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Merrill Lynch Variable
Series Funds, Inc.
INVESTMENT PORTFOLIOS
AVAILABLE WITH THE MERRILL
LYNCH FUNDS RETIREMENT
PLUS VARIABLE ANNUITY:
-American Balanced Fund
-Basic Value Focus Fund
-Developing Capital Markets Focus Fund
-Domestic Money Market Fund
-Equity Growth Fund
-Flexible Strategy Fund
-Global Strategy Focus Fund
-Global Utility Focus Fund
-High Current Income Fund
-Intermediate Government Bond Fund
-International Bond Fund
-International Equity Focus Fund
-Natural Resources Focus Fund
-Prime Bond Fund
-Quality Equity Fund
-Reserve Assets Fund
-World Income Focus Fund
INVESTMENT PORTFOLIOS
AVAILABLE WITH THE PORTFOLIO
PLUS VARIABLE ANNUITY:
-American Balanced Fund
-Equity Growth Fund
-Flexible Strategy Fund
-High Current Income Fund
-Natural Resources Focus Fund
-Prime Bond Fund
-Quality Equity Fund
-Reserve Assets Fund
INVESTMENT PORTFOLIOS
AVAILABLE WITH THE MERRILL
LYNCH FUNDS INVESTOR LIFE,
INVESTOR LIFE PLUS AND
ESTATE INVESTOR I & II
VARIABLE LIFE INSURANCE
POLICIES:
-Basic Value Focus Fund
-Developing Capital Markets Focus Fund
-Global Utility Focus Fund
-International Bond Fund
-International Equity Focus Fund
-World Income Focus Fund
Semi-Annual Report
June 30, 1995
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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 Assets 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
Pound16897-6/95
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MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
SEMI-ANNUAL REPORT--JUNE 30, 1995
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DEAR SHAREHOLDER:
We are pleased to submit this semi-annual report for Merrill Lynch Variable
Series Funds, Inc., in which we summarize the investment performance of each of
the Fund's portfolios and outline our view of the investment environment.
Performance information for each portfolio in Merrill Lynch Variable Series
Funds, Inc., excluding the Domestic Money Market Fund and Reserve Assets Fund,
can be found in the tables on pages 10 through 15 of this report to
shareholders.
THE ENVIRONMENT
During the first six months of 1995, economic data finally showed evidence of
slowing activity. Gross domestic product (GDP) growth for the first three months
of 1995 was reported at 2.7%, the weakest showing in the past 18 months. Other
signs of a sluggish economy included slowing growth in the manufacturing sector
in May and June as well as three consecutive months of declines in the Index of
Leading Economic Indicators, an occurrence which has often (but not always)
forecast recessions. As a result, by the end of June concerns had arisen that
the economic 'soft landing' could turn into an actual recession. However, at the
same time there were also expectations that a few months of very slow or zero
growth would be followed by a pickup in economic activity later in the year.
This view was supported by the stronger-than-expected employment data for June
and an upward revision in May's employment figures.
Thus far in 1995, economic developments have been very positive for the US
stock and bond markets, and most US stock market averages recently have attained
record levels. In contrast, the US dollar has been persistently weak, especially
relative to the yen. Following the Federal Reserve Board's cut in short-term
interest rates in early July, continued signs of a moderating expansion and
well-contained inflationary pressures could provide further assurance that the
peak in US interest rates is behind us, creating a stronger foundation for
higher stock and bond prices. On the other hand, indications of reaccelerating
growth and increasing inflationary pressures would likely suggest that higher
interest rates are on the horizon, a negative development for the US financial
markets.
AMERICAN BALANCED FUND
As of June 30, 1995, the Fund's asset allocation was: stocks (44%), bonds
(40%), and cash (15%). We took advantage of a rally in the bond market during
the first half of 1995 to reduce the size of our bond commitment. The remaining
assets in the bond sector remain allocated to intermediate-term US Treasury
obligations. The average duration of the remaining bond commitment is 6.5 years,
with the average maturity at 8.7 years. The reduction in the Fund's bond
holdings reflected our belief that the market was discounting a modest slowdown
in US economic activity. We believe that such a modest slowdown could be
followed by a gradual reacceleration in the economy over the next 6 months--12
months. In such an environment, we believe Federal Reserve Board monetary policy
likely will remain stable rather than aggressively accommodative. A stable
monetary policy, in turn, will not support a substantial further decline in
intermediate-term interest rates. On this basis, we believe that the major
portion of a rally in the US bond market has taken place, at least for the next
several quarters.
On the other hand, we expanded equity representation during the early part of
1995. While we accepted profits in Hewlett-Packard Co. and sold J.P. Morgan &
Co., we established new positions in General Signal Corporation, Stewart &
Stevenson Services, Inc., Ford Motor Co., GTE Corp. and Fisher Scientific
International, Inc. We enlarged the equity commitment at a time when we believed
that the Federal Reserve Board had completed its tightening of monetary policy,
which had commenced in February 1994. The economic scenario outlined in
reference to the bond sector should prove favorable for US equities, since it
will permit a favorable trend in corporate earnings, at least through 1996. The
equity sector reflects emphasis on the capital spending area, which we believe
will remain a strong sector over the next several years. Significant assets
remain allocated to consumer staples with favorable earnings prospects. The
energy sector also remains overweighted as an area offering exceptional value
within the US equity market.
BASIC VALUE FOCUS FUND
The six months ended June 30, 1995 were very positive for the US stock and
bond markets. Increasing signs of slowing economic growth and well-contained
inflationary pressures have assured investors there will not be more monetary
tightening by the Federal Reserve Board. In fact, economic indicators such as
personal income, construction spending, auto sales and the Purchasing Agents
Management Index suggest the economy has significantly slowed to a point where
the next move by the Federal Reserve Board was to lower interest rates as it did
on July 6, 1995. US stocks anticipated this downward move in interest rates and
rose sharply in the first six months of the year.
Normally we would take advantage of market strength to sell on balance, while
alternatively buying stocks during weak market periods. However, the Fund
attracted a significant amount of new money during the six months ended June 30,
1995. We did not want our cash to extend far beyond the 8% level; thus, we
essentially invested most of the new money coming in. We added several new
positions during the period including Allwaste Inc., ASARCO Inc., Centex Corp.,
Deere & Co., Dillard Department Stores, Eaton Corp., Foundation Health Corp.,
International Paper Co., Liz Claiborne, Inc., Republic Engineered Steels, Inc.,
Unisys Corp., Washington Mutual Savings Bank,
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Western Digital Corp., and WHX Corp. In the particular case of Liz Claiborne,
weakness in women's apparel over the last several years has led to a precipitous
decline in the share price of this leading manufacturer of women's fashion. New
management has eliminated poor-selling merchandise lines and is making progress
toward regaining better margins. Dillard Department Stores, a leading Midwest
and Southwest retailer, was also purchased as weak retail sales have led to
depressed earnings. We believe the stock reflects most of the bad news within
the retail sector, and is well-positioned to benefit when the industry recovers.
WHX Corp. and Republic Engineered Steels are two steel manufacturers purchased
recently. This group has fallen decidedly out-of-favor as a result of weak auto
sales and steel pricing weakness. We believe the stocks have overreacted to
these circumstances and offer attractive risk-reward characteristics.
Completed sales during the six months ended June 30, 1995 included Atlantic
Richfield Co., Bankers Trust Company, Conner Peripherals, Inc., Fruit of the
Loom, Inc., Gerrity Oil and Gas Corp., International Business Machine Corp., and
Sears, Roebuck & Co.
We have just concluded our second year of operation, and our net assets have
grown from $2 million to approximately $240 million as a result of your
continued support. After the recent uptrend in the US stock market, we expect
more modest gains in stocks in the second half of the year. An accelerating
economy could portend significant monetary policy tightening, a potential
negative for the US financial markets. We will continue to individually select
stocks that meet our strict valuation measures.
DEVELOPING CAPITAL MARKETS FOCUS FUND
During the past year we took a more defensive approach to investing the
Fund's assets. In our opinion, this was appropriate because we considered many
of the stocks in emerging markets to be expensive, particularly in light of the
financial crisis in Mexico and rising interest rates in the United States.
Therefore, we built up our cash position to about 30% at June 30, 1995. We
initiated investments in Indonesian and South African fixed-income securities,
and we reduced investments in Hong Kong and Mexico. We also found attractively
priced securities in Brazil, South Korea and Turkey, and added to our
investments there.
This year, the global growth and interest rate environment is more favorable
for emerging markets investing. We expect stable growth in the major economies,
such as the United States and Germany, with room for interest rates to decline.
While this is extremely beneficial for the countries in which we invest, we are
mindful of the potential domestic economic and political risks in the developing
countries, and continue to emphasize finding good values in their markets.
We have maintained a cautious stance in Asia. Valuations are excessively
high, and blue chip earnings growth has been disappointing, particularly after
adjusting for inflation. Some market analysts justify higher prices for Asian
stocks on the basis of the region's political stability, but there are
developments, such as the rising trade tension between the United States and
China, which should not be taken for granted. In this environment, we favor
investments in stable currency countries, such as Singapore and South Korea, and
in markets where there is greater room for monetary ease, such as Indonesia and
India.
In Latin America, government policies are on the right track, most of the bad
news regarding the Mexican financial crisis is already out, and stock prices
have surged. Caution is warranted, however, because we believe that the market
rallies have been driven largely by international investors who may not be
committed to the local markets for the long term.
Our strategy in Latin America is twofold. We are somewhat defensive in the
event of near-term volatility in our markets. However, at the same time, we are
building solid foundations in those companies which will benefit in the long
term. For the most part, the companies are characterized by strong managements
and attractive valuations.
We are increasing the Fund's investments in Europe. We believe that the
countries in the periphery will get a leveraged benefit from lower German
interest rates. At the same time, domestic developments in these countries bode
well for their stock markets.
In Russia, while economic, currency and political risks are great, we believe
that the low prices for the country's natural resource companies already reflect
much of this. On the positive side, market reforms are proceeding rapidly, and
privatizations are the fastest and largest in scale that we have seen in
developing countries. As a result, after only a few years of reforms, the size
of the Russian market is already $20 billion. At present, the Fund cannot buy
Russian shares directly. We are therefore investing through a country fund and
exploring other vehicles.
DOMESTIC MONEY MARKET FUND
For the six-month period ended June 30, 1995, Domestic Money Market Fund's
net annualized yield was 5.63%*. The Fund's 7-day yield as of June 30, 1995 was
5.61% (excluding gains and losses) and 5.61% (including gains and losses).
For the six months ended June 30, 1995, Domestic Money Market Fund maintained
an average life ranging from a low of 30 days to a high of 82 days. Throughout
most of the six-month period, the Fund's average life
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* 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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was extended to reflect our progressively optimistic stance on the direction of
interest rates.
As the new year began, the average life was held in the mid 40-day area while
we awaited the results of the February 1, 1995 Federal Open Market Committee
(FOMC) meeting. The meeting, which produced a 50 basis point (0.50%) increase in
interest rates, gave us the incentive to modestly increase the Fund's average
life to the high 50-day area as strong technicals dominated the market. In spite
of the market's improved sentiment, much of the Fund's involvement in interest
rates was concentrated in the six-month and one-year area, which encompassed
much of the steepness in the yield curve. As we approached the end of March, our
outlook brightened further as it became apparent that the central bank's next
move to raise interest rates would be postponed until a clearer economic picture
emerged. By the end of March, the average life stood at 60 days.
This strategy continued into the second half of the June period, as the
Fund's average life was extended to the mid 70--low 80-day area. Strong demand
for longer-dated securities coupled with a 6% Federal Funds rate actually
inverted the yield curve whereby two-year Treasury notes traded at a low yield
of 5.32%. As the economy showed definite signs of slowing, the market seemed
determined to seek value, which in turn drove interest rates to their lowest
levels in recent history. As a result, the Fund emphasized selected areas that
reflected good relative value, with commitments to the very front end of the
investment spectrum, the six-month area, and the two-year sector. Much of the
exposure in the longer end was placed in Treasury securities and Federal
agencies as quality spreads continued to compress further out on the yield
curve. As the period came to a close, we reduced the Fund's average life to 75
days as the mixed signals clouded the market's perception as to the outcome of
the July FOMC meeting.
Looking ahead, we feel that if economic activity remains under pressure with
inflation under control, the Federal Reserve Board would have further room to
ease. Accordingly, we expect to maintain the Fund's average life toward the
longer end of its permitted investment band.
EQUITY GROWTH FUND
Small capitalization growth stocks came to life in the first half of 1995, in
part as a result of growing investor confidence that the Federal Reserve Board
would not raise interest rates further. Investors will recall that as interest
rates increased in 1994, smaller-capitalized stocks growth issues were
underperformers, as investors apparently felt that higher interest rates would
adversely impact these companies to a greater degree than larger companies.
Despite the strong six-month performance, small-cap stocks have lagged their
larger-cap peers to a significant degree.
Strong earnings momentum is expected to continue and assets appear to be
flowing into this sector, partially in response to the turmoil in international
markets. Also, the sector could fare better as the economy moves into a
sustained period of slow growth, since these equities tend to grow relatively
faster in such an environment. The prospect of a capital gains tax cut also
focuses investor attention on this area, as gains become more attractive than
dividend return.
During the first half of 1995 we decreased our cash position from over 15% of
the portfolio to under 6%; in addition, net new cash of $18 million was
committed to equities. Significant sector increases were in technology and
healthcare; sector decreases were in the industrial and financial areas. Themes
utilized in the portfolio included increased technology usage in all areas of
the global economy and semiconductor capital spending (as evidenced by the
additions of ASM Lithography Holding N.V., Altron Inc., Sheldahl, Inc., Opti
Inc., Oak Technology Inc. and Sterling Software, Inc.); a focus on healthcare
spending and cost cutting (as evidenced by the additions of Isolyser Company,
Inc., Heart Technology, Inc., OrNda Healthcorp); and a moderate increase in
consumer spending (as evidenced by the additions of Speedway Motorsports, Inc.,
Tommy Hilfiger Corp., and Scientific Games Holdings Corp.).
Significant contributions to performance came from the technology, industrial
and healthcare sectors. Over longer periods of time, technology and healthcare
are expected to provide continued sources of earnings growth. Characteristics of
the portfolio included a median market capitalization of $450 million with 14%
of holdings having a capitalization of under $150 million and 16% with a
capitalization over $1 billion.
We have attempted to focus on performance and reduce risk in the portfolio by
including a number of larger, more liquid issues which have the potential for
substantial growth. We believe that investors have overlooked very small
equities (market capitalization under $150 million) and might continue to do so.
The shift in portfolio holdings away from very small-
capitalized companies will be undertaken at a gradual pace, allowing a focus on
larger emerging growth companies. However since valuations are compelling and
earnings growth prospects are powerful, we will continue to maintain a portfolio
representation in smaller capitalization issues.
FLEXIBLE STRATEGY FUND
Attempts by the Federal Reserve Board to slow the US economy during 1994 and
into 1995 are clearly meeting with success. GDP growth declined to very modest
levels during the second quarter as US industry attempted to control inventories
which were slightly above desired levels. The products sector of GDP has fallen
far behind the services sector in recent months, lending strength to the
argument that commodity inflation is contained both at home and abroad. Since
the
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US economy continues to be the locomotive for worldwide growth, especially in
developed economies, markets around the world are focusing on the US Federal
Funds rate.
Many equity markets began to discount renewed growth of economic activity in
the United States brought on by lower interest rates in the marketplace even
before action by the Federal Reserve Board in early July.
During recent months it remained appropriate to emphasize capital spending
and credit-sensitive sectors which continued in market favor through mid-year.
The quest for global competitiveness has driven industry to seek labor-saving
equipment and technology at a pace not seen since the industrial revolution. Our
underweighted positions in basic industry, consumer durables and energy seem
appropriate at the moment, although evidence of economic reacceleration later
this year would cause us to become more interested in basic industry, especially
if export demand improves as we expect.
Recognizing that the yield on a 30-year US Treasury bond dropped from 8.15%
in November 1994 to 6.50% recently, it seemed appropriate to assume a less
aggressive posture in the fixed-income segment of the portfolio. Accordingly, we
have shortened the duration and slightly reduced the allocation to bonds in
favor of equities.
GLOBAL STRATEGY FOCUS FUND
As of June 30, 1995, the Fund's asset allocation was: US stocks (20%),
foreign stocks (41%), US bonds (17%), foreign bonds (12%), and cash (10%).
During the first half of 1995, we reduced the US bond sector, taking advantage
of a rally in bond prices. The reduction resulted from our belief that limited
potential existed for a further decline in intermediate-term US interest rates
during the second half of 1995, as the market appeared to fully discount the
modest slowdown in US economic activity which appeared to be taking place. In
the foreign bond sector, we eliminated our position in Australian bonds and
expanded the commitment to German bonds, which appeared to offer better total
return potential. Other foreign bond commitments were maintained in Canada, the
United Kingdom and Italy.
The primary change in the equity sector was to enlarge the position in US
common stocks. Much of this change was undertaken early in 1995 and resulted
from the expectation that the Federal Reserve Board had completed its tightening
of monetary policy. However, the primary overweighting is maintained in the
emerging Asian and Latin American markets. In Asia, we established a position in
Philippine Long Distance Telephone Co. We believe these emerging markets have
the potential to extend the recoveries which commenced in recent months. Lower
interest rates worldwide could prove to be a catalyst for higher share prices in
the emerging markets. Favorable economic prospects in Asia and evidence of a
continuing improvement in the financial condition of Mexico also could have a
positive impact on shareholder interest in the Asian and Latin American stock
markets, respectively.
While the commitment to Japanese equities remains relatively neutral, we
shifted representation in favor of companies which appeared reasonably valued
relative to earnings expectations. Following significant weakness during the
first half of 1995, the Japanese stock market offers a larger number of
undervalued situations than has been the case for many years. Since we expect
the US dollar to recover relative to the Japanese yen, we maintain a currency
hedge by selling yen forward for the equivalent of 75% of the value of the
Japanese equity positions. We also reduced our weighting in European equities
during the first half of 1995, with emphasis among remaining positions focused
on companies which had made excellent progress in restructuring operations to
maintain strong competitive positions in Europe and globally.
GLOBAL UTILITY FOCUS FUND
Stock prices of utilities in the first half of 1995 have recovered from their
disastrous 13% decline in 1994. Through June 30, 1995, the Standard & Poor's
Utility Index was up 10.8% on a price-only basis. This action largely followed
the substantial decline in the yield of 30-year US Treasury bonds, from 7.88% as
of December 30, 1994 to 6.61% as of June 30, 1995. With approximately one-half
of the Fund's net assets invested in US-based utility stocks, this positive turn
in interest rates favorably impacted our overall performance. Other world
markets were also positively influenced by declining US interest rates, most
notably Hong Kong where utilities rose 13% during the first half of 1995 and
where the Fund has 3.9% of its net assets invested. Also during the period,
utilities in Spain, where the Fund had 3.1% of its net assets invested, rose
17%, according to the FT-Actuaries World Utilities Index, and contributed to the
Fund's performance.
During the first six months of 1995, the percentage of net assets invested in
domestic equities declined from 54% as of December 30, 1994 to 50% as of June
30, 1995, and the Fund's portfolio of foreign equities held steady at around 39%
of net assets. The reduction in net assets invested in the United States
resulted from the elimination of four positions: Enron Corp., Pacific Telesis
Group, Rochester Gas & Electric Corp. and Texas Utilities Co. The primary reason
for the elimination of these positions was deterioration in their fundamental
outlooks. We added three new small positions to the Fund's portfolio: National
Power PLC, a UK-based electric generating company; Portugal Telecom, the
Portuguese telephone company that was privatized; and Frontier Corp., the
US-based fully integrated telephone company.
Looking ahead, we see no reason to change our current investment strategy of
balancing the growth of
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foreign utilities with the higher yields of domestic utilities. We will, of
course, continue to divest or reduce positions as they become fairly valued or
when fundamentals warrant a change in opinion, but overall we remain fairly
optimistic about the prospects for performance of the sector and the Fund.
In the foreign portion of the portfolio, we expect to see some of the
economic and political fears calmed as elections get underway and the emerging
markets continue to recover from their late 1994 hiatus caused by the Mexican
devaluation. The number of initial public offerings and secondary offerings of
foreign equities is expected to pick up in the second half of 1995 and into 1996
as a result of further privatizations in the utility sector and governments
selling down their remaining positions. While this increase in equity (some
estimate $25 billion in just European telephones) could cause near-term pressure
on some stock prices, it could also heighten investor interest abroad and, in
turn, result in higher valuations. On the domestic side, competition between and
among electric utilities is ongoing but at a pace slower than investors thought
back in 1994. This factor, coupled with the current attractive valuation levels
relative to bonds, has supported current prices of utility equities.
HIGH CURRENT INCOME FUND
The positive trend in the financial markets continued during the second
quarter of 1995. Ten-year US Treasury note yields declined from 7.13% to 6.25%
over the three-month period. High-yield bond yields also dropped, but the
decline was more muted. Heavy new-issue supply was a factor affecting the
market. Concern that the economic slowdown could deepen seems to have depressed
investor psychology toward economically sensitive cyclicals like steel and
paper. This contributed to the lag between US Treasury securities and high-yield
bonds. In July, the high-yield market caught up as technical conditions and
investor sentiment improved.
We have been positive on the high-yield market for most of the year, feeling
that last year's bear market left US Government and high-yield securities
significantly undervalued. The fundamentals unique to high-yield securities
remain positive. Credit quality trends are stable for the market as a whole and
pockets of undervaluation exist. However, the relatively narrow spreads between
high-yield and US Government securities reflect the solid fundamentals.
Consequently, we have become more selective recently. We increased our positions
in selected cyclicals which we felt were oversold and added to our emerging
market and consumer product positions. The quality focus in new issues was on
B-rated companies which appeared particularly inexpensive.
At June 30, 1995, the portfolio's cash position was 5.3% with the average
portfolio maturity at seven years. Major industry sectors represented in the
Fund included: hotels and casinos, 6.1%; energy, 5.9%; paper, 5.8%;
conglomerates, 5.7%; and broadcasting and publishing, 5.6%.
INTERMEDIATE GOVERNMENT BOND FUND
The bond market rallied with unexpected vigor during the six-month period
ended June 30, 1995 in response to a significant deceleration in economic
growth. The domestic economy expanded at a 2.7% annual rate for the first three
months of 1995, the slowest rate of growth since the summer of 1993. This was an
abrupt change from the pace of the fourth quarter of 1994, which recorded a 5.1%
rate of growth. The slowdown offered further evidence that the economy, after a
four-year expansion, is braking at a steady rate in a much desired 'soft
landing'. At the same time, signs indicated that inflation remains under
control.
During the six-month period ended June 30, 1995, the yield on the long-term
US Treasury bond dropped 126 basis points from 7.88% at December 31, 1994 to
6.62% at June 30, 1995. Since prices move inversely to yields, this resulted in
a strong rally in bond values, particularly in the longer maturities.
We have continued to push the average duration of the portfolio out longer in
order to take advantage of the rally by extending the portfolio from 0.7 years
in January to 4.2 years at the end of June. This was accomplished by investment
of cash flows into bonds with longer maturities. The portfolio's cash position
remained at less than 2% at June 30, 1995.
INTERNATIONAL BOND FUND
It was another great quarter for international fixed-income investors, as
non-US bond markets returned 4.38% in local currency terms (as measured by the
J.P. Morgan Government Bond Index). Currency returns were mixed, with high-yield
European currencies, the Japanese yen, and the Canadian dollar appreciating
versus the US dollar, and core European currencies, such as the British Pound
and the Australian dollar, depreciating. Combining both components, the
best-performing sectors were the European high-yield European currencies and the
Japanese yen.
The core markets led the rally in the first quarter, as bond market
performance was driven by currencies. On March 31, 1995, the Bundesbank
surprised investors with a 50 basis point cut in the discount rate. Even though
policy makers in the higher yielding markets were not in the position to follow
with interest rate cuts, it was the high-yielding markets that benefited most
from the easing of currency pressures. Throughout the second quarter, the
portfolio was slightly overweighted in core European currencies and
underweighted in the high-yielding European currencies. From current market
levels we feel this strategy has the potential to provide attractive returns.
The portfolio was underweighted in yen bonds, yet fully weighted in the
currency, throughout the period.
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Going forward, we would look to reduce yen exposure for a correction in the
currency appreciation vis-a-vis the US dollar, while maintaining a defensive
position in yen bonds. Within the dollar-bloc markets, Canada managed to
outperform the US market, while Australia lagged both markets, primarily in
response to the appreciation of the Canadian dollar and the depreciation of the
Australian dollar. The portfolio was overweighted in Australian bonds early in
the period and underweighted in both markets since May.
INTERNATIONAL EQUITY FOCUS FUND
A significant slowing in US economic activity prompted rallies in world
financial markets over the six-month period ended June 30, 1995. The review
period was also initially marked by a continued weakness in emerging market
equities, a sharp depreciation of the US dollar against the yen and Deutschemark
and a significant deterioration in sentiment in Japan.
Over the six-month period ended June 30, 1995, the Financial Times-Actuaries
World (ex-US) Index total return was +1.7%. The aggregate index performance,
however, disguised strong performance in European equity markets (+13.2% in US
dollar terms) and a decline in Japan (-8.8% in US dollar terms). During the
six-month period ended June 30, 1995, emerging markets equity prices declined by
9.1%, although since mid-March emerging markets have generally rebounded
strongly. During the period, our strategy was to retain an overweighted bias
toward emerging markets investments relative to the unmanaged benchmark weight.
Although on average the Fund remained underweighted in Japanese equities, our
exposure may have been high relative to most international funds. During the
June period we added to our Japanese and Hong Kong positions, reducing exposure
in Latin America and the United Kingdom. At the end of the period, the Fund had
30% of net assets invested in Japan, 22% in Continental Europe, 15% in the
Pacific Basin (excluding Japan), 8% in the United Kingdom and 6% in other equity
markets including Mexico, Canada and South Africa. The Fund's cash position was
around 6% as of June 30, 1995, with an additional 3% in fixed-income securities.
Looking forward, we expect the outlook for global financial markets to be
dominated by developments in US monetary policy and the US bond market. The
portfolio has increasingly been positioned for a stronger US economy. As a
result, we remain skeptical about the extent of the US slowdown already priced
into financial assets.
The Fund's exposures are positioned to benefit from a stronger dollar,
especially relative to the yen. The settlement of the US-Japanese trade talks,
the further easing of Japanese monetary policy and the more gradual, but
important, turn in the Japanese current account surplus should all support a
recovery in the US dollar from clearly oversold levels. A stronger dollar should
be supportive of the Japanese equity market.
Elsewhere, we may become more cautious on the outlook for financial assets.
For instance, there is considerable room for further earnings disappointments in
Europe and for higher US bond yields to hold back Latin American and some Asian
equity markets. Should US expectations of a further significant easing in the
Federal Funds rate not be fulfilled, our investment strategy may become
significantly more defensive.
NATURAL RESOURCES FOCUS FUND
The environment for investments in the natural resource sector turned
positive during the six-month period ended June 30, 1995. After a weak start,
investor sentiment toward natural resource-related shares improved progressively
during the period, encouraged by signs that US economic growth might be slowing
and that we may be at or near the end of interest rate increases by the US
Federal Reserve Board. The broad stock market averages in the US pushed ahead
into record territory, with many resource-related shares staging sharp
recoveries after being sold aggressively during the final months of 1994.
Foreign equities also recovered from weakness earlier in the year, encouraged by
more stable currency markets and the German Bundesbank's unexpected interest
rate cut near the end of March. Share prices of gold mining companies and
energy-related companies were particularly strong. Commodity prices generally
maintained their upward trend during the period, benefiting from continued
strong demand for basic resources worldwide.
The Fund's primary investment focus remained in the energy sector, where we
maintained exposure in a cross-section of integrated, producing and oil service
companies. Fund returns during the period were enhanced by this large exposure
to energy-related stocks. The integrated oil companies posted solid share price
gains, supported by their relatively high dividend yields, improved chemical
margins and ongoing cost-cutting efforts, which allowed many companies to report
better-than-expected earnings for the first quarter of 1995. Our increased
exposure to natural gas-related exploration and production companies also
contributed positively to returns for the period. Share prices in this group
rose significantly as natural gas prices stabilized and oil prices rose
modestly. The Fund also continued to maintain a significant exposure to the
industrial side of our universe, including investment in the paper, base metal
and chemical industries, where a combination of firm commodity prices, improved
capacity utilization rates and reduced cost structures were expected to lead to
an improved earnings outlook. In fact, earnings results reported during the
period did generally meet or exceed expectations. However, these results failed
to inspire investors, as prospects of slower economic growth heightened
concerns about the sustainability of these earnings.
6
<PAGE>
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--------------------------------------------------------------------------------
Investor psychology generally turned negative toward cyclical areas of the
economy, and stock price performance in these industries generally lagged the
strong returns of the broad stock market averages.
Looking ahead, we remain optimistic about the outlook for investing in the
natural resource sector. Uncertainty about the ability of the US Federal Reserve
Board to achieve a soft landing in the US economy may keep investors cautious
toward the outlook for natural resource companies in the near term. While the
growth rate of the US economy may be moderating, we believe that worldwide
economic growth will remain robust and will continue to support a rising
consumption pattern for most basic resources. This should strengthen fundamental
supply/demand prospects for most natural resource-related industries, which in
turn may have positive implications for the earnings of many resource-related
companies.
PRIME BOND FUND
The bond market rallied with unexpected vigor during the six-month period
ended June 30, 1995 in response to a significant deceleration in economic
growth. The domestic economy expanded at a 2.7% annual rate for the first three
months of 1995, the slowest rate of growth since the summer of 1993. This was an
abrupt change from the pace of the fourth quarter of 1994, which recorded a 5.1%
rate of growth. The slowdown offered further evidence that the economy, after a
four-year expansion, is braking at a steady rate in a much desired 'soft
landing'. At the same time, signs indicated that inflation remains under
control.
During the six-month period ended June 30, 1995, the yield on the long-term
US Treasury bond dropped 126 basis points from 7.88% at December 31, 1994 to
6.62% at June 30, 1995. Since prices move inversely to yields, this resulted in
a strong rally in bond values, particularly in the longer maturities.
We have continued to push the average duration of the portfolio out longer in
order to take advantage of the rally by extending the portfolio from 4.7 years
in January to 5.8 years at the end of June. This was accomplished by investment
of cash flows into bonds with longer maturities. The portfolio's cash position
remained at less than 2% at June 30, 1995.
QUALITY EQUITY FUND
Attempts by the Federal Reserve Board to decelerate the US economy during
1994 and into 1995 are clearly meeting with success. GDP growth declined to very
modest levels during the second quarter as US industry attempted to control
inventories which were slightly above desired levels. The products sector of GDP
has fallen far behind the services sector in recent months, lending strength to
the argument that commodity inflation is contained both at home and abroad.
Since the US economy continues to be the locomotive for worldwide growth,
especially in developed economies, markets around the world are focusing on the
US Federal Funds rate. Many equity markets began to discount a renewed level of
economic activity in the United States brought on by lower interest rates in the
marketplace even before action by the Federal Reserve Board in early July.
During recent months it remained appropriate to emphasize capital spending
and credit-sensitive sectors which continued in market favor through mid-year.
The quest for global competitiveness has driven industry to seek labor-saving
equipment and technology at a pace not seen since the industrial revolution. Our
underweighted positions in basic industry, consumer durables and energy seem
appropriate at the moment, although evidence of economic reacceleration later
this year would cause us to become more interested in basic industry, especially
if export demand improves as we expect.
RESERVE ASSETS FUND
For the six-month period ended June 30, 1995, Reserve Assets Fund's net
annualized yield was 5.60%*. The Fund's 7-day yield as of June 30, 1995 was
5.59% (excluding gains and losses) and 5.87% (including gains and losses).
For the six months ended June 30, 1995, Reserve Assets Fund maintained an
average life ranging from a low of 40 days to a high of 85 days. The upward
trend in average life reflects our progressively optimistic attitude regarding
the direction of interest rates and the expected shape for the front end of the
yield curve.
As 1995 began, the Fund's average life was held in the mid 40-day area while
we awaited the results of the February 1, 1995 FOMC meeting. The meeting, which
produced a 50 basis point increase in interest rates, gave us the incentive to
increase the Fund's average life to the high 50-day--low 60-day area as strong
technicals dominated the market. In spite of improved investor sentiment, much
of the Fund's involvement in interest rates was concentrated in the six-
month--one-year area, which encompassed much of the steepness in the yield
curve. Although we took advantage of the technicals by extending the Fund's
average life into the 60-day area, we tempered our involvement somewhat until we
saw clearer evidence that economic momentum has slowed. At this point, it was
our contention that the Federal Reserve Board would be on hold at least until
the May FOMC meeting.
By mid-period, we extended the Fund's average life to the mid 70-day--low
80-day area. This investment decision was based on the belief that the level of
------------
* Based on a constant investment throughout the period, with dividends
compounded daily, and reflecting a net return to the investor after all
expenses.
7
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
economic activity will continue to slow, thereby negating the Federal Reserve
Board's ability to maintain a tight monetary policy. As a result, the Fund
emphasized selected areas that reflected good relative value, with commitments
to the very front end of the investment spectrum, the six-month area, and the
two-year sector. Much of the exposure in the longer end was placed in Treasuries
and Federal agencies as quality spreads continued to compress further out on the
yield curve. As the period came to a close, we reduced the Fund's average life
to 75 days as the mixed signals clouded the market's perception as to the
outcome of the July FOMC meeting.
Looking forward, we expect to maintain the Fund's average life toward the
higher end of the allowed band, in view of our belief that the shorter end of
the yield curve will remain well bid for. We will continue to monitor economic
data as well as the inflationary impact of the recent Federal Reserve Board
move.
WORLD INCOME FOCUS FUND
During the last six months world industrial activity continued to slow from
its heady pace seen at the end of 1994. Odds are the current deceleration is a
transition to a more sustainable pace versus a renewed downturn, although risks
of the latter have risen. In the United States, the slowdown, which began in
December, will likely persist through the third quarter of 1995. In Europe, the
second quarter looks also to be one of stagnation, although this is not as clear
as in the United States. These developments allowed ten-year bond yields to
accelerate their declines in the Dollar bloc countries, while the weak currency
countries in Europe reversed their first quarter increases. The
Dollar bloc was basically unchanged versus the
Deutschemark, while the weaker European currencies recovered from their first
quarter debacle when the Spanish peseta was devalued 7%. The Australian
dollar declined 3% and the Canadian dollar rose 2%.
Portfolio changes during the six-month period
ended June 30, 1995 were relatively modest. The Fund's mix of high-yield and
international securities was unchanged quarter on quarter, although we took
profits on part of the high-yield exposure in June. Within the international
portion of the Fund we eliminated our New Zealand position and established a new
position in Sweden by reducing our position in Italy. Our concern over Mexico's
ability to weather the current economic crisis led us to reduce the Fund's
exposure to the emerging markets. From a currency perspective, we reduced the
exposure to the Deutschemark largely by removing the cross-hedges in place, and
the exposure to the Australian dollar was cut in half.
The outlook for Dollar Bloc and European interest rates remains positive,
although less so in the non-core European markets, given the sharp rises in
inflation this year, and the potential for no further easings by the Bundesbank.
From a currency perspective, the Dollar has been trading sideways since early
spring, which has provided a positive backdrop for the weaker European
currencies as well as the Canadian and Australian dollars. Marginal new lows
relative to the Deutschemark cannot yet be ruled out given the Federal Reserve
Board's easing bias and no clear signs of recovery potential in the United
States. Within Europe, uncertainties remain high given the new French
administration's move away from a Franc-Fort policy, potential delay in Italy's
pension reform package and the waning of support for Spain's Socialist
government. The Australian Dollar remains at risk from the current activity
slowdown and possible early elections, while the Canadian dollar is at risk from
an easing in rates at a time when fiscal improvement is heavily reliant on
continued solid growth, with partial offset from the decline in rates so far
this year.
The positive trend in the financial markets continued during the second
quarter of 1995. Ten-year US Treasury note yields declined from 7.13% to 6.25%
over the three-month period. High-yield bond yields also dropped, but the
decline was more muted. Heavy new-issue supply was one factor affecting the
market. Concern that the economic slowdown could deepen seems to have depressed
investor psychology toward economically sensitive cyclicals like steel and
paper. This contributed to the lag between US Treasury securities and high-yield
bonds. In July, the high-yield market caught up as technical conditions and
investor sentiment improved.
We have been positive on the high-yield market for most of the year, feeling
that last year's bear market left US Government and high-yield securities
significantly undervalued. The fundamentals unique to high-yield securities
remain positive. Credit quality trends are stable for the market as a whole and
pockets of undervaluation exist. However, the relatively narrow spreads between
high-yield and US Government securities reflect the solid fundamentals.
Consequently, we have become more selective recently. We increased our positions
in selected cyclicals which we felt were oversold and added to our consumer
product positions. The quality focus in new issues was on B-rated companies
which appeared particularly inexpensive.
At June 30, 1995, the portfolio's cash position was 13.4% with the average
portfolio maturity at seven years. Major industry sectors represented in the
Fund included: energy, 3%; hotels and casinos, 5.4%; conglomerates, 3.5%;
communications, 2%; food & beverage, 2.6%; and consumer products, 3%.
8
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
IN CONCLUSION
We appreciate your investment in Merrill Lynch Variable Series Funds, Inc.,
and we look forward to sharing our investment outlook and objectives with you in
our December annual report to shareholders.
Sincerely,
Arthur Zeikel
President
August 18, 1995
9
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
JUNE 30, 1995
--------------------------------------------------------------------------------
TOTAL RETURNS
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
12 MONTH 6 MONTH
6/30/95 12/31/94 6/30/94 % CHANGE % CHANGE
AMERICAN BALANCED FUND $14.38 $13.08 $13.15 +13.51%(1) +12.27%(2)
BASIC VALUE FOCUS FUND 12.12 11.10 10.54 +22.19(3) +15.28(4)
DEVELOPING CAPITAL MARKETS FOCUS FUND 9.16 9.51 9.71 - 4.78(5) - 2.78(5)
EQUITY GROWTH FUND 23.73 19.26 18.39 +29.33(6) +23.49(6)
FLEXIBLE STRATEGY FUND 15.59 14.70 14.55 +11.73(7) + 9.50(8)
GLOBAL STRATEGY FOCUS FUND 12.04 11.73 12.05 + 2.58(9) + 4.24(10)
GLOBAL UTILITY FOCUS FUND 10.16 9.45 9.64 + 9.44(11) + 9.56(12)
HIGH CURRENT INCOME FUND 11.14 10.61 11.23 + 9.84(13) +10.57(14)
INTERMEDIATE GOVERNMENT BOND FUND 10.51 9.97 10.03 + 9.86(15) + 8.47(16)
INTERNATIONAL BOND FUND 10.51 9.70 9.81 +14.58(17) +12.33(18)
INTERNATIONAL EQUITY FOCUS FUND 10.13 10.90 11.07 - 4.47(19) - 3.30(20)
NATURAL RESOURCES FOCUS FUND 11.59 10.82 10.68 +10.58(21) + 8.21(22)
PRIME BOND FUND 12.02 11.12 11.45 +12.70(23) +12.09(24)
QUALITY EQUITY FUND 29.82 27.74 26.91 +14.73(25) +10.68(26)
WORLD INCOME FOCUS FUND 9.54 9.17 9.54 + 9.21(27) + 8.82(28)
</TABLE>
<TABLE>
<S> <C>
(1) Percent change includes reinvestment of $0.485 per share ordinary income dividends.
(2) Percent change includes reinvestment of $0.271 per share ordinary income dividends.
(3) Percent change includes reinvestment of $0.639 per share ordinary income dividends and $0.016 per share capital
gains distributions.
(4) Percent change includes reinvestment of $0.570 per share ordinary income dividends and $0.016 per share capital
gains distributions.
(5) Percent change includes reinvestment of $0.086 per share ordinary income dividends.
(6) Percent change includes reinvestment of $0.043 per share ordinary income dividends.
(7) Percent change includes reinvestment of $0.333 per share ordinary income dividends and $0.271 per share capital
gains distributions.
(8) Percent change includes reinvestment of $0.190 per share ordinary income dividends and $0.271 per share capital
gains distributions.
(9) Percent change includes reinvestment of $0.305 per share ordinary income dividends and $0.005 per share capital
gains distributions.
(10) Percent change includes reinvestment of $0.174 per share ordinary income dividends and $0.005 per share capital
gains distributions.
(11) Percent change includes reinvestment of $0.361 per share ordinary income dividends.
(12) Percent change includes reinvestment of $0.179 per share ordinary income dividends.
(13) Percent change includes reinvestment of $1.110 per share ordinary income dividends.
(14) Percent change includes reinvestment of $0.561 per share ordinary income dividends.
(15) Percent change includes reinvestment of $0.476 per share ordinary income dividends.
(16) Percent change includes reinvestment of $0.288 per share ordinary income dividends.
(17) Percent change includes reinvestment of $0.670 per share ordinary income dividends.
(18) Percent change includes reinvestment of $0.366 per share ordinary income dividends.
(19) Percent change includes reinvestment of $0.367 per share ordinary income dividends and $0.080 per share capital
gains distributions.
(20) Percent change includes reinvestment of $0.330 per share ordinary income dividends and $0.080 per share capital
gains distributions.
(21) Percent change includes reinvestment of $0.170 per share ordinary income dividends and $0.032 per share capital
gains distributions.
(22) Percent change includes reinvestment of $0.077 per share ordinary income dividends and $0.032 per share capital
gains distributions.
(23) Percent change includes reinvestment of $0.807 per share ordinary income dividends.
(24) Percent change includes reinvestment of $0.415 per share ordinary income dividends.
(25) Percent change includes reinvestment of $0.431 per share ordinary income dividends and $0.512 per share capital
gains distributions.
(26) Percent change includes reinvestment of $0.282 per share ordinary income dividends and $0.512 per share capital
gains distributions.
(27) Percent change includes reinvestment of $0.822 per share ordinary income dividends.
(28) Percent change includes reinvestment of $0.418 per share ordinary income dividends.
</TABLE>
10
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
JUNE 30, 1995
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
YEAR FIVE YEARS TEN YEARS SINCE
ENDED ENDED ENDED INCEPTION
6/30/95 6/30/95 6/30/95 TO 6/30/95
AMERICAN BALANCED FUND +13.51% + 9.07% -- + 9.79%+
BASIC VALUE FOCUS FUND +22.19% -- -- + 13.69%++
DEVELOPING CAPITAL MARKETS FOCUS FUND - 4.78% -- -- - 6.53%+++
EQUITY GROWTH FUND +29.33% + 10.39% + 8.37% --
FLEXIBLE STRATEGY FUND +11.73% + 9.51% -- + 9.63%++++
GLOBAL STRATEGY FOCUS FUND + 2.58% -- -- + 7.57%+++++
GLOBAL UTILITY FOCUS FUND + 9.44% -- -- + 3.49%++
HIGH CURRENT INCOME FUND + 9.84% + 13.73% +11.71% --
INTERMEDIATE GOVERNMENT BOND FUND + 9.86% -- -- 8.90%+++
INTERNATIONAL BOND FUND +14.58% -- -- + 10.88%+++
INTERNATIONAL EQUITY FOCUS FUND - 4.47% -- -- + 3.57%++
NATURAL RESOURCES FOCUS FUND +10.58% + 3.99% -- + 4.04%+
PRIME BOND FUND +12.70% + 9.48% + 9.13% --
QUALITY EQUITY FUND +14.73% + 9.62% +12.74% --
WORLD INCOME FOCUS FUND + 9.21% -- -- + 5.07%++
</TABLE>
<TABLE>
<S> <C>
+ The Fund commenced operations on 6/01/88.
++ The Fund commenced operations on 7/01/93.
+++ The Fund commenced operations on 5/02/94.
++++ Flexible Strategy Fund commenced operations on 5/01/86.
+++++ Global Strategy Focus Fund commenced operations on 2/28/92.
</TABLE>
11
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
JUNE 30, 1995
--------------------------------------------------------------------------------
SEPARATE ACCOUNT AVERAGE ANNUAL TOTAL RETURNS*
--------------------------------------------------------------------------------
RETIREMENT PLUS VARIABLE ANNUITY
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
YEAR FIVE YEARS TEN YEARS SINCE
ENDED ENDED ENDED INCEPTION
6/30/95 6/30/95 6/30/95 TO 6/30/95
AMERICAN BALANCED FUND + 4.88% + 7.05% -- + 8.20%+
BASIC VALUE FOCUS FUND +13.43% -- -- + 9.34%++
DEVELOPING CAPITAL MARKETS FOCUS FUND -12.02% -- -- - 12.92%+++
EQUITY GROWTH FUND +20.47% + 8.36% + 6.78% --
FLEXIBLE STRATEGY FUND + 3.12% + 7.48% -- + 8.04%++++
GLOBAL STRATEGY FOCUS FUND - 5.27% -- -- + 4.92%+++++
GLOBAL UTILITY FOCUS FUND + 1.01% -- -- - 0.80%++
HIGH CURRENT INCOME FUND + 1.38% + 11.71% +10.10% --
INTERMEDIATE GOVERNMENT BOND FUND + 1.40% -- -- + 2.24%+++
INTERNATIONAL BOND FUND + 5.93% -- -- + 4.09%+++
INTERNATIONAL EQUITY FOCUS FUND -11.74% -- -- - 0.74%++
NATURAL RESOURCES FOCUS FUND + 2.06% + 1.95% -- + 2.55%+
PRIME BOND FUND + 4.08% + 7.45% + 7.55% --
QUALITY EQUITY FUND + 6.08% + 7.59% +11.10% --
WORLD INCOME FOCUS FUND + 0.80% -- -- + 0.70%++
</TABLE>
<TABLE>
<S> <C>
* Returns are calculated as if the contract were surrendered at the end of the periods shown and assume 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.
+ The Fund commenced operations on 6/01/88.
++ The Fund commenced operations on 7/01/93.
+++ The Fund commenced operations on 5/02/94.
++++ The Fund commenced operations on 5/01/86.
+++++ The Fund commenced operations on 2/28/92.
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.
</TABLE>
12
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
JUNE 30, 1995
--------------------------------------------------------------------------------
SEPARATE ACCOUNT AVERAGE ANNUAL TOTAL RETURNS*
--------------------------------------------------------------------------------
PORTFOLIO PLUS VARIABLE ANNUITY
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
YEAR FIVE YEARS TEN YEARS SINCE
ENDED ENDED ENDED INCEPTION
6/30/95 6/30/95 6/30/95 TO 6/30/95
AMERICAN BALANCED FUND + 7.53% + 6.96% -- +7.93%+
EQUITY GROWTH FUND +23.14% + 8.28% + 6.90% --
FLEXIBLE STRATEGY FUND + 5.77% + 7.39% -- +8.16%++
HIGH CURRENT INCOME FUND + 3.91% + 11.65% +10.22% --
NATURAL RESOURCES FOCUS FUND + 4.66% + 1.81% -- +2.12%+++
PRIME BOND FUND + 6.73% + 7.36% + 7.68% --
QUALITY EQUITY FUND + 8.72% + 7.50% +11.22% --
</TABLE>
<TABLE>
<S> <C>
* Returns are calculated as if the contract were surrendered at the end of the periods 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.
+ The Fund commenced operations on 6/01/88.
++ The Fund commenced operations on 5/01/86.
+++ The Fund commenced operations on 6/01/88.
</TABLE>
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.
13
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
JUNE 30, 1995
--------------------------------------------------------------------------------
SEPARATE ACCOUNT AVERAGE ANNUAL TOTAL RETURNS*
--------------------------------------------------------------------------------
INVESTOR LIFE/INVESTOR LIFE PLUS VARIABLE LIFE INSURANCE POLICIES
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SINCE
YEAR ENDED INCEPTION
6/30/95 TO 6/30/95
BASIC VALUE FOCUS FUND + 12.09% + 8.83%+
DEVELOPING CAPITAL MARKETS FOCUS FUND - 14.64% - 15.19%++
GLOBAL UTILITY FOCUS FUND - 0.55% - 4.03%+
INTERNATIONAL BOND FUND + 2.10% + 4.55%++
INTERNATIONAL EQUITY FOCUS FUND - 14.33% - 12.96%+
WORLD INCOME FOCUS FUND - 0.78% - 1.72%+
</TABLE>
<TABLE>
<S> <C>
* Returns reflect a separate account mortality and expense risk charge at an annual rate of 0.90% and a deferred
contract load of 9%. They do not reflect quarterly cost of insurance. Returns would be lower if they reflected
the deduction for cost of insurance, which can vary by age, sex, and rating class of the insured, and by each
contract's net amount at risk. All charges and fees are described in the product prospectuses. See those
prospectuses for more complete information.
+ The Fund commenced operations on 7/1/93.
++ The Fund commenced operations on 5/2/94.
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.
</TABLE>
14
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
JUNE 30, 1995
--------------------------------------------------------------------------------
SEPARATE ACCOUNT AVERAGE ANNUAL TOTAL RETURNS*
--------------------------------------------------------------------------------
ESTATE INVESTOR I & II VARIABLE LIFE INSURANCE POLICIES
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SINCE
YEAR ENDED INCEPTION
6/30/95 TO 6/30/95
BASIC VALUE FOCUS FUND + 21.09% + 16.57%+
DEVELOPING CAPITAL MARKETS FOCUS FUND - 5.64% - 7.36%++
GLOBAL UTILITY FOCUS FUND + 8.45% + 3.76%+
INTERNATIONAL BOND FUND - 13.55% + 9.86%++
INTERNATIONAL EQUITY FOCUS FUND - 5.33% - 5.16%+
WORLD INCOME FOCUS FUND + 7.07% + 6.04%+
</TABLE>
<TABLE>
<S> <C>
* Returns assume the separate account had been in existence and a contract had been in force during the periods
shown. They reflect the separate account mortality and expense risks charge at an annual rate of 0.90%. Returns
do not reflect contract loading or quarterly cost of insurance, which varies by age, sex and underwriting class
of the insured and the contract's net amount at risk. Returns would be lower if these two charges were reflected.
Refer to the product prospectus which contains a more complete description of all charges and fees.
When contract loading is reflected, the returns for One Year and Since Inception, respectively, would be: Basic
Value Focus, - 39.46%, -35.72%; Developing Capital Markets Focus, -52.82%, -48.92%; Global Utility Focus,
-45.77%, -42.79%; International Bond, -42.23%, -39.42%; International Equity Focus, -52.66%, -47.70%; and World
Income Focus, -45.89%, -41.53%.
+ The Fund commenced operations on 7/1/93.
++ The Fund commenced operations on 5/2/94.
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.
</TABLE>
15
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--AMERICAN BALANCED FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
AEROSPACE 42,000 United Technologies Corp......... $ 2,368,095 $ 3,281,250 1.7%
------------------------------------------------------------------------------------------------------------------------
AUTO & TRUCK 120,000 Ford Motor Co.................... 3,234,604 3,570,000 1.8
------------------------------------------------------------------------------------------------------------------------
BUILDING--RELATED 67,700 Stanley Works Co................. 2,802,105 2,564,138 1.3
------------------------------------------------------------------------------------------------------------------------
CHEMICALS 55,100 Eastman Chemical Co.............. 2,468,863 3,278,450 1.7
82,400 Nalco Chemical Co................ 2,742,236 2,997,300 1.5
5,211,099 6,275,750 3.2
------------------------------------------------------------------------------------------------------------------------
CONSUMER--SERVICES 108,000 Kelly Services, Inc.............. 2,907,200 2,727,000 1.4
------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 80,000 General Signal Corporation....... 2,846,693 3,180,000 1.6
------------------------------------------------------------------------------------------------------------------------
ENERGY RELATED 176,000 + California Energy Co., Inc....... 3,127,566 2,882,000 1.5
------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL CONTROL 197,792 Wheelabrator Technologies, 3,340,872 3,041,052 1.6
Inc..............................
