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MERRILL LYNCH VARIABLE
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SERIES FUNDS, INC.
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Annual Report
December 31, 1993
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MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
ANNUAL REPORT--DECEMBER 31, 1993
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TO OUR SHAREHOLDERS:
We are pleased to submit this annual report for Merrill Lynch Variable Series
Fund, Inc.
THE ENVIRONMENT
As 1993 drew to a close, the US economy began to show some signs of
improvement with little evidence of an appreciable increase in the rate of
inflation. Interest rate-sensitive sectors of the US economy are expanding, such
as capital goods, consumer durables and residential construction. However,
excluding the interest rate-sensitive sectors, the US economy grew only
marginally during 1993. Growth was hampered by declining government spending, a
deteriorating trade balance, and sluggishness in other sectors of the economy.
Despite the areas of economic weakness that persist, concerns arose late in 1993
that the rate of business activity might increase inflationary pressures which
were reflected in an upturn of long-term interest rates.
Other developments late in the year had significant long-term implications for
the US financial markets. The outline for proposed healthcare reform is very
important for the US economy. As the various healthcare reform proposals are
debated, investors will focus on their potential effects on the Federal budget,
the US economy and the quality of healthcare delivery in the United States. In
addition, the ratification of the North American Free Trade Agreement (NAFTA) by
the US Congress was important not only for the prospect of expanding trade with
Canada and Mexico, but also as a positive influence on the recently concluded
round of negotiations on the General Agreement on Tariffs and Trade (GATT).
Further economic integration and growth through trade liberalization would be
positive for the capital markets in the United States and around the world.
AMERICAN BALANCED FUND
For the six-month period ended December 31, 1993, the American Balanced Fund's
total investment return was +4.11%, based on a change in per share net asset
value from $13.68 to $14.08, and assuming reinvestment of $0.154 per share
income dividends.* For the year ended December 31, 1993, the Portfolio's total
investment return was +13.49%, based on a change in per share net asset value
from $12.85 to $14.08, and assuming reinvestment of $0.358 per share income
dividends and $0.098 per share capital gains distributions.*
Stocks and bond investments both contributed to the Fund's total return of
+13.49% for the year ended December 31, 1993. However, the primary positive
contribution of the bonds took place during the first nine months of the year,
with interest rates rising thereafter. The reduction of bond weighting during
the second half of 1993 from 44% to 38% helped to limit the impact of bond
market erosion on the overall Fund. We maintained the equity weighting near the
maximum allowable 50% level throughout the year.
As of December 31, 1993, the Fund's asset allocation was: common stocks (46%),
bonds (36%), and cash (18%). The previously mentioned reduction of bond holdings
reflected our belief that the major portion of the interest rate decline in the
United States already had taken place. However, we do not foresee a dramatic
further rise in US interest rates as inflation is likely to remain subdued.
Consequently, we maintain a representation in intermediate-term US Treasury
obligations.
In the equity sector, we accepted profits in Union Pacific Corp. We
established a position in Kelly Services as an attractive means of participating
in the temporary employment industry. We remain overweighted in capital spending
and energy equities and underweighted in consumer staples, where the
underperformance of 1993 is likely to persist in 1994.
BASIC VALUE FOCUS FUND
We are pleased to provide you with this first annual report for the Basic
Value Focus Fund. In this and future reports, we will provide recent performance
information, discuss the investment
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* Results do not reflect expenses and charges of variable annuity policies.
Complete performance
information, including average annual total returns, can be found on pages
10-16 of this report to
shareholders.
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environment for the period under review, and outline our investment strategy.
Since inception (July 1, 1993) through December 31, 1993, the Fund's total
investment return was +9.50%, based on a change in per share net asset value
from $10.00 to $10.95.*
The Basic Value Focus Fund's investment universe is clearly defined by strict
valuation criteria. Specifically, the Fund purchases issues that are selling at
price/book ratios below the stock market, have above-average dividend yields,
are selling at price/earnings ratios below the stock market, and/or display
other out-of-favor characteristics such as operational or financial turnarounds.
The first six months of Basic Value Focus Fund's operations were marked by
modestly rising US stock prices. For the six months ended December 31, 1993, the
Fund provided a total return of +9.50% compared with a total return of +4.97%
for the unmanaged Standard & Poor's 500 Index.* The Fund's better-than-market
average return for the six-month period was generally well-balanced, with 29
stocks advancing in price while only 1 declined in value. In addition, 13 issues
were up more than 10%, while only 1 declined by more than 10%.
We have invested the Fund's assets among different market-capitalization
levels. Sixteen stocks have market capitalizations of less than $400 million,
six have market capitalizations of between $400 million and $1 billion, and
eighteen have market capitalizations of over $1 billion. In total,
small-capitalization stocks represent 27.34% of the Fund's invested assets,
medium-capitalization stocks represent 11.48%, and large-capitalization stocks
make up 33.30%.
Performance for the six months ended December 31, 1993 was in response more to
individual stock selection rather than a concentration in any one industry.
Positions were established in General Motors Corp. and International Business
Machines Corp. since we believed that at the prevailing prices there was a lack
of recognition for the turnaround potential of these two companies. Within the
basic industries, we focused on metals and mining, chemicals, and paper and
forest products issues. Equities in these cyclical groups experienced declines
in earnings from the historic high levels recorded in 1988 and 1989. In our
opinion, share price valuations do not reflect the future earnings potential for
these companies. To capitalize on these areas, we initiated positions in
Reynolds Metals Co., Union Carbide Corp., ASARCO Inc., Cyprus Minerals Co.,
Federal Paper Board Co., Inc., Chesapeake Corp., and Geneva Steel Co.
Consumer growth stocks have underperformed the stock market dramatically for
the past two years. In many cases, these stocks have fallen to levels where the
yields were above the overall stock market and the price/earnings ratios were
below the market averages. Accordingly, we established initial positions in two
financially strong drug companies: Bristol-Myers Squibb Co. and Merck & Co.,
Inc. We also purchased shares of Philip Morris Cos. Inc. on the same
out-of-favor basis. In the case of Philip Morris, at the average cost, the stock
was trading at less than ten times 1994 expected earnings per share and the
dividend yield was twice that of the overall market.
At December 31, 1993, the portfolio was 72% invested, with the remaining
assets in cash and cash equivalents. Although by traditional standards US
domestic stock prices are at historically high valuations, leading us to take a
cautious approach, we will continue to invest our cash as individual
opportunities arise.
DOMESTIC MONEY MARKET FUND
For the six-month period ended December 31, 1993, the Domestic Money Market
Fund's net annualized yield was 2.96%+. For the year ended December 31, 1993,
the Fund's net yield was 3.10%+.
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* Results do not reflect expenses and charges of variable annuity policies.
Complete performance information, including average annual total returns,
can be found on pages 10-16 of this report to shareholders.
+ Based on a constant investment throughout the period, with dividends
compounded daily, and reflecting a net return to the investor after all
expenses.
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As we entered the second half of 1993, economic data portrayed an environment
of modest growth and well-contained inflation. This setting led to interest
rates moving lower during early July and provided an opportunity to reduce the
Fund's average maturity by selling longer-term US Treasury securities. However,
by month-end the market's optimistic tone was abruptly interrupted by negative
comments on inflation from Chairman Greenspan at the Humphrey Hawkins testimony.
Looking beyond Chairman Greenspan's comments and focusing on the economy, we
felt that these higher interest rates offered an attractive buying opportunity
for the Fund. Therefore, we increased the average portfolio maturity to the mid
80-day area.
We continued this constructive strategy from August through October. During
this time, the Fund remained involved in the 18-month-- 24-month sector of the
US Treasury curve given the steepness that the front end offered investors. Also
the 3-month--6-month sector of the money market curve proved especially
attractive as a result of pricing pressures that year-end funding requirements
were exerting on the market. Finally, we also found value in one-year
high-quality bank notes where credit spreads were reasonably wide to similar
maturity US Treasury issues.
During November and December, we grew somewhat less optimistic about the
overall direction of interest rates since we doubted the sustainability of a
rally should one materialize. We reduced the Fund's average maturity to the high
60-day--low 70-day area. Since it was our contention that the Federal Reserve
Board would not move to tighten money supply, we did not seek to reduce our
longer-term exposure to the market at the time.
Looking forward, during the early part of 1994 we expect to maintain the
Fund's average maturity toward the higher end of our allowed maturity spectrum
given our belief that short-term interest rates will remain within a narrow
trading range. Of course, diversity, liquidity, and credit quality remain
paramount to the Fund in the evaluation of future purchases, and we will
continue to closely monitor the shape and structure of the yield curve.
EQUITY GROWTH FUND
For the six-month period ended December 31, 1993, the Equity Growth Fund's
total investment return was +16.96%, based on a change in per share net asset
value from $17.92 to $20.96. For the year ended December 31, 1993, the Fund's
total investment return was +17.78%, based on a change in per share net asset
value from $17.80 to $20.96, and assuming reinvestment of $0.004 per share
income dividends.*
Fueled by rumblings of an economic recovery, low inflation and stable interest
rates, smaller-capitalization equities soared to new highs in 1993, while new
stock issuance exploded. While there is no question that an economic recovery is
under way, we believe that conflicting economic signals will persist, presenting
investors with a "stop and start" recovery. It is likely that ongoing
discussions over the extent to which the Federal Reserve Board will tighten
monetary policy will heighten tensions in the stock and bond markets.
We expect profits to continue to improve among small-and medium-capitalization
companies in response to recovery in the economy and productivity improvements
of recent years. Issuance of equities in the form of initial public and
secondary offerings hit all-time records during 1993 as a large amount of
investible funds poured into the equity markets. While this record issuance
raises a flag of caution, as long as interest rates and inflation remain stable,
we believe that the greater risk is in not being invested in equities.
During 1993 the Fund tried to maintain a fully invested position whenever
possible in the presence of large positive cash flows. The Fund successfully
participated in a number of initial and secondary public offerings, and was
diversified over a broad spectrum of economic sectors,
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* Results do not reflect expenses and charges of variable annuity policies.
Complete performance information, including average annual total returns,
can be found on pages 10-16 of this report to shareholders.
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emphasizing an economic recovery. The strategies resulted in the Fund's +17.78%*
total return for the fiscal year.
FLEXIBLE STRATEGY FUND
For the six-month period ended December 31, 1993, the Flexible Strategy Fund's
total investment return was +10.49%, based on a change in per share net asset
value from $14.83 to $16.19, and assuming reinvestment of $0.147 per share
income dividends and $0.028 per share capital gains distribution.* The Fund's
total investment return for the year ended December 31, 1993 was +15.80%, based
on a change in per share net asset value from $14.15 to $16.19 and assuming
reinvestment of $0.147 per share income dividends and $0.028 per share capital
gains distribution.*
During recent months economic growth has been above trend line, stirring
renewed interest in equities while raising concerns over the possibility of
higher interest rates on a sustained basis. Bond investments, which produced
superior results in the first nine months of 1993, began to lag during the
fourth quarter, reflecting concern that demand for capital could raise interest
rates despite low current and forecast inflation.
Estimates of lower GDP growth in the first half of 1994 compared to the second
half of 1993 (which result from consumer spending having exceeded household
income, fiscal drag and the belated impact of higher taxes) should calm the
fears of bond investors even if the Federal Reserve Board deems it appropriate
to raise short-term interest rates further. Nonetheless, we remain of the
opinion that the return on bonds will not exceed the return on equities for a
sustained period during the balance of the present economic expansion.
Accordingly, we have reduced the allocation to fixed-income investments,
especially in the United States. Outside of the United States there is
substantially better potential for interest rate reductions in several economies
which are making progress on the inflation front.
The proliferation of free enterprise outside the United States has created
equity investment opportunities unparalleled in the experience of most current
stock market investors. Reduced restrictions on the movement of capital across
borders and lowered trade barriers have created a euphoric atmosphere in which
to conduct business in many underdeveloped markets, especially in Latin America
and the Pacific Basin. The Fund has sizable investments in these two areas and
has derived substantial benefit from them during 1993 although most of the
return was achieved in the latter part of the fiscal year. These uneven returns
are often characteristic of emerging economies. Patience with these positions
through a period of sub-par returns early in the year was more than amply
rewarded, enabling the Fund to achieve a total return of +15.80% in 1993.*
GLOBAL STRATEGY FOCUS FUND
For the six-month period ended December 31, 1993, the Global Strategy Focus
Fund's total investment return was +9.57%, based on a change in per share net
asset value from $11.19 to $12.17, and assuming reinvestment of $0.082 per share
income dividends.* For the year ended December 31, 1993, the Fund's total
investment return was +21.03%, based on a change in per share net asset value
from $10.22 to $12.17, and assuming reinvestment of $0.173 per share ordinary
income dividends.*
The major positive influence on the total return of the Fund's +21.03% for
the year ended December 31, 1993, was the performance of emerging equity
markets, which were overweighted in the Fund.* These markets include Hong Kong,
Malaysia and Singapore in Southeast Asia and Argentina, Brazil and Mexico in
Latin America. The allocation of more than 60% of the Fund's assets to equities
throughout the year also benefited the Fund, as
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* Results do not reflect expenses and charges of variable annuity policies.
Complete performance information, including average annual total returns,
can be found on pages 10-16 of this report to shareholders.
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global equity securities substantially outperformed fixed-income securities.
As of December 31, 1993, the Fund's asset allocation was: US stocks (15%),
foreign stocks (48%), US bonds (12%), foreign bonds (8%), and cash (20%). We
reduced the US bond weighting from 16% to 12% during the second half of 1993
because we believed that the major portion of the decline in US interest rates
had taken place. We took profits in Japanese bonds in response to expectations
that returns to dollar-based investors could be limited by a weakening yen.
In the equity sector, we enlarged the commitment to emerging markets. New
positions included Consorcio G Grupo Dina, S.A. de C.V. and Empresas ICA
Sociedad Controladora S.A. de C.V. in Mexico, Banco Rio de la Plata in
Argentina, and Hutchison Whampoa Ltd. in Hong Kong. We initiated positions in
Thailand, namely Bangkok Bank and MDX Corp., Ltd. We accepted profits in several
telecommunications stocks, including Telefonos de Chile, Telebras, and New
Zealand Telecom. We also continued to expand representation in Japanese equities
in anticipation of an improving stock market environment. The Fund remains
underweighted in US equities, given our expectations that the US stock market
will continue to lag other equity markets over the next 6-12 months.
GLOBAL UTILITY FOCUS FUND
We are pleased to provide you with this first annual report for the Global
Utility Focus Fund. In this and future reports, we will provide recent
performance information, discuss the investment environment for the period under
review, and outline our investment strategy.
Since inception (July 1, 1993) through December 31, 1993, the Global Utility
Focus Fund's total investment return was +6.85%, based on a change in per share
net asset value from $10.00 to $10.66, and assuming reinvestment of $0.025 per
share income dividends.*
The Fund's strategy during the year ended December 31, 1993 was to balance the
higher growth found in utilities abroad with the higher yields found among
domestic utilities. This combination benefited total return and at the same time
increased the Fund's diversification.
The greater capital appreciation potential of utility companies outside of the
United States is based on demographic growth rates and the building of needed
infrastructures in developing economies. In addition, global diversification
reduces the risk inherent in being exposed to only one interest-rate cycle. Our
strategy enabled the Fund to outperform many utility funds confined only to the
investment in domestic utilities. While past performance is no guarantee of
future performance, we believe that the Fund's globally diversified portfolio
will continue to provide attractive total return opportunities.
HIGH CURRENT INCOME FUND
For the six-month period ended December 31, 1993, the High Current Income
Fund's total investment return was +6.68%, based on a change in per share net
asset value from $11.76 to $12.06, and assuming reinvestment of $0.466 per share
income dividends.* For the year ended December 31, 1993, the Fund's total
investment return was +17.84%, based on a change in per share net asset value
from $11.13 to $12.06, and assuming reinvestment of $0.972 per share income
dividends.*
Fiscal 1993 was a very good year for high-yield securities. It was a year in
which high-yield bond prices advanced with relative consistency (two minor
corrections in April and September notwithstanding), capped by a solid rally
during October. The net result was a +3.47% return for the unmanaged Merrill
Lynch High Yield Master Index for the quarter, bringing the 12-month figure to
+17.18%.
Steady cash inflows into high-yield mutual funds enhanced the receptiveness of
new issues while price gains in selected cyclical securities contributed to a
strong secondary market environment.
Portfolio strategies over the course of the fiscal year ended December 31,
1993 have reflected our viewpoint that high-yield bonds have been attrac-
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* Results do not reflect expenses and charges of variable annuity policies.
Complete performance information, including average annual total returns,
can be found on pages 10-16 of this report to shareholders.
5
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tive. We have attempted to maintain a fully invested position throughout the
period. The largest contribution to portfolio returns was from cyclical credits,
including chemicals, paper, transportation, and building-related companies.
Overall, yields have trended to the mean (9.75%) with most of the performance
in lower-quality, higher-yielding issues. Under this scenario, credit selection
has become increasingly important as the spread between higher-quality and
lower-quality issuers continue to tighten. We have focused securities purchases
on new issues generally with five-year call protection.
Cash equivalents at year-end constituted 9.1% of net assets. Major industry
classifications included energy, 11.1%; conglomerates 8.9%; and industrial
services, 6.5%. Our outlook for the high-yield market continues to be positive,
given attractive valuations, growing economy and improving technical factors.
INTERNATIONAL EQUITY FOCUS FUND
We are pleased to provide you with this first annual report for the
International Equity Focus Fund. In this and future reports, we will provide
recent performance information, discuss the investment environment for the
period under review, and outline our investment strategy.
The Fund seeks capital appreciation and, secondarily, income by investing in a
diversified portfolio of equity securities of issuers located in countries other
than the United States, and was designed for investors seeking to complement
their US holdings through foreign equity investments.
Since inception (July 1, 1993) through December 31, 1993, the International
Equity Focus Fund's total investment return on the Fund was +10.30%, based on a
change in per share net asset value from $10.00 to $11.03.* During the same
period, the unmanaged Financial Times--Actuaries (FT-A) World (Ex-US) Index had
a total return of +7.16%. The Fund commenced operations with net assets of
nearly $1 million. By December 31, 1993, the Fund's net assets had risen to
$76.9 million.
Since the Fund's inception, our primary focus has been to fully invest the
Fund's assets in international equities. At the end of December, the Fund's cash
reserves accounted for approximately 3.1% of net assets, with the balance
invested in non-US stocks. The portfolio is overweighted relative to the FT-A
World (Ex-US) Index in Europe. In addition, we are overweighted in Switzerland
(6.8% of net assets), the Netherlands (4.7%), Hong Kong (7.8%), and Mexico
(6.6%). At December 31, 1993, the Fund also had large positions in the United
Kingdom (14.2%) and Japan (26.9%). Early in 1994, however, we significantly
altered our investment strategy, increasing our weighting in Latin America and
Japan, out of both Europe and South East Asia. Our strategy is to overweight
Latin American stock markets and to significantly hedge the Fund's Japanese and
European currency exposures back into US dollars. These strategies resulted in
the Fund's +10.30% total return since inception through fiscal year-end.
NATURAL RESOURCES FOCUS FUND
For the six-month period ended December 31, 1993, the Natural Resources Focus
Fund's total investment return was -2.42%, based on a change in per share net
asset value from $11.14 to $10.82, and assuming reinvestment of $0.051 per share
income dividends.* For the year ended December 31, 1993, the Fund's total
investment return was +10.47%, based on a change in per share net asset value
from $9.84 to $10.82, and assuming reinvestment of $0.051 per share income
dividends.*
The price of most energy shares finally succumbed to declining oil prices
following the November Organization of Petroleum Exporting Countries' meeting at
which quotas were left unchanged. The apparent abandonment of a strategy of
controlling prices via production agreements has resulted in the price of
petroleum falling to the $14/barrel area. For the time being and until there is
evidence of a better supply/demand environment for oil, we have reduced the
energy
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* Results do not reflect expenses and charges of variable annuity policies.
Complete performance information, including average annual total returns,
can be found on pages 10-16 of this report to shareholders.
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component of the Fund to about 40% compared with 65% via sale of a number of
international oil companies as well as oil and gas producers.
With the economy gathering momentum as we enter 1994, our current strategy is
to focus on the industrial side of the business cycle where growing demand is
likely to improve the pricing environment for basic commodities. Therefore, we
have added to the forest products and paper areas as well as aluminum. In
addition, we have established a new position in the steel industry.
Our strategy in 1993 placed major emphasis on the energy sector, which
represented about 65% of portfolio value for most of the year. The absence of
precious metals stocks hindered the total return of the Fund in 1993. The fact
that we placed so much emphasis on the energy sector resulted in the Fund's
underperforming other funds which emphasized precious metals.
PRIME BOND FUND
For the six-month period ended December 31, 1993, the Prime Bond Fund's total
investment return was +3.30%, based on a change in per share net asset value
from $12.58 to $12.64, and assuming reinvestment of $0.354 per share income
dividends.* For the year ended December 31, 1993, the Fund's total investment
return was +12.02%, based on a change in per share net asset value from $12.04
to $12.64, and assuming reinvestment of $0.808 per share income dividends.*
After a disappointing start in the first quarter of 1993, the domestic economy
began to show signs of increasing activity for the balance of the year. The
decidedly upbeat tone was evidenced by a jump in new home sales and an increase
in automobile sales and durable goods orders. The lowest mortgage rates in well
over a decade encouraged new buyers into the market as affordability improved.
The pent-up demand of buyers who were shut out of the housing market by rapid
price increases in the 1980s helped boost demand. Auto sales continued to
improve, based on many factors, including low interest rates, improved consumer
confidence and the yen-US dollar exchange rate.
The usual expectation is that a pick-up in economic growth is accompanied by a
commensurate increase in the rate of inflation. This expectation led to an
uptick in interest rates in the December quarter. Inflation did not keep pace
with economy, however. The underlying rate of inflation was 3.2%, the smallest
annual increase in 20 years. Faster economic growth translates into higher
inflation only when the economy is operating close to potential output, and
these conditions are not currently being met.
During the first six months of 1993, we extended the average maturity of the
Fund from 7.1 years to 10.5 years. This enabled us to participate in the bond
rally which occurred during this period. In anticipation of the rise in interest
rates which began in the fourth quarter of 1993, we assumed a more defensive
posture in investment strategy. The average maturity of the portfolio was
reduced from 10.5 years to 8.9 years in the quarter ended December 31, 1993. We
built the cash position up from 4.0% to 10.2%. We believe that the change in
regulations in the electric utility industry will result in increased
competition and difficulty for a number of companies. We reduced our exposure to
the electric utility industry as well as the telephone industry. Because we
believed that the low interest rate environment would help companies in the
banking and brokerage industries, we added to these sectors. We also increased
holdings in US dollar-denominated securities and supranational issues. The
unmanaged Merrill Lynch Corporate Master Bond Index (COAO) showed a return of
+12.43% for the year. The Prime Bond Fund had a return of +12.02% for the same
period.*
QUALITY EQUITY FUND
For the six-month period ended December 31, 1993, the Quality Equity Fund's
total investment return was +10.11%, based on a change in per share net asset
value from $26.51 to $29.02, and assuming reinvestment of $0.116 per share
income dividends and $0.036 per share capital gains
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* Results do not reflect expenses and charges of variable annuity policies.
Complete performance information, including average annual total returns,
can be found on pages 10-16 of this report to shareholders.
7
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distributions.* For the year ended December 31, 1993, the Fund had a total
investment return of +14.57%, based on a change in per share net asset value
from $25.48 to $29.02, and assuming reinvestment of $0.116 per share income
dividends and $0.036 per share capital gains distributions.*
During the last few months of 1993, the US economic expansion, which began in
early 1991, demonstrated that it is on a firmer footing despite investor
concerns over higher taxes and fiscal drag, both of which are by-products of the
effort to reduce the budget deficit. Rising corporate profits are returning
equity valuations to more realistic levels in relation to earnings. Prospects
for 1994 are bright in response to continuing restructuring and productivity
gains and improved consumer sentiment. Moreover, prospects for exports are
expected to improve following the implementation of NAFTA and GATT.
Although it is likely that the rate of economic growth in the first half of
1994 will decelerate from the recent strong pace, we do not expect a return to
recession even if the Federal Reserve Board raises short-term interest rates
again. In this context we have maintained a moderately aggressive posture
following the extended equity market advance, recognizing that we could
experience some consolidation.
Earlier in the year we held our participation in economy-sensitive stocks
down, expecting profit comparisons to fall short of many analysts' estimates.
Although this fear proved well-founded, cyclicals performed relatively well. Our
heavy weighting in telecommunications equipment manufacturers, which performed
unusually well, more than compensated for the less-than-full participation in
the cyclicals. These strategies resulted in the Fund's +14.57% total return for
the fiscal year.*
RESERVE ASSETS FUND
For the six-month period ended December 31, 1993, the Reserve Assets Fund's
net annualized yield was 2.82%+. For the year ended December 31, 1993, the
Fund's net yield was 2.77%+.
As we entered the second half of 1993, economic data portrayed an environment
of modest growth and well-contained inflation. This setting led to interest
rates moving lower during early July and provided an opportunity to reduce the
Fund's average maturity by selling longer-term US Treasury securities. However,
by month-end the market's optimistic tone was abruptly interrupted by negative
comments on inflation from Chairman Greenspan at the Humphrey Hawkins testimony.
Looking beyond Chairman Greenspan's comments and focusing on the economy, we
felt that these higher interest rates offered an attractive buying opportunity
for the Fund. Therefore, we increased the average portfolio maturity to the mid
80-day area.
We continued this constructive strategy from August through October. During
this time, the Fund remained involved in the 18-month-- 24-month sector of the
US Treasury curve given the steepness that the front end offered investors.
Also, the 3-month--6-month sector of the money market curve proved especially
attractive as a result of pricing pressures that year-end funding requirements
were exerting on the market. Finally, we also found value in one-year
high-quality bank notes where credit spreads were reasonably wide to similar
maturity US Treasury issues.
During November and December, we grew somewhat less optimistic about the
overall direction of interest rates since we doubted the sustainability of a
rally should one materialize. We reduced the Fund's average maturity to the high
60-day--low 70-day area.
Since it was our contention that the Federal Reserve Board would not move to
tighten money supply, we did not seek to reduce our longer exposure to the
market at the time.
Looking forward, during the early part of 1994 we expect to maintain the
Fund's average maturity
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* Results do not reflect expenses and charges of variable annuity policies.
Complete performance information, including average annual total returns,
can be found on pages 10-16 of this report to shareholders.
+ Based on a constant investment throughout the period, with dividends
compounded daily, and reflecting a net return to the investor after all
expenses.
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toward the higher end of our allowed maturity spectrum given our belief that
short-term interest rates will remain within a narrow trading range. Of course,
diversity, liquidity, and credit quality remain paramount to the Fund in the
evaluation of future purchases, and we will continue to closely monitor the
shape and structure of the yield curve.
WORLD INCOME FOCUS FUND
We are pleased to provide you with this first annual report for the World
Income Focus Fund. In this and future reports, we will provide recent
performance information, discuss the investment environment for the period under
review, and outline our investment strategy.
Since inception (July 1, 1993) through December 31, 1993, the World Income
Focus Fund's total investment return was +5.90%, based on a change in per share
net asset value from $10.00 to $10.38, and assuming reinvestment of $0.204 per
share income dividends.
The Fund seeks to achieve high current income by investing in a global
portfolio of fixed-income securities denominated in various currencies. The Fund
may invest in US and foreign government and corporate fixed-income securities,
including high-yield, lower-rated, and unrated securities. At the close of the
period, we had allocated the Fund's investments as follows: 70% in North America
(including 50% in US high-yield investments); 25% in Europe; and, 5% in the
Pacific Basin. The Fund commenced operations on July 1, 1993, with net assets of
$8 million. At December 31, 1993, net assets had risen to $50.7 million.
Since the Fund's inception, its US dollar concentration remains overweighted,
favoring high-yield bonds. The purpose of this strategy is to reduce the Fund's
exposure to currency volatility and to allow for higher expected returns. As a
result, the Fund has already benefited from the outperformance of US high-yield
bonds relative to all other international bond markets (except Japan) in 1993.
These strategies enabled the Fund to achieve its +5.90% total return since
inception through December 31, 1993.*
Major industry classifications within the US high-yield sector included
energy, 11.1%; conglomerates, 8.9%; and industrial services, 6.5%. Our outlook
for the high-yield market continues to be positive, given attractive valuations,
a growing economy and improving technical factors.
Since inception, we have established modest exposures in Italy, Spain, and
Sweden. However, hedges have been placed against these investments given the
prospect of currency volatility in those markets. With the realization of
positive fundamentals benefiting both the pound sterling and UK yield curve, we
continued to favor the UK bond market. Additionally, because of the political
and economic pressures affecting both the
Canadian dollar and bond market, we continue to
hedge that currency exposure.
We have also established modest positions in several emerging market sovereign
and corporate US dollar-denominated Eurobonds. These investments have already
provided the Fund with attractive spreads across the US Treasury yield curve.
Such issuers include the Republic of Argentina and Telecom Argentina, S.A. (one
of Argentina's two recently privatized telecommunications companies). We will
continue to seek additional attractive investments among emerging market issues
to enhance the Fund's total return.
We appreciate your investment in Merrill Lynch Variable Series Fund, Inc., and
we look forward to sharing our investment outlook and objectives with you in our
June semi-annual report.
Sincerely,
Arthur Zeikel
President
February 16, 1994
- ---------------
* Results do not reflect expenses and charges of variable annuity policies.
Complete performance information, including average annual total returns,
can be found on pages 10-16 of this report to shareholders.
9
<PAGE> 11
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR FIVE YEARS TEN YEARS SINCE
ENDED ENDED ENDED INCEPTION
12/31/93 12/31/93 12/31/93 TO 12/31/93
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
AMERICAN BALANCED FUND +13.49% +11.59% -- +11.11%+
- -----------------------------------------------------------------------------------------------------------------------
BASIC VALUE FOCUS FUND -- -- -- +9.50%++
- -----------------------------------------------------------------------------------------------------------------------
EQUITY GROWTH FUND +17.78% +12.39% +6.64% --
- -----------------------------------------------------------------------------------------------------------------------
FLEXIBLE STRATEGY FUND +15.80% +13.72% -- +10.92%++
- -----------------------------------------------------------------------------------------------------------------------
GLOBAL STRATEGY FOCUS FUND +21.03% -- -- +12.49%+++
- -----------------------------------------------------------------------------------------------------------------------
GLOBAL UTILITY FOCUS FUND -- -- -- +6.85%++
- -----------------------------------------------------------------------------------------------------------------------
HIGH CURRENT INCOME FUND +17.84% +14.68% +13.39% --
- -----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY FOCUS FUND -- -- -- +10.30%++
- -----------------------------------------------------------------------------------------------------------------------
NATURAL RESOURCES FOCUS FUND +10.47% +4.71% -- +3.40%++++
- -----------------------------------------------------------------------------------------------------------------------
PRIME BOND FUND +12.02% +11.17% +11.18% --
- -----------------------------------------------------------------------------------------------------------------------
QUALITY EQUITY FUND +14.57% +15.05% +14.70% --
- -----------------------------------------------------------------------------------------------------------------------
WORLD INCOME FOCUS FUND -- -- -- +5.90%++
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ American Balanced Fund commenced operations on 6/01/88.
++ Flexible Strategy Fund commenced operations on 5/01/86.
+++ Global Strategy Focus Fund commenced operations on 2/28/92.
++++ Natural Resources Focus Fund commenced operations on 6/01/88.
++ The Fund commenced operations on 7/01/93.
10
<PAGE> 12
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
RETIREMENT PLUS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR FIVE YEARS TEN YEARS SINCE
ENDED ENDED ENDED INCEPTION
12/31/93 12/31/93 12/31/93 TO 12/31/93
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
AMERICAN BALANCED FUND +5.86% +9.71% -- +9.27%+
- -----------------------------------------------------------------------------------------------------------------------
BASIC VALUE FOCUS FUND -- -- -- +3.52%++
- -----------------------------------------------------------------------------------------------------------------------
EQUITY GROWTH FUND +10.09% +10.48% +5.07% --
- -----------------------------------------------------------------------------------------------------------------------
FLEXIBLE STRATEGY FUND +8.14% +11.80% -- +9.32%++
- -----------------------------------------------------------------------------------------------------------------------
GLOBAL STRATEGY FOCUS FUND +13.29% -- -- +7.77%+++
- -----------------------------------------------------------------------------------------------------------------------
GLOBAL UTILITY FOCUS FUND -- -- -- -1.38%++
- -----------------------------------------------------------------------------------------------------------------------
HIGH CURRENT INCOME FUND +10.15% +12.77% +11.75% --
- -----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY FOCUS FUND -- -- -- +5.02%++
- -----------------------------------------------------------------------------------------------------------------------
NATURAL RESOURCES FOCUS FUND +2.95% +2.87% -- +1.61%++++
- -----------------------------------------------------------------------------------------------------------------------
PRIME BOND FUND +4.41% +9.27% +9.56% --
- -----------------------------------------------------------------------------------------------------------------------
QUALITY EQUITY FUND +6.92% +13.14% +13.03% --
- -----------------------------------------------------------------------------------------------------------------------
WORLD INCOME FOCUS FUND -- -- -- -3.12%++
</TABLE>
- --------------------------------------------------------------------------------
* Separate Account Average Annual Total Return figures are calculated as if
the contract were surrendered at the end of the period shown and assume
that the Separate Account had been in existence and a contract had been in
force during the periods shown. They reflect separate account charges
deducted daily at an annual rate of 1.25% mortality and expense risk
charge, and a 0.10% administrative charge. In addition, a contingent
deferred sales charge incrementally decreasing from 7% in the first year a
premium is invested in the contract to 0% the eighth year and later that
the premium remains in the contract, deducted on the last day of the period
shown and a contract maintenance charge of $40 are reflected. All charges
and fees are described in the product prospectuses. See those prospectuses
for more complete information.
+ American Balanced Fund commenced operations on 6/01/88.
++ Flexible Strategy Fund commenced operations on 4/30/86.
+++ Global Strategy Focus Fund commenced operations on 2/28/92.
++++ Natural Resources Focus Fund commenced operations on 6/01/88.
++ The Fund commenced operations on 7/01/93.
Investment results and principal value will fluctuate so that an investment may
be worth more or less than its original cost. Past performance illustrated
should not be considered a representation of future performance.
11
<PAGE> 13
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT AVERAGE ANNUAL TOTAL RETURNS* (CONCLUDED)
- --------------------------------------------------------------------------------
PORTFOLIO PLUS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR FIVE YEARS TEN YEARS SINCE
ENDED ENDED ENDED INCEPTION
12/31/93 12/31/93 12/31/93 TO 12/31/93
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
AMERICAN BALANCED FUND +7.53% +9.48% -- +9.09%+
- -----------------------------------------------------------------------------------------------------------------------
EQUITY GROWTH FUND +11.77% +10.27% +5.31% --
- -----------------------------------------------------------------------------------------------------------------------
FLEXIBLE STRATEGY FUND +9.82% +11.61% -- +9.10%++
- -----------------------------------------------------------------------------------------------------------------------
HIGH CURRENT INCOME FUND +11.83% +12.57% +11.95% --
- -----------------------------------------------------------------------------------------------------------------------
NATURAL RESOURCES FOCUS FUND +4.56% +2.51% -- +1.29%+++
- -----------------------------------------------------------------------------------------------------------------------
PRIME BOND FUND +6.08% +9.04% +9.70% --
- -----------------------------------------------------------------------------------------------------------------------
QUALITY EQUITY FUND +8.60% +12.96% +12.48% --
</TABLE>
- --------------------------------------------------------------------------------
* Separate Account Average Annual Total Return figures are calculated as if
the contract were surrendered at the end of the period shown. They reflect
separate account charges deducted daily at an annual rate of 1.25% mortality
and expense risk charge, and 0.05% distribution expense charge. (Family Life
Insurance Company contracts are assessed a 1.30% mortality and expense risk
charge and no distribution expense charge.) In addition, a contingent
deferred sales charge of 5% for the first seven years the premium remains in
the contract, deducted on the last day of the period shown, and a contract
administration charge of $30 are reflected. All charges and fees are
described in the product prospectuses. See those prospectuses for more
complete information.
Charges reflected are for non-qualified contracts. Qualified contracts have
a lower expense risk charge. Average annual total returns for those contract
owners would, therefore, be higher than the returns shown above.
+ American Balanced Fund commenced operations on 6/01/88.
++ Flexible Strategy Fund commenced operations on 4/30/86.
+++ Natural Resources Focus Fund commenced operations on 6/01/88.
Investment results and principal value will fluctuate so that an investment may
be worth more or less than its original cost. Past performance illustrated
should not be considered a representation of future performance.
12
<PAGE> 14
- --------------------------------------------------------------------------------
MERRILL LYNCH AMERICAN BALANCED FUND
TOTAL RETURN BASED ON A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN
MEASUREMENT PERIOD BALANCED S&P 500 WEIGHTED
(FISCAL YEAR COVERED) FUND*+ INDEX++ INDEX+++
<S> <C> <C> <C>
6/01/88** 10000 10000 10000
12/88 10410 10638 10538
12/89 12295 14009 12463
12/90 12445 13565 13034
12/91 15014 17696 15326
12/92 15874 19044 16307
12/93 18015 20966 17629
</TABLE>
* Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses.
** Commencement of Operations.
+ American Balanced Fund 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
Treasury Bill Index, the MLBOAO Index, and the S&P 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.
- --------------------------------------------------------------------------------
MERRILL LYNCH EQUITY GROWTH FUND
TOTAL RETURN BASED ON A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MEASUREMENT PERIOD EQUITY GROWTH RUSSELL 1000
(FISCAL YEAR COVERED) FUND*+ GROWTH INDEX++
<S> <C> <C>
12/83 10000 10000
12/84 8356 9905
12/85 11031 13159
12/86 13091 15181
12/87 10173 15986
12/88 10606 17787
12/89 12366 24177
12/90 10814 24114
12/91 16232 34040
12/92 16146 35742
12/93 19017 36780
</TABLE>
* Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses.
+ Equity Growth Fund invests primarily in common stocks of small companies and
emerging growth companies regardless of size.
++ This unmanaged Index is comprised of a representative sampling of the common
stocks of 1,000 of the largest publicly traded companies domiciled in the
United States.
Past performance is not predictive of future performance.
13
<PAGE> 15
- --------------------------------------------------------------------------------
MERRILL LYNCH FLEXIBLE STRATEGY FUND
TOTAL RETURN BASED ON A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MEASUREMENT PERIOD FLEXIBLE S & P 500 WEIGHTED
(FISCAL YEAR COVERED) STRATEGY FUND*+ INDEX++ INDEX+++
<S> <C> <C> <C>
5/01/86** 10000 10000 10000
12/86 10220 10506 10561
12/87 10468 11057 10949
12/88 11647 12923 12295
12/89 14011 17018 15112
12/90 14684 16479 15514
12/91 18353 21469 19110
12/92 19132 23134 20572
12/93 22156 25469 22749
</TABLE>
* Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses.
** Commencement of Operations.
+ Flexible Strategy Fund, through a flexible investment policy, invests in
equity securities, intermediate-and long-term debt obligations and money
market securities of domestic and foreign issuers.
++ 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 MLBOAO Index, is comprised of common stocks as well as
investment-grade bonds.
Past performance is not predictive of future performance.
- --------------------------------------------------------------------------------
MERRILL LYNCH GLOBAL STRATEGY FOCUS FUND
TOTAL RETURN BASED ON A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ML GLOBAL MORGAN
MEASUREMENT PERIOD STRATEGY STANLEY WORLD WEIGHTED
(FISCAL YEAR COVERED) FOCUS FUND*+ INDEX++ INDEX+++
<S> <C> <C> <C>
2/28/93** 10000 10000 10000
12/92 10262 9832 10383
12/93 12420 12044 11761
</TABLE>
* Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses.
** Commencement of Operations.
+ Global Strategy Focus Fund invests primarily in a portfolio of equity and
fixed-income securities of US and foreign issuers.
++ This unmanaged market capitalization-weighted Index 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 Morgan
Stanley World Index, the Solomon Brothers World Government Bond Index, and
the Solomon Brothers World Money Market Index, is comprised of a
representative sampling of stocks of large-, medium-, and
small-capitalization companies in 22 countries, government bonds and money
market securities in the major markets, including the United States.
Past performance is not predictive of future performance.
14
<PAGE> 16
- --------------------------------------------------------------------------------
MERRILL LYNCH HIGH CURRENT INCOME FUND
TOTAL RETURN BASED ON A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ML HIGH FIRST BOSTON
MEASUREMENT PERIOD CURRENT HIGH YIELD
(FISCAL YEAR COVERED) INCOME FUND*+ INDEX++
<S> <C> <C>
12/83 10000 10000
12/84 10797 11069
12/85 13414 13829
12/86 14989 15990
12/87 15562 17036
12/88 17720 19361
12/89 18808 19435
12/90 17373 18195
12/91 24843 26155
12/92 29824 30512
12/93 35145 36282
</TABLE>
* Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses.
+ High Current Income Fund invests principally in fixed-income securities,
which are rated in the lower rating categories of the established rating
services or in unrated securities of comparable quality.
++ This unmanaged market-weighted Index of high-yield debt securities is
comprised of 423 securities rated BBB or lower.
Past performance is not predictive of future performance.
- --------------------------------------------------------------------------------
MERRILL LYNCH NATURAL RESOURCES FOCUS FUND
TOTAL RETURN BASED ON A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIPPER
ML NATURAL S&P NATURAL
MEASUREMENT PERIOD RESOURCES INDUSTRIALS RESOURCES CONSUMER
(FISCAL YEAR COVERED) FOCUS FUND*+ INDEX++ AVERAGE+++ PRICE INDEX++++
<S> <C> <C> <C> <C>
6/01/88** 10000 10000 10000 10000
12/88 9580 10815 10070 10260
12/89 11326 13998 13325 10681
12/90 10622 13869 12180 11332
12/91 10766 18149 12536 11683
12/92 10913 19200 12779 12057
12/93 12056 20945 15710 12359
</TABLE>
* Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses.
** Commencement of Operations.
+ Natural Resources Focus Fund invests primarily in a portfolio of equity
securities of domestic and foreign companies with substantial natural
resource assets.
++ This unmanaged Index measures the pattern of movements of the common stocks
of 400 large industrial companies and their weighting by capitalization.
+++ This unmanaged Index is comprised of all US mutual funds classified as
natural resource-related funds.
++++ 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.
Past performance is not predictive of future performance.
15
<PAGE> 17
- --------------------------------------------------------------------------------
MERRILL LYNCH PRIME BOND FUND
TOTAL RETURN BASED ON A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ML COAO
MEASUREMENT PERIOD ML PRIME BOND CORPORATE
(FISCAL YEAR COVERED) FUND*+ MASTER++
<S> <C> <C>
12/83 10000 10000
12/84 11582 11621
12/85 14147 14567
12/86 16093 16942
12/87 15916 17254
12/88 16990 18937
12/89 19248 21610
12/90 20620 23203
12/91 24004 27435
12/92 25749 29937
12/93 28844 33658
</TABLE>
* Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses.
+ Prime Bond Fund invests primarily in long-term corporate bonds rated A or
better by either Standard & Poor's Corp. or Moody's Investors Service, Inc.
++ This unmanaged Index is comprised of all industrialized bonds rated BBB3 or
higher, of all maturities.
Past performance is not predictive of future performance.
- --------------------------------------------------------------------------------
MERRILL LYNCH QUALITY EQUITY FUND
TOTAL RETURN BASED ON A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MEASUREMENT PERIOD ML QUALITY S&P 500
(FISCAL YEAR COVERED) EQUITY FUND*+ INDEX++
<S> <C> <C>
12/83 10000 10000
12/84 10854 10639
12/85 14399 14038
12/86 17333 16670
12/87 17212 17544
12/88 19543 20505
12/89 25556 27003
12/90 25725 26147
12/91 33488 34109
12/92 34389 36708
12/93 39399 40412
</TABLE>
* Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses.
+ Quality Equity Fund, which uses a fully managed investment policy, invests
primarily in common stocks of large-capitalization companies, as well as
investment-grade debt and convertible securities.
++ This unmanaged broad-based Index is comprised of common stocks.
Past performance is not predictive of future performance.
