<PAGE>
MERRILL LYNCH VARIABLE
SERIES FUNDS, INC.
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
- -Equity Growth Fund
- -Global Utility Focus Fund
- -International Bond Fund
- -International Equity Focus Fund
- -World Income Focus Fund
INVESTMENT PORTFOLIOS AVAILABLE
WITH PRIME PLAN I, II, III, IV, V,
VI, 7, PRIME PLAN INVESTOR, DIRECTED
LIFE AND DIRECTED LIFE 2 VARIABLE LIFE
INSURANCE POLICIES:
- -Basic Value Focus Fund
- -Developing Capital Markets Focus Fund
- -Equity Growth Fund
- -Global Utility Focus Fund
- -International Equity Focus Fund
Semi-Annual Report
June 30, 1996
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
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
SEMI-ANNUAL REPORT--JUNE 30, 1996
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 views on 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 13 to 18 of this report to shareholders.
THE ENVIRONMENT
The pace of economic activity picked up over the course of the six-month period
ended June 30, 1996. As a result, recessionary concerns have abated. Investors
are now focusing on prospects for an overheating economy, increasing
inflationary pressures, and the potential for monetary policy tightening by the
Federal Reserve Board. With more robust economic growth, a sharp rise in prices
for crude oil and agricultural commodities, and expectations of escalating wage
pressures, long-term interest rates (as measured by the yield on the 30-year US
Treasury bond) rose to in excess of 7%.
Inflationary concerns were heightened further shortly after the close of the
June period with a stronger-than-expected employment report for June.
Unemployment fell to a six-year low, and hourly wages rose sharply. This
mounting evidence of a tighter labor market and rising labor costs suggested to
many investors that the US central bank would be forced to raise short-term
interest rates in the coming months. In the weeks ahead, investors will continue
to monitor economic data releases to determine the potential for monetary policy
tightening by the Federal Reserve Board. Evidence of more moderate, but
sustained, economic activity would be a beneficial development for the US
capital markets.
AMERICAN BALANCED FUND
As of June 30, 1996, the asset allocation for American Balanced Fund was: US
equities, 50% of net assets; US bonds, 40%; and cash and cash reserves,10%.
Earlier in the year, we reduced the Fund's duration in the US bond sector to
under 3.5 years. In recent weeks, there was further evidence that the US economy
is more vigorous than was the case during the early months of 1996. This
environment may encourage the Federal Reserve Board to raise short-term interest
rates in the coming months and result in a further rise in intermediate-term and
long-term interest rates. Given this outlook, a relatively short duration
remains justified, in our opinion.
In recent months, as we moved to complete portfolio restructuring, we also
increased our commitment to US equities. We believe stock selection, rather than
industry focus, is more likely to yield positive results. We continued to
allocate significant assets to focused and restructured companies which enjoy
dominant franchises within their respective industries. Cincinnati Milacron,
Inc. is an example of a new position which fulfills these criteria. Other new
positions which appeared reasonably valued in relation to their asset values or
earnings growth included International Business Machines Corp. and Procter &
Gamble Co. We also continued to enlarge the representation in quality technology
companies, where new positions included Intel Corp. and Microsoft Corp.
BASIC VALUE FOCUS FUND
Our prior strategy of overweighting the cyclical, retail and technology sectors
benefited our performance for the six-month period ended June 30, 1996. During
the first week of March, the US Government reported that employment for February
had increased by a much higher-than-expected 700,000 jobs. As a result, the US
bond market sold off sharply for fear that a strengthening economy would
preclude further reductions in short-term interest rates by the Federal Reserve
Board. Subsequent employment reports further justified this strength as did
gross domestic product (GDP), manufacturing output, housing and personal income
statistics. In response, investors began to return to economically-sensitive
stocks in the belief that the earnings growth of these companies would
accelerate as the economy improved.
Our overweighting in the credit cyclicals and capital goods, technology,
consumer cyclicals and basic industries sectors determined our performance for
the period. Specifically helping us were stocks in the long- neglected retail
sector, including Woolworth Corp., Dillard Department Stores Inc. and Charming
Shoppes, Inc. All benefited from better-than-expected sales in response to the
rebound in consumer spending. Storage Technology Corp. performed admirably as a
result of two consecutive better-than-expected earnings reports as well as an
announced alliance with International Business Machines Corp. to jointly sell
high-end storage products. Applied Bioscience International Inc., a leading
outside contract researcher for the drug industry, was the subject of a takeover
by Pharmaceutical Product Development, Inc. for more than double our average
cost of $5.50 per share.
During the six-month period ended June 30, 1996, we purchased $134 million in
stock while selling $118.7 million. Our new positions added during the period
were Advanced Micro Devices, Inc., Apple Computer, Inc., Fingerhut Companies,
Inc.,
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Giddings & Lewis, Inc., Hanson PLC, Hechinger Company, Hibernia Corporation,
Louisiana-Pacific Corp., Micron Technology, Inc., PFF Bancorp, Inc., Reebok
International Ltd., Scitex Corp. Ltd., The Seagram Company Ltd., Texas
Instruments Inc. and US West Media Group, Inc.
Our biggest commitment in the period was to Hanson PLC, a British conglomerate.
Hanson's shares came under severe pressure after the company announced its
intention to reduce its dividend and de- merge into four separately traded
companies in the chemical, tobacco, energy and construction industries. In
response, British institutions sold the stock because many had owned Hanson for
its hefty 6% dividend yield. We believe the potential value of the separately
traded companies far exceeds the current price of Hanson stock, given each
company's ability to manage its businesses autonomously. Many details of
Hanson's current de-merger plan will be released this summer, including debt
allocation and pro-forma earnings. We expect the stock will react favorably as
more information becomes public.
We purchased Apple Computer, Inc. following the announcement that Gil Amelio,
former Chairman and Chief Executive Officer of National Semiconductor Corp.,
would be the new CEO of the company. Apple shares peaked in July 1995 at $51 and
have since been a generally poor performer. Apple has suffered from declining
market share and mounting losses as it has attempted to retain premium pricing
for its proprietary MacIntosh operating system. In a market dominated primarily
by Microsoft Windows and Intel Pentium chips, Apple has failed to develop a
strategy which will allow it to compete for market share in a world of
increasing pricing competition. We expect Mr. Amelio to streamline the cost
structure, take financial charges for obsolete inventory and outline a plan for
Apple to license its operating system to outside vendors. Although it will be
some time before Apple returns to profitability, we view the shares as
discounting much of the bad news, and believe Apple will eventually regain much
of its lost luster as a preeminent designer of personal computers.
We increased our weighting in the out-of-favor semiconductor industry by adding
Advanced Micro Devices, Inc. and Micron Technology, Inc. to the portfolio and
increasing our positions in National Semiconductor Corp. and Texas Instruments
Inc. The group has come under severe pressure in response to excess supply of
manufacturing capacity and inventory buildups at major personal computer
manufacturers. Although the news may get worse before it gets better, valuations
are quite attractive and we believe the future is bright for these companies.
In the latest period, we completed sales in 14 companies while reducing our
holdings in 24 positions. All 14 eliminations, except for The Limited, Inc.,
were sold with gains, and most were sold because the stocks had reached our
price targets. These eliminations included Bay Apartment Communities, Inc.,
Comsat Corp., Darden Restaurants, Inc., Eaton Corp., Felcor Suite Hotels, Inc.,
Foundation Health Corp., The Limited, Inc., MCI Communications Corp., Merck &
Co., Inc., Olin Corp., Swift Energy Co., SyQuest Technology, Inc., TIG Holdings,
Ltd. and Western Digital Corp.
Looking forward, the pace of economic activity will dictate our performance as
we remain overweighted in the consumer cyclical sector (19.39% of the
portfolio's net assets versus 8.06% for the S&P 500) and the capital
goods/technology sector (23.41% versus 15.57%). Although many of our
economically- sensitive companies, including Ford Motor Co., General Motors
Corp., International Paper Co. and ASARCO Inc., began to outperform the broad
stock market averages following the March jobs report, these same stocks
recently came under severe pressure in response to fears that the Federal
Reserve Board will raise interest rates enough to slow the economy. Our
overweighting in the out-of-favor technology sector, particularly
semiconductors, may prove to be early. However, the sector is suffering through
what we believe to be a temporary inventory correction which, although may last
longer than many experts anticipate, is not a prelude to a secular decline. At
June 30, 1996, the Fund traded at half the Standard & Poor's 500 Composite on a
price/book value per share valuation and at two-thirds of the price/earnings
ratio. As always, we will look for individual equities that are trading at
attractive price/book ratios and price/earnings ratios or that have
above-average dividend yields.
DEVELOPING CAPITAL MARKETS FOCUS FUND
For the six-month period ended June 30, 1996, the total return for Developing
Capital Markets Focus Fund was +11.69%, outperforming the unmanaged Morgan
Stanley Capital International Emerging Markets Free Index return of +10.67%.
Beneficial to performance was the Fund's overweighting in Argentina and Brazil,
whose markets performed well with total returns of +14.80% and +28.41%,
respectively. Also contributing was the Fund's underweighting in South Africa,
which had a total return of -7.14% during the same six-month period.
During the six-month period ended June 30, 1996, the climate improved for
emerging markets investments. After the dramatic correction touched off by
rising US interest rates and the Mexican peso crisis in 1994, emerging markets
stabilized in the early months
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of this year. This resulted from the improved outlook in Latin America and
eastern Europe, where incipient economic recoveries from recessions had begun.
The political environment was relatively calm, especially considering the
important elections that took place in Russia, Poland, India and Israel.
Most important, the valuations of emerging markets stocks had reached very
attractive levels after two years of weak stock market performance. At the same
time, earnings growth was satisfactory and additional economic and capital
market reforms were implemented. In light of these developments, we reduced the
Fund's cash position significantly, and increased its concentration in several
key stocks.
Over the past six months, we decreased the Fund's cash position from 21.9% of
net assets to 11.7%. Fixed-income investments were 1.0% of net assets at June
30, 1996, essentially unchanged from year-end 1995. We reduced the Fund's
investments in the Middle East/Africa regions from 12.8% of net assets to 10.2%
at June 30, 1996, and reduced the Fund's weighting in the Pacific region from
38.1% to 37.3% of net assets. We increased substantially the Fund's investments
in the European region from 7.3% to 12.9%, and in Latin America from 19.9% to
27.9%.
In eastern Europe, we increased investments in Poland, where we bought shares
of Bank Rozwoju Eksportu S.A. (BRE), a bank engaged primarily in trade finance.
One of the few private banks in Poland, it has a unique partnership with
CommerzBank in Germany, Poland's main trading partner. Because of the
CommerzBank relationship, BRE is able to tap into the growing market of German
companies doing business in Poland. As the Polish economy recovers, we believe
BRE is well-positioned to participate in financing investment in infrastructure,
international trade and the overall increase in demand for long-term financing.
We maintained a large position in South African gold mining companies such as
Driefontein Consolidated Ltd. and Kinross Mines Ltd. Aside from being net
beneficiaries of a decline in the value of the Rand, these companies had gold
reserves that were extremely undervalued in comparison with mining companies in
other countries. In the case of Kinross, the company will soon benefit from the
recently announced Evander mines merger. Gencor, the parent company, will
combine its four mines into Kinross, forming a new company called Evander Gold
Mines, providing Kinross additional gold reserves to mine. On a market
capitalization per gold reserves valuation, Kinross' valuation has become even
more attractive. Furthermore, management contracts will be eliminated, reducing
costs and giving management more accountability to Kinross' shareholders.
In Asia, we bought Technology Resources Industries BHD (TRI), a Malaysian
cellular services provider. TRI, the dominant company in cellular phone services
in Malaysia, recently signed a letter of intent with Deutsche Telekom AG whereby
the German company will acquire approximately 20% of TRI. This alliance would
bring not only technical enhancements to TRI but also inject a large amount of
capital. We believe that investors have underestimated potential cellular phone
penetration in Malaysia. Throughout the world, cellular communications have
exhibited excellent growth, especially in developing countries where less-
developed infrastructures make cellular services
a rapid and cost effective means of establishing
communication.
In Brazil, we added to the Fund's position in Telecomunicacoes Brasileiras
S.A.--Telebras. Throughout the year, we observed that governmental policies
regarding the telecommunications sector were translating into higher corporate
earnings for the company. In late 1995, the Finance Ministry in Brazil approved
an initial rebalancing of telephone tariffs and the first inflation adjustment
since the implementation of the Real Plan. The rebalancing eliminated
cross-subsidies between different services, and increased local and
long-distance rates. This resulted in a sharp earnings increase for Telebras,
with earnings for the first five months of 1996 reported at approximately
US$1.14 billion, in comparison with earnings of approximately US$803 million for
all of 1995. Telebras was one of our best performers during the last six months.
We are optimistic on the long-term prospects for emerging markets. However, we
remind our shareholders that the emerging markets are more volatile than the
securities markets of more developed countries.
DOMESTIC MONEY MARKET FUND
For the six-month period ended June 30, 1996, the Domestic Money Market Fund's
net annualized yield was 4.95%. The Fund's 7-day yield as of June 30, 1996 was
4.91%*. The average portfolio maturity was 54 days at June 30,1996 compared to
79 days at December 31, 1995.
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The Fund's composition at the end of June and as of our last report is detailed
below:
<TABLE>
<CAPTION>
<S> <C> <C>
- ----------------------------------------------------------------------------
ISSUE 6/30/96 12/31/95
- ----------------------------------------------------------------------------
Commercial Paper. . . . . . . . . . . . . . . . . . 45.4% 37.6%
Corporate Notes. . . . . . . . . . . . . . . . . . 8.0 7.8
Funding Agreements. . . . . . . . . . . . . . . . . 1.8 --
Master Notes. . . . . . . . . . . . . . . . . . . . 1.1 1.0
Medium-Term Notes. . . . . . . . . . . . . . . . . 2.9 6.8
US Government Agency & Instrumentality Obligations--
Discount. . . . . . . . . . . . . . . . . . . . . 1.5 12.4
US Government Agency & Instrumentality Obligations--
Non-Discount. . . . . . . . . . . . . . . . . . . 39.2 35.5
Other Assets Less Liabilities/Liabilities in Excess
of Other Assets. . . . . . . . . . . . . . . . . . 0.1 (1.1)
- ---------------------------------------------------- ---------- -----------
Total. . . . . . . . . . . . . . . . . . . . . . . 100.0 % 100.0 %
------ ------
------ ------
</TABLE>
EQUITY GROWTH FUND
Emerging growth stocks marginally underperformed their larger-cap counterparts
in the first six months of 1996, as the economy slowed slightly from last year's
rate of growth. Looking at the US economy, some signs of strength are currently
evident, which has caused some investors concern about higher interest rates and
inflation. We believe that the "bond vigilantes" will address the former which,
in turn, will take care of the latter. Regarding equity market strategy, we
recognize that there has not been a significant correction (5%- 10%) for over
five years. However, we expect a slow growth, low-inflation environment for the
balance of 1996, which should provide a favorable setting for emerging growth
equities, as their faster relative rates of growth should remain attractive to
investors. Also, the recent strength of the US dollar creates appeal for the
small-cap and mid-cap growth areas, since their revenues tend to be less
sensitive to currency fluctuations.
During the six-month period ended June 30, 1996, we reduced cash equivalents
from 16.2% of net assets to 10.8%. Significant sector increases were: technology
(from 16.0% to 21.2%) and energy (from 7.3% to 10.8%). The only significant
sector decrease was industrial (11.6% to 8.7%). The technology area became more
attractive earlier this year as many stocks had declined dramatically from their
peaks last summer. We selectively added to our technology holdings (Microchip
Technology, Inc., System Software Associates, Inc. and Activision Inc.). During
June, disappointing earnings pre-announcements shook investors and, combined
with end-of-quarter "window dressing" (in which many institutional investors
sold their technology holdings), many technology companies' shares declined
precipitously. We expect a rebound in the technology sector after second quarter
earnings are reported. Higher energy prices have translated into buoyant demand
for both oil and gas producers as well as energy service companies (Trico Marine
Services, Inc. and Barrett Resources Corp.). Although we continue to find the
industrial area attractive, certain companies exceeded their price targets and
were sold (IMCO Recycling, Inc., Lydall Inc., Continental Waste Industries, Inc.
and Chicago Miniature Lamp, Inc.).
The most significant contribution to performance in the six-month period ended
June 30, 1996 (approximately 2.7%) came from the industrial sector. Other
significant contributions came from the healthcare sector (approximately 2.2%),
the consumer sector (approximately 1.2%) and the energy sector (approximately
1.1%). Significant underperformance (approximately -2.9%) came from the
technology sector, which represented fully 60% of the Fund's underperformance
relative to the small-cap indexes.
Characteristics of the Fund on June 30, 1996 included a median market
capitalization of $545 million, with 30% of holdings (29 of 98) having a
capitalization of under $250 million and 29% (28 of 98) with a capitalization
over $1 billion.
While the economy appears to be picking up steam, there continues to be pockets
of weakness, as evidenced by the growing number of earnings disappointments.
Thus, 1996 is proving to be challenging. The stock market appears to be growing
more speculative, as evidenced by the record number of initial public offerings
and the spike in NASDAQ trading volume relative to the New York Stock Exchange.
Increased volatility in the equity markets led us to seek areas where earnings
are more predictable. As an example, we increased the energy sector
significantly during the past few months. As oil and gas prices moved higher,
earnings estimates for many energy companies did not change, and we viewed the
resulting valuations quite compelling. In addition, we purchased our first
convertible bond issue in a growing company: Sanifil, Inc. Another example of
our efforts at volatility dampening included the purchase of two rapidly-growing
real estate investment trusts, National Golf Properties Inc. and National Health
Investors, Inc. Collectively, these holdings are expected to
assist in providing attractive investment returns to shareholders.
Future commitments to the portfolio and additions to existing holdings will be
made where enticing growth prospects can be purchased at reasonable valuations.
Our investment discipline, including target prices and sector allocations, are
examined regularly and reevaluated whenever it is deemed necessary. We are
likely to maintain significant holdings (15%-30%
of net assets) in both the technology and healthcare sectors. Reductions will be
made selectively where
4
<PAGE>
individual issues have achieved their target prices or where sector fundamentals
have been unfavorably impacted by economic conditions. Our cash position will
fluctuate between 5% and 20% of net assets as market conditions warrant and as
attractive purchase candidates present themselves.
FLEXIBLE STRATEGY FUND
As of June 30, 1996, the asset allocation of Flexible Strategy Fund was: US
equities, 52% of net assets; foreign equities, 19%; US bonds, 15%; foreign
bonds, 5%; and cash reserves, 9%.
In the US bond sector, we reduced the Fund's duration to under 3.5 years
because we believed that evidence of a stronger US economy may result in a
further rise in US interest rates. In the foreign bond sector, after
re-establishing commitments in two-year and three-year German bonds and Italian
fixed-income securities in March, we established positions in other
higher-yielding European bond markets, such as Spain and Sweden. Our investments
were in bonds in the two-year to five-year maturity range. The returns from
these bonds should be enhanced by a convergence of yields in these markets with
those in Germany. The factors expected to cause this convergence are a
lackluster German economy, an accommodative monetary policy by the Bundesbank,
and solid or better fiscal and monetary rectitude in their economies. This
should allow for interest rate cuts by the central banks of Italy, Spain and
Sweden, while enabling their currencies to strengthen against the Deutschemark.
In recent months, as we moved to complete Fund restructuring, we increased the
commitment to US equities. We believe stock selection, rather than industry
focus, is more likely to yield positive results. We continued to allocate
significant assets to focused and restructured companies which enjoy dominant
franchises within their respective industries. Cincinnati Milacron, Inc. is an
example of a new position which fulfills these criteria. Other new investments
which appeared reasonably valued in relationship to their asset values or
earnings growth included International Business Machines Corp. and Procter &
Gamble Co. We also continued to enlarge the Fund's investments in quality
technology companies, where new positions included Intel Corp. and Microsoft
Corp.
While increasing the foreign equity allocation, we focused our commitments in
Europe and invested in companies such as Michelin (C.G.D.E.), Henkel KGaA and
Nokia Corp. We also enlarged the Fund's representation in Latin America through
commitments such as Telecomunicacoes Brasileiras S.A.--Telebras and Companhia
Cervejaria Brahma S.A. PN in Brazil. New investments in Asia included San Miguel
Corp. in the Philippines. The Fund's largest commitment in the foreign equity
sector is in Japan, with new positions established in Eisai Co. Ltd. and
Matsushita Electric Industrial Co., Ltd.
Overall, our expectation of a relatively synchronized global economic recovery
led us to allocate the largest proportion of foreign equity assets to the
capital equipment area, including electronics and electrical equipment. The
Fund's most significant underweighted area is the finance sector, including
banking, insurance and real estate, because the economic environment we
anticipate will not be conducive to declining interest rates.
GLOBAL STRATEGY FOCUS FUND
As of June 30, 1996, the asset allocation for Global Strategy Focus Fund was:
US equities, 40% of net assets; foreign equities, 36%; foreign bonds, 21%; and
cash reserves, 3%.
In the fixed-income sector, we shifted assets from US bonds to foreign bonds
during the second quarter of 1996. This change reflected our belief that
evidence of a stronger US economy reduces the appeal of US bonds relative to
securities in selected foreign markets. In the foreign bond sector, after
initiating commitments in two-year and three-year German bonds in March, we
established positions in the higher-yielding European bond markets, namely
Italy, Spain and Sweden. Commitments were in bonds in the two-year to five- year
maturity range. The returns from these bonds may be enhanced by the convergence
of yields in these markets with those in Germany in response to a lackluster
German economy, an accommodative monetary policy by the Bundesbank and solid or
better fiscal and monetary rectitude in their economies. This should allow for
interest rate cuts by the central banks of Italy, Spain and Sweden, even while
enabling their currencies to strengthen versus the Deutschemark.
In recent months, as we moved to complete portfolio restructuring, we also
increased our commitment to US equities. We believe stock selection, rather than
industry focus, is more likely to yield positive results. We have continued to
allocate significant assets to focused and restructured companies which enjoy
dominant franchises within their respective industries. Cincinnati Milacron,
Inc. is an example of a new position which fulfills these criteria. Other new
positions which appeared reasonably valued in relation to their asset values or
earnings growth included International Business Machines Corp. and Procter &
Gamble Co. We also continued to enlarge the representation in quality technology
companies, where new positions included Intel Corp. and Microsoft Corp.
5
<PAGE>
While increasing our foreign equity allocation, we focused on commitments in
Europe, including Michelin S.A. (C.G.D.E.), Henkel KGaA and Nokia Corp. We also
enlarged representation in Latin America through commitments such as
Telecomunicacoes Brasileiras S.A.--Telebras and Companhia Cervejaria Brahma S.A.
P.N. in Brazil, and in Asia where new positions included San Miguel Corp. in the
Philippines. We reduced our position in Japan through the sale of a number of
positions, including Kamigumi Co., Ltd. and Dai Nippon Printing Co., Ltd.
Overall, our expectation of a relatively synchronized global economic recovery
has led us to allocate the largest portion of foreign equity assets to the
capital equipment area, including electronics and electrical equipment. The most
significant underweighting is in the finance area, including banking, insurance
and real estate, since the economic environment we anticipate would not be
conducive to declining interest rates.
GLOBAL UTILITY FOCUS FUND
Global Utility Focus Fund outperformed the broad global utility benchmark
during the six-month period ended June 30, 1996. During this period, the
unmanaged Financial Times/Standard & Poor's (S&P)--Actuaries World Utilities
Index had a total return of +2.44% as compared to +6.34% for the Fund.
The Fund's positive relative performance for the six- month period ended June
30, 1996 was driven primarily by investments in European utility equities.
European equity investments in the Fund accounted for 22.0% of net assets.
Strength in Europe was fueled by a very strong performance by the Italian
utility sector, which had a six-month total rate of return of +29.76%; by Spain,
with a total return of +21.51%; and by Austria, with a total return of +24.15%.
These three individual markets accounted for approximately 8.85% of the
Financial Times/S&P--Actuaries World Utilities Index but are overweighted at
10.63% of the Global Utility Focus Fund's assets. We attributed the strength in
these European markets to improving fundamentals, lower interest rates and
changing political climates. In addition, the Fund remained underweighted in the
UK utility market, which recently accounted for 10.29% of the Index as compared
to 5.34% of the Fund's net assets. According to the data compiled by the
Financial Times/S&P--Actuaries World Utilities Index, the UK utility market had
a total rate of return of -4.52% for the six-month period ended June 30, 1996.
The weakness in the UK utility market resulted from both regulatory and upcoming
election concerns, in our view.
Also adding to the Fund's better total rate of return performance relative to
the Index was its overweighted position in emerging Latin American markets. More
specifically, 7.4% of the Fund's net assets was invested in Latin American
countries relative to about 3.0% for the Index. Although the Fund had
approximately 8.3% of its net assets invested in the Asian/ Pacific Basin Region
as compared to 18.8% for the Index, the Fund benefited from this underweighting
because this region had a -1.34% total return overall that was primarily driven
by Japan's -3.36% return, where the Fund had no investments.
While the US-based utility market weakened in the first half of the year from
its strong relative performance in 1995, the Fund's domestic holdings made a
positive contribution to total performance for the six-month period ended June
30, 1996. Performance in this geographical region was principally driven by the
natural gas sector which rose by 13% (price only), as measured by the S&P
Natural Gas Index. This sector accounted for approximately 11% of the Fund's net
assets at June 30, 1996, well in excess of the sector's weighting of about 2% in
the benchmark Financial Times/S&P--Actuaries World Utilities Index. The strength
in the domestic natural gas sector was driven by rising prices and low storage
levels. The weakness in the domestic electric utility sector primarily resulted
from an increase in long-term interest rates as measured by the 30-year US
Treasury bond, which rose from 6% to 7%. The domestic telephone stocks were also
negatively impacted (registering a -4.5% price- only decline) by rising interest
rates, but fundamental issues such as changing regulation and the breakdown of
telephone monopolies created most of the relative weakness in this sector.
During the six-month period ended June 30, 1996, several transactions were made
in the Fund. We eliminated four holdings, Hong Kong Electric Holdings, Ltd.,
Northeast Utilities Co., Pacific Gas & Electric Company and WestCoast Energy,
Inc. In addition, we reduced our weightings in NYNEX Corp., Bell Atlantic Corp.
and US West Communications Group. In terms of new holdings in the Fund, we added
ten companies. The new positions included six domestic electric utility stocks
which have an average common stock yield of 5.5% and an average dividend payout
ratio of 72%. These new holdings further diversified our domestic electric
utility holdings, and their yields should add to the total rate of return of the
Fund. Also in the domestic portion of the portfolio, we added one new natural
gas company, AGL Resources Inc. We believe that this company will benefit from
the current positive outlook for the natural gas sector. Finally, we initiated
positions in MCI Communications Corp., the second-largest US long distance
carrier, and American Water Works Co., Inc. Additions to two existing
6
<PAGE>
domestic holdings were also made during the first half of the year. In total,
these domestic transactions resulted in an increase of $2.4 million, or
approximately 1.6%, to net assets invested in the US utility market.
Other transactions that were made during the first half of 1996 included adding
to our small positions in Portugal Telecom, S.A. and Telecomunicacoes
Brasileiras S. A.--Telebras, as well as adding to our position in the UK-based
electric generating company, National Power PLC. A new equity position was taken
in the Switzerland-based utility company, Elektrowatt AG. As a result of these
transactions coupled with price movements, the Fund had total net assets of
about $150 million on June 30, 1996, with nearly 55% invested in domestic
utility stocks, 38% in foreign utility stocks, 1% in bonds and approximately 6%
in cash.
Looking forward, we have begun to see several new utility stock offerings come
to the market, mainly the result of governments selling down their holdings.
Values appear to be found more with companies being privatized in the emerging
markets. We continue to evaluate these investment opportunities as they become
available. With long-term interest rates hovering around the 7% level and near
their peak according to several economists, we may see a bounce-back in the
prices of US-based electric utility stocks. We expect the fundamental outlook
for the domestic natural gas sector to remain positive for at least the next
year, given the current positive position of the industry. The domestic
telephone sector, with a few exceptions, may remain lackluster in terms of
performance as investors wait to see how new regulations are implemented.
HIGH CURRENT INCOME FUND
The high-yield bond market gave ground grudgingly over the six-month period
ended June 30, 1996 in the face of pressure from the weak Treasury bond market.
For the six-month period, the unmanaged Merrill Lynch High Yield Master Bond
Index returned +2.85% compared to -4.96% for the ten-year US Treasury note. Most
high-yield bond funds have produced returns superior to the Index because of a
lower weighting in BB-rated issues. This rating category is more sensitive to
Treasury yields than lower-quality
B-rated and CCC-rated issues.
High coupon income, moderate default levels, strong earnings growth and
excellent technical support from cash inflows to the high-yield market have
buoyed prices for high-yield debt securities. Although there were periods when
high-yield bonds tracked other bond types quite closely, the importance of
prospective earnings and credit risk perceptions resulted in high-yield bonds
offering very different returns than other fixed-income investments over an
extended time period. The table below reflects the correlation of investment
returns of US Treasury notes with other financial asset categories from 1980 to
1995. A perfect correlation would be 1.0, and no correlation in returns would be
0.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CORRELATION WITH US TREASURY NOTES
- --------------------------------------------------------------------
Merrill Lynch High Yield Index 0.60 Somewhat Correlated
S&P 500 0.29 Minimally Correlated
High Quality Corporate Bond Index 0.93 Highly Correlated
Mortgage Index 0.91 Highly Correlated
- --------------------------------------------------------------------
</TABLE>
We believe that high-yield bond market returns will continue to diverge from
other fixed-income investments over the next few months. However, we expect the
high-yield bond market to reverse its favorable trend and underperform US
Treasury securities. Because high-yield bonds reacted only modestly to the major
drop in Government and high-grade bond prices since February, yield spreads
tightened substantially. The yield spread between ten-year Treasury securities
and the unmanaged Merrill Lynch Master Bond Index at December 31, 1995 was 400
basis points (4%) as compared to only 313 basis points at June 30, 1996.
Historically, high-yield investors required a larger spread to compensate for
the greater credit risk of high-yield issuers. Although high-yield fundamentals
remain sound, we expect spreads to widen, causing underperformance in the
high-yield market. Furthermore, with fixed-income markets in a nervous
transition period while investors evaluate the potential for strong economic
growth in the second half of the year, we believe there is room for further
downside price risk in fixed-income investments.
There was no single decisive event affecting performance during the six-month
period ended June 30, 1996. Given the relatively extended valuation of the
high-yield market, we maintained a somewhat defensive posture. We kept cash
reserves at higher-than- normal levels, and selectively participated in
attractively priced new issues. Lower coupon, higher-quality bonds (34.6% of the
Fund's net assets) suffered the most, coincident with falling Treasury bond
prices. By the end of the period, however, BB-rated credits returned to fair
value relative to B-rated bonds, and we began to increase holdings in
better-quality companies, including Mexican media company Grupo Televisa, S.A.
and Canadian-based publisher Hollinger Inc.
A positive contributor to the Fund's performance in both the past six and 12
months was our relative overweighting in zero coupon bonds, which significantly
outperformed the high-yield market as a whole. As of June 30, 1996, the zero
coupon bond sector totaled 16.7% of net assets.
7
<PAGE>
At June 30, 1996, the Fund's cash position was 9.9% of net assets. Major
industries represented in the Fund included: communications, 5.9% of net assets;
energy, 6.2%; utilities, 6.6%; and consumer products, 5.5%. The Fund's average
maturity was 6 years, 4 months.
INTERMEDIATE GOVERNMENT BOND FUND
The acceleration of job creation, which became evident in February, adversely
impacted interest rates during the six-month period ended June 30, 1996. Job
growth averaged 233,000 per month during the first six months of 1996, compared
with an average monthly gain of only 144,000 in the same period in 1995.
Combined with surprising strength in the wage and salary index, this caused
concern that the period of favorable inflation rates may be drawing to a close.
Economic activity heated up in the second quarter, and there was speculation
that the Federal Reserve Board may reverse trend and tighten interest rates
during the summer months. Federal Reserve Board Chairman Alan Greenspan lamented
that serious discussion relating to reducing the Federal budget deficit had
faded, which caused investors additional concern. Trading activity pushed the
interest rates on long-term Treasury notes from under 6% up to 7.25% before
recovering to 6.90% at June 30, 1996.
During June, we maintained a defensive position and kept the average maturity
for the Fund at around 5.8 years. At the end of June, Treasury notes made up
80.8% of the portfolio's net assets. We are hopeful that economic growth will
slow in the third quarter of 1996, but we will remain wary by continuing to
maintain a defensive strategy.
INTERNATIONAL BOND FUND
The economies throughout Europe experienced moderating growth during the latter
part of 1995 and into 1996. This was particularly true for Germany which had
negative growth rates for the period ended June 30, 1996. Recently, there have
been signs that German economic activity was picking up, particularly in the
construction area, which was severely affected by inclement winter weather. The
United Kingdom has also showed signs of stronger growth as the inventory
adjustment was generally completed and consumer spending remained strong.
However, throughout most of Europe, economic conditions remained weak.
For most countries, the desire to meet the necessary criteria for inclusion
into the European Monetary Union has led to the setting of fiscal policies on a
stringent course. These policies, in addition to structural rigidities, have led
to a slowing in economic activity, which left monetary policy as the main tool
available to stimulate the respective economies. Since inflation for European
economies was either on a declining path or remained at low levels, central
banks have continued to lower interest rates.
The fixed-income markets that benefited from these lower interest rates were
the high-yielding markets of Italy, Spain and Sweden. The significant declines
in inflation supported their currencies and led to a substantial narrowing of
spreads to Germany. This was in contrast to the core markets which could not
completely decouple from the back-up in US yields.
In Canada, contraction in its fiscal deficit continued as exemplified by
announcements of Ontario and Quebec budgets. This led to high unemployment
levels throughout most of Canada. As in Europe, Canada's low inflation rate gave
the Bank of Canada the latitude to lower interest rates, and this is expected to
stimulate domestic demand during the course of 1996 and into 1997. In contrast,
the Reserve Bank of Australia's monetary policy remained on hold. While the
economy showed increased activity recently, it is not clear that inflation will
take a sustainable downward trend under a higher growth scenario. However, the
yield trends for both Canada and Australia were not as onerous compared to the
United States. In the former yields rose, and in the latter yields remained
within range but volatile. In both markets, yield spreads narrowed to the United
States.
In Japan, the economy is beginning to experience an upturn. The growth is a
response to the low interest rate environment that has prevailed since 1995 and
the fiscal stimulus packages that were implemented. Since the banking and
financial sectors are still weakened by massive non-performing loans, the Bank
of Japan is not expected to raise rates materially over the near term. Yields
should continue to remain near current levels.
It appears that the most likely economic scenario is one of a continued pick-up
in activity through 1996 across Europe, Canada, Australia and Japan.
Accordingly, the portfolio is positioned defensively as the risk appears to be
an upward bias on interest rates. In Europe, we expect the high-yield countries
will continue to provide more favorable returns compared to the core markets.
The portfolio is marginally overweighted in the high-yielding markets at the
shorter end of the curve. In contrast, the portfolio is positioned in the
five-year to seven-year maturity range in the core markets to benefit from their
steep yield curves. Similarly, in Canada and Australia, investments are at the
longer end of the curve to take advantage of the yield pick-up.
In Japan, recently released economic data suggested that the trend is toward
higher growth and
8
<PAGE>
higher interest rates. Therefore, the portfolio remained defensive along the
yield curve with most investments at the middle of the maturity spectrum.
Although yields in Japan remained low, asset allocation to this sector was
maintained as risks do not appear as high as in alternative markets.
With respect to currencies, the US dollar was supported by favorable interest
rate differentials and an improved trade position. Further support would appear
to be dependent on interest rate increases by the Federal Reserve Board. Until
this occurs, it would appear that the US dollar will remain in its recent
trading range. Since the Fund is considered a diversification vehicle for US
dollar-based investors, currency exposure remained broadly in line with
fixed-income allocations.
INTERNATIONAL EQUITY FOCUS FUND
International equity markets continued to rise during the six-month period
ended June 30, 1996, although they underperformed the US equity market. The
unmanaged Financial Times/S&P--Actuaries World (Ex-US) Index had a US dollar
total return of 5.01% for the six-month period ended June 30, 1996. This
compared with a 10.04% rise in the Standard & Poor's 500 Composite Index.
International Equity Focus Fund outperformed the World (Ex-US) Index and
returned +7.53%. The Fund's outperformance of 2.5 percentage points over the six
months reflected its overweighting in US dollars together with overweightings in
Asian and peripheral European equity markets.
Equity markets generally outperformed bond markets as strong economic growth
bolstered expectations concerning future interest rates. During the six- month
period, the Pacific Basin (ex Japan) contributed positively to performance,
increasing by 10.5%. During this time, our strategy was to retain an
overweighted bias toward emerging markets investments. According to the IFC
Investables Index, emerging markets equities rose 12.1%. Equity market returns,
when expressed in US dollars, were generally lower than local returns, since the
US dollar appreciated against most major currencies.
During the six-month period ended June 30, 1996, we added to the Fund's
positions in emerging Europe, Latin America and the United Kingdom, while
reducing the Fund's effective exposure in Continental Europe, Japan and the
Pacific Basin. Furthermore, we increased the Fund's overweight bias in emerging
markets, and increased its underweight positions in Continental Europe.
Substantial purchases included stocks in Mexico, such as Panamerican Beverages,
Inc. and Apasco, S.A. de C.V., and in India, such as East India Hotels Ltd.,
BSES Ltd. and Larsen & Toubro Ltd. Significant sales included stocks in the
Netherlands such as ABN-AMRO Bank, AEGON N.V., Amev N.V. and Internationale
Nederlanden Groep N.V. We eliminated the Fund's exposure to Singapore by selling
equities such as Singapore Press Holdings Ltd. and Development Bank of Singapore
Ltd. Japanese exposure was also reduced.
As of June 30, 1996, we had invested approximately 32% of the Fund's net assets
in Japan, 17% in Continental Europe, and 15% in the Pacific Basin (ex Japan).
The Fund also had an equity position of 5% in the United Kingdom, together with
10% in other equity markets, including Mexico and South Africa. The effective
cash position increased to 21% of net assets.
The continued rise in international equity markets, against the background of
higher bond yields, has reduced the attraction of many regions. As a result, the
investment strategy for the Fund has become more defensive. Overall, the Fund's
total effective equity exposure fell to approximately 83%, after adjusting for
the net expected impact of warrants and options. This compares to 88% six months
earlier.
US final demand, output and employment indicators continued to firm,
contributing to a sharp reversal in US interest rate expectations in 1996. The
US ten- year Treasury yield rose to 7.1% at June 30, 1996, from a low of 5.5% in
January. We expect continued strong economic growth in the United States as
previous excessive inventory levels are reduced. However, it is possible that
both the US housing and automobile sectors already have reached peak expansion
growth rates. Additionally, it seems likely that the US Treasury bond market has
largely discounted the strengthening in economic growth and potential
inflationary risks. At the same time, US profit margins remain at peak levels,
and there appears to be little scope for a further expansion in US earnings per
share, especially in light of the US dollar's recent strengthening. Against this
background, US equities may be exposed to a tightening in monetary policy, and
as a result a number of other equity markets may experience volatility.
Elsewhere, economic indicators continued to show a mixed picture in Europe,
while Japanese data recently showed a recovery in economic activity. In the
first quarter of 1996, European economies generally exhibited weak economic
activity in response to fiscal consolidation plans, the 1995 slowdown in world
trade growth and uncompetitive pricing. However, monetary easing continued, and
more recently imparted a potentially strong stimulus to growth. Specifically,
interest rate reductions in both the core and peripheral European economies,
combined with weaker currencies against both the US dollar and to a lesser
extent the yen, should improve both external and internal
9
<PAGE>
demand conditions. Consequently, we expect a firming of economic conditions
across Europe in the second half of 1996 and through 1997.
In Japan, the combination of easy fiscal policy, low interest rates and the
significant currency depreciation continues to result in an improved corporate
profits outlook. The banking system, while generally still confronted by a large
unrecoverable loan problem, is now generating significant operating profits,
partly as a result of the Bank of Japan's current money market operations.
Japanese growth expectations overall rose steadily, and the firming in growth
was associated with an anticipation of higher interest rates and a rise in bond
yields. If the yen remains below Y105 relative to the US dollar, we believe that
Japanese profits will continue to expand, even with only modest annual GDP
growth.
Our investment strategy for the Fund is more defensive. Although we have
retained a strategic diversified weighting in emerging markets and the Pacific
Rim, we are increasingly concerned with the valuations of many larger developed
equity markets. This concern stems from the potential correlation of these
markets with the US equity market, which our analysis suggests is probably
significantly overvalued.
The Fund's cash position of approximately 21% could increase should equity
markets continue to rise in the face of weaker bond markets and, in many cases,
what we believe to be peak profit margins. If the yen stabilizes between
Y105-Y110 relative to the US dollar, the Japanese equity market potentially
remains the most attractive of the larger markets. However, a potential risk for
the Japanese market is the strength of the economic recovery. As growth
expectations rise, an increase in interest rates may result in a firming of the
yen and a deterioration in the outlook for profits growth and equity valuations.
Although we outlined potential risks for international equity markets, the
intermediate-term outlook for continued economic growth and profit expansion
appears to offer reasonable prospects for positive returns from international
equity markets. We believe the diversified International Equity Focus Fund is
well-positioned to benefit from this outlook.
NATURAL RESOURCES FOCUS FUND
The environment for investments in the natural resources sector was positive
during the six-month period ended June 30, 1996, as investors were encouraged by
signs of accelerating global economic activity. In the United States, the
improvement in investor sentiment about revived economic growth was triggered by
the release of stronger-than expected employment figures for February and March.
This was reinforced by a number of other positive statistics such as
accelerating auto sales, an increase in consumer confidence and a
larger-than-expected 2.3% advance in real GDP for the first quarter. In Japan,
several indicators, including an upturn in industrial production, strong
machinery and construction orders, and an improvement in business and consumer
confidence, suggested that a moderate economic recovery is continuing. In the
emerging markets, growth in Asia continued to be strong, while growth in Latin
America appeared to be recovering. In contrast, the Continental European
economies generally remained weak. However, European central banks responded to
this by continuing to ease monetary policy in an attempt to stimulate economic
growth.
Investor sentiment in the underlying commodity markets was mixed during the
six-month period ended June 30, 1996. Despite the fact that Iraq may soon resume
oil exports, oil prices strengthened considerably and appear to have support
near the top of their recent trading range of $19-$21 per barrel. Natural gas
prices recovered sharply from their extreme weakness last year. While natural
gas prices may pull back somewhat from their recent highs, strong demand to
refill extremely low inventory levels should support prices above those realized
last year. Gold prices broke out of their trading range and moved sharply higher
in January and February. However, gold prices have since retraced all of these
gains as gold producers and central banks used the higher gold prices as an
opportunity to sell. Similarly, base metals prices moved higher during the first
four months of the year as inventory drawdowns continued on the major commodity
exchanges. However, uncertainty surrounding Sumitomo Metal Mining Co., Ltd.'s
disclosure of huge losses in copper trading caused copper and other base metals
prices to fall sharply. In the paper markets, the pricing environment remained
weak because of rising inventories in many paper grades, although there is some
evidence that inventories are being worked down and order levels are increasing,
which could give the industry greater pricing flexibility soon.
Most sectors of our investment universe posted strong share price gains during
the six months ended June 30, 1996, with the exception of paper and steel
shares, which were modestly lower. Gold mining stocks posted the strongest gains
in our investment universe as the gold price moved briefly above $400 per ounce.
The Fund's increased exposure to the precious metals sector contributed
positively to returns. Fund returns also benefited from our large exposure to
the energy sector, with particular emphasis on exploration and production
companies. Energy-related stocks posted solid share price gains, with the shares
10
<PAGE>
of exploration and production companies leading the advance, as both oil and
natural gas prices continued to strengthen. Natural gas prices rallied sharply
as colder-than-normal weather combined with low storage levels of natural gas.
Oil prices were supported by strong demand and low inventories of crude oil and
oil products, particularly in the United States. Base metals and chemical shares
also posted solid gains as these economy-sensitive industries benefited from the
prospects of an extended economic cycle. The Fund's large exposure to companies
in these industries enhanced performance during the June period. Fund returns
also benefited from a number of takeover/ merger proposals announced during the
six-month period ended June 30, 1996. In the energy area, Ampolex Ltd. received
a takeover proposal from Mobil Corp. In the gold mining industry, Hemlo Gold
Mines Inc. received a merger proposal from Battle Mountain Gold Co., and Golden
Shamrock Mines Ltd. received a merger proposal from Ashanti Goldfields Co. Ltd.
During the six-month period ended June 30, 1996, there was little change in our
investment strategy. While the Fund's largest exposure continued to be in
energy-related companies at about 29% of net assets, we used the strength in the
energy sector as an opportunity to take profits in several of our exploration
and production company holdings. The proceeds were generally redeployed into the
industrial side of our universe, including the base metals and paper sectors.
Despite the risk of a near-term slowdown in earnings momentum in some of these
areas caused by sluggish industrial commodity prices, we remain positive on the
medium-term outlook for these industries. We believe the emerging trend of
stronger worldwide economic growth should keep the demand for these industrial
commodities on a strong upward trend and provide support for underlying
commodity prices. Stronger industry fundamentals and reduced corporate cost
structures potentially could lead to a period of sustained above-average
profitability for many of these companies. We also continued to increase the
Fund's exposure to the Japanese equity market, where prospects of stronger
economic growth and corporate restructuring could set the stage for a strong
rebound in profitability. Our investment focus in Japan is on sectors that are
both sensitive to the global economy and are prime beneficiaries of a weaker
yen, including the non-ferrous metals, steel and chemical sectors.
Looking ahead, we continue to be optimistic about the outlook for the natural
resources sector. There continues to be much debate over the sustainability of
recent advances in economic growth. However, we remain encouraged by these
positive economic trends, and believe we may be moving toward a period of
synchronized growth in both the industrialized and developing economies. This
should support the demand for basic resources and should improve the earnings
prospects for many natural resource-related companies.
PRIME BOND FUND
The acceleration of job creation, which became evident in February, adversely
impacted interest rates during the six-month period ended June 30, 1996. Job
growth averaged 233,000 per month during the first six months of 1996, compared
with an average monthly gain of only 144,000 in the same period in 1995.
Combined with surprising strength in the wage and salary index, this caused
concern that the period of favorable inflation rates may be drawing to a close.
Economic activity heated up in the second quarter, and there was speculation
that the Federal Reserve Board may reverse trend and tighten interest rates
during the summer months. Federal Reserve Board Chairman Alan Greenspan lamented
that serious discussion relating to reducing the Federal budget deficit had
faded, which caused investors additional concern. Trading activity pushed the
interest rates on long-term Treasury notes from under 6% up to 7.25% before
recovering to 6.90% at June 30, 1996.
During June, we maintained a defensive position by shortening the average
maturity of the Fund from 11.32 years to 9.11 years. We accomplished this by
trading down the yield curve. We remained underweighted in the utility and
Canadian sectors, and increased our commitment to Yankee issues. We are hopeful
that economic growth will slow in the third quarter of 1996, but we will remain
wary and maintain a defensive strategy. The steepness of the short-term yield
curve compelled us to be invested, but inflation concerns will keep us cautious.
The US Treasury securities position is lower than usual because we believe that
the wider spreads encourage us to invest in the corporate market.
QUALITY EQUITY FUND
As of June 30, 1996, the asset allocation for Quality Equity Fund was: US
equities, 82% of net assets; foreign equities, 8%; and cash and cash reserves,
10%.
In recent months, as we moved to complete portfolio restructuring, we also
increased our commitment to US equities. We believe stock selection, rather than
industry focus, is more likely to yield positive results. We have continued to
allocate significant assets to focused and restructured companies which enjoy
dominant franchises within their respective industries. Cincinnati Milacron,
Inc. is an example of a new
position which fulfills these criteria. Other new positions which appeared
reasonably valued in relation to
11
<PAGE>
their asset values or earnings growth included International Business Machines
Corp. and Procter & Gamble Co. We also continued to enlarge the representation
in quality technology companies, where new positions included Intel Corp. and
Microsoft Corp.
Within the foreign sector, we expanded our position in Canada by adding
Canadian Pacific, Ltd. and Potash Corp. of Saskatchewan Inc. We also established
a position in Korea through a small holding in the shares of Hyundai Engineering
& Construction Co., Ltd. At the same time, we eliminated our position in Hong
Kong Telecommunications. Canada represents the largest concentration of assets
among the foreign equity holdings, with European and Latin American equities
accounting for the majority of the remaining non-US equity holdings.
RESERVE ASSETS FUND
For the six-month period ended June 30, 1996, the Reserve Assets Fund's net
annualized yield was 4.93%. The Fund's 7-day yield as of June 30, 1996 was
4.92%*. The average portfolio maturity was 55 days at June 30, 1996 compared to
84 days at December 31, 1995.
The Fund's composition at the end of June and as of our last report is detailed
below:
<TABLE>
<CAPTION>
<S> <C> <C>
ISSUE 6/30/96 12/31/95
- -------------------------------------------------------------------------------
Certificates of Deposit--European. . . . . . . . . . . -- 2.0%
Commercial Paper. . . . . . . . . . . . . . . . . . . 43.9 % 26.8
Corporate Notes. . . . . . . . . . . . . . . . . . . . 10.6 7.1
Funding Agreements. . . . . . . . . . . . . . . . . . 4.3 --
Master Notes. . . . . . . . . . . . . . . . . . . . . 4.3 3.9
Medium-Term Notes. . . . . . . . . . . . . . . . . . . 1.1 1.0
US Government Agency & Instrumentality Obligations--
Discount. . . . . . . . . . . . . . . . . . . . . . . 8.3 26.0
- ------------------------------------------------------- ---------- -----------
US Government Agency & Instrumentality Obligations--
Non-Discount. . . . . . . . . . . . . . . . . . . . . 27.5 34.5
Other Assets Less Liabilities/Liabilities in Excess of
Other Assets. . . . . . . . . . . . . . . . . . . . . -- (1.3)
Total. . . . . . . . . . . . . . . . . . . . . . . . . 100.0 % 100.0 %
------ ------
------ ------
</TABLE>
WORLD INCOME FOCUS FUND
During the period ended June 30, 1996, the high- yield bond market produced a
modest positive return in an environment of rising interest rates. The yield on
ten-year Treasury notes rose from 6.4% to 6.7%, while the yield on the unmanaged
Merrill Lynch High Yield Master Index increased from 9.6% to 9.9%, and yield
spreads remained stable. Overall, the high-yield bond market appeared fully
valued relative to the Government market at June 30, 1996. Yield spreads were at
the narrow end of a 15-year range. The valuation reflected positive
fundamentals, such as:
- - Defaults were below normal rates for the first half of the year.
- - Special events such as acquisitions of high-yield issuers by investment-grade
companies improved returns. During the June quarter, Hilton Hotels, an
investment-grade bond issuer, announced plans to acquire Bally's Park Place,
Inc., which favorably affected bond prices.
- - Ready access to the equity market allowed high- yield issuers to improve
balance sheets. Both Trump Hotels and Fort Howard Corp. issued equity during
the June quarter.
- - Cash flows into the high-yield market were strong. Mutual funds received
healthy cash flows all year. Other institutional buyers such as insurance
companies were net buyers.
Absolute valuations improved considerably over the course of the year because
of the significant rise in intermediate-term and long-term interest rates. Given
the cyclical pressures, interest rates--particularly at the short end of the
yield curve--could continue to rise further. This rise could be cyclical, with
interest rates falling later this year or in 1997, or secular (a longer- term or
protracted rise). We believe the rise is cyclical. Therefore, we regard the
current period as an opportunity to improve the earnings power or quality of the
Fund (or both).
We continued to invest selectively and generally on weakness. Purchases during
the June period included: Time Warner Inc., 10.25% PIK Preferred Stock due July
1, 2116; Trump Atlantic City, 11.25% First Mortgage Notes due May 1, 2006;
Hollinger International, Inc., 9.25% Senior Notes due February 1, 2006; and
Doman Industries Ltd., 8.75% Senior Notes due March 15, 2004.
At June 30, 1996, the average portfolio maturity was 7.7 years. Our largest
industry exposures included: gaming, 4.2% of net assets; communications, 3.7%;
consumer products, 3.7%; and conglomerates, 3.7%.
IN CONCLUSION
We appreciate your investment in Merrill Lynch Variable Series Funds, Inc., and
we look forward to sharing our investment outlook and strategies with you in our
December annual report to shareholders.
Sincerely,
Arthur Zeikel
President
August 15, 1996
12
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
JUNE 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TOTAL RETURNS
- --------------------------------------------------------------------------------------
12 MONTH 6 MONTH
6/30/96 12/31/95 6/30/95 % CHANGE % CHANGE
------- ----------------------------------------
AMERICAN BALANCED FUND $15.22 $15.17 $14.38 +10.28%(1) + 2.48%(2)
- --------------------------------------------------------------------------------------
BASIC VALUE FOCUS FUND 13.64 13.10 12.12 +20.86(3) +11.03(4)
- --------------------------------------------------------------------------------------
DEVELOPING CAPITAL MARKETS FOCUS FUND 10.15 9.32 9.16 +13.64(5) +11.69(5)
- --------------------------------------------------------------------------------------
EQUITY GROWTH FUND 25.62 27.98 23.73 +24.63(6) + 5.48(7)
- --------------------------------------------------------------------------------------
FLEXIBLE STRATEGY FUND 15.47 16.47 15.59 +11.68(8) + 4.17(9)
- --------------------------------------------------------------------------------------
GLOBAL STRATEGY FOCUS FUND 12.75 12.55 12.04 +10.38(10) + 4.03(11)
- --------------------------------------------------------------------------------------
GLOBAL UTILITY FOCUS FUND 11.73 11.30 10.16 +20.68(12) + 6.34(13)
- --------------------------------------------------------------------------------------
HIGH CURRENT INCOME FUND 11.13 11.25 11.14 + 9.96(14) + 3.73(15)
- --------------------------------------------------------------------------------------
INTERMEDIATE GOVERNMENT BOND FUND 10.25 10.79 10.51 + 4.14(16) - 1.63(17)
- --------------------------------------------------------------------------------------
INTERNATIONAL BOND FUND 9.93 10.52 10.51 + 2.28(18) - 1.25(19)
- --------------------------------------------------------------------------------------
INTERNATIONAL EQUITY FOCUS FUND 11.73 11.06 10.14 +17.29(20) + 7.53(20)
- --------------------------------------------------------------------------------------
NATURAL RESOURCES FOCUS FUND 12.52 11.95 11.59 +11.75(21) + 7.34(22)
- --------------------------------------------------------------------------------------
PRIME BOND FUND 11.74 12.45 12.02 + 4.48(23) - 2.52(24)
- --------------------------------------------------------------------------------------
QUALITY EQUITY FUND 29.86 32.76 29.82 +17.37(25) + 5.94(26)
- --------------------------------------------------------------------------------------
WORLD INCOME FOCUS FUND 9.63 9.79 9.54 + 9.98(27) + 2.56(28)
- --------------------------------------------------------------------------------------
</TABLE>
(1) Percent change includes reinvestment of $0.582 per share ordinary income
dividends and $0.023 per share capital gains distributions.
(2) Percent change includes reinvestment of $0.296 per share ordinary income
dividends and $0.023 per share capital gains distributions.
(3) Percent change includes reinvestment of $0.644 per share ordinary income
dividends and $0.265 per share capital gains distributions.
(4) Percent change includes reinvestment of $0.556 per share ordinary income
dividends and $0.265 per share capital gains distributions.
(5) Percent change includes reinvestment of $0.234 per share ordinary income
dividends.
(6) Percent change includes reinvestment of $2.920 per share ordinary income
dividends and $0.820 per share capital gains distributions.
(7) Percent change includes reinvestment of $2.871 per share ordinary income
dividends and $0.820 per share capital gains distributions.
(8) Percent change includes reinvestment of $0.958 per share ordinary income
dividends and $0.897 per share capital gains distributions.
(9) Percent change includes reinvestment of $0.727 per share ordinary income
dividends and $0.897 per share capital gains distributions.
(10) Percent change includes reinvestment of $0.511 per share ordinary income
dividends.
(11) Percent change includes reinvestment of $0.295 per share ordinary income
dividends.
(12) Percent change includes reinvestment of $0.482 per share ordinary income
dividends.
(13) Percent change includes reinvestment of $0.272 per share ordinary income
dividends.
(14) Percent change includes reinvestment of $1.074 per share ordinary income
dividends.
(15) Percent change includes reinvestment of $0.533 per share ordinary income
dividends.
(16) Percent change includes reinvestment of $0.689 per share ordinary income
dividends.
(17) Percent change includes reinvestment of $0.366 per share ordinary income
dividends.
(18) Percent change includes reinvestment of $0.814 per share ordinary income
dividends.
(19) Percent change includes reinvestment of $0.459 per share ordinary income
dividends.
(20) Percent change includes reinvestment of $0.153 per share ordinary income
dividends.
(21) Percent change includes reinvestment of $0.232 per share ordinary income
dividends and $0.171 per share capital gains distributions.
(22) Percent change includes reinvestment of $0.118 per share ordinary income
dividends and $0.171 per share capital gains distributions.
(23) Percent change includes reinvestment of $0.811 per share ordinary income
dividends.
(24) Percent change includes reinvestment of $0.399 per share ordinary income
dividends.
(25) Percent change includes reinvestment of $1.827 per share ordinary income
dividends and $3.019 per share capital gains distributions.
(26) Percent change includes reinvestment of $1.573 per share ordinary income
dividends and $3.019 per share capital gains distributions.
(27) Percent change includes reinvestment of $0.827 per share ordinary income
dividends.
(28) Percent change includes reinvestment of $0.404 per share ordinary income
dividends.
