 (349,974)
---------- ---------- -----------
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units...................................... 182,231
Redemptions of units.............................................. (1,103,948) (1,170,043) (716,485)
---------- ---------- -----------
Net capital share transactions.................................... (1,103,948) (1,170,043) (534,254)
---------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS............................... 386,178 162,562 (884,228)
NET ASSETS, BEGINNING OF YEAR....................................... 9,579,952 9,417,390 10,301,618
---------- ---------- -----------
NET ASSETS, END OF YEAR............................................. $9,966,130 $9,579,952 $ 9,417,390
---------- ---------- -----------
---------- ---------- -----------
UNIT VALUE, END OF YEAR............................................. $.60954 $.52533 $.45585
------- ------- -------
------- ------- -------
UNITS OUTSTANDING, END OF YEAR...................................... 16,350,375 18,236,148 20,659,112
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See Notes to Financial Statements.
D-23
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES G
STATEMENTS OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2000 TRUST 2010 TRUST
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1)......................................................... $26,531,652 $10,431,997
Other................................................................................ 5,500 6,185
----------- ----------
Total trust property........................................................ 26,537,152 10,438,182
LESS LIABILITY - Other................................................................. 2,154 178
----------- ----------
NET ASSETS (Note 2).................................................................... $26,534,998 $10,438,004
----------- ----------
----------- ----------
UNITS OUTSTANDING...................................................................... 27,855,188 18,391,957
----------- ----------
----------- ----------
UNIT VALUE............................................................................. $.95261 $.56753
------- -------
------- -------
</TABLE>
See Notes to Financial Statements.
D-24
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES G
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2000 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income......................................................... $ 9,671 $ 9,454 $ 9,437
Accretion of original issue discount.................................... 1,694,876 1,610,298 1,521,693
Trustee's fees and expenses............................................. (9,184) (9,020) (9,004)
---------- ---------- ----------
Net investment income................................................... 1,695,363 1,610,732 1,522,126
---------- ---------- ----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain (loss) on securities sold................................. 85,281 97,827 54,447
Unrealized appreciation (depreciation)
of investments.......................................................... (73,905) (181,107) (907,562)
---------- ---------- ----------
Realized and unrealized gain (loss) on
investments........................................................... 11,376 (83,280) (853,115)
---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS......................................................... $1,706,739 $1,527,452 $ 669,011
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
D-25
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES G
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2010 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income......................................................... $ 6,416 $ 7,100 $ 7,681
Accretion of original issue discount.................................... 540,842 634,768 604,550
Trustee's fees and expenses............................................. (6,387) (6,969) (7,558)
---------- ---------- ----------
Net investment income................................................... 540,871 634,899 604,673
---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) on securities sold................................. 69,850 192,086 413,063
Unrealized appreciation (depreciation) of
investments........................................................... 721,439 410,774 (1,250,513)
---------- ---------- ----------
Realized and unrealized gain (loss)on
investments........................................................... 791,289 602,860 (837,450)
---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS......................................................... $1,332,160 $1,237,759 $ (232,777)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
D-26
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES G
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2000 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
OPERATIONS:
Net investment income.............................................. $ 1,695,363 $ 1,610,732 $ 1,522,126
Realized gain (loss) on securities sold............................ 85,281 97,827 54,447
Unrealized appreciation (depreciation)
of investments................................................... (73,905) (181,107) (907,562)
----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations........................................ 1,706,739 1,527,452 669,011
----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units....................................... 5,875,313 1,984,343 487,979
Redemptions of units............................................... (3,803,375) (2,875,921) (1,346,695)
----------- ----------- -----------
Net capital share transactions..................................... 2,071,938 (891,578) (858,716)
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS................................ 3,778,677 635,874 (189,705)
NET ASSETS, BEGINNING OF YEAR ...................................... 22,756,321 22,120,447 22,310,152
----------- ----------- -----------
NET ASSETS, END OF YEAR ............................................ $26,534,998 $22,756,321 $22,120,447
----------- ----------- -----------
----------- ----------- -----------
UNIT VALUE, END OF YEAR ............................................ $.95261 $.88976 $.83284
----------- ----------- -----------
----------- ----------- -----------
UNITS OUTSTANDING, END OF YEAR....................................... 27,855,188 25,575,784 26,560,105
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
D-27
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES G
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2010 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
OPERATIONS:
Net investment income............................................... $ 540,871 $ 634,899 $ 604,673
Realized gain (loss) on securities sold............................. 69,850 192,086 413,063
Unrealized appreciation (depreciation) of
investments....................................................... 721,439 410,774 (1,250,513)
----------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations......................................... 1,332,160 1,237,759 (232,777)
----------- ---------- ----------
CAPITAL SHARE TRANSACTIONS (Note 3):
Issuance of additional units........................................ 1,225,106 5,760,544 2,997,567