16
<PAGE> 18
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--AMERICAN BALANCED FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
INDUSTRIES HELD COMMON STOCKS COST 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
AEROSPACE 32,000 United Technologies Corp............. $ 1,722,120 $ 1,984,000 1.7%
- -------------------------------------------------------------------------------------------------------------------------
AIRLINES 28,500+ AMR Corp............................. 1,876,975 1,909,500 1.6
- -------------------------------------------------------------------------------------------------------------------------
BANKING 28,000 Morgan (J. P.) & Co.................. 1,884,577 1,942,500 1.7
- -------------------------------------------------------------------------------------------------------------------------
BUILDING--RELATED 47,700 Stanley Works Co..................... 1,970,379 2,122,650 1.8
- -------------------------------------------------------------------------------------------------------------------------
CHEMICALS 52,400 Nalco Chemical Co.................... 1,730,335 1,965,000 1.7
- -------------------------------------------------------------------------------------------------------------------------
COMPUTER TECHNOLOGY 24,600 Hewlett-Packard Co................... 1,654,024 1,943,400 1.7
- -------------------------------------------------------------------------------------------------------------------------
DRUGS & HOSPITAL 33,000 Bristol-Myers Squibb Co.............. 1,930,617 1,918,125 1.7
SUPPLIES
- -------------------------------------------------------------------------------------------------------------------------
FOOD 86,870 Archer-Daniels-Midland Co............ 2,000,658 1,976,292 1.7
- -------------------------------------------------------------------------------------------------------------------------
HEALTH MAINTENANCE 111,400+ Humana Inc........................... 957,129 1,963,425 1.7
ORGANIZATIONS
- -------------------------------------------------------------------------------------------------------------------------
MACHINERY 47,700 Ingersoll-Rand Co.................... 1,538,715 1,824,525 1.6
74,100 Morrison Knudsen Corp................ 1,702,527 1,861,763 1.6
------------ ------------ ----------
3,241,242 3,686,288 3.2
- -------------------------------------------------------------------------------------------------------------------------
MERCHANDISING 47,500 May Department Stores Co............. 1,722,656 1,870,313 1.6
- -------------------------------------------------------------------------------------------------------------------------
METALS 27,700 Aluminum Co. of America.............. 1,902,193 1,921,687 1.7
- -------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS-- 70,900 Keystone International, Inc.......... 1,838,872 1,940,888 1.7
MANUFACTURING
- -------------------------------------------------------------------------------------------------------------------------
NATURAL GAS 46,900 Consolidated Natural Gas Co.......... 2,215,910 2,204,300 1.9
- -------------------------------------------------------------------------------------------------------------------------
OFFICE RELATED 42,800 Pitney-Bowes, Inc.................... 1,616,246 1,770,850 1.5
- -------------------------------------------------------------------------------------------------------------------------
OIL & RELATED 95,300 Dresser Industries, Inc.............. 2,004,443 1,977,475 1.7
70,500 Phillips Petroleum Co................ 2,096,314 2,044,500 1.8
------------ ------------ ----------
4,100,757 4,021,975 3.5
- -------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY 28,400 Eastman Kodak Co..................... 1,430,804 1,590,400 1.4
- -------------------------------------------------------------------------------------------------------------------------
PRINT/PUBLISHING 32,200 Gannett Co., Inc..................... 1,571,211 1,843,450 1.6
- -------------------------------------------------------------------------------------------------------------------------
RETAIL STORES 85,900 K mart Corp.......................... 1,946,759 1,825,375 1.6
- -------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTOR 76,000+ Teradyne, Inc........................ 1,487,451 2,109,000 1.8
PRODUCTION EQUIPMENT
- -------------------------------------------------------------------------------------------------------------------------
SERVICES 68,000 Kelly Services, Inc.................. 1,781,000 1,878,500 1.6
- -------------------------------------------------------------------------------------------------------------------------
SPECIAL SITUATIONS 102,792 Wheelabrator Technologies Inc........ 1,748,874 1,824,558 1.6
- -------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 34,800 American Telephone & Telegraph Co.... 1,852,700 1,827,000 1.6
30,600 Bell Atlantic Corp................... 1,661,964 1,805,400 1.6
60,500 Comsat Corp.......................... 1,722,000 1,799,875 1.5
------------ ------------ ----------
5,236,664 5,432,275 4.7
- -------------------------------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC 94,000+ California Energy Co. Inc............ 1,686,121 1,739,000 1.5
- -------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS.................. 49,253,574 53,383,751 46.2
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 19
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--AMERICAN BALANCED FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE (NOTE PERCENT OF
AMOUNT US GOVERNMENT OBLIGATIONS COST 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
US TREASURY NOTES US Treasury Notes:
$ 1,250,000 6.375% due 1/15/2000................. $ 1,277,148 $ 1,313,662 1.1%
12,450,000 5.50% due 4/15/2000.................. 12,578,024 12,558,813 10.9
700,000 7.75% due 2/15/2001.................. 706,094 796,684 0.7
1,400,000 8.00% due 5/15/2001.................. 1,387,922 1,602,118 1.4
200,000 7.875% due 8/15/2001................. 204,031 227,686 0.2
1,300,000 7.50% due 11/15/2001................. 1,315,492 1,450,709 1.2
900,000 7.50% due 5/15/2002.................. 955,500 1,007,154 0.9
3,500,000 6.375% due 8/15/2002................. 3,455,779 3,650,920 3.2
12,550,000 6.25% due 2/15/2003.................. 12,863,703 12,965,656 11.2
6,350,000 5.75% due 8/15/2003.................. 6,441,133 6,330,125 5.5
- -------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT OBLIGATIONS...... 41,184,826 41,903,527 36.3
- -------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
- -------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER* 3,566,000 General Electric Capital Corp.,
3.220% due 1/03/1994............... 3,565,043 3,565,043 3.1
- -------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT US Treasury Bills:
DISCOUNT NOTES* 1,000,000 3.055% due 2/03/1994................. 997,115 994,661 0.9
5,000,000 3.06% due 2/03/1994.................. 4,985,550 4,973,305 4.3
1,000,000 3.065% due 2/03/1994................. 997,105 994,661 0.9
1,000,000 3.08% due 2/03/1994.................. 997,091 994,661 0.9
1,000,000 3.01% due 3/10/1994.................. 994,231 994,289 0.8
4,000,000 3.04% due 3/10/1994.................. 3,976,655 3,977,153 3.4
------------ ------------ ----------
12,947,747 12,928,730 11.2
- -------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES.......... 16,512,790 16,493,773 14.3
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS.................... $106,951,190 111,781,051 96.8
------------
------------
OTHER ASSETS LESS LIABILITIES........ 3,638,869 3.2
------------ ----------
NET ASSETS........................... $115,419,920 100.0%
------------ ----------
------------ ----------
</TABLE>
- --------------------------------------------------------------------------------
+ Non-income producing security.
* Commercial Paper and US Government Discount Notes are traded on a discount
basis, the interest rates shown are the discount rates paid at the time of
purchase by the Fund.
See Notes to Financial Statements.
18
<PAGE> 20
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--BASIC VALUE FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
DISCOUNT FROM BOOK VALUE
- ----------------------------------------------------------------------------------------------------------------------------
METALS 40,000 ASARCO Inc............................. $ 773,693 $ 915,000 1.9%
COMPUTERS 14,000 +Digital Equipment Corp................. 562,722 479,500 1.0
PACKAGING 55,000 Federal Paper Board Co., Inc........... 1,170,668 1,168,750 2.5
OIL & GAS PRODUCERS 80,000 +Gerrity Oil & Gas Corp................. 1,127,238 930,000 2.0
INSURANCE 100,000 Greater N. Y. Savings Bank............. 708,612 725,000 1.5
BANKING & FINANCIAL 70,000 +Peoples Heritage Financial Group, Inc.. 757,318 831,250 1.8
TEXTILE & APPAREL 60,000 +Texfi Industries, Inc.................. 265,250 240,000 0.5
OIL--INTEGRATED 60,000 Total Petroleum N.A., Ltd.............. 579,312 667,500 1.4
INSURANCE 10,000 Travelers Corp......................... 326,690 311,250 0.7
------------ ------------ ----------
6,271,503 6,268,250 13.3
- ----------------------------------------------------------------------------------------------------------------------------
BELOW-AVERAGE PRICE/EARNINGS RATIO
- ----------------------------------------------------------------------------------------------------------------------------
CONGLOMERATES 91,100 +ADT Ltd................................ 805,189 819,900 1.7
AUTOMOBILES 50,000 +Agency Rent-A-Car, Inc................. 513,750 662,500 1.4
BANKING 30,000 BankAmerica Corp....................... 1,327,975 1,391,250 3.0
RETAIL STORES 34,300 +Bon-Ton Stores, Inc.................... 222,590 274,400 0.6
HOUSING 75,000 +Castle & Cooke Homes, Inc.............. 993,370 1,012,500 2.1
AUTOMOBILES 20,000 General Motors Corp.................... 905,765 1,097,500 2.3
RETAIL 10,000 Liz Claiborne Inc...................... 226,864 227,500 0.5
TECHNOLOGY 130,000 +Micronics Computers, Inc............... 745,040 780,000 1.7
INSURANCE 40,000 PartnerRe Holdings Ltd................. 826,750 860,000 1.8
AUTO PARTS 70,000 Purolator Products Co.................. 1,206,910 1,225,000 2.6
BROADCAST--MEDIA 30,000 U.S. Shoe Corp......................... 298,650 450,000 1.0
ENERGY 50,000 Valero Energy Corp..................... 1,124,015 1,056,250 2.2
------------ ------------ ----------
9,196,868 9,856,800 20.9
- ----------------------------------------------------------------------------------------------------------------------------
ABOVE-AVERAGE YIELD
- ----------------------------------------------------------------------------------------------------------------------------
FOODS 60,000 Borden, Inc............................ 951,390 1,020,000 2.2
PHARMACEUTICALS 15,000 Bristol-Myers Squibb Co................ 874,595 871,875 1.8
REAL ESTATE 60,000 Camden Property Trust Inc.............. 1,461,025 1,515,000 3.2
INVESTMENT TRUST
PHOTOGRAPHY 30,000 Eastman Kodak Co....................... 1,765,150 1,680,000 3.6
MERCHANDISING 35,000 K mart Corp............................ 819,725 743,750 1.6
OIL/DOMESTIC 60,000 Occidental Petroleum Corp.............. 1,122,705 1,027,500 2.2
TOBACCO 20,000 Philip Morris Cos. Inc................. 998,850 1,115,000 2.4
------------ ------------ ----------
7,993,440 7,973,125 17.0
- ----------------------------------------------------------------------------------------------------------------------------
SPECIAL SITUATIONS
- ----------------------------------------------------------------------------------------------------------------------------
MEDICAL SERVICES 198,200 +Applied Bioscience International, Inc.. 916,926 1,015,775 2.2
PAPER PRODUCTS 36,000 Chesapeake Corp........................ 715,332 918,000 1.9
DIVERSIFIED COMPANIES 30,000 Cyprus Minerals Co..................... 736,448 776,250 1.6
STEEL 60,000 Geneva Steel Co. (Class A)............. 879,456 1,020,000 2.2
OIL SERVICES 15,000 Halliburton Co......................... 454,650 478,125 1.0
COMPUTER SERVICES 15,000 International Business Machines 683,550 847,500 1.8
Corp...................................
PHARMACEUTICALS 40,000 Merck & Co., Inc....................... 1,305,200 1,375,000 2.9
TECHNOLOGY 70,000 +Network Systems Corp................... 581,400 586,250 1.2
</TABLE>
19
<PAGE> 21
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--BASIC VALUE FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
SPECIAL SITUATIONS
(CONCLUDED)
- ----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 20,000 Northern Telecom Ltd................... $ 513,700 $ 617,500 1.3%
METALS 15,000 +Reynolds Metals Co..................... 688,560 680,625 1.4
HEALTH CARE 42,500 Salick Health Care, Inc................ 599,645 695,938 1.5
ENERGY 100,000 +Varco International Inc................ 568,294 600,000 1.3
------------ ------------ ----------
8,643,161 9,610,963 20.3
- ----------------------------------------------------------------------------------------------------------------------------
32,104,972 33,709,138 71.5
TOTAL COMMON STOCKS....................
- ----------------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT ISSUE
- ----------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
- ----------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER* $ 1,500,000 Ciesco L.P., 3.20% due 1/05/1994....... 1,499,333 1,499,333 3.2
1,856,000 General Electric Capital Corp., 1,855,502 1,855,502 3.9
3.22% due 1/03/1994...................
New Jersey Economic Development
Authority:
3,000,000 3.15% due 1/11/1994................... 2,997,112 2,997,112 6.4
2,000,000 3.11% due 1/25/1994................... 1,995,681 1,995,681 4.2
2,000,000 Preferred Receivables Funding Corp., 1,997,720 1,997,720 4.2
3.42% due 1/12/1994...................
------------ ------------ ----------
10,345,348 10,345,348 21.9
- ----------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY 2,000,000 Federal National Mortgage Association,
OBLIGATIONS-- 3.13% due 1/13/1994...................
DISCOUNT 1,997,739 1,997,739 4.2
- ----------------------------------------------------------------------------------------------------------------------------
12,343,087 12,343,087 26.1
TOTAL SHORT-TERM SECURITIES............
- ----------------------------------------------------------------------------------------------------------------------------
$ 44,448,059 46,052,225 97.6
TOTAL INVESTMENTS......................
------------
------------
1,155,038 2.4
OTHER ASSETS LESS LIABILITIES..........
------------ ----------
$ 47,207,263 100.0%
NET ASSETS.............................
------------ ----------
------------ ----------
</TABLE>
- --------------------------------------------------------------------------------
+ Non-income producing security.
* Commercial Paper and certain US Government Agency Obligations are traded on a
discount basis; the interest rates shown are the discount rates paid at the
time of purchase by the Fund.
See Notes to Financial Statements.
20
<PAGE> 22
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--DOMESTIC MONEY MARKET FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE
AMOUNT ISSUE RATE* DATE (NOTE 1A)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
BANK NOTES--5.9% $ 4,000,000 FNB of Chicago............................. 3.35% 1/31/94 $ 3,999,986
3,000,000 FNB of Chicago............................. 3.55 5/25/94 3,001,710
2,000,000 Nationsbank North Carolina................. 3.65 6/21/94 2,001,332
1,000,000 PNC Bank, N.A.............................. 3.80 4/29/94 1,000,618
- -------------------------------------------------------------------------------------------------------------------------
TOTAL BANK NOTES
(COST--$10,002,652)................................................ 10,003,646
- -------------------------------------------------------------------------------------------------------------------------
COMMERCIAL 329,000 ABN-AMRO N.A. Finance, Inc................. 3.26 1/24/94 328,265
PAPER*--61.6% 988,000 ABN-AMRO N.A. Finance, Inc................. 3.32 1/24/94 985,793
5,000,000 Abbey National N.A. Corp................... 3.21 3/21/94 4,964,444
3,000,000 American Express Credit Corp............... 3.22 1/10/94 2,997,250
4,000,000 Apreco, Inc................................ 3.35 2/25/94 3,979,342
3,000,000 Apreco, Inc................................ 3.28 3/11/94 2,981,333
1,000,000 Arco Coal Australia, Inc................... 3.33 2/07/94 996,443
2,000,000 Bank One Diversified Services Inc.......... 3.40 1/13/94 1,997,544
5,000,000 Bankers Trust N.Y. Corp.................... 3.21 3/16/94 4,966,667
4,500,000 Beta Finance Inc........................... 3.375 2/22/94 4,478,005
1,000,000 CIT Group Holdings, Inc.................... 3.25 1/07/94 999,358
1,400,000 CIT Group Holdings, Inc.................... 3.30 3/01/94 1,392,183
3,000,000 CIT Group Holdings, Inc.................... 3.28 4/15/94 2,971,563
1,500,000 CIT Group Holdings, Inc.................... 3.24 4/18/94 1,485,375
4,000,000 CSW Credit, Inc............................ 3.25 2/14/94 3,983,400
275,000 CXC Inc.................................... 3.40 1/18/94 274,544
1,973,000 CXC Inc.................................... 3.23 2/01/94 1,967,335
1,000,000 Ciesco L.P................................. 3.35 2/01/94 997,022
2,000,000 Ciesco L.P................................. 3.35 2/08/94 1,992,742
2,000,000 Ciesco L.P................................. 3.20 3/10/94 1,987,733
2,893,000 Ciesco L.P................................. 3.20 3/11/94 2,874,999
3,000,000 Corporate Asset Funding Co., Inc........... 3.25 2/18/94 2,986,729
4,000,000 Ford Motor Credit Co....................... 3.20 1/27/94 3,989,950
2,000,000 General Electric Capital Corp.............. 3.21 1/31/94 1,994,231
873,000 General Electric Capital Corp.............. 3.35 3/23/94 866,637
3,000,000 Goldman Sachs Group L.P.................... 3.22 1/14/94 2,996,150
2,000,000 Goldman Sachs Group L.P.................... 3.36 2/07/94 1,992,886
2,000,000 Hertz Funding Corp......................... 3.34 2/11/94 1,992,137
5,000,000 HYPO U.S. Finance, Inc..................... 3.28 3/11/94 4,968,889
600,000 MCA Funding Corp........................... 3.30 1/18/94 599,004
1,500,000 Nomura Holding America, Inc................ 3.40 1/24/94 1,496,650
5,000,000 Sanwa Business Credit Corp................. 3.25 2/24/94 4,974,639
1,582,000 Sanwa Business Credit Corp................. 3.20 2/28/94 1,573,392
1,519,000 Sanwa Business Credit Corp................. 3.23 3/22/94 1,508,063
5,617,000 Sheffield Receivables Corp................. 3.25 2/18/94 5,591,617
3,740,000 Student Loan Corp.......................... 3.33 1/31/94 3,729,276
7,000,000 Svenska Handelsbanken, Inc................. 3.25 1/05/94 6,996,792
</TABLE>
21
<PAGE> 23
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--DOMESTIC MONEY MARKET FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE
AMOUNT ISSUE RATE* DATE (NOTE 1A)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER* $ 4,257,000 Transamerica Finance Corp.................. 3.27% 2/04/94 $ 4,243,466
(CONCLUDED) 3,000,000 Transamerica Finance Corp.................. 3.36 2/22/94 2,985,337
- -------------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(COST--$105,087,255)............................................... 105,087,185
- -------------------------------------------------------------------------------------------------------------------------
CORPORATE 500,000 Associates Corp. of North America.......... 9.00 1/15/94 501,414
NOTES--1.8% 2,370,000 Associates Corp. of North America.......... 12.50 9/15/94 2,512,200
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE NOTES
(COST--$3,017,067)................................................. 3,013,614
- -------------------------------------------------------------------------------------------------------------------------
MASTER NOTES+--1.2% 2,000,000 Goldman Sachs Group L.P.+.................. 3.33 3/01/94 2,000,000
- -------------------------------------------------------------------------------------------------------------------------
TOTAL MASTER NOTES
(COST--$2,000,000)................................................. 2,000,000
- -------------------------------------------------------------------------------------------------------------------------
MEDIUM-TERM 3,000,000 General Electric Capital Corp.............. 3.29 5/18/94 2,998,500
NOTES--2.3% 1,000,000 General Electric Capital Corp.............. 3.50 8/25/94 999,600
- -------------------------------------------------------------------------------------------------------------------------
TOTAL MEDIUM-TERM NOTES
(COST--$3,999,277)................................................. 3,998,100
- -------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & 1,783,000 Federal Home Loan Mortgage Corporation..... 3.12 1/24/94 1,779,220
AGENCY OBLIGATIONS-- 172,000 Federal Home Loan Mortgage Corporation..... 3.35 5/20/94 169,853
DISCOUNT*--6.0% 133,000 Federal Home Loan Mortgage Corporation..... 3.47 7/28/94 130,460
560,000 Federal National Mortgage Association...... 3.23 5/12/94 553,409
365,000 Federal National Mortgage Association...... 3.28 6/30/94 359,036
275,000 Federal National Mortgage Association...... 3.39 7/15/94 270,074
155,000 Federal National Mortgage Association...... 3.34 9/22/94 151,121
4,000,000 Federal National Mortgage Association...... 3.43 9/29/94 3,897,244
55,000 Federal National Mortgage Association...... 3.55 10/13/94 53,497
3,000,000 United States Treasury Bills............... 3.245 6/23/94 2,953,600
- -------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY
OBLIGATIONS--DISCOUNT (COST--$10,315,567).......................... 10,317,514
- -------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & 2,500,000 Federal Home Loan Bank+.................... 3.15 5/20/94 2,497,403
AGENCY OBLIGATIONS-- 3,000,000 Federal Home Loan Bank+.................... 3.43 12/28/95 3,000,000
NON-DISCOUNT*-- 10,000,000 Federal Home Loan Mortgage Association+.... 3.36 9/01/95 9,996,770
21.0% 2,000,000 Federal National Mortgage Association+..... 3.33 5/13/96 2,000,000
2,000,000 Federal National Mortgage Association+..... 3.33 8/13/96 2,000,000
2,000,000 Federal National Mortgage Association+..... 3.45 5/19/97 2,000,000
2,000,000 Federal National Mortgage Association+..... 3.50 5/14/98 2,000,000
3,500,000 Student Loan Marketing Association+........ 3.51 12/30/94 3,508,159
2,000,000 Student Loan Marketing Association+........ 3.44 3/03/97 2,000,736
1,000,000 United States Treasury Notes............... 5.375 2/28/94 1,003,627
250,000 United States Treasury Notes............... 5.125 5/31/94 251,875
250,000 United States Treasury Notes............... 5.00 6/30/94 252,031
1,000,000 United States Treasury Notes............... 3.875 3/31/95 1,000,312
1,500,000 United States Treasury Notes............... 3.875 4/30/95 1,500,000
1,000,000 United States Treasury Notes............... 4.125 6/30/95 1,002,500
</TABLE>
22
<PAGE> 24
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--DOMESTIC MONEY MARKET FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE
AMOUNT ISSUE RATE* DATE (NOTE 1A)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & $ 500,000 United States Treasury Notes............... 4.25 % 7/31/95 $ 501,406
AGENCY OBLIGATIONS-- 750,000 United States Treasury Notes............... 3.875 8/31/95 747,890
NON-DISCOUNT* 500,000 United States Treasury Notes............... 4.25 12/31/95 500,156
(CONCLUDED)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY
OBLIGATIONS--NON-DISCOUNT (COST--$35,758,372)...................... 35,762,865
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST--$170,180,190)--99.8%...................... 170,182,924
OTHER ASSETS LESS LIABILITIES--0.2%................................ 348,429
------------
NET ASSETS--100.0%................................................. $170,531,353
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
* Commercial Paper and certain US Government Obligations are traded on a
discount basis; the interest rates shown are the discount rates paid at the
time of purchase by the Fund. Other securities bear interest at the rates
shown, payable at fixed dates or upon maturity. The interest rates on variable
rate securities are adjusted periodically based upon appropriate indexes. The
interest rates shown are the rates in effect at December 31, 1993.
+ Variable Rate Notes.
See Notes to Financial Statements.
23
<PAGE> 25
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
AIR TRANSPORTATION 29,000 SkyWest Inc............................ $ 558,750 $ 996,875 1.0%
- ----------------------------------------------------------------------------------------------------------------------------
AUTO--RELATED 50,000 +Automotive Industries Inc.............. 1,091,625 1,462,500 1.5
- ----------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS 60,000 +TBC Corp............................... 757,500 735,000 0.7
- ----------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE 40,000 Monro Muffler Brake Inc................ 564,375 650,000 0.7
- ----------------------------------------------------------------------------------------------------------------------------
BUSINESS SERVICES 20,000 Reynolds & Reynolds Co. (Class A)...... 809,271 912,500 0.9
- ----------------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 50,000 +BancTec, Inc........................... 867,125 1,193,750 1.2
50,000 Merisel, Inc........................... 834,375 912,500 0.9
------------ ------------ ----------
1,701,500 2,106,250 2.1
- ----------------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE 62,000 Metatec Corp. (Class A)................ 670,500 914,500 0.9
- ----------------------------------------------------------------------------------------------------------------------------
COMPUTERS & 32,000 Adaptec Inc............................ 859,000 1,274,000 1.3
PERIPHERALS
- ----------------------------------------------------------------------------------------------------------------------------
CONSUMER--GOODS 65,000 Oshkosh B Gosh Inc. (Class A).......... 1,250,000 1,283,750 1.3
- ----------------------------------------------------------------------------------------------------------------------------
CONSUMER--MISCELLANEOUS 45,000 Toro Co................................ 886,575 1,260,000 1.3
- ----------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 30,000 IEC Electronics Corp................... 358,750 397,500 0.4
120,000 +Willcox & Gibbs, Inc................... 617,266 930,000 0.9
------------ ------------ ----------
976,016 1,327,500 1.3
- ----------------------------------------------------------------------------------------------------------------------------
ELECTRONIC/INSTRUMENTS 70,000 +BMC Industries Inc..................... 961,524 1,478,750 1.5
110,000 Checkmate Electronics Inc.............. 1,041,875 1,045,000 1.1
35,000 DOVatron International Inc............. 596,438 949,375 1.0
40,000 Electronics For Imaging Inc............ 765,000 660,000 0.7
65,000 Exide Electronics Group Inc............ 1,200,000 1,218,750 1.2
40,000 +Kent Electronics Corp.................. 816,041 1,140,000 1.2
108,000 Methode Electronics Inc. (Class A)..... 1,056,455 1,566,000 1.6
------------ ------------ ----------
6,437,333 8,057,875 8.3
- ----------------------------------------------------------------------------------------------------------------------------
ELECTRONICS 45,000 Vishay Intertechnology Inc............. 1,467,780 1,580,625 1.6
- ----------------------------------------------------------------------------------------------------------------------------
ENERGY-RELATED 40,000 Magma Power Co., Inc................... 1,333,876 1,395,000 1.4
- ----------------------------------------------------------------------------------------------------------------------------
ENGINEERING & 40,000 Butler Manufacturing Co................ 691,000 1,075,000 1.1
CONSTRUCTION
- ----------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL 25,000 Donaldson Co........................... 756,777 1,106,250 1.1
60,000 IMCO Recycling Inc..................... 791,697 720,000 0.7
------------ ------------ ----------
1,548,474 1,826,250 1.8
- ----------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL CONTROL 45,000 TETRA Technologies Inc................. 751,250 871,875 0.9
- ----------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 35,000 CMAC Investment Corp................... 1,016,387 971,250 1.0
75,000 First Financial Corp................... 1,087,188 1,246,875 1.3
50,000 First State Bancorp.................... 548,750 581,250 0.6
85,000 Southwest Securities Group, Inc........ 1,042,500 966,875 1.0
------------ ------------ ----------
3,694,825 3,766,250 3.9
- ----------------------------------------------------------------------------------------------------------------------------
FOOD DISTRIBUTION 46,300 Performance Food Group Co.............. 759,450 1,134,350 1.1
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 26
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
FOODS 70,000 J & J Snack Food Corp.................. $ 1,141,625 $ 1,443,750 1.5%
- ----------------------------------------------------------------------------------------------------------------------------
GAMING 40,000 Players International Inc.............. 941,875 982,500 1.0
35,000 Sodak Gaming Inc....................... 1,088,750 1,032,500 1.0
------------ ------------ ----------
2,030,625 2,015,000 2.0
- ----------------------------------------------------------------------------------------------------------------------------
GOLD 75,000 Echo Bay Mines Ltd..................... 987,325 965,625 1.0
- ----------------------------------------------------------------------------------------------------------------------------
HEALTH CARE-- 47,000 Sybron Corp............................ 1,176,235 1,504,000 1.5
PRODUCTS & SERVICES
- ----------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL 91,500 Medalist Industries Inc................ 1,195,687 1,383,938 1.4
- ----------------------------------------------------------------------------------------------------------------------------
INSURANCE 64,000 Gainsco Inc............................ 779,583 584,000 0.6
50,000 Life USA Holding Inc................... 964,375 937,500 0.9
------------ ------------ ----------
1,743,958 1,521,500 1.5
- ----------------------------------------------------------------------------------------------------------------------------
LEASING 50,000 Rollins Truck Leasing Corp............. 809,888 956,250 1.0
- ----------------------------------------------------------------------------------------------------------------------------
MACHINERY 62,000 Duriron Co., Inc....................... 1,429,875 1,433,750 1.4
35,000 Electroglas Inc........................ 731,250 866,250 0.9
75,000 Thermo Fibertek Inc.................... 1,045,450 1,190,625 1.2
------------ ------------ ----------
3,206,575 3,490,625 3.5
- ----------------------------------------------------------------------------------------------------------------------------
MANUFACTURED HOUSING 60,000...... Redman Industries Inc.................. 946,062 1,237,500 1.3
- ----------------------------------------------------------------------------------------------------------------------------
MEDICAL SERVICES 75,000 Clintrials, Inc........................ 739,376 937,500 0.9
50,000 Renal Treatment Centers Inc............ 600,000 1,037,500 1.0
50,000 Sun Healthcare Group Inc............... 601,500 837,500 0.8
70,000 Wellcare Management Group Inc.......... 1,130,314 1,662,500 1.7
------------ ------------ ----------
3,071,190 4,475,000 4.4
- ----------------------------------------------------------------------------------------------------------------------------
MEDICAL SUPPLIES 40,000 Sullivan Dental Products, Inc.......... 620,000 685,000 0.7
- ----------------------------------------------------------------------------------------------------------------------------
MEDICAL TECHNOLOGY 30,000 Cordis Corp............................ 1,003,125 1,481,250 1.5
40,000 Dentsply International Inc............. 1,527,500 1,755,000 1.8
------------ ------------ ----------
2,530,625 3,236,250 3.3
- ----------------------------------------------------------------------------------------------------------------------------
MERCHANDISING 50,000 Grow Biz International Inc............. 663,776 875,000 0.9
- ----------------------------------------------------------------------------------------------------------------------------
METALS 53,000 Material Sciences Corp................. 1,107,365 1,212,375 1.2
- ----------------------------------------------------------------------------------------------------------------------------
METALS & BASIC 30,000 Harsco Corp............................ 1,219,587 1,218,750 1.2
MATERIALS
- ----------------------------------------------------------------------------------------------------------------------------
OFFICE--RELATED 30,000 Miller (Herman) Inc.................... 658,125 916,875 0.9
- ----------------------------------------------------------------------------------------------------------------------------
OIL & GAS 125,000 Lomak Petroleum Inc.................... 915,625 921,875 0.9
60,000 Parker & Parsley Development
Partners.............................. 1,380,798 1,485,000 1.5
------------ ------------ ----------
2,296,423 2,406,875 2.4
- ----------------------------------------------------------------------------------------------------------------------------
OIL SERVICE 65,000 Hornbeck Offshore Service Inc.......... 1,177,625 950,625 1.0
60,000 Sundowner Offshore Services............ 843,951 780,000 0.8
------------ ------------ ----------
2,021,576 1,730,625 1.8
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 27
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
PRINTING 55,000 Merrill Corp........................... $ 1,103,738 $ 1,485,000 1.5%
- ----------------------------------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING 30,000 Banta Corp............................. 983,750 1,083,750 1.1
100,000 International Imaging Materials Inc.... 1,598,749 2,000,000 2.0
------------ ------------ ----------
2,582,499 3,083,750 3.1
- ----------------------------------------------------------------------------------------------------------------------------
RETAIL 100,000 Goody's Family Clothing Inc............ 1,396,250 1,237,500 1.3
52,500 Haverty Furniture Companies Inc........ 673,750 899,063 0.9
------------ ------------ ----------
2,070,000 2,136,563 2.2
- ----------------------------------------------------------------------------------------------------------------------------
RETAIL SPECIALTY 50,000 Discovery Zone Inc..................... 1,168,750 1,062,500 1.1
15,000 MicroAge Inc........................... 318,375 577,500 0.6
50,000 Shoe Carnival Inc...................... 837,500 612,500 0.6
------------ ------------ ----------
2,324,625 2,252,500 2.3
- ----------------------------------------------------------------------------------------------------------------------------
RETAIL TRADE 25,000 Fingerhut Companies Inc................ 714,000 703,125 0.7
- ----------------------------------------------------------------------------------------------------------------------------
SAVINGS & LOAN 50,000 Coast Savings & Loan Association....... 792,125 712,500 0.7
ASSOCIATIONS
- ----------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTOR 85,000 Aetrium Inc............................ 878,751 871,250 0.9
EQUIPMENT
- ----------------------------------------------------------------------------------------------------------------------------
SHIPPING 50,000 +Kirby Corp............................ 896,850 1,068,750 1.1
- ----------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY 50,000 LSI Logic Corp......................... 787,752 800,000 0.8
30,000 Storage Technology Corp................ 868,050 948,750 1.0
50,000 Ultratech Stepper Inc.................. 830,625 925,000 0.9
------------ ------------ ----------
2,486,427 2,673,750 2.7
- ----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 80,000 Communications Central Inc............. 960,000 1,070,000 1.1
61,100 Peoples Telephone Co................... 604,651 603,362 0.6
13,000 Pittencrieff Communications Inc........ 187,000 315,250 0.3
90,000 SpecTran Corp.......................... 1,053,122 1,023,750 1.0
------------ ------------ ----------
2,804,773 3,012,362 3.0
- ----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 80,000 Cellstar Corp.......................... 920,000 1,360,000 1.4
EQUIPMENT
- ----------------------------------------------------------------------------------------------------------------------------
TEXTILES 86,000 Worldtex Inc........................... 509,646 451,500 0.5
- ----------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION 47,000 Greyhound Lines Inc.................... 814,858 540,500 0.5
- ----------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION 40,000 Johnstown America Industries, Inc...... 687,500 965,000 1.0
SERVICES
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS.................... 73,821,539 85,221,588 86.2
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 28
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
INDUSTRY AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER* $ 4,184,000 General Electric Capital Corp., 3.00%
due 1/03/1994......................... $ 4,182,877 $ 4,182,877 4.2%
3,000,000 Morgan Stanley Group Inc., 3.25%
due 1/14/1994......................... 2,996,208 2,996,208 3.0
2,000,000 Penney (J.C.) Co., 3.25% due
1/27/1994............................. 1,995,125 1,995,125 2.0
4,500,000 Schering-Plough Corp., 3.20%
due 1/24/1994......................... 4,490,400 4,490,400 4.5
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES............ 13,664,610 13,664,610 13.7
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS...................... $ 87,486,149 98,886,198 99.9
------------
------------
OTHER ASSETS LESS LIABILITIES.......... 90,226 0.1
------------ ----------
NET ASSETS............................. $ 98,976,424 100.0%
------------ ----------
------------ ----------
</TABLE>
- --------------------------------------------------------------------------------
* Commercial Paper is traded on a discount basis; the interest rates shown are
the discount rates paid at the time of purchase by the Fund.
+ Non-income producing security.
See Notes to Financial Statements.
27
<PAGE> 29
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--FLEXIBLE STRATEGY FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
INDUSTRIES HELD US STOCKS & WARRANTS COST 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
AEROSPACE 35,000 AlliedSignal Inc................. $ 2,374,243 $ 2,765,000 1.4%
- -------------------------------------------------------------------------------------------------------------------------
APPAREL 51,500 Phillips-Van Heusen Corp......... 1,356,596 1,931,250 1.0
- -------------------------------------------------------------------------------------------------------------------------
APPLIANCES 120,000 Singer Co. N.V................... 3,614,607 4,485,000 2.3
150,000 Sunbeam-Oster.................... 3,055,575 3,300,000 1.7
------------ ------------ ----------
6,670,182 7,785,000 4.0
- -------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE 65,000 Ford Motor Co.................... 3,677,850 4,192,500 2.2
- -------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE & EQUIPMENT 75,000 Cooper Tire & Rubber Co.......... 1,477,729 1,875,000 1.0
- -------------------------------------------------------------------------------------------------------------------------
BANKING 40,000 +Banco Rio de la Plata S.A.
(ADR) (a)....................... 1,278,562 1,575,000 0.8
55,000 Bank of New York, Inc............ 2,648,375 3,135,000 1.6
65,000 +Bank of New York, Inc.
(Warrants)(b)................... 485,312 682,500 0.3
------------ ------------ ----------
4,412,249 5,392,500 2.7
- -------------------------------------------------------------------------------------------------------------------------
BEVERAGES 10,000 PanAmerican Beverage, Inc.
(Class A)...................... 322,807 382,500 0.2
15,000 PepsiCo Inc...................... 596,344 613,125 0.3
------------ ------------ ----------
919,151 995,625 0.5
- -------------------------------------------------------------------------------------------------------------------------
CHEMICALS 30,000 PPG Industries, Inc.............. 2,131,584 2,276,250 1.2
35,000 Rohm and Haas.................... 1,977,095 2,082,500 1.1
------------ ------------ ----------
4,108,679 4,358,750 2.3
- -------------------------------------------------------------------------------------------------------------------------
COMMUNICATION 32,000 Tellabs, Inc..................... 972,036 1,504,000 0.8
EQUIPMENT
- -------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS 62,367 LDDS Communication............... 2,660,824 3,024,800 1.6
15,000 Sprint Corp...................... 556,050 521,250 0.3
------------ ------------ ----------
3,216,874 3,546,050 1.9
- -------------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 40,000 Computer Sciences Corp........... 3,508,763 3,980,000 2.0
100,000 General Motors Corp. (Class E)... 2,944,585 2,925,000 1.5
------------ ------------ ----------
6,453,348 6,905,000 3.5
- -------------------------------------------------------------------------------------------------------------------------
CONTAINERS 80,000 Crown Cork & Seal Co., Inc....... 2,173,307 3,350,000 1.7
- -------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 55,000 Emerson Electric Co.............. 3,151,393 3,313,750 1.7
- -------------------------------------------------------------------------------------------------------------------------
ELECTRONICS 50,000 Perkin-Elmer Corp................ 1,847,668 1,925,000 1.0
70,000 Solectron Corp................... 1,411,567 1,986,250 1.0
------------ ------------ ----------
3,259,235 3,911,250 2.0
- -------------------------------------------------------------------------------------------------------------------------
ENGINEERING & 50,000 Thermo Electron Corp............. 2,020,650 2,100,000 1.1
CONSTRUCTION
- -------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL CONTROL 225,000 Wheelabrator Technologies Inc.... 3,579,011 3,993,750 2.0
- -------------------------------------------------------------------------------------------------------------------------
FERTILIZERS 12,000 IMC Fertilizer Group, Inc........ 558,348 544,500 0.3
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 30
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--FLEXIBLE STRATEGY FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
INDUSTRIES HELD US STOCKS & WARRANTS COST 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS 49,000 Willamette Industries, Inc....... $ 1,854,798 $ 2,437,750 1.2%
- -------------------------------------------------------------------------------------------------------------------------
HEALTHCARE-- 125,000 +Humana Corp...................... 2,100,084 2,203,125 1.1
PRODUCTS/SERVICES 15,000 Johnson & Johnson Co............. 599,666 671,250 0.3
------------ ------------ ----------
2,699,750 2,874,375 1.4
- -------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS 60,000 Procter & Gamble................. 3,292,754 3,420,000 1.8
- -------------------------------------------------------------------------------------------------------------------------
INSURANCE 30,000 America International Group
Inc............................ 2,641,542 2,632,500 1.3
20,000 Capital Holding Corp............. 821,259 742,500 0.4
------------ ------------ ----------
3,462,801 3,375,000 1.7
- -------------------------------------------------------------------------------------------------------------------------
MEDICAL 44,000 Physician Corp................... 786,250 1,094,500 0.6
15,000 Vivra Inc........................ 278,914 346,875 0.2
------------ ------------ ----------
1,065,164 1,441,375 0.8
- -------------------------------------------------------------------------------------------------------------------------
MEDIA/PUBLISHING 50,000 News Corp. Ltd. (ADR)(a)......... 2,617,345 2,637,500 1.4
- -------------------------------------------------------------------------------------------------------------------------
MERCHANDISING 27,500 Heilig-Meyers Co................. 465,055 1,072,500 0.5
- -------------------------------------------------------------------------------------------------------------------------
MULTI--INDUSTRY 15,234 Pacific Dunlop Ltd............... 55,601 55,832 0.0
- -------------------------------------------------------------------------------------------------------------------------
OFFICE EQUIPMENT 67,000 Danka Business Systems
PLC (ADR)(a)................... 1,874,782 2,650,688 1.4
- -------------------------------------------------------------------------------------------------------------------------
PAPER & PACKAGING 40,000 Union Camp Corp.................. 1,919,332 1,905,000 1.0
- -------------------------------------------------------------------------------------------------------------------------
PETROLEUM-- 65,000 Phillips Petroleum Co............ 2,046,532 1,885,000 1.0
DOMESTIC
- -------------------------------------------------------------------------------------------------------------------------
PETROLEUM-- 45,000 British Petroleum PLC............ 2,305,178 2,880,000 1.5
INTERNATIONAL 15,000 Chevron Oil Corp................. 1,314,133 1,306,875 0.7
30,000 Mobil Oil Corp................... 2,303,502 2,370,000 1.2
------------ ------------ ----------
5,922,813 6,556,875 3.4
- -------------------------------------------------------------------------------------------------------------------------
PUBLISHING 40,000 Gannett Co., Inc................. 2,129,343 2,290,000 1.2
- -------------------------------------------------------------------------------------------------------------------------
RAILROADS 10,000 CSX Corp......................... 851,775 810,000 0.4
25,000 Southern Pacific Rail Corp....... 480,690 493,750 0.3
------------ ------------ ----------
1,332,465 1,303,750 0.7
- -------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS 12,000 Motorola, Inc.................... 1,003,033 1,108,500 0.6
- -------------------------------------------------------------------------------------------------------------------------
SERVICES 15,000 Block (H&R), Inc................. 545,801 611,250 0.3
45,000 Huntingdon International Holdings
PLC (ADR)(a)................... 461,978 410,625 0.2
12,500 Kelly Services, Inc. (Class A)... 361,324 345,312 0.2
------------ ------------ ----------
1,369,103 1,367,187 0.7
- -------------------------------------------------------------------------------------------------------------------------
SMALLER GROWTH 20,000 Bandag, Inc. (Class A)........... 1,088,927 1,035,000 0.5
4,700 Bandag, Inc...................... 252,630 260,262 0.1
------------ ------------ ----------
1,341,557 1,295,262 0.6
- -------------------------------------------------------------------------------------------------------------------------
SOFTWARE--COMPUTER 20,000 Microsoft Corp................... 1,616,500 1,612,500 0.8
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 31
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--FLEXIBLE STRATEGY FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
INDUSTRIES HELD US STOCKS & WARRANTS COST 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 13,100 ALC Communications Corp.......... $ 334,050 $ 376,625 0.2%
120,000 MCI Communications Corp.......... 3,351,698 3,382,500 1.7
------------ ------------ ----------
3,685,748 3,759,125 1.9
- -------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 70,000 ADC Telecommunications Inc....... 1,876,416 2,493,750 1.3
EQUIPMENT 32,000 Antec Corp....................... 754,074 784,000 0.4
35,000 DSC Communications Corp.......... 1,843,006 2,150,312 1.1
8,000 Picturetel Corp.................. 145,636 149,000 0.1
------------ ------------ ----------
4,619,132 5,577,062 2.9
- -------------------------------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC 100,000 California Energy, Inc........... 1,837,585 1,850,000 0.9
- -------------------------------------------------------------------------------------------------------------------------
TOTAL US STOCK & WARRANTS........ 96,592,074 108,939,206 56.0
- -------------------------------------------------------------------------------------------------------------------------
COUNTRY FOREIGN STOCKS & WARRANTS
- -------------------------------------------------------------------------------------------------------------------------
ARGENTINA 7,360 Banco de Galicia y Buenos Aires
S.A. (ADR)(a)(2)............... 139,200 295,780 0.1
115,000 Telecom Argentina Stet S.A.
(16)........................... 549,904 723,647 0.4
------------ ------------ ----------
689,104 1,019,427 0.5
- -------------------------------------------------------------------------------------------------------------------------
AUSTRALIA 15,000 Coles Meyer, Ltd.
(Warrants)(b)(15).............. 44,571 32,272 0.0
16,917 National Australia Bank
Ltd.(2)........................ 105,508 141,453 0.1
------------ ------------ ----------
150,079 173,725 0.1
- -------------------------------------------------------------------------------------------------------------------------
CANADA 15,000 Hudson Bay Co.(15)............... 451,080 447,508 0.2
50,000 International Semi-Tech
Microelectronics Receipts Inc.