13
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
JUNE 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS
FIVE
YEAR YEARS TEN YEARS SINCE
ENDED ENDED ENDED INCEPTION
6/30/96 6/30/96 6/30/96 TO 6/30/96
- ----------------------------------------------------------------------------
AMERICAN BALANCED FUND +10.28% + 9.90% -- + 9.86%+
- ----------------------------------------------------------------------------
BASIC VALUE FOCUS FUND +20.86 -- -- +16.02 ++
- ----------------------------------------------------------------------------
DEVELOPING CAPITAL MARKETS FOCUS FUND +13.64 -- -- + 2.31 +++
- ----------------------------------------------------------------------------
EQUITY GROWTH FUND +24.63 +15.36 + 6.38% --
- ----------------------------------------------------------------------------
FLEXIBLE STRATEGY FUND +11.68 +10.43 + 9.80 --
- ----------------------------------------------------------------------------
GLOBAL STRATEGY FOCUS FUND +10.38 -- -- + 8.21 ++++
- ----------------------------------------------------------------------------
GLOBAL UTILITY FOCUS FUND +20.68 -- -- + 8.93 ++
- ----------------------------------------------------------------------------
HIGH CURRENT INCOME FUND + 9.96 +12.98 +10.98 --
- ----------------------------------------------------------------------------
INTERMEDIATE GOVERNMENT BOND FUND + 4.14 -- -- + 6.67 +++
- ----------------------------------------------------------------------------
INTERNATIONAL BOND FUND + 2.28 -- -- + 6.82 +++
- ----------------------------------------------------------------------------
INTERNATIONAL EQUITY FOCUS FUND +17.29 -- -- + 7.95 ++
- ----------------------------------------------------------------------------
NATURAL RESOURCES FOCUS FUND +11.75 + 6.43 -- + 4.96 +
- ----------------------------------------------------------------------------
PRIME BOND FUND + 4.48 + 8.33 + 7.80 --
- ----------------------------------------------------------------------------
QUALITY EQUITY FUND +17.37 +12.16 +11.09 --
- ----------------------------------------------------------------------------
WORLD INCOME FOCUS FUND + 9.98 -- -- + 6.68 ++
- ----------------------------------------------------------------------------
</TABLE>
+ The Fund commenced operations on 6/01/88.
++ The Fund commenced operations on 7/01/93.
+++ The Fund commenced operations on 5/02/94.
++++ Global Strategy Focus Fund commenced operations on 2/28/92.
14
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
JUNE 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT AVERAGE ANNUAL TOTAL RETURNS*
RETIREMENT PLUS VARIABLE ANNUITY
- ---------------------------------------------------------------------------
FIVE
YEAR YEARS TEN YEARS SINCE
ENDED ENDED ENDED INCEPTION
6/30/96 6/30/96 6/30/96 TO 6/30/96
- ---------------------------------------------------------------------------
AMERICAN BALANCED FUND + 2.04% + 7.93% -- + 8.30%+
- ---------------------------------------------------------------------------
BASIC VALUE FOCUS FUND +13.34 -- -- +13.47 ++
- ---------------------------------------------------------------------------
DEVELOPING CAPITAL MARKETS FOCUS FUND + 5.33 -- -- - 1.43 +++
- ---------------------------------------------------------------------------
EQUITY GROWTH FUND +16.93 +13.54 +4.92% --
- ---------------------------------------------------------------------------
FLEXIBLE STRATEGY FUND + 3.42 + 8.48 +8.25 --
- ---------------------------------------------------------------------------
GLOBAL STRATEGY FOCUS FUND + 2.27 -- -- + 6.15 ++++
- ---------------------------------------------------------------------------
GLOBAL UTILITY FOCUS FUND +11.83 -- -- + 5.87 ++
- ---------------------------------------------------------------------------
HIGH CURRENT INCOME FUND + 1.57 +10.98 9.39 --
- ---------------------------------------------------------------------------
INTERMEDIATE GOVERNMENT BOND FUND - 3.87 -- -- + 2.90 +++
- ---------------------------------------------------------------------------
INTERNATIONAL BOND FUND - 5.55 -- -- + 3.01 +++
- ---------------------------------------------------------------------------
INTERNATIONAL EQUITY FOCUS FUND + 8.69 -- -- + 4.94 ++
- ---------------------------------------------------------------------------
NATURAL RESOURCES FOCUS FUND + 3.75 + 4.52 -- + 3.53 +
- ---------------------------------------------------------------------------
PRIME BOND FUND - 3.54 + 6.30 6.25 --
- ---------------------------------------------------------------------------
QUALITY EQUITY FUND + 9.29 +10.25 9.54 --
- ---------------------------------------------------------------------------
WORLD INCOME FOCUS FUND + 1.61 -- -- + 3.65 ++
- ---------------------------------------------------------------------------
</TABLE>
* 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 Fund
operating expenses, 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 periods shown, and an annual 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 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.
15
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
JUNE 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT AVERAGE ANNUAL TOTAL RETURNS*
PORTFOLIO PLUS VARIABLE ANNUITY
- ---------------------------------------------------------------------------
FIVE
YEAR YEARS TEN YEARS SINCE
ENDED ENDED ENDED INCEPTION
6/30/96 6/30/96 6/30/96 TO 6/30/96
- ---------------------------------------------------------------------------
AMERICAN BALANCED FUND + 4.62% + 7.86% -- +8.43%+
- ---------------------------------------------------------------------------
EQUITY GROWTH FUND +19.59 +13.51 +5.04% --
- ---------------------------------------------------------------------------
FLEXIBLE STRATEGY FUND + 6.08 + 8.41 +8.36 --
- ---------------------------------------------------------------------------
HIGH CURRENT INCOME FUND + 4.11 +10.93 +9.51 --
- ---------------------------------------------------------------------------
NATURAL RESOURCES FOCUS FUND + 6.43 + 4.42 -- +3.65 +
- ---------------------------------------------------------------------------
PRIME BOND FUND - 1.39 + 6.21 +6.38 --
- ---------------------------------------------------------------------------
QUALITY EQUITY FUND +11.94 +10.20 +9.66 --
- ---------------------------------------------------------------------------
</TABLE>
* Returns are calculated as if the contract were surrendered at the end of
the periods shown. They reflect Fund operating expenses, Separate Account
charges deducted daily at an annual rate of 1.25% mortality and expense risk
charge, and a 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 an annual 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.
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.
16
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
JUNE 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
SEPARATE ACCOUNT AVERAGE ANNUALIZED RETURNS*
VARIABLE LIFE INSURANCE POLICIES (EXCEPT ESTATE INVESTOR I & II)
- -----------------------------------------------------------------------------------
FROM DATE
YEAR MADE
ENDED AVAILABLE
6/30/96 TO 6/30/96
- -----------------------------------------------------------------------------------
BASIC VALUE FOCUS FUND +18.88% +16.78%+
- -----------------------------------------------------------------------------------
DEVELOPING CAPITAL MARKETS FOCUS FUND +11.72 + 0.08 +
- -----------------------------------------------------------------------------------
EQUITY GROWTH FUND -- - 5.40 ++
- -----------------------------------------------------------------------------------
GLOBAL UTILITY FOCUS FUND + 8.51 + 7.88 +
- -----------------------------------------------------------------------------------
INTERNATIONAL BOND FUND + 0.46 + 4.61 +
- -----------------------------------------------------------------------------------
INTERNATIONAL EQUITY FOCUS FUND +15.34 + 2.89 +
- -----------------------------------------------------------------------------------
WORLD INCOME FOCUS FUND + 8.09 + 6.14 +
- -----------------------------------------------------------------------------------
</TABLE>
* 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 in force during the periods shown. They reflect Fund operating
expenses, a Separate Account mortality and expense risk charge deducted daily
at an annual rate at the beginning of the year 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 underwriting class of the insured, and by each
contract's net amount at risk. Some contract owners have lower mortality and
expense risk charges and/or lower deferred contract loads than those
reflected above. Returns for those contract owners would, therefore, be
higher than the returns shown above. Some contract owners pay administrative
fees that could have the effect of reducing the returns shown above. All
charges and fees are described in the product prospectuses. Certain Funds are
not available to all variable life insurance products. Not all Funds were
made available to all products on the same date. See those prospectuses for
more complete information.
+ Investment option was made available 5/01/94.
++ Investment option was made available 5/01/96.
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.
17
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
JUNE 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
SEPARATE ACCOUNT AVERAGE ANNUALIZED RETURNS*
ESTATE INVESTOR I & II VARIABLE LIFE INSURANCE POLICIES
- -----------------------------------------------------------------------------
FROM DATE
YEAR MADE
ENDED AVAILABLE
6/30/96 TO 6/30/96
- -----------------------------------------------------------------------------
BASIC VALUE FOCUS FUND +19.78% +18.04%+
- -----------------------------------------------------------------------------
DEVELOPING CAPITAL MARKETS FOCUS FUND +12.62 + 1.39 +
- -----------------------------------------------------------------------------
EQUITY GROWTH FUND -- - 4.50 ++
- -----------------------------------------------------------------------------
GLOBAL UTILITY FOCUS FUND +19.59 +10.80 +
- -----------------------------------------------------------------------------
INTERNATIONAL BOND FUND + 1.36 + 5.85 +
- -----------------------------------------------------------------------------
INTERNATIONAL EQUITY FOCUS FUND +16.24 + 4.19 +
- -----------------------------------------------------------------------------
WORLD INCOME FOCUS FUND + 8.89 + 7.40 +
- -----------------------------------------------------------------------------
</TABLE>
* Returns assume the Separate Account had been in existence and a contract had
been in force during the periods shown. They reflect Fund operating expenses,
a Separate Account mortality and expense risk charge deducted daily at an
annual rate at the beginning of the year of 0.90%. Returns do not reflect
contract loading or quarterly cost of insurance, which can vary 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 From Date
Made Available, respectively, would be: Basic Value Focus, -40.11%, -14.30%;
Developing Capital Markets Focus, -43.69%, -26.39%; Equity Growth, N/A,
-52.25%; Global Utility Focus, -40.20%, -19.56%; International Bond, -49.32%,
-23.16%; International Equity Focus, -41.88%, -24.36%; and World Income Focus,
-45.50%, -22.03%.
+ Investment option was made available 5/01/94.
++ Investment option was made available 5/01/96.
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.
18
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--AMERICAN BALANCED FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AEROSPACE 30,000 Boeing Co.. . . . . . . . . . . . . . $ 2,280,268 $ 2,613,750 1.2%
25,800 Northrop Grumman Corp.. . . . . . . . 1,688,391 1,757,625 0.8
31,000 United Technologies Corp. . . . . . . 1,830,680 3,565,000 1.7
--------------- --------------- -----------
5,799,339 7,936,375 3.7
- ---------------------------------------------------------------------------------------------------------------------------
AIRLINES 31,900 Delta Air Lines, Inc. . . . . . . . . 2,541,452 2,647,700 1.2
- ---------------------------------------------------------------------------------------------------------------------------
AUTO & TRUCK 45,000 Ford Motor Co.. . . . . . . . . . . . 1,221,635 1,456,875 0.7
29,000 General Motors Corp.. . . . . . . . . 1,635,078 1,518,875 0.7
--------------- --------------- -----------
2,856,713 2,975,750 1.4
- ---------------------------------------------------------------------------------------------------------------------------
BANKING 50,000 Bank of New York, Co., Inc.. . . . . 2,364,009 2,562,500 1.2
35,000 Citicorp. . . . . . . . . . . . . . . 2,617,911 2,891,875 1.3
--------------- --------------- -----------
4,981,920 5,454,375 2.5
- ---------------------------------------------------------------------------------------------------------------------------
BEVERAGES 24,000 Coca-Cola Co.. . . . . . . . . . . . 1,119,183 1,173,000 0.5
- ---------------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS 53,500 Spieker Properties, Inc.. . . . . . . 1,372,755 1,457,875 0.7
- ---------------------------------------------------------------------------------------------------------------------------
CHEMICALS 44,000 PPG Industries, Inc.. . . . . . . . . 2,183,892 2,145,000 1.0
- ---------------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 36,500 +cisco Systems, Inc.. . . . . . . . . 1,626,877 2,066,813 1.0
40,000 Electronic Data Systems Corp.. . . . 2,058,814 2,150,000 1.0
15,000 International Business Machines Corp. 1,648,439 1,485,000 0.7
--------------- --------------- -----------
5,334,130 5,701,813 2.7
- ---------------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE 9,600 +Microsoft Corp.. . . . . . . . . . . 1,075,787 1,152,000 0.5
60,750 +Oracle Corp.. . . . . . . . . . . . . 1,944,112 2,392,031 1.1
--------------- --------------- -----------
3,019,899 3,544,031 1.6
- ---------------------------------------------------------------------------------------------------------------------------
CONSUMER GOODS 20,000 Philip Morris Companies, Inc.. . . . 1,979,778 2,080,000 1.0
19,000 Procter & Gamble Co.. . . . . . . . . 1,600,536 1,721,875 0.8
--------------- --------------- -----------
3,580,314 3,801,875 1.8
- ---------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED 65,000 Corning, Inc.. . . . . . . . . . . . 1,813,477 2,494,375 1.2
- ---------------------------------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT 29,000 General Electric Co.. . . . . . . . . 2,223,695 2,508,500 1.2
- ---------------------------------------------------------------------------------------------------------------------------
ELECTRONICS 25,500 Intel Corp.. . . . . . . . . . . . . 1,585,076 1,871,063 0.9
70,000 +Lexmark International Group, Inc.
(Class A). . . . . . . . . . . . . . 1,488,050 1,408,750 0.7
13,300 +Sun Microsystems, Inc.. . . . . . . . 838,563 781,375 0.4
--------------- --------------- -----------
3,911,689 4,061,188 2.0
- ---------------------------------------------------------------------------------------------------------------------------
ENGINEERING & CONSTRUCTION 50,000 Foster Wheeler Corp.. . . . . . . . . 2,182,526 2,243,750 1.0
- ---------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL CONTROL 133,800 Wheelabrator Technologies, Inc.. . . 2,258,835 2,040,450 0.9
- ---------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 52,500 American Express Company. . . . . . . 2,440,860 2,342,813 1.1
2,100 +Associates First Capital Corp.. . . . 60,900 79,013 0.0
33,100 First Data Corp.. . . . . . . . . . . 2,337,513 2,635,588 1.2
--------------- --------------- -----------
4,839,273 5,057,414 2.3
- ---------------------------------------------------------------------------------------------------------------------------
HARDWARE PRODUCTS 85,600 Stanley Works Co.. . . . . . . . . . 1,779,135 2,546,600 1.2
- ---------------------------------------------------------------------------------------------------------------------------
1,779,463 1,732,087 0.8
HEALTHCARE 96,900 +Humana, Inc.. . . . . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------
1,109,533 1,122,000 0.5
INDUSTRIAL EQUIPMENT 34,000 +American Standard Companies, Inc.. .
- ---------------------------------------------------------------------------------------------------------------------------
INSURANCE 30,000 Aetna Life & Casualty Co.. . . . . . 2,232,630 2,145,000 1.0
50,000 Allstate Corp.. . . . . . . . . . . . 2,046,610 2,281,250 1.1
--------------- --------------- -----------
4,279,240 4,426,250 2.1
- ---------------------------------------------------------------------------------------------------------------------------
MACHINERY 45,200 Cincinnati Milacron, Inc.. . . . . . 1,138,419 1,084,800 0.5
54,000 Deere & Co.. . . . . . . . . . . . . 2,243,176 2,160,000 1.0
--------------- --------------- -----------
3,381,595 3,244,800 1.5
- ---------------------------------------------------------------------------------------------------------------------------
2,251,736 2,268,000 1.1
MEDICAL EQUIPMENT 48,000 Baxter International, Inc.. . . . . .
- ---------------------------------------------------------------------------------------------------------------------------
NATURAL GAS 64,000 Enron Corp.. . . . . . . . . . . . . 2,454,763 2,616,000 1.2
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--AMERICAN BALANCED FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONCLUDED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------
OIL SERVICES 120,300 Dresser Industries, Inc.. . . . . . . $ 2,494,821 $ 3,548,850 1.6 %
- ---------------------------------------------------------------------------------------------------------------------
PETROLEUM 54,700 Pennzoil Co.. . . . . . . . . . . . . 2,225,568 2,529,875 1.2
15,300 Unocal Corp.. . . . . . . . . . . . . 512,359 516,375 0.2
--------------- --------------- -----------
2,737,927 3,046,250 1.4
- ---------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 90,000 Abbott Laboratories. . . . . . . . . 2,827,672 3,915,000 1.8
51,000 Merck & Co., Inc.. . . . . . . . . . 1,635,720 3,295,875 1.5
--------------- --------------- -----------
4,463,392 7,210,875 3.3
- ---------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY 28,300 Eastman Kodak Co.. . . . . . . . . . 1,299,475 2,200,325 1.0
- ---------------------------------------------------------------------------------------------------------------------
RAILROADS 16,000 Conrail, Inc.. . . . . . . . . . . . 1,121,760 1,062,000 0.5
- ---------------------------------------------------------------------------------------------------------------------
RECREATION 27,000 +Viacom, Inc. (Class B). . . . . . . . 1,123,196 1,049,625 0.5
- ---------------------------------------------------------------------------------------------------------------------
RETAIL 48,000 +AutoZone, Inc.. . . . . . . . . . . . 1,680,000 1,668,000 0.8
75,000 Limited, Inc. (The). . . . . . . . . 1,672,275 1,612,500 0.8
53,000 Sears, Roebuck & Co.. . . . . . . . . 2,202,624 2,577,125 1.2
--------------- --------------- -----------
5,554,899 5,857,625 2.8
- ---------------------------------------------------------------------------------------------------------------------
SCIENTIFIC EQUIPMENT 50,000 Fisher Scientific International, Inc. 1,555,116 1,875,000 0.9
- ---------------------------------------------------------------------------------------------------------------------
1,783,045 1,670,637 0.8
STEEL 42,700 AK Steel Holding Corp.. . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 50,800 AT&T Corp.. . . . . . . . . . . . . . 2,777,251 3,149,600 1.5
20,000 Bell Atlantic Corp.. . . . . . . . . 1,043,470 1,275,000 0.6
10,800 Lucent Technologies, Inc.. . . . . . 291,600 409,050 0.2
--------------- --------------- -----------
4,112,321 4,833,650 2.3
- ---------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 60,000 Carnival Corp. (Class A). . . . . . . 1,697,029 1,732,500 0.8
- ---------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 94,997,538 107,286,545 50.0
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT US GOVERNMENT OBLIGATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
US TREASURY NOTES & US Treasury Notes & Bonds:
BONDS
$ 38,500,000 5.75% due 10/31/1997. . . . . . . . . 38,361,641 38,403,750 17.8
44,500,000 5.00% due 1/31/1998. . . . . . . . . 43,981,875 43,804,465 20.3
5,000,000 6.875% due 8/15/2025. . . . . . . . . 4,888,281 4,949,200 2.3
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT OBLIGATIONS 87,231,797 87,157,415 40.4
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
- -----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER* 3,958,000 General Electric Capital Corp.,
5.56% due 7/01/1996. . . . . . . . . 3,956,166 3,956,166 1.8
2,000,000 International Securitization Corp.,
5.32% due 7/02/1996. . . . . . . . . 1,998,818 1,998,818 0.9
2,000,000 National Fleet Funding Corp., 5.39%
due 8/09/1996. . . . . . . . . . . . 1,987,423 1,987,423 0.9
3,500,000 Sheffield Receivables Corp., 5.30%
due 7/01/1996. . . . . . . . . . . . 3,498,454 3,498,454 1.6
2,000,000 Transamerica Corporation, 5.35%
due 7/15/1996. . . . . . . . . . . . 1,994,947 1,994,947 0.9
5,000,000 Walt Disney Company (The), 5.26%
due 7/10/1996. . . . . . . . . . . . 4,991,233 4,991,233 2.3
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 18,427,041 18,427,041 8.4
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS. . . . . . . . . . $ 200,656,376 212,871,001 98.8
------------------
------------------
OTHER ASSETS LESS LIABILITIES. . . . 2,566,052 1.2
------------------ -------
NET ASSETS. . . . . . . . . . . . . . $ 215,437,053 100.0%
------------------ -------
------------------ -------
- -----------------------------------------------------------------------------------------------------------------------------------
* Commercial Paper is traded on a discount basis; the interest rate shown is the discount rate paid at the time of purchase by the
Fund.
+ Non-income producing security.
See Notes to Financial Statements.
</TABLE>
20
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--BASIC VALUE FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
DISCOUNT FROM BOOK VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
METALS--NON FERROUS 292,000 ASARCO Inc.. . . . . . . . . . . . . . $ 8,131,097 $ 8,066,500 2.0%
SOFTWARE--COMPUTER 425,000 +Advanced Micro Devices, Inc.. . . . . 7,244,603 5,790,625 1.5
BANKING 125,000 Bankers Trust New York Corp.. . . . . 7,946,060 9,234,375 2.3
HOME--BUILDERS 300,000 +Beazer Homes USA, Inc.. . . . . . . . 4,646,099 4,800,000 1.2
RETAIL 1,300,000 +Charming Shoppes, Inc.. . . . . . . . 4,822,368 9,018,750 2.3
RETAIL/CATALOG 300,000 Fingerhut Companies, Inc.. . . . . . . 3,866,875 4,687,500 1.2
FARM & CONSTRUCTION EQUIPMENT 350,000 Giddings & Lewis, Inc.. . . . . . . . 5,475,740 5,687,500 1.4
SAVINGS & LOANS 713,200 +Greater N.Y. Savings Bank (b). . . . . 7,230,899 7,488,600 1.9
CONGLOMERATES 572,700 Hanson PLC (Sponsored) (ADR) (a). . . 8,446,487 8,160,975 2.0
RETAIL 626,100 Hechinger Company (Class A). . . . . . 2,877,339 2,739,188 0.7
SAVINGS & LOANS 350,000 Klamath First Bancorp, Inc.. . . . . . 4,558,580 5,075,000 1.3
TECHNOLOGY 1,184,100 +Micronics Computers, Inc. (b). . . . . 4,763,925 2,960,250 0.7
SAVINGS & LOANS 500,000 +PFF Bancorp, Inc. . . . . . . . . . . 5,715,000 5,437,500 1.4
COMPUTER SERVICES 275,000 Scitex Corp. Ltd (ADR) (a). . . . . . 5,128,090 4,743,750 1.2
BEVERAGE & ENTERTAINMENT 150,000 Seagram Company Ltd. (The). . . . . . 5,098,135 5,043,750 1.3
TECHNOLOGY 250,000 +Storage Technology Corp.. . . . . . . 6,072,920 9,562,500 2.4
OIL--REFINERS 640,000 Total Petroleum Ltd.. . . . . . . . . 7,380,309 6,240,000 1.6
STEEL 700,000 +WHX Corp.. . . . . . . . . . . . . . . 7,620,779 6,387,500 1.6
-------------- -------------- ---------
107,025,305 111,124,263 28.0
- -----------------------------------------------------------------------------------------------------------------------------------
BELOW-AVERAGE PRICE/EARNINGS RATIO
- -----------------------------------------------------------------------------------------------------------------------------------
OIL--DOMESTIC 420,000 +American Exploration Co.. . . . . . . 4,538,700 5,250,000 1.3
TEXTILE 500,000 +Burlington Industries, Inc.. . . . . . 5,670,534 7,062,500 1.8
TECHNOLOGY 600,000 +Computervision Corp.. . . . . . . . . 6,678,973 6,000,000 1.5
FARM & CONSTRUCTION EQUIPMENT 115,000 Deere & Co.. . . . . . . . . . . . . . 3,313,725 4,600,000 1.1
RETAIL 300,000 Dillard Department Stores Inc.. . . . 9,320,727 10,950,000 2.7
AUTOMOTIVE 150,000 General Motors Corp.. . . . . . . . . 6,767,259 7,856,250 2.0
FINANCIAL SERVICES 500,000 Hibernia Corporation (Class A). . . . 5,766,091 5,437,500 1.4
FOREST PRODUCTS & PAPER 220,000 International Paper Co.. . . . . . . . 8,418,780 8,112,500 2.0
ELECTRONICS 193,200 Micron Technology, Inc.. . . . . . . . 6,213,974 4,999,050 1.3
AUTO-RELATED 475,600 National Auto Credit, Inc.. . . . . . 4,799,156 5,409,950 1.4
ATHLETIC FOOTWEAR 175,000 Reebok International Ltd.. . . . . . . 4,847,939 5,884,375 1.5
INFORMATION PROCESSING 600,000 +Tandem Computers, Inc.. . . . . . . . 7,099,584 7,425,000 1.9
STEEL 250,000 USX-US Steel Group. . . . . . . . . . 7,883,748 7,093,750 1.8
-------------- -------------- ---------
81,319,190 86,080,875 21.7
- -----------------------------------------------------------------------------------------------------------------------------------
ABOVE-AVERAGE YIELD
- -----------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 80,000 Bristol-Myers Squibb Co.. . . . . . . 5,862,033 7,200,000 1.8
REAL ESTATE INVESTMENT TRUST 175,000 Camden Property Trust. . . . . . . . . 4,150,263 4,156,250 1.0
REAL ESTATE INVESTMENT TRUST 250,000 Evans Withycombe Residential, Inc. 5,055,373 5,218,750 1.3
AUTOMOTIVE 200,000 Ford Motor Co.. . . . . . . . . . . . 5,886,695 6,475,000 1.6
FOREST PRODUCTS & PAPER 300,000 Louisiana-Pacific Corp.. . . . . . . . 7,906,026 6,637,500 1.7
OIL--DOMESTIC 400,000 Occidental Petroleum Corp.. . . . . . 8,263,748 9,900,000 2.5
FINANCIAL SERVICES 130,000 Student Loan Marketing Association. . 6,067,476 9,620,000 2.4
SAVINGS & LOANS 200,000 Washington Mutual Savings Bank. . . . 4,325,030 5,975,000 1.5
OIL--INTERNATIONAL 400,000 Yacimientos Petroliferos Fiscales S.A.
(ADR) (a). . . . . . . . . . . . . . . 7,692,340 9,000,000 2.3
-------------- -------------- ---------
55,208,984 64,182,500 16.1
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--BASIC VALUE FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONCLUDED)
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
SPECIAL SITUATIONS
- ----------------------------------------------------------------------------------------------------------------------------
CONGLOMERATES 400,000 +ADT Ltd. (ADR)(a). . . . . . . . . . $ 3,935,114 $ 7,550,000 1.9%
ENVIRONMENTAL SERVICES 873,500 +Allwaste, Inc.. . . . . . . . . . . . 4,514,409 4,039,937 1.0
INFORMATION PROCESSING 325,000 Apple Computer, Inc.. . . . . . . . . 7,610,273 6,784,375 1.7
MEDICAL SERVICES 682,800 +Applied Bioscience International Inc. 3,755,859 7,084,050 1.8
PHOTOGRAPHY 70,000 Eastman Kodak Co.. . . . . . . . . . 3,369,714 5,442,500 1.4
TECHNOLOGY 407,600 +Exabyte Corp.. . . . . . . . . . . . 5,527,712 5,298,800 1.3
INFORMATION PROCESSING 97,000 International Business Machines Corp. 9,053,140 9,603,000 2.4
HOTELS 450,000 +John Q. Hammons Hotels, Inc. (b). . . 6,010,122 4,893,750 1.2
STEEL 450,000 +Lone Star Technologies, Inc.. . . . . 3,179,819 4,950,000 1.3
SEMICONDUCTORS 400,000 +National Semiconductor Corp.. . . . . 7,360,669 6,200,000 1.6
OIL--RELATED 350,000 +TETRA Technologies, Inc.. . . . . . . 3,800,842 6,081,250 1.5
ELECTRONICS 110,000 Texas Instruments Inc.. . . . . . . . 5,520,297 5,486,250 1.4
TELECOMMUNICATIONS 400,000 US West Media Group, Inc.. . . . . . 7,031,690 7,300,000 1.8
RETAIL 537,500 +Woolworth Corp.. . . . . . . . . . . 6,857,505 12,093,750 3.1
-------------- -------------- ----------
77,527,165 92,807,662 23.4
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS 321,080,644 354,195,300 89.2
- ----------------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT SHORT-TERM SECURITIES
- ----------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER* $ 5,000,000 AlliedSignal, Inc.,
5.37% due 7/11/1996. . . . . . . . . 4,990,304 4,990,304 1.2
7,000,000 CSW Credit, Inc., 5.28%
due 7/11/1996. . . . . . . . . . . . 6,986,654 6,986,654 1.8
10,000,000 Corporate Asset Funding Co. Inc.,
5.27% due 7/08/1996. . . . . . . . . 9,985,361 9,985,361 2.5
7,000,000 Delaware Funding Corp.,
5.37% due 8/20/1996. . . . . . . . . 6,944,659 6,944,659 1.7
5,000,000 Eureka Securitization, Inc., 5.30%
due 7/26/1996. . . . . . . . . . . . 4,979,389 4,979,389 1.3
4,000,000 Falcon Asset Securitization Corp.,
5.32% due 7/16/1996. . . . . . . . . 3,989,360 3,989,360 1.0
8,829,000 General Electric Capital Corp., 5.56%
due 7/01/1996. . . . . . . . . . . . 8,824,909 8,824,909 2.2
3,000,000 National Fleet Corp., 5.39% due 2,981,135 2,981,135
8/09/1996. . . . . . . . . . . . . . 0.8
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 49,681,771 49,681,771 12.5
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS. . . . . . . . . . $370,762,415 403,877,071 101.7
--------------
LIABILITIES IN EXCESS OF OTHER ASSETS -------------- (6,688,396) (1.7)
-------------- ------
NET ASSETS. . . . . . . . . . . . . . $397,188,675 100.0%
-------------- ------
-------------- ------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Non-income producing security.
* 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 Receipts (ADR).
(b) Investment in companies 5% or more of whose outstanding securities are
held by the Fund (such companies are defined as "Affiliated Companies" in
Section 2 (a) (3) of the Investment Company Act of 1940) are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
NET SHARE DIVIDEND
INDUSTRY AFFILIATE ACTIVITIY NET COST INCOME
- ------------------------------------------------------------------------------------
SAVINGS & LOANS Greater N.Y. Savings Bank. 288,200 $ 3,327,263 --
HOTELS John Q. Hammons Hotels, Inc. 21,400 239,480 --
TECHNOLOGY Micronics Computers, Inc.. 291,600 802,425 --
$4,369,168
TOTAL ------------
------------
- ------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--DEVELOPING CAPITAL MARKETS FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
VALUE PERCENT OF
AFRICA INDUSTRY SHARES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MOROCCO BANKING 16,500 Wafa Bank. . . . . . . . . . $ 789,762 $ 761,684 1.0%
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
MOROCCO 789,762 761,684 1.0
---------------------------------------------------------------------------------------------------------------
SOUTH AFRICA BEVERAGE & TOBACCO 15,000 South African Breweries Ltd.. 345,465 440,157 0.6
11,700 South African Breweries Ltd.
(ADR) (a). . . . . . . . . . 391,063 342,225 0.4
-- -------- -- -------- ---- ----
736,528 782,382 1.0
---------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 656,900 Sun International, Ltd.. . . 903,206 705,773 0.9
---------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 39,500 Nedcor Ltd. (Ordinary). . . . 479,425 597,793 0.8
---------------------------------------------------------------------------------------------------------------
MINING 78,700 Beatrix Mines Ltd.. . . . . . 679,625 631,891 0.8
18,000 De Beers Consolidated
Mines Ltd. (ADR) (a). . . . . 454,723 611,368 0.8
33,900 Driefontein Consolidated Ltd.
(ADR) (a). . . . . . . . . . 484,124 440,700 0.6
27,500 Kinross Mines Ltd.. . . . . . 294,703 292,283 0.4
400 Vaal Reefs Exploration &
Mining Co. Ltd.. . . . . . . 40,800 32,671 0.0
--------- --------- ---
1,953,975 2,008,913 2.6
---------------------------------------------------------------------------------------------------------------
STEEL 5,454 South Africa Iron & Steel
Industrial Corp., Ltd.. . . 5,274 4,272 0.0
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SOUTH AFRICA 4,078,408 4,099,133 5.3
---------------------------------------------------------------------------------------------------------------
ZIMBABWE BEVERAGE & TOBACCO 321,000 Delta Corporation Ltd.. . . . 763,178 813,070 1.1
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
ZIMBABWE 763,178 813,070 1.1
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
AFRICA 5,631,348 5,673,887 7.4
- ----------------------------------------------------------------------------------------------------------------------------
EUROPE
- ----------------------------------------------------------------------------------------------------------------------------
FRANCE MERCHANDISING 900 Carrefour S.A. (Ordinary). . 650,858 504,490 0.7
900 +Carrefour S.A. (Rights) (d). 0 248,746 0.3
-- -------- -- -------- ---- ----
650,858 753,236 1.0
---------------------------------------------------------------------------------------------------------------
UTILITIES--WATER 11,900 Compagnie Generale des Eaux
S.A.. . . . . . . . . . . . 1,258,859 1,329,932 1.7
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
FRANCE 1,909,717 2,083,168 2.7
- ----------------------------------------------------------------------------------------------------------------------------
GREECE BANKING 20,170 Ergo Bank S.A. (Ordinary). . 878,822 1,111,006 1.4
---------------------------------------------------------------------------------------------------------------
BEVERAGE 11,010 Hellenic Bottling Co. S.A.. . 215,402 365,703 0.5
---------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 23,400 Hellenic Telecommunication
Organization S.A.. . . . . . 387,013 388,136 0.5
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
GREECE 1,481,237 1,864,845 2.4
- ----------------------------------------------------------------------------------------------------------------------------
HUNGARY HEALTH/PERSONAL CARE 28,800 Gedeon Richter Ltd. (GDR) (b)
569,350 1,447,200 1.9
---------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 1,100 Magyar TavKozlesi
Reszvenytarsasag
(Ordinary). . . . . . . . . . 174,885 164,857 0.2
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
HUNGARY 744,235 1,612,057 2.1
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--DEVELOPING CAPITAL MARKETS FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
EUROPE VALUE PERCENT OF
(CONCLUDED) INDUSTRY SHARES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
POLAND AUTOMOTIVE 10,000 +T.C. Debica. . . . . . . . . $ 211,943 $ 242,826 0.3%
---------------------------------------------------------------------------------------------------------------
ELECTRICAL & ELECTRONICS 41,000 Elektrim Towarzystwo
Handlowe S.A.. . . . . . . . 239,769 336,387 0.4
---------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 2,000 Bank Rozwoju Eksportu S.A.
(BRE). . . . . . . . . . . 49,744 52,244 0.1
---------------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY 182,551 +Mostostal-Export S.A.. . . . 469,280 624,623 0.8
182,551 Mostostal-Export S.A.
(Rights). . . . . . . . . . 0 0 0.0
-- -------- -- -------- --- ----
469,280 624,623 0.8
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
POLAND 970,736 1,256,080 1.6
- ---------------------------------------------------------------------------------------------------------------------------
PORTUGAL MULTI-INDUSTRY 27,000 Sonae Investimentos-SGPS
S.A.. . . . . . . . . . . . 647,882 702,173 0.9
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
PORTUGAL 647,882 702,173 0.9
- ---------------------------------------------------------------------------------------------------------------------------
RUSSIA MULTI-INDUSTRY 15,200 Templeton Russia Fund, Inc.
(ADR) (a). . . . . . . . . 215,911 397,100 0.5
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
RUSSIA 215,911 397,100 0.5
- ---------------------------------------------------------------------------------------------------------------------------
TURKEY BEVERAGE & TOBACCO 1,500,000 Erciyas Biracilik Ve Malt
Sanayii A.S.. . . . . . . . 934,016 850,610 1.1
---------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS 2,012,031 Alarko Holdings A.S.. . . . 598,650 368,054 0.5
---------------------------------------------------------------------------------------------------------------
METAL FABRICATING 7,800,000 Eregli Demir Ve Celik
Fabrikalari T.A.S.. . . . . 983,792 865,610 1.1
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
TURKEY 2,516,458 2,084,274 2.7
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
EUROPE 8,486,176 9,999,697 12.9
- ---------------------------------------------------------------------------------------------------------------------------
LATIN
AMERICA
---------------------------------------------------------------------------------------------------------------
ARGENTINA BANKING 2,500 Banco Frances del Rio de la
Plata S.A. (ADR) (a). . . . 69,067 71,875 0.1
31,000 +Bansud S.A. (Class B). . . . 357,015 362,863 0.5
-- -------- -- -------- --- ----
426,082 434,738 0.6
---------------------------------------------------------------------------------------------------------------
OIL & RELATED 236,390 Companhia Naviera Perez
Companc S.A.C.F.I.M.F.A.
(Class B). . . . . . . . . 1,156,335 1,549,052 2.0
---------------------------------------------------------------------------------------------------------------
STEEL 129,000 Siderar S.A.. . . . . . . . 100,461 175,519 0.2
---------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 46,226 Telefonica de Argentina S.A.
(Class B) (ADR) (a). . . . 1,340,493 1,369,445 1.8
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
ARGENTINA 3,023,371 3,528,754 4.6
- ---------------------------------------------------------------------------------------------------------------------------
BRAZIL BANKING 114,876,523 Banco Bradesco S.A.
(Preferred). . . . . . . . . 767,850 938,235 1.2
---------------------------------------------------------------------------------------------------------------
BEVERAGE 1,900,000 Companhia Cervejaria Brahma
S.A. PN (Preferred). . . . . 643,289 1,133,566 1.5
111,764 Companhia Cervejaria
Brahma S.A. PN
(Warrants) (c). . . . . . . 5,665 5,566 0.0
-- -------- -- -------- --- ----
648,954 1,139,132 1.5
---------------------------------------------------------------------------------------------------------------
MINING 10,296 Companhia Vale do Rio Doce
S.A. (Preferred). . . . . . 227,523 199,459 0.3
---------------------------------------------------------------------------------------------------------------
OIL & RELATED 3,050,000 Petroleo Brasileiro S.A.
(Preferred). . . . . . . . . 367,644 375,174 0.5
---------------------------------------------------------------------------------------------------------------
STEEL 570,200,000 Usinas Siderurgicas de Minas
Gerais-Usiminas S.A.
(Preferred). . . . . . . . . 631,915 602,004 0.8
---------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--DEVELOPING CAPITAL MARKETS FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
LATIN
AMERICA
(CONCLUDED) VALUE PERCENT OF
- ------------INDUSTRY SHARES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
BRAZIL TELECOMMUNICATIONS 38,780 Telecomunicacoes
(CONCLUDED) Brasileiras S.A.-Telebras
PN (ADR) (a). . . . . . . . $ 1,637,160 $ 2,700,058 3.5%
13,972,227 Telecomunicacoes
Brasileiras S.A.-Telebras
PN (Preferred). . . . . . . 737,840 975,551 1.3
13,037,631 Telecomunicacoes de
Minas Gerais S.A.- TELEMIG
(Class B) (Preferred). . .
1,054,772 1,344,149 1.7
-- --------- -- --------- --- ----
3,429,772 5,019,758 6.5
-----------------------------------------------------------------------------------------------------------------
UTILITIES 29,513 Companhia Energetica de
Minas Gerais S.A. (CEMIG)
(ADR) (a). . . . . . . . . . 558,442 789,473 1.0
20,000 Companhia Energetica de Minas
Gerais S.A. (CEMIG) (ADR)
(a) (e). . . . . . . . . . 426,315 535,000 0.7
1,928,000 Light Participacoes S.A.. . 175,511 364,284 0.5
-- --------- -- --------- --- ----
1,160,268 1,688,757 2.2
-----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
BRAZIL 7,233,926 9,962,519 13.0
- -----------------------------------------------------------------------------------------------------------------------------
CHILE TELECOMMUNICATIONS 5,786 Compania de
Telecomunicaciones de Chile
S.A. (ADR) (a). . . . . . . 491,808 567,751 0.7
-----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
CHILE 491,808 567,751 0.7
- -----------------------------------------------------------------------------------------------------------------------------
MEXICO BANKING 355,000 +Grupo Financiero Banamex-
Accival, S.A. de C.V.
(BANACCL) (Class B). . . . 660,134 739,759 1.0
10,650 +Grupo Financiero Banamex-
Accival, S.A. de C.V.
(BANACCL) (Class L). . . . 18,179 20,278 0.0
-- --------- -- --------- --- ----
678,313 760,037 1.0
----------------------------------------------------------------------------------
BEVERAGE & TOBACCO 16,100 Panamerican Beverages, Inc.
(Class A). . . . . . . . . . 644,974 720,475 0.9
----------------------------------------- ---- ----
BUILDING & CONSTRUCTION 126,000 Apasco, S.A. de C.V.. . . . 458,715 697,223 0.9
----------------------------------------- ---- ----
BUILDING MATERIALS 154,000 Cementos Mexicanos, S.A. de
C.V.. . . . . . . . . . . . 665,660 599,669 0.8
-----------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 77,000 +Banca Quadrum, S.A. de C.V.
(ADR) (a). . . . . . . . . . 510,125 385,000 0.5
-----------------------------------------------------------------------------------------------------------------
HEALTH/PERSONAL CARE 100,000 Kimberly-Clark de Mexico,
S.A. de C.V.. . . . . . . . 1,333,327 1,824,673 2.4
-----------------------------------------------------------------------------------------------------------------
LEISURE 184,787 +Grupo Carso, S.A. de C.V.
'A1'. . . . . . . . . . . . 1,407,999 1,314,497 1.7
-----------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 19,400 Telefonos de Mexico, S.A. de
C.V. (ADR) (a). . . . . . . 861,114 649,900 0.8
-----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN MEXICO 6,560,227 6,951,474 9.0
- -----------------------------------------------------------------------------------------------------------------------------
VENEZUELA STEEL 137,000 Siderurgica Venezolana
SIVENSA, S.A.I.C.A.-
S.A.C.A. (ADR) (a). . . . . 414,470 438,400 0.6
-----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
VENEZUELA 414,470 438,400 0.6
-----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
LATIN AMERICA 17,723,802 21,448,898 27.9
- -----------------------------------------------------------------------------------------------------------------------------
MIDDLE
EAST
- -----------------------------------------------------------------------------------------------------------------------------
EGYPT BANKING 2,666 Commercial International
Bank (Egypt) S.A.E.. . . . . 350,674 330,009 0.4
-----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
EGYPT 350,674 330,009 0.4
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--DEVELOPING CAPITAL MARKETS FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
MIDDLE EAST
(CONCLUDED) SHARES HELD/ VALUE PERCENT OF
- -------------INDUSTRY FACE AMOUNT INVESTMENTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
ISRAEL BANKING 6,000 Bank Hapoalim Ltd.. . . . . . $ 8,651 $ 8,852 0.0%
------------------------------------------------------------------------------------------------------------------
MERCHANDISING 72,000 +Blue Square Chain Stores
Properties & Investments
Ltd.. . . . . . . . . . . . . 522,937 502,776 0.7
------------------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY 10,578 Koor Industries Ltd.. . . . . 968,604 896,842 1.2
3,500 Koor Industries Ltd. (ADR) (a) 67,069 60,375 0.1
-- -------- -- -------- ---- ----
1,035,673 957,217 1.3
------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
ISRAEL 1,567,261 1,468,845 2.0
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
THE MIDDLE EAST 1,917,935 1,798,854 2.4
- -------------------------------------------------------------------------------------------------------------------------------
PACIFIC
BASIN/ASIA
- -------------------------------------------------------------------------------------------------------------------------------
AUSTRALIA MERCHANDISING 19,740 Amway Asia Pacific Ltd.
(ADR) (a). . . . . . . . . . . 690,260 597,135 0.8
------------------------------------------------------------------------------------------------------------------
RECREATION 168,900 +Crown Casino Ltd.. . . . . . . 321,163 377,361 0.5
------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
AUSTRALIA 1,011,423 974,496 1.3
- -------------------------------------------------------------------------------------------------------------------------------
HONG KONG AUTOMOTIVE 467,000 Sime Darby (Hong Kong) Ltd. 592,680 503,772 0.7
------------------------------------------------------------------------------------------------------------------
BANKING 848,000 JCG Holdings, Ltd.. . . . . . 704,307 690,188 0.9
------------------------------------------------------------------------------------------------------------------
FOOD 880,000 C.P. Pokphand Co. Ltd.
(Ordinary). . . . . . . . . . 458,329 349,590 0.5
5,095,000 Tingyi (Cayman Islands)
Holdings, Co.. . . . . . . . . 1,419,781 1,398,731 1.8
-- -------- -- -------- ---- ----
1,878,110 1,748,321 2.3
------------------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY 5,066,000 Sinocan Holdings Ltd.. . . . . 1,328,338 2,225,231 2.9
------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
HONG KONG 4,503,435 5,167,512 6.8
- -------------------------------------------------------------------------------------------------------------------------------
INDIA AUTOMOTIVE 89,000 Ashok Leyland Ltd. (GDR) (b). 947,250 1,246,000 1.6
39,000 Ashok Leyland Ltd. (GDR)
(b) (e). . . . . . . . . . . . 532,185 546,000 0.7
-- -------- -- -------- ---- ----
1,479,435 1,792,000 2.3
------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS 71,600 Larsen & Toubro Ltd.
(GDR) (b). . . . . . . . . . . 1,124,562 1,342,500 1.7
------------------------------------------------------------------------------------------------------------------
ENERGY SOURCES 37,900 Bombay Suburban Electric
Supply Co. Ltd. (GDR) (b). . . 694,175 729,575 0.9
------------------------------------------------------------------------------------------------------------------
LEISURE 51,800 East India Hotels, Ltd. (ADR)
(a) (e). . . . . . . . . . . 820,294 1,431,234 1.9
------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN INDIA 4,118,466 5,295,309 6.8
- -------------------------------------------------------------------------------------------------------------------------------
INDONESIA BANKING--INTERNATIONAL 259,000 P.T. Bank Bali 'Foreign'. . . 562,911 556,511 0.7
------------------------------------------------------------------------------------------------------------------
BROADCASTING & US$765,000 P.T. Surya Citra Television,
PUBLISHING 4% due 7/01/1997
(Convertible) (e). . . . . . . 800,697 765,306 1.0
------------------------------------------------------------------------------------------------------------------
FOOD & TOBACCO 63,100 P.T. Wicaksana Overseas
International. . . . . . . . . 179,543 173,545 0.2
------------------------------------------------------------------------------------------------------------------
REAL ESTATE 336,000 P.T. Ciputra Development. . . 697,964 682,252 0.9
------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS & 388,000 P.T. Kabelmetal Indonesia. . . 486,874 175,075 0.2
EQUIPMENT
------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
INDONESIA 2,727,989 2,352,689 3.0
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--DEVELOPING CAPITAL MARKETS FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
PACIFIC
BASIN/ASIA VALUE PERCENT OF
(CONCLUDED) INDUSTRY SHARES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MALAYSIA BANKING 62,000 Malayan Banking BHD. . . . $ 593,441 $ 596,632 0.8%
270,000 Public Bank (Malaysia) BHD
'Foreign'. . . . . . . . . 507,714 746,993 1.0
-- --------- -- --------- --- ----
1,101,155 1,343,625 1.8
------------------------------------------------------------------
BROADCASTING & 274,000 New Straits Times Press
PUBLISHING BHD. . . . . . . . . . . . 1,362,444 1,428,228 1.9
348,000 Sistem Televisyen Malaysia
BHD. . . . . . . . . . . . 510,629 711,628 0.9
-- --------- -- --------- --- ----
1,873,073 2,139,856 2.8
CHEMICALS 90,000 Nylex (Malaysia) BHD. . . . 354,841 346,431 0.4
----------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY 427,000 Renong BHD. . . . . . . . . 723,102 681,419 0.9
----------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 168,000 Leader Universal Holdings
BHD (Class A). . . . . . . 500,473 474,900 0.6
455,000 +Technology Resources
Industries BHD (TRI). . . . 1,661,164 1,587,209 2.1
-- --------- -- --------- --- ----
2,161,637 2,062,109 2.7
----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
MALAYSIA 6,213,808 6,573,440 8.6
- ----------------------------------------------------------------------------------------------------------------------
PAKISTAN TELECOMMUNICATIONS 2,800 +Pakistan
Telecommunications Corp.. . 258,800 319,954 0.4
----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
PAKISTAN 258,800 319,954 0.4
- ----------------------------------------------------------------------------------------------------------------------
SOUTH KOREA TELECOMMUNICATIONS 247,200 Korea Mobile
Telecommunications
Corp. (GDR) (b) (e). . . . 3,278,421 4,183,860 5.4
----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SOUTH KOREA 3,278,421 4,183,860 5.4
- ----------------------------------------------------------------------------------------------------------------------
THAILAND BANKING 132,000 Krung Thai Bank Public
Co. Ltd.. . . . . . . . . . 623,254 618,669 0.8
63,400 Phatra Thanakit Public
Co. Ltd.. . . . . . . . . . 665,227 441,977 0.6
11,000 Siam Commercial Bank
Public Co. Ltd. 'Foreign'. 175,656 159,433 0.2
127,000 Thai Farmers Bank Co., Ltd. 1,374,271 1,390,547 1.8
-- --------- -- --------- --- ----
2,838,408 2,610,626 3.4
----------------------------------------------------------------------------------------------------------
FINANCE 116,400 Finance One Public Company
Ltd. 'Foreign'. . . . . . . 834,837 751,855 1.0
----------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 46,900 Advanced Info Service Public
Company Ltd. 'Foreign'. . . 897,215 735,179 1.0
----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
THAILAND 4,570,460 4,097,660 5.4
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
PACIFIC BASIN/ASIA 26,682,802 28,964,920 37.7
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--DEVELOPING CAPITAL MARKETS FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONCLUDED)
<TABLE>
<CAPTION>
VALUE
- -------------------- FACE AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A)
<S> <C> <C> <C> <C>
US GOVERNMENT & US$ 6,223,000 Federal Home Loan Mortgage
AGENCY OBLIGATIONS* Corp., 5.52% due
7/01/1996. . . . . . . . $ 6,220,137 $ 6,220,137
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SHORT-TERM SECURITIES 6,220,137 6,220,137
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS. . . . . . . . . . . . . . . . . . . . $66,662,200 74,106,393
-------------
OTHER ASSETS LESS LIABILITIES. . . . . . . . . . . . . . ------------- 2,743,041
-- ---------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . $76,849,434
-------------
-------------
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
PERCENT OF
- -------------------- NET ASSETS
<S> <C>
US GOVERNMENT &
AGENCY OBLIGATIONS*
8.1%
- ------------------------------------
8.1
- ------------------------------------
96.4
3.6
-----------
100.0%
------------
------------
- ------------------------------------
</TABLE>
* 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.
(a) American Depositary Receipts (ADR).
(b) Global Depositary Receipts (GDR).
(c) 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.
(d) The rights may be exercised until 7/15/1996.
(e) Restricted security as to resale. The value of the Fund's investment in
restricted securities was approximately $7,461,000, representing 9.7% of net
assets.
<TABLE>
<CAPTION>
ACQUISITION VALUE
ISSUE DATES COST (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ashok Leyland Ltd. (GDR). . . . . . . . . . . . . . . . . . 3/09/1995-5/22/1996 $ 532,185 $ 546,000
Companhia Energetica de Minas Gerais S.A. (CEMIG) (ADR). . 7/20/1995-8/01/1995 426,315 535,000
East India Hotels, Ltd. (ADR) 12/12/1994-7/10/1995 820,294 1,431,234
Korea Mobile Telecommunications Corp. (GDR). . . . . . . . 6/21/1995-1/18/1996 3,278,421 4,183,860
P.T. Surya Citra Television, 4% due 7/01/1997 (Convertible) 6/24/1994-3/31/1995 800,697 765,306
- ---------------------------------------------------------------------------------------------------------------
TOTAL $ 5,857,912 $ 7,461,400
------------- --------------
------------- --------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
28
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--DOMESTIC MONEY MARKET FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE
AMOUNT ISSUE RATE* DATE (NOTE 1A)
<S> <C> <C> <C> <C> <C>
COMMERCIAL $ 6,000,000 Allomon Funding Corp.. . . . . . . . . . . . . . . 5.30 % 7/15/96 $ 5,984,898
PAPER--45.4%
5,420,000 Allomon Funding Corp.. . . . . . . . . . . . . . . 5.38 7/25/96 5,398,130
4,000,000 American Express Credit Corp.. . . . . . . . . . . 4.88 8/09/96 3,975,173
6,000,000 CSW Credit, Inc.. . . . . . . . . . . . . . . . . 5.31 7/10/96 5,989,380
4,000,000 CSW Credit, Inc.. . . . . . . . . . . . . . . . . 5.38 7/29/96 3,981,469
5,693,000 Caterpillar, Inc.. . . . . . . . . . . . . . . . . 5.34 7/09/96 5,683,711
5,000,000 Dow Jones & Company, Inc.. . . . . . . . . . . . . 5.33 7/08/96 4,992,597
10,500,000 Eureka Securitization Inc.. . . . . . . . . . . . 5.30 7/18/96 10,469,083
1,500,000 Eureka Securitization Inc.. . . . . . . . . . . . 5.30 8/19/96 1,488,343
2,000,000 Ford Motor Credit Co.. . . . . . . . . . . . . . . 5.31 7/12/96 1,995,870
9,000,000 Ford Motor Credit Co.. . . . . . . . . . . . . . . 5.35 7/15/96 8,977,262
2,000,000 General Electric Capital Corp.. . . . . . . . . . 5.50 3/03/97 1,922,569
4,200,000 General Motors Acceptance Corp.. . . . . . . . . . 5.41 7/22/96 4,184,852
5,000,000 General Motors Acceptance Corp.. . . . . . . . . . 5.35 7/30/96 4,976,311
7,000,000 Goldman Sachs Group, L.P.. . . . . . . . . . . . . 5.33 7/08/96 6,989,636
2,692,000 H.J. Heinz Company. . . . . . . . . . . . . . . . 5.40 7/31/96 2,678,675
4,000,000 International Securitization Corp.. . . . . . . . 5.30 8/09/96 3,975,173
10,000,000 Koch Industries, Inc.. . . . . . . . . . . . . . . 5.55 7/01/96 9,995,375
503,000 McKenna Triangle National Corp.. . . . . . . . . . 5.38 7/17/96 501,572
8,000,000 National Fleet Funding Corp.. . . . . . . . . . . 5.42 7/30/96 7,961,458
1,000,000 National Rural Utilities Cooperative Finance Corp. 5.36 7/11/96 998,064
9,000,000 New Center Asset Trust. . . . . . . . . . . . . . 5.36 7/11/96 8,982,580
2,000,000 Preferred Receivables Funding Corp.. . . . . . . . 5.32 7/16/96 1,994,680
6,975,000 Preferred Receivables Funding Corp.. . . . . . . . 5.29 9/04/96 6,903,328
4,000,000 Riverwoods Funding Corp.. . . . . . . . . . . . . 5.30 8/16/96 3,970,709
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (COST--$124,977,281) 124,970,898
- ------------------------------------ --------------------------------------
CORPORATE NOTES--8.0% 8,000,000 Beta Finance Inc.+. . . . . . . . . . . . . . . . 5.38 9/16/96 8,000,000
2,000,000 Ford Motor Credit Co.. . . . . . . . . . . . . . . 8.00 10/01/96 2,011,400
3,000,000 J.P. Morgan & Company+. . . . . . . . . . . . . . 5.47 7/17/96 2,999,894
9,000,000 SMM Trust 1995-Q+. . . . . . . . . . . . . . . . . 5.496 1/08/97 9,000,000
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE NOTES (COST--$22,010,366) 22,011,294
- -----------------------------------------------------------------------------------------------------------------------------
FUNDING 5,000,000 Jackson National Life Insurance Co.+. . . . . . . 5.47 4/08/97 5,000,000
AGREEMENTS--1.8%
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL FUNDING AGREEMENTS (COST--$5,000,000) 5,000,000
- -----------------------------------------------------------------------------------------------------------------------------
MASTER NOTES--1.1% 3,000,000 Goldman Sachs Group L.P.+. . . . . . . . . . . . . 5.46 11/08/96 3,000,000
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL MASTER NOTES (COST--$3,000,000) 3,000,000
- -----------------------------------------------------------------------------------------------------------------------------
MEDIUM-TERM 8,000,000 CIT Group Holdings, Inc.. . . . . . . . . . . . . 5.31 9/12/96 7,998,551
NOTES--2.9%
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL MEDIUM-TERM NOTES (COST--$7,998,551) 7,998,551
- -----------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT, AGENCY 295,000 Federal Home Loan Bank. . . . . . . . . . . . . . 4.96 7/24/96 293,886
& INSTRUMENTALITY
OBLIGATIONS-- 165,000 Federal Home Loan Bank. . . . . . . . . . . . . . 4.90 7/30/96 164,233
DISCOUNT--1.5%
200,000 Federal National Mortgage Association. . . . . . . 5.11 10/30/96 196,321
2,000,000 Federal National Mortgage Association. . . . . . . 5.19 1/08/98 1,971,800
1,500,000 Federal National Mortgage Association. . . . . . . 6.12 4/15/98 1,494,450
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT, AGENCY & INSTRUMENTALITY OBLIGATIONS--
DISCOUNT (COST--$4,148,421) 4,120,690
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--DOMESTIC MONEY MARKET FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONCLUDED)
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE
AMOUNT ISSUE RATE* DATE (NOTE 1A)
<S> <C> <C> <C> <C> <C>
US GOVERNMENT, AGENCY $ 5,000,000 Federal Farm Credit Bank+. . . . . . . . . . . 5.38 % 11/25/97 $ 4,998,523
& INSTRUMENTALITY
OBLIGATIONS-- 5,000,000 Federal Home Loan Bank+. . . . . . . . . . . . 5.34 9/12/96 4,999,451
NON-DISCOUNT--39.2%
1,040,000 Federal Home Loan Bank+. . . . . . . . . . . . 5.60 1/26/98 1,040,444
2,000,000 Federal National Mortgage Association+. . . . 5.58 8/13/96 2,000,000
15,000,000 Federal National Mortgage Association+. . . . 5.343 10/11/96 15,000,000
2,000,000 Federal National Mortgage Association+. . . . 5.37 11/04/96 2,000,000
5,000,000 Federal National Mortgage Association+. . . . 5.85 2/14/97 5,013,287
12,000,000 Federal National Mortgage Association+. . . . 5.46 2/21/97 12,000,000
2,000,000 Federal National Mortgage Association+. . . . 5.33 5/14/97 1,998,460
9,500,000 Federal National Mortgage Association+. . . . 5.334 5/22/97 9,494,201
4,000,000 Student Loan Marketing Association+. . . . . . 5.69 8/22/96 4,001,788
3,700,000 Student Loan Marketing Association+. . . . . . 5.37 10/04/96 3,700,000
8,650,000 Student Loan Marketing Association+. . . . . . 5.64 11/01/96 8,656,239
5,000,000 Student Loan Marketing Association+. . . . . . 5.64 1/23/97 5,002,475
2,000,000 Student Loan Marketing Association+. . . . . . 5.56 3/03/97 2,000,157
6,500,000 Student Loan Marketing Association+. . . . . . 5.59 10/30/97 6,501,846
2,000,000 US Treasury Notes. . . . . . . . . . . . . . . 6.625 3/31/97 2,012,500
1,750,000 US Treasury Notes. . . . . . . . . . . . . . . 6.50 4/30/97 1,759,706
1,750,000 US Treasury Notes. . . . . . . . . . . . . . . 6.50 5/15/97 1,759,296
1,500,000 US Treasury Notes. . . . . . . . . . . . . . . 6.125 5/31/97 1,503,750
1,800,000 US Treasury Notes. . . . . . . . . . . . . . . 6.00 8/31/97 1,800,000
1,800,000 US Treasury Notes. . . . . . . . . . . . . . . 5.75 9/30/97 1,794,937
2,000,000 US Treasury Notes. . . . . . . . . . . . . . . 5.625 10/31/97 1,990,000
3,800,000 US Treasury Notes. . . . . . . . . . . . . . . 5.375 11/30/97 3,766,750
2,200,000 US Treasury Notes. . . . . . . . . . . . . . . 5.25 12/31/97 2,173,875
1,170,000 US Treasury Notes. . . . . . . . . . . . . . . 5.00 1/31/98 1,150,621
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT, AGENCY & INSTRUMENTALITY OBLIGATIONS--
NON-DISCOUNT (COST--$108,238,904) 108,118,306
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST--$275,373,523)--99.9%. 275,219,739
OTHER ASSETS LESS LIABILITIES--0.1%. . . . . . 383,972
-----------------
NET ASSETS--100.0%. . . . . . . . . . . . . . $ 275,603,711
-----------------
-----------------
- -----------------------------------------------------------------------------------------------------------------------------------
*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, 1996.