Redemptions of units................................................ (540,288) (6,927,386) (2,968,890)
--------- ---------- ----------
Net capital share transactions...................................... 684,818 (1,166,842) 28,677
----------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS................................. 2,016,978 70,917 (204,100)
NET ASSETS, BEGINNING OF YEAR......................................... 8,421,026 8,350,109 8,554,209
----------- ---------- ----------
NET ASSETS, END OF YEAR............................................... $10,438,004 $8,421,026 $8,350,109
----------- ---------- ----------
----------- ---------- ----------
UNIT VALUE, END OF YEAR.............................................. $.56753 $.48925 $.42143
----------- ---------- ----------
----------- ---------- ----------
UNITS OUTSTANDING, END OF YEAR....................................... 18,391,957 17,212,004 19,813,618
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
D-28
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES H
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2011 TRUST
<S> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1).......................................................................... $2,308,070
Other................................................................................................. 2,127
----------
Total trust property......................................................................... 2,310,197
LESS LIABILITY - Other.................................................................................. 317
----------
NET ASSETS (Note 2)..................................................................................... $2,309,880
----------
----------
UNITS OUTSTANDING....................................................................................... 4,283,180
----------
----------
UNIT VALUE.............................................................................................. $.53929
----------
----------
</TABLE>
See Notes to Financial Statements.
D-29
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES H
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2011 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income................................................................. $ 1,507 $ 2,020 $ 2,130
Accretion of original issue discount............................................ 118,651 164,042 146,632
Trustee's fees and expenses..................................................... (1,527) (1,943) (2,103)
-------- -------- --------
Net investment income........................................................... 118,631 164,119 146,659
-------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold or redeemed.................................... 104,640
Unrealized appreciation (depreciation) of investments........................... 186,725 71,464 (195,003)
-------- -------- --------
Realized and unrealized gain (loss) on investments.............................. 186,725 176,104 (195,003)
-------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................................................. $305,356 $340,223 $(48,344)
-------- -------- --------
-------- -------- --------
</TABLE>
See Notes to Financial Statements.
D-30
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES H
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2011 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
OPERATIONS:
Net investment income.................................................... $ 118,631 $ 164,119 $ 146,659
Realized gain on securities sold......................................... 104,640
Unrealized appreciation (depreciation)
of investments......................................................... 186,725 71,464 (195,003)
---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations.............................................. 305,356 340,223 (48,344)
---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Issuance of additional units............................................. 223,286 404,419
Redemption of units...................................................... (1,116,749)
---------- ---------- -----------
Net capital share transactions........................................... 223,286 (1,116,749) 404,419
---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS...................................... 528,642 (776,526) 356,075
NET ASSETS, BEGINNING OF YEAR.............................................. 1,781,238 2,557,764 2,201,689
---------- ---------- ----------
NET ASSETS, END OF YEAR.................................................... $2,309,880 $1,781,238 $2,557,764
---------- ---------- ----------
---------- ---------- ----------
UNIT VALUE, END OF YEAR.................................................... $.53929 $.46569 $.39709
---------- ---------- ----------
---------- ---------- ----------
UNITS OUTSTANDING, END OF YEAR............................................. 4,283,180 3,824,917 6,441,209
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
D-31
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES I
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2002 TRUST
<S> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1)......................................................................... $11,950,688
Other................................................................................................ 3,324
-----------
Total trust property........................................................................ 11,954,012
LESS LIABILITY - Other................................................................................. 486
-----------
NET ASSETS (Note 2).................................................................................... $11,953,526
-----------
-----------
UNITS OUTSTANDING...................................................................................... 13,762,347
-----------
-----------
UNIT VALUE............................................................................................. $.86857
-----------
-----------
</TABLE>
See Notes to Financial Statements.
D-32
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES I
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2002 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income.......................................................... $ 5,166 $ 4,996 $ 4,486
Accretion of original issue discount..................................... 749,861 677,645 587,737
Trustee's fees and expenses.............................................. (2,627) (4,866) (4,567)
---------- -------- --------
Net investment income.................................................... 752,400 677,775 587,656
---------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold or redeemed............................. 60,441 24,811 26,301
Unrealized appreciation (depreciation) of
investments............................................................ 256,059 144,877 (479,823)
---------- -------- --------
Realized and unrealized gain (loss) on
investments............................................................ 316,500 169,688 (453,522)
---------- -------- --------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.......................................................... $1,068,900 $847,463 $134,134
---------- -------- --------
---------- -------- --------
</TABLE>
See Notes to Financial Statements.