(5)(d)......................... 331,795 283,233 0.1
60,000 Magna International Inc. (Class
A)(1).......................... 2,647,900 2,985,000 1.5
------------ ------------ ----------
3,430,775 3,715,741 1.8
- -------------------------------------------------------------------------------------------------------------------------
CHILE 15,900 Distribuidora Chilectra
Metropolitana S.A.
(ADR)(a)(4)++.................. 415,283 652,854 0.3
- -------------------------------------------------------------------------------------------------------------------------
FRANCE 643 Compagnie Generale des Eaux
(Ordinary)(5).................. 240,370 317,750 0.2
- -------------------------------------------------------------------------------------------------------------------------
GERMANY 400 Mannesman AG(11)................. 68,658 97,210 0.0
- -------------------------------------------------------------------------------------------------------------------------
HONG KONG 6,000 Cheung Kong Holdings Ltd.(14).... 21,616 36,709 0.0
258,907 Dairy Farms International
Holdings Ltd.(7)............... 399,176 516,272 0.3
35,000 Henderson Land Development Co.,
Ltd.(14)....................... 110,593 258,319 0.1
263,000 Hutchison Whampoa, Ltd.(12)...... 495,611 1,311,084 0.7
200,000 Johnson Electric Holdings
Ltd.(5)........................ 408,481 512,754 0.3
80,500 Swire Pacific, Ltd. (Class
A)(12)......................... 308,125 724,427 0.4
------------ ------------ ----------
1,743,602 3,359,565 1.8
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 32
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--FLEXIBLE STRATEGY FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
COUNTRY HELD FOREIGN STOCKS & WARRANTS COST 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
MEXICO 205,200 +Cifra, S.A. de C.V.(15).......... $ 196,740 $ 615,930 0.3%
50,000 Consorcio G Grupo Dino S.A. de
C.V.
(ADR)(a)(2).................... 922,018 1,393,750 0.7
70,000 Empresas ICA Sociedad
Controladora, S.A. de C.V.
(ADR)(a)(4).................... 1,398,296 1,977,500 1.0
115,000 Grupo Carso, S.A. de C.V.
(ADR)(a)(12)++................. 1,270,567 2,501,250 1.3
25,000 Grupo Financiero Serfin S.A. de
C.V. (ADR)(a)(2)............... 615,413 737,500 0.4
45,000 Telefonos de Mexico, S.A. de C.V.
(Telmex) (ADR)(a)(16).......... 2,281,902 3,037,500 1.6
100,000 Telefonos de Mexico, S.A. de C.V.
(Telmex) (Class A)(16)......... 215,208 336,554 0.2
311,500 Telefonos de Mexico, S.A. de C.V.
(Telmex) (Class L)(16)......... 579,168 1,048,366 0.5
------------ ------------ ----------
7,479,312 11,648,350 6.0
- -------------------------------------------------------------------------------------------------------------------------
NETHERLANDS 15,844 Aegon N.V.(10)................... 567,718 860,821 0.4
31,500 Royal Dutch Petroleum Co., N.V.
(ADR)(a)(6).................... 2,962,142 3,287,812 1.7
------------ ------------ ----------
3,529,860 4,148,633 2.1
- -------------------------------------------------------------------------------------------------------------------------
PORTUGAL 3,040 Banco Comercial Portuges(2)...... 38,256 45,746 0.0
40,000 Banco Comercial Portuges (New)
(ADR)(a)(2).................... 559,100 610,000 0.3
25,000 Espirito Santo Financial Holdings
S.A. (ADR)(a)(2)............... 725,712 881,250 0.4
------------ ------------ ----------
1,323,068 1,536,996 0.7
- -------------------------------------------------------------------------------------------------------------------------
SPAIN 12,000 Empresa Nacional de Electricidad
S.A. (ADR)(a)(4)............... 260,496 570,000 0.3
10,000 Repsol S.A.(13).................. 277,603 311,080 0.2
------------ ------------ ----------
538,099 881,080 0.5
- -------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM 26,065 British Petroleum PLC(13)........ 131,040 138,687 0.1
150,000 Hong Kong Land Holdings,
Ltd.(14)....................... 291,839 532,177 0.3
58,700 HSBC Holdings PLC(2)............. 401,456 874,077 0.4
31,300 Reuters Holdings PLC
(ADR)(a)(3).................... 2,101,244 2,472,700 1.3
------------ ------------ ----------
2,925,579 4,017,641 2.1
- -------------------------------------------------------------------------------------------------------------------------
VENEZUELA 39,500 +Siderurgica Venezolana SIVENSA
S.A.I.C.A.-S.A.C.A.
(Warrants)(b)(9)++............. 56,525 5,530 0.0
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS &
WARRANTS....................... 22,590,314 31,574,502 16.1
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 33
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--FLEXIBLE STRATEGY FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
FACE VALUE OF NET
INDUSTRIES AMOUNT* CORPORATE & FOREIGN BONDS COST (NOTE 1A) ASSETS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES $ 1,000,000 Ford Motor Credit Corp., 7.125%
due 12/01/1997................. $ 995,000 $ 1,059,301 0.5%
1,000,000 International Business Machines
Corp., 6.375%
due 6/15/2000.................. 1,000,000 1,016,784 0.5
------------ ------------ ----------
1,995,000 2,076,085 1.0
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN--AUSTRALIA A$ 425,000 Queensland Treasury Corp.
Global Notes, 8.00%
due 7/14/1999(8)............... 313,607 308,806 0.2
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN--CANADA C$ 750,000 Government of Canada, 7.25%
due 6/01/2003(8)............... 555,467 593,467 0.3
5,000,000 Hydro-Electric Quebec, 6.35%
due 1/15/2002(6)............... 5,000,000 4,921,875 2.5
------------ ------------ ----------
5,555,467 5,515,342 2.8
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN--FRANCE Ffr 3,250,000 French "OAT", 8.50%
due 4/25/2003(8)............... 653,879 661,058 0.3
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN--ITALY Lit 950,000,000 Buoni Poliennali del Tesoro
(BTPS), 12.00% due
1/01/1998(8)................... 623,358 617,587 0.3
500,000 Republic of Italy, 8.75%
due 2/08/2001(8)............... 537,305 568,126 0.3
------------ ------------ ----------
1,160,663 1,185,713 0.6
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN--MEXICO Mxp 3,564,470 Mexican Cetes, 12.60%(e)
due 9/07/1995(8)............... 948,988 964,301 0.5
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN--NETHERLANDS Nlg 500,000 Aegon N.V., 7.00%
due 9/15/2001(8)............... 652,486 740,000 0.4
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN--SPAIN Pta 90,000,000 Spanish Government, 10.50%
due 10/30/2003(8).............. 773,823 728,242 0.4
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN--SWEDEN Skr 3,500,000 Government of Sweden, 10.75%
due 1/23/1997(8)............... 486,204 470,757 0.2
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN--UNITED KINGDOM L 625,000 U.K. Treasury Gilt, 7.25%
due 3/30/1998(8)............... 942,775 981,918 0.5
- -------------------------------------------------------------------------------------------------------------------------
TOBACCO $ 500,000 Phillip Morris Corp. Inc., 9.25%
due 12/01/1997................. 499,150 564,527 0.3
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE & FOREIGN BONDS.. 13,982,042 14,196,749 7.2
- -------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY OBLIGATIONS
- -------------------------------------------------------------------------------------------------------------------------
FEDERAL AGENCY Federal National Mortgage Association:
OBLIGATIONS 7,500,000 FHG-16PH, 6.75%
due 4/25/2021................ 7,617,188 7,485,938 3.8
2,000,000 Series 93D, 5.85%
due 2/25/2006................ 1,996,250 1,971,250 1.0
------------ ------------ ----------
9,613,438 9,457,188 4.8
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 34
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--FLEXIBLE STRATEGY FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE US GOVERNMENT & AGENCY VALUE (NOTE PERCENT OF
INDUSTRIES AMOUNT* OBLIGATIONS COST 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED Government National Mortgage
SECURITIES Association:
1,600,477 9.00% due 11/15/2019(c).......... $ 1,585,954 $ 1,712,011 0.9 %
824,029 9.00% due 11/15/2019(c).......... 818,364 881,454 0.5
- -------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & US Treasury Notes:
AGENCY OBLIGATIONS 1,000,000 8.625% due 8/15/1997............. 1,027,344 1,125,156 0.6
850,000 7.50% due 11/15/2001............. 853,320 948,414 0.5
3,000,000 6.25% due 2/15/2003.............. 3,103,594 3,099,375 1.6
3,000,000 US Treasury Bond, 7.125%
due 2/15/2023.................. 3,169,219 3,245,157 1.7
3,000,000 US Treasury STRIPS++, 5.795%
due 5/15/2000(e)............... 2,098,883 2,123,970 1.1
------------ ------------ ----------
10,252,360 10,542,072 5.5
- -------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY
OBLIGATIONS...................... 22,270,116 22,592,725 11.7
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 35
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--FLEXIBLE STRATEGY FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
FACE VALUE OF NET
INDUSTRY AMOUNT* SHORT-TERM SECURITIES COST (NOTE 1A) ASSETS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER** $ 3,000,000 American Telephone & Telegraph
Co.
(AT&T), 3.29%
due 1/04/1994.................. $ 2,999,178 $ 2,999,177 1.5%
2,000,000 Ciesco L.P., 3.18%
due 2/01/1994.................. 1,994,523 1,994,523 1.0
3,435,000 General Electric Capital Corp.,
3.22% due 1/03/1994............ 3,434,386 3,434,386 1.8
5,000,000 Sanwa Business Corp., 3.20%
due 1/25/1994.................. 4,989,333 4,989,333 2.6
- -------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES...... 13,417,420 13,417,419 6.9
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS................ $168,851,966 190,720,601 97.9
------------
------------
OTHER ASSETS LESS LIABILITIES.... 4,055,915 2.1
------------ ----------
NET ASSETS....................... $194,776,516 100.0%
------------ ----------
------------ ----------
</TABLE>
- --------------------------------------------------------------------------------
(a) American Depositary Receipts (ADR).
(b) Warrants entitle the Fund to purchase a predetermined number of shares of
common stock. The purchase price and number of shares are subject to
adjustment under certain conditions until the expiration date.
(c) US Government Agency Mortgage-Backed Obligations are subject to principal
paydowns as a result of prepayments or refinancings of the underlying
mortgage investments. As a result, the average life may be substantially
less than the original maturity.
(d) Receipts evidence payment by the Fund of 40% of the purchase price of
International Semi-Tech Microelectronics, Inc. The Fund is obligated to pay
the remaining 60%, approximately $498,000 over the next two years.
(e) Represents the yield-to-maturity on this zero coupon issue.
* Denominated in US dollars unless otherwise indicated.
** Commercial Paper is traded on a discount basis; the interest rates shown are
the discount rates paid at the time of purchase by the Fund.
+ Non-income producing security.
++ Restricted securities as to resale. The value of the Fund's investment in
restricted securities was approximately $3,160,000, representing 1.6% of net
assets.
Corresponding industry groups for foreign securities:
(1) Automotive (10) Insurance
(2) Banking (11) Machinery
(3) Business Services (12) Multi-Industry
(4) Electric Utilities (13) Petroleum
(5) Electronics (14) Real Estate
(6) Energy (15) Retail Stores
(7) Food Chains (16) Telecommunications
(8) Government Entities
(9) Health and Personal
Care
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACQUISITION VALUE
ISSUE DATE COST (NOTE 1A)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Distribuidora Chilectra Metropolitana S.A. (ADR)....................... 2/13/92 $ 415,283 $ 652,854
Grupo Carso, S.A. de C.V. (ADR)........................................ 9/24/91 1,270,567 2,501,250
Siderurgica Venezolana SIVENSA S.A.I.C.A.-S.A.C.A. (Warrants).......... 2/13/92 56,525 5,530
- ----------------------------------------------------------------------------------------------------------------------
TOTAL.................................................................. $1,742,375 $3,159,634
---------- ----------
---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
++ Separate Trading of Registered Interest and Principal of Securities
(STRIPS).
See Notes to Financial Statements.
34
<PAGE> 36
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL STRATEGY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
INDUSTRY HELD US STOCKS COST 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
AEROSPACE 23,500 United Technologies Corp....... $ 1,335,387 $ 1,457,000 0.5%
- ----------------------------------------------------------------------------------------------------------------------------
AIRLINES 22,000 +AMR Corp...................... 1,466,263 1,474,000 0.5
- ----------------------------------------------------------------------------------------------------------------------------
ALUMINUM 18,100 Aluminum Co. of America........ 1,262,536 1,255,688 0.5
- ----------------------------------------------------------------------------------------------------------------------------
BANKING 19,900 Morgan (J.P.) & Co............. 1,420,000 1,380,563 0.5
- ----------------------------------------------------------------------------------------------------------------------------
CHEMICALS 39,500 Nalco Chemical Co.............. 1,372,693 1,481,250 0.5
- ----------------------------------------------------------------------------------------------------------------------------
COMPUTER TECHNOLOGY 16,400 Hewlett-Packard Co............. 1,197,290 1,295,600 0.5
- ----------------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE 56,100 Grand Metropolitan PLC
(Sponsored) (ADR)*........... 1,462,676 1,549,763 0.6
- ----------------------------------------------------------------------------------------------------------------------------
FOODS 54,381 Archer-Daniels-Midland Co...... 1,243,105 1,237,168 0.5
- ----------------------------------------------------------------------------------------------------------------------------
HARDWARE/PRODUCTS 35,700 Stanley Works Co............... 1,483,509 1,588,650 0.6
- ----------------------------------------------------------------------------------------------------------------------------
MACHINERY 36,900 Ingersoll-Rand Co.............. 1,300,234 1,411,425 0.5
53,800 Morrison Knudsen Corp.......... 1,285,583 1,351,725 0.5
------------- ------------- ----------
2,585,817 2,763,150 1.0
- ----------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS 40,000 Kelly Services, Inc. (Class
A)........................... 1,102,500 1,105,000 0.4
- ----------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS 47,200 Keystone International, Inc.... 1,233,722 1,292,100 0.5
CAPITAL GOODS
- ----------------------------------------------------------------------------------------------------------------------------
NATURAL GAS 74,000 Westcoast Energy Inc........... 1,199,590 1,221,000 0.5
- ----------------------------------------------------------------------------------------------------------------------------
OFFICE--RELATED 31,500 Pitney Bowes, Inc.............. 1,239,729 1,303,312 0.5
- ----------------------------------------------------------------------------------------------------------------------------
OIL SERVICE 77,900 Dresser Industries, Inc........ 1,685,325 1,616,425 0.6
24,200 Schlumberger Ltd............... 1,522,423 1,430,825 0.5
------------- ------------- ----------
3,207,748 3,047,250 1.1
- ----------------------------------------------------------------------------------------------------------------------------
PETROLEUM 46,700 Phillips Petroleum Co.......... 1,396,735 1,354,300 0.5
- ----------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 50,000 Abbott Laboratories............ 1,358,227 1,475,000 0.5
23,800 Bristol-Myers Squibb Co........ 1,400,865 1,383,375 0.5
------------- ------------- ----------
2,759,092 2,858,375 1.0
- ----------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHIC 20,200 Eastman Kodak Co............... 1,096,178 1,131,200 0.4
- ----------------------------------------------------------------------------------------------------------------------------
PRINTING/PUBLISHING 21,800 Gannett Co., Inc............... 1,079,334 1,248,050 0.5
- ----------------------------------------------------------------------------------------------------------------------------
RETAIL STORES 62,900 K mart Corp.................... 1,416,070 1,336,625 0.5
32,600 May Department Stores Co....... 1,290,202 1,283,625 0.5
------------- ------------- ----------
2,706,272 2,620,250 1.0
- ----------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTOR 49,000 +Teradyne Inc.................. 1,140,755 1,359,750 0.5
PRODUCTION EQUIPMENT
- ----------------------------------------------------------------------------------------------------------------------------
SMALLER CAPITALIZATION 42,000 Comsat Corp.(a)................ 1,222,587 1,249,500 0.5
- ----------------------------------------------------------------------------------------------------------------------------
SPECIAL SITUATIONS 76,800 Wheelabrator Technologies,
Inc.......................... 1,317,755 1,363,200 0.5
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 37
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL STRATEGY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
INDUSTRY HELD US STOCKS COST 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 22,100 American Telephone & Telegraph
Co........................... $ 1,265,039 $ 1,160,250 0.4%
23,300 Bell Atlantic Corp............. 1,365,642 1,374,700 0.5
------------- ------------- ----------
2,630,681 2,534,950 0.9
- ----------------------------------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC 54,000 +California Energy Co., Inc..... 973,666 999,000 0.4
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL US STOCKS................ 39,135,620 40,170,069 14.9
- ----------------------------------------------------------------------------------------------------------------------------
COUNTRY FOREIGN STOCKS & WARRANTS
- ----------------------------------------------------------------------------------------------------------------------------
ARGENTINA 42,800 Banco de Galicia S.A.
(ADR)*(1).................... 1,049,975 1,720,025 0.6
47,000 +Banco Frances del Rio de la
Plata S.A. (Class A)(1)....... 1,420,597 1,850,625 0.7
------------- ------------- ----------
2,470,572 3,570,650 1.3
- ----------------------------------------------------------------------------------------------------------------------------
AUSTRALIA 401,000 CSR Ltd. Ordinary(17).......... 1,188,354 1,328,134 0.5
171,000 National Bank of
Australia(1)................. 1,243,148 1,429,831 0.5
377,600 Pacific Dunlop, Ltd.(17)....... 1,219,150 1,383,896 0.5
------------- ------------- ----------
3,650,652 4,141,861 1.5
- ----------------------------------------------------------------------------------------------------------------------------
BRAZIL 137,600 Aracruz Celulose S.A.
(ADR)*(20)................... 1,314,143 1,806,000 0.7
- ----------------------------------------------------------------------------------------------------------------------------
CANADA 82,100 Canadian Pacific Ltd.(17)...... 1,294,667 1,334,125 0.5
37,000 Imperial Oil Ltd.(5)........... 1,347,223 1,250,566 0.5
44,400 Northern Telecommunications,
Ltd.(27)..................... 1,181,567 1,370,850 0.5
105,000 Thomson Corp.(24).............. 1,306,964 1,288,708 0.5
------------- ------------- ----------
5,130,421 5,244,249 2.0
- ----------------------------------------------------------------------------------------------------------------------------
FRANCE 11,400 Alactel Alsthom(4)............. 1,408,181 1,622,790 0.6
15,100 Compagnie de Saint
Gobain(15)................... 1,490,945 1,501,065 0.6
3,200 +Compagnie Generale des
Eaux(30)...................... 1,373,440 1,581,336 0.6
130 +Compagnie Generale des Eaux
(Rights)(30).................. -- 4,545 0.0
21,766 Schneider S.A.(7).............. 1,386,094 1,622,791 0.6
1,966 Schneider S.A.
(Warrants)(b)(7)............. 16,313 24,995 0.0
26,300 TOTAL S.A. (21)................ 1,348,914 1,434,828 0.5
------------- ------------- ----------
7,023,887 7,792,350 2.9
- ----------------------------------------------------------------------------------------------------------------------------
GERMANY 6,250 Mannesmann AG(14).............. 1,165,504 1,518,910 0.6
5,950 Preussag AG(17)................ 1,473,941 1,481,938 0.5
4,700 RWE AG (Rheinisch
Westfalisches)(29)........... 1,234,359 1,446,362 0.5
3,150 Siemens AG(8).................. 1,277,995 1,444,996 0.5
10,100 Thyssen AG (Ordinary) (14)..... 1,322,824 1,600,546 0.6
------------- ------------- ----------
6,474,623 7,492,752 2.7
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 38
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL STRATEGY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
COUNTRY HELD FOREIGN STOCKS & WARRANTS COST 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
HONG KONG 236,400 China Light & Power Co.,
Ltd.(29)..................... $ 1,097,227 $ 1,729,457 0.6%
340,000 Hutchison Whampoa, Ltd.(12).... 1,191,669 1,694,937 0.6
182,000 Swire Pacific, Ltd. (Class
A)(16)....................... 909,716 1,637,835 0.6
------------- ------------- ----------
3,198,612 5,062,229 1.8
- ----------------------------------------------------------------------------------------------------------------------------
ITALY 410,000 Daniel & Co.(14)............... 1,430,488 1,384,807 0.5
430,000 Italclementi S.p.A.(2)......... 1,449,431 1,542,425 0.6
915,000 Stet Savings Telecom(27)....... 1,683,468 1,849,806 0.7
------------- ------------- ----------
4,563,387 4,777,038 1.8
- ----------------------------------------------------------------------------------------------------------------------------
JAPAN 119,000 Asahi Glass Co., Ltd.(2)....... 1,344,440 1,129,679 0.4
28,000 Bandai Co.(28)................. 985,433 1,055,705 0.4
98,000 Canon, Inc.(8)................. 1,276,837 1,351,603 0.5
92,000 Dai Nippon Printing Co.,
Ltd.(24)..................... 1,395,217 1,310,048 0.5
88,000 Daiwa House Industries,
Ltd.(12)..................... 1,299,429 1,182,160 0.4
56,000 Fuji Photo Film Co.,
Ltd.(23)..................... 1,328,598 1,238,761 0.5
205,000 Hitachi Cable, Ltd.(4)......... 1,501,758 1,325,542 0.5
26,000 Ito-Yokado Co., Ltd.(25)....... 1,173,699 1,187,534 0.4
131,000 Kamigumi Co.(26)............... 1,553,445 1,384,381 0.5
58,000 Kandenko Co. Ltd.(2)........... 1,374,145 1,111,589 0.4
47,000 Kansai Electric Power
Co.(30)...................... 1,329,800 1,178,578 0.4
132,000 Maeda Corp.(2)................. 1,283,398 1,182,160 0.4
267,000 Makino Milling Machine
Co.(14)...................... 1,649,966 1,243,418 0.5
78,000 Makita Electric Works,
Ltd.(8)...................... 1,273,092 1,362,171 0.5
106,000 Matsushita Electric Industries,
Ltd.(8)...................... 1,359,367 1,414,472 0.5
221,000 Mitsubishi Heavy Industry,
Ltd.(4)...................... 1,328,964 1,217,222 0.5
20,000 Nintendo Ltd.(8)............... 1,648,723 1,286,047 0.5
210,000 Nippon Fire and Marine
Insurance Co., Ltd.(13)...... 1,435,241 1,352,230 0.5
214,000 Nippon Oil Co., Ltd.(21)....... 1,473,852 1,253,412 0.5
175,000 Okumura Corp.(2)............... 1,355,961 1,352,543 0.5
134,000 Sekisui Chemical Co.,
Ltd.(5)...................... 1,324,144 1,200,072 0.4
95,000 Sharp Corp.(8)................. 1,319,123 1,293,212 0.5
49,000 Shikoku Electric Power
Co.(29)...................... 1,326,068 1,176,070 0.4
40,000 Tokyo Electric Power Co.,
Inc.(29)..................... 1,248,014 1,103,349 0.4
76,000 Tokyo Style Co.(6)............. 1,309,440 1,095,827 0.4
75,000 Toto Ltd.(2)................... 1,418,884 1,229,178 0.5
50,000 Toyo Seikan Kaisha Corp.(19)... 1,397,919 1,253,806 0.5
66,000 Yamazaki Banking Ltd.(1)....... 1,252,559 1,270,822 0.5
------------- ------------- ----------
37,967,516 34,741,591 12.9
- ----------------------------------------------------------------------------------------------------------------------------
MEXICO 55,500 Cementos Mexicanos, S.A. de
C.V. (Class B)(4)............ 1,055,969 1,655,169 0.6
499,000 +Cifra S.A. de C.V. (Class
C)(25)........................ 1,076,840 1,497,804 0.6
60,000 Consorcio G Grupo Dina S.A. de
C.V. (ADR)*(3)............... 1,157,338 1,672,500 0.6
</TABLE>
37
<PAGE> 39
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL STRATEGY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
COUNTRY HELD FOREIGN STOCKS & WARRANTS COST 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
MEXICO 50,000 Empresas ICA Sociedad
(CONCLUDED) Controladora, S.A. de C.V.
(ADR)*(30)................... $ 1,141,552 $ 1,412,500 0.5 %
24,600 Telefonos de Mexico, S.A. de
C.V. (Telmex) (ADR)*(27)..... 1,260,088 1,660,500 0.6
------------- ------------- ----------
5,691,787 7,898,473 2.9
- ----------------------------------------------------------------------------------------------------------------------------
NETHERLANDS 466 ABN Amro Holdings N.V.(1)...... 15,383 17,159 0.0
38,600 ABN Amro Holdings N.V.(1)...... 1,305,021 1,421,310 0.5
14,000 Royal Dutch Petroleum Co.
N.V. (ADR)*(21)................ 1,361,397 1,461,250 0.5
17,900 Ver Ner Utigevers(24).......... 1,236,673 1,601,210 0.6
------------- ------------- ----------
3,918,474 4,500,929 1.6
- ----------------------------------------------------------------------------------------------------------------------------
NORWAY 16,200 Hafslund Nycomed, Inc.
(ADR)*(22)................... 328,622 269,325 0.1
87,200 Hafslund Nycomed, Inc. (Class
B)(22)....................... 1,534,353 1,458,581 0.5
34,200 Kvaerner, Inc. (Class B)(16)... 1,234,012 1,657,153 0.6
------------- ------------- ----------
3,096,987 3,385,059 1.2
- ----------------------------------------------------------------------------------------------------------------------------
PORTUGAL 89,200 Banco Comercial Portuges
(ADR)*(1). .................. 1,151,795 1,360,300 0.5
- ----------------------------------------------------------------------------------------------------------------------------
SINGAPORE 153,000 Jurong Shipyard Ltd.(2)........ 1,105,918 1,379,664 0.5
1,175,000 Neptune Orient Lines
Ltd.(26)..................... 1,250,889 2,170,243 0.8
530,000 Sime Darby (ADR)*(25).......... 1,130,772 1,486,165 0.6
------------- ------------- ----------
3,487,579 5,036,072 1.9
- ----------------------------------------------------------------------------------------------------------------------------
SPAIN 48,400 Repsol S.A. (Sponsored)
(ADR)*(21)................... 1,325,504 1,494,350 0.6
38,700 Telefonica Nacional de Espana
S.A.
(ADR)*(27)................... 1,340,946 1,509,300 0.6
------------- ------------- ----------
2,666,450 3,003,650 1.2
- ----------------------------------------------------------------------------------------------------------------------------
SWEDEN 102,000 SKF AB 'B' Free(16)............ 1,390,487 1,650,367 0.6
- ----------------------------------------------------------------------------------------------------------------------------
SWITZERLAND 2,100 BBC Brown Boveri & Cie(16)..... 1,292,692 1,533,176 0.6
2,640 Holderbank Financiere Glarus
AG(4)........................ 1,317,434 1,650,555 0.6
310 Roche Holdings, Ltd.(22)....... 1,044,564 1,315,025 0.5
2,890 Sulzer Gebrueder AG(14)........ 1,457,695 1,637,829 0.6
390 Sulzer Gebrueder AG
(Warrants)(b)(14)............ -- 2,097 0.0
------------- ------------- ----------
5,112,385 6,138,682 2.3
- ----------------------------------------------------------------------------------------------------------------------------
THAILAND 90,000 Bangkok Bank Co. Ltd.(1)....... 696,775 888,367 0.3
120,000 +M.D.X. Corp., Ltd.(33)........ 686,720 958,872 0.4
------------- ------------- ----------
1,383,495 1,847,239 0.7
- ----------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM 125,600 Allied Lyons PLC(9)............ 1,116,657 1,265,115 0.5
283,000 British Gas PLC(18)............ 1,344,449 1,426,314 0.5
</TABLE>
38
<PAGE> 40
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL STRATEGY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE (NOTE PERCENT OF
COUNTRY HELD FOREIGN STOCKS & WARRANTS COST 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM 23,400 British Petroleum PLC
(CONCLUDED) (ADR)*(21)...................... $ 1,330,220 $ 1,497,600 0.6%
195,000 British Telecommunications
PLC(3)....................... 1,293,218 1,360,351 0.5
285,000 General Electric PLC(7)........ 1,430,390 1,436,394 0.5
194,000 GKN PLC(3)..................... 1,405,238 1,513,945 0.6
347,000 Hanson PLC(6).................. 1,316,828 1,374,481 0.5
552,000 Hillsdown Holdings PLC(6)...... 1,285,749 1,280,894 0.5
127,000 Imperial Chemical Industries
PLC(5)....................... 1,440,295 1,499,771 0.6
437,000 Lucas Industries PLC(3)........ 985,970 1,240,101 0.5
------------- ------------- ----------
12,949,014 13,894,966 5.3
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS &
WARRANTS..................... 112,642,266 123,344,457 45.8
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
COUNTRY AMOUNT** FOREIGN BONDS
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
AUSTRALIA A $ 1,625,000 Queensland Treasury Corp.,
8.00% due 7/14/1999(1)....... 1,165,025 1,180,729 0.4
3,500,000 Queensland Treasury Corp.,
8.00% due 5/14/2003(1)....... 2,520,859 2,554,977 0.9
------------- ------------- ----------
3,685,884 3,735,706 1.3
- ----------------------------------------------------------------------------------------------------------------------------
CANADA C $ 7,800,000 Government of Canada, 7.25% due
6/01/2003(1)................. 6,102,682 6,172,056 2.3
- ----------------------------------------------------------------------------------------------------------------------------
FRANCE Ffr 2,000,000 French Government "OAT", 8.125%
due 5/25/1999(1)............. 386,664 384,595 0.1
8,880,000 French Government "OAT", 8.50%
due 4/25/2003(1)............. 1,773,338 1,806,215 0.7
------------- ------------- ----------
2,160,002 2,190,810 0.8
- ----------------------------------------------------------------------------------------------------------------------------
ITALY Lit 1,000,000,000 Buoni Poliennali del Tesoro,
11.50% due 3/01/1998(1)...... 663,339 639,382 0.2
3,100,000,000 Buoni Poliennali del Tesoro,
12.00% due 1/01/1998(1)...... 2,119,044 2,015,283 0.7
------------- ------------- ----------
2,782,383 2,654,665 0.9
- ----------------------------------------------------------------------------------------------------------------------------
SWEDEN Government of Sweden(1):
Skr 6,000,000 11.00% due 1/21/1999........... 854,936 856,925 0.3
9,500,000 10.75% due 1/23/1997........... 1,303,345 1,277,768 0.5
------------- ------------- ----------
2,158,281 2,134,693 0.8
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 41
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL STRATEGY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
COUNTRY AMOUNT** FOREIGN BONDS
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM UK Gilt,
L 2,190,000 7.25% due 3/30/1998(11)........ $ 3,400,346 $ 3,440,639 1.3 %
75,000 9.75% due 8/27/2002(11)........ 149,409 136,657 0.1
------------- ------------- ----------
3,549,755 3,577,296 1.4
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS............ 20,438,987 20,465,226 7.5
- ----------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT OBLIGATIONS
- ----------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT US Treasury Notes:
OBLIGATIONS $ 13,275,000 5.50% due 4/15/2000............ 13,476,063 13,391,156 5.0
500,000 6.375% due 1/15/2000........... 510,859 525,391 0.2
300,000 7.875% due 8/15/2001........... 304,953 341,531 0.1
700,000 7.50% due 11/15/2001........... 714,297 781,047 0.3
1,400,000 6.375% due 8/15/2002........... 1,383,906 1,460,157 0.5
7,175,000 6.25% due 2/15/2003............ 7,371,895 7,412,672 2.7
8,000,000 5.75% due 8/15/2003............ 8,168,984 7,973,752 3.0
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT
OBLIGATIONS.................. 31,930,957 31,885,706 11.8
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE> 42
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL STRATEGY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE (NOTE PERCENT OF
AMOUNT** SHORT-TERM SECURITIES COST 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER*** $ 10,000,000 Bank One Diversified Services, 3.20%
due 1/28/1994...................... $ 9,976,000 $ 9,976,000 3.7%
10,000,000 Ciesco L.P., 3.20%
due 2/10/1994...................... 9,964,444 9,964,444 3.7
9,460,000 General Electric Capital Corp., 3.22%
due 1/03/1994...................... 9,458,308 9,458,308 3.5
4,000,000 Hertz Funding Corp., 3.25%
due 1/12/1994...................... 3,996,028 3,996,028 1.5
6,000,000 PHH Corp., 3.35%
due 1/10/1994...................... 5,994,975 5,994,975 2.2
6,100,000 Xerox Credit Corp., 3.35%
due 1/14/1994...................... 6,092,621 6,092,621 2.3
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES.......... 45,482,376 45,482,376 16.9
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS.................... $ 249,630,206 261,347,834 96.9
-------------
-------------
OTHER ASSETS LESS LIABILITIES........ 8,279,347 3.1
------------- ----------
NET ASSETS........................... $ 269,627,181 100.0%
------------- ----------
------------- ----------
</TABLE>
- --------------------------------------------------------------------------------
* American Depositary Receipt (ADR).
** Denominated in US dollars unless otherwise indicated.
*** Commercial Paper is traded on a discount basis; the interest rates shown are
the discount rates paid at the time of purchase by the Fund.
(a) Formerly Communications Satellite Corp.
(b) Warrants entitle the Fund to purchase a predetermined number of shares of
common stock. The purchase price and number of shares are subject to
adjustment under certain conditions until the expiration date.
+ Non-income producing security.
Corresponding industry groups for foreign stocks and
bonds:
(1) Banking (17) Multi-Industry
(2) Building & (18) Natural Gas
Construction (19) Packaging
(3) Business & Public (20) Paper
Service (21) Petroleum
(4) Capital Goods (22) Pharmaceutical
(5) Chemicals (23) Photography
(6) Diversified (24) Printing & Publishing
(7) Electrical Equipment (25) Retail Stores
(8) Electronics (26) Shipping
(9) Food (27) Telecommunications
(10) Government Bonds (28) Toys
(11) Government Agencies (29) Utilities
(12) Housing (30) Utilities--Electric
(13) Insurance (31) Advertising
(14) Machinery (32) Trucking
(15) Miscellaneous (33) Real Estate
(16) Miscellaneous Capital
Goods
See Notes to Financial Statements.
41
<PAGE> 43
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL UTILITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRY INDUSTRIES HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
ARGENTINA TELECOMMUNICATIONS 900 +Central Costanera S.A..... $ 21,600 $ 27,418 0.0%
21,600 +Telecom Argentina Stet,
S.A. (ADR)*.............. 924,319 1,360,800 1.3
19,000 +Telefonica de Argentina
S.A. (ADR)*.............. 940,801 1,396,500 1.3
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
ARGENTINA............... 1,866,720 2,784,718 2.6
- ------------------------------------------------------------------------------------------------------------------------
AUSTRALIA UTILITIES--GAS 342,049 Australian Gas & Light
Co., Ltd................ 947,000 1,044,669 1.0
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
AUSTRALIA............... 947,000 1,044,669 1.0
- ------------------------------------------------------------------------------------------------------------------------
AUSTRIA UTILITIES 4,300 Energie Versorgung
Niederoesterreich AG
(EVN)................... 460,213 552,051 0.5
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
AUSTRIA................. 460,213 552,051 0.5
- ------------------------------------------------------------------------------------------------------------------------
CANADA TELECOMMUNICATIONS 2,400 BC Telecom, Inc........... 43,814 45,997 0.0
--------------------------------------------------------------------------------------------------------
UTILITIES--GAS 53,100 Transcanada Pipeline Co.,
Ltd..................... 825,380 816,413 0.8
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
CANADA.................. 869,194 862,410 0.8
- ------------------------------------------------------------------------------------------------------------------------
CHILE TELECOMMUNICATIONS 14,400 Compania de Telefonos de
Chile, S.A. (ADR)*...... 1,254,995 1,467,000 1.4
--------------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC 29,700 +Distribuidora Chilectra
Metropolitana, S.A.
(ADR)*................... 872,213 1,219,482 1.2
37,500 Enersis S.A. (ADR)*....... 799,661 881,250 0.8
------------ ------------ ----------
1,671,874 2,100,732 2.0
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
CHILE................... 2,926,869 3,567,732 3.4
- ------------------------------------------------------------------------------------------------------------------------
FRANCE UTILITIES--ELECTRIC 3,537 +Compagnie Generale des
Eaux (Ord.).............. 1,608,201 1,747,870 1.7
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
FRANCE.................. 1,608,201 1,747,870 1.7
- ------------------------------------------------------------------------------------------------------------------------
HONG KONG TELECOMMUNICATIONS 894,000 Hong Kong
Telecommunications Ltd.
PLC..................... 1,646,544 1,886,857 1.8
--------------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC 538,200 China Light & Power Co.,
Ltd..................... 3,285,897 3,937,369 3.8
253,500 Hong Kong Electric
Holdings, Ltd........... 681,517 1,058,575 1.0
------------ ------------ ----------
3,967,414 4,995,944 4.8
--------------------------------------------------------------------------------------------------------
UTILITIES--GAS 329,000 The Hong Kong & China Gas
Co. Ltd................. 755,615 954,241 0.9
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
HONG KONG............... 6,369,573 7,837,042 7.5
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
42
<PAGE> 44
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL UTILITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRY INDUSTRIES HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
ITALY TELECOMMUNICATIONS 694,900 Societa Finanziara
Telefonica S.p.A.
(STET).................. $ 1,415,223 $ 1,404,842 1.3%
652,600 Societa Italiana Esercizio
Telecom S.p.A. (SIP).... 1,415,407 1,369,205 1.3
------------ ------------ ----------
2,830,630 2,774,047 2.6
--------------------------------------------------------------------------------------------------------
UTILITIES--GAS 453,400 Italgas Torino............ 1,362,668 1,309,449 1.3
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
ITALY................... 4,193,298 4,083,496 3.9
- ------------------------------------------------------------------------------------------------------------------------
MALAYSIA TELECOMMUNICATIONS 139,000 Telekom Malaysia BHD...... 962,438 1,140,910 1.1
--------------------------------------------------------------------------------------------------------
UTILITIES 148,000 Tenaga Nasional BHD....... 738,712 1,060,873 1.0
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
MALAYSIA................ 1,701,150 2,201,783 2.1
- ------------------------------------------------------------------------------------------------------------------------
MEXICO TELECOMMUNICATIONS 25,000 Telefonos de Mexico S.A.
de C.V. (Telemex)
(ADR)*.................. 1,481,566 1,687,500 1.6
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
MEXICO.................. 1,481,566 1,687,500 1.6
- ------------------------------------------------------------------------------------------------------------------------
NEW ZEALAND TELECOMMUNICATIONS 31,800 Telecom Corporation of New
Zealand Ltd. (ADR)*..... 1,442,105 1,609,875 1.5
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN NEW
ZEALAND................. 1,442,105 1,609,875 1.5
- ------------------------------------------------------------------------------------------------------------------------
PHILIPPINES TELECOMMUNICATIONS 18,800 Philippine Long Distance
Telephone Co. (ADR)*.... 1,057,611 1,525,150 1.5
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN THE
PHILIPPINES............. 1,057,611 1,525,150 1.5
- ------------------------------------------------------------------------------------------------------------------------
SPAIN TELECOMMUNICATIONS 23,200 Telefonica de Espana S.A.
(ADR)*.................. 844,184 904,800 0.9
--------------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC 36,400 Empresa Nacional de
Electricidad, S.A.
(ADR)* (Endesa)......... 1,634,684 1,729,000 1.7
136,900 Iberdrola I S.A........... 861,792 980,933 0.9
------------ ------------ ----------
2,496,476 2,709,933 2.6
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
SPAIN................... 3,340,660 3,614,733 3.5
- ------------------------------------------------------------------------------------------------------------------------
THAILAND TELECOMMUNICATIONS 2,000 +TelecomAsia Corp. Public
Co., Ltd. (ADR).......... 43,740 106,500 0.1
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
THAILAND................ 43,740 106,500 0.1
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE> 45
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL UTILITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRY INDUSTRIES HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
UNITED TELECOMMUNICATIONS 10,000 British Telecommunications
KINGDOM PLC (ADR)*.............. $ 741,450 $ 711,250 0.7%
57,000 British Telecommunications
PLC (Ordinary).......... 406,712 397,641 0.4
248,140 British Telecommunications
PLC (Part Pay).......... 735,211 792,182 0.8
11,000 Vodafone Group PLC
(ADR)*.................. 980,210 981,750 0.9
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN THE
UNITED KINGDOM.......... 2,863,583 2,882,823 2.8
- ------------------------------------------------------------------------------------------------------------------------
UNITED STATES TELECOMMUNICATIONS 42,800 American Telephone &
Telegraph Co............ 2,405,105 2,247,000 2.1
13,400 Ameritech Corp............ 1,097,333 1,028,450 1.0
18,800 Bell Atlantic Corp........ 1,145,785 1,109,200 1.1
19,700 BellSouth Corp............ 1,149,084 1,140,138 1.1
31,500 GTE Corp.................. 1,170,878 1,102,500 1.1
40,100 MCI Communications
Corp.................... 1,072,528 1,130,319 1.1
25,000 NYNEX Corp................ 1,122,519 1,003,125 1.0
21,400 Pacific Telesis Group..... 1,160,333 1,155,600 1.1
26,300 Southwestern Bell Corp.... 1,118,830 1,091,450 1.0
39,900 US West, Inc.............. 1,863,861 1,830,412 1.7
------------ ------------ ----------
13,306,256 12,838,194 12.3
--------------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC 45,600 Allegheny Power System,
Inc....................... 1,237,676 1,208,400 1.2
20,500 Boston Edison Co.......... 650,444 609,875 0.6
38,300 Central & SouthWest
Corp.................... 1,237,363 1,158,575 1.1
18,300 Consolidated Edison Co. of
N.Y..................... 669,290 587,888 0.6
14,500 Detroit Edison Co......... 512,573 435,000 0.4
26,400 Dominion Resources,
Inc..................... 1,242,516 1,197,900 1.1
36,000 Duke Power Co............. 1,534,156 1,525,500 1.5
17,300 Entergy Corp.............. 671,377 622,800 0.6
39,200 General Public Utilities
Corp.................... 1,252,521 1,210,300 1.2
44,100 Houston Industries,
Inc..................... 2,115,495 2,100,262 2.0
23,900 Long Island Lighting
Co...................... 668,586 582,562 0.6
18,700 New York State Electric &
Gas Corp................ 667,501 575,025 0.5
37,000 NIPSCO Industries, Inc.... 1,226,985 1,216,375 1.2
24,300 Northeast Utilities Co.... 665,976 577,125 0.5
53,800 PacifiCorp................ 1,068,916 1,035,650 1.0
22,307 Pennsylvania Power & Light
Co...................... 673,784 602,289 0.6
39,800 Philadelphia Electric
Co...................... 1,234,908 1,203,950 1.1
46,300 PSI Resources, Inc........ 1,202,688 1,226,950 1.1
36,000 Public Service Co. of
Colorado................ 1,101,146 1,156,500 1.1
22,900 Rochester Gas & Electric
Corp.................... 670,864 601,125 0.6
</TABLE>
44
<PAGE> 46
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL UTILITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRY INDUSTRIES HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
UNITED STATES UTILITIES--ELECTRIC 26,000 SCEcorp................... $ 586,637 $ 520,000 0.5%
(CONCLUDED) (CONCLUDED)
26,600 Southern Co............... 1,192,679 1,173,725 1.1
14,000 Texas Utilities Co........ 670,007 605,500 0.6
34,600 Western Resources Co...... 1,226,601 1,206,675 1.2
------------ ------------ ----------
23,980,689 22,939,951 22.0
--------------------------------------------------------------------------------------------------------
UTILITIES--GAS 33,000 The Brooklyn Union Gas
Co...................... 855,855 903,375 0.9
28,000 The Coastal Corp.......... 761,928 787,500 0.8
18,000 Consolidated Natural
Gas Co.................. 898,489 846,000 0.8
29,800 El Paso Natural Gas Co.... 1,110,642 1,072,800 1.0
48,700 Enron Corp................ 1,621,393 1,412,300 1.3
11,000 New Jersey Resources
Corp.................... 312,335 284,625 0.3
31,100 NICOR Inc................. 886,928 870,800 0.9
30,500 Questar Corp.............. 1,157,336 1,006,500 1.0
40,200 Sonat, Inc................ 1,300,425 1,160,775 1.1
11,900 Washington Gas Light
Co...................... 524,002 490,875 0.5
45,600 Williams Co., Inc......... 1,299,178 1,111,500 1.1
------------ ------------ ----------
10,728,511 9,947,050 9.7
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN THE
UNITED STATES........... 48,015,456 45,725,195 44.0
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
COMMON STOCKS........... 79,206,939 81,833,547 78.5
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT FIXED-INCOME SECURITIES
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
AUSTRALIA TELECOMMUNICATIONS $1,040,000 Telstra Corp. Ltd., 6.50%
due 7/31/2003........... 1,084,062 1,039,896 1.0
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
SECURITIES IN
AUSTRALIA............... 1,084,062 1,039,896 1.0
- ------------------------------------------------------------------------------------------------------------------------
KOREA ELECTRIC 1,000,000 Korea Electric Power
Corp., 6.375%
due 12/01/2020.......... 985,510 968,258 0.9
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
SECURITIES IN KOREA..... 985,510 968,258 0.9
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
FIXED-INCOME
SECURITIES.............. 2,069,572 2,008,154 1.9
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE> 47
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL UTILITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONCLUDED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
COUNTRY AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
UNITED STATES COMMERCIAL PAPER** $3,500,000 BASF Corp., 3.23%
(CONCLUDED) due 1/11/1994........... $ 3,496,546 $ 3,496,546 3.3%
3,500,000 Cooper Industries, Inc.,
3.20%
due 1/14/1994........... 3,495,644 3,495,644 3.3
2,000,000 Corporate Bond Asset
Fund, 3.20%
due 1/28/1994........... 1,995,022 1,995,022 1.9
4,000,000 Delaware Funding
Corp., 3.23%
due 1/10/1994........... 3,996,411 3,996,411 3.8
823,000 General Electric Capital
Corp., 3.22%
due 1/03/1994........... 822,779 822,779 0.8
3,000,000 Hertz Funding Corp., 3.35%
due 1/10/1994........... 2,997,208 2,997,208 2.9
3,500,000 K mart Corp., 3.30%
due 1/18/1994........... 3,494,225 3,494,225 3.3
2,000,000 Metlife Funding Inc.,
3.30% due 1/04/1994..... 1,999,267 1,999,267 1.9
3,500,000 PHH Corp., 3.25%
due 1/20/1994........... 3,493,681 3,493,681 3.3
3,500,000 Sara Lee Corp., 3.30%
due 1/04/1994........... 3,498,717 3,498,717 3.3
------------ ------------ ----------
29,289,500 29,289,500 27.8
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SHORT-TERM SECURITIES... 29,289,500 29,289,500 27.8
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS......... $110,566,011 113,131,201 108.2
------------
------------
LIABILITIES IN EXCESS OF
OTHER ASSETS............ (8,613,888) (8.2)
------------ ----------
NET ASSETS................ $104,517,313 100.0%
------------ ----------
------------ ----------
</TABLE>
- --------------------------------------------------------------------------------
* American Depositary Receipt (ADR).