------------------------------------------------------------------------------------------------------------------------
FOODS 184,069 Archer-Daniels-Midland Co........ 2,699,457 3,428,285 1.8
------------------------------------------------------------------------------------------------------------------------
HEALTHCARE 172,400 + Humana, Inc...................... 2,449,466 3,038,550 1.6
------------------------------------------------------------------------------------------------------------------------
MACHINERY 77,700 Ingersoll-Rand Co................ 2,609,066 2,972,025 1.5
80,000 Stewart & Stevenson Services, 2,853,980 2,860,000 1.5
Inc..............................
5,463,046 5,832,025 3.0
------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS--
CAPITAL GOODS 80,000 Fisher Scientific International, 2,468,552 2,650,000 1.4
Inc..............................
137,900 Keystone International, Inc...... 3,285,477 2,706,287 1.4
5,754,029 5,356,287 2.8
------------------------------------------------------------------------------------------------------------------------
NATURAL GAS 76,900 Consolidated Natural Gas Co...... 3,420,260 2,902,975 1.5
------------------------------------------------------------------------------------------------------------------------
OFFICE RELATED 88,800 Pitney Bowes, Inc................ 3,400,742 3,407,700 1.7
------------------------------------------------------------------------------------------------------------------------
OIL--INTEGRATED 90,500 Phillips Petroleum Co............ 2,637,514 3,020,437 1.5
------------------------------------------------------------------------------------------------------------------------
PETROLEUM & EQUIPMENT SERVICES 160,300 Dresser Industries, Inc.......... 3,300,993 3,566,675 1.8
------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 90,000 Abbott Laboratories.............. 2,827,672 3,645,000 1.9
101,000 Merck & Co., Inc................. 3,482,470 4,949,000 2.5
6,310,142 8,594,000 4.4
------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY 67,400 Eastman Kodak Co................. 2,909,430 4,086,125 2.1
------------------------------------------------------------------------------------------------------------------------
PRINTING/PUBLISHING 51,200 Gannett Co., Inc................. 2,589,416 2,777,600 1.4
------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 67,800 American Telephone & Telegraph 3,588,830 3,601,875 1.8
Co...............................
59,600 Bell Atlantic Corp............... 3,218,314 3,337,600 1.7
136,500 Comsat Corp...................... 3,464,705 2,678,812 1.4
90,000 GTE Corp......................... 2,937,729 3,071,250 1.6
13,209,578 12,689,537 6.5
------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 79,982,307 86,221,386 44.2
</TABLE>
--------------------------------------------------------------------------------
16
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--AMERICAN BALANCED FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FACE VALUE PERCENT OF
AMOUNT US GOVERNMENT OBLIGATIONS COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
US TREASURY NOTES US Treasury Notes:
$12,550,000 6.25% due 2/15/2003................. $ 12,863,703 $ 12,583,383 6.5%
8,750,000 5.75% due 8/15/2003................. 8,756,820 8,483,388 4.4
11,300,000 7.25% due 5/15/2004................. 11,427,203 12,064,558 6.2
30,500,000 7.25% due 8/15/2004................. 30,594,766 32,591,995 16.7
10,000,000 7.875% due 11/15/2004............... 10,003,750 11,137,500 5.7
73,646,242 76,860,824 39.5
------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT OBLIGATIONS 73,646,242 76,860,824 39.5
------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER* 6,829,000 General Electric Capital Corp.,
6.20% due 7/03/1995................. 6,825,472 6,825,472 3.5
6,000,000 Matterhorn Capital Corp.,
5.93% due 7/25/1995................. 5,975,292 5,975,292 3.1
6,000,000 Riverwood Funding Corp.,
5.96% due 7/20/1995................. 5,980,133 5,980,133 3.1
------------ ------------ ----------
18,780,897 18,780,897 9.7
------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT &
AGENCY OBLIGATIONS* Federal National Mortgage
Association:
3,000,000 5.75% due 7/06/1995................. 2,997,125 2,997,125 1.5
8,000,000 5.88% due 7/17/1995................. 7,977,787 7,977,787 4.1
------------ ------------ ----------
10,974,912 10,974,912 5.6
------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 29,755,809 29,755,809 15.3
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS................... $183,384,358 192,838,019 99.0
------------
------------
OTHER ASSETS LESS LIABILITIES....... 1,916,847 1.0
NET ASSETS.......................... $194,754,866 100.0%
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
* 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.
+ Non-income producing security.
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--BASIC VALUE FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS COST (NOTE 1A) NET ASSETS
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
DISCOUNT FROM BOOK VALUE
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
METALS--NON FERROUS 130,000 + ASARCO Inc........................ $ 3,214,920 $ 3,965,000 1.6%
AEROSPACE 425,000 Aviall, Inc....................... 4,127,033 3,559,375 1.5
HOME--BUILDERS 225,000 Beazer Homes USA, Inc............. 3,558,474 3,740,625 1.6
SAVINGS & LOANS 385,000 Greater N.Y. Savings Bank......... 3,413,536 3,561,250 1.5
TECHNOLOGY 600,000 Micronics Computers, Inc.......... 2,862,283 2,325,000 1.0
TECHNOLOGY 200,000 Storage Technology Corp........... 5,477,284 4,925,000 2.0
OIL--REFINERS 501,000 Total Petroleum Ltd............... 5,898,809 5,511,000 2.3
OIL--REFINERS 180,000 Valero Energy Corp................ 3,496,915 3,645,000 1.5
STEEL 399,200 WHX Corp.......................... 4,376,427 4,690,600 2.0
36,425,681 35,922,850 15.0
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
BELOW-AVERAGE PRICE/EARNINGS RATIO
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
ELECTRONICS 650,000 Automated Security (Holdings) PLC
(ADR) (a)....................... 2,039,500 975,000 0.4
SAVINGS & LOANS 150,000 Brooklyn Bancorp Inc.............. 4,817,050 4,987,500 2.1
TEXTILE & APPAREL 300,000 Burlington Industries, Inc........ 3,402,116 3,450,000 1.4
FARM & CONSTRUCTION 50,000 Deere & Co........................ 3,517,060 4,281,250 1.8
EQUIPMENT
RETAIL 200,000 Dillard Department Stores......... 5,604,050 5,875,000 2.5
CAPITAL GOODS 50,000 Eaton Corp........................ 2,464,500 2,906,250 1.2
MEDICAL SERVICES 200,000 Foundation Health Corp............ 5,967,118 5,400,000 2.3
AUTOMOTIVE 125,000 General Motors Corp............... 5,850,587 5,859,375 2.4
FOREST PRODUCTS & PAPER 60,000 International Paper Co............ 4,415,711 5,145,000 2.1
OIL & GAS PRODUCERS 120,000 KCS Energy Inc.................... 1,744,400 2,565,000 1.1
INSURANCE 100,000 PartnerRe Holdings Ltd............ 2,016,881 2,600,000 1.1
STEEL 200,000 Republic Engineered Steels,
Inc............................. 1,600,000 1,500,000 0.6
TECHNOLOGY 345,000 Syquest Technology, Inc........... 4,728,709 4,441,875 1.9
INSURANCE 180,000 TIG Holdings, Inc................. 3,174,355 4,140,000 1.7
INSURANCE 100,000 Travelers Corp.................... 3,791,524 4,375,000 1.8
TECHNOLOGY 245,000 Western Digital Corp.............. 3,837,387 4,256,875 1.8
58,970,948 62,758,125 26.2
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
ABOVE-AVERAGE YIELD
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
REAL ESTATE INVESTMENT TRUST 170,000 Bay Apartment Communities, Inc.... 3,289,250 3,315,000 1.4
PHARMACEUTICALS 80,000 Bristol-Myers Squibb Co........... 4,485,799 5,450,000 2.3
REAL ESTATE INVESTMENT TRUST 130,000 Camden Property Trust............. 3,136,188 2,843,750 1.2
REAL ESTATE INVESTMENT TRUST 150,000 Evans Withycombe Residential, 3,013,688 3,056,250 1.3
Inc.............................
REAL ESTATE INVESTMENT TRUST 160,000 Felcor Suite Hotels, Inc.......... 3,447,250 4,080,000 1.7
RETAIL 450,000 K mart Corp....................... 6,607,928 6,581,250 2.7
OIL--DOMESTIC 175,000 Occidental Petroleum Corp......... 3,275,872 4,003,125 1.7
TOBACCO 60,000 Philip Morris Cos. Inc............ 3,341,700 4,462,500 1.8
SAVINGS & LOANS 125,000 River Bank of America
(Preferred)..................... 3,453,125 2,906,250 1.2
FINANCIAL SERVICES 140,000 Student Loan Marketing
Association..................... 5,430,576 6,562,500 2.7
SAVINGS & LOANS 215,000 Washington Mutual Savings Bank.... 4,552,937 5,025,625 2.1
OIL/INTERNATIONAL 225,000 Yacimientos Petroliferos Fiscales
S.A. (ADR) (a).................. 4,440,610 4,246,875 1.8
48,474,923 52,533,125 21.9
</TABLE>
--------------------------------------------------------------------------------
18
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--BASIC VALUE FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS COST (NOTE 1A) NET ASSETS
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
SPECIAL SITUATIONS
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
CONGLOMERATES 400,000 ADT Ltd. (ADR) (a)................ $ 3,883,501 $ 4,700,000 2.0%
ENVIRONMENTAL SERVICES 333,600 Allwaste, Inc..................... 1,857,864 1,834,800 0.8
MEDICAL SERVICES 428,600 Applied Bioscience International
Inc............................. 2,214,938 2,196,575 0.9
HOME--BUILDERS 140,000 Centex Corp....................... 3,301,590 3,955,000 1.7
PHOTOGRAPHY 80,000 Eastman Kodak Co.................. 3,613,959 4,850,000 2.0
RETAIL 150,000 Federated Department Stores,
Inc............................. 3,112,749 3,862,500 1.6
HOTELS 300,000 John Q Hammons Hotels Inc......... 4,477,124 4,200,000 1.8
RETAIL SPECIALTY 250,000 The Limited, Inc.................. 4,810,464 5,500,000 2.3
RETAIL--APPAREL 184,200 Liz Claiborne Inc................. 3,147,249 3,914,250 1.6
STEEL 500,000 Lone Star Technologies Inc........ 3,532,092 4,000,000 1.7
PHARMACEUTICALS 100,000 Merck & Co., Inc.................. 3,127,175 4,900,000 2.0
AUTO--RELATED 460,000 National Auto Credit Inc.......... 5,185,729 6,037,500 2.5
SEMICONDUCTORS 110,000 National Semiconductor Corp....... 1,935,350 3,052,500 1.3
FOOD & HOUSEHOLD 125,000 Sara Lee Corp..................... 2,749,090 3,562,500 1.5
OIL--RELATED 280,000 TETRA Technologies, Inc........... 2,329,950 3,395,000 1.4
INFORMATION PROCESSING 400,000 Unisys Corp....................... 3,920,638 4,350,000 1.8
OIL SERVICES 275,000 Varco International, Inc.......... 1,663,725 2,268,750 0.9
54,863,187 66,579,375 27.8
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL STOCKS 198,734,739 217,793,475 90.9
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
FACE
AMOUNT SHORT-TERM SECURITIES
------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER* $3,000,000 ANZ (Delaware) Inc., 5.82% due
7/12/1995....................... 2,994,180 2,994,180 1.2
5,000,000 du Pont (E.I.) de Nemours, 5.91%
due 7/28/1995................... 4,977,017 4,977,017 2.1
8,928,000 General Electric Capital Corp.,
6.02% due 7/03/1995............. 8,923,387 8,923,387 3.7
6,000,000 Matterhorn Capital Corp., 5.93%
due 7/12/1995................... 5,988,140 5,988,140 2.5
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL SHORT-TERM SECURITIES 22,882,724 22,882,724 9.5
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL INVESTMENTS................. $221,617,463 240,676,199 100.4
------------
------------
LIABILITIES IN EXCESS OF OTHER (993,447) (0.4)
ASSETS..........................
NET ASSETS........................ $239,682,752 100.0%
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
* 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) American Depositary Receipt (ADR).
+ Non-income producing security.
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--DEVELOPING CAPITAL MARKETS FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHARES HELD/ VALUE PERCENT OF NET
AFRICA INDUSTRY FACE AMOUNT INVESTMENTS COST (NOTE 1A) ASSETS
SOUTH AFRICA BEVERAGE & TOBACCO 83,700 Rembrandt Group Ltd..... $ 561,187 $ 575,574 1.3%
BEVERAGES 15,000 South African Breweries
Ltd. 344,669 428,070 1.0
MULTI--INDUSTRY 6,000 ASA Ltd................. 281,052 258,000 0.6
22,000 The Morgan Stanley
Africa Investment
Fund, Inc............. 254,320 253,000 0.6
18,000 New South Africa Fund,
Inc................... 257,580 258,750 0.6
18,000 Southern Africa Fund,
Inc................... 264,224 254,250 0.6
1,057,176 1,024,000 2.4
STEEL 392,700 South Africa Iron &
Steel Industrial
Corp., Ltd............ 425,793 446,115 1.0
TRANSPORTATION ZAL 9,000,000 Transnet Ltd., 15% due
10/01/1995............ 2,165,104 2,463,210 5.8
TOTAL INVESTMENTS IN
SOUTH AFRICA 4,553,929 4,936,969 11.5
TOTAL INVESTMENTS IN
AFRICA 4,553,929 4,936,969 11.5
EUROPE
GREECE BEVERAGE 14,400 + Hellenic Bottling Co.
S.A. (Bearer)......... 281,725 427,748 1.0
TOTAL INVESTMENTS IN
GREECE 281,725 427,748 1.0
HUNGARY FOOD 2,065 + Pick Szeged
Reszvenytarsasag (ADR)
(a) (c)............... 141,347 104,747 0.2
TOTAL INVESTMENTS IN
HUNGARY 141,347 104,747 0.2
PORTUGAL ENGINEERING & 32,500 Sociedade de Construsoes
CONSTRUCTION Soares de Costa
S.A................... 550,438 577,308 1.4
TOTAL INVESTMENTS IN
PORTUGAL 550,438 577,308 1.4
RUSSIA MULTI--INDUSTRY 60,000 + Fleming Russia 588,000 420,000 1.0
Securities Fund (ADR)
(a)...................
TOTAL INVESTMENTS IN
RUSSIA 588,000 420,000 1.0
SRI LANKA DIVERSIFIED 6,500 John Keells Holdings
Corp. (GDR) (b)....... 65,000 48,750 0.1
TOTAL INVESTMENTS IN
SRI LANKA 65,000 48,750 0.1
TURKEY BEVERAGE 735,375 Erciyas Biracilik Ve
Malt Sanayii A.S...... 322,290 632,509 1.5
BUILDING MATERIALS 659,250 Alarko Holdings A.S..... 581,801 581,955 1.4
72,600 Cimentas Izmir Cimento
Fabrikasi T.A.S....... 56,391 46,833 0.1
638,192 628,788 1.5
FOOD 84,000 + Dardanel Onentas Gida
A.S................... 134,376 209,144 0.5
INSURANCE 93,000 Aksigorta A.S........... 23,250 18,103 0.0
RETAIL STORES 963,000 Migros Turk A.S......... 720,847 1,078,961 2.5
STEEL 3,744,900 Izmir Demir Celik
Sanayii A.S........... 147,748 144,100 0.3
TOTAL INVESTMENTS IN
TURKEY 1,986,703 2,711,605 6.3
TOTAL INVESTMENTS IN
EUROPE 3,613,213 4,290,158 10.0
</TABLE>
20
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--DEVELOPING CAPITAL MARKETS FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LATIN SHARES HELD/ VALUE PERCENT OF NET
AMERICA INDUSTRY FACE AMOUNT INVESTMENTS COST (NOTE 1A) ASSETS
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ARGENTINA OIL & RELATED 23,800 Yacimientos Petroliferos
Fiscales S.A.
(Sponsored) (ADR)
(a)................... $ 495,581 $ 449,225 1.1%
TOTAL INVESTMENTS IN
ARGENTINA 495,581 449,225 1.1
BRAZIL APPLIANCES 1,335,000 Brasmotor Group S.A.
(Preferred)........... 582,433 246,417 0.6
AUTOMOTIVE 55,000 CAPCO Automotive
Products Corp. S.A.... 719,382 426,250 1.0
FOODS 800,000 La Bombril S.A. PN
(Preferred)........... 19,694 16,678 0.0
TELECOMMUNICATIONS 32,780 Telecomunicacoes
Brasileiras
S.A.--Telebras PN
(ADR) (a) (c)......... 1,337,550 1,073,545 2.5
1,600,000 Telecomunicacoes
Brasileiras
S.A.--Telebras PN
(Preferred)........... 68,826 52,638 0.1
55,745 Telecomunicacoes
Brasileiras
S.A.--Telebras PN
(Preferred) (Pro
Rata)................. 3,908 1,834 0.0
1,410,284 1,128,017 2.6
UTILITIES 29,513 Companhia Energetica de
Minas Gerais S.A.
(CEMIG) (ADR) (a)
(c)................... 558,442 560,747 1.3
UTILITIES--ELECTRIC 117,000 Centrais Eletricas
Brasileiras
S.A.--Eletrobras 'B'
(Preferred)........... 40,181 31,124 0.1
1,928,000 Light--Servicios de
Electricidade S.A..... 806,939 607,079 1.4
847,120 638,203 1.5
TOTAL INVESTMENTS IN
BRAZIL 4,137,355 3,016,312 7.0
CHILE TELECOMMUNICATIONS 5,500 Compana de Telefonos de
Chile S.A. (ADR)
(a)................... 500,110 447,563 1.1
TOTAL INVESTMENTS IN
CHILE 500,110 447,563 1.1
ECUADOR BUILDING MATERIALS 332 La Cemento Nacional C.A.
(c)................... 100,100 76,360 0.2
TOTAL INVESTMENTS IN
ECUADOR 100,100 76,360 0.2
MEXICO BUILDING & 126,000 + Apasco, S.A. de C.V..... 458,715 499,568 1.2
CONSTRUCTION
HEALTH & PERSONAL CARE 44,000 Kimberly-Clark de
Mexico, S.A. de
C.V................... 461,632 505,068 1.2
LEISURE 56,000 + Grupo Carso, S.A. de
C.V. 'A1'............. 562,674 306,187 0.7
NEWSPAPER/ PUBLISHING 44,000 + Grupo Fernandez Editores
S.A. de C.V........... 69,936 16,601 0.0
RETAIL STORES 24,000 Sears Roebuck de Mexico,
S.A. de C.V. 'B'...... 99,756 57,554 0.1
TELECOMMUNICATIONS 19,400 Telefonos de Mexico,
S.A. de C.V. (ADR)
(a)................... 861,114 574,725 1.3
TOTAL INVESTMENTS IN
MEXICO................ 2,513,827 1,959,703 4.5
</TABLE>
21
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--DEVELOPING CAPITAL MARKETS FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LATIN
AMERICA SHARES HELD/ VALUE PERCENT OF NET
(CONCLUDED) INDUSTRY FACE AMOUNT INVESTMENTS COST (NOTE 1A) ASSETS
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PERU BANKING 51,548 Banco Wiese Limitado
S.A. (ADR) (a)........ $ 493,750 $ 425,271 1.0%
TOTAL INVESTMENTS IN
PERU 493,750 425,271 1.0
VENEZUELA BUILDING MATERIALS 65,100 Corimon C.A. S.A.C.A.
(ADR) (a)............. 497,843 423,150 1.0
TOTAL INVESTMENTS IN
VENEZUELA 497,843 423,150 1.0
TOTAL INVESTMENTS IN
LATIN AMERICA 8,738,566 6,797,584 15.9
PACIFIC
BASIN/ASIA
------------------------------------------------------------------------------------------------------------------------
AUSTRALIA MERCHANDISING 21,400 Amway Asia Pacific
Ltd................... 732,865 775,750 1.8
TOTAL INVESTMENTS IN
AUSTRALIA 732,865 775,750 1.8
HONG KONG AUTOMOTIVE 254,000 Sime Darby (Hong Kong)
Ltd................... 406,139 279,038 0.7
FINANCIAL SERVICES 1,500,000 Winton Holdings
(Bermuda) Ltd......... 361,334 364,468 0.9
MULTI--INDUSTRY 5,570,000 Sinocan Holdings Ltd.... 1,113,613 1,583,757 3.7
OIL & GAS PRODUCERS 974,000 Zhenhai Refining &
Chemical Co........... 239,204 232,885 0.5
TOTAL INVESTMENTS IN
HONG KONG 2,120,290 2,460,148 5.8
INDIA AUTOMOTIVE 14,000 + Ashok Leyland Ltd....... 179,060 189,000 0.4
BROADCASTING & 185,600 + Videocon International
PUBLISHING Ltd. (ADR) (a)........ 839,737 658,880 1.5
LEISURE 40,400 + East India Hotels
Ltd................... 640,744 631,452 1.5
TEXTILES 22,000 + Reliance Industries Ltd.
(ADR) (a)............. 412,500 401,500 0.9
TOTAL INVESTMENTS IN
INDIA 2,072,041 1,880,832 4.3
INDONESIA BANKING--INTERNATIONAL 222,000 P.T. Bank Bali.......... 485,642 563,477 1.3
BROADCASTING & US$ 765,000 P.T. Surya Citra
PUBLISHING Television, 4% due
7/01/1997
(Convertible)......... 767,812 757,350 1.8
FOOD & HOUSEHOLD 330,000 P.T. Wicaksana Overseas
PRODUCTS International......... 938,975 833,895 2.0
TELECOMMUNICATIONS
& EQUIPMENT 324,000 P.T. Kabelmetal 454,749 545,822 1.3
Indonesia.............
86,500 P.T. Supreme Cable
Manufacturing Corp.
(GDR) (b)............. 246,140 254,526 0.6
700,889 800,348 1.9
TOTAL INVESTMENTS IN
INDONESIA 2,893,318 2,955,070 7.0
MALAYSIA BROADCASTING 93,000 Sistem Televisyen
Malaysia BHD.......... 267,129 248,000 0.6
FINANCIAL SERVICES 121,000 Commerce Asset--Holdings
BHD................... 458,885 620,513 1.5
TELECOMMUNICATIONS 46,000 Leader Universal
Holdings BHD.......... 156,646 164,185 0.4
TOTAL INVESTMENTS IN
MALAYSIA 882,660 1,032,698 2.5
NEW ZEALAND TRANSPORTATION 127,000 Ports of Auckland 179,243 250,229 0.6
Ltd...................
TOTAL INVESTMENT IN NEW
ZEALAND 179,243 250,229 0.6
</TABLE>
22
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--DEVELOPING CAPITAL MARKETS FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PACIFIC
BASIN/ASIA VALUE PERCENT OF NET
(CONCLUDED) INDUSTRY SHARES HELD INVESTMENTS COST (NOTE 1A) ASSETS
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PHILIPPINES MULTI-INDUSTRY 11,550 + Benpres Holdings Corp.
(c)................... $ 106,200 $ 95,287 0.2%
TOTAL INVESTMENTS IN THE
PHILIPPINES 106,200 95,287 0.2
SOUTH KOREA TELECOMMUNICATIONS 55,000 + Korea Mobile
Telecommunications
Corp. (GDR) (b)....... 1,926,875 1,925,000 4.5
UTILITIES--ELECTRIC 77,000 Korea Electric Power
Corp.................. 1,606,935 1,742,125 4.1
TOTAL INVESTMENTS IN
SOUTH KOREA 3,533,810 3,667,125 8.6
TAIWAN MERCHANDISING 12,047 Hocheng Group Corp.
(ADR) (a) (c)......... 349,363 141,552 0.3
TOTAL INVESTMENTS IN
TAIWAN 349,363 141,552 0.3
THAILAND HOUSEHOLD PRODUCTS 40,000 Srithai Superware Co.,
Ltd................... 321,298 286,930 0.7
UTILITIES 17,200 Sanyo Universal Electric
Co., Ltd.............. 53,919 88,527 0.2
TOTAL INVESTMENTS IN
THAILAND 375,217 375,457 0.9
TOTAL INVESTMENTS IN THE
PACIFIC BASIN/ASIA 13,245,007 13,634,148 32.0
FACE AMOUNT SHORT-TERM SECURITIES
COMMERCIAL $ 1,000,000 Corporate Asset Funding
PAPER* Co., Inc., 5.91% due
7/06/1995 999,179 999,179 2.3
2,000,000 Daimler-Benz AG, 5.95%
due 7/25/1995......... 1,992,067 1,992,067 4.7
1,273,000 General Electric Capital
Corp., 6.20% due
7/03/1995............. 1,272,562 1,272,562 3.0
4,263,808 4,263,808 10.0
US GOVERNMENT &
AGENCY OBLIGATIONS* 2,455,000 Federal Farm Credit
Bank, 5.84% due
7/24/1995............. 2,445,840 2,445,840 5.7
6,000,000 Federal Home Loan
Mortgage Corp., 5.87%
due
7/17/1995............... 5,984,347 5,984,347 14.0
8,430,187 8,430,187 19.7
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SHORT-TERM SECURITIES 12,693,995 12,693,995 29.7
TOTAL INVESTMENTS.......................... $42,844,710 42,352,854 99.1
OTHER ASSETS LESS LIABILITIES.............. 389,648 0.9
NET ASSETS................................. $42,742,502 100.0%
</TABLE>
<TABLE>
<S> <C>
(a) American Depositary Receipt (ADR).
(b) Global Depositary Receipt (GDR).
(c) Restricted securities as to resale. The value of the Fund's investment in restricted securities was approximately
$2,052,000, representing 4.80% of net assets.
------------------------------------------------------------------------------------------------------------------------
ACQUISITION VALUE (NOTE
ISSUE DATES COST 1A)
------------------------------------------------------------------------------------------------------------------------
Benpres Holdings Corp............................................................... 10/15/1994 $ 106,200 $ 95,287
Companhia Energetica de Minas Gerais S.A. (CEMIG) (ADR)............................. 6/07/1994 558,442 560,747
Hocheng Group Corp. (ADR)........................................................... 8/09/1994 349,363 141,552
La Cemento Nacional C.A............................................................. 1/05/1994 100,100 76,360
Pick Szeged Reszvenytarsasag (ADR).................................................. 6/01/1994 141,347 104,747
Telecomunicacoes Brasileiras S.A.-Telebras PN (ADR)................................. 6/07/1994 1,337,550 1,073,545
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
TOTAL............................................................................... $ 2,593,002 $ 2,052,238
------------------------------------------------------------------------------------------------------------------------
* 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 of the Fund.
+ Non-income producing security.
</TABLE>
See Notes to Financial Statements.
23
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--DOMESTIC MONEY MARKET FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
FACE INTEREST MATURITY VALUE
AMOUNT ISSUE RATE* DATE (NOTE 1A)
------------------------------------------------------------------------------------------------------------------------
COMMERCIAL
PAPER--37.2% $ 15,000,000 Asset Securitization Cooperative................. 5.90 % 7/14/95 $ 14,965,583
4,000,000 CSW Corp......................................... 5.85 9/25/95 3,942,967
3,000,000 Deer Park Refining, L.P.......................... 5.95 7/05/95 2,997,521
2,400,000 Deer Park Refining, L.P.......................... 5.93 7/14/95 2,394,465
3,500,000 Deer Park Refining, L.P.......................... 5.96 7/14/95 3,491,888
6,000,000 Deer Park Refining, L.P.......................... 6.00 7/14/95 5,986,000
4,000,000 Deutsche Bank Finance, Inc....................... 5.97 7/07/95 3,995,357
9,319,000 du Pont (E.I.) de Nemours & Co................... 6.05 10/13/95 9,161,354
1,476,000 ESC Securitization Inc........................... 5.97 7/14/95 1,472,573
2,904,000 Falcon Asset Securitization Corp................. 5.95 8/09/95 2,884,801
3,600,000 Falcon Asset Securitization Corp................. 5.93 8/17/95 3,571,536
9,000,000 General Electric Capital Corp.................... 6.38 8/03/95 8,949,850
9,562,000 Goldman Sachs Group L.P.......................... 5.92 8/14/95 9,492,197
4,000,000 KFW International Finance, Inc................... 6.00 7/07/95 3,995,333
5,000,000 National Fleet Funding Corp...................... 6.00 7/13/95 4,989,167
2,000,000 New Center Asset Trust........................... 6.20 7/19/95 1,993,698
5,000,000 New Center Asset Trust........................... 6.12 9/07/95 4,943,458
2,750,000 PHH Corp......................................... 5.90 7/06/95 2,747,296
918,000 Southwestern Bell Capital Corp................... 6.00 7/20/95 914,955
5,000,000 Svenska Handelsbanken, Inc....................... 5.85 9/20/95 4,932,806
5,000,000 Svenska Handelsbanken, Inc....................... 5.89 9/20/95 4,932,806
6,000,000 Windmill Funding Corp............................ 5.98 7/31/95 5,969,103
7,044,000 Windmill Funding Corp............................ 5.98 8/04/95 7,003,047
------------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (COST--$115,714,730) 115,727,761
------------------------------------------------------------------------------------------------------------------------
CORPORATE NOTES--3.7% 10,000,000 Morgan Guaranty Trust Co......................... 6.40 5/28/96 10,001,000
1,600,000 SMM Trust+....................................... 6.083 6/14/96 1,600,000
------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE NOTES (COST--$11,600,000) 11,601,000
------------------------------------------------------------------------------------------------------------------------
MASTER NOTES--1.0% 3,000,000 Goldman Sachs Group L.P.+........................ 6.08 2/14/96 3,000,000
------------------------------------------------------------------------------------------------------------------------
TOTAL MASTER NOTES (COST--$3,000,000) 3,000,000
------------------------------------------------------------------------------------------------------------------------
MEDIUM-TERM
NOTES--4.0% 7,500,000 Federal National Mortgage Association............ 6.46 3/27/96 7,522,500
5,000,000 General Electric Capital Corp.................... 6.55 3/28/96 5,006,000
------------------------------------------------------------------------------------------------------------------------
TOTAL MEDIUM-TERM NOTES (COST--$12,499,811) 12,528,500
------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT, AGENCY
& INSTRUMENTALITY 1,970,000 Federal Farm Credit Bank......................... 6.52 7/05/95 1,968,388
OBLIGATIONS-- 210,000 Federal Home Loan Bank........................... 6.03 9/06/95 207,711
DISCOUNT--14.7% 10,000,000 Federal Home Loan Bank........................... 5.84 11/06/95 9,796,108
605,000 Federal Home Loan Bank........................... 6.18 1/17/96 586,117
160,000 Federal Home Loan Bank........................... 6.10 2/26/96 154,034
485,000 Federal National Mortgage Association............ 6.12 9/15/95 479,014
490,000 Federal National Mortgage Association............ 5.95 9/29/95 482,853
175,000 Federal National Mortgage Association............ 6.14 11/03/95 171,515
10,000,000 US Treasury Bills................................ 6.415 7/13/95 9,979,597
7,000,000 US Treasury Bills................................ 6.115 8/17/95 6,948,947
5,000,000 US Treasury Bills................................ 6.60 10/19/95 4,915,054
3,700,000 US Treasury Bills................................ 6.815 1/11/96 3,591,374
2,150,000 US Treasury Bills................................ 6.59 2/08/96 2,077,550
4,500,000 US Treasury Bills................................ 6.605 2/08/96 4,348,360
------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT, AGENCY & INSTRUMENTALITY OBLIGATIONS--
DISCOUNT (COST--$45,596,216) 45,706,622
------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--DOMESTIC MONEY MARKET FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
FACE INTEREST MATURITY VALUE
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
AMOUNT ISSUE RATE* DATE (NOTE 1A)
------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT, AGENCY
& INSTRUMENTALITY $ 3,000,000 Federal Home Loan Bank+.......................... 6.43 % 12/28/95 $ 3,000,000
OBLIGATIONS-- 1,500,000 Federal Home Loan Bank+.......................... 6.28 5/06/96 1,497,732
NON-DISCOUNT--34.8% 5,000,000 Federal Home Loan Bank+.......................... 5.61 9/12/96 4,996,821
1,000,000 Federal Home Loan Bank........................... 7.10 4/03/97 1,000,300
2,000,000 Federal Home Loan Bank........................... 6.42 6/12/97 2,000,000
5,000,000 Federal Home Loan Mortgage Corp.................. 6.84 2/28/96 5,030,000
10,000,000 Federal Home Loan Mortgage Corp.+................ 6.36 9/01/95 9,999,672
1,000,000 Federal Home Loan Mortgage Corp.+................ 6.25 6/03/96 998,148
10,000,000 Federal Home Loan Mortgage Corp.+................ 6.45 6/07/96 9,997,118
4,000,000 Federal National Mortgage Association............ 6.86 2/28/96 4,024,800
5,000,000 Federal National Mortgage Association............ 6.46 3/27/96 5,015,000
10,000,000 Federal National Mortgage Association+........... 5.61 5/10/96 9,995,845
2,000,000 Federal National Mortgage Association+........... 6.33 5/13/96 2,000,000
2,000,000 Federal National Mortgage Association+........... 6.33 8/13/96 2,000,000
15,000,000 Federal National Mortgage Association+........... 5.593 10/11/96 15,000,000
12,000,000 Federal National Mortgage Association+........... 5.73 2/21/97 12,000,000
2,000,000 Federal National Mortgage Association+........... 6.45 5/19/97 2,000,000
2,000,000 Federal National Mortgage Association+........... 6.50 5/14/98 2,000,000
600,000 Student Loan Marketing Association+.............. 5.86 3/20/96 600,959
3,360,000 Student Loan Marketing Association+.............. 6.17 3/20/96 3,360,000
3,000,000 Student Loan Marketing Association+.............. 5.69 5/14/96 3,002,006
4,000,000 Student Loan Marketing Association+.............. 5.96 8/22/96 4,013,619
2,000,000 Student Loan Marketing Association+.............. 5.83 3/03/97 2,000,387
750,000 US Treasury Notes................................ 3.875 8/31/95 747,421
500,000 US Treasury Notes................................ 4.00 1/31/96 494,844
1,500,000 US Treasury Notes................................ 6.125 5/31/97 1,506,563
------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT, AGENCY & INSTRUMENTALITY OBLIGATIONS--
NON-DISCOUNT (COST--$108,248,372) 108,281,235
------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS
------------------------------------------------------------------------------------------------------------------------
REPURCHASE 13,015,000 Lehman Government Securities, purchased on
AGREEMENT**--4.2% 6/30/95 to yield 6.25% to 7/03/95................ 13,015,000
------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST--$13,015,000) 13,015,000
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST--$309,674,129)--99.6%.... 309,860,118
OTHER ASSETS LESS LIABILITIES--0.4%.............. 1,163,865
-------------
NET ASSETS--100.0%............................... $ 311,023,983
-------------
-------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* 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 June 30, 1995.
** Repurchase Agreements are fully collateralized by US Government Obligations.
+ Variable Rate Notes.
</TABLE>
See Notes to Financial Statements.
25
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
AIR TRANSPORTATION 100,000 Skywest, Inc........................ $ 2,305,063 $ 2,250,000 0.9%
------------------------------------------------------------------------------------------------------------------------
AUTO-RELATED 145,000 + Automotive Industries Inc........... 3,461,784 3,896,875 1.6
------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS 200,000 Spartan Motors, Inc................. 2,218,730 1,750,000 0.7
------------------------------------------------------------------------------------------------------------------------
BANKING 95,000 Cole Taylor Financial Group, Inc.... 1,723,242 1,615,000 0.7
140,000 Collective Bancorp, Inc............. 2,786,251 2,800,000 1.1
50,000 Mercantile Bancorp., Inc............ 1,621,750 2,243,750 0.9
150,000 Roosevelt Financial Group, Inc...... 2,302,501 2,475,000 1.0
62,000 TCF Financial Corp.................. 2,485,152 2,945,000 1.2
10,918,896 12,078,750 4.9
------------------------------------------------------------------------------------------------------------------------
BIOPHARMACEUTICALS 50,000 + Genzyme Corp........................ 1,646,250 1,987,500 0.8
------------------------------------------------------------------------------------------------------------------------
BROADCAST, RADIO & TV 255,000 + Westcott Communications, Inc........ 3,766,879 4,462,500 1.8
------------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS 140,000 Apogee Enterprises, Inc............. 1,943,285 2,450,000 1.0
200,000 Ply-Gem Industries, Inc............. 3,550,140 3,550,000 1.4
5,493,425 6,000,000 2.4
------------------------------------------------------------------------------------------------------------------------
BUSINESS SERVICES 100,000 Reynolds & Reynolds Co. (The) (Class 2,392,876 2,950,000 1.2
A)................................
------------------------------------------------------------------------------------------------------------------------
CAPITAL EQUIPMENT 180,000 BWIP Holdings, Inc.................. 3,124,687 3,285,000 1.3
------------------------------------------------------------------------------------------------------------------------
CHEMICALS 200,000 Crompton & Knowles Corp............. 3,358,875 2,825,000 1.2
------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES 135,000 Rollins Inc......................... 3,489,515 3,240,000 1.3
110,000 Stewart Enterprises, Inc. (Class 2,925,624 3,685,000 1.5
A)................................
6,415,139 6,925,000 2.8
------------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE 75,000 + Sterling Software, Inc.............. 2,318,689 2,887,500 1.2
------------------------------------------------------------------------------------------------------------------------
COMPUTER 120,000 + Oak Technology Inc.................. 3,583,753 4,380,000 1.8
SOFTWARE/SERVICES
------------------------------------------------------------------------------------------------------------------------
COMPUTERS 150,000 + 3d Systems Corp..................... 2,512,500 2,775,000 1.1
80,000 + Boca Research, Inc.................. 1,160,000 2,160,000 0.9
165,000 + Opti Inc............................ 3,063,125 3,753,750 1.5
6,735,625 8,688,750 3.5
------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 75,000 + Anadigics, Inc...................... 1,036,750 1,462,500 0.6
190,000 + Sheldahl, Inc....................... 2,734,375 2,470,000 1.0
3,771,125 3,932,500 1.6
------------------------------------------------------------------------------------------------------------------------
ELECTRONIC/INSTRUMENTS 110,000 BMC Industries, Inc................. 1,333,308 2,763,750 1.1
145,000 + DOVatron International, Inc......... 3,243,125 3,480,000 1.4
135,000 Methode Electronics Inc. (Class 1,749,200 2,598,750 1.1
A)................................
6,325,633 8,842,500 3.6
------------------------------------------------------------------------------------------------------------------------
ELECTRONIC/SEMI-
CONDUCTORS 100,000 + Orbit Semiconductor, Inc............ 1,907,500 2,075,000 0.8
50,000 + SDL Inc............................. 1,077,500 1,475,000 0.6
2,985,000 3,550,000 1.4
------------------------------------------------------------------------------------------------------------------------
ELECTRONICS 160,000 + Altron Inc.......................... 2,604,690 3,800,000 1.6
80,000 + Semitool Inc........................ 1,602,500 2,520,000 1.0
95,000 Sensormatic Electronics Corp........ 2,699,450 3,372,500 1.4
6,906,640 9,692,500 4.0
------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 85,000 + Speedway Motorsports, Inc........... 1,529,200 1,838,125 0.8
------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL 200,000 Calgon Carbon Corp.................. 2,433,712 2,425,000 1.0
150,400 IMCO Recycling, Inc................. 2,149,984 2,820,000 1.2
109,375 + TETRA Technologies, Inc............. 1,201,250 1,941,406 0.8
5,784,946 7,186,406 3.0
------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 75,000 FINOVA Group, Inc................... 2,393,126 2,625,000 1.1
200,000 + National Auto Credit, Inc........... 2,454,377 2,625,000 1.1
200,000 Transmedia Network, Inc............. 2,407,899 2,000,000 0.8
7,255,402 7,250,000 3.0
------------------------------------------------------------------------------------------------------------------------
FOODS/FOOD PROCESSING 95,000 + Smithfield Foods, Inc............... 2,564,995 2,018,750 0.8
------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
GAMING 50,000 + Sodak Gaming, Inc.................... $ 1,268,874 $ 850,000 0.3%
------------------------------------------------------------------------------------------------------------------------
HEALTH SERVICES 150,000 + OrNda Health Corp.................... 2,331,250 2,568,750 1.0
------------------------------------------------------------------------------------------------------------------------
HEALTHCARE--PRODUCTS & 50,000 + Sybron Chemical Corp................. 1,503,250 1,993,750 0.8
SERVICES 110,000 + Thermedics, Inc...................... 1,535,333 2,145,000 0.9
3,038,583 4,138,750 1.7
------------------------------------------------------------------------------------------------------------------------
INSURANCE 100,000 + Acceptance Insurance Holdings, 1,447,425 1,450,000 0.6
Inc................................
100,000 + American Travellers Corp............. 1,763,517 1,750,000 0.7
3,210,942 3,200,000 1.3
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------
MACHINE--DIVERSIFIED 105,000 + Asyst Technologies, Inc.............. 3,583,437 3,858,750 1.6
------------------------------------------------------------------------------------------------------------------------
MACHINERY 57,500 + ASM Lithography Holding N.V. 1,258,125 2,062,813 0.8
(ADR)**............................
------------------------------------------------------------------------------------------------------------------------
MANUFACTURED HOUSING 125,000 Clayton Homes, Inc................... 1,920,136 2,046,875 0.8
100,000 Oakwood Homes Corp................... 2,299,368 2,562,500 1.0
120,000 + Redman Industries, Inc............... 2,210,186 2,550,000 1.0
6,429,690 7,159,375 2.8
------------------------------------------------------------------------------------------------------------------------
MANUFACTURING 52,000 + Chicago Miniature Lamp, Inc.......... 650,000 702,000 0.3
85,000 Fisher Scientific International, 2,282,662 2,815,625 1.2
Inc................................
141,200 + Lydall, Inc.......................... 2,261,774 3,106,400 1.3
5,194,436 6,624,025 2.8
------------------------------------------------------------------------------------------------------------------------
MEDICAL--BIOTECHNOLOGY 63,100 + Thermo Cardiosystems, Inc............ 1,165,737 2,311,037 0.9
------------------------------------------------------------------------------------------------------------------------
MEDICAL SERVICES 150,000 + North American Biologicals, Inc...... 1,050,000 1,350,000 0.6
------------------------------------------------------------------------------------------------------------------------
MEDICAL SUPPLIES 300,000 + Angeion Corp......................... 1,174,070 1,462,500 0.6
170,000 + ATS Medical, Inc..................... 765,000 1,445,000 0.6
170,000 ATS Medical, Inc. (Warrents) (a)..... 0 106,250 0.0
120,000 Beckman Instruments, Inc............. 3,351,219 3,345,000 1.4
70,000 Dentsply International, Inc.......... 2,378,125 2,520,000 1.0
125,000 + Heart Technology, Inc................ 2,306,250 2,390,625 1.0
75,000 + Isolyser Company, Inc................ 1,363,869 2,662,500 1.1
108,600 + Maxxim Medical, Inc.................. 1,375,316 1,629,000 0.7
115,000 U.S. Surgical Corp................... 2,597,375 2,400,625 1.0
15,311,224 17,961,500 7.4
------------------------------------------------------------------------------------------------------------------------
METAL FABRICATING 55,000 Valmont Industries, Inc.............. 1,131,874 1,141,250 0.5
------------------------------------------------------------------------------------------------------------------------
METALS 65,000 Harsco Corp.......................... 2,668,892 3,428,750 1.4
185,000 Magma Copper Co...................... 3,005,225 3,006,250 1.2
5,674,117 6,435,000 2.6
------------------------------------------------------------------------------------------------------------------------
OIL & GAS 100,000 Parker & Parsley Development 2,073,198 1,962,500 0.8
Partners...........................
------------------------------------------------------------------------------------------------------------------------
OIL/GAS--EQUIPMENT &
SERVICES 200,000 + Pride Petroleum Services, Inc........ 1,198,760 1,475,000 0.6
150,000 + Weatherford International, Inc....... 1,339,815 1,912,500 0.8
2,538,575 3,387,500 1.4
------------------------------------------------------------------------------------------------------------------------
OIL/GAS--EXPLORATION 100,000 + Seagull Energy Corp.................. 1,969,249 1,650,000 0.7
------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 200,000 + Centocor, Inc........................ 3,008,750 2,850,000 1.2
------------------------------------------------------------------------------------------------------------------------
PRINTING 85,000 Merrill Corp......................... 1,900,473 1,572,500 0.6
------------------------------------------------------------------------------------------------------------------------
PRINTING & 110,000 Banta Corp........................... 3,611,250 3,657,500 1.5
PUBLISHING 145,000 + Scientific Games Holdings Corp....... 3,529,624 3,915,000 1.6
7,140,874 7,572,500 3.1
------------------------------------------------------------------------------------------------------------------------
REAL ESTATE 80,450 National Health Investors, Inc....... 2,201,700 2,192,262 0.9
------------------------------------------------------------------------------------------------------------------------
RESTAURANTS 100,000 + Boston Chicken, Inc.................. 1,693,240 2,412,500 1.0
160,000 Morrison Restaurants, Inc............ 3,715,824 3,840,000 1.6
125,000 + Outback Steakhouse, Inc.............. 3,292,190 3,609,375 1.5
8,701,254 9,861,875 4.1
------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
RETAIL--APPAREL 140,000 + Tommy Hilfiger Corp.................. $ 2,933,869 $ 3,920,000 1.6%
------------------------------------------------------------------------------------------------------------------------
RETAIL SPECIALTY 250,000 + MicroAge Inc......................... 2,702,501 3,500,000 1.4
------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTOR PRODUCTION 80,000 + Ultratech Stepper Inc................ 877,501 2,780,000 1.1
EQUIPMENT
------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS 170,000 Dallas Semiconductor Corp............ 2,926,559 3,485,000 1.4
------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY 15,000 + Paradigm Technology Inc.............. 210,000 333,750 0.1
------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 130,000 Comsat Corp.......................... 2,625,195 2,551,250 1.0
200,000 + General Datacomm Industries, Inc..... 2,511,997 2,500,000 1.0
5,137,192 5,051,250 2.0
------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS & 89,000 + Teltrend Inc......................... 1,424,000 1,713,250 0.7
EQUIPMENT
------------------------------------------------------------------------------------------------------------------------
TEXTILES 182,000 + Galey & Lord, Inc.................... 2,292,120 2,525,250 1.0
140,000 + Mohawk Industries, Inc............... 2,311,875 2,030,000 0.8
4,603,995 4,555,250 1.8
------------------------------------------------------------------------------------------------------------------------
UTILITIES--GAS 100,000 MCN Corporation...................... 1,794,000 1,975,000 0.8
70,000 NICOR Inc............................ 1,642,351 1,881,250 0.8
3,436,351 3,856,250 1.6
------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 199,297,942 228,582,793 93.1
------------------------------------------------------------------------------------------------------------------------
FACE AMOUNT SHORT-TERM SECURITIES
------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER* $4,398,000 General Electric Capital Corp., 6.20%
due 7/03/1995...................... 4,395,728 4,395,728 1.8
5,500,000 Paccar Financial Corp., 5.95% due
7/10/1995.......................... 5,490,910 5,490,910 2.2
1,400,000 Toys 'R' Us, Inc., 5.95% due 1,395,604 1,395,604 0.6
7/19/1995..........................
11,282,242 11,282,242 4.6
------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & 3,000,000 Federal National Mortgage
AGENCY OBLIGATIONS* Association, 5.88% due 7/19/1995... 2,990,690 2,990,690 1.2
------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 14,272,932 14,272,932 5.8
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS.................... $213,570,874 242,855,725 98.9
OTHER ASSETS LESS LIABILITIES........ 2,614,241 1.1
NET ASSETS........................... $245,469,966
100.0%
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* 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.
** American Depositary Receipt (ADR).
(a) 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.
</TABLE>
See Notes to Financial Statements.