D-33
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES I
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2002 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
OPERATIONS:
Net investment income.................................................... $ 752,400 $ 677,775 $ 587,656
Realized gain on securities sold......................................... 60,441 24,811 26,301
Unrealized appreciation (depreciation) of
investments............................................................ 256,059 144,877 (479,823)
----------- ----------- ----------
Net increase in net assets resulting
from operations........................................................ 1,068,900 847,463 134,134
----------- ----------- ----------
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Issuance of additional units............................................. 589,692 1,602,921 999,668
Redemptions of units..................................................... (713,612) (329,153) (593,312)
----------- ----------- ----------
Net capital share transactions........................................... (123,920) 1,273,768 406,356
----------- ----------- ----------
NET INCREASE IN NET ASSETS................................................. 944,980 2,121,231 540,490
NET ASSETS, BEGINNING OF YEAR.............................................. 11,008,546 8,887,315 8,346,825
----------- ----------- ----------
NET ASSETS, END OF YEAR.................................................... $11,953,526 $11,008,546 $8,887,315
----------- ----------- ----------
----------- ----------- ----------
UNIT VALUE, END OF YEAR.................................................... $.86857 $.79373 $.73334
----------- ----------- ----------
----------- ----------- ----------
UNITS OUTSTANDING, END OF YEAR............................................. 13,762,347 13,869,363 12,118,903
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
See Notes to Financial Statements.
D-34
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES J
STATEMENT OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2013 TRUST
<S> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1).......................................................................... $1,682,253
Other................................................................................................. 1,903
----------
Total trust property......................................................................... 1,684,156
LESS LIABILITY - Other.................................................................................. 80
----------
NET ASSETS (Note 2)..................................................................................... $1,684,076
----------
----------
UNITS OUTSTANDING....................................................................................... 3,548,349
----------
----------
UNIT VALUE.............................................................................................. $.47461
----------
----------
</TABLE>
See Notes to Financial Statements.
D-35
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES J
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2013 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income................................................................ $ 1,279 $ 1,279 $ 1,409
Accretion of original issue discount........................................... 88,872 82,526 89,578
Trustee's fees and expenses.................................................... (640) (1,280) (1,266)
-------- -------- --------
Net investment income.......................................................... 89,511 82,525 89,721
-------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold
or redeemed.................................................................. 56,841
Unrealized appreciation (depreciation) of
investments.................................................................. 138,787 157,252 (241,371)
-------- -------- --------
Realized and unrealized gain (loss) on
investments.................................................................. 138,787 157,252 (184,530)
-------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS...................................................... $228,298 $239,777 $(94,809)
-------- -------- --------
-------- -------- --------
</TABLE>
See Notes to Financial Statements.
D-36
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES J
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2013 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
OPERATIONS:
Net investment income................................................. $ 89,511 $ 82,525 $ 89,721
Realized gain on securities sold...................................... 56,841
Unrealized appreciation (depreciation) of
investments......................................................... 138,787 157,252 (241,371)
---------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations..................................................... 228,298 239,777 (94,809)
---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Issuance of additional units.......................................... 277,784
Redemption of units................................................... (475,164)
---------- ---------- ----------
Net capital share transactions........................................ (197,380)
---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS................................... 228,298 239,777 (292,189)
NET ASSETS, BEGINNING OF YEAR........................................... 1,455,778 1,216,001 1,508,190
---------- ---------- ----------
NET ASSETS, END OF YEAR................................................. $1,684,076 $1,455,778 $1,216,001
---------- ---------- ----------
---------- ---------- ----------
UNIT VALUE, END OF YEAR................................................. $.47461 $.41027 $.34269
---------- ---------- ----------
---------- ---------- ----------
UNITS OUTSTANDING, END OF YEAR.......................................... 3,548,349 3,548,349 3,548,349
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
D-37
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES K
STATEMENTS OF CONDITION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
2004 TRUST 2014 TRUST
<S> <C> <C>
TRUST PROPERTY:
Investment in marketable securities
(see Portfolio and Note 1)...................................................... $ 8,250,450 $26,473,515
Other............................................................................. 1,832 23,078
----------- -----------
Total trust property..................................................... 8,252,282 26,496,593
LESS LIABILITY - Other.............................................................. 784 4,982
----------- -----------
NET ASSETS (Note 2)................................................................. $ 8,251,498 $26,491,611
----------- -----------
----------- -----------
UNITS OUTSTANDING................................................................... 10,460,977 60,031,399
----------- -----------
----------- -----------
UNIT VALUE.......................................................................... $.78879 $.44130
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements.