** Commercial Paper is traded on a discount basis; the interest rates shown are
the discount rates paid at the time of purchase by the Fund.
+ Restricted securities as to resale. The value of the Fund's investment in
restricted securities was approximately $4,111,000, representing 3.9% of net
assets.
<TABLE>
<CAPTION>
VALUE
ISSUE ACQUISITION DATE COST (NOTE 1A)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Central Costranera S.A......................................... 12/17/93 $ 21,600 $ 27,418
Distribuidora Chilectra Metropolitana, S.A. (ADR).............. 8/06/93-12/21/93 872,213 1,219,482
Telecom Argentina Stet, S.A. (ADR)............................. 10/05/93-12/22/93 924,319 1,360,800
TelecomAsia Corp., Public Co., Ltd............................. 11/15/93 43,740 106,500
Telefonica de Argentina S.A. (ADR)............................. 7/02/93-12/22/93 940,801 1,396,500
- ----------------------------------------------------------------------------------------------------------------------
TOTAL.......................................................... $2,802,673 $4,110,700
---------- ----------
---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
46
<PAGE> 48
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S VALUE
INDUSTRIES RATING RATING FACE AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
AIRLINES--4.3% Delta Air Lines Inc.:
BB+ Baa3 $ 1,000,000 9.300% due 1/02/2010............... $ 987,700 $ 999,148
BB+ Baa3 500,000 10.50% due 4/30/2016............... 506,875 536,110
United Air Lines, Inc.:
BB+ Baa1 1,000,000 9.35% due 4/07/2016................ 1,016,260 1,060,000
BB+ Baa1 995,000 9.21% due 1/21/2017................ 991,938 1,003,487
USAir, Inc.:
B+ Ba3 450,000 10.00% due 7/01/2003............... 450,000 432,000
BB+ Ba2 1,000,000 9.82% due 1/01/2013................ 1,010,000 985,000
BB+ Ba2 2,000,000 10.375% due 3/01/2013.............. 2,000,000 2,001,926
------------ ------------
6,962,773 7,017,671
- -----------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE B- B2 500,000 Exide Corp., 10.75%
PARTS--0.3% due 12/15/2002.................... 518,750 547,500
- -----------------------------------------------------------------------------------------------------------------------------
BROADCASTING & B B2 250,000 Century Communications, Inc.,
PUBLISHING--5.0% 11.875% due 10/15/2003............ 250,000 287,500
BB- Ba2 1,000,000 Continental Cablevision Inc., 9.50%
due 8/01/2013..................... 1,000,000 1,120,000
BB- Ba3 750,000 Heritage Media Services Inc., 11.00%
due 6/15/2002..................... 789,062 830,625
BB- Ba2 250,000 K-III Communications Corp., 10.625%
due 5/01/2002..................... 250,000 272,500
B B3 500,000 The Katz Corp., 12.75%
due 11/15/2002.................... 510,625 556,250
CCC+ B3 1,500,000 SCI Television Inc., 11.00%
due 6/30/2005..................... 1,557,500 1,560,000
B+ B3 2,000,000 Sinclair Broadcasting Group, Inc.,
10.00%
due 12/15/2003.................... 2,000,000 2,055,000
BB- B1 1,500,000 World Color Press Inc., 9.125%
due 3/15/2003..................... 1,511,250 1,556,250
------------ ------------
7,868,437 8,238,125
- -----------------------------------------------------------------------------------------------------------------------------
BUILDING & B B1 250,000 K Hovnanian Enterprises Inc.,
CONSTRUCTION--1.0% 11.250%
due 4/15/2002..................... 247,812 273,437
BB+ Ba2 250,000 Ryland Group Inc., 10.50%
due 7/15/2002..................... 246,260 265,000
B+ Ba3 1,000,000 U.S. Home Corp., 9.75%
due 6/15/2003..................... 1,000,000 1,032,500
------------ ------------
1,494,072 1,570,937
- -----------------------------------------------------------------------------------------------------------------------------
BUILDING B+ B3 1,500,000 Pacific Lumber Co., 10.50%
MATERIALS--1.0% due 3/01/2003..................... 1,527,813 1,556,250
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE> 49
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S VALUE
INDUSTRIES RATING RATING FACE AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
BUILDING American Standard Inc.:
PRODUCTS--2.4% B Ba3 $ 250,000 9.875% due 6/01/2001.............. $ 250,000 $ 262,812
B+ Ba3 750,000 9.25% due 12/01/2016.............. 755,625 778,125
B Ba3 1,250,000 Inter-City Products Corp.,
9.75% due 3/01/2000............... 1,221,250 1,253,125
B+ B1 500,000 National Gypsum Co., 10.00%
due 7/01/2003..................... 500,938 507,500
USG Corp.:
B+ B2 250,000 10.25% due 12/15/2002............. 251,563 257,500
B- B3 1,000,000 8.75% due 3/01/2017............... 904,375 925,000
------------ ------------
3,883,751 3,984,062
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--1.0% B+ B1 1,660,000 Essex Group, Inc., 10.00%
due 5/01/2003..................... 1,668,925 1,674,525
- -----------------------------------------------------------------------------------------------------------------------------
CELLULAR B- B3 1,500,000 Dial Page Inc., 12.25%
TELEPHONES--1.0% due 2/15/2000..................... 1,586,125 1,672,500
- -----------------------------------------------------------------------------------------------------------------------------
CHEMICALS--3.4% B B2 1,250,000 Agricultural Minerals Co., L.P.,
10.75% due 9/30/2003.............. 1,250,000 1,318,750
B+ Ba3 1,735,000 G-I Holdings, Inc., 11.38%
due 10/01/1998+................... 1,025,835 1,113,653
B+ B2 2,500,000 Harris Chemical Corp., 10.25%
due 7/15/2001*.................... 2,013,696 2,146,875
B- B3 1,750,000 Indespec Chemical Corp., 11.50%
due 12/01/2003*+.................. 1,005,309 1,023,750
------------ ------------
5,294,840 5,603,028
- -----------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS-- B- B3 1,650,000 Panamsat L.P., 11.38%
0.7% due 8/01/2003*.................... 971,469 1,105,500
- -----------------------------------------------------------------------------------------------------------------------------
CONGLOMERATES-- B Caa 317,000 Collins & Aikman Group, Inc., 7.50%
8.5% due 1/31/2005..................... 273,790 312,641
Coltec Industries, Inc.:
B+ Ba2 845,000 9.75% due 4/01/2000............... 895,700 903,094
B+ B1 750,000 10.25% due 4/01/2002.............. 796,250 808,125
Foamex L.P.:
B+ B1 450,000 11.25% due 10/01/2002............. 458,875 492,750
BB- B1 750,000 9.50% due 6/01/2000............... 732,187 787,500
NR NR 500,000 Gillette Holdings Inc., 12.25%
due 6/30/2002..................... 515,000 547,500
Interco Inc.:
B+ Ba3 1,750,000 10.00% due 6/01/2001.............. 1,770,000 1,780,625
B B2 1,000,000 9.00% due 6/01/2004............... 973,906 1,002,500
B- B3 1,500,000 Interlake Corp., 12.125%
due 3/01/2002..................... 1,537,500 1,518,750
B+ B3 3,000,000 Jordan Industries Inc., 10.375%
due 8/01/2003..................... 2,993,000 3,060,000
NR NR 150,000 MacAndrews & Forbes Group, Inc.,
13.00%
due 3/01/1999..................... 128,373 150,937
BB- Ba3 250,000 Reeves Industries, Inc., 11.00%
due 7/15/2002..................... 248,190 271,250
BB B2 750,000 Sequa Corp., 9.625%
due 10/15/1999.................... 740,625 787,500
</TABLE>
48
<PAGE> 50
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S VALUE
INDUSTRIES RATING RATING FACE AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
CONGLOMERATES BB- Ba3 $ 1,500,000 Sherritt Gordon Ltd, 9.75%
(CONCLUDED) due 4/01/2003....................... $ 1,503,438 $ 1,515,000
------------ ------------
13,566,834 13,938,172
- -----------------------------------------------------------------------------------------------------------------------------
CONSUMER NR NR 1,250,000 Coleman Holdings Inc., 11.09%
PRODUCTS--3.6% due 5/27/1998+.................... 778,440 809,375
Formica Corp.:
NR NR 750,000 13.06% due 10/01/2001*+........... 673,711 708,750
NR NR 750,000 13.125% due 9/15/2005+............ 750,000 761,719
NR NR 500,000 Liggett Group, Inc., 11.50%
due 2/01/1999..................... 451,760 370,000
B- B3 3,000,000 Revlon Worldwide Corp., 14.84%
due 3/15/1998*.................... 1,670,677 1,545,000
B+ B1 1,520,000 Sealy Corp., 9.50%
due 5/01/2003..................... 1,548,425 1,592,200
------------ ------------
5,873,013 5,787,044
- -----------------------------------------------------------------------------------------------------------------------------
CONTAINERS--4.0% B B2 1,000,000 Anchor Glass Container Corp., 9.875%
due 12/15/2008.................... 1,000,000 1,025,000
B+ B3 250,000 IVEX Packaging Corp., 12.50%
due 12/15/2002.................... 248,247 272,500
BB Ba3 750,000 Owens-Illinois, Inc., 11.00%
due 12/01/2003.................... 855,938 864,375
B+ Ba3 250,000 Plastic Containers, Inc., 10.75%
due 4/01/2001..................... 251,875 264,375
B- B3 2,660,000 Silgan Holdings, Inc., 13.00%
due 6/15/1996*.................... 2,042,513 2,061,500
B+ B1 1,000,000 Stone Consolidated Corp., 10.25%
due 12/15/2000.................... 1,000,000 1,010,000
B+ Ba3 1,000,000 Sweetheart Cup Co., 9.625%
due 9/01/2000..................... 1,000,000 1,055,000
------------ ------------
6,398,573 6,552,750
- -----------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE B- B1 1,750,000 Employee Benefit Plans, Inc., 6.75%
BONDS++--1.8% due 7/31/2006(1).................. 1,194,325 1,262,188
B- B3 200,000 MEDIQ Inc., 7.25%
due 6/01/2006(1).................. 138,000 173,500
B B2 1,200,000 OHM Corp., 8.00%
due 10/01/2006(2)................. 1,070,500 1,177,500
B+ B2 250,000 UNC Inc., 7.50%
due 3/31/2006(3).................. 145,625 238,125
------------ ------------
2,548,450 2,851,313
- -----------------------------------------------------------------------------------------------------------------------------
ENERGY--9.8% Clark Oil & Refining Corp.:
BB+ Ba2 250,000 9.50% due 9/15/2004............... 240,937 263,750
B+ B- 4,000,000 11.00% due 2/15/2000*............. 2,140,102 2,205,000
NR NR 1,500,000 Consolidated Hydro, Inc., 11.80%
due 7/15/2003*+................... 868,918 892,500
CC Caa 230,000 Empire, Inc., 9.00%
due 12/31/2007.................... 124,025 201,250
B B2 2,000,000 Ferrell Gas Companies, Inc., 11.625%
due 12/15/2003.................... 2,140,420 2,177,500
B+ B1 600,000 Global Marine Inc., 12.75%
due 12/15/1999.................... 616,625 669,000
</TABLE>
49
<PAGE> 51
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S VALUE
INDUSTRIES RATING RATING FACE AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
ENERGY BB B1 $ 1,080,000 Gulf Canada Resources, Ltd., 9.00%
(CONCLUDED) due 8/15/1999..................... $ 1,023,700 $ 1,072,372
BB B1 250,000 Maxus Energy Corp., 11.50%
due 11/15/2015.................... 246,563 263,750
C Caa 177,000 National Propane Corp., 13.125%
due 3/01/1999..................... 139,334 176,115
BB- Ba3 1,000,000 Noble Drilling Corp., 9.25%
due 10/01/2003.................... 1,000,000 1,035,000
BBB- Ba2 200,000 Oryx Energy Co., 10.375%
due 9/15/2018..................... 198,494 215,500
BB- Ba2 250,000 Rowan Companies, Inc., 11.875%
due 12/01/2001.................... 257,500 279,375
BB- Ba3 2,500,000 Seagull Energy Corp., 8.625%
due 8/01/2005..................... 2,493,750 2,500,000
CCC+ Caa 250,000 Tesoro Petroleum Corp., 12.75%
due 3/15/2001..................... 228,413 250,313
BB- B1 1,750,000 Trans Texas Gas Corp., 10.50%
due 9/01/2000..................... 1,766,875 1,846,250
B+ B1 2,000,000 Triton Energy Corp., 12.816%*
due 11/01/1997.................... 1,368,257 1,400,000
B+ B1 500,000 Western Co. of North America,
12.875%
due 12/01/2002.................... 513,753 595,000
------------ ------------
15,367,666 16,042,675
- -----------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT--2.7% B- B3 500,000 AMC Entertainment, Inc., 12.625%
due 8/01/2002..................... 509,742 571,250
B+ B1 250,000 Cinemark, USA, Inc., 12.00%
due 6/01/2002..................... 250,000 280,000
CCC+ B3 260,000 Fair Lanes Inc., 11.875%
due 8/15/1997..................... 261,300 183,300
B B3 1,865,000 Marvel Holdings, Inc., 11.47%
due 4/15/1998*.................... 1,166,533 1,226,238
NR Caa 1,000,000 New World Pictures, 12.25%
due 9/15/1998..................... 967,250 1,015,000
B+ B2 1,415,000 SPI Holdings, Inc., 11.50%
due 10/01/2001*................... 1,023,178 1,103,700
------------ ------------
4,178,003 4,379,488
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL--2.4% BB Ba1 1,500,000 Lomas Mortgage USA, 10.25%
due 10/01/2002.................... 1,561,250 1,582,500
CCC+ B2 250,000 Pioneer Finance Corp., 13.50%
due 12/01/1998.................... 264,063 263,750
BB- B1 2,000,000 Reliance Group Holdings Inc., 9.75%
due 11/15/2003.................... 2,000,000 2,065,000
------------ ------------
3,825,313 3,911,250
- -----------------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE--4.1% B- B3 400,000 Farm Fresh Inc., 7.50%
due 3/01/2010..................... 208,000 266,000
BB- Ba3 1,000,000 Del Monte Corp., 10.00%
due 5/01/2003+.................... 1,002,500 990,000
B+ B2 500,000 Grand Union Co., 12.25%
due 7/15/2002..................... 498,750 526,250
BB- Ba3 250,000 P&C Food Markets, Inc., 11.50%
due 10/15/2001.................... 260,156 279,688
</TABLE>
50
<PAGE> 52
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S VALUE
INDUSTRIES RATING RATING FACE AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
FOOD & B B2 $ 1,000,000 Penn Traffic Co., 9.625%
BEVERAGE due 4/15/2005..................... $ 1,013,760 $ 1,042,500
(CONCLUDED) B- B2 1,500,000 Pueblo Xtra, 9.50%
due 8/01/2003..................... 1,504,375 1,522,500
B+ B1 1,000,000 Royal Crown Corp., 9.75%
due 8/01/2000..................... 1,000,000 1,030,000
B B2 1,000,000 Specialty Foods Corp., 10.25%
due 8/15/2001..................... 1,000,000 1,047,500
------------ ------------
6,487,541 6,704,438
- -----------------------------------------------------------------------------------------------------------------------------
HEALTH SERVICES--2.0% B- B1 750,000 Abbey Healthcare Group Inc., 9.50%
due 11/01/2002.................... 750,000 769,687
BB- Ba2 500,000 American International Group, Inc.,
11.25%
due 6/01/2015..................... 525,625 532,500
B+ B1 250,000 Continental Medical Systems Inc.,
10.875%
due 8/15/2002..................... 248,125 259,375
B+ B1 250,000 Continental Medsystems, Inc.,
10.375%
due 4/01/2003..................... 249,687 255,000
Epic Properties, Inc.:
NR NR 500,000 11.375% due 7/15/2001............. 532,500 560,000
NR NR 98,235 11.50% due 7/15/2001.............. 97,744 110,515
B+ B1 250,000 Healthtrust Inc., 10.75%
due 5/01/2002..................... 255,625 280,625
B+ B1 250,000 MEDIQ/PRN Life Support Services,
Inc., 11.125% due 7/01/1999....... 250,625 263,750
B- B3 200,000 The Multicare Companies Inc., 12.50%
due 7/01/2002..................... 194,841 225,000
------------ ------------
3,104,772 3,256,452
- -----------------------------------------------------------------------------------------------------------------------------
HIGH CCC+ B3 250,000 ANACOMP, Inc., 15.00%
TECHNOLOGY--0.3% due 11/01/2000.................... 240,000 288,750
B- B2 250,000 ComputerVision Corp., 10.875%
due 8/15/1997..................... 250,625 230,000
------------ ------------
490,625 518,750
- -----------------------------------------------------------------------------------------------------------------------------
HOTELS--0.6% B- B3 1,000,000 Red Roof Inn, 9.625%
due 12/15/2003+................... 1,000,000 1,012,500
- -----------------------------------------------------------------------------------------------------------------------------
HOTELS & B B2 1,000,000 Aztar Corp., 11.00%
CASINOS--4.4% due 10/01/2002.................... 1,016,250 1,020,000
B+ B2 1,000,000 GNS Mirage Finance Corp., 9.25%
due 3/15/2003..................... 989,687 1,047,500
NR NR 158,000 Goldriver Hotel & Casino
Finance Corp., 11.375%
due 8/31/1999..................... 222,801 128,770
BB- Ba3 2,500,000 Showboat Inc., 9.25%
due 5/01/2008..................... 2,528,750 2,562,500
NR Caa 484,000 Trump Castle Funding, Inc., 9.50%
due 8/15/1998(a).................. 346,210 401,417
</TABLE>
51
<PAGE> 53
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S VALUE
INDUSTRIES RATING RATING FACE AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
HOTELS & B B3 $ 1,500,000 Trump Plaza Funding, Inc., 10.875%
CASINOS due 6/15/2001..................... $ 1,487,965 $ 1,507,500
(CONCLUDED) NR Caa 533,279 Trump Taj Mahal Funding, Inc.,
11.35%
due 11/15/1999(a)................. 401,034 501,323
------------ ------------
6,992,697 7,169,010
- -----------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS--2.8% B B2 2,000,000 Coca-Cola Bottling Co., 9.00%
due 11/15/2003.................... 2,000,000 2,005,000
BB Ba3 1,000,000 Methanex Corp., 8.875%
due 11/15/2001.................... 992,980 1,035,000
B+ B2 1,500,000 Navistar Financial Co., 8.875%
due 11/15/1998.................... 1,500,000 1,518,750
------------ ------------
4,492,980 4,558,750
- -----------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL BB- B2 2,000,000 ADT Operations, 9.25%
SERVICES--3.0% due 8/01/2003..................... 2,010,000 2,060,000
Bell & Howell Co.:
B- B3 500,000 10.75% due 10/01/2002............. 507,500 548,750
B- B3 1,000,000 11.50% due 3/01/2005*............. 501,447 555,000
B+ B2 750,000 Blount, Inc., 9.00%
due 6/15/2003..................... 750,000 778,125
NR NR 583,200 DYN Corp., 16.00%
due 6/30/2003(a).................. 586,005 588,776
NA Caa 355,900 Thermadyne Industry, Inc., 15.00%
due 5/01/1999(a).................. 354,342 371,965
------------ ------------
4,709,294 4,902,616
- -----------------------------------------------------------------------------------------------------------------------------
METALS & MINING--1.7% B- B2 1,000,000 Kaiser Aluminum Corp., 12.75%
due 2/01/2003..................... 1,003,750 1,007,500
B- B3 3,000,000 Maxxam Group, Inc., 12.25%
due 8/01/2003*.................... 1,697,537 1,717,500
------------ ------------
2,701,287 2,725,000
- -----------------------------------------------------------------------------------------------------------------------------
PAPER--3.6% Container Corp. of America:
B B3 1,000,000 14.00% due 12/01/2001............. 1,110,000 1,118,750
B+ B2 1,000,000 9.75% due 4/01/2003............... 1,015,000 1,037,500
B+ B1 250,000 Fort Howard Corp., 9.25%
due 3/15/2001..................... 250,000 257,187
B B3 500,000 Gaylord Container Corp., 11.50%
due 5/15/2001..................... 500,000 535,000
B B1 1,250,000 Riverwood International Corp.,
11.25%
due 6/15/2002..................... 1,340,313 1,368,750
Stone Container Corp.:
B- B2 250,000 10.75% due 6/15/1997.............. 240,000 231,563
B B1 1,000,000 12.625% due 7/15/1998............. 1,000,000 1,030,000
B B1 250,000 11.875% due 12/01/1998............ 249,375 254,375
------------ ------------
5,704,688 5,833,125
- -----------------------------------------------------------------------------------------------------------------------------
PAPER & B- Caa 2,000,000 Ivex Holdings Inc., 13.25%
PACKAGING--0.6% due 3/15/2005*.................... 964,800 1,010,000
- -----------------------------------------------------------------------------------------------------------------------------
POLLUTION B B1 163,000 International Technology Inc.,
CONTROL--0.1% 9.375%
due 7/01/1996..................... 148,330 163,815
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE> 54
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S VALUE
INDUSTRIES RATING RATING FACE AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
RAILROADS--0.8% B+ Ba3 $ 1,250,000 Southern Pacific Rail Co., 9.375%
due 8/15/2005..................... $ 1,250,000 $ 1,337,500
- -----------------------------------------------------------------------------------------------------------------------------
RESTAURANTS--2.6% B- B2 1,000,000 Flagstar Corp., 11.375%
due 9/15/2003..................... 1,000,000 1,035,000
Foodmaker, Inc.:
B B2 1,500,000 9.75% due 6/01/2002............... 1,502,812 1,526,250
B+ Ba3 1,750,000 9.75% due 11/01/2003.............. 1,722,700 1,723,750
------------ ------------
4,225,512 4,285,000
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL B+ B2 250,000 Bradlees, Inc., 11.00%
SPECIALTY--2.1% due 8/01/2002..................... 255,312 269,687
B- B3 1,500,000 Pamida Holdings, Inc., 11.75%
due 3/15/2003..................... 1,502,188 1,533,750
Specialty Retailer Services Inc.:
B+ B1 500,000 10.00% due 8/15/2000.............. 500,000 512,500
B- B3 1,000,000 11.00% due 8/15/2003+............. 1,000,000 1,030,000
------------ ------------
3,257,500 3,345,937
- -----------------------------------------------------------------------------------------------------------------------------
STEEL--1.3% B+ B1 2,000,000 WCI Steel, Inc., 10.50%
due 3/01/2002..................... 2,000,000 2,080,000
- -----------------------------------------------------------------------------------------------------------------------------
TEXTILES--1.5% CCC- Caa 2,500,000 J.P. Stevens & Co., 9.00%
due 3/01/2017..................... 2,376,750 2,512,500
- -----------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION B+ B1 217,000 ACF Industries, Inc., 11.60%
SERVICES--0.6% due 5/15/2000..................... 207,235 218,085
BB Ba2 750,000 Eletson Holdings Inc., 9.25%
due 11/15/2003.................... 750,000 763,125
------------ ------------
957,235 981,210
- -----------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--1.7% BB- B1 1,500,000 International Shipholding Corp.,
9.00%
due 7/01/2003..................... 1,498,750 1,533,750
B+ Ba3 1,250,000 Viking Star Shipping Co., 9.625%
due 7/15/2003+.................... 1,252,813 1,289,063
------------ ------------
2,751,563 2,822,813
- -----------------------------------------------------------------------------------------------------------------------------
UTILITIES--3.7% BB+ Ba1 1,500,000 CTC Mansfield Funding, 11.125%
due 9/30/2016..................... 1,612,500 1,626,142
Midland Cogeneration Venture L.P.:
BB Ba2 928,692 10.33% due 7/23/2002+............. 958,875 958,810
B B1 250,000 11.75% due 7/23/2005(a)........... 250,000 271,299
Texas New Mexico:
BB Ba3 1,750,000 9.25% due 9/15/2000............... 1,750,000 1,831,478
B+ B2 250,000 10.75% due 9/15/2003.............. 255,000 264,856
Tucson Electric Power Co.:
NR NR 570,386 (Series B), 10.21067%
due 1/01/2009+(a)................. 529,034 550,067
NR NR 500,000 (Series C), 10.73239%
due 1/01/2013+(a)................. 461,050 488,125
------------ ------------
5,816,459 5,990,777
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
CORPORATE BONDS--90.4%............ 142,966,840 147,642,983
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE> 55
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
INDUSTRIES HELD PREFERRED STOCKS COST (NOTE 1A)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
BROADCASTING & PUBLISHING--0.3% 9,100 K-III Communications Corp........... $ 249,113 $ 250,819
2,639 K-III Communications Corp.(a)....... 270,778 266,531
------------ ------------
519,891 517,350
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--0.0% 222 Southmark Corp. (Series A)++........ 79,876 1,110
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
PREFERRED STOCKS--0.3%............ 599,767 518,460
- -----------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
- -----------------------------------------------------------------------------------------------------------------------------
DEFENSE--0.0% 78 +Empire of Carolina, Inc.++.......... 4,056 507
- -----------------------------------------------------------------------------------------------------------------------------
ENERGY--0.0% 4,900 Petrolane Inc....................... 56,963 47,163
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--0.1% 4,384 Southmark Corp...................... 130,874 0
- -----------------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE--0.1% 4,060 Doskocil Companies, Inc............. 238,230 44,406
7,063 RJR Holdings Corp................... 68,864 45,027
------------ ------------
307,094 89,433
- -----------------------------------------------------------------------------------------------------------------------------
HOTELS & CASINOS--0.0% 1,095 Buckhead Corp. of America+.......... 2,738 2,738
2,500 Goldriver Hotel & Casino Finance
Corp.............................. 18,603 10,156
500 Trump Taj Mahal Holding Corp. (Class
A)................................ 250 11,375
------------ ------------
21,591 24,269
- -----------------------------------------------------------------------------------------------------------------------------
PAPER--0.0% 5,280 Gaylord Container Corp. (Class A)... 14,190 24,090
- -----------------------------------------------------------------------------------------------------------------------------
STEEL--0.0% 1,259 LTV Corp............................ 141,540 20,301
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
COMMON STOCKS--0.2%............... 676,308 205,763
- -----------------------------------------------------------------------------------------------------------------------------
TRUSTS, WARRANTS & RIGHTS
- -----------------------------------------------------------------------------------------------------------------------------
ENERGY--0.0% 833 UGI Corp. (Warrants)(b)++........... 3,644 937
- -----------------------------------------------------------------------------------------------------------------------------
HIGH TECHNOLOGY--0.0% 7,588 +Anacomp, Inc. (Warrants)(b)++....... 10,000 19,918
- -----------------------------------------------------------------------------------------------------------------------------
HOTEL--0.0% 250 +Goldriver Hotel & Casino Finance
Corp. (Liquidating Trust)++........ 6,000 4,282
- -----------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--0.0% 95 Thermadyne Industries, Inc.
(Warrants)(b)++................... 945 413
- -----------------------------------------------------------------------------------------------------------------------------
PAPER--0.1% 28,046 Gaylord Container Corp.
(Warrants)(b)++................... 59,598 101,667
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN TRUSTS,
WARRANTS & RIGHTS--0.1%........... 80,187 127,217
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE> 56
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY $ 3,000,000 Federal Home Loan, 3.17%
OBLIGATIONS--DISCOUNT--1.8% due 1/10/1994................... $ 2,997,359 $ 2,997,359
- -----------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER**--5.0% 5,153,000 General Electric Capital Corp.,
3.22%
due 1/03/1994................... 5,151,617 5,151,617
3,000,000 Goldman Sachs Group L.P., 3.40%
due 1/21/1994................... 2,994,050 2,994,050
------------- -------------
8,145,667 8,145,667
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SHORT-TERM
SECURITIES--6.8%................ 11,143,026 11,143,026
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--97.7%.......... $ 155,466,128 159,637,449
-------------
-------------
OTHER ASSETS LESS
LIABILITIES--2.3%............... 3,790,723
-------------
NET ASSETS--100.0%................ $ 163,428,172
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
* Represents the yield to maturity at time of purchase.
** Commercial Paper is traded on a discount basis; the interest rates shown are
the discount rates paid at the time of purchase by the Fund.
(a) Represents a pay-in-kind security which may pay interest/dividend in
additional face/shares.
(b) Warrants entitle the portfolio to purchase a predetermined number of shares
of common stock/face amount of bonds. The purchase price and number of
shares/face amount are subject to adjustment under certain conditions until
the expiration date.
+ Restricted security as to resale. The value of the Fund's investment in
restricted securities was approximately $11,656,000, representing 7.1% of
net assets.
<TABLE>
<CAPTION>
VALUE
ISSUE ACQUISITION DATE COST (NOTE 1A)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Anacomp, Inc. (Warrants).................................... 10/23/1990 10,000 19,918
Buckhead Corp. of America (Common Stock).................... 12/29/1992 2,738 2,738
Coleman Holdings Inc., 11.09% due 5/27/1998................. 10/07/1993 778,440 809,375
Consolidated Hydro, Inc., 11.80% due 7/15/2003.............. 7/08/1993 868,918 892,500
Del Monte Corp., 10.00% due 5/01/2003....................... 4/22/93-7/26/1993 1,002,500 990,000
Empire of Carolina, Inc. (common stock)..................... 3/22/1989 4,056 507
Formica Corp., 13.06% due 10/01/2001........................ 6/30/1993 673,711 708,750
Formica Corp., 13.125% due 9/15/2005........................ 9/17/1993 750,000 761,719
G-I Holdings, Inc., 11.38% due 10/01/1998................... 9/28/1993 1,025,835 1,113,653
Goldriver Hotel & Casino Finance Corp. (Liquidating 8/31/1992 6,000 4,282
Trust)....................................................
Indespec Chemical Corp., 11.50% due 12/01/2003.............. 11/19/1993 1,005,309 1,023,750
Midland Cogeneration Venture L.P., 10.33% due 7/23/2002..... 6/10/93 958,875 958,810
Red Roof Inn, 9.625% due 12/15/2003......................... 12/08/1993 1,000,000 1,012,500
Stone Container Corp., 12.625% due 7/15/1998................ 6/24/93 1,000,000 1,030,000
Tucson Electric Co. (Series B) 10.2106% due 1/01/2009....... 6/16/1993 529,034 550,067
Tucson Electric Co. (Series C) 10.73239% due 1/01/2013...... 3/01/1993 461,050 488,125
Viking Star Shipping Co., 9.625% due 7/15/2003.............. 7/08/93-9/09/1993 1,252,813 1,289,063
- -----------------------------------------------------------------------------------------------------------------------
TOTAL....................................................... $ 11,329,279 $ 11,655,757
------------ ------------
------------ ------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
++ Non-income producing security.
++ Corresponding industry groups for convertible bonds:
(1) Healthcare
(2) Waste Management
(3) Conglomerates
Ratings of Issuers shown here have not been audited by Deloitte & Touche.
See Notes to Financial Statements.
55
<PAGE> 57
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
HELD/
FACE STOCKS, BONDS, VALUE PERCENT OF
LATIN AMERICA INDUSTRIES AMOUNT WARRANTS & RIGHTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
BRAZIL TELECOMMUNICATIONS 22,000 Telecommunicacoes
Brasileiras S.A. Telebras
PN (Preferred)
(ADR)(a)+................. $ 739,050 $ 739,750 1.0%
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
BRAZILIAN STOCKS.......... 739,050 739,750 1.0
- ------------------------------------------------------------------------------------------------------------------------
CHILE MISCELLANEOUS 1,000 Enersis S.A. (ADR)(a)....... 18,000 23,500 0.0
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
CHILEAN STOCKS............ 18,000 23,500 0.0
- ------------------------------------------------------------------------------------------------------------------------
MEXICO BANKING 21,000 Servicios Financieros
Quadrum S.A. de C.V.
(ADR)(a)+................. 480,375 675,938 0.9
--------------------------------------------------------------------------------------------------------
BEVERAGES 135,000 Fomento Economico Mexicano
S.A. de C.V. (Femsa)
(ADR)(a)+................. 794,324 890,325 1.2
--------------------------------------------------------------------------------------------------------
BUILDING & 2,500 Cementos Mexicanos, S.A. de
CONSTRUCTION C.V. (Class B) (ADR)(a)... 100,000 147,500 0.2
25,500 Cementos Mexicanos, S.A. de
C.V. (Series B)
(Cemex)................... 692,998 760,483 1.0
----------- ----------- ----------
792,998 907,983 1.2
--------------------------------------------------------------------------------------------------------
DIVERSIFIED 100,000 Grupo Carso, S.A. de C.V.
Series A.................. 1,026,924 1,091,787 1.4
--------------------------------------------------------------------------------------------------------
MISCELLANEOUS 62,500 Elecktra 'L' Shares......... 511,892 555,556 0.7
--------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 11,800 Telefonos de Mexico, S.A. de
C.V. (Telmex) (ADR)(a).... 650,108 796,500 1.0
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN MEXICAN
STOCKS.................... 4,256,621 4,918,089 6.4
- ------------------------------------------------------------------------------------------------------------------------
PANAMA BEVERAGES 2,560 Panamerican Beverages, Inc.
(ADR)(a).................. 82,617 97,920 0.1
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
PANAMANIAN STOCKS......... 82,617 97,920 0.1
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
LATIN AMERICA............. 5,096,288 5,779,259 7.6
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
56
<PAGE> 58
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
HELD/
FACE STOCKS, BONDS, VALUE PERCENT OF
PACIFIC BASIN INDUSTRIES AMOUNT WARRANTS & RIGHTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
AUSTRALIA ENGINEERING & 230,800 Australia National
CONSTRUCTION Industries, Ltd.
(Ordinary)................ $ 296,137 $ 324,253 0.4%
--------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE 162,000 Burns Philp & Co., Ltd.
(Ordinary)................ 477,965 525,558 0.7
52,852 Coca-Cola Amatil, Ltd.
(Ordinary)................ 321,089 412,513 0.5
170,000 Goodman Fielder Wattie...... 193,004 190,375 0.2
----------- ----------- ----------
992,058 1,128,446 1.4
--------------------------------------------------------------------------------------------------------
INSURANCE 113,523 GIO Australia Holdings
Ltd....................... 221,504 263,504 0.3
--------------------------------------------------------------------------------------------------------
PROPERTY 32,000 Lend Lease Corp............. 372,709 384,416 0.5
--------------------------------------------------------------------------------------------------------
UTILITIES--GAS 48,062 The Australian Gas & Light
Co. (Ordinary)............ 121,398 146,789 0.2
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
AUSTRALIAN STOCKS......... 2,003,806 2,247,408 2.8
- ------------------------------------------------------------------------------------------------------------------------
HONG KONG BANKING 388,000 J.C.G. Holdings Ltd......... 300,147 311,485 0.4
654,000 Winton Holdings Ltd......... 250,162 228,642 0.3
----------- ----------- ----------
550,309 540,127 0.7
--------------------------------------------------------------------------------------------------------
DIVERSIFIED 185,000 Citic Pacific Ltd.
(Ordinary)................ 475,097 610,838 0.8
--------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 1,060,000 Sun Kung Kai & Co., Ltd.
(Ordinary)................ 593,942 857,827 1.1
--------------------------------------------------------------------------------------------------------
FOODS 1,326,000 C.P. Pokphand Co., Ltd.
(Ordinary)................ 499,958 583,763 0.8
--------------------------------------------------------------------------------------------------------
PROPERTY 243,000 Hang Lung Development Co.,
Ltd. (Ordinary)........... 393,365 594,678 0.8
390,000 Hopewell Holdings, Ltd...... 335,770 510,035 0.7
----------- ----------- ----------
729,135 1,104,713 1.5
--------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 253,000 Hong Kong Telecommunications
Ltd. (Ordinary)........... 432,236 533,976 0.7
--------------------------------------------------------------------------------------------------------
UTILITIES 2,932 Consolidated Electric Power
Ltd. (Ordinary)........... 4,745 5,087 0.0
175,000 The Hong Kong and China Gas
Co., Ltd. (Ordinary)...... 379,583 507,575 0.7
----------- ----------- ----------
384,328 512,662 0.7
--------------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC 148,800 China Light & Power Co.,
Ltd. (Ordinary)........... 735,003 1,088,593 1.4
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
HONG KONG STOCKS.......... 4,400,008 5,832,499 7.7
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE> 59
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
PACIFIC HELD/
BASIN FACE STOCKS, BONDS, VALUE PERCENT OF
(CONTINUED) INDUSTRIES AMOUNT WARRANTS & RIGHTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
JAPAN AUTOMOBILES 65,000 Suzuki Motor Co.
(Ordinary)................ $ 564,404 $ 611,231 0.8%
--------------------------------------------------------------------------------------------------------
BEVERAGES 9,000 Chukyo Coca-Cola Bottling
Co., Ltd. (Ordinary)...... 126,675 100,752 0.1
10,000 Hokkaido Coca-Cola Bottling
Co., Ltd. (Ordinary)...... 166,311 137,919 0.2
11,000 Kinki Coca-Cola Bottling
Co., Ltd. (Ordinary)...... 201,084 180,279 0.2
12,000 Mikuni Coca-Cola Bottling
Co., Ltd.................. 222,547 184,847 0.2
11,000 Sanyo Coca-Cola Bottling
Co., Ltd.................. 181,958 157,621 0.2
----------- ----------- ----------
898,575 761,418 0.9
--------------------------------------------------------------------------------------------------------
CAPITAL GOODS 142,000 Mitsubishi Heavy Industries,
Ltd....................... 903,477 782,106 1.0
--------------------------------------------------------------------------------------------------------
CONSUMER--ELECTRONICS 56,000 Matsushita Electric
Industrial Co., Ltd....... 746,797 747,268 1.0
1,800 Nintendo Co., Ltd........... 167,380 115,744 0.2
----------- ----------- ----------
914,177 863,012 1.2
--------------------------------------------------------------------------------------------------------
CONSTRUCTION/HOUSING 37,000 Sanki Engineering Co.,
Ltd....................... 534,028 394,322 0.5
--------------------------------------------------------------------------------------------------------
ELECTRICAL 15,000 Chudenko Corp. (Ordinary)... 576,519 470,177 0.6
CONSTRUCTION 15,000 Taihei Dengyo Kaisha,
Ltd....................... 370,758 323,751 0.4
----------- ----------- ----------
947,277 793,928 1.0
--------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 14,000 Murata Manufacturing
Co., Ltd.................. 449,523 480,208 0.6
51,000 Sumitomo Electric Industries
Ltd....................... 635,263 593,767 0.8
23,000 The Nippon Signal Co.,
Ltd....................... 347,016 278,076 0.4
----------- ----------- ----------
1,431,802 1,352,051 1.8
--------------------------------------------------------------------------------------------------------
INSURANCE 77,000 Dai-Tokyo Fire & Marine
Insurance Co., Ltd........ 600,583 498,576 0.7
63,000 Fuji Fire & Marine Insurance
Co., Ltd.................. 438,102 335,707 0.4
76,000 Koa Fire & Marine Insurance
Co., Ltd.................. 535,648 426,079 0.6
98,000 Nichido Fire & Marine
Insurance Co., Ltd........ 769,213 561,705 0.7
41,000 Sumitomo Marine & Fire
Insurance Co., Ltd........ 366,544 323,858 0.4
64,000 Tokio Marine & Fire
Insurance Co., Ltd.
(Ordinary)................ 793,046 699,266 0.9
----------- ----------- ----------
3,503,136 2,845,191 3.7
--------------------------------------------------------------------------------------------------------
OFFICE EQUIPMENT 61,000 Canon, Inc. (Ordinary)...... 832,516 841,304 1.1
--------------------------------------------------------------------------------------------------------
</TABLE>
58
<PAGE> 60
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
PACIFIC HELD/
BASIN FACE STOCKS, BONDS, VALUE PERCENT OF
(CONCLUDED) INDUSTRIES AMOUNT WARRANTS & RIGHTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
JAPAN PACKAGING 29,000 Toyo Seikan Kaisha, Ltd.
(CONCLUDED) (Ordinary).................. $ 838,658 $ 727,208 0.9 %
--------------------------------------------------------------------------------------------------------
PHARMACEUTICAL-- 36,000 Sankyo Co., Ltd.
PRESCRIPTION (Ordinary)................ 935,269 712,520 0.9
--------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 22,000 Taisho Pharmaceutical Co.,
Ltd. (Ordinary)........... 459,150 423,607 0.6
--------------------------------------------------------------------------------------------------------
PHOTOGRAPHY 20,000 Fuji Photo Film Co., Ltd.... 487,545 442,414 0.6
--------------------------------------------------------------------------------------------------------
RETAIL TRADE 16,000 Ito Yokado Co., Ltd.
(Ordinary)................ 766,061 730,790 1.0
--------------------------------------------------------------------------------------------------------
STEEL 16,000 Maruichi Steel Tube, Ltd.
(Ordinary)................ 303,873 250,761 0.3
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
JAPANESE STOCKS........... 14,319,948 12,531,863 16.3
- ------------------------------------------------------------------------------------------------------------------------
MALAYSIA LEISURE 15,000 Genting BHD................. 138,632 208,914 0.3
70,000 Magnum Corp. BHD............ 142,789 207,985 0.3
----------- ----------- ----------
281,421 416,899 0.6
--------------------------------------------------------------------------------------------------------
STEEL 210,000 Maruichi Malaysia Steel Tube
BHD....................... 496,962 534,262 0.7
--------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 62,000 Telekom Malaysia BHD........ 503,306 508,895 0.7
50,000 Uniphone Telecommunications
BHD....................... 218,690 315,692 0.4
----------- ----------- ----------
721,996 824,587 1.1
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
MALAYSIAN STOCKS.......... 1,500,379 1,775,748 2.4
- ------------------------------------------------------------------------------------------------------------------------
NEW ZEALAND FOREIGN GOVERNMENT $ 925,000 New Zealand Bill, 8.00%
OBLIGATIONS due 4/15/2004............. 598,473 600,296 0.8
--------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 25,000 Telecommunications Corp. New
Zealand Ltd. (ADR)(a)..... 1,117,263 1,265,625 1.6
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN NEW
ZEALAND STOCKS & BONDS.... 1,715,736 1,865,921 2.4
- ------------------------------------------------------------------------------------------------------------------------
SINGAPORE BANKING 29,166 United Overseas Bank Ltd.