28
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--FLEXIBLE STRATEGY FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
INDUSTRY HELD US STOCKS & WARRANTS COST (NOTE 1A) NET ASSETS
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
AEROSPACE 40,000 Boeing Company................... $ 2,469,252 $ 2,505,000 0.8%
11,700 Crane Co......................... 418,627 424,125 0.1
30,000 United Technologies Corp......... 2,317,734 2,343,750 0.8
------------ ------------ ----------
5,205,613 5,272,875 1.7
------------------------------------------------------------------------------------------------------------------------
ALUMINUM 20,000 Aluminum Co. of America.......... 961,593 1,002,500 0.3
------------------------------------------------------------------------------------------------------------------------
APPLIANCES 120,000 Singer Co. N.V................... 4,025,070 3,105,000 1.0
------------------------------------------------------------------------------------------------------------------------
AUTO & TRUCK 105,000 Ford Motor Co.................... 3,015,412 3,123,750 1.0
------------------------------------------------------------------------------------------------------------------------
BANKING 105,000 Bank of New York, Inc............ 3,186,578 4,239,375 1.4
40,000 Bank of New York, Inc. (Warrants)
(b)............................ 300,938 850,000 0.3
60,000 BankAmerica Corp................. 2,745,471 3,157,500 1.0
30,000 CoreStates Financial Corp........ 1,060,190 1,046,250 0.3
------------ ------------ ----------
7,293,177 9,293,125 3.0
------------------------------------------------------------------------------------------------------------------------
BEVERAGES 20,000 PepsiCo Inc...................... 809,443 912,500 0.3
------------------------------------------------------------------------------------------------------------------------
CHEMICALS 12,000 Dow Chemical Co.................. 878,514 862,500 0.3
76,400 Eastman Chemical Co.............. 3,965,408 4,545,800 1.5
3,000 Engelhard Corp................... 121,680 128,625 0.0
------------ ------------ ----------
4,965,602 5,536,925 1.8
------------------------------------------------------------------------------------------------------------------------
COMMUNICATION EQUIPMENT 91,500 + ADC Telecommunication Inc........ 2,026,500 3,248,250 1.1
95,000 + DSC Communications Corp.......... 2,215,919 4,417,500 1.5
45,000 + Tellabs, Inc..................... 1,052,175 2,160,000 0.7
------------ ------------ ----------
5,294,594 9,825,750 3.3
------------------------------------------------------------------------------------------------------------------------
COMPUTER EQUIPMENT 30,000 + Solectron Corp................... 794,063 1,023,750 0.3
------------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 105,000 + Computer Sciences Corp........... 4,163,266 5,971,875 2.0
100,000 General Motors Corp. (Class E)... 4,092,109 4,350,000 1.4
------------ ------------ ----------
8,255,375 10,321,875 3.4
------------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES 60,000 + Novell, Inc...................... 1,269,307 1,192,500 0.4
------------------------------------------------------------------------------------------------------------------------
COMPUTERS 55,000 + Compaq Computer Corp............. 2,188,858 2,495,625 0.8
40,000 International Business Machines
Corp........................... 3,696,045 3,840,000 1.3
------------ ------------ ----------
5,884,903 6,335,625 2.1
------------------------------------------------------------------------------------------------------------------------
CONSUMER SERVICES 40,000 Block (H & R), Inc............... 1,650,438 1,645,000 0.5
------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 75,000 General Electric Co. PLC......... 4,164,372 4,228,125 1.4
60,000 Grainger (W.W.), Inc............. 3,652,694 3,525,000 1.2
------------ ------------ ----------
7,817,066 7,753,125 2.6
------------------------------------------------------------------------------------------------------------------------
ENERGY RELATED 60,000 California Energy Co., Inc....... 1,095,722 982,500 0.3
------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL CONTROL 350,000 Wheelabrator Technologies,
Inc............................ 5,888,869 5,381,250 1.8
------------------------------------------------------------------------------------------------------------------------
FOODS/FOOD 35,000 General Mills, Inc............... 1,727,854 1,798,125 0.6
PROCESSING
------------------------------------------------------------------------------------------------------------------------
HEALTHCARE 120,000 + Humana Inc....................... 2,544,970 2,115,000 0.7
105,000 + Physician Corp. of America....... 2,393,653 1,417,500 0.5
------------ ------------ ----------
4,938,623 3,532,500 1.2
------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS 40,000 Procter & Gamble Co.............. 2,271,960 2,875,000 0.9
------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--FLEXIBLE STRATEGY FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
INDUSTRY HELD US STOCKS & WARRANTS COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INSURANCE 50,000 Aetna Life & Casualty Co......... $ 2,771,530 $ 3,143,750 1.0%
45,000 American International Group,
Inc............................ 4,711,929 5,130,000 1.7
35,000 ITT Corp......................... 3,004,477 4,112,500 1.4
38,000 National Re Corp................. 1,085,853 1,273,000 0.4
------------ ------------ ----------
11,573,789 13,659,250 4.5
------------------------------------------------------------------------------------------------------------------------
MACHINE--DIVERSIFIED 30,100 York International Corp.......... 1,293,215 1,354,500 0.4
------------------------------------------------------------------------------------------------------------------------
OIL--INTEGRATED 55,000 Chevron Corp..................... 2,616,569 2,564,375 0.8
50,000 Mobil Corp....................... 3,922,826 4,800,000 1.6
------------ ------------ ----------
6,539,395 7,364,375 2.4
------------------------------------------------------------------------------------------------------------------------
PACKAGING 34,200 Crown Cork & Seal Co., Inc....... 1,447,535 1,714,275 0.6
------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 25,000 American Home Products Corp...... 1,707,873 1,934,375 0.6
45,000 Merck & Co., Inc................. 1,792,599 2,205,000 0.7
------------ ------------ ----------
3,500,472 4,139,375 1.3
------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY 70,000 Eastman Kodak Co................. 3,560,150 4,243,750 1.4
------------------------------------------------------------------------------------------------------------------------
RESTAURANTS 50,000 + Darden Restaurants, Inc.......... 527,316 543,750 0.2
------------------------------------------------------------------------------------------------------------------------
RETAIL 35,000 + Revco D.S., Inc.................. 663,683 840,000 0.3
------------------------------------------------------------------------------------------------------------------------
RETAIL SPECIALTY 22,000 + Michaels Stores, Inc............. 688,735 467,500 0.2
40,000 + Toys 'R' Us, Inc................. 1,089,814 1,170,000 0.4
------------ ------------ ----------
1,778,549 1,637,500 0.6
------------------------------------------------------------------------------------------------------------------------
RETAIL STORES 30,000 Sears, Roebuck & Co.............. 1,615,288 1,796,250 0.6
------------------------------------------------------------------------------------------------------------------------
SEMI-CONDUCTORS 35,000 INTEL Corp....................... 1,408,931 2,213,750 0.7
33,000 Texas Instruments, Inc........... 3,860,640 4,417,875 1.5
------------ ------------ ----------
5,269,571 6,631,625 2.2
------------------------------------------------------------------------------------------------------------------------
TIRE & RUBBER 25,000 Bandag, Inc. (Class A)........... 1,354,227 1,431,250 0.5
------------------------------------------------------------------------------------------------------------------------
UTILITIES--COMMUNICATIONS 46,000 + ALC Communications Corp.......... 1,551,090 2,075,750 0.7
60,000 GTE Corp......................... 1,920,691 2,047,500 0.7
60,000 MCI Communications Corp.......... 1,528,832 1,312,500 0.4
70,000 Southwestern Bell Capital
Corp........................... 2,980,278 3,333,750 1.1
145,000 + WorldCom, Inc.................... 3,129,017 3,896,875 1.3
------------ ------------ ----------
11,109,908 12,666,375 4.2
------------------------------------------------------------------------------------------------------------------------
TOTAL US STOCKS & WARRANTS 123,397,782 138,935,950 45.7
------------------------------------------------------------------------------------------------------------------------
COUNTRY FOREIGN STOCKS++++
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
AUSTRALIA 40,000 News Corp., Ltd. (ADR) (a)
(21)........................... 776,544 905,000 0.3
245,000 News Corp., Ltd. (Preferred)
(ADR) (a) (21)................. 3,844,784 4,900,000 1.6
------------ ------------ ----------
4,621,328 5,805,000 1.9
------------------------------------------------------------------------------------------------------------------------
CANADA 15,000 Canadian Pacific Ltd. (32)....... 260,625 260,625 0.1
25,000 Magna International Inc. (Class
A) (26)........................ 912,593 1,103,125 0.4
55,000 NOVA Corp. of Alberta (18)....... 577,810 467,500 0.2
50,000 Semi-Tech Corp. (Receipts)
(d) (31)....................... 536,117 200,292 0.1
------------ ------------ ----------
2,287,145 2,031,542 0.8
------------------------------------------------------------------------------------------------------------------------
CHILE 25,200 + Banco O'Higgins (Sponsored)
(ADR) (a) (2).................. 394,612 579,600 0.2
30,900 Cristalerias de Chile S.A. (ADR)
(a) (27)....................... 578,285 764,775 0.3
25,000 + Distribuidora Chilectra
Metropolitana S.A. (ADR) (a)
(4)++.......................... 795,208 1,250,000 0.4
------------ ------------ ----------
1,768,105 2,594,375 0.9
------------------------------------------------------------------------------------------------------------------------
DENMARK 52,000 Tele Danmark A/S (ADR) (a)
(16)........................... 1,275,360 1,456,000 0.5
------------------------------------------------------------------------------------------------------------------------
FRANCE 7,800 Eramet S.A. (28)................. 488,521 556,913 0.2
20,000 Havas S.A. (33).................. 1,761,248 1,584,812 0.5
------------ ------------ ----------
2,249,769 2,141,725 0.7
------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--FLEXIBLE STRATEGY FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
COUNTRY HELD FOREIGN STOCKS++++ COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
HONG KONG 20,000 Hong Kong Telecommunications Ltd.
(ADR) (a) (16)................. $ 414,439 $ 397,500 0.1%
126,641 HSBC Holdings PLC (2)............ 1,203,585 1,624,484 0.5
28,000 Johnson Electric Co. (5)......... 62,137 56,454 0.0
700,000 Shanghai Petrochemical Co., Ltd.
(18)........................... 233,787 219,392 0.1
------------ ------------ ----------
1,913,948 2,297,830 0.7
------------------------------------------------------------------------------------------------------------------------
INDONESIA 24,000 PT Hanjaya Mandala Sampoerna
(29)........................... 133,851 188,679 0.1
4,000 PT Indonesian Satellite (ADR) (a)
(16)........................... 139,933 153,000 0.1
------------ ------------ ----------
273,784 341,679 0.2
------------------------------------------------------------------------------------------------------------------------
JAPAN 180,000 Danka Business Systems PLC (ADR)
(a) (34)....................... 3,410,699 4,342,500 1.4
------------------------------------------------------------------------------------------------------------------------
MEXICO 146,400 + Grupo Carso, S.A. de C.V. (ADR)
(a) (12)++..................... 1,702,240 1,592,100 0.5
------------------------------------------------------------------------------------------------------------------------
NETHERLANDS 45,200 Getronics NV (24)................ 1,938,203 2,215,200 0.7
20,000 Royal Dutch Petroleum Co. N.V.
(ADR) (a) (13)................. 2,046,055 2,437,500 0.8
------------ ------------ ----------
3,984,258 4,652,700 1.5
------------------------------------------------------------------------------------------------------------------------
NORWAY 64,925 Nera A.S. (16)................... 1,848,833 1,843,712 0.6
------------------------------------------------------------------------------------------------------------------------
PORTUGAL 150,000 Espirito Santo Financial Holdings
S.A. (ADR) (a) (2)............. 2,177,096 1,743,750 0.6
------------------------------------------------------------------------------------------------------------------------
SPAIN 35,000 Repsol S.A. (ADR) (a) (13)....... 1,151,615 1,106,875 0.4
------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM 200,000 + L. M. Ericsson Telephone Co.
(23)........................... 2,895,870 4,000,000 1.3
76,354 Siebe PLC (17)................... 734,689 762,650 0.3
65,000 Thorn EMI PLC (Ordinary) (30).... 1,251,426 1,349,141 0.4
------------ ------------ ----------
4,881,985 6,111,791 2.0
------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS 33,546,165 38,061,579 12.7
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FACE
INDUSTRY AMOUNT* CORPORATE & FOREIGN BONDS++++
------------------------------------------------------------------------------------------------------------------------
FOREIGN--CANADA C$ 8,000,000 Government of Canada, 7.50% due
9/01/2000 (8)................... 5,888,647 5,815,685 1.9
US$ 5,000,000 Hydro-Electric Quebec, 6.35% due
1/15/2002 (8)................... 5,000,000 4,896,875 1.6
------------ ------------ ----------
10,888,647 10,712,560 3.5
------------------------------------------------------------------------------------------------------------------------
FOREIGN--GERMANY Bundes Obligations (8):
DM 17,000,000 6.00% due 2/20/1998............... 11,796,846 12,445,782 4.1
18,000,000 7.375% due 1/03/2005.............. 13,045,282 13,345,770 4.4
------------ ------------ ----------
24,842,128 25,791,552 8.5
------------------------------------------------------------------------------------------------------------------------
FOREIGN--ITALY US$ 500,000 Republic of Italy, 8.75% due
2/08/2001 (8)................... 537,305 543,282 0.2
------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--FLEXIBLE STRATEGY FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FACE VALUE PERCENT OF
INDUSTRY AMOUNT* CORPORATE & FOREIGN BONDS COST (NOTE 1A) NET ASSETS
---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
US--FINANCIAL US$ 1,000,000 Ford Motor Credit Co., 7.125%
SERVICES due 12/01/1997............. $ 995,000 $ 1,017,445 0.3%
---------------------------------------------------------------------------------------------------------
US--INDUSTRIAL 1,000,000 International Business
Machines Corp., 6.375% due
6/15/2000.................. 1,000,000 997,189 0.3
---------------------------------------------------------------------------------------------------------
US--TELECOMMUNICATIONS 5,000,000 Chesapeake & Potomac Telecom
Co., 6.125% due
7/15/2005.................. 4,503,300 4,750,000 1.6
---------------------------------------------------------------------------------------------------------
TOTAL CORPORATE & FOREIGN
BONDS 42,766,380 43,812,028 14.4
---------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY
OBLIGATIONS
---------------------------------------------------------------------------------------------------------
FEDERAL Federal National Mortgage
AGENCY Association:
OBLIGATIONS
US$ 5,000,000 7.85% due 9/10/2004.......... 4,992,969 5,215,850 1.7
4,968,461 8.00% due 11/01/2024......... 4,744,104 5,060,030 1.7
2,000,000 Series 93D, 5.85% due
2/25/2006.................. 1,996,250 1,943,740 0.6
------------ ------------ ----------
11,733,323 12,219,620 4.0
---------------------------------------------------------------------------------------------------------
GOVERNMENT
OBLIGATIONS US Treasury Notes:
1,000,000 8.625% due 8/15/1997....... 1,027,344 1,054,220 0.3
6,000,000 7.50% due 11/15/2001......... 6,143,336 6,440,640 2.1
5,000,000 6.25% due 2/15/2003.......... 4,990,469 5,013,300 1.6
3,000,000 US Treasury STRIPS++,
7.77% (e) due 5/15/2000...... 2,226,452 2,258,460 0.7
------------ ------------ ----------
14,387,601 14,766,620 4.7
---------------------------------------------------------------------------------------------------------
MORTGAGE- Government National Mortgage
BACKED Association (c):
SECURITIES 496,384 9.00% due 11/15/2019......... 492,971 523,610 0.2
1,092,208 9.00% due 11/15/2019......... 1,082,297 1,150,947 0.4
------------ ------------ ----------
1,575,268 1,674,557 0.6
---------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY
OBLIGATIONS 27,696,192 28,660,797 9.3
---------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--FLEXIBLE STRATEGY FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FACE VALUE PERCENT OF
AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
COMMERCIAL US$ 12,000,000 Ciesco L.P., 5.95% due
PAPER** 7/05/1995.................. $ 11,992,066 $ 11,992,066 3.9%
11,709,000 Kimberly-Clark Corp.,
6.125% due 7/03/1995....... 11,705,016 11,705,016 3.8
7,000,000 PHH Corp., 5.96% due
7/18/1995.................. 6,980,299 6,980,299 2.3
------------ ------------ ----------
30,677,381 30,677,381 10.0
---------------------------------------------------------------------------------------------------------
US Federal National Mortgage
GOVERNMENT Association:
&
AGENCY
OBLIGATIONS**
12,000,000 5.91% due 7/07/1995.......... 11,988,180 11,988,180 3.9
20,000,000 5.88% due 7/21/1995.......... 19,934,667 19,934,667 6.6
------------ ------------ ----------
31,922,847 31,922,847 10.5
---------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 62,600,228 62,600,228 20.5
---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS............ $290,006,747 312,070,582 102.6
------------
------------
LIABILITIES IN EXCESS OF
OTHER ASSETS............... (7,907,197) (2.6)
------------ ----------
NET ASSETS................... $304,163,385 100.0%
------------ ----------
------------ ----------
---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(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.
(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 70% of the purchase price of Class A shares of Semi-Tech Corp. The Fund is
obligated to pay the remaining 30%, approximately $205,000, over the next year.
(e) Represents the yield-to-maturity on this zero coupon issue.
* Denominated in US dollars unless otherwise indicated.
** Commercial Paper and certain US Government & Agency Obligations are traded on a discount basis; the interest rates
shown are the discount rates paid at the time of purchase by the Fund.
+ Non-income producing security.
</TABLE>
<TABLE>
<S> <C>
++ Restricted securities as to resale. The value of the Fund's investment in restricted securities was approximately
$2,842,000 representing 0.9% of net assets.
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
VALUE
ISSUE ACQUISITION DATES COST (NOTE 1A)
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Distribuidora Chilectra Metropolitana S.A. (ADR)........................ 2/12/1992 $ 795,208 $ 1,250,000
Grupo Carso, S.A. de C.V. (ADR)......................................... 1/24/1992-1/31/1995
1,702,240 1,592,100
------------------------------------------------------------------------------------------------------------------------
TOTAL...................................................................
$ 2,497,448 $ 2,842,100
------------ ------------
------------ ------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
++ Separate Trading of Registered Interest and Principal of Securities (STRIPS).
++++ Corresponding industry groups for foreign securities:
</TABLE>
<TABLE>
<S> <C>
(1) Automotive
(2) Banking
(3) Business Services
(4) Electric Utilities
(5) Electronics
(6) Energy
(7) Food Chains
(8) Government Entities
(9) Health and Personal Care
(10) Insurance
(11) Machinery
(12) Multi-Industry
(13) Petroleum
(14) Real Estate
(15) Retail Stores
(16) Telecommunications
(17) Electrical Equipment
(18) Chemicals
(19) Financial Services
(20) Beverages
(21) Media Publishing
(22) Construction
(23) Communications Equipment
(24) Computers
(25) Soap
(26) Auto Parts--Original
(27) Containers
(28) Metals
(29) Tobacco
(30) Leisure/Entertainment
(31) Appliances
(32) Railroads
(33) Advertising
(34) Office Equipment
</TABLE>
See Notes to Financial Statements.
33
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL STRATEGY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
INDUSTRY HELD US STOCKS COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
AEROSPACE 61,500 United Technologies Corp........... $ 3,820,923 $ 4,804,688 0.9%
------------------------------------------------------------------------------------------------------------------------
AUTOMOBILES 120,000 Ford Motor Co...................... 3,221,336 3,570,000 0.7
------------------------------------------------------------------------------------------------------------------------
BUILDING--RELATED 95,700 Stanley Works Co. (The)............ 3,935,571 3,624,638 0.7
------------------------------------------------------------------------------------------------------------------------
CHEMICALS 72,050 Eastman Chemical Co................ 3,290,340 4,286,975 0.8
94,500 Nalco Chemical Co.................. 3,283,332 3,437,437 0.7
------------ ------------ ----------
6,573,672 7,724,412 1.5
------------------------------------------------------------------------------------------------------------------------
CONGLOMERATES 6,670 + US Industies Inc................... 97,072 90,879 0.0
------------------------------------------------------------------------------------------------------------------------
CONSUMER--SERVICES 132,000 Kelly Services, Inc. (Class A)..... 3,779,000 3,333,000 0.6
------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 110,000 General Signal Corp................ 3,964,612 4,372,500 0.8
------------------------------------------------------------------------------------------------------------------------
ENERGY RELATED 214,000 + California Energy Co., Inc......... 3,700,896 3,504,250 0.7
------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL CONTROL 261,800 Wheelabrator Technologies, Inc..... 4,510,490 4,025,175 0.8
------------------------------------------------------------------------------------------------------------------------
FOODS 222,275 Archer-Daniels-Midland Co.......... 3,489,332 4,139,872 0.8
------------------------------------------------------------------------------------------------------------------------
HEALTHCARE 160,000 + Humana Inc......................... 3,839,054 2,820,000 0.5
------------------------------------------------------------------------------------------------------------------------
MACHINERY 108,900 Ingersoll-Rand Co.................. 3,771,905 4,165,425 0.8
120,000 Stewart & Stevenson Services,
Inc.............................. 4,173,980 4,290,000 0.8
------------ ------------ ----------
7,945,885 8,455,425 1.6
------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS--
110,000 Fisher Scientific International,
MANUFACTURING Inc.............................. 3,455,487 3,643,750 0.7
187,200 Keystone International, Inc........ 4,152,758 3,673,800 0.7
------------ ------------ ----------
7,608,245 7,317,550 1.4
------------------------------------------------------------------------------------------------------------------------
OFFICE--RELATED 117,500 Pitney Bowes, Inc.................. 4,407,443 4,509,062 0.9
------------------------------------------------------------------------------------------------------------------------
OIL--INTEGRATED 116,700 Phillips Petroleum Co.............. 3,479,759 3,894,862 0.8
------------------------------------------------------------------------------------------------------------------------
PETROLEUM & SERVICE 192,900 Dresser Industries, Inc............ 4,099,100 4,292,025 0.8
EQUIPMENT 50,200 Schlumberger Ltd................... 2,972,633 3,118,675 0.6
------------ ------------ ----------
7,071,733 7,410,700 1.4
------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 112,000 Abbott Laboratories................ 3,152,867 4,536,000 0.9
105,000 Merck & Co., Inc................... 3,539,150 5,145,000 1.0
------------ ------------ ----------
6,692,017 9,681,000 1.9
------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY 77,200 Eastman Kodak Co................... 3,487,735 4,680,250 0.9
------------------------------------------------------------------------------------------------------------------------
PRINTING/PUBLISHING 70,800 Gannett Co., Inc................... 3,634,477 3,840,900 0.7
------------------------------------------------------------------------------------------------------------------------
70,100 American Telephone & Telegraph
TELECOMMUNICATIONS Co............................... 3,715,987 3,724,062 0.7
70,300 Bell Atlantic Corp................. 3,816,168 3,936,800 0.8
168,000 Comsat Corp........................ 3,973,398 3,297,000 0.6
110,000 GTE Corp........................... 3,615,179 3,753,750 0.7
------------ ------------ ----------
15,120,732 14,711,612 2.8
------------------------------------------------------------------------------------------------------------------------
TOTAL US STOCKS 100,379,984 106,510,775 20.4
------------------------------------------------------------------------------------------------------------------------
COUNTRY FOREIGN STOCKS & WARRANTS++
------------------------------------------------------------------------------------------------------------------------
ARGENTINA 127,520 Banco de Galicia S.A. (ADR)* (3)... 2,868,834 2,008,440 0.4
117,000 Banco Frances del Rio de la Plata
S.A. (Class A) (ADR)* (3)........ 3,272,016 2,106,000 0.4
100,000 Yacimientos Petroliferos Fiscales
S.A. (Sponsored) (ADR)* (21)..... 2,345,882 1,887,500 0.4
------------ ------------ ----------
8,486,732 6,001,940 1.2
------------------------------------------------------------------------------------------------------------------------
251,000 National Bank of Australia Ltd.
AUSTRALIA (3).............................. 1,939,280 1,980,300 0.4
837,600 Pacific Dunlop, Ltd. (18).......... 2,815,855 1,759,061 0.3
------------ ------------ ----------
4,755,135 3,739,361 0.7
------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL STRATEGY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
COUNTRY HELD FOREIGN STOCKS & WARRANTS++ COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CANADA 172,100 Canadian Pacific Ltd. (18)......... $ 2,710,067 $ 2,990,237 0.6%
85,000 Imperial Oil Ltd. (9).............. 2,890,681 3,157,320 0.6
77,400 Northern Telecommunications, Ltd.
(27)............................. 2,137,422 2,825,100 0.5
119,000 Westcoast Energy Inc............... 1,925,615 1,755,250 0.3
------------ ------------ ----------
9,663,785 10,727,907 2.0
------------------------------------------------------------------------------------------------------------------------
150,000 Banco O'Higgins (Sponsored) (ADR)*
CHILE (3).............................. 2,377,482 3,450,000 0.7
------------------------------------------------------------------------------------------------------------------------
CHINA 8,000,000 Shanghai Petrochemical Co.,
Ltd. (9)......................... 2,557,317 2,507,335 0.5
------------------------------------------------------------------------------------------------------------------------
FRANCE 33,900 Alcatel Alsthom Cie Generale
d' Electricite S.A. (8).......... 3,830,275 3,055,617 0.6
22,100 Compagnie de Saint Gobain S.A.
(14)............................. 2,366,194 2,672,431 0.5
36,766 Schneider S.A (11)................. 2,409,589 2,911,084 0.6
1,966 Schneider S.A. (Warrants) (a)
(11)............................. 16,314 10,812 0.0
40,300 TOTAL S.A. (Class B) (21).......... 2,118,813 2,428,312 0.5
------------ ------------ ----------
10,741,185 11,078,256 2.2
------------------------------------------------------------------------------------------------------------------------
GERMANY 10,250 Mannesmann AG (17)................. 2,195,390 3,131,327 0.6
9,750 Preussag AG (18)................... 2,569,641 2,911,605 0.6
6,150 Siemens AG (12).................... 2,507,770 3,052,766 0.6
16,600 + Thyssen AG (Ordinary) (17)......... 2,353,011 3,090,745 0.6
------------ ------------ ----------
9,625,812 12,186,443 2.4
------------------------------------------------------------------------------------------------------------------------
636,400 China Light & Power Co., Ltd.
HONG KONG (31)............................. 3,160,940 3,273,586 0.6
450,000 Sun Hung Kai Properties, Ltd.
(24)............................. 3,112,807 3,329,650 0.6
477,000 Swire Pacific, Ltd. (Class A)
(8).............................. 2,982,563 3,637,315 0.7
------------ ------------ ----------
9,256,310 10,240,551 1.9
------------------------------------------------------------------------------------------------------------------------
65,180 PT Indonesian Satellite (ADR)*
INDONESIA (27)............................. 2,516,111 2,493,135 0.5
------------------------------------------------------------------------------------------------------------------------
ITALY 680,000 Danieli & Co. (17)................. 2,451,794 2,067,848 0.4
660,000 Italcementi S.p.A. (4)............. 2,340,308 2,057,457 0.4
500,000 Societa Finanziara Telefonica
S.p.A. (STET) (27)............... 1,517,192 1,382,946 0.3
------------ ------------ ----------
6,309,294 5,508,251 1.1
------------------------------------------------------------------------------------------------------------------------
JAPAN 229,000 Asahi Glass Co., Ltd. (4).......... 2,536,504 2,530,327 0.5
165,000 Canon, Inc. (12)................... 2,315,252 2,687,994 0.5
165,000 Dai Nippon Printing Co., Ltd.
(23)............................. 2,681,206 2,629,560 0.5
305,000 Hitachi Cable, Ltd. (8)............ 2,258,069 1,987,487 0.4
57,000 Ito-Yokado Co., Ltd. (25).......... 2,773,666 3,007,791 0.6
281,000 Kamigumi Co., Ltd. (26)............ 3,327,164 2,819,620 0.5
160,000 Kandenko Co., Ltd. (4)............. 3,100,536 2,191,005 0.4
320,000 Komatsu Ltd. (17).................. 2,495,094 2,444,103 0.5
30,000 Kyocera Corp. (12)................. 2,254,567 2,471,963 0.5
242,000 Maeda Corp. (4).................... 2,444,979 2,685,397 0.5
407,000 + Makino Milling Machine Co. (17).... 2,527,613 2,363,877 0.5
162,000 Makita Electric Works, Ltd. (12)... 2,941,609 2,218,392 0.4
166,000 Matsushita Electric Industries,
Ltd. (12)........................ 2,324,954 2,586,708 0.5
430,000 Mitsubishi Electric Co. (11)....... 2,778,342 3,025,381 0.6
386,000 Mitsubishi Heavy Industry, Ltd.
(8).............................. 2,363,424 2,624,672 0.5
130,000 Mitsubishi Trust & Banking Corp.
(3).............................. 2,200,813 1,841,577 0.4
415,000 Nippon Fire and Marine Insurance
Co., Ltd. (16)................... 2,923,392 2,616,102 0.5
364,000 Nippon Oil Co., Ltd. (21).......... 2,469,057 2,290,308 0.4
310,000 Okumura Corp. (4).................. 2,626,893 2,945,933 0.6
40,000 Rohm Company Ltd. (12)............. 1,892,557 2,068,233 0.4
294,000 Sekisui Chemical Co., Ltd. (9)..... 2,969,066 3,470,665 0.7
170,000 Sharp Corp. (12)................... 2,504,542 2,247,669 0.4
60,000 SMC Corp. (17)..................... 3,085,930 3,449,416 0.7
</TABLE>
35
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL STRATEGY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
COUNTRY HELD FOREIGN STOCKS & WARRANTS++ COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
JAPAN
(CONCLUDED) 285,000 Sumitomo Corp. (30)................ $ 2,414,459 $ 2,597,332 0.5%
225,000 Tokio Marine and Fire Insurance
Co., Ltd. (16)................... 2,906,154 2,581,749 0.5
144,000 Tokyo Style Co., Ltd. (10)......... 2,477,721 2,175,894 0.4
400,000 Toray Industries Ltd. (28)......... 2,827,073 2,488,490 0.5
172,000 Toto Ltd. (4)...................... 3,106,946 2,456,853 0.5
87,000 Toyo Seikan Kaisha Ltd. (20)....... 2,447,671 2,547,043 0.5
151,000 Yamazaki Banking Co., Ltd. (3)..... 2,993,580 3,101,641 0.6
------------ ------------ ----------
78,968,833 77,153,182 15.0
------------------------------------------------------------------------------------------------------------------------
MALAYSIA 400,000 Hong Leong Industries BHD (5)...... 2,162,754 2,494,359 0.5
900,000 UMW Holdings BHD (2)............... 2,305,627 2,603,077 0.5
------------ ------------ ----------
4,468,381 5,097,436 1.0
------------------------------------------------------------------------------------------------------------------------
MEXICO 458,813 Cementos Mexicanos, S.A. de C.V.
(Class B) (8).................... 2,998,578 1,657,742 0.3
1,399,000 Cifra, S.A. de C.V. (Class C)
(25)............................. 3,373,615 1,842,967 0.4
130,000 Empresas ICA Sociedad Controladora,
S.A. de C.V. (ADR)* (32)......... 3,203,355 1,332,500 0.3
71,600 Telefonos de Mexico, S.A. de C.V.
(Telmex) (ADR)* (27)............. 3,705,673 2,121,150 0.4
------------ ------------ ----------
13,281,221 6,954,359 1.4
------------------------------------------------------------------------------------------------------------------------
466 ABN AMRO Holdings N.V. (Preferred)
NETHERLANDS (3).............................. 15,383 16,971 0.0
23,000 Royal Dutch Petroleum Co. N.V.
(ADR)* (21)...................... 2,269,122 2,803,125 0.5
------------ ------------ ----------
2,284,505 2,820,096 0.5
------------------------------------------------------------------------------------------------------------------------
NORWAY 72,200 Kvaerner, Inc. (Class B) (8)....... 2,934,292 3,163,327 0.6
------------------------------------------------------------------------------------------------------------------------
PHILIPPINES 40,000 Philippine Long Distance Telephone
Co. (ADR)* (27).................. 2,829,796 2,870,000 0.6
------------------------------------------------------------------------------------------------------------------------
PORTUGAL 169,200 Banco Commercial Portugues (ADR)*
(3).............................. 2,313,645 2,220,750 0.4
------------------------------------------------------------------------------------------------------------------------
SINGAPORE 333,000 Jurong Shipyards Ltd. (4).......... 2,607,046 2,383,679 0.5
1,875,000 Neptune Orient Lines Ltd. (26)..... 2,302,432 2,174,302 0.4
------------ ------------ ----------
4,909,478 4,557,981 0.9
------------------------------------------------------------------------------------------------------------------------
82,400 Repsol S.A. (Sponsored) (ADR)*
SPAIN (21)............................. 2,379,669 2,605,900 0.5
------------------------------------------------------------------------------------------------------------------------
SWEDEN 167,000 SKF AB 'B' Free (8)................ 2,580,434 3,375,918 0.7
------------------------------------------------------------------------------------------------------------------------
SWITZERLAND 3,300 BBC Brown Boveri & Cie AG (8)...... 2,297,018 3,417,550 0.7
3,340 Holderbank Financiere Glarus AG
(8).............................. 1,776,158 2,742,224 0.5
16,700 Holderbank Financiere Glarus AG
(Warrants) (a) (8)............... 0 22,489 0.0
3,890 Sulzer Gebrueder AG (17)........... 2,142,764 2,636,142 0.5
------------ ------------ ----------
6,215,940 8,818,405 1.7
------------------------------------------------------------------------------------------------------------------------
THAILAND 600,000 MDX Company, Ltd. (24)............. 2,580,580 1,373,860 0.3
------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL STRATEGY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
COUNTRY HELD FOREIGN STOCKS & WARRANTS++ COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
UNITED KINGDOM 295,600 Allied Lyons PLC (13).............. $ 2,648,038 $ 2,559,977 0.5%
553,000 British Gas PLC (19)............... 2,565,455 2,546,287 0.5
345,000 British Telecommunications PLC
(27)............................. 2,219,411 2,150,992 0.4
294,000 GKN PLC (6)........................ 2,318,167 2,997,361 0.6
585,000 General Electric Co. PLC (11)...... 2,809,289 2,856,458 0.6
101,100 Grand Metropolitan PLC (Sponsored)
(ADR)* (13)...................... 2,697,289 2,527,500 0.5
667,000 Hanson PLC (10).................... 2,518,724 2,333,900 0.5
207,000 Imperial Chemical Industries PLC
(9).............................. 2,402,001 2,536,744 0.5
737,000 Lucas Industries PLC (6)........... 1,866,692 2,209,594 0.4
------------ ------------ ----------
22,045,066 22,718,813 4.5
------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS & WARRANTS 214,081,003 211,663,206 41.3
------------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT** FOREIGN BONDS++
------------------------------------------------------------------------------------------------------------------------
CANADA C$ 15,800,000 Government of Canada,
7.25% due 6/01/2003 (15)......... 11,839,689 11,091,750 2.1
------------------------------------------------------------------------------------------------------------------------
GERMANY Bundes Obligations, (15):
DM 24,000,000 6.375% due 5/20/1998............... 15,218,569 17,682,586 3.4
10,000,000 7.375% due 1/03/2005............... 7,212,121 7,414,317 1.4
------------ ------------ ----------
22,430,690 25,096,903 4.8
------------------------------------------------------------------------------------------------------------------------
ITALY Buoni Poliennali del Tesoro (15):
Lit 6,000,000,000 8.50% due 1/01/1997................ 3,753,480 3,522,249 0.7
7,100,000,000 10.00% due 8/01/2003............... 4,508,125 3,874,187 0.7
------------ ------------ ----------
8,261,605 7,396,436 1.4
------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM UK Treasury Gilt (15):
Pound Sterling 8,190,000 7.25% due 3/30/1998................ 12,651,800 12,814,519 2.5
75,000 9.75% due 8/27/2002................ 149,409 127,563 0.0
3,000,000 8.00% due 6/10/2003................ 4,822,692 4,643,266 0.9
------------ ------------ ----------
17,623,901 17,585,348 3.4
------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS 60,155,885 61,170,437 11.7
------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT OBLIGATIONS
------------------------------------------------------------------------------------------------------------------------
US Treasury Notes:
US$ 14,000,000 5.75% due 8/15/2003................ 14,037,891 13,573,420 2.6
29,000,000 7.25% due 8/15/2004................ 29,290,000 30,989,110 6.0
40,000,000 7.875% due 11/15/2004.............. 39,980,781 44,550,000 8.6
------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT OBLIGATIONS 83,308,672 89,112,530 17.2
------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL STRATEGY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FACE** VALUE PERCENT OF
AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
COMMERCIAL PAPER*** US$ 17,905,000 General Electric Capital Corp.,
6.20% due 7/03/1995............ $ 17,898,833 $ 17,898,833 3.5 %
7,000,000 Paribas Finance, 5.90% due
7/06/1995...................... 6,994,264 6,994,264 1.4
12,000,000 Riverwoods Funding Corp., 5.96%
due 7/20/1995.................. 11,962,253 11,962,253 2.3
------------- ------------- ----------
36,855,350 36,855,350 7.2
------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY 15,000,000 Federal National Mortgage
OBLIGATIONS*** Association, 5.88% due
7/13/1995...................... 14,970,600 14,970,600 2.9
------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 51,825,950 51,825,950 10.1
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS...................................... $ 509,751,494 520,282,898 100.7
-------------
-------------
UNREALIZED DEPRECIATION ON FORWARD FOREIGN
EXCHANGE CONTRACTS ++.................................. (6,879,120) (1.3 )
OTHER ASSETS LESS LIABILITIES.......................... 3,223,315 0.6
------------- ----------
NET ASSETS............................................. $ 516,627,093 100.0 %
------------- ----------
------------- ----------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* American Depositary Receipt (ADR).
** Denominated in US dollars unless otherwise indicated.
*** Commercial Paper and certain US Government & Agency Obligations are traded on a discount basis; the interest rates
shown are the discount rates paid at the time of purchase by the Fund.
(a) 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 securities.
++ Corresponding industry groups for foreign stocks and bonds:
</TABLE>
<TABLE>
<S> <C> <C> <C>
(1) Automobiles (17) Machinery
(2) Automotive Equipment (18) Multi-Industry
(3) Banking (19) Natural Gas
(4) Building & Construction (20) Packaging
(5) Building Materials (21) Petroleum
(6) Business & Public Service (22) Pharmaceutical
(7) Business Publishing (23) Printing & Publishing
(8) Capital Goods (24) Real Estate
(9) Chemicals (25) Retail Stores
(10) Diversified (26) Shipping
(11) Electrical Equipment (27) Telecommunications
(12) Electronics (28) Textiles
(13) Food (29) Toys
(14) Glass (30) Trading
(15) Government (Bonds) (31) Utilities
(16) Insurance (32) Utilities--Electric
</TABLE>
<TABLE>
<S> <C>
++ Forward foreign exchange contracts as of June 30, 1995 were as follows:
</TABLE>
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------------
UNREALIZED
EXPIRATION DEPRECIATION
FOREIGN CURRENCY SOLD DATE (NOTE 1B)
------------------------------------------------------------------------------------------------------------------------
Yen 4,819,200,000............................................................... July 1995 $(6,879,120)
------------------------------------------------------------------------------------------------------------------------
TOTAL UNREALIZED DEPRECIATION ON FORWARD
FOREIGN EXCHANGE CONTRACTS (US$ COMMITMENT--$50,118,444)......................... $(6,879,120)
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
38
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL UTILITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF NET
COUNTRY INDUSTRY HELD COMMON STOCKS & WARRANTS COST (NOTE 1A) ASSETS
ARGENTINA TELECOMMUNICATIONS 25,600 Telecom Argentina Stet S.A.
(ADR)* (b)................ $ 1,160,819 $ 1,164,800 0.9%
44,800 Telefonica de Argentina S.A.
(ADR)*.................... 1,173,168 1,108,800 0.8
------------ ------------ ----------
2,333,987 2,273,600 1.7
UTILITIES--ELECTRIC 7,900 Central Costanera S.A.
(ADR)* (b)................ 261,847 248,850 0.2
TOTAL COMMON STOCKS IN
ARGENTINA 2,595,834 2,522,450 1.9
AUSTRALIA UTILITIES--GAS 434,496 The Australian Gas Light
Co........................ 1,238,060 1,374,906 1.0
TOTAL COMMON STOCKS IN
AUSTRALIA 1,238,060 1,374,906 1.0
AUSTRIA UTILITIES--GAS 11,300 Energie-Versorgung
Niederoesterreich AG
(EVN)..................... 1,388,213 1,579,389 1.2
TOTAL COMMON STOCKS IN
AUSTRIA 1,388,213 1,579,389 1.2
BRAZIL UTILITIES--ELECTRIC 132,860 Companhia Energetica de
Minas Gerais S.A. (CEMIG)
(ADR)* (b)................ 3,360,000 2,524,340 1.9
TOTAL COMMON STOCKS IN
BRAZIL.................... 3,360,000 2,524,340 1.9
CANADA TELECOMMUNICATIONS 56,000 BC Telecom, Inc............. 1,052,989 963,583 0.7
UTILITIES--GAS 70,100 Transcanada Pipeline Co.
Ltd. (ADR)*............... 1,045,275 937,588 0.7
93,000 Westcoast Energy, Inc....... 1,594,099 1,371,750 1.0
------------ ------------ ----------
2,639,374 2,309,338 1.7
TOTAL COMMON STOCKS IN
CANADA 3,692,363 3,272,921 2.4
CHILE TELECOMMUNICATIONS 14,400 Compana de Telefonos de
Chile S.A. (ADR)*......... 1,254,995 1,171,800 0.9
UTILITIES--ELECTRIC 20,000 Chilgener S.A. (ADR)*....... 460,000 632,500 0.5
35,100 Distribuidora Chilectra
Metropolitana S.A. (ADR)*
(b)....................... 1,098,338 1,755,000 1.3
48,300 Enersis S.A. (ADR)*......... 1,026,061 1,424,850 1.1
------------ ------------ ----------
2,584,399 3,812,350 2.9
TOTAL COMMON STOCKS IN
CHILE..................... 3,839,394 4,984,150 3.8
DENMARK TELECOMMUNICATIONS 77,000 Tele Danmark A/S (ADR)*..... 1,826,433 2,156,000 1.6
TOTAL COMMON STOCKS IN
DENMARK 1,826,433 2,156,000 1.6
FRANCE UTILITIES--WATER 16,409 Generale des Eaux........... 1,872,761 1,828,489 1.4
7,111 Lyonnaise des Eaux-Dumez.... 722,326 673,241 0.5
------------ ------------ ----------
2,595,087 2,501,730 1.9
TOTAL COMMON STOCKS IN
FRANCE 2,595,087 2,501,730 1.9
GERMANY UTILITIES--ELECTRIC 4,000 VEBA AG..................... 1,305,397 1,571,945 1.2
TOTAL COMMON STOCKS IN
GERMANY 1,305,397 1,571,945 1.2
HONG KONG TELECOMMUNICATIONS 894,000 Hong Kong Telecommunications
Ltd. PLC.................. 1,646,544 1,767,826 1.3
UTILITIES--ELECTRIC 355,200 China Light & Power Co.,
Ltd....................... 2,385,389 1,827,118 1.4
253,500 Hong Kong Electric Holdings,
Ltd....................... 681,517 861,677 0.6
------------ ------------ ----------
3,066,906 2,688,795 2.0
UTILITIES--GAS 473,760 The Hong Kong & China Gas
Co., Ltd.................. 755,615 756,199 0.6
32,900 The Hong Kong & China Gas
Co., Ltd. (Warrants)
(a)....................... 0 5,018 0.0
------------ ------------ ----------
755,615 761,217 0.6
TOTAL COMMON STOCKS &
WARRANTS IN HONG KONG 5,469,065 5,217,838 3.9
</TABLE>
39
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL UTILITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF NET
COUNTRY INDUSTRY HELD COMMON STOCKS & WARRANTS COST (NOTE 1A) ASSETS
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INDIA UTILITIES--ELECTRIC 4,500 CESC Ltd. (GDR)** (b)....... $ 40,950 $ 20,835 0.0%
7,500 CESC Ltd. (Units)........... 400,050 172,500 0.1
1,000 Tata Electric Companies
(GDR)** (b)............... 710,000 350,000 0.3
------------ ------------ ----------
1,151,000 543,335 0.4
TOTAL COMMON STOCKS IN INDIA 1,151,000 543,335 0.4
INDONESIA TELECOMMUNICATIONS 1,110 PT Indonesian Satellite
Corp. (ADR)*.............. 35,576 42,458 0.0
TOTAL COMMON STOCKS IN
INDONESIA 35,576 42,458 0.0
ITALY TELECOMMUNICATIONS 761,900 Societa Finanziara
Telefonica S.p.A.
(STET).................... 1,629,934 1,692,852 1.3
729,600 Telecom Italia S.p.A........ 1,635,193 1,977,858 1.5
------------ ------------ ----------
3,265,127 3,670,710 2.8
UTILITIES--GAS 513,400 Italgas Torino.............. 1,581,576 1,333,710 1.0
TOTAL COMMON STOCKS IN
ITALY....................... 4,846,703 5,004,420 3.8
MALAYSIA TELECOMMUNICATIONS 139,000 Telekom Malaysia BHD........ 962,438 1,054,974 0.8
TOTAL COMMON STOCKS IN
MALAYSIA 962,438 1,054,974 0.8
MEXICO TELECOMMUNICATIONS 29,000 Telefonos de Mexico, S.A. de
C.V. (Telemex) (ADR)*..... 1,706,306 859,125 0.6
TOTAL COMMON STOCKS IN
MEXICO 1,706,306 859,125 0.6
NEW ZEALAND TELECOMMUNICATIONS 36,800 Telecom Corporation of New
Zealand Ltd. (ADR)*....... 1,680,030 2,231,000 1.7
TOTAL COMMON STOCKS IN NEW
ZEALAND 1,680,030 2,231,000 1.7
PHILIPPINES TELECOMMUNICATIONS 21,800 Philippine Long Distance
Telephone Co. (ADR)*...... 1,270,791 1,564,150 1.2
UTILITIES--ELECTRIC 57,000 Manila Electric Co.
(MERALCO) 'B'............. 518,117 458,415 0.3
TOTAL COMMON STOCKS IN THE
PHILIPPINES 1,788,908 2,022,565 1.5
PORTUGAL TELECOMMUNICATIONS 20,600 + Portugal Telecom (ADR)*..... 385,735 388,825 0.3
TOTAL COMMON STOCKS IN
PORTUGAL 385,735 388,825 0.3
SOUTH KOREA UTILITIES--ELECTRIC 40,800 Korea Electric Power Corp.
(ADR)*.................... 821,100 923,100 0.7
TOTAL COMMON STOCKS IN SOUTH
KOREA 821,100 923,100 0.7
SPAIN TELECOMMUNICATIONS 28,700 Telefonica de Espana S.A.
(ADR)*.................... 1,065,201 1,112,125 0.8
UTILITIES--ELECTRIC 36,400 Empresa Nacional de
Electricidad, S.A.
(Endesa) (ADR)*........... 1,634,684 1,792,700 1.3
15,000 HidroElectrica Del
Cantabrico, S.A........... 503,484 458,110 0.3
131,000 Iberdrola I S.A............. 879,896 986,149 0.7
------------ ------------ ----------
3,018,064 3,236,959 2.3
TOTAL COMMON STOCKS IN
SPAIN....................... 4,083,265 4,349,084 3.1
THAILAND TELECOMMUNICATIONS 2,000 + TelecomAsia Corporation
Public Co., Ltd. PLC
(ADR)* (b)................ 43,740 72,000 0.1
UTILITIES--ELECTRIC 68,000 + Electricity Generating
Company of Thailand
(EGCOMP).................. 60,715 205,309 0.2
TOTAL COMMON STOCKS IN
THAILAND 104,455 277,309 0.3
</TABLE>
40
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL UTILITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF NET
COUNTRY INDUSTRY HELD COMMON STOCKS & WARRANTS COST (NOTE 1A) ASSETS
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UNITED KINGDOM TELECOMMUNICATIONS 10,000 British Telecommunications
PLC (ADR)*................ $ 741,450 $ 627,500 0.5%
57,000 British Telecommunications
PLC (Ordinary)............ 406,712 355,381 0.3
87,000 Vodafone Group PLC (ADR)*... 2,549,289 3,295,125 2.5
------------ ------------ ----------
3,697,451 4,278,006 3.3
UTILITIES--ELECTRIC 86,000 London Electricity PLC...... 860,944 878,147 0.7
140,000 National Power PLC.......... 1,010,949 991,995 0.7
90,000 Powergen PLC................ 658,010 692,822 0.5
------------ ------------ ----------
2,529,903 2,562,964 1.9
TOTAL COMMON STOCKS IN THE
UNITED KINGDOM 6,227,354 6,840,970 5.2
UNITED
STATES TELECOMMUNICATIONS 36,400 + AirTouch Communications,
Inc....................... 879,157 1,037,400 0.8
45,800 Ameritech Corp.............. 1,864,458 2,015,200 1.5
31,800 Bell Atlantic Corp.......... 1,872,160 1,780,800 1.3
33,700 BellSouth Corp.............. 2,020,584 2,139,950 1.6
32,000 Frontier Corp............... 653,920 768,000 0.6
53,500 GTE Corp.................... 1,866,628 1,825,688 1.4
150,000 NYNEX Corp.................. 5,893,598 6,037,500 4.5
45,300 SBC Communications, Inc..... 1,921,580 2,157,413 1.6
66,900 U S West, Inc............... 2,970,861 2,784,713 2.1
------------ ------------ ----------
19,942,946 20,546,664 15.4
UTILITIES--ELECTRIC 65,600 Allegheny Power System,
Inc....................... 1,689,846 1,541,600 1.2
47,500 Boston Edison Co............ 1,386,299 1,240,938 0.9
42,300 Central & SouthWest Corp.... 1,326,363 1,110,375 0.8
84,192 CINergy Corp................ 2,052,668 2,210,040 1.7
49,300 Consolidated Edison Co. of
New York.................. 1,597,050 1,454,350 1.1
31,500 Detroit Edison Co........... 989,953 929,250 0.7
26,400 Dominion Resources, Inc..... 1,242,516 963,600 0.7
61,000 Duke Power Co............... 2,452,906 2,531,500 1.9
54,300 Entergy Corp................ 1,905,240 1,309,987 1.0
85,200 General Public Utilities
Corp...................... 2,559,840 2,534,700 1.9
73,100 Houston Industries, Inc..... 3,215,466 3,079,337 2.3
56,000 NIPSCO Industries, Inc...... 1,787,890 1,904,000 1.4
50,700 New York State Electric &
Gas Corp.................. 1,537,761 1,185,112 0.9
42,300 Northeast Utilities Co...... 1,096,216 951,750 0.7
93,800 PECO Energy Co.............. 2,719,313 2,591,225 1.9
72,800 PacifiCorp.................. 1,401,416 1,365,000 1.0
35,307 Pennsylvania Power & Light
Co........................ 958,939 684,073 0.5
44,000 Public Service Co. of
Colorado.................. 1,312,146 1,430,000 1.1
64,000 SCEcorp..................... 1,220,732 1,096,000 0.8
86,200 Southern Co................. 1,846,654 1,928,725 1.4
40,600 Western Resources Co........ 1,393,851 1,253,525 0.9
------------ ------------ ----------
35,693,065 33,295,087 24.8
UTILITIES--GAS 33,000 The Brooklyn Union Gas
Co........................ 855,855 866,250 0.6
52,000 The Coastal Corp............ 1,509,758 1,579,500 1.2
24,800 El Paso Natural Gas Co...... 895,148 706,800 0.5
55,100 NICOR, Inc.................. 1,539,128 1,480,812 1.1
26,100 National Fuel Gas Company... 788,314 747,112 0.6
25,000 New Jersey Resources
Corp...................... 656,623 578,125 0.4
53,500 Questar Corp................ 1,908,628 1,538,125 1.2
72,200 Sonat, Inc.................. 2,342,585 2,202,100 1.6
49,800 Washington Gas Light Co..... 1,046,197 939,975 0.7
78,600 Williams Co., Inc........... 2,298,643 2,741,175 2.1
------------ ------------ ----------
13,840,879 13,379,974 10.0
TOTAL COMMON STOCKS IN THE
UNITED STATES 69,476,890 67,221,725 50.2
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN COMMON
STOCKS & WARRANTS 120,579,606 119,464,559 89.4
------------------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL UTILITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONCLUDED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FACE VALUE PERCENT OF NET
COUNTRY INDUSTRY AMOUNT FIXED-INCOME SECURITIES COST (NOTE 1A) ASSETS
AUSTRALIA TELECOMMUNI- US$ 1,040,000 Telstra Corp. Ltd., 6.50%
CATIONS due 7/31/2003 (b)......... $ 1,084,062 $ 1,024,442 0.8%
TOTAL FIXED-INCOME
SECURITIES IN AUSTRALIA 1,084,062 1,024,442 0.8
------------------------------------------------------------------------------------------------------------------------
SOUTH KOREA UTILITIES--ELECTRIC 1,000,000 Korea Electric Power Corp.,
6.375% due 12/01/2003..... 985,510 962,710 0.7
TOTAL FIXED-INCOME
SECURITIES IN SOUTH KOREA 985,510 962,710 0.7
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FIXED-
INCOME SECURITIES 2,069,572 1,987,152 1.5
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHORT-TERM SECURITIES
COMMERCIAL PAPER*** 4,000,000 ANZ (Delaware), Inc., 5.86%
due 8/02/1995............... 3,978,513 3,978,513 3.0
4,679,000 General Electric Capital
Corp., 6.20% due
7/03/1995................... 4,676,583 4,676,583 3.5
------------ ------------ ----------
8,655,096 8,655,096 6.5
US GOVERNMENT & AGENCY 3,000,000 Federal Farm Credit Bank,
OBLIGATIONS*** 5.79% due 8/04/1995......... 2,983,113 2,983,113 2.2
TOTAL INVESTMENTS IN
SHORT-TERM SECURITIES 11,638,209 11,638,209 8.7
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS............. $134,287,387 133,089,920 99.6
------------
------------
OTHER ASSETS LESS
LIABILITIES................. 474,087 0.4
------------ ----------
NET ASSETS.................... $133,564,007 100.0%
------------ ----------
------------ ----------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* American Depositary Receipt (ADR).
** Global Depositary Receipt (GDR).
*** Commercial Paper and certain US Government & Agency Obligations are traded on a discount basis; the interest rates
shown are the discount rates paid at the time of purchase by the Fund.
(a) 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.
(b) Restricted securities as to resale. The value of the Fund's investment in restricted securities was approximately
$7,160,000, representing 5.36% of the Fund's net assets.