D-38
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES K
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2004 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income........................................................ $ 3,839 $ 4,366 $ 4,441
Accretion of original issue discount................................... 517,767 556,688 543,331
Trustee's fees and expenses............................................ (3,721) (4,217) (4,777)
-------- ---------- --------
Net investment income.................................................. 517,885 556,837 542,995
-------- ---------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on securities sold....................................... 164,436 429,318 83,953
Unrealized appreciation (depreciation)
of investments....................................................... 207,329 152,350 (586,245)
-------- ---------- --------
Realized and unrealized gain (loss) on
investments.......................................................... 371,765 581,668 (502,292)
-------- ---------- --------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................................................ $889,650 $1,138,505 $ 40,703
-------- ---------- --------
-------- ---------- --------
</TABLE>
See Notes to Financial Statements.
D-39
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES K
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2014 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income....................................................... $ 19,256 $ 21,572 $ 23,635
Accretion of original issue discount.................................. 1,464,616 1,515,782 1,600,126
Trustee's fees and expenses........................................... (15,177) (15,987) (17,481)
---------- --------- ----------
Net investment income................................................. 1,468,695 1,521,367 1,606,280
---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) on securities sold............................... 1,722,576 2,627 (688,528)
Unrealized appreciation (depreciation)
of investments...................................................... 53,921 2,654,490 (1,102,292)
---------- ---------- ----------
Realized and unrealized gain (loss)
on investments...................................................... 1,776,497 2,657,117 (1,790,820)
---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............................................. $3,245,192 $4,178,484 $ (184,540)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
D-40
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES K
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2004 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
OPERATIONS:
Net investment income.................................................... $ 517,885 $ 556,837 $ 542,995
Realized gain on securities sold......................................... 164,436 429,318 83,953
Unrealized appreciation (depreciation)
of investments......................................................... 207,329 152,350 (586,245)
---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations.............................................. 889,650 1,138,505 40,703
---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Issuance of additional units............................................. 796,913 513,283 2,528,106
Redemptions of units..................................................... (1,486,459) (2,219,459) (1,342,267)
---------- ---------- ----------
Net capital share transactions........................................... (689,546) (1,706,176) 1,185,839
---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS...................................... 200,104 (567,671) 1,226,542
NET ASSETS, BEGINNING OF YEAR.............................................. 8,051,394 8,619,065 7,392,523
---------- ---------- ----------
NET ASSETS, END OF YEAR.................................................... $8,251,498 $8,051,394 $8,619,065
---------- ---------- ----------
---------- ---------- ----------
UNIT VALUE, END OF YEAR.................................................... $.78879 $.70618 $.63949
---------- ---------- ----------
---------- ---------- ----------
UNITS OUTSTANDING, END OF YEAR............................................. 10,460,977 11,401,318 13,477,969
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
D-41
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES K
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
2014 TRUST
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
OPERATIONS:
Net investment income................................................ $ 1,468,695 $1,521,367 $ 1,606,280
Realized gain (loss) on securities sold.............................. 1,722,576 2,627 (688,528)
Unrealized appreciation (depreciation)
of investments..................................................... 53,921 2,654,490 (1,102,292)
----------- ---------- -----------
Net increase (decrease) in net assets
resulting from operations.......................................... 3,245,192 4,178,484 (184,540)
----------- ---------- -----------
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Issuance of additional units......................................... 12,948,776 5,440,489 20,777,671
Redemptions of units................................................. (9,990,644) (10,272,293) (12,608,859)
----------- ----------- -----------
Net capital share transactions....................................... 2,958,132 (4,831,804) 8,168,812
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS.................................. 6,203,324 (653,320) 7,984,272
NET ASSETS, BEGINNING OF YEAR.......................................... 20,288,287 20,941,607 12,957,335
----------- ----------- -----------
NET ASSETS, END OF YEAR................................................ $26,491,611 $20,288,287 $20,941,607
----------- ----------- -----------
----------- ----------- -----------
UNIT VALUE, END OF YEAR................................................ $.44130 $.38263 $.31570
----------- ----------- -----------
----------- ----------- -----------
UNITS OUTSTANDING, END OF YEAR......................................... 60,031,399 53,023,893 66,334,438
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
D-42
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Funds are registered under the Investment Company Act of 1940 as a Unit
Investment Trust. The following is a summary of significant accounting
policies consistently followed by the Funds in the preparation of their
financial statements. The policies are in conformity with generally
accepted accounting principles.
(a) Securities are stated at value as determined by an independent
evaluator based on bid side evaluations for the securities.
(b) Cost of securities is based on offering side evaluations for the
securities at Dates of Deposit. Cost of securities subsequent to
such dates has been adjusted to include the accretion of original
issue discount on the Stripped Treasury Securities. Realized gain
and loss on sales of securities are determined using the first-in,
first-out cost basis.
(c) The Funds are not subject to income taxes. Accordingly, no provision
for such taxes is required.