+Variable Rate Notes.
</TABLE>
See Notes to Financial Statements.
30
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) PERCENT OF
- ------------------------------------------------------------------------------------------------------- NET ASSETS
<S> <C> <C> <C> <C> <C>
BANKING 134,300 TCF Financial Corp.. . . . . . . . . . $ 3,317,345 $ 4,465,475 1.1%
- ---------------------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY 400,000 +COR Therapeutics Inc.. . . . . . . . . 4,470,630 4,550,000 1.1
95,000 Genzyme Corp.. . . . . . . . . . . . . 5,215,374 4,773,750 1.2
320,000 +Neoprobe Corp.. . . . . . . . . . . . . 5,810,262 5,600,000 1.4
150,000 +Sano Corporation. . . . . . . . . . . . 1,931,875 2,325,000 0.6
------------- ------------- ----------
17,428,141 17,248,750 4.3
- ---------------------------------------------------------------------------------------------------------------------
BROADCAST, RADIO & TV 50,000 Clear Channel Communications, Inc.. . . 4,200,000 4,118,750 1.0
227,000 +Jacor Communications, Inc.. . . . . . . 6,356,000 7,008,625 1.7
------------- ------------- ----------
10,556,000 11,127,375 2.7
- ---------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS 165,000 Apogee Enterprises, Inc.. . . . . . . . 2,358,910 5,610,000 1.4
265,000 Ply-Gem Industries, Inc.. . . . . . . . 4,750,765 3,610,625 0.9
------------- ------------- ----------
7,109,675 9,220,625 2.3
- ---------------------------------------------------------------------------------------------------------------------
BUSINESS SERVICES 140,000 Accustaff, Inc.. . . . . . . . . . . . 3,927,500 3,815,000 0.9
100,000 Reynolds & Reynolds Co. (The) (Class A) 2,392,876 5,325,000 1.3
------------- ------------- ----------
6,320,376 9,140,000 2.2
- ---------------------------------------------------------------------------------------------------------------------
CHEMICALS 305,000 Crompton & Knowles Corp.. . . . . . . . 4,915,361 5,108,750 1.2
- ---------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES 155,000 Rollins Inc.. . . . . . . . . . . . . . 3,898,215 3,642,500 0.9
- ---------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS 155,000 +ProNet, Inc.. . . . . . . . . . . . . . 4,655,720 1,898,750 0.5
- ---------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE 265,000 +Activision Inc.. . . . . . . . . . . . 3,858,754 3,445,000 0.8
15,000 Check Point Software Technologies, Ltd. 210, 000 360,000 0.0
35,000 +Sterling Software, Inc.. . . . . . . . 1,099,939 2,695,000 0.7
180,000 System Software Associates, Inc.. . . . 4,042,642 3,060,000 0.7
------------- ------------- ----------
9,211,335 9,560,000 2.2
- ---------------------------------------------------------------------------------------------------------------------
COMPUTERS 152,500 +3d Systems Corp.. . . . . . . . . . . . 2,658,750 3,316,875 0.8
145,000 +Madge Networks N.V.. . . . . . . . . . 5,446,533 2,120,625 0.5
165,000 +Read-Rite Corp.. . . . . . . . . . . . 3,654,688 2,310,000 0.6
------------- ------------- ----------
11,759,971 7,747,500 1.9
- ---------------------------------------------------------------------------------------------------------------------
DIVERSIFIED 38,000 Harsco Corp.. . . . . . . . . . . . . . 1,553,899 2,555,500 0.6
150,000 Lancaster Colony Corp.. . . . . . . . . 5,148,124 5,587,500 1.4
------------- ------------- ----------
6,702,023 8,143,000 2.0
- ---------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 155,000 Belden, Inc.. . . . . . . . . . . . . . 4,879,765 4,650,000 1.1
236,000 +Sheldahl, Inc.. . . . . . . . . . . . . 3,827,189 4,926,500 1.2
162,750 Vishay Intertechnology, Inc.. . . . . . 4,682,125 3,844,969 0.9
------------- ------------- ----------
13,389,079 13,421,469 3.2
- ---------------------------------------------------------------------------------------------------------------------
ELECTRONIC/INSTRUMENTS 224,500 BMC Industries, Inc.. . . . . . . . . . 1,436,390 6,454,375 1.6
175,000 +Electro Scientific Industries, Inc.. . 4,868,003 3,543,750 0.9
272,500 Methode Electronics Inc. (Class A). . . 3,128,357 4,632,500 1.1
------------- ------------- ----------
9,432,750 14,630,625 3.6
- ---------------------------------------------------------------------------------------------------------------------
ELECTRONIC/SEMI- 165,000 +Microchip Technology, Inc.. . . . . . . 4,550,625 4,083,750 1.0
CONDUCTORS
180,000 Oak Technology, Inc.. . . . . . . . . . 3,877,500 1,687,500 0.4
------------- ------------- ----------
8,428,125 5,771,250 1.4
- ---------------------------------------------------------------------------------------------------------------------
ELECTRONICS 75,000 +Pinnacle Systems, Inc.. . . . . . . . . 1,378,125 1,556,250 0.4
200,000 Semitool Inc.. . . . . . . . . . . . . 3,381,041 2,600,000 0.6
------------- ------------- ----------
4,759,166 4,156,250 1.0
- ---------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL 350,000 Calgon Carbon Corp.. . . . . . . . . . 4,244,610 4,725,000 1.2
186,719 TETRA Technologies, Inc.. . . . . . . . 2,121,250 3,641,016 0.9
------------- ------------- -----
6,365,860 8,366,016 2.1
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE
PERCENT OF
INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FINANCIAL SERVICES 100,000 FINOVA Group, Inc.. . . . . . . . . . $ 3,520,726 $ 4,875,000 1.2%
105,000 First USA, Inc.. . . . . . . . . . . 4,734,200 5,775,000 1.4
200,000 Imperial Credit Industries, Inc.. . . 5,187,268 6,050,000 1.5
250,000 National Auto Credit, Inc.. . . . . . 2,804,197 2,843,750 0.7
83,000 +Southern Pacific Funding Corp.. . . . 1,429,810 1,452,500 0.4
------------- ------------- ----------
17,676,201 20,996,250 5.2
- ------------------------------------------------------------------------------------------------------------------
FOODS/FOOD PROCESSING 100,000 +Smithfield Foods, Inc.. . . . . . . . 2,513,120 2,500,000 0.6
- ------------------------------------------------------------------------------------------------------------------
GAMING 145,000 +Scientific Games Holdings Corp.. . . 5,165,625 4,096,250 1.0
- ------------------------------------------------------------------------------------------------------------------
1,535,333
HEALTHCARE-- 110,000 +Thermedics, Inc.. . . . . . . . . . . 2,750,000 0.7
PRODUCTS & SERVICES
- ------------------------------------------------------------------------------------------------------------------
HOSPITAL MANAGEMENT 100,000 +Collaborative Clinical Research, Inc. 1,414,250 1,150,000 0.3
127,500 Health Care & Retirement Corp.. . . . 2,493,162 3,028,125 0.7
185,000 +OrNda Health Corp.. . . . . . . . . . 3,182,121 4,440,000 1.1
------------- ------------- -----
7,089,533 8,618,125 2.1
- ------------------------------------------------------------------------------------------------------------------
HOTELS 150,000 +Red Lion Hotels Inc.. . . . . . . . . 2,569,500 3,150,000 0.8
- ------------------------------------------------------------------------------------------------------------------
INSURANCE 249,500 +Acceptance Insurance Holdings, Inc.. 3,777,533 4,272,687 1.0
- ------------------------------------------------------------------------------------------------------------------
LEISURE 150,000 Callaway Golf Co.. . . . . . . . . . 2,255,250 4,987,500 1.2
167,500 Royal Caribbean Cruises Ltd. . . . . 3,905,376 4,773,750 1.2
------------- ------------- ----------
6,160,626 9,761,250 2.4
- ------------------------------------------------------------------------------------------------------------------
MANUFACTURED HOUSING 190,250 Clayton Homes, Inc.. . . . . . . . . 2,611,802 3,805,000 0.9
- ------------------------------------------------------------------------------------------------------------------
MANUFACTURING 135,000 Fisher Scientific International, Inc. 3,813,699 5,062,500 1.2
- ------------------------------------------------------------------------------------------------------------------
MEDICAL SERVICES 170,000 +Emcare Holdings Inc. (a). . . . . . . 4,693,754 4,972,500 1.2
330,000 +Mariner Health Group, Inc.. . . . . . 4,886,250 6,063,750 1.5
420,000 +North American Biologicals, Inc.. . . 3,766,248 3,937,500 1.0
------------- ------------- -----
13,346,252 14,973,750 3.7
- ------------------------------------------------------------------------------------------------------------------
MEDICAL SUPPLIES 290,000 +ATS Medical, Inc.. . . . . . . . . . 1,868,125 2,900,000 0.7
385,000 +Angeion Corp.. . . . . . . . . . . . 2,159,688 2,887,500 0.7
170,000 Beckman Instruments, Inc.. . . . . . 4,789,806 6,460,000 1.6
250,000 +Cholestech Corp.. . . . . . . . . . . 1,250,000 1,250,000 0.3
105,000 Dentsply International, Inc.. . . . . 3,690,000 4,423,125 1.1
310,000 +Healthdyne Technologies Inc.. . . . . 3,683,749 3,991,250 1.0
143,600 +Maxxim Medical, Inc.. . . . . . . . . 1,919,391 2,459,150 0.6
85,000 Meridan Diagnostics, Inc.. . . . . . 839,375 1,285,625 0.3
130,000 +Quest Medical, Inc.. . . . . . . . . 1,362,500 926,250 0.2
60,000 +Sofamor Danek Group, Inc.. . . . . . 1,543,680 1,665,000 0.4
120,000 Technical Chemicals & Products, Inc.. 1,800,000 1,680,000 0.4
85,300 Urologix, Inc.. . . . . . . . . . . . 1,281,050 1,151,550 0.3
351,000 +Uromed Corp.. . . . . . . . . . . . . 3,739,625 4,738,500 1.2
------------- ------------- ----------
29,926,989 35,817,950 8.8
- ------------------------------------------------------------------------------------------------------------------
METAL FABRICATING 112,500 Valmont Industries, Inc.. . . . . . . 2,398,749 3,740,625 0.9
- ------------------------------------------------------------------------------------------------------------------
OFFICE EQUIPMENT 91,000 Danka Business Systems PLC (ADR)**. . 4,250,437 2,639,000 0.6
- ------------------------------------------------------------------------------------------------------------------
OIL & GAS 195,000 Parker & Parsley Petroleum Co.. . . . 4,069,740 5,411,250 1.3
185,000 Vintage Petroleum, Inc.. . . . . . . 4,138,899 4,717,500 1.2
------------- ------------- ----------
8,208,639 10,128,750 2.5
- ------------------------------------------------------------------------------------------------------------------
OIL/GAS-- 225,000 +Barrett Resources Corp.. . . . . . . 5,262,412 6,693,750 1.6
EQUIPMENT & SERVICES
360,000 +Pride Petroleum Services, Inc.. . . . 2,707,508 5,040,000 1.2
125,000 Weatherford Enterra, Inc.. . . . . . 2,662,915 3,750,000 0.9
------------- ------------- -----
10,632,835 15,483,750 3.7
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE
PERCENT OF
INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OIL/GAS--EXPLORATION 270,000 +Belden & Blake Energy Co.. . . . . . $ 4,281,147 $ 5,602,500 1.4%
150,000 +Seagull Energy Corp.. . . . . . . . . 2,956,364 3,750,000 0.9
-------------- -------------- -----
7,237,511 9,352,500 2.3
- -------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 100,000 +Flamel Technologies S.A. (ADR)**. . . 1,200,000 775,000 0.2
150,000 Mylan Laboratories Inc.. . . . . . . 3,025,890 2,587,500 0.6
230,000 +NeXstar Pharmaceuticals, Inc.. . . . 5,199,688 5,002,500 1.2
----------- ----------- -----
9,425,578 8,365,000 2.0
- -------------------------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING 122,000 Banta Corp.. . . . . . . . . . . . . 2,822,042 3,080,500 0.8
- -------------------------------------------------------------------------------------------------------------------
RAILROADS 92,000 +Genesee & Wyoming Inc. (Class A). . . 1,617,749 1,874,500 0.5
- -------------------------------------------------------------------------------------------------------------------
REAL ESTATE 100,000 National Golf Properties Inc.. . . . 2,144,530 2,425,000 0.6
INVESTMENT TRUSTS
80,450 National Health Investors, Inc.. . . 2,201,700 2,634,737 0.6
-------------- -------------- -----
4,346,230 5,059,737 1.2
- -------------------------------------------------------------------------------------------------------------------
RESTAURANTS 225,000 Applebee's International, Inc.. . . . 4,505,625 7,256,250 1.8
130,000 +Outback Steakhouse, Inc.. . . . . . . 3,596,565 4,452,500 1.1
-------------- -------------- -----
8,102,190 11,708,750 2.9
- -------------------------------------------------------------------------------------------------------------------
RETAIL SPECIALTY 180,000 +Discount Auto Parts, Inc.. . . . . . 4,504,998 4,567,500 1.1
365,000 +MicroAge Inc.. . . . . . . . . . . . 3,989,382 4,881,875 1.2
135,000 +Moovies, Inc.. . . . . . . . . . . . 1,552,500 1,063,125 0.3
150,000 +Movie Gallery, Inc.. . . . . . . . . 3,620,623 3,150,000 0.8
-------------- -------------- -----
13,667,503 13,662,500 3.4
- -------------------------------------------------------------------------------------------------------------------
SEMICONDUCTOR 50,500 +ASM Lithography Holding N.V. (ADR)**. 1,052,100 2,057,875 0.5
PRODUCTION EQUIPMENT
135,000 +Asyst Technologies, Inc.. . . . . . . 4,242,814 2,295,000 0.6
80,800 +MEMC Electronic Materials, Inc.. . . 2,414,397 3,131,000 0.8
145,000 +Ultratech Stepper Inc.. . . . . . . . 3,884,469 2,700,625 0.7
-------------- -------------- ---------
11,593,780 10,184,500 2.6
- -------------------------------------------------------------------------------------------------------------------
TEXTILES 188,800 +Galey & Lord, Inc.. . . . . . . . . . 2,380,203 1,722,800 0.4
160,000 Unifi, Inc.. . . . . . . . . . . . . 3,646,704 4,500,000 1.1
----------- ----------- -----
6,026,907 6,222,800 1.5
- -------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--MARINE 100,000 +Trico Marine Services, Inc.. . . . . 1,600,000 2,225,000 0.5
- -------------------------------------------------------------------------------------------------------------------
UTILITIES--GAS 150,000 MCN Corporation. . . . . . . . . . . 3,004,324 3,656,250 0.9
125,000 NICOR Inc.. . . . . . . . . . . . . . 3,068,051 3,546,875 0.9
-------------- -------------- -----
6,072,375 7,203,125 1.8
- -------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 322,437,880 360,383,134 88.2
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONCLUDED)
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
INDUSTRY AMOUNT CORPORATE BONDS COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ENVIRONMENTAL $ 3,500,000 Sanifill, Inc., 5% due 3/01/2006. . . $ 3,500,000 $ 4,095,000 1.0%
- ------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS 3,500,000 4,095,000 1.0
- ------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
- ------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER* 7,000,000 Ciesco L.P., 5.36% due
8/23/1996. . . . . . . . . . . . . . 6,941,636 6,941,636 1.7
17,778,000 General Electric Capital Corp., 5.56%
due 7/01/1996. . . . . . . . . . . . 17,769,763 17,769,763 4.4
5,000,000 National Fleet Funding Corp., 5.40%
due 7/30/1996. . . . . . . . . . . . 4,976,000 4,976,000 1.2
4,000,000 PHH Corp., 5.35% due 7/24/1996. . . . 3,984,544 3,984,544 1.0
5,000,000 Preferred Receivable Funding Corp.,
5.32% due 7/08/1996. . . . . . . . . 4,992,611 4,992,611 1.2
- ------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 38,664,554 38,664,554 9.5
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS. . . . . . . . . . $364,602,434 403,142,688 98.7
--------------
--------------
OTHER ASSETS LESS LIABILITIES. . . . 5,215,504 1.3
-------------- ------
-------------- ------
NET ASSETS. . . . . . . . . . . . . . $408,358,192 100.0%
-------------- ------
-------------- ------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<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.
** American Depositary Receipts (ADR).
+ Non-income producing security.
(a)Investment in companies 5% or more of whose outstanding securities are held by the Fund (such companies are defined as
"Affiliated Companies" in Section 2(a)(3) of the Investment Company Act of 1940) are as follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
NET SHARE NET DIVIDEND
INDUSTRY AFFILIATE ACTIVITY COST INCOME
- ----------------------------------------------------------------------------
Medical Services Emcare Holdings Inc. 170,000 $4,693,754 --
TOTAL $4,693,754
- ----------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
34
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--FLEXIBLE STRATEGY FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD US STOCKS & WARRANTS COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AEROSPACE 66,500 Boeing Co.. . . . . . . . . . . . $ 4,307,460 $ 5,793,813 1.8%
39,200 Northrop Grumman Corp.. . . . . . 2,563,931 2,670,500 0.8
45,000 United Technologies Corp.. . . . 3,643,624 5,175,000 1.6
------------- ------------- -----
10,515,015 13,639,313 4.2
- -------------------------------------------------------------------------------------------------------------------
AIR TRANSPORTATION 50,800 Delta Air Lines, Inc.. . . . . . 4,043,005 4,216,400 1.3
- -------------------------------------------------------------------------------------------------------------------
AUTO-RELATED 73,000 +AutoZone, Inc.. . . . . . . . . . 2,555,000 2,536,750 0.8
- -------------------------------------------------------------------------------------------------------------------
AUTOMOBILES 68,000 Ford Motor Co.. . . . . . . . . . 2,115,533 2,201,500 0.7
44,000 General Motors Corp.. . . . . . . 2,480,814 2,304,500 0.7
------------- ------------- -----
4,596,347 4,506,000 1.4
- -------------------------------------------------------------------------------------------------------------------
BANKING 60,000 Bank of New York Co. Inc.. . . . 2,162,589 3,075,000 0.9
40,000 Bank of New York Co. Inc.
(Warrants) (c). . . . . . . . . . 300,938 1,630,000 0.5
Citicorp. . . . . . . . . . . . . 3,812,706 4,213,875 1.3
51,000 ------------- ------------- -----
6,276,233 8,918,875 2.7
- -------------------------------------------------------------------------------------------------------------------
BEVERAGES 36,000 Coca-Cola Co.. . . . . . . . . . 1,678,702 1,759,500 0.5
- -------------------------------------------------------------------------------------------------------------------
BROADCAST-MEDIA 40,000 +Viacom, Inc. (Class B). . . . . . 1,664,002 1,555,000 0.5
- -------------------------------------------------------------------------------------------------------------------
BUSINESS SERVICES 82,875 Oracle Corp.. . . . . . . . . . . 2,699,527 3,263,203 1.0
- -------------------------------------------------------------------------------------------------------------------
CHEMICALS 72,000 PPG Industries, Inc.. . . . . . . 3,573,628 3,510,000 1.1
- -------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 55,000 +cisco Systems, Inc.. . . . . . . 2,451,253 3,114,375 1.0
64,000 Electronic Data Systems Corp.. . 2,802,254 3,440,000 1.1
23,000 International Business
Machines Corp. . . . . . . . . . 2,527,606 2,277,000 0.7
---------- ---------- -----
7,781,113 8,831,375 2.8
- -------------------------------------------------------------------------------------------------------------------
COMPUTER(S) 20,300 Sun Microsystems, Inc.. . . . . . 1,279,913 1,192,625 0.4
- -------------------------------------------------------------------------------------------------------------------
DIVERSIFIED 100,000 Corning Inc.. . . . . . . . . . . 2,789,976 3,837,500 1.2
- -------------------------------------------------------------------------------------------------------------------
ELECTRONICS 57,000 General Electric Co.. . . . . . . 4,410,448 4,930,500 1.5
39,000 Intel Corp.. . . . . . . . . . . 2,424,234 2,861,625 0.9
75,000 +Lexmark International Group, Inc.
(Class A). . . . . . . . . . . . 1,594,294 1,509,375 0.5
------------- ------------- -----
8,428,976 9,301,500 2.9
- -------------------------------------------------------------------------------------------------------------------
ENGINEERING & CONSTRUCTION 89,000 Foster Wheeler Corp.. . . . . . . 3,965,962 3,993,875 1.2
- -------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL CONTROL 252,500 Wheelabrator Technologies, Inc.. 4,654,658 3,850,625 1.2
- -------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 78,000 American Express Company. . . . . 3,626,556 3,480,750 1.1
3,000 +Associates First Capital Corp.. . 87,000 112,875 0.0
42,200 First Data Corp.. . . . . . . . . 2,971,679 3,360,175 1.0
------------- ------------- -----
6,685,235 6,953,800 2.1
- -------------------------------------------------------------------------------------------------------------------
HARDWARE PRODUCTS 138,600 Stanley Works Co. (The). . . . . 3,759,200 4,123,350 1.3
- -------------------------------------------------------------------------------------------------------------------
HEALTHCARE 113,500 +Humana, Inc.. . . . . . . . . . . 2,460,002 2,028,812 0.6
- -------------------------------------------------------------------------------------------------------------------
HOSPITAL SUPPLIES 78,000 Abbott Laboratories. . . . . . . 3,193,987 3,393,000 1.0
72,000 Baxter International, Inc.. . . . 3,377,581 3,402,000 1.1
------------- ------------- -----
6,571,568 6,795,000 2.1
- -------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS 29,000 Procter & Gamble Co.. . . . . . . 2,442,906 2,628,125 0.8
- -------------------------------------------------------------------------------------------------------------------
INSURANCE 65,000 Aetna Life & Casualty Co.. . . . 3,829,284 4,647,500 1.4
- -------------------------------------------------------------------------------------------------------------------
MACHINERY 56,000 +American Standard Companies, Inc. 1,827,403 1,848,000 0.6
105,000 Deere & Co.. . . . . . . . . . . 4,395,448 4,200,000 1.3
---------- ---------- -----
6,222,851 6,048,000 1.9
- -------------------------------------------------------------------------------------------------------------------
MACHINERY & MACHINE TOOLS 67,000 Cincinnati Milacron, Inc.. . . . 1,687,622 1,608,000 0.5
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--FLEXIBLE STRATEGY FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD US STOCKS & WARRANTS COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
MANUFACTURING 50,000 Fisher Scientific International Inc.. $ 1,651,733 $ 1,875,000 0.6%
- -------------------------------------------------------------------------------------------------------------------
NATURAL RESOURCES 73,500 Canadian Pacific, Ltd.. . . . . . . . 1,506,063 1,617,000 0.5
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OIL SERVICES 100,000 Dresser Industries, Inc.. . . . . . . 2,343,697 2,950,000 0.9
30,000 Schlumberger Ltd.. . . . . . . . . . . 2,530,832 2,527,500 0.8
----------- ----------- -----
4,874,529 5,477,500 1.7
- -------------------------------------------------------------------------------------------------------------------
PETROLEUM 120,000 Enron Corp.. . . . . . . . . . . . . . 4,602,728 4,905,000 1.5
90,500 Pennzoil Co.. . . . . . . . . . . . . 3,623,316 4,185,625 1.3
25,200 Unocal Corp.. . . . . . . . . . . . . 843,885 850,500 0.3
----------- ----------- -----
9,069,929 9,941,125 3.1
- -------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 55,000 Merck & Co., Inc.. . . . . . . . . . . 3,307,995 3,554,375 1.1
- -------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY 57,400 Eastman Kodak Co.. . . . . . . . . . . 3,265,243 4,462,850 1.4
- -------------------------------------------------------------------------------------------------------------------
RAILROADS 24,000 Conrail, Inc.. . . . . . . . . . . . . 1,682,655 1,593,000 0.5
- -------------------------------------------------------------------------------------------------------------------
RETAIL APPAREL 122,000 Limited, Inc. (The). . . . . . . . . . 2,720,234 2,623,000 0.8
- -------------------------------------------------------------------------------------------------------------------
RETAIL TRADE 97,000 Allstate Corp.. . . . . . . . . . . . 3,306,532 4,425,625 1.4
80,000 Sears, Roebuck & Co.. . . . . . . . . 2,791,819 3,890,000 1.2
----------- ----------- -----
6,098,351 8,315,625 2.6
- -------------------------------------------------------------------------------------------------------------------
SOFTWARE-COMPUTER 14,000 +Microsoft Corp.. . . . . . . . . . . . 1,568,855 1,680,000 0.5
- -------------------------------------------------------------------------------------------------------------------
STEEL 65,000 AK Steel Holding Corp.. . . . . . . . 2,714,569 2,543,125 0.8
- -------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 54,500 Bell Atlantic Corporation. . . . . . . 3,265,316 3,474,375 1.1
15,400 Lucent Technologies, Inc.. . . . . . . 415,800 583,275 0.2
----------- ----------- -----
3,681,116 4,057,650 1.3
- -------------------------------------------------------------------------------------------------------------------
TOBACCO 25,000 Philip Morris Companies, Inc.. . . . . 2,474,674 2,600,000 0.8
- -------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 89,000 Carnival Corp. (Class A). . . . . . . 2,515,652 2,569,875 0.8
- -------------------------------------------------------------------------------------------------------------------
UTILITIES-- 66,500 AT&T Corp.. . . . . . . . . . . . . . 4,309,808 4,123,000 1.3
COMMUNICATIONS
- -------------------------------------------------------------------------------------------------------------------
TOTAL US STOCKS & WARRANTS 151,602,131 166,778,253 51.7
- -------------------------------------------------------------------------------------------------------------------
COUNTRY FOREIGN STOCKS ++
ARGENTINA 70,000 Banco de Galicia y Buenos Aires S.A.
(ADR) (a) (2). . . . . . . . . . . . 1,710,191 1,793,750 0.6
27,400 Banco Frances del Rio de la Plata S.A.
(ADR) (a) (2). . . . . . . . . . . . 750,107 787,750 0.2
72,900 Yacimientos Petroliferos Fiscales S.A.
(ADR) (a) (9). . . . . . . . . . . . 1,631,152 1,640,250 0.5
----------- ----------- -----
4,091,450 4,221,750 1.3
- -------------------------------------------------------------------------------------------------------------------
BRAZIL 2,500,000 Companhia Cervejaria Brahma S.A. PN
(Preferred) (16). . . . . . . . . . . 1,406,927 1,491,534 0.5
20,000 Telecomunicacoes Brasileiras S.A.-
Telebras (ADR) (a) (2). . . . . . . . 1,093,835 1,392,500 0.4
----------- ----------- -----
2,500,762 2,884,034 0.9
- -------------------------------------------------------------------------------------------------------------------
CANADA 34,400 Magna International Inc. (Class A) (2) 1,391,807 1,582,400 0.5
4,500 Northern Telecom Limited (2). . . . . 244,440 244,687 0.1
32,300 Potash Corp. of Saskatchewan Inc. (14) 2,347,614 2,139,875 0.7
----------- ----------- -----
3,983,861 3,966,962 1.3
- -------------------------------------------------------------------------------------------------------------------
FINLAND 51,000 Nokia Corp. (Sponsored) (ADR) (a) (12) 1,885,343 1,887,000 0.6
49,400 UPM-Kymmene OY (d) (8). . . . . . . . 1,017,917 1,027,104 0.3
----------- ----------- -----
2,903,260 2,914,104 0.9
- -------------------------------------------------------------------------------------------------------------------
FRANCE 35,000 Michelin S.A. (C.G.D.E.) (Class B) (1) 1,457,443 1,711,565 0.5
100,000 Usinor-Sacilor S.A. (20). . . . . . . 1,662,242 1,443,149 0.4
----------- ----------- -----
3,119,685 3,154,714 0.9
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--FLEXIBLE STRATEGY FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
COUNTRY HELD FOREIGN STOCKS ++ COST (NOTE 1A) NET ASSETS
GERMANY 3,500 Henkel KGaA (Preferred) (19). . . . . $ 1,494,069 $ 1,511,834 0.5%
4,500 Mannesmann AG (7). . . . . . . . . . 1,571,035 1,556,213 0.5
5,000 SGL Carbon AG (14). . . . . . . . . . 508,873 585,141 0.2
30,000 Siemens AG (4). . . . . . . . . . . . 1,685,183 1,603,550 0.5
---------- ---------- -----
5,259,160 5,256,738 1.7
- ------------------------------------------------------------------------------------------------------------
HONG KONG 125,200 HSBC Holdings PLC (2). . . . . . . . 2,016,804 1,892,436 0.6
1,000,000 Hong Kong Telecommunications Ltd. 1,768,771 1,795,750 0.6
(ADR) (a) (2). . . . . . . . . . . . ---------- ---------- -----
3,785,575 3,688,186 1.2
- ------------------------------------------------------------------------------------------------------------
INDONESIA 40,800 P.T. Indonesian Satellite Corp. (ADR)
(a) (2). . . . . . . . . . . . . . . 1,575,583 1,366,800 0.4
- ------------------------------------------------------------------------------------------------------------
ITALY 91,800 Danieli & Co. (7). . . . . . . . . . 361,183 326,744 0.1
280,000 Societa Finanziara Telefonica S.p.A.
(STET) (12). . . . . . . . . . . . . 873,880 947,231 0.3
---------- ---------- -----
1,235,063 1,273,975 0.4
- ------------------------------------------------------------------------------------------------------------
JAPAN 80,000 Canon, Inc. (3). . . . . . . . . . . 1,467,936 1,665,145 0.5
115,000 Eisai Co. Ltd. (21). . . . . . . . . 2,031,674 2,173,179 0.7
105,000 Matsushita Electric Industrial Co.,
Ltd. (18). . . . . . . . . . . . . . 1,665,138 1,955,450 0.6
225,000 Mitsubishi Electric Corporation (13). 1,625,269 1,569,290 0.5
200,000 Mitsubishi Heavy Industries, Inc. (7) 1,633,858 1,740,004 0.5
75,000 Nomura Securities Co., Ltd. (ADR) (a)
(15). . . . . . . . . . . . . . . . 1,486,571 1,465,218 0.5
30,000 Rohm Company Ltd. (4). . . . . . . . 1,666,464 1,982,837
0.6
120,000 Tokio Marine & Fire Insurance Co.
(ADR) (a) (6). . . . . . . . . . . . 1,428,630 1,599,416 0.5
------------- ------------- -----
13,005,540 14,150,539 4.4
- ------------------------------------------------------------------------------------------------------------
MEXICO 146,400 +Grupo Carso, S.A. de C.V.
(ADR) (a) (8)++. . . . . . . . . . . 1,702,240 2,049,600 0.6
78,000 Kimberly/Clark de Mexico, S.A.
de C.V. (5). . . . . . . . . . . . . 1,325,778 1,423,245 0.4
30,000 Panamerican Beverages, Inc.
(Class A) (16). . . . . . . . . . . . 1,174,599 1,342,500 0.4
---------- ---------- -----
4,202,617 4,815,345 1.4
- ------------------------------------------------------------------------------------------------------------
NETHERLANDS 10,300 Royal Dutch Petroleum Co. N.V.
(ADR) (a) (9). . . . . . . . . . . . 1,394,706 1,583,625 0.5
- ------------------------------------------------------------------------------------------------------------
PHILIPPINES 330,000 San Miguel Corp. (Class B) (16). . . 1,147,142 1,142,065 0.4
- ------------------------------------------------------------------------------------------------------------
SOUTH KOREA 63,000 +Hyundai Engineering & Construction
Co., Ltd. (GDR) (b) (17)++. . . . . 820,890 787,500 0.2
- ------------------------------------------------------------------------------------------------------------
SPAIN 35,000 Repsol S.A. (ADR) (a) (9). . . . . . 1,151,616 1,216,250 0.4
- ------------------------------------------------------------------------------------------------------------
SWEDEN 96,350 Bure Investment AB (15). . . . . . . 827,605 884,877 0.3
85,700 Sparbanken Sverige AB (Class A) (3). 1,088,183 1,109,636 0.3
---------- ---------- -----
1,915,788 1,994,513 0.6
- ------------------------------------------------------------------------------------------------------------
SWITZERLAND 1,400 ABB-AG (Bearer) (7). . . . . . . . . 1,699,751 1,732,374 0.5
2,300 Sandoz AG (Registered) (17). . . . . 1,996,772 2,630,935 0.8
---------- ---------- -----
3,696,523 4,363,309 1.3
- ------------------------------------------------------------------------------------------------------------
UNITED KINGDOM 290,000 General Electric Co. PLC
(Ordinary) (4). . . . . . . . . . . 1,606,014 1,560,331 0.5
120,000 Imperial Chemical Industries PLC (14) 1,706,933 1,464,601 0.5
---------- ---------- -----
3,312,947 3,024,932 1.0
- ------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS 59,102,168 61,805,341 19.2
- ------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--FLEXIBLE STRATEGY FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
COUNTRY AMOUNT* FOREIGN BONDS++ COST (NOTE 1A) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GERMANY DM 4,500,000 BundesObligation,
5.875% due 5/15/2000 (22). . . . . $ 3,032,098 $ 3,027,515 0.9%
2,100,000 BundesRepublic Deutscheland,
7.125% due 12/20/2002 (22). . . . . 1,458,409 1,459,645 0.5
---------- ---------- -------
4,490,507 4,487,160 1.4
- --------------------------------------------------------------------------------------------------------------------------
ITALY Buoni Poliennali del Tesoro
(Italian Government Bonds) (22):
Lit 5,000,000,000 9.50% due 2/01/1999. . . . . . . . 3,197,563 3,353,905 1.0
5,000,000,000 9.50% due 2/01/2001. . . . . . . . 3,155,548 3,371,212 1.0
---------- ---------- -------
6,353,111 6,725,117 2.0
- --------------------------------------------------------------------------------------------------------------------------
SPAIN Government of Spain (22):
Pta 160,000,000 7.40% due 7/30/1999. . . . . . . . 1,239,223 1,239,806 0.4
170,000,000 8.40% due 4/30/2001. . . . . . . . 1,324,450 1,343,627 0.4
---------- ---------- -------
2,563,673 2,583,433 0.8
- --------------------------------------------------------------------------------------------------------------------------
SWEDEN Government of Sweden (22):
Skr 7,500,000 11.00% due 1/21/1999. . . . . . . . 1,229,909 1,243,338 0.4
7,500,000 10.25% due 5/05/2000. . . . . . . . 1,226,804 1,247,403 0.4
---------- ---------- -------
2,456,713 2,490,741 0.8
- --------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS 15,864,004 16,286,451 5.0
- --------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT OBLIGATIONS
- --------------------------------------------------------------------------------------------------------------------------
US$ 4,500,000 US Treasury Bonds, 6.875% due
8/15/2025. . . . . . . . . . . . 4,399,453 4,454,280 1.4
US Treasury Notes:
1,000,000 8.625% due 8/15/1997. . . . . . . 1,027,344 1,029,220 0.3
16,000,000 5.75% due 10/31/1997. . . . . . . 15,942,500 15,960,000 4.9
28,000,000 5.00% due 1/31/1998. . . . . . . . 27,588,750 27,562,360 8.5
---------- ---------- -------
48,958,047 49,005,860 15.1
- --------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT &
AGENCY OBLIGATIONS 48,958,047 49,005,860 15.1
- --------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
- --------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER** 5,774,000 General Electric Capital Corp.,
5.56% due 7/01/1996. . . . . . . . 5,772,216 5,772,216 1.8
3,000,000 Lucent Technologies, Inc.,
5.36% due 7/26/1996. . . . . . . . 2,987,940 2,987,940 0.9
4,000, 000 McKenna Triangle National Corp.,
5.34% due 7/15/1996. . . . . . . . 3,990,507 3,990,507 1.2
7,456,000 National Fleet Funding Corp.,
5.32% due 7/11/1996. . . . . . . . 7,442,778 7,442,778 2.3
3,000,000 Preferred Receivables Funding Corp.,
5.30% due 7/08/1996. . . . . . . . 2,996,025 2,996,025 0.9
---------- ---------- -------
23,189,466 23,189,466 7.1
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--FLEXIBLE STRATEGY FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONCLUDED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FACE VALUE PERCENT OF
AMOUNT* SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & US$ 4,000,000 Federal National Mortgage Association,
AGENCY OBLIGATIONS** 5.26% due 7/19/1996. . . . . . . . . $ 3,988,311 $ 3,988,311 1.2%
- -------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 27,177,777 27,177,777 8.3
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS. . . . . . . . . . $302,704,127 321,053,682 99.3
--------------
--------------
OTHER ASSETS LESS LIABILITIES. . . . 2,227,158 0.7
----------- ------
NET ASSETS. . . . . . . . . . . . . . $323,280,840 100.0%
-------------- ------
-------------- ------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) American Depositary Receipts (ADR).
(b) Global Depositary Receipts (GDR).
(c) 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.
(d) Created as a result of the merger of Kymmene Corporation and Repola Ltd.
*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.
++ Restricted securities as to resale. The value of the Fund's investment in
restricted securities was approximately $2,837,000,
representing 0.9% of net assets.
<TABLE>
<CAPTION>
VALUE
ISSUE ACQUISITION DATE(S) COST (NOTE 1A)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Grupo Carso, S.A. de C.V. (ADR). . . . . . . . . . 1/24/1992 - 1/31/1995 $1,702,240 $ 2,049,600
Hyundai Engineering & Construction Co., Ltd. (GDR) 3/19/1996 820,890 787,500
- ----------------------------------------------------------------------------------------------------
TOTAL $2,523,130 $ 2,837,100
------------ -------------
------------ -------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
++ Corresponding industry groups for foreign securities:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(1) Automotive (12) Telecommunications
(2) Banking (13) Electrical Equipment
(3) Business & Public Service (14) Chemicals
(4) Electronics (15) Financial Services
(5) Health and Personal Care (16) Beverages
(6) Insurance (17) Construction
(7) Machinery (18) Computers
(8) Multi-Industry (19) Soap
(9) Petroleum (20) Metals
(10) Real Estate (21) Pharmaceuticals
(11) Retail Stores (22) Government Bonds
</TABLE>
See Notes to Financial Statements.
39
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL STRATEGY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD US STOCKS COST (NOTE 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AEROSPACE 70,000 Boeing Co.. . . . . . . . . . . . . . $ 5,693,406 $ 6,098,750 1.1%
53,300 Northrop Grumman Corp.. . . . . . . . 3,486,236 3,631,063 0.7
61,500 United Technologies Corp. . . . . . . 3,820,923 7,072,500 1.3
------------- ------------- -------
13,000,565 16,802,313 3.1
- ----------------------------------------------------------------------------------------------------------------------
AIRLINES 69,400 Delta Air Lines, Inc.. . . . . . . . 5,512,805 5,760,200 1.0
- ----------------------------------------------------------------------------------------------------------------------
AUTO & TRUCK 93,000 Ford Motor Co.. . . . . . . . . . . . 2,707,766 3,010,875 0.6
60,000 General Motors Corp.. . . . . . . . . 3,382,925 3,142,500 0.6
------------- ------------- -------
6,090,691 6,153,375 1.2
- ----------------------------------------------------------------------------------------------------------------------
BANKING 110,000 Bank of New York Co., Inc.. . . . . . 5,527,311 5,637,500 1.0
58,000 Citicorp. . . . . . . . . . . . . . . 4,455,835 4,792,250 0.9
---------- ------------- -------
9,983,146 10,429,750 1.9
- ----------------------------------------------------------------------------------------------------------------------
BEVERAGES 49,000 Coca-Cola Co.. . . . . . . . . . . . 2,284,927 2,394,875 0.4
- ----------------------------------------------------------------------------------------------------------------------
CHEMICALS 89,000 PPG Industries, Inc.. . . . . . . . . 4,417,343 4,338,750 0.8
- ----------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 93,000 + cisco Systems, Inc.. . . . . . . . . 4,199,341 5,266,125 1.0
58,000 Electronic Data Systems Corp.. . . . 3,092,644 3,117,500 0.6
77,700 First Data Corp.. . . . . . . . . . . 5,488,238 6,186,863 1.1
------------- ------------- -------
12,780,223 14,570,488 2.7
- ----------------------------------------------------------------------------------------------------------------------
COMPUTERS 31,000 International Business Machines Corp. 3,406,773 3,069,000 0.6
28,100 + Sun Microsystems, Inc.. . . . . . . . 1,771,688 1,650,875 0.3
------------- ------------- -------
5,178,461 4,719,875 0.9
- ----------------------------------------------------------------------------------------------------------------------
DIVERSIFIED 142,500 Corning, Inc.. . . . . . . . . . . . 4,270,562 5,468,438 1.0
- ----------------------------------------------------------------------------------------------------------------------
ELECTRONICS 60,000 General Electric Co.. . . . . . . . . 4,665,908 5,190,000 0.9
69,000 Intel Corp.. . . . . . . . . . . . . 4,372,881 5,062,875 0.9
65,000 + Lexmark International Group, Inc.
(Class A). . . . . . . . . . . . . . 1,381,633 1,308,125 0.2
------------- ------------- -------
10,420,422 11,561,000 2.0
- ----------------------------------------------------------------------------------------------------------------------
ENGINEERING & CONSTRUCTION 110,000 Foster Wheeler Corp.. . . . . . . . . 4,841,531 4,936,250 0.9
- ----------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 55,000 + Viacom, Inc. (Class B). . . . . . . . 2,288,012 2,138,125 0.4
- ----------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL CONTROL 251,100 Wheelabrator Technologies Inc.. . . . 4,328,707 3,829,275 0.7
- ----------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 121,500 American Express Company. . . . . . . 5,649,181 5,421,937 1.0
3,500 + Associates First Capital Corp.. . . . 101,500 131,687 0.0
------------- ------------- -------
5,750,681 5,553,624 1.0
- ----------------------------------------------------------------------------------------------------------------------
HARDWARE PRODUCTS 179,300 Stanley Works Co.. . . . . . . . . . 3,677,717 5,334,175 1.0
- ----------------------------------------------------------------------------------------------------------------------
HEALTHCARE 120,900 +Humana Inc.. . . . . . . . . . . . . 2,918,565 2,161,087 0.4
- ----------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS 40,000 Procter & Gamble Co.. . . . . . . . . 3,369,510 3,625,000 0.7
- ----------------------------------------------------------------------------------------------------------------------
INSURANCE 70,000 Aetna Life & Casualty Co.. . . . . . 5,247,630 5,005,000 0.9
116,000 Allstate Corp.. . . . . . . . . . . . 4,925,776 5,292,500 1.0
------------- ------------- -------
10,173,406 10,297,500 1.9
- ----------------------------------------------------------------------------------------------------------------------
MACHINERY 70,000 + American Standard Companies, Inc.. . 2,284,294 2,310,000 0.4
91,900 Cincinnati Milacron, Inc.. . . . . . 2,315,063 2,205,600 0.4
144,000 Deere & Co.. . . . . . . . . . . . . 5,995,533 5,760,000 1.0
------------- ------------- -------
10,594,890 10,275,600 1.8
- ----------------------------------------------------------------------------------------------------------------------
MEDICAL SUPPLIES 100,000 Baxter International, Inc.. . . . . . 4,691,069 4,725,000 0.9
- ----------------------------------------------------------------------------------------------------------------------
NATURAL GAS 177,000 Enron Corp.. . . . . . . . . . . . . 6,679,349 7,234,875 1.3
- ----------------------------------------------------------------------------------------------------------------------
OIL SERVICES 192,900 Dresser Industries, Inc.. . . . . . . 4,099,100 5,690,550 1.0
70,200 Schlumberger Ltd.. . . . . . . . . . 4,521,333 5,914,350 1.1
------------- ------------- -------
8,620,433 11,604,900 2.1
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL STRATEGY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
INDUSTRY HELD US STOCKS COST (NOTE 1A) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
PETROLEUM 99,600 Pennzoil Co.. . . . . . . . . . . . . . $ 4,145,656 $ 4,606,500 0.8%
31,300 Unocal Corp.. . . . . . . . . . . . . . 1,048,159 1,056,375 0.2
-------------- -------------- --------
5,193,815 5,662,875 1.0
- --------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 142,000 Abbott Laboratories. . . . . . . . . . 4,389,057 6,177,000 1.1
105,000 Merck & Co., Inc.. . . . . . . . . . . 3,539,150 6,785,625 1.2
-------------- -------------- --------
7,928,207 12,962,625 2.3
- --------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY 53,900 Eastman Kodak Co.. . . . . . . . . . . 2,483,414 4,190,725 0.8
- --------------------------------------------------------------------------------------------------------------------------
RAILROADS 32,000 Conrail, Inc.. . . . . . . . . . . . . 2,243,549 2,124,000 0.4
- --------------------------------------------------------------------------------------------------------------------------
RETAIL 100,000 +AutoZone, Inc.. . . . . . . . . . . . . 3,500,000 3,475,000 0.6
152,000 Limited, Inc. (The). . . . . . . . . . 3,389,144 3,268,000 0.6
106,000 Sears, Roebuck & Co.. . . . . . . . . . 4,674,698 5,154,250 0.9
-------------- -------------- --------
11,563,842 11,897,250 2.1
- --------------------------------------------------------------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS 110,000 Fisher Scientific International, Inc.. 3,455,487 4,125,000 0.8
- --------------------------------------------------------------------------------------------------------------------------
SOFTWARE-COMMUNICATIONS 19,000 + Microsoft Corp.. . . . . . . . . . . . 2,129,161 2,280,000 0.4
117,000 + Oracle Corp.. . . . . . . . . . . . . . 3,874,920 4,606,875 0.8
-------------- -------------- --------
6,004,081 6,886,875 1.2
- --------------------------------------------------------------------------------------------------------------------------
STEEL 87,900 AK Steel Holding Corp.. . . . . . . . . 3,670,916 3,439,088 0.6
- --------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 81,100 AT&T Corp.. . . . . . . . . . . . . . . 4,406,897 5,028,200 0.9
70,300 Bell Atlantic Corporation. . . . . . . 3,816,168 4,481,625 0.8
19,200 Lucent Technologies, Inc.. . . . . . . 518,400 727,200 0.1
-------------- -------------- --------
8,741,465 10,237,025 1.8
- --------------------------------------------------------------------------------------------------------------------------
TOBACCO 50,000 Philip Morris Companies, Inc.. . . . . 4,899,905 5,200,000 0.9
- --------------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 121,000 Carnival Corp. (Class A). . . . . . . . 3,420,071 3,493,875 0.6
- --------------------------------------------------------------------------------------------------------------------------
TOTAL US STOCKS 201,477,767 224,133,813 40.6
- --------------------------------------------------------------------------------------------------------------------------
COUNTRY FOREIGN STOCKS++
- --------------------------------------------------------------------------------------------------------------------------
ARGENTINA 200,473 Banco de Galicia y Buenos Aires S.A.
(ADR)* (3). . . . . . . . . . . . . . 4,090,487 5,137,121 0.9
150,850 Banco Frances del Rio de la Plata S.A.
(ADR)* (3). . . . . . . . . . . . . . 3,718,186 4,336,937 0.8
200,000 Yacimientos Petroliferos Fiscales S.A.
(ADR)* (21). . . . . . . . . . . . . . 4,376,882 4,500,000 0.8
-------------- -------------- --------
12,185,555 13,974,058 2.5
- --------------------------------------------------------------------------------------------------------------------------
BRAZIL 6,500,000 Companhia Cervejaria Brahma S.A. PN
(Preferred) (34). . . . . . . . . . . 3,659,195 3,877,988 0.7
67,000 Telecomunicacoes Brasileiras S.A.-
Telebras (ADR)* (27). . . . . . . . . 3,569,717 4,664,875 0.9
-------------- -------------- --------
7,228,912 8,542,863 1.6
- --------------------------------------------------------------------------------------------------------------------------
CANADA 205,100 Canadian Pacific, Ltd. (18). . . . . . 3,376,172 4,512,200 0.8
91,000 Magna International Inc. (Class A) (1). 4,124,096 4,186,000 0.8
77,400 Northern Telecommunications Ltd. (27). 2,137,422 4,208,625 0.8
61,000 Potash Corp. of Saskatchewan, Inc.
(35). . . . . . . . . . . . . . . . . . 4,375,801 4,041,250 0.7
-------------- -------------- --------
14,013,491 16,948,075 3.1
- --------------------------------------------------------------------------------------------------------------------------
FINLAND 100,000 Finnlines OY (36). . . . . . . . . . . 1,846,601 2,003,749 0.4
147,000 Nokia Corp. (Sponsored) (ADR)* (37). . 5,267,098 5,439,000 1.0
166,000 UPM-Kymmene OY (a) (38). . . . . . . . 3,415,221 3,451,404 0.6
-------------- -------------- --------
10,528,920 10,894,153 2.0
- --------------------------------------------------------------------------------------------------------------------------
FRANCE 90,000 Michelin (C.G.D.E.) S.A. (Class B) (39) 4,010,314 4,401,166 0.8
250,000 Usinor-Sacilor S.A. (40). . . . . . . . 4,073,372 3,607,872 0.7
-------------- -------------- --------
8,083,686 8,009,038 1.5
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL STRATEGY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SHARES VALUE PERCENT OF
COUNTRY HELD FOREIGN STOCKS++ COST (NOTE 1A) NET ASSETS
GERMANY 10,000 Henkel KGaA (Preferred) (9). . . . . . . $ 4,269,032 $ 4,319,527 0.8%
10,900 Mannesmann AG (17). . . . . . . . . . . . 2,436,826 3,769,494 0.7
15,000 SGL Carbon AG (9). . . . . . . . . . . . 1,526,618 1,755,424 0.3
75,500 Siemens AG (12). . . . . . . . . . . . . 3,276,622 4,035,602 0.7
-------------- -------------- --------
11,509,098 13,880,047 2.5
- ---------------------------------------------------------------------------------------------------------------------
HONG KONG 2,738,000 Hong Kong Telecommunications,
Ltd. (27). . . . . . . . . . . . . . . . 4,847,297 4,916,762 0.9
275,200 HSBC Holdings PLC (3). . . . . . . . . . 4,291,964 4,159,731 0.7
-------------- -------------- --------
9,139,261 9,076,493 1.6
- ---------------------------------------------------------------------------------------------------------------------
INDONESIA 123,180 P.T. Indonesian Satellite Corp.
(ADR)* (27). . . . . . . . . . . . . . . 4,511,561 4,126,530 0.8
- ---------------------------------------------------------------------------------------------------------------------
ITALY 1,070,000 Danieli & Company (17). . . . . . . . . . 3,914,994 3,808,451 0.7
1,379,000 Societa Finanziara Telefonica S.p.A.
(STET) (27). . . . . . . . . . . . . . . 4,057,296 4,665,112 0.8
-------------- -------------- --------
7,972,290 8,473,563 1.5
- ---------------------------------------------------------------------------------------------------------------------
JAPAN 188,000 Canon, Inc. (12). . . . . . . . . . . . . 2,801,321 3,913,091 0.7
206,000 Eisai Co. Ltd. (22). . . . . . . . . . . 3,789,350 3,892,825 0.7
403,000 Maeda Corp. (4). . . . . . . . . . . . . 4,077,658 4,010,133 0.7
247,000 Matsushita Electric Industries, Ltd. (12) 3,639,922 4,599,963 0.8
550,000 Mitsubishi Electric Corp. (11). . . . . . 3,633,830 3,836,042 0.7
486,000 Mitsubishi Heavy Industry, Ltd. (12). . . 3,075,981 4,228,209 0.8
553,000 Mitsui-Soko Co., Ltd. (42). . . . . . . . 4,721,747 4,997,900 0.9
197,000 Nomura Securities Co., Ltd. (33). . . . . 4,042,417 3,848,640 0.7
456,000 Okumura Corp. (4). . . . . . . . . . . . 3,893,002 3,813,182 0.7
60,000 Rohm Company Ltd. (12). . . . . . . . . . 3,105,057 3,965,675 0.7
204,000 Sanwa Bank, Ltd. (3). . . . . . . . . . . 4,110,563 3,780,537 0.7
305,000 Tokio Marine and Fire Insurance Co., Ltd.
(16). . . . . . . . . . . . . . . . . . 3,851,033 4,065,182 0.8
550,000 Toray Industries Ltd. (28). . . . . . . . 3,773,273 3,795,874 0.7
-------------- -------------- --------
48,515,154 52,747,253 9.6
MEXICO 265,000 +Grupo Carso, S.A. de C.V. (ADR)* (18)
+++. . . . . . . . . . . . . . . . . . . 4,216,066 3,710,000 0.7
212,000 Kimberly-Clark de Mexico, S.A. de C.V.
(38). . . . . . . . . . . . . . . . . . 3,805,437 3,868,306 0.7
88,700 Panamerican Beverages, Inc. (Class A)
(34). . . . . . . . . . . . . . . . . . . 3,529,318 3,969,325 0.7
-------------- -------------- --------
11,550,821 11,547,631 2.1
NETHERLANDS 466 ABN-AMRO Holdings N.V. (Convertible
Preferred) (3). . . . . . . . . . . . . . 15,383 22,945 0.0
33,000 Royal Dutch Petroleum Co., N.V.