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
VALUE
ISSUE ACQUISITION DATES COST (NOTE 1A)
------------------------------------------------------------------------------------------------------------------------
Central Costanera S.A. (ADR).................................. 12/17/1993 $ 261,847 $ 248,850
CESC Ltd. (GDR)............................................... 5/17/1994 40,950 20,835
Companhia Energetica de Minas Gerais S.A. (CEMIG) (ADR)....... 9/22/1994 3,360,000 2,524,340
Distribuidora Chilectra Metropolitana S.A. (ADR).............. 8/06/1993-12/21/1993 1,098,338 1,755,000
Tata Electric Companies (GDR)................................. 2/22/1994 710,000 350,000
Telecom Argentina Stet S.A. (ADR)............................. 10/05/1993-12/22/1993 1,160,819 1,164,800
TelecomAsia Corp. Public Co., Ltd. (ADR)...................... 11/15/1993 43,740 72,000
Telstra Corp. Ltd., 6.50% due 7/31/2003....................... 7/26/1993-9/29/1993 1,084,062 1,024,442
------------------------------------------------------------------------------------------------------------------------
TOTAL......................................................... $ 7,759,756 $ 7,160,267
----------- -----------
----------- -----------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Non-income producing security.
See Notes to Financial Statements.
42
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
S&P MOODY'S FACE VALUE
INDUSTRY RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
AIRLINES--2.3% Delta Air Lines Inc.:
BB+ Baa3 $1,000,000 9.30% due 1/02/2010.................. $ 987,700 $ 1,113,994
BB+ Baa3 500,000 10.50% due 4/30/2016................. 506,875 580,895
United Air Lines, Inc.:
BB+ Baa2 500,000 10.02% due 3/22/2014................. 506,250 553,095
BB+ Baa2 1,000,000 9.35% due 4/07/2016.................. 1,016,260 1,007,200
BB- B1 4,000,000 USAir, Inc., 10.375% due 3/01/2013... 3,935,000 3,800,000
------------- -------------
6,952,085 7,055,184
------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS--1.0% NR* B1 1,000,000 Exide Corp., 10.00% due 4/15/2005.... 1,000,000 1,027,500
B B3 2,000,000 SPX Corp., 11.75% due 6/01/2002...... 2,043,750 2,085,000
------------- -------------
3,043,750 3,112,500
------------------------------------------------------------------------------------------------------------------------
BROADCASTING & CCC B3 5,000,000 Australis Media Ltd, 14.07% due
PUBLISHING--5.6% 5/15/2003 (d) (e).................. 2,577,077 2,612,500
BB- Ba3 750,000 Heritage Media Services Corporation,
11.00% due 6/15/2002............... 789,063 808,125
B B1 1,000,000 K-III Communications Corp., 10.25%
due 6/01/2004...................... 995,000 1,050,000
B B3 1,700,000 The Katz Corp., 12.75% due
11/15/2002......................... 1,755,500 1,844,500
B Caa 4,300,000 NWCG Holding Corp., 13.50% due
6/15/1999 (d)...................... 2,565,784 2,666,000
BB- B2 2,000,000 Rogers Communications, Inc., 10.875%
due 4/15/2004...................... 2,022,500 2,050,000
BB- B3 2,500,000 SCI Television Inc., 11.00% due
6/30/2005.......................... 2,560,000 2,612,500
B+ B3 2,500,000 Sinclair Broadcast Group Inc., 10.00%
due 12/15/2003..................... 2,436,250 2,500,000
B NR* 1,500,000 ++ Young Broadcasting Corp., 10.125% due
2/15/2005.......................... 1,500,000 1,503,750
------------- -------------
17,201,174 17,647,375
------------------------------------------------------------------------------------------------------------------------
BUILDING & B- B2 2,500,000 Del Webb Corp., 9.00% due
CONSTRUCTION--0.8% 2/15/2006.......................... 2,497,500 2,237,500
B B1 250,000 K Hovnanian Enterprises Inc., 11.25%
due 4/15/2002...................... 247,813 220,000
------------- -------------
2,745,313 2,457,500
------------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS--1.0% B+ B3 3,340,000 Pacific Lumber Co., 10.50% due
3/01/2003.......................... 3,252,088 3,064,450
------------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS--0.5% B Ba3 1,750,000 Inter-City Products Corp., 9.75% due
3/01/2000.......................... 1,718,750 1,505,000
------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--1.0% B+ B1 1,660,000 Essex Group, Inc., 10.00% due
5/01/2003.......................... 1,668,925 1,601,900
B- B3 1,500,000 ++ International Wire Group, 11.75% due
6/01/2005.......................... 1,500,000 1,507,500
------------- -------------
3,168,925 3,109,400
------------------------------------------------------------------------------------------------------------------------
CELLULAR TELEPHONES--2.1% CCC Caa 4,000,000 Dial Page, Inc., 12.25% due
2/15/2000.......................... 4,103,063 4,120,000
CCC+ B3 3,000,000 USA Mobile Communications Holdings,
Inc., 9.50% due 2/01/2004.......... 2,710,000 2,640,000
------------- -------------
6,813,063 6,760,000
------------------------------------------------------------------------------------------------------------------------
CHEMICALS--4.5% B+ Ba3 4,100,000 Agricultural Minerals & Chemicals
Co., L.P., 10.75% due 9/30/2003.... 4,123,188 4,212,750
B Ba3 7,495,000 G-I Holdings Inc., 12.77% due
10/01/1998 (d)..................... 5,125,420 5,021,650
B+ B2 2,000,000 Harris Chemical North America, 11.95%
due 7/15/2001(d)................... 1,747,115 1,815,000
B B3 3,000,000 Laroche Industries Inc., 13.00% due
8/15/2004.......................... 2,991,250 3,090,000
------------- -------------
13,986,973 14,139,400
------------------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
S&P MOODY'S FACE VALUE
INDUSTRY RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
COMMUNICATIONS--3.7% CCC+ Caa $4,670,000 American Telecasting, Inc., 13.25%
due 6/15/2004(d)................... $ 2,720,202 $ 2,755,300
BB- B1 4,000,000 Telefonica de Argentina S.A., 11.875%
due 11/01/2004..................... 3,917,780 3,860,000
Videotron Holdings PLC:
B+ B3 4,000,000 11.82% due 7/01/2004(d).............. 2,465,968 2,620,000
BB+ Baa 2,500,000 10.625% due 2/15/2005................ 2,559,375 2,631,250
------------- -------------
11,663,325 11,866,550
------------------------------------------------------------------------------------------------------------------------
CONGLOMERATES--5.7% NR* B3 2,000,000 Astrum International Corp., 11.50%
due 6/08/2003...................... 2,017,500 2,100,000
BB- B1 1,750,000 Coltec Industries, Inc., 10.25% due
4/01/2002.......................... 1,866,250 1,811,250
Foamex L.P.:
B+ B1 530,000 9.50% due 6/01/2000.................. 517,413 522,050
B+ B1 1,950,000 11.25% due 10/01/2002................ 1,936,375 1,920,750
B+ B2 2,000,000 J.B. Poindexter & Co., 12.50% due
5/15/2004.......................... 2,000,000 1,960,000
B+ B3 3,000,000 Jordan Industries Inc., 10.375% due
8/01/2003.......................... 2,993,000 2,767,500
NR* NR* 890,000 MacAndrews & Forbes Group, Inc.,
13.00% due 3/01/1999............... 868,373 881,100
Sequa Corp.:
BB B2 750,000 9.625% due 10/15/1999................ 740,625 757,500
B+ B3 2,500,000 9.375% due 12/15/2003................ 2,512,813 2,337,500
BB- B1 3,000,000 Sherritt Gordon, Ltd., 9.75% due
4/01/2003.......................... 2,985,938 2,910,000
------------- -------------
18,438,287 17,967,650
------------------------------------------------------------------------------------------------------------------------
CONSUMER--
PRODUCTS--2.5% B NR* 4,950,000 Coleman Holdings, Inc., 11.28% due
5/27/1998 (d)...................... 3,583,994 3,638,250
B- Caa 4,000,000 ++ Polymer Group Inc., 12.75% due
7/15/2002.......................... 3,967,500 4,040,000
------------- -------------
7,551,494 7,678,250
------------------------------------------------------------------------------------------------------------------------
CONSUMER--SERVICES-- 0.4% B+ Ba3 1,250,000 Coty Inc., 10.25% due 5/01/2005...... 1,250,000 1,275,000
------------------------------------------------------------------------------------------------------------------------
CONTAINERS--3.6% B B2 4,000,000 Anchor Glass Container Co., 9.875%
due 12/15/2008..................... 3,782,500 3,680,000
Owens-Illinois, Inc.:
B+ B2 2,000,000 10.00% due 8/01/2002................. 2,000,000 2,035,000
BB Ba3 2,000,000 11.00% due 12/01/2003................ 2,145,313 2,195,000
B- B3 3,660,000 Silgan Holdings, Inc., 12.51% due
12/15/2002(d)...................... 3,294,896 3,348,900
------------- -------------
11,222,709 11,258,900
------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS+--0.7% B B3 400,000 Farm Fresh Inc., 7.50% due
3/01/2010 (1)...................... 208,000 241,428
B- B3 200,000 MEDIQ, Inc., 7.25% due 6/01/2006
(2)................................ 138,000 166,000
B B2 1,200,000 OHM Corp., 8.00% due 10/01/2006 (3).. 1,070,500 1,104,000
B B2 250,000 UNC, Inc., 7.50% due 3/31/2006 (4)... 145,625 222,500
------------- -------------
1,562,125 1,733,928
------------------------------------------------------------------------------------------------------------------------
COSMETICS--0.9% B B2 3,000,000 Revlon Consumer Products Corp.,
9.375% due 4/01/2001............... 2,675,199 2,895,000
------------------------------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
S&P MOODY'S FACE VALUE
INDUSTRY RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
ENERGY--5.9% NR* NR* $1,500,000 Consolidated Hydro, Inc., 11.80% due
7/15/2003(d)....................... $ 1,058,839 $ 1,020,000
BB- B1 2,925,000 ++ Energy Ventures, Inc., 10.25% due
3/15/2004.......................... 2,901,875 2,998,125
BB B1 1,580,000 Gulf Canada Resources, Ltd., 9.00%
due 8/15/1999...................... 1,517,450 1,572,100
BB- B1 250,000 Maxus Energy Corp., 11.50% due
11/15/2015......................... 246,563 245,000
BB- B2 3,500,000 ++ TransTexas Gas Corp., 11.50% due
6/15/2002.......................... 3,500,000 3,570,000
B- Caa 3,400,000 Transamerican Refining Corp., 19.08%
due 2/15/2002(d)................... 2,051,383 2,244,000
B+ B1 4,000,000 Triton Energy Corp., 10.24% due
11/01/1997 (d)..................... 3,162,758 3,260,000
BB- B1 4,500,000 Yacimientos Petroliferos Fiscales
S.A., 8.00% due 2/15/2004.......... 3,694,375 3,915,000
------------- -------------
18,133,243 18,824,225
------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT--2.9% B B3 500,000 AMC Entertainment, Inc., 12.625% due
8/01/2002.......................... 509,743 555,000
B+ B1 250,000 Cinemark USA, Inc., 12.00% due
6/01/2002.......................... 250,000 268,750
B Caa 4,500,000 Marvel Holdings, Inc., 9.125% due
2/15/1998.......................... 3,999,375 4,162,500
NR* B2 5,000,000 ++ Six Flags Theme Parks, 12.02% due
6/15/2005 (d)...................... 3,576,419 3,600,000
D B2 3,415,000 SpectraVision Inc., 16.80% due
10/01/2001(d)...................... 2,983,294 785,450
------------- -------------
11,318,831 9,371,700
------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--1.6% B+ B1 1,500,000 Lomas Mortgage USA, Inc., 10.25% due
10/01/2002......................... 1,561,250 990,000
B- B3 250,000 Pioneer Finance Corp., 13.50% due
12/01/1998......................... 264,062 210,000
BB- B1 4,000,000 Reliance Group Holdings Inc., 9.75%
due 11/15/2003..................... 3,898,750 3,880,000
------------- -------------
5,724,062 5,080,000
------------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE--4.5% B+ B1 3,000,000 Chiquita Brands International Inc.,
9.125% due 3/01/2004............... 2,950,625 2,910,000
NR* NR* 2,000,000 ++ Cumberland Farms, 10.50% due
10/01/2003......................... 1,957,500 1,690,000
B B3 2,500,000 Del Monte Corp., 10.00% due
5/01/2003.......................... 2,310,000 2,100,000
B- B2 3,000,000 Envirodyne Industries, Inc., 10.25%
due 12/01/2001..................... 3,056,250 2,385,000
B- B3 2,274,800 Grand Union Co., 12.00% due
9/01/2004.......................... 2,186,040 2,195,182
B- B2 2,000,000 Pueblo Xtra International Inc., 9.50%
due 8/01/2003...................... 2,004,375 1,840,000
B B3 1,000,000 Specialty Foods Corp., 10.25% due
8/15/2001.......................... 1,000,000 960,000
------------- -------------
15,464,790 14,080,182
------------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT BB- B1 3,000,000 Republic of Argentina, 8.375% due
OBLIGATIONS--0.7% 12/20/2003......................... 2,257,500 2,212,500
------------------------------------------------------------------------------------------------------------------------
HEALTH SERVICES--0.1% B+ B1 250,000 MEDIQ/PRN Life Support Services,
Inc., 11.125% due 7/01/1999........ 250,625 232,500
------------------------------------------------------------------------------------------------------------------------
HIGH TECHNOLOGY--0.1% B B2 250,000 ComputerVision Corp., 10.875% due
8/15/1997.......................... 250,625 246,250
------------------------------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
S&P MOODY'S FACE VALUE
INDUSTRY RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
HOTELS & CASINOS--6.1% B B2 $2,250,000 Aztar Corp., 11.00% due 10/01/2002... $ 2,295,000 $ 2,238,750
BB B1 3,000,000 Bally's Park Place Funding Corp.,
9.25% due 3/15/2004................ 2,850,000 2,820,000
NR* NR* 158,000 Goldriver Hotel & Casino Corp.,
11.375% due 8/31/1999.............. 222,801 116,920
B+ B2 3,000,000 Great Bay Properties, Inc., Property
Funding Corp., 10.875% due
1/15/2004.......................... 2,755,000 2,550,000
B+ B1 2,500,000 Harrah's Jazz Company, 14.25% due
11/15/2001......................... 2,500,000 2,600,000
BB- B1 3,500,000 John Q. Hammons Hotel, 8.875% due
2/15/2004.......................... 3,092,500 3,395,000
B B2 2,500,000 Showboat Inc., 13.00% due 8/01/2009.. 2,500,000 2,575,000
B+ B3 3,000,000 Trump Plaza Funding, Inc., 10.875%
due 6/15/2001...................... 2,963,277 2,745,000
NR* Caa 552,658 Trump Taj Mahal Funding, Inc., 11.35%
due 11/15/1999 (a) (c)............. 437,712 430,140
------------- -------------
19,616,290 19,470,810
------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL PRODUCTS-- B- B3 3,500,000 Day International Corp., 11.125% due
1.1% 6/01/2005.......................... 3,525,000 3,517,500
------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES-- BB+ Ba3 4,000,000 ADT Operations, Inc., 9.25% due
1.3% 8/01/2003.......................... 4,010,000 4,130,000
------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS--3.8% B B2 3,000,000 Coca-Cola Bottling Co., 9.00% due
11/15/2003......................... 2,973,750 2,955,000
NR* NR* 2,500,000 Decorative Home Accents, Inc., 13.00%
due 6/30/2002 (f).................. 2,500,000 2,500,000
BB- B1 3,500,000 Host Marriott Hospitality, Inc.,
9.50% due 5/15/2005................ 3,372,538 3,386,250
B+ B2 2,800,000 Navistar Financial Co., 8.875% due
11/15/1998......................... 2,754,500 2,772,000
Thermadyne Industries, Inc.:
NR* NR* 154,000 10.25% due 5/01/2002................. 155,008 151,690
NR* NR* 215,000 10.75% due 11/01/2003................ 216,545 209,625
------------- -------------
11,972,341 11,974,565
------------------------------------------------------------------------------------------------------------------------
IRON/STEEL--0.4% B B2 1,500,000 ++ Weirton Steel Corp., 10.75% due
6/01/2005.......................... 1,477,500 1,402,500
------------------------------------------------------------------------------------------------------------------------
MEDICAL SERVICES--1.0% B+ Ba3 2,900,000 National Medical Enterprises, 10.125%
due 3/01/2005...................... 2,900,000 3,063,125
------------------------------------------------------------------------------------------------------------------------
METALS & MINING--0.9% B- B2 1,000,000 Kaiser Aluminum and Chemical Corp.,
12.75% due 2/01/2003............... 1,003,750 1,075,000
B- B3 3,000,000 Maxxam Group, Inc., 12.25% due
8/01/2003(d)....................... 2,078,053 1,860,000
------------- -------------
3,081,803 2,935,000
------------------------------------------------------------------------------------------------------------------------
OIL/GAS-- B+ B1 6,000,000 Clark R & M Holdings, Inc., 10.54%
DOMESTIC--1.2% due 2/15/2000 (d).................. 3,672,344 3,750,000
------------------------------------------------------------------------------------------------------------------------
PAPER--5.8% BB- Ba3 2,000,000 Doman Industries Ltd., 8.75% due
3/15/2004.......................... 1,825,000 1,900,000
B B2 3,000,000 Fort Howard Corp., 9.00% due
2/01/2006.......................... 2,935,000 2,730,000
BB Ba3 2,000,000 PT Indah Kiat International Finance,
11.875% due 6/15/2002.............. 1,957,500 2,020,000
BB- Ba3 2,100,000 Rainy River Forest Products, Inc.,
10.75% due 10/15/2001.............. 2,094,897 2,178,750
B+ B1 3,000,000 Repap Wisconsin Finance, Inc., 9.25%
due 2/01/2002...................... 2,760,000 2,902,500
B B1 1,250,000 Riverwood International, Corp.,
11.25% due 6/15/2002............... 1,340,312 1,362,500
B+ B 2,000,000 ++ S.D. Warren Co., 12.00% due
12/15/2004......................... 2,000,000 2,155,000
Stone Container Corp.:
B B1 1,950,000 9.875% due 2/01/2001................. 1,869,375 1,932,938
B+ B1 1,300,000 10.75% due 10/01/2002................ 1,287,000 1,361,750
------------- -------------
18,069,084 18,543,438
------------------------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
S&P MOODY'S FACE VALUE
INDUSTRY RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
PAPER & PACKAGING--0.6% B- Caa $3,500,000 IVEX Holdings Corp., 12.21% due
3/15/2005(d)....................... $ 2,041,580 $ 1,890,000
------------------------------------------------------------------------------------------------------------------------
POLLUTION CONTROL--1.1% B B3 3,500,000 Mid-American Waste Systems, Inc.,
12.25% due 2/15/2003............... 3,555,000 3,578,750
------------------------------------------------------------------------------------------------------------------------
RESTAURANTS--1.5% CCC+ Caa 3,890,000 Flagstar Corp., 11.375% due
9/15/2003.......................... 3,701,100 3,053,650
B- B2 1,750,000 Foodmaker, Inc., 9.75% due
11/01/2003......................... 1,722,700 1,452,500
------------- -------------
5,423,800 4,506,150
------------------------------------------------------------------------------------------------------------------------
RETAIL SPECIALTY--1.9% B+ Caa 4,500,000 Bradlees, Inc., 11.00% due
8/01/2002.......................... 4,466,562 1,395,000
A A3 5,000,000 International Semi-Tech
Microelectronics Inc., 13.20% due
8/15/2003(d)....................... 2,481,956 2,450,000
B- B3 2,500,000 Pamida Holdings, Inc., 11.75% due
3/15/2003.......................... 2,457,187 2,225,000
------------- -------------
9,405,705 6,070,000
------------------------------------------------------------------------------------------------------------------------
STEEL--2.6% B B2 1,500,000 AK Steel Holding Corp., 10.75% due
4/01/2004.......................... 1,500,000 1,575,000
B B1 4,000,000 ++ Gulf States Acquisition Steel Corp.,
13.50% due 4/15/2003 (g)........... 4,020,000 3,900,000
B+ B1 3,000,000 WCI Steel Inc., 10.50% due
3/01/2002.......................... 2,990,000 2,940,000
------------- -------------
8,510,000 8,415,000
------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-- 3.0% CCC+ B3 4,000,000 NEXTEL Communications, Inc., 13.97%
due 8/15/2004(d)................... 2,067,394 1,920,000
A A3 3,000,000 Paging Network Inc., 8.875% due
2/01/2006.......................... 2,517,500 2,730,000
B- B3 3,000,000 Panamsat L.P., 12.16% due
8/01/2003(d)....................... 2,028,530 2,145,000
NR* NR* 3,000,000 Telecom Argentina S.A., 8.375% due
10/18/2000......................... 2,357,500 2,647,500
------------- -------------
8,970,924 9,442,500
------------------------------------------------------------------------------------------------------------------------
TEXTILES--2.2% BB- Ba3 3,500,000 Tultex Corp., 10.625% due
3/15/2005.......................... 3,500,000 3,521,875
B+ B3 3,500,000 Westpoint Stevens Industries, Inc.,
9.375% due 12/15/2005.............. 3,291,250 3,368,750
------------- -------------
6,791,250 6,890,625
------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--0.9% B+ Ba3 3,000,000 Viking Star Shipping Co., 9.625% due
7/15/2003.......................... 2,905,937 2,992,500
------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION B+ B2 155,000 ACF Industries Inc., 11.60% due
SERVICES--0.8% 5/15/2000.......................... 148,025 158,875
NR* NR* 3,700,000 Transtar Holdings Inc., 11.02% due
12/15/2003(d)...................... 2,349,339 2,220,000
------------- -------------
2,497,364 2,378,875
------------------------------------------------------------------------------------------------------------------------
UTILITIES--2.7% B+ B1 3,453,000 Beaver Valley Funding Corp., 9.00%
due 6/01/2017...................... 3,252,225 2,900,520
CTC Mansfield Funding Corp.:
B+ Ba3 1,000,000 10.25% due 3/30/2003................. 983,750 1,020,000
B+ Ba3 2,300,000 11.125% due 9/30/2016................ 2,402,500 2,341,262
Midland Cogeneration Venture L.P.:
BB Ba3 916,219 ++10.33% due 7/23/2002............... 897,894 939,957
B- B2 250,000 11.75% due 7/23/2005................. 250,000 253,252
++ Tucson Electric Power Co.:
NR* NR* 570,386 10.21% due 1/01/2009................. 529,034 560,981
NR* NR* 500,000 10.732% due 1/01/2013................ 461,050 482,195
------------- -------------
8,776,453 8,498,167
------------------------------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC--0.6% BB Ba2 2,000,000 Cleveland Electric Illuminating,
9.50% due 5/15/2005................ 1,996,160 2,005,540
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
CORPORATE BONDS--91.6% 295,843,471 289,028,489
------------------------------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
SHARES VALUE
INDUSTRY HELD PREFERRED STOCKS COST (NOTE 1A)
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
BROADCASTING &
PUBLISHING--0.4% 36,600 K-III Communications Corp............ $ 998,487 $ 960,750
3,134 K-III Communications Corp. (a)....... 318,522 303,980
------------- -------------
1,317,009 1,264,730
------------------------------------------------------------------------------------------------------------------------
STEEL--0.9% 120,000 USX Capital Corp..................... 3,000,000 2,925,000
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
PREFERRED STOCKS--1.3% 4,317,009 4,189,730
------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
------------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE--0.5% 53,021 Grand Union Co....................... 3,090,000 742,294
25,095 Kash - N - Karry Food Stores, Inc.... 1,123,417 840,682
------------- -------------
4,213,417 1,582,976
------------------------------------------------------------------------------------------------------------------------
FOOD/FOOD PROCESSING-- 4,211 Foodbrands America, Inc.............. 239,652 54,217
0.0%
------------------------------------------------------------------------------------------------------------------------
HOTELS & CASINOS--0.0% 2,500 Goldriver Hotel & Casino Finance
Corp............................... 18,603 2,500
500 Trump Taj Mahal
Holding Corp. (Class A) (c)........ 250 6,000
------------- -------------
18,853 8,500
------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS--0.0% 311 Thermadyne Industries, Inc. (c)...... 4,495 4,393
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
COMMON STOCKS--0.5% 4,476,417 1,650,086
------------------------------------------------------------------------------------------------------------------------
TRUSTS AND WARRANTS
------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--0.0% 23,350 American Telecasting, Inc. (Warrants)
(b)................................ 4,776 70,050
------------------------------------------------------------------------------------------------------------------------
ENERGY--0.0% 42,733 Transamerica Refining Corp.
(Warrants) (b)..................... 99,622 138,882
833 UGI Corp. (Warrants) (b)............. 3,644 125
------------- -------------
103,266 139,007
------------------------------------------------------------------------------------------------------------------------
HIGH TECHNOLOGY--0.0% 7,588 ++ Anacomp, Inc. (Warrants) (b)......... 10,000 2,845
------------------------------------------------------------------------------------------------------------------------
HOTEL--0.0% 250 ++ Goldriver Hotel & Casino Finance
Corp. (Liquidating Trust) (c)...... 6,000 4,282
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
TRUSTS & WARRANTS--0.0% 124,042 216,184
------------------------------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
FACE VALUE
INDUSTRY AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A)
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
COMMERCIAL
PAPER**--3.7% $ 2,500,000 Ciba-Geigy Corp., 6.00% due $ 2,495,417 $ 2,495,417
7/11/1995..........................
3,000,000 Daimler-Benz AG, 5.92% due
7/18/1995.......................... 2,991,120 2,991,120
3,348,000 General Electric Capital Corp., 6.20%
due 7/03/1995...................... 3,346,270 3,346,270
3,000,000 Sheffield Receivables Corp., 5.98%
due 7/24/1995...................... 2,988,040 2,988,040
------------- -------------
11,820,847 11,820,847
-----------------------------------------------------------------------------------------------------------
US 5,000,000 Federal National Mortgage
GOVERNMENT Association, 5.77% due 7/11/1995...
&
AGENCY
OBLIGATIONS**--1.6% 4,991,185 4,991,185
-----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SHORT-TERM SECURITIES--5.3% 16,812,032 16,812,032
-----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--98.7%............. $ 321,572,971 311,896,521
-------------
-------------
OTHER ASSETS LESS LIABILITIES--1.3%.. 4,119,726
-------------
NET ASSETS--100.0%................... $ 316,016,247
-------------
-------------
-----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Not Rated.
** 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.
(a) Represents a pay-in-kind security which may pay interest/dividend in additional face/shares.
(b) Warrants entitle the Fund 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.
(c) Non-income producing security.
(d) Represents a zero coupon or step bond; the interest rate shown is the effective yield at the time of purchase.
(e) Each $1,000 face amount contains one warrant of Australis Media Ltd.
(f) Each $1,000 face amount contains one share of Decorative Home Accents, Inc.'s Class F common stock.
(g) Each $1,000 face amount contains one warrant of Gulf States Acquisition Steel Corp.
+ Corresponding industry groups for convertible bonds:
(1) Food & Beverage
(2) Healthcare
(2) Waste Management
(4) Conglomerates
</TABLE>
<TABLE>
<S> <C>
++ Restricted securities as to resale. The value of the Fund's investment in restricted securities was approximately
$28,357,000, representing 8.97% of net assets.
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
VALUE
ISSUE ACQUISITION DATES COST (NOTE 1A)
------------------------------------------------------------------------------------------------------------------------
Anacomp Inc. (Warrants).................................... 10/23/1990 $ 10,000 $ 2,845
Cumberland Farms, 10.50% due 10/01/2003.................... 2/18/1994 1,957,500 1,690,000
Energy Ventures, Inc., 10.25% due 3/15/2004................ 3/17/1994-4/25/1994 2,901,875 2,998,125
Goldriver Hotel & Casino Finance Corp. (Liquidating 8/31/1992 6,000 4,282
Trust)........................................................
Gulf States Acquisition Steel Corp., 13.50% due 4/12/1995-6/08/1995 4,020,000 3,900,000
4/15/2003.....................................................
International Wire Holding Co., 11.75% due 6/01/2005....... 6/07/1995 1,500,000 1,507,500
Midland Cogeneration Venture L.P., 10.33% due 7/23/2002.... 7/13/1994 897,894 939,957
Polymer Group Inc., 12.75% due 7/15/2002................... 6/17/1994-12/07/1994 3,967,500 4,040,000
S.D. Warren Co., 12.00% due 12/15/2004..................... 12/13/1994 2,000,000 2,155,000
Six Flags Theme Parks, 12.02% due 6/15/2005................ 6/23/1995 3,576,419 3,600,000
TransTexas Gas Corp., 11.50% due 6/15/2002................. 6/14/1995 3,500,000 3,570,000
Tucson Electric Power Co., 10.21% due 1/01/2009............ 6/16/1993 529,034 560,981
Tucson Electric Power Co., 10.732% due 1/01/2013........... 3/01/1993 461,050 482,195
Weirton Steel Corp., 10.75% due 6/01/2005.................. 6/05/1995 1,477,500 1,402,500
Young Broadcasting Corp., 10.125% due 2/15/2005............ 6/07/1995 1,500,000 1,503,750
------------------------------------------------------------------------------------------------------------------------
TOTAL...................................................... $ 28,304,772 $ 28,357,135
------------ ------------
------------ ------------
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements.
49
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
FACE VALUE
AMOUNT ISSUE COST (NOTE 1A)
------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY OBLIGATIONS
------------------------------------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE $ 500,000 Federal National Mortgage Association, 7.85%
ASSOCIATION--1.8% due 9/10/2004................................ $ 499,297 $ 521,585
------------------------------------------------------------------------------------------------------------------------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION 499,297 521,585
------------------------------------------------------------------------------------------------------------------------
US TREASURY NOTES--69.0% US Treasury Notes:
1,000,000 8.875% due 2/15/1999........................... 1,086,250 1,093,750
2,000,000 7.125% due 2/29/2000........................... 2,004,375 2,089,060
2,000,000 6.875% due 3/31/2000........................... 2,038,750 2,070,000
2,000,000 7.50% due 11/15/2001........................... 2,021,875 2,146,880
2,000,000 6.375% due 8/15/2002........................... 1,899,678 2,023,740
2,000,000 7.25% due 5/15/2004............................ 2,010,625 2,135,320
8,000,000 6.50% due 5/15/2005............................ 7,732,480 8,170,000
------------------------------------------------------------------------------------------------------------------------
TOTAL US TREASURY NOTES 18,794,033 19,728,750
------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY OBLIGATIONS--70.8% 19,293,330 20,250,335
------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT*--4.9% 1,397,000 Morgan Stanley Group, Inc., purchased on
6/30/95 to yield 6% to 7/03/1995............. 1,397,000 1,397,000
------------------------------------------------------------------------------------------------------------------------
US TREASURY BILLS**--22.7% US Treasury Bills:
300,000 5.20% due 7/06/1995............................ 299,740 299,740
500,000 5.30% due 8/10/1995............................ 496,982 496,982
5,735,000 5.32% due 8/10/1995............................ 5,700,252 5,700,252
------------ ------------
6,496,974 6,496,974
------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES--27.6% 7,893,974 7,893,974
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--98.4%....................... $ 27,187,304 28,144,309
------------
------------
OTHER ASSETS LESS LIABILITIES--1.6%............ 469,745
------------
NET ASSETS--100.0%............................. $ 28,614,054
------------
------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Repurchase Agreements are fully collateralized by US Government Obligations.
**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.
See Notes to Financial Statements.
50
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VALUE PERCENT OF NET
NORTH AMERICA FACE AMOUNT ISSUE COST (NOTE 1A) ASSETS
CANADA FOREIGN GOVERNMENT C$ 500,000 Canadian Government
OBLIGATIONS Bond, 8.50% due $ 381,028 $ 377,422 3.7%
3/01/2000..........
TOTAL INVESTMENTS IN
CANADA 381,028 377,422 3.7
TOTAL INVESTMENTS IN
NORTH AMERICA 381,028 377,422 3.7
PACIFIC BASIN
AUSTRALIA FOREIGN GOVERNMENT A$ 350,000 Australian Government
OBLIGATIONS Bond, 9.00% due
9/15/2004.......... 240,188 245,906 2.4
TOTAL INVESTMENTS IN
AUSTRALIA 240,188 245,906 2.4
JAPAN FOREIGN GOVERNMENT Yen 50,000,000 IBRD World Bank,
OBLIGATIONS 4.75% due
12/20/2004......... 672,007 682,328 6.6
50,000,000 Lkb, Baden Wurt Bank,
3.50% due
1/26/2004.......... 617,438 612,383 5.9
----------- ----------- ----------
1,289,445 1,294,711 12.5
TOTAL INVESTMENTS IN
JAPAN 1,289,445 1,294,711 12.5
NEW ZEALAND FOREIGN GOVERNMENT NZ$ 300,000 New Zealand
OBLIGATIONS Government Bond,
8.00% due
7/15/1998.......... 184,989 200,258 1.9
TOTAL INVESTMENTS IN
NEW ZEALAND 184,989 200,258 1.9
TOTAL INVESTMENTS IN
THE
PACIFIC BASIN 1,714,622 1,740,875 16.8
WESTERN EUROPE
AUSTRIA FOREIGN GOVERNMENT ATS 4,000,000 Republic of Austria,
OBLIGATIONS 7.625% due
10/18/2004......... 419,440 420,313 4.1
TOTAL INVESTMENTS IN
AUSTRIA 419,440 420,313 4.1
DENMARK FOREIGN GOVERNMENT Dkr 3,000,000 Denmark Government
OBLIGATIONS Bond, 7.00% due
12/15/2004......... 427,693 500,278 4.8
TOTAL INVESTMENTS IN
DENMARK 427,693 500,278 4.8
EUROPEAN
CURRENCY FOREIGN GOVERNMENT ECU 300,000 Kingdom of Sweden,
UNIT OBLIGATIONS 7.25% due
6/30/2000.......... 389,169 390,474 3.8
400,000 Republic of Portugal,
6.00% due
2/16/2004.......... 404,448 457,348 4.4
----------- ----------- ----------
793,617 847,822 8.2
TOTAL INVESTMENTS IN
EUROPEAN CURRENCY
UNIT 793,617 847,822 8.2
FINLAND FOREIGN GOVERNMENT Fmk 1,000,000 Finland Government
OBLIGATIONS Bond, 11.00% due
1/15/1999.......... 259,024 256,283 2.5
TOTAL INVESTMENTS IN
FINLAND 259,024 256,283 2.5
FRANCE FOREIGN GOVERNMENT Frf 2,500,000 French Government
OBLIGATIONS 'B-Tan', 4.75% due
4/12/1999.......... 423,692 478,230 4.6
TOTAL INVESTMENTS IN
FRANCE 423,692 478,230 4.6
</TABLE>
51
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WESTERN
EUROPE FACE VALUE PERCENT OF NET
(CONCLUDED) AMOUNT ISSUE COST (NOTE 1A) ASSETS
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GERMANY FOREIGN GOVERNMENT DM 400,000 Bundes Obligations,
OBLIGATIONS 7.375% due
1/03/2005.......... $ 258,625 $ 296,573 2.9%
1,000,000 Export Import Bank,
7.75% due
2/21/2005.......... 729,491 748,301 7.3
800,000 Kingdom of Belgium,
6.25% due
10/06/2003......... 472,882 546,696 5.3
600,000 Kredit Fuer
Wiederausbau
International
Finance, 7.50% due
1/24/2000.......... 386,087 454,490 4.4
1,000,000 Treuhand-Obligation,
6.75% due
5/13/2004.......... 691,408 708,098 6.9
----------- ----------- ----------
2,538,493 2,754,158 26.8
TOTAL INVESTMENTS IN
GERMANY 2,538,493 2,754,158 26.8
IRELAND FOREIGN GOVERNMENT Iep 300,000 Irish Gilts, 6.25%
OBLIGATIONS due 4/01/1999...... 441,335 454,782 4.4
TOTAL INVESTMENTS IN
IRELAND 441,335 454,782 4.4
ITALY FOREIGN GOVERNMENT Lit 700,000,000 Credit Local de
OBLIGATIONS France S.A., 12.20%
due 6/12/1996...... 438,093 428,215 4.1
600,000,000 Nordic Investment
Bank, 12.375% due
4/19/1996.......... 375,519 367,005 3.6
----------- ----------- ----------
813,612 795,220 7.7
TOTAL INVESTMENTS IN
ITALY 813,612 795,220 7.7
NETHERLANDS FOREIGN GOVERNMENT Nlg 700,000 Netherlands
OBLIGATIONS Government Bond,
7.25% due
10/01/2004......... 386,865 459,857 4.5
TOTAL INVESTMENTS IN
THE NETHERLANDS 386,865 459,857 4.5
SPAIN FOREIGN GOVERNMENT Pta 50,000,000 Government of Spain,
OBLIGATIONS 7.40% due
7/30/1999.......... 333,061 357,862 3.5
TOTAL INVESTMENTS IN
SPAIN 333,061 357,862 3.5
UNITED FOREIGN GOVERNMENT Pound United Kingdom Gilt,
Sterling 200,000
KINGDOM OBLIGATIONS 8.50% due
12/07/2005......... 327,574 319,193 3.1
TOTAL INVESTMENTS IN
THE UNITED KINGDOM 327,574 319,193 3.1
TOTAL INVESTMENTS IN
WESTERN EUROPE 7,164,406 7,643,998 74.2
</TABLE>
52
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONCLUDED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FACE VALUE PERCENT OF NET
AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) ASSETS
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMMERCIAL PAPER* $ 263,000 General Electric
Capital Corp.,
6.20% due
7/03/1995.......... $ 262,909 $ 262,909 2.5%
TOTAL INVESTMENTS IN
SHORT-TERM
SECURITIES......... 262,909 262,909 2.5
TOTAL INVESTMENTS.......................... $ 9,522,965 10,025,204 97.2
-----------
-----------
UNREALIZED DEPRECIATION ON FORWARD
FOREIGN EXCHANGE CONTRACTS**............... (16,966) (0.2)
OTHER ASSETS LESS LIABILITIES.............. 310,212 3.0
----------- ----------
NET ASSETS................................. $10,318,450 100.0%
----------- ----------
----------- ----------
* 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.
</TABLE>
** Forward foreign exchange contracts as of June 30, 1995 were as follows:
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
UNREALIZED APPRECIATION
FOREIGN CURRENCY EXPIRATION (DEPRECIATION)
PURCHASED DATE (NOTE 1B)
----------------------------------------------------------------------
Yen 151,179,306 ... July 1995 $ 995
----------------------------------------------------------------------
TOTAL (US$ COMMITMENT--$1,784,880) $ 995
--------
----------------------------------------------------------------------
FOREIGN CURRENCY SOLD
----------------------------------------------------------------------
DM 1,636,632 ... July 1995 $ (18,386)
Pta 18,597,466 ... July 1995 (3,695)
Frf 189,551 ..... July 1995 (726)
Yen 52,779,167 ... July 1995 4,846
----------------------------------------------------------------------
TOTAL (US$ COMMITMENT--$1,981,602) $ (17,961)
--------
----------------------------------------------------------------------
TOTAL UNREALIZED DEPRECIATION ON
FORWARD FOREIGN EXCHANGE
CONTRACTS--NET $ (16,966)
--------
--------
----------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
53
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHARES HELD/ VALUE PERCENT OF NET
AFRICA INDUSTRY FACE AMOUNT INVESTMENTS COST (NOTE 1A) ASSETS
SOUTH BANKING 34,530 Nedcor Ltd. (d)............... $ 1,553,850 $ 1,700,602 0.7%
AFRICA
BEVERAGES 8,600 South African Breweries
Ltd......................... 197,617 245,427 0.1
DIVERSIFIED 26,900 Rembrandt Group Ltd........... 180,264 184,981 0.1
INVESTMENT MANAGEMENT 20,700 The Morgan Stanley Africa
Investment Fund, Inc........ 239,340 238,050 0.1
13,500 Southern Africa Fund, Inc..... 200,143 190,687 0.1
----------- ----------- ---
439,483 428,737 0.2
MINING 6,200 Anglo American Corp. of South
Africa Ltd. (ADR) (a)....... 298,763 330,150 0.1
STEEL 214,200 South Africa Iron & Steel
Industrial Corp., Ltd....... 233,988 243,335 0.1
TRANSPORTATION ZAL 6,400,000 Transnet Ltd., 15% due
10/01/1995.................. 1,627,942 1,751,616 0.8
TOTAL INVESTMENTS IN SOUTH
AFRICA 4,531,907 4,884,848 2.1
TOTAL INVESTMENTS IN
AFRICA 4,531,907 4,884,848 2.1
LATIN AMERICA
ARGENTINA OIL & GAS PRODUCERS 48,500 Yacimientos Petroliferos
Fiscales S.A. (Sponsored)
(ADR) (a)................... 960,284 915,437 0.4
TOTAL INVESTMENTS IN
ARGENTINA 960,284 915,437 0.4
BRAZIL AUTOMOBILES 53,400 CAPCO Automotive Products
Corp.
S.A......................... 488,550 413,850 0.2
FOREIGN GOVERNMENT US$ 500,000 Republic of Brazil, 7.25% due
OBLIGATIONS 4/15/2024..................... 271,250 285,000 0.1
MINING 4,300,000 Companhia Vale do Rio Doce
S.A. (Preferred)............ 666,010 648,968 0.3
OIL--RELATED 5,750,000 Petroleo Brasileiro S.A.
(Preferred)................. 504,797 486,971 0.2
STEEL 38,200 Usinas Siderurgicas de Minas
Gerais-Usiminas S.A. (d).... 555,525 420,200 0.2
429,000,000 Usinas Siderurgicas de Minas
Gerais-Usiminas S.A.
(Preferred)................. 725,035 484,430 0.2
----------- ----------- ---
1,280,560 904,630 0.4
TOTAL INVESTMENTS IN
BRAZIL 3,211,167 2,739,419 1.2
CHILE TELECOMMUNICATIONS Clp 400,000 Compana de Telefonos de Chile
S.A., 4.50% due 1/15/2003... 481,000 444,000 0.2
TOTAL INVESTMENTS IN
CHILE 481,000 444,000 0.2
MEXICO LEISURE 220,500 Grupo Carso, S.A. de C.V.
(Series A1) (e)............. 1,947,650 1,205,611 0.5
TOTAL INVESTMENTS IN
MEXICO 1,947,650 1,205,611 0.5
VENEZUELA FOODS 5,000 Mavesa S.A. (d)............... 16,250 13,750 0.0
TOTAL INVESTMENTS IN
VENEZUELA 16,250 13,750 0.0
TOTAL INVESTMENTS IN
LATIN AMERICA 6,616,351 5,318,217 2.3
</TABLE>
54
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NORTH VALUE PERCENT OF NET
AMERICA INDUSTRY SHARES HELD INVESTMENTS COST (NOTE 1A) ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CANADA DIVERSIFIED 98,000 Horsham Corp.................. $ 1,505,053 $ 1,323,000 0.6%
ENERGY SOURCES 51,820 Imperial Oil Ltd.
(Ordinary).................. 1,695,032 1,924,851 0.8
MINING 89,171 Barrick Gold Corp............. 2,274,717 2,256,877 1.0
TOTAL INVESTMENTS IN
CANADA 5,474,802 5,504,728 2.4
TOTAL INVESTMENTS IN
NORTH AMERICA 5,474,802 5,504,728 2.4
------------------------------------------------------------------------------------------------------------------------
PACIFIC
BASIN
------------------------------------------------------------------------------------------------------------------------
AUSTRALIA DIVERSIFIED 798,000 BTR Nylex Ltd................. 1,901,058 1,523,027 0.6
FOOD & BEVERAGE 131,355 Coca-Cola Amatil, Ltd.
(Ordinary).................. 711,630 810,808 0.3
32,838 Coca-Cola Amatil, Ltd.
(Rights) (f)................ 0 37,511 0.0
----------- ----------- ---
711,630 848,319 0.3
FOOD & HOUSEHOLD 338,807 Burns Philp & Co., Ltd.
PRODUCTS (Ordinary).................. 1,004,156 706,728 0.3
MEDIA 123,663 The News Corp., Ltd.
(Ordinary) (ADR) (a)........ 601,947 689,628 0.3
52,038 The News Corp., Ltd.
(Preferred)................. 220,979 256,970 0.1
----------- ----------- ---
822,926 946,598 0.4
MERCHANDISING 24,000 Amway Asia Pacific Ltd........ 934,077 870,000 0.4
NATURAL GAS PIPELINES 70,943 Broken Hill Proprietary Co.... 863,592 871,786 0.4
PROPERTY 256,056 Lend Lease Corp............... 3,267,597 3,266,458 1.4
TOTAL INVESTMENTS IN
AUSTRALIA 9,505,036 9,032,916 3.8
------------------------------------------------------------------------------------------------------------------------
HONG KONG BANKING 231,070 HSBC Holdings PLC............. 2,617,855 2,964,044 1.3
MULTI-INDUSTRY 322,000 Swire Pacific Ltd. (Class
A).......................... 2,144,870 2,455,378 1.0
TELECOMMUNICATIONS 1,863,000 Hong Kong Telecommunications
Ltd. (Ordinary)............. 3,710,688 3,683,960 1.6
UTILITIES 168,600 Hong Kong & China Gas Co.,
Ltd. (Ordinary)............. 238,217 269,113 0.1
UTILITIES--ELECTRIC 752,800 China Light & Power Co., Ltd.
(Ordinary).................. 3,706,269 3,872,338 1.7
TOTAL INVESTMENTS IN
HONG KONG 12,417,899 13,244,833 5.7
INDONESIA COMMUNICATIONS 117,000 PT Supreme Cable Manufacturing
Company (GDR) (b)........... 332,701 344,272 0.1
FOOD & HOUSEHOLD 338,000 PT Wicaksana Overseas
PRODUCTS International............... 577,989 854,110 0.4
TELECOMMUNICATIONS 18,960 PT Indonesian Satellite (ADR)
(a)......................... 664,105 725,220 0.3
TOTAL INVESTMENTS IN
INDONESIA 1,574,795 1,923,602 0.8
</TABLE>
55
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PACIFIC
BASIN VALUE PERCENT OF NET
(CONTINUED) INDUSTRY SHARES HELD INVESTMENTS COST (NOTE 1A) ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JAPAN AUTOMOBILES 340,000 Suzuki Motor Corp.
(Ordinary).................. $ 3,740,006 $ 3,792,941 1.6%
BEVERAGES 23,000 Chukyo Coca-Cola Bottling Co.,
Ltd. (Ordinary)............. 303,183 236,218 0.1
31,000 Hokkaido Coca-Cola Bottling
Co., Ltd. (Ordinary)........ 473,832 453,783 0.2
27,000 Kinki Coca-Cola Bottling Co.,
Ltd. (Ordinary)............. 429,219 385,669 0.2
35,000 Mikuni Coca-Cola Bottling Co.,
Ltd......................... 539,515 454,492 0.2
29,000 Sanyo Coca-Cola Bottling Co.,
Ltd......................... 434,480 472,435 0.2
----------- ----------- ---
2,180,229 2,002,597 0.9
CAPITAL GOODS 641,000 Mitsubishi Heavy Industries,
Ltd......................... 4,408,659 4,358,588 1.9
CHEMICALS 119,000 Shin-Etsu Chemical Co., Ltd.
(Ordinary).................. 2,474,232 2,093,141 0.9
ELECTRICAL
CONSTRUCTION 72,000 Chudenko Corp. (Ordinary)..... 2,550,264 2,855,861 1.2
63,000 Sanki Engineering Co., Ltd.... 888,004 576,378 0.2
74,000 Taihei Dengyo Kaisha, Ltd..... 1,583,696 1,126,904 0.5
----------- ----------- ---
5,021,964 4,559,143 1.9
ELECTRICAL EQUIPMENT 147,000 Murata Manufacturing Co.,
Ltd......................... 5,515,018 5,570,417 2.4
74,000 The Nippon Signal Co., Ltd.... 1,013,087 485,704 0.2
95,000 Rohm Co., Ltd................. 3,630,393 4,912,053 2.1
220,000 Sumitomo Electric Industries,
Ltd......................... 3,142,686 2,623,067 1.1
----------- ----------- ---
13,301,184 13,591,241 5.8
ENGINEERING & 123,000 Kinden Corp................... 2,323,181 2,352,261 1.0
CONSTRUCTION
INSURANCE 328,000 Dai-Tokyo Fire & Marine
Insurance Co., Ltd.......... 2,370,162 2,323,220 1.0
70,000 Fuji Fire & Marine Insurance
Co.,
Ltd......................... 477,842 391,689 0.2
292,000 Koa Fire & Marine Insurance
Co.,
Ltd......................... 2,008,042 1,792,468 0.8
149,000 Mitsui Marine & Fire Insurance
Co., Ltd.................... 1,217,441 977,972 0.4
282,000 Nichido Fire & Marine
Insurance Co., Ltd.......... 2,210,110 2,280,368 1.0
117,000 Nippon Fire & Marine Insurance
Co., Ltd.................... 858,344 737,552 0.3
342,000 Sumitomo Marine & Fire
Insurance Co., Ltd.......... 2,851,410 2,717,105 1.2
298,000 Tokio Marine & Fire Insurance
Co., Ltd. (Ordinary)........ 3,518,462 3,419,384 1.5
201,000 Yasuda Fire & Marine Insurance
Co., Ltd.................... 1,505,908 1,257,585 0.5
----------- ----------- ---
17,017,721 15,897,343 6.9
OFFICE EQUIPMENT 338,000 Canon Inc. (Ordinary)......... 5,809,359 5,506,316 2.4
PACKAGING 169,000 Toyo Seikan Kaisha, Ltd.
(Ordinary).................. 5,221,253 4,947,704 2.1
PHARMACEUTICALS 141,000 Sankyo Co., Ltd. (Ordinary)... 3,106,650 3,279,070 1.4
67,000 Taisho Pharmaceutical Co.,
Ltd. (Ordinary)............. 1,345,910 1,297,131 0.6
----------- ----------- ---
4,452,560 4,576,201 2.0
RETAILING 85,000 Ito-Yokado Co., Ltd.
(Ordinary).................. 4,387,634 4,485,303 1.9
30,000 Sangetsu Co., Ltd............. 1,120,547 796,836 0.3
----------- ----------- ---
5,508,181 5,282,139 2.2
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STEEL 48,000 Maruichi Steel Tube, Ltd.
(Ordinary).................. 840,875 934,955 0.4
TOTAL INVESTMENTS IN
JAPAN 72,299,404 69,894,570 30.0
------------------------------------------------------------------------------------------------------------------------
</TABLE>
56
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PACIFIC
BASIN SHARES HELD/ VALUE PERCENT OF NET
(CONCLUDED) INDUSTRY FACE AMOUNT INVESTMENTS COST (NOTE 1A) ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MALAYSIA BANKING 119,000 Public Bank (Malaysia) BHD
'Foreign'................... $ 266,690 $ 266,072 0.1%
LEISURE 22,500 Genting BHD................... 138,632 222,462 0.1
68,000 Sime Darby BHD................ 158,458 189,703 0.1
----------- ----------- ---
297,090 412,165 0.2
TRANSPORTATION 141,000 Malaysian International
Shipping Co. BHD............ 405,839 413,600 0.2
TOTAL INVESTMENTS IN
MALAYSIA 969,619 1,091,837 0.5
NEW FOREIGN
ZEALAND GOVERNMENT New Zealand Government Bonds:
NZ$ OBLIGATIONS 2,118,000 8.00% due 11/15/1995.......... 1,332,553 1,409,371 0.6
NZ$ 1,600,000 9.00% due 11/15/1996.......... 973,385 1,076,687 0.5
----------- ----------- ---
2,305,938 2,486,058 1.1
INVESTMENT COMPANY 1,173,500 Brierley Investments Ltd...... 908,562 885,672 0.4
TOTAL INVESTMENTS IN
NEW ZEALAND 3,214,500 3,371,730 1.5
PHILIPPINES MULTI--INDUSTRY 60,500 Benpres Holdings Corp. (d).... 553,200 499,125 0.2
TOTAL INVESTMENTS IN
THE PHILIPPINES 553,200 499,125 0.2
SINGAPORE BANKING 88,800 United Overseas Bank Ltd.