2. NET ASSETS, DECEMBER 31, 1998
<TABLE>
<S> <C>
Series A (2003 Trust)
Cost of 59,850,919 units at Dates of Deposit............................................. $14,560,959
Less sales charge........................................................................ 254,817
-----------
Net amount applicable to Holders......................................................... 14,306,142
Realized gain on securities sold......................................................... 13,298,272
Unrealized appreciation of investments................................................... 7,913,243
Redemptions of units - net cost of units redeemed less redemption amounts................ (7,706,143)
Undistributed net investment income...................................................... 20,776,287
-----------
Net assets............................................................................... $48,587,801
-----------
-----------
Series B (2001 Trust)
Cost of 53,520,078 units at Dates of Deposit............................................. $16,868,982
Less sales charge........................................................................ 253,035
-----------
Net amount applicable to Holders......................................................... 16,615,947
Realized gain on securities sold......................................................... 14,424,949
Unrealized appreciation of investments................................................... 1,930,560
Redemptions of units - net cost of units redeemed less redemption amounts................ (4,458,572)
Undistributed net investment income...................................................... 20,298,282
-----------
Net assets............................................................................... $48,811,166
-----------
-----------
</TABLE>
D-43
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
NOTES TO FINANCIAL STATEMENTS
2. NET ASSETS, DECEMBER 31, 1998 (Continued)
<TABLE>
<S> <C>
Series B (2005 Trust)
Cost of 33,867,164 units at Dates of Deposit............................................. $ 8,602,812
Less sales charge........................................................................ 150,549
-----------
Net amount applicable to Holders......................................................... 8,452,263
Realized gain on securities sold......................................................... 6,207,677
Unrealized appreciation of investments................................................... 3,666,856
Redemptions of units - redemption amounts less net cost of units redeemed................ 432,590
Undistributed net investment income...................................................... 6,891,832
-----------
Net assets............................................................................... $25,651,218
-----------
-----------
Series C (2006 Trust)
Cost of 12,116,560 units at Dates of Deposit............................................. $ 3,492,758
Less sales charge........................................................................ 61,123
-----------
Net amount applicable to Holders......................................................... 3,431,635
Realized gain on securities sold......................................................... 1,797,524
Unrealized appreciation of investments................................................... 960,220
Redemptions of units - net cost of units redeemed less redemption amounts................ 1,297,540
Undistributed net investment income...................................................... 1,419,082
-----------
Net assets............................................................................... $ 8,906,001
-----------
-----------
Series D (2007 Trust)
Cost of 21,715,233 units at Dates of Deposit............................................. $ 4,267,979
Less sales charge........................................................................ 85,360
-----------
Net amount applicable to Holders......................................................... 4,182,619
Realized gain on securities sold......................................................... 4,373,994
Unrealized appreciation of investments................................................... 3,621,683
Redemptions of units - net cost of units redeemed less redemption amounts................ (1,997,141)
Undistributed net investment income...................................................... 4,898,899
-----------
Net assets............................................................................... $15,080,054
-----------
-----------
Series E (2008 Trust)
Cost of 36,757,279 units at Dates of Deposit............................................. $ 7,311,222
Less sales charge........................................................................ 146,224
-----------
Net amount applicable to Holders......................................................... 7,164,998
Realized gain on securities sold......................................................... 10,302,635
Unrealized appreciation of investments................................................... 5,881,857
Redemptions of units - net cost of units redeemed less redemption amounts................ (6,938,402)
Undistributed net investment income...................................................... 7,319,802
-----------
Net assets............................................................................... $23,730,890
-----------
-----------
</TABLE>
D-44
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
NOTES TO FINANCIAL STATEMENTS
2. NET ASSETS, DECEMBER 31, 1998 (Continued)
<TABLE>
<S> <C>
Series F (1999 Trust)
Cost of 25,751,924 units at Dates of Deposit............................................. $17,215,365