(Foreign Registered)...... 209,500 315,602 0.4
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SINGAPOREAN STOCKS........ 209,500 315,602 0.4
- ------------------------------------------------------------------------------------------------------------------------
THAILAND BANKING 67,600 Bangkok Bank Co., Ltd....... 594,571 667,262 0.9
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
THAI STOCKS............... 594,571 667,262 0.9
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
PACIFIC BASIN............. 24,743,948 25,236,303 32.9
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
59
<PAGE> 61
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
HELD/
FACE STOCKS, BONDS, VALUE PERCENT OF
SOUTHEAST ASIA INDUSTRIES AMOUNT WARRANTS & RIGHTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
INDIA INSURANCE 11,800 Grasim Industries Ltd.
(ADR)(a).................. $ 200,851 $ 265,500 0.3%
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
INDIAN STOCKS............. 200,851 265,500 0.3
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SOUTHEAST ASIA............ 200,851 265,500 0.3
- ------------------------------------------------------------------------------------------------------------------------
WESTERN
EUROPE
- ------------------------------------------------------------------------------------------------------------------------
AUSTRIA UTILITIES 2,371 Energie-Versorgung
Niederoesterreich AG...... 220,683 304,398 0.4
4,145 Verbund Oesterreichische
Elekrizitats AG........... 224,164 252,304 0.3
----------- ----------- ----------
444,847 556,702 0.7
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
AUSTRIAN STOCKS........... 444,847 556,702 0.7
- ------------------------------------------------------------------------------------------------------------------------
BELGIUM BANKING 1,110 Generale de Banque S.A.
(Ordinary)................ 273,130 276,495 0.4
--------------------------------------------------------------------------------------------------------
CHEMICALS 500 Solvay Group (Ordinary)..... 193,772 204,584 0.3
--------------------------------------------------------------------------------------------------------
FOODS 6,000 GIB Group (Bearer).......... 211,854 258,771 0.3
--------------------------------------------------------------------------------------------------------
METAL & MINING 2,421 Union Miniere N.V........... 162,857 163,984 0.2
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
BELGIAN STOCKS............ 841,613 903,834 1.2
- ------------------------------------------------------------------------------------------------------------------------
DENMARK BANKING 3,140 Den Danske Bank AF
(Ordinary)................ 177,329 177,581 0.2
--------------------------------------------------------------------------------------------------------
FOREIGN Dkr 1,250,000 Danish Government Bond,
GOVERNMENT 7.00% due 12/15/2004...... 198,619 196,984 0.3
OBLIGATIONS
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
DANISH STOCKS & BONDS..... 375,948 374,565 0.5
- ------------------------------------------------------------------------------------------------------------------------
FINLAND MINING 5,000 Outokumpu OY................ 54,883 59,055 0.1
--------------------------------------------------------------------------------------------------------
PAPER & 30,500 Enso-Gutzeit OY
(Registered).............. 201,133 193,285 0.3
FOREST PRODUCTS 7,250 Metsa Serla OY.............. 297,297 291,693 0.4
16,175 Repola OY S................. 251,155 251,652 0.3
----------- ----------- ----------
749,585 736,630 1.0
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
FINNISH STOCKS............ 804,468 795,685 1.1
- ------------------------------------------------------------------------------------------------------------------------
FRANCE AUTOMOBILES 2,190 Peugeot S.A................. 243,781 291,753 0.4
--------------------------------------------------------------------------------------------------------
</TABLE>
60
<PAGE> 62
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
HELD/
WESTERN EUROPE FACE STOCKS, BONDS, VALUE PERCENT OF
(CONTINUED) INDUSTRIES AMOUNT WARRANTS & RIGHTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
FRANCE BANKING 2,630 Compagnie Financiere de
(CONCLUDED) Paribas................... $ 223,993 $ 220,493 0.3%
3,400 Compagnie Financiere de
Suez...................... 194,401 205,150 0.3
1,650 Societe Generale de
Surveillance S.A. (Class
A) (Ordinary)............. 176,382 213,677 0.3
----------- ----------- ----------
594,776 639,320 0.9
--------------------------------------------------------------------------------------------------------
OIL--RELATED 2,500 Societe Nationale Elf
Aquitaine (Ordinary)...... 180,830 176,120 0.2
--------------------------------------------------------------------------------------------------------
PETROLEUM 3,500 Total S.A. (Class B)........ 176,839 190,947 0.3
--------------------------------------------------------------------------------------------------------
RETAIL TRADE 1,500 Pinault Printemps S.A....... 177,710 254,607 0.3
--------------------------------------------------------------------------------------------------------
UTILITIES 621 Compagnie Generale des
Eaux...................... 281,389 306,878 0.4
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
FRENCH STOCKS............. 1,655,325 1,859,625 2.5
- ------------------------------------------------------------------------------------------------------------------------
GERMANY AUTOMOBILES 498 Bayerische Motorenwerke AG
(BMW) (Bearer)............ 171,887 206,820 0.3
591 Daimler-Benz AG............. 258,961 287,596 0.4
2,659 Volkswagen AG (Preferred
Warrants)(b).............. 239,121 244,717 0.3
750 Volkswagen AG (Preferred)... 140,599 157,032 0.2
----------- ----------- ----------
810,568 896,165 1.2
--------------------------------------------------------------------------------------------------------
BANKING 1,440 Deustche Bank AG
(Ordinary)................ 700,090 734,288 1.0
--------------------------------------------------------------------------------------------------------
BUILDING MATERIALS 116 Hochtief AG................. 74,861 76,066 0.1
--------------------------------------------------------------------------------------------------------
CHEMICALS 1,726 BASF AG (Ordinary).......... 277,672 303,800 0.4
2,654 Bayer AG (Ordinary)......... 487,062 564,843 0.7
----------- ----------- ----------
764,734 868,643 1.1
--------------------------------------------------------------------------------------------------------
HEALTH & PERSONAL CARE 911 Schering AG................. 543,830 602,093 0.8
--------------------------------------------------------------------------------------------------------
INSURANCE 600 Allianz AG Holding
(Warrants)(b)............. 23,070 37,964 0.1
--------------------------------------------------------------------------------------------------------
MACHINERY 7,650 Kloeckner Werke AG.......... 382,078 453,236 0.6
--------------------------------------------------------------------------------------------------------
METAL & MINING 1,948 Thyssen AG (Ordinary)....... 246,738 308,699 0.4
--------------------------------------------------------------------------------------------------------
UTILITIES 2,000 Veba (Warrants)(b).......... 113,000 200,748 0.3
584 Veba Vereinigte
Elektrizitaets & Bergwerks
AG (Ordinary)............. 137,526 175,351 0.2
----------- ----------- ----------
250,526 376,099 0.5
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
GERMAN STOCKS &
WARRANTS.................. 3,796,495 4,353,253 5.8
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
61
<PAGE> 63
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
HELD/
WESTERN EUROPE FACE STOCKS, BONDS, VALUE PERCENT OF
(CONTINUED) INDUSTRIES AMOUNT WARRANTS & RIGHTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
IRELAND BANKING 132,000 Bank of Ireland
(Ordinary)................ $ 538,778 $ 562,704 0.7%
--------------------------------------------------------------------------------------------------------
FOREIGN Iep 350,000 Irish Gilts, 9.25%
GOVERNMENT due 7/11/2003............. 595,056 591,390 0.8
OBLIGATIONS
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
IRISH STOCKS & BONDS...... 1,133,834 1,154,094 1.5
- ------------------------------------------------------------------------------------------------------------------------
ITALY DIVERSIFIED 335,500 CIR NC Savings.............. 157,313 178,912 0.2
211,000 Compagnie Industrial Riunite
S.p.A. (CIR).............. 179,915 212,976 0.3
----------- ----------- ----------
337,228 391,888 0.5
--------------------------------------------------------------------------------------------------------
PAPER & 34,700 Cartiere Burgo S.p.A.
FOREST PRODUCTS (Ordinary)................ 175,909 196,362 0.3
--------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 261,720 Stet Savings Telecom........ 509,588 529,105 0.7
--------------------------------------------------------------------------------------------------------
UTILITIES--GAS 12,800 Italgas (Sud) S.p.A......... 35,600 36,967 0.0
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
ITALIAN STOCKS............ 1,058,325 1,154,322 1.5
- ------------------------------------------------------------------------------------------------------------------------
NETHERLANDS BANKING 8,755 ABNAmro Bank (Ordinary)..... 314,833 322,372 0.4
--------------------------------------------------------------------------------------------------------
BEVERAGES 496 Heineken Holdings, N.V.
(Class A)................. 39,308 48,686 0.1
1,530 Heineken N.V................ 160,673 169,720 0.2
----------- ----------- ----------
199,981 218,406 0.3
--------------------------------------------------------------------------------------------------------
CHEMICALS 4,235 Akzo N.V. (Ordinary)........ 395,654 410,022 0.5
5,110 Dutch State Mining N.V.
(Ordinary)................ 269,387 280,526 0.4
----------- ----------- ----------
665,041 690,548 0.9
--------------------------------------------------------------------------------------------------------
INSURANCE 8,643 AEGON N.V. (Ordinary)....... 431,625 469,583 0.6
10,670 Amev N.V. (Ordinary)........ 438,161 472,562 0.6
10,191 Internationale Nederlanden
Groep N.V................. 418,061 487,560 0.6
----------- ----------- ----------
1,287,847 1,429,705 1.8
--------------------------------------------------------------------------------------------------------
PAPER & 16,175 Koninkljke KNP.............. 304,559 394,004 0.5
FOREST PRODUCTS
--------------------------------------------------------------------------------------------------------
RETAIL TRADE 512 De Boer Winkelbedr N.V...... 19,118 18,984 0.0
--------------------------------------------------------------------------------------------------------
TRANSPORTATION 19,470 KLM Royal Dutch Airlines.... 389,595 406,085 0.5
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
DUTCH STOCKS.............. 3,180,974 3,480,104 4.4
- ------------------------------------------------------------------------------------------------------------------------
PORTUGAL BANKING 17,400 Banco Comercial Portugues... 247,411 265,350 0.3
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
PORTUGUESE STOCKS......... 247,411 265,350 0.3
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
62
<PAGE> 64
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
HELD/
WESTERN EUROPE FACE STOCKS, BONDS, VALUE PERCENT OF
(CONTINUED) INDUSTRIES AMOUNT WARRANTS & RIGHTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
SPAIN BANKING 2,215 Banco Popular Espanol
(Ordinary)................ $ 251,992 $ 247,900 0.3%
--------------------------------------------------------------------------------------------------------
OIL--RELATED 10,760 Repsol S.A.................. 304,591 334,722 0.4
--------------------------------------------------------------------------------------------------------
REAL ESTATE 307 Vallehermoso Inmobiliaria
S.A. (New)................ 3,760 5,955 0.0
1,840 Vallehermoso Inmobiliaria
S.A....................... 26,146 35,694 0.0
----------- ----------- ----------
29,906 41,649 0.0
--------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 39,710 Telefonica Nacional de
Espana S.A. (Ordinary).... 476,770 517,715 0.7
--------------------------------------------------------------------------------------------------------
UTILITIES 47,000 Fuerzas Electricas de
Cataluna, FECSA (Class
A)........................ 267,823 282,559 0.4
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SPANISH STOCKS............ 1,331,082 1,424,545 1.8
- ------------------------------------------------------------------------------------------------------------------------
SWEDEN BUILDING RELATED 12,300 Svedala Industry............ 221,118 200,489 0.3
--------------------------------------------------------------------------------------------------------
FOREIGN Skr 700,000 Swedish Government Bond,
GOVERNMENT 10.25% due 5/05/2003...... 99,005 102,039 0.1
OBLIGATIONS
--------------------------------------------------------------------------------------------------------
METAL & MINING 23,040 Trelleborg AB (Class B)..... 163,109 220,912 0.3
--------------------------------------------------------------------------------------------------------
PHARMACEUTICAL-- 20,050 Astra 'A' Fria.............. 401,920 456,578 0.6
PRESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWEDISH
STOCKS & BONDS............ 885,152 980,018 1.3
- ------------------------------------------------------------------------------------------------------------------------
SWITZERLAND BANKING 1,194 SBV Schweitz Bankverein..... 388,403 382,080 0.5
--------------------------------------------------------------------------------------------------------
BUILDING MATERIALS 543 Holderbank Financiere Glarus
AG (Bearer)............... 302,322 339,489 0.4
--------------------------------------------------------------------------------------------------------
CHEMICALS 744 Ciba-Geigy AG
(Registered).............. 367,871 450,151 0.6
--------------------------------------------------------------------------------------------------------
ELECTRICAL 1,211 BBC Brown Boveri & Cie...... 783,636 884,132 1.2
EQUIPMENT 212 Landis & Gyr AG
(Registered).............. 76,819 126,131 0.2
----------- ----------- ----------
860,455 1,010,263 1.4
--------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE 536 Nestle AG (Registered)...... 410,920 462,311 0.6
--------------------------------------------------------------------------------------------------------
HEALTH/PERSONAL CARE 160 Roche Holding Genusschein
AG........................ 599,734 678,723 0.9
277 Sandoz AG (Registered)...... 640,518 777,462 1.0
----------- ----------- ----------
1,240,252 1,456,185 1.9
--------------------------------------------------------------------------------------------------------
</TABLE>
63
<PAGE> 65
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
HELD/
WESTERN EUROPE FACE STOCKS, BONDS, VALUE PERCENT OF
(CONTINUED) INDUSTRIES AMOUNT WARRANTS & RIGHTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
SWITZERLAND INSURANCE 80 Baloise Holding Insurance... $ 103,904 $ 147,899 0.2%
(CONCLUDED) 842 Winterthur.................. 384,990 464,727 0.6
----------- ----------- ----------
488,894 612,626 0.8
--------------------------------------------------------------------------------------------------------
MACHINERY 182 Sulzer Gebrueder AG
(Registered).............. 92,856 103,144 0.1
--------------------------------------------------------------------------------------------------------
STEEL 1,850 Von Roll (Registered)....... 203,001 211,429 0.3
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SWISS STOCKS.............. 4,354,974 5,027,678 6.6
- ------------------------------------------------------------------------------------------------------------------------
UNITED AEROSPACE 202,500 Rolls Royce PLC
KINGDOM (Ordinary)................ 483,323 486,354 0.6
--------------------------------------------------------------------------------------------------------
AIRLINES 40,500 British Airways PLC
(Ordinary)................ 230,579 269,665 0.4
--------------------------------------------------------------------------------------------------------
BANKING 29,000 Barclays Bank, Ltd.
(Ordinary)................ 225,156 272,174 0.4
40,000 National Westminster Bank
PLC (Ordinary)............ 310,089 365,362 0.5
----------- ----------- ----------
535,245 637,536 0.9
--------------------------------------------------------------------------------------------------------
BEVERAGES 99,500 Grand Metropolitan PLC
(Ordinary)................ 643,076 697,069 0.9
--------------------------------------------------------------------------------------------------------
BUILDING & 70,000 CRH PLC (Ordinary).......... 335,762 366,357 0.5
CONSTRUCTION
--------------------------------------------------------------------------------------------------------
BUILDING MATERIALS 92,500 Tarmac PLC (Ordinary)....... 192,214 235,150 0.3
--------------------------------------------------------------------------------------------------------
CONSUMER--GOODS 25,000 Vendome Luxury Group
(Units)................... 134,600 142,812 0.2
--------------------------------------------------------------------------------------------------------
DIVERSIFIED 56,700 BTR PLC (Warrants)(b)....... 112,261 121,514 0.2
--------------------------------------------------------------------------------------------------------
ELECTRICAL 123,600 General Electric Co., Ltd.
EQUIPMENT PLC (Ordinary)............ 632,673 622,942 0.8
--------------------------------------------------------------------------------------------------------
FOODS 44,000 Argyll Group PLC
(Ordinary)................ 175,513 179,813 0.2
111,000 Tesco PLC (Ordinary)........ 328,445 351,084 0.5
----------- ----------- ----------
503,958 530,897 0.7
--------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE 84,000 Tate & Lyle PLC
(Ordinary)................ 491,229 495,366 0.6
--------------------------------------------------------------------------------------------------------
INSURANCE 35,000 Commercial Union Assurance
Co. PLC (Ordinary)........ 332,852 334,693 0.4
--------------------------------------------------------------------------------------------------------
LEISURE & 28,000 The Rank Organisation PLC
ENTERTAINMENT (Ordinary)................ 334,626 404,736 0.5
22,500 Thorn EMI (Ordinary)........ 337,196 329,224 0.4
----------- ----------- ----------
671,822 733,960 0.9
--------------------------------------------------------------------------------------------------------
MEDIA/PUBLISHING 36,000 Pearson PLC (Ordinary)...... 310,943 321,908 0.4
135,000 WPP Group PLC............... 194,584 179,577 0.2
----------- ----------- ----------
505,527 501,485 0.6
--------------------------------------------------------------------------------------------------------
</TABLE>
64
<PAGE> 66
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
HELD/
WESTERN EUROPE FACE STOCKS, BONDS, VALUE PERCENT OF
(CONCLUDED) INDUSTRIES AMOUNT WARRANTS & RIGHTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
UNITED OIL--RELATED 49,000 British Petroleum Co.,
Ltd....................... $ 258,638 $ 260,719 0.3%
KINGDOM
(CONCLUDED) --------------------------------------------------------------------------------------------------
PHARMACEUTICALS 81,600 SmithKline Beecham 'A'...... 491,858 486,640 0.6
--------------------------------------------------------------------------------------------------------
RETAIL TRADE 39,000 Boots Co. PLC (Ordinary).... 310,146 344,699 0.4
62,600 Dixons Group PLC
(Ordinary)................ 253,377 261,840 0.3
249,300 Sears PLC................... 438,129 469,793 0.6
----------- ----------- ----------
1,001,652 1,076,332 1.3
--------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 70,000 British Telecommunications
PLC (Ordinary)............ 500,780 488,331 0.6
--------------------------------------------------------------------------------------------------------
UTILITIES--GAS 56,000 British Gas PLC
(Ordinary)................ 269,257 282,239 0.4
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
UNITED KINGDOM STOCKS..... 8,327,306 8,770,061 11.2
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN WESTERN
EUROPE.................... 28,437,754 31,099,836 40.4
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
INDUSTRIES AMOUNT SHORT-TERM SECURITIES
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
UNITED STATES US GOVERNMENT $ 10,000 Federal Farm Credit Bank,
AGENCY 3.15% due 1/24/1994....... 9,979 9,979 0.0
OBLIGATIONS 500,000 Federal Home Loan Bank,
3.18% due 1/18/1994....... 499,205 499,205 0.7
1,000,000 Federal Home Loan Mortgage
Association, 3.15%
due 1/11/1994............. 999,562 999,563 1.3
1,300,000 Federal National Mortgage
Association, 3.12%
due 1/27/1994............. 1,296,958 1,296,958 1.7
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN US
GOVERNMENT & AGENCY
OBLIGATIONS............... 2,805,704 2,805,705 3.7
- ------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER* 2,357,000 General Electric Co., 3.22%
due 1/03/1994............. 2,356,368 2,356,368 3.1
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
COMMERCIAL PAPER.......... 2,356,368 2,356,368 3.1
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE> 67
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
UNITED US GOVERNMENT US Treasury Bill:
STATES OBLIGATIONS $ 380,000 2.95% due 3/17/1994......... $ 377,633 $ 377,633 0.5 %
(CONCLUDED) 400,000 2.96% due 3/24/1994......... 397,270 397,270 0.5
175,000 3.00% due 3/17/1994......... 173,892 173,899 0.2
10,000 3.00% due 3/24/1994......... 9,931 9,931 0.0
30,000 3.011% due 3/24/1994........ 29,792 29,811 0.0
650,000 3.015% due 3/24/1994........ 645,482 645,519 0.8
4,000,000 3.025% due 3/10/1994........ 3,976,808 3,977,153 5.2
1,000,000 3.04% due 3/10/1994......... 994,164 994,288 1.3
200,000 3.06% due 3/17/1994......... 198,708 198,742 0.3
10,000 3.098% due 3/17/1994........ 9,937 9,937 0.0
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN US
GOVERNMENT OBLIGATIONS.... 6,813,617 6,814,183 8.8
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SHORT-TERM SECURITIES..... 11,975,689 11,976,256 15.6
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS..................... $70,454,530 74,357,154 96.7
-----------
-----------
Put Options Written (Premium
Received--$118,850)**............... (221,740) (0.3)
Call Options Purchased
(Cost--$131,375)***................. 39,270 0.0
Unrealized Appreciation on Forward
Foreign Exchange Contracts++........ 529,800 0.7
Variation Margin on Stock Index
Futures Contracts++................. (14,358) --
Other Assets Less Liabilities......... 2,216,296 2.9
----------- ----------
NET ASSETS............................ $76,906,422 100.0%
----------- ----------
----------- ----------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) American Depositary Receipt (ADR).
(b) Warrants entitle the Fund to purchase a predetermined number of shares of
common stock. The purchase price and number of shares are subject to
adjustment under certain conditions until the expiration date.
+ Restricted securities as to resale. The value of the Fund's investment in
restricted securities was approximately $2,306,000, representing 2.0% of net
assets.
<TABLE>
<CAPTION>
VALUE
ISSUE ACQUISITION DATE COST (NOTE 1A)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Fomento Economico Mexicano S.A. de C.V. (Femsa) (Class B) 8/24/93 $ 794,324 $ 890,325
(ADR)........................................................
Servicios Financieros Quadrum S.A. de C.V. (ADR)............... 11/02/93 480,375 675,938
Telecommunicacoes Brasileiras S.A. Telebras PN (Preferred)..... 10/08/93 739,050 739,750
- ----------------------------------------------------------------------------------------------------------------------
TOTAL.......................................................... $2,013,749 $2,306,013
---------- ----------
---------- ----------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
66
<PAGE> 68
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
++ Forward foreign exchange contracts as of December 31, 1993 are as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION APPRECIATION
FOREIGN CURRENCY PURCHASED DATE (DEPRECIATION)
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
A$ 296,417........................................................................ January 1994 $ 2,125
Chf 1,454,600..................................................................... January 1994 (12,120)
- -------------------------------------------------------------------------------------------------------------------
TOTAL (US$ COMMITMENT--$1,187,892)................................................ $ (9,995)
--------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOREIGN CURRENCY SOLD
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
A$ 4,698,148...................................................................... January 1994 $ 4,780
Bf 19,314,300..................................................................... January 1994 (3,466)
Chf 1,454,600..................................................................... January 1994 22,428
DM 6,857,200...................................................................... January 1994 58,668
Dkr 545,763....................................................................... January 1994 (309)
Pta 88,185,400.................................................................... January 1994 14,420
Fmk 1,750,485..................................................................... January 1994 (2,076)
Frf 11,581,448.................................................................... January 1994 (6,574)
Iep 149,095....................................................................... January 1994 407
Y 1,383,482,500................................................................... January 1994 428,478
Nlg 5,772,750..................................................................... January 1994 28,921
Skr 2,972,354..................................................................... January 1994 (5,882)
- -------------------------------------------------------------------------------------------------------------------
TOTAL (US$ COMMITMENT--$25,260,000)............................................... 539,795
--------------
- -------------------------------------------------------------------------------------------------------------------
TOTAL UNREALIZED APPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS............... $529,800
--------------
--------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
*Commercial Paper is traded on a discount basis; the interest rates shown are
the discount rates paid at the time of purchase by the Fund.
**Put options written as of December 31, 1993 are as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SUBJECT PREMIUMS VALUE
TO PUT ISSUE RECEIVED (NOTES 1A & 1D)
<C> <S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
$2,000,000 DM currency put option, strike price 1.7336, expiring 1/12/94......... $ (15,500) $ (4,460)
2,000,000 DM currency put option, strike price 1.805, expiring 4/13/94.......... (27,200) (28,600)
1,000,000 Nlg currency put option, strike price 2.012, expiring 4/13/94......... (14,050) (15,400)
8,000,000 Y currency put option, strike price 103.6, expiring 1/02/94........... (52,000) (169,600)
2,000,000 Nlg currency put option, strike price 1.835, expiring 1/12/94......... (10,100) (3,680)
- --------------------------------------------------------------------------------------------------------------------
TOTAL PUT OPTIONS WRITTEN............................................. $(118,850) $(221,740)
--------- ---------------
--------- ---------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
***Call Options purchased as of December 31, 1993 are as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SUBJECT VALUE
TO PUT ISSUE COST (NOTES 1A & 1D)
<C> <S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
$2,000,000 DM currency call option, strike price 1.675, expiring 4/13/94......... $ 27,200 $ 25,400
1,000,000 Nlg currency call option, strike price 1.895, expiring 4/13/94........ 14,050 12,500
2,000,000 Nlg currency call option, strike price 1.885, expiring 1/12/94........ 10,100 480
8,000,000 Y currency call option, strike price 109.5, expiring 1/12/94.......... 62,800 0
2,000,000 DM currency call option, strike price 1.675, expiring 1/12/94......... 15,500 20
500,000 Frf currency call option, strike price 5.84, expiring 1/12/94......... 1,725 870
- --------------------------------------------------------------------------------------------------------------------
TOTAL CALL OPTIONS PURCHASED.......................................... $ 131,375 $ 39,270
--------- ---------------
--------- ---------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE> 69
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONCLUDED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
++Stock Index futures contracts sold as of December 31, 1993 are as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION VALUE
CONTRACTS ISSUE DATE (NOTE 1E)
<C> <S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
17 LIFFE FTSE 100............................................................ March 1994 $2,152,042
97 Nikkei 225................................................................ March 1994 7,531,703
- -------------------------------------------------------------------------------------------------------------------
TOTAL FINANCIAL FUTURES CONTRACTS SOLD (TOTAL CONTRACT
PRICE--$9,671,377)........................................................ $9,683,745
----------
----------
- -------------------------------------------------------------------------------------------------------------------
The market value of the pledged securities is $6,615,442.
</TABLE>
See Notes to Financial Statements.
68
<PAGE> 70
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--NATURAL RESOURCES FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
SHARES VALUE (NOTE OF NET
INDUSTRY HELD COMMON STOCKS COST 1A) ASSETS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
ALUMINUM 22,000 Alcan Aluminum Ltd........................... $ 460,790 $ 456,500 3.1%
7,500 Aluminum Co. of America...................... 480,958 520,313 3.5
11,700 Reynolds Metals Co........................... 550,233 530,888 3.6
----------- ----------- -------
1,491,981 1,507,701 10.2
- -------------------------------------------------------------------------------------------------------------------------
CHEMICALS 10,700 du Pont (E.I.) de Nemours & Co............... 534,988 516,275 3.5
- -------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED RESOURCES 17,900 Norsk Hydro A.S. (ADR)*...................... 471,628 501,200 3.4
COMPANY
- -------------------------------------------------------------------------------------------------------------------------
ENGINEERING & 23,300 Dresser Industries, Inc...................... 486,528 483,475 3.3
CONSTRUCTION
- -------------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS 7,000 Georgia-Pacific Corp......................... 510,263 481,250 3.3
12,100 Weyerhaeuser Co.............................. 476,374 539,963 3.7
----------- ----------- -------
986,637 1,021,213 7.0
- -------------------------------------------------------------------------------------------------------------------------
NATURAL GAS 11,100 Consolidated Natural Gas Co.................. 539,539 521,700 3.5
DISTRIBUTORS 4,800 Equitable Resources, Inc..................... 118,772 175,800 1.2
----------- ----------- -------
658,311 697,500 4.7
- -------------------------------------------------------------------------------------------------------------------------
NATURAL GAS PIPELINES 18,500 Coastal Corp................................. 493,653 520,313 3.5
4,000 Sonat, Inc................................... 78,255 115,500 0.8
----------- ----------- -------
571,908 635,813 4.3
- -------------------------------------------------------------------------------------------------------------------------
OIL & GAS PRODUCERS 38,500 Norcen Energy Corp........................... 600,603 466,812 3.2
- -------------------------------------------------------------------------------------------------------------------------
OIL--INTEGRATED 9,500 Amoco Corp................................... 499,683 502,312 3.4
14,300 Imperial Oil Ltd............................. 523,303 484,412 3.3
17,700 Phillips Petroleum Co........................ 517,938 513,300 3.5
----------- ----------- -------
1,540,924 1,500,024 10.2
- -------------------------------------------------------------------------------------------------------------------------
OIL--INTERNATIONAL 7,500 Exxon Corp................................... 461,040 472,500 3.2
4,700 Royal Dutch Petroleum Co. N.V. (ADR)*........ 398,449 490,562 3.3
----------- ----------- -------
859,489 963,062 6.5
- -------------------------------------------------------------------------------------------------------------------------
OIL SERVICE 71,500 +Parker Drilling Co........................... 482,452 393,250 2.7
64,400 Rowan Companies Inc.......................... 602,479 579,600 3.9
8,600 Schlumberger Ltd., Inc....................... 533,099 508,475 3.4
24,000 Tidewater Inc................................ 486,658 480,000 3.2
----------- ----------- -------
2,104,688 1,961,325 13.2
- -------------------------------------------------------------------------------------------------------------------------
PAPER & PACKAGING 7,400 International Paper Co....................... 497,368 501,350 3.4
12,000.. Scott Paper Co............................... 479,340 493,500 3.3
12,200 Union Camp Corp.............................. 530,592 581,025 3.9
----------- ----------- -------
1,507,300 1,575,875 10.6
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
69
<PAGE> 71
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--NATURAL RESOURCES FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
SHARES VALUE (NOTE OF NET
INDUSTRY HELD COMMON STOCKS COST 1A) ASSETS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
SPECIAL SITUATIONS 33,100 +Destec Energy Inc............................ $ 562,620 $ 475,812 3.2%
- -------------------------------------------------------------------------------------------------------------------------
STEEL 21,000.. Allegheny Ludlum Corp........................ 493,494 501,375 3.4
- -------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS.......................... 12,871,098 12,807,462 86.7
- -------------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT SHORT-TERM INVESTMENTS
- -------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER** $614,000 General Electric Capital Corp., 3.22%
due 1/03/1994.............................. 613,835 613,835 4.2
- -------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & 300,000 Federal Home Loan Mortgage Corp., 3.13%
AGENCY OBLIGATIONS** due 1/05/1994.............................. 299,870 299,870 2.0
185,000 Federal National Mortgage Association, 3.135%
due 1/10/1994.............................. 184,839 184,839 1.3
US Treasury Bill:
300,000 3.065% due 2/03/1994....................... 299,132 299,122 2.0
200,000 2.99% due 2/17/1994........................ 199,202 199,202 1.3
----------- ----------- -------
983,043 983,033 6.6
- -------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS 1,596,878 1,596,868 10.8
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS............................ $14,467,976 14,404,330 97.5
-----------
-----------
OTHER ASSETS LESS LIABILITIES................ 373,232 2.5
----------- -------
NET ASSETS................................... $14,777,562 100.0%
----------- -------
----------- -------
</TABLE>
- --------------------------------------------------------------------------------
* American Depositary Receipt (ADR).
** Certain US Government & Agency Obligations and Commercial Paper are traded
on a discount basis; the interest rates shown are the discount rates paid at
the time of purchase by the Fund.
+ Non-income producing security.
See Notes to Financial Statements.
70
<PAGE> 72
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--PRIME BOND FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S VALUE
INDUSTRIES RATING RATING FACE AMOUNT CORPORATE BONDS & NOTES COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
BANKS & THRIFTS--11.4% A- Baa1 $ 3,000,000 Bank of New York, 6.50%
due 12/01/2003................. $ 2,986,875 $ 2,984,334
A- A3 1,000,000 Boatmen's Bancshares, Inc., 6.75%
due 3/15/2003.................. 999,800 1,018,209
BBB+ A3 3,000,000 First Interstate Bancorp, 11.00%
due 3/05/1998.................. 3,605,145 3,557,994
First Union Corp.:
A- A3 1,000,000 6.75% due 1/15/1998............ 997,070 1,040,335
A- A3 5,000,000 8.125% due 6/24/2002........... 5,541,690 5,555,910
Golden West Financial Corp.:
A- A3 2,000,000 9.15% due 5/23/1998............ 2,271,480 2,273,712
A- A3 1,500,000 7.875% due 1/15/2002........... 1,592,310 1,638,105
A- A3 2,000,000 8.375% due 4/15/2002........... 2,014,380 2,251,302
A- A3 1,000,000 Huntington National Bank, 7.625%
due 1/15/2003.................. 1,066,660 1,076,927
BBB+ A3 1,000,000 Meridian Bancorp., 6.625%
due 3/15/2003.................. 971,970 1,007,739
A- A3 4,500,000 NationsBank Corp., 6.875%
due 2/15/2005.................. 4,743,055 4,595,544
A A2 2,000,000 Norwest Corp., 6.625%
due 3/15/2003.................. 2,007,520 2,039,006
A- A3 2,000,000 Society National Bank, Inc.,
6.75%
due 6/15/2003.................. 2,032,760 2,046,500
U.S. Bancorp:
A- Baa1 3,000,000 8.125% due 5/15/2002........... 3,343,260 3,316,755
A- Baa1 1,500,000 7.00% due 3/15/2003............ 1,496,250 1,553,658
------------ ------------
35,670,225 35,956,030
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES-- Ford Motor Credit Corp.:
CAPTIVE--1.0% A A2 1,000,000 7.75% due 11/15/2002........... 1,040,130 1,093,898
A A2 1,000,000 7.50% due 1/15/2003............ 1,020,320 1,073,334
A A2 1,000,000 6.75% due 8/15/2008............ 994,150 994,072
------------ ------------
3,054,600 3,161,304
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES-- A+ A1 2,000,000 American General Finance Corp.,
CONSUMER--2.6% 8.50% due 8/15/1998............ 2,278,920 2,233,086
Associates Corp. of North
America:
AA- A1 1,500,000 8.80% due 8/01/1998............ 1,690,365 1,693,362
AA- A1 1,000,000 7.50% due 5/15/1999............ 1,097,300 1,079,667
A A2 3,000,000 Commercial Credit Co., 6.70%
due 8/01/1999.................. 3,022,580 3,117,876
------------ ------------
8,089,165 8,123,991
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES-- A A2 3,000,000 Bear Stearns Cos., Inc., 6.70%
OTHER--11.2% due 8/01/2003.................. 2,985,330 3,008,124
Dean Witter, Discover & Co.:
A A3 2,000,000 6.875% due 3/01/2003........... 2,045,720 2,048,390
A A3 3,000,000 6.50% due 11/01/2005........... 3,000,000 2,973,735
A A3 4,750,000 6.75% due 10/15/2013........... 4,691,575 4,503,147
A+ A2 2,000,000 Dillard Investment Co., 9.25%
due 2/01/2001.................. 2,354,230 2,389,524
</TABLE>
71
<PAGE> 73
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--PRIME BOND FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S VALUE
INDUSTRIES RATING RATING FACE AMOUNT CORPORATE BONDS & NOTES COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES-- AAA Aaa $ 2,000,000 General Electric Capital Corp.,
OTHER 8.70%
due 2/15/2003.................. $ 2,422,100 $ 2,336,122
(CONCLUDED) Morgan Stanley Group, Inc.:
A+ A1 4,000,000 9.25% due 3/01/1998............ 4,606,111 4,529,008
A+ A1 3,000,000 8.875% due 10/15/2001.......... 3,454,480 3,460,989
A+ A1 2,000,000 7.00% due 10/01/2013........... 1,981,260 1,949,198
PaineWebber Group, Inc.:
BBB+ A3 1,000,000 6.25% due 6/15/1998............ 1,026,020 1,007,861
BBB+ A3 4,000,000 9.25% due 12/15/2001........... 4,670,870 4,627,952
A+ A3 1,900,000 Torchmark Corp., 9.625%
due 5/01/1998.................. 2,114,568 2,186,526
------------ ------------
35,352,264 35,020,576
- --------------------------------------------------------------------------------------------------------------------------
FOREIGN*--8.3% A+ A2 6,000,000 CRA Finance Ltd., 7.125%
due 12/01/2013 (1)............. 5,965,200 5,906,796
Hydro-Quebec (2):
A+ A1 1,000,000 8.00% due 2/01/2013............ 1,121,260 1,081,096
A+ A1 3,000,000 8.40% due 1/15/2022............ 3,354,810 3,360,120
AAA Aaa 4,165,000 Japan Finance Corp. for Municipal
Enterprises, 8.70%
due 7/30/2001 (3).............. 4,754,072 4,858,352
A+ A1 1,175,000 Korea Development Bank Co., 7.90%
due 2/01/2002 (3).............. 1,282,700 1,267,756
A+ A1 4,000,000 Korea Electric Power Corp., 7.75%
due 4/01/2013 (2).............. 4,093,760 4,104,388
Metropolis of Tokyo (Japan):
AAA Aaa 250,000 9.25% due 11/08/2000 (4)....... 268,428 296,832
AAA Aaa 2,000,000 8.65% due 7/18/2001 (4)........ 2,288,720 2,319,932
A+ A1 1,500,000 Province of Manitoba (Canada),
8.80% due 1/15/2020 (4)........ 1,775,700 1,770,376
A+ A1 1,000,000 Province of Quebec (Canada),
7.50%
due 7/15/2002 (4).............. 1,076,020 1,069,346
------------ ------------
25,980,670 26,034,994
- --------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL-- AA- A1 2,500,000 Anheuser-Busch Cos., Inc., 8.75%
CONSUMER--8.4% due 12/01/1999................. 2,839,090 2,867,533
A+ A1 2,500,000 Bass America, Inc., 8.125%
due 3/31/2002.................. 2,668,930 2,769,375
Dillard Department Stores, Inc.:
A+ A2 2,000,000 7.375% due 6/15/1999........... 2,095,990 2,151,770
A+ A2 1,000,000 7.85% due 10/01/2012........... 1,033,960 1,082,836
Grand Metropolitan Investment
Corp.:
A+ A2 4,000,000 6.50% due 9/15/1999............ 4,054,400 4,133,152
A+ A2 1,000,000 8.625% due 8/15/2001........... 1,049,910 1,150,171
A+ A2 1,000,000 7.125% due 9/15/2004........... 1,027,490 1,055,163
A+ A2 1,750,000 9.00% due 8/15/2011............ 2,049,972 2,085,200
A A2 1,000,000 K mart Corp., 7.77%
due 7/02/2002(a)............... 1,000,000 1,075,660
A A1 1,000,000 PepsiCo, Inc., 6.125%
due 1/15/1998.................. 993,060 1,029,117
</TABLE>
72
<PAGE> 74
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--PRIME BOND FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S VALUE
INDUSTRIES RATING RATING FACE AMOUNT CORPORATE BONDS & NOTES COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL-- A A2 $ 1,000,000 Philip Morris Cos., Inc., 9.00%
CONSUMER-- due 1/01/2001.................. $ 1,043,370 $ 1,154,561
(CONCLUDED) Wal-Mart Stores, Inc.:
AA Aa1 2,500,000 8.625% due 4/01/2001........... 2,827,500 2,907,012
AA Aa1 3,000,000 6.50% due 6/01/2003............ 2,992,810 3,071,040
------------ ------------
25,676,482 26,532,590
- --------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL-- BP America Inc.:
ENERGY--6.0% AA- A1 1,000,000 9.50% due 1/01/1998............ 1,169,680 1,143,350
AA- A1 5,500,000 7.875% due 5/15/2002........... 5,972,510 6,078,914
Burlington Resources Inc.:
A- A3 1,000,000 9.625% due 6/15/2000........... 1,201,910 1,193,948
A- A3 3,000,000 8.50% due 10/01/2001........... 3,497,340 3,420,456
Texaco Capital Inc.:
A+ A1 1,500,000 9.00% due 12/15/1999........... 1,731,670 1,736,587
A+ A1 2,500,000 8.50% due 2/15/2003............ 2,925,310 2,876,125
A+ A1 1,000,000 8.875% due 9/01/2021........... 1,220,140 1,208,077
A+ A1 1,000,000 8.00% due 8/01/2032.............. 969,730 1,101,910
------------ ------------
18,688,290 18,759,367
- --------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL-- A+ A1 2,000,000 Air Products & Chemicals Inc.,
6.25%
OTHER--13.1% due 6/15/2003.................. 1,982,700 2,001,500
AA- Aa2 2,000,000 Archer-Daniels-Midland Co., 6.25%
due 5/15/2003.................. 1,992,640 2,022,520
A- A3 2,000,000 Baxter International Inc., 8.125%
due 11/15/2001................. 2,105,970 2,221,062
A+ A1 3,000,000 Capital Cities/ABC, Inc., 8.875%
due 12/15/2000................. 3,454,220 3,509,088
A- Baa1 2,000,000 Carnival Cruise Lines, Inc.,
6.15%
due 10/01/2003................. 1,998,900 1,948,190
A A2 3,000,000 Communications Satellite Corp.,
8.125% due 4/01/2004........... 3,183,750 3,368,334
A A2 4,000,000 Equifax, Inc., 6.50%
due 6/15/2003.................. 3,999,320 4,022,136
A A3 5,000,000 First Data Corp., 6.625%
due 4/01/2003.................. 5,010,870 5,076,610
AA- Aa3 1,000,000 Gannett Co., Inc., 5.25%
due 3/01/1998.................. 996,820 999,268
AA Aa2 5,020,000 Kaiser Foundation Hospitals,
9.00%
due 11/01/2001................. 5,678,096 5,885,227
AA- Aa3 4,000,000 Walt Disney Co., 5.80%
due 10/27/2008................. 4,000,000 3,761,000
Weyerhaeuser Corp.:
A A2 3,000,000 7.50% due 3/01/2013............ 3,159,740 3,159,903
A A2 2,000,000 7.25% due 7/01/2013............ 2,141,860 2,058,326
A A3 1,000,000 Witco Corp., 6.60%
due 4/01/2003.................. 999,710 1,015,130
------------ ------------
40,704,596 41,048,294
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
73
<PAGE> 75
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--PRIME BOND FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S VALUE
INDUSTRIES RATING RATING FACE AMOUNT CORPORATE BONDS & NOTES COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
SUPRANATIONAL--6.0% Asian Development Bank:
AAA Aaa $ 1,000,000 10.75% due 6/01/1997........... $ 1,084,890 $ 1,176,623
AAA Aaa 3,000,000 6.50% due 9/21/2002............ 3,088,230 3,087,933
AAA Aaa 5,000,000 European Investment Bank, 9.125%
due 6/01/2002.................. 6,147,500 5,996,760
Inter-American Development Bank
Co.:
AAA Aaa 2,000,000 8.875% due 6/01/2009........... 2,481,700 2,464,838
AAA Aaa 4,000,000 8.50% due 3/15/2011............ 4,910,200 4,751,328
AAA Aaa 1,000,000 International Bank for
Reconstruction & Development,
12.375% due 10/15/2002......... 1,210,790 1,413,593
------------ ------------
18,923,310 18,891,075
- --------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION Southwest Airlines, Inc.:
SERVICES--1.8% A- Baa1 2,000,000 9.40% due 7/01/2001............ 2,407,120 2,353,712
A- Baa1 2,000,000 8.75% due 10/15/2003........... 2,297,060 2,308,578
A- Baa1 1,000,000 7.875% due 9/01/2007........... 992,600 1,086,883
------------ ------------
5,696,780 5,749,173
- --------------------------------------------------------------------------------------------------------------------------
UTILITIES-- GTE Corp.:
COMMUNICA- BBB+ A3 1,000,000 8.85% due 3/01/1998............ 1,143,360 1,118,230
TIONS--4.0% BBB+ A3 1,000,000 9.10% due 6/01/2003............ 1,221,680 1,181,977
Pacific Bell, Inc.:
AA- Aa3 4,000,000 8.70% due 6/15/2001............ 4,554,320 4,634,992
AA- Aa3 1,500,000 7.125% due 3/15/2026........... 1,532,790 1,504,561
Southwestern Bell
Telecommunications Corp.:
A+ A1 2,000,000 6.125% due 3/01/2000........... 2,010,000 2,033,124
A+ A1 2,000,000 7.00% due 7/01/2015............ 1,975,000 2,019,230
------------ ------------
12,437,150 12,492,114
- --------------------------------------------------------------------------------------------------------------------------
UTILITIES-- A- A3 3,000,000 Georgia Power Co., 6.125%
ELECTRIC--2.2% due 9/01/1999.................. 2,892,720 3,048,123
A A1 1,000,000 Pacific Gas & Electric Co.,
7.875%
due 3/01/2002.................. 997,920 1,102,846
Pennsylvania Power & Light Co.:
A A2 1,000,000 7.75% due 5/01/2002............ 995,100 1,093,746
A A2 1,000,000 6.875% due 2/01/2003........... 1,014,350 1,035,025
A A2 500,000 Virginia Electric & Power Co.,
6.625%
due 4/01/2003.................. 499,450 512,868
------------ ------------
6,399,540 6,792,608
- --------------------------------------------------------------------------------------------------------------------------
UTILITIES--GAS--2.0% Consolidated Natural Gas Co.:
AA- A1 3,000,000 8.75% due 6/01/1999............ 3,231,620 3,421,017
AA- A1 3,000,000 5.75% due 8/01/2003............ 3,002,550 2,902,176
------------ ------------
6,234,170 6,323,193
- --------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS & NOTES--
78.0%............................ 242,907,242 244,885,309
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
74
<PAGE> 76
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--PRIME BOND FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P MOODY'S VALUE
INDUSTRIES RATING RATING FACE AMOUNT US GOVERNMENT OBLIGATIONS COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT US Treasury Notes & Bonds:
OBLIGATIONS--11.7% NR Aaa $ 4,000,000 8.25% due 7/15/1998............ $ 4,502,500 $ 4,502,480
NR Aaa 9,000,000 6.375% due 7/15/1999........... 9,681,563 9,458,370
NR Aaa 4,000,000 6.00% due 10/15/1999........... 4,144,375 4,129,960
NR Aaa 4,500,000 8.75% due 8/15/2000............ 5,356,113 5,312,790
NR Aaa 3,000,000 8.50% due 11/15/2000........... 3,530,625 3,507,180
NR Aaa 3,000,000 6.375% due 8/15/2002........... 3,135,938 3,129,360
NR Aaa 4,500,000 5.75% due 8/15/2003............ 4,670,312 4,485,915
NR Aaa 2,000,000 7.50% due 11/15/2016........... 2,219,480 2,221,240
------------ ------------
37,240,906 36,747,295
- --------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT
OBLIGATIONS--11.7%............... 37,240,906 36,747,295
- --------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
- --------------------------------------------------------------------------------------------------------------------------
COMMERCIAL 15,000,000 General Electric Capital Corp.,
PAPER**--4.8% 3.38% due 1/04/1994............ 14,994,367 14,994,367
- --------------------------------------------------------------------------------------------------------------------------
REPURCHASE 9,168,000 Carroll McEntee & McGinley, Inc.,
AGREEMENTS***-- purchased on 12/31/1993 to
2.9% yield 3.25% to 1/03/1994....... 9,168,000 9,168,000
- --------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM
SECURITIES--7.7%............... 24,162,367 24,162,367
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--97.4%......... $304,310,515 305,794,971
------------
------------
OTHER ASSETS LESS
LIABILITIES--2.6%................ 8,296,493
------------
NET ASSETS--100%................. $314,091,464
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
(a) Medium-Term Note.