(Warrants) (c).............. 399,558 419,528 0.2
MACHINERY 51,000 Jurong Shipbuilding Ltd....... 412,686 365,068 0.2
NEWSPAPER/
PUBLISHING 30,000 Singapore Press Holdings
Ltd......................... 395,638 448,819 0.2
REAL ESTATE 81,000 City Developments Ltd.,
Local....................... 545,042 495,741 0.2
TOTAL INVESTMENTS IN SINGAPORE 1,752,924 1,729,156 0.8
SOUTH KOREA TELECOMMUNICATIONS 15,000 Korea Mobile
Telecommunications Corp.
(GDR) (b) (e)............... 511,875 525,000 0.2
UTILITIES 52,000 Korea Electric Power Corp.
(e)......................... 1,011,333 1,176,500 0.5
TOTAL INVESTMENTS IN
SOUTH KOREA 1,523,208 1,701,500 0.7
TAIWAN MERCHANDISING 15,360 Hocheng Group Corp. (ADR) (a)
(d)......................... 437,760 180,480 0.1
TOTAL INVESTMENTS IN
TAIWAN 437,760 180,480 0.1
THAILAND BANKING 91,000 Bangkok Bank Co., Ltd.
'Foreign'................... 802,548 1,003,121 0.4
TOTAL INVESTMENTS IN THAILAND 802,548 1,003,121 0.4
TOTAL INVESTMENTS IN THE
PACIFIC BASIN 105,050,893 103,672,870 44.5
SOUTHEAST
ASIA
INDIA AUTOMOBILES 20,000 Ashok Leyland Ltd. (GDR) (b)
(e)......................... 255,800 270,000 0.1
MEDIA 263,500 Videocon International Ltd.
(GDR)
(b)......................... 2,100,431 935,425 0.4
TEXTILES 5,000 JCT Ltd. (GDR) (b) (e)........ 92,500 90,000 0.1
5,000 Raymond Woolen Mills Ltd.
(GDR) (b) (e)............... 75,000 75,650 0.0
----------- ----------- ---
167,500 165,650 0.1
TOBACCO 75,500 Indian Tobacco Co. Ltd. (e)... 1,076,021 528,500 0.2
TOTAL INVESTMENTS IN
INDIA 3,599,752 1,899,575 0.8
TOTAL INVESTMENTS IN
SOUTHEAST ASIA 3,599,752 1,899,575 0.8
</TABLE>
57
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WESTERN SHARES HELD/ VALUE PERCENT OF NET
EUROPE INDUSTRY FACE AMOUNT INVESTMENTS COST (NOTE 1A) ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AUSTRIA ENGINEERING & 1,500 V.A. Technologie AG........... $ 163,987 $ 187,779 0.1%
CONSTRUCTION
UTILITIES 8,395 Verbund Oesterreichische
Elekrizitats AG............. 489,227 615,561 0.2
TOTAL INVESTMENTS IN
AUSTRIA 653,214 803,340 0.3
BELGIUM BANKING 1,660 Generale de Banque S.A.
(Ordinary).................. 410,855 539,310 0.2
TOTAL INVESTMENTS IN
BELGIUM 410,855 539,310 0.2
DENMARK FOREIGN GOVERNMENT Dkr 18,600,000 Denmark Government Bond,
OBLIGATIONS 9.00% due 11/15/2000.......... 3,581,101 3,569,050 1.5
TOTAL INVESTMENTS IN
DENMARK 3,581,101 3,569,050 1.5
FINLAND BANKING 508,400 Kansallis-Osake-Pankki (e).... 792,468 553,709 0.3
160,000 Unitas Bank Ltd. Series A
(Ordinary) (e).............. 391,417 517,157 0.2
----------- ----------- ---
1,183,885 1,070,866 0.5
DIVERSIFIED 41,500 Outokumpu OY.................. 653,106 690,128 0.3
MACHINE--
DIVERSIFIED 17,600 Rauma OY (e).................. 317,423 317,826 0.1
NATURAL GAS UTILITIES
4,750 Kymmene OY (Ordinary)......... 138,723 147,968 0.1
PAPER & FOREST
PRODUCTS 75,400 Enso-Gutzeit OY
(Registered)................ 555,578 683,448 0.3
22,100 Metsa Serla OY................ 873,739 983,488 0.4
55,575 Repola OY (d)................. 919,279 1,171,507 0.5
----------- ----------- ---
2,348,596 2,838,443 1.2
TOTAL INVESTMENTS IN
FINLAND 4,641,733 5,065,231 2.2
FRANCE AUTOMOBILES 8,100 Peugeot S.A................... 1,224,176 1,124,907 0.5
BANKING 2,500 Societe Generale de
Surveillance S.A. (Class A)
(Ordinary).................. 272,615 292,509 0.1
BUILDING &
CONSTRUCTION 6,000 Compagnie de Saint-Gobain
S.A......................... 717,949 725,547 0.3
MULTI-INDUSTRY 1,853 EuraFrance S.A................ 588,784 612,568 0.3
OIL & RELATED 5,075 Societe Nationale Elf
Aquitaine................... 357,037 375,441 0.2
STEEL 4,070 Ugine S.A..................... 275,270 286,395 0.1
TOTAL INVESTMENTS IN
FRANCE 3,435,831 3,417,367 1.5
GERMANY AUTOMOBILES 2,150 Volkswagen AG (Ordinary)...... 581,798 621,059 0.3
CHEMICALS 2,900 BASF AG (Ordinary)............ 552,964 619,422 0.3
2,900 Bayer AG (Ordinary)........... 663,276 721,330 0.3
----------- ----------- ---
1,216,240 1,340,752 0.6
ELECTRONICS 1,900 Siemens AG.................... 954,764 943,131 0.4
INSURANCE 205 Munich Reinsurance Co.
(Ordinary).................. 362,865 449,132 0.2
MACHINERY 17,250 Kloeckner Werke AG (e)........ 1,232,262 1,153,742 0.5
3,300 Mannesmann AG................. 819,475 1,008,134 0.4
----------- ----------- ---
2,051,737 2,161,876 0.9
UTILITIES 5,000 Vereinigte Elektrizitaets &
Bergwerks AG (Veba)
(Warrants) (c).............. 215,257 241,468 0.1
TOTAL INVESTMENTS IN GERMANY 5,382,661 5,757,418 2.5
</TABLE>
58
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WESTERN
EUROPE SHARES HELD/ VALUE PERCENT OF NET
(CONTINUED) INDUSTRY FACE AMOUNT INVESTMENTS COST (NOTE 1A) ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GREECE BANKING 12,900 Ergo Bank S.A. (Registered)... $ 510,673 $ 593,717 0.3%
BEVERAGES 35,625 Hellenic Bottling Co. S.A.
(e)......................... 759,018 1,058,231 0.4
TOTAL INVESTMENTS IN
GREECE 1,269,691 1,651,948 0.7
HUNGARY FOODS 4,133 Pick Szeged Reszvenytarsasag
(ADR) (a) (e)............... 234,349 209,646 0.1
TELECOMMUNICATIONS 750 Matav Reszvenytarsasag
(Ordinary).................. 155,605 118,951 0.0
TOTAL INVESTMENTS IN
HUNGARY 389,954 328,597 0.1
IRELAND BANKING 63,300 Allied Irish Banks PLC
(Ordinary).................. 263,497 301,393 0.1
BANKING & FINANCIAL 207,600 Anglo Irish Bank Corp......... 164,472 176,631 0.1
BUILDING & 215,800 CRH PLC (Ordinary)............ 1,224,007 1,444,146 0.6
CONSTRUCTION
CLOSED-END FUNDS 520,000 First Ireland Investment
Co.......................... 782,598 934,577 0.4
FOREST PRODUCTS 224,000 Jefferson Smurfit Group PLC
(Ordinary) (e).............. 657,626 678,041 0.3
TOTAL INVESTMENTS IN
IRELAND 3,092,200 3,534,788 1.5
ITALY BUILDING &
CONSTRUCTION 96,100 Fochi Filippo S.p.A. (e)...... 304,917 5,874 0.0
DIVERSIFIED 335,500 CIR NC Savings (e)............ 157,313 160,983 0.0
546,500 Compagnie Industrial Riunite
S.p.A. (CIR) (e)............ 558,345 417,558 0.2
----------- ----------- ---
715,658 578,541 0.2
TELECOMMUNICATIONS 407,016 Stet Savings Telecom.......... 1,005,906 904,342 0.4
TOTAL INVESTMENTS IN
ITALY 2,026,481 1,488,757 0.6
NETHERLANDS BANKING 16,450 ABN AMRO Bank (Ordinary)...... 561,832 635,184 0.3
CHEMICALS 8,200 Akzo N.V. (Ordinary).......... 908,533 980,590 0.4
17,120 European Vinyls Corporation
International N.V. (d)
(e)......................... 743,928 798,130 0.3
----------- ----------- ---
1,652,461 1,778,720 0.7
ELECTRICAL EQUIPMENT 54,200 Philips Industries Inc........ 1,473,734 2,295,809 1.0
INSURANCE 39,000 AEGON N.V. (Ordinary)......... 813,328 1,349,777 0.5
20,000 Amev N.V. (Ordinary).......... 825,683 1,091,238 0.5
19,300 Internationale Nederlanden
Groep N.V................... 816,416 1,067,999 0.5
----------- ----------- ---
2,455,427 3,509,014 1.5
PAPER & FOREST
PRODUCTS 800 Koninklijke KNP (Preferred)
(e)......................... 3,250 3,895 0.0
22,055 Koninklijke KNP (Warrants)
(c)......................... 76,134 35,033 0.0
----------- ----------- ---
79,384 38,928 0.0
TRANSPORTATION 25,800 KLM Royal Dutch Airlines
(e)......................... 659,306 837,954 0.4
TOTAL INVESTMENTS IN THE
NETHERLANDS 6,882,144 9,095,609 3.9
NORWAY OIL & GAS PRODUCERS 13,100 Saga Petroleum A.S. (Class
A).......................... 154,863 186,004 0.1
84,000 Saga Petroleum A.S. (Class
B).......................... 951,425 1,110,913 0.5
----------- ----------- ---
1,106,288 1,296,917 0.6
TOTAL INVESTMENTS IN
NORWAY 1,106,288 1,296,917 0.6
</TABLE>
59
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WESTERN
EUROPE VALUE PERCENT OF NET
(CONTINUED) INDUSTRY SHARES HELD INVESTMENTS COST (NOTE 1A) ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PORTUGAL BANKING 80,400 Banco Comercial Portugues S.A.
(ADR) (a)................... $ 1,256,303 $ 1,055,250 0.4%
BUILDING &
CONSTRUCTION 1,050 Sociedade de Construsoes
Soares da Costa S.A.
(Ordinary).................. 13,141 18,651 0.0
RETAIL 34,980 Sonae Investimentos S.A....... 737,095 837,654 0.4
TOTAL INVESTMENTS IN
PORTUGAL 2,006,539 1,911,555 0.8
SPAIN BANKING 4,800 Banco Popular Espanol
(Ordinary).................. 545,778 713,165 0.3
GLASS 11,400 Cristaleria Espanola S.A...... 502,213 649,278 0.3
OIL--RELATED 51,000 Repsol S.A.................... 1,551,028 1,603,879 0.7
TOTAL INVESTMENTS IN
SPAIN 2,599,019 2,966,322 1.3
SWEDEN APPLIANCES 18,481 Electrolux AB................. 898,932 841,224 0.4
AUTOMOBILES &
EQUIPMENT 80,000 Volvo AB 'B'.................. 1,466,079 1,523,694 0.7
BANKING 23,875 Stadshypotek AB............... 352,150 354,589 0.2
BUILDING RELATED 19,100 Svedala Industry (d).......... 388,692 514,811 0.2
ENGINEERING 11,530 Celsius Industrier AB......... 169,896 175,206 0.1
38,850 SKF AB 'A' (e)................ 716,222 780,013 0.3
15,300 SKF AB 'B' Free (e)........... 297,053 309,291 0.1
----------- ----------- ---
1,183,171 1,264,510 0.5
FOREST PRODUCTS 14,900 Mo Och Domsjo AB-B Free....... 732,131 859,560 0.4
51,500 Stora Kopparbergs AB.......... 652,743 690,510 0.3
----------- ----------- ---
1,384,874 1,550,070 0.7
METALS & MINING 31,300 Avesta Sheffield AB (e)....... 273,594 344,344 0.1
TOTAL INVESTMENTS IN
SWEDEN 5,947,492 6,393,242 2.8
SWITZERLAND BANKING 8,500 CS Holdings (Registered)...... 807,592 779,105 0.3
CHEMICALS 1,400 Ciba-Geigy AG (Registered).... 786,967 1,026,586 0.4
ELECTRICAL EQUIPMENT 790 BBC Brown Boveri & Cie........ 668,242 818,141 0.4
PHARMACEUTICALS 220 Roche Holdings Genusschein
AG.......................... 1,143,674 1,418,245 0.6
TOTAL INVESTMENTS IN
SWITZERLAND 3,406,475 4,042,077 1.7
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TURKEY BEVERAGES 168,692 Erciyas Biracilik Ve Malt
Sanayii A.S................. 67,432 145,095 0.1
BUILDING MATERIALS 230,502 Alarko Holdings A.S. (e)...... 246,833 203,476 0.1
97,073 Cimentos Izmir Cimento
Fabrikasi T.A.S. (e)........ 65,259 62,621 0.0
----------- ----------- ---
312,092 266,097 0.1
FOOD & HOUSEHOLD
PRODUCTS 22,068 Dardanel Onentas Gida A.S.
(e)......................... 42,647 54,945 0.0
INSURANCE 603,000 Aksigorta A.S................. 150,750 117,379 0.0
RETAIL STORES 189,696 Migros Turk A.S............... 147,406 212,539 0.1
STEEL 8,903,279 Izmir Demir Celik Sanayii A.S.
(e)......................... 314,126 342,589 0.2
TOTAL INVESTMENTS IN
TURKEY 1,034,453 1,138,644 0.5
</TABLE>
60
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WESTERN
EUROPE VALUE PERCENT OF NET
(CONCLUDED) INDUSTRY SHARES HELD INVESTMENTS COST (NOTE 1A) ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UNITED KINGDOM AEROSPACE 341,212 Rolls Royce PLC (Ordinary).... $ 881,306 $ 947,007 0.4%
AUTOMOBILE PARTS 187,800 T & N PLC..................... 499,345 503,303 0.2
BANKING 53,600 Standard Chartered PLC
(Ordinary) (e).............. 252,403 284,738 0.1
BEVERAGE 368,100 Grand Metropolitan PLC
(Ordinary).................. 2,326,866 2,256,960 1.0
BROADCAST--MEDIA 127,700 British Sky Broadcasting Group
PLC (e)..................... 533,796 557,528 0.2
BUILDING MATERIALS 100,000 BAT Industries PLC (Ordinary)
(e)......................... 768,969 765,030 0.3
CONGLOMERATES 76,000 Hanson PLC (Ordinary)......... 283,385 265,932 0.1
2,072 US Industries Inc. (e)........ 28,519 28,231 0.0
----------- ----------- ---
311,904 294,163 0.1
CONSUMER--GOODS 80,800 Vendome Luxury Group
(Units)..................... 495,817 607,864 0.3
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ELECTRICAL EQUIPMENT 94,600 The BICC Group PLC............ 504,183 446,870 0.2
174,300 General Electric Co., Ltd. PLC
(Ordinary).................. 804,240 851,078 0.4
----------- ----------- ---
1,308,423 1,297,948 0.6
FOOD & BEVERAGE 43,100 Tate & Lyle PLC (Ordinary).... 286,107 291,340 0.1
FOOD MANUFACTURING 65,200 Unilever Capital Corp......... 1,099,274 1,319,590 0.6
INDUSTRIAL--OTHER 286,000 Tomkins PLC................... 995,138 1,021,212 0.4
INSURANCE 178,900 Prudential Corp. PLC.......... 869,094 953,210 0.4
LEISURE &
ENTERTAINMENT 79,000 The Rank Organisation PLC
(Ordinary).................. 498,595 498,829 0.2
METALS & MINING 102,500 The RTZ Corp. PLC............. 1,330,125 1,336,000 0.6
OIL--RELATED 142,400 British Petroleum Co., Ltd.... 1,039,907 1,020,325 0.4
SERVICES 401,300 BET PLC....................... 707,839 785,069 0.3
TELECOMMUNICATIONS 334,900 NYNEX Cablecomms Group (e).... 735,835 671,150 0.3
204,300 Racal Electronics PLC......... 712,277 833,469 0.4
187,500 Vodafone Group PLC
(Ordinary).................. 679,760 696,341 0.3
----------- ----------- ---
2,127,872 2,200,960 1.0
UTILITIES 167,600 British Telecommunications PLC
(Ordinary).................. 1,018,814 1,044,946 0.5
UTILITIES--GAS 200,300 British Gas PLC (Ordinary)
(e)......................... 1,005,939 922,281 0.4
TOTAL INVESTMENTS IN THE
UNITED KINGDOM 18,357,533 18,908,303 8.1
TOTAL INVESTMENTS IN
WESTERN EUROPE 66,223,664 71,908,475 30.8
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FACE
AMOUNT SHORT-TERM SECURITIES
COMMERCIAL PAPER* THB Finance One Public Company
60,000,000 Ltd., 13% due 8/24/1995..... 2,378,160 2,381,763 1.0
General Electric Capital
Corp.,
US$ 1,680,000
6.20% due 7/03/1995........... 1,679,132 1,679,132 0.7
Pound General Electric Capital
Sterling Corp., 6.31% due
3,000,000 7/10/1995................... 4,763,297 4,746,020 2.1
TOTAL INVESTMENTS IN
COMMERCIAL PAPER 8,820,589 8,806,915 3.8
FOREIGN GOVERNMENT
OBLIGATIONS* C$ 4,200,000 Canadian Treasury Bill, 7.09%
due 8/17/1995............... 3,016,793 3,031,277 1.3
NZ$ 10,550,000 New Zealand Treasury Bill,
8.79% due 9/06/1995......... 6,977,240 6,937,127 3.0
TOTAL INVESTMENTS IN
FOREIGN GOVERNMENT OBLIGATIONS 9,994,033 9,968,404 4.3
</TABLE>
61
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VALUE PERCENT OF NET
FACE AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
US GOVERNMENT
OBLIGATIONS* US Treasury Bills:
US$ 570,000 5.425% due 7/27/1995.......... $ 567,681 $ 567,681 0.3%
50,000 5.45% due 7/27/1995........... 49,796 49,796 0.0
500,000 5.52% due 7/27/1995........... 497,930 497,930 0.2
80,000 5.59% due 7/27/1995........... 79,665 79,656 0.0
3,000,000 5.60% due 7/27/1995........... 2,987,400 2,987,100 1.3
6,000,000 5.625% due 7/27/1995.......... 5,974,687 5,974,200 2.6
100,000 5.66% due 7/27/1995........... 99,575 99,570 0.0
1,740,000 5.88% due 3/07/1996........... 1,668,666 1,674,750 0.7
TOTAL INVESTMENTS IN US
GOVERNMENT OBLIGATIONS 11,925,400 11,930,683 5.1
TOTAL INVESTMENTS IN
SHORT-TERM SECURITIES 30,740,022 30,706,002 13.2
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NUMBER OF
OPTIONS CONTRACTS/ PREMIUMS
PURCHASED FACE AMOUNT ISSUE PAID
CALL OPTIONS
PURCHASED 14,600 Nikkei, expiring December
1995 at
Yen 15,000................. 154,226 148,913 0.1
50,750 + Topix Second Section,
expiring July 1995 at Yen
2512.93.................... 137,151 0 0.0
65,535 + Topix Second Section,
expiring August 1995 at Yen
2453.64.................... 193,711 0 0.0
42,919 + Topix Second Section,
expiring September 1995 at
Yen 2311.10................ 100,000 0 0.0
------------ ------------ ----------
585,088 148,913 0.1
CURRENCY PUT
OPTIONS PURCHASED DM5,000,000 German Deutschemark, expiring
August 1995 at DM 1.45..... 73,000 18,000 0.0
Yen12,000,000 Japanese Yen, expiring August
1995 at Yen 99............. 153,480 0 0.0
Yen13,500,000 Japanese Yen, expiring
January 1996 at Yen
86.15...................... 361,582 258,701 0.1
------------ ------------ ----------
588,062 276,701 0.1
TOTAL OPTIONS PURCHASED 1,173,150 425,614 0.2
TOTAL INVESTMENTS 223,410,541 224,320,329 96.3
OPTIONS PREMIUMS
WRITTEN RECEIVED
CALL OPTIONS WRITTEN 1,000 Hang Seng Index, expiring
August 1995 at HK$
10,000..................... (48,872) (36,059) 0.0
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CURRENCY CALL OPTIONS
WRITTEN DM5,000,000 German Deutschemark, expiring
August 1995 at DM 1.433.... (67,250) (219,000) (0.1)
DM5,000,000 German Deutschemark, expiring
August 1995 at DM 1.282.... (53,000) (6,000) 0.0
Yen4,000,000 Japanese Yen, expiring August
1995 at Yen 91.38.......... (52,280) (340,292) (0.1)
Yen8,000,000 Japanese Yen, expiring August
1995 at Yen 91.29.......... (101,200) (683,200) (0.3)
Yen7,000,000 Japanese Yen, expiring
December 1995 at Yen
87.0....................... (111,531) (422,275) (0.2)
Yen6,500,000 Japanese Yen, expiring
January 1996 at Yen
81.75...................... (215,982) (185,432) (0.1)
------------ ------------ ----------
(601,243) (1,856,199) (0.8)
PUT OPTIONS WRITTEN
65,535 + Topix Second Section,
expiring August 1995 at Yen
2453.64.................... (136,111) (730,384) (0.3)
TOTAL OPTIONS WRITTEN (786,226) (2,622,642) (1.1)
TOTAL INVESTMENTS, NET OF OPTIONS WRITTEN............................. $222,624,315 221,697,687 95.2
------------
------------
0.0
VARIATION MARGIN ON STOCK INDEX FUTURES CONTRACTS**................... (70,320)
(0.4)
UNREALIZED DEPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS***...... (780,885)
5.2
OTHER ASSETS LESS LIABILITIES......................................... 12,108,202
------------ ----------
100.0%
NET ASSETS............................................................ $232,954,684
------------ ----------
------------ ----------
</TABLE>
62
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
(a) American Depositary Receipt (ADR).
(b) Global Depositary Receipt (GDR).
(c) Warrants entitle the Fund to purchase a predetermined number of shares of common stock. The purchase price and the
number of shares are subject to adjustment under certain conditions until the expiration date.
(d) Restricted securities as to resale. The value of the Fund's investment in restricted securities was approximately
$5,299,000, representing 2.27% of net assets.
</TABLE>
<TABLE>
<S> <C> <C> <C>
ACQUISITION VALUE
ISSUE DATE(S) COST (NOTE 1A)
</TABLE>
<TABLE>
<S> <C> <C> <C>
Benpres Holdings Corp................................................ 10/25/1994-2/13/1995 $ 553,200 $ 499,125
European Vinyls Corporation International N.V........................ 11/18/1994-6/02/1995 743,928 798,130
Hocheng Group Corp. (ADR)............................................ 8/09/1994 437,760 180,480
Mavesa S.A........................................................... 6/02/1995 16,250 13,750
Nedcor Ltd........................................................... 3/23/1995-5/23/1995 1,553,850 1,700,602
Repola OY............................................................ 8/03/1993-3/23/1995 919,279 1,171,507
Svedala Industry..................................................... 10/28/1993 388,692 514,811
Usinas Siderurgicas de Minas Gerais-Usiminas S.A..................... 10/05/1994-6/02/1995 555,525 420,200
TOTAL $ 5,168,484 $ 5,298,605
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<S> <C>
(e) Non-income producing security.
(f) The rights may be exercised until 7/26/1995.
+ All Topix 2nd Section OTCs are with Morgan Stanley & Co. International Ltd. as counterparty.
* Commercial Paper and certain Foreign Government and US Government & Agency Obligations are traded on a discount
basis; the interest rates shown are the rates paid at the time of purchase by the Fund.
** Stock index futures contracts purchased as of June 30, 1995 were as follows:
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
NUMBER OF EXPIRATION VALUE
CONTRACTS ISSUE EXCHANGE DATE (NOTE 1B)
18 Nikkei 225..................................................... CME September 1995 $ 1,305,900
297 Nikkei 225..................................................... SIMEX September 1995 25,427,842
TOTAL STOCK INDEX FUTURES CONTRACTS PURCHASED (TOTAL CONTRACT PRICE--$28,760,376) $ 26,733,742
-------------
-------------
Stock index futures contracts sold as of June 30, 1995 were as follows:
NUMBER OF EXPIRATION VALUE
CONTRACTS ISSUE EXCHANGE DATE (NOTE 1B)
15 DAX............................................................ DTB September 1995 $ 2,284,165
6 FT 100......................................................... LIFFE September 1995 792,546
40 HANG SENG...................................................... HKSE July 1995 2,391,015
TOTAL STOCK INDEX FUTURES CONTRACTS SOLD (TOTAL CONTRACT PRICE--$5,495,348) $ 5,467,726
-------------
-------------
THE MARKET VALUE OF PLEDGED SECURITIES IS $11,930,683.
</TABLE>
63
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONCLUDED) (IN US DOLLARS)
--------------------------------------------------------------------------------
***Forward foreign exchange contracts as of June 30, 1995 were as follows:
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
UNREALIZED
APPRECIATION
EXPIRATION (DEPRECIATION)
FOREIGN CURRENCY SOLD DATE (NOTE 1B)
------------------------------------------------------------------------------------------------------------------------
A$ 2,796,616 ....................................................................... July 1995 $ 17,733
Bf 20,000,000 ....................................................................... September 1995 (18,766)
Ffr 9,913,020 ....................................................................... July 1995 (84,295)
Pound Sterling
115,839 ....................................................................... September 1995 938
Nlg 10,749,880 ....................................................................... July 1995 (415,293)
NZ$ 2,075,000 ....................................................................... July 1995 (3,486)
Yen 637,776,250 ....................................................................... July 1995 (36,054)
Yen 155,480,000 ....................................................................... August 1995 (243,807)
------------------------------------------------------------------------------------------------------------------------
TOTAL (US$ COMMITMENT--$21,845,487) $ (783,030)
--------------
------------------------------------------------------------------------------------------------------------------------
FOREIGN CURRENCY PURCHASED
------------------------------------------------------------------------------------------------------------------------
Bf 5,349,120 ....................................................................... September 1995 $ 3,848
C$ 1,879,950 ....................................................................... July 1995 (11,901)
Pound Sterling
426,076 ....................................................................... September 1995 (10,311)
MYR 2,442,025 ....................................................................... July 1995 1,977
Nlg 10,709,267 ....................................................................... July 1995 45,711
Yen 85,385,900 ....................................................................... July 1995 (27,179)
------------------------------------------------------------------------------------------------------------------------
TOTAL (US$ COMMITMENT--$11,164,674) $ 2,145
--------------
------------------------------------------------------------------------------------------------------------------------
TOTAL UNREALIZED DEPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS $ (780,885)
--------------
--------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
64
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--NATURAL RESOURCES FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
VALUE PERCENT OF
INDUSTRY SHARES HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
ALUMINUM 15,000 Alcan Aluminium, Ltd................. $ 314,175 $ 453,750 1.0%
58,000 Comalco Ltd.......................... 213,082 209,459 0.5
7,700 Reynolds Metals Co................... 349,628 398,475 0.9
------------ ------------ ----------
876,885 1,061,684 2.4
------------------------------------------------------------------------------------------------------------------------
CHEMICALS 85,000 Asahi Chemical Industry Co., Ltd..... 631,171 558,907 1.3
10,400 Dow Chemical Co...................... 646,664 747,500 1.7
10,700 du Pont (E.I.) de Nemours & Co....... 534,988 735,625 1.7
------------ ------------ ----------
1,812,823 2,042,032 4.7
------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED RESOURCES 26,500 Canadian Pacific, Ltd................ 415,534 460,438 1.0
COMPANIES 14,000 Coastal Corp......................... 376,945 425,250 1.0
33,000 Cyprus Amax Minerals Co.............. 921,470 940,500 2.1
4,800 Equitable Resources, Inc............. 118,772 138,600 0.3
24,000 + Freeport-McMoran Inc................. 464,588 423,000 1.0
38,500 Norcen Energy Resources Ltd.......... 600,603 518,755 1.2
20,000 Occidental Petroleum Corp............ 391,200 457,500 1.0
Renison Goldfields Consolidated
61,200 Ltd................................ 236,439 193,225 0.4
------------ ------------ ----------
3,525,551 3,557,268 8.0
------------------------------------------------------------------------------------------------------------------------
GAS DISTRIBUTION/ 12,100 Consolidated Natural Gas Co.......... 586,109 456,775 1.0
TRANSMISSION
------------------------------------------------------------------------------------------------------------------------
GOLD 192,000 + Delta Gold N.L....................... 369,686 356,907 0.8
281,000 Newcrest Mining Ltd.................. 1,247,688 1,186,249 2.7
22,864 Newmont Mining Corp.................. 914,907 957,430 2.2
45,000 Placer Dome Inc...................... 1,018,177 1,175,625 2.7
33,000 Santa Fe Pacific Gold Corp........... 474,572 400,125 0.9
------------ ------------ ----------
4,025,030 4,076,336 9.3
------------------------------------------------------------------------------------------------------------------------
INTEGRATED OIL
COMPANIES 10,500 Amoco Corp........................... 554,378 699,563 1.6
10,600 British Petroleum Co. PLC (ADR)*..... 808,886 907,625 2.1
15,800 Imperial Oil Ltd..................... 576,846 586,575 1.3
2,200 Mobil Corp........................... 214,196 211,200 0.5
2,000 OMV AG............................... 214,068 230,655 0.5
39,000 Petro-Canada......................... 325,876 369,264 0.8
17,700 Phillips Petroleum Co................ 517,938 590,737 1.3
3,000 Repsol, S.A. (ADR)*.................. 86,490 94,875 0.2
7,300 Repsol, S.A. (Foreign)............... 210,174 229,575 0.5
Societe Nationale Elf Aquitaine
11,000 (ADR)*............................. 391,885 409,750 0.9
14,000 Total S.A. (Class B)................. 841,536 843,582 1.9
29,000 Unocal Corp.......................... 819,256 801,125 1.8
29,000 Yacimientos Petroliferos Fiscales
S.A. (ADR)*........................ 660,776 547,375 1.2
------------ ------------ ----------
6,222,305 6,521,901 14.6
------------------------------------------------------------------------------------------------------------------------
METALS & MINING 12,100 ASARCO Inc........................... 341,486 369,050 0.8
21,000 CRA Ltd.............................. 258,884 285,176 0.7
31,500 Falconbridge Ltd..................... 436,776 562,090 1.3
Freeport-McMoran Copper & Gold
1,200 Inc................................ 27,601 24,750 0.1
283,000 M.I.M. Holdings Ltd.................. 618,436 351,380 0.8
14,600 Magma Copper Co...................... 252,977 237,250 0.5
50,000 Noranda Inc.......................... 947,209 983,248 2.2
10,000 Phelps Dodge Corp.................... 556,143 590,000 1.3
64,600 The RTZ Corp. PLC.................... 837,147 842,006 1.9
34,000 Trelleborg 'B' Fria.................. 454,495 397,426 0.9
165,000 Western Mining Corp. Holdings Ltd.... 939,947 906,102 2.1
------------ ------------ ----------
5,671,101 5,548,478 12.6
------------------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--NATURAL RESOURCES FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
VALUE PERCENT OF
INDUSTRY SHARES HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
OIL & GAS PRODUCERS 151,300 Ampolex Ltd.......................... $ 461,392 $ 341,365 0.8%
10,500 Anadarko Petroleum Corp.............. 513,411 452,812 1.0
18,000 Apache Corp.......................... 482,356 492,750 1.1
13,500 Burlington Resources Inc............. 528,438 497,812 1.1
37,000 + Chauvco Resources Ltd................ 437,096 421,067 1.0
17,300 Enron Oil & Gas Co................... 370,478 376,275 0.9
102,000 Enterprise Oil PLC................... 658,895 642,435 1.5
The Louisiana Land and Exploration
8,900 Co................................. 342,742 354,887 0.8
25,000 Mitchell Energy & Development Corp.
(Class B).......................... 437,442 446,875 1.0
13,000 + Oryx Energy Co....................... 216,739 178,750 0.4
11,000 Parker & Parsley Petroleum Co........ 216,535 215,875 0.5
93,000 Ranger Oil Ltd....................... 625,617 581,250 1.3
15,000 Sonat Inc............................ 477,890 457,500 1.0
7,200 Triton Energy Corp................... 233,834 333,900 0.8
9,800 Vastar Resources, Inc................ 268,604 302,575 0.7
------------ ------------ ----------
6,271,469 6,096,128 13.9
------------------------------------------------------------------------------------------------------------------------
OIL SERVICE 16,800 Baker Hughes, Inc.................... 322,264 344,400 0.8
Coflexip Stena Offshore, Inc.
8,000 (ADR)*............................. 172,000 202,000 0.5
18,000 IHC Caland N.V....................... 400,101 511,397 1.2
64,400 + Rowan Companies Inc.................. 602,479 523,250 1.2
11,400 Schlumberger Ltd..................... 693,409 708,225 1.6
13,400 Tidewater Inc........................ 271,679 336,675 0.8
------------ ------------ ----------
2,461,932 2,625,947 6.1
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
PAPER & FOREST 24,533 Aracruz Celulose S.A. (ADR)*......... 196,788 288,263 0.7
PRODUCTS 28,800 + Avenor Inc........................... 573,943 613,547 1.4
10,000 Georgia-Pacific Corp................. 710,723 867,500 2.0
7,400 International Paper.................. 497,368 634,550 1.4
11,500 Metsa-Serla OY 'B'................... 499,397 511,770 1.2
11,300 Mo Och Domsjo AB Co.................. 492,512 651,881 1.5
24,000 Scott Paper Co....................... 479,340 1,188,000 2.7
20,000 Weyerhaeuser Co...................... 796,864 942,500 2.1
9,000 Willamette Industries, Inc........... 376,875 495,000 1.1
------------ ------------ ----------
4,623,810 6,193,011 14.1
------------------------------------------------------------------------------------------------------------------------
</TABLE>
66
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--NATURAL RESOURCES FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
VALUE PERCENT OF
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
INDUSTRY SHARES HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
PLANTATIONS 86,000 Golden Hope Plantations BHD.......... $ 158,974 $ 158,064 0.4%
60,000 Kuala Lumpur Kepong BHD.............. 120,553 190,769 0.4
------------ ------------ ----------
279,527 348,833 0.8
------------------------------------------------------------------------------------------------------------------------
REFINING Total Petroleum (North America),
22,300 Ltd................................ 328,442 245,300 0.6
------------------------------------------------------------------------------------------------------------------------
STEEL 21,000 Allegheny Ludlum Corp................ 493,494 414,750 0.9
Koninklijke Nederlandsche Hoogovens
10,800 en Staalfabrienken N.V............. 460,210 429,573 1.0
192,000 + Sumitomo Metal Industries, Ltd....... 637,900 500,909 1.1
------------ ------------ ----------
1,591,604 1,345,232 3.0
------------------------------------------------------------------------------------------------------------------------
WOOD PRODUCTS 33,000 Louisiana-Pacific Corp............... 1,042,980 866,250 2.0
------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 39,319,568 40,985,175 93.1
------------------------------------------------------------------------------------------------------------------------
FACE AMOUNT SHORT-TERM SECURITIES
------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER** $ 905,000 General Electric Capital Corp., 6.02% 904,532 904,532
due 7/03/1995...................... 2.1
------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY Federal National Mortgage
OBLIGATIONS** 2,000,000 Association, 5.86% due 7/07/1995... 1,997,721 1,997,721 4.5
------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 2,902,253 2,902,253 6.6
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS.................... $ 42,221,821 43,887,428 99.7
------------
------------
OTHER ASSETS LESS LIABILITIES........ 115,592 0.3
------------ ----------
NET ASSETS........................... $ 44,003,020 100.0%
------------ ----------
------------ ----------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
* American Depositary Receipt (ADR).
** Commercial Paper and certain US Government & Agency Obligations are traded on a discount basis; the interest rates shown are
the discount rates paid at the time of purchase by the Fund.
+ Non-income producing security.
</TABLE>
See Notes to Financial Statements.
67
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--PRIME BOND FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
S&P MOODY'S FACE VALUE
INDUSTRY RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES
------------------------------------------------------------------------------------------------------------------------
BANKS & THRIFTS--7.5% A A2 $ 1,000,000 BankAmerica Corp., 7.125% due
5/12/2005....................... $ 985,500 $ 1,009,100
A A2 6,000,000 Comerica Inc., 8.375% due
7/15/2024....................... 5,706,180 6,311,940
A- A2 3,000,000 First Interstate Bancorp, 11.00%
due 3/05/1998................... 3,605,145 3,309,900
A- A3 2,000,000 Golden West Financial Corp., 9.15%
due 5/23/1998................... 2,271,480 2,145,080
AA Aa3 4,000,000 Morgan (J.P.) & Co., Inc., 7.625%
due 9/15/2004................... 3,857,120 4,213,960
NationsBank Corp.:................
A A2 2,000,000 7.50% due 2/15/1997............... 1,998,280 2,037,020
A- A3 6,500,000 10.50% due 3/15/1999.............. 6,808,555 6,683,300
AA+ Aa2 3,000,000 Wachovia Bank, 6.55% due
6/09/1997....................... 2,997,810 3,027,630
------------- ------------
28,230,070 28,737,930
------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--
CAPTIVE--2.5% Chrysler Finance Corp.:
A- A3 1,000,000 7.13% due 9/30/1996............... 985,130 1,010,410
A- A3 2,500,000 9.50% due 12/15/1999.............. 2,747,175 2,749,925
A- A3 6,500,000 10.95% due 8/01/2017.............. 7,380,520 7,279,935
------------- ------------
11,112,825 11,040,270
------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES-- A+ A1 2,000,000 American General Finance Corp.,
CONSUMER--6.9% 8.50% due 8/15/1998............. 2,278,920 2,116,060
Associates Corp. of North America:
AA- Aa3 5,000,000 8.375% due 1/15/1998.............. 5,016,100 5,225,850
AA- Aa3 1,500,000 8.80% due 8/01/1998............... 1,690,365 1,596,315
AA- Aa3 1,000,000 7.25% due 9/01/1999............... 987,620 1,025,160
A A2 10,000,000 Beneficial Corp., 5.73% due
10/14/1997...................... 10,000,000 9,940,380
A+ Aa3 3,000,000 CIT Group Holdings, Inc., 7.625%
due
12/05/1996...................... 2,990,340 3,057,450
Commercial Credit Co.:
A+ A1 3,250,000 10.00% due 5/01/1999.............. 3,626,350 3,598,400
A+ A1 3,000,000 6.70% due 8/01/1999............... 3,022,580 3,015,930
A+ A2 1,000,000 Transamerica Financial Corp.,
6.80% due 3/15/1999............. 999,730 1,009,860
------------- ------------
30,612,005 30,585,405
------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--
OTHER--9.6% Dean Witter, Discover & Co.:
A A2 4,000,000 6.50% due 11/01/2005.............. 3,953,800 3,838,000
A A2 4,750,000 6.75% due 10/15/2013.............. 4,691,575 4,348,815
A+ A2 2,000,000 Dillard Investment Co., 9.25%
due 2/01/2001................... 2,354,230 2,230,280
General Electric Capital Corp.:
AAA Aaa 3,000,000 14.00% due 7/01/1996.............. 3,405,570 3,234,750
AAA Aaa 3,500,000 8.125% due 5/15/2001.............. 3,553,725 3,841,355
A Baa1 10,000,000 Lehman Brothers Holdings, Inc.,
7.375% due 8/15/1997............ 9,987,000 10,038,800
PaineWebber Group, Inc.:
BBB+ Baa1 3,000,000 9.25% due 12/15/2001.............. 3,501,570 3,265,380
BBB+ Baa1 2,000,000 8.875% due 3/15/2005.............. 2,012,540 2,163,200
A- A3 4,000,000 Smith Barney Holdings, 7.98% due
3/01/2000....................... 4,000,000 4,196,600
Travelers Corp. (The):
A+ A2 1,000,000 9.50% due 3/01/2002............... 1,084,200 1,132,170
A+ A2 4,000,000 7.875% due 5/15/2025.............. 3,997,680 4,061,600
------------- ------------
42,541,890 42,350,950
------------------------------------------------------------------------------------------------------------------------
</TABLE>
68
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--PRIME BOND FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
S&P MOODY'S FACE VALUE
INDUSTRY RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CORPORATE BONDS & NOTES
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FOREIGN*--9.8% A+ Aa2 $ 4,500,000 ABN AMRO Bank, N.V., 7.25% due
5/31/2005 (1)................... $ 4,496,175 $ 4,621,725
AA- A1 4,000,000 Aegon N.V., 8.00% due 8/15/2006
(1)............................. 3,963,480 4,308,200
CRA Finance Ltd. (3):
A+ A2 3,000,000 6.50% due 12/01/2003.............. 3,001,380 2,922,810
A+ A2 3,000,000 7.125% due 12/01/2013............. 2,982,600 2,895,150
AAA Aaa 2,000,000 Export-Import Bank of Japan, 8.35%
due 12/01/1999 (1).............. 2,113,320 2,155,700
A A2 1,000,000 Kingdom of Thailand, 8.25% due
3/15/2002 (2)................... 1,084,670 1,072,360
Metropolis of Tokyo (Japan) (2):
AAA Aaa 3,000,000 8.70% due 10/05/1999.............. 3,469,410 3,262,110
AAA Aaa 250,000 9.25% due 11/08/2000.............. 268,428 281,555
A+ A2 4,500,000 Pohang Iron & Steel Co., Ltd.,
7.375% due 5/15/2005 (3)........ 4,581,720 4,592,610
AA- Aa3 6,000,000 Province of Ontario (Canada),
7.75% due 6/04/2002 (2)......... 5,854,440 6,375,480
Province of Quebec (Canada) (2):
A+ A2 1,000,000 8.80% due 4/15/2003............... 1,038,020 1,109,900
A+ A2 9,000,000 7.125% due 2/09/2024.............. 7,384,440 8,366,940
AA A1 7,000,000 Republic of Italy, 6.875% due
9/27/2023 (2)................... 6,487,690 6,213,480
------------- ------------
46,725,773 48,178,020
------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--CONSUMER
GOODS--11.0% A- A2 2,000,000 American Home Products Corp.,
7.90% due 2/15/2005............. 1,996,100 2,149,440
Anheuser-Busch Cos., Inc.:
AA- A1 2,500,000 8.75% due 12/01/1999.............. 2,839,090 2,733,525
AA- A1 5,000,000 7.375% due 7/01/2023.............. 5,127,300 4,920,450
A+ A1 2,500,000 Bass America, Inc., 8.125% due
3/31/2002....................... 2,668,930 2,687,425
Dillard Department Stores, Inc.:
A+ A2 5,000,000 7.375% due 6/15/1999.............. 5,305,840 5,156,400
A+ A2 3,000,000 9.125% due 8/01/2011.............. 3,240,150 3,472,620
Grand Metropolitan Investment
Corp.:
A+ A2 5,500,000 6.50% due 9/15/1999............... 5,615,810 5,502,420
A+ A2 1,000,000 8.625% due 8/15/2001.............. 1,049,910 1,093,510
AAA Aaa 3,000,000 Johnson & Johnson Co., 8.72% due
11/01/2024...................... 3,000,000 3,394,230
A A2 2,000,000 May Department Stores Company
(The), 10.625% due 11/01/2010... 2,419,800 2,591,720
A A1 1,000,000 PepsiCo, Inc., 6.125% due
1/15/1998....................... 993,060 996,390
A A2 4,000,000 Philip Morris Companies, Inc.,
9.00% due 1/01/2001............. 4,071,540 4,393,440
AA Aa1 4,000,000 Wal-Mart Stores, Inc., 8.50% due
9/15/2024....................... 3,926,560 4,352,160
A A2 5,000,000 Weyerhaeuser Co., 7.95% due
3/15/2025....................... 4,945,200 5,347,700
------------- ------------
47,199,290 48,791,430
------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--ENERGY--
3.7% BP America Inc.:
AA- A1 2,000,000 9.375% due 11/01/2000............. 2,204,960 2,258,920
AA- A1 4,000,000 8.50% due 4/15/2001............... 4,176,000 4,375,200
AA- A1 5,500,000 7.875% due 5/15/2002.............. 5,972,510 5,908,320
Texaco Capital Inc.:
A+ A1 1,500,000 9.00% due 12/15/1999.............. 1,731,670 1,646,475
A+ A1 1,000,000 8.875% due 2/15/2021.............. 999,860 1,209,080
A+ A1 1,000,000 8.625% due 11/15/2031............. 1,045,390 1,150,970
------------- ------------
16,130,390 16,548,965
------------------------------------------------------------------------------------------------------------------------
</TABLE>
69
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--PRIME BOND FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
S&P MOODY'S FACE VALUE
INDUSTRY RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CORPORATE BONDS & NOTES
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INDUSTRIAL--OTHER--8.5% AA- Aa2 $ 2,000,000 Archer-Daniels-Midland Co., 8.875%
due 4/15/2011................... $ 2,159,000 $ 2,333,600
AA- Aa3 5,500,000 Capital Cities/ABC, Inc., 8.75%
due 8/15/2021................... 5,965,850 6,374,555
A- A3 1,000,000 Carnival Cruise Lines, Inc., 6.15%
due 10/01/2003.................. 891,530 943,370
A A1 7,000,000 Electronic Data Systems Corp.,
6.85% due 5/15/2000............. 6,994,470 7,122,500
Ford Motor Credit Co.:
A+ A2 2,500,000 7.75% due 3/15/2005............... 2,497,725 2,627,575
A+ A1 2,000,000 9.50% due 6/01/2010............... 2,217,880 2,378,080
AA Aa2 5,890,000 Kaiser Foundation Hospital, 9.55%
due 7/15/2005................... 6,625,367 7,027,064
A+ A1 2,000,000 New York Times Co. (The), 7.625%
due 3/15/2005................... 1,995,620 2,121,232
BBB+ A3 3,000,000 Philips Electronics N.V., 7.75%
due 5/15/2025................... 2,989,830 3,086,190
AA- Aa3 4,000,000 Reed Elsevier Capital PLC, 7.50%
due 5/15/2025................... 3,955,280 4,054,040
------------- ------------
36,292,552 38,068,206
------------------------------------------------------------------------------------------------------------------------
SUPRANATIONAL--2.7% AAA Aaa 1,000,000 Asian Development Bank, 10.75% due
6/01/1997....................... 1,084,890 1,080,330
Inter-American Development Bank
Co.:
AAA Aaa 2,000,000 8.875% due 6/01/2009.............. 2,481,700 2,428,700
AAA Aaa 4,000,000 8.50% due 3/15/2011............... 4,910,200 4,536,560
AAA Aaa 3,000,000 International Bank for
Reconstruction & Development,
12.375% due 10/15/2002.......... 3,817,430 3,994,230
------------- ------------
12,294,220 12,039,820
------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION
SERVICES--5.1% AA A1 9,500,000 Boeing Co. (The), 6.35% due
6/15/2003....................... 8,549,905 9,254,615
A A2 3,640,000 Conrail Inc., 9.75% due
6/01/2000....................... 4,047,134 4,128,270
Southwest Airlines, Inc.:
A- Baa1 3,500,000 9.40% due 7/01/2001............... 4,021,990 3,928,365
A- Baa1 4,000,000 8.00% due 3/01/2005............... 3,980,450 4,279,200
A- Baa1 1,000,000 7.875% due 9/01/2007.............. 992,600 1,063,440
------------- ------------
21,592,079 22,653,890
------------------------------------------------------------------------------------------------------------------------
UTILITIES--
COMMUNICATIONS--2.1% AA Aa3 4,000,000 AT&T Corp., 8.35% due 1/15/2025... 3,929,080 4,232,640
GTE Corp.:
BBB+ Baa1 1,000,000 8.85% due 3/01/1998............... 1,143,360 1,055,190
BBB+ Baa1 1,000,000 9.10% due 6/01/2003............... 1,221,680 1,131,840
AAA Aaa 2,000,000 Southern Bell Telephone and
Telegraph Co., 8.625% due
9/01/2026....................... 1,942,380 2,082,660
A+ A1 1,000,000 Southwestern Bell
Telecommunications Corp., 6.125%
due 3/01/2000................... 1,005,000 987,030
------------- ------------
9,241,500 9,489,360
------------------------------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC--4.2% AA- Aa2 7,000,000 Duke Power Co., 8.00% due
11/01/1999...................... 6,966,520 7,426,930
A+ A1 3,000,000 Georgia Power Co., 6.125% due
9/01/1999....................... 2,892,720 2,962,110
A A2 7,500,000 Virginia Electric & Power Co.,
8.625% due 10/01/2024........... 7,416,540 8,223,225
------------- ------------
17,275,780 18,612,265
------------------------------------------------------------------------------------------------------------------------
UTILITIES--GAS--1.7% AA- A1 7,000,000 Consolidated Natural Gas Co.,
8.75% due 6/01/1999............. 7,448,861 7,550,760
------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS & NOTES--
75.3% 326,697,235 334,647,271
------------------------------------------------------------------------------------------------------------------------
</TABLE>
70
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--PRIME BOND FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
S&P MOODY'S FACE VALUE
RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
US GOVERNMENT & AGENCY OBLIGATIONS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
US GOVERNMENT AGENCY AAA Aaa $ 5,000,000 Federal Home Loan Bank, 6.25% due
OBLIGATIONS--2.7% 5/06/1996....................... $ 4,980,500 $ 5,002,255
AAA Aaa 7,000,000 Federal National Mortgage
Association, 7.85% due
9/10/2004....................... 6,925,569 7,302,190
------------- ------------
11,906,069 12,304,445
------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT US Treasury Notes & Bonds:
OBLIGATIONS--18.6% AAA Aaa 23,500,000 5.875% due 6/30/2000.............. 23,519,035 23,397,070
AAA Aaa 2,500,000 8.75% due 8/15/2000............... 2,976,172 2,800,000
AAA Aaa 12,500,000 6.375% due 8/15/2002.............. 11,939,871 12,648,375
AAA Aaa 11,000,000 6.50% due 5/15/2005............... 10,668,276 11,233,750
AAA Aaa 2,000,000 7.50% due 11/15/2016.............. 2,219,480 2,177,500
AAA Aaa 11,000,000 8.875% due 8/15/2017.............. 12,467,812 13,695,000
AAA Aaa 1,000,000 8.125% due 8/15/2021.............. 1,227,187 1,168,910
AAA Aaa 14,000,000 7.50% due 11/15/2024.............. 13,803,750 15,489,740
------------- ------------
78,821,583 82,610,345
------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY
OBLIGATIONS--21.3% 90,727,652 94,914,790
------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
------------------------------------------------------------------------------------------------------------------------
REPURCHASE 8,150,000 Morgan Stanley Group, Inc.,
AGREEMENT**--1.8% purchased on 6/30/1995 to yield
6.00% to 7/03/1995.............. 8,150,000 8,150,000
------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES--1.8% 8,150,000 8,150,000
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--98.4%.......... $ 425,574,887 437,712,061
-------------
-------------
OTHER ASSETS LESS LIABILITIES--
1.6%............................ 7,303,219
------------
NET ASSETS--100.0%................ $445,015,280
------------
------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Corresponding industry groups for foreign securities, which are denominated in US dollars.