(NY Registered Shares) (21). . . . . . . 3,886,849 5,073,750 0.9
-------------- -------------- --------
3,902,232 5,096,695 0.9
PHILIPPINES 1,320,000 San Miguel Corp. (Class B) (34). . . . . 4,374,076 4,568,260 0.8
SOUTH KOREA 117,600 +Hyundai Engineering & Construction Co.,
Ltd. (GDR)** (44) +++. . . . . . . . . . 1,532,328 1,470,000 0.3
SPAIN 142,000 Repsol S.A. (ADR)* (21). . . . . . . . . 4,429,778 4,934,500 0.9
SWEDEN 287,400 Bure Investment Aktiebolaget (45). . . . 2,470,143 2,639,476 0.5
257,000 Sparbanken Sverige AB (Class A) (3). . . 3,262,920 3,327,612 0.6
-------------- -------------- --------
5,733,063 5,967,088 1.1
SWITZERLAND 3,300 ABB AG (Bearer) (8). . . . . . . . . . . 2,297,018 4,083,453 0.7
3,800 Sandoz AG (Registered) (22). . . . . . . 3,568,645 4,346,763 0.8
-------------- -------------- --------
5,865,663 8,430,216 1.5
UNITED KINGDOM 742,000 General Electric PLC (12). . . . . . . . 3,701,071 3,992,295 0.7
294,000 Imperial Chemical Industries PLC (43). . 3,618,732 3,588,272 0.7
-------------- -------------- --------
7,319,803 7,580,567 1.4
- ---------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN STOCKS 178,395,692 196,267,030 35.7
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
42
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL STRATEGY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FACE VALUE PERCENT OF
COUNTRY AMOUNT*** FOREIGN BONDS++ COST (NOTE 1A) NET ASSETS
GERMANY BundesObligation,
DM 52,400,000 5.875% due 5/15/2000 (15). . . . . $ 35,307,098 $ 35,253,728 6.4%
33,000,000 BundesRepublic Deutscheland,
7.125% due 12/20/2002 (15). . . . . 22,917,863 22,937,278 4.2
-------------- ------------ ------
58,224,961 58,191,006 10.6
- ---------------------------------------------------------------------------------------------------------------------------------
ITALY Buoni Poliennali del Tesoro
(Italian Government Bonds) (15):
Lit 9,000,000,000 9.50% due 2/01/1999. . . . . . . . 5,755,613 6,037,030 1.1
22,700,000,000 9.50% due 2/01/2001. . . . . . . . 14,858,255 15,305,303 2.8
-------------- -------------- ------------
20,613,868 21,342,333 3.9
- ---------------------------------------------------------------------------------------------------------------------------------
SPAIN Government of Spain (15):
Pta 525,000,000 7.40% due 7/30/1999. . . . . . . . 4,066,201 4,068,114 0.7
525,000,000 8.40% due 4/30/2001. . . . . . . . 4,090,214 4,149,436 0.8
-------------- -------------- ------------
8,156,415 8,217,550 1.5
- ---------------------------------------------------------------------------------------------------------------------------------
SWEDEN Government of Sweden (15):
Skr 134,000,000 11.00% due 1/21/1999. . . . . . . . 22,168,157 22,214,303 4.0
24,000,000 10.25% due 5/05/2000. . . . . . . . 3,925,774 3,991,689 0.7
-------------- -------------- ------
26,093,931 26,205,992 4.7
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS 113,089,175 113,956,881 20.7
- ---------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
- ---------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER**** US$ 128,000 Ciesco L.P., 5.30% due 7/18/1996. . 127,642 127,642 0.0
8,740,000 McKenna Triangle National
Corp., 5.33% due 8/02/1996. . . . . 8,696,004 8,696,004 1.6
100,000 Preferred Receivables Funding Corp.,
5.32% due 7/08/1996. . . . . . . . 99,867 99,867 0.0
1,890,000 Xerox Credit Corp., 5.29% due
7/08/1996. . . . . . . . . . . . . 1,887,500 1,887,500 0.4
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 10,811,013 10,811,013 2.0
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . $503,773,647 545,168,737 99.0
--------------
OTHER ASSETS LESS LIABILITIES. . . . . . . . . . . . . . . . -- ---------- 5,359,680 1.0
-------------- ------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . %
$550,528,417 100.0
-------------- ------------
-- ---------- -----------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* American Depositary Receipts (ADR).
** Global Depositary Receipts (GDR).
*** Denominated in US dollars unless otherwise indicated.
**** Commercial Paper is traded on a discount basis; the interest rates shown
are the discount rates paid at the time of purchase by the Fund.
(a) Created as a result of the merger of Kymmene Corporation and Repola Ltd.
43
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL STRATEGY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONCLUDED)
+ Non-Income producing securities.
++ Corresponding industry groups for foreign stocks and bonds:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(1) Auto-Parts (24) Real Estate
(2) Automotive Equipment (25) Retail Stores
(3) Banking (26) Shipping
(4) Building & Construction (27) Telecommunications
(5) Building Materials (28) Textiles
(6) Business & Public Service (29) Toys
(7) Business Publishing (30) Trading
(8) Capital Goods (31) Utilities
(9) Chemicals (32) Utilities-Electric
(10) Diversified (33) Financial Services
(11) Electrical Equipment (34) Beverages
(12) Electronics (35) Mining
(13) Food (36) Transportation
(14) Glass (37) Telecommunications & Equipment
(15) Government (Bonds) (38) Paper & Forest Products
(16) Insurance (39) Tire & Rubber
(17) Machinery & Equipment (40) Metals
(18) Multi-Industry (41) Photography
(19) Natural Gas (42) Warehouse & Storage
(20) Packaging (43) Oil-Integrated
(21) Petroleum (44) Engineering & Construction
(22) Pharmaceutical (45) Investment Management
(23) Printing & Publishing
</TABLE>
+++ Restricted securities as to resale. The value of the Fund's investment in
restricted securities was approximately $5,180,000,
representing 0.9% of net assets.
<TABLE>
<CAPTION>
VALUE
ISSUE ACQUISITION DATE(S) COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Grupo Carso, S.A. de C.V. (ADR). . . . . . . . . . 4/01/1996 - 4/03/1996 $4,216,066 $3,710,000
Hyundai Engineering & Construction Co., Ltd. (GDR) 3/19/1996 1,532,328 1,470,000
- ------------------------------------------------------------------------------------------------------
TOTAL $5,748,394 $5,180,000
------------ ------------
-- -------- -- --------
- ------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
44
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL UTILITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
(IN US DOLLARS)
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRY INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ARGENTINA TELECOMMUNICATIONS 7,900 Central Costanera S.A. (ADR)* (a) $ 261,847 $ 296,250 0.2%
Telecom Argentina Stet S.A.
25,600 (ADR)* . . . . . . . . . . . . . 1,160,819 1,200,000 0.8
44,800 Telefonica de Argentina S.A. (ADR)* 1,173,168 1,327,200 0.9
---------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
ARGENTINA 2,595,834 2,823,450 1.9
- -------------------------------------------------------------------------------------------------------------------------
AUSTRALIA UTILITIES--GAS 434,496 Australian Gas & Light Co., Ltd.. 1,238,060 1,808,217 1.2
---------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
AUSTRALIA 1,238,060 1,808,217 1.2
- -------------------------------------------------------------------------------------------------------------------------
AUSTRIA UTILITIES--GAS 13,560 Energie-Versorgung
Niederoesterreich AG (EVN). . . . 1,388,213 1,874,363 1.3
---------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
AUSTRIA 1,388,213 1,874,363 1.3
- -------------------------------------------------------------------------------------------------------------------------
BRAZIL TELECOMMUNICATIONS 30,000 Telecomunicacoes Brasileiras
S.A.-Telebras (ADR)*. . . . . . . 1,523,979 2,088,750 1.4
---------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN BRAZIL 1,523,979 2,088,750 1.4
- -------------------------------------------------------------------------------------------------------------------------
CANADA TELECOMMUNICATIONS 56,000 B C Telecom, Inc.. . . . . . . . . 1,052,989 1,089,071 0.7
---------------------------------------------------------------------------------------------------------------
UTILITIES--GAS 70,100 Transcanada Pipeline Co., Ltd.
(ADR)*. . . . . . . . . . . . . . 1,045,275 1,033,975 0.7
---------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
CANADA 2,098,264 2,123,046 1.4
- -------------------------------------------------------------------------------------------------------------------------
CHILE TELECOMMUNICATIONS 14,400 Compania de Telefonos de Chile
S.A. (ADR)*. . . . . . . . . . . . 1,254,995 1,413,000 0.9
---------------------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC 20,000 Chilgener S.A. (ADR)*. . . . . . . 460,000 480,000 0.3
35,100 Distribuidora Chilectra
Metropolitana, S.A. (ADR)* (a). . 1,098,338 1,956,825 1.3
48,300 Enersis S.A. (ADR)*. . . . . . . . 1,026,061 1,497,300 1.0
------------ --------- ----------
2,584,399 3,934,125 2.6
---------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN CHILE 3,839,394 5,347,125 3.5
- -------------------------------------------------------------------------------------------------------------------------
DENMARK TELECOMMUNICATIONS 77,000 Tele Danmark A/S (ADR)*. . . . . . 1,826,433 1,953,875 1.3
---------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
DENMARK 1,826,433 1,953,875 1.3
- -------------------------------------------------------------------------------------------------------------------------
FRANCE UTILITIES--WATER 16,409 Generale des Eaux. . . . . . . . . 1,872,761 1,833,853 1.2
7,111 Lyonnaise des Eaux-Dumez. . . . . 722,326 679,449 0.5
---------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
FRANCE 2,595,087 2,513,302 1.7
- -------------------------------------------------------------------------------------------------------------------------
GERMANY UTILITIES--ELECTRIC 40,000 Veba AG. . . . . . . . . . . . . . 1,305,397 2,126,759 1.4
---------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
GERMANY 1,305,397 2,126,759 1.4
- -------------------------------------------------------------------------------------------------------------------------
HONG KONG UTILITIES--GAS 568,512 The Hong Kong & China Gas Co.,
Ltd.. . . . . . . . . . . . . . . 755,615 907,063 0.6
---------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
IN HONG KONG 755,615 907,063 0.6
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL UTILITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
COUNTRY INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INDIA UTILITIES--ELECTRIC 42,000 CESC Ltd. (GDR)** (a). . . . . . $ 441,000 $ 115,500 0.1%
1,000 Tata Electric Companies
(GDR)** (a). . . . . . . . . . . 710,000 540,000 0.4
------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN INDIA 1,151,000 655,500 0.5
- ------------------------------------------------------------------------------------------------------------------------
INDONESIA TELECOMMUNICATIONS 1,110 P.T. Indonesian Satellite
Corp. (ADR)*. . . . . . . . . . 35,576 37,185 0.0
8,000 P.T. Telekomunikasi Indonesia
(PERSERO) (ADR)*. . . . . . . . 144,000 238,000 0.2
------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
INDONESIA 179,576 275,185 0.2
- ------------------------------------------------------------------------------------------------------------------------
ITALY TELECOMMUNICATIONS 761,900 Societa Finanziara Telefonica
S.p.A. (STET). . . . . . . . . . 1,629,934 2,002,774 1.3
729,600 Telecom Italia Mobile S.p.A.. . 684,328 1,631,975 1.1
729,600 Telecom Italia S.p.A.. . . . . . 950,865 1,570,031 1.0
------------ --------- --------
3,265,127 5,204,780 3.4
------------------------------------------------------------------------------------------------------------
UTILITIES--GAS 513,400 Italgas Torino. . . . . . . . . 1,581,576 1,919,550 1.3
------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN ITALY 4,846,703 7,124,330 4.7
- ------------------------------------------------------------------------------------------------------------------------
KOREA UTILITIES--ELECTRIC 40,800 Korea Electric Power Corp.. . . 821,100 989,400 0.7
------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
KOREA 821,100 989,400 0.7
------------------------------------------------------------------------------------------------------------
MALAYSIA TELECOMMUNICATIONS 139,000 Telekom Malaysia BHD. . . . . . 962,438 1,237,289 0.8
------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
MALAYSIA 962,438 1,237,289 0.8
- ------------------------------------------------------------------------------------------------------------------------
MEXICO TELECOMMUNICATIONS 29,000 Telefonos de Mexico, S.A. de C.V.
(Telemex) (ADR)*. . . . . . . . 1,706,306 971,500 0.6
------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
MEXICO 1,706,306 971,500 0.6
- ------------------------------------------------------------------------------------------------------------------------
NEW TELECOMMUNICATIONS 36,800 Telecom Corporation of New
ZEALAND Zealand Ltd. (ADR)*. . . . . . . 1,680,030 2,456,400 1.6
------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
NEW ZEALAND 1,680,030 2,456,400 1.6
- ------------------------------------------------------------------------------------------------------------------------
PHILIPPINES TELECOMMUNICATIONS 21,800 Philippine Long Distance
Telephone Co. (ADR)*. . . . . . 1,270,791 1,267,125 0.8
------------------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC 57,000 Manila Electric Co. (MERALCO)
'B'. . . . . . . . . . . . . . . 518,117 599,426 0.4
------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN THE
PHILIPPINES 1,788,908 1,866,551 1.2
- ------------------------------------------------------------------------------------------------------------------------
PORTUGAL TELECOMMUNICATIONS 65,720 Portugal Telecom, S.A. (ADR)*. . 1,417,539 1,725,150 1.2
------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
PORTUGAL 1,417,539 1,725,150 1.2
- ------------------------------------------------------------------------------------------------------------------------
SPAIN TELECOMMUNICATIONS 50,700 Telefonica de Espana S.A. (ADR)* 1,942,165 2,794,838 1.8
------------------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC 36,400 Empresa Nacional de Electricidad,
S.A. (ADR)*. . . . . . . . . . . 1,634,684 2,279,550 1.5
15,000 HidroCantabrico S.A.. . . . . . 503,484 522,575 0.4
131,000 Iberdrola I S.A.. . . . . . . . 879,896 1,345,610 0.9
------------ --------- --------
3,018,064 4,147,735 2.8
------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN SPAIN 4,960,229 6,942,573 4.6
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL UTILITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
SHARES
COUNTRY INDUSTRY HELD COMMON STOCKS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SWITZERLAND UTILITIES--ELECTRIC 1,500 Elektrowatt AG. . . . . . . .
-------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
SWITZERLAND
-------------------------------------------------------------------------------------------------
THAILAND TELECOMMUNICATIONS 2,000 +TelecomAsia Corporation Public
Co., Ltd. (ADR)*. . . . . . .
-------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC 68,000 Electricity Generating Company
of Thailand (EGCOMP). . . . .
-------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN
THAILAND
- -------------------------------------------------------------------------------------------------------------
UNITED TELECOMMUNICATIONS 57,000 British Telecommunications PLC
KINGDOM 10,000 British Telecommunications PLC
(ADR)*. . . . . . . . . . . .
87,000 Vodafone Group PLC (ADR)*. . .
-------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC 73,714 London Electricity PLC. . . .
120,000 Midlands Electricity PLC. . .
174,822 National Grid Holding Co.. . .
167,500 National Power PLC. . . . . .
90,000 PowerGen PLC. . . . . . . . .
TOTAL COMMON STOCKS IN THE
UNITED KINGDOM
- -------------------------------------------------------------------------------------------------------------
UNITED INDEPENDENT POWER 40,000 Enron Global Power & Pipelines
STATES PRODUCERS L.L.C.. . . . . . . . . . . .
-------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 20,000 +360 Communications Company. .
10,000 AT&T Corp.. . . . . . . . . .
36,400 +AirTouch Communications, Inc..
45,800 Ameritech Corp.. . . . . . . .
8,000 Bell Atlantic Corp.. . . . . .
67,400 BellSouth Corp.. . . . . . . .
42,000 Frontier Corp.. . . . . . . .
53,500 GTE Corp.. . . . . . . . . . .
20,000 MCI Communications Corp.. . .
75,000 NYNEX Corp.. . . . . . . . . .
45,300 SBC Communications, Inc.. . .
60,000 Sprint Corporation. . . . . .
44,900 US West Communications Group.
-------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC 65,600 Allegheny Power System, Inc..
25,000 American Electric Power
Company, Inc.. . . . . . . . .
72,500 Boston Edison Co.. . . . . . .
84,192 CINergy Corp.. . . . . . . . .
49,300 Consolidated Edison Co. of New
York. . . . . . . . . . . . .
31,500 DTE Energy. . . . . . . . . .
26,400 Dominion Resources, Inc.. . .
61,000 Duke Power Co.. . . . . . . .
64,000 Edison International. . . . .
50,000 Enova Corporation Holding Co..
54,300 Entergy Corp.. . . . . . . . .
30,000 FPL Group, Inc.. . . . . . . .
85,200 General Public Utilities Corp.
146,200 Houston Industries, Inc.. . .
55,000 MDU Resources Group, Inc.. .
56,000 NIPSCO Industries, Inc.. . . .
50,700 New York State Electric & Gas
Corp.. . . . . . . . . . . . .
30,000 Ohio Edison Company. . . . . .
93,800 PECO Energy Co.. . . . . . . .
72,800 PacifiCorp.. . . . . . . . . .
44,000 Public Service Co. of Colorado
86,200 Southern Co.. . . . . . . . .
55,000 Texas Utilities Co.. . . . . .
40,600 Western Resources Co.. . . . .
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
VALUE PERCENT OF
COUNTRY COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SWITZERLAND $ 588,618 $ 555,156 0.4%
------------------------------------------------------------------------------
588,618 555,156 0.4
------------------------------------------------------------------------------
THAILAND
43,740 40,000 0.0
------------------------------------------------------------------------------
60,715 237,022 0.2
------------------------------------------------------------------------------
104,455 277,022 0.2
- ------------------------------------------------------------------------------------------
UNITED 406,712 305,358 0.2
KINGDOM
741,450 537,500 0.4
2,549,289 3,208,125 2.1
-------------------------------- ----------------------------- -------
3,697,451 4,050,983 2.7
------------------------------------------------------------------------------
860,944 716,539 0.5
684,138 782,611 0.5
561,038 462,845 0.3
1,238,839 1,349,888 0.9
658,010 655,437 0.4
-------------------------------- ----------------------------- -------
4,002,969 3,967,320 2.6
7,700,420 8,018,303 5.3
- ------------------------------------------------------------------------------------------
UNITED
STATES 930,101 970,000 0.6
------------------------------------------------------------------------------
389,337 480,000 0.3
564,350 620,000 0.4
879,157 1,028,300 0.7
1,864,458 2,719,375 1.8
447,000 510,000 0.3
2,020,584 2,856,075 1.9
969,520 1,286,250 0.9
1,866,628 2,394,125 1.6
602,500 510,000 0.3
2,864,775 3,562,500 2.4
1,921,580 2,231,025 1.5
1,745,737 2,520,000 1.7
1,150,586 1,431,188 1.0
-------------------------------- ----------------------------- -------
17,286,212 22,148,838 14.8
------------------------------------------------------------------------------
1,689,846 2,025,400 1.3
1,092,125 1,065,625 0.7
2,012,799 1,848,750 1.2
2,052,668 2,694,144 1.8
1,597,050 1,442,025 1.0
989,953 972,563 0.6
1,242,516 1,056,000 0.7
2,452,906 3,126,250 2.1
1,220,732 1,128,000 0.8
1,184,750 1,156,250 0.8
1,905,240 1,540,763 1.0
1,374,501 1,380,000 0.9
2,559,840 3,003,300 2.0
3,215,466 3,600,175 2.4
1,171,945 1,182,500 0.8
1,787,890 2,254,000 1.5
1,537,761 1,235,813 0.8
733,050 656,250 0.4
2,719,313 2,438,800 1.6
1,401,416 1,619,800 1.1
1,312,146 1,617,000 1.1
1,846,654 2,122,675 1.4
2,237,675 2,351,250 1.6
1,393,851 1,212,925 0.8
-------------------------------- ----------------------------- -------
40,732,093 42,730,258 28.4
- ------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--GLOBAL UTILITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONCLUDED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
SHARES VALUE
COUNTRY INDUSTRY HELD COMMON STOCKS COST (NOTE 1A)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
UNITED UTILITIES--GAS 33,100 AGL Resources Inc.. . . . . . $ 619,896 $ 624,763
STATES 33,000 The Brooklyn Union Gas Co.. . 855,855 899,250
(CONCLUDED) 52,000 The Coastal Corp.. . . . . . . 1,509,758 2,171,000
24,800 El Paso Natural Gas Co.. . . . 895,148 954,800
26,100 National Fuel Gas Company. . . 788,314 939,600
25,000 New Jersey Resources Corp.. . 656,623 718,750
53,500 Questar Corp.. . . . . . . . . 1,908,628 1,819,000
72,200 Sonat, Inc.. . . . . . . . . . 2,342,585 3,249,000
49,800 Washington Gas Light Co.. . . 1,046,197 1,095,600
78,600 Williams Co., Inc.. . . . . . 2,298,643 3,890,700
-------------- ------------
12,921,647 16,362,463
-------------------------------------------------------------------------------------------------------------
UTILITIES--WATER 19,000 American Water Works Co., Inc. 714,875 764,750
-------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN THE
UNITED STATES 72,584,928 82,976,309
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN COMMON
STOCKS 119,658,526 139,636,618
- -------------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT FIXED-INCOME SECURITIES
- ------------
AUSTRALIA TELECOMMUNICA- US$ 1,040,000 Telstra Corp. Ltd., 6.50% due
TIONS 7/31/2003 (a) 1,084,062 998,400
-------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME SECURITIES
IN AUSTRALIA 1,084,062 998,400
- -------------------------------------------------------------------------------------------------------------------------
KOREA UTILITIES--ELECTRIC 1,000,000 Korea Electric Power Corp.,
6.375% due 12/01/2003. . . . . 985,510 947,070
-------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME SECURITIES
IN KOREA 985,510 947,070
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FIXED-
INCOME SECURITIES 2,069,572 1,945,470
- -------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
-------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER*** 4,103,000 General Electric Capital Corp.,
5.56% due 7/01/1996. . . . . . 4,101,099 4,101,099
-------------------------------------------------------------------------------------------------------------
4,000,000 Federal National Mortgage
US GOVERNMENT & Association, 5.28% due
AGENCY OBLIGATIONS*** 8/13/1996. . . . . . . . . . . 3,973,013 3,973,013
-------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SHORT-TERM SECURITIES 8,074,112 8,074,112
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS. . . . . . . $129,802,210 149,656,200
-- ----------
OTHER ASSETS LESS LIABILITIES. -- ---------- 619,191
------------
NET ASSETS. . . . . . . . . . $150,275,391
-----------
-----------
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COUNTRY PERCENT OF
NET ASSETS
- ------------
----------------
<S> <C>
UNITED 0.4%
STATES 0.6
(CONCLUDED) 1.5
0.6
0.6
0.5
1.2
2.2
0.7
2.6
-------------
10.9
----------------
0.5
----------------
55.2
- ----------------------------
92.9
- ----------------------------
- ------------
AUSTRALIA
0.7
----------------
0.7
- ----------------------------
KOREA
0.6
----------------
0.6
- ----------------------------
1.3
- ----------------------------
----------------
2.7
----------------
2.7
----------------
5.4
- ----------------------------
99.6
0.4
-------------
100.0%
------------
------------
- ----------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
* American Depositary Receipts (ADR).
** Global Depositary Receipts (GDR).
*** Commercial Paper and certain US Government & Agency Obligations are traded on a discount basis; the interest rates shown are
the discount rates paid at the time of purchase by the Fund.
+ Non-income producing security.
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Restricted security as to resale. The value of the Fund's investment in restricted securities was approximately $3,907,000,
representing 2.6% of net assets.
- -----------------------------------------------------------------------------------------------------------------------------------
VALUE
ISSUE ACQUISITION DATE(S) COST (NOTE 1A)
- -----------------------------------------------------------------------------------------------------------------------------------
CESC Ltd. (GDR). . . . . . . . . . . . . . . . . 4/11/1994 - 5/17/1994 $ 441,000 $ 115,500
Central Costanera S.A. (ADR). . . . . . . . . . 12/17/1993 261,847 296,250
Distribuidora Chilectra Metropolitan, S.A. (ADR) 8/06/1993 - 12/21/1993 1,098,338 1,956,825
Tata Electric Companies (GDR). . . . . . . . . . 2/22/1994 710,000 540,000
Telstra Corp. Ltd., 6.50% due 7/31/2003. . . . . 7/26/1993 - 9/29/1993 1,084,062 998,400
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 3,595,247 $ 3,906,975
-------------- ---------------
-------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
48
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
S&P MOODY'S FACE VALUE
INDUSTRY RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
AEROSPACE--0.3% AA+ AA1 $1,000,000 Haynes International Inc.,
13.50% due 8/15/1999. . . . . . . . . $ 1,000,000 $ 1,015,000
- ------------------------------------------------------------------------------------------------------------------------
AIRLINES--1.5% United Air Lines, Inc.:
BB+ Baa2 500,000 10.02% due 3/22/2014. . . . . . . . . 506,250 566,865
BB+ Baa2 1,000,000 9.35% due 4/07/2016. . . . . . . . . . 1,016,260 1,079,180
USAir, Inc.,
BB- B1 4,000,000 10.375% due 3/01/2013. . . . . . . . . 3,935,000 4,005,000
------------- --------------
5,457,510 5,651,045
- ------------------------------------------------------------------------------------------------------------------------
BROADCASTING & BB Ba3 4,000,000++ Grupo Televisa S.A.,
PUBLISHING--4.5% 11.375% due 5/15/2003. . . . . . . . . 4,025,000 4,040,000
BB- B1 5,000,000 Hollinger International, Inc.,
9.25% due 2/01/2006. . . . . . . . . . 4,961,250 4,575,000
B B1 1,000,000 K-III Communications Corp.,
10.25% due 6/01/2004. . . . . . . . . 995,000 1,025,000
B Caa 4,300,000 NWCG Holding Corp., 13.50% due
6/15/1999 (d). . . . . . . . . . . . 2,921,029 3,149,750
Sinclair Broadcasting Group Inc.:
B+ B3 2,500,000 10.00% due 12/15/2003. . . . . . . . . 2,436,250 2,387,500
B+ B1 2,000,000 10.00% due 9/30/2005. . . . . . . . . 1,993,750 1,910,000
------------- --------------
17,332,279 17,087,250
- ------------------------------------------------------------------------------------------------------------------------
BROADCASTING/ CCC+ Caa 5,023,939 American Telecasting, Inc.,
CABLE--8.4% 14.38% due 6/15/2004 (d). . . . . . . 3,308,410 3,566,997
B- B2 1,500,000 Argyle Television Inc.,
9.75% due 11/01/2005. . . . . . . . . 1,447,500 1,410,000
CCC B3 5,000,000 Australis Media Ltd.,
14.07% due 5/15/2003 (d). . . . . . . 2,949,469 2,950,000
BB- B2 9,000,000 Bell Cablemedia PLC,
11.74% due 9/15/2005 (d). . . . . . . 5,586,632 5,467,500
BB- B3 2,500,000 CAI Wireless Systems Inc.,
12.25% due 9/15/2002. . . . . . . . . 2,500,000 2,612,500
B- Caa 4,500,000 Echostar Satellite Broadcasting,
13.08% due 3/15/2004 (d). . . . . . . 2,815,104 2,790,000
BB+ Ba3 4,000,000 Lenfest Communications, Inc.,
8.375% due 11/01/2005. . . . . . . . . 3,725,000 3,650,000
B- B3 3,000,000++ SFX Broadcasting Inc.,
10.75% due 5/15/2006. . . . . . . . . 2,985,000 2,992,500
Videotron Holdings PLC.:
B+ B3 5,500,000 11.77% due 7/01/2004 (d). . . . . . . 3,806,451 4,042,500
BB+ Ba3 2,500,000 10.625% due 2/15/2005 2,559,375 2,612,500
------------- --------------
31,682,941 32,094,497
- ------------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS-- B+ B3 3,340,000 Pacific Lumber Co.,
0.8% 10.50% due 3/01/2003. . . . . . . . . 3,252,088 3,239,800
- ------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--1.6% B+ B1 1,660,000 Essex Group, Inc.,
10.00% due 5/01/2003. . . . . . . . . 1,668,925 1,684,900
B- B3 4,500,000 International Wire Group Inc.,
11.75% due 6/01/2005. . . . . . . . . 4,490,625 4,466,250
------------- --------------
6,159,550 6,151,150
- ------------------------------------------------------------------------------------------------------------------------
CHEMICALS--4.4% B+ Ba3 4,100,000 Agricultural Minerals & Chemicals Co.,
L.P., 10.75% due 9/30/2003. . . . . . 4,123,188 4,305,000
G-I Holdings, Inc:
B+ Ba3 3,410,000 12.64% due 10/01/1998 (d). . . . . . . 2,559,781 2,736,525
B+ Ba3 3,500,000 ++10.00% due 2/15/2006 3,615,543 3,447,500
B B3 3,000,000 Laroche Industries Inc.,
13.00% due 8/15/2004. . . . . . . . . 2,991,250 3,180,000
BB- Ba1 3,000,000 Viridian, Inc., 9.75% due 4/01/2003. . 2,985,938 3,082,500
------------- --------------
16,275,700 16,751,525
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
S&P MOODY'S FACE VALUE
INDUSTRY RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
COMMUNICATIONS--5.9% B- B3 $6,000,000 Millicom International Cellular S.A.,
13.21% due 6/01/2006 (d). . . . . . $ 3,229,747 $ 3,195,000
CCC+ B3 6,000,000 Nextel Communications, Inc.,
14.11% due 8/15/2004 (d). . . . . . . 3,491,797 3,525,000
B- B3 3,000,000 Panamsat L.P.,
12.16% due 8/01/2003 (d). . . . . . . 2,276,585 2,610,000
BB- B2 3,000,000 Rogers Communications, Inc.,
10.875% due 4/15/2004. . . . . . . . 3,042,500 3,052,500
BB- B1 4,000,000 Telefonica de Argentina S.A.,
11.875% due 11/01/2004. . . . . . . . 3,917,780 4,320,000
BB B1 5,000,000 TeleWest Communications PLC,
11.52% due 10/01/2007 (d). . . . . . 3,032,114 2,950,000
CCC+ B3 3,000,000 USA Mobile Communications Holdings,
Inc., 9.50% due 2/01/2004. . . . . . 2,710,000 2,850,000
------------- --------------
21,700,523 22,502,500
- ----------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES-- B- B3 3,000,000 Dictaphone Corp.,
0.8% 11.75% due 8/01/2005. . . . . . . . . 2,943,750 2,895,000
- ----------------------------------------------------------------------------------------------------------------------
CONGLOMERATES--3.2% BB- B3 3,890,000 Coltec Industries Inc.,
10.25% due 4/01/2002. . . . . . . . . 4,070,450 3,948,350
CCC+ B3 2,500,000 Interlake Corp.,
12.125% due 3/01/2002. . . . . . . . 2,354,188 2,500,000
B+ B2 2,000,000 JB Poindexter & Co.,
12.50% due 5/15/2004. . . . . . . . . 2,000,000 1,685,000
NR* NR* 890,000 MacAndrews & Forbes Group, Inc.,
13.00% due 3/01/1999. . . . . . . . 868,373 873,313
Sequa Corp.:
BB B2 750,000 9.625% due 10/15/1999. . . . . . . . 740,625 754,688
B+ B3 2,500,000 9.375% due 12/15/2003. . . . . . . . 2,512,813 2,400,000
------------- --------------
12,546,449 12,161,351
- ----------------------------------------------------------------------------------------------------------------------
CONSUMER-- B NR* 4,950,000 Coleman Holdings, Inc.,
PRODUCTS--5.5% 11.41% due 5/27/1998 (d). . . . . . . 3,988,043 4,139,438
B+ Ba3 1,250,000 Coty Inc., 10.25% due 5/01/2005. . . 1,250,000 1,310,938
B+ Ba2 7,000,000 International Semi-Tech
Microelectronics, Inc.,
13.13% due 8/15/2003 (d). . . . . . . 3,973,345 4,007,500
B- Caa 2,619,000 Polymer Group Inc.,
12.25% due 7/15/2002. . . . . . . . . 2,585,547 2,828,520
B- B3 4,500,000 Samsonite Corp.,
11.125% due 7/15/2005. . . . . . . . 4,348,750 4,567,500
B+ B1 4,500,000 Sealy Corp., 9.50% due 5/01/2003. . . 4,453,125 4,365,000
------------- --------------
20,598,810 21,218,896
- ----------------------------------------------------------------------------------------------------------------------
CONVERTIBLE B B2 200,000 OHM Corp., 8.00% due
BONDS+--0.0% 10/01/2006 (1). . . . . . . . . . . . 186,500 173,500
- ----------------------------------------------------------------------------------------------------------------------
DIVERSIFIED--0.6% Foamex L.P. :
B+ B1 530,000 9.50% due 6/01/2000. . . . . . . . . 517,412 522,050
B B1 1,950,000 11.25% due 10/01/2002. . . . . . . . 1,936,375 1,959,750
------------- --------------
2,453,787 2,481,800
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
50
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
S&P MOODY'S FACE VALUE
INDUSTRY RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
ENERGY--6.2% B B2 $4,500,000++ Benton Oil & Gas Co.,
11.625% due 5/01/2003. . . . . . . . . $ 4,500,000 $ 4,646,250
BB- Ba3 2,500,000 California Energy Company, Inc., 9.875%
due 6/30/2003. . . . . . . . . . . . . 2,518,750 2,550,000
B+ B1 6,000,000 Clark R & M Holdings, Inc.,
11.00% due 2/15/2000 (d). . . . . . . . 4,074,302 4,117,500
NR* NR* 1,500,000 Consolidated Hydro, Inc.,
11.80% due 7/15/2003 (d). . . . . . . . 1,186,235 315,000
BB B1 1,580,000 Gulf Canada Resources Ltd.,
9.00% due 8/15/1999. . . . . . . . . . 1,517,450 1,580,000
B- Caa 3,400,000 Transamerican Refining Corp.,
19.11% due 2/15/2002 (d). . . . . . . . 2,477,735 2,125,000
BB+ B2 4,500,000 TransTexas Gas Corp.,
11.50% due 6/15/2002. . . . . . . . . . 4,498,750 4,477,500
BB- B1 4,500,000 Yacimientos Petroliferos Fiscales S.A.,
8.00% due 2/15/2004. . . . . . . . . . 3,694,375 3,988,125
------------- --------------
24,467,597 23,799,375
- --------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT--2.7% B Caa 4,500,000 Marvel Holdings Inc.,
9.125% due 2/15/1998. . . . . . . . . . 3,999,375 4,252,500
B B2 5,000,000 Six Flags Corp.,
12.25% due 6/15/2005 (d). . . . . . . . 4,000,216 4,200,000
D Ca 3,415,000 SpectraVision Inc.,
16.80% due 10/01/2001 (c) (d). . . . . 2,983,294 1,844,100
------------- --------------
10,982,885 10,296,600
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES-- BB- B1 4,000,000 Reliance Group Holdings Inc.,
1.0% 9.75% due 11/15/2003. . . . . . . . . . 3,898,750 3,930,000
- --------------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE-- B- B2 3,000,000 Envirodyne Industries Inc.,
0.7% 10.25% due 12/01/2001. . . . . . . . . 3,056,250 2,565,000
- ---------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT BB- B1 4,000,000 Republic of Argentina,
OBLIGATIONS--0.9% 8.375% due 12/20/2003. . . . . . . . . 3,175,000 3,480,000
- --------------------------------------------------------------------------------------------------------------------------
GAMING--3.4% BB B1 3,000,000 Bally's Park Place Funding Corp.,
9.25% due 3/15/2004. . . . . . . . . . 2,850,000 3,191,250
D NR* 158,000 Goldriver Hotel & Casino Corp.,
13.375% due 8/31/1999 (c). . . . . . . 222,801 86,110
B+ B2 4,000,000 Greate Bay Properties, Inc.,
10.875% due 1/15/2004. . . . . . . . . 3,590,000 3,600,000
D Caa 4,500,000 Harrah's Jazz Company,
14.25% due 11/15/2001 (c). . . . . . . 4,468,750 2,250,000
BB- B1 4,000,000 Trump Atlantic City Association,
11.25% due 5/01/2006. . . . . . . . . . 4,008,750 4,020,000
------------- --------------
15,140,301 13,147,360
- --------------------------------------------------------------------------------------------------------------------------
HEALTH SERVICES--1.3% B+ Ba3 2,900,000 Tenet Healthcare Corp.,
10.125% due 3/01/2005. . . . . . . . . 2,900,000 3,059,500
B+ B1 2,000,000 Unilab Corp., 11.00% due 4/01/2006. . . 1,995,000 1,880,000
------------- --------------
4,895,000 4,939,500
- --------------------------------------------------------------------------------------------------------------------------
HEALTHCARE--1.0% B+ B1 4,000,000 Beverly Enterprises, Inc.,
9.00% due 2/15/2006. . . . . . . . . . 3,740,000 3,700,000
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
S&P MOODY'S FACE VALUE
INDUSTRY RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
HOME BUILDERS--0.6% B- B2 $2,500,000 Del Webb Corporation,
9.00% due 2/15/2006. . . . . . . . . $ 2,497,500 $ 2,250,000
B B1 250,000 K. Hovnanian Enterprise Inc.,
11.25% due 4/15/2002. . . . . . . . . 247,812 230,000
------------- --------------
2,745,312 2,480,000
- -------------------------------------------------------------------------------------------------------------------------
HOTELS--1.9% BB- Ba3 4,500,000++ HMC Acquisition Properties, 9.00% due
12/15/2007. . . . . . . . . . . . . 4,202,500 4,095,000
BB- B1 3,500,000 John Q. Hammons Hotel, Inc.,
8.875% due 2/15/2004. . . . . . . . . 3,092,500 3,272,500
------------- --------------
7,295,000 7,367,500
- -------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES-- B B3 2,000,000 Collins & Aikman Corp., 11.50% due
0.5% 4/15/2006. . . . . . . . . . . . . . 2,000,000 2,025,000
- -------------------------------------------------------------------------------------------------------------------------
METALS & MINING--1.5% B- B2 3,500,000 Kaiser Aluminum Corp., 12.75% due
2/01/2003. . . . . . . . . . . . . . 3,721,250 3,692,500
B- B3 3,000,000 Maxxam Group, Inc.,
12.25% due 8/01/2003 (d). . . . . . . 2,339,007 2,130,000
------------- --------------
6,060,257 5,822,500
- -------------------------------------------------------------------------------------------------------------------------
PACKAGING--3.5% CCC- B3 4,000,000 Anchor Glass Container Co.,
9.875% due 12/15/2008. . . . . . . . 3,782,500 1,800,000
Owens-Illinois, Inc.:
B+ B2 2,000,000 10.00% due 8/01/2002. . . . . . . . . 2,000,000 2,015,000
BB Ba3 2,000,000 11.00% due 12/01/2003. . . . . . . . 2,145,312 2,150,000
B B2 4,000,000 Portola Packaging Inc.,
10.75% due 10/01/2005. . . . . . . . 4,000,000 4,070,000
B- B3 3,353,000 Silgan Holdings, Inc.,
13.25% due 12/15/2002. . . . . . . . 3,353,000 3,394,912
------------- --------------
15,280,812 13,429,912
- -------------------------------------------------------------------------------------------------------------------------
PAPER--5.2% BB Ba3 2,000,000 Applied International Finance,
11.75% due 10/01/2005. . . . . . . . 1,935,000 2,050,000
B B3 4,000,000 Crown Paper Co., 11.00% due
9/01/2005. . . . . . . . . . . . . . 3,663,750 3,810,000
B B2 3,000,000 Fort Howard Corp.,
9.00% due 2/01/2006. . . . . . . . . 2,895,000 2,880,000
B+ B1 3,000,000 Repap Wisconsin Finance, Inc.,
9.25% due 2/01/2002. . . . . . . . . 2,760,000 2,805,000
B B3 3,000,000 Riverwood International Corp.,
10.875% due 4/01/2008. . . . . . . . 3,005,000 2,955,000
NR* NR* 2,000,000 S.D. Warren Co.,
12.00% due 12/15/2004. . . . . . . . 2,000,000 2,110,000
Stone Container Corp.:
B B1 1,950,000 9.875% due 2/01/2001. . . . . . . . . 1,869,375 1,891,500
B- B2 1,300,000 10.75% due 10/01/2002 1,287,000 1,313,000
------------- --------------
19,415,125 19,814,500
- -------------------------------------------------------------------------------------------------------------------------
REAL ESTATE--0.5% NR* NR* 3,000,000 Rockefeller Center Properties, Inc.,
11.09% due 12/31/2000 (d). . . . . . 1,868,126 1,800,000
- -------------------------------------------------------------------------------------------------------------------------
RESTAURANTS--1.1% CCC+ Caa 3,890,000 Flagstar Corp.,
11.375% due 9/15/2003. . . . . . . . 3,701,100 2,606,300
B+ Ba3 1,750,000 Foodmaker, Inc.,
9.75% due 11/01/2003. . . . . . . . . 1,722,700 1,645,000
------------- --------------
5,423,800 4,251,300
- -------------------------------------------------------------------------------------------------------------------------
RETAIL SPECIALTY--0.2% D Caa 4,500,000 Bradlees, Inc., 11.00% due
8/01/2002 (c). . . . . . . . . . . . 4,466,562 585,000
- -------------------------------------------------------------------------------------------------------------------------
SPECIALTY B+ B1 4,500,000 Chiquita Brands International Inc.,
RETAILING--3.3% 9.125% due 3/01/2004. . . . . . . . 4,448,750 4,365,000
NR* NR* 1,935,000++ Cumberland Farms, Inc., 10.50% due
10/01/2003. . . . . . . . . . . . . . 1,893,881 1,828,575
CCC+ Caa 2,500,000 Del Monte Corp., 10.00% due
5/01/2003. . . . . . . . . . . . . . 2,310,000 2,325,000
B- B3 4,500,000 Specialty Foods Corp.,
11.125% due 10/01/2002. . . . . . . . 4,444,375 4,275,000
------------- --------------
13,097,006 12,793,575
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
S&P MOODY'S FACE VALUE
INDUSTRY RATINGS RATINGS AMOUNT ISSUE COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
STEEL--2.6% B B1 $4,000,000 Gulf States Steel Acquisition Corp.,
13.50% due 4/15/2003. . . . . . . . . . $ 3,975,780 $ 3,650,000
B+ B1 3,000,000 WCI Steel Inc., 10.50% due
3/01/2002. . . . . . . . . . . . . . . . 2,990,000 3,045,000
B B2 3,500,000 Weirton Steel Corp., 10.75% due
6/01/2005. . . . . . . . . . . . . . . . 3,346,250 3,325,000
-------------- ---------------
10,312,030 10,020,000
- -----------------------------------------------------------------------------------------------------------------------------
SUPERMARKETS--0.8% Ralph's Grocery Co.:
B B1 2,000,000 ++10.45% due 6/15/2004. . . . . . . . . 1,892,999 1,915,000
B B1 1,000,000 10.45% due 6/15/2004 962,500 980,000
-------------- ---------------
2,855,499 2,895,000
- -----------------------------------------------------------------------------------------------------------------------------
TEXTILES--2.4% NR* NR* 3,000,000 Decorative Home Accents, Inc. (Class F),
13.00% due 6/30/2002. . . . . . . . . . 2,977,008 2,370,000
BB- Ba3 3,500,000 Tultex Corp., 10.625% due 3/15/2005. . . 3,500,000 3,622,500
B+ B3 3,500,000 Westpoint Stevens Industries, Inc.,
9.375% due 12/15/2005. . . . . . . . . 3,291,250 3,377,500
-------------- ---------------
9,768,258 9,370,000
- -----------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--1.5% B- B3 3,700,000 Transtar Holdings L.P.,
11.02% due 12/15/2003 (d). . . . . . . . 2,586,482 2,534,500
B+ Ba3 3,000,000 Viking Star Shipping Co.,
9.625% due 7/15/2003. . . . . . . . . . 2,905,937 3,030,000
-------------- ---------------
5,492,419 5,564,500
- -----------------------------------------------------------------------------------------------------------------------------
UTILITIES--6.6% B+ B1 3,453,000 Beaver Valley Funding Corp., 9.00% due
6/01/2017. . . . . . . . . . . . . . . 3,252,225 2,818,442
CTC Mansfield Funding Inc.:
B+ Ba3 995,000 10.25% due 3/30/2003. . . . . . . . . . 978,850 1,016,193
B+ Ba3 2,300,000 11.125% due 9/30/2016. . . . . . . . . . 2,402,500 2,357,776
BB Ba2 2,000,000 Cleveland Electric Illuminating Co.,
9.50% due 5/15/2005. . . . . . . . . . 1,996,160 1,971,720
NR* A3 4,000,000 Gas Argentino S.A.,
7.25% due 12/07/1998. . . . . . . . . . 3,542,634 3,850,000
NR* B1 4,000,000 Metrogas S.A.,
12.00% due 8/15/2000. . . . . . . . . . 3,935,000 4,255,000
Midland Cogeneration Venture L.P.:
BB Ba3 2,492,244 10.33% due 7/23/2002 (e). . . . . . . . 2,534,820 2,626,202
B- B2 250,000 11.75% due 7/23/2005 250,000 261,150
++ Trans Gas de Occidente S.A.,
BBB- NR* 3,000,000 9.79% due 11/01/2010. . . . . . . . . . 3,000,000 2,853,750
++ Tucson Electric & Power Co.:
NR* NR* 3,070,686 10.21% due 1/01/2009. . . . . . . . . . 2,948,074 2,900,049
NR* NR* 500,000 10.732% due 1/01/2013. . . . . . . . . 461,050 464,960
-------------- ---------------
25,301,313 25,375,242
- -----------------------------------------------------------------------------------------------------------------------------
WASTE D B3 3,500,000 Mid-American Waste Systems, Inc., 12.25%
MANAGEMENT--0.5% due 2/15/2003 (c). . . . . . . . . . . 3,555,000 2,100,000
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
CORPORATE BONDS--87.4% 345,882,189 334,975,178
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE
INDUSTRY HELD PREFERRED STOCKS COST (NOTE 1A)
<S> <C> <C> <C> <C>
BROADCASTING & 14,411 K-III Communications Corp.
PUBLISHING--1.7% (Series B) (a). . . . . . . . . . . . $1,429,057 $ 1,426,681
5,128++ Time Warner Inc. (Series K) (a). . . . 5,125,075 4,935,700
------------ -------------
6,554,132 6,362,381
- -----------------------------------------------------------------------------------------------------------
STEEL--0.7% 120,000 USX Capital Corp. (c).. . . . . . . . 3,000,000 2,880,000
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN 9,554,132 9,242,381
PREFERRED STOCKS--2.4%
- -----------------------------------------------------------------------------------------------------------
COMMON STOCKS
- -----------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE--0.0% 4,300 FoodBrands America, Inc. (c). . . . . 240,909 55,362
- -----------------------------------------------------------------------------------------------------------
GAMING--0.0% 2,500 Goldriver Hotel & Casino Finance
Corp. (c). . . . . . . . . . . . . . . 18,603 0
- -----------------------------------------------------------------------------------------------------------
HOTELS--0.0% 107 Buckhead America Corp. (c). . . . . . 575 655
- -----------------------------------------------------------------------------------------------------------
INDUSTRIAL-- 311 Thermadyne Industries, Inc.. . . . . . 4,495 6,686
SERVICES--0.0%
- -----------------------------------------------------------------------------------------------------------
SUPERMARKETS--0.3% 53,022 Grand Union Co. (c). . . . . . . . . . 3,090,000 338,015
37,642 Kash-N-Karry Food Stores, Inc.. . . . 1,123,412 950,460
------------ -------------
4,213,412 1,288,475
- -----------------------------------------------------------------------------------------------------------
TEXTILES--0.0% 3,000++ Decorative Home Accents, Inc.
(Class F) (c). . . . . . . . . . . . . 22,992 16,500
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
COMMON STOCKS--0.3% 4,500,986 1,367,678
- -----------------------------------------------------------------------------------------------------------
TRUSTS AND WARRANTS
- -----------------------------------------------------------------------------------------------------------
BROADCASTING/ 23,350 American Telecasting, Inc.
CABLE--0.0% (Warrants) (b). . . . . . . . . . . . 4,776 116,750
- -----------------------------------------------------------------------------------------------------------
ENERGY--0.0% 42,733 Transamerica Refining Corp.
(Warrants) (b). . . . . . . . . . . . 99,622 85,466
833 UGI Corp. (Warrants) (b). . . . . . . 3,644 167
------------ -------------
103,266 85,633
- -----------------------------------------------------------------------------------------------------------
GAMING--0.0% 250++ Goldriver Hotel & Casino Finance Corp.
(Liquidating Trust). . . . . . . . . 6,000 2,141
- -----------------------------------------------------------------------------------------------------------
STEEL--0.0% 4,000++ Gulf States Steel Acquisition
Corp. (Warrants) (b). . . . . . . . . 44,220 1,000
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
TRUSTS AND WARRANTS--0.0% 158,262 205,524
- -----------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--HIGH CURRENT INCOME FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONCLUDED)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
COMMERCIAL General Electric Capital Corp.:
PAPER**--8.1% $ 9,206,000 5.56% due 7/01/1996. . . . . . . . $ 9,201,735 $ 9,201,735
2,000,000 5.28% due 7/02/1996 1,998,827 1,998,827
10,000,000 International Securitization Corp.,
5.42% due 7/25/1996. . . . . . . . 9,959,350 9,959,350
10,000,000 Xerox Credit Corp.,
5.27% due 7/10/1996. . . . . . . . 9,982,433 9,982,433
- -------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SHORT-TERM SECURITIES--8.1% 31,142,345 31,142,345
- -------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--98.2%. . . . . . $391,237,914 376,933,106
--------------
OTHER ASSETS LESS LIABILITIES--1.8% -------------- 6,884,567
---------------
NET ASSETS--100.0%. . . . . . . . . $ 383,817,673
---------------
---------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not Rated.
** Commercial Paper is traded on a discount basis; the interest rates shown are
the discount rates paid at the time of purchase by the Fund.
(a) Represents a pay-in-kind security which may pay interest/dividend in
additional face/shares.
(b) Warrants entitle the portfolio to purchase a predetermined number of shares
of common stock/face amount of bonds. The purchase price and number of
shares/face amount are subject to adjustment under certain conditions until the
expiration date.
(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) Subject to principal paydowns.
+ Corresponding industry groups for convertible bonds:
(1) Waste Management
++ Restricted securities as to resale. The value of the Fund's investment in
restricted securities was approximately $34,139,000, representing 8.9% of net
assets.
<TABLE>
<CAPTION>
VALUE
ISSUE ACQUISITION DATE(S) COST (NOTE 1A)
<S> <C> <C> <C>
Benton Oil & Gas Co., 11.625% due 5/01/2003. . . . . . . . 4/29/1996 $ 4,500,000 $ 4,646,250
Cumberland Farms, Inc., 10.50% due 10/01/2003. . . . . . . 2/18/1994 1,893,881 1,828,575
Decorative Home Accents, Inc. (Class F). . . . . . . . . . 6/30/1995-9/21/1995 22,992 16,500
G-I Holdings, Inc., 10.00% due 2/15/2006. . . . . . . . . 2/14/1996-3/18/1996 3,615,543 3,447,500
Goldriver Hotel & Casino Finance Corp. (Liquidating Trust) 8/31/1992 6,000 2,141
Grupo Televisa S.A., 11.375% due 5/15/2003. . . . . . . . 5/08/1996-5/30/1996 4,025,000 4,040,000
Gulf States Steel Acquisition Corp. (Warrants). . . . . . 4/12/1995-6/08/1995 44,220 1,000
HMC Acquisition Properties, 9.00% due 12/15/2007. . . . . 12/18/1995-5/10/1996 4,202,500 4,095,000
Ralphs Grocery Co., 10.45% due 6/15/2004. . . . . . . . . 6/03/1996 1,892,999 1,915,000
SFX Broadcasting Inc., 10.75% due 5/15/2006. . . . . . . . 6/04/1996 2,985,000 2,992,500
Time Warner Inc. (Series K). . . . . . . . . . . . . . . . 4/03/1996-6/07/1996 5,125,075 4,935,700
Trans Gas de Occidente S.A., 9.79% due 11/01/2010. . . . . 11/02/1995 3,000,000 2,853,750
Tucson Electric & Power Co., 10.21% due 1/01/2009. . . . . 6/16/1993-4/01/1996 2,948,074 2,900,049
Tucson Electric & Power Co., 10.732% due 1/01/2013. . . . 3/01/1993 461,050 464,960
- --------------------------------------------------------------------------------------------------------------
TOTAL $34,722,334 $ 34,138,925
------------- --------------
------------- --------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
55
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT ISSUE COST (NOTE 1A)
US GOVERNMENT & AGENCY OBLIGATIONS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL NATIONAL MORTGAGE Federal National Mortgage Association:
ASSOCIATION--8.8% $ 2,000,000 8.90% due 6/12/2000. . . . . . . . . . . . $ 2,171,480 $ 2,158,740
500,000 7.85% due 9/10/2004 499,297 507,345
2,000,000 7.65% due 3/10/2005. . . . . . . . . . . . 2,091,140 2,085,000
- ---------------------------------------------------------------------------------------------------------------------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION 4,761,917 4,751,085
- ---------------------------------------------------------------------------------------------------------------------
US TREASURY NOTES--80.8% US Treasury Notes:
2,000,000 5.75% due 9/30/1997. . . . . . . . . . . . 2,007,422 1,996,240
1,000,000 8.125% due 2/15/1998. . . . . . . . . . . 1,056,094 1,031,250
1,000,000 6.375% due 5/15/1999. . . . . . . . . . . 998,906 1,002,190
2,000,000 6.875% due 8/31/1999. . . . . . . . . . . 2,056,875 2,028,440
1,000,000 7.50% due 10/31/1999. . . . . . . . . . . 1,062,780 1,032,660
2,000,000 7.125% due 2/29/2000. . . . . . . . . . . 2,004,375 2,045,320
1,000,000 6.875% due 3/31/2000. . . . . . . . . . . 1,019,375 1,014,530
4,000,000 7.50% due 11/15/2001. . . . . . . . . . . 4,088,437 4,175,640
5,000,000 6.375% due 8/15/2002. . . . . . . . . . . 4,981,519 4,960,150
10,000,000 7.25% due 5/15/2004. . . . . . . . . . . . 10,377,891 10,360,900
4,000,000 7.875% due 11/15/2004. . . . . . . . . . . 4,440,000 4,299,360
1,000,000 7.50% due 2/15/2005. . . . . . . . . . . . 1,106,875 1,052,030
8,000,000 6.50% due 5/15/2005. . . . . . . . . . . . 7,732,480 7,894,960
1,000,000 6.875% due 5/15/2006. . . . . . . . . . . 1,009,062 1,011,090
- ---------------------------------------------------------------------------------------------------------------------
TOTAL US TREASURY NOTES 43,942,091 43,904,760
- ---------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY
OBLIGATIONS--89.6% 48,704,008 48,655,845
- ---------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
- ---------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS*--0.3% 160,000 UBS Securities Funding Corp., purchased on
6/28/1996 to yield 5.45% to 7/01/1996. . . 160,000 160,000
- ---------------------------------------------------------------------------------------------------------------------
US TREASURY BILLS**--8.7% US Treasury Bills:
1,100,000 4.98% due 7/05/1996. . . . . . . . . . . . 1,098,935 1,098,935
207,000 4.92% due 7/11/1996. . . . . . . . . . . . 206,632 206,632
1,300,000 4.945% due 7/25/1996. . . . . . . . . . . 1,295,179 1,295,179
160,000 4.90% due 8/08/1996. . . . . . . . . . . . 159,107 159,107
500,000 4.87% due 8/15/1996. . . . . . . . . . . . 496,753 496,753
500,000 4.96% due 8/15/1996. . . . . . . . . . . . 496,693 496,693
1,000,000 5.01% due 8/22/1996. . . . . . . . . . . . 992,346 992,346
---------- -----------
4,745,645 4,745,645
- ---------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES--9.0% 4,905,645 4,905,645
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--98.6%. . . . . . . . . $53,609,653 53,561,490
-------------
OTHER ASSETS LESS LIABILITIES--1.4%. . . . -- --------- 766,730
--------------
NET ASSETS--100.0%. . . . . . . . . . . . $ 54,328,220
--------------
-- ----------
- ---------------------------------------------------------------------------------------------------------------------
</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.