* Corresponding industry groups for foreign securities, which are denominated
in US dollars:
(1) Industrial Mining.
(2) Electric Utility.
(3) Financial Institution.
(4) Government Entity.
** Commercial Paper is traded on a discount basis and amortized to maturity.
The interest rate shown is the discount rate paid at the time of purchase by
the Fund.
*** Repurchase Agreements are fully collateralized by US Government Obligations.
Ratings of issues shown have not been audited by Deloitte & Touche.
See Notes to Financial Statements.
75
<PAGE> 77
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--QUALITY EQUITY FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
SHARES VALUE (NOTE OF NET
INDUSTRIES HELD COMMON STOCKS & WARRANTS COST 1A) ASSETS
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
AEROSPACE 90,000 Allied Signal Inc..................... $ 5,931,968 $ 7,110,000 2.3%
- ------------------------------------------------------------------------------------------------------------------------
APPAREL 110,000 Phillips-Van Heusen Corp.............. 3,066,754 4,125,000 1.3
- ------------------------------------------------------------------------------------------------------------------------
APPLIANCES 245,000 Singer Co., N.V....................... 7,897,329 9,156,875 3.0
392,000 Sunbeam-Oster......................... 8,017,244 8,624,000 2.8
------------ ------------ -------
15,914,573 17,780,875 5.8
- ------------------------------------------------------------------------------------------------------------------------
AUTO & TRUCK 20,000 Consorcio D Grupo Dina S.A.
(ADR)(a)............................ 482,962 557,500 0.2
- ------------------------------------------------------------------------------------------------------------------------
AUTOMOBILES 150,000 Ford Motor Co......................... 8,093,805 9,675,000 3.1
- ------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE 120,000 Magna International, Inc. (Class A)... 5,330,158 5,970,000 1.9
- ------------------------------------------------------------------------------------------------------------------------
BANKING 60,000 Bank of New York Co. (Warrants)(b).... 433,750 630,000 0.2
160,000 Bank of New York, Inc................. 7,904,505 9,120,000 3.0
------------ ------------ -------
8,338,255 9,750,000 3.2
- ------------------------------------------------------------------------------------------------------------------------
BEVERAGES 35,000 PepsiCo Inc........................... 1,391,470 1,430,625 0.5
13,500 Panamerican Beverages, Inc. (Class
A).................................. 438,013 516,375 0.2
------------ ------------ -------
1,829,483 1,947,000 0.7
- ------------------------------------------------------------------------------------------------------------------------
CHEMICALS 50,000 PPG Industries, Inc................... 3,521,030 3,793,750 1.2
70,000 Rohm and Haas......................... 3,859,029 4,165,000 1.3
------------ ------------ -------
7,380,059 7,958,750 2.5
- ------------------------------------------------------------------------------------------------------------------------
COMMUNICATION 215,000 ADC Telecommunications Inc............ 6,295,827 7,659,375 2.5
EQUIPMENT 90,000 DSC Communications Corp............... 4,998,923 5,529,375 1.8
45,000 Motorola, Inc......................... 3,930,075 4,156,875 1.3
37,000 Picturetel Corp....................... 669,067 689,125 0.2
125,000 Tellabs, Inc.......................... 4,755,455 5,875,000 1.9
------------ ------------ -------
20,649,347 23,909,750 7.7
- ------------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 85,000 Computer Sciences Corp................ 6,859,844 8,457,500 2.7
300,000 General Motors Corp. (Class E)........ 8,878,108 8,775,000 2.8
------------ ------------ -------
15,737,952 17,232,500 5.5
- ------------------------------------------------------------------------------------------------------------------------
COMPUTER TECHNOLOGY 140,000 Solectron Corp........................ 2,900,977 3,972,500 1.3
- ------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 100,000 Emerson Electric Co................... 5,778,286 6,025,000 1.9
- ------------------------------------------------------------------------------------------------------------------------
ELECTRONIC/INSTRUMENTS 80,000 Perkin-Elmer Corp..................... 2,878,887 3,080,000 1.0
- ------------------------------------------------------------------------------------------------------------------------
ENGINEERING & 135,500 Thermo Electron....................... 5,429,097 5,691,000 1.8
CONSTRUCTION
- ------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL CONTROL 460,000 Wheelabrator Technologies Inc......... 7,465,633 8,165,000 2.6
- ------------------------------------------------------------------------------------------------------------------------
FERTILIZER 25,000 IMC Fertilizer Group Inc.............. 1,060,593 1,134,375 0.4
- ------------------------------------------------------------------------------------------------------------------------
FOREIGN--ARGENTINA 50,000 +Banco Frances del Rio de la Plata
S.A.(2)............................. 1,563,880 1,968,750 0.6
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
76
<PAGE> 78
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--QUALITY EQUITY FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
SHARES VALUE (NOTE OF NET
INDUSTRIES HELD COMMON STOCKS & WARRANTS COST 1A) ASSETS
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
FOREIGN--MEXICO 25,000 Empresas ICA Sociedad Controladora,
S.A. de C.V. (ADR)(a)(4)............ $ 566,315 $ 706,250 0.2%
75,000 Grupo Financiero Serfin, S.A. de C.V.
(ADR)(a)(2)......................... 1,874,720 2,212,500 0.7
122,000 Telefonos de Mexico, S.A. de C.V.
(Telmex) (ADR)(a)(7)................ 6,019,253 8,235,000 2.7
------------ ------------ -------
8,460,288 11,153,750 3.6
- ------------------------------------------------------------------------------------------------------------------------
FOREIGN--NETHERLANDS 25,316 AEGON N.V. (ADR)(a)(3)................ 1,125,525 1,373,393 0.4
1,165,000 AEGON N.V. (ADR)(a)(3)................ 1,496,297 1,724,200 0.6
------------ ------------ -------
2,621,822 3,097,593 1.0
- ------------------------------------------------------------------------------------------------------------------------
FOREIGN--PORTUGAL 30,000 Espirito Santo Financial Holdings S.A.
(ADR)(a)(2)......................... 855,676 1,057,500 0.3
- ------------------------------------------------------------------------------------------------------------------------
FOREIGN--UNITED 75,000 British Petroleum PLC (ADR)(a)(6)..... 4,173,012 4,800,000 1.6
KINGDOM 40,000 Reuters Holdings PLC (ADR)(a)(1)...... 2,583,407 3,160,000 1.0
------------ ------------ -------
6,756,419 7,960,000 2.6
- ------------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS 102,500 Willamette Industries Inc............. 3,925,498 5,099,375 1.7
- ------------------------------------------------------------------------------------------------------------------------
HEALTH CARE 90,000 Vivra Inc............................. 1,646,529 2,081,250 0.7
- ------------------------------------------------------------------------------------------------------------------------
HEALTHCARE-- 306,600 +Humana Inc............................ 5,094,403 5,403,825 1.7
PRODUCTS/SERVICES 40,000 Johnson & Johnson Co.................. 1,600,252 1,790,000 0.6
------------ ------------ -------
6,694,655 7,193,825 2.3
- ------------------------------------------------------------------------------------------------------------------------
HOME FURNISHINGS 90,000 Heilig-Meyers Co...................... 1,593,336 3,510,000 1.1
- ------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS 130,000 Procter & Gamble...................... 6,748,835 7,410,000 2.4
- ------------------------------------------------------------------------------------------------------------------------
INSURANCE 70,000 America International Group Inc....... 6,156,186 6,142,500 2.0
100,000 Capital Holding Corp.................. 4,035,123 3,712,500 1.2
------------ ------------ -------
10,191,309 9,855,000 3.2
- ------------------------------------------------------------------------------------------------------------------------
MEDICAL 240,000 Physician Corp........................ 4,708,447 5,970,000 1.9
- ------------------------------------------------------------------------------------------------------------------------
OFFICE EQUIPMENT 200,000 Danka Business Systems PLC
(ADR)(a)(5)......................... 5,044,461 7,912,500 2.6
- ------------------------------------------------------------------------------------------------------------------------
OIL--INTEGRATED 50,000 Chevron Corp.......................... 4,388,825 4,356,250 1.4
60,000 Mobil Corp............................ 4,670,347 4,740,000 1.5
50,000 Royal Dutch Petroleum Co.
(ADR)(a)(6)......................... 4,870,500 5,218,750 1.7
------------ ------------ -------
13,929,672 14,315,000 4.6
- ------------------------------------------------------------------------------------------------------------------------
PAPER & PACKAGING 200,000 Crown Cork & Seal Co., Inc............ 5,824,550 8,375,000 2.7
60,000 Union Camp Corp....................... 2,870,356 2,857,500 0.9
------------ ------------ -------
8,694,906 11,232,500 3.6
- ------------------------------------------------------------------------------------------------------------------------
PETROLEUM 165,000 Phillips Petroleum Co................. 4,733,030 4,785,000 1.5
- ------------------------------------------------------------------------------------------------------------------------
PRINTING/PUBLISHING 80,000 News Corp., Ltd. (ADR)(a)............. 4,300,065 4,220,000 1.4
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
77
<PAGE> 79
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--QUALITY EQUITY FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
SHARES VALUE (NOTE OF NET
INDUSTRIES HELD COMMON STOCKS & WARRANTS COST 1A) ASSETS
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
RAILROADS 29,000 CSX Corp.............................. $ 2,458,253 $ 2,349,000 0.8%
50,000 Southern Pacific Rail Corp............ 959,750 987,500 0.3
------------ ------------ -------
3,418,003 3,336,500 1.1
- ------------------------------------------------------------------------------------------------------------------------
SERVICES 85,000 Block (H&R), Inc...................... 2,979,575 3,463,750 1.1
40,000 Kelly Services, Inc. (Class A)........ 1,137,039 1,105,000 0.4
12,000 Kelly Services, Inc. (Class B)........ 114,998 363,000 0.1
------------ ------------ -------
4,231,612 4,931,750 1.6
- ------------------------------------------------------------------------------------------------------------------------
SOFTWARE--COMPUTER 40,000 Microsoft Corp........................ 3,233,000 3,225,000 1.0
- ------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 35,000 ALC Communications Corp............... 991,049 1,006,250 0.3
150,000 LDDS Communications Inc............... 6,763,866 7,275,000 2.4
290,000 MCI Communications Corp............... 8,127,036 8,174,375 2.6
70,000 Sprint Corp........................... 2,557,650 2,432,500 0.8
------------ ------------ -------
18,439,601 18,888,125 6.1
- ------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 4,000 Antec Corp............................ 72,000 98,000 0.0
EQUIPMENT
- ------------------------------------------------------------------------------------------------------------------------
TIRES & RUBBER 10,000 Bandag, Inc........................... 426,702 553,750 0.2
50,000 Bandag, Inc. (Class A)................ 2,585,504 2,587,500 0.8
130,000 Cooper Tire & Rubber Co............... 2,713,790 3,250,000 1.1
------------ ------------ -------
5,725,996 6,391,250 2.1
- ------------------------------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC 294,000 California Energy Co., Inc............ 5,502,330 5,439,000 1.8
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS & WARRANTS........ 251,360,159 285,215,918 92.0
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
78
<PAGE> 80
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--QUALITY EQUITY FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
FACE VALUE (NOTE OF NET
AMOUNT SHORT-TERM SECURITIES COST 1A) ASSETS
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER* $4,507,000 General Electric Capital Corp., 3.22%
due 1/03/1994....................... $ 4,505,791 $ 4,505,791 1.5%
4,500,000 Matterhorn Capital Corp., 3.20%
due 1/24/1994....................... 4,490,400 4,490,400 1.5
5,000,000 Paribas Finance Corp., 3.36%
due 1/04/1994....................... 4,998,133 4,998,133 1.6
3,000,000 PHH Corp., 3.25%
due 1/12/1994....................... 2,996,750 2,996,750 1.0
7,000,000 Preferred Receivable Funding, 3.30%
due 1/07/1994....................... 6,995,508 6,995,508 2.3
- ------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT 2,380,000 Federal Home Loan Bank, 3.17%
OBLIGATIONS due 1/18/1994....................... 2,376,228 2,376,228 0.8
- ------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES........... 26,362,810 26,362,810 8.7
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS..................... $277,722,969 311,578,728 100.7
------------
------------
LIABILITIES IN EXCESS OF OTHER
ASSETS.............................. (2,159,091) (0.7)
------------ -------
NET ASSETS............................ $309,419,637 100.0%
------------ -------
------------ -------
</TABLE>
- --------------------------------------------------------------------------------
(a) American Depositary Receipt (ADR).
(b) Warrants entitle the Fund to purchase a predetermined number of shares of
common stock. The purchase price and number of shares are subject to
adjustments under certain conditions until the expiration date.
* Commercial Paper and certain US Government Obligations traded on a discount
basis; the interest rates shown are the discount rates paid at the time of
purchase by the Fund.
Corresponding industry groups for foreign securities:
(1) Business Services (5) Office Equipment
(2) Financial Services (6) Petroleum
(3) Insurance (7) Telecommunications
(4) Miscellaneous
See Notes to Financial Statements.
79
<PAGE> 81
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--RESERVE ASSETS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE
AMOUNT ISSUE RATE* DATE (NOTE 1A)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
BANK NOTE--3.3% $ 1,000,000 FNB of Chicago............................... 3.35% 1/31/94 $ 1,000,000
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL BANK NOTES (COST--$1,000,000).................................. 1,000,000
- ----------------------------------------------------------------------------------------------------------------------------
COMMERCIAL 203,000 American Express Credit Corp................. 3.22 1/10/94 202,814
PAPER--49.1% 1,000,000 Arco Coal Australia, Inc..................... 3.33 2/07/94 996,443
1,235,000 Bass Finance (C.I.) Ltd...................... 3.28 3/11/94 1,227,315
500,000 CIT Group Holdings, Inc. (The)............... 3.30 3/01/94 497,208
588,000 CSW Credit, Inc.............................. 3.27 2/18/94 585,343
900,000 CSW Credit, Inc.............................. 3.25 2/25/94 895,352
60,000 CXC Inc...................................... 3.40 1/18/94 59,900
628,000 Central Hispano N.A. Capital Corp............ 3.23 1/10/94 627,424
1,302,000 Fisons U.S. Inc.............................. 3.22 1/12/94 1,300,568
1,000,000 Ford Motor Credit Co......................... 3.20 1/27/94 997,487
500,000 Goldman Sachs Group L.P...................... 3.36 2/07/94 498,221
1,300,000 Hanson Finance (UK) PLC...................... 3.21 1/24/94 1,297,097
1,000,000 Nomura Holding America Inc................... 3.40 1/24/94 997,767
1,388,000 Province of Quebec........................... 3.35 2/03/94 1,383,582
961,000 Sheffield Receivables Corp................... 3.25 2/18/94 956,657
1,301,000 Societe Generale North America, Inc.......... 3.35 3/01/94 1,293,736
1,000,000 Svenska Handlesbanken, Inc................... 3.25 1/05/94 999,542
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (COST--$14,816,867)........................... 14,816,456
- ----------------------------------------------------------------------------------------------------------------------------
CORPORATE NOTES--3.3% 1,000,000 Goldman Sachs Group L.P...................... 3.33 3/01/94 1,000,000
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE NOTES--(COST--$1,000,000)............................ 1,000,000
- ----------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & 50,000 Federal Farm Credit.......................... 3.59 11/17/94 48,440
AGENCY OBLIGATIONS-- 85,000 Federal Farm Credit.......................... 3.64 11/17/94 82,347
DISCOUNT--7.5% 54,000 Federal Home Loan Mortgage................... 3.22 1/18/94 53,914
60,000 Federal Home Loan Mortgage................... 3.22 1/25/94 59,867
128,000 Federal Home Loan Mortgage................... 3.39 5/09/94 126,528
70,000 Federal Home Loan Mortgage................... 3.47 7/28/94 68,663
303,000 Federal Home Loan Mortgage................... 3.50 7/28/94 297,213
78,000 Federal Home Loan Mortgage................... 3.55 7/28/94 76,510
125,000 Federal National Mortgage Association........ 3.24 2/24/94 124,415
50,000 Federal National Mortgage Association........ 3.30 3/07/94 49,710
30,000 Federal National Mortgage Association........ 3.21 4/01/94 29,758
20,000 Federal National Mortgage Association........ 3.22 4/01/94 19,839
125,000 Federal National Mortgage Association........ 3.275 6/06/94 123,228
95,000 Federal National Mortgage Association........ 3.39 6/07/94 93,645
90,000 Federal National Mortgage Association........ 3.38 7/19/94 88,355
50,000 Federal National Mortgage Association........ 3.46 8/22/94 48,914
25,000 Federal National Mortgage Association........ 3.46 8/23/94 24,455
45,000 Federal National Mortgage Association........ 3.51 9/20/94 43,882
120,000 Federal National Mortgage Association........ 3.34 9/22/94 116,997
50,000 Federal National Mortgage Association........ 3.37 9/22/94 48,749
</TABLE>
80
<PAGE> 82
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--RESERVE ASSETS FUND
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE
AMOUNT ISSUE RATE* DATE (NOTE 1A)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & 25,000 Federal National Mortgage Association........ 3.42 % 9/27/94 $ 24,363
AGENCY OBLIGATIONS-- 115,000 Federal National Mortgage Association........ 3.46 9/27/94 112,068
DISCOUNT (CONCLUDED) 20,000 Federal National Mortgage Association........ 3.49 9/27/94 19,490
45,000 Federal National Mortgage Association........ 3.50 9/30/94 43,840
45,000 Federal National Mortgage Association........ 3.42 10/11/94 43,779
90,000 Federal National Mortgage Association........ 3.52 10/13/94 87,540
240,000 Federal National Mortgage Association........ 3.53 10/13/94 233,441
55,000 Federal National Mortgage Association........ 3.55 10/13/94 53,497
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY
OBLIGATIONS--DISCOUNT (COST--$2,242,107)............................. 2,243,447
- ----------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & 500,000 Federal Home Loan Bank+...................... 3.43 12/28/95 500,000
AGENCY OBLIGATIONS-- 2,000,000 Federal Home Loan Mortgage+.................. 3.36 9/01/95 1,999,240
NON-DISCOUNT--36.7% 1,000,000 Federal National Mortgage Association+....... 3.33 5/13/96 1,000,000
1,000,000 Federal National Mortgage Association+....... 3.45 5/19/97 1,000,000
1,000,000 Federal National Mortgage Association+....... 3.50 5/14/98 1,000,000
500,000 Student Loan Marketing Association+.......... 3.72 3/01/95 502,939
1,000,000 Student Loan Marketing Association+.......... 3.72 3/23/95 1,002,969
450,000 Student Loan Marketing Association+.......... 3.47 3/20/96 450,000
1,000,000 United States Treasury Notes................. 5.75 3/31/94 1,006,250
500,000 United States Treasury Notes................. 5.125 5/31/94 503,750
650,000 United States Treasury Notes................. 5.00 6/30/94 655,281
300,000 United States Treasury Notes................. 3.875 3/31/95 300,094
250,000 United States Treasury Notes................. 3.875 4/30/95 250,000
250,000 United States Treasury Notes................. 4.125 6/30/95 250,625
400,000 United States Treasury Notes................. 3.875 8/31/95 398,875
250,000 United States Treasury Notes................. 4.25 12/31/95 250,078
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY
OBLIGATIONS--NON-DISCOUNT (COST--$11,063,854)........................ 11,070,101
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST--$30,122,927)--99.9%......................... 30,130,004
OTHER ASSETS LESS LIABILITIES--0.1%.................................. 37,901
------------
NET ASSETS--100.0%................................................... $ 30,167,905
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
* Bankers' Acceptances, Commercial Paper and certain US Government & Agency
Obligations are traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Fund. Other securities bear
interest at the rates shown, payable at fixed dates or upon maturity. The
interest rates on variable rate securities are adjusted periodically based upon
appropriate indexes. The interest rates shown are the rates in effect at
December 31, 1993.
+ Variable Rate Note.
See Notes to Financial Statements.
81
<PAGE> 83
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LATIN
AMERICA
AND THE FACE VALUE PERCENT OF
CARIBBEAN INDUSTRIES AMOUNT FIXED-INCOME INVESTMENTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
ARGENTINA AUTOMOBILES $ 500,000 Compania Naviera Perez
Companc
S.A.C.F.I.M.F.A. S.A.,
8.375%
due 7/30/1998.......... $ 511,875 $ 508,750 1.01%
500,000 Sevel Argentina, S.A.,
8.50%
due 11/17/1996......... 505,625 510,625 1.01
--------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT 500,000 Republic of Argentina,
OBLIGATIONS 8.25%
due 8/02/2000.......... 506,250 514,687 1.01
--------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 500,000 Telecom Argentina
Stet--France Telecom,
S.A., 8.375%
due 10/18/2000......... 502,500 513,750 1.01
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
INVESTMENTS IN
ARGENTINA 2,026,250 2,047,812 4.04
- ------------------------------------------------------------------------------------------------------------------------
MEXICO RETAIL STORES 250,000 Controladora Comercial
Mexicana, S.A., 8.75%
due 4/21/1998.......... 263,125 264,375 0.52
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
INVESTMENTS IN MEXICO 263,125 264,375 0.52
- ------------------------------------------------------------------------------------------------------------------------
TRINIDAD FOREIGN GOVERNMENT 200,000 Republic of Trinidad and
& TOBAGO OBLIGATIONS Tobago, 11.50%
due 11/20/1997......... 214,750 217,500 0.43
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
INVESTMENTS IN TRINIDAD
& TOBAGO 214,750 217,500 0.43
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
INVESTMENTS IN LATIN
AMERICAN SECURITIES 2,504,125 2,529,687 4.99
- ------------------------------------------------------------------------------------------------------------------------
NORTH AMERICA
- ------------------------------------------------------------------------------------------------------------------------
CANADA FOREIGN GOVERNMENT Canadian Government
OBLIGATIONS Bonds:
C$ 550,000 6.50% due 9/01/1998.... 431,789 428,763 0.84
2,000,000 7.50% due 12/01/2003... 1,581,135 1,606,495 3.17
----------- ----------- ----------
2,012,924 2,035,258 4.01
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
INVESTMENTS IN CANADA 2,012,924 2,035,258 4.01
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
82
<PAGE> 84
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NORTH AMERICA FACE VALUE PERCENT OF
(CONTINUED) INDUSTRIES AMOUNT FIXED-INCOME INVESTMENTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
UNITED STATES AIR TRANSPORT US$ 250,000 Delta Air Lines, Inc.,
9.30% due 1/02/2010.... $ 246,925 $ 249,787 0.49%
USAir Inc.:
100,000 10.00% due 7/01/2003... 100,000 96,000 0.19
250,000 10.375% due 3/01/2013.. 250,000 250,241 0.49
100,000 United Air Pass-Through,
10.125% due
3/22/2015.............. 109,036 110,236 0.22
----------- ----------- ----------
705,961 706,264 1.39
--------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS 100,000 Exide Corp., 10.75%
due 12/15/2002......... 107,500 109,500 0.22
--------------------------------------------------------------------------------------------------------
BROADCASTING & 250,000 Continental Cablevision
PUBLISHING Inc., 9.50%
due 8/01/2013.......... 250,000 280,000 0.55
500,000 SCI Television Inc.,
11.00% due 6/30/2005... 520,625 520,000 1.03
500,000 Sinclair Broadcasting
Group, Inc., 10.00%
due 12/15/2003......... 500,000 511,250 1.01
250,000 World Color Press Inc.,
9.125% due 3/15/2003... 250,625 259,375 0.51
----------- ----------- ----------
1,521,250 1,570,625 3.10
--------------------------------------------------------------------------------------------------------
BUILDING MATERIALS 250,000 Inter-City Products
Corp., 9.75%
due 3/01/2000.......... 242,500 250,625 0.49
100,000 Pacific Lumber Co.,
10.50% due 3/01/2003... 102,500 103,750 0.21
350,000 USG Corp., 8.75%
due 3/01/2017.......... 323,125 323,750 0.64
----------- ----------- ----------
668,125 678,125 1.34
--------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS 250,000 American Standard Inc.,
9.25% due 12/01/2016... 251,875 259,375 0.51
--------------------------------------------------------------------------------------------------------
CELLULAR TELEPHONES & 260,000 Dial Page, Inc., 12.25%
PAGING due 2/15/2000.......... 282,775 289,900 0.57
--------------------------------------------------------------------------------------------------------
CHEMICALS 435,000 G-I Holdings, Inc.,
9.65%* due
10/01/1998............. 257,198 279,216 0.55
500,000 Harris Chemical North
America Co., 9.42%*
due 7/15/2001.......... 402,739 429,375 0.85
250,000 Methanex Corp., 8.875%
due 11/15/2001......... 248,245 258,750 0.51
----------- ----------- ----------
908,182 967,341 1.91
--------------------------------------------------------------------------------------------------------
COMMUNICATIONS 175,000 Panamsat L.P., 10.12%*
due 8/01/2003.......... 103,035 117,250 0.23
--------------------------------------------------------------------------------------------------------
</TABLE>
83
<PAGE> 85
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NORTH AMERICA FACE VALUE PERCENT OF
(CONTINUED) INDUSTRIES AMOUNT FIXED-INCOME INVESTMENTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
UNITED STATES CONGLOMERATES Coltec Industries:
(CONTINUED) US$ 150,000 9.75% due 11/01/1999... $ 159,000 $ 161,250 0.32 %
100,000 10.25% due 4/01/2002... 107,000 107,750 0.21
250,000 Foamex L.P., 9.50%
due 6/01/2000.......... 244,062 262,500 0.52
292,000 Interco. Inc., 10.00%
due 6/01/2001.......... 294,920 297,110 0.58
500,000 Interlake Corp., 12.125%
due 3/01/2002.......... 513,750 506,250 1.00
500,000 Jordan Industries, Inc. 10.375%
due 8/01/2003.......... 495,688 510,000 1.00
500,000 Sherritt Gordon, Ltd.,
9.75% due 4/01/2003.... 503,625 505,000 1.00
----------- ----------- ----------
2,318,045 2,349,860 4.63
--------------------------------------------------------------------------------------------------------
CONSUMER-PRODUCTS 500,000 ++Coleman Holdings Inc., 10.11%*
due 5/27/1998.......... 311,376 324,375 0.64
250,000 ++Formica Corp., 13.125%
due 9/15/2005.......... 250,000 253,906 0.50
925,000 Revlon Worldwide Corp., 16.61%*
due 3/15/1998.......... 516,725 476,375 0.94
250,000 Sealy Corp., 9.5%
due 5/01/2003.......... 256,750 261,875 0.51
----------- ----------- ----------
1,334,851 1,316,531 2.59
--------------------------------------------------------------------------------------------------------
CONTAINERS 250,000 Anchor Glass Container
Co., 9.875%
due 12/15/2008......... 250,000 256,250 0.51
500,000 Silgan Holdings, Inc.,
12.43%* due
6/15/1996.............. 386,521 387,500 0.76
250,000 Stone-Consolidated
Corp., 10.25%
due 12/15/2000......... 251,250 252,500 0.50
250,000 Sweetheart Cup Co.,
9.625% due 9/01/2000... 250,000 263,750 0.52
----------- ----------- ----------
1,137,771 1,160,000 2.29
--------------------------------------------------------------------------------------------------------
ENERGY 100,000 ++Clark Oil, 10.50%
due 12/01/2001......... 106,375 108,375 0.21
1,000,000 Clark R & M Holdings, Inc.,
9.9684%*
due 2/15/2000.......... 520,005 551,250 1.09
250,000 ++Consolidated-Hydro
Inc., 11.95%*
due 7/15/2003.......... 144,849 148,750 0.29
500,000 Ferrell Gas Inc., 11.625%
due 12/15/2003......... 543,250 544,375 1.07
250,000 Noble Drilling Corp.,
9.25% due 10/01/2003... 250,000 258,750 0.51
500,000 Seagull Energy Corp.,
8.625% due 8/01/2005... 499,688 500,000 0.99
</TABLE>
84
<PAGE> 86
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NORTH AMERICA FACE VALUE PERCENT OF
(CONTINUED) INDUSTRIES AMOUNT FIXED-INCOME INVESTMENTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
UNITED STATES ENERGY (CONTINUED) US$ 250,000 Trans Texas Gas Corp., 10.50%
(CONTINUED) due 9/01/2000.......... $ 250,000 $ 263,750 0.52%
500,000 Triton Energy Corp.,
9.65%* due
11/01/1997............. 343,791 350,000 0.69
----------- ----------- ----------
2,657,958 2,725,250 5.37
--------------------------------------------------------------------------------------------------------
ENTERTAINMENT 500,000 Marvel Holdings, Inc.,
10.13%* due
4/15/1998.............. 312,570 328,750 0.65
100,000 New World Pictures Inc., 12.25%
due 9/15/1998.......... 97,315 101,500 0.20
350,000 SPI Holding Inc., 10.65%*
due 10/01/2001......... 253,083 273,000 0.54
----------- ----------- ----------
662,968 703,250 1.39
--------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 250,000 Penn Financial Corp.,
9.25% due 12/15/2003... 250,000 253,750 0.50
250,000 Reliance Group Holdings,
Inc.,
9.75% due 11/15/2003... 250,000 258,125 0.51
----------- ----------- ----------
500,000 511,875 1.01
--------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE 250,000 Coca-Cola Bottling Co.,
9.0% due 11/15/2003.... 250,625 250,625 0.49
250,000 Del Monte Corp., 10.00%
due 5/01/2003.......... 251,250 247,500 0.49
350,000 Grand Union Co., 12.25%
due 7/15/2002.......... 362,250 368,375 0.72
300,000 Penn Traffic Co., 9.625%
due 4/15/2005.......... 309,000 312,750 0.62
250,000 PuebloXtra, 9.50%
due 8/01/2003.......... 250,938 253,750 0.50
250,000 Royal Crown Corp., 9.75%
due 8/01/2000.......... 250,000 257,500 0.51
250,000 Specialty Foods Corp.,
10.25% due 8/15/2001... 250,000 255,313 0.50
----------- ----------- ----------
1,924,063 1,945,813 3.83
--------------------------------------------------------------------------------------------------------
HOME BUILDING 250,000 Ryland Group, Inc.,
9.625% due 6/01/2004... 250,000 252,188 0.50
--------------------------------------------------------------------------------------------------------
HOTELS & CASINOS 250,000 Aztar Corp., 11.00%
due 10/01/2002......... 254,062 255,000 0.50
250,000 Mirage Resorts Inc.,
9.25% due 3/15/2003.... 248,750 261,875 0.52
500,000 Showboat Inc., 9.25%
due 5/01/2008.......... 506,250 512,500 1.01
500,000 Trump Plaza Associates, 10.875%
due 6/15/2001.......... 500,313 502,500 0.99
100,000 Trump Taj Mahal Funding,
Inc., 11.35%
due 11/15/1999(a)...... 93,575 98,664 0.20
----------- ----------- ----------
1,602,950 1,630,539 3.22
--------------------------------------------------------------------------------------------------------
</TABLE>
85
<PAGE> 87
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NORTH AMERICA FACE VALUE PERCENT OF
(CONTINUED) INDUSTRIES AMOUNT FIXED-INCOME INVESTMENTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
UNITED STATES INDUSTRIAL SERVICES US$ 250,000 ADT Operations, 9.25%
(CONTINUED) due 8/01/2003.......... $ 251,687 $ 257,500 0.51%
300,000 Blount, Inc., 9.00%
due 6/15/2003.......... 300,500 311,250 0.61
----------- ----------- ----------
552,187 568,750 1.12
--------------------------------------------------------------------------------------------------------
METALS & MINING 250,000 Maxxam Group, Inc.,
12.48%* due
8/01/2003.............. 141,461 143,125 0.28
--------------------------------------------------------------------------------------------------------
PAPER 250,000 Container Corp.
of America, 9.75%
due 4/01/2003.......... 255,000 259,375 0.51
250,000 Riverwood International
Corp., 11.25%
due 6/15/2002.......... 274,813 273,750 0.54
100,000 Stone Container Group,
11.875%
due 12/01/1998......... 101,625 101,750 0.20
----------- ----------- ----------
631,438 634,875 1.25
--------------------------------------------------------------------------------------------------------
RAILROADS 250,000 Southern Pacific Rail
Co.,
9.375% due 8/15/2005... 250,000 267,500 0.53
--------------------------------------------------------------------------------------------------------
RESTAURANTS & FOOD 250,000 Flagstar Corp., 11.375%
SERVICES due 9/15/2003.......... 250,000 258,750 0.51
250,000 Foodmaker, Inc., 9.75%
due 6/01/2002.......... 251,250 254,375 0.50
----------- ----------- ----------
501,250 513,125 1.01
--------------------------------------------------------------------------------------------------------
RETAIL STORES 250,000 Pamida Holdings, Inc.,
11.75% due 3/15/2003... 247,500 255,625 0.51
150,000 Specialty Retailers Inc.,
10.00% due 8/15/2000... 149,625 153,750 0.30
100,000 ++Specialty Retailers
Inc., 11.00% due
8/15/2003.............. 100,000 103,000 0.20
----------- ----------- ----------
497,125 512,375 1.01
--------------------------------------------------------------------------------------------------------
STEEL 500,000 WCI Steel Inc., 10.50%
due 3/01/2002.......... 500,000 520,000 1.02
--------------------------------------------------------------------------------------------------------
TEXTILES 500,000 West Point Stevens Inc.,
9.375% due
12/15/2005............. 500,000 506,875 1.00
--------------------------------------------------------------------------------------------------------
TRANSPORT SERVICES 250,000 Eletson Holdings Inc.,
9.25% due 11/15/2003... 250,000 255,469 0.50
250,000 International Shipholding
Corp., 9.00%
due 7/01/2003.......... 249,750 255,625 0.50
250,000 Viking Star Shipping Co.,
9.625% due 7/15/2003... 250,938 257,813 0.51
----------- ----------- ----------
750,688 768,907 1.51
--------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY 4,000,000 US Treasury Note, 5.75%
OBLIGATIONS due 8/15/2003.......... 3,983,125 3,986,876 7.86
--------------------------------------------------------------------------------------------------------
</TABLE>
86
<PAGE> 88
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NORTH AMERICA FACE VALUE PERCENT OF
(CONCLUDED) INDUSTRIES AMOUNT FIXED-INCOME INVESTMENTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
UNITED STATES UTILITIES US$ 92,869 Midland Funding Corp. II,
(CONCLUDED) 10.33% due 7/23/2002... $ 96,816 $ 95,881 0.19%
250,000 Texas-New Mexico Power
Company, 9.25%
due 9/15/2000.......... 250,000 261,640 0.51
233,383 ++Tucson Electric Power Co.,
10.732%
due 1/01/2013.......... 223,464 227,840 0.45
----------- ----------- ----------
570,280 585,361 1.15
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
INVESTMENTS IN THE
UNITED STATES 25,814,863 26,303,916 51.84
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
INVESTMENTS IN NORTH
AMERICAN SECURITIES 27,827,787 28,339,174 55.85
- ------------------------------------------------------------------------------------------------------------------------
PACIFIC
BASIN
- ------------------------------------------------------------------------------------------------------------------------
AUSTRALIA FOREIGN GOVERNMENT Australia Government
Bonds:
OBLIGATIONS--REGIONAL A$ 2,400,000 9.50% due 8/15/2003.... 1,931,468 1,948,792 3.84
& AGENCY 1,000,000 7.00% due 4/01/2004.... 659,662 693,767 1.37
----------- ----------- ----------
2,591,130 2,642,559 5.21
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
INVESTMENTS IN
AUSTRALIA 2,591,130 2,642,559 5.21
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
INVESTMENTS IN PACIFIC
BASIN SECURITIES 2,591,130 2,642,559 5.21
- ------------------------------------------------------------------------------------------------------------------------
WESTERN EUROPE
- ------------------------------------------------------------------------------------------------------------------------
DENMARK FOREIGN GOVERNMENT Denmark Government Bonds:
OBLIGATION
Dkr 2,000,000 9.00% due 11/15/2000... 344,014 343,746 0.67
8,000,000 7.00% due 12/15/2004... 1,283,497 1,261,874 2.49
----------- ----------- ----------
1,627,511 1,605,620 3.16
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
INVESTMENTS IN DENMARK 1,627,511 1,605,620 3.16
- ------------------------------------------------------------------------------------------------------------------------
ITALY FOREIGN Lit 3,600,000,000 Buoni Poliennali del
Tesoro
GOVERNMENT (Italian Government Bonds
OBLIGATIONS 9.00% due 10/01/1998... 2,179,661 2,165,524 4.27
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
INVESTMENTS IN ITALY 2,179,661 2,165,524 4.27
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
87
<PAGE> 89
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WESTERN EUROPE FACE VALUE PERCENT OF
(CONTINUED) INDUSTRIES AMOUNT FIXED-INCOME INVESTMENTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
SPAIN FOREIGN GOVERNMENT Government of Spain:
OBLIGATIONS Pta 200,000,000 9.00%* due 2/28/1997... $ 1,432,931 $ 1,434,603 2.83 %
71,000,000 10.50% due 10/30/2003.. 608,038 574,750 1.13
----------- ----------- ----------
2,040,969 2,009,353 3.96
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
INVESTMENTS IN SPAIN 2,040,969 2,009,353 3.96
- ------------------------------------------------------------------------------------------------------------------------
SWEDEN FOREIGN GOVERNMENT Skr 9,500,000 SBAB, 12.50%
OBLIGATIONS--REGIONAL due 1/23/1997.......... 1,308,032 1,311,482 2.59
& AGENCY 15,000,000 Government of Sweden,
10.250% due
5/05/2003.............. 2,161,107 2,187,904 4.31
----------- ----------- ----------
3,469,139 3,499,386 6.90
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
INVESTMENTS IN SWEDEN 3,469,139 3,499,386 6.90
- ------------------------------------------------------------------------------------------------------------------------
UNITED FOREIGN GOVERNMENT United Kingdom Gilt:
KINGDOM OBLIGATIONS L 800,000 7.75% due 9/08/2006.... 1,273,065 1,330,385 2.62
250,000 8.00% due 6/10/2003.... 390,145 419,671 0.83
700,000 8.00% due 9/27/2013.... 1,137,043 1,215,493 2.39
----------- ----------- ----------
2,800,253 2,965,549 5.84
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
INVESTMENTS IN THE
UNITED KINGDOM 2,800,253 2,965,549 5.84
- ------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
INVESTMENTS IN WESTERN
EUROPEAN SECURITIES 12,117,533 12,245,432 24.13
- ------------------------------------------------------------------------------------------------------------------------
SHORT-TERM
SECURITIES ISSUE
- ------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER+ US$ 819,000 General Electric Capital
Corp., 3.22%
due 1/03/1994.......... 818,853 818,853 1.62
1,000,000 Goldman Sachs & Co.,
3.35%
due 1/10/1994.......... 999,163 999,163 1.97
1,200,000 PepsiCo., Inc., 3.30%
due 1/14/1994.......... 1,198,570 1,198,570 2.36
----------- ----------- ----------
3,016,586 3,016,586 5.95
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
88
<PAGE> 90
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONTINUED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & US$ 1,100,000 Federal Home
AGENCY OBLIGATIONS Loan Bank, 3.120%
due 2/03/1994.......... $ 1,096,854 $ 1,096,854 2.16%
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SHORT-TERM SECURITIES 4,113,440 4,113,440 8.11
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $49,154,015 49,867,831 98.29
-----------
-----------
UNREALIZED APPRECIATION ON FORWARD
FOREIGN EXCHANGE CONTRACTS** 9,831 0.02
OTHER ASSETS LESS LIABILITIES 857,786 1.69
----------- ----------
NET ASSETS $50,737,448 100.00%
----------- ----------
----------- ----------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Each $1,000 face amount contains one non-detachable share of Taj Mahal
Holding Corp.'s Class B redeemable Common Stock.
+ Commercial Paper and certain US Government & Agency Obligations are
traded on a discount basis; the interest rates shown are the discount
rates paid at the time of purchase by the Fund.
* Represents the yield to maturity.
89
<PAGE> 91
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 1993 (CONCLUDED) (IN US DOLLARS)
- --------------------------------------------------------------------------------
** Forward foreign exchange contracts as of December 31, 1993 are as follows:
<TABLE>
<CAPTION>
UNREALIZED APPRECIATION
EXPIRATION DATE (DEPRECIATION)
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
FOREIGN CURRENCY PURCHASED
- -------------------------------------------------------------------------------------------------------------------
DM 3,467,664 January 1994 $ (32,428)
Dkr 6,835,300 January 1994 5,218
Fmk 6,510,328 January 1994 (2,818)
Lit 1,939,020,000 January 1994 3,064
NZ$ 2,524,249 January 1994 14,085
- -------------------------------------------------------------------------------------------------------------------
TOTAL (US$ COMMITMENT--$6,674,504) $ (12,879)
- -------------------------------------------------------------------------------------------------------------------
FOREIGN CURRENCY SOLD
- -------------------------------------------------------------------------------------------------------------------
A$ 3,560,305 January 1994 (4,234)
C$ 2,686,665 January 1994 (5,720)
DM 2,693,329 January 1994 23,356
Dkr 8,697,222 January 1994 4,571
Fmk 5,999,380 January 1994 (8,986)
L 169,400 January 1994 1,877
Lit 3,954,989,758 January 1994 37,803
Pta 113,569,246 January 1994 25,171
NZ$ 1,089,839 January 1994 (12,915)
Skr 30,430,608 January 1994 (38,213)
- -------------------------------------------------------------------------------------------------------------------
TOTAL (US$ COMMITMENT--$15,928,966) $ 22,710
- -------------------------------------------------------------------------------------------------------------------
TOTAL UNREALIZED APPRECIATION ON FORWARD FOREIGN EXCHANGE
CONTRACTS--NET $ 9,831
----------
----------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
++ Restricted securities as to resale. The value of the Fund's investment in
restricted securities was approximately $1,217,000, representing 2.39% of
net assets.