(1) Financial Institution
(2) Government Entity
(3) Industrial Mining and Metals
** Repurchase Agreements are fully collateralized by US Government Obligations.
</TABLE>
See Notes to Financial Statements.
71
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--QUALITY EQUITY FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS & WARRANTS COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
AEROSPACE 135,000 Boeing Co. (The)..................... $ 8,336,603 $ 8,454,375 1.5%
42,400 Crane Co............................. 1,517,956 1,537,000 0.3
100,000 United Technologies Corp............. 7,731,559 7,812,500 1.4
------------- ------------- ----------
17,586,118 17,803,875 3.2
------------------------------------------------------------------------------------------------------------------------
ALUMINUM 65,000 Aluminum Co. of America.............. 3,125,290 3,258,125 0.6
------------------------------------------------------------------------------------------------------------------------
APPLIANCES 400,000 Singer Co. N.V....................... 13,220,178 10,350,000 1.9
------------------------------------------------------------------------------------------------------------------------
AUTO & TRUCK 325,000 Ford Motor Co........................ 9,327,869 9,668,750 1.7
------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS--
ORIGINAL EQUIPMENT 85,000 Magna International, Inc. (Class
A)................................. 3,105,361 3,750,625 0.7
------------------------------------------------------------------------------------------------------------------------
BANKING 350,000 Bank of New York, Inc................ 10,946,930 14,131,250 2.5
60,000 Bank of New York, Inc. (Warrants)
(b)................................ 433,750 1,275,000 0.2
235,000 BankAmerica Corp..................... 10,882,147 12,366,875 2.2
141,800 CoreStates Financial Corp............ 5,031,971 4,945,275 0.9
------------- ------------- ----------
27,294,798 32,718,400 5.8
------------------------------------------------------------------------------------------------------------------------
BEVERAGES 65,000 PepsiCo Inc.......................... 2,507,436 2,965,625 0.5
------------------------------------------------------------------------------------------------------------------------
CHEMICALS 40,000 Dow Chemical Co...................... 2,928,388 2,875,000 0.5
254,100 Eastman Chemical Co.................. 13,175,021 15,118,950 2.7
8,000 Engelhard Corp....................... 324,480 343,000 0.1
------------- ------------- ----------
16,427,889 18,336,950 3.3
------------------------------------------------------------------------------------------------------------------------
COMMUNICATION
EQUIPMENT 300,200 + ADC Telecommunications, Inc.......... 6,673,063 10,657,100 1.9
325,000 + DSC Communications Corp.............. 8,197,339 15,112,500 2.7
160,000 + Tellabs, Inc......................... 4,128,649 7,680,000 1.4
------------- ------------- ----------
18,999,051 33,449,600 6.0
------------------------------------------------------------------------------------------------------------------------
COMPUTER EQUIPMENT 130,000 + Solectron Corp....................... 3,436,348 4,436,250 0.8
------------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 305,000 Computer Sciences Corp............... 10,663,719 17,346,875 3.1
325,000 General Motors Corp. (Class E)....... 13,426,121 14,137,500 2.6
------------- ------------- ----------
24,089,840 31,484,375 5.7
------------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE/ 200,000 + Novell, Inc.......................... 4,224,585 3,975,000 0.7
SERVICES
------------------------------------------------------------------------------------------------------------------------
COMPUTERS 180,000 + Compaq Computer Corp................. 7,185,508 8,167,500 1.5
135,000 International Business Machines
Corp............................... 12,501,503 12,960,000 2.3
------------- ------------- ----------
19,687,011 21,127,500 3.8
------------------------------------------------------------------------------------------------------------------------
CONSUMER SERVICES 135,000 Block (H & R), Inc................... 5,570,150 5,551,875 1.0
------------------------------------------------------------------------------------------------------------------------
DRUG STORES 100,000 + Revco D.S., Inc...................... 1,949,530 2,400,000 0.4
------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 240,000 General Electric Co. PLC............. 13,333,949 13,530,000 2.4
185,000 Grainger (W.W.), Inc................. 11,200,707 10,868,750 2.0
------------- ------------- ----------
24,534,656 24,398,750 4.4
------------------------------------------------------------------------------------------------------------------------
ENERGY RELATED 183,300 + California Energy Co., Inc........... 3,388,199 3,001,538 0.5
------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL CONTROL 800,000 Wheelabrator Technologies, Inc....... 13,684,829 12,300,000 2.2
------------------------------------------------------------------------------------------------------------------------
FOODS 250,000 General Mills, Inc................... 12,364,131 12,843,750 2.3
------------------------------------------------------------------------------------------------------------------------
FOREIGN--AUSTRALIA 260,000 News Corp., Ltd. (Preferred) (ADR)
(a) (8)............................ 3,920,153 5,200,000 0.9
------------------------------------------------------------------------------------------------------------------------
FOREIGN--CANADA 180,000 NOVA Corp. of Alberta (2)............ 1,891,620 1,530,000 0.3
------------------------------------------------------------------------------------------------------------------------
FOREIGN--CHILE 48,800 + Banco O'Higgins (Sponsored) (ADR) (a)
(9)................................ 750,822 1,122,400 0.2
------------------------------------------------------------------------------------------------------------------------
FOREIGN--DENMARK 65,000 Tele Danmark A/S (ADR) (a) (7)....... 1,577,685 1,820,000 0.3
------------------------------------------------------------------------------------------------------------------------
FOREIGN--JAPAN 525,000 Danka Business Systems PLC (ADR) (a)
(10)............................... 9,528,979 12,665,625 2.3
------------------------------------------------------------------------------------------------------------------------
</TABLE>
72
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--QUALITY EQUITY FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS & WARRANTS COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FOREIGN--NETHERLANDS 70,000 Royal Dutch Petroleum Co. N.V. (ADR)
(a) (11)........................... $ 7,402,510 $ 8,531,250 1.5%
------------------------------------------------------------------------------------------------------------------------
FOREIGN--PORTUGAL 360,000 Espirito Santo Financial Holdings
S.A. (ADR) (a) (9)................. 4,978,435 4,185,000 0.8
------------------------------------------------------------------------------------------------------------------------
HEALTHCARE 360,000 + Humana Inc........................... 7,584,594 6,345,000 1.1
325,000 + Physician Corp....................... 7,047,329 4,387,500 0.8
------------- ------------- ----------
14,631,923 10,732,500 1.9
------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS 135,000 Procter & Gamble Co.................. 7,868,635 9,703,125 1.8
------------------------------------------------------------------------------------------------------------------------
INSURANCE 195,000 Aetna Life & Casualty Co............. 11,219,431 12,260,625 2.2
165,000 American International Group, Inc.... 17,231,442 18,810,000 3.4
177,100 ITT Corp............................. 15,140,615 20,809,250 3.8
100,000 National Re Corp..................... 2,890,779 3,350,000 0.6
------------- ------------- ----------
46,482,267 55,229,875 10.0
------------------------------------------------------------------------------------------------------------------------
MACHINE--DIVERSIFIED 95,500 York International Corp.............. 4,120,391 4,297,500 0.8
------------------------------------------------------------------------------------------------------------------------
OIL--INTEGRATED 175,000 Chevron Corp......................... 8,497,485 8,159,375 1.5
165,000 Mobil Corp........................... 12,823,266 15,840,000 2.9
------------- ------------- ----------
21,320,751 23,999,375 4.4
------------------------------------------------------------------------------------------------------------------------
PACKAGING 116,100 Crown Cork & Seal Co., Inc........... 4,867,939 5,819,512 1.1
------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 80,000 American Home Products Corp.......... 5,588,302 6,190,000 1.1
150,000 Merck & Co., Inc..................... 6,005,520 7,350,000 1.3
------------- ------------- ----------
11,593,822 13,540,000 2.4
------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY 220,000 Eastman Kodak Co..................... 11,217,476 13,337,500 2.4
------------------------------------------------------------------------------------------------------------------------
RESTAURANTS/
FOOD SERVICE 250,000 + Darden Restaurants Inc............... 2,671,720 2,718,750 0.5
------------------------------------------------------------------------------------------------------------------------
RETAIL SPECIALTY 80,000 + Michaels Stores, Inc................. 2,504,541 1,700,000 0.3
140,000 + Toys 'R' Us, Inc..................... 3,814,325 4,095,000 0.7
------------- ------------- ----------
6,318,866 5,795,000 1.0
------------------------------------------------------------------------------------------------------------------------
RETAIL STORES 110,000 Sears, Roebuck & Co.................. 5,935,647 6,586,250 1.2
------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS 119,000 INTEL Corp........................... 4,790,367 7,526,750 1.4
120,000 Texas Instruments, Inc............... 14,026,232 16,065,000 2.9
------------- ------------- ----------
18,816,599 23,591,750 4.3
------------------------------------------------------------------------------------------------------------------------
UTILITIES--
COMMUNICATIONS 142,500 + ALC Communications Corp.............. 4,780,787 6,430,312 1.2
225,000 GTE Corp............................. 7,244,191 7,678,125 1.4
200,000 MCI Communications Corp.............. 5,204,954 4,375,000 0.8
180,000 Southwestern Bell Capital Corp....... 7,664,078 8,572,500 1.5
440,000 + WorldCom, Inc........................ 9,517,874 11,825,000 2.1
------------- ------------- ----------
34,411,884 38,880,937 7.0
------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS & WARRANTS 444,831,393 503,107,337 90.6
------------------------------------------------------------------------------------------------------------------------
FACE AMOUNT SHORT-TERM SECURITIES
------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER* $ 15,000,000 ABN AMRO North America Finance,
Inc., 5.94% due 7/14/1995......... 14,965,350 14,965,350 2.7
23,605,000 Associates Corp. of North America,
6.20% due 7/03/1995............... 23,592,804 23,592,804 4.3
10,000,000 Daimler-Benz North American Corp.,
5.94% due 7/17/1995............... 9,971,950 9,971,950 1.8
------------- ------------- ----------
48,530,104 48,530,104 8.8
------------------------------------------------------------------------------------------------------------------------
</TABLE>
73
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--QUALITY EQUITY FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FACE VALUE PERCENT OF
AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
US GOVERNMENT & $ 15,000,000 Federal Home Loan Bank, 5.86% due
AGENCY OBLIGATIONS* 7/14/1995......................... $ 14,965,817 $ 14,965,817 2.7%
------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 63,495,921 63,495,921 11.5
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS...................................... $ 508,327,314 566,603,258 102.1
-------------
-------------
LIABILITIES IN EXCESS OF OTHER ASSETS.................. (11,751,417) (2.1)
------------- ----------
NET ASSETS............................................. $ 554,851,841 100.0%
------------- ----------
------------- ----------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(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 & 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.
+ Non-income producing security.
</TABLE>
Corresponding industry groups for foreign securities:
<TABLE>
<S> <C> <C> <C>
(1) Business Services (7) Telecommunications
(2) Chemicals (8) Media-Publishing
(3) Financial Services (9) Banking
(4) Food-Processing (10) Office Equipment
(5) Multi-Industry (11) Oil Integrated
(6) Petroleum
</TABLE>
See Notes to Financial Statements.
74
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--RESERVE ASSETS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
FACE INTEREST MATURITY VALUE
AMOUNT ISSUE RATE* DATE (NOTE 1A)
------------------------------------------------------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT-- $ 500,000 Abbey National PLC............................... 6.54 % 4/09/96 $ 502,473
EUROPEAN--1.7%
------------------------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATE OF DEPOSIT/EUROPEAN (COST--$500,037) 502,473
------------------------------------------------------------------------------------------------------------------------
COMMERCIAL
PAPER--49.7% 518,000 Asset Securitization Cooperative................. 5.90 7/14/95 516,811
222,000 Deer Park Refining L.P........................... 5.95 7/05/95 221,817
965,000 Deer Park Refining L.P........................... 6.00 7/14/95 962,748
354,000 ESC Securitization Inc........................... 5.97 7/14/95 353,178
1,400,000 Falcon Asset Securitization Corp................. 5.93 8/17/95 1,388,931
900,000 General Electric Capital Corp.................... 6.38 8/03/95 894,985
400,000 Goldman Sachs Group L.P.......................... 5.92 8/14/95 397,080
1,400,000 National Fleet Funding Corp...................... 6.00 7/13/95 1,396,967
500,000 New Center Asset Trust........................... 6.20 7/19/95 498,425
707,000 New Center Asset Trust........................... 5.98 8/03/95 703,060
1,198,000 PepsiCo, Inc..................................... 6.00 7/07/95 1,196,602
982,000 Premium Funding, Inc............................. 6.00 7/07/95 980,854
1,400,000 Riverwood Funding Corp........................... 5.98 7/03/95 1,399,297
1,300,000 Sheffield Receivables Corp....................... 5.98 7/14/95 1,296,977
1,000,000 Svenska Handelsbanken, Inc....................... 5.85 9/20/95 986,561
462,000 Windmill Funding Corp............................ 5.97 7/06/95 461,540
1,000,000 Windmill Funding Corp............................ 5.97 7/17/95 997,181
------------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (COST--$14,652,572) 14,653,014
------------------------------------------------------------------------------------------------------------------------
CORPORATE NOTES--1.1% 325,000 SMM Trust+....................................... 6.082 6/14/96 325,000
------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE NOTES (COST--$325,000) 325,000
------------------------------------------------------------------------------------------------------------------------
MASTER NOTES--3.4% 1,000,000 Goldman Sachs Group, L.P.+....................... 6.09 2/14/96 1,000,000
------------------------------------------------------------------------------------------------------------------------
TOTAL MASTER NOTES (COST--$1,000,000) 1,000,000
------------------------------------------------------------------------------------------------------------------------
MEDIUM-TERM 500,000 Federal National Mortgage Association............ 6.46 3/27/96 501,500
NOTES--1.7%
------------------------------------------------------------------------------------------------------------------------
TOTAL MEDIUM-TERM NOTES (COST--$500,230) 501,500
------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT, AGENCY
& INSTRUMENTALITY 190,000 Federal Home Loan Bank........................... 6.00 9/20/95 187,503
OBLIGATIONS-- 290,000 Federal Home Loan Bank........................... 6.13 10/24/95 284,627
DISCOUNT--16.3% 120,000 Federal Home Loan Bank........................... 6.12 10/31/95 117,642
1,000,000 Federal Home Loan Bank........................... 5.84 11/06/95 979,611
710,000 Federal Home Loan Bank........................... 6.30 11/08/95 695,299
215,000 Federal Home Loan Bank........................... 6.10 12/18/95 209,261
130,000 Federal Home Loan Bank........................... 6.18 3/07/96 124,970
363,000 Federal Home Loan Mortgage Corp.................. 6.44 2/09/96 350,419
255,000 Federal National Mortgage Association............ 6.14 11/03/95 249,922
100,000 Federal National Mortgage Association............ 6.09 11/13/95 97,850
275,000 International Bank for Reconstruction............ 5.78 12/04/95 268,260
300,000 US Treasury Bills................................ 6.815 1/11/96 291,193
500,000 US Treasury Bills................................ 6.59 2/08/96 483,151
500,000 US Treasury Bills................................ 6.605 2/08/96 483,151
------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT, AGENCY & INSTRUMENTALITY
OBLIGATIONS--DISCOUNT (COST--$4,806,930) 4,822,859
------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT, AGENCY
& INSTRUMENTALITY 500,000 Federal Home Loan Bank+.......................... 6.43 12/28/95 500,000
OBLIGATIONS-- 500,000 Federal Home Loan Mortgage Corp.+................ 6.84 2/28/96 503,000
NON-DISCOUNT--22.5% 1,000,000 Federal National Mortgage Association+........... 6.33 5/13/96 1,000,000
1,000,000 Federal National Mortgage Association+........... 5.592 10/11/96 1,000,000
1,000,000 Federal National Mortgage Association+........... 6.45 5/19/97 1,000,000
1,000,000 Federal National Mortgage Association+........... 6.50 5/14/98 1,000,000
450,000 Student Loan Marketing Association+.............. 5.86 3/20/96 450,000
100,000 Student Loan Marketing Association+.............. 5.73 4/16/96 100,052
400,000 US Treasury Notes................................ 3.875 8/31/95 398,625
200,000 US Treasury Notes................................ 6.125 5/31/97 200,875
500,000 US Treasury Notes................................ 5.625 6/30/97 497,968
------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT, AGENCY & INSTRUMENTALITY
OBLIGATIONS--NON-DISCOUNT (COST--$6,652,707) 6,650,520
------------------------------------------------------------------------------------------------------------------------
</TABLE>
75
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--RESERVE ASSETS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
FACE VALUE
AMOUNT ISSUE (NOTE 1A)
------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS
------------------------------------------------------------------------------------------------------------------------
REPURCHASE $1,015,000 Lehman Goverment Securities, purchased on 6/30/95
AGREEMENTS**--3.4% to yield 6.25% to 7/03/95........................ $ 1,015,000
------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST--$1,015,000) 1,015,000
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST--$29,452,476)--99.8%........................... 29,470,366
OTHER ASSETS LESS LIABILITIES--0.2%.................................... 53,245
NET ASSETS--100.0%..................................................... $29,523,611
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Commercial Paper and certain US Government, Agency & Instrumentality 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
rate 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 June 30,
1995.
** Repurchase Agreements are fully collateralized by US Government Obligations.
+ Variable Rate Note.
</TABLE>
See Notes to Financial Statements.
76
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VALUE PERCENT OF
AFRICA INDUSTRY FACE AMOUNT FIXED-INCOME INVESTMENTS COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA FOREIGN GOVERNMENT US $ 500,000 Republic of South Africa,
OBLIGATIONS 9.625% due 12/15/1999... $ 498,425 $ 518,750 0.7%
TOTAL FIXED-INCOME
INVESTMENTS IN AFRICA 498,425 518,750 0.7
------------------------------------------------------------------------------------------------------------------------
LATIN AMERICA
AND THE CARIBBEAN
------------------------------------------------------------------------------------------------------------------------
ARGENTINA TELECOMMUNICATIONS 500,000 Telefonica de Argentina,
S.A., 11.875%
due11/01/2004........... 490,040 482,500 0.6
TOTAL FIXED-INCOME
INVESTMENTS IN ARGENTINA 490,040 482,500 0.6
------------------------------------------------------------------------------------------------------------------------
BRAZIL BUILDING MATERIALS 500,000 Unibank N.V., 10.25% due
6/12/1997............... 498,750 498,080 0.6
TOTAL FIXED-INCOME
INVESTMENTS IN BRAZIL 498,750 498,080 0.6
------------------------------------------------------------------------------------------------------------------------
MEXICO ENERGY 500,000 Petroleos Mexicanos, 8.25%
due 2/04/1998........... 521,875 462,500 0.6
TOTAL FIXED-INCOME
INVESTMENTS IN MEXICO 521,875 462,500 0.6
------------------------------------------------------------------------------------------------------------------------
TRINIDAD & FOREIGN GOVERNMENT 350,000 Republic of Trinidad &
TOBAGO OBLIGATIONS Tobago, 11.50% due
11/20/1997.............. 368,500 363,125 0.5
TOTAL FIXED-INCOME
INVESTMENTS IN TRINIDAD &
TOBAGO 368,500 363,125 0.5
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
LATIN AMERICAN AND
CARIBBEAN SECURITIES 1,879,165 1,806,205 2.3
------------------------------------------------------------------------------------------------------------------------
NORTH AMERICA
------------------------------------------------------------------------------------------------------------------------
CANADA FOREIGN GOVERNMENT
OBLIGATIONS C $ 1,005,000 Canadian Government Bond,
7.75% due 9/01/1999..... 711,951 739,440 1.0
TOTAL FIXED-INCOME
INVESTMENTS IN CANADA 711,951 739,440 1.0
------------------------------------------------------------------------------------------------------------------------
UNITED STATES AIR TRANSPORT US $ 250,000 Delta Air Lines, Inc.,
9.30% due 1/02/2010..... 246,925 278,499 0.4
500,000 USAir Inc., 10.375% due
3/01/2013............... 504,688 475,000 0.6
500,000 United Air Lines, Inc.,
10.02% due 3/22/2014.... 506,250 553,095 0.7
100,000 United Air Pass-Through,
10.125% due 3/22/2015... 109,036 111,475 0.1
----------- ----------- ----------
1,366,899 1,418,069 1.8
BROADCASTING & 250,000 Continental Cablevision
PUBLISHING Inc., 9.50% due
8/01/2013............... 250,000 257,500 0.3
500,000 SCI Television Inc.,
11.00% due 6/30/2005.... 520,625 522,500 0.7
----------- ----------- ----------
770,625 780,000 1.0
BUILDING MATERIALS 250,000 Inter-City Products Corp.,
9.75% due 3/01/2000..... 242,500 215,000 0.3
500,000 Pacific Lumber Co., 10.50%
due 3/01/2003........... 492,000 458,750 0.6
----------- ----------- ----------
734,500 673,750 0.9
CELLULAR TELEPHONES 1,060,000 Dial Page, Inc., 12.25%
& PAGING due 2/15/2000........... 1,090,150 1,091,800 1.4
1,000,000 Rogers Communications,
Inc., 10.875% due
4/15/2004............... 1,007,500 1,025,000 1.3
----------- ----------- ----------
2,097,650 2,116,800 2.7
</TABLE>
77
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NORTH AMERICA VALUE PERCENT OF
(CONTINUED) INDUSTRY FACE AMOUNT FIXED-INCOME INVESTMENTS COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UNITED STATES CHEMICALS US $ 500,000 Envirodyne Industries
(CONTINUED) Inc., 10.25% due
12/01/2001.............. $ 509,375 $ 397,500 0.5%
1,225,000 G-I Holdings, Inc.,
12.86%* due
10/01/1998.............. 838,637 820,750 1.1
----------- ----------- ----------
1,348,012 1,218,250 1.6
COMMUNICATIONS 940,000 + American Telecasting Inc.,
13.22%* due 6/15/2004... 560,315 554,600 0.7
1,375,000 Panamsat L.P., 11.35%* due
8/01/2003............... 932,074 983,125 1.3
----------- ----------- ----------
1,492,389 1,537,725 2.0
CONGLOMERATES Coltec Industries Inc.:
150,000 9.75% due 11/01/1999...... 159,000 155,250 0.2
100,000 10.25% due 4/01/2002...... 107,000 103,500 0.1
Foamex L.P.:
191,000 9.50% due 6/01/2000....... 186,464 188,135 0.2
500,000 11.25% due 10/01/2002..... 498,125 492,500 0.6
500,000 JB Poindexter Co., Inc.,
12.50% due 5/15/2004.... 500,000 490,000 0.6
500,000 Jordan Industries, Inc.,
10.375% due 8/01/2003... 495,688 461,250 0.6
500,000 Sequa Corp., 9.375% due
12/15/2003.............. 508,750 467,500 0.6
500,000 Sherritt Gordon, Ltd.,
9.75% due 4/01/2003..... 503,625 485,000 0.6
----------- ----------- ----------
2,958,652 2,843,135 3.5
CONSUMER 500,000 Coleman Holdings, Inc.,
PRODUCTS 11.02%* due 5/27/1998... 365,296 367,500 0.5
1,000,000 + Polymer Group Inc., 12.75%
due 7/15/2002........... 1,001,250 1,010,000 1.3
1,000,000 Revlon Consumer Products
Corp., 9.375% due
4/01/2001............... 871,088 965,000 1.2
----------- ----------- ----------
2,237,634 2,342,500 3.0
CONTAINERS 500,000 Anchor Glass Container
Co., 9.875% due
12/15/2008.............. 493,125 460,000 0.6
500,000 Owens-Illinois, Inc.,
11.00% due 12/01/2003... 512,500 548,750 0.7
----------- ----------- ----------
1,005,625 1,008,750 1.3
ENERGY 2,000,000 Clark R & M Holdings,
Inc., 10.52%* due
12/15/2000.............. 1,201,662 1,250,000 1.6
250,000 + Consolidated-Hydro Inc.,
12.55%* due 7/15/2003... 176,473 170,000 0.2
500,000 TransTexas Gas Corp.,
11.50% due 6/15/2002.... 500,000 510,000 0.7
500,000 Triton Energy Corp.,
9.11%* due 11/01/1997... 396,332 407,500 0.5
----------- ----------- ----------
2,274,467 2,337,500 3.0
ENTERTAINMENT 500,000 Marvel Holdings, Inc.,
9.125% due 2/15/1998.... 448,000 462,500 0.6
350,000 Spectravision Inc.,
11.50%* due
10/01/2001.............. 303,557 80,500 0.1
1,000,000 Videotron Holdings PLC,
11.05%* due 7/01/2004... 616,617 655,000 0.8
----------- ----------- ----------
1,368,174 1,198,000 1.5
FINANCIAL SERVICES 500,000 Penn Financial Corp.,
9.25% due 12/15/2003.... 498,750 485,000 0.6
500,000 Reliance Group Holdings,
Inc., 9.00% due
11/15/2000.............. 460,000 491,250 0.6
----------- ----------- ----------
958,750 976,250 1.2
</TABLE>
78
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NORTH AMERICA VALUE PERCENT OF
(CONTINUED) INDUSTRY FACE AMOUNT FIXED-INCOME INVESTMENTS COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UNITED STATES FOOD & BEVERAGE US $ 500,000 Chiquita Brands
(CONTINUED) International Corp.,
9.125% due 3/01/2004.... $ 497,500 $ 485,000 0.6%
250,000 Coca-Cola Bottling Co.,
9.00% due 11/15/2003.... 250,625 246,250 0.3
500,000 Cumberland Farms, 10.50%
due 10/01/2003.......... 489,375 422,500 0.6
750,000 Del Monte Corp., 10.00%
due 5/01/2003........... 740,000 615,000 0.8
250,000 Specialty Foods Corp.,
10.25% due 8/15/2001.... 250,000 240,000 0.3
----------- ----------- ----------
2,227,500 2,008,750 2.6
HOME BUILDING 500,000 Del E. Webb Corp., 9.00%
due 2/15/2006........... 500,000 447,500 0.6
HOTELS & CASINOS 1,000,000 Bally's Park Place
Funding, Inc., 9.25% due
3/15/2004............... 920,000 940,000 1.2
1,100,000 Greate Bay Properties,
Inc., Property Funding
Corp., 10.875% due
1/15/2004............... 990,750 935,000 1.2
1,000,000 John Q. Hammons Hotel,
8.875% due 2/15/2004.... 887,500 970,000 1.3
500,000 Showboat, Inc., 13.00% due
8/01/2009............... 500,000 515,000 0.7
750,000 Trump Plaza Funding, Inc.,
10.875% due 6/15/2001... 741,250 686,250 0.9
103,633 Trump Taj Mahal Funding,
Inc., 11.35% due
11/15/1999 (a) (c)...... 97,547 80,627 0.1
----------- ----------- ----------
4,137,047 4,126,877 5.4
INDUSTRIAL SERVICES 1,050,000 ADT Operations, 9.25% due
8/01/2003............... 1,041,062 1,084,125 1.4
INDUSTRIALS 500,000 HMH Properties, Inc.,
9.50% due 5/15/2005..... 481,791 485,000 0.6
500,000 Tultex Corp., 10.625% due
3/15/2005............... 500,000 510,000 0.7
----------- ----------- ----------
981,791 995,000 1.3
METALS & MINING 250,000 Maxxam Group, Inc.,
14.04%* due 8/01/2003... 173,171 155,000 0.2
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PAPER 500,000 S.D. Warren Co., 12.00%
due 12/15/2004.......... 500,000 538,750 0.7
PAPER & FOREST 500,000 Fort Howard Corp., 9.00%
PRODUCTS due 2/01/2006........... 500,000 455,000 0.6
250,000 Riverwood International
Corp., 11.25% due
6/15/2002............... 274,812 272,500 0.4
100,000 Stone Container Group,
10.75% due 10/01/2002... 99,000 104,750 0.1
----------- ----------- ----------
873,812 832,250 1.1
POLLUTION CONTROL 500,000 Mid-American Waste System,
Inc., 12.25% due
2/15/2003............... 511,250 515,000 0.7
</TABLE>
79
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NORTH AMERICA VALUE PERCENT OF
(CONCLUDED) INDUSTRY FACE AMOUNT FIXED-INCOME INVESTMENTS COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UNITED STATES RESTAURANTS & FOOD US $ 750,000 Flagstar Corp., 11.375%
(CONCLUDED) SERVICES due 9/15/2003........... $ 762,500 $ 588,750 0.8%
250,000 Foodmaker, Inc., 9.75% due
11/01/2003.............. 246,562 207,500 0.3
----------- ----------- ----------
1,009,062 796,250 1.1
RETAIL 500,000 Bradlees Inc., 11.00% due
8/01/2002............... 489,375 155,000 0.2
STEEL 500,000 WCI Steel, Inc., 10.50%
due 3/01/2002........... 500,000 490,000 0.6
TELECOMMUNICATIONS 500,000 USA Mobile Communications
Holdings, Inc., 9.50%
due 2/01/2004........... 454,375 440,000 0.6
TEXTILES 1,500,000 WestPoint Stevens Inc.,
9.375% due 12/15/2005... 1,451,875 1,443,750 1.9
TRANSPORT SERVICES 250,000 Eletson Holdings Inc.,
9.25% due 11/15/2003.... 250,000 243,125 0.3
1,050,000 Transtar Holdings L.P.,
12.52%* due 12/15/2003.. 666,909 630,000 0.8
250,000 Viking Star Shipping Co.,
9.625% due 7/15/2003.... 250,937 249,375 0.3
----------- ----------- ----------
1,167,846 1,122,500 1.4
UTILITIES 494,000 Beaver Valley Funding
Corp., 9.00% due
6/01/2017............... 466,212 414,960 0.5
91,622 + Midland Funding Corp. II,
10.33% due 7/23/2002.... 89,789 93,996 0.1
233,382 + Tucson Electric Power Co.,
10.732% due 1/01/2013... 223,464 225,072 0.3
----------- ----------- ----------
779,465 734,028 0.9
TOTAL FIXED-INCOME
INVESTMENTS IN THE
UNITED STATES 35,411,008 34,335,509 44.2
------------------------------------------------------------------------------------------------------------------------
SHARES
HELD STOCKS & WARRANTS
------------------------------------------------------------------------------------------------------------------------
UNITED STATES BROADCASTING & 9,000 K-III Communications Corp.
PUBLISHING (Non-Convertible
Preferred).............. 245,250 234,000 0.3
COMMUNICATIONS 4,700 American Telecasting Inc.
(Warrants) (b).......... 11,222 14,100 0.0
FOOD & BEVERAGE 17,674 Grand Union Co. (Common).. 917,437 247,436 0.3
TOTAL STOCKS & WARRANTS IN
THE UNITED STATES 1,173,909 495,536 0.6
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
NORTH AMERICAN
SECURITIES 37,296,868 35,570,485 45.8
------------------------------------------------------------------------------------------------------------------------
</TABLE>
80
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PACIFIC VALUE PERCENT OF
BASIN INDUSTRY FACE AMOUNT FIXED-INCOME INVESTMENTS COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AUSTRALIA FOREIGN GOVERNMENT
OBLIGATIONS-- A$ 3,500,000 Australian Government
REGIONAL & AGENCY Bond, 12.00% due
11/15/2001.............. $ 2,822,226 $ 2,860,878 3.7%
2,000,000 Western Australia Treasury
Corp., 12.00% due
8/01/2001............... 1,618,668 1,613,971 2.1
----------- ----------- ----------
4,440,894 4,474,849 5.8
TOTAL FIXED-INCOME
INVESTMENTS IN AUSTRALIA 4,440,894 4,474,849 5.8
------------------------------------------------------------------------------------------------------------------------
NEW ZEALAND FOREIGN GOVERNMENT NZ$ 500,000 New Zealand Government
OBLIGATIONS Bond, 10.00% due
3/15/2002............... 315,976 372,531 0.4
TOTAL FIXED-INCOME
INVESTMENTS IN
NEW ZEALAND 315,976 372,531 0.4
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
PACIFIC BASIN SECURITIES 4,756,870 4,847,380 6.2
------------------------------------------------------------------------------------------------------------------------
WESTERN EUROPE
------------------------------------------------------------------------------------------------------------------------
DENMARK FOREIGN GOVERNMENT Dkr 25,500,000 Denmark Government Bond,
OBLIGATIONS 9.00% due 11/15/2000.... 4,549,447 4,893,052 6.3
TOTAL FIXED-INCOME
INVESTMENTS IN DENMARK 4,549,447 4,893,052 6.3
------------------------------------------------------------------------------------------------------------------------
ITALY FOREIGN GOVERNMENT Buoni Poliennali del
OBLIGATIONS Tesoro (Italian
Government Bonds):
Lit 1,000,000,000 12.00% due 9/18/1998...... 657,255 611,858 0.8
1,600,000,000 9.00% due 10/01/1998...... 968,720 906,699 1.2
5,000,000,000 8.50% due 1/01/1999....... 2,884,655 2,763,753 3.6
2,600,000,000 Credit Local de France
S.A., 12.20% due
6/12/1996............... 1,627,204 1,590,513 2.0
----------- ----------- ----------
6,137,834 5,872,823 7.6
TOTAL FIXED-INCOME
INVESTMENTS IN ITALY 6,137,834 5,872,823 7.6
------------------------------------------------------------------------------------------------------------------------
SPAIN FOREIGN GOVERNMENT Government of Spain:
OBLIGATIONS Pta 200,000,000 11.00% due 6/15/1997.... 1,556,019 1,648,370 2.1
332,000,000 11.45% due 8/30/1998...... 2,650,476 2,736,294 3.5
190,000,000 10.25% due 11/30/1998..... 1,435,849 1,513,413 2.0
----------- ----------- ----------
5,642,344 5,898,077 7.6
TOTAL FIXED-INCOME
INVESTMENTS IN SPAIN 5,642,344 5,898,077 7.6
------------------------------------------------------------------------------------------------------------------------
Skr 8,000,000 Government of Sweden,
SWEDEN FOREIGN GOVERNMENT 11.00% due 1/21/1999.... 1,103,799 1,110,371 1.4
OBLIGATIONS--
REGIONAL & AGENCY
TOTAL FIXED-INCOME
INVESTMENTS IN SWEDEN 1,103,799 1,110,371 1.4
------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM FOREIGN GOVERNMENT Pound 3,000,000 United Kingdom Gilt, 9.00%
OBLIGATIONS Sterling due 3/03/2000........... 4,792,681 4,917,627 6.3
TOTAL FIXED-INCOME
INVESTMENTS IN THE
UNITED KINGDOM 4,792,681 4,917,627 6.3
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
WESTERN EUROPEAN
SECURITIES 22,226,105 22,691,950 29.2
------------------------------------------------------------------------------------------------------------------------
</TABLE>
81
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VALUE PERCENT OF
FACE AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMMERCIAL PAPER** $ 3,587,000 General Electric Capital
Corp., 6.20% due
7/03/1995.............. $ 3,585,764 $ 3,585,764 4.6%
2,500,000 PACCAR Financial Corp.,
5.95% due 7/10/1995.... 2,496,281 2,496,281 3.2
----------- ----------- ----------
6,082,045 6,082,045 7.8
US GOVERNMENT
& AGENCY 4,000,000 Federal National Mortgage
OBLIGATIONS** Association, 5.88% due
7/05/1995.............. 3,997,387 3,997,387 5.1
350,000 US Treasury Bills, 5.781%
due 9/07/1995.......... 346,298 346,357 0.5
----------- ----------- ----------
4,343,685 4,343,744 5.6
TOTAL INVESTMENTS IN
SHORT-TERM SECURITIES 10,425,730 10,425,789 13.4
------------------------------------------------------------------------------------------------------------------------
PREMIUMS
OPTIONS PURCHASED ISSUE PAID
------------------------------------------------------------------------------------------------------------------------
CURRENCY CALL 1,000,000 German
OPTIONS PURCHASED Deutschemark/Italian
Lira expiring July 1995
at DM/Lit 1200......... 9,353 1,229 0.0
------------------------------------------------------------------------------------------------------------------------
TOTAL OPTIONS PURCHASED 9,353 1,229 0.0
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS 77,092,516 75,861,788 97.6
------------------------------------------------------------------------------------------------------------------------
PREMIUMS
RECEIVED
OPTIONS WRITTEN
------------------------------------------------------------------------------------------------------------------------
CURRENCY CALL 5,000,000 German Deutschemark,
OPTIONS WRITTEN expiring September 1995
at DM 1251............. (26,515) (37,240) 0.0
------------------------------------------------------------------------------------------------------------------------
CURRENCY PUT 1,000,000 German
OPTIONS WRITTEN Deutschemark/Italian
Lira expiring July 1995
at DM/Lit 1150......... (9,353) (1,663) 0.0
5,000,000 German Deutschemark,
expiring September 1995
at DM 1158............. (43,650) (41,575) (0.1)
----------- ----------- ----------
(53,003) (43,238) (0.1)
------------------------------------------------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN (79,518) (80,478) (0.1)
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, NET OF OPTIONS WRITTEN............................ $77,012,998 75,781,310 97.5
-----------
-----------
VARIATION MARGIN ON FINANCIAL FUTURES CONTRACTS***................... 16,116 0.0
UNREALIZED APPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS****.... 27,780 0.1
OTHER ASSETS LESS LIABILITIES........................................ 1,878,462 2.4
----------- ----------
NET ASSETS........................................................... $77,703,668 100.0%
----------- ----------
----------- ----------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(a) Each $1,000 face amount contains one non-detachable share of Taj Mahal Holding Corp.'s Class B redeemable Common
Stock.
(b) Warrants entitle the Fund to puchase 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.
(c) Represents a pay-in-kind security which may pay interest/dividends in additional face/shares.
* Represents a zero coupon or step bond; the interest rate shown is the effective yield at the time of purchase.
** 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.
</TABLE>
82
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1995 (CONCLUDED) (IN US DOLLARS)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
*** Financial futures contracts sold as of June 30, 1995 were as follows:
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
NUMBER OF EXPIRATION VALUE
CONTRACTS ISSUE EXCHANGE DATE (NOTE 1C)
------------------------------------------------------------------------------------------------------------------------
27 Buoni Poliennali del Tesoro............................ LIFFE September 1995 $(3,235,049)
------------------------------------------------------------------------------------------------------------------------
TOTAL FUTURES CONTRACTS SOLD
(TOTAL CONTRACT PRICE--$3,337,042) $(3,235,049)
-----------
-----------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
The market value of pledged securities is $346,357.
****Forward foreign exchange contracts as of June 30, 1995 were as follows:
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
UNREALIZED APPRECIATION
EXPIRATION (DEPRECIATION)
FOREIGN CURRENCY PURCHASED DATE (NOTE 1B)
------------------------------------------------------------------------------------------------------------------------
DM 2,819,077 ...................................................... July 1995 $ 38,730
Lit 1,169,910,000 ...................................................... July 1995 305
------------------------------------------------------------------------------------------------------------------------
(TOTAL US$ COMMITMENT--$2,714,510) $ 39,035
------------
------------------------------------------------------------------------------------------------------------------------
FOREIGN CURRENCY SOLD
------------------------------------------------------------------------------------------------------------------------
A$ 2,798,094 ...................................................... July 1995 $ 24,198
DM 2,294,825 ...................................................... July 1995 (20,774)
Pta 65,070,400 ...................................................... July 1995 (12,927)
Lit 4,965,184,303 ...................................................... July 1995 (1,752)
------------------------------------------------------------------------------------------------------------------------
(TOTAL US$ COMMITMENT--$7,196,949) $ (11,255)
------------
------------------------------------------------------------------------------------------------------------------------
TOTAL UNREALIZED APPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS--NET $ 27,780
------------
------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
+Restricted securities as to resale. The value of the Fund's investment in
restricted securities was approximately $2,054,000, representing 2.64% of net
assets.