56
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
(IN US DOLLARS)
<TABLE>
<CAPTION>
NORTH FACE VALUE PERCENT OF
AMERICA AMOUNT INVESTMENTS COST (NOTE 1A) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CANADA FOREIGN GOVERNMENT Canadian Government Bonds:
OBLIGATIONS C$ 550,000 6.50% due 8/01/1999. . . . $ 400,745 $ 402,348 2.2%
600,000 8.75% due 12/01/2005. . . 478,644 473,118 2.6
--------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
CANADA 879,389 875,466 4.8
- ------------------------------------------------------------------------------------------------------------------
US GOVERNMENT
UNITED OBLIGATIONS US$ 250,000 US Treasury Notes, 5.625%
STATES due 2/15/2006. . . . . . . 249,062 231,640 1.3
-------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
THE UNITED STATES 249,062 231,640 1.3
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
NORTH AMERICA 1,128,451 1,107,106 6.1
- ------------------------------------------------------------------------------------------------------------------
PACIFIC
BASIN
- ------------------------------------------------------------------------------------------------------------------
AUSTRALIA FOREIGN GOVERNMENT A$ 350,000 Australian Government Bond,
OBLIGATIONS 9.00% due 9/15/2004. . . . 272,462 278,291 1.5
--------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
AUSTRALIA 272,462 278,291 1.5
- ------------------------------------------------------------------------------------------------------------------
JAPAN FOREIGN GOVERNMENT Y 65,000,000 Asian Development Bank,
OBLIGATIONS 5.625% due 2/18/2002. . . 750,697 684,179 3.8
50,000,000 European Investment Bank,
5.875% due 11/26/1999. . . 541,960 515,565 2.9
90,000,000 Federal National Mortgage
Association, 2.00% due
12/20/1999. . . . . . . . 844,636 825,315 4.6
70,000,000 Japanese Government
Bond--145, 5.50% due
3/20/2002. . . . . . . . 761,744 735,677 4.1
60,000,000 Republic of Finland, 6.00%
due 1/29/2002. . . . . . 654,914 640,314 3.6
60,000,000 World Bank, 4.50% due
3/20/2003. . . . . . . . 614,797 601,369 3.3
--------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN JAPAN 4,168,748 4,002,419 22.3
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE 4,441,210 4,280,710 23.8
PACIFIC BASIN
- ------------------------------------------------------------------------------------------------------------------
WESTERN
EUROPE
- ------------------------------------------------------------------------------------------------------------------
AUSTRIA FOREIGN GOVERNMENT Ats 4,000,000 Republic of Austria, 7.625%
OBLIGATIONS due 10/18/2004. . . . . . 419,440 398,599 2.2
--------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
AUSTRIA 419,440 398,599 2.2
- ------------------------------------------------------------------------------------------------------------------
DENMARK FOREIGN GOVERNMENT Dkr 2,800,000 Denmark Government Bonds,
OBLIGATIONS 8.00% due 5/15/2003. . . . 516,582 507,124 2.8
--------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
DENMARK 516,582 507,124 2.8
- ------------------------------------------------------------------------------------------------------------------
FRANCE FOREIGN GOVERNMENT Frf French Government 'B-Tan':
OBLIGATIONS 2,500,000 5.75% due 3/12/1998. . . . 498,490 495,850 2.8
2,000,000 7.00% due 10/12/2000. . . 420,453 409,135 2.3
2,600,000 5.75% due 3/12/2001. . . . 503,782 509,135 2.8
2,500,000 French OAT, 7.25% due
4/25/2006. . . . . . . . . 535,026 507,629 2.8
--------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
FRANCE 1,957,751 1,921,749 10.7
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
WESTERN
EUROPE FACE VALUE
(CONCLUDED) AMOUNT INVESTMENTS COST (NOTE 1A)
<S> <C> <C> <C> <C> <C>
GERMANY FOREIGN GOVERNMENT DM 1,000,000 BundesObligations, 6.375%
OBLIGATIONS due 5/20/1998. . . . . . . $ 689,811 $ 684,352
800,000 Kingdom of Belgium, 6.25%
due 10/06/2003. . . . . . . 472,882 522,446
1,000,000 Ontario Province, 6.25% due
1/13/2004. . . . . . . . . 678,814 645,233
800,000 World Bank, 6.125% due
9/27/2002. . . . . . . . . 541,224 528,968
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
GERMANY 2,382,731 2,380,999
- ---------------------------------------------------------------------------------------------------------------------------
IRELAND FOREIGN GOVERNMENT Iep 515,000 Irish Government Bond,
OBLIGATIONS 8.00% due 10/18/2000. . . . 838,252 857,802
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
IRELAND 838,252 857,802
- ---------------------------------------------------------------------------------------------------------------------------
ITALY FOREIGN GOVERNMENT Lit 650,000,000 Buoni Poliennali Del Tesoro
OBLIGATIONS (Italian Goverment Bonds),
10.50% due 11/01/1998. . . 425,035 443,479
2,200,000,000 Government of Italy, 10.50%
due 7/15/2000. . . . . . . 1,456,374 1,526,293
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
ITALY 1,881,409 1,969,772
- ---------------------------------------------------------------------------------------------------------------------------
NETHERLANDS FOREIGN GOVERNMENT Nlg 750,000 Netherlands Government
OBLIGATIONS Bond, 6.50% due
1/15/1999. . . . . . . . . 459,321 460,595
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
NETHERLANDS 459,321 460,595
- ---------------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT
SPAIN OBLIGATIONS Government of Spain:
Pta 45,000,000 12.25% due 3/25/2000. . . . 400,291 399,488
46,000,000 11.30% due 1/15/2002. . . . 402,014 405,312
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SPAIN 802,305 804,800
- ---------------------------------------------------------------------------------------------------------------------------
SWEDEN FOREIGN GOVERNMENT Skr 4,000,000 Government of Sweden,
OBLIGATIONS 11.00% due 1/21/1999. . . . 595,412 663,114
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SWEDEN 595,412 663,114
- ---------------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT
UNITED OBLIGATIONS (pound sterling) 300,000 Eurofima, 11.375% due
KINGDOM 11/30/1999. . . . . . . . . 507,488 522,905
United Kingdom Gilt, 8.00%
600,000 due 6/10/2003. . . . . . . 913,868 952,352
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
THE UNITED KINGDOM 1,421,356 1,475,257
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
WESTERN EUROPE 11,274,559 11,439,811
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
WESTERN
EUROPE PERCENT OF
(CONCLUDED) NET ASSETS
<S> <C>
GERMANY
3.8 %
2.9
3.6
2.9
------------
13.2
- ------------------------
IRELAND
4.8
------------
4.8
- ------------------------
ITALY
2.5
8.5
------------
11.0
- ------------------------
NETHERLANDS
2.6
------------
2.6
- ------------------------
SPAIN
2.2
2.2
------------
4.4
- ------------------------
SWEDEN
3.7
------------
3.7
- ------------------------
UNITED
KINGDOM 2.9
5.3
------------
8.2
- ------------------------
63.6
- ------------------------
</TABLE>
58
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONCLUDED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER* US $ 768,000 General Electric Capital Corp.,
5.56% due 7/01/1996. . . . . . . $ 767,763 $ 767,763 4.3%
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SHORT-TERM SECURITIES 767,763 767,763 4.3
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS. . . . . . . . . . . . . $ 17,611,983 17,595,390 97.8
-----------------
OTHER ASSETS LESS LIABILITIES. . . . . . . ---- ----------- 388,126 2.2
----------------- ---------
NET ASSETS. . . . . . . . . . . . . . . . . $ 17,983,516 100.0%
----------------- ---------
---- ----------- --------
- -----------------------------------------------------------------------------------------------------------------------------------
*Commercial Paper is traded on a discount basis; the interest rate shown is the discount rate paid at the time of purchase by the
Fund.
</TABLE>
See Notes to Financial Statements.
59
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
(IN US DOLLARS)
<TABLE>
<CAPTION>
VALUE PERCENT OF
AFRICA INDUSTRY SHARES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SOUTH BANKING 102,120 Nedcor Ltd. (GDR) (b) (e). . . . $1,087,409 $1,506,270 0.5%
AFRICA
10,000 Nedcor Ltd. (Ordinary). . . . . . 147,857 151,340 0.0
--------- --------- -----
1,235,266 1,657,610 0.5
------------------------------------------------------------------------------------------------------------------
BEVERAGES 59,550 South African Breweries, Ltd.. . 1,750,594 1,747,424 0.5
------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 496,000 Sun International (South Africa),
Ltd.. . . . . . . . . . . . . . . 613,843 532,902 0.2
------------------------------------------------------------------------------------------------------------------
MINING 5,150 Anglo American Corp. of South
Africa, Ltd.. . . . . . . . . . . 347,236 326,635 0.1
18,200 Anglo American Corp. of South
Africa, Ltd. (ADR) (a). . . . . . 1,209,251 1,146,600 0.4
9,000 Driefontein Consolidated Ltd.. . 133,361 120,610 0.0
36,000 Driefontein Consolidated Ltd.
(ADR) (a). . . . . . . . . . . . 541,728 468,000 0.1
47,300 Kinross Mines Ltd.. . . . . . . . 511,564 502,726 0.2
------------ ------------ ----------
2,743,140 2,564,571 0.8
------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
AFRICA 6,342,843 6,502,507 2.0
------------------------------------------------------------------------------------------------------------------
LATIN
AMERICA
- ----------------------------------------------------------------------------------------------------------------------------
ARGENTINA BANKING 24,350 Banco Frances del Rio de la Plata
S.A. (ADR) (a). . . . . . . . . . 584,750 700,062 0.2
------------------------------------------------------------------------------------------------------------------
OIL & RELATED 135,000 Companhia Naviera Perez
Companc S.A.C.F.I.M.F.A.
(Class B). . . . . . . . . . . . 833,567 884,648 0.3
------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 11,700 Telefonica de Argentina S.A.
(Class B) (ADR) (a). . . . . . . 284,969 346,612 0.1
------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
ARGENTINA 1,703,286 1,931,322 0.6
- ----------------------------------------------------------------------------------------------------------------------------
BRAZIL BANKING 129,750,000 Banco Bradesco S.A. PN
(Preferred). . . . . . . . . . . 1,003,739 1,059,711 0.4
------------------------------------------------------------------------------------------------------------------
BEVERAGES 2,800,000 Companhia Cervejaria Brahma S.A.
PN (Preferred). . . . . . . . . . 1,362,618 1,670,518 0.5
164,705 Companhia Cervejaria Brahma S.A.
PN (Warrants) (c). . . . . . . . 8,349 8,202 0.0
------------ ------------ ----------
1,370,967 1,678,720 0.5
------------------------------------------------------------------------------------------------------------------
STEEL 65,000 Usinas Siderurgicas de Minas
Gerais-Usiminas S.A.
(ADR) (a) (d) (e). . . . . . . . 742,500 702,975 0.2
960,000,000 Usinas Siderurgicas de Minas
Gerais-Usiminas S.A. PN
(Preferred). . . . . . . . . . . 1,012,434 1,013,546 0.3
------------ ------------ ----------
1,754,934 1,716,521 0.5
------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 63,140 Telecommunicacoes Brasileiras
S.A.--Telebras (ADR) (a). . . . . 2,938,044 4,396,122 1.4
------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
BRAZIL 7,067,684 8,851,074 2.8
------------------------------------------------------------------------------------------------------------------
CHILE BANKING 22,000 Banco O'Higgins S.A. (ADR) (a). . 538,861 530,750 0.2
------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 13,500 Compania de Telecomunicaciones
de Chile S.A. (ADR) (a). . . . . 963,907 1,324,687 0.4
------------------------------------------------------------------------------------------------------------------
UTILITIES 20,480 Enersis S.A. (ADR) (a). . . . . . 530,085 634,880 0.2
------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
CHILE 2,032,853 2,490,317 0.8
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
60
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
LATIN
AMERICA VALUE PERCENT OF
(CONCLUDED) INDUSTRY SHARES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
MEXICO BEVERAGES 26,400 Panamerican Beverages, Inc.
(Class A). . . . . . . . . . . . . $ 1,185,222 $ 1,181,400 0.4%
-----------------------------------------------------------------------------------------------------------------------
BROADCAST--MEDIA 17,000 Grupo Televisa, S.A. de C.V.
(ADR) (a) (d). . . . . . . . . . . 438,163 522,750 0.2
-----------------------------------------------------------------------------------------------------------------------
BUILDING & 174,950 Apasco, S.A. de C.V.. . . . . . . 971,758 968,089 0.3
CONSTRUCTION
-----------------------------------------------------------------------------------------------------------------------
FORESTRY 49,000 Kimberly-Clark de Mexico, S.A. de
C.V. (ADR) (a). . . . . . . . . 1,790,602 1,751,750 0.5
-----------------------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY 269,200 Grupo Carso, S.A. de C.V. 'A1' (d) 2,259,825 1,914,976 0.6
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
MEXICO 6,645,570 6,338,965 2.0
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
LATIN AMERICA 17,449,393 19,611,678 6.2
- -----------------------------------------------------------------------------------------------------------------------------------
MIDDLE EAST
- -----------------------------------------------------------------------------------------------------------------------------------
ISRAEL BANKING 500,815 Bank Hapoalim Ltd.. . . . . . . 784,916 738,887 0.2
-----------------------------------------------------------------------------------------------------------------------
ENGINEERING & 11,200 Koor Industries Ltd.. . . . . . 1,102,900 949,577 0.3
CONSTRUCTION
-----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
THE MIDDLE EAST 1,887,816 1,688,464 0.5
- -----------------------------------------------------------------------------------------------------------------------------------
PACIFIC
BASIN
- -----------------------------------------------------------------------------------------------------------------------------------
AUSTRALIA FOOD & BEVERAGE 568,019 Coca-Cola Amatil, Ltd. (Ordinary) 3,271,061 6,314,140 2.0
-----------------------------------------------------------------------------------------------------------------------
MEDIA 89,939 The News Corp., Ltd. (Ordinary). 431,743 510,144 0.2
52,364 The News Corp., Ltd. (Preferred) 222,611 255,408 0.1
------------- ---------- ----------
654,354 765,552 0.3
-----------------------------------------------------------------------------------------------------------------------
MERCHANDISING 18,700 Amway Asia Pacific Ltd.
(ADR) (a). . . . . . . . . . . . 725,368 565,675 0.2
-----------------------------------------------------------------------------------------------------------------------
NATURAL GAS PIPELINES 37,943 Broken Hill Proprietary Co.. . . 452,087 524,460 0.2
-----------------------------------------------------------------------------------------------------------------------
PROPERTY 342,927 Lend Lease Corp.. . . . . . . . 4,543,759 5,260,723 1.7
-----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
AUSTRALIA 9,646,629 13,430,550 4.4
- -----------------------------------------------------------------------------------------------------------------------------------
HONG KONG BANKING 342,670 HSBC Holdings PLC. . . . . . . . 4,260,942 5,179,561 1.6
34,000 J.C.G. Holdings Ltd.. . . . . . 32,167 27,673 0.0
------------- ------------- ----------
4,293,109 5,207,234 1.6
-----------------------------------------------------------------------------------------------------------------------
DIVERSIFIED 493,140 Hutchison Whampoa Ltd.. . . . . 2,649,474 3,102,631 1.0
-----------------------------------------------------------------------------------------------------------------------
FOODS 4,000 C.P. Pokphand Co., Ltd.
(Ordinary). . . . . . . . . . . 1,610 1,589 0.0
4,224,000 Tingyi (Cayman Islands)
Holdings Co. (d). . . . . . . . 1,113,725 1,159,615 0.4
------------- ------------- ----------
1,115,335 1,161,204 0.4
-----------------------------------------------------------------------------------------------------------------------
INSURANCE 176,000 National Mutual Asia Ltd.. . . . 184,973 154,615 0.0
-----------------------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY 399,000 Swire Pacific Ltd. (Class A). . 2,742,209 3,414,993 1.1
-----------------------------------------------------------------------------------------------------------------------
PROPERTY 524,000 Cheung Kong (Holdings) Ltd.. . . 3,660,891 3,774,046 1.2
-----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
HONG KONG 14,645,991 16,814,723 5.3
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
61
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
PACIFIC
BASIN VALUE PERCENT OF
(CONTINUED) INDUSTRY SHARES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
JAPAN AUTOMOBILES 380,000 Suzuki Motor Corp. (Ordinary). . $ 4,231,171 $ 4,995,435 1.6%
----------------------------------------------------------------------------------------------------------------------
BEVERAGES
23,000 Chukyo Coca-Cola Bottling Co.,
Ltd. (Ordinary). . . . . . . . . 303,183 264,561 0.1
31,000 Hokkaido Coca-Cola Bottling Co.,
Ltd. (Ordinary). . . . . . . . . 473,832 432,992 0.1
27,000 Kinki Coca-Cola Bottling Co., Ltd.
(Ordinary). . . . . . . . . . . . 429,219 409,166 0.1
35,000 Mikuni Coca-Cola Bottling Co.,
Ltd.. . . . . . . . . . . . . . . 539,515 527,205 0.2
29,000 Sanyo Coca-Cola Bottling Co.,
Ltd.. . . . . . . . . . . . . . . 434,480 436,827 0.1
------------- -------------- ---------
2,180,229 2,070,751 0.6
----------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS 859,000 Mitsubishi Heavy Industries, Ltd. 6,767,958 7,473,316 2.3
----------------------------------------------------------------------------------------------------------------------
CHEMICALS 220,650 Shin-Etsu Chemical Co., Ltd.
(Ordinary). . . . . . . . . . . . 4,377,529 4,230,099 1.3
----------------------------------------------------------------------------------------------------------------------
ELECTRICAL
CONSTRUCTION 80,000 Chudenko Corp. (Ordinary). . . . 2,823,335 2,906,701 0.9
83,000 Sanki Engineering Co., Ltd.. . . 1,132,597 1,136,571 0.4
92,000 Taihei Dengyo Kaisha, Ltd.. . . . 1,739,163 1,461,384 0.5
------------- -------------- ---------
5,695,095 5,504,656 1.8
----------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
210,000 Murata Manufacturing Co., Ltd.. . 7,791,572 7,955,998 2.5
278,000 NEC Corporation. . . . . . . . . 3,773,968 3,020,084 0.9
109,000 Rohm Co., Ltd.. . . . . . . . . . 4,425,820 7,204,309 2.3
------------- -------------- ---------
15,991,360 18,180,391 5.7
----------------------------------------------------------------------------------------------------------------------
ENGINEERING & 197,000 Kinden Corp.. . . . . . . . . . . 3,284,788 3,129,268 1.0
CONSTRUCTION
----------------------------------------------------------------------------------------------------------------------
INSURANCE 467,000 Dai-Tokyo Fire & Marine
Insurance Co., Ltd.. . . . . . . 3,358,181 3,517,208 1.1
70,000 Fuji Fire & Marine Insurance Co.,
Ltd.. . . . . . . . . . . . . . . 477,842 389,812 0.1
292,000 Koa Fire & Marine Insurance Co.,
Ltd.. . . . . . . . . . . . . . . 2,008,042 1,895,308 0.6
149,000 Mitsui Fire & Marine Insurance Co.,
Ltd.. . . . . . . . . . . . . . . 1,217,441 1,184,764 0.4
400,000 Nichido Fire & Marine Insurance Co.,
Ltd.. . . . . . . . . . . . . . . 3,026,008 3,092,934 1.0
152,000 Nippon Fire & Marine Insurance
Co., Ltd.. . . . . . . . . . . . 1,069,497 992,149 0.3
467,000 Sumitomo Marine & Fire
Insurance Co., Ltd.. . . . . . . 3,910,634 4,071,435 1.3
330,000 Tokio Marine & Fire Insurance Co.,
Ltd. (Ordinary). . . . . . . . . 3,890,208 4,398,393 1.4
268,000 Yasuda Marine & Fire Insurance
Co., Ltd.. . . . . . . . . . . . 2,004,769 2,003,761 0.6
------------- -------------- ---------
20,962,622 21,545,764 6.8
OFFICE EQUIPMENT 398,000 Canon, Inc. (Ordinary). . . . . . . 7,184,788 8,284,097 2.6
----------------------------------------------------------------------------------------------------------------------
PACKAGING 194,000 Toyo Seikan Kaisha, Ltd.
(Ordinary). . . . . . . . . . . . . 6,036,561 6,765,382 2.1
----------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS
187,000 Sankyo Co., Ltd. (Ordinary). . . . 4,196,189 4,848,275 1.5
140,000 Taisho Pharmaceutical Co., Ltd.
(Ordinary). . . . . . . . . . . . . 2,828,042 3,029,030 0.9
------------- -------------- ---------
7,024,231 7,877,305 2.4
----------------------------------------------------------------------------------------------------------------------
RETAILING
124,000 Ito Yokado Co., Ltd. (Ordinary). . 6,977,438 7,482,563 2.4
30,000 Sangetsu Co., Ltd.. . . . . . . . . 1,120,547 802,447 0.2
------------- -------------- ---------
8,097,985 8,285,010 2.6
----------------------------------------------------------------------------------------------------------------------
STEEL 69,000 Maruichi Steel Tube, Ltd.
(Ordinary). . . . . . . . . . . . . 1,250,520 1,240,917 0.4
----------------------------------------------------------------------------------------------------------------------
TIRE & RUBBER 197,000 Bridgestone Corp.. . . . . . . . . 3,447,899 3,758,718 1.2
----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
JAPAN 96,532,736 103,341,109 32.4
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
62
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PACIFIC
BASIN SHARES HELD/ VALUE
(CONCLUDED) INDUSTRY FACE AMOUNT INVESTMENTS COST (NOTE 1A)
MALAYSIA BANKING
190,000 Malayan Banking BHD. . . . . . . . . $ 1,609,229 $ 1,828,388
449,000 Public Bank (Malaysia) BHD
'Foreign'. . . . . . . . . . . . . . 1,055,118 1,242,221
-------------- --------------
2,664,347 3,070,609
------------------------------------------------------------------------------------------------------------
PRINTING/PUBLISHING 145,000 The New Straits Times Press BHD
(Malaysia). . . . . . . . . . . . . 796,152 755,814
------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 132,000 Telekom Malaysia BHD. . . . . . . . 1,040,375 1,174,980
------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
MALAYSIA 4,500,874 5,001,403
- ------------------------------------------------------------------------------------------------------------------------
NEW CHEMICALS 10,000 Fernz Corporation Ltd.. . . . . . . 27,213 29,776
ZEALAND
------------------------------------------------------------------------------------------------------------
ELECTRONICS 5,000 PDL Holdings Ltd.. . . . . . . . . . 28,130 20,877
------------------------------------------------------------------------------------------------------------
FOODS 548,600 Wrightson Ltd.. . . . . . . . . . . 418,731 401,803
------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT NZ$ 2,600,000 New Zealand Government Bonds,
OBLIGATIONS 9.00% due 11/15/1996. . . . . . . . 1,626,140 1,772,777
------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY 357,850 Brierley Investments Ltd.. . . . . . 274,881 338,029
------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 140,000 Telecom Corporation of New
Zealand. . . . . . . . . . . . . . . 602,772 586,480
------------------------------------------------------------------------------------------------------------
TEXTILES 61,200 Lane Walker Rudkin Industries,
Ltd.. . . . . . . . . . . . . . . . 73,075 67,864
------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
NEW ZEALAND
3,050,942 3,217,606
- ------------------------------------------------------------------------------------------------------------------------
SOUTH TELECOMMUNICATIONS 125,700 Korea Mobile Telecommunications
KOREA Corp. (GDR) (b) (e). . . . . . . . . 1,498,350 2,127,472
------------------------------------------------------------------------------------------------------------
UTILITIES 55,730 Korea Electric Power Corp.. . . . . 2,378,736 2,251,190
------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SOUTH KOREA
3,877,086 4,378,662
- ------------------------------------------------------------------------------------------------------------------------
THAILAND BANKING 108,500 Finance One Public Co., Ltd.
'Foreign'. . . . . . . . . . . . . . 856,748 700,827
430,500 Krung Thai Bank Public Co. Ltd.. . . 2,013,799 2,017,704
219,800 Phatra Thanakit Public Co. Ltd.
'Foreign'. . . . . . . . . . . . . . 2,093,321 1,532,280
-------------- --------------
4,963,868 4,250,811
------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THAILAND 4,963,868 4,250,811
------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
PACIFIC BASIN 137,218,126 150,434,864
- ------------------------------------------------------------------------------------------------------------------------
SOUTHEAST
ASIA
- ------------------------------------------------------------------------------------------------------------------------
INDIA AUTOMOBILES 26,300 Ashok Leyland Ltd. (GDR) (b). . . . 302,506 368,200
20,000 Ashok Leyland Ltd. (GDR) (b) (e). . 255,800 280,000
-------------- --------------
558,306 648,200
------------------------------------------------------------------------------------------------------------
HOTELS 14,700 East India Hotels Ltd. (GDR) (b) (e) 404,100 406,161
13,300 Indian Hotels Co., Ltd. (GDR) (b)
(d) (e). . . . . . . . . . . . . . . 299,250 379,050
-------------- --------------
703,350 785,211
------------------------------------------------------------------------------------------------------------
MACHINERY & 18,500 Larsen & Toubro Ltd.. . . . . . . . 296,000 346,875
ENGINEERING
31,000 Larsen & Toubro Ltd. (GDR) (b) (e). 592,875 581,250
-------------- --------------
888,875 928,125
------------------------------------------------------------------------------------------------------------
UTILITIES 103,750 BSES Ltd. (GDR) (b) (d). . . . . . . 2,025,897 1,997,188
------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN INDIA 4,176,428 4,358,724
------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>
PACIFIC
BASIN PERCENT OF
(CONCLUDED) NET ASSETS
MALAYSIA 0.6%
0.4
---------
1.0
------------
0.2
------------
0.4
------------
1.6
- ------------------------
NEW 0.0
ZEALAND
------------
0.0
------------
0.1
------------
0.6
------------
0.1
------------
0.2
------------
0.0
------------
1.0
- ------------------------
SOUTH
KOREA 0.7
------------
0.7
------------
1.4
- ------------------------
THAILAND
0.2
0.6
0.5
---------
1.3
------------
1.3
------------
47.4
- ------------------------
SOUTHEAST
ASIA
- ------------------------
INDIA 0.1
0.1
---------
0.2
------------
0.1
0.1
---------
0.2
------------
0.1
0.2
---------
0.3
------------
0.6
------------
1.3
------------
</TABLE>
63
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
SOUTHEAST
ASIA
(CONCLUDED) VALUE PERCENT OF
- ------------INDUSTRY SHARES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
INDONESIA FOOD & HOUSEHOLD 307,000 P.T. Wicaksana Overseas
PRODUCTS International. . . . . . . . . $ 574,396 $ 844,349 0.3%
---------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS
599,500 P.T. Kabelmetal Indonesia. . . 757,512 270,509 0.1
600 P.T. Telekomunikasi Indonesia
(ADR) (a). . . . . . . . . . . 19,911 17,850 0.0
------------ ------------ ----------
777,423 288,359 0.1
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN INDONESIA 1,351,819 1,132,708 0.4
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SOUTHEAST ASIA 5,528,247 5,491,432 1.7
- ---------------------------------------------------------------------------------------------------------------------------
WESTERN
EUROPE
- ---------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED 28,500 Outokumpu OY. . . . . . . . . . 474,256 478,961 0.1
FINLAND
---------------------------------------------------------------------------------------------------------------
PAPER & FOREST 154,100 Enso-Gutzeit OY (Class A). . . 1,154,546 1,198,589 0.4
PRODUCTS
127,500 Metsa Serla OY. . . . . . . . . 972,184 906,535 0.3
90,365 UPM-Kymmene OY (Ordinary) (f). 1,665,596 1,878,832 0.6
------------ ------------ ----------
3,792,326 3,983,956 1.3
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FINLAND 4,266,582 4,462,917 1.4
---------------------------------------------------------------------------------------------------------------
FRANCE AUTOMOBILES 8,680 Peugeot S.A.. . . . . . . . . . 1,298,715 1,162,395 0.4
---------------------------------------------------------------------------------------------------------------
BANKING 11,200 Compagnie Financiere de Paribas
(Ordinary). . . . . . . . . . . 567,919 661,769 0.2
18,900 Compangie Financiere de Suez
(Ordinary). . . . . . . . . . . 743,625 691,714 0.2
6,050 Societe Generale de Surveillance
S.A. (Class A) (Ordinary). . . 634,340 665,559 0.2
------------ ------------ ----------
1,945,884 2,019,042 0.6
---------------------------------------------------------------------------------------------------------------
BUILDING & 6,667 Bouygues S.A.. . . . . . . . . 707,181 743,801 0.2
CONSTRUCTION
---------------------------------------------------------------------------------------------------------------
COMMUNICATION 8,170 Alcatel Alsthom Cie Generale
EQUIPMENT d'Electricite S.A.. . . . . . . 781,107 712,989 0.2
---------------------------------------------------------------------------------------------------------------
FOODS 4,300 Groupe Danone S.A.. . . . . . . 683,124 651,059 0.2
---------------------------------------------------------------------------------------------------------------
INSURANCE 30,120 Assurances Generales de France
S.A. (AGF). . . . . . . . . . . 768,212 816,079 0.3
---------------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY 2,969 EuraFrance S.A.. . . . . . . . 918,349 1,148,360 0.4
---------------------------------------------------------------------------------------------------------------
STEEL 46,580 Usinor-Sacilor S.A.. . . . . . 716,099 672,219 0.2
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FRANCE 7,818,671 7,925,944 2.5
---------------------------------------------------------------------------------------------------------------
GERMANY BANKING 3,100 Deutsche Bank AG (Ordinary). . 151,032 146,746 0.0
8,599 Deutsche Bank AG (Warrants) (c) 143,223 134,554 0.0
------------ ------------ ----------
294,255 281,300 0.0
---------------------------------------------------------------------------------------------------------------
CHEMICALS 38,560 Bayer AG. . . . . . . . . . . . 962,689 1,362,656 0.4
4,199 Henkel KGaA (Preferred). . . . 1,731,994 1,813,769 0.6
--------- --------- -----
2,694,683 3,176,425 1.0
---------------------------------------------------------------------------------------------------------------
ENGINEERING & 1,800 Philipp Holzmann AG. . . . . . 688,664 499,408 0.2
CONSTRUCTION
---------------------------------------------------------------------------------------------------------------
MACHINERY 17,250 Kloeckner Werke AG (d). . . . . 1,232,262 606,755 0.2
1,260 Mannesmann AG. . . . . . . . . 312,890 435,740 0.1
------------ ------------ ----------
1,545,152 1,042,495 0.3
---------------------------------------------------------------------------------------------------------------
RETAIL 1,940 Karstadt AG. . . . . . . . . . 757,073 785,056 0.2
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN GERMANY 5,979,827 5,784,684 1.7
---------------------------------------------------------------------------------------------------------------
</TABLE>
64
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
WESTERN
EUROPE VALUE PERCENT OF
(CONTINUED) INDUSTRY SHARES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
GREECE BANKING 7,000 Ergo Bank S.A. (Ordinary). . . . . $ 275,271 $ 385,575 0.1%
-------------------------------------------------------------------------------------------------------------------
BEVERAGES 29,195 Hellenic Bottling Co. S.A.. . . . . 744,766 969,728 0.3
-------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 70,800 Hellenic Tellecommunication
Organization S.A.. . . . . . . . . 1,213,682 1,174,359 0.4
-------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN GREECE 2,233,719 2,529,662 0.8
- -------------------------------------------------------------------------------------------------------------------------------
HUNGARY TELECOMMUNICATIONS 5,500 Magyar TarKozlesi
Reszvenytarsasag (Ordinary). . . . 910,789 824,286 0.3
-------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN HUNGARY 910,789 824,286 0.3
-------------------------------------------------------------------------------------------------------------------
IRELAND INSURANCE 157,000 Irish Life PLC. . . . . . . . . . . 526,948 624,101 0.2
-------------------------------------------------------------------------------------------------------------------
PACKAGING & 297,800 Jefferson Smurfit Group PLC
CONTAINERS (Ordinary). . . . . . . . . . . . . 888,436 802,592 0.2
------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN IRELAND 1,415,384 1,426,693 0.4
-------------------------------------------------------------------------------------------------------------------
ITALY AUTOMOBILES 250,000 Fiat S.p.A. (Ordinary). . . . . . . 750,125 838,395 0.3
1,750,000 Montedison S.p.A. (d). . . . . . . 1,364,663 1,018,319 0.3
------------ ------------ ----------
2,114,788 1,856,714 0.6
-------------------------------------------------------------------------------------------------------------------
BUILDING & 96,100 Fochi Filippo S.p.A. (d). . . . . . 304,917 21,966 0.0
CONSTRUCTION
-------------------------------------------------------------------------------------------------------------------
DIVERSIFIED 1,411,500 Compagnie Industrial Riunite
S.p.A. (CIR) (d). . . . . . . . . . 1,306,203 894,171 0.3
335,500 Compagnie Industrial Riunite
S.p.A. (CIR) (NC Savings). . . . . 157,313 111,307 0.0
------------ ------------ ----------
1,463,516 1,005,478 0.3
-------------------------------------------------------------------------------------------------------------------
INSURANCE 55,000 Assicurazioni Generali S.p.A.. . . 1,392,767 1,269,756 0.4
473,560 Istituto Nazionale delle
Assicurazioni (INA) S.p.A.. . . . . 678,038 706,691 0.2
------------ ------------ ----------
2,070,805 1,976,447 0.6
-------------------------------------------------------------------------------------------------------------------
OIL & RELATED 107,000 Ente Nazionale Idrocarburi S.p.A.
(ENI). . . . . . . . . . . . . . . 418,604 534,231 0.2
-------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 643,016 Stet Societa Finanziaria Telefonica
S.p.A.. . . . . . . . . . . . . . . 1,452,678 1,690,269 0.5
-------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ITALY 7,825,308 7,085,105 2.2
- -------------------------------------------------------------------------------------------------------------------------------
NETHERLANDS CHEMICALS 24,770 European Vinyls Corporation
International N.V.. . . . . . . . . 1,064,893 769,525 0.2
-------------------------------------------------------------------------------------------------------------------
FINANCE 13,775 AEGON N.V. (Ordinary). . . . . . . 299,881 634,651 0.2
-------------------------------------------------------------------------------------------------------------------
INSURANCE 20,475 Fortis Amev N.V.. . . . . . . . . . 332,763 586,886 0.2
20,125 Internationale Nederlanden
Groep N.V.. . . . . . . . . . . . . 437,493 600,447 0.2
------------ ------------ ----------
770,256 1,187,333 0.4
-------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 25,700 Koninklijke PTT Nederland N.V.. . . 600,608 616,137 0.2
7,175 Royal PTT Nederland N.V.. . . . . . 263,297 271,691 0.1
------------ ------------ ----------
863,905 887,828 0.3
-------------------------------------------------------------------------------------------------------------------
TRANSPORTATION 22,350 KLM Royal Dutch Airlines N.V.. . . 655,652 715,305 0.2
-------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
NETHERLANDS 3,654,587 4,194,642 1.3
- -------------------------------------------------------------------------------------------------------------------------------
NORWAY CONSUMER GOODS 12,100 Orkla A.S. (Class A). . . . . . . . 611,357 637,549 0.2
-------------------------------------------------------------------------------------------------------------------
OIL & GAS PRODUCERS 36,005 Saga Petroleum A.S. (Class B). . . 396,180 488,143 0.1
-------------------------------------------------------------------------------------------------------------------
OIL & RELATED 16,900 Norsk Hydro A.S.. . . . . . . . . . 707,860 827,972 0.3
-------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN NORWAY 1,715,397 1,953,664 0.6
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
WESTERN
EUROPE VALUE PERCENT OF
(CONTINUED) INDUSTRY SHARES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
POLAND AUTOMOTIVE & 19,000 T.C. Debica S.A.. . . . . . . . . $ 299,311 $ 461,369 0.1%
EQUIPMENT
-----------------------------------------------------------------------------------------------------------------
ENGINEERING & 188,300 Mostostal-Export S.A.. . . . . . . 512,705 644,294 0.2
CONSTRUCTION
188,300 Mostostal-Export S.A. (Rights) (d) 0 0 0.0
------------ ------------ ----------
512,705 644,294 0.2
-----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN POLAND 812,016 1,105,663 0.3
- -----------------------------------------------------------------------------------------------------------------------------
PORTUGAL BANKING 24,900 Banco Commercial Portugues S.A.
(ADR) (a). . . . . . . . . . . . . 351,972 286,350 0.1
-----------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS 50,330 Sonae Investimentos-SGPS S.A.. . . 1,136,299 1,308,902 0.4
-----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN PORTUGAL 1,488,271 1,595,252 0.5
- -----------------------------------------------------------------------------------------------------------------------------
SPAIN BANKING 1,490 Banco Popular Espanol S.A.
(Ordinary). . . . . . . . . . . . 160,314 265,830 0.1
-----------------------------------------------------------------------------------------------------------------
ENGINEERING & 3,500 Fomento de Construcciones
CONSTRUCTION Y Contratas S.A. (d). . . . . . . 289,804 289,798 0.1
-----------------------------------------------------------------------------------------------------------------
GLASS 9,120 Cristaleria Espanola S.A.. . . . . 401,770 572,760 0.2
-----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SPAIN 851,888 1,128,388 0.4
- -----------------------------------------------------------------------------------------------------------------------------
SWEDEN APPLIANCES 18,481 Electrolux AB. . . . . . . . . . . 898,932 927,945 0.3
-----------------------------------------------------------------------------------------------------------------
AUTOMOBILES & 26,500 Volvo AB 'B'. . . . . . . . . . . 485,639 602,454 0.2
EQUIPMENT
-----------------------------------------------------------------------------------------------------------------
BANKING 51,500 Sparbanken Sverige AB (Class A). . 604,471 666,817 0.2
-----------------------------------------------------------------------------------------------------------------
BUILDING RELATED 30,531 Svedala Industry AB. . . . . . . . 400,387 576,881 0.2
-----------------------------------------------------------------------------------------------------------------
ENGINEERING 27,400 SKF AB 'A'. . . . . . . . . . . . 496,206 635,291 0.2
4,100 SKF AB 'B' Free. . . . . . . . . . 79,603 97,222 0.0
------------ ------------ -----
575,809 732,513 0.2
-----------------------------------------------------------------------------------------------------------------
FINANCE 23,875 Stadshypotek AB. . . . . . . . . . 352,150 531,993 0.2
-----------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS 37,800 Mo Och Domsjo AB-'B' Free. . . . . 962,403 967,480 0.3
432,300 Rottneros Bruks AB. . . . . . . . 666,730 501,161 0.2
91,500 Stora Kopparbergs Bergslags AB. . 1,152,700 1,205,397 0.4
------------ ------------ ----------
2,781,833 2,674,038 0.9
-----------------------------------------------------------------------------------------------------------------
INSURANCE 34,000 Forsakrings AB Skandia. . . . . . 799,113 898,374 0.3
-----------------------------------------------------------------------------------------------------------------
METALS & MINING 63,800 Avesta Sheffield AB. . . . . . . . 562,711 600,346 0.2
-----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWEDEN 7,461,045 8,211,361 2.7
- -----------------------------------------------------------------------------------------------------------------------------
SWITZERLAND CHEMICALS 1,365 Ciba-Geigy AG (Registered). . . . 1,052,532 1,663,969 0.5
1,375 Clariant AG (Registered). . . . . 449,723 502,298 0.2
------------ ------------ ----------
1,502,255 2,166,267 0.7
-----------------------------------------------------------------------------------------------------------------
DIVERSIFIED 8,285 Oerlikon-Buehrle Holdings AG (d). 892,893 860,951 0.3
-----------------------------------------------------------------------------------------------------------------
ELECTRONIC 2,698 SMH AG (Societe Suisse pour la
COMPONENTS Microelectronique et
l'Horlogerie AG (Registered) (d). 378,902 421,630 0.1
-----------------------------------------------------------------------------------------------------------------
LEISURE 798 Fotolabo S.A.. . . . . . . . . . . 331,433 331,065 0.1
-----------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 250 Sandoz AG (Registered). . . . . . 270,721 285,971 0.1
-----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SWITZERLAND 3,376,204 4,065,884 1.3
- -----------------------------------------------------------------------------------------------------------------------------
TURKEY BEVERAGES 1,382,392 Erciyas Biracilik Ve Malt Sanayii
A.S.. . . . . . . . . . . . . . . 847,637 783,917 0.2
-----------------------------------------------------------------------------------------------------------------
METAL FABRICATING 5,400,000 Eregli Demir Ve Celik Fabrikalari
T.A.S.. . . . . . . . . . . . . . 609,808 599,268 0.2
-----------------------------------------------------------------------------------------------------------------
RETAIL STORES 1,069,612 Migros Turk A.S.. . . . . . . . . 643,675 939,171 0.3
-----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN TURKEY 2,101,120 2,322,356 0.7
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
66
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
WESTERN
EUROPE VALUE PERCENT OF
(CONCLUDED) INDUSTRY SHARES HELD INVESTMENTS COST (NOTE 1A) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
UNITED BANKING 49,650 Barclays Bank, Ltd.
KINGDOM (Ordinary). . . . . . . . . . . . $ 611,306 $ 594,221 0.2%
58,000 National Westminster Bank PLC
(Ordinary). . . . . . . . . . . . 596,955 552,983 0.2
141,355 TSB Group PLC (Ordinary). . . . . 667,748 691,413 0.2
------------- ------------- ---------
1,876,009 1,838,617 0.6
--------------------------------------------------------------------------------------------------------------------
BEVERAGES 125,130 Cadbury Schweppes PLC. . . . . . . 1,012,117 988,025 0.3
128,250 Grand Metropolitan PLC (Ordinary). 807,748 850,356 0.3
28,433 Matthew Clark PLC. . . . . . . . . 338,939 340,402 0.1
------------- ------------- ---------
2,158,804 2,178,783 0.7
--------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 26,190 Misys PLC. . . . . . . . . . . . . 323,536 315,989 0.1
--------------------------------------------------------------------------------------------------------------------
CONGLOMERATES 308,325 Hanson PLC (Ordinary). . . . . . . 906,758 861,781 0.3
--------------------------------------------------------------------------------------------------------------------
DIVERSIFIED 100,000 Peninsular & Oriental Steam
Navigation Co. (The). . . . . . . 802,965 751,555 0.2
--------------------------------------------------------------------------------------------------------------------
FOOD MANUFACTURING 55,660 Unilever PLC.. . . . . . . . . . . 1,027,802 1,106,289 0.3
--------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--OTHER 134,000 Tomkins PLC. . . . . . . . . . . . 461,257 503,542 0.1
--------------------------------------------------------------------------------------------------------------------
INSURANCE 78,500 Prudential Corp. PLC. . . . . . . 386,922 494,893 0.1
--------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 104,700 Glaxo Holdings PLC. . . . . . . . 1,313,555 1,409,553 0.4
--------------------------------------------------------------------------------------------------------------------
REAL ESTATE 60,000 Land Securities PLC. . . . . . . . 593,293 581,368 0.2
--------------------------------------------------------------------------------------------------------------------
RETAIL 140,000 Tesco PLC (Ordinary). . . . . . . 600,324 638,046 0.2
--------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 225,300 British Telecommunications
PLC (Ordinary). . . . . . . . . . 1,250,874 1,206,968 0.4
--------------------------------------------------------------------------------------------------------------------
UTILITIES 60,000 Anglian Water PLC. . . . . . . . . 491,821 549,691 0.2
190,600 British Gas PLC (Ordinary). . . . 717,690 529,775 0.2
60,000 Severn Trent PLC. . . . . . . . . 514,675 506,834 0.2
60,000 United Utilities PLC. . . . . . . 514,675 507,766 0.2
50,000 Yorkshire Water PLC. . . . . . . . 482,984 512,424 0.2
------------- ------------- ---------
2,721,845 2,606,490 1.0
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE
UNITED KINGDOM 14,423,944 14,493,874 4.6
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
WESTERN EUROPE 66,334,752 69,110,375 21.7
- --------------------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT SHORT-TERM SECURITIES
- --------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER* US$ 12,840,000 General Electric Capital Corp.,
5.56% due 7/01/1996. . . . . . . . 12,834,051 12,834,051 4.0
5,000,000 International Securitization Corp.,
5.43% due 7/29/1996. . . . . . . . 4,976,621 4,976,621 1.6
------------- ------------- ---------
17,810,672 17,810,672 5.6
- ------------------------------
FOREIGN GOVERNMENT C$ 11,220,000 Canadian Treasury Bills,
OBLIGATIONS* 4.95% due 10/24/1996. . . . . . . 8,061,452 8,088,723 2.5
- --------------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & US$ 5,000,000 Federal National Mortgage
AGENCY OBLIGATIONS* Association, 5.26%
due 7/19/1996. . . . . . . . . . . 4,984,658 4,977,400 1.6
United States Treasury Bills:
3,900,000 4.915% due 7/25/1996 (g). . . . . 3,885,390 3,887,793 1.2
30,000 4.95% due 7/25/1996 (g). . . . . . 29,889 29,906 0.0
4,000,000 4.955% due 7/25/1996. . . . . . . 3,985,135 3,987,480 1.3
90,000 4.96% due 7/25/1996 (g). . . . . . 89,665 89,718 0.0
24,460,000 4.99% due 7/25/1996. . . . . . . . 24,368,458 24,383,440 7.7
------------- ------------- ---------
37,343,195 37,355,737 11.8
-------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SHORT-TERM SECURITIES 63,215,319 63,255,132 19.9
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NOMINAL VALUE
OPTIONS COVERED BY PREMIUMS VALUE PERCENT OF
PURCHASED OPTIONS ISSUE PAID (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------------
CALL OPTIONS 914 NZ Top Ten Index, expiring
PURCHASED August 1996 at NZ$109. . . . . . $ 45,172 $ 13,467 0.0%
--------------------------------------------------------------------------------------------------------------------------
CURRENCY CALL
OPTIONS PURCHASED C$ 6,050,000 Canadian Dollar, expiring
August 1996 at C$1.34. . . . . . 9,075 5,142 0.0
--------------------------------------------------------------------------------------------------------------------------
CURRENCY PUT
OPTIONS PURCHASED Y 10,000,000 Japanese Yen, expiring
September 1996 at Y 105. . . . . 235,000 368,000 0.1
--------------------------------------------------------------------------------------------------------------------------
PUT OPTIONS 35 Bovespa, expiring November
PURCHASED 1996 at US$552. . . . . . . . . 105,000 66,918 0.0
34 Bovespa, expiring December
1996 at US$581. . . . . . . . . 181,832 148,831 0.1
-------------- -------------- -----
286,832 215,749 0.1
--------------------------------------------------------------------------------------------------------------------------
TOTAL OPTIONS PURCHASED 576,079 602,358 0.2
TOTAL INVESTMENTS 298,552,575 316,696,810 99.6
- ---------------------------------------------------------------------------------------------------------------------------------
OPTIONS
WRITTEN PREMIUMS
RECEIVED
- ---------------------------------------------------------------------------------------------------------------------------------
CALL OPTIONS WRITTEN 35 Bovespa, expiring November
1996 at US$552. . . . . . . . . (105,000) (290,091) (0.1)
34 Bovespa, expiring December
1996 at US$598. . . . . . . . . (181,832) (212,788) (0.1)
-------------- -------------- -----
(286,832) (502,879) (0.2)
--------------------------------------------------------------------------------------------------------------------------
PUT OPTIONS WRITTEN 914 NZ Top Ten Index, expiring August
1996 at NZ$109. . . . . . . . . (21,437) (23,600) (0.0)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN (308,269) (526,479) (0.2)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, NET OF OPTIONS WRITTEN. . . . . . . . . . . . . . . . . $298,244,306 316,170,331 99.4
--------------
-- ----------
VARIATION MARGIN ON STOCK INDEX FUTURES CONTRACTS**. . . . . . . . . . . . 2,259 0.0
UNREALIZED DEPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS*** (28,873) 0.0
. . . . . . . . . . . . . . . . . . . . . . .OTHER ASSETS LESS LIABILITIES 1,822,414 0.6
-------------- ---------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $317,966,131 1 00.0%
-------------- ---------
-- ---------- --- ----
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(a) American Depositary Receipts (ADR).
(b) Global Depositary Receipts (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) Non-income producing securities.
(e) Restricted securities as to resale. The value of the Fund's investment in restricted securities was approximately $5,983,000,
representing 1.9% of net assets.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ISSUE ACQUISITION COST VALUE
DATE (NOTE 1A)
- ------------------------------------------------------------------------------------------------
Ashok Leyland Ltd. (GDR). . . . . . . . . . . . . . . . 7/10/1995 $ 255,800 $ 280,000
East India Hotels Ltd. (GDR). . . . . . . . . . . . . . 4/23/1996 404,100 406,161
Indian Hotels Co., Ltd. (GDR). . . . . . . . . . . . . 3/08/1996 299,250 379,050
Korea Mobile Telecommunications Corp. (GDR). . . . . . 6/02/1995 1,498,350 2,127,472
Larsen & Toubro Ltd. (GDR). . . . . . . . . . . . . . . 4/23/1996 592,875 581,250
Nedcor Ltd. (GDR). . . . . . . . . . . . . . . . . . . 5/23/1996 1,087,409 1,506,270
Usinas Siderurgicas de Minas Gerais-Usiminas S.A. (ADR) 5/03/1996 742,500 702,975
- -----------------------------------------------------------------------------------------------
TOTAL $ 4,880,284 $ 5,983,178
------------ -------------
-- -------- -- ---------
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(f) Created as a result of the merger of Kymmene Corporation and Repola Ltd.
(g) Securities held as collateral in connection with open stock index futures contracts.
* Commercial Paper and certain Foreign and US Government Obligations are traded on a discount basis; the interest rates shown
are the rates paid at the time of purchase by the Fund.
</TABLE>
68
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--INTERNATIONAL EQUITY FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONCLUDED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
<S> <C>
**Stock index futures contracts purchased as of June 30, 1996 were as follows:
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EXPIRATION VALUE
NUMBER OF DATE (NOTES 1A & 1C)
CONTRACTS ISSUE EXCHANGE
- ------------------------------------------------------------------------------------------------------------------------
96 Tokyo Topix September 1996 $ 14,995,070
11 FT-SE 100 Index September 1996 1,579,547
- ------------------------------------------------------------------------------------------------------------------------
TOTAL STOCK INDEX FUTURES CONTRACTS PURCHASED (TOTAL CONTRACT PRICE--$16,390,290)
$16,574,617
-------------
------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
***Forward foreign exchange contracts as of June 30, 1996 were as follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
UNREALIZED
APPRECIATION
EXPIRATION (DEPRECIATION)
FOREIGN CURRENCY PURCHASED DATE (NOTE 1B)
- ---------------------------------------------------------------------------------------------------------------------
Y267,768,750 September 1996 $ (30,450)
TOTAL (US$ COMMITMENT--$2,500,000)
- -----------------------------------------------------------------------------------------------------------------------
FOREIGN CURRENCY SOLD
- ---------------------------------------------------------------------------------------------------------------------
DM4,935,122 July 1996 $ 7,759
NZ $2,500,000 August 1996 (6,182)
TOTAL (US$ COMMITMENT--$4,949,507) $ 1,577
- ---------------------------------------------------------------------------------------------------------------------
TOTAL UNREALIZED DEPRECIATION--NET ON FORWARD FOREIGN EXCHANGE CONTRACTS $ (28,873)
------------
-- --------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
69
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--NATURAL RESOURCES FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALUMINUM 15,000 +Alcan Aluminium, Ltd.. . . . . . . . . $ 314,175 $ 457,500 1.0%
7,600 Alumax, Inc.. . . . . . . . . . . . . . 250,293 230,850 0.5
4,300 Aluminum Co. of America. . . . . . . . 224,399 246,713 0.5
7,700 Reynolds Metals Co.. . . . . . . . . . 349,628 401,363 0.9
------------ ------------ ---------
1,138,495 1,336,426 2.9
- ----------------------------------------------------------------------------------------------------------------
CHEMICALS 4,300 Air Products & Chemicals, Inc.. . . . . 245,939 248,325 0.5
114,000 Asahi Chemical Industry Co., Ltd.. . . 838,003 813,840 1.8
1,700 BASF AG. . . . . . . . . . . . . . . . 407,600 486,193 1.1
10,400 Dow Chemical Co.. . . . . . . . . . . . 646,664 790,400 1.7
10,700 DuPont (E.I.) de Nemours & Co.. . . . . 534,988 846,638 1.9
------------ ------------ ---------
2,673,194 3,185,396 7.0
- ----------------------------------------------------------------------------------------------------------------
DIVERSIFIED RESOURCES 20,000 Asahi Glass Company, Ltd.. . . . . . . 240,000 239,182 0.5
COMPANIES
23,500 Canadian Pacific, Ltd.. . . . . . . . . 367,729 517,000 1.1
11,600 Coastal Corp.. . . . . . . . . . . . . 314,701 484,300 1.1
33,000 Cyprus Amax Minerals Co.. . . . . . . . 921,470 746,625 1.6
38,500 Norcen Energy Resources Ltd.. . . . . . 600,603 675,414 1.5
20,000 Occidental Petroleum Corp.. . . . . . . 391,200 495,000 1.1
37,700 RGC Ltd.. . . . . . . . . . . . . . . . 142,865 182,400 0.4
------------ ------------ ---------
2,978,568 3,339,921 7.3
- ----------------------------------------------------------------------------------------------------------------
GOLD 17,000 +Amax Gold, Inc.. . . . . . . . . . . . 107,020 93,500 0.2
17,500 Ashanti Goldfields Co. Ltd. (GDR)***. . 434,367 343,438 0.8
23,500 +Cambior Inc.. . . . . . . . . . . . . . 315,479 310,705 0.7
173,300 +Delta Gold N.L.. . . . . . . . . . . . 333,170 443,089 1.0
30,600 Driefontein Consolidated Ltd.. . . . . 477,914 410,074 0.9
78,000 +Great Central Mines N.L.. . . . . . . . 248,020 213,542 0.5
45,000 Newcrest Mining Ltd.. . . . . . . . . . 192,990 180,548 0.4
22,864 Newmont Mining Corp.. . . . . . . . . . 914,907 1,128,910 2.5
45,000 Placer Dome Inc.. . . . . . . . . . . . 1,018,177 1,074,375 2.3
24,800 Prime Resources Group, Inc.. . . . . . 242,631 183,475 0.4
75,900 Sante Fe Pacific Gold Corp.. . . . . . 1,018,143 1,072,088 2.3
22,000 +TVX Gold, Inc.. . . . . . . . . . . . . 179,135 159,500 0.3
------------ ------------ ---------
5,481,953 5,613,244 12.3
- ----------------------------------------------------------------------------------------------------------------
INTEGRATED OIL 10,500 Amoco Corp.. . . . . . . . . . . . . . 554,378 759,938 1.7
COMPANIES
10,600 British Petroleum Co. PLC (ADR)*. . . . 808,886 1,132,875 2.5
2,200 Mobil Corp.. . . . . . . . . . . . . . 214,196 246,675 0.5
2,000 OMV AG. . . . . . . . . . . . . . . . . 214,068 201,737 0.4
25,000 Petro-Canada (Installment Receipts) (c) 117,895 156,250 0.3
7,300 Repsol S.A.. . . . . . . . . . . . . . 210,174 254,035 0.6
3,000 Repsol S.A. (ADR)*. . . . . . . . . . . 86,490 104,250 0.2
19,800 Societe Nationale Elf Aquitaine (ADR)*. 717,231 727,650 1.6
14,000 Total S.A. (Class B). . . . . . . . . . 841,536 1,038,912 2.3
22,000 Unocal Corporation. . . . . . . . . . . 621,504 742,500 1.6
23,000 Yacimientos Petroliferos Fiscales S.A.
(ADR)*. . . . . . . . . . . . . . . . 508,759 517,500 1.1
------------ ------------ ---------
4,895,117 5,882,322 12.8
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
70
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--NATURAL RESOURCES FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
METALS & MINING 10,800 ASARCO Inc.. . . . . . . . . . . . . . . $ 305,116 $ 298,350 0.7%
167,000 +Centaur Mining & Exploration Ltd.. . . . 244,194 228,599 0.5
25,600 Falconbridge Ltd. (Installment Receipts) (a) 207,067 206,270 0.4
7,400 Inco Ltd.. . . . . . . . . . . . . . . . 244,911 238,650 0.5
51,300 Industrias Penoles S.A. de C.V.. . . . . 230,560 235,371 0.5
465,000 M.I.M. Holdings Ltd.. . . . . . . . . . . 867,286 599,937 1.3
14,000 +Minsur S.A. (T Shares). . . . . . . . . . 111,555 125,369 0.3
91,000 Mitsubishi Materials Corp.. . . . . . . . 461,572 495,125 1.1
38,000 Nippon Light Metal Co., Ltd.. . . . . . . 225,758 215,775 0.5
32,400 Noranda Inc.. . . . . . . . . . . . . . . 600,505 663,331 1.4
25,500 Outokumpu OY. . . . . . . . . . . . . . . 455,626 428,544 0.9
9,400 ++P.T. Tambang Timah (GDR)***. . . . . . . 115,742 170,610 0.4
89,000 Pasminco Ltd.. . . . . . . . . . . . . . 107,296 125,329 0.3
6,700 Phelps Dodge Corp.. . . . . . . . . . . . 382,311 417,912 0.9
108,000 QNI Ltd.. . . . . . . . . . . . . . . . . 216,381 241,297 0.5
59,800 RTZ Corp. PLC. . . . . . . . . . . . . . 775,698 885,860 1.9
6,000 Rio Algom Ltd.. . . . . . . . . . . . . . 116,616 116,466 0.3
410,000 Savage Resources Ltd.. . . . . . . . . . 313,412 374,155 0.8
41,000 Savage Resources Ltd. (Warrants) (b). . . 5,506 10,483 0.0
46,000 Sumitomo Metal Mining Co. Ltd.. . . . . . 383,546 398,521 0.9
34,000 Trelleborg 'B' Fria. . . . . . . . . . . 454,495 424,872 0.9
164,900 WMC Ltd.. . . . . . . . . . . . . . . . . 964,809 1,180,514 2.6
------------ ------------ ---------
7,789,962 8,081,340 17.6
- -------------------------------------------------------------------------------------------------------------------
OIL & GAS PRODUCERS 21,400 Apache Corp.. . . . . . . . . . . . . . . 573,935 703,525 1.5
6,000 +Belco Oil & Gas Corp.. . . . . . . . . . 114,000 213,000 0.5
37,000 +Chauvco Resources Ltd.. . . . . . . . . . 437,096 298,125 0.7
14,300 Enron Oil & Gas Co.. . . . . . . . . . . 306,151 398,612 0.9
23,100 +Enserch Exploration Inc.. . . . . . . . . 230,541 248,325 0.5
78,100 Enterprise Oil PLC. . . . . . . . . . . . 510,617 557,859 1.2
90,800 Lasmo PLC. . . . . . . . . . . . . . . . 246,409 246,740 0.5
8,900 Louisiana Land and Exploration Co. (The) 342,742 512,862 1.1
25,000 +Mitchell Energy & Development Corp.
(Class B). . . . . . . . . . . . . . . . 437,442 475,000 1.0
13,000
Oryx Energy Co.. . . . . . . . . . . . . 216,739 211,250 0.5
93,000
Ranger Oil Ltd.. . . . . . . . . . . . . 625,617 685,875 1.5
18,400
Saga Petroleum A.S.. . . . . . . . . . . 242,398 270,722 0.6
10,900
Sonat Inc.. . . . . . . . . . . . . . . . 355,879 490,500 1.1
9,800
Vastar Resources, Inc.. . . . . . . . . . 268,603 366,275 0.8
------------ ------------ ---------
4,908,169 5,678,670 12.4
- -------------------------------------------------------------------------------------------------------------------
OIL SERVICE 12,500 Coflexip Stena Offshore, Inc. (ADR)*. . . 259,460 217,187 0.5
9,800 IHC Caland N.V.. . . . . . . . . . . . . 214,018 482,532 1.1
6,400 Schlumberger Ltd.. . . . . . . . . . . . 382,287 539,200 1.2
------------ ------------ ---------
855,765 1,238,919 2.8
- -------------------------------------------------------------------------------------------------------------------
PAPER & FOREST 24,533 Aracruz Celulose S.A. (ADR)*. . . . . . . 196,788 233,063 0.5
PRODUCTS
31,400 Avenor Inc.. . . . . . . . . . . . . . . 611,175 508,306 1.1
15,800 Empresa Nacional de Celulosas, S.A.. . . 233,184 224,621 0.5
10,000 Georgia-Pacific Corp.. . . . . . . . . . 710,723 710,000 1.6
14,800 International Paper Co.. . . . . . . . . 497,368 545,750 1.2
11,700 Kimberly-Clark Corp.. . . . . . . . . . . 299,587 903,825 2.0
57,500 Metsa Serla OY 'B'. . . . . . . . . . . . 499,397 408,829 0.9
16,800 Mo Och Domsjo AB 'B'. . . . . . . . . . . 373,697 429,991 0.9
36,000 Slocan Forest Products Ltd.. . . . . . . 365,179 334,896 0.7
9,520 +UPM-Kymmene OY (d). . . . . . . . . . . . 169,172 197,936 0.4
20,000 Weyerhaeuser Co.. . . . . . . . . . . . . 796,864 850,000 1.9
9,000 Willamette Industries, Inc.. . . . . . . 376,875 533,250 1.2
------------ ------------ ---------
5,130,009 5,880,467 12.9
- -------------------------------------------------------------------------------------------------------------------
PLANTATIONS 136,000 Golden Hope Plantations BHD. . . . . . . 240,608 211,580 0.5
90,000 Kuala Lumpur Kepong BHD. . . . . . . . . 120,553 227,346 0.5
------------ ------------ ---------
361,161 438,926 1.0
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
71
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--NATURAL RESOURCES FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONCLUDED)
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRY HELD COMMON STOCKS COST (NOTE 1A) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REFINING 45,300 Total Petroleum (North America), Ltd.