<TABLE>
<CAPTION>
VALUE
ISSUE ACQUISITION DATE COST (NOTE 1A)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Clark Oil Co., 10.50% due 12/01/2001........................... 9/01/1993 $ 106,375 $ 108,375
Coleman Holdings Inc., 10.11% due 5/27/1998.................... 10/07/1993 311,376 324,375
Consolidated-Hydro Inc., 11.95% due 7/15/2003.................. 7/08/1993 144,849 148,750
Formica Corp., 13.125% due 9/15/2005........................... 9/17/1993 250,000 253,906
Speciality Retail Services Inc., 11.00% due 8/15/2003.......... 11/05/1993 149,625 153,750
Tucson Electric Power Co., 10.732% due 7/01/2013............... 8/03/1993 223,464 227,840
- ----------------------------------------------------------------------------------------------------------------------
TOTAL.......................................................... $1,185,689 $1,216,996
---------- ----------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
90
<PAGE> 92
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES AS OF DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BASIC DOMESTIC
AMERICAN VALUE MONEY EQUITY
BALANCED FOCUS MARKET GROWTH
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value* (Note 1a)......................... $111,781,051 $ 46,052,225 $170,182,924 $ 98,886,198
Cash..................................................... 14,486 -- 5,390 81,004
Interest receivable...................................... 757,630 -- 439,143 --
Dividends receivable..................................... 72,540 80,539 -- 18,820
Receivable for securities sold........................... -- -- -- --
Receivable for capital shares sold....................... 2,909,239 2,822,719 -- 2,602,952
Receivable from investment adviser (Note 2).............. -- -- 20,578 --
Deferred organization expenses (Note 1f)................. -- 3,600 4,020 --
Prepaid registration fees and other assets (Note 1f)..... 1,272 -- 9,983 1,287
Foreign cash............................................. -- -- -- --
------------ ------------ ------------ ------------
Total assets........................................... 115,536,218 48,959,083 170,662,038 101,590,261
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for capital shares redeemed...................... 20,650 -- -- 65,966
Payable for securities purchased......................... -- 1,709,155 -- 2,442,812
Payable to investment adviser (Note 2)................... 50,752 20,560 68,595 57,740
Accrued expenses and other liabilities................... 44,896 22,105 62,090 47,319
------------ ------------ ------------ ------------
Total liabilities...................................... 116,298 1,751,820 130,685 2,613,837
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS............................................... $115,419,920 $ 47,207,263 $170,531,353 $ 98,976,424
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par value+........................... $ 819,974 $ 431,308 $ 17,052,862 $ 472,106
Paid-in capital in excess of par......................... 108,108,763 45,102,816 153,475,757 86,208,596
Undistributed (overdistributed) investment income--net... 1,279,064 153,585 -- --
Undistributed (accumulated) realized capital gains
(losses) and foreign currency transactions--net (Note
5)..................................................... 382,258 (84,612) -- 895,673
Unrealized appreciation/depreciation on investments and
foreign currency transactions--net..................... 4,829,861 1,604,166 2,734 11,400,049
------------ ------------ ------------ ------------
NET ASSETS............................................... $115,419,920 $ 47,207,263 $170,531,353 $ 98,976,424
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
CAPITAL SHARES OUTSTANDING............................... 8,199,743 4,313,085 170,528,619 4,721,063
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE.................................................. $ 14.08 $ 10.95 $ 1.00 $ 20.96
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
* Identified cost........................................ $106,951,190 $ 44,448,059 $170,180,190 $ 87,486,149
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
+ Authorized shares...................................... 100,000,000 100,000,000 100,000,000 100,000,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
91
<PAGE> 93
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL GLOBAL HIGH
FLEXIBLE STRATEGY UTILITY CURRENT
STRATEGY FOCUS FOCUS INCOME
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value* (Note 1a)......................... $190,720,601 $261,347,834 $113,131,201 $159,637,449
Cash..................................................... -- 21,132 11,335 10,518
Interest receivable...................................... 505,549 1,134,757 32,831 3,141,802
Dividends receivable..................................... 88,186 271,486 227,326 --
Receivable for securities sold........................... 3,052,707 4,725 -- --
Receivable for capital shares sold....................... 3,323,319 7,557,095 3,338,787 3,302,657
Receivable from investment adviser (Note 2).............. -- -- -- --
Deferred organization expenses (Note 1f)................. -- 4,020 5,002 --
Prepaid registration fees and other assets (Note 1f)..... 9,919 690 -- 18,844
Foreign cash............................................. -- -- -- --
------------ ------------ ------------ ------------
Total assets........................................... 197,700,281 270,341,739 116,746,482 166,111,270
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for capital shares redeemed...................... 162,370 700 -- 39,814
Payable for securities purchased......................... 2,412,620 469,904 12,128,755 2,470,980
Payable to investment adviser (Note 2)................... 94,873 136,563 48,240 72,339
Accrued expenses and other liabilities................... 253,902 107,391 52,174 99,965
------------ ------------ ------------ ------------
Total liabilities...................................... 2,923,765 714,558 12,229,169 2,683,098
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS............................................... $194,776,516 $269,627,181 $104,517,313 $163,428,172
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par value+........................... $ 1,202,747 $ 2,215,515 $ 980,477 $ 1,355,661
Paid-in capital in excess of par......................... 163,437,304 252,693,893 100,371,469 156,922,503
Undistributed (overdistributed) investment income--net... 1,585,213 1,762,959 558,583 1,096,476
Undistributed (accumulated) realized capital gains
(losses) and foreign currency transactions--net (Note
5)..................................................... 6,688,557 1,249,740 34,110 (117,789)
Unrealized appreciation/depreciation on investments and
foreign currency transactions--net..................... 21,862,695 11,705,074 2,572,674 4,171,321
------------ ------------ ------------ ------------
NET ASSETS............................................... $194,776,516 $269,627,181 $104,517,313 $163,428,172
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
CAPITAL SHARES OUTSTANDING............................... 12,027,465 22,155,153 9,804,762 13,556,613
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE.................................................. $ 16.19 $ 12.17 $ 10.66 $ 12.06
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
* Identified cost........................................ $168,851,966 $249,630,206 $110,566,011 $155,466,128
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
+ Authorized shares...................................... 100,000,000 100,000,000 100,000,000 100,000,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
92
<PAGE> 94
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES AS OF DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATURAL
INTERNATIONAL RESOURCES PRIME QUALITY
EQUITY FOCUS FOCUS BOND EQUITY
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value* (Note 1a)......................... $ 74,357,154 $ 14,404,330 $305,794,971 $311,578,728
Call options purchased, at value (Cost--$131,375) (Notes
1a & 1e)............................................... 39,270 -- -- --
Unrealized appreciation on forward foreign exchange
contracts--net (Note 1h)............................... 529,800 -- -- --
Cash..................................................... 35,175 3,783 311 316,427
Interest receivable...................................... 6,240 -- 5,021,705 23,906
Dividends receivable..................................... 32,853 10,317 -- 169,031
Receivable for securities sold........................... 598,025 -- 1,044,280 2,439,313
Receivable for capital shares sold....................... 3,409,641 381,601 5,387,619 5,158,667
Receivable from investment adviser (Note 2).............. -- -- -- --
Prepaid registration fees and other assets (Note 1f)..... -- 268 9,205 5,147
Foreign cash............................................. 693,271 -- -- --
Deferred organization expenses (Note 1f)................. 6,245 -- -- --
Option receivable........................................ 41,250 -- -- --
Forward exchange contract (Note 1c)...................... 107,840 -- -- --
------------ ------------ ------------ ------------
Total assets........................................... 79,856,764 14,800,299 317,258,091 319,691,219
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Put options written, at value (premiums
received--$118,500) (Notes 1a & 1c).................... 221,740 -- -- --
Payable for capital shares redeemed...................... -- 563 55,575 128,230
Payable for securities purchased......................... 2,567,462 -- 2,856,852 9,910,287
Payable to investment adviser (Note 2)................... 42,260 8,007 129,057 122,695
Variation margin on stock index futures contracts (Note
1i).................................................... 14,358 -- -- --
Accrued expenses and other liabilities................... 43,922 14,167 125,143 110,370
Option purchase.......................................... 41,250 -- -- --
Forward exchange contract (Note 1h)...................... 19,350 -- -- --
------------ ------------ ------------ ------------
Total liabilities...................................... 2,950,342 22,737 3,166,627 10,271,582
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS............................................... $ 76,906,422 $ 14,777,562 $314,091,464 $309,419,637
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par value+........................... $ 697,249 $ 136,573 $ 2,484,213 $ 1,066,357
Paid-in capital in excess of par......................... 71,655,499 14,671,581 304,396,890 266,831,740
Undistributed (overdistributed) investment income--net... 53,487 82,634 1,534,560 1,111,383
Undistributed (accumulated) realized capital gains
(losses) and foreign currency transactions--net (Note
5)..................................................... 115,051 (49,560) 4,191,345 6,554,398
Unrealized appreciation/depreciation on investments and
foreign currency transactions--net..................... 4,385,136 (63,666) 1,484,456 33,855,759
------------ ------------ ------------ ------------
NET ASSETS............................................... $ 76,906,422 $ 14,777,562 $314,091,464 $309,419,637
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
CAPITAL SHARES OUTSTANDING............................... 6,972,495 1,365,728 24,842,132 10,663,572
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE.................................................. $ 11.03 $ 10.82 $ 12.64 $ 29.02
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
* Identified cost........................................ $ 70,454,530 $ 14,467,976 $304,310,515 $277,722,969
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
+ Authorized shares...................................... 100,000,000 100,000,000 100,000,000 100,000,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
93
<PAGE> 95
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES AS OF DECEMBER 31, 1993 (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WORLD
RESERVE INCOME
ASSETS FOCUS
FUND FUND
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value* (Note 1a)...................................................... $ 30,130,004 $ 49,867,831
Unrealized appreciation on forward foreign exchange contracts (Note 1h)............... -- 9,831
Cash.................................................................................. 5,628 --
Interest receivable................................................................... 63,907 1,032,484
Dividends receivable.................................................................. -- --
Receivable for securities sold........................................................ -- --
Receivable for capital shares sold.................................................... -- 2,073,604
Receivable from investment adviser (Note 2)........................................... -- --
Deferred organization expenses (Note 1f).............................................. -- --
Prepaid registration fees and other assets (Note 1f).................................. 2,196 7,099
Foreign cash.......................................................................... -- --
------------ ------------
Total assets........................................................................ 30,201,735 52,990,849
------------ ------------
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for capital shares redeemed................................................... -- --
Payable for securities purchased...................................................... -- 1,669,440
Payable to investment adviser (Note 2)................................................ 12,798 23,536
Accrued expenses and other liabilities................................................ 21,032 560,425
------------ ------------
Total liabilities................................................................... 33,830 2,253,401
------------ ------------
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS............................................................................ $ 30,167,905 $ 50,737,448
------------ ------------
------------ ------------
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par value+........................................................ $ 3,016,083 $ 488,857
Paid-in capital in excess of par...................................................... 27,144,745 49,094,430
Undistributed (overdistributed) investment income--net................................ -- 257,069
Undistributed (accumulated) realized capital gains (losses)
and foreign currency transactions--net.............................................. -- 176,781
Unrealized appreciation/depreciation on investments and foreign
currency transactions--net.......................................................... 7,077 720,311
------------ ------------
NET ASSETS............................................................................ $ 30,167,905 $ 50,737,448
------------ ------------
------------ ------------
- -------------------------------------------------------------------------------------------------------------------
CAPITAL SHARES OUTSTANDING............................................................ 30,160,829 4,888,571
------------ ------------
------------ ------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.............................. $ 1.00 $ 10.38
------------ ------------
------------ ------------
- -------------------------------------------------------------------------------------------------------------------
* Identified cost..................................................................... $ 30,122,927 $ 49,154,015
------------ ------------
------------ ------------
+ Authorized shares................................................................... 700,000,000 100,000,000
------------ ------------
------------ ------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
94
<PAGE> 96
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BASIC DOMESTIC
AMERICAN VALUE MONEY EQUITY
BALANCED FOCUS MARKET GROWTH
FUND FUND+ FUND FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME (NOTES 1D & 1E):
Interest and discount earned*................................ $1,665,280 $ 74,035 $3,090,335 $ 222,025
Dividends*................................................... 649,751 157,366 -- 252,221
Other income................................................. -- -- -- --
---------- ---------- ---------- -----------
Total income................................................. 2,315,031 231,401 3,090,335 474,246
---------- ---------- ---------- -----------
- ------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2)............................ 326,591 54,569 462,020 393,786
Transfer agent fees (Note 2)................................. 6,746 2,554 5,168 7,845
Custodian fees............................................... 21,426 8,063 9,750 27,826
Professional fees............................................ 12,276 391 16,391 9,525
Registration fees (Note 1f).................................. 25,510 9,003 43,828 19,665
Directors' fees and expenses................................. 2,149 53 2,700 2,992
Accounting services (Note 2)................................. 19,697 2,645 38,498 35,714
Pricing services............................................. -- -- -- --
Amortization of organization expenses (Note 1f).............. -- 400 -- --
Other........................................................ 1,927 138 3,361 1,789
---------- ---------- ---------- -----------
Total expenses before reimbursement.......................... 416,322 77,816 581,716 499,142
Reimbursement of expenses (Note 2)........................... -- -- (246,351) --
---------- ---------- ---------- -----------
Total expenses--net of reimbursement......................... 416,322 77,816 335,365 499,142
---------- ---------- ---------- -----------
Investment income (loss)--net................................ 1,898,709 153,585 2,754,970 (24,896)
---------- ---------- ---------- -----------
- ------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS--NET (NOTES 1B, 1E & 3):
Realized gain (loss) on investments--net..................... 381,401 (84,612) 41,187 3,639,264
Realized gain (loss) on foreign currency transactions--net... -- -- -- --
Change in unrealized appreciation/depreciation on
investments--net........................................... 3,571,478 1,604,166 (1,652) 7,724,322
Change in unrealized appreciation/depreciation on currency
transactions--net.......................................... -- -- -- --
---------- ---------- ---------- -----------
Total realized and unrealized gain (loss) on investments and
foreign currency transactions--net......................... 3,952,879 1,519,554 39,535 11,363,586
---------- ---------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................. $5,851,588 $1,673,139 $2,794,505 $11,338,690
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
- ------------------------------------------------------------------------------------------------------------------------
* Net of withholding tax..................................... $ -- $ 712 $ -- $ 370
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The Fund commenced operations on July 1, 1993.
See Notes to Financial Statements.
95
<PAGE> 97
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL GLOBAL HIGH
FLEXIBLE STRATEGY UTILITY CURRENT
STRATEGY FOCUS FOCUS INCOME
FUND FUND FUND+ FUND
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME (NOTES 1D & 1E):
Interest and discount earned*............................. $ 2,373,016 $ 1,747,217 $ 307,737 $ 7,404,967
Dividends*................................................ 1,403,692 1,199,987 581,834 52,902
Other income.............................................. 13,604 -- -- 3,162
----------- ----------- ---------- -----------
Total income.............................................. 3,790,312 2,947,204 889,571 7,461,031
----------- ----------- ---------- -----------
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2)......................... 803,592 582,082 142,995 439,699
Transfer agent fees (Note 2).............................. 7,841 5,840 2,653 7,411
Custodian fees............................................ 50,668 89,850 25,126 26,730
Professional fees......................................... 21,558 12,508 1,379 10,342
Registration fees (Note 1f)............................... 32,546 53,895 28,706 30,644
Directors' fees and expenses.............................. 6,679 1,580 134 2,347
Accounting services (Note 2).............................. 58,069 31,561 9,227 50,406
Pricing services.......................................... 6,355 7,439 1,210 2,108
Amortization of organization expenses (Note 1f)........... -- 1,340 435 --
Other..................................................... 5,626 1,485 215 2,136
----------- ----------- ---------- -----------
Total expenses before reimbursement....................... 992,934 787,580 212,080 571,823
Reimbursement of expenses (Note 2)........................ -- -- -- --
----------- ----------- ---------- -----------
Total expenses--net of reimbursement...................... 992,934 787,580 212,080 571,823
----------- ----------- ---------- -----------
Investment income (loss)--net............................. 2,797,378 2,159,624 677,491 6,889,208
----------- ----------- ---------- -----------
- -----------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS--NET (NOTES 1B, 1E & 3):
Realized gain (loss) on investments--net.................. 6,460,171 1,230,629 33,513 615,071
Realized gain (loss) on foreign currency
transactions--net....................................... 238,214 34,587 597 --
Change in unrealized appreciation/depreciation on
investments--net........................................ 11,288,425 11,704,702 2,565,190 4,541,949
Change in unrealized appreciation/depreciation on currency
transactions--net....................................... (5,532) (10,236) 7,484 --
----------- ----------- ---------- -----------
Total realized and unrealized gain (loss) on investments
and foreign currency transactions--net.................. 17,981,278 12,959,682 2,606,784 5,157,020
----------- ----------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. $20,778,656 $15,119,306 $3,284,275 $12,046,228
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
- -----------------------------------------------------------------------------------------------------------------------
* Net of withholding tax.................................. $ 54,406 $ 124,209 $ 18,294 $ --
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The Fund commenced operations on July 1, 1993.
See Notes to Financial Statements.
96
<PAGE> 98
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL NATURAL
EQUITY RESOURCES PRIME QUALITY
FOCUS FOCUS BOND EQUITY
FUND+ FUND FUND FUND
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME (NOTES 1D & 1E):
Interest and discount earned*................................ $ 132,598 $ 28,031 $11,866,781 $ 665,734
Dividends*................................................... 124,532 198,183 -- 2,281,319
Other income................................................. -- -- 108,833 --
---------- -------- ----------- -----------
Total income................................................. 257,130 226,214 11,975,614 2,947,053
---------- -------- ----------- -----------
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2)............................ 133,754 59,420 918,563 874,617
Transfer agent fees (Note 2)................................. 2,569 6,880 10,265 7,475
Custodian fees............................................... 43,366 12,643 33,099 31,890
Professional fees............................................ 1,011 4,339 34,485 31,658
Registration fees (Note 1f).................................. 16,806 2,491 70,039 60,423
Directors' fees and expenses................................. 118 379 7,148 7,328
Accounting services (Note 2)................................. 5,079 16,397 40,300 57,796
Pricing services............................................. 100 -- 41,374 --
Amortization of organization expenses (Note 1f).............. 700 -- -- --
Other........................................................ 140 768 5,849 5,734
---------- -------- ----------- -----------
Total expenses before reimbursement.......................... 203,643 103,317 1,161,122 1,076,921
Reimbursement of expenses (Note 2)........................... -- -- -- --
---------- -------- ----------- -----------
Total expenses--net of reimbursement......................... 203,643 103,317 1,161,122 1,076,921
---------- -------- ----------- -----------
Investment income (loss)--net................................ 53,487 122,897 10,814,492 1,870,132
---------- -------- ----------- -----------
- -----------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS--NET (NOTES 1B, 1E & 3):
Realized gain (loss) on investments--net..................... (176,770) 64,649 4,199,723 6,568,052
Realized gain (loss) on foreign currency transactions--net... 291,821 42 -- (8)
Change in unrealized appreciation/depreciation on
investments--net........................................... 4,048,621 (85,110) 200,559 20,450,896
Change in unrealized appreciation/depreciation on currency
transactions--net.......................................... 336,515 (24) -- --
---------- -------- ----------- -----------
Total realized and unrealized gain (loss) on investments and
foreign currency transactions--net......................... 4,500,187 (20,443) 4,400,282 27,018,940
---------- -------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................. $4,553,674 $102,454 $15,214,774 $28,889,072
---------- -------- ----------- -----------
---------- -------- ----------- -----------
- -----------------------------------------------------------------------------------------------------------------------
* Net of withholding tax..................................... $ 13,838 $ 5,359 $ -- $ 40,626
---------- -------- ----------- -----------
---------- -------- ----------- -----------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The Fund commenced operations on July 1, 1993.
See Notes to Financial Statements.
97
<PAGE> 99
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1993 (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WORLD
RESERVE INCOME
ASSETS FOCUS
FUND FUND+
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME (NOTES 1D & 1E):
Interest and discount earned*............................................................. $953,880 $1,041,858
Dividends*................................................................................ -- --
Other income.............................................................................. -- --
-------- ----------
Total income.............................................................................. 953,880 1,041,858
-------- ----------
- --------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2)......................................................... 141,301 88,050
Transfer agent fees (Note 2).............................................................. 7,154 2,575
Custodian fees............................................................................ 7,950 16,568
Professional fees......................................................................... 7,986 665
Registration fees (Note 1f)............................................................... 994 11,505
Directors' fees and expenses.............................................................. 2,210 106
Accounting services (Note 2).............................................................. 27,119 4,865
Amortization of organization expenses (Note 1f)........................................... -- 789
Pricing services.......................................................................... -- 12,114
Other..................................................................................... 1,717 133
-------- ----------
Total expenses before reimbursement....................................................... 196,431 137,370
Reimbursement of expenses (Note 2)........................................................ -- --
-------- ----------
Total expenses--net of reimbursement...................................................... 196,431 137,370
-------- ----------
Investment income (loss)--net............................................................. 757,449 904,488
-------- ----------
- --------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS--NET (NOTES 1B, 1E & 3):
Realized gain (loss) on investments--net.................................................. 15,302 101,414
Realized gain (loss) on foreign currency transactions--net................................ -- 75,366
Change in unrealized appreciation/depreciation on investments--net........................ (173) 713,816
Change in unrealized appreciation/depreciation on currency transactions--net.............. -- 6,495
-------- ----------
Total realized and unrealized gain (loss) on investments and foreign currency
transactions--net....................................................................... 15,129 897,091
-------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................... $772,578 $1,801,579
-------- ----------
-------- ----------
- --------------------------------------------------------------------------------------------------------------------
* Net of withholding tax.................................................................. $ -- $ 11,636
-------- ----------
-------- ----------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The Fund commenced operations on July 1, 1993.
See Notes to Financial Statements.
98
<PAGE> 100
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN BALANCED FUND
-----------------------------
FOR THE YEAR ENDED DECEMBER
31,
-----------------------------
INCREASE (DECREASE) IN NET ASSETS: 1993 1992
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net.............................................................. $ 1,898,709 $ 551,068
Realized gain on investments and foreign currency transactions--net................. 381,401 228,607
Change in unrealized appreciation/depreciation on investments--net.................. 3,571,478 415,741
------------ -----------
Net increase in net assets resulting from operations................................ 5,851,588 1,195,416
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net.............................................................. (975,251) (342,416)
Realized and unrealized gain on investments--net.................................... (227,751) (185,720)
------------ -----------
Net decrease in net assets resulting from dividends and distributions to
shareholders...................................................................... (1,203,002) (528,136)
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase in net assets derived from capital share transactions.................. 85,853,104 16,314,371
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase in net assets........................................................ 90,501,690 16,981,651
Beginning of period................................................................. 24,918,230 7,936,579
------------ -----------
End of period*...................................................................... $115,419,920 $24,918,230
------------ -----------
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
* Undistributed investment income--net.............................................. $ 1,279,064 $ 355,606
------------ -----------
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
99
<PAGE> 101
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BASIC VALUE FOCUS FUND
-------------------------------
FOR THE PERIOD JULY 1, 1993+ TO
INCREASE (DECREASE) IN NET ASSETS: DECEMBER 31, 1993
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net.............................................................. $ 153,585
Realized gain (loss) on investments and foreign currency transactions--net.......... (84,612)
Change in unrealized appreciation/depreciation on investments--net.................. 1,604,166
-------------
Net increase in net assets resulting from operations................................ 1,673,139
-------------
- ----------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net.............................................................. --
Realized and unrealized gain on investments--net.................................... --
-------------
Net decrease in net assets resulting from dividends and distributions to
shareholders...................................................................... --
-------------
- ----------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase in net assets derived from capital share transactions.................. 43,534,024
-------------
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase in net assets........................................................ 45,207,163
Beginning of period................................................................. 2,000,100
-------------
End of period*...................................................................... $47,207,263
-------------
-------------
- ----------------------------------------------------------------------------------------------------------------------
* Undistributed investment income--net.............................................. $ 153,585
-------------
-------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Commencement of Operations.
See Notes to Financial Statements.
100
<PAGE> 102
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY GROWTH FUND
DOMESTIC MONEY ----------------------------
MARKET FUND
- ------------------------------------------- FOR THE YEAR ENDED DECEMBER
FOR THE YEAR FOR THE PERIOD 31,
ENDED FEBRUARY 20, 1992+ ----------------------------
DECEMBER 31, 1993 TO DECEMBER 31, 1992 1993 1992
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------
$ 2,754,970 $ 507,987 $ (24,896) $ 5,872
41,187 16,865 3,639,264 (391,529)
(1,652) 4,386 7,724,322 983,789
- ----------------- -------------------- ----------- -----------
2,794,505 529,238 11,338,690 598,132
- ----------------- -------------------- ----------- -----------
- ---------------------------------------------------------------------------------
(2,754,970) (507,987) (5,834) (47,447)
(41,187) (16,865) -- --
- ----------------- -------------------- ----------- -----------
(2,796,157) (524,852) (5,834) (47,447)
- ----------------- -------------------- ----------- -----------
- ---------------------------------------------------------------------------------
129,405,088 39,123,431 64,476,432 11,298,272
- ----------------- -------------------- ----------- -----------
- ---------------------------------------------------------------------------------
129,403,436 39,127,817 75,809,289 11,848,957
41,127,917 2,000,100 23,167,135 11,318,178
- ----------------- -------------------- ----------- -----------
$ 170,531,353 $ 41,127,917 $98,976,424 $23,167,135
- ----------------- -------------------- ----------- -----------
- ----------------- -------------------- ----------- -----------
- ---------------------------------------------------------------------------------
$ -- $ -- $ -- $ --
- ----------------- -------------------- ----------- -----------
- ----------------- -------------------- ----------- -----------
- ---------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
101
<PAGE> 103
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLEXIBLE STRATEGY FUND
-----------------------------
FOR THE YEAR ENDED DECEMBER
31,
-----------------------------
INCREASE (DECREASE) IN NET ASSETS: 1993 1992
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net.............................................................. $ 2,797,378 $ 1,666,621
Realized gain (loss) on investments and foreign currency transactions--net.......... 6,698,385 2,290,915
Change in unrealized appreciation/depreciation on investments--net.................. 11,288,425 (488,639)
Change in unrealized appreciation/depreciation on currency transactions--net........ (5,532) (3,631)
------------ -----------
Net increase in net assets resulting from operations................................ 20,778,656 3,465,266
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net.............................................................. (1,224,834) (2,438,767)
Realized and unrealized gain on investments--net.................................... (235,661) (3,175,999)
------------ -----------
Net decrease in net assets resulting from dividends and distributions to
shareholders...................................................................... (1,460,495) (5,614,766)
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase in net assets derived from capital share transactions.................. 92,909,143 29,477,979
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase in net assets........................................................ 112,227,304 27,328,479
Beginning of period................................................................. 82,549,212 55,220,733
------------ -----------
End of period*...................................................................... $194,776,516 $82,549,212
------------ -----------
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
* Undistributed investment income--net.............................................. $ 1,585,213 $ 9,152
------------ -----------
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Commencement of Operations.
See Notes to Financial Statements.
102
<PAGE> 104
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL STRATEGY FOCUS FUND
- ------------------------------------------- GLOBAL UTILITY FOCUS FUND
FOR THE YEAR FOR THE PERIOD -------------------------------
ENDED FEBRUARY 28, 1992+ FOR THE PERIOD JULY 1, 1993+ TO
DECEMBER 31, 1993 TO DECEMBER 31, 1992 DECEMBER 31, 1993
<S> <C> <C>
- ------------------------------------------------------------------------------------
$ 2,159,624 $ 164,192 $ 677,491
1,265,216 (15,476) 34,110
11,704,702 12,926 2,565,190
(10,236) (2,318) 7,484
- ----------------- -------------------- ---------------
15,119,306 159,324 3,284,275
- ----------------- -------------------- ---------------
- ------------------------------------------------------------------------------------
(531,339) (29,518) (118,908)
-- -- --
- ----------------- -------------------- ---------------
(531,339) (29,518) (118,908)
- ----------------- -------------------- ---------------
- ------------------------------------------------------------------------------------
239,511,867 13,397,441 99,351,846
- ----------------- -------------------- ---------------
- ------------------------------------------------------------------------------------
254,099,834 13,527,247 102,517,213
15,527,347 2,000,100 2,000,100
- ----------------- -------------------- ---------------
$ 269,627,181 $ 15,527,347 $ 104,517,313
- ----------------- -------------------- ---------------
- ----------------- -------------------- ---------------
- ------------------------------------------------------------------------------------
$ 1,762,959 $ 134,674 $ 558,583
- ----------------- -------------------- ---------------
- ----------------- -------------------- ---------------
- ------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
103
<PAGE> 105
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH CURRENT INCOME FUND
-----------------------------
FOR THE YEAR ENDED DECEMBER
31,
-----------------------------
INCREASE (DECREASE) IN NET ASSETS: 1993 1992
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net.............................................................. $ 6,889,208 $ 1,671,914
Realized gain (loss) on investments and foreign currency transactions--net.......... 615,071 120,708
Change in unrealized appreciation/depreciation on investments--net.................. 4,541,949 760,863
Change in unrealized appreciation/depreciation on currency transactions--net........ -- --
------------ -----------
Net increase in net assets resulting from operations................................ 12,046,228 2,553,485
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net.............................................................. (6,035,740) (1,522,781)
Realized and unrealized gain on investments--net.................................... -- --
------------ -----------
Net decrease in net assets resulting from dividends and distributions to
shareholders...................................................................... (6,035,740) (1,522,781)
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase in net assets derived from capital share transactions.................. 131,074,555 15,663,036
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase in net assets........................................................ 137,085,043 16,693,740
Beginning of period................................................................. 26,343,129 9,649,389
------------ -----------
End of period*...................................................................... $163,428,172 $26,343,129
------------ -----------
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
* Undistributed investment income--net.............................................. $ 1,096,476 $ 243,004
------------ -----------
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Commencement of Operations.
See Notes to Financial Statements.
104
<PAGE> 106
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATURAL RESOURCES FOCUS
FUND
---------------------------
INTERNATIONAL EQUITY FOCUS FUND FOR THE YEAR ENDED
- ------------------------------- DECEMBER 31,
FOR THE PERIOD JULY 1, 1993+ TO ---------------------------
DECEMBER 31, 1993 1993 1992
<S> <C> <C>
- --------------------------------------------------------------------
$ 53,487 $ 122,897 $ 71,479
115,051 64,691 (110,450)
4,048,621 (85,110) 81,927
336,515 (24) 4
------------- ----------- ----------
4,553,674 102,454 42,960
------------- ----------- ----------
- --------------------------------------------------------------------
-- (40,449) (106,437)
-- -- (19,447)
------------- ----------- ----------
-- (40,449) (125,884)
------------- ----------- ----------
- --------------------------------------------------------------------
64,352,648 10,571,877 1,142,825
------------- ----------- ----------
- --------------------------------------------------------------------
68,906,322 10,633,882 1,060,001
8,000,100 4,143,680 3,083,679
------------- ----------- ----------
$76,906,422 $14,777,562 $4,143,680
------------- ----------- ----------
------------- ----------- ----------
- --------------------------------------------------------------------
$ 53,487 $ 82,634 $ 186
------------- ----------- ----------
------------- ----------- ----------
- --------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
105
<PAGE> 107
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME BOND FUND
-----------------------------
FOR THE YEAR ENDED DECEMBER
31,
-----------------------------
INCREASE (DECREASE) IN NET ASSETS: 1993 1992
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net.............................................................. $ 10,814,492 $ 3,773,379
Realized gain (loss) on investments and foreign currency transactions--net.......... 4,199,723 1,133,106
Change in unrealized appreciation/depreciation on investments--net.................. 200,559 (935,353)
Change in unrealized appreciation/depreciation on currency transactions--net........ -- --
------------ -----------
Net increase in net assets resulting from operations................................ 15,214,774 3,971,132
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net.............................................................. (9,710,533) (3,604,131)
Realized and unrealized gain on investments--net.................................... (752,637) --
------------ -----------
Net decrease in net assets resulting from dividends and distributions to
shareholders...................................................................... (10,463,170) (3,604,131)
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase (decrease) in net assets derived from capital share transactions....... 224,530,037 44,700,280
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets............................................. 229,281,641 45,067,281
Beginning of period................................................................. 84,809,823 39,742,542
------------ -----------
End of period*...................................................................... $314,091,464 $84,809,823
------------ -----------
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
* Undistributed investment income--net.............................................. $ 1,534,560 $ 430,601
------------ -----------
------------ -----------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Commencement of Operations.
See Notes to Financial Statements.
106
<PAGE> 108
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUALITY EQUITY FUND RESERVE ASSETS FUND
- ----------------------------- ----------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED WORLD INCOME FOCUS FUND
DECEMBER 31, DECEMBER 31, -------------------------------
- ----------------------------- ---------------------------- FOR THE PERIOD JULY 1, 1993+ TO
1993 1992 1993 1992 DECEMBER 31, 1993
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 1,870,132 $ 1,015,610 $ 757,449 $ 940,130 $ 904,488
6,568,044 2,097,924 15,302 45,971 176,780
20,450,896 202,444 (173) (25,438) 713,816
-- -- -- -- 6,495
- ------------ ----------- ----------- ----------- -------------
28,889,072 3,315,978 772,578 960,663 1,801,579
- ------------ ----------- ----------- ----------- -------------
- ------------------------------------------------------------------------------------------------------------
(758,750) (1,554,668) (757,449) (940,130) (647,419)
(236,123) (2,663,160) (15,302) (13,284) --
- ------------ ----------- ----------- ----------- -------------
(994,873) (4,217,828) (772,751) (953,414) (647,419)
- ------------ ----------- ----------- ----------- -------------
- ------------------------------------------------------------------------------------------------------------
193,548,727 33,873,740 3,400,720 (7,602,390) 41,583,188
- ------------ ----------- ----------- ----------- -------------
- ------------------------------------------------------------------------------------------------------------
221,442,926 32,971,890 3,400,547 (7,595,141) 42,737,348
87,976,711 55,004,821 26,767,358 34,362,499 8,000,100
- ------------ ----------- ----------- ----------- -------------
$309,419,637 $87,976,711 $30,167,905 $26,767,358 $50,737,448
- ------------ ----------- ----------- ----------- -------------
- ------------ ----------- ----------- ----------- -------------
- ------------------------------------------------------------------------------------------------------------
$ 1,111,383 $ (106,252) $ -- $ -- $ 257,069
- ------------ ----------- ----------- ----------- -------------
- ------------ ----------- ----------- ----------- -------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
107
<PAGE> 109
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN BALANCED FUND
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN -------------------------------------------------------------
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL
STATEMENTS. FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value beginning of period.......................... $ 12.85 $ 12.82 $ 11.26 $ 11.74 $ 10.41
--------- -------- -------- -------- --------
Investment income--net....................................... .32 .31 .47 .47 .44
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net......................... 1.37 .37 1.76 (.35) 1.40
--------- -------- -------- -------- --------
Total from investment operations............................. 1.69 .68 2.23 .12 1.84
--------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net..................................... (.34) (.37) (.49) (.46) (.50)
Realized gain on investments--net.......................... (.12) (.28) (.18) (.14) (.01)
--------- -------- -------- -------- --------
Total dividends and distributions............................ (.46) (.65) (.67) (.60) (.51)
--------- -------- -------- -------- --------
Net asset value, end of period............................... $ 14.08 $ 12.85 $ 12.82 $ 11.26 $ 11.74
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:*
Based on net asset value per share........................... 13.49% 5.72% 20.65% 1.22% 18.11%
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement............................... .70% .97% 1.20% 1.25% 1.25%
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
Expenses..................................................... .70% .97% 1.20% 1.50% 2.29%
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
Investment income (loss)--net................................ 3.20% 3.71% 4.16% 4.71% 4.71%
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
Investment income--net, and realized gain (loss) on
investments--net........................................... -- -- -- -- --
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)..................... $ 115,420 $ 24,918 $ 7,937 $ 5,675 $ 3,854
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
Portfolio turnover........................................... 12.55% 36.34% 50.82% 23.52% 37.60%
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
108
<PAGE> 110
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED
FROM INFORMATION PROVIDED IN THE FINANCIAL
STATEMENTS.
INCREASE (DECREASE) IN NET ASSET VALUE: BASIC VALUE
FOCUS FUND DOMESTIC MONEY MARKET FUND
-------------------- -----------------------------------------
FOR THE PERIOD FOR THE YEAR FOR THE PERIOD
JULY 1, 1993+ ENDED FEBRUARY 28, 1992+
TO DECEMBER 31, 1993 DECEMBER 31, 1993 TO DECEMBER 31, 1992
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value beginning of period............... $ 10.00 $ 1.00 $ 1.00
-------- ----------------- --------
Investment income--net............................ .04 .0302 .0302
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net.......... .91 .0005 .0013
-------- ----------------- --------
Total from investment operations.................. .95 .0307 .0315
-------- ----------------- --------
Less dividends and distributions:
Investment income--net.......................... -- (.0302) (.0302)
Realized gain on investments--net............... -- (.0005) (.0010)
-------- ----------------- --------
Total dividends and distributions................. -- (.0307) (.0312)
-------- ----------------- --------
Net asset value, end of period.................... $ 10.95 $ 1.00 $ 1.00
-------- ----------------- --------
-------- ----------------- --------
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share................ 9.50%++ 3.10 3.16%++
-------- ----------------- --------
-------- ----------------- --------
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement.................... .86%* .36% .32%*
-------- ----------------- --------
-------- ----------------- --------
Expenses.......................................... .86%* .63% .88%*
-------- ----------------- --------
-------- ----------------- --------
Investment income (loss)--net..................... 1.69%* -- --
-------- ----------------- --------
-------- ----------------- --------
Investment income--net, and realized gain (loss)
on investments--net............................. --* 3.03% 3.48%*
-------- ----------------- --------
-------- ----------------- --------
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).......... $ 47,207 $ 170,531 $ 41,128
-------- ----------------- --------
-------- ----------------- --------
Portfolio turnover................................ 30.86% -- --
-------- ----------------- --------
-------- ----------------- --------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of Operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
109
<PAGE> 111
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY GROWTH FUND
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN ------------------------------------------------------------
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1993++ 1992++ 1991 1990 1989
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value beginning of period........................... $ 17.80 $ 17.96 $ 11.98 $ 13.70 $ 11.75
-------- -------- -------- -------- --------
Investment income--net........................................ (.01) .01 .09 .05 (.07)
Realized and unrealized gain (loss) on investments--net....... 3.17 (.10) 5.91 (1.77) 2.02
-------- -------- -------- -------- --------
Total from investment operations.............................. 3.16 (.09) 6.00 (1.72) 1.95
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net...................................... -- (.07) (.02) -- --
Realized gain on investments--net........................... -- -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions............................. -- (.07) (.02) -- --
-------- -------- -------- -------- --------
Net asset value, end of period................................ $ 20.96 $ 17.80 $ 17.96 $ 11.98 $ 13.70
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:*
Based on net asset value per share............................ 17.78% (0.53%) 50.10% (12.55%) 16.60%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement................................ .96% 1.18% 1.25% 1.25% 1.25%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Expenses...................................................... .96% 1.18% 1.28% 1.47% 1.53%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Investment income (loss)--net................................. (.05%) .04% .51% .14% (.68%)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Investment income--net, and realized gain (loss) on
investments--net............................................ -- -- -- -- --
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)...................... $ 98,976 $ 23,167 $ 11,318 $ 6,851 $ 6,811
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Portfolio turnover............................................ 131.75% 98.64% 79.10% 135.24% 100.49%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total investment returns exclude the effects of sales loads.
++ Based on average number of shares outstanding during the year.
See Notes to Financial Statements.
110
<PAGE> 112
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLEXIBLE STRATEGY FUND
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN -------------------------------------------------------------
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL
STATEMENTS. FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value beginning of period.......................... $ 14.15 $ 14.79 $ 12.55 $ 12.44 $ 10.84
--------- -------- -------- -------- --------
Investment income--net....................................... .28 .33 .47 .65 .48
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net......................... 1.94 .25 2.52 (.08) 1.67
--------- -------- -------- -------- --------
Total from investment operations............................. 2.22 .58 2.99 .57 2.15
--------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net..................................... (.15) (.54) (.66) (.46) (.55)
Realized gain on investments--net.......................... (.03) (.68) (.09) -- --
--------- -------- -------- -------- --------
Total dividends and distributions............................ (.18) (1.22) (.75) (.46) (.55)
--------- -------- -------- -------- --------
Net asset value, end of period............................... $ 16.19 $ 14.15 $ 14.79 $ 12.55 $ 12.44
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:*
Based on net asset value per share........................... 15.80% 4.25% 24.98% 4.81% 20.29%
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement............................... .80% .90% .96% 1.08% 1.19%
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
Expenses..................................................... .80% .90% .96% 1.08% 1.19%
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
Investment income--net....................................... 2.26% 2.62% 3.51% 5.19% 3.94%
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
Investment income--net, and realized gain (loss) on
investments--net........................................... -- -- -- -- --
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)..................... $ 194,777 $82,549 $ 55,221 $ 47,428 $47,837
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
Portfolio turnover........................................... 56.42% 55.25% 67.13% 52.95% 83.31%
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
111
<PAGE> 113
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN
DERIVED FROM INFORMATION PROVIDED IN THE
FINANCIAL STATEMENTS.