Less sales charge........................................................................ 344,307
-----------
Net amount applicable to Holders......................................................... 16,871,058
Realized gain on securities sold......................................................... 530,904
Unrealized appreciation of investments................................................... 60,660
Redemptions of units - net cost of units redeemed less redemption amounts................ 2,628,509
Undistributed net investment income...................................................... 5,529,246
-----------
Net assets............................................................................... $25,620,377
-----------
-----------
Series F (2009 Trust)
Cost of 16,350,375 units at Dates of Deposit............................................. $ 3,559,929
Less sales charge........................................................................ 35,599
-----------
Net amount applicable to Holders......................................................... 3,524,330
Realized loss on securities sold......................................................... 66,202
Unrealized appreciation of investments................................................... 2,587,017
Redemptions of units - net cost of units redeemed less redemption amounts................ 826,112
Undistributed net investment income...................................................... 2,962,469
-----------
Net assets............................................................................... $ 9,966,130
-----------
-----------
Series G (2000 Trust)
Cost of 27,855,188 units at Dates of Deposit............................................. $17,682,008
Less sales charge........................................................................ 265,230
-----------
Net amount applicable to Holders......................................................... 17,416,778
Realized gain on securities sold......................................................... 541,096
Unrealized appreciation of investments................................................... 487,089
Redemptions of units - net cost of units redeemed less redemption amounts................ 2,971,285
Undistributed net investment income...................................................... 5,118,750
-----------
Net assets............................................................................... $26,534,998
-----------
-----------
Series G (2010 Trust)
Cost of 18,391,957 units at Dates of Deposit............................................. $ 4,759,098
Less sales charge........................................................................ 95,182
-----------
Net amount applicable to Holders......................................................... 4,663,916
Realized gain on securities sold......................................................... 2,796,757
Unrealized appreciation of investments................................................... 1,384,753
Redemptions of units - net cost of units redeemed less redemption amounts................ 787,949
Undistributed net investment income...................................................... 804,629
-----------
Net assets............................................................................... $10,438,004
-----------
-----------
</TABLE>
D-45
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
NOTES TO FINANCIAL STATEMENTS
2. NET ASSETS, DECEMBER 31, 1998 (Continued)
<TABLE>
<S> <C>
Series H (2011 Trust)
Cost of 4,283,180 units at Dates of Deposit.............................................. $ 1,282,342
Less sales charge........................................................................ 25,647
-----------
Net amount applicable to Holders......................................................... 1,256,695
Realized gain on securities sold......................................................... 658,774
Unrealized appreciation of investments................................................... 435,313
Redemptions of units - net cost of units redeemed less
redemption amounts..................................................................... (449,955)
Undistributed net investment income...................................................... 409,053
-----------
Net assets............................................................................... $ 2,309,880
-----------
-----------
Series I (2002 Trust)
Cost of 13,762,347 units at Dates of Deposit............................................. $ 8,852,187
Less sales charge........................................................................ 132,783
-----------
Net amount applicable to Holders......................................................... 8,719,404
Realized gain on securities sold......................................................... 145,207
Unrealized appreciation of investments................................................... 714,196
Redemptions of units - net cost of units redeemed less
redemption amounts..................................................................... 4,506
Undistributed net investment income...................................................... 2,370,213
-----------
Net assets............................................................................... $11,953,526
-----------
-----------
Series J (2013 Trust)
Cost of 3,548,349 units at Dates of Deposit.............................................. $ 936,698
Less sales charge........................................................................ 18,734
-----------
Net amount applicable to Holders......................................................... 917,964
Realized loss on securities sold......................................................... (15,485)