(ADR)*. . . . . . . . . . . . . . . . . . $ 579,947 $ 441,675 1.0%
- -----------------------------------------------------------------------------------------------------------------------------------
STEEL 21,000 Allegheny Ludlum Corp.. . . . . . . . . . 493,494 396,375 0.9
83,000 British Steel PLC. . . . . . . . . . . . . 218,182 210,723 0.5
135,000 +Kobe Steel, Ltd.. . . . . . . . . . . . . 390,945 388,214 0.8
12,800 Koninklijke Nederlandsche Hoogovens en
Staalfabrienken N.V.. . . . . . . . . . . 529,034 474,185 1.0
273,000 Nippon Steel Corp.. . . . . . . . . . . . 929,419 937,082 2.0
328,000 Sumitomo Metal Industries, Ltd.. . . . . . 1,044,000 1,006,098 2.2
--------------- --------------- ---------------
3,605,074 3,412,677 7.4
- -----------------------------------------------------------------------------------------------------------------------------------
WOOD PRODUCTS 18,400 Louisiana-Pacific Corp.. . . . . . . . . . 467,929 407,100 0.9
18,400 Riverside Forest Products Ltd.. . . . . . 242,667 239,232 0.5
--------------- --------------- ---------------
710,596 646,332 1.4
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 41,108,010 45,176,315 98.8
- -----------------------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT SHORT-TERM INVESTMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER** $ 491,000 General Electric Capital Corp., 5.56% due
7/01/1996. . . . . . . . . . . . . . . . 490,773 490,773 1.1
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS 490,773 490,773 1.1
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS. . . . . . . . . . . . . $ 41,598,783 45,667,088 99.9
---------------
---------------
OTHER ASSETS LESS LIABILITIES. . . . . . . 54,656 0.1
--------------- ---------------
NET ASSETS. . . . . . . . . . . . . . . . $ 45,721,744 100.0%
--------------- ---------------
--------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Receipts evidence payment by the Fund of 34% of the purchase price common stock of Falconbridge Ltd. The Fund is obligated to
pay the remaining 66%, approximately $356,000, over the next year.
(b) 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.
(c) Receipts evidence payment by the Fund of 42% of the purchase price common stock of Petro-Canada. The Fund is obligated to pay
the remaining 58%, approximately $156,000, over the next year.
(d) Created as a result of the merger of Kymmene Corporation and Repola Ltd.
* American Depositary Receipts (ADR).
**Commercial Paper is traded on a discount basis; the interest rates shown are the discount rates paid at the time of purchase by
the Fund.
*** Global Depositary Receipts (GDR).
+ Non-income producing security.
++Restricted securities as to resale. The value of the Fund's investment in restricted securities was approximately $171,000,
representing 0.4% of net assets.
</TABLE>
<TABLE>
<CAPTION>
VALUE
ISSUE ACQUISITION DATE COST (NOTE 1A)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
P.T. Tambang Timah (GDR). . . . . . . . . . 10/06/1995 $115,742 $ 170,610
- ---------------------------------------------------------------------------------------
TOTAL $115,742 $ 170,610
---------- -----------
---------- -----------
- ---------------------------------------------------------------------------------------
</TABLE>
See Notes toFinancial Statements.
72
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--PRIME BOND FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
S&P MOODY'S FACE VALUE
INDUSTRY RATINGS RATINGS AMOUNT CORPORATE BONDS & NOTES COST (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSET-BACKED AAA Aaa $5,000,000 AT&T Universal Card Master Trust,
SECURITIES++--3.0% 5.609% due 4/17/2003. . . . . . . $ 5,000,000 $ 5,000,000
AAA Aaa 9,000,000 Banc One Credit Card Master Trust
(Series B), 7.55% due 12/15/1999 9,171,523 9,157,500
----------- --------------
14,171,523 14,157,500
- ------------------------------------------------------------------------------------------------------------------------
BANKS & THRIFTS--10.1% Bank of New York Co., Inc.:
A- A2 4,000,000 7.625% due 7/15/2002. . . . . . . 4,306,000 4,110,080
A- A2 2,000,000 7.875% due 11/15/2002 2,213,400 2,074,280
BankAmerica Corp.:
A+ A1 7,750,000 6.65% due 5/01/2001. . . . . . . 7,745,318 7,680,126
A+ A1 1,000,000 7.125% due 5/12/2005 985,500 985,540
A A1 4,000,000 Continental Bank N.A., 7.875%
due 2/01/2003. . . . . . . . . . 4,176,640 4,114,800
A- A2 2,000,000 First Interstate Bancorp.,
11.25% due 3/27/2001. . . . . . . 2,354,060 2,310,420
A- A3 2,000,000 Golden West Financial Corp.,
9.15% due 5/23/1998. . . . . . . 2,271,480 2,089,800
NationsBank Corp.:
A A2 2,000,000 7.50% due 2/15/1997. . . . . . . 1,998,280 2,018,660
A A2 5,000,000 7.00% due 5/15/2003 4,980,000 4,972,350
A- A3 2,000,000 7.75% due 8/15/2015. . . . . . . 2,000,000 1,998,320
Norwest Corp.:
AA- Aa3 5,000,000 6.25% due 4/15/1999. . . . . . . 4,983,600 4,951,400
AA- Aa3 2,500,000 6.75% due 5/12/2000 2,529,975 2,493,775
A A2 5,000,000 Security Pacific Corp., 9.80% due
7/01/2003. . . . . . . . . . . . 5,834,300 5,732,850
AA+ Aa2 3,000,000 Wachovia Corp., 6.55% due
6/09/1997. . . . . . . . . . . . 2,997,810 3,013,830
----------- --------------
49,376,363 48,546,231
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES-- Chrysler Finance Corp.:
CAPTIVE--5.0% A- A3 1,000,000 7.13% due 9/30/1996. . . . . . . 985,130 1,003,040
A- A3 6,500,000 10.95% due 8/01/2017. . . . . . 7,380,520 7,106,255
Ford Motor Credit Co.:
A+ A1 3,000,000 6.25% due 11/08/2000. . . . . . . 2,990,100 2,926,320
A+ A1 2,500,000 7.75% due 3/15/2005 2,497,725 2,552,100
General Motors Acceptance Corp.:
A- A3 3,000,000 7.125% due 5/11/1998. . . . . . . 3,033,840 3,039,630
A- A3 4,000,000 7.70% due 4/15/2016. . . . . . . 3,967,000 3,968,840
A- A3 3,500,000 7.40% due 9/01/2025. . . . . . . 3,471,790 3,317,300
----------- --------------
24,326,105 23,913,485
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES-- A+ A1 2,000,000 American General Finance Corp.,
CONSUMER--4.2% 8.50% due 8/15/1998. . . . . . . 2,278,920 2,075,080
Associates Corp. of North America:
AA- Aa3 5,000,000 8.375% due 1/15/1998. . . . . . 5,016,100 5,142,450
AA- Aa3 1,500,000 5.25% due 9/01/1998. . . . . . . 1,454,385 1,461,480
AA- Aa3 1,000,000 7.25% due 9/01/1999. . . . . . . 987,620 1,014,800
A+ Aa3 3,000,000 CIT Group Holdings, Inc.,
7.625% due 12/05/1996. . . . . . 2,990,340 3,020,760
Commercial Credit Co.:
A+ A1 3,250,000 10.00% due 5/01/1999. . . . . . 3,626,350 3,520,303
A+ A1 3,000,000 6.70% due 8/01/1999. . . . . . . 3,022,580 2,991,030
A+ A2 1,000,000 Transamerica Financial Corp.,
6.80% due 3/15/1999. . . . . . . 999,730 1,004,040
----------- --------------
20,376,025 20,229,943
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
73
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--PRIME BOND FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
S&P MOODY'S FACE VALUE
INDUSTRY RATINGS RATINGS AMOUNT CORPORATE BONDS & NOTES COST (NOTE 1A)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL SERVICES-- A A2 $10,000,000 Bear Stearns Companies Inc. (The),
OTHER--11.6% 6.75% due 8/15/2000. . . . . . . . $ 9,936,500 $ 9,953,600
Dean Witter, Discover & Co.:
A A2 3,500,000 6.75% due 8/15/2000. . . . . . . . 3,486,805 3,485,930
A A2 4,000,000 6.30% due 1/15/2006. . . . . . . . 3,982,400 3,695,744
A A2 3,500,000 6.75% due 1/01/2016. . . . . . . . 3,500,000 3,149,020
A A2 4,355,000 Equitable Life Assurance Society,
6.95% due 12/01/2005. . . . . . . . 4,110,249 4,181,366
AAA Aaa 3,000,000 General Electric Capital Corp.,
14.00% due 7/01/1996. . . . . . . . 3,405,570 3,000,000
A Baa1 10,000,000 Lehman Brothers Holdings, Inc.,
7.375% due 8/15/1997. . . . . . . . 9,987,000 10,076,300
PaineWebber Group, Inc.:
BBB+ Baa1 3,000,000 9.25% due 12/15/2001. . . . . . . . 3,501,570 3,258,210
BBB+ Baa1 2,000,000 8.875% due 3/15/2005. . . . . . . . 2,012,540 2,150,840
Smith Barney Holdings, Inc.:
A- A3 2,000,000 5.875% due 2/01/2001. . . . . . . . 1,993,680 1,916,960
A- A3 6,000,000 6.50% due 10/15/2002. . . . . . . . 5,972,240 5,779,260
Travelers Corp. (The):
A+ A1 1,000,000 9.50% due 3/01/2002. . . . . . . . 1,084,200 1,114,480
A+ A1 4,000,000 7.875% due 5/15/2025. . . . . . . . - 3,997,680 --- 4,002,960
---------- -----------
56,970,434 55,764,670
- -------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--CONSUMER Anheuser-Busch Cos., Inc.:
GOODS--8.0% AA- A1 2,500,000 8.75% due 12/01/1999. . . . . . . . 2,839,090 2,653,150
AA- A1 5,000,000 7.375% due 7/01/2023. . . . . . . . 5,127,300 4,785,850
Dillard Department Stores, Inc.:
A+ A2 5,000,000 7.375% due 6/15/1999. . . . . . . . 5,305,840 5,060,750
A+ A2 3,000,000 9.125% due 8/01/2011. . . . . . . . 3,240,150 3,415,590
AAA Aaa 3,000,000 Johnson & Johnson Co.,
8.72% due 11/01/2024. . . . . . . . 3,000,000 3,249,090
AA Aa2 2,000,000 Kimberly-Clark Corporation,
7.875% due 2/01/2023. . . . . . . . 2,033,960 2,008,480
A A2 2,000,000 May Department Stores Company (The),
10.625% due 11/01/2010. . . . . . . 2,419,800 2,493,860
A A1 1,000,000 PepsiCo., Inc., 6.125% due 1/15/1998 993,060 995,410
A A2 4,000,000 Philip Morris Companies, Inc.,
9.00% due 1/01/2001. . . . . . . . . 4,071,540 4,297,800
AA Aa2 7,000,000 Wal-Mart Stores, Inc., 8.50% due
9/15/2024. . . . . . . . . . . . . 7,036,810 7,381,290
A A1 2,000,000 Disney Enterprises Inc., 6.375% due
3/30/2001+. . . . . . . . . . . . . 2,000,000 1,964,320
---------- -----------
38,067,550 38,305,590
- -------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--ENERGY-- Texaco Capital Inc.:
0.8% A+ A1 1,500,000 9.00% due 12/15/1999. . . . . . . . 1,731,670 1,605,450
A+ A1 1,000,000 8.875% due 2/15/2021. . . . . . . . 999,860 1,159,940
A+ A1 1,000,000 8.625% due 11/15/2031 1,045,390 1,122,740
----------- --------------
3,776,920 3,888,130
- -------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--OTHER--9.3% AA- Aa2 2,000,000 Archer-Daniels-Midland Co.,
8.125% due 6/01/2012. . . . . . . . 2,125,020 2,126,880
A A3 4,000,000 Carnival Cruise Lines, Inc.,
7.70% due 7/15/2004. . . . . . . . . 4,208,480 4,019,280
A- A3 5,000,000 Columbia/HCA Healthcare Corp., 6.41%
due 6/15/2000. . . . . . . . . . . 4,997,000 4,895,600
AA- Aa3 2,950,000 du Pont (E.I.) de Nemours & Co.,
8.25% due 1/15/2022. . . . . . . . . 3,066,304 3,022,776
A A1 7,000,000++ Electronic Data Systems Corp.,
6.85% due 5/15/2000. . . . . . . . . 6,994,470 7,021,637
BBB+ A3 4,000,000 Harris Corp., 7.00% due 1/15/2026. . 3,980,120 3,613,000
AA Aa3 5,890,000 Kaiser Foundation Hospital,
9.55% due 7/15/2005. . . . . . . . . 6,625,366 6,725,791
Lockheed Martin Corp.:
BBB+ A3 7,000,000 6.625% due 6/15/1998. . . . . . . . 6,999,090 7,025,130
BBB+ A3 2,500,000 6.55% due 5/15/1999 2,498,800 2,494,150
BBB+ A3 3,500,000 Martin Marietta Corp.,
7.375% due 4/15/2013. . . . . . . . 3,365,635 3,433,220
----------- --------------
44,860,285 44,377,464
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
74
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--PRIME BOND FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
S&P MOODY'S FACE VALUE
INDUSTRY RATINGS RATINGS AMOUNT CORPORATE BONDS & NOTES COST (NOTE 1A)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SUPRANATIONAL--1.8% Asian Development Bank:
AAA Aaa $1,000,000 10.75% due 6/01/1997. . . . . . . . $ 1,084,890 $ 1,040,040
AAA Aaa 1,000,000 6.125% due 3/09/2004 990,580 953,910
Inter-American Development Bank Co.:
AAA Aaa 2,000,000 8.875% due 6/01/2009. . . . . . . . 2,481,700 2,292,960
AAA Aaa 4,000,000 8.50% due 3/15/2011. . . . . . . . . 4,910,200 4,481,840
---------- -----------
9,467,370 8,768,750
- --------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION AA A1 9,500,000 Boeing Co., 6.35% due
SERVICES--3.8% 6/15/2003. . . . . . . . . . . . . . 8,549,905 9,156,765
Southwest Airlines, Inc.:
A- Baa1 3,500,000 9.40% due 7/01/2001. . . . . . . . . 4,021,990 3,790,220
A- Baa1 4,000,000 8.00% due 3/01/2005 3,980,450 4,125,600
A- Baa1 1,000,000 7.875% due 9/01/2007. . . . . . . . 992,600 1,011,610
----------- --------------
17,544,945 18,084,195
- --------------------------------------------------------------------------------------------------------------------------------
UTILITIES-- GTE Corp.:
COMMUNICATIONS--1.1% BBB+ Baa1 1,000,000 8.85% due 3/01/1998. . . . . . . . . 1,143,360 1,036,770
BBB+ Baa1 1,000,000 9.10% due 6/01/2003 1,221,680 1,104,870
BBB+ A3 2,000,000 10.30% due 11/15/2017. . . . . . . . 2,187,020 2,191,000
AA A1 1,000,000 Southwestern Bell Telecommunications
Corp., 6.125% due 3/01/2000. . . . 1,005,000 981,210
----------- --------------
5,557,060 5,313,850
- --------------------------------------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC--4.2% AA- Aa2 7,000,000 Duke Power Co., 8.00% due
11/01/1999. . . . . . . . . . . . . 6,966,520 7,273,490
A+ A1 3,000,000 Georgia Power Co., 6.125% due
9/01/1999. . . . . . . . . . . . . . 2,892,720 2,950,080
AA- A1 2,000,000 Northern States Power Company, 7.125%
due 7/01/2025. . . . . . . . . . . 2,122,360 1,909,078
A A2 7,500,000 Virginia Electric & Power Co.,
8.625% due 10/01/2024. . . . . . . . 7,416,540 8,007,195
----------- --------------
19,398,140 20,139,843
- --------------------------------------------------------------------------------------------------------------------------------
UTILITIES--GAS--1.5% AA- A1 7,000,000 Consolidated Natural Gas Co.,
8.75% due 6/01/1999. . . . . . . . . 7,448,861 7,353,080
- --------------------------------------------------------------------------------------------------------------------------------
YANKEE CORPORATES-- 8.3% AA- Aa2 3,500,000 ABN AMRO Bank,
7.25% due 6/28/2006 (1). . . . . . . 3,499,510 3,557,330
AA- Aa3 2,000,000 BP America Inc., 9.375% due
11/01/2000. . . . . . . . . . . . . 2,204,960 2,188,960
A+ A1 2,500,000 Bass America, Inc., 8.125% due
3/31/2002. . . . . . . . . . . . . . 2,668,930 2,633,750
A+ A2 6,500,000 CRA Finance Ltd.,
6.50% due 12/01/2003 (3). . . . . . 6,509,920 6,161,610
A A3 2,000,000 China Light & Power Co., Ltd., 7.50%
due 4/15/2006 (5). . . . . . . . . 1,987,260 1,970,220
A+ A1 2,000,000 Ford Capital, B.V., 9.50%
due 6/01/2010. . . . . . . . . . . . 2,217,880 2,300,080
Grand Metropolitan Investment Corp.:
A+ A2 5,500,000 6.50% due 9/15/1999. . . . . . . . . 5,615,810 5,450,005
A+ A2 1,000,000 8.625% due 8/15/2001 . . . . . . . . 1,049,910 1,075,210
A A1 3,000,000 Midland Bank PLC, 7.625% due
6/15/2006 (1). . . . . . . . . . . 2,977,020 3,039,420
A+ A1 1,000,000 ++Petronas Corp., 6.875% due
7/01/2003 (4). . . . . . . . . . . . 986,480 984,800
Philips Electronics N.V.,
BBB+ A3 3,000,000 7.75% due 5/15/2025. . . . . . . . . 2,989,830 2,960,520
BBB+ A3 3,000,000 7.20% due 6/01/2026 (4) 2,993,220 2,981,280
A+ A2 4,500,000 Pohang Iron & Steel Co., Ltd.,
7.375% due 5/15/2005 (3). . . . . . 4,581,720 4,421,340
--------- ----------
40,282,450 39,724,525
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
75
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--PRIME BOND FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONCLUDED)
<TABLE>
<CAPTION>
S&P MOODY'S FACE VALUE
INDUSTRY RATINGS RATINGS AMOUNT CORPORATE BONDS & NOTES COST (NOTE 1A)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
YANKEE SOVEREIGN--7.4% AA- A1 $ 2,000,000 Export-Import Bank Korea,
6.375% due 2/15/2006 (2). . . . . . . $ 1,988,920 $ 1,855,860
AAA Aaa 2,000,000 Export-Import Bank of Japan,
8.35% due 12/01/1999 (1). . . . . . . 2,113,320 2,102,700
AA- A1 2,000,000 Korea Development Bank,
7.25% due 5/15/2006 (2). . . . . . . . 1,957,240 1,957,240
Metropolis of Tokyo (Japan) (2):
AAA Aaa 3,000,000 8.70% due 10/05/1999. . . . . . . . . 3,469,410 3,173,580
AAA Aaa 250,000 9.25% due 11/08/2000 268,428 273,182
BBB A3 4,000,000 People's Republic of China,
7.375% due 7/03/2001 (2). . . . . . . 3,982,600 3,982,600
AA- Aa3 6,000,000 Province of Ontario (Canada),
7.75% due 6/04/2002 (2). . . . . . . . 5,854,440 6,261,240
Province of Quebec (Canada) (2):
A+ A2 3,500,000 8.80% due 4/15/2003. . . . . . . . . . 3,944,780 3,819,550
A+ A2 6,500,000 7.125% due 2/09/2024 5,283,240 5,939,505
AA A1 7,000,000 Republic of Italy, 6.875% due
9/27/2023 (2). . . . . . . . . . . . . 6,487,690 6,312,040
------------ ------------
35,350,068 35,677,497
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS & NOTES-- 80.1% 386,974,099 384,244,753
- -----------------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY OBLIGATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT AGENCY AAA Aaa 7,000,000 Federal National Mortgage Association,
OBLIGATIONS--1.5% 7.85% due 9/10/2004. . . . . . . . . 6,925,569 7,102,830
- -----------------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT US Treasury Notes & Bonds:
OBLIGATIONS--8.5% AAA Aaa 2,500,000 5.875% due 6/30/2000. . . . . . . . . 2,502,025 2,451,550
AAA Aaa 2,500,000 8.75% due 8/15/2000. . . . . . . . . 2,976,172 2,707,425
AAA Aaa 8,500,000 6.25% due 2/15/2003. . . . . . . . . 8,383,125 8,349,890
AAA Aaa 11,000,000 6.50% due 5/15/2005. . . . . . . . . 10,668,276 10,855,570
AAA Aaa 1,000,000 5.875% due 11/15/2005. . . . . . . . 1,026,250 942,030
AAA Aaa 5,000,000 6.875% due 5/15/2006. . . . . . . . . 5,084,844 5,055,450
AAA Aaa 5,000,000 8.875% due 8/15/2017. . . . . . . . . 5,651,562 6,003,100
AAA Aaa 4,500,000 6.875% due 8/15/2025. . . . . . . . . 4,327,734 4,454,280
------------ -----------------
40,619,988 40,819,295
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY
OBLIGATIONS--10.0% 47,545,557 47,922,125
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
- -----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER**-- 20,000,000 American Express Credit Corp.,
4.1% 5.32% due 7/02/1996. . . . . . . . . . 19,988,178 19,988,178
- -----------------------------------------------------------------------------------------------------------------------------------
REPURCHASE 23,990,000 UBS Securities Funding, Inc.,
AGREEMENTS***--5.0% purchased on 6/28/1996 to yield 5.45%
to 7/01/1996. . . . . . . . . . . . . 23,990,000 23,990,000
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES--9.1% 43,978,178 43,978,178
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--99.2%. . . . . . . . . . . . . $478,497,834 476,145,056
------------
OTHER ASSETS LESS LIABILITIES--0.8%. . . . . . . . ------------ 3,690,456
-----------------
NET ASSETS--100.0%. . . . . . . . . . . . . . . . $ 479,835,512
-----------------
-----------------
- -----------------------------------------------------------------------------------------------------------------------------------
*Corresponding industry groups for foreign securities, which are denominated in US dollars.
(1) Financial Institution
(2) Government Entity
(3) Industrial Mining and Metals
(4) Industrial
(5) Utility
**Commercial Paper is traded on a discount basis. The interest rate shown is the discount rate paid at the time of purchase by the
Fund.
***Repurchase Agreements are fully collateralized by US Government and Agency Obligations.
+Formerly The Walt Disney Co.
++ Subject to principal paydowns.
++ Restricted securities as to resale. The value of the Fund's investment in restricted securities was approximately $8,006,000,
representing 1.7% of net assets.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ISSUE ACQUISITION VALUE
DATE COST (NOTE 1A)
- -----------------------------------------------------------------------------------------------
Electronic Data Systems Corp., 6.85% due 5/15/2000 5/26/1995 $6,994,470 $ 7,021,637
Petronas Corp., 6.875% due 7/01/2003. . . . . . . 8/10/1995 986,480 984,800
TOTAL $ 7,980,950 $ 8,006,437
------------ -------------
- ---------------------------------------------------- ------------ -------------
-------------------------------------------
</TABLE>
See Notes to Financial Statements.
76
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--QUALITY EQUITY FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
HELD (NOTE 1A) NET ASSETS
INDUSTRY STOCKS & WARRANTS COST
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AEROSPACE 144,000 Boeing Co.. . . . . . . . . . . . . . . $ 9,445,506 $12,546,000 1.8%
133,700 Northrop Grumman Corp.. . . . . . . . . 8,747,485 9,108,313 1.3
140,000 United Technologies Corp.. . . . . . . 11,440,124 16,100,000 2.3
------------- ------------- -----
29,633,115 37,754,313 5.4
- -------------------------------------------------------------------------------------------------------------------------
AIR TRANSPORT 153,500 Delta Air Lines, Inc.. . . . . . . . . 12,235,109 12,740,500 1.8
- -------------------------------------------------------------------------------------------------------------------------
AUTO-RELATED 245,000 +AutoZone, Inc.. . . . . . . . . . . . . 8,575,000 8,513,750 1.2
- -------------------------------------------------------------------------------------------------------------------------
AUTO & TRUCK 230,000 Ford Motor Co.. . . . . . . . . . . . . 7,271,359 7,446,250 1.1
- -------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE 150,000 General Motors Corp.. . . . . . . . . . 8,457,323 7,856,250 1.1
- -------------------------------------------------------------------------------------------------------------------------
BANKING 225,000 Bank of New York Co., Inc.. . . . . . . 8,620,202 11,531,250 1.7
60,000 Bank of New York Co., Inc.
(Warrants) (c). . . . . . . . . . . . . 433,750 2,445,000 0.4
110,000 Citicorp. . . . . . . . . . . . . . . . 8,023,517 9,088,750 1.3
------------- ------------- -----
17,077,469 23,065,000 3.4
- -------------------------------------------------------------------------------------------------------------------------
BEVERAGES 122,000 Coca-Cola Co.. . . . . . . . . . . . . 5,689,093 5,962,750 0.9
- -------------------------------------------------------------------------------------------------------------------------
CHEMICALS 240,000 PPG Industries Inc.. . . . . . . . . . 11,911,956 11,700,000 1.7
- -------------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES 195,000 +cisco Systems, Inc.. . . . . . . . . . 9,293,567 11,041,875 1.6
255,000 Electronic Data Systems Corp.. . . . . 11,193,379 13,706,250 2.0
122,000 International Business Machines Corp. 13,326,888 12,078,000 1.7
70,200 Sun Microsystems, Inc.. . . . . . . . . 4,426,113 4,124,250 0.6
------------- ------------- -----
38,239,947 40,950,375 5.9
- -------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 149,000 General Electric Co.. . . . . . . . . . 11,590,357 12,888,500 1.8
- -------------------------------------------------------------------------------------------------------------------------
ELECTRONICS 165,000 Intel Corp.. . . . . . . . . . . . . . 10,644,282 12,106,875 1.7
250,000 +Lexmark International Group, Inc. (Class
A). . . . . . . . . . . . . . . . . . 5,314,517 5,031,250 0.7
------------- ------------- -----
15,958,799 17,138,125 2.4
- -------------------------------------------------------------------------------------------------------------------------
ELECTRONICS/INSTRUMENTS 387,500 Corning Inc.. . . . . . . . . . . . . . 11,485,244 14,870,313 2.1
- -------------------------------------------------------------------------------------------------------------------------
ENGINEERING & CONSTRUCTION 319,000 Foster Wheeler Corporation.. . . . . . 14,138,907 14,315,125 2.0
- -------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 201,000 +Viacom, Inc. (Class B). . . . . . . . . 8,361,664 7,813,875 1.1
- -------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL CONTROL 745,200 Wheelabrator Technologies, Inc.. . . . 13,173,393 11,364,300 1.6
- -------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 307,000 American Express Company. . . . . . . . 14,499,680 13,699,875 2.0
9,000 +Associates First Capital Corp.. . . . . 261,000 338,625 0.0
151,400 First Data Corp.. . . . . . . . . . . . 10,714,914 12,055,225 1.7
------------- ------------- -----
25,475,594 26,093,725 3.7
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN--ARGENTINA 328,900 Yacimientos Petroliferos Fiscales S.A.
(ADR) (a) (1). . . . . . . . . . . . . 6,959,706 7,400,250 1.1
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN--CANADA 300,000 Canadian Pacific, Ltd. (8). . . . . . . 6,137,243 6,600,000 0.9
148,400 Magna International, Inc. (Class A) (9) 6,577,918 6,826,400 1.0
24,500 Northern Telecom Limited (3). . . . . . 1,330,840 1,332,187 0.2
126,700 Potash Corp. of Saskatchewan Inc. (10) 8,971,328 8,393,875 1.2
---------- ---------- -----
23,017,329 23,152,462 3.3
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN--GERMANY 19,600 SGL Carbon AG (ADR) (a) (5). . . . . . 665,028 749,700 0.1
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN--KOREA 175,700 +Hyundai Engineering & Construction Co.,
Ltd. (GDR) (b) (7) ++. . . . . . . . . 2,289,371 2,196,250 0.3
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN--MEXICO 215,000 Panamerican Beverages, Inc. (Class A)
(6). . . . . . . . . . . . . . . . . . 8,458,209 9,621,250 1.4
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN--NETHERLANDS 42,000 Royal Dutch Petroleum Co., N.V. (ADR)
(a) (1). . . . . . . . . . . . . . . . 5,685,274 6,457,500 0.9
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN--SWITZERLAND 160,000 Sandoz AG (ADR) (a) (2). . . . . . . . 6,973,917 9,120,000 1.3
- -------------------------------------------------------------------------------------------------------------------------
HARDWARE PRODUCTS 308,000 Stanley Works Co. (The). . . . . . . . 7,801,432 9,163,000 1.3
- -------------------------------------------------------------------------------------------------------------------------
HEALTHCARE 378,400 +Humana Inc.. . . . . . . . . . . . . . 7,984,329 6,763,900 1.0
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
77
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--QUALITY EQUITY FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
HELD (NOTE 1A) NET ASSETS
INDUSTRY STOCKS & WARRANTS COST
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HOSPITAL SUPPLIES 375,000 Abbott Laboratories. . . . . . . . . $ 15,336,682 $ 16,312,500 2.3%
248,000 Baxter International, Inc.. . . . . . 11,634,167 11,718,000 1.7
-------------- ----------- -----
26,970,849 28,030,500 4.0
- ----------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS 189,000 Procter & Gamble Co.. . . . . . . . . 15,958,444 17,128,125 2.5
- ----------------------------------------------------------------------------------------------------------------------
INSURANCE 180,000 Aetna Life & Casualty Co.. . . . . . 11,176,900 12,870,000 1.8
- ----------------------------------------------------------------------------------------------------------------------
MACHINERY 186,000 +American Standard Companies, Inc.. . 6,069,797 6,138,000 0.9
- ----------------------------------------------------------------------------------------------------------------------
MACHINERY & MACHINE TOOLS 324,500 Cincinnati Milacron, Inc.. . . . . . 7,998,022 7,788,000 1.1
- ----------------------------------------------------------------------------------------------------------------------
MANUFACTURING 200,000 Fisher Scientific International, Inc. 6,606,669 7,500,000 1.1
- ----------------------------------------------------------------------------------------------------------------------
NATURAL GAS 330,000 Enron Corp.. . . . . . . . . . . . . 12,657,402 13,488,750 1.9
- ----------------------------------------------------------------------------------------------------------------------
OIL SERVICE 350,000 Dresser Industries, Inc.. . . . . . . 8,202,968 10,325,000 1.5
78,000 Schlumberger Ltd.. . . . . . . . . . 6,580,141 6,571,500 0.9
-------------- ----------- -----
14,783,109 16,896,500 2.4
- ----------------------------------------------------------------------------------------------------------------------
PETROLEUM 261,600 Pennzoil Co.. . . . . . . . . . . . . 10,752,129 12,099,000 1.7
84,100 Unocal Corporation. . . . . . . . . . 2,816,299 2,838,375 0.4
-------------- ----------- -----
13,568,428 14,937,375 2.1
- ----------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 195,000 Merck & Co., Inc.. . . . . . . . . . 11,792,491 12,601,875 1.8
- ----------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY 172,700 Eastman Kodak Co.. . . . . . . . . . 10,946,175 13,427,425 1.9
- ----------------------------------------------------------------------------------------------------------------------
PUBLISHING 260,000 Deere & Co.. . . . . . . . . . . . . 10,655,913 10,400,000 1.5
- ----------------------------------------------------------------------------------------------------------------------
RAILROADS 236,000 Conrail, Inc.. . . . . . . . . . . . 16,575,695 15,664,500 2.2
- ----------------------------------------------------------------------------------------------------------------------
RETAIL 290,000 Allstate Corp.. . . . . . . . . . . . 9,515,583 13,231,250 1.9
408,000 Limited, Inc. (The). . . . . . . . . 9,097,176 8,772,000 1.3
260,000 Sears, Roebuck & Co.. . . . . . . . . 10,339,207 12,642,500 1.8
-------------- ----------- -----
28,951,966 34,645,750 5.0
- ----------------------------------------------------------------------------------------------------------------------
SOFTWARE--COMPUTER 91,000 +Microsoft Corp.. . . . . . . . . . . 10,310,372 10,920,000 1.6
297,750 Oracle Corp.. . . . . . . . . . . . . 9,759,633 11,723,906 1.7
-------------- ----------- -----
20,070,005 22,643,906 3.3
- ----------------------------------------------------------------------------------------------------------------------
STEEL 220,500 AK Steel Holding Corp.. . . . . . . . 9,211,204 8,627,063 1.2
- ----------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS 212,000 AT&T Corp.. . . . . . . . . . . . . . 13,617,709 13,144,000 1.9
220,000 Bell Atlantic Corporation. . . . . . 13,554,148 14,025,000 2.0
123,900 Lucent Technologies, Inc.. . . . . . 3,853,758 4,692,712 0.7
-------------- ----------- -----
31,025,615 31,861,712 4.6
- ----------------------------------------------------------------------------------------------------------------------
TOBACCO 109,000 Philip Morris Companies, Inc.. . . . 10,501,259 11,336,000 1.6
- ----------------------------------------------------------------------------------------------------------------------
TRAVEL & LODGING 358,000 Carnival Corp. (Class A). . . . . . . 10,533,687 10,337,250 1.5
- ----------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS & WARRANTS 585,162,554 631,420,194 90.3
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
78
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--QUALITY EQUITY FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONCLUDED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FACE VALUE PERCENT OF
AMOUNT SHORT-TERM SECURITIES COST (NOTE 1A) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER* $ 5,989,000 CSW Credit, Inc.,
5.40% due 8/08/1996. . . . . . . . . $ 5,952,168 $ 5,952,168 0.9%
15,000,000 Dean Witter, Discover & Co.,
5.28% due 7/02/1996. . . . . . . . . 14,991,200 14,991,200 2.1
15,000,000 Preferred Receivables Funding Corp.,
5.32% due 7/01/1996. . . . . . . . 14,993,350 14,993,350 2.1
20,000,000 Xerox Credit Corp., 5.29% due
7/08/1996. . . . . . . . . . . . . 19,970,611 19,970,611 2.9
- --------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES 55,907,329 55,907,329 8.0
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS. . . . . . . . . . . . . . . . $641,069,883 687,327,523 98.3
--------------
--------------
OTHER ASSETS LESS LIABILITIES. . . . . . . . . . 12,144,047 1.7
----------- ------
NET ASSETS. . . . . . . . . . . . . . . . . . . . $699,471,570 100.0%
-------------- ------
-------------- ------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) American Depositary Receipts (ADR).
(b) Global Depositary Receipts (GDR).
(c) 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.
* Commercial Paper is traded on a discount basis; the interest rates shown are
the discount rates paid at the time of purchase by the Fund.
+ Non-income producing security.
++Restricted security as to resale. The value of the Fund's investment in
restricted securities was approximately $2,196,000, representing 0.3% of net
assets.
<TABLE>
<CAPTION>
ACQUISITION VALUE
ISSUE DATE COST (NOTE 1A)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hyundai Engineering & Construction Co., Ltd. (GDR) 3/19/1996 $2,289,371 $2,196,250
- --------------------------------------------------------------------------------------------
TOTAL $2,289,371 $2,196,250
------------ ----------
------------ ----------
- --------------------------------------------------------------------------------------------
</TABLE>
Corresponding industry groups for foreign securities:
<TABLE>
<CAPTION>
<S> <C>
(1) Petroleum
(2) Pharmaceuticals
(3) Telecommunications
(4) Appliances
(5) Chemicals
(6) Beverages
(7) Engineering & Construction
(8) Natural Resources
(9) Automobile Parts--Original Equipment
(10) Natural Gas Pipelines
</TABLE>
See Notes to Financial Statements.
79
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--RESERVE ASSETS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE
AMOUNT ISSUE RATE* DATE (NOTE 1A)
<S> <C> <C> <C> <C> <C>
COMMERCIAL $1,042,000 Allomon Funding Corp.. . . . . . . . . . . . . . . 5.38 % 7/16/96 $ 1,039,197
PAPER--43.9%
1,000,000 American Brands, Inc.. . . . . . . . . . . . . . . 5.30 7/23/96 996,299
900,000 American Express Credit Corp.. . . . . . . . . . . 4.88 8/09/96 894,414
249,000 Bass Finance (C.I.) Ltd.. . . . . . . . . . . . . 5.375 7/02/96 248,851
500,000 CSW Credit, Inc.. . . . . . . . . . . . . . . . . 5.38 8/02/96 497,385
500,000 Eureka Securitization Inc.. . . . . . . . . . . . 5.30 7/18/96 498,528
500,000 Eureka Securitization Inc.. . . . . . . . . . . . 5.30 8/19/96 496,114
500,000 General Electric Capital Corp.. . . . . . . . . . 5.50 3/03/97 480,642
600,000 General Motors Acceptance Corp.. . . . . . . . . . 5.35 7/30/96 597,157
664,000 International Securitization Corp.. . . . . . . . 5.30 7/01/96 663,707
301,000 Koch Industries, Inc.. . . . . . . . . . . . . . . 5.55 7/01/96 300,861
1,000,000 Korea Development Bank. . . . . . . . . . . . . . 5.30 8/28/96 990,850
327,000 National Fleet Funding Corp.. . . . . . . . . . . 5.42 7/30/96 325,424
300,000 National Rural Utilities Cooperative Finance Corp. 5.36 7/11/96 299,419
1,000,000 New Center Asset Trust. . . . . . . . . . . . . . 5.36 7/11/96 998,064
1,000,000 Riverwoods Funding Corp.. . . . . . . . . . . . . 5.30 8/16/96 992,677
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (COST--$10,320,811) 10,319,589
- --------------------------------------------------------------------------------------------------------------------------------
CORPORATE NOTES--10.6% 1,000,000 Beta Finance Inc.+. . . . . . . . . . . . . . . . 5.38 9/16/96 1,000,000
500,000 Morgan (J.P.) & Company, Inc.+. . . . . . . . . . 5.47 7/17/96 499,982
1,000,000 Short Term Card Account Trust (1995-1)+. . . . . . 5.506 1/15/97 1,000,000
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE NOTES (COST--$2,499,927) 2,499,982
- --------------------------------------------------------------------------------------------------------------------------------
FUNDING AGREEMENTS-- 1,000,000 Jackson National Life Insurance Co.+. . . . . . . 5.47 4/08/97 1,000,000
4.3%
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL FUNDING AGREEMENTS (COST--$1,000,000) 1,000,000
- --------------------------------------------------------------------------------------------------------------------------------
MASTER NOTES--4.3% 1,000,000 Goldman Sachs Group L.P.+. . . . . . . . . . . . . 5.46 11/08/96 1,000,000
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL MASTER NOTES (COST--$1,000,000) 1,000,000
- --------------------------------------------------------------------------------------------------------------------------------
MEDIUM-TERM 250,000 General Electric Capital Corp.. . . . . . . . . . 7.625 7/30/96 250,433
NOTES--1.1%
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL MEDIUM-TERM NOTES (COST--$250,372) 250,433
- --------------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT, AGENCY 90,000 Federal Farm Credit Bank. . . . . . . . . . . . . 5.50 2/13/97 86,883
& INSTRUMENTALITY
OBLIGATIONS-- 410,000 Federal Home Loan Bank.. . . . . . . . . . . . . . 5.36 11/07/96 401,942
DISCOUNT--8.3%
205,000 Federal National Mortgage Association. . . . . . . 5.33 8/08/96 203,763
105,000 Federal National Mortgage Association. . . . . . . 5.25 9/13/96 103,801
450,000 Federal National Mortgage Association. . . . . . . 5.33 10/04/96 443,459
135,000 Federal National Mortgage Association. . . . . . . 5.47 12/06/96 131,752
100,000 Federal National Mortgage Association. . . . . . . 5.48 12/06/96 97,594
400,000 Federal National Mortgage Association. . . . . . . 5.48 12/17/96 389,718
105,000 Federal National Mortgage Association. . . . . . . 6.12 4/15/98 104,612
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT, AGENCY & INSTRUMENTALITY
OBLIGATIONS--DISCOUNT (COST--$1,963,244) 1,963,524
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
80
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--RESERVE ASSETS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONCLUDED)
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE
AMOUNT ISSUE RATE* DATE (NOTE 1A)
<S> <C> <C> <C> <C> <C>
US GOVERNMENT, AGENCY & $ 150,000 Federal Farm Credit Bank+. . . . . . . . . . . 5.61 % 8/19/96 $ 149,987
INSTRUMENTALITY
OBLIGATIONS-- 1,000,000 Federal National Mortgage Association+. . . . 5.85 2/14/97 1,002,657
NON-DISCOUNT--27.5%
1,000,000 Federal National Mortgage Association+. . . . 5.70 5/19/97 1,000,000
500,000 Federal National Mortgage Association+. . . . 5.3337 5/22/97 499,695
1,000,000 Federal National Mortgage Association+. . . . 5.3425 10/11/96 1,000,000
1,000,000 Federal National Mortgage Association+. . . . 5.75 5/14/98 1,000,000
300,000 Student Loan Marketing Association+. . . . . . 5.37 10/04/96 300,000
365,000 Student Loan Marketing Association+. . . . . . 5.64 1/23/97 365,181
200,000 US Treasury Notes. . . . . . . . . . . . . . . 6.125 5/31/97 200,500
200,000 US Treasury Notes. . . . . . . . . . . . . . . 6.00 8/31/97 200,000
400,000 US Treasury Notes. . . . . . . . . . . . . . . 5.625 10/31/97 398,000
200,000 US Treasury Notes. . . . . . . . . . . . . . . 5.375 11/30/97 198,250
150,000 US Treasury Notes. . . . . . . . . . . . . . . 5.25 12/31/97 148,219
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT AGENCY & INSTRUMENTALITY
OBLIGATIONS--NON-DISCOUNT (COST--$6,469,981) 6,462,489
TOTAL INVESTMENTS (COST--$23,504,335)--100.0%. 23,496,017
OTHER ASSETS LESS LIABILITIES--0.0%. . . . . . 7,116
---------------
NET ASSETS--100.0%. . . . . . . . . . . . . . $ 23,503,133
---------------
---------------
- -----------------------------------------------------------------------------------------------------------------------------------
*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 rates 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, 1996.
+Variable Rate Notes.
</TABLE>
See Notes to Financial Statements.
81
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (IN US DOLLARS)
<TABLE>
<CAPTION>
VALUE PERCENT OF
LATIN AMERICA INDUSTRY FACE AMOUNT FIXED-INCOME INVESTMENTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
ARGENTINA COMMUNICATIONS US$ 500,000 Telefonica de Argentina, S.A.,
11.875% due 11/01/2004. . . $ 490,040 $ 536,250 0.6%
---------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT Republic of Argentina:
OBLIGATIONS 500,000 8.375% due 12/20/2003. . . . 458,125 435,000 0.5
495,000 6.312% due 3/31/2005. . . . 376,200 386,719 0.4
-- -------- -- -------- ----
834,325 821,719 0.9
---------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME INVESTMENTS
IN ARGENTINA 1,324,365 1,357,969 1.5
- -----------------------------------------------------------------------------------------------------------------------------
BRAZIL FOREIGN GOVERNMENT 541,217 Republic of Brazil, 8.00% due
OBLIGATIONS 4/15/2014. . . . . . . . . 351,015 332,849 0.4
---------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME
INVESTMENTS IN BRAZIL 351,015 332,849 0.4
- -----------------------------------------------------------------------------------------------------------------------------
MEXICO FINANCIAL SERVICES 500,000+ Bancomex Huites Trust
Division, 11.25% due 5/30/2006 495,885 495,000 0.6
---------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT 500,000 United Mexican States, Brady
OBLIGATIONS Par Bonds, 6.25% due
12/31/2019. . . . . . . . . 343,750 323,125 0.4
500,000 United Mexican States,
Government Bond, 9.75% due
2/06/2001. . . . . . . . . 503,750 498,125 0.6
500,000 United Mexican States, Value
Recovery Rights (a). . . . 0 0 0.0
-- -------- -- -------- ----
847,500 821,250 1.0
---------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME INVESTMENTS
IN MEXICO 1,343,385 1,316,250 1.6
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
LATIN AMERICAN SECURITIES 3,018,765 3,007,068 3.5
- -----------------------------------------------------------------------------------------------------------------------------
NORTH AMERICA
- -----------------------------------------------------------------------------------------------------------------------------
UNITED STATES AIRLINES 500,000 USAir Inc., 10.375% due
3/01/2013. . . . . . . . . 504,688 500,625 0.6
500,000 United Air Lines, Inc.,
10.02% due 3/22/2014. . . . 506,250 566,865 0.7
100,000 United Air Pass Through 10.125%
due 3/22/2015. . . . . . . 109,036 115,099 0.1
-- -------- -- -------- ----
1,119,974 1,182,589 1.4
---------------------------------------------------------------------------------------------------------------
BROADCASTING & 500,000 Hollinger International, Inc.,
PUBLISHING 9.25% due 2/01/2006. . . . 478,125 457,500 0.5
1,000,000 Sinclair Broadcast Group Inc.,
10.00% due 9/30/2005. . . . 993,750 970,000 1.1
-- -------- -- -------- ----
1,471,875 1,427,500 1.6
---------------------------------------------------------------------------------------------------------------
BROADCASTING/CABLE 1,011,242 American Telecasting Inc.,
12.59%* due 6/15/2004. . . 684,220 717,982 0.8
1,000,000 Videotron Holdings PLC, 11.05%*
due 7/01/2004. . . . . . . 690,493 735,000 0.9
-- -------- -- -------- ----
1,374,713 1,452,982 1.7
---------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS 500,000 Pacific Lumber Co.,
10.50% due 3/01/2003. . . . 492,000 485,000 0.6
---------------------------------------------------------------------------------------------------------------
CHEMICALS G-I Holdings, Inc.:
558,000 11.38%* due 10/01/1998. . . 423,271 447,795 0.5
530,000 +10.00% due 2/15/2006. . . . 548,550 522,050 0.6
-- -------- -- -------- ----
971,821 969,845 1.1
---------------------------------------------------------------------------------------------------------------
</TABLE>
82
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
NORTH AMERICA VALUE PERCENT OF
(CONTINUED) INDUSTRY FACE AMOUNT FIXED-INCOME INVESTMENTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES COMMUNICATIONS US$ 1,375,000 PanAmSat L.P.,
(CONTINUED) 11.35%* due 8/01/2003. . . . . $1,045,766 $1,196,250 1.4%
1,000,000 Rogers Communications, Inc.,
10.875% due 4/15/2004. . . . 1,007,500 1,017,500 1.2
500,000 USA Mobile Communications
Holdings, Inc., 9.50% due
2/01/2004. . . . . . . . . . 454,375 475,000 0.5
-- -------- -- -------- ----
2,507,641 2,688,750 3.1
------------------------------------------------------------------------------------------------------------
CONGLOMERATES Coltec Industries Inc.:
150,000 9.75% due 11/01/1999 159,000 153,000 0.2
600,000 10.25% due 4/01/2002. . . . . 622,000 609,000 0.7
J.B. Poindexter & Co., Inc.,
500,000 12.50% due 5/15/2004. . . . . 500,000 421,250 0.5
Sequa Corp.:
1,000,000 8.75% due 12/15/2001. . . . . 962,500 963,750 1.1
500,000 9.375% due 12/15/2003. . . . . 508,750 480,000 0.6
500,000 Veridian, Inc., 9.75% due
4/01/2003. . . . . . . . . . 503,625 513,750 0.6
-- -------- -- -------- ----
3,255,875 3,140,750 3.7
------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS 638,000 Polymer Group Inc.,
12.25% due 7/15/2002. . . . . 639,250 689,040 0.8
1,000,000 Revlon Consumer Products Corp.,
9.375% due
4/01/2001. . . . . . . . . . 873,299 980,000 1.1
1,000,000 Samsonite Corp.,
11.125% due 7/15/2005. . . . . 963,125 1,015,000 1.2
500,000 Sealy Corp., 9.50% due
5/01/2003. . . . . . . . . . 491,250 485,000 0.6
-- -------- -- -------- ----
2,966,924 3,169,040 3.7
------------------------------------------------------------------------------------------------------------
DIVERSIFIED 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. . . . . 498,125 502,500 0.6
-- -------- -- -------- ----
684,589 690,635 0.8
------------------------------------------------------------------------------------------------------------
ENERGY 2,000,000 Clark R & M Holdings, Inc.,
10.52%* due 2/15/2000. . . 1,338,549 1,372,500 1.6
250,000 Consolidated-Hydro Inc.,
16.05%* due 7/15/2003. . . 197,706 52,500 0.1
500,000 TransTexas Gas Corp., 11.50%
due 6/15/2002. . . . . . . 500,000 497,500 0.6
-- -------- -- -------- ----
2,036,255 1,922,500 2.3
------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 1,000,000 Marvel Holdings, Inc.,
9.125% due 2/15/1998. . . . 909,250 945,000 1.1
350,000++ SPI Holdings, Inc.,
11.50%* due 10/01/2001. . . 303,557 189,000 0.2
-- -------- -- -------- ----
1,212,807 1,134,000 1.3
------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES 500,000 Penn Financial Corp.,
9.25% due 12/15/2003. . . . 498,750 491,250 0.6
500,000 Reliance Group Holdings, Inc.,
9.00% due 11/15/2000. . . . 460,000 495,000 0.6
-- -------- -- -------- ----
958,750 986,250 1.2
------------------------------------------------------------------------------------------------------------
</TABLE>
83
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
NORTH AMERICA VALUE PERCENT OF
(CONTINUED) INDUSTRY FACE AMOUNT FIXED-INCOME INVESTMENTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES FOOD & BEVERAGE US$ 500,000 Chiquita Brands International
(CONTINUED) Corp., 9.125% due
3/01/2004. . . . . . . . . $ 497,500 $ 485,000 0.6%
483,000+ Cumberland Farms,
10.50% due 10/01/2003. . . . 472,736 456,435 0.5
750,000 Del Monte Corp.,
10.00% due 5/01/2003. . . . 740,000 693,750 0.8
500,000 Envirodyne Industries, Inc.,
10.25% due 12/01/2001. . . 509,375 427,500 0.5
250,000 Specialty Foods Corp., 10.25%
due 8/15/2001. . . . . . . 250,000 232,500 0.3
-- -------- -- -------- ----
2,469,611 2,295,185 2.7
--------------------------------------------------------------------------------------------------------
GAMING 1,000,000 Bally's Park Place Funding,
Inc., 9.25% due 3/15/2004. 920,000 1,063,750 1.3
500,000 GNF Corp., 10.625% due
4/01/2003. . . . . . . . . 497,500 543,750 0.6
1,100,000 Greate Bay Properties, Inc.,
10.875% due 1/15/2004. . . 990,750 990,000 1.1
500,000 Harrah's Jazz Company, 14.25%
due 11/15/2001. . . . . . . 482,500 250,000 0.3
750,000 Trump Atlantic City,
11.25% due 5/01/2006. . . . 750,000 753,750 0.9
-- -------- -- -------- ----
3,640,750 3,601,250 4.2
--------------------------------------------------------------------------------------------------------
HOME BUILDING 500,000 Del E. Webb Corp., 9.00% due
2/15/2006. . . . . . . . . 500,000 450,000 0.5
--------------------------------------------------------------------------------------------------------
HOTELS 500,000+ HMC Acquisition Properties,
9.00% due 12/15/2007. . . . 500,000 455,000 0.5
1,000,000 John Q. Hammons Hotel, Inc.,
8.875% due 2/15/2004. . . . 887,500 935,000 1.1
-- -------- -- -------- ----
1,387,500 1,390,000 1.6
--------------------------------------------------------------------------------------------------------
METALS & MINING 500,000 Kaiser Aluminum and Chemical
Corp.,
12.75% due 2/01/2003. . . . 543,750 527,500 0.6
250,000 Maxxam Group, Inc.,
14.04%* due 8/01/2003. . . . 194,917 177,500 0.2
-- -------- -- -------- ----
738,667 705,000 0.8
--------------------------------------------------------------------------------------------------------
PACKAGING 500,000 Anchor Glass Container Co.,
9.875% due 12/15/2008. . . 493,125 225,000 0.3
500,000 Owens-Illinois, Inc.,
11.00% due 12/01/2003. . . . 512,500 537,500 0.6
500,000 Portola Packaging Inc., 10.75%
due 10/01/2005. . . . . . . 500,000 502,500 0.6
-- -------- -- -------- ---- ----
1,505,625 1,265,000 1.5
--------------------------------------------------------------------------------------------------------
PAPER 500,000 Doman Industries Ltd.,
8.75% due 3/15/2004. . . . . 460,000 450,000 0.5
500,000
Fort Howard Corp.,
500,000 9.00% due 2/01/2006. . . . . 485,000 480,000 0.6
500,000 Riverwood International Corp.,
10.875% due 4/01/2008. . . 496,250 492,500 0.6
S.D. Warren Co.,
12.00% due 12/15/2004. . . . 500,000 527,500 0.6
-- -------- -- -------- ----
1,941,250 1,950,000 2.3
--------------------------------------------------------------------------------------------------------
RESTAURANTS 750,000 Flagstar Corp.,
11.375% due 9/15/2003. . . . 762,500 502,500 0.6
250,000 Foodmaker, Inc.,
9.75% due 11/01/2003. . . . 246,563 235,000 0.3
-- -------- -- -------- ----
1,009,063 737,500 0.9
--------------------------------------------------------------------------------------------------------
</TABLE>
84
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
NORTH AMERICA VALUE PERCENT OF
(CONCLUDED) INDUSTRY FACE AMOUNT FIXED-INCOME INVESTMENTS COST (NOTE 1A) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
UNITED STATES SPECIALTY RETAILING US$ 500,000++ Bradlees Inc., 11.00% due
(CONCLUDED) 8/01/2002. . . . . . . . . $ 489,375 $ 65,000 0.1%
------------------------------------------------------------------------------------------------------------
STEEL 500,000 WCI Steel, Inc., 10.50% due
3/01/2002. . . . . . . . . 500,000 507,500 0.6
------------------------------------------------------------------------------------------------------------
TEXTILES 500,000 Tultex Corp., 10.625% due
3/15/2005. . . . . . . . . 500,000 517,500 0.6
1,500,000 WestPoint Stevens, Inc.,
9.375% due 12/15/2005. . . 1,451,875 1,447,500 1.7
--------- --------- ----
1,951,875 1,965,000 2.3
------------------------------------------------------------------------------------------------------------
TRANSPORTATION 250,000 Eletson Holdings Inc.,
9.25% due 11/15/2003. . . . 250,000 236,562 0.3
1,050,000 Transtar Holdings L.P.,
12.52%* due 12/15/1999. . . 734,176 719,250 0.8
250,000 Viking Star Shipping Co.,
9.625% due 7/15/2003. . . . 250,938 252,500 0.3
-- --------- -- --------- ----
1,235,114 1,208,312 1.4
------------------------------------------------------------------------------------------------------------
US GOVERNMENT 3,000,000 United States Treasury Bonds,
OBLIGATIONS 6.875% due 8/15/2025. . . . 3,170,937 2,969,520 3.5
1,500,000 United States Treasury Notes,
6.50% due 8/15/2005. . . . 1,467,578 1,478,430 1.7
-- --------- -- --------- ----
4,638,515 4,447,950 5.2
------------------------------------------------------------------------------------------------------------
UTILITIES 494,000 Beaver Valley Funding Corp.,
9.00% due 6/01/2017. . . . 466,213 403,218 0.5
83,075 Midland Cogeneration
Venture L.P., 10.33% due 81,413 86,398 0.1
7/23/2002. . . . . . . . .
233,382 + Tucson Electric Power Co.,
10.732% due 1/01/2013. . . 223,464 217,027 0.2
-- --------- -- --------- ----
771,090 706,643 0.8
------------------------------------------------------------------------------------------------------------
WASTE MANAGEMENT 500,000 Mid-American Waste System,
Inc., 12.25% due 2/15/2003. 511,250 300,000 0.3
------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME INVESTMENTS
IN THE UNITED STATES 42,342,909 40,844,181 47.7
- --------------------------------------------------------------------------------------------------------------------------
SHARES HELD STOCKS & WARRANTS
- --------------------------------------------------------------------------------------------------------------------------
UNITED STATES BROADCASTING/CABLE 4,700 American Telecasting Inc.
(Warrants) (b). . . . . . . 11,222 23,500 0.0
------------------------------------------------------------------------------------------------------------
BROADCASTING & 2,724 K-III Communications Corp.