INCREASE (DECREASE) IN NET ASSET VALUE: GLOBAL STRATEGY FOCUS GLOBAL UTILITY FOCUS
FUND FUND
----------------------------------------- --------------------
FOR THE YEAR FOR THE PERIOD FOR THE PERIOD
ENDED FEBRUARY 28, 1992+ JULY 1, 1993+
DECEMBER 31, 1993 TO DECEMBER 31, 1992 TO DECEMBER 31, 1993
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value beginning of period......... $ 10.22 $ 10.00 $ 10.00
----------------- -------- ----------
Investment income--net...................... .07 .13 .04
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net......................... 1.96 .13 .64
----------------- -------- ----------
Total from investment operations............ 2.03 .26 .68
----------------- -------- ----------
Less dividends and distributions:
Investment income--net.................... (.08) (.04) (.02)
Realized gain on investments--net......... -- -- --
----------------- -------- ----------
Total dividends and distributions........... (.08) (.04) (.02)
----------------- -------- ----------
Net asset value, end of period.............. $ 12.17 $ 10.22 $ 10.66
----------------- -------- ----------
----------------- -------- ----------
- ---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share.......... 21.03% 2.62%++ 6.85%++
----------------- -------- ----------
----------------- -------- ----------
- ---------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement.............. .88% 1.25%* .89%*
----------------- -------- ----------
----------------- -------- ----------
Expenses.................................... .88% 1.35%* .89%*
----------------- -------- ----------
----------------- -------- ----------
Investment income--net...................... 2.41% 2.66%* 2.84%*
----------------- -------- ----------
----------------- -------- ----------
Investment income--net, and realized gain
(loss) on investments--net................ -- -- --
----------------- -------- ----------
----------------- -------- ----------
- ---------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).... $ 269,627 $15,527 $104,517
----------------- -------- ----------
----------------- -------- ----------
Portfolio turnover.......................... 17.07% 14.47% 1.72%
----------------- -------- ----------
----------------- -------- ----------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of Operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
112
<PAGE> 114
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH CURRENT INCOME FUND
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN --------------------------------------------------------
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value beginning of period........................... $ 11.13 $ 10.23 $ 8.14 $10.21 $ 10.85
--------- -------- ------ ------ -------
Investment income--net........................................ .95 1.07 1.19 1.40 1.29
Realized and unrealized gain (loss) on investments and foreign
currency transactions--net.................................. .95 .90 2.10 (2.08) (.64)
--------- -------- ------ ------ -------
Total from investment operations.............................. 1.90 1.97 3.29 (.68) .65
--------- -------- ------ ------ -------
Less dividends and distributions:
Investment income--net...................................... (.97) (1.07) (1.20) (1.39) (1.29)
Realized gain on investments--net........................... -- -- -- -- --
--------- -------- ------ ------ -------
Total dividends and distributions............................. (.97) (1.07) (1.20) (1.39) (1.29)
--------- -------- ------ ------ -------
Net asset value, end of period................................ $ 12.06 $ 11.13 $10.23 $ 8.14 $ 10.21
--------- -------- ------ ------ -------
--------- -------- ------ ------ -------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:*
Based on net asset value per share............................ 17.84% 20.05% 43.00% (7.63%) 6.14%
--------- -------- ------ ------ -------
--------- -------- ------ ------ -------
- -------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement................................ .72% .89% 1.10% 1.15% 1.22%
--------- -------- ------ ------ -------
--------- -------- ------ ------ -------
Expenses...................................................... .72% .89% 1.10% 1.15% 1.22%
--------- -------- ------ ------ -------
--------- -------- ------ ------ -------
Investment income--net........................................ 8.62% 10.06% 12.49% 14.52% 11.98%
--------- -------- ------ ------ -------
--------- -------- ------ ------ -------
Investment income--net, and realized gain (loss) on
investments--net............................................ -- -- -- -- --
--------- -------- ------ ------ -------
--------- -------- ------ ------ -------
- -------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)...................... $ 163,428 $26,343 $9,649 $8,106 $12,942
--------- -------- ------ ------ -------
--------- -------- ------ ------ -------
Portfolio turnover............................................ 35.67% 28.21% 51.54% 26.43% 53.52%
--------- -------- ------ ------ -------
--------- -------- ------ ------ -------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
113
<PAGE> 115
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN FOCUS FUND
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. ----------------------------
FOR THE PERIOD JULY 1, 1993+
INCREASE (DECREASE) IN NET ASSET VALUE: TO DECEMBER 31, 1993
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value beginning of period................................................... $ 10.00
--------
Investment income--net................................................................ .01
Realized and unrealized gain (loss) on investments and foreign currency
transactions--net................................................................... 1.02
--------
Total from investment operations...................................................... 1.03
--------
Less dividends and distributions:
Investment income--net.............................................................. --
Realized gain on investments--net................................................... --
--------
Total dividends and distributions..................................................... --
--------
Net asset value, end of period........................................................ $ 11.03
--------
--------
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share.................................................... 10.30%++
--------
--------
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement........................................................ 1.14%*
--------
--------
Expenses.............................................................................. 1.14%*
--------
--------
Investment income (loss)--net......................................................... 0.30%*
--------
--------
Investment income--net, and realized gain (loss) on investments--net.................. -- %
--------
--------
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).............................................. $ 76,906
--------
--------
Portfolio turnover.................................................................... 17.39%
--------
--------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of Operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
114
<PAGE> 116
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATURAL RESOURCES FOCUS FUND
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED FROM ------------------------------------------------------------
INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value beginning of period........................... $ 9.84 $ 10.06 $ 10.17 $ 11.09 $ 9.58
-------- -------- -------- -------- --------
Investment income--net........................................ .11 .18 .25 .22 .24
Realized and unrealized gain (loss) on investments and foreign
currency transactions--net.................................. .92 (.05) (.11) (.90) 1.49
-------- -------- -------- -------- --------
Total from investment operations.............................. 1.03 .13 .14 (.68) 1.73
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net...................................... (.05) (.29) (.25) (.24) (.22)
Realized gain on investments--net........................... -- (.06) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions............................. (.05) (.35) (.25) (.24) (.22)
-------- -------- -------- -------- --------
Net asset value, end of period................................ $ 10.82 $ 9.84 $ 10.06 $ 10.17 $ 11.09
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:*
Based on net asset value per share............................ 10.47% 1.36% 1.36% (6.21%) 18.23%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement................................ 1.13% 1.25% 1.25% 1.25% 1.25%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Expenses...................................................... 1.13% 1.27% 1.30% 1.38% 1.74%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Investment income--net........................................ 1.34% 2.00% 2.31% 2.26% 2.26%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Investment income--net, and realized gain (loss) on
investments--net............................................ -- % -- % -- % -- % -- %
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)...................... $ 14,778 $ 4,144 $ 3,084 $ 3,247 $ 2,704
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Portfolio turnover............................................ 58.44% 22.88% 31.38% 27.61% 93.97%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
115
<PAGE> 117
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME BOND FUND
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN --------------------------------------------------------
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL
STATEMENTS. FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value beginning of period......................... $ 12.04 $ 12.02 $ 11.18 $ 11.29 $ 10.81
-------- ------- ------- ------- -------
Investment income--net...................................... .70 .79 .90 .88 .90
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net........................ .71 .04 .84 (.12) .48
-------- ------- ------- ------- -------
Total from investment operations............................ 1.41 .83 1.74 .76 1.38
-------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net.................................... (.70) (.81) (.90) (.87) (.90)
Realized gain on investments--net......................... (.11) -- -- -- --
-------- ------- ------- ------- -------
Total dividends and distributions........................... (.81) (.81) (.90) (.87) (.90)
-------- ------- ------- ------- -------
Net asset value, end of period.............................. $ 12.64 $ 12.04 $ 12.02 $ 11.18 $ 11.29
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:*
Based on net asset value per share.......................... 12.02% 7.27% 16.41% 7.13% 13.29%
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement.............................. .63% .78% .78% 1.06% 1.16%
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Expenses.................................................... .63% .78% .78% 1.06% 1.16%
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Investment income--net...................................... 5.86% 6.76% 7.94% 8.01% 8.12%
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................... $314,091 $84,810 $39,743 $34,655 $29,593
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Portfolio turnover.......................................... 115.26% 82.74% 152.18% 155.17% 144.52%
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
116
<PAGE> 118
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUALITY EQUITY FUND
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN ---------------------------------------------------------
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL
STATEMENTS. FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value beginning of period........................ $ 25.48 $ 26.35 $ 21.72 $ 22.88 $ 17.94
--------- ------- ------- ------- -------
Investment income--net..................................... .24 .34 .43 .47 .50
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net....................... 3.46 .32 5.75 (.38) 4.96
--------- ------- ------- ------- -------
Total from investment operations........................... 3.70 .66 6.18 .09 5.46
--------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net................................... (.12) (.58) (.50) (.41) (.52)
Realized gain on investments--net........................ (.04) (.95) (1.05) (.84) --
--------- ------- ------- ------- -------
Total dividends and distributions.......................... (.16) (1.53) (1.55) (1.25) (.52)
--------- ------- ------- ------- -------
Net asset value, end of period............................. $ 29.02 $ 25.48 $ 26.35 $ 21.72 $ 22.88
--------- ------- ------- ------- -------
--------- ------- ------- ------- -------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:*
Based on net asset value per share......................... 14.57% 2.69% 30.18% 0.66% 30.77%
--------- ------- ------- ------- -------
--------- ------- ------- ------- -------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement............................. .62% .74% .79% .94% 1.05%
--------- ------- ------- ------- -------
--------- ------- ------- ------- -------
Expenses................................................... .62% .74% .79% .94% 1.05%
--------- ------- ------- ------- -------
--------- ------- ------- ------- -------
Investment income--net..................................... 1.07% 1.54% 1.87% 2.36% 2.58%
--------- ------- ------- ------- -------
--------- ------- ------- ------- -------
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................... $ 309,420 $87,977 $55,005 $39,470 $31,467
--------- ------- ------- ------- -------
--------- ------- ------- ------- -------
Portfolio turnover......................................... 88.25% 62.54% 55.83% 69.05% 44.23%
--------- ------- ------- ------- -------
--------- ------- ------- ------- -------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
117
<PAGE> 119
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RESERVE ASSETS FUND
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN -------------------------------------------------------
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value beginning of period........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Investment income--net........................................ .0268 .0320 .0546 .0730 .0822
Realized and unrealized gain (loss) on investments and foreign
currency transactions--net.................................. .0005 .0007 .0014 .0019 .0012
------- ------- ------- ------- -------
Total from investment operations.............................. .0273 .0327 .0560 .0749 .0834
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net...................................... (.0268) (.0320) (.0546) (.0730) (.0822)
Realized gain on investments--net........................... (.0005) (.0005) (.0014)+ (.0019)+ (.0012)+
------- ------- ------- ------- -------
Total dividends and distributions............................. (.0273) (.0325) (.0560) (.0749) (.0834)
------- ------- ------- ------- -------
Net asset value, end of period................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
------- ------- ------- ------- -------
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:*
Based on net asset value per share............................ 2.77% 3.29% 5.68% 7.65% 8.62%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses...................................................... .70% .79% .79% .97% 1.03%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Investment income--net, and realized gain (loss) on
investments--net............................................ 2.73% 3.36% 5.64%+ 7.46%+ 8.34%+
------- ------- ------- ------- -------
------- ------- ------- ------- -------
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)...................... $30,168 $26,767 $34,362 $35,871 $29,311
------- ------- ------- ------- -------
------- ------- ------- ------- -------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total investment returns exclude the effects of sales loads.
+ Includes unrealized gain (loss). (See Note 1g.)
See Notes to Financial Statements.
118
<PAGE> 120
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN WORLD INCOME FOCUS FUND
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. -------------------------------
FOR THE PERIOD JULY 1, 1993+ TO
INCREASE (DECREASE) IN NET ASSET VALUE: DECEMBER 31, 1993
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value beginning of period................................................. $ 10.00
--------
Investment income--net.............................................................. .25
Realized and unrealized gain (loss) on investments and foreign currency
transactions--net................................................................. .33
--------
Total from investment operations.................................................... .58
--------
Less dividends and distributions:
Investment income--net............................................................ (.20)
Realized gain on investments--net................................................. --
--------
Total dividends and distributions................................................... (.20)
--------
Net asset value, end of period...................................................... $ 10.38
--------
--------
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:*
Based on net asset value per share.................................................. 5.90%++
--------
--------
- ----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement...................................................... .94%*
--------
--------
Expenses............................................................................ .94%*
--------
--------
Investment income (loss)--net....................................................... 6.20%*
--------
--------
Investment income--net, and realized gain (loss) on investments--net................ -- %
--------
--------
- ----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............................................ $50,737
--------
--------
Portfolio turnover.................................................................. 54.80%
--------
--------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of Operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
119
<PAGE> 121
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES:
Merrill Lynch Variable Series Funds, Inc. (the "Company") is an open-end
management investment company which is comprised of fourteen separate funds
offering fourteen separate classes of shares to the Merrill Lynch Life Insurance
Company, ML Life Insurance Company of New York (indirect wholly-owned
subsidiaries of Merrill Lynch & Co., Inc.), and Family Life Insurance Company
(an insurance company not affiliated with Merrill Lynch & Co., Inc.) separate
accounts to fund benefits under certain variable annuity contracts. Each Fund is
classified as "diversified", as defined in the Investment Company Act of 1940,
except for Natural Resources Focus Fund and the Global Strategy Focus Fund, each
of which is classified as "non-diversified." The following is a summary of
significant accounting policies followed by the Funds.
(a) Valuation of investments--Money market securities 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 the 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.
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 mean between closing bid and asked prices.
Securities traded in the over-the-counter market are valued at the mean between
the bid and asked prices or yield equivalent as obtained from one or more
dealers that make markets in such securities. Portfolio securities which are
traded both in the over-the-counter market and on a stock exchange are valued
according to the broadest and most representative market, and it is expected
that for debt securities this ordinarily will be the over-the-counter market.
Securities 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 Company.
Options which are traded on exchanges are valued at the last bid price in the
case of options purchased and last asked price in the case of options written.
Financial future contracts are valued at settlement price at the close of the
applicable exchange.
(b) 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) receivables or payables expressed in
foreign currencies into US dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on investments.
(c) Options--Flexible Strategy, Quality Equity, Natural Resources Focus,
American Balanced, Global Strategy Focus, Basic Value Focus, World Income Focus,
Global Utility Focus, and International Equity Focus Funds may write covered
call options and purchase put options. When these Funds write an option, an
amount equal to the premium received by the Fund 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 written call option is exercised, the related premium received is added
to the proceeds of the security sold. When an option expires (or the Fund enters
into a closing transaction), the Fund 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 is less than or greater than the premiums
received or paid).
Written and purchased options are non-income producing investments.
(d) Income taxes--It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment
120
<PAGE> 122
- --------------------------------------------------------------------------------
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.
(e) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Dividend income is recorded on the ex-dividend dates except that if the
ex-dividend date has passed, certain dividends from foreign securities are
recorded as soon as the funds are informed of the ex-dividend date. Interest
income (including amortization of premium and discount) is recognized on the
accrual basis. Realized gains and losses on security transactions are determined
on the identified cost basis.
(f) Deferred organization expenses and prepaid registration fees--Deferred
organization expenses are charged to expense on a straight-line basis over a
five year period. Prepaid registration fees are charged to expense as the
related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid by the Funds
are recorded on the ex-dividend dates. This method maintains the Funds' current
valuation of investment policy (see Note 1a). However, unrealized appreciation
or depreciation will not be included in the daily dividend to shareholders.
Dividends are declared from the total of net investment income and net realized
gain or loss on investments.
(h) Foreign exchange contracts--The Funds 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 Funds' records.
However, the effect on operations is recorded from the date the Funds enter into
such contracts. Premium or discount is amortized over the life of the contracts.
(i) Reclassifications--Certain 1992 amounts have been reclassified to conform
to the 1993 presentation.
2. INVESTMENT ADVISORY AGREEMENT AND
TRANSACTIONS WITH AFFILIATES:
The Company has entered into an Investment Advisory Agreement with Merrill Lynch
Asset Management ("MLAM"). MLAM is the name under which Merrill Lynch Investment
Management, Inc. ("MLIM") does business. MLIM is an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. MLAM is responsible for the management
of the Company's portfolios and provided the necessary personnel, facilities,
equipment and certain other services necessary to the operations of the Funds.
Effective January 1, 1994, the investment advisory business of MLAM was
reorganized from a corporation to a limited partnership. The general partner of
MLAM is Princeton Services, Inc., an indirect wholly-owned subsidiary of Merrill
Lynch & Co. The limited partners are Merrill Lynch & Co. and MLIM.
For such services, the Company pays a monthly fee based upon the average
daily value of each Fund's net assets at the following annual rates: American
Balanced Fund, 0.55% of the average daily net assets of the Fund; Basic Value
Focus Fund, 0.60% of average daily net assets of the Fund; Domestic Money Market
Fund, 0.50% of the average daily net assets of the Fund; Equity Growth Fund,
0.75% of the average daily net assets of the Fund; Flexible Strategy Fund, 0.65%
of the average daily net assets of the Fund; Global Strategy Focus Fund, 0.65%
of the average daily net assets of the Fund; Global Utility Focus, 0.60% of the
average daily net assets of the Fund; High Current Income Fund, 0.55% of the
Fund's average daily net assets not exceeding $250 million, and at reduced rates
for average daily net assets in excess of $250 million; International Equity
Focus, 0.75% of average daily net assets of the Fund; Natural Resources Focus
Fund, 0.65% of the average daily net assets of the Fund; Prime Bond Fund, 0.50%
of the Fund's average daily net assets not exceeding $250 million, and at
reduced rates for average daily net assets in excess of $250 million; Quality
Equity Fund, 0.50% of the Fund's average daily net assets not exceeding $250
million, and at reduced rates for average daily net assets in excess of $250
million; and Reserve
121
<PAGE> 123
- --------------------------------------------------------------------------------
Assets Fund, 0.50% of the Fund's average daily net assets not exceeding $500
million, and at reduced rates for average daily net assets in excess of $500
million; and World Income Focus, 0.60% of average daily net assets of the Fund.
The Investment Advisory Agreement obligates MLAM to reimburse the Company, if
in any year the aggregate ordinary operating expenses of any Fund exceed the
most restrictive expense limitations then in effect under any state securities
law or the regulations thereunder. Under the most restrictive state regulations
presently in effect, the Investment Advisor would be required to reimburse each
Fund for advisory fees received by it from the Fund, to the extent that such
Fund's aggregate ordinary operating expenses (excluding interest, taxes,
brokerage fees and commissions, and extraordinary items) exceed in any fiscal
year 2.5% of each Fund's first $30 million of average daily net assets, 2.0% of
the Fund's average daily net assets in excess of $30 million but less tan $100
million, and 1.5% of average daily net assets in excess of $100 million. In
addition, the Investment Adviser, MLAM, and Merrill Lynch Life Agency, Inc.
("MLLA") have entered into an agreement which limits the operating expenses paid
by each Fund to 1.25% of its average daily net assets. Any expenses in excess of
1.25% of average daily net assets will be reimbursed to the Fund by the
Investment Adviser which, in turn, will be reimbursed by MLLA.
For Domestic Money Market Fund, for the year ended December 31, 1993, MLAM has
voluntarily agreed to waive $246,351 of its advisory fee.
Merrill Lynch, Pierce, Fenner & Smith Inc. (MLPF&S), an affiliate of MLIM,
earned commissions on the execution of portfolio security transactions
aggregating $3,860 in the American Balanced Fund, $3,173 in the Basic Value
Focus Fund, $5,610 in the Equity Growth Fund, $17,295 in the Flexible Strategy
Fund, $59,256 in the Global Strategy Focus Fund, $11,815 in the Global Utility
Focus Fund, $8,520 in International Equity Focus Fund, $1,725 in the Natural
Resources Focus Fund and $47,188 in the Quality Equity Fund.
Accounting services are provided to the Fund by MLAM at cost.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of Merrill
Lynch & Co., Inc., is the Fund's transfer agent.
Certain officers and/or directors of the Company are officers and/or directors
of MLIM, FDS, Merrill Lynch Funds Distributor, Inc., a wholly owned subsidiary
of MLIM, which is the Fund's distributor, and/or Merrill Lynch & Co., Inc.
3. INVESTMENTS:
Purchases and sales of investments, excluding short-term securities and
maturities, for the year ended December 31, 1993, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
- ----------------------------------------------------------------
American Balanced Fund............. $ 76,476,739 $ 6,568,473
Basic Value Focus Fund............. 36,468,837 4,292,258
Equity Growth Fund................. 114,186,789 60,092,866
Flexible Strategy Fund............. 172,795,711 91,376,748
Global Strategy Focus Fund......... 202,555,937 13,232,386
Global Utility Focus Fund.......... 81,894,944 581,737
High Current Income Fund........... 145,426,639 26,253,324
International Equity Focus Fund.... 62,933,311 4,642,661
Natural Resources Focus Fund....... 13,643,916 4,676,701
Prime Bond Fund.................... 398,007,600 196,929,420
Quality Equity Fund................ 312,484,148 137,688,316
World Income Focus Fund............ 57,608,250 12,668,475
- ----------------------------------------------------------------
</TABLE>
Transactions in written call and put options for the year ended December 31,
1993, were as follows:
<TABLE>
<CAPTION>
FLEXIBLE STRATEGY FUND
- ----------------------------------------------------------------
NUMBER OF PREMIUMS
CALL OPTIONS WRITTEN SHARES COVERED RECEIVED
- ----------------------------------------------------------------
<S> <C> <C>
Outstanding call options written
at beginning of year............ -- --
Options written.................. 40 $ 8,326
Options expired.................. (25) (5,824)
Options exercised................ (15) (2,502)
-------------- ------------
Outstanding call options written
at end of year.................. -- $ --
-------------- ------------
-------------- ------------
- ----------------------------------------------------------------
</TABLE>
122
<PAGE> 124
- --------------------------------------------------------------------------------
Transactions in written call and put options for the period ended December 31,
1993, were as follows:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FOCUS FUND
- ----------------------------------------------------------------
NUMBER OF PREMIUMS
PUT OPTIONS WRITTEN SHARES COVERED RECEIVED
- ----------------------------------------------------------------
<S> <C> <C>
Outstanding put options written
at beginning of period.......... -- --
Options written.................. $ 15,000,000 $ 118,850
-------------- ------------
Outstanding put options written
at end of period................ $ 15,000,000 $ 118,850
-------------- ------------
-------------- ------------
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
QUALITY EQUITY FUND
- ----------------------------------------------------------------
NUMBER OF PREMIUMS
CALL OPTIONS WRITTEN SHARES COVERED RECEIVED
- ----------------------------------------------------------------
<S> <C> <C>
Outstanding options written at
beginning of year............... -- --
Options written.................. 8,500 $ 17,816
Options expired.................. (5,500) (12,812)
Options exercised................ (3,000) (5,004)
-------------- ------------
Outstanding options written at
end of year..................... -- $ --
-------------- ------------
-------------- ------------
- ----------------------------------------------------------------
</TABLE>
Transactions in call options purchased for the period ended December 31, 1993,
were as follows:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FOCUS FUND
- ----------------------------------------------------------------
NUMBER OF PREMIUMS
CALL OPTIONS PURCHASED SHARES COVERED COST
- ----------------------------------------------------------------
<S> <C> <C>
Outstanding call options
purchased at beginning of
period.......................... -- --
Options purchased................ $ 19,500,000 $ 145,575
Options expired.................. (4,000,000) (14,200)
-------------- ------------
Outstanding call options
purchased at end of period...... $ 15,500,000 $ 131,375
-------------- ------------
-------------- ------------
- ----------------------------------------------------------------
</TABLE>
At December 31, 1993 net unrealized appreciation/depreciation and aggregate
cost for Federal income tax purposes were as follows:
- -------------------------------------------------------
<TABLE>
<CAPTION>
BASIC DOMESTIC
AMERICAN VALUE MONEY EQUITY
BALANCED FOCUS MARKET GROWTH
FUND FUND FUND FUND
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Appreciated
securities........ $ 5,253,985 $ 2,261,984 $ 14,174 $ 13,263,368
Depreciated
securities........ (424,124 ) (657,818) (11,440) (1,863,319)
------------- ------------ ------------ ------------
Net unrealized
appreciation/
depreciation...... $ 4,829,861 $ 1,604,166 $ 2,734 $ 11,400,049
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
Cost for Federal
income tax
purposes*......... $106,951,190 $ 44,448,059 $170,180,190 $ 87,486,149
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
GLOBAL GLOBAL HIGH
FLEXIBLE STRATEGY UTILITY CURRENT
STRATEGY FOCUS FOCUS INCOME
FUND FUND FUND FUND
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Appreciated
securities........ $ 22,800,480 $ 16,477,099 $ 5,285,411 $ 5,234,018
Depreciated
securities........ (931,845 ) (4,759,471) (2,720,221) (1,062,697)
------------- ------------ ------------ ------------
Net unrealized
appreciation/
depreciation...... $ 21,868,635 $ 11,717,628 $ 2,565,190 $ 4,171,321
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
Cost for Federal
income tax
purposes*......... $168,851,966 $249,630,206 $110,566,011 $155,466,128
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
INTERNATIONAL NATURAL
EQUITY RESOURCES PRIME
FOCUS FOCUS BOND
FUND FUND FUND
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Appreciated
securities..................... $ 5,927,605 $ 436,107 $ 3,982,785
Depreciated
securities..................... (2,024,981) (499,753) (2,505,829)
------------ ------------ ------------
Net unrealized appreciation/
depreciation................... $ (3,902,624) $ (63,646) $ 1,476,956
------------ ------------ ------------
------------ ------------ ------------
Cost for Federal income tax
purposes*...................... $ 70,454,530 $ 14,467,976 $304,318,015
------------ ------------ ------------
------------ ------------ ------------
- -------------------------------------------------------------------------------
</TABLE>
123
<PAGE> 125
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WORLD
QUALITY RESERVE INCOME
EQUITY ASSETS FOCUS
FUND FUND FUND
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Appreciated securities.......... $ 34,758,443 $ 9,647 $ 847,505
Depreciated securities.......... (902,684) (2,570) (133,689)
------------ ------------ ------------
Net unrealized
appreciation/depreciation...... $ 33,855,759 $ 7,077 $ 713,816
------------ ------------ ------------
------------ ------------ ------------
Cost for Federal income tax
purposes*...................... $277,722,969 $ 30,122,927 $ 49,154,015
------------ ------------ ------------
------------ ------------ ------------
- ----------------------------------------------------------------------------
</TABLE>
*Net of premiums received on options written.
At December 31, 1993, net realized and unrealized gains (losses) were as
follows:
- -------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AMERICAN BALANCED FUND BASIC VALUE FOCUS FUND
---------------------- ----------------------
Realized Unrealized Realized Unrealized
Gains Gains Gains Gains
(Losses) (Losses) (Losses) (Losses)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term investments.......... $ 381,896 $4,848,878 $ (84,592) $1,604,166
Short-term investments......... (495) (19,017) (20) --
--------- ---------- --------- ----------
$ 381,401 $4,829,861 $ (84,612) $1,604,166
--------- ---------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
DOMESTIC MONEY MARKET
FUND EQUITY GROWTH FUND
----------------------- --------------------------
Realized Unrealized Realized Unrealized
Gains Gains Gains Gains
(Losses) (Losses) (Losses) (Losses)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term investments...... -- -- $ 3,639,259 $ 11,400,049
Short-term investments..... $ 41,187 $ 2,734 5 --
Options written............ -- -- -- --
Foreign currency
transactions.............. -- -- -- --
--------- ----------- ----------- ------------
$ 41,187 $ 2,734 $ 3,639,264 $ 11,400,049
--------- ----------- ----------- ------------
--------- ----------- ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
FLEXIBLE STRATEGY FUND GLOBAL STRATEGY FOCUS FUND
--------------------------- ---------------------------
Realized Unrealized Realized Unrealized
Gains Gains Gains Gains
(Losses) (Losses) (Losses) (Losses)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term investments... $ 6,476,703 $ 21,868,635 $ 1,230,629 $ 11,717,628
Short-term
investments............ (1,272) -- -- --
Foreign currency
transactions........... 238,214 (5,939) 34,587 (12,554)
Financial Futures
Contracts.............. (15,260) -- -- --
------------ ------------ ------------ ------------
$ 6,698,385 $ 21,862,695 $ 1,265,216 $ 11,705,074
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
GLOBAL UTILITY FOCUS FUND HIGH CURRENT INCOME FUND
--------------------------- ---------------------------
Realized Unrealized Realized Unrealized
Gains Gains Gains Gains
(Losses) (Losses) (Losses) (Losses)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term investments... $ 33,546 $ 2,565,190 $ 615,232 $ 4,171,321
Short-term
investments............ (33) -- (161) --
Options written......... -- -- -- --
Foreign currency
transactions........... 597 7,484 -- --
------------ ------------ ------------ ------------
$ 34,110 $ 2,572,674 $ 615,071 $ 4,171,321
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
INTERNATIONAL EQUITY FOCUS NATURAL RESOURCES FOCUS
FUND FUND
--------------------------- ---------------------------
Realized Unrealized Realized Unrealized
Gains Gains Gains Gains
(Losses) (Losses) (Losses) (Losses)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term investments... $ 188,191 $ 3,902,056 $ 64,514 $ (63,636)
Short-term
investments............ (287) 568 135 (10)
Options written......... (14,200) (102,890) -- --
Financial Futures
Contracts.............. (364,674) 145,997 -- --
Options purchased....... -- (92,105) -- --
Foreign currency
transactions........... 306,021 531,510 42 (20)
------------ ------------ ------------ ------------
$ 115,051 4,385,136 $ 64,691 $ (63,666)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
PRIME BOND FUND QUALITY EQUITY FUND
--------------------------- ---------------------------
Realized Realized Unrealized
Gains Unrealized Gains Gains
(Losses) Gains (Losses) (Losses)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term investments.... $ 4,199,757 $ 1,484,456 $ 6,567,931 $ 33,855,759
Short-term investments... (34) -- 121 --
Options written.......... -- -- -- --
Foreign currency
transactions............ -- -- (8) --
------------ ------------ ------------ ------------
$ 4,199,723 $ 1,484,456 $ 6,568,044 $ 33,855,759
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
RESERVE ASSETS FUND WORLD INCOME FOCUS FUND
----------------------- --------------------------
Realized Unrealized Realized Unrealized
Gains Gains Gains Gains
(Losses) (Losses) (Losses) (Losses)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term investments......... -- -- $ 101,797 $ 713,816
Short-term investments........ $ 15,302 $ 7,077 (383) --
Options written............... -- -- -- --
Foreign currency
transactions................. -- -- 75,366 6,495
--------- ----------- ----------- ------------
$ 15,302 $ 7,077 $ 176,780 $ 720,311
--------- ----------- ----------- ------------
--------- ----------- ----------- ------------
- ------------------------------------------------------------------------------------
</TABLE>
124
<PAGE> 126
- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares were as follows:
AMERICAN BALANCED FUND
<TABLE>
<CAPTION>
For the Year Ended Dollar
December 31, 1993 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 6,659,885 $ 91,353,359
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 92,618 1,203,002
------------- -------------
Total issued..................... 6,752,503 92,556,361
Shares redeemed.................. (491,212) (6,703,257)
------------- -------------
Net increase..................... 6,261,291 $ 85,853,104
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1992 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 1,367,773 $ 16,923,962
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 43,421 528,136
------------- -------------
Total issued..................... 1,411,194 17,452,098
Shares redeemed.................. (91,625) (1,137,727)
------------- -------------
Net increase..................... 1,319,569 $ 16,314,371
------------- -------------
------------- -------------
</TABLE>
BASIC VALUE FOCUS FUND
<TABLE>
<CAPTION>
For the Period July 1, 1993+ Dollar
to December 31, 1993 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 4,316,053 $ 47,688,307
Shares issued to shareholders in
reinvestment of dividends and
distributions................... -- --
------------- -------------
Total issued..................... 4,316,053 47,688,307
Shares redeemed.................. (202,978) (2,154,283)
------------- -------------
Net increase..................... 4,113,075 $ 45,534,024
------------- -------------
------------- -------------
- --------------------------------------------------------------------
</TABLE>
+ Prior to July 1, 1993 (commencement of operations), the Fund issued 200,010
shares to MLAM for $2,000,100.
DOMESTIC MONEY MARKET FUND
<TABLE>
<CAPTION>
For the Year Ended Dollar
December 31, 1993 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 371,125,144 $ 371,125,144
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 2,796,153 2,796,153
------------- -------------
Total issued..................... 373,921,297 373,921,297
Shares redeemed.................. (244,516,209) (244,516,209)
------------- -------------
Net increase..................... 129,405,088 $ 129,405,088
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
For the Period February 20, 1992+ Dollar
to December 31, 1992 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 77,059,988 $ 77,059,988
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 522,668 522,668
------------- -------------
Total issued..................... 77,582,656 77,582,656
Shares redeemed.................. (38,459,225) (38,459,225)
------------- -------------
Net increase..................... 39,123,431 $ 39,123,431
------------- -------------
------------- -------------
- --------------------------------------------------------------------
</TABLE>
+ Prior to February 20, 1992 (commencement of operations), the Company issued
2,000,100 shares to MLAM for $2,000,100.
EQUITY GROWTH FUND
<TABLE>
<CAPTION>
For the Year Ended Dollar
December 31, 1993 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 3,715,936 $ 69,928,165
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 330 5,834
------------- -------------
Total issued..................... 3,716,266 69,933,999
Shares redeemed.................. (296,830) (5,457,567)
------------- -------------
Net increase..................... 3,419,436 $ 64,476,432
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1992 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 888,271 $ 14,836,367
Shares issued to shareholders in
reinvestment of dividends....... 2,518 47,447
------------- -------------
Total issued..................... 890,789 14,883,814
Shares redeemed.................. (219,409) (3,585,542)
------------- -------------
Net increase..................... 671,380 $ 11,298,272
------------- -------------
------------- -------------
- --------------------------------------------------------------------
</TABLE>
125
<PAGE> 127
- --------------------------------------------------------------------------------
FLEXIBLE STRATEGY FUND
<TABLE>
<CAPTION>
For the Year Ended Dollar
December 31, 1993 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 6,911,886 103,761,462
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 100,932 1,460,495
------------- -------------
Total issued..................... 7,012,818 105,221,957
Shares redeemed.................. (820,921) (12,310,730)
------------- -------------
Net increase..................... 6,191,897 $ 92,909,143
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1992 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 2,252,323 $ 31,668,961
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 402,362 5,614,766
------------- -------------
Total issued..................... 2,654,685 37,283,727
Shares redeemed.................. (553,710) (7,805,748)
------------- -------------
Net increase..................... 2,100,975 $ 29,477,979
------------- -------------
------------- -------------
- --------------------------------------------------------------------
</TABLE>
GLOBAL STRATEGY FOCUS FUND
<TABLE>
<CAPTION>
For the Year Ended Dollar
December 31, 1993 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 20,813,811 $ 241,520,508
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 35,643 394,216
------------- -------------
Total issued..................... 20,849,454 241,914,724
Shares redeemed.................. (213,171) (2,402,857)
------------- -------------
Net increase..................... 20,636,283 $ 239,511,867
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
For the Period February 28, 1992+ Dollar
to December 31, 1992 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 1,321,900 $ 13,428,045
Shares issued to shareholders in
reinvestment of dividends....... 2,888 29,518
------------- -------------
Total issued..................... 1,324,788 13,457,563
Shares redeemed.................. (5,928) (60,122)
------------- -------------
Net increase..................... 1,318,860 $ 13,397,441
------------- -------------
------------- -------------
- --------------------------------------------------------------------
</TABLE>
+ Prior to February 28, 1992 (commencement of operations), the Company sold
200,010 shares to MLAM for $2,000,100.
GLOBAL UTILITY FOCUS FUND
<TABLE>
<CAPTION>
For the Period July 1, 1993+ Dollar
to December 31, 1993 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 9,794,562 $ 101,325,529
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 11,422 118,908
------------- -------------
Total issued..................... 9,805,984 101,444,437
Shares redeemed.................. (201,232) (2,092,591)
------------- -------------
Net increase..................... 9,604,752 $ 99,351,846
------------- -------------
------------- -------------
- --------------------------------------------------------------------
</TABLE>
+ Prior to July 1, 1993 (commencement of operations), the Company sold 200,010
shares to MLAM for $2,000,100.
HIGH CURRENT INCOME FUND
<TABLE>
<CAPTION>
For the Year Ended Dollar
December 31, 1993 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 11,096,856 $ 130,007,224
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 517,507 6,035,740
------------- -------------
Total issued..................... 11,614,363 136,042,964
Shares redeemed.................. (424,381) (4,968,409)
------------- -------------
Net increase..................... 11,189,982 $ 131,074,555
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1992 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 1,655,403 $ 18,211,484
Shares issued to shareholders in
reinvestment of dividends....... 139,646 1,522,781
------------- -------------
Total issued..................... 1,795,049 19,734,265
Shares redeemed.................. (371,472) (4,071,229)
------------- -------------
Net increase..................... 1,423,577 $ 15,663,036
------------- -------------
------------- -------------
- --------------------------------------------------------------------
</TABLE>
INTERNATIONAL EQUITY FOCUS FUND
<TABLE>
<CAPTION>
For the Period July 1, 1993+ Dollar
to December 31, 1993 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 6,976,839 $ 72,732,083
Shares issued to shareholders in
reinvestment of dividends and
distributions................... -- --
------------- -------------
Total issued..................... 6,976,839 72,732,083
Shares redeemed.................. (804,344) (8,379,435)
------------- -------------
Net increase..................... 6,172,495 $ 64,352,648
------------- -------------
------------- -------------
- --------------------------------------------------------------------
</TABLE>
+ Prior to July 1, 1993 (commencement of operations), the Company sold 800,010
shares to MLAM for $8,000,100.
126
<PAGE> 128
- --------------------------------------------------------------------------------
NATURAL RESOURCES FOCUS FUND
<TABLE>
<CAPTION>
For the Year Ended Dollar
December 31, 1993 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 1,268,742 $ 13,999,275
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 3,674 40,449
------------- -------------
Total issued..................... 1,272,416 14,039,724
Shares redeemed.................. (327,587) (3,584,398)
------------- -------------
Net increase..................... 944,829 $ 10,571,877
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1992 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 169,193 $ 1,683,526
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 13,009 125,884
------------- -------------
Total issued..................... 182,202 1,809,410
Shares redeemed.................. (67,934) (666,485)
------------- -------------
Net increase..................... 114,268 $ 1,142,925
------------- -------------
------------- -------------
- --------------------------------------------------------------------
</TABLE>
PRIME BOND FUND
<TABLE>
<CAPTION>
For the Year Ended Dollar
December 31, 1993 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 18,166,471 $ 229,284,947
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 835,307 10,463,170
------------- -------------
Total issued..................... 19,001,778 239,748,117
Shares redeemed.................. (1,205,821) (15,218,080)
------------- -------------
Net increase..................... 17,795,957 $ 224,530,037
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1992 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 4,282,632 $ 51,080,851
Shares issued to shareholders in
reinvestment of dividends....... 303,832 3,604,131
------------- -------------
Total issued..................... 4,586,464 54,684,982
Shares redeemed.................. (847,635) (9,984,702)
------------- -------------
Net increase..................... 3,738,829 $ 44,700,280
------------- -------------
------------- -------------
- --------------------------------------------------------------------
</TABLE>
QUALITY EQUITY FUND
<TABLE>
<CAPTION>
For the Year Ended Dollar
December 31, 1993 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 7,584,386 $ 204,488,643
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 38,501 99,487
------------- -------------
Total issued..................... 7,622,887 204,588,130
Shares redeemed.................. (412,554) (11,039,403)
------------- -------------
Net increase..................... 7,210,333 $ 193,548,727
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1992 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 1,635,715 $ 40,556,147
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 168,257 4,217,827
------------- -------------
Total issued..................... 1,803,972 44,773,974
Shares redeemed.................. (437,956) (10,900,234)
------------- -------------
Net increase..................... 1,366,016 $ 33,873,740
------------- -------------
------------- -------------
- --------------------------------------------------------------------
</TABLE>
RESERVE ASSETS FUND
<TABLE>
<CAPTION>
For the Year Ended Dollar
December 31, 1993 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 18,903,263 $ 18,903,263
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 772,770 772,770
------------- -------------
Total issued..................... 19,676,033 19,676,033
Shares redeemed.................. (16,275,313) (16,275,313)
------------- -------------
Net increase..................... 3,400,720 $ 3,400,720
------------- -------------
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1992 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 8,149,134 $ 8,149,134
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 953,406 953,406
------------- -------------
Total issued..................... 9,102,540 9,102,540
Shares redeemed.................. (16,704,930) (16,704,930)
------------- -------------
Net decrease..................... (7,602,390) $ (7,602,390)
------------- -------------
------------- -------------
- --------------------------------------------------------------------
</TABLE>
127
<PAGE> 129
- --------------------------------------------------------------------------------
WORLD INCOME FOCUS FUND
<TABLE>
<CAPTION>
For the Period July 1, 1993+ Dollar
to December 31, 1993 Shares Amount
- --------------------------------------------------------------------
<S> <C> <C>
Shares sold...................... 4,880,334 $ 49,656,106
Shares issued to shareholders in
reinvestment of dividends and
distributions................... 63,693 647,784
------------- -------------
Total issued..................... 4,944,037 50,303,890
Shares redeemed.................. (855,476) (8,720,702)
------------- -------------
Net increase..................... 4,088,561 $ 41,583,188
------------- -------------
------------- -------------
- --------------------------------------------------------------------
</TABLE>
+ Prior to July 1, 1993 (commencement of operations), the Fund issued 800,010
shares to MLAM for $8,000,100.
5. CAPITAL LOSS CARRYFORWARD:
At December 31, 1993, the Fund had capital loss carryforwards of approximately
$52,000 in the Basic Value Focus Fund, all of which expires in 2001, $119,000 in
the High Current Income Fund, all of which expires in 1999 and $48,000 in the
Natural Resources Focus Fund, all of which expires in 2000. These will be
available to offset like amount of any future taxable gains.
6. LOANED SECURITIES:
At December 31, 1993, the Prime Bond Fund held U.S. Treasury bonds having an
aggregate value of approximately $4,742,000 as collateral for portfolio
securities loaned having a market value of approximately $4,486,000.
7. COMMITMENTS:
At December 31, 1993, the Global Utility Focus Fund had entered into forward
exchange contracts under which it agreed to purchase various foreign currencies
with values of approximately $2,955,000 and International Equity Focus $87,000,
and sold various foreign currencies with value of approximately $298,000.
8. SUBSEQUENT EVENTS:
On January 3, 1994, the Board of Directors declared ordinary income dividends
and a capital gains distributions per share to shareholders of record as of
December 31, 1993 as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Ordinary Capital
Fund Income-net Gains
- -----------------------------------------------------------------
<S> <C> <C>
American Balanced Fund (2).......... $0.182570 $0.020055
Basic Value Focus Fund (2).......... 0.036210 --
Equity Growth Fund (2).............. -- 0.189770
Flexible Strategy Fund (2).......... 0.301396 0.386555
Global Strategy Focus Fund (2)...... 0.125658 0.010581
Global Utility Focus Fund (2)....... 0.060742 --
High Current Income Fund (1)........ -- --
International Equity Focus Fund
(2)................................ 0.154109 --
Natural Resources Focus Fund (2).... 0.061468 --
Prime Bond Fund (1)................. 0.128691 0.040576
Quality Equity Fund (2)............. 0.423812 0.354436
World Income Focus Fund (1)......... 0.043089 --
</TABLE>
- ------------
(1) Payable on 1/03/1994.
(2) Payable on 1/10/1994.
128
<PAGE> 130
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS,
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of American Balanced, Domestic Money Market,
Equity Growth, Flexible Strategy, Global Strategy Focus, High Current Income,
Natural Resources Focus, Prime Bond, Quality Equity, Reserve Assets, Basic Value
Focus, World Income Focus, Global Utility Focus, and International Equity Focus
Funds of Merrill Lynch Variable Series Funds, Inc. as of December 31, 1993, the
related statements of operations for the period then ended, and changes in net
assets for each of the periods in the two-year period then ended, and the
financial highlights for each of the periods presented. These financial
statements and the financial highlights are the responsibility of the Funds'
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 procedure included confirmation of securities owned at December
31, 1993, by correspondence with the custodian and brokers, or other alternative
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial positions of American Balanced,
Domestic Money Market, Equity Growth, Flexible Strategy, Global Strategy Focus,
High Current Income, Natural Resources Focus, Prime Bond, Quality Equity,
Reserve Assets, Basic Value Focus, World Income Focus, Global Utility Focus, and
International Equity Focus Funds of Merrill Lynch Variable Series Funds, Inc. as
of December 31, 1993, the results of their operations, the changes in their net
assets, and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche
Princeton, New Jersey
February 18, 1994
129
<PAGE> 131
- -------------------------------------------------------
MERRILL LYNCH
VARIABLE SERIES FUNDS, INC.
- -------------------------------------------------------
PRINCIPAL OFFICE OF THE FUNDS
Box 9011
Princeton, NJ 08543-9011
DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
CUSTODIAN
The Bank of New York
110 Washington Street
New York, NY 10286
TRANSFER AGENT
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
DIRECTORS AND OFFICERS
Arthur Zeikel
President and Director
Walter Mintz
Director
Melvin R. Seiden
Director
Stephen B. Swensrud
Director
Harry Woolf
Director
Terry K. Glenn
Executive Vice President
Bernard J. Durnin
Senior Vice President
N. John Hewitt
Senior Vice President
Joseph T. Monagle, Jr.
Senior Vice President
Christopher G. Ayoub
Vice President
Donald C. Burke
Vice President
Denis B. Cummings
Vice President
Joel Heymsfeld
Vice President
Joseph T. Kenney
Vice President
Vincent T. Lathbury, III
Vice President
Fredric Lutcher
Vice President
Jay C. Harbeck
Vice President
Aldona A. Schwartz
Vice President
Gerald M. Richard
Treasurer
Michael J. Hennewinkel
Secretary
130
<PAGE> 132
- --------------------------------------------------------------------------------
This report is not authorized for use as an offer of sale or a solicitation
of an offer to buy shares of the Funds unless accompanied or preceded by the
Funds' current prospectus. Past performance results shown in this report should
not be considered a representation of future performance. Investment return and
principal value of non-money market fund shares will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. For Domestic
Money Market Fund and Reserve Asset Fund, the Funds seek to maintain a
consistent $1.00 net asset value per share, although this cannot be assured. An
investment in the Funds is neither
insured nor guaranteed by the US Government.
Merrill Lynch Variable Series Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
#16897