Unrealized appreciation of investments................................................... 416,927
Redemptions of units - net cost of units redeemed less
redemption amounts..................................................................... 72,037
Undistributed net investment income...................................................... 292,633
-----------
Net assets............................................................................... $ 1,684,076
-----------
-----------
Series K (2004 Trust)
Cost of 10,460,977 units at Dates of Deposit............................................. $ 6,005,794
Less sales charge........................................................................ 120,116
-----------
Net amount applicable to Holders......................................................... 5,885,678
Realized gain on securities sold......................................................... 686,941
Unrealized appreciation of investments................................................... 673,466
Redemption of units - net cost of units redeemed less
redemption amounts..................................................................... (185,339)
Undistributed net investment income...................................................... 1,190,752
-----------
Net assets............................................................................... $ 8,251,498
-----------
-----------
</TABLE>
D-46
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
NOTES TO FINANCIAL STATEMENTS
2. NET ASSETS, DECEMBER 31, 1998 (Concluded)
<TABLE>
<C> <C>
Series K (2014 Trust)
Cost of 60,031,399 units at Dates of Deposit............................................. $18,418,152
Less sales charge........................................................................ 368,363
-----------
Net amount applicable to Holders......................................................... 18,049,789
Realized gain on securities sold......................................................... 2,940,938
Unrealized appreciation of investments................................................... 2,761,427
Redemptions of units - net cost of units redeemed less
redemption amounts..................................................................... 1,203,489
Undistributed net investment income...................................................... 1,535,968
-----------
Net assets............................................................................... $26,491,611
-----------
-----------
</TABLE>
3. CAPITAL SHARE TRANSACTIONS
Additional units were issued as follows:
<TABLE>
<CAPTION>
Series Trust 1998 1997 1996
<S> <C> <C> <C> <C>
A 2003 0 295,618 335,709
B 2001 749,573 499,725 1,049,370
B 2005 2,941,197 1,222,534 2,047,138
C 2006 1,681,203 420,107 5,142,683
D 2007 458,880 2,872,766 397,026
E 2008 780,399 0 2,285,094
F 1999 2,439,284 1,330,068 923,519
F 2009 0 0 389,225
G 2000 6,346,370 2,356,540 596,716
G 2010 2,245,742 13,001,876 7,645,028
H 2011 458,263 0 1,105,160
I 2002 727,856 2,168,572 1,390,455
J 2013 0 0 829,985
K 2004 1,072,923 770,557 4,088,054
K 2014 31,094,278 16,314,688 68,769,448
</TABLE>
D-47
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
NOTES TO FINANCIAL STATEMENTS
3. CAPITAL SHARE TRANSACTIONS (Continued)
Units were redeemed as follows:
<TABLE>
<CAPTION>
Series Trust 1998 1997 1996
<S> <C> <C> <C> <C>
A 2003 5,826,527 8,066,861 7,108,646
B 2001 4,662,930 5,992,055 7,988,798
B 2005 2,316,917 2,976,435 3,967,657
C 2006 793,015 2,117,172 1,604,908
D 2007 528,099 529,607 1,057,295
E 2008 4,863,928 4,049,357 7,812,795
F 1999 2,056,920 2,826,672 2,054,556
F 2009 1,885,773 2,422,964 1,612,044
G 2000 4,066,966 3,340,861 1,673,631
G 2010 1,065,789 15,603,490 7,393,245
H 2011 0 2,616,292 0
I 2002 834,872 418,112 834,868
J 2013 0 0 1,473,737
K 2004 2,013,264 2,847,208 2,173,415
K 2014 24,086,772 29,625,233 4,288,897
</TABLE>
Units may be redeemed at the office of the Trustee upon tender thereof
generally on any business day or, in the case of uncertificated units,
upon delivery of a request for redemption and payment of any relevant
tax. The Trustee will redeem units either in cash or in kind at the
option of the Holder as specified in writing to the Trustee.
4. INCOME TAXES
All items of income received, accretion of original issue discount,
expenses paid, and realized gains and losses on securities sold are
attributable to the Holders, on a pro rata basis, for Federal income
tax purposes in accordance with the grantor trust rules of the United
States Internal Revenue Code.
At December 31, 1998, the cost of investment securities for Federal
income tax purposes was approximately equivalent to the adjusted cost
as shown in each Trust's portfolio.
5. DISTRIBUTIONS
It is anticipated that each Trust will not make any distributions
until the first business day following the maturity of its holdings in
the Stripped Treasury Securities which are noninterest-bearing.
D-48
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
PORTFOLIOS
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
PORTFOLIO NO. ADJUSTED
AND TITLE OF INTEREST FACE COST VALUE
SECURITIES RATE MATURITIES AMOUNT (NOTE A) (NOTE A)
<S> <C> <C> <C> <C> <C>
Series A (2003 Trust)
1 Stripped Treasury
Securities (Note B) 0% 8/15/03 $59,721,625 $40,362,380 $48,261,353
2 U.S. Treasury Bonds 11.125 8/15/03 192,475 228,549 242,819
----------- ----------- -----------
Total $59,914,100 $40,590,929 $48,504,172
----------- ----------- -----------
----------- ----------- -----------
Series B (2001 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/01 $53,556,325 $46,616,340 $48,560,880
2 U.S. Treasury Bonds 11.750 2/15/01 158,800 195,260 181,280
----------- ----------- -----------
Total $53,715,125 $46,811,600 $48,742,160