PUBLISHING (Non-Convertible Preferred) 268,309 269,652 0.3
------------------------------------------------------------------------------------------------------------
ENTERTAINMENT 512 + Time Warner Inc. (Non-
Convertible Preferred)
(10.25% Series K). . . . . 512,175 492,800 0.6
------------------------------------------------------------------------------------------------------------
SUPERMARKETS 17,674 Grand Union Co.. . . . . . . 917,437 112,672 0.1
------------------------------------------------------------------------------------------------------------
TOTAL STOCKS & WARRANTS IN THE
UNITED STATES 1,709,143 898,624 1.0
------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
NORTH AMERICAN SECURITIES 44,052,052 41,742,805 48.7
- --------------------------------------------------------------------------------------------------------------------------
PACIFIC
BASIN FACE AMOUNT FIXED-INCOME INVESTMENTS
- --------------------------------------------------------------------------------------------------------------------------
AUSTRALIA FOREIGN GOVERNMENT A$ 4,500,000 Australian Government Bonds,
OBLIGATIONS-- 8.75% due 1/15/2001. . . . 3,585,974 3,566,737 4.1
REGIONAL & AGENCY
Queensland Treasury Corp.,
2,700,000 8.00% due 8/14/2001. . . . 2,082,634 2,058,179 2.4
------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME INVESTMENTS
IN AUSTRALIA 5,668,608 5,624,916 6.5
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN PACIFIC
BASIN SECURITIES 5,668,608 5,624,916 6.5
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
85
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
WESTERN VALUE PERCENT OF
EUROPE INDUSTRY FACE AMOUNT FIXED-INCOME INVESTMENTS COST (NOTE 1A) NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
DENMARK FOREIGN GOVERNMENT Denmark Government Bonds:
OBLIGATIONS
Dkr 9,000,000 8.00% due 5/15/2003. . . . . $ 1,644,329 $ 1,630,041 1.9%
26,230,000 8.00% due 3/15/2006. . . . . 4,773,563 4,655,355 5.4
-----------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME INVESTMENTS
IN DENMARK 6,417,892 6,285,396 7.3
- --------------------------------------------------------------------------------------------------------------------------------
GERMANY FOREIGN GOVERNMENT DM 3,500,000 German Unity, 8.00% due
OBLIGATIONS 1/21/2002. . . . . . . . . 2,728,638 2,538,593 3.0
3,000,000 Treuhandanstalt, 6.625% due
7/09/2003. . . . . . . . . 2,011,957 2,019,724 2.3
-----------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME INVESTMENTS
IN GERMANY 4,740,595 4,558,317 5.3
- --------------------------------------------------------------------------------------------------------------------------------
ITALY FOREIGN GOVERNMENT Lit 2,500,000,000 Buoni Poliennali del Tesoro
OBLIGATIONS (Italian Government Bonds),
9.50% due 2/01/2001. . . . 1,685,405 1,685,606 2.0
-----------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME INVESTMENTS
IN ITALY 1,685,405 1,685,606 2.0
- --------------------------------------------------------------------------------------------------------------------------------
POLAND FOREIGN GOVERNMENT US$ 250,000 Polish Global Bonds, PDI,
OBLIGATIONS 3.75% due 10/27/2014. . . . 194,375 191,875 0.2
250,000 Polish Government Brady Bonds,
6.437% due 10/27/2024. . . 216,250 231,562 0.3
-----------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME INVESTMENTS
IN POLAND 410,625 423,437 0.5
- --------------------------------------------------------------------------------------------------------------------------------
SPAIN FOREIGN GOVERNMENT Pta 410,000,000 Government of Spain, 11.30%
OBLIGATIONS due 1/15/2002. . . . . . . 3,612,292 3,612,561 4.2
-----------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME INVESTMENTS
IN SPAIN 3,612,292 3,612,561 4.2
- --------------------------------------------------------------------------------------------------------------------------------
SWEDEN FOREIGN GOVERNMENT Skr 21,000,000 Government of Sweden, 10.25%
OBLIGATIONS due 5/05/2003. . . . . . . 3,480,865 3,557,195 4.1
-----------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME INVESTMENTS
IN SWEDEN 3,480,865 3,557,195 4.1
- --------------------------------------------------------------------------------------------------------------------------------
UNITED FOREIGN GOVERNMENT (pound 2,600,000 United Kingdom Treasury Gilt,
KINGDOM OBLIGATIONS sterling) 8.50% due 12/07/2005. . . . 4,202,371 4,179,846 4.9
-----------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-INCOME INVESTMENTS
IN THE
UNITED KINGDOM 4,202,371 4,179,846 4.9
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN WESTERN
EUROPEAN
SECURITIES 24,550,045 24,302,358 28.3
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
86
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FACE AMOUNT SHORT-TERM SECURITIES COST
- ----------------------------------------------------------------------------------------------------------------------
COMMERCIAL US $ 2,815,000 General Electric Capital Corp.,
PAPER** 5.56% due 7/01/1996. . . . . $ 2,814,130
- ----------------------------------------------------------------------------------------------------------------------
US GOVERNMENT 3,000,000 Federal Home Loan Mortgage
& AGENCY Corp., 5.26% due 7/15/1996. 2,992,987
OBLIGATIONS**
Federal National Mortgage
3,500,000 Association, 5.27% due
7/24/1996. . . . . . . . . . 3,487,191
United States Treasury Bills,
50,000 5.085% due 9/12/1996 (c). . 49,470
-- ---------
6,529,648
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN
SHORT-TERM SECURITIES 9,343,778
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS 86,633,248
- ----------------------------------------------------------------------------------------------------------------------
OPTIONS NOMINAL VALUE PREMIUMS
WRITTEN COVERED BY OPTIONS RECEIVED
- ----------------------------------------------------------------------------------------------------------------------
CALL OPTIONS WRITTEN US$ 500,000 United States Treasury Notes,
expiring July 1996 at US$99.32 (1,641)
--------------------------------------------------------------------------------------------------------
CURRENCY CALL OPTIONS 795,000 Australian Dollar Currency,
WRITTEN expiring May 1997 at A$0.795 (19,835)
--------------------------------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN (21,476)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, NET OF OPTIONS WRITTEN. . . . . . . . . . . . . . . . . . . . . . $86,611,772
-------------
VARIATION MARGIN ON STOCK INDEX FUTURES CONTRACTS***. . . . . . . . . . . . . . . . . -------------
UNREALIZED APPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS****. . . . . . . . . .
OTHER ASSETS LESS LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
VALUE PERCENT OF
(NOTE 1A) NET ASSETS
- ------------------------------------------
COMMERCIAL
PAPER** $ 2,814,130 3.3%
- ------------------------------------------
US GOVERNMENT
& AGENCY
OBLIGATIONS** 2,992,987 3.5
3,487,191 4.1
49,479 0.1
-- --------- -----
6,529,657 7.7
- ------------------------------------------
9,343,787 11.0
- ------------------------------------------
84,020,934 98.0
- ------------------------------------------
OPTIONS
WRITTEN
- ------------------------------------------
(1,640) 0.0
----------------------------
(10,557) 0.0
----------------------------
(12,197) 0.0
- ------------------------------------------
84,008,737 98.0
(6,357) 0.0
7,823 0.0
1,721,548 2.0
-- --------- -----
$85,731,751 100.0%
------------- ------
------------- ------
- ------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(a)The rights may be exercised until 6/30/2003.
(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.
(c)Security held as collateral in connection with open financial futures contracts.
* Represents a zero coupon or step bond; the interest rate shown is the effective yield at the time of purchase by the Fund.
**Commercial Paper 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.
***Financial futures contracts sold as of June 30, 1996 were as follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EXPIRATION VALUE
NUMBER OF DATE (NOTES 1A & 1C)
CONTRACTS ISSUE
EXCHANGE
- --------------------------------------------------------------------------------------------------
6 Italian BTP LIFFE September 1996 $915,204
5 United States Treasury Bonds CBOT September 1996 547,656
- --------------------------------------------------------------------------------------------------
TOTAL FINANCIAL FUTURES CONTRACTS SOLD
(TOTAL CONTRACT PRICE--$1,444,528) $1,462,860
------------
------------
- --------------------------------------------------------------------------------------------------
</TABLE>
87
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.--WORLD INCOME FOCUS FUND
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996 (CONCLUDED)
(IN US DOLLARS)
<TABLE>
<CAPTION>
<S> <C> <C>
****Forward foreign exchange contracts as of June 30, 1996 were as follows:
- -------------------------------------------------------------------------------------------------------------------
UNREALIZED
APPRECIATION
FOREIGN CURRENCY PURCHASED EXPIRATION DATE (NOTE 1B)
- -------------------------------------------------------------------------------------------------------------------
DM 2,293,010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July 1996 $7,823
- -------------------------------------------------------------------------------------------------------------------
TOTAL UNREALIZED APPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS
(US $ COMMITMENT--$1,507,823) $7,823
-------
-------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
++Non-income producing security.
+Restricted securities as to resale. The value of the Fund's investment in restricted securities was approximately $2,638,000,
representing 3.1% of net assets.
<S> <C> <C> <C>
ACQUISITION VALUE
ISSUE DATE COST (NOTE 1A)
- -----------------------------------------------------------------------------------------------------------------------------------
Cumberland Farms, 10.50% due 10/01/2003. . 3/10/1994 $ 472,736 $ 456,435
HMC Acquisition Properties, 9.00% due
12/15/2007. . . . . . . . . . . . . . . . . 12/21/1995 500,000 455,000
Bancomex Huites Trust Division, 11.25% due
5/30/2006. . . . . . . . . . . . . . . . . 5/30/1996 495,885 495,000
G-I Holdings, Inc., 10.00% due 2/15/2006. . 2/14/1996 548,550 522,050
Time Warner Inc. (Non-Convertible Preferred)
(10.25% Series K). . . . . . . . . . . . . 4/29/1996 512,175 492,800
Tucson Electric Power Co., 10.732% due
1/01/2013. . . . . . . . . . . . . . . . . 8/19/1993 223,464 217,027
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 2,752,810 $ 2,638,312
------------------- --------------------
------------------- --------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
88
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
<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). . . . . . . . . . . . . . . . $ 212,871,001 $ 403,877,071 $ 74,106,393 $ 275,219,739
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 768 804 100,908 588
Receivable for securities sold. . . . . . . . . . . . . . . . . 3,500,972 615,729 2,177,185 --
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . 1,392,250 -- 30,349 1,327,486
Receivable for capital shares sold. . . . . . . . . . . . . . . 129,622 846,876 282,360 --
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . 148,397 599,355 376,848 --
Deferred organization expenses (Note 1f). . . . . . . . . . . . -- 2,160 2,667 1,340
Prepaid registration fees and other assets (Note 1f). . . . . . 18,329 21,000 5,980 29,070
-------------- -------------- ------------- ----------------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . 218,061,339 405,962,995 77,082,690 276,578,223
-------------- -------------- ------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased. . . . . . . . . . . . . . . . 2,447,668 8,489,549 168,617 --
Payable for capital shares redeemed. . . . . . . . . . . . . . . 23,683 552 1,888 791,660
Payable to investment adviser (Note 2). . . . . . . . . . . . . 91,486 182,432 56,414 104,769
Accrued expenses and other liabilities. . . . . . . . . . . . . 61,449 101,787 6,337 78,083
-------------- -------------- ------------- -----------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 2,624,286 8,774,320 233,256 974,512
- -------------------------------------------------------------------------------------------------------------------------------
-------------- -------------- ------------- ----------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 215,437,053 $ 397,188,675 $ 76,849,434 $ 275,603,711
-------------- -------------- ------------- -----------------
-------------- -------------- ------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par value+. . . . . . . . . . . . . . . . . $ 1,415,797 $ 2,911,583 $ 756,984 $ 27,575,749
Paid-in capital in excess of par. . . . . . . . . . . . . . . . 188,688,535 332,949,347 73,630,225 248,181,746
Undistributed investment income--net. . . . . . . . . . . . . . 3,735,464 2,308,627 583,022 --
Undistributed (accumulated) realized capital gains (losses) on
investments and foreign currency transactions--net (Note 5). . . 9,382,632 25,904,462 (5,562,311) --
Unrealized appreciation (depreciation) on investments and foreign
currency transactions--net. . . . . . . . . . . . . . . . . . . 12,214,625 33,114,656 7,441,514 (153,784)
-------------- -------------- ------------- ----------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 215,437,053 $ 397,188,675 $ 76,849,434 $ 275,603,711
-------------- -------------- ------------- -----------------
-------------- -------------- ------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARES OUTSTANDING. . . . . . . . . . . . . . . . . . . 14,157,967 29,115,828 7,569,835 275,757,494
-------------- -------------- ------------- ----------------
-------------- -------------- ------------- ----------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE. . . . $ 15.22 $ 13.64 $ 10.15 $ 1.00
-------------- -------------- ------------- -----------------
-------------- -------------- ------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------
* Identified cost. . . . . . . . . . . . . . . . . . . . . . . . $ 200,656,376 $ 370,762,415 $ 66,662,200 $ 275,373,523
-------------- -------------- ------------- -----------------
-------------- -------------- ------------- -----------------
+ Authorized shares. . . . . . . . . . . . . . . . . . . . . . . 100,000,000 100,000,000 100,000,000 1,300,000,000
-------------- -------------- ------------- ----------------
-------------- -------------- ------------- ----------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
89
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
GLOBAL GLOBAL
EQUITY FLEXIBLE STRATEGY UTILITY
GROWTH STRATEGY FOCUS FOCUS
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value* (Note 1a). . . . . . . . . . . . . . . $ 403,142,688 $ 321,053,682 $ 545,168,737 $ 149,656,200
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 525 955,041 410
Foreign cash (Note 1c). . . . . . . . . . . . . . . . . . . . -- 84,869 534,323 311
Receivable for securities sold. . . . . . . . . . . . . . . . 9,320,922 7,190,066 11,192,114 --
Interest receivable. . . . . . . . . . . . . . . . . . . . . 53,696 1,345,497 3,099,994 32,374
Dividends receivable. . . . . . . . . . . . . . . . . . . . . 199,751 344,291 745,597 492,934
Receivable for capital shares sold. . . . . . . . . . . . . . 850,173 11,223 -- 205,074
Receivable for forward foreign exchange contracts (Note 1b). -- 146,121 483,431 --
Deferred organization expenses (Note 1f). . . . . . . . . . . -- -- -- 3,277
Prepaid registration fees and other assets (Note 1f). . . . . 23,118 28,002 41,934 11,488
-------------- -------------- -------------- --------------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . 413,590,348 330,204,276 562,221,171 150,402,068
-------------- -------------- -------------- ----------------
- -----------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased. . . . . . . . . . . . . . . 4,853,273 6,515,668 9,854,033 --
Payable for forward foreign exchange contracts (Note 1b). . . -- 93,168 865,072 --
Payable to investment adviser (Note 2). . . . . . . . . . . . 238,470 161,914 266,665 65,113
Payable for capital shares redeemed. . . . . . . . . . . . . 1,642 58,546 504,504 1,628
Accrued expenses and other liabilities. . . . . . . . . . . . 138,771 94,140 202,480 59,936
-------------- -------------- -------------- --------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . 5,232,156 6,923,436 11,692,754 126,677
-------------- -------------- -------------- --------------
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . $ 408,358,192 $ 323,280,840 $ 550,528,417 $ 150,275,391
-------------- -------------- -------------- ----------------
-------------- -------------- -------------- ----------------
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par value+. . . . . . . . . . . . . . . . $ 1,594,158 $ 2,089,979 $ 4,316,675 $ 1,281,135
Paid-in capital in excess of par. . . . . . . . . . . . . . . 341,070,957 295,398,545 506,440,444 130,805,555
Undistributed investment income--net. . . . . . . . . . . . . 702,715 3,462,821 2,705,491 1,679,397
Undistributed (accumulated) realized capital gains (losses) on
investments and foreign currency transactions--net (Note 5). 26,450,108 3,981,013 (4,326,801) (3,343,839)
Unrealized appreciation on investments and foreign
currency transactions--net. . . . . . . . . . . . . . . . . . 38,540,254 18,348,482 41,392,608 19,853,143
-------------- -------------- -------------- --------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . $ 408,358,192 $ 323,280,840 $ 550,528,417 $ 150,275,391
-------------- -------------- -------------- ----------------
-------------- -------------- -------------- ----------------
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARES OUTSTANDING. . . . . . . . . . . . . . . . . . 15,941,579 20,899,788 43,166,754 12,811,346
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE. . . $ 25.62 $ 15.47 $ 12.75 $ 11.73
-------------- -------------- -------------- ----------------
-------------- -------------- -------------- ----------------
- -----------------------------------------------------------------------------------------------------------------------------
* Identified cost. . . . . . . . . . . . . . . . . . . . . . $ 364,602,434 $ 302,704,127 $ 503,773,647 $ 129,802,210
-------------- -------------- -------------- ----------------
-------------- -------------- -------------- ----------------
+ Authorized shares. . . . . . . . . . . . . . . . . . . . . 100,000,000 100,000,000 100,000,000 100,000,000
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
90
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HIGH INTERMEDIATE
CURRENT GOVERNMENT INTERNATIONAL
INCOME BOND BOND
FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value* (Note 1a). . . . . . . . . . . . . . . . $ 376,933,106 $ 53,561,490 $ 17,595,390
Options purchased, at value (cost--$576,079)
(Notes 1a & 1b). . . . . . . . . . . . . . . . . . . . . . . . . -- -- --
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,829 283 394
Foreign cash (Note 1c). . . . . . . . . . . . . . . . . . . . . -- -- 2,897
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . 7,009,503 626,471 437,997
Receivable for securities sold. . . . . . . . . . . . . . . . . 2,313,750 -- --
Receivable for capital shares sold. . . . . . . . . . . . . . . 198,101 148,788 334
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . 21,875 -- --
Receivable from investment adviser (Note 2). . . . . . . . . . . -- 10,116 8,592
Receivable for forward foreign exchange contracts (Note 1b). . . -- -- --
Receivable for variation margin on stock index futures contracts
(Note 1b). . . . . . . . . . . . . . . . . . . . . . . . . . . .
-- -- --
Receivable for loaned securities (Note 6). . . . . . . . . . . . -- 233 --
Deferred organization expenses (Note 1f). . . . . . . . . . . . -- -- 2,667
Prepaid registration fees and other assets (Note 1f). . . . . . 30,383 3,078 3,008
-------------- --------------- ---------------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . 386,512,547 54,350,459 18,051,279
-------------- --------------- ---------------
-------------- --------------- ---------------
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Options written, at value (premiums received--$308,269)
(Notes 1a & 1b). . . . . . . . . . . . . . . . . . . . . . . . . -- -- --
Unrealized depreciation on forward foreign exchange
contracts (Note 1b). . . . . . . . . . . . . . . . . . . . . . . -- -- --
Payable for securities purchased. . . . . . . . . . . . . . . . 2,413,825 -- --
Payable to investment adviser (Note 2). . . . . . . . . . . . . 142,882 -- --
Payable for forward foreign exchange contracts (Note 1b). . . . -- -- --
Payable for capital shares redeemed. . . . . . . . . . . . . . . 28,782 -- 50,123
Accrued expenses and other liabilities. . . . . . . . . . . . . 109,385 22,239 17,640
-------------- --------------- ---------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 2,694,874 22,239 67,763
-------------- --------------- ---------------
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 383,817,673 $ 54,328,220 $ 17,983,516
-------------- --------------- ---------------
-------------- --------------- ---------------
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par value+. . . . . . . . . . . . . . . . . $ 3,449,188 $ 530,068 $ 181,063
Paid-in capital in excess of par. . . . . . . . . . . . . . . . 391,084,202 53,658,500 18,097,261
Undistributed investment income--net. . . . . . . . . . . . . . 2,746,405 254,355 90,589
Undistributed (accumulated) realized capital gains (losses) on
investments and foreign currency transactions--net (Note 5). . . 842,686 (66,540) (367,085)
Unrealized appreciation (depreciation) on investments and foreign
currency transactions--net. . . . . . . . . . . . . . . . . . . (14,304,808) (48,163) (18,312)
-------------- --------------- ---------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 383,817,673 $ 54,328,220 $ 17,983,516
-------------- --------------- ---------------
-------------- --------------- ---------------
- --------------------------------------------------------------------------------------------------------------------
CAPITAL SHARES OUTSTANDING. . . . . . . . . . . . . . . . . . . 34,491,875 5,300,683 1,810,634
-------------- --------------- ---------------
-------------- --------------- ---------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE. . . . $ 11.13 $ 10.25 $ 9.93
-------------- --------------- ---------------
-------------- --------------- ---------------
- --------------------------------------------------------------------------------------------------------------------
* Identified cost. . . . . . . . . . . . . . . . . . . . . . . . $ 391,237,914 $ 53,609,653 $ 17,611,983
-------------- --------------- ---------------
-------------- --------------- ---------------
+ Authorized shares. . . . . . . . . . . . . . . . . . . . . . . 100,000,000 100,000,000 100,000,000
-------------- --------------- ---------------
-------------- --------------- ---------------
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>
INTERNATIONAL
EQUITY FOCUS
FUND
- ------------------------------------------------------------------------------------
ASSETS:
Investments, at value* (Note 1a). . . . . . . . . . . . . . . . $ 316,094,452
Options purchased, at value (cost--$576,079)
(Notes 1a & 1b). . . . . . . . . . . . . . . . . . . . . . . . . 602,358
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
Foreign cash (Note 1c). . . . . . . . . . . . . . . . . . . . .
11,823
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . 19,586
Receivable for securities sold. . . . . . . . . . . . . . . . . 1,932,305
Receivable for capital shares sold. . . . . . . . . . . . . . . 644,357
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . 659,725
Receivable from investment adviser (Note 2). . . . . . . . . . . --
Receivable for forward foreign exchange contracts (Note 1b). . . 6,301
Receivable for variation margin on stock index futures contracts
(Note 1b). . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,259
--
Receivable for loaned securities (Note 6). . . . . . . . . . . .
Deferred organization expenses (Note 1f). . . . . . . . . . . . --
Prepaid registration fees and other assets (Note 1f). . . . . . 41,671
----------------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . 320,014,837
------------------
----------------
- ------------------------------------------------------------------------------------
LIABILITIES:
Options written, at value (premiums received--$308,269)
(Notes 1a & 1b). . . . . . . . . . . . . . . . . . . . . . . . . 526,479
Unrealized depreciation on forward foreign exchange
contracts (Note 1b). . . . . . . . . . . . . . . . . . . . . . . 28,873
Payable for securities purchased. . . . . . . . . . . . . . . . 885,534
Payable to investment adviser (Note 2). . . . . . . . . . . . . 178,082
Payable for forward foreign exchange contracts (Note 1b). . . . 183,142
Payable for capital shares redeemed. . . . . . . . . . . . . . . --
Accrued expenses and other liabilities. . . . . . . . . . . . . 246,596
----------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 2,048,706
----------------
- ----------------------------------------------------------------------------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 317,966,131
------------------
------------------
- ------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par value+. . . . . . . . . . . . . . . . . $ 2,711,085
Paid-in capital in excess of par. . . . . . . . . . . . . . . . 296,345,662
Undistributed investment income--net. . . . . . . . . . . . . . 4,576,376
Undistributed (accumulated) realized capital gains (losses) on
investments and foreign currency transactions--net (Note 5). . . (3,746,046)
Unrealized appreciation (depreciation) on investments and foreign
currency transactions--net. . . . . . . . . . . . . . . . . . . 18,079,054
----------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 317,966,131
------------------
------------------
- ------------------------------------------------------------------------------------
CAPITAL SHARES OUTSTANDING. . . . . . . . . . . . . . . . . . . 27,110,851
----------------
----------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE. . . . $ 11.73
------------------
------------------
- ------------------------------------------------------------------------------------
* Identified cost. . . . . . . . . . . . . . . . . . . . . . . . $ 297,976,496
------------------
------------------
+ Authorized shares. . . . . . . . . . . . . . . . . . . . . . . 100,000,000
----------------
----------------
- ----------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
91
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NATURAL
RESOURCES PRIME QUALITY
FOCUS BOND EQUITY
FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value* (Note 1a). . . . . . . . . . . . . . . . $ 45,667,088 $ 476,145,056 $ 687,327,523
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252 577 190
Foreign cash (Note 1c). . . . . . . . . . . . . . . . . . . . . 20,647 -- --
Receivable for securities sold. . . . . . . . . . . . . . . . . -- 9,141,457 26,244,657
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . -- 7,594,926 --
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . 136,477 -- 677,692
Receivable for capital shares sold. . . . . . . . . . . . . . . -- 323,077 218,866
Receivable for loaned securities (Note 6). . . . . . . . . . . . -- 1,257 --
Prepaid registration fees and other assets (Note 1f). . . . . . 3,285 41,602 47,821
------------- --------------- --------------
Total assets. . . . . . . . . . . . . . . . . . . .. . . . . . . 45,827,749 493,247,952 714,516,749
----------------------------------------------
- ----------------------------------------------------------------- ------------- --------------- --------------
LIABILITIES:
Payable for securities purchased. . . . . . . . . . . . . . . . - 13,117,445 14,565,657
Payable to investment adviser (Note 2). . . . . . . . . . . . . 23,341 157,101 237,293
Payable for capital shares redeemed. . . . . . . . . . . . . . . 61,943 8,859 63,933
Accrued expenses and other liabilities. . . . . . . . . . . . . 20,721 129,035 178,296
------------- --------------- --------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 106,005 13,412,440 15,045,179
----------------------------------------------
- ----------------------------------------------------------------- ------------- --------------- --------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,721,744 $ 479,835,512 $ 699,471,570
------------- --------------- --------------
------------- --------------- --------------
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par value+. . . . . . . . . . .. . . . . . . $ 365,173 $ 4,086,510 $ 2,342,157
Paid-in capital in excess of par. . . . . . . . . .. . . . . . . 39,582,597 492,116,585 627,633,959
Undistributed investment income--net. . . . . . . . . . . . . . 483,425 2,444,731 8,197,116
Undistributed (accumulated) realized capital gains (losses) on
investments and foreign currency transactions--net (Note 5). . . 1,222,269 (16,459,536) 15,040,698
Unrealized appreciation (depreciation) on investments and foreign
currency transactions--net. . . . . . . . . . . . . . . . . . . 4,068,280 (2,352,778) 46,257,640
------------- --------------- --------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,721,744 $ 479,835,512 $ 699,471,570
------------- --------------- --------------
------------- --------------- --------------
- ---------------------------------------------------------------------------------------------------------------
CAPITAL SHARES OUTSTANDING. . . . . . . . . . . . .. . . . . . . 3,651,734 40,865,099 23,421,567
------------- --------------- --------------
------------- --------------- --------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE. . . . $ 12.52 $ 11.74 $ 29.86
------------- --------------- --------------
------------- --------------- --------------
- ---------------------------------------------------------------------------------------------------------------
* Identified cost. . . . . . . . . . . . . . . . . . . . . . . . $ 41,598,783 $ 478,497,834 $ 641,069,883
------------- --------------- --------------
------------- --------------- --------------
+ Authorized shares. . . . . . . . . . . . . . . . . . . . . . . 100,000,000 100,000,000 100,000,000
------------- --------------- --------------
------------- --------------- --------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
92
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES AS OF JUNE 30, 1996 (CONCLUDED)
<TABLE>
<CAPTION>
<S> <C> <C>
WORLD
RESERVE INCOME
ASSETS FOCUS
FUND FUND
- -------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value* (Note 1a). . . . . . . . . . . . . . . . . . . . $ 23,496,017 $ 84,020,934
Unrealized appreciation on forward foreign exchange contracts (Note 1b) -- 7,823
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,131 4,374
Receivable for securities sold. . . . . . . . . . . . . . . . . . . . . -- 5,425,856
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . 88,204 1,615,147
Receivable for forward foreign exchange contracts (Note 1b). . . . . . -- 95,225
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . . . . . -- 11,550
Receivable for options written. . . . . . . . . . . . . . . . . . . . . -- 1,641
Receivable for capital shares sold. . . . . . . . . . . . . . . . . . . 623 --
Deferred organization expenses (Note1f). . . . . . . . . . . . . . . . -- 3,944
Prepaid registration fees and other assets (Note1f). . . . . . . . . . 6,663 6,032
------------- -------------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,592,638 91,192,526
- -------------------------------------------------------------------------------------------------------
------------- ---------------
LIABILITIES:
Options written, at value (premiums received--$21,476) (Notes 1a & 1b). -- 12,197
Payable for securities purchased. . . . . . . . . . . . . . . . . . . . -- 5,320,421
Payable for capital shares redeemed. . . . . . . . . . . . . . . . . . 63,055 53,810
Payable to investment adviser (Note 2). . . . . . . . . . . . . . . . . 9,041 39,499
Payable for variation margin on financial futures contracts (Note 1b). -- 6,357
Payable for forward foreign exchange contracts (Note 1b). . . . . . . . -- 100
Accrued expenses and other liabilities. . . . . . . . . . . . . . . . . 17,409 28,391
------------- -------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 89,505 5,460,775
- -----------------------------------------------------------------------------------------------------
------------- -------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,503,133 $ 85,731,751
------------- ---------------
------------- ---------------
- -------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Common Stock, $0.10 par value+. . . . . . . . . . . . . . . . . . . . . $ 2,351,145 $ 890,560
Paid-in capital in excess of par. . . . . . . . . . . . . . . . . . . . 21,160,306 88,672,442
Undistributed investment income--net. . . . . . . . . . . . . . . . . . -- 681,420
Accumulated realized capital losses on
investments and foreign currency transactions--net (Note 5). . . . . . -- (1,896,662)
Unrealized depreciation on investments and
foreign currency transactions--net. . . . . . . . . . . . . . . . . . . (8,318) (2,616,009)
---------- ----------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23,503,133 $ 85,731,751
------------- ---------------
------------- ---------------
- -------------------------------------------------------------------------------------------------------
CAPITAL SHARES OUTSTANDING. . . . . . . . . . . . . . . . . . . . . . . 23,511,452 8,905,602
------------- -------------
------------- -------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE. . . . . . . . $ 1.00 $ 9.63
------------- ---------------
------------- ---------------
- -------------------------------------------------------------------------------------------------------
* Identified cost. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,504,335 $ 86,633,248
------------- ---------------
------------- ---------------
+ Authorized shares. . . . . . . . . . . . . . . . . . . . . . . . . . 500,000,000 100,000,000
------------- -------------
------------- -------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
93
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
DEVELOPING
BASIC CAPITAL DOMESTIC
AMERICAN VALUE MARKETS MONEY
BALANCED FOCUS FOCUS MARKET
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
INVESTMENT INCOME (NOTES 1D & 1E):
Interest and discount earned. . . . . . . . . . . . . . . . . . . . $ 3,423,725 $ 791,151 $ 210,557 $7,736,277
Dividends*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 959,007 2,631,357 969,888 --
----------- ------------- ------------- ------------
Total income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,382,732 3,422,508 1,180,445 7,736,277
----------- ------------- ------------- ------------
- --------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2). . . . . . . . . . . . . . . . . 591,689 1,040,764 330,366 700,732
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 16,849 15,645 50,657 11,218
Accounting services (Note 2). . . . . . . . . . . . . . . . . . . . 14,119 29,135 4,034 17,348
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . 14,645 13,457 3,397 15,988
Directors' fees and expenses. . . . . . . . . . . . . . . . . . . . 3,317 3,294 484 3,641
Transfer agent fees (Note 2). . . . . . . . . . . . . . . . . . . . 3,261 2,271 2,064 2,713
Registration fees (Note 1f). . . . . . . . . . . . . . . . . . . . 8 6,981 1,666 9
Pricing services. . . . . . . . . . . . . . . . . . . . . . . . . . 522 108 2,256 --
Amortization of organization expenses (Note 1f). . . . . . . . . . -- 329 1,102 724
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,847 1,881 697 5,771
----------- ------------- ------------- ------------
Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 647,257 1,113,865 396,723 758,144
----------- ------------- ------------- ------------
Investment income--net. . . . . . . . . . . . . . . . . . . . . . .
3,735,475 2,308,643 783,722 6,978,133
----------- ------------- ------------- ------------
- --------------------------------------------------------------------------------------------------------------------------------
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS & FOREIGN
CURRENCY TRANSACTIONS--NET (NOTES 1B, 1C, 1E & 3):
Realized gain (loss) on investments--net. . . . . . . . . . . . . . 10,657,106 29,409,646 (1,700,652) 8,460
Realized loss on foreign currency transactions--net. . . . . . . . -- -- (59,761) --
Change in unrealized appreciation/depreciation on investments--net. (9,191,391) 3,761,125 7,986,349 (292,067)
Change in unrealized appreciation/depreciation on foreign currency
transactions--net. . . . . . . . . . . . . . . . . . . . . . . . . -- -- (2,992) --
----------- ------------- ------------- ------------
Total realized and unrealized gain (loss) on investments and foreign
currency transactions--net. . . . . . . . . . . . . . . . . . . . . 1,465,715 33,170,771 6,222,944 (283,607)
----------- ------------- ------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,201,190 $35,479,414 $ 7,006,666 $6,694,526
----------- ------------- ------------- ------------
----------- ------------- ------------- ------------
- --------------------------------------------------------------------------------------------------------------------------------
*Net of foreign withholding tax on dividends. . . . . . . . . . . . $ 873 $ 56,721 $ 71,062 --
----------- ------------- ------------- ------------
----------- ------------- ------------- ------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
94
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
GLOBAL GLOBAL
EQUITY FLEXIBLE STRATEGY UTILITY
GROWTH STRATEGY FOCUS FOCUS
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
INVESTMENT INCOME (NOTES 1D & 1E):
Interest and discount earned*. . . . . . . . . . . . . . . . . . . $ 1,079,453 $ 4,346,459 $ 6,896,154 $ 428,120
Dividends**. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,109,991 1,771,577 2,984,885 3,153,827
Other income. . . . . . . . . . . . . . . . . . . . . . . . . . . -- 23,338 -- --
----------- ------------- ------------- ------------
Total income. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,189,444 6,141,374 9,881,039 3,581,947
----------- ------------- ------------- ------------
- --------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2). . . . . . . . . . . . . . . . . 1,405,270 1,047,399 1,790,004 446,115
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . 19,179 28,270 74,753 15,613
Accounting services (Note 2). . . . . . . . . . . . . . . . . . . 32,621 30,564 55,047 15,209
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . 14,046 16,344 27,493 9,364
Directors' fees and expenses. . . . . . . . . . . . . . . . . . . 3,540 3,894 6,457 2,057
Transfer agent fees (Note 2). . . . . . . . . . . . . . . . . . . 2,167 2,574 2,579 2,887
Registration fees (Note 1f). . . . . . . . . . . . . . . . . . . . 7,153 10 -- 5
Pricing services. . . . . . . . . . . . . . . . . . . . . . . . . -- 1,861 1,833 1,392
Amortization of organization expenses (Note 1f). . . . . . . . . . -- -- -- 498
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,742 4,482 7,470 2,240
----------- ------------- ------------- ------------
Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 1,486,718 1,135,398 1,965,636 495,380
----------- ------------- ------------- ------------
Investment income--net. . . . . . . . . . . . . . . . . . . . . .
702,726 5,005,976 7,915,403 3,086,567
----------- ------------- ------------- ------------
- --------------------------------------------------------------------------------------------------------------------------------
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS & FOREIGN
CURRENCY TRANSACTIONS--NET (NOTES 1B, 1C, 1E & 3):
Realized gain on investments--net. . . . . . . . . . . . . . . . . 26,607,899 2,610,731 10,381,340 557,142
Realized gain (loss) on foreign currency transactions--net. . . . -- (168,982) 9,041,091 (39,403)
Change in unrealized appreciation/depreciation on investments--net (9,045,390) 5,768,190 4,593,426 5,456,830
Change in unrealized appreciation/depreciation on foreign currency
transactions--net. . . . . . . . . . . . . . . . . . . . . . . . . -- (694) (9,685,172) (11,305)
----------- ------------- ------------- ------------
Total realized and unrealized gain on investments and foreign
currency transactions--net. . . . . . . . . . . . . . . . . . . . 17,562,509 8,209,245 14,330,685 5,963,264
----------- ------------- ------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,265,235 $13,215,221 $22,246,088 $9,049,831
----------- ------------- ------------- ------------
----------- ------------- ------------- ------------
- --------------------------------------------------------------------------------------------------------------------------------
*Net of foreign withholding tax on interest. . . . . . . . . . . . -- $ 21,146 $ 40,360 --
----------- ------------- ------------- ------------
----------- ------------- ------------- ------------
**Net of foreign withholding tax on dividends. . . . . . . . . . . $ 1,202 $ 65,310 $ 214,322 $ 217,002
----------- ------------- ------------- ------------
----------- ------------- ------------- ------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
95
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
HIGH INTERMEDIATE
CURRENT GOVERNMENT INTERNATIONAL
INCOME BOND BOND
FUND FUND FUND
<S> <C> <C> <C>
INVESTMENT INCOME (NOTES 1D & 1E):
Interest and discount earned*. . . . . . . . . . . . . . . . . . . $18,240,140 $ 1,447,957 $ 591,574
Dividends**. . . . . . . . . . . . . . . . . . . . . . . . . . . . 218,136 5,415 --
----------- --------------- ---------------
Total income. . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,458,276 1,453,372 591,574
----------- --------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2). . . . . . . . . . . . . . . . . 905,732 111,990 55,321
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 26,411 12,054 7,549
Accounting services (Note 2). . . . . . . . . . . . . . . . . . . . 26,317 1,598 2,157
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . 23,878 4,731 3,188
Pricing services. . . . . . . . . . . . . . . . . . . . . . . . . . 4,947 663 --
Transfer agent fees (Note 2). . . . . . . . . . . . . . . . . . . . 3,451 3,499 2,561
Directors' fees and expenses. . . . . . . . . . . . . . . . . . . . -- 671 220
Registration fees (Note 1f). . . . . . . . . . . . . . . . . . . . -- 302 29
Amortization of organization expenses (Note 1f). . . . . . . . . . -- -- 410
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 915 466
----------- --------------- ---------------
Total expenses before reimbursement. . . . . . . . . . . . . . . . 990,736 136,423 71,901
Reimbursement of expenses (Note 2). . . . . . . . . . . . . . . . . -- (136,423) (71,901)
----------- --------------- ---------------
Expenses after reimbursement. . . . . . . . . . . . . . . . . . . . 990,736 -- --
----------- --------------- ---------------
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . 17,467,540 1,453,372 591,574
----------- --------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS & FOREIGN
CURRENCY TRANSACTIONS--NET (NOTES 1B, 1C, 1E & 3):
Realized gain (loss) on investments--net. . . . . . . . . . . . . . 2,358,133 (66,539) 30,078)
Realized gain (loss) on foreign currency transactions--net. . . . . -- -- (268,633
Change in unrealized appreciation/depreciation on investments--net. (6,295,162) (2,012,002) (587,984)
Change in unrealized appreciation/depreciation on foreign currency
transactions--net. . . . . . . . . . . . . . . . . . . . . . . . . -- -- (1,865
----------- --------------- ---------------
Total realized and unrealized gain (loss) on investments and foreign
currency transactions--net. . . . . . . . . . . . . . . . . . . . . (3,937,029) (2,078,541) (828,404)
----------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,530,511 $ (625,169) $ (236,830)
----------- --------------- ---------------
----------- --------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------
*Net of foreign withholding tax on interest. . . . . . . . . . . . -- -- $ 5,803
----------- --------------- ---------------
----------- --------------- ---------------
**Net of foreign withholding tax on dividends. . . . . . . . . . . -- -- --
----------- --------------- ---------------
----------- --------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
INTERNATIONAL
EQUITY
FOCUS
FUND
<S> <C>
INVESTMENT INCOME (NOTES 1D & 1E):
Interest and discount earned*. . . . . . . . . . . . . . . . . . . $ 1,612,058
Dividends**. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,928,708
---------------
Total income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,540,766
---------------
- --------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2). . . . . . . . . . . . . . . . . 1,096,395
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 118,870
Accounting services (Note 2). . . . . . . . . . . . . . . . . . . . 23,346
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . 11,522
Pricing services. . . . . . . . . . . . . . . . . . . . . . . . . . 8,334
Transfer agent fees (Note 2). . . . . . . . . . . . . . . . . . . . 1,972
Directors' fees and expenses. . . . . . . . . . . . . . . . . . . . 2,745
Registration fees (Note 1f). . . . . . . . . . . . . . . . . . . . 2,964
Amortization of organization expenses (Note 1f). . . . . . . . . . 594
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,158
---------------
Total expenses before reimbursement. . . . . . . . . . . . . . . . 1,269,900
Reimbursement of expenses (Note 2). . . . . . . . . . . . . . . . . --
---------------
Expenses after reimbursement. . . . . . . . . . . . . . . . . . . . 1,269,900
---------------
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . 3,270,866
---------------
- --------------------------------------------------------------------------------------
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS & FOREIGN
CURRENCY TRANSACTIONS--NET (NOTES 1B, 1C, 1E & 3):
Realized gain (loss) on investments--net. . . . . . . . . . . . . . 8,664,045
Realized gain (loss) on foreign currency transactions--net. . . . . 299,017
Change in unrealized appreciation/depreciation on investments--net. 9,668,988
Change in unrealized appreciation/depreciation on foreign currency
transactions--net. . . . . . . . . . . . . . . . . . . . . . . . . (880,270)
---------------
Total realized and unrealized gain (loss) on investments and foreign
currency transactions--net. . . . . . . . . . . . . . . . . . . . . 17,751,780
---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,022,646
---------------
---------------
- --------------------------------------------------------------------------------------
*Net of foreign withholding tax on interest. . . . . . . . . . . . --
---------------
---------------
**Net of foreign withholding tax on dividends. . . . . . . . . . .
$ 385,550
---------------
---------------
- --------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
96
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
NATURAL
RESOURCES PRIME QUALITY
FOCUS BOND EQUITY
FUND FUND FUND
<S> <C> <C> <C>
INVESTMENT INCOME (NOTES 1D & 1E):
Interest and discount earned. . . . . . . . . . . . . . . . . . . . $ 47,988 $ 16,797,756 $ 4,858,801
Dividends*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602,092 -- 4,989,084
Other income. . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 49,189 3,074
------------ -------------- -------------
Total income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 650,080 16,846,945 9,850,959
------------ -------------- -------------
- ---------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2). . . . . . . . . . . . . . . . . 147,928 1,034,341 1,488,622
Accounting services (Note 2). . . . . . . . . . . . . . . . . . . . 4,768 28,059 59,533
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 16,340 32,670 28,131
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . 5,450 29,475 28,216
Directors' fees and expenses. . . . . . . . . . . . . . . . . . . . 526 7,137 8,160
Transfer agent fees (Note 2). . . . . . . . . . . . . . . . . . . . 2,587 3,274 2,415
Pricing services. . . . . . . . . . . . . . . . . . . . . . . . . . 1,535 5,727 115
Registration fees (Note 1f). . . . . . . . . . . . . . . . . . . . 113 -- 2,334
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 698 5,878 6,498
------------ -------------- -------------
Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 179,945 1,146,561 1,624,024
------------ -------------- -------------
Investment income--net. . . . . . . . . . . . . . . . . . . . . . .
470,135 15,700,384 8,226,935
------------ -------------- -------------
- ---------------------------------------------------------------------------------------------------------------------
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS & FOREIGN
CURRENCY TRANSACTIONS--NET (NOTES 1B, 1C, 1E & 3):
Realized gain (loss) on investments--net. . . . . . . . . . . . . . 1,244,960 (513,078) 15,040,763
Realized loss on foreign currency transactions--net. . . . . . . . (7,988) -- (66)
Change in unrealized appreciation/depreciation on investments--net. 1,435,417 (27,084,561) 15,420,315
Change in unrealized appreciation/depreciation on foreign currency
transactions--net. . . . . . . . . . . . . . . . . . . . . . . . . (57) -- --
------------ -------------- -------------
Total realized and unrealized gain (loss) on investments and foreign
currency transactions--net. . . . . . . . . . . . . . . . . . . . . 2,672,332 (27,597,639) 30,461,012
------------ -------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS. . )
$ 3,142,467 $(11,897,255 $38,687,947
------------ -------------- -------------
------------ -------------- -------------
- ---------------------------------------------------------------------------------------------------------------------
*Net of foreign withholding tax on dividends. . . . . . . . . . . . $ 54,810 -- $ 165,559
------------ -------------- -------------
------------ -------------- -------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
97
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 (CONCLUDED)
<TABLE>
<CAPTION>
WORLD
RESERVE INCOME
ASSETS FOCUS
FUND FUND
<S> <C> <C>
INVESTMENT INCOME (NOTES 1D & 1E):
Interest and discount earned*. . . . . . . . . . . . . . . . . . . $ 675,090 $ 3,795,425
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 26,768
---------- -------------
Total income. . . . . . . . . . . . . . . . . . . . . . . . . . .
675,090 3,822,193
---------- -------------
- --------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2). . . . . . . . . . . . . . . . . 60,674 259,604
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . 5,438 16,026
Accounting services (Note 2). . . . . . . . . . . . . . . . . . . 2,377 7,726
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . 3,258 5,311
Transfer agent fees (Note 2). . . . . . . . . . . . . . . . . . . 2,668 2,419
Pricing services. . . . . . . . . . . . . . . . . . . . . . . . . -- 2,572
Directors' fees and expenses. . . . . . . . . . . . . . . . . . . -- 925
Amortization of organization expenses (Note 1f). . . . . . . . . . -- 762
Registration fees (Note 1f). . . . . . . . . . . . . . . . . . . . -- 618
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 973
---------- -------------
Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 74,415 296,936
---------- -------------
Investment income--net. . . . . . . . . . . . . . . . . . . . . .
600,675 3,525,257
---------- -------------
- --------------------------------------------------------------------------------------------------
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS & FOREIGN
CURRENCY TRANSACTIONS--NET (NOTES 1B, 1C, 1E & 3):
Realized gain on investments--net. . . . . . . . . . . . . . . . . 2,562 996,847
Realized loss on foreign currency transactions--net. . . . . . . . -- (116,486)
Change in unrealized appreciation/depreciation on investments--net (22,267) (2,286,088)
Change in unrealized appreciation/depreciation on foreign currency
transactions--net. . . . . . . . . . . . . . . . . . . . . . . . . 123
---------- -------------
Total realized and unrealized loss on investments and foreign
currency transactions--net. . . . . . . . . . . . . . . . . . . . (19,705) (1,405,604)
---------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 580,970 $ 2,119,653
---------- -------------
---------- -------------
- --------------------------------------------------------------------------------------------------
*Net of foreign withholding tax on interest. . . . . . . . . . . . -- $ 18,867
---------- -------------
---------- -------------
- --------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statemeents.
98
<PAGE>
This page left intentionally blank.
99
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMERICAN BALANCED FUND
---------------------------------------------
FOR THE
FOR THE SIX MONTHS ENDED YEAR ENDED DEC.
INCREASE (DECREASE) IN NET ASSETS: JUNE 30, 1996 31, 1995
- ----------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net. . . . . . . . . . . . . . . . . . . . . $ 3,735,475 $ 8,022,508
Realized gain (loss) on investments and foreign currency
transactions--net. . . . . . . . . . . . . . . . . . . . . . . . 10,657,106 (311,392)
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net. . . . . . . . . . . . . . . (9,191,391) 27,587,655
--------------- -----------
Net increase in net assets resulting from operations. . . . . . 5,201,190 35,298,771
--------------- -----------
- ----------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net. . . . . . . . . . . . . . . . . . . . . (4,146,625) (7,173,644)
Realized gain on investments--net. . . . . . . . . . . . . . . . (328,715) --
--------------- -----------
Net decrease in net assets resulting from dividends and
distributions to shareholders. . . . . . . . . . . . . . . . . . (4,475,340) (7,173,644)
--------------- -----------
- ----------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase in net assets derived from capital share 1,798,989 25,836,347
transactions. . . . . . . . . . . . . . . . . . . . . . . . . . ------- --------------- --- -----------
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase in net assets. . . . . . . . . . . . . . . . . . 2,524,839 53,961,474
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . 212,912,214 158,950,740
------- --------------- --- -----------
End of period*. . . . . . . . . . . . . . . . . . . . . . . . . $ 215,437,053 $ 212,912,214
------------------------ ----------------
------------------------ ----------------
- ----------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net. . . . . . . . . . . . . . $ 3,735,464 $ 4,146,614
------------------------ ----------------
------------------------ ----------------
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
BASIC VALUE FOCUS FUND
---------------------------------------------
FOR THE
FOR THE SIX MONTHS ENDED YEAR ENDED DEC.
INCREASE (DECREASE) IN NET ASSETS: JUNE 30, 1996 31, 1995
- ----------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net. . . . . . . . . . . . . . . . . . . . . $ 2,308,643 $ 3,967,636
Realized gain (loss) on investments and foreign currency 29,409,646 13,595,994
transactions--net. . . . . . . . . . . . . . . . . . . . . . . .
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net. . . . . . . . . . . . . . . 3,761,125 34,077,480
------- --------------- --- -----------
Net increase in net assets resulting from operations. . . . . . 35,479,414 51,641,110
------- --------------- --- -----------
- ----------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net. . . . . . . . . . . . . . . . . . . . . (2,262,442) (3,296,595)
Realized gain on investments--net. . . . . . . . . . . . . . . . (16,947,347) (7,106,929)
------- --------------- --- -----------
Net decrease in net assets resulting from dividends and
distributions to shareholders. . . . . . . . . . . . . . . . . . (19,209,789) (10,403,524)
------- --------------- --- -----------
- ----------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase in net assets derived from capital share 74,456,157 100,918,588
transactions. . . . . . . . . . . . . . . . . . . . . . . . . . ------- --------------- --- -----------
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase in net assets. . . . . . . . . . . . . . . . . . 90,725,782 142,156,174
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . 306,462,893 164,306,719
------- --------------- --- -----------
End of period*. . . . . . . . . . . . . . . . . . . . . . . . . $ 397,188,675 $ 306,462,893
------------------------ ----------------
------------------------ ----------------
- ----------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net. . . . . . . . . . . . . . $ 2,308,627 $ 2,262,426
------------------------ ----------------
------------------------ ----------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
100 101
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C>
DEVELOPING CAPITAL
MARKETS FOCUS FUND
------------------------------------------
FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS: JUNE 30, 1996 DEC. 31, 1995
- ---------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . $ 783,722 $ 1,186,414
Realized gain (loss) on investments and foreign currency (1,760,413) (3,129,641)
transactions--net. . . . . . . . . . . . . . . . . . . . . . . . .
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net. . . . . . . . . . . . . . . . . 7,983,357 1,803,333
------ ------------- -- ------------
Net increase (decrease) in net assets resulting from operations. . 7,006,666 (139,894)
------ ------------- -- ------------
- ----------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . (1,385,673) (332,002)
Realized gain on investments--net. . . . . . . . . . . . . . . . . -- --
------ ------------- -- ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders. . . . . . . . . . . . . . . . . . . (1,385,673) (332,002)
------ ------------- -- ------------
- ----------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase (decrease) in net assets derived from capital share 16,019,811 19,004,774
transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . ------ ------------- -- ------------
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets. . . . . . . . . . . . . . 21,640,804 18,532,878
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . 55,208,630 36,675,752
------ ------------- -- ------------
End of period*. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 76,849,434 $ 55,208,630
--------------------- ----------------
--------------------- ----------------
- ----------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net. . . . . . . . . . . . . . . $ 583,022 $ 1,184,973
--------------------- ----------------
--------------------- ----------------
- ----------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
<CAPTION>
<S> <C> <C>
DOMESTIC MONEY
MARKET FUND
------------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED DEC.
INCREASE (DECREASE) IN NET ASSETS: JUNE 30, 1996 31, 1995
- --------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . $ 6,978,133 $ 17,526,423
Realized gain (loss) on investments and foreign currency
transactions--net. . . . . . . . . . . . . . . . . . . . . . . . . 8,460 44,778
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net. . . . . . . . . . . . . . . . . (292,067) 334,598
--- ----------- --- -----------
Net increase (decrease) in net assets resulting from operations. . 6,694,526 17,905,799
--- ----------- --- -----------
- --------------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . (6,978,133) (17,526,423)
Realized gain on investments--net. . . . . . . . . . . . . . . . . (8,460) (44,778)
--- ----------- --- -----------
Net decrease in net assets resulting from dividends and
distributions to shareholders. . . . . . . . . . . . . . . . . . . (6,986,593) (17,571,201)
--- ----------- --- -----------
- --------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase (decrease) in net assets derived from capital share (28,016,051) (59,621,869)
transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . --- ----------- --- -----------
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets. . . . . . . . . . . . . . (28,308,118) (59,287,271)
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . 303,911,829 363,199,100
--- ----------- --- -----------
End of period*. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 275,603,711 $ 303,911,829
---------------- ----------------
---------------- ----------------
- --------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net. . . . . . . . . . . . . . . $ -- $ --
---------------- ----------------
---------------- ----------------
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
EQUITY GROWTH FUND
----------------------------------------
FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED DEC.
INCREASE (DECREASE) IN NET ASSETS: JUNE 30, 1996 31, 1995
- --------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . $ 702,726 $ 1,785,602
Realized gain (loss) on investments and foreign currency
transactions--net. . . . . . . . . . . . . . . . . . . . . . . . . 26,607,899 45,385,878
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net. . . . . . . . . . . . . . . . . (9,045,390) 44,941,516
----- ------------- --- -----------
Net increase (decrease) in net assets resulting from operations. . 18,265,235 92,112,996
----- ------------- --- -----------
- ---------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . (1,279,878) (889,063)
Realized gain on investments--net. . . . . . . . . . . . . . . . . (43,561,906) --
----- ------------- --- -----------
Net decrease in net assets resulting from dividends and
distributions to shareholders. . . . . . . . . . . . . . . . . . . (44,841,784) (889,063)
----- ------------- --- -----------
- ---------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase (decrease) in net assets derived from capital share 95,013,587 78,653,598
transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . ----- ------------- --- -----------
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets. . . . . . . . . . . . . . 68,437,038 169,877,531
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . 339,921,154 170,043,623
----- ------------- --- -----------
End of period*. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 408,358,192 $ 339,921,154
-------------------- ----------------
-------------------- ----------------
- ---------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net. . . . . . . . . . . . . . . $ 702,715 $ 1,279,867
-------------------- ----------------
-------------------- ----------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
102 103
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C>
FLEXIBLE STRATEGY FUND
-------------------------------------------
FOR THE
FOR THE SIX MONTHS ENDED YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS: JUNE 30, 1996 DEC. 31, 1995
- -----------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,005,976 $ 9,166,703
Realized gain (loss) on investments and foreign currency transactions--net 2,441,749 27,052,018
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net. . . . . . . . . . . . . . . . . . . . . . . . 5,767,496 11,822,579
------- --------------- -- ----------
Net increase in net assets resulting from operations. . . . . . . . . . . 13,215,221 48,041,300
------- --------------- -- ----------
- -----------------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . . . . (6,146,563) (8,045,358)
Realized gain on investments--net. . . . . . . . . . . . . . . . . . . . (25,432,100) (5,055,924)
In excess of realized gain on investments--net. . . . . . . . . . . . . . -- --
------- --------------- -- ----------
Net decrease in net assets resulting from dividends and distributions to
shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31,578,663) (13,101,282)
------- --------------- -- ----------
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase (decrease) in net assets derived from capital share 21,410,619 10,795,379
transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ------- --------------- -- ----------
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase in net assets. . . . . . . . . . . . . . . . . . . . . . . 3,047,177 45,735,397
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . 320,233,663 274,498,266
------- --------------- -- ----------
End of period*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 323,280,840 $ 320,233,663
------------------------ --------------
------------------------ --------------
- -----------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net. . . . . . . . . . . . . . . . . . $ 3,462,821 $ 4,603,408
------------------------ --------------
------------------------ --------------
- -----------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
<CAPTION>
<S> <C> <C>
GLOBAL STRATEGY FOCUS FUND
------------------------------------------------
FOR THE
FOR THE SIX MONTHS ENDED YEAR ENDED DEC.
INCREASE (DECREASE) IN NET ASSETS: JUNE 30, 1996 31, 1995
- -------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,915,403 $ 17,146,054
Realized gain (loss) on investments and foreign currency transactions--net 19,422,431 (23,380,052)
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net. . . . . . . . . . . . . . . . . . . . . . . . (5,091,746) 58,162,628
--------- ----------------- --- -----------
Net increase in net assets resulting from operations. . . . . . . . . . . 22,246,088 51,928,630
--------- ----------------- --- -----------
- -------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . . . . (12,699,527) (16,913,134)
Realized gain on investments--net. . . . . . . . . . . . . . . . . . . . -- --
In excess of realized gain on investments--net. . . . . . . . . . . . . . -- (199,509)
--------- ----------------- --- -----------
Net decrease in net assets resulting from dividends and distributions to
shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,699,527) (17,112,643)
--------- ----------------- --- -----------
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase (decrease) in net assets derived from capital share 740,243 (9,981,690)
transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --------- ----------------- --- -----------
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase in net assets. . . . . . . . . . . . . . . . . . . . . . . 10,286,804 24,834,297
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . 540,241,613 515,407,316
--------- ----------------- --- -----------
End of period*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 550,528,417 $ 540,241,613
---------------------------- ----------------
---------------------------- ----------------
- -------------------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net. . . . . . . . . . . . . . . . . . $ 2,705,491 $ 7,489,615
---------------------------- ----------------
---------------------------- ----------------
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
GLOBAL UTILITY FOCUS FUND
------------------------------------------------
FOR THE
FOR THE SIX MONTHS ENDED YEAR ENDED DEC.
INCREASE (DECREASE) IN NET ASSETS: JUNE 30, 1996 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,086,567 $ 5,942,408
Realized gain (loss) on investments and foreign currency transactions--net 517,739 (2,380,178)
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net. . . . . . . . . . . . . . . . . . . . . . . . 5,445,525 26,090,740
--------- ----------------- --- -----------
Net increase in net assets resulting from operations. . . . . . . . . . . 9,049,831 29,652,970
--------- ----------------- --- -----------
- -----------------------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . . . . (3,566,704) (5,144,108)
Realized gain on investments--net. . . . . . . . . . . . . . . . . . . . -- --
In excess of realized gain on investments--net. . . . . . . . . . . . . . -- --
--------- ----------------- --- -----------
Net decrease in net assets resulting from dividends and distributions to
shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,566,704) (5,144,108)
--------- ----------------- --- -----------
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase (decrease) in net assets derived from capital share (3,433,013) (2,526,392)
transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --------- ----------------- --- -----------
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase in net assets. . . . . . . . . . . . . . . . . . . . . . . 2,050,114 21,982,470
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . 148,225,277 126,242,807
--------- ----------------- --- -----------
End of period*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 150,275,391 $ 148,225,277
---------------------------- ----------------
---------------------------- ----------------
- -----------------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net. . . . . . . . . . . . . . . . . . $ 1,679,397 $ 2,159,534
---------------------------- ----------------
---------------------------- ----------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
104 105
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C>
HIGH CURRENT INCOME FUND
-------------------------------
--------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED DEC.