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
ACQUISITION VALUE
ISSUE DATES COST (NOTE 1A)
------------------------------------------------------------------------------------------------------------------------
American Telecasting Inc., 13.22% due 6/15/2004.............................. 10/25/1994 $ 560,315 $ 554,600
Consolidated-Hydro Inc., 12.55% due 7/15/2003................................ 7/01/1993 176,473 170,000
Midland Funding Corp. II, 10.33% due 7/23/2002............................... 9/17/1993-
6/17/1994 89,789 93,996
Polymer Group Inc., 12.75% due 7/15/2002..................................... 7/07/1994 1,001,250 1,010,000
Tucson Electric Power Co., 10.732% due 1/01/2013............................. 8/03/1993 223,464 225,072
------------------------------------------------------------------------------------------------------------------------
$ 2,051,291 $2,053,668
TOTAL
----------- ----------
----------- ----------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
83
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES AS OF JUNE 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
BASIC DEVELOPING DOMESTIC
AMERICAN VALUE CAPITAL MONEY
BALANCED FOCUS MARKETS MARKET
FUND FUND FOCUS FUND FUND
------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value*
(Note 1a)................................................... $192,838,019 $240,676,199 $ 42,352,854 $ 309,860,118
Cash.......................................................... 24,542 -- 6,406 853
Interest receivable........................................... 1,505,626 -- 155,812 1,319,762
Dividends receivable.......................................... 184,739 398,600 36,137 --
Receivable for securities sold................................ -- -- 26,957 --
Receivable for capital shares sold............................ 348,910 1,115,662 177,339 --
Receivable from investment adviser (Note 2)................... -- -- 1,344 --
Deferred organization expenses (Note 1f)...................... -- 2,880 3,467 2,680
Prepaid registration fees and other assets (Note 1f).......... 10,255 7,436 23,726 8,224
------------ ------------ ------------ --------------
Total assets................................................ 194,912,091 242,200,777 42,784,042 311,191,637
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for capital shares redeemed........................... 41,453 -- -- --
Payable for securities purchased.............................. -- 2,130,616 7,266 --
Payable to investment adviser (Note 2)........................ 87,834 115,344 34,274 127,783
Accrued expenses and other liabilities........................ 27,938 272,065 -- 39,871
------------ ------------ ------------ --------------
Total liabilities........................................... 157,225 2,518,025 41,540 167,654
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
NET ASSETS.................................................... $194,754,866 $239,682,752 $ 42,742,502 $ 311,023,983
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par value+................................ $ 1,354,385 $ 1,978,191 $ 466,846 $ 31,083,799
Paid-in capital in excess of par.............................. 179,978,463 213,841,609 46,228,265 279,754,195
Undistributed investment income--net.......................... 3,875,886 1,728,636 671,819 --
Undistributed (accumulated) realized capital gains (losses) on
investments and foreign currency transactions--net (Note
5).......................................................... 92,471 3,075,580 (4,132,697) --
Unrealized appreciation (depreciation) on investments and
foreign
currency transactions--net.................................. 9,453,661 19,058,736 (491,731) 185,989
------------ ------------ ------------ --------------
NET ASSETS.................................................... $194,754,866 $239,682,752 $ 42,742,502 $ 311,023,983
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARES OUTSTANDING.................................... 13,543,849 19,781,909 4,668,459 310,837,994
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE...... $ 14.38 $ 12.12 $ 9.16 $ 1.00
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
* Identified cost............................................. $183,384,358 $221,617,463 $ 42,844,710 $ 309,674,129
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
+ Authorized shares........................................... 100,000,000 100,000,000 100,000,000 1,300,000,000
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
84
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
GLOBAL GLOBAL
FLEXIBLE STRATEGY UTILITY
EQUITY STRATEGY FOCUS FOCUS
GROWTH FUND FUND FUND FUND
------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value* (Note 1a).............................. $242,855,725 $312,070,582 $520,282,898 $ 133,089,920
Cash.......................................................... -- -- 239,187 110,673
Foreign cash (Note 1c)........................................ -- -- 274,159 311
Interest receivable........................................... -- 1,378,607 2,514,098 33,062
Dividends receivable.......................................... 177,859 330,518 1,312,382 445,306
Receivable for securities sold................................ 2,540,000 2,775,059 277,034 --
Receivable for capital shares sold............................ 761,123 225,287 34,586 19,449
Deferred organization expenses (Note 1f)...................... -- -- 2,680 4,139
Prepaid registration fees and other assets (Note 1f).......... 7,984 10,015 8,994 7,649
------------ ------------ ------------ --------------
Total assets................................................ 246,342,691 316,790,068 524,946,018 133,710,509
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Unrealized depreciation on forward foreign exchange contracts
(Note 1b)................................................... -- -- 6,879,120 --
Payable for capital shares redeemed........................... 45,281 139,379 412,379 23,614
Payable for securities purchased.............................. 316,250 10,271,677 -- --
Payable to investment adviser (Note 2)........................ 144,399 161,065 275,301 66,355
Payable for forward foreign exchange contracts (Note 1b)...... -- -- 625,461 --
Accrued expenses and other liabilities........................ 366,795 2,054,562 126,664 56,533
------------ ------------ ------------ --------------
Total liabilities........................................... 872,725 12,626,683 8,318,925 146,502
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
NET ASSETS.................................................... $245,469,966 $304,163,385 $516,627,093 $ 133,564,007
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par value+................................ $ 1,034,609 $ 1,951,181 $ 4,290,428 $ 1,314,901
Paid-in capital in excess of par.............................. 199,711,272 275,351,746 503,806,471 134,534,218
Undistributed investment income--net.......................... 755,728 4,428,354 8,869,457 1,500,326
Undistributed (accumulated) realized capital gains (losses) on
investments and foreign currency transactions--net (Note
5).......................................................... 14,683,506 339,422 (3,847,006) (2,555,225)
Accumulated distributions in excess of realized capital
gains--net.................................................. -- -- (169,671) (33,522)
Unrealized appreciation (depreciation) on investments and
foreign
currency transactions--net.................................. 29,284,851 22,092,682 3,677,414 (1,196,691)
------------ ------------ ------------ --------------
NET ASSETS.................................................... $245,469,966 $304,163,385 $516,627,093 $ 133,564,007
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARES OUTSTANDING.................................... 10,346,088 19,511,810 42,904,275 13,149,010
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE...... $ 23.73 $ 15.59 $ 12.04 $ 10.16
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
* Identified cost............................................. $213,570,874 $290,006,747 $509,751,494 $ 134,287,387
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
+ Authorized shares........................................... 100,000,000 100,000,000 100,000,000 100,000,000
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
85
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
HIGH INTERMEDIATE
CURRENT GOVERNMENT INTERNATIONAL INTERNATIONAL
INCOME BOND BOND EQUITY FOCUS
FUND FUND FUND FUND
------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value* (Note 1a).............................. $311,896,521 $ 28,144,309 $ 10,025,204 $ 223,894,715
Options purchased, at value (cost--$1,173,150) (Notes 1a &
1b)......................................................... -- -- -- 425,614
Cash.......................................................... 22,501 379 903 24,522
Foreign cash (Note 1c)........................................ -- -- 27,319 11,188,404
Interest receivable........................................... 6,245,868 275,895 257,512 301,916
Dividends receivable.......................................... -- -- 204 477,230
Receivable for securities sold................................ -- -- -- 3,228,371
Receivable for capital shares sold............................ 588,692 182,647 32,575 270,275
Receivable from investment adviser (Note 2)................... -- 9,574 11,018 --
Receivable for forward foreign exchange contracts (Note 1b)... -- -- 4,856 38,424
Deferred organization expenses (Note 1f)...................... -- -- 3,467 4,856
Prepaid registration fees and other assets (Note 1f).......... 12,180 9,689 7,318 126,170
------------ ------------ ------------ --------------
Total assets................................................ 318,765,762 28,622,493 10,370,376 239,980,497
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Options written, at value (premiums received--$786,226)
(Notes 1a & 1b)............................................. -- -- -- 2,622,642
Unrealized depreciation on forward foreign exchange contracts
(Note 1b)................................................... -- -- 16,966 780,885
Payable for capital shares redeemed........................... 75,206 249 19,950 530,957
Payable for securities purchased.............................. 500,000 -- -- 2,374,994
Payable to investment adviser (Note 2)........................ 129,955 -- -- 145,410
Payable for options purchased................................. -- -- -- 154,225
Payable for forward foreign exchange contracts (Note 1b)...... -- -- -- 270,707
Payable for variation margin (Note 1b)........................ -- -- -- 70,320
Accrued expenses and other liabilities........................ 44,354 8,190 15,010 75,673
------------ ------------ ------------ --------------
Total liabilities........................................... 2,749,515 8,439 51,926 7,025,813
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
NET ASSETS.................................................... $316,016,247 $ 28,614,054 $ 10,318,450 $ 232,954,684
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par value+................................ $ 2,835,694 $ 272,334 $ 98,156 $ 2,298,720
Paid-in capital in excess of par.............................. 323,068,639 27,105,284 9,603,534 250,645,445
Undistributed investment income--net.......................... 2,644,085 141,971 61,169 3,258,727
Undistributed (accumulated) realized capital gains (losses) on
investments and foreign currency transactions--net (Note
5).......................................................... (2,855,721) 137,460 63,601 (19,415,594)
Unrealized appreciation (depreciation) on investments and
foreign currency transactions--net.......................... (9,676,450) 957,005 491,990 (3,832,614)
------------ ------------ ------------ --------------
NET ASSETS.................................................... $316,016,247 $ 28,614,054 $ 10,318,450 $ 232,954,684
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARES OUTSTANDING.................................... 28,356,938 2,723,337 981,560 22,987,199
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE...... $ 11.14 $ 10.51 $ 10.51 $ 10.13
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
* Identified cost............................................. $321,572,971 $ 27,187,304 $ 9,522,965 $ 222,237,391
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
+ Authorized shares........................................... 100,000,000 100,000,000 100,000,000 100,000,000
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
86
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES AS OF JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
NATURAL
RESOURCES PRIME QUALITY
FOCUS BOND EQUITY
FUND FUND FUND
------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value* (Note 1a).............................................. $ 43,887,428 $437,712,061 $566,603,258
Cash.......................................................................... 2,286 743 --
Foreign cash (Note 1c)........................................................ 2,047 -- --
Interest receivable........................................................... -- 7,672,523 --
Dividends receivable.......................................................... 113,837 -- 863,799
Receivable for securities sold................................................ -- -- 5,088,906
Receivable for capital shares sold............................................ 105,033 84,952 732,291
Receivable for loaned securities (Note 6)..................................... -- 685 --
Prepaid registration fees and other assets (Note 1f).......................... 6,777 14,832 10,676
------------ ------------ ------------
Total assets................................................................ 44,117,408 445,485,796 573,298,930
------------ ------------ ------------
------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for capital shares redeemed........................................... 78,382 252,036 61,141
Payable for securities purchased.............................................. -- -- 12,032,381
Payable to investment adviser (Note 2)........................................ 23,319 163,915 203,980
Accrued expenses and other liabilities........................................ 12,687 54,565 6,149,587
------------ ------------ ------------
Total liabilities........................................................... 114,388 470,516 18,447,089
------------ ------------ ------------
------------------------------------------------------------------------------------------------------------------------
NET ASSETS.................................................................... $ 44,003,020 $445,015,280 $554,851,841
------------ ------------ ------------
------------ ------------ ------------
------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par value+................................................ $ 379,763 $ 3,703,725 $ 1,860,844
Paid-in capital in excess of par.............................................. 41,224,277 446,935,367 488,003,591
Undistributed investment income--net.......................................... 442,305 2,527,955 4,713,276
Undistributed (accumulated) realized capital gains (losses) on investments and
foreign currency transactions--net (Note 5)................................. 289,759 (16,083,988) 1,998,186
Accumulated distributions in excess of realized capital gains--net............ -- (4,204,953) --
Unrealized appreciation (depreciation) on investments and foreign currency
transactions--net........................................................... 1,666,916 12,137,174 58,275,944
------------ ------------ ------------
NET ASSETS.................................................................... $ 44,003,020 $445,015,280 $554,851,841
------------ ------------ ------------
------------ ------------ ------------
------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARES OUTSTANDING.................................................... 3,797,632 37,037,254 18,608,444
------------ ------------ ------------
------------ ------------ ------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE...................... $ 11.59 $ 12.02 $ 29.82
------------ ------------ ------------
------------ ------------ ------------
------------------------------------------------------------------------------------------------------------------------
* Identified cost............................................................. $ 42,221,821 $425,574,887 $508,327,314
------------ ------------ ------------
------------ ------------ ------------
+ Authorized shares........................................................... 100,000,000 100,000,000 100,000,000
------------ ------------ ------------
------------ ------------ ------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
87
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES AS OF JUNE 30, 1995 (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
RESERVE WORLD INCOME
ASSETS FOCUS
FUND FUND
------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value* (Note 1a)............................................................ $ 29,470,366 $ 75,860,559
Options purchased, at value (cost--$9,353) (Notes 1a & 1b).................................. -- 1,229
Unrealized appreciation on forward foreign exchange contracts (Note 1b)..................... -- 27,780
Cash........................................................................................ 18,949 987
Foreign cash (Note 1c)...................................................................... -- 1,424
Receivable for options written.............................................................. -- 70,166
Interest receivable......................................................................... 78,732 1,974,109
Receivable for securities sold.............................................................. -- 216
Receivable for capital shares sold.......................................................... -- 28,175
Receivable for variation margin (Note 1b)................................................... -- 16,116
Deferred organization expenses (Note 1f).................................................... -- 5,522
Prepaid registration fees and other assets (Note 1f)........................................ 8,455 6,597
------------ ------------
Total assets.............................................................................. 29,576,502 77,992,880
------------ ------------
------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Options written, at value (premiums received--$79,518) (Notes 1a & 1b)...................... -- 80,478
Payable for capital shares redeemed......................................................... 9 70,191
Payable for securities purchased............................................................ -- 6,792
Payable to investment adviser (Note 2)...................................................... 12,266 38,423
Payable for options purchased............................................................... -- 66,175
Payable for forward foreign exchange contacts (Note 1b)..................................... -- 675
Accrued expenses and other liabilities...................................................... 40,616 26,478
------------ ------------
Total liabilities......................................................................... 52,891 289,212
------------ ------------
------------------------------------------------------------------------------------------------------------------------
NET ASSETS.................................................................................. $ 29,523,611 $ 77,703,668
------------ ------------
------------ ------------
------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par value+.............................................................. $ 2,950,572 $ 814,433
Paid-in capital in excess of par............................................................ 26,555,149 81,434,444
Undistributed (overdistributed) investment income (loss)--net............................... -- 467,993
Undistributed (accumulated) realized capital gains (losses) on investments and foreign
currency transactions--net (Note 5)....................................................... -- (3,830,782)
Accumulated distributions in excess of realized capital gains--net.......................... -- (101,589)
Unrealized appreciation (depreciation) on investments and foreign currency
transactions--net......................................................................... 17,890 (1,080,831)
------------ ------------
NET ASSETS.................................................................................. $ 29,523,611 $ 77,703,668
------------ ------------
------------ ------------
------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARES OUTSTANDING.................................................................. 29,505,721 8,144,325
------------ ------------
------------ ------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.................................... $ 1.00 $ 9.54
------------ ------------
------------ ------------
------------------------------------------------------------------------------------------------------------------------
* Identified cost........................................................................... $ 29,452,476 $ 77,083,163
------------ ------------
------------ ------------
+ Authorized shares......................................................................... 500,000,000 100,000,000
------------ ------------
------------ ------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
88
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
DEVELOPING
BASIC CAPITAL
AMERICAN VALUE MARKETS DOMESTIC
BALANCED FOCUS FOCUS MONEY MARKET
FUND FUND FUND FUND
------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME (NOTES 1D & 1E):
Interest and discount earned*................................. $ 3,372,659 $ 460,137 $ 633,335 $ 10,055,119
Dividends**................................................... 1,041,799 1,893,672 272,764 102
Other income.................................................. -- -- 62 --
------------ ------------ --------------- ------------
Total income.................................................. 4,414,458 2,353,809 906,161 10,055,221
------------ ------------ --------------- ------------
------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2)............................. 486,800 590,644 186,080 823,697
Transfer agent fees (Note 2).................................. 2,687 2,388 1,566 2,984
Custodian fees................................................ 10,928 11,301 32,436 11,047
Professional fees............................................. 9,194 8,305 2,241 21,624
Registration fees (Note 1f)................................... 2,216 -- 747 3,033
Directors' fees and expenses.................................. 2,024 1,913 -- 4,894
Accounting services (Note 2).................................. 20,868 23,994 4,123 47,557
Pricing services.............................................. 367 110 1,662 --
Amortization of organization expenses (Note 1f)............... -- 336 244 799
Other......................................................... 3,484 9,608 5,146 9,752
------------ ------------ --------------- ------------
Total expenses before reimbursement........................... 538,568 648,599 234,245 925,387
Reimbursement of expenses (Note 2)............................ -- -- (1,344) --
------------ ------------ --------------- ------------
Expenses after reimbursement.................................. 538,568 648,599 232,901 925,387
------------ ------------ --------------- ------------
Investment income--net........................................ 3,875,890 1,705,210 673,260 9,129,834
------------ ------------ --------------- ------------
------------------------------------------------------------------------------------------------------------------------
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS & FOREIGN
CURRENCY TRANSACTIONS--NET (NOTES 1B, 1C, 1E & 3):
Realized gain (loss) on investments--net...................... 726,838 3,229,410 (3,298,317) 20,319
Realized loss on foreign currency transactions--net........... -- -- (162,124) --
Change in unrealized appreciation/depreciation on
investments--net............................................ 15,635,300 23,782,685 1,853,693 382,304
Change in unrealized appreciation/depreciation on foreign
currency transactions....................................... -- -- (247) --
------------ ------------ --------------- ------------
Total realized and unrealized gain (loss) on investments and
foreign currency transactions--net.......................... 16,362,138 27,012,095 (1,606,995) 402,623
------------ ------------ --------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.................................................. $ 20,238,028 $ 28,717,305 $ (933,735) $ 9,532,457
------------ ------------ --------------- ------------
------------ ------------ --------------- ------------
------------------------------------------------------------------------------------------------------------------------
* Net of withholding tax on interest......................... $ -- $ -- $ 194 $ --
------------ ------------ --------------- ------------
------------ ------------ --------------- ------------
** Net of withholding tax on dividends........................ $ -- $ 2,245 $ 30,740 $ --
------------ ------------ --------------- ------------
------------ ------------ --------------- ------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
89
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
GLOBAL
FLEXIBLE GLOBAL STRATEGY UTILITY
EQUITY STRATEGY FOCUS FOCUS
GROWTH FUND FUND FUND FUND
------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME (NOTES 1D & 1E):
Interest and discount earned*................................. $ 574,796 $ 4,024,480 $ 7,180,722 $ 271,226
Dividends**................................................... 986,279 1,483,551 3,898,480 2,720,209
Other income.................................................. -- 5,245 -- --
------------ ------------ --------------- ------------
Total income.................................................. 1,561,075 5,513,276 11,079,202 2,991,435
------------ ------------ --------------- ------------
------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2)............................. 743,948 925,287 1,639,033 389,668
Transfer agent fees (Note 2).................................. 2,493 2,621 1,770 2,949
Custodian fees................................................ 14,404 26,214 77,893 29,960
Professional fees............................................. 9,394 14,854 24,784 9,544
Registration fees (Note 1f)................................... 3,985 874 -- --
Directors' fees and expenses.................................. 1,682 3,495 5,311 1,853
Accounting services (Note 2).................................. 25,056 34,952 60,190 11,504
Pricing services.............................................. -- 2,621 3,541 3,223
Amortization of organization expenses (Note 1f)............... -- -- 1,770 542
Other......................................................... 4,384 1,748 1,771 --
------------ ------------ --------------- ------------
Total expenses before reimbursement........................... 805,346 1,012,666 1,816,063 449,243
Reimbursement of expenses (Note 2)............................ -- -- -- --
------------ ------------ --------------- ------------
Expenses after reimbursement.................................. 805,346 1,012,666 1,816,063 449,243
------------ ------------ --------------- ------------
Investment income--net........................................ 755,729 4,500,610 9,263,139 2,542,192
------------ ------------ --------------- ------------
------------------------------------------------------------------------------------------------------------------------
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS & FOREIGN
CURRENCY TRANSACTIONS--NET (NOTES 1B, 1C, 1E & 3):
Realized gain (loss) on investments--net...................... 16,665,512 (832,908) (2,996,374) (1,100,334)
Realized gain (loss) on foreign currency transactions--net.... -- 1,245,310 (651,123) (7,013)
Change in unrealized appreciation/depreciation on
investments--net............................................ 26,640,723 21,311,978 22,759,640 10,485,793
Change in unrealized appreciation/depreciation on foreign
currency transactions....................................... -- 22,297 (7,403,952) 638
------------ ------------ --------------- ------------
Total realized and unrealized gain on investments and foreign
currency transactions--net.................................. 43,306,235 21,746,677 11,708,191 9,379,084
------------ ------------ --------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... $ 44,061,964 $ 26,247,287 $ 20,971,330 $ 11,921,276
------------ ------------ --------------- ------------
------------ ------------ --------------- ------------
------------------------------------------------------------------------------------------------------------------------
* Net of withholding tax on interest......................... $ -- $ -- $ 46,205 $ --
------------ ------------ --------------- ------------
------------ ------------ --------------- ------------
** Net of withholding tax on dividends........................ $ (6) $ 60,197 $ 352,604 $ 115,928
------------ ------------ --------------- ------------
------------ ------------ --------------- ------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
90
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
HIGH INTERMEDIATE
CURRENT GOVERNMENT INTERNATIONAL INTERNATIONAL
INCOME BOND BOND EQUITY FOCUS
FUND FUND FUND FUND
------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME (NOTES 1D & 1E):
Interest and discount earned*................................. $ 15,210,958 $ 706,389 $ 377,844 $ 1,966,966
Dividends**................................................... 200,200 -- -- 2,117,171
Other income.................................................. 119,402 -- -- --
------------ ------------ --------------- ------------
Total income.................................................. 15,530,560 706,389 377,844 4,084,137
------------ ------------ --------------- ------------
------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2)............................. 723,198 57,154 30,695 877,870
Transfer agent fees (Note 2).................................. 2,492 2,611 2,572 2,609
Custodian fees................................................ 13,711 4,286 8,418 124,969
Professional fees............................................. 13,485 2,553 3,765 11,890
Registration fees (Note 1f)................................... 4,668 2,575 -- --
Directors' fees and expenses.................................. 3,129 -- 327 2,898
Accounting services (Note 2).................................. 35,359 3,432 3,375 28,775
Pricing services.............................................. 5,375 58 -- 3,419
Amortization of organization expenses (Note 1f)............... -- -- 411 721
Other......................................................... 3,393 2,731 3,215 2,460
------------ ------------ --------------- ------------
Total expenses before reimbursement........................... 804,810 75,400 52,778 1,055,611
Reimbursement of expenses (Note 2)............................ -- (75,400) (52,778) --
------------ ------------ --------------- ------------
Expenses after reimbursement.................................. 804,810 -- -- 1,055,611
------------ ------------ --------------- ------------
Investment income--net........................................ 14,725,750 706,389 377,844 3,028,526
------------ ------------ --------------- ------------
------------------------------------------------------------------------------------------------------------------------
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS & FOREIGN
CURRENCY TRANSACTIONS--NET (NOTES 1B, 1C, 1E & 3):
Realized gain (loss) on investments--net...................... (819,427) 192,776 57,745 (11,734,357)
Realized gain (loss) on foreign currency transactions--net.... -- -- 104,547 (2,405,618)
Change in unrealized appreciation/depreciation on
investments--net............................................ 14,669,707 1,017,747 598,707 5,451,969
Change in unrealized appreciation/depreciation on foreign
currency transactions....................................... -- -- 56,967 (2,989,378)
------------ ------------ --------------- ------------
Total realized and unrealized gain (loss) on investments and
foreign currency transactions--net.......................... 13,850,280 1,210,523 817,966 (11,677,384)
------------ ------------ --------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.................................................. $ 28,576,030 $ 1,916,912 $ 1,195,810 $ (8,648,858)
------------ ------------ --------------- ------------
------------ ------------ --------------- ------------
------------------------------------------------------------------------------------------------------------------------
* Net of withholding tax on interest......................... $ -- $ -- $ 1,315 $ 768
------------ ------------ --------------- ------------
------------ ------------ --------------- ------------
** Net of withholding tax on dividends........................ $ -- $ -- $ -- $ 277,318
------------ ------------ --------------- ------------
------------ ------------ --------------- ------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
91
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
NATURAL
RESOURCES PRIME QUALITY
FOCUS BOND EQUITY
FUND FUND FUND
------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME (NOTES 1D & 1E):
Interest and discount earned*................................................. $ 146,589 $ 16,092,834 $ 2,059,511
Dividends**................................................................... 452,233 -- 3,940,360
Other income.................................................................. -- 112,441 --
------------ ------------ ------------
Total income.................................................................. 598,822 16,205,275 5,999,871
------------ ------------ ------------
------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2)............................................. 134,841 946,319 1,154,680
Transfer agent fees (Note 2).................................................. 2,595 2,652 2,460
Custodian fees................................................................ 11,662 21,753 21,803
Professional fees............................................................. 4,017 19,289 24,806
Registration fees (Note 1f)................................................... 474 2,256 3,882
Directors' fees and expenses.................................................. 279 5,161 5,618
Accounting services (Note 2).................................................. 3,739 51,858 61,112
Pricing services.............................................................. 2,623 2,806 118
Other......................................................................... 2,511 4,258 12,079
------------ ------------ ------------
Total expenses before reimbursement........................................... 162,741 1,056,352 1,286,558
Reimbursement of expenses (Note 2)............................................ -- -- --
------------ ------------ ------------
Expenses after reimbursement.................................................. 162,741 1,056,352 1,286,558
------------ ------------ ------------
Investment income--net........................................................ 436,081 15,148,923 4,713,313
------------ ------------ ------------
------------------------------------------------------------------------------------------------------------------------
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS & FOREIGN CURRENCY
TRANSACTIONS--NET (NOTES 1B, 1C, 1E & 3):
Realized gain (loss) on investments--net...................................... 355,340 (1,491,557) 2,261,999
Realized loss on foreign currency transactions--net........................... (2,029) -- --
Change in unrealized appreciation/depreciation on investments--net............ 2,539,587 34,036,701 45,066,470
Change in unrealized appreciation/depreciation on foreign currency
transactions................................................................ 1,360 -- --
------------ ------------ ------------
Total realized and unrealized gain on investments and foreign currency
transactions--net........................................................... 2,894,258 32,545,144 47,328,469
------------ ------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................... $ 3,330,339 $ 47,694,067 $ 52,041,782
------------ ------------ ------------
------------ ------------ ------------
------------------------------------------------------------------------------------------------------------------------
* Net of withholding tax on interest......................................... $ -- $ -- $ --
------------ ------------ ------------
------------ ------------ ------------
** Net of withholding tax on dividends........................................ $ 32,719 $ -- $ 101,412
------------ ------------ ------------
------------ ------------ ------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
92
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
WORLD
RESERVE INCOME
ASSETS FOCUS
FUND FUND
---------------------------------------------------------------------------------
INVESTMENT INCOME (NOTES 1D & 1E):
Interest and discount earned*....................... $ 922,902 $ 3,682,775
Dividends**......................................... -- 12,937
Other income........................................ -- 33,274
------------ ------------
Total income........................................ 922,902 3,728,986
------------ ------------
---------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2)................... 75,613 228,200
Transfer agent fees (Note 2)........................ 2,805 2,736
Custodian fees...................................... 5,872 13,644
Professional fees................................... 3,253 4,264
Directors' fees and expenses........................ 281 853
Accounting services (Note 2)........................ 741 6,928
Pricing services.................................... -- 4,583
Amortization of organization expenses (Note 1f)..... -- 888
Other............................................... 5,808 1,634
------------ ------------
Total expenses...................................... 94,373 263,730
------------ ------------
Investment income--net.............................. 828,529 3,465,256
------------ ------------
---------------------------------------------------------------------------------
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS &
FOREIGN CURRENCY TRANSACTIONS--NET (NOTES 1B, 1C,
1E & 3):
Realized gain (loss) on investments--net............ 6,177 (299,569)
Realized loss on foreign currency
transactions--net................................ -- (454,546)
Change in unrealized appreciation/depreciation on
investments--net................................. 45,814 3,497,068
Change in unrealized appreciation/depreciation on
foreign currency transactions.................... -- 254,882
------------ ------------
Total realized and unrealized gain on investments
and foreign currency transactions--net........... 51,991 2,997,835
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS....................................... $ 880,520 $ 6,463,091
------------ ------------
------------ ------------
---------------------------------------------------------------------------------
* Net of withholding tax interest.................. $ -- $ 32,371
------------ ------------
------------ ------------
** Net of withholding tax on dividends.............. $ -- $ --
------------ ------------
------------ ------------
---------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
93
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
FOR THE SIXAMERICAN BALANCED FUND
MONTHS ENDED FOR THE YEAR
JUNE 30, ENDED DEC. 31,
INCREASE (DECREASE) IN NET ASSETS: 1995 1994
------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment Income--net....................................................... $ 3,875,890 $ 5,743,492
Realized gain (loss) on investments and foreign currency transactions--net... 726,838 (634,222)
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net................................................... 15,635,300 (11,011,500)
------------ ---------------
Net increase (decrease) in net assets resulting from operations.............. 20,238,028 (5,902,230)
------------ ---------------
------------------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net....................................................... (3,297,754 ) (3,724,806)
Realized gain on investments--net............................................ -- --
In excess of realized gain on investments--net............................... -- (382,403)
------------ ---------------
Net decrease in net assets resulting from dividends and distributions to
shareholders................................................................. (3,297,754 ) (4,107,209)
------------ ---------------
------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase in net assets derived from capital share transactions........... 18,863,852 53,540,259
------------ ---------------
------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase in net assets................................................. 35,804,126 43,530,820
Beginning of period.......................................................... 158,950,740 115,419,920
------------ ---------------
End of period*............................................................... $194,754,866 $ 158,950,740
------------ ---------------
------------ ---------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
*Undistributed investment income--net........................................ $ 3,875,886 $ 3,297,750
------------ ---------------
------------ ---------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
94
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
FOR THE SIXBASIC VALUE FOCUS FUND
MONTHS ENDED FOR THE YEAR
JUNE 30, ENDED DEC 31,
1995 1994
</TABLE>
---------------------------------------
<TABLE>
<S> <C> <C> <C>
$ 1,705,210 $ 2,366,053
3,229,410 7,037,711
23,782,685 (6,328,115)
------------ ----------------
28,717,305 3,075,649
------------ ----------------
</TABLE>
---------------------------------------
<TABLE>
<S> <C> <C> <C>
(1,567,959 ) (928,253)
(7,106,928 ) --
-- --
------------ ----------------
(8,674,887 ) (928,253)
------------ ----------------
</TABLE>
---------------------------------------
<TABLE>
<S> <C> <C> <C>
55,333,615 114,952,060
------------ ----------------
</TABLE>
---------------------------------------
<TABLE>
<S> <C> <C> <C>
75,376,033 117,099,456
164,306,719 47,207,263
------------ ----------------
$239,682,752 $164,306,719
------------ ----------------
------------ ----------------
</TABLE>
---------------------------------------
<TABLE>
<S> <C> <C> <C>
$ 1,728,636 $ 1,591,385
------------ ----------------
------------ ----------------
</TABLE>
---------------------------------------
95
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
DEVELOPING CAPITAL
MARKETS FOCUS FUND
--------------------------------------
FOR THE SIX
MONTHS ENDED FOR THE PERIOD
JUNE 30, MAY 2, 1994+
INCREASE (DECREASE) IN NET ASSETS: 1995 TO DEC. 31, 1994
------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment Income--net....................................................... $ 673,260 $ 330,561
Realized gain (loss) on investments and foreign currency transactions--net... (3,460,441 ) (672,256)
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net................................................... 1,853,446 (2,345,177)
------------ ----------------
Net increase (decrease) in net assets resulting from operations.............. (933,735 ) (2,686,872)
------------ ----------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net....................................................... (332,002 ) --
Realized gain on investments--net............................................ -- --
------------ ----------------
Net decrease in net assets resulting from dividends and distributions to
shareholders................................................................. (332,002 ) --
------------ ----------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase (decrease) in net assets derived from capital share
transactions................................................................. 7,332,487 31,362,624
------------ ----------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
NET ASSETS:
Total increase (decrease) in net assets...................................... 6,066,750 28,675,752
Beginning of period.......................................................... 36,675,752 8,000,000
------------ ----------------
End of period*............................................................... $42,742,502 $ 36,675,752
------------ ----------------
------------ ----------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
*Undistributed investment income--net........................................ $ 671,819 $ 330,561
------------ ----------------
------------ ----------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
+ Commencement of Operations.
</TABLE>
See Notes to Financial Statements.
96
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
DOMESTIC MONEY
MARKET FUND EQUITY GROWTH FUND
----------------------------------------- -----------------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED
1995 DEC. 31, 1994 1995 DEC. 31, 1994
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
$ 9,129,834 $ 11,419,926 $ 755,729 $ 383,328
20,319 5,347 16,665,512 (1,981,763)
382,304 (199,049) 26,640,723 (8,755,921)
------------ ---------------- ------------ ----------------
9,532,457 11,226,224 44,061,964 (10,354,356)
------------ ---------------- ------------ ----------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
(9,129,834 ) (11,419,926) (383,329 ) --
(20,319 ) (5,347) -- (895,916)
------------ ---------------- ------------ ----------------
(9,150,153 ) (11,425,273) (383,329 ) (895,916)
------------ ---------------- ------------ ----------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
(52,557,421) 192,866,796 31,747,708 82,317,471
------------ ---------------- ------------ ----------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
(52,175,117) 192,667,747 75,426,343 71,067,199
363,199,100 170,531,353 170,043,623 98,976,424
------------ ---------------- ------------ ----------------
$311,023,983 $363,199,100 $245,469,966 $170,043,623
------------ ---------------- ------------ ----------------
------------ ---------------- ------------ ----------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
$ -- $ -- $ 755,728 $ 383,328
------------ ---------------- ------------ ----------------
------------ ---------------- ------------ ----------------
</TABLE>
--------------------------------------------------------------------------------
97
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
FLEXIBLE STRATEGY FUND
--------------------------------------
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS: 1995 DEC. 31, 1994
------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net........................................................ $ 4,500,610 $ 6,185,965
Realized gain (loss) on investments and foreign currency transactions--net.... 412,402 4,744,740
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net.................................................... 21,334,275 (21,104,289)
------------ ----------------
Net increase (decrease) in net assets resulting from operations............... 26,247,287 (10,173,584)
------------ ----------------
------------------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net........................................................ (3,546,644 ) (4,296,790)
Realized gain on investments--net............................................. (5,055,923 ) (6,450,353)
In excess of realized gain on investments--net................................ -- --
------------ ----------------
Net decrease in net assets resulting from dividends and distributions to
shareholders.................................................................. (8,602,567 ) (10,747,143)
------------ ----------------
------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Net increase (decrease) in net assets derived from capital share
transactions.................................................................. 12,020,399 100,642,477
------------ ----------------
------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase in net assets.................................................. 29,665,119 79,721,750
Beginning of period........................................................... 274,498,266 194,776,516
------------ ----------------
End of period*................................................................ $304,163,385 $274,498,266
------------ ----------------
------------ ----------------
------------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net......................................... $ 4,428,354 $ 3,474,388
------------ ----------------
------------ ----------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
98
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
GLOBAL STRATEGY FOCUS FUND GLOBAL UTILITY FOCUS FUND
-------------------------------------- --------------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED
1995 DEC. 31, 1994 1995 DEC. 31, 1994
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
$ 9,263,139 $ 12,299,420 $ 2,542,192 $ 4,762,634
(3,647,497 ) (202,960 ) (1,107,347 ) (1,481,987 )
15,355,688 (23,383,348 ) 10,486,431 (14,255,796 )
------------ ------------- ------------ -------------
20,971,330 (11,286,888 ) 11,921,276 (10,975,149 )
------------ ------------- ------------ -------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
(7,650,377 ) (6,805,684 ) (2,403,100 ) (3,959,983 )
(199,509 ) (1,046,779 ) -- --
-- (169,671 ) -- (33,522 )
------------ ------------- ------------ -------------
(7,849,886 ) (8,022,134 ) (2,403,100 ) (3,993,505 )
------------ ------------- ------------ -------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
(11,901,667 ) 265,089,157 (2,196,976 ) 36,694,148
------------ ------------- ------------ -------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
1,219,777 245,780,135 7,321,200 21,725,494
515,407,316 269,627,181 126,242,807 104,517,313
------------ ------------- ------------ -------------
$516,627,093 $515,407,316 $133,564,007 $126,242,807
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
$ 8,869,457 $ 7,256,695 $ 1,500,326 $ 1,361,234
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</TABLE>
--------------------------------------------------------------------------------
99
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
HIGH CURRENT INCOME FUND
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DEC. 31,
INCREASE (DECREASE) IN NET ASSETS: 1995 1994
------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net......................................................... $14,725,750 $21,977,178
Realized gain (loss) on investments and foreign currency transactions--net..... (819,427 ) (1,918,504 )
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net..................................................... 14,669,707 (28,517,478 )
------------ ------------
Net increase (decrease) in net assets resulting from operations................ 28,576,030 (8,458,804 )
------------ ------------
------------------------------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS (NOTE 1G):
Investment income--net......................................................... (14,591,354 ) (20,563,966 )
------------ ------------
Net decrease in net assets resulting from dividends to shareholders............ (14,591,354 ) (20,563,966 )
------------ ------------
------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase (decrease) in net assets derived from capital share
transactions................................................................... 46,312,831 121,313,338
------------ ------------
------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase in net assets................................................... 60,297,507 92,290,568
Beginning of period............................................................ 255,718,740 163,428,172
------------ ------------
End of period*................................................................. $316,016,247 $255,718,740
------------ ------------
------------ ------------
------------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net.......................................... $ 2,644,085 $ 2,509,684
------------ ------------
------------ ------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
+ Commencement of Operations.
</TABLE>
See Notes to Financial Statements.
100
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
INTERMEDIATE
GOVERNMENT BOND FUND INTERNATIONAL BOND FUND
------------------------------------------ ------------------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE PERIOD MONTHS ENDED FOR THE PERIOD
JUNE 30, MAY 2, 1994+ TO JUNE 30, MAY 2, 1994+ TO
1995 DEC. 31, 1994 1995 DEC. 31, 1994
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
$ 706,389 $ 295,427 $ 377,844 $ 325,753
192,776 (55,316) 162,292 (98,691)
1,017,747 (60,742) 655,674 (163,684)
------------ ----------------- ------------ -----------------
1,916,912 179,369 1,195,810 63,378
------------ ----------------- ------------ -----------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
(637,793 ) (222,052) (371,075 ) (271,353)
------------ ----------------- ------------ -----------------
(637,793 ) (222,052) (371,075 ) (271,353)
------------ ----------------- ------------ -----------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
9,524,284 15,853,334 (439,579 ) 5,141,269
------------ ----------------- ------------ -----------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
10,803,403 15,810,651 385,156 4,933,294
17,810,651 2,000,000 9,933,294 5,000,000
------------ ----------------- ------------ -----------------
$28,614,054 $17,810,651 $10,318,450 $ 9,933,294
------------ ----------------- ------------ -----------------
------------ ----------------- ------------ -----------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
$ 141,971 $ 73,375 $ 61,169 $ 54,400
------------ ----------------- ------------ -----------------
------------ ----------------- ------------ -----------------
</TABLE>
--------------------------------------------------------------------------------
101
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INTERNATIONAL EQUITY
FOCUS FUND
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS: 1995 DEC. 31, 1994
------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net........................................................ $ 3,028,526 $ 1,973,400
Realized gain (loss) on investments and foreign currency transactions--net.... (14,139,975 ) 3,850,217
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net.................................................... 2,462,591 (10,680,341)
------------ ----------------
Net increase (decrease) in net assets resulting from operations............... (8,648,858 ) (4,856,724)
------------ ----------------
------------------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net........................................................ (151,930 ) (1,644,756)
Realized gain on investments--net............................................. (9,179,696 ) (61,190)
In excess of realized gain on investments--net................................ -- --
------------ ----------------
Net decrease in net assets resulting from dividends and distributions to
shareholders.................................................................. (9,331,626 ) (1,705,946)
------------ ----------------
------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTES 4):
Net increase in net assets derived from capital share transactions............ 3,051,393 177,540,023
------------ ----------------
------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets....................................... (14,929,091) 170,977,353
Beginning of period........................................................... 247,883,775 76,906,422
------------ ----------------
End of period*................................................................ $232,954,684 $247,883,775
-
-
------------ ----------------
------------ ----------------
------------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net......................................... $ 3,258,727 $ 382,131
------------ ----------------
------------ ----------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
102
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
NATURAL RESOURCES
FOCUS FUND PRIME BOND FUND
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED
1995 DEC. 31, 1994 1995 DEC. 31, 1994
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
$ 436,081 $ 526,129 $15,148,923 $ 24,851,838
353,311 102,053 (1,491,557 ) (18,783,776 )
2,540,947 (810,365) 34,036,701 (23,383,983 )
------------ ------------- ------------ -------------
3,330,339 (182,183) 47,694,067 (17,315,921 )
------------ ------------- ------------ -------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
(283,043 ) (319,496) (15,020,751 ) (23,986,615 )
(116,045 ) -- -- --
-- -- -- (4,204,953 )
------------ ------------- ------------ -------------
(399,088 ) (319,496) (15,020,751 ) (28,191,568 )
------------ ------------- ------------ -------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
1,356,908 25,438,978 21,107,789 122,650,200
------------ ------------- ------------ -------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
4,288,159 24,937,299 53,781,105 77,142,711
39,714,861 14,777,562 391,234,175 314,091,464
------------ ------------- ------------ -------------
$44,003,020 $39,714,861 $445,015,280 $391,234,175
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
$ 442,305 $ 289,267 $ 2,527,955 $ 2,399,783
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</TABLE>
--------------------------------------------------------------------------------
103
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
QUALITY EQUITY FUND
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS: 1995 DEC. 31, 1994
------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net..................................................... $ 4,713,313 $ 5,564,058
Realized gain (loss) on investments and foreign currency
transactions--net.......................................................... 2,261,999 10,329,187
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net................................................. 45,066,470 (20,646,284)
------------ ----------------
Net increase (decrease) in net assets resulting from operations............ 52,041,782 (4,753,039)
------------ ----------------
------------------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net..................................................... (3,329,790 ) (3,345,688)
Realized gain on investments--net.......................................... (9,959,874 ) (7,187,525)
In excess of realized gain on investments--net............................. -- --
------------ ----------------
Net decrease in net assets resulting from dividends and distributions to
shareholders............................................................... (13,289,664 ) (10,533,213)
------------ ----------------
------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTES 4):
Net increase (decrease) in net assets derived from capital share
transactions............................................................... 51,739,841 170,226,497
------------ ----------------
------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets.................................... 90,491,959 154,940,245
Beginning of period........................................................ 464,359,882 309,419,637
------------ ----------------
End of period*............................................................. $554,851,841 $464,359,882
------------ ----------------
------------ ----------------
------------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net...................................... $ 4,713,276 $ 3,329,753
------------ ----------------
------------ ----------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
104
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
RESERVE ASSETS FUND WORLD INCOME FOCUS FUND
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED
1995 DEC. 31, 1994 1995 DEC. 31, 1994
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
$ 828,529 $ 1,248,878 $ 3,465,256 $ 5,733,672
6,177 1,901 (754,115 ) (3,236,703)
45,814 (35,001 ) 3,751,950 (5,553,092)
------------ ------------- ------------ ----------------
880,520 1,215,778 6,463,091 (3,056,123)
------------ ------------- ------------ ----------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
(828,529 ) (1,248,878 ) (3,406,549 ) (5,598,199)
(6,177 ) (1,901 ) -- --
-- -- -- (101,589)
------------ ------------- ------------ ----------------
(834,706 ) (1,250,779 ) (3,406,549 ) (5,699,788)
------------ ------------- ------------ ----------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
(2,718,234 ) 2,063,127 (502,790 ) 33,168,379
------------ ------------- ------------ ----------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
(2,672,420 ) 2,028,126 2,553,752 24,412,468
32,196,031 30,167,905 75,149,916 50,737,448
------------ ------------- ------------ ----------------
$29,523,611 $ 32,196,031 $77,703,668 $ 75,149,916
------------ ------------- ------------ ----------------
------------ ------------- ------------ ----------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
$ -- $ -- $ 467,993 $ 409,286
------------ ------------- ------------ ----------------
------------ ------------- ------------ ----------------
</TABLE>
--------------------------------------------------------------------------------
105
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
AMERICAN BALANCED FUND
--------------------------------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED FOR THE SIX
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1995 1994 1993 1992 1991
------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....................... $ 13.08 $ 14.08 $ 12.85 $ 12.82 $ 11.26
------------ -------- -------- ------- -------
Investment income--net..................................... .29 .48 .32 .31 .47
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net....................... 1.28 (1.06) 1.37 .37 1.76
------------ -------- -------- ------- -------
Total from investment operations........................... 1.57 (.58) 1.69 .68 2.23
------------ -------- -------- ------- -------
Less dividends and distributions:
Investment income--net................................... (.27) (.37) (.34) (.37) (.49)
Realized gain on investments--net........................ -- -- (.12) (.28) (.18)
In excess of realized gain on investments--net........... -- (.05) -- -- --
------------ -------- -------- ------- -------
Total dividends and distributions.......................... (.27) (.42) (.46) (.65) (.67)
------------ -------- -------- ------- -------
Net asset value, end of period............................. $ 14.38 $ 13.08 $ 14.08 $ 12.85 $ 12.82
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share......................... 12.27%++ (4.19%) 13.49% 5.72% 20.65%
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................... .61%* .63% .70% .97% 1.20%
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
Investment income--net..................................... 4.38%* 3.95% 3.20% 3.71% 4.16%
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................... $194,755 $158,951 $115,420 $24,918 $ 7,937
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
Portfolio turnover......................................... 13.05% 35.36% 12.55% 36.34% 50.82%
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
++ Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
106
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
BASIC VALUE FOCUS FUND
-------------------------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED FOR THE FOR THE PERIOD
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. FOR THE SIX YEAR ENDED JULY 1, 1993+ TO
MONTHS ENDED DECEMBER 31, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSET VALUE: JUNE 30, 1995 1994 1993
------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................... $ 11.10 $ 10.95 $ 10.00
----------------- ------------ --------
Investment income--net......................................... .09 .17 .04
Realized and unrealized gain on investments and foreign
currency transactions--net................................... 1.52 .08 .91
----------------- ------------ --------
Total from investment operations............................... 1.61 .25 .95
----------------- ------------ --------
Less dividends and distributions:
Investment income--net....................................... (.11) (.10) --
Realized gain on investments--net............................ (.48) -- --
----------------- ------------ --------
Total dividends and distributions.............................. (.59) (.10) --
----------------- ------------ --------
Net asset value, end of period................................. $ 12.12 $ 11.10 $ 10.95
----------------- ------------ --------
----------------- ------------ --------
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share............................. 15.28%++ 2.36% 9.50%++
----------------- ------------ --------
----------------- ------------ --------
------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses....................................................... .66%* .72% .86%*
----------------- ------------ --------
----------------- ------------ --------
Investment income--net......................................... 1.73%* 2.08% 1.69%*
----------------- ------------ --------
----------------- ------------ --------
------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)....................... $ 239,683 $164,307 $ 47,207
----------------- ------------ --------
----------------- ------------ --------
Portfolio turnover............................................. 30.08% 60.55% 30.86%
----------------- ------------ --------
----------------- ------------ --------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Commencement of Operations.
++ Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
107
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
DEVELOPING CAPITAL MARKETS
FOCUS FUND
-------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED FOR THE PERIOD
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. FOR THE SIX MAY 2, 1994+
MONTHS ENDED TO
INCREASE (DECREASE) IN NET ASSET VALUE: JUNE 30, 1995 DEC. 31,1994
------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............................................ $ 9.51 $ 10.00
-------------- --------------
Investment income--net.......................................................... .14 .09
Realized and unrealized loss on investments and foreign currency
transactions--net............................................................. (.40) (.58)
-------------- --------------
Total from investment operations................................................ (.26) (.49)
-------------- --------------
Less dividends and distributions:
Investment income--net........................................................ (.09) --
Realized gain on investments--net............................................. -- --
-------------- --------------
Total dividends and distributions............................................... (.09) --
-------------- --------------
Net asset value, end of period.................................................. $ 9.16 $ 9.51
-------------- --------------
-------------- --------------
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share.............................................. (2.78%)++ (4.90%)++
-------------- --------------
-------------- --------------
------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement.................................................. 1.25%* 1.29%*
-------------- --------------
-------------- --------------
Expenses........................................................................ 1.26%* 1.35%*
-------------- --------------
-------------- --------------
Investment income--net.......................................................... 3.62%* 2.18%*
-------------- --------------
-------------- --------------
------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)........................................ $ 42,743 $ 36,676
-------------- --------------
-------------- --------------
Portfolio turnover.............................................................. 43.26% 29.79%
-------------- --------------
-------------- --------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Commencement of Operations.
++ Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
108
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
DOMESTIC MONEY MARKET FUND
----------------------------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED FOR THE YEAR ENDED FOR THE PERIOD
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. FOR THE SIX DECEMBER 31, FEB. 20, 1992+
MONTHS ENDED ---------------------- TO DEC. 31,
INCREASE (DECREASE) IN NET ASSET VALUE: JUNE 30, 1995 1994 1993 1992
------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- --------- --------- ---------------
Investment income--net...................................... .0277 .0386 .0302 .0302
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net........................ .0013 (.0007) .0005 .0013
------------- --------- --------- ---------------
Total from investment operations............................ .0290 .0379 .0307 .0315
------------- --------- --------- ---------------
Less dividends and distributions:
Investment income--net.................................... (.0277) (.0386) (.0302) (.0302)
Realized gain on investments--net......................... (.0001) -- (.0005) (.0010)
------------- --------- --------- ---------------
Total dividends and distributions........................... (.0278) (.0386) (.0307) (.0312)
------------- --------- --------- ---------------
Net asset value, end of period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- --------- --------- ---------------
------------- --------- --------- ---------------
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share.......................... 5.63%* 3.94% 3.10% 3.65%*
------------- --------- --------- ---------------
------------- --------- --------- ---------------
------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement.............................. .56%* .50% .36% .32%*
------------- --------- --------- ---------------
------------- --------- --------- ---------------
Expenses.................................................... .56%* .57% .63% .88%*
------------- --------- --------- ---------------
------------- --------- --------- ---------------
Investment income--net, and realized gain (loss) on
investments--net.......................................... 5.55%* 4.02% 3.03% 3.48%*
------------- --------- --------- ---------------
------------- --------- --------- ---------------
------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................... $ 311,024 $ 363,199 $ 170,531 $ 41,128
------------- --------- --------- ---------------
------------- --------- --------- ---------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Commencement of Operations.
</TABLE>
See Notes to Financial Statements.
109
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
EQUITY GROWTH FUND
---------------------------------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED FOR THE SIX
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1995+ 1994+ 1993+ 1992+ 1991
------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..................... $ 19.26 $ 20.96 $ 17.80 $ 17.96 $ 11.98
------------ -------- -------- ------- --------
Investment income (loss)--net............................ .08 .05 (.01) .01 .09
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net..................... 4.43 (1.56) 3.17 (.10) 5.91
------------ -------- -------- ------- --------
Total from investment operations......................... 4.51 (1.51) 3.16 (.09) 6.00
------------ -------- -------- ------- --------
Less dividends and distributions:
Investment income--net................................. (.04) -- --++ (.07) (.02)
Realized gain on investments--net...................... -- (.19) -- -- --
------------ -------- -------- ------- --------
Total dividends and distributions........................ (.04) (.19) -- (.07) (.02)
------------ -------- -------- ------- --------
Net asset value, end of period........................... $ 23.73 $ 19.26 $ 20.96 $ 17.80 $ 17.96
------------ -------- -------- ------- --------
------------ -------- -------- ------- --------
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share....................... 23.49%++ (7.27%) 17.78% (.53%) 50.10%
------------ -------- -------- ------- --------
------------ -------- -------- ------- --------
------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement........................... .81%* .83% .96% 1.18% 1.25%
------------ -------- -------- ------- --------
------------ -------- -------- ------- --------
Expenses................................................. .81%* .83% .96% 1.18% 1.28%
------------ -------- -------- ------- --------
------------ -------- -------- ------- --------
Investment income (loss)--net............................ .76%* .27% (.05%) .04% .51%
------------ -------- -------- ------- --------
------------ -------- -------- ------- --------
------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................. $245,470 $170,044 $ 98,976 $23,167 $ 11,318
------------ -------- -------- ------- --------
------------ -------- -------- ------- --------
Portfolio turnover....................................... 48.38% 88.48% 131.75% 98.64% 79.10%
------------ -------- -------- ------- --------
------------ -------- -------- ------- --------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the period.
++ Amount is less than $.01 per share.
++ Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
110
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FLEXIBLE STRATEGY FUND
--------------------------------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED FOR THE SIX
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1995+ 1994+ 1993 1992 1991
------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...................... $ 14.70 $ 16.19 $ 14.15 $ 14.79 $ 12.55
------------ -------- -------- ------- -------
Investment income--net.................................... .23 .37 .28 .33 .47
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net...................... 1.12 (1.02) 1.94 .25 2.52
------------ -------- -------- ------- -------
Total from investment operations.......................... 1.35 (.65) 2.22 .58 2.99
------------ -------- -------- ------- -------
Less dividends and distributions:
Investment income--net.................................. (.19) (.30) (.15) (.54) (.66)
Realized gain on investments--net....................... (.27) (.54) (.03) (.68) (.09)
------------ -------- -------- ------- -------
Total dividends and distributions......................... (.46) (.84) (.18) (1.22) (.75)
------------ -------- -------- ------- -------
Net asset value, end of period............................ $ 15.59 $ 14.70 $ 16.19 $ 14.15 $ 14.79
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share........................ 9.50%++ (4.20%) 15.80% 4.25% 24.98%
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................. .71%* .73% .80% .90% .96%
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
Investment income--net.................................... 3.16%* 2.52% 2.26% 2.62% 3.51%
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................. $304,163 $274,498 $194,777 $82,549 $55,221
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
Portfolio turnover........................................ 65.39% 65.54% 56.42% 55.25% 67.13%
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the period.
++ Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
111
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
GLOBAL STRATEGY FOCUS FUND
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN -------------------------------------------------------------
DERIVED FOR THE SIX FOR THE YEAR ENDED FOR THE PERIOD
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. MONTHS ENDED DECEMBER 31, FEB. 28, 1992+
JUNE 30, ----------------------- TO DECEMBER 31,
INCREASE (DECREASE) IN NET ASSET VALUE: 1995 1994 1993 1992
------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................... $ 11.73 $ 12.17 $ 10.22 $ 10.00
------------ --------- --------- ----------------
Investment income--net.................................. .21 .30 .16 .13
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net.................... .27 (.48) 1.96 .13
------------ --------- --------- ----------------
Total from investment operations........................ .48 (.18) 2.12 .26
------------ --------- --------- ----------------
Less dividends and distributions:
Investment income--net................................ (.17) (.21) (.17) (.04)
Realized gain on investments--net..................... --++ (.04) -- --
In excess of realized gain on investments--net........ -- (.01) -- --
------------ --------- --------- ----------------
Total dividends and distributions....................... (.17) (.26) (.17) (.04)
------------ --------- --------- ----------------
Net asset value, end of period.......................... $ 12.04 $ 11.73 $ 12.17 $ 10.22
------------ --------- --------- ----------------
------------ --------- --------- ----------------
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share...................... 4.24%++ (1.46%) 21.03% 2.62%++
------------ --------- --------- ----------------
------------ --------- --------- ----------------
------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement.......................... .72%* .77% .88% 1.25%*
------------ --------- --------- ----------------
------------ --------- --------- ----------------
Expenses................................................ .72%* .77% .88% 1.35%*
------------ --------- --------- ----------------
------------ --------- --------- ----------------
Investment income--net.................................. 3.67%* 2.85% 2.41% 2.66%*
------------ --------- --------- ----------------
------------ --------- --------- ----------------
------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................ $516,627 $ 515,407 $ 269,627 $ 15,527
------------ --------- --------- ----------------
------------ --------- --------- ----------------
Portfolio turnover...................................... 12.90% 21.03% 17.07% 14.47%
------------ --------- --------- ----------------
------------ --------- --------- ----------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Commencement of Operations.
++ Amount is less than $.01 per share.
++ Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
112
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
GLOBAL UTILITY FOCUS FUND
-------------------------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED FOR THE FOR THE PERIOD
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. FOR THE SIX YEAR ENDED JULY 1, 1993+ TO
MONTHS ENDED DECEMBER 31, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSET VALUE: JUNE 30, 1995 1994 1993
------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....................... $ 9.45 $ 10.66 $ 10.00
------------- ------------ ----------------
Investment income--net..................................... .19 .35 .04
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net....................... .70 (1.25) .64
------------- ------------ ----------------
Total from investment operations........................... .89 (.90) .68
------------- ------------ ----------------
Less dividends and distributions:
Investment income--net................................... (.18) (.29) (.02)
In excess of realized gain on investments--net........... -- (.02) --
------------- ------------ ----------------
Total dividends and distributions.......................... (.18) (.31) (.02)
------------- ------------ ----------------
Net asset value, end of period............................. $ 10.16 $ 9.45 $ 10.66
------------- ------------ ----------------
------------- ------------ ----------------
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share......................... 9.56%++ (8.51%) 6.85%++
------------- ------------ ----------------
------------- ------------ ----------------
------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................... .69%* .73% .89%*
------------- ------------ ----------------
------------- ------------ ----------------
Investment income--net..................................... 3.91%* 3.68% 2.84%*
------------- ------------ ----------------
------------- ------------ ----------------
------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................... $ 133,564 $126,243 $104,517
------------- ------------ ----------------
------------- ------------ ----------------
Portfolio turnover......................................... 2.41% 9.52% 1.72%
------------- ------------ ----------------
------------- ------------ ----------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Commencement of Operations.
++ Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
113
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
HIGH CURRENT INCOME FUND
--------------------------------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED FOR THE SIX
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1995 1994 1993 1992 1991
------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...................... $ 10.61 $ 12.06 $ 11.13 $ 10.23 $ 8.14
------------ -------- -------- ------- -------
Investment income--net.................................... .55 1.05 .95 1.07 1.19
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net...................... .54 (1.47) .95 .90 2.10
------------ -------- -------- ------- -------
Total from investment operations.......................... 1.09 (.42) 1.90 1.97 3.29
------------ -------- -------- ------- -------
Less dividends and distributions:
Investment income--net.................................. (.56) (1.03) (.97) (1.07) (1.20)
Realized gain on investments--net....................... -- -- -- -- --
------------ -------- -------- ------- -------
Total dividends and distributions......................... (.56) (1.03) (.97) (1.07) (1.20)
------------ -------- -------- ------- -------
Net asset value, end of period............................ $ 11.14 $ 10.61 $ 12.06 $ 11.13 $ 10.23
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share........................ 10.57%++ (3.59%) 17.84% 20.05% 43.00%
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................. .56%* .61% .72% .89% 1.10%
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
Investment income--net.................................... 10.24%* 9.73% 8.62% 10.06% 12.49%
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................. $316,016 $255,719 $163,428 $26,343 $ 9,649
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
Portfolio turnover........................................ 18.14% 51.88% 35.67% 28.21% 51.54%
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
++ Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
114
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INTERMEDIATE GOVERNMENT BOND FUND
------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED FOR THE SIX FOR THE PERIOD
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. MONTHS ENDED MAY 2, 1994+
JUNE 30, TO
INCREASE (DECREASE) IN NET ASSET VALUE: 1995 DEC. 31,1994
------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....................................... $ 9.97 $ 10.00
------------ --------------
Investment income--net..................................................... .30 .25
Realized and unrealized gain (loss) on investments and foreign currency
transactions--net........................................................ .53 (.07)
------------ --------------
Total from investment operations........................................... .83 .18
------------ --------------
Less dividends and distributions:
Investment income--net................................................... (.29) (.21)
Realized gain on investments--net........................................ -- --
------------ --------------
Total dividends and distributions.......................................... (.29) (.21)
------------ --------------
Net asset value, end of period............................................. $ 10.51 $ 9.97
------------ --------------
------------ --------------
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share......................................... 8.47%++ 1.79%++
------------ --------------
------------ --------------
------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement............................................. .00%* .00%*
------------ --------------
------------ --------------
Expenses................................................................... .66%* .80%*
------------ --------------
------------ --------------
Investment income--net..................................................... 6.18%* 4.66%*
------------ --------------
------------ --------------
------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................................... $ 28,614 $ 17,811
------------ --------------
------------ --------------
Portfolio turnover......................................................... 73.49% 103.03%
------------ --------------
------------ --------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Commencement of Operations.
++ Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
115
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INTERNATIONAL BOND FUND
------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED FOR THE SIX FOR THE PERIOD
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. MONTHS ENDED MAY 2, 1994+
JUNE 30, TO
INCREASE (DECREASE) IN NET ASSET VALUE: 1995 DEC. 31,1994
------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....................................... $ 9.70 $ 10.00
------------ --------------
Investment income--net..................................................... .38 .38
Realized and unrealized gain (loss) on investments and foreign currency
transactions--net........................................................ .80 (.35)
------------ --------------
Total from investment operations........................................... 1.18 .03
------------ --------------
Less dividends and distributions:
Investment income--net................................................... (.37) (.33)
Realized gain on investments--net........................................ -- --
------------ --------------
Total dividends and distributions.......................................... (.37) (.33)
------------ --------------
Net asset value, end of period............................................. $ 10.51 $ 9.70
------------ --------------
------------ --------------
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share......................................... 12.33%++ .37%++
------------ --------------
------------ --------------
------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement............................................. .00%* .00%*
------------ --------------
------------ --------------
Expenses................................................................... 1.03%* 1.08%*
------------ --------------
------------ --------------
Investment income--net..................................................... 7.39%* 6.34%*
------------ --------------
------------ --------------
------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................................... $ 10,318 $ 9,933
------------ --------------
------------ --------------
Portfolio turnover......................................................... 134.98% 152.20%
------------ --------------
------------ --------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Commencement of Operations.
++ Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
116
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN INTERNATIONAL EQUITY FOCUS FUND
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL --------------------------------------------------------------
STATEMENTS. FOR THE SIX FOR THE YEAR FOR THE PERIOD
MONTHS ENDED ENDED JULY 1, 1993+ TO
INCREASE (DECREASE) IN NET ASSET VALUE: JUNE 30, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993
-----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............... $ 10.90 $ 11.03 $ 10.00
------------- ---------- --------
Investment income--net............................. .13 .19 .01
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net........... (.49) (.13) 1.02
------------- ---------- --------
Total from investment operations................... (.36) .06 1.03
------------- ---------- --------
Less dividends and distributions:
Investment income--net........................... (.01) (.18) --
Realized gain on investments--net................ (.40) (.01) --
------------- ---------- --------
Total dividends and distributions.................. (.41) (.19) --
------------- ---------- --------
Net asset value, end of period..................... $ 10.13 $ 10.90 $ 11.03
------------- ---------- --------
------------- ---------- --------
-----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share................. (3.30%)++ .55% 10.30%++
------------- ---------- --------
------------- ---------- --------
-----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses........................................... .90%* .97% 1.14%*
------------- ---------- --------
------------- ---------- --------
Investment income--net............................. 2.59%* 1.09% .30%*
------------- ---------- --------
------------- ---------- --------
-----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)........... $ 232,955 $247,884 $76,906
------------- ---------- --------
------------- ---------- --------
Portfolio turnover................................. 42.50% 58.84% 17.39%
------------- ---------- --------
------------- ---------- --------
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Commencement of Operations.
++ Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
117
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NATURAL RESOURCES FOCUS FUND
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN -------------------------------------------------------------------
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL FOR THE SIX
STATEMENTS. MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1995 1994 1993 1992 1991
------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................... $ 10.82 $ 10.82 $ 9.84 $ 10.06 $ 10.17
------------ ------- -------- -------- -------
Investment income--net.................................. .12 .17 .11 .18 .25
Realized and unrealized gain (loss) on investments and
foreign
currency transactions--net............................ .76 (.02) .92 (.05) (.11)
------------ ------- -------- -------- -------
Total from investment operations........................ .88 .15 1.03 .13 .14
------------ ------- -------- -------- -------
Less dividends and distributions:
Investment income--net................................ (.08) (.15) (.05) (.29) (.25)
Realized gain on investments--net..................... (.03) -- -- (.06) --
------------ ------- -------- -------- -------
Total dividends and distributions....................... (.11) (.15) (.05) (.35) (.25)
------------ ------- -------- -------- -------
Net asset value, end of period.......................... $ 11.59 $ 10.82 $ 10.82 $ 9.84 $ 10.06
------------ ------- -------- -------- -------
------------ ------- -------- -------- -------
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share...................... 8.21%++ 1.44% 10.47% 1.36% 1.36%
------------ ------- -------- -------- -------
------------ ------- -------- -------- -------
------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement.......................... .78%* .87% 1.13% 1.25% 1.25%
------------ ------- -------- -------- -------
------------ ------- -------- -------- -------
Expenses................................................ .78%* .87% 1.13% 1.27% 1.30%
------------ ------- -------- -------- -------
------------ ------- -------- -------- -------
Investment income--net.................................. 2.10%* 1.91% 1.34% 2.00% 2.31%
------------ ------- -------- -------- -------
------------ ------- -------- -------- -------
------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................ $ 44,003 $39,715 $ 14,778 $ 4,144 $ 3,084
------------ ------- -------- -------- -------
------------ ------- -------- -------- -------
Portfolio turnover...................................... 9.65% 10.94% 58.44% 22.88% 31.38%
------------ ------- -------- -------- -------
------------ ------- -------- -------- -------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized
** Total investment returns exclude insurance-related fees and expenses.
++ Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
118
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
PRIME BOND FUND
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN ---------------------------------------------------------------------
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL FOR THE SIX
STATEMENTS. MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1995 1994 1993 1992 1991
------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................. $ 11.12 $ 12.64 $ 12.04 $ 12.02 $ 11.18
------------ -------- -------- -------- --------
Investment income--net................................ .42 .77 .70 .79 .90
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net.................. .90 (1.36) .71 .04 .84
------------ -------- -------- -------- --------
Total from investment operations...................... 1.32 (.59) 1.41 .83 1.74
------------ -------- -------- -------- --------
Less dividends and distributions:
Investment income--net.............................. (.42) (.76) (.70) (.81) (.90)
Realized gain on investments--net................... -- -- (.11) -- --
In excess of realized gain on investments--net...... -- (.17) -- -- --
------------ -------- -------- -------- --------
Total dividends and distributions..................... (.42) (.93) (.81) (.81) (.90)
------------ -------- -------- -------- --------
Net asset value, end of period........................ $ 12.02 $ 11.12 $ 12.64 $ 12.04 $ 12.02
------------ -------- -------- -------- --------
------------ -------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share.................... 12.09%++ (4.80%) 12.02% 7.27% 16.41%
------------ -------- -------- -------- --------
------------ -------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................. .51%* .54% .63% .78% .78%
------------ -------- -------- -------- --------
------------ -------- -------- -------- --------
Investment income--net................................ 7.25%* 6.74% 5.86% 6.76% 7.94%
------------ -------- -------- -------- --------
------------ -------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).............. $445,015 $391,234 $314,091 $ 84,810 $ 39,743
------------ -------- -------- -------- --------
------------ -------- -------- -------- --------
Portfolio turnover.................................... 60.97% 139.89% 115.26% 82.74% 152.18%
------------ -------- -------- -------- --------
------------ -------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
++ Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
119
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
QUALITY EQUITY FUND
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN ---------------------------------------------------------------------
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL FOR THE SIX
STATEMENTS. MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1995+ 1994+ 1993 1992 1991
------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................. $ 27.74 $ 29.02 $ 25.48 $ 26.35 $ 21.72
------------ -------- -------- -------- --------
Investment income--net................................ .26 .38 .24 .34 .43
Realized and unrealized gain (loss) on investments and
foreign
currency transactions--net.......................... 2.61 (.74) 3.46 .32 5.75
------------ -------- -------- -------- --------
Total from investment operations...................... 2.87 (.36) 3.70 .66 6.18
------------ -------- -------- -------- --------
Less dividends and distributions:
Investment income--net.............................. (.20) (.25) (.12) (.58) (.50)
Realized gain on investments--net................... (.59) (.67) (.04) (.95) (1.05)
------------ -------- -------- -------- --------
Total dividends and distributions..................... (.79) (.92) (.16) (1.53) (1.55)
------------ -------- -------- -------- --------
Net asset value, end of period........................ $ 29.82 $ 27.74 $ 29.02 $ 25.48 $ 26.35
------------ -------- -------- -------- --------
------------ -------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share.................... 10.68%++ (1.20%) 14.57% 2.69% 30.18%
------------ -------- -------- -------- --------
------------ -------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................. .51%* .54% .62% .74% .79%
------------ -------- -------- -------- --------
------------ -------- -------- -------- --------
Investment income--net................................ 1.88%* 1.39% 1.07% 1.54% 1.87%
------------ -------- -------- -------- --------
------------ -------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).............. $554,852 $464,360 $309,420 $ 87,977 $ 55,005
------------ -------- -------- -------- --------
------------ -------- -------- -------- --------
Portfolio turnover.................................... 53.13% 60.57% 88.25% 62.54% 55.83%
------------ -------- -------- -------- --------
------------ -------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the period.
++ Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
120
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
RESERVE ASSETS FUND
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN ---------------------------------------------------------------------
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL FOR THE SIX
STATEMENTS. MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1995 1994 1993 1992 1991
------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ -------- -------- -------- --------
Investment income--net................................ .0274 .0371 .0268 .0320 .0546
Realized and unrealized gain (loss) on investments and
foreign
currency transactions--net.......................... .0017 (.0009) .0005 .0007 .0014
------------ -------- -------- -------- --------
Total from investment operations...................... .0291 .0362 .0273 .0327 .0560
------------ -------- -------- -------- --------
Less dividends and distributions:
Investment income--net.............................. (.0274) (.0362) (.0268) (.0320) (.0546)
Realized gain on investments--net................... (.0002) -- (.0005) (.0005) (.0014)+
------------ -------- -------- -------- --------
Total dividends and distributions..................... (.0276) (.0362) (.0273) (.0325) (.0560)
------------ -------- -------- -------- --------
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.................... 5.60%* 3.80% 2.77% 3.28% 5.68%
------------ -------- -------- -------- --------
------------ -------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................. .62%* .65% .70% .79% .79%
------------ -------- -------- -------- --------
------------ -------- -------- -------- --------
Investment income--net, and realized gain (loss)
on investments--net................................. 5.52%* 2.73% 2.73% 3.36% 5.64%
------------ -------- -------- -------- --------
------------ -------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).............. $ 29,524 $ 32,196 $ 30,168 $ 26,767 $ 34,362
------------ -------- -------- -------- --------
------------ -------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Includes unrealized gain (loss). (See Note 1g).
</TABLE>
See Notes to Financial Statements.
121
<PAGE>
--------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
WORLD INCOME FOCUS FUND
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN -------------------------------------------------------------
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL FOR THE SIX
STATEMENTS. MONTHS ENDED FOR THE YEAR FOR THE PERIOD
JUNE 30, ENDED JULY 1, 1993++ TO
INCREASE (DECREASE) IN NET ASSET VALUE: 1995+ DECEMBER 31, 1994 DECEMBER 31, 1993
-----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 9.17 $ 10.38 $ 10.00
------------ ---------- --------
Investment income--net.............................. .42 .76 .25
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net............ .37 (1.19) .33
------------ ---------- --------
Total from investment operations.................... .79 (.43) .58
------------ ---------- --------
Less dividends and distributions:
Investment income--net............................ (.42) (.76) (.20)
In excess of realized gain on investments--net.... -- (.02) --
------------ ---------- --------
Total dividends and distributions................... (.42) (.78) (.20)
------------ ---------- --------
Net asset value, end of period...................... $ 9.54 $ 9.17 $ 10.38
------------ ---------- --------
------------ ---------- --------
-----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share.................. 8.82%++ (4.21%) 5.90%++
------------ ---------- --------
------------ ---------- --------
-----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses............................................ .69%* .75% .94%*
------------ ---------- --------
------------ ---------- --------
Investment income--net.............................. 9.11%* 8.01% 6.20%*
------------ ---------- --------
------------ ---------- --------
-----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............ $ 77,704 $ 75,150 $50,737
------------ ---------- --------
------------ ---------- --------
Portfolio turnover.................................. 63.52% 117.58% 54.80%
------------ ---------- --------
------------ ---------- --------
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the period.
++ Commencement of Operations.
++ Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
122
<PAGE>
--------------------------------------------------------------------------------
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 17 separate funds ('Funds'
or 'Fund') offering 17 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. 'ML & Co.'), and Family Life Insurance
Company (an insurance company not affiliated with ML & Co.) for their 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 Developing Capital Markets Fund, Global Strategy Focus Fund,
International Bond Fund, Natural Resources Focus Fund and the World Income Focus
Fund, all of which are classified as 'non-diversified.' These unaudited
financial statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature. 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 value.
Portfolio securities which are traded on stock exchanges are valued at the
last sale price as of the close of business on the day the securities are being
valued, or lacking any sales, at the closing bid price. Securities traded in the
over-the-counter market are valued at the bid price 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. Futures contracts are valued at settlement price at the
close of the applicable exchange. 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.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its portfolio
against adverse movements in the equity, debt and currency markets. Losses may
arise due to changes in the value of the contract or if the counterparty does
not perform under the contract.
* Forward foreign exchange contracts--Certain 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
Fund's records. However, the effect operations is recorded from the date the
Funds enter into such contracts. Premiums or discount is amortized over the life
of the contracts.
* Options--Certain Funds may write and purchase call and put options. When a
Fund writes 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 security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or deducted from)
the basis of the security acquired or deducted from (or added to) the proceeds
of the security sold. When an option expires (or the 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 exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
* Futures contracts--Certain Funds may purchase or sell futures contracts and
options on such futures contracts for the purpose of hedging the market risk on
existing securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific future date and
at a specific price or yield. Upon entering into a contract, the Fund deposits
and maintains as collateral such initial margin as required by the exchange on
which the transaction is effected. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
* Foreign currency options and futures--Certain Funds may also purchase or sell
listed or over-the-counter foreign currency options, foreign currency futures
and related options on foreign currency futures as a short or long hedge against
possible variations in foreign exchange rates. Such transactions may be effected
with respect to hedges on non-US dollar denominated securities owned by the
Fund, sold by the Fund but not yet delivered, or committed or anticipated to be
purchased by the Fund.
123
<PAGE>
--------------------------------------------------------------------------------
(c) Foreign currency transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets and liabilities expressed in
foreign currencies into US dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on investments.
(d) Income taxes--It is the policy of the Fund's of the Company to comply
with the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its taxable income
to its shareholders. Therefore, no Federal income tax provision is required.
Under the applicable foreign tax law, a withholding tax may be imposed on
interest, dividends and capital gains at various rates.
(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 Fund is 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. Distributions in excess of realized
capital gains are due primarily to differing tax treatments for futures
transactions and post-October losses.
2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES:
The Company has entered into an Investment Advisory Agreement with Merrill Lynch
Asset Management, L.P. ('MLAM'). The general partner of MLAM is Princeton
Services, Inc. ('PSI'), an indirect, wholly-owned subsidiary of ML & Co., which
is the limited partner. MLAM is responsible for the management of the Company's
portfolios and provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Funds.
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: 0.75% of
the average daily net assets of the Equity Growth Fund, 0.65% of the average
daily net assets of each of the Flexible Strategy Fund, Natural Resources Focus
Fund and Global Strategy Focus Fund, 0.55% of the average daily net assets of
the American Balanced Fund, 0.50% of the average daily net assets of each of the
Domestic Money Market Fund and Intermediate Government Bond Fund, 0.60% of the
average daily net assets of each of the Basic Value Focus Fund, International
Bond Fund, World Income Focus Fund, Global Utility Focus Fund, 0.75% of the
average daily net assets of the International Equity Focus Fund, 1.00% of the
average daily net assets of the Developing Capital Markets Focus Fund, and at
the following annual rates with respect to the other Funds:
<TABLE>
<S> <C>
RESERVE ASSETS FUND
-------------------------------------------------
Portion of average daily value of net
assets of the Fund:
-------------------------------------------------
ADVISORY
FEE
-------------------------------------------------
Not exceeding $500 million............ 0.500%
In excess of $500 million but not
exceeding $750 million................ 0.425%
In excess of $750 million but not
exceeding $1 billion.................. 0.375%
-------------------------------------------------
QUALITY EQUITY FUND
-------------------------------------------------
Portion of average daily value of net
assets of the Fund:
-------------------------------------------------
ADVISORY
FEE
-------------------------------------------------
Not exceeding $250 million............ 0.500%
In excess of $250 million but not
exceeding $300 million................ 0.450%
In excess of $300 million but not
exceeding $400 million................ 0.425%
In excess of $400 million............. 0.400%
-------------------------------------------------
PRIME BOND FUND AND HIGH CURRENT
INCOME FUND
-------------------------------------------------
Portion of aggregate average daily
value of net assets of both Funds:
</TABLE>
<TABLE>
<S> <C> <C>
ADVISORY FEE
----------------------------------------------------------
HIGH CURRENT PRIME
INCOME BOND
FUND FUND
----------------------------------------------------------
Not exceeding $250 million......... 0.55% 0.50 %
In excess of $250 million but not
more than $500 million............. 0.50% 0.45 %
In excess of $500 million but not
more than $750 million............. 0.45% 0.40 %
In excess of $750 million.......... 0.40% 0.35 %
----------------------------------------------------------
</TABLE>
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
laws or the regulations thereunder. Under the most restrictive state regulations
presently in effect, the Investment Adviser 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 next $70 million of average daily net assets, and 1.5% of
124
<PAGE>
--------------------------------------------------------------------------------
average daily net assets in excess thereof. 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 the Developing Capital Markets Focus Fund for the six months ended June
30, 1995, MLAM earned fees of $186,080, of which $1,344 was waived.
For Intermediate Government Bond Fund for the six months ended June 30, 1995,
MLAM earned fees of $57,154, all of which was voluntarily waived. MLAM has also
reimbursed the Fund $18,246 in additional expenses.
For the International Bond Fund for the six months ended June 30, 1995, MLAM
earned fees of $30,695, all of which was voluntarily waived. MLAM has also
reimbursed the Fund for $22,083 in additional expenses.
Merrill Lynch, Pierce, Fenner & Smith Inc. ('MLPF&S'), an affiliate of MLAM,
earned commissions on the execution of portfolio security transactions
aggregating $5,400 in the American Balanced Fund, $8,374 in the Basic Value
Focus Fund, $6,415 in the Developing Capital Markets Focus Fund, $10,077 in the
Flexible Strategy Fund, $62,493 in the Global Strategy Focus Fund, $1,920 in the
Global Utility Focus Fund, $13,007 in the International Equity Focus Fund, $180
in the Natural Resources Focus Fund, and $17,540 in the Quality Equity Fund.
Accounting services are provided to the Company by MLAM at cost.
American Balanced Fund, Global Utility Focus Fund, High Current Income Fund,
Intermediate Government Bond Fund, Prime Bond Fund and World Income Focus Fund
paid Merrill Lynch Security Pricing Service, an affiliate of MLPF&S, $151, $265,
$2,309, $74, $2,227, and $4,583, respectively, for security price quotations to
compute the net asset value of each Fund.
Merrill Lynch Financial Data Services, Inc. ('MLFDS'), a wholly-owned
subsidiary of ML & Co., is the Company's transfer agent.
Certain officers and/or directors of the Company are officers and/or
directors of MLAM, PSI, MLFDS, MLPF&S, MLLA, Merrill Lynch Funds Distributor,
Inc., a wholly-owned subsidiary of Merrill Lynch Group, Inc., which is the
Fund's distributor, and/or ML & Co.
3. INVESTMENTS:
Purchases and sales of investments, excluding short-term securities for the six
months ended June 30, 1995 were as follows:
<TABLE>
<S> <C> <C>
PURCHASES SALES
----------------------------------------------------------
American Balanced Fund............................ $ 21,146,487 $ 24,254,529
Basic Value Focus Fund............................ 94,482,446 54,760,391
Developing Capital Markets Focus Fund............. 14,513,765 11,465,308
Domestic Money Market Fund........................ -- --
Equity Growth Fund................................ 124,395,037 90,838,257
Flexible Strategy Fund............................ 161,018,944 157,320,123
Global Strategy Focus Fund........................ 62,854,015 106,225,755
Global Utility Focus Fund......................... 2,957,674 9,610,005
High Current Income Fund.......................... 90,457,367 47,882,782
Intermediate Government Bond Fund................. 25,829,845 9,311,094
International Bond Focus Fund..................... 13,102,013 12,479,379
International Equity Focus Fund................... 84,597,826 100,284,052
Natural Resources Focus Fund...................... 8,853,192 3,518,984
Prime Bond Fund................................... 282,715,712 237,460,414
Quality Equity Fund............................... 313,971,611 233,257,366
Reserve Assets Fund............................... -- --
World Income Focus Fund........................... 41,784,718 41,407,124
----------------------------------------------------------
</TABLE>
Transactions in options written for the six months ended June 30, 1995, were
as follows:
<TABLE>
<S> <C> <C>
FLEXIBLE STRATEGY FUND
----------------------------------------------------------
NUMBER
OF PREMIUMS
CALL OPTIONS WRITTEN SHARES RECEIVED
----------------------------------------------------------
Outstanding call options written, beginning of
period........................................ 16,000 $ 20,528
Options written................................ 59,000 73,306
Options closed................................. (56,000) (62,093)
Options exercised.............................. (19,000) (31,741)
-------------- ------------
Outstanding call options written, end of
period........................................ -- $ --
-------------- ------------
-------------- ------------
----------------------------------------------------------
INTERNATIONAL EQUITY FOCUS FUND
----------------------------------------------------------
NUMBER
OF PREMIUMS
CALL OPTIONS WRITTEN CONTRACTS RECEIVED
----------------------------------------------------------
Outstanding call options written, beginning of
period........................................ 3 $ 357,100
Options written................................ 7 844,479
Options expired................................ (1) (493,584)
Options closed................................. (3) (14,463)
Options exercised.............................. (1) (43,417)
-------------- ------------
Outstanding call options written, end of
period........................................ 5 $ 650,115
-------------- ------------
-------------- ------------
----------------------------------------------------------
</TABLE>
125
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INTERNATIONAL EQUITY FOCUS FUND
----------------------------------------------------------
NUMBER
OF PREMIUMS
PUT OPTIONS WRITTEN CONTRACTS RECEIVED
----------------------------------------------------------
Outstanding put options written, beginning of
period........................................ 3 $ 215,822
Options written................................ 1 34,300
Options expired................................ (1) (79,711)
Options closed................................. (1) (34,300)
-------------- ------------
Outstanding put options written, end of
period........................................ 2 $ 136,111
-------------- ------------
-------------- ------------
----------------------------------------------------------
QUALITY EQUITY FUND
----------------------------------------------------------
NUMBER OF PREMIUMS
CALL OPTIONS WRITTEN SHARES RECEIVED
----------------------------------------------------------
Outstanding call options written, beginning of
period........................................ 28,700 $ 35,167
Options written................................ 165,000 202,369
Options expired................................ (4,400) (5,551)
Options closed................................. (106,000) (110,673)
Options exercised.............................. (83,300) (121,312)
-------------- ------------
Outstanding call options written, end of
period........................................ -- $ --
-------------- ------------
-------------- ------------
----------------------------------------------------------
WORLD INCOME FOCUS FUND
----------------------------------------------------------
NUMBER OF PREMIUMS
CALL OPTIONS WRITTEN CONTRACTS RECEIVED
----------------------------------------------------------
Outstanding call options written, beginning of
period........................................ 2 $ 10,100
Options written................................ 3 50,019
Options expired................................ (2) (29,504)
Options closed................................. (2) (4,100)
-------------- ------------
Outstanding call options written, end of
period........................................ 1 $ 26,515
-------------- ------------
-------------- ------------
----------------------------------------------------------
NUMBER OF PREMIUMS
PUT OPTIONS WRITTEN CONTRACTS RECEIVED
----------------------------------------------------------
Outstanding put options written, beginning of
period........................................ -- --
Options written................................ 4 89,417
Options closed................................. (2) (36,414)
-------------- ------------
Outstanding put options written, end of
period........................................ 2 $ 53,003
-------------- ------------
-------------- ------------
----------------------------------------------------------
</TABLE>
At June 30, 1995, net unrealized appreciation/
depreciation and aggregate cost for Federal income tax purposes were as follows:
<TABLE>
<S> <C> <C> <C> <C>
DEVELOPING
BASIC CAPITAL DOMESTIC
AMERICAN VALUE MARKETS MONEY
BALANCED FOCUS FOCUS MARKET
FUND FUND FUND FUND
----------------------------------------------------------
Appreciated
securities............. $ 12,853,336 $ 24,500,497 $ 2,533,477 $ 206,244
Depreciated
securities............. (3,399,675) (5,441,761) (3,025,333) (20,255)
------------ ------------ ----------- ------------
Net unrealized
appreciation
(depreciation)......... $ 9,453,661 $ 19,058,736 $ (491,856) $ 185,989
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Cost for Federal income
tax purposes*.......... $183,384,358 $221,617,463 $42,844,710 $309,674,129
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
GLOBAL GLOBAL
EQUITY FLEXIBLE STRATEGY UTILITY
GROWTH STRATEGY FOCUS FOCUS
FUND FUND FUND FUND
----------------------------------------------------------
Appreciated securities.... $ 33,856,930 $ 27,224,867 $ 35,704,574 $ 7,196,265
Depreciated securities.... (4,572,079) (5,161,032) (25,173,170) (8,393,732)
------------ ------------ ------------- ------------
Net unrealized
appreciation
(depreciation)............ $ 29,284,851 $ 22,063,835 $ 10,531,404 $ (1,197,467)
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
Cost for Federal income
tax purposes*............. $213,570,874 $290,006,747 $ 509,751,494 $134,287,387
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
----------------------------------------------------------
HIGH INTERMEDIATE INTERNATIONAL
CURRENT GOVERNMENT INTERNATIONAL EQUITY
INCOME BOND BOND FOCUS
FUND FUND FUND FUND
----------------------------------------------------------
Appreciated securities.... $ 5,882,704 $ 957,005 $ 540,413 $ 12,534,475
Depreciated securities.... (15,559,154) -- (38,174) (11,894,786)
------------ ------------ ------------- ------------
Net unrealized
appreciation
(depreciation)............ $ (9,676,450) $ 957,005 $ 502,239 $ 639,689
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
Cost for Federal income
tax purposes*............. $321,572,971 $ 27,187,304 $ 9,522,965 $222,637,496
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
----------------------------------------------------------
NATURAL
RESOURCES PRIME QUALITY RESERVE
FOCUS BOND EQUITY ASSETS
FUND FUND FUND FUND
----------------------------------------------------------
Appreciated securities.... $ 3,630,750 $ 16,628,978 $ 70,684,595 $ 21,755
Depreciated securities.... (1,965,143) (4,491,804) (12,408,651) (3,865)
------------ ------------ ------------- ------------
Net unrealized
appreciation.............. $ 1,665,607 $ 12,137,174 $ 58,275,944 $ 17,890
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
Cost for Federal income
tax purposes*............. $ 42,221,821 $425,574,887 $ 508,327,314 $ 29,452,476
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
WORLD
INCOME
FOCUS
FUND
----------------------------------------------------------
Appreciated securities.......................................... $ 1,561,513
Depreciated securities.......................................... (2,784,117)
------------
Net unrealized depreciation..................................... $ (1,222,604)
------------
------------
Cost for Federal income tax purposes*........................... $ 77,083,163
------------
------------
----------------------------------------------------------
</TABLE>
* Net of premiums paid on options purchased and premiums received for options
written.
At June 30, 1995, net realized and unrealized gains (losses) were as follows:
----------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
AMERICAN BASIC VALUE
BALANCED FUND FOCUS FUND
-------------------------- ---------------------------
Realized Unrealized Realized Unrealized
Gains Gains Gains Gains
----------------------------------------------------------
Long-term investments.... $ 726,838 $ 9,453,661 $ 3,229,410 $ 19,058,736
----------- ------------ ------------ ------------
$ 726,838 $ 9,453,661 $ 3,229,410 $ 19,058,736
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
DEVELOPING CAPITAL DOMESTIC MONEY
MARKETS FUND MARKET FUND
-------------------------- ---------------------------
Unrealized
Realized Gains Realized Unrealized
Losses (Losses) Gains Gains
----------------------------------------------------------
Long-term investments.... $(3,298,257) $ (491,856) -- --
Short-term investments... (60) -- $ 20,319 $ 185,989
Foreign currency
transactions............. (162,124) 125 -- --
----------- ------------ ------------ ------------
$(3,460,441) $ (491,731) $ 20,319 $ 185,989
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
----------------------------------------------------------
</TABLE>
126
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
EQUITY GROWTH FLEXIBLE STRATEGY
FUND FUND
-------------------------- ---------------------------
Realized Realized
Gains Unrealized Gains Unrealized
(Losses) Gains (Losses) Gains
----------------------------------------------------------
Long-term investments.... $16,665,905 $ 29,284,851 $ (880,779) $ 22,063,835
Short-term investments... (393) -- (349) --
Options written.......... -- -- 48,220 --
Foreign currency
transactions............. -- -- 1,245,310 28,847
----------- ------------ ------------ ------------
$16,665,512 $ 29,284,851 $ 412,402 $ 22,092,682
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
----------------------------------------------------------
GLOBAL STRATEGY GLOBAL UTILITY
FOCUS FUND FOCUS FUND
-------------------------- ---------------------------
Realized Unrealized Unrealized
Gains Gains Realized Gains
(Losses) (Losses) Losses (Losses)
----------------------------------------------------------
Long-term investments.... $(2,996,490) $ 10,531,404 $ (1,100,334) $ (1,197,467)
Short-term investments... 116 -- -- --
Forward foreign exchange
contracts................ (634,600) (6,879,120) -- --
Foreign currency
transactions............. (16,523) 25,130 (7,013) 776
----------- ------------ ------------ ------------
$(3,647,497) $ 3,677,414 $ (1,107,347) $ (1,196,691)
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
----------------------------------------------------------
HIGH CURRENT INTERMEDIATE GOVERNMENT
INCOME FUND BOND FUND
-------------------------- ---------------------------
Realized
Realized Unrealized Gains Unrealized
Losses Losses (Losses) Gains
----------------------------------------------------------
Long-term investments.... $ (819,427) $ (9,676,450) $ 194,164 $ 957,005
Short-term investments... -- -- (1,388) --
----------- ------------ ------------ ------------
$ (819,427) $ (9,676,450) $ 192,776 $ 957,005
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
----------------------------------------------------------
INTERNATIONAL BOND INTERNATIONAL EQUITY
FUND FOCUS FUND
-------------------------- ---------------------------
Realized Unrealized Realized Unrealized
Gains Gains Gains Gains
(Losses) (Losses) (Losses) (Losses)
----------------------------------------------------------
Long-term investments.... $ 57,595 $ 502,239 $ (6,792,747) $ 1,691,345
Short-term investments... 150 -- 3,774 (34,021)
Foreign currency
transactions............. 232,754 6,717 (999,003) (126,089)
Forward foreign exchange
contracts................ (128,207) (16,966) (1,222,004) (780,885)
Investment stock index
futures contracts........ -- -- (5,130,643) (1,999,012)
Currency options
written.................. -- -- 339,300 (1,254,956)
Currency options
purchased................ -- -- (523,911) (311,361)
Investment options
purchased................ -- -- (50,500) (436,175)
Investment options
written.................. -- -- 235,759 (581,460)
----------- ------------ ------------ ------------
$ 162,292 $ 491,990 $(14,139,975) $ (3,832,614)
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
----------------------------------------------------------
NATURAL RESOURCES PRIME BOND
FOCUS FUND FUND
-------------------------- ---------------------------
Realized
Gains Unrealized Realized Unrealized
(Losses) Gains Losses Gains
----------------------------------------------------------
Long-term investments.... $ 355,356 $ 1,665,607 $ (1,491,180) $ 12,137,174
Short-term investments... (16) -- (377) --
Foreign currency
transactions............. (2,029) 1,309 -- --
----------- ------------ ------------ ------------
$ 353,311 $ 1,666,916 $ (1,491,557) $ 12,137,174
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
----------------------------------------------------------
QUALITY EQUITY RESERVE ASSETS
FUND FUND
-------------------------- ---------------------------
Realized
Gains Unrealized Realized Unrealized
(Losses) Gains Gains Gains
----------------------------------------------------------
Long-term investments.... $ 2,171,546 $ 58,275,944 -- --
Short-term investments... (224) -- $ 6,177 $ 17,890
Investment options
written.................. 90,677 -- -- --
----------- ------------ ------------ ------------
$ 2,261,999 $ 58,275,944 $ 6,177 $ 17,890
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
----------------------------------------------------------
WORLD INCOME
FOCUS FUND
--------------------------
Realized Unrealized
Gains Gains
(Losses) (Losses)
----------------------------------------------------------
Long-term investments.... $ (105,370) $ (1,222,663)
Short-term investments... (135) 59
Currency options
written.................. (2,458) (960)
Currency options
purchased................ (94,037) (8,124)
Financial futures
contract................. (194,064) 101,993
Foreign currency
transactions............. 134,719 21,084
Forward foreign exchange
contracts................ (492,770) 27,780
----------- ------------
$ (754,115) $ (1,080,831)
----------- ------------
----------- ------------
----------------------------------------------------------
</TABLE>
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares were as follows:
<TABLE>
<S> <C> <C>
AMERICAN BALANCED FUND
----------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
----------------------------------------------------------
Shares sold........................................ 1,385,240 $ 18,975,155
Shares issued to shareholders in reinvestment of
dividends........................................ 257,838 3,297,754
------------ ------------
Total issued....................................... 1,643,078 22,272,909
Shares redeemed.................................... (250,396) (3,409,057)
------------ ------------
Net increase....................................... 1,392,682 $ 18,863,852
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<S> <C> <C>
----------------------------------------------------------
For the Year Ended Dollar
December 31, 1994 Shares Amount
----------------------------------------------------------
Shares sold........................................ 4,208,232 $ 56,940,222
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 308,791 4,107,209
------------ ------------
Total issued....................................... 4,517,023 61,047,431
Shares redeemed.................................... (565,599) (7,507,172)
------------ ------------
Net increase....................................... 3,951,424 $ 53,540,259
------------ ------------
------------ ------------
----------------------------------------------------------
</TABLE>
127
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
BASIC VALUE FOCUS FUND
----------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
----------------------------------------------------------
Shares sold........................................ 4,608,647 $ 51,536,030
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 825,393 8,674,887
------------ ------------
Total issued....................................... 5,434,040 60,210,917
Shares redeemed.................................... (454,531) (4,877,302)
------------ ------------
Net increase....................................... 4,979,509 $ 55,333,615
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<S> <C> <C>
----------------------------------------------------------
For the Year Ended Dollar
December 31, 1994 Shares Amount
----------------------------------------------------------
Shares sold........................................ 10,501,448 $115,102,779
Shares issued to shareholders in reinvestment of
dividends........................................ 87,071 928,253
------------ ------------
Total issued....................................... 10,588,519 116,031,032
Shares redeemed.................................... (99,204) (1,078,972)
------------ ------------
Net increase....................................... 10,489,315 $114,952,060
------------ ------------
------------ ------------
----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
DEVELOPING CAPITAL MARKETS FOCUS FUND
----------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
----------------------------------------------------------
Shares sold........................................ 1,181,149 $ 10,496,745
Shares issued to shareholders in reinvestment of
dividends........................................ 36,009 332,002
------------ ------------
Total issued....................................... 1,217,158 10,828,747
Shares redeemed.................................... (404,610) (3,496,260)
------------ ------------
Net increase....................................... 812,548 $ 7,332,487
------------ ------------
------------ ------------
----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
For the Period May 2, 1994+ to Dollar
December 31, 1994 Shares Amount
----------------------------------------------------------
Shares sold........................................ 3,089,579 $ 31,702,122
Shares issued to shareholders in reinvestment of
dividends and distributions...................... -- --
------------ ------------
Total issued....................................... 3,089,579 31,702,122
Shares redeemed.................................... (33,668) (339,498)
------------ ------------
Net increase....................................... 3,055,911 $ 31,362,624
------------ ------------
------------ ------------
----------------------------------------------------------
</TABLE>
+Prior to May 2, 1994 (commencement of operations), the Fund issued 800,000
shares to MLAM for $8,000,000.
<TABLE>
<S> <C> <C>
----------------------------------------------------------
DOMESTIC MONEY MARKET FUND
----------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
----------------------------------------------------------
Shares sold........................................ 43,034,018 $ 43,034,018
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 9,150,056 9,150,056
------------ ------------
Total issued....................................... 52,184,074 52,184,074
Shares redeemed.................................... (104,741,495) (104,741,495)
------------ ------------
Net decrease....................................... (52,557,421) $(52,557,421)
------------ ------------
------------ ------------
----------------------------------------------------------
For the Year Ended Dollar
December 31, 1994 Shares Amount
----------------------------------------------------------
Shares sold........................................ 458,988,915 $458,988,915
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 11,425,228 11,425,228
------------ ------------
Total issued....................................... 470,414,143 470,414,143
Shares redeemed.................................... (277,547,347) (277,547,347)
------------ ------------
Net increase....................................... 192,866,796 $192,866,796
------------ ------------
------------ ------------
----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
EQUITY GROWTH FUND
----------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
----------------------------------------------------------
Shares sold........................................ 1,620,761 $ 33,980,201
Shares issued to shareholders in reinvestment of
dividends........................................ 20,250 383,329
------------ ------------
Total issued....................................... 1,641,011 34,363,530
Shares redeemed.................................... (125,761) (2,615,822)
------------ ------------
Net increase....................................... 1,515,250 $ 31,747,708
------------ ------------
------------ ------------
----------------------------------------------------------
For the Year Ended Dollar
December 31, 1994 Shares Amount
----------------------------------------------------------
Shares sold........................................ 4,244,767 $ 84,908,525
Shares issued to shareholders in reinvestment of
distributions.................................... 43,323 895,916
------------ ------------
Total issued....................................... 4,288,090 85,804,441
Shares redeemed.................................... (178,315) (3,486,970)
------------ ------------
Net increase....................................... 4,109,775 $ 82,317,471
------------ ------------
------------ ------------
----------------------------------------------------------
</TABLE>
128
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
----------------------------------------------------------
FLEXIBLE STRATEGY FUND
----------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
----------------------------------------------------------
Shares sold........................................ 796,188 $ 11,735,787
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 607,526 8,602,567
------------ ------------
Total issued....................................... 1,403,714 20,338,354
Shares redeemed.................................... (566,020) (8,317,955)
------------ ------------
Net increase....................................... 837,694 $ 12,020,399
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<S> <C> <C>
----------------------------------------------------------
For the Year Ended Dollar
December 31, 1994 Shares Amount
----------------------------------------------------------
Shares sold........................................ 6,842,583 $103,469,524
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 708,891 10,747,143
------------ ------------
Total issued....................................... 7,551,474 114,216,667
Shares redeemed.................................... (904,823) (13,574,190)
------------ ------------
Net increase....................................... 6,646,651 $100,642,477
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<S> <C> <C>
----------------------------------------------------------
GLOBAL STRATEGY FOCUS FUND
----------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
----------------------------------------------------------
Shares sold........................................ 966,124 $ 11,535,239
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 683,787 7,849,886
------------ ------------
Total issued....................................... 1,649,911 19,385,125
Shares redeemed.................................... (2,699,933) (31,286,792)
------------ ------------
Net decrease....................................... (1,050,022) $(11,901,667)
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<S> <C> <C>
----------------------------------------------------------
For the Year Ended Dollar
December 31, 1994 Shares Amount
----------------------------------------------------------
Shares sold........................................ 22,592,355 $274,822,981
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 668,929 8,022,134
------------ ------------
Total issued....................................... 23,261,284 282,845,115
Shares redeemed.................................... (1,462,140) (17,755,958)
------------ ------------
Net increase....................................... 21,799,144 $265,089,157
------------ ------------
------------ ------------
----------------------------------------------------------
GLOBAL UTILITY FOCUS FUND
----------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
----------------------------------------------------------
Shares sold........................................ 424,607 $ 4,041,113
Shares issued to shareholders in reinvestment of
dividends........................................ 253,502 2,403,099
------------ ------------
Total issued....................................... 678,109 6,444,212
Shares redeemed.................................... (888,655) (8,641,188)
------------ ------------
Net decrease....................................... (210,546) $ (2,196,976)
------------ ------------
------------ ------------
----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
----------------------------------------------------------
For the Year Ended Dollar
December 31, 1994 Shares Amount
----------------------------------------------------------
Shares sold........................................ 4,446,449 $ 45,407,839
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 408,041 3,993,505
------------ ------------
Total issued....................................... 4,854,490 49,401,344
Shares redeemed.................................... (1,299,696) (12,707,196)
------------ ------------
Net increase....................................... 3,554,794 $ 36,694,148
------------ ------------
------------ ------------
----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
HIGH CURRENT INCOME FUND
----------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
----------------------------------------------------------
Shares sold........................................ 3,659,843 $ 39,960,203
Shares issued to shareholders in reinvestment of
dividends........................................ 1,349,319 14,591,354
------------ ------------
Total issued....................................... 5,009,162 54,551,557
Shares redeemed.................................... (750,214) (8,238,726)
------------ ------------
Net increase....................................... 4,258,948 $ 46,312,831
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<S> <C> <C>
----------------------------------------------------------
For the Year Ended Dollar
December 31, 1994 Shares Amount
----------------------------------------------------------
Shares sold........................................ 10,081,695 $116,511,262
Shares issued to shareholders in reinvestment of
dividends........................................ 1,840,902 20,563,966
------------ ------------
Total issued....................................... 11,922,597 137,075,228
Shares redeemed.................................... (1,381,220) (15,761,890)
------------ ------------
Net increase....................................... 10,541,377 $121,313,338
------------ ------------
------------ ------------
----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
INTERMEDIATE GOVERNMENT BOND FUND
----------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
----------------------------------------------------------
Shares sold........................................ 1,129,073 $ 11,433,869
Shares issued to shareholders in reinvestment of
dividends........................................ 63,126 637,793
------------ ------------
Total issued....................................... 1,192,199 12,071,662
Shares redeemed.................................... (255,183) (2,547,378)
------------ ------------
Net increase....................................... 937,016 $ 9,524,284
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<S> <C> <C>
----------------------------------------------------------
For the Period May 2, 1994+ to Dollar
December 31, 1994 Shares Amount
----------------------------------------------------------
Shares sold........................................ 1,580,746 $ 15,798,020
Shares issued to shareholders in reinvestment of
dividends........................................ 22,294 222,052
------------ ------------
Total issued....................................... 1,603,040 16,020,072
Shares redeemed.................................... (16,719) (166,738)
------------ ------------
Net increase....................................... 1,586,321 $ 15,853,334
------------ ------------
------------ ------------
----------------------------------------------------------
</TABLE>
+ Prior to May 2, 1994 (commencement of operations), the Fund issued 200,000
shares to MLAM for $2,000,000.
129
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
----------------------------------------------------------
INTERNATIONAL BOND FUND
----------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
----------------------------------------------------------
Shares sold........................................ 186,756 $ 1,928,966
Shares issued to shareholders in reinvestment of
dividends........................................ 36,713 371,075
------------ ------------
Total issued....................................... 223,469 2,300,041
Shares redeemed.................................... (266,231) (2,739,620)
------------ ------------
Net decrease....................................... (42,762) $ (439,579)
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<S> <C> <C>
----------------------------------------------------------
For the Period May 2, 1994+ to Dollar
December 31, 1994 Shares Amount
----------------------------------------------------------
Shares sold........................................ 532,215 $ 5,218,763
Shares issued to shareholders in reinvestment of
dividends........................................ 27,759 271,353
------------ ------------
Total issued....................................... 559,974 5,490,116
Shares redeemed.................................... (35,652) (348,847)
------------ ------------
Net increase....................................... 524,322 $ 5,141,269
------------ ------------
------------ ------------
----------------------------------------------------------
</TABLE>
+ Prior to May 2, 1994 (commencement of operations), the Fund issued 500,000
shares to MLAM for $5,000,000.
<TABLE>
<S> <C> <C>
----------------------------------------------------------
INTERNATIONAL EQUITY FOCUS FUND
----------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
----------------------------------------------------------
Shares sold........................................ 797,738 $ 8,063,701
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 898,136 9,331,626
------------ ------------
Total issued....................................... 1,695,874 17,395,327
Shares redeemed.................................... (1,449,325) (14,343,934)
------------ ------------
Net increase....................................... 246,549 $ 3,051,393
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<S> <C> <C>
----------------------------------------------------------
For the Year Ended Dollar
December 31, 1994 Shares Amount
----------------------------------------------------------
Shares sold........................................ 15,762,751 $177,512,550
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 155,170 1,705,946
------------ ------------
Total issued....................................... 15,917,921 179,218,496
Shares redeemed.................................... (149,766) (1,678,473)
------------ ------------
Net increase....................................... 15,768,155 $177,540,023
------------ ------------
------------ ------------
----------------------------------------------------------
NATURAL RESOURCES FOCUS FUND
----------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
----------------------------------------------------------
Shares sold........................................ 334,680 $ 3,658,803
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 26,502 283,043
------------ ------------
Total issued....................................... 361,182 3,941,846
Shares redeemed.................................... (234,478) (2,584,938)
------------ ------------
Net increase....................................... 126,704 $ 1,356,908
------------ ------------
------------ ------------
----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
----------------------------------------------------------
For the Year Ended Dollar
December 31, 1994 Shares Amount
----------------------------------------------------------
Shares sold........................................ 2,431,502 $ 26,836,585
Shares issued to shareholders in reinvestment of
dividends........................................ 7,751 83,948
------------ ------------
Total issued....................................... 2,439,253 26,920,533
Shares redeemed.................................... (134,053) (1,481,555)
------------ ------------
Net increase....................................... 2,305,200 $ 25,438,978
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<S> <C> <C>
----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
PRIME BOND FUND
----------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
----------------------------------------------------------
Shares sold........................................ 1,924,613 $ 21,970,621
Shares issued to shareholders in reinvestment of
dividends........................................ 1,317,809 15,020,751
------------ ------------
Total issued....................................... 3,242,422 36,991,372
Shares redeemed.................................... (1,378,830) (15,883,583)
------------ ------------
Net increase....................................... 1,863,592 $ 21,107,789
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<S> <C> <C>
----------------------------------------------------------
For the Year Ended Dollar
December 31, 1994 Shares Amount
----------------------------------------------------------
Shares sold........................................ 9,962,468 $118,092,307
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 2,421,862 28,191,568
------------ ------------
Total issued....................................... 12,384,330 146,283,875
Shares redeemed.................................... (2,052,800) (23,633,675)
------------ ------------
Net increase....................................... 10,331,530 $122,650,200
------------ ------------
------------ ------------
</TABLE>
----------------------------------------------------------
<TABLE>
<S> <C> <C>
QUALITY EQUITY FUND
----------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
----------------------------------------------------------
Shares sold........................................ 1,600,882 $ 45,005,179
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 499,307 13,289,664
------------ ------------
Total issued....................................... 2,100,189 58,294,843
Shares redeemed.................................... (232,689) (6,555,002)
------------ ------------
Net increase....................................... 1,867,500 $ 51,739,841
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<S> <C> <C>
----------------------------------------------------------
For the Year Ended Dollar
December 31, 1994 Shares Amount
----------------------------------------------------------
Shares sold........................................ 6,335,594 $177,474,655
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 218,564 6,013,863
------------ ------------
Total issued....................................... 6,554,158 183,488,518
Shares redeemed.................................... (476,786) (13,262,021)
------------ ------------
Net increase....................................... 6,077,372 $170,226,497
------------ ------------
------------ ------------
----------------------------------------------------------
</TABLE>
130
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
----------------------------------------------------------
RESERVE ASSETS FUND
----------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
----------------------------------------------------------
Shares sold........................................ 4,534,807 $ 4,534,807
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 834,702 834,702
------------ ------------
Total issued....................................... 5,369,509 5,369,509
Shares redeemed.................................... (8,087,743) (8,087,743)
------------ ------------
Net decrease....................................... (2,718,234) $ (2,718,234)
------------ ------------
------------ ------------
----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
For the Year Ended Dollar
December 31, 1994 Shares Amount
----------------------------------------------------------
Shares sold........................................ 19,180,364 $ 19,180,364
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 1,250,777 1,250,777
------------ ------------
Total issued....................................... 20,431,141 20,431,141
Shares redeemed.................................... (18,368,014) (18,368,014)
------------ ------------
Net increase....................................... 2,063,127 $ 2,063,127
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<S> <C> <C>
----------------------------------------------------------
WORLD INCOME FOCUS FUND
----------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1995 Shares Amount
----------------------------------------------------------
Shares sold........................................ 140,146 $ 1,305,025
Shares issued to shareholders in reinvestment of
dividends........................................ 368,009 3,406,549
------------ ------------
Total issued....................................... 508,155 4,711,574
Shares redeemed.................................... (560,580) (5,214,364)
------------ ------------
Net decrease....................................... (52,425) $ (502,790)
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<S> <C> <C>
----------------------------------------------------------
For the Year Ended Dollar
December 31, 1994 Shares Amount
----------------------------------------------------------
Shares sold........................................ 3,613,258 $ 35,765,361
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 565,499 5,699,784
------------ ------------
Total issued....................................... 4,178,757 41,465,145
Shares redeemed.................................... (870,578) (8,296,766)
------------ ------------
Net increase....................................... 3,308,179 $ 33,168,379
------------ ------------
------------ ------------
----------------------------------------------------------
</TABLE>
5. CAPITAL LOSS CARRYFORWARD:
At December 31, 1994, the Company had capital loss carryforwards of
approximately $634,000 in the American Balanced Fund, all of which expires in
2002; $91,000 in the Developing Capital Markets Focus Fund, all of which expires
in 2002; $1,982,000 in the Equity Growth Fund, all of which expires in 2002;
$1,462,000 in the Global Utility Focus Fund, all of which expires in 2002;
$420,000 in the High Current Income Fund, of which $119,000 expires in 1999 and
$301,000 expires in 2002; $5,000 in the Intermediate Government Bond Fund, all
of which expires in 2002; $27,000 in the International Bond Fund, all of which
expires in 2002; $15,024,000 in the Prime Bond Fund, all of which expires in
2002; and $2,008,000 in the World Income Focus Fund, all of which expires in
2002. These amounts will be available to offset like amounts of any future
taxable gains.
6. LOANED SECURITIES:
At June 30, 1995, the Prime Bond Fund held US Treasury bonds having an aggregate
value of approximately $28,049,000 as collateral for portfolio securities loaned
having a market value of approximately $26,724,000.
7. COMMITMENTS:
At June 30, 1995, the following Portfolios had entered into foreign exchange
contracts under which they agreed to purchase and sell various foreign
currencies with approximate values as follows:
<TABLE>
<S> <C> <C>
----------------------------------------------------------
FUND PURCHASE SELL
----------------------------------------------------------
Flexible Strategy Fund $ 6,617,000 $255,000
Developing Capital Markets Fund -- 7,600
International Equity Focus Fund 511,000 --
World Income Focus Fund 104,000 136,000
----------------------------------------------------------
</TABLE>
8. SUBSEQUENT EVENT:
On July 6, 1995, the Board of Directors declared net investment income dividends
per share payable on July 13, 1995 to shareholders of record as of July 5, 1995
as follows:
<TABLE>
<S> <C>
----------------------------------------------------------
ORDINARY
FUND INCOME
----------------------------------------------------------
American Balanced Fund.......................................... $ .286396
Basic Value Focus Fund.......................................... .087120
Developing Capital Markets Focus Fund........................... --
Domestic Money Market Fund...................................... --
Equity Growth Fund.............................................. .048698
Flexible Strategy Fund.......................................... .230857
Global Strategy Focus Fund...................................... .215906
Global Utility Focus Fund....................................... .114803
High Current Income Fund........................................ --
Intermediate Government Bond Fund............................... --
International Bond Fund......................................... --
International Equity Focus Fund................................. --
Natural Resources Focus Fund.................................... .113817
Prime Bond Fund................................................. .068254
Quality Equity Fund............................................. .253123
Reserve Assets Fund............................................. --
World Income Focus Fund......................................... --
----------------------------------------------------------
</TABLE>
131
<PAGE>
----------------------------------------------------------
MERRILL LYNCH
VARIABLE SERIES FUNDS, INC.
----------------------------------------------------------
PRINCIPAL OFFICE OF THE FUNDS
Box 9011
Princeton, NJ 08543-9011
DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
CUSTODIAN
For all Funds except Developing Capital
Markets Focus Fund:
The Bank of New York
90 Washington Street
New York, NY 10286
For Developing Capital Markets Focus Fund:
Chase Manhattan Bank
Chase Metro Tech Center
Brooklyn, NY 11245
TRANSFER AGENT
Merrill Lynch
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
DIRECTORS AND OFFICERS
Arthur Zeikel Adrian Holmes
President Vice President
Joe Grills Vincent T. Lathbury III
Director Vice President
Walter Mintz Peter Lehman
Director Vice President
Melvin R. Seiden Fredric Lutcher
Director Vice President
Stephen B. Swensrud Jay C. Harbeck
Director Vice President
Harry Woolf Robert Parish
Director Vice President
Terry K. Glenn Grace Pineda
Executive Vice President Vice President
Bernard J. Durnin Kevin Rendino
Senior Vice President Vice President
N. John Hewitt Walter Rogers
Senior Vice President Vice President
Christopher G. Ayoub Aldona A. Schwartz
Vice President Vice President
Andrew Bascand Stephen Silverman
Vice President Vice President
Donald C. Burke Gerald M. Richard
Vice President
Treasurer
Denis B. Cummings Michael J. Hennewinkel
Vice President
Secretary
Joel Heymsfeld
Vice President
132
<PAGE>