----------- ----------- -----------
----------- ----------- -----------
Series B (2005 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/05 $34,072,940 $21,828,527 $25,491,175
2 U.S. Treasury Bonds 11.625 11/15/04 102,141 133,331 137,539
----------- ----------- -----------
Total $34,175,081 $21,961,858 $25,628,714
----------- ----------- -----------
----------- ----------- -----------
Series C (2006 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/06 $12,415,000 $ 7,892,132 $ 8,850,516
2 U.S. Treasury Bonds 9.375 2/15/06 41,698 51,433 53,269
----------- ----------- -----------
Total $12,456,698 $ 7,943,565 $ 8,903,785
----------- ----------- -----------
----------- ----------- -----------
Series D (2007 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/07 $22,150,000 $11,370,888 $14,977,625
2 U.S. Treasury Bonds 9.375 2/15/06 79,045 86,034 100,980
----------- ----------- -----------
Total $22,229,045 $11,456,922 $15,078,605
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
D-49
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
PORTFOLIOS
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
PORTFOLIO NO. ADJUSTED
AND TITLE OF INTEREST FACE COST VALUE
SECURITIES RATE MATURITIES AMOUNT (NOTE A) (NOTE A)
<S> <C> <C> <C> <C> <C>
Series E (2008 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/08 $36,734,000 $17,669,172 $23,524,417
2 U.S. Treasury Bonds 9.375 2/15/06 141,801 154,539 181,151
----------- ----------- -----------
Total $36,875,801 $17,823,711 $23,705,568
----------- ----------- -----------
----------- ----------- -----------
Series F (1999 Trusts)
1 Stripped Treasury
Securities (Note B) 0% 2/15/99 $25,654,000 $25,448,726 $25,516,469
2 U.S. Treasury Notes 8.875 2/15/99 101,171 108,728 101,645
----------- ----------- -----------
Total $25,755,171 $25,557,454 $25,618,114
----------- ----------- -----------
----------- ----------- -----------
Series F (2009 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/09 $16,371,000 $ 7,298,248 $ 9,875,953
2 U.S. Treasury Bonds 9.375 2/15/06 64,525 73,119 82,431
----------- ----------- -----------
Total $16,435,525 $ 7,371,367 $ 9,958,384
----------- ----------- -----------
----------- ----------- -----------
Series G (2000 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/00 $27,786,000 $25,919,202 $26,413,066
2 U.S. Treasury Notes 8.500 2/15/00 113,922 125,361 118,586
----------- ----------- -----------
Total $27,899,922 $26,044,563 $26,531,652
----------- ----------- -----------
----------- ----------- -----------
Series G (2010 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/10 $18,253,000 $ 8,964,439 $10,339,211
2 U.S. Treasury Bonds 9.375 2/15/06 72,631 82,805 92,786
----------- ----------- -----------
Total $18,325,631 $ 9,047,244 $10,431,997
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
D-50
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
PORTFOLIOS
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
PORTFOLIO NO. ADJUSTED
AND TITLE OF INTEREST FACE COST VALUE
SECURITIES RATE MATURITIES AMOUNT (NOTE A) (NOTE A)
<S> <C> <C> <C> <C> <C>
Series H (2011 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/11 $ 4,299,000 $ 1,852,210 $ 2,286,548
2 U.S. Treasury Bonds 9.375 2/15/06 16,847 20,547 21,522
----------- ----------- -----------
Total $ 4,315,847 $ 1,872,757 $ 2,308,070
----------- ----------- -----------
----------- ----------- -----------
Series I (2002 Trust)
1 Stripped Treasury
Securities (Note B) 0% 02/15/02 $13,708,000 $11,167,020 $11,879,613
2 U.S. Treasury Notes 7.500 11/15/01 66,135 69,472 71,075
----------- ----------- -----------
Total $13,774,135 $11,236,492 $11,950,688
----------- ----------- -----------
----------- ----------- -----------
Series J (2013 Trust)
1 Stripped Treasury
Securities (Note B) 0% 02/15/13 $ 3,552,000 $ 1,249,953 $ 1,665,210
2 U.S. Treasury Bonds 10.375 11/15/12(C) 12,328 15,373 17,043
----------- ----------- -----------
Total $ 3,564,328 $ 1,265,326 $ 1,682,253
----------- ----------- -----------
----------- ----------- -----------
Series K (2004 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/04 $10,384,000 $ 7,513,101 $ 8,184,035
2 U.S. Treasury Notes 5.875 2/15/04 62,934 63,883 66,415
----------- ----------- -----------
Total $10,446,934 $ 7,576,984 $ 8,250,450
----------- ----------- -----------
----------- ----------- -----------
Series K (2014 Trust)
1 Stripped Treasury
Securities (Note B) 0% 2/15/14 $59,411,000 $23,434,130 $26,165,139
2 U.S. Treasury Bonds 11.250 2/15/15 186,189 277,958 308,376
----------- ----------- -----------
Total $59,597,189 $23,712,088 $26,473,515
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
D-51
<PAGE>
THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
NOTES TO PORTFOLIOS
AS OF DECEMBER 31, 1998
Note A - See Note 1 to Financial Statements.
Note B - Stripped Treasury Securities consist of one or more of the following
types of securities: (a) U.S. Treasury debt obligations which have
been stripped of their remaining interest coupons, (b) interest
coupons which have been stripped from U.S. Treasury debt obligations,
and (c) receipts or certificates for underlying stripped U.S. Treasury
debt obligations. The receipts or certificates evidence ownership of
future interest or principal payments on U.S. Treasury notes or bonds.
The receipts or certificates are issued in registered form by a major
bank which acts as custodian and nominal holder of the underlying
stripped U.S. Treasury debt obligation. The Stripped Treasury
Securities are payable in full at maturity at their stated maturity
amount and are not subject to redemption prior to maturity. The
Stripped Treasury Securities do not make any periodic payments of
interest.
Note C - Callable at par commencing 11/15/07.
D-52