INCREASE (DECREASE) IN NET ASSETS: JUNE 30, 1996 31, 1995
- ---------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,467,540 $ 30,889,361
Realized gain (loss) on investments and foreign currency transactions--net 2,358,133 589,358
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net. . . . . . . . . . . . . . . . . . . . . . . . (6,295,162) 16,336,511
-- ---------- --- -----------
Net increase (decrease) in net assets resulting from operations. . . . . . 13,530,511 47,815,230
-- ---------- --- -----------
- ----------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . . . . (17,543,433) (30,645,264)
Realized gain on investments--net. . . . . . . . . . . . . . . . . . . . . -- --
-- ---------- --- -----------
Net decrease in net assets resulting from dividends and distributions to
shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,543,433) (30,645,264)
-- ---------- --- -----------
- ---------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase in net assets derived from capital share transactions. . . . 31,478,655 83,463,234
-- ---------- --- -----------
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets. . . . . . . . . . . . . . . . . . 27,465,733 100,633,200
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . 356,351,940 255,718,740
-- ---------- --- -----------
End of period*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 383,817,673 $ 356,351,940
-------------- ----------------
-------------- ----------------
- ----------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net. . . . . . . . . . . . . . . . . . . $ 2,746,405 $ 2,822,298
-------------- ----------------
-------------- ----------------
- ----------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
<CAPTION>
<S> <C> <C>
INTERMEDIATE
GOVERNMENT BOND FUND
------------------------------------------
FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED DEC.
INCREASE (DECREASE) IN NET ASSETS: JUNE 30, 1996 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,453,372 $ 1,796,464
Realized gain (loss) on investments and foreign currency transactions--net (66,539) 192,982
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net. . . . . . . . . . . . . . . . . . . . . . . . (2,012,002) 2,024,581
------- -------------- --- ----------
Net increase (decrease) in net assets resulting from operations. . . . . . (625,169) 4,014,027
------- -------------- --- ----------
- ----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . . . . (1,398,070) (1,670,786)
Realized gain on investments--net. . . . . . . . . . . . . . . . . . . . . (137,667) --
------- -------------- --- ----------
Net decrease in net assets resulting from dividends and distributions to
shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,535,737) (1,670,786)
------- -------------- --- ----------
- ----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase in net assets derived from capital share transactions. . . . 15,492,699 20,842,535
------- -------------- --- ----------
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets. . . . . . . . . . . . . . . . . . 13,331,793 23,185,776
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,996,427 17,810,651
------- -------------- --- ----------
End of period*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,328,220 $ 40,996,427
----------------------- ---------------
----------------------- ---------------
- ----------------------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net. . . . . . . . . . . . . . . . . . . $ 254,355 $ 199,053
----------------------- ---------------
----------------------- ---------------
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
INTERNATIONAL BOND FUND
--------------------------------------------
FOR THE
FOR THE SIX MONTHS ENDED YEAR ENDED DEC.
INCREASE (DECREASE) IN NET ASSETS: JUNE 30, 1996 31, 1995
- -------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . . . . $ 591,574 $ 829,012
Realized gain (loss) on investments and foreign currency transactions--net (238,555) 201,199
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net. . . . . . . . . . . . . . . . . . . . . . . . (589,849) 735,220
-------- --------------- --- ----------
Net increase (decrease) in net assets resulting from operations. . . . . . (236,830) 1,765,431
-------- --------------- --- ----------
- --------------------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . . . . (589,177) (795,220)
Realized gain on investments--net. . . . . . . . . . . . . . . . . . . . . (231,037) --
-------- --------------- --- ----------
Net decrease in net assets resulting from dividends and distributions to
shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (820,214) (795,220)
-------- --------------- --- ----------
- --------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase in net assets derived from capital share transactions. . . . 920,016 7,217,039
-------- --------------- --- ----------
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets. . . . . . . . . . . . . . . . . . (137,028) 8,187,250
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,120,544 9,933,294
-------- --------------- --- ----------
End of period*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,983,516 $ 18,120,544
------------------------- ---------------
------------------------- ---------------
- -------------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net. . . . . . . . . . . . . . . . . . . $ 90,589 $ 88,192
------------------------- ---------------
------------------------- ---------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
106 107
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C>
INTERNATIONAL EQUITY
FOCUS FUND
-----------------------------------------
FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS: JUNE 30, 1996 DEC. 31, 1995
- ----------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . $ 3,270,866 $ 4,728,612
Realized gain (loss) on investments and foreign currency )
transactions--net. . . . . . . . . . . . . . . . . . . . . . . . . . 8,963,062 (7,417,463
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net. . . . . . . . . . . . . . . . . 8,788,718 15,585,541
------ -------------- -- ----------
Net increase (decrease) in net assets resulting from operations. . . 21,022,646 12,896,690
------ -------------- -- ----------
- ----------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . (3,669,329) (151,930)
Realized gain on investments--net. . . . . . . . . . . . . . . . . . -- (3,904,078)
In excess of realized gain on investments--net. . . . . . . . . . . -- (5,275,618)
------ -------------- -- ----------
Net decrease in net assets resulting from dividends and distributions
to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . (3,669,329) (9,331,626)
------ -------------- -- ----------
- ----------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase (decrease) in net assets derived from capital share
transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,010,573 14,153,402
------ -------------- -- ----------
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets. . . . . . . . . . . . . . . 52,363,890 17,718,466
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . 265,602,241 247,883,775
------ -------------- -- ----------
End of period*. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 317,966,131 $ 265,602,241
---------------------- --------------
---------------------- --------------
- ----------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net (Note 1i). . . . . . . . . . . $ 4,576,376 $ 4,974,839
---------------------- --------------
---------------------- --------------
- ----------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
<CAPTION>
<S> <C> <C>
NATURAL RESOURCES
FOCUS FUND
--------------------------------------
FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED DEC.
INCREASE (DECREASE) IN NET ASSETS: JUNE 30, 1996 31, 1995
- -----------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . $ 470,135 $ 745,572
Realized gain (loss) on investments and foreign currency
transactions--net. . . . . . . . . . . . . . . . . . . . . . . . . . 1,236,972 789,560
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net. . . . . . . . . . . . . . . . . 1,435,360 3,506,951
----- ------------ --- ----------
Net increase (decrease) in net assets resulting from operations. . . 3,142,467 5,042,083
----- ------------ --- ----------
- -----------------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . (302,424) (719,125)
Realized gain on investments--net. . . . . . . . . . . . . . . . . . (740,711) (116,046)
In excess of realized gain on investments--net. . . . . . . . . . . -- --
----- ------------ --- ----------
Net decrease in net assets resulting from dividends and distributions
to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . (1,043,135) (835,171)
----- ------------ --- ----------
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase (decrease) in net assets derived from capital share
transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 520,061 (819,422)
----- ------------ --- ----------
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets. . . . . . . . . . . . . . . 2,619,393 3,387,490
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . 43,102,351 39,714,861
----- ------------ --- ----------
End of period*. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,721,744 $ 43,102,351
------------------- ---------------
------------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net (Note 1i). . . . . . . . . . . $ 483,425 $ 315,714
------------------- ---------------
------------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
PRIME BOND FUND
--------------------------------------
FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED DEC.
INCREASE (DECREASE) IN NET ASSETS: JUNE 30, 1996 31, 1995
- -------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . $ 15,700,384 $ 30,681,580
Realized gain (loss) on investments and foreign currency
transactions--net. . . . . . . . . . . . . . . . . . . . . . . . . . (513,078) 2,850,926
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net. . . . . . . . . . . . . . . . . (27,084,561) 46,631,310
---- ------------ --- -----------
Net increase (decrease) in net assets resulting from operations. . . (11,897,255) 80,163,816
---- ------------ --- -----------
- --------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . (15,751,538) (30,585,478)
Realized gain on investments--net. . . . . . . . . . . . . . . . . . -- --
In excess of realized gain on investments--net. . . . . . . . . . . -- --
---- ------------ --- -----------
Net decrease in net assets resulting from dividends and distributions
to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . (15,751,538) (30,585,478)
---- ------------ --- -----------
- --------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase (decrease) in net assets derived from capital share
transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,646,337 49,025,455
---- ------------ --- -----------
- --------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets. . . . . . . . . . . . . . . (10,002,456) 98,603,793
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . 489,837,968 391,234,175
---- ------------ --- -----------
End of period*. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 479,835,512 $ 489,837,968
------------------ ----------------
------------------ ----------------
- --------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net (Note 1i). . . . . . . . . . . $ 2,444,731 $ 2,495,885
------------------ ----------------
------------------ ----------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
108 109
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY EQUITY FUND
-----------------------------------------
FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS: JUNE 30, 1996 DEC. 31, 1995
- ----------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . $ 8,226,935 $ 10,721,106
Realized gain on investments and foreign currency transactions--net. 15,040,697 84,589,225
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net. . . . . . . . . . . . . . . . . 15,420,315 17,627,851
------ -------------- -- ----------
Net increase in net assets resulting from operations. . . . . . . . 38,687,947 112,938,182
------ -------------- -- ----------
- ----------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . (6,037,948) (8,042,730)
Realized gain on investments--net. . . . . . . . . . . . . . . . . . (84,325,411) (9,959,874)
------ -------------- -- ----------
Net decrease in net assets resulting from dividends and distributions
to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . (90,363,359) (18,002,604)
------ -------------- -- ----------
- ----------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase (decrease) in net assets derived from capital share
transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,596,381 85,255,141
------ -------------- -- ----------
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets. . . . . . . . . . . . . . . 54,920,969 180,190,719
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . 644,550,601 464,359,882
------ -------------- -- ----------
End of period*. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 699,471,570 $ 644,550,601
---------------------- --------------
---------------------- --------------
- ----------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net. . . . . . . . . . . . . . . . $ 8,197,116 $ 6,008,129
---------------------- --------------
---------------------- --------------
- ----------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
<CAPTION>
<S> <C> <C>
RESERVE ASSETS FUND
----------------------------------------
FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED DEC.
INCREASE (DECREASE) IN NET ASSETS: JUNE 30, 1996 31, 1995
- ---------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . $ 600,675 $ 1,572,494
Realized gain on investments and foreign currency transactions--net. 2,562 10,309
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net. . . . . . . . . . . . . . . . . (22,267) 41,873
------ ------------- --- ----------
Net increase in net assets resulting from operations. . . . . . . . 580,970 1,624,676
------ ------------- --- ----------
- -------------------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . (600,675) (1,572,494)
Realized gain on investments--net. . . . . . . . . . . . . . . . . . (2,562) (10,309)
------ ------------- --- ----------
Net decrease in net assets resulting from dividends and distributions
to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . (603,237) (1,582,803)
------ ------------- --- ----------
- -------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase (decrease) in net assets derived from capital share
transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,024,469) (6,688,035)
------ ------------- --- ----------
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets. . . . . . . . . . . . . . . (2,046,736) (6,646,162)
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . 25,549,869 32,196,031
------ ------------- --- ----------
End of period*. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,503,133 $ 25,549,869
--------------------- ---------------
--------------------- ---------------
- -------------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net. . . . . . . . . . . . . . . . -- --
--------------------- ---------------
--------------------- ---------------
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
WORLD INCOME FOCUS FUND
--------------------------------------------
FOR THE
FOR THE SIX MONTHS ENDED YEAR ENDED DEC.
INCREASE (DECREASE) IN NET ASSETS: JUNE 30, 1996 31, 1995
- -------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . $ 3,525,257 $ 6,952,991
Realized gain on investments and foreign currency transactions--net. 880,361 510,287
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net. . . . . . . . . . . . . . . . . (2,285,965) 4,502,738
-------- --------------- --- ----------
Net increase in net assets resulting from operations. . . . . . . . 2,119,653 11,966,016
-------- --------------- --- ----------
- --------------------------------------------------------------------------------------------------------------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G):
Investment income--net. . . . . . . . . . . . . . . . . . . . . . . (3,609,145) (6,851,555)
Realized gain on investments--net. . . . . . . . . . . . . . . . . . -- --
-------- --------------- --- ----------
Net decrease in net assets resulting from dividends and distributions
to shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . (3,609,145) (6,851,555)
-------- --------------- --- ----------
- --------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net increase (decrease) in net assets derived from capital share
transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,376,611 1,580,255
-------- --------------- --- ----------
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets. . . . . . . . . . . . . . . 3,887,119 6,694,716
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . 81,844,632 75,149,916
-------- --------------- --- ----------
End of period*. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 85,731,751 $ 81,844,632
------------------------- ---------------
------------------------- ---------------
- --------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net. . . . . . . . . . . . . . . . $ 681,420 $ 765,308
------------------------- ---------------
------------------------- ---------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
110 111
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
THE FOLLOWING PER SHARE DATA AND RATIOS
HAVE BEEN DERIVED AMERICAN BALANCED FUND
FROM INFORMATION PROVIDED IN THE ------------------------------------------------------------------
FINANCIAL STATEMENTS.
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: FOR THE SIX MONTHS ENDED
JUNE 30, 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period. . $ 15.17 $ 13.08 $ 14.08 $ 12.85 $ 12.82
---------------- ------------ ------------ ------------ -----------
Investment income--net. . . . . . . . . .26 .59 .48 .32 .31
Realized and unrealized gain (loss) on
investments
and foreign currency transactions--net. .11 2.06 (1.06) 1.37 .37
---------------- ------------ ------------ ------------ -----------
Total from investment operations. . . . .37 2.65 (.58) 1.69 .68
---------------- ------------ ------------ ------------ -----------
Less dividends and distributions:
Investment income--net. . . . . . . . . (.30) (.56) (.37) (.34) (.37)
Realized gain on investments--net (.02) -- --) (.12) (.28)
In excess of realized gain on
investments--net. . . . . . . . . . . . -- -- (.05 -- --
---------------- ------------ ------------ ------------ -----------
Total dividends and distributions. . . . (.32) (.56) (.42) (.46) (.65)
---------------- ------------ ------------ ------------ -----------
Net asset value, end of period. . . . . $ 15.22 $ 15.17 $ 13.08 $ 14.08 $ 12.85
---- ---------- --- ------- --- ------- --- ------- --- ------
---- ---------- --- ------- --- ------- --- ------- --- ------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share. . . 2.48%++ 20.81% (4.19%) 13.49% 5.72%
---- ---------- --- ------- --- ------- --- ------- --- ------
---- ---------- --- ------- --- ------- --- ------- --- ------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses. . . . . . . . . . . . . . . . .60%* .61% .63% .70% .97%
---- ---------- --- ------- --- ------- --- ------- --- ------
---- ---------- --- ------- --- ------- --- ------- --- ------
Investment income--net. . . . . . . . . 3.46%* 4.22% 3.95% 3.20% 3.71%
---- ---------- --- ------- --- ------- --- ------- --- ------
---- ---------- --- ------- --- ------- --- ------- --- ------
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 215,437 $ 212,912 $ 158,951 $ 115,420 $ 24,918
---- ---------- --- ------- --- ------- --- ------- --- ------
---- ---------- --- ------- --- ------- --- ------- --- ------
Portfolio turnover. . . . . . . . . . . 111.96% 38.40% 35.36% 12.55% 36.34%
---- ---------- --- ------- --- ------- --- ------- --- ------
---- ---------- --- ------- --- ------- --- ------- --- ------
Average commission rate paid ++++. . . . $ .0613 -- -- -- --
---- ---------- --- ------- --- ------- --- ------- --- ------
---- ---------- --- ------- --- ------- --- ------- --- ------
- -----------------------------------------------------------------------------------------------------------------------------------
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
++ Aggregate total investment return.
++++ For fiscal years beginning on or after September 1, 1995, the Fund is required to disclose its average commission rate per
share for purchases and sales of equity securities.
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
BASIC VALUE FOCUS FUND
------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
THE FOLLOWING PER SHARE DATA FOR THE YEAR ENDED
AND RATIOS HAVE BEEN DERIVED DECEMBER 31,
FROM INFORMATION PROVIDED IN
THE FINANCIAL STATEMENTS. -----------------------------------------
FOR THE PERIOD
JULY 1, 1993+ TO
FOR THE SIX DECEMBER 31,
INCREASE (DECREASE) IN NET MONTHS ENDED 1993
ASSET VALUE: JUNE 30, 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period $ 13.10 $ 11.10 $ 10.95 $ 10.00
---------------- ------------------ ------------ -----------
---------------------------------------------------------------------------------------------------
Investment income--net. . . . .08 .18 .17 .04
Realized and unrealized gain on 1.28 2.49 .08 .91
investments --net. . . . . . ---------------- ------------------ ------------ -----------
---------------------------------------------------------------------------------------------------
Total from investment 1.36 2.67 .25 .95
operations. . . . . . . . . . ---------------- ------------------ ------------ -----------
Less dividends and
distributions:
Investment income--net. . . . (.10) (.19) (.10) --
Realized gain on
investments--net. . . . . . . (.72) (.48) -- --
---------------- ------------------ ------------ -----------
---------------------------------------------------------------------------------------------------
Total dividends and (.82) (.67) (.10) --
distributions. . . . . . . . ---------------- ------------------ ------------ -----------
Net asset value, end of period $ 13.64 $ 13.10 $ 11.10 $ 10.95
---- ---------- ----- ----------- --- ------- -- -------
---- ---------- ----- ----------- --- ------- -- -------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per 11.03++ 25.49% 2.36% 9.50%++
share. . . . . . . . . . . . ---- ---------- ----- ----------- --- ------- -- -------
---- ---------- ----- ----------- --- ------- -- -------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses. . . . . . . . . . . .64%* .66% .72% .86%*
---- ---------- ----- ----------- --- ------- -- -------
---- ---------- ----- ----------- --- ------- -- -------
Investment income--net. . . . 1.33%* 1.68% 2.08% 1.69%*
---- ---------- ----- ----------- --- ------- -- -------
---- ---------- ----- ----------- --- ------- -- -------
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in $ 397,189 $ 306,463 $ 164,307 $ 47,207
thousands). . . . . . . . . . ---- ---------- ----- ----------- --- ------- -- -------
---- ---------- ----- ----------- --- ------- -- -------
Portfolio turnover. . . . . . 37.28% 74.10% 60.55% 30.86%
---- ---------- ----- ----------- --- ------- -- -------
---- ---------- ----- ----------- --- ------- -- -------
-------------------------------------------------------------
Average commission rate paid $ .0552 -- -- --
++++. . . . . . . . . . . . . ---- ---------- ----- ----------- --- ------- -- -------
---- ---------- ----- ----------- --- ------- -- -------
- ---------------------------------------------------------------------------------------------------------------------------------
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+Commencement of Operations.
++ Aggregate total investment return.
++++ For fiscal years beginning on or after September 1, 1995, the Fund is required to disclose its average commission rate per
share for purchases and sales of equity securities.
</TABLE>
113
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DEVELOPING CAPITAL MARKETS FOCUS FUND
------------------------------------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE -----------------------------------------------------------------------------------
BEEN DERIVED
FROM INFORMATION PROVIDED IN THE FINANCIAL
STATEMENTS. FOR THE SIX FOR THE FOR THE PERIOD
MONTHS ENDED YEAR ENDED MAY 2, 1994+ TO
INCREASE (DECREASE) IN NET ASSET VALUE: JUNE 30, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period. . . . . $ 9.32 $ 9.51 $ 10.00
--------------------- ------------ ---------
-----------------------------------------------------------------------------------
Investment income--net. . . . . . . . . . .. . .11 .20 .09
Realized and unrealized gain (loss) on
investments and .95 (.30) (.58)
foreign currency transactions--net. . . . . . --------------------- ------------ ---------
-----------------------------------------------------------------------------------
Total from investment operations. . . . . .. . 1.06 (.10) (.49)
--------------------- ------------ ---------
Less dividends from investment income--net.. . (.23) (.09) --
--------------------- ------------ ---------
Net asset value, end of period. . . . . . .. . $ 10.15 $ 9.32 $ 9.51
------- ------------ -- -------- - ------
------- ------------ -- -------- - ------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share. . . . .. . 11.69%++ (1.08%) (4.90%)++
------- ------------ -- -------- - ------
------- ------------ -- -------- - ------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement. . . . . . .. . 1.20%* 1.25% 1.29%*
------- ------------ -- -------- - ------
------- ------------ -- -------- - ------
Expenses. . . . . . . . . . . . . . . . . .. . 1.20%* 1.36% 1.35%*
------- ------------ -- -------- - ------
------- ------------ -- -------- - ------
Investment income--net. . . . . . . . . . .. . 2.37%* 2.73% 2.18%*
------- ------------ -- -------- - ------
------- ------------ -- -------- - ------
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands). .. . $ 76,849 $ 55,209 $ 36,676
------- ------------ -- -------- - ------
------- ------------ -- -------- - ------
---------------------------------------------------------------- --
Portfolio turnover. . . . . . . . . . . . .. . 53.29% 62.53% 29.79%
------- ------------ -- -------- - ------
------- ------------ -- -------- - ------
Average commission rate paid++. . . . . . .. . $ 0.0005 -- --
------- ------------ -- -------- - ------
------- ------------ -- -------- - ------
- -----------------------------------------------------------------------------------------------------------------------------------
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Commencement of Operations.
++ For fiscal years beginning on or after September 1, 1995, the Fund is required to disclose its average commission rate
per share for purchases and sales of equity securities.
++ Aggregate total investment returns.
</TABLE>
114
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
DOMESTIC MONEY MARKET FUND
------------------------------------------------------------------
FOR THE YEAR ENDED
DECEMBER 31,
THE FOLLOWING PER SHARE DATA AND RATIOS --------------------------------------------
HAVE BEEN DERIVED FROM INFORMATION FOR THE SIX FOR THE PERIOD
PROVIDED IN THE FINANCIAL STATEMENTS. MONTHS ENDED FEB. 20, 1992+
JUNE 30, TO DEC. 31,
INCREASE (DECREASE) IN NET ASSET VALUE: 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------- ---------------- ---------- ---------- ---------
Investment income--net .0248 .0547 .0386 .0302 .0302
Realized and unrealized gain (loss) on
investments (.0010) .0012 (.0007) .0005 .0013
and foreign currency transactions--net ---------------- ---------------- ---------- ---------- ---------
Total from investment operations .0238 .0559 .0379 .0307 .0315
---------------- ---------------- ---------- ---------- ---------
Less dividends and distributions:
Investment income--net (.0248) (.0547 ) ) (.0386) (.0302) (.0302)
Realized gain on investments--net --++ (.0002 -- (.0005) (.0010)
---------------- ---------------- ---------- ---------- ---------
Total dividends and distributions (.0248) (.0549 ) (.0386) (.0307) (.0312)
---------------- ---------------- ---------- ---------- ---------
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 4.95%* 5.65% 3.94% 3.10% 3.65%*
---- ---------- ----- --------- -- ------ -- ------ - ------
---- ---------- ----- --------- -- ------ -- ------ - ------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement .54%* .55% .50% .36% .32%*
---- ---------- ----- --------- -- ------ -- ------ - ------
---- ---------- ----- --------- -- ------ -- ------ - ------
Expenses .54%* .55% .57% .63% .88%*
---- ---------- ----- --------- -- ------ -- ------ - ------
---- ---------- ----- --------- -- ------ -- ------ - ------
Investment income--net, and realized
gain on 4.97%* 5.50% 4.02% 3.03% 3.48%*
investments--net ---- ---------- ----- --------- -- ------ -- ------ - ------
---- ---------- ----- --------- -- ------ -- ------ - ------
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in $ 275,604 $ 303,912 $363,199 $170,531 $ 41,128
thousands) ---- ---------- ----- --------- -- ------ -- ------ - ------
---- ---------- ----- --------- -- ------ -- ------ - ------
- -----------------------------------------------------------------------------------------------------------------------------------
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+Commencement of Operations.
++Amount is less than $.0001 per share.
</TABLE>
115
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED FROM
INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. EQUITY GROWTH FUND+
------------------------------------------------------------------ -
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------
FOR THE SIX
INCREASE (DECREASE) IN NET ASSET VALUE: MONTHS ENDED 1995 1994 1993 1992
JUNE 30, 1996
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 27.98 $ 19.26 $ 20.96 $ 17.80 $ 17.96
------------ ---------- ---------- --------- ---------
Investment income (loss)--net .05 .17 .05 (.01) .01
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net 1.28 8.64 (1.56) 3.17 (.10)
------------ ---------- ---------- --------- ---------
Total from investment operations 1.33 8.81 (1.51) 3.16 (.09)
------------ ---------- ---------- --------- ---------
Less dividends and distributions:
Investment income--net (.10) (.09) -- --++ (.07)
Realized gain on investments--net (3.59) -- (.19) -- --
------------ ---------- ---------- --------- ---------
Total dividends and distributions (3.69) (.09) (.19) -- (.07)
------------ ---------- ---------- --------- ---------
Net asset value, end of period $ 25.62 $ 27.98 $ 19.26 $ 20.96 $ 17.80
-- -------- -- ------ -- ------ -- ----- -- -----
-- -------- -- ------ -- ------ -- ----- -- -----
- ------------------------------------------------------------------------------- ------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share 5.48%++ 45.90% (7.27%) 17.78% (.53%)
-- -------- -- ------ -- ------ -- ----- -- -----
-- -------- -- ------ -- ------ -- ----- -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses .79%* .81% .83% .96% 1.18%
-- -------- -- ------ -- ------ -- ----- -- -----
-- -------- -- ------ -- ------ -- ----- -- -----
Investment income--net .37%* .72% .27% (.05%) .04%
-- -------- -- ------ -- ------ -- ----- -- -----
-- -------- -- ------ -- ------ -- ----- -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 408,358 $339,921 $170,044 $98,976 $23,167
-- -------- -- ------ -- ------ -- ----- -- -----
-- -------- -- ------ -- ------ -- ----- -- -----
Portfolio turnover 43.26% 96.79% 88.48% 131.75% 98.64%
-- -------- -- ------ --------- -------- --------
-- -------- -- ------ --------- -------- --------
Average commission rate paid ++++ $ .0590 -- -- -- --
-- -------- -- ------ -- ------ -- ----- -- -----
-- -------- -- ------ -- ------ -- ----- -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
* 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.
++++ For fiscal years beginning on or after September 1, 1995, the Fund is required to disclose its average commission rate per
share for purchases and sales of equity securities.
</TABLE>
116
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
THE FOLLOWING PER SHARE DATA AND
RATIOS HAVE BEEN DERIVED FLEXIBLE STRATEGY FUND
FROM INFORMATION PROVIDED IN THE ------------------------------------------------------------------ -
FINANCIAL STATEMENTS.
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET FOR THE SIX
VALUE: MONTHS ENDED 1995+ 1994+ 1993 1992
JUNE 30, 1996+
- ---------------------------------- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of $ 16.47 $ 14.70 $ 16.19 $ 14.15 $ 14.79
period -------------- ---------------------------------- ---------- ---------- ---------
Investment income--net .24 .47 .37 .28 .33
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions--net .39 1.99 (1.02) 1.94 .25
-------------- ---------------------------------- ---------- ---------- ---------
Total from investment operations .63 2.46 (.65) 2.22 .58
-------------- ---------------------------------- ---------- ---------- ---------
Less dividends and distributions:
Investment income--net (.32) (.42) (.30) (.15) (.54)
Realized gain on investments--net (1.31) (.27) (.54) (.03) (.68)
-------------- ---------------------------------- ---------- ----------) ---------)
Total dividends and distributions (1.63) (.69) (.84) (.18) (1.22)
-------------- ---------------------------------- ---------- ---------- ---------
Net asset value, end of period $ 15.47 $ 16.47 $ 14.70 $ 16.19 $ 14.15
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per 4.17%++ 17.40% (4.20%) 15.80% 4.25%
share --- --------- -------------- ------------------ -- ------ -- ------ -- -----
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses .70%* .71% .73% .80% .90%
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
Investment income--net 3.04%* 3.07% 2.52% 2.26% 2.62%
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in $ 323,281 $ 320,234 $274,498 $194,777 $82,549
thousands) --- --------- -------------- ------------------ -- ------ -- ------ -- -----
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
Portfolio turnover 54.86% 135.83% 65.54% 56.42% 55.25%
------------- --------------------------------- -- ------ -- ------ --------
------------- --------------------------------- -- ------ -- ------ --------
Average commission rate paid++++ $ .0375 -- -- -- --
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+Based on average shares outstanding during the period.
++ Aggregate total investment return.
++++ For fiscal years beginning on or after September 1, 1995, the Fund is required to disclose its average commission rate per
share for purchases and sales of equity securities.
</TABLE>
117
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
GLOBAL STRATEGY FOCUS FUND
------------------------------------------------------------------
THE FOLLOWING PER SHARE DATA
AND RATIOS HAVE BEEN FOR THE YEAR ENDED
DERIVED FROM INFORMATION DECEMBER 31,
PROVIDED IN THE FINANCIAL ---------------------------------------------
STATEMENTS. FOR THE PERIOD
FEB. 28, 1992+
INCREASE (DECREASE) IN NET FOR THE SIX MONTHS ENDED JUNE 30, TO DEC. 31,
ASSET VALUE: 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period $ 12.55 $ 11.73 $ 12.17 $ 10.22 $ 10.00
------------------ ------------ ------------ ------------ -----------
Investment income--net .18 .39 .30 .16 .13
Realized and unrealized gain
(loss) on investments
and foreign currency
transactions--net .31 .82 (.48) 1.96 .13
------------------ ------------ ------------ ------------ -----------
Total from investment .49 1.21 (.18) 2.12 .26
operations ------------------ ------------ ------------ ------------ -----------
Less dividends and
distributions:
Investment income--net (.29) (.39) (.21) (.17) (.04)
Realized gain on
investments--net -- -- (.04) -- --
In excess of realized gain
on investments--net -- --++ (.01) -- --
------------------ ------------ ------------ ------------ -----------
Total dividends and (.29) (.39) (.26) (.17) (.04)
distributions ------------------ ------------ ------------ ------------ -----------
Net asset value, end of $ 12.75 $ 12.55 $ 11.73 $ 12.17 $ 10.22
period ----- ----------- --- ------- --- ------- --- ------- -- -------
----- ----------- --- ------- --- ------- --- ------- -- -------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per 4.03%++ 10.60% (1.46%) 21.03% 2.62%++
share ----- ----------- --- ------- --- ------- --- ------- -- -------
----- ----------- --- ------- --- ------- --- ------- -- -------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of .71%* .72% .77% .88% 1.25%*
reimbursement ----- ----------- --- ------- --- ------- --- ------- -- -------
----- ----------- --- ------- --- ------- --- ------- -- -------
Expenses .71%* .72% .77% .88% 1.35%*
----- ----------- --- ------- --- ------- --- ------- -- -------
----- ----------- --- ------- --- ------- --- ------- -- -------
Investment income--net 2.87%* 3.33% 2.85% 2.41% 2.66%*
----- ----------- --- ------- --- ------- --- ------- -- -------
----- ----------- --- ------- --- ------- --- ------- -- -------
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in $ 550,528 $ 540,242 $ 515,407 $ 269,627 $ 15,527
thousands) ----- ----------- --- ------- --- ------- --- ------- -- -------
----- ----------- --- ------- --- ------- --- ------- -- -------
Portfolio turnover 80.64% 27.23% 21.03% 17.07% 14.47%
----- ----------- --- ------- --- ------- --- ------- -- -------
----- ----------- --- ------- --- ------- --- ------- -- -------
Average commission rate $ .0290 -- -- -- --
paid+++ ----- ----------- --- ------- --- ------- --- ------- -- -------
----- ----------- --- ------- --- ------- --- ------- -- -------
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized.
**Total investment returns exclude insurance-related fees and expenses.
+Commencement of Operations.
++Amount is less than $.01 per share.
+++
For fiscal years beginning on or after September 1, 1995, the Fund is required to disclose its average commission rate per share
for purchases and sales of equity securities.
++Aggregate total investment return.
</TABLE>
118
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
GLOBAL UTILITY FOCUS FUND
------------------------------------------------------------------
---------------------------------------------------------------------------
--
FOR THE YEAR ENDED
DECEMBER 31,
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN -- -------------------------------------------------- --------------
DERIVED FOR THE PERIOD
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. FOR THE SIX MONTHS ENDED JUNE JULY 1, 1993+
30, TO DECEMBER 31,
INCREASE (DECREASE) IN NET ASSET VALUE: 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.30 $ 9.45 $ 10.66 $ 10.00
---------------- ---------- ---------- ----------
-----------------------------------------------------------------------------
Investment income--net .24 .45 .35 .04
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net .46 1.79 (1.25) .64
---------------- ---------- ---------- ----------
-----------------------------------------------------------------------------
Total from investment operations .70 2.24 (.90) .68
---------------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.27) (.39) (.29) (.02)
In excess of realized gain on investments--net -- -- (.02) --
---------------- ---------- ----------) ----------
-----------------------------------------------------------------------------
Total dividends and distributions (.27) (.39) (.31) (.02)
---------------- ---------- ---------- ----------
Net asset value, end of period $ 11.73 $ 11.30 $ 9.45 $ 10.66
---- ---------- -- ------ -- ------ - -------
---- ---------- -- ------ -- ------ - -------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share 6.34%++ 24.33% (8.51%) 6.85%++
---- ---------- -- ------ -- ------ - -------
---- ---------- -- ------ -- ------ - -------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses .66%* .66% .73% .89%*
---- ---------- -- ------ -- ------ - -------
---- ---------- -- ------ -- ------ - -------
Investment income--net 4.14%* 4.44% 3.68% 2.84%*
---- ---------- -- ------ -- ------ - -------
---- ---------- -- ------ -- ------ - -------
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 150,275 $148,225 $126,243 $ 104,517
---- ---------- -- ------ -- ------ - -------
---- ---------- -- ------ -- ------ - -------
Portfolio turnover 7.73% 11.05% 9.52% 1.72%
---- ---------- -- ------ -- ------ - -------
---- ---------- -- ------ -- ------ - -------
Average commission rate paid ++++ $ .0596 -- -- --
---- ---------- -- ------ -- ------ - -------
---- ---------- -- ------ -- ------ - -------
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+Commencement of Operations.
++ Aggregate total investment return.
++++ For fiscal years beginning on or after September 1, 1995, the Fund is required to disclose its average commission rate per
share for purchases and sales of equity securities.
</TABLE>
119
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
HIGH CURRENT INCOME FUND
THE FOLLOWING PER SHARE DATA AND ------------------------------------------------------------------ -
RATIOS HAVE BEEN DERIVED
FROM INFORMATION PROVIDED IN THE
FINANCIAL STATEMENTS. FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET
VALUE: 1995 1994 1993 1992
FOR THE SIX MONTHS ENDED
- ---------------------------------- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of $ 11.25 $ 10.61 $ 12.06 $ 11.13 $ 10.23
period -------------- ---------------------------------- ---------- ---------- ---------
Investment income--net .52 1.09 1.05 .95 1.07
Realized and unrealized gain
(loss) on investments
and foreign currency
transactions--net (.11) .65 (1.47) .95 .90
-------------- ---------------------------------- ---------- ---------- ---------
Total from investment operations .41 1.74 (.42) 1.90 1.97
-------------- ---------------------------------- ---------- ---------- ---------
Less dividends from investment (.53) (1.10) (1.03) (.97) (1.07)
income--net -------------- ---------------------------------- ---------- ---------- ---------
Net asset value, end of period $ 11.13 $ 11.25 $ 10.61 $ 12.06 $ 11.13
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per 3.73%++ 17.21% (3.59%) 17.84% 20.05%
share --- --------- -------------- ------------------ -- ------ -- ------ -- -----
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses .53%* .55% .61% .72% .89%
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
Investment income--net 9.40%* 9.92% 9.73% 8.62% 10.06%
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in $ 383,818 $ 356,352 $255,719 $163,428 $26,343
thousands) --- --------- -------------- ------------------ -- ------ -- ------ -- -----
--- --------- -------------- ------------------ -- ------ -- ------ -- -----
Portfolio turnover 28.32% 41.60% 51.88% 35.67% 28.21%
--- --------- --------------------------------- -- ------ -- ------ --------
--- --------- --------------------------------- -- ------ -- ------ --------
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized.
** Total investment returns exclude insurance-related
fees and expenses.
++ Aggregate total investment return.
</TABLE>
120
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INTERMEDIATE GOVERNMENT BOND FUND
------------------------------------------------------------------
----------------------------------------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED FOR THE FOR THE FOR THE PERIOD
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. SIX MONTHS ENDED YEAR ENDED MAY 2, 1994+ TO
JUNE 30, 1996 DEC. 31, 1995 DEC. 31, 1994
INCREASE (DECREASE) IN NET ASSET VALUE:
- ---------------------------------------------------------- ----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period. . . . . . . . . . $ 10.79 $ 9.97 $ 10.00
------------------- --------- ----------
Investment income--net. . . . . . . . . . . . . . . . . .33 .62 .25
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net. . . . . . . . . (.50) .81 (.07)
------------------- --------- ----------
Total from investment operations. . . . . . . . . . . . (.17) 1.43 .18
------------------- --------- ----------
Less dividends and distributions:
Investment income--net. . . . . . . . . . . . . . . . . (.33) (.61) (.21)
Realized gain on investments--net. . . . . . . . . . . .
(.04) -- --
------------------- --------- ----------
Total dividends and distributions. . . . . . . . . . . . (.37) (.61) (.21)
------------------- --------- ----------
Net asset value, end of period. . . . . . . . . . . . . $ 10.25 $ 10.79 $ 9.97
------ ----------- - ------ - -------
------ ----------- - ------ - -------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share. . . . . . . . . . . (1.63%)++ 14.83% 1.79%++
------ ----------- - ------ - -------
------ ----------- - ------ - -------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement. . . . . . . . . . . . . .00%* .00% .00%*
------ ----------- - ------ - -------
------ ----------- - ------ - -------
Expenses. . . . . . . . . . . . . . . . . . . . . . . . .61%* .66% .80%*
------ ----------- - ------ - -------
------ ----------- - ------ - -------
Investment income--net. . . . . . . . . . . . . . . . . 6.47%* 6.28% 4.66%*
------ ----------- - ------ - -------
------ ----------- - ------ - -------
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands). . . . . . . . $ 54,328 $ 40,996 $ 17,811
------ ----------- - ------ - -------
------ ----------- - ------ - -------
Portfolio turnover. . . . . . . . . . . . . . . . . . . 7.71% 45.39% 103.03%
------ ----------- - ------ - -------
------ ----------- - ------ - -------
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized.
**Total investment returns exclude insurance-related fees and expenses.
+Commencement of Operations.
++Aggregate total investment return.
</TABLE>
121
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INTERNATIONAL BOND FUND
------------------------------------------------------------
--------------------------------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. FOR THE SIX FOR THE FOR THE PERIOD
MONTHS ENDED YEAR ENDED MAY 2, 1994+ TO
INCREASE (DECREASE) IN NET ASSET VALUE: JUNE 30, 1996 DEC. 31, 1995 DEC. 31, 1994
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period. . . . . . . . . $ 10.52 $ 9.70 $ 10.00
------------------ --------- ----------
--------------------------------------------------------------
Investment income--net. . . . . . . . . . . . . . . . .32 .72 .38
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net. . . . . . . . (.46) .82 (.35)
------------------ --------- ----------
--------------------------------------------------------------
Total from investment operations. . . . . . . . . . . (.14) 1.54 .03
------------------ --------- ----------
Less dividends:
Investment income--net. . . . . . . . . . . . . . . .. . (.32) (.72) (.33)
Realized gain on investments--net. . . . . . . . . . (.13) -- --
------------------ --------- ----------
--------------------------------------------------------------
Total dividends and distributions. . . . . . . . . . (.45) (.72) (.33)
------------------ --------- ----------
Net asset value, end of period. . . . . . . . . . . $ 9.93 $ 10.52 $ 9.70
------ ---------- - ------ - -------
------ ---------- - ------ - -------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share. . . . . . . . . (1.25%)++ 16.35% 0.37%++
------ ---------- - ------ - -------
------ ---------- - ------ - -------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement. . . . . . . . . . . .00%* .00% .00%*
------ ---------- - ------ - -------
------ ---------- - ------ - -------
Expenses. . . . . . . . . . . . . . . . . . . . . . .78%* .95% 1.08%*
------ ---------- - ------ - -------
------ ---------- - ------ - -------
Investment income--net. . . . . . . . . . . . . . . 6.40%* 7.05% 6.34%*
------ ---------- - ------ - -------
------ ---------- - ------ - -------
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands). . . . . . $ 17,984 $ 18,121 $ 9,933
------ ---------- - ------ - -------
------ ---------- - ------ - -------
Portfolio turnover. . . . . . . . . . . . . . . . . 123.88% 2.23% 152.20%
------ ---------- - ------ - -------
------ ---------- - ------ - -------
- -----------------------------------------------------------------------------------------------------------------------
*Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+Commencement of Operations.
++ Aggregate total investment return.
</TABLE>
122
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
INTERNATIONAL EQUITY FOCUS FUND
------------------------------------------------------------------
THE FOLLOWING PER SHARE DATA AND ---------------------------------------------------------------------------------------------
RATIOS HAVE BEEN DERIVED
FROM INFORMATION PROVIDED IN THE
FINANCIAL STATEMENTS.
FOR THE YEAR ENDED
DECEMBER 31,
------------------------------------
FOR THE PERIOD
FOR THE SIX JULY 1, 1993+ TO
INCREASE (DECREASE) IN NET ASSET MONTHS ENDED 1995 1994 DEC. 31, 1993
VALUE: -- -------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.06 $ 10.90 $ 11.03 $ 10.00
------------------ ---------------------- ---------- -----------
-----------------------------------------------------------------------------------------------
Investment income--net .11 .20 .19 .01
Realized and unrealized gain (loss)
on investments
and foreign currency
transactions--net .71 .37 (.13) 1.02
------------------ ---------------------- ---------- -----------
-----------------------------------------------------------------------------------------------
Total from investment operations .82 .57 .06 1.03
------------------ ---------------------- ---------- -----------
Less dividends and distributions:
Investment income--net (.15) (.01) (.18) --
Realized gain on investments--net -- (.17) (.01) --
In excess of realized gain on
investments--net -- (.23) -- --
------------------ ---------------------- ---------- -----------
-----------------------------------------------------------------------------------------------
Total dividends and distributions (.15) (.41) (.19) --
------------------ ---------------------- ---------- -----------
Net asset value, end of period $ 11.73 $ 11.06 $ 10.90 $ 11.03
----- ----------- -------- ------------ -- ------ -- -------
----- ----------- -------- ------------ -- ------ -- -------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share 7.53%++ 5.48% .55% 10.30%++
----- ----------- -------- ------------ -- ------ -- -------
----- ----------- -------- ------------ -- ------ -- -------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses .87%* .89% .97% 1.14%*
----- ----------- -------- ------------ -- ------ -- -------
----- ----------- -------- ------------ -- ------ -- -------
Investment income--net 2.23%* 1.95% 1.09% .30%*
----- ----------- -------- ------------ -- ------ -- -------
----- ----------- -------- ------------ -- ------ -- -------
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in $ 317,966 $ 265,602 $247,884 $ 76,906
thousands) ----- ----------- -------- ------------ -- ------ -- -------
----- ----------- -------- ------------ -- ------ -- -------
Portfolio turnover 27.43% 100.02% 58.84% 17.39%
----- ----------- --------------------- -- ------ -- -------
----- ----------- --------------------- -- ------ -- -------
Average commission rate paid ++ $ .0004 -- -- --
----- ----------- -------- ------------ -- ------ -- -------
----- ----------- -------- ------------ -- ------ -- -------
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+Commencement of Operations.
++ Aggregate total investment return.
++ For fiscal years beginning on or after September 1, 1995, the Fund is required to disclose its average commission rate per share
for purchases and sales of equity securities.
</TABLE>
123
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
NATURAL RESOURCES FOCUS FUND
------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
THE FOLLOWING PER SHARE DATA ------------------------------------------------------------------
AND RATIOS HAVE
BEEN DERIVED FROM INFORMATION
PROVIDED IN THE FINANCIAL
STATEMENTS. FOR THE SIX
MONTHS ENDED
INCREASE (DECREASE) IN NET JUNE 30, 1996 1995 1994 1993 1992
ASSET VALUE: ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period $ 11.95 $ 10.82 $ 10.82 $ 9.84 $ 10.06
----------------- --------------------------------- --------- --------- ---------
Investment income--net .12 .20 .17 .11 .18
Realized and unrealized gain
(loss) on investments
and foreign currency
transactions--net .74 1.15 (.02) .92 (.05)
----------------- --------------------------------- --------- --------- ---------
Total from investment .86 1.35 .15 1.03 .13
operations ----------------- --------------------------------- --------- --------- ---------
Less dividends and
distributions:
Investment income--net (.08) (.19) (.15) (.05) (.29)
Realized gain on
investments--net (.21) (.03) -- -- (.06)
----------------- --------------------------------- --------- --------- ---------
Total dividends and (.29) (.22) (.15) (.05) (.35)
distributions ----------------- --------------------------------- --------- --------- ---------
Net asset value, end of $ 12.52 $ 11.95 $ 10.82 $ 10.82 $ 9.84
period ----- ---------- -------------- ----------------- -- ----- -- ------ -- ------
----- ---------- -------------- ----------------- -- ----- -- ------ -- ------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per 7.34%++ 12.65% 1.44% 10.47% 1.36%
share ----- ---------- -------------- ----------------- -- ----- -- ------ -- ------
----- ---------- -------------- ----------------- -- ----- -- ------ -- ------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of .79%* .78% .87% 1.13% 1.25%
reimbursement ---------------- -------------------------------- -- ----- -- ----- -- -----
---------------- -------------------------------- -- ----- -- ----- -- -----
Expenses .79%* .78% .87% 1.13% 1.27%
---------------- -------------------------------- -- ----- -- ----- -- -----
---------------- -------------------------------- -- ----- -- ----- -- -----
Investment income--net $ 2.06%* $ 1.75% $ 1.91% $ 1.34% $ 2.00%
----- ---------- -------------- ----------------- -- ----- -- ------ -- ------
----- ---------- -------------- ----------------- -- ----- -- ------ -- ------
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in $ 45,722 $ 43,102 $39,715 $14,778 $ 4,144
thousands) ----- ---------- -------------- ----------------- -- ----- -- ----- -- -----
----- ---------- -------------- ----------------- -- ----- -- ----- -- -----
Portfolio turnover 15.03% 30.15% 10.94% 58.44% 22.88%
----- ---------- -------------- ----------------- -------- -- ----- -- -----
----- ---------- -------------- ----------------- -------- -- ----- -- -----
Average commission rate paid $ .0202 -- -- -- --
++++ ----- ---------- -------------- ----------------- -- ----- -- ----- -- -----
----- ---------- -------------- ----------------- -- ----- -- ----- -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized.
** Total investment returns exclude insurance-related fees and expenses.
++ Aggregate total investment return.
++++ For fiscal years beginning on or after September 1, 1995, the Fund is required to disclose its average commission rate per
share for purchases and sales of equity securities.
</TABLE>
124
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
THE FOLLOWING PER SHARE DATA AND
RATIOS HAVE BEEN DERIVED PRIME BOND FUND
FROM INFORMATION PROVIDED IN THE ------------------------------------------------------------------ -
FINANCIAL STATEMENTS.
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET
VALUE: FOR THE SIX MONTHS 1995 1994 1993 1992
ENDED JUNE 30, 1996
- -------------------------------------- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.45 $ 11.12 $ 12.64 $ 12.04 $ 12.02
------------ ---------------------------------- ---------- ---------- ---------
Investment income--net .40 .82 .77 .70 .79
Realized and unrealized gain (loss)
on investments
and foreign currency
transactions--net (.71) 1.34 (1.36) .71 .04
------------ ---------------------------------- ---------- ---------- ---------
Total from investment operations (.31) 2.16 (.59) 1.41 .83
------------ ---------------------------------- ---------- ---------- ---------
Less dividends and distributions:
Investment income--net (.40) (.83) (.76) (.70) (.81)
Realized gain on investments--net -- -- --) (.11) --
In excess of realized gain on
investments--net -- -- (.17 -- --
------------ ---------------------------------- ---------- ---------- ---------
Total dividends and distributions (.40) (.83) (.93) (.81) (.81)
------------ ---------------------------------- ---------- ---------- ---------
Net asset value, end of period $ 11.74 $ 12.45 $ 11.12 $ 12.64 $ 12.04
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share (2.52%)++ 20.14% (4.80%) 12.02% 7.27%
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses .49%* .50% .54% .63% .78%
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
Investment income--net 6.65%* 7.00% 6.74% 5.86% 6.76%
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in $ 479,836 $ 489,838 $391,234 $314,091 $84,810
thousands) -- -------- -------------- ------------------ -- ------ -- ------ -- -----
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
Portfolio turnover 48.14% 90.12% 139.89% 115.26% 82.74%
----------- --------------------------------- --------- --------- --------
----------- --------------------------------- --------- --------- --------
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized.
** Total investment returns exclude insurance-related
fees and expenses.
++ Aggregate total investment return.
</TABLE>
125
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
THE FOLLOWING PER SHARE DATA AND
RATIOS HAVE BEEN DERIVED QUALITY EQUITY FUND
FROM INFORMATION PROVIDED IN THE ------------------------------------------------------------------ -
FINANCIAL STATEMENTS.
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET
VALUE: FOR THE SIX MONTHS 1995+ 1994+ 1993 1992
ENDED JUNE 30, 1996+
- -------------------------------------- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 32.76 $ 27.74 $ 29.02 $ 25.48 $ 26.35
------------ ---------------------------------- ---------- ---------- ---------
Investment income--net .36 .58 .38 .24 .34
Realized and unrealized gain (loss)
on investments
and foreign currency
transactions--net 1.34 5.48 (.74) 3.46 .32
------------ ---------------------------------- ---------- ---------- ---------
Total from investment operations 1.70 6.06 (.36) 3.70 .66
------------ ---------------------------------- ---------- ---------- ---------
Less dividends and distributions:
Investment income--net (.31) (.45) (.25) (.12) (.58)
Realized gain on investments--net (4.29) (.59) (.67) (.04) (.95)
------------ ---------------------------------- ---------- ---------- ---------
Total dividends and distributions (4.60) (1.04) (.92) (.16) (1.53)
------------ ---------------------------------- ---------- ---------- ---------
Net asset value, end of period $ 29.86 $ 32.76 $ 27.74 $ 29.02 $ 25.48
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share 5.94%++ 22.61% (1.20%) 14.57% 2.69%
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses .48%* .51% .54% .62% .74%
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
Investment income--net 2.45%* 1.94% 1.39% 1.07% 1.54%
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in $ 699,472 $ 644,551 $464,360 $309,420 $87,977
thousands) -- -------- -------------- ------------------ -- ------ -- ------ -- -----
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
Portfolio turnover 48.72% 140.32% 60.57% 88.25% 62.54%
----------- --------------------------------- --------- --------- --------
----------- --------------------------------- --------- --------- --------
Average commission rate paid++ $ .0619 -- -- -- --
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
-- -------- -------------- ------------------ -- ------ -- ------ -- -----
- -----------------------------------------------------------------------------------------------------------------------------------
* Annualized.
** Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding during the period.
++ For fiscal years beginning on or after September 1, 1995, the Fund is required to disclose its average commission rate
per share for purchases and sales of equity securities.
++ Aggregate total investment return.
</TABLE>
126
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. RESERVE ASSETS FUND
------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: FOR THE SIX MONTHS ENDED 1995 1994 1993 1992
JUNE 30, 1996
- ----------------------------------------------------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- --------- --------- --------- ---------
Investment income--net .0246 .0543 .0371 .0268 .0320
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net (.0008) .0018 (.0009) .0005 .0007
------------- --------- --------- --------- ---------
Total from investment operations .0238 .0561 .0362 .0273 .0327
------------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.0246) (.0543) (.0362) (.0268) (.0320)
Realized gain on investments--net (.0001) (.0004) -- (.0005) (.0005)
------------- --------- --------- --------- ---------
Total dividends and distributions (.0247) (.0547) (.0362) (.0273) (.0325)
------------- --------- --------- --------- ---------
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 4.93%* 5.63% 3.80% 2.77% 3.28%
--- -------- -- ----- -- ----- -- ----- -- -----
--- -------- -- ----- -- ----- -- ----- -- -----
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses .61%* .61% .65% .70% .79%
--- -------- -- ----- -- ----- -- ----- -- -----
--- -------- -- ----- -- ----- -- ----- -- -----
Investment income--net, and realized gain
on investments--net 4.96% 5.47% 3.75% 2.73% 3.36%
--- -------- -- ----- -- ----- -- ----- -- -----
--- -------- -- ----- -- ----- -- ----- -- -----
- -------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 23,503 $25,550 $32,196 $30,168 $26,767
--- -------- -- ----- -- ----- -- ----- -- -----
--- -------- -- ----- -- ----- -- ----- -- -----
*Annualized.
**Total investment returns exclude insurance-related fees and expenses.
</TABLE>
127
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONCLUDED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
WORLD INCOME FOCUS FUND
------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
THE FOLLOWING PER SHARE DATA AND
RATIOS HAVE BEEN DERIVED FROM
INFORMATION PROVIDED IN THE
FINANCIAL STATEMENTS.
FOR THE YEAR ENDED
DECEMBER 31,
---------------------------------------
FOR THE PERIOD
JULY 1, 1993+ TO
FOR THE SIX MONTHS DECEMBER 31,
INCREASE (DECREASE) IN NET ASSET ENDED JUNE 30, 1996++ 1993
VALUE: 1995++ 1994
-----------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.79 $ 9.17 $ 10.38 $ 10.00
------------------------- --------------------- --------- ---------
-----------------------------------------------------------------------------------------------
Investment income--net .39 .85 .76 .25
Realized and unrealized gain (loss)
on investments
and foreign currency
transactions--net (.15) .61 (1.19) .33
------------------------- --------------------- --------- ---------
-----------------------------------------------------------------------------------------------
Total from investment operations .24 1.46 (.43) .58
------------------------- --------------------- --------- ---------
Less dividends and distributions:
Investment income--net (.40) (.84) (.76) (.20)
In excess of realized gain on
investments--net -- -- (.02) --
------------------------- --------------------- --------- ---------
Total dividends and distributions (.40) (.84) (.78) (.20)
------------------------- --------------------- --------- ---------
Net asset value, end of period $ 9.63 $ 9.79 $ 9.17 $ 10.38
---------- ------------- -------- ----------- -- ----- - ------
---------- ------------- -------- ----------- -- ----- - ------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:**
Based on net asset value per share 2.56%++ 16.69% (4.21%) 5.90%++
---------- ------------- -------- ----------- -- ----- - ------
---------- ------------- -------- ----------- -- ----- - ------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses .68%* .68% .75% .94%*
---------- ------------- -------- ----------- -- ----- - ------
---------- ------------- -------- ----------- -- ----- - ------
Investment income--net 8.13%* 8.99% 8.01% 6.20%*
---------- ------------- -------- ----------- -- ----- - ------
---------- ------------- -------- ----------- -- ----- - ------
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets, end of period (in $ 85,732 $ 81,845 $75,150 $ 50,737
thousands) ---------- ------------- -------- ----------- -- ----- - ------
---------- ------------- -------- ----------- -- ----- - ------
----------------------------------------------------------------- --
Portfolio turnover 106.40% 132.57% 117.58% 54.80%
------------------------ -------------------- -------- - ------
------------------------ -------------------- -------- - ------
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized.
**Total investment returns exclude insurance-related fees and expenses.
+Commencement of Operations.
++Based on average shares outstanding during the period.
++Aggregate total investment return.
</TABLE>
128
<PAGE>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONCLUDED)
<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 Focus 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 last available bid price prior to the
time of valuation. Portfolio securities which are traded both in the over-the-
counter market and on a stock exchange are valued according to the broadest and
most representative market, and it is expected that for debt securities this
ordinarily will be the over-the-counter market. Options written are valued at
the last sale price in the case of exchange-traded options or, in the case of
options traded in the over-the-counter market, the last asked price. Options
purchased are valued at the last sale price in the case of exchange-traded
options or, in the case of options traded in the over-the-counter market, the
last bid price. Futures contracts are valued at settlement price at the close of
the applicable exchange. Securities 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.
(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
Funds' records. However, the effect on 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.
- - Financial 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
129
<PAGE>
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.
(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 Company's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends and
capital gains at various rates.
(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.
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 and International Equity
Focus 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 for 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, 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>
<CAPTION>
<S> <C> <C>
RESERVE ASSETS FUND
- ---------------------------------------------------------------------
ADVISORY
Portion of average daily value of net assets of the Fund: 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%
In excess of $1 billion but not exceeding $1.5
billion. . . . . . . . . . . . . . . . . . . . . . . . . 0.350%
In excess of $1.5 billion but not exceeding $2
billion. . . . . . . . . . . . . . . . . . . . . . . . . 0.325%
In excess of $2 billion but not exceeding $2.5
billion. . . . . . . . . . . . . . . . . . . . . . . . . 0.300%
In excess of $2.5 billion. . . . . . . . . . . . . . . . 0.275%
- ---------------------------------------------------------------------
</TABLE>
130
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
QUALITY EQUITY FUND
- ------------------------------------------------------------------------
ADVISORY
Portion of average daily value of net assets of the Fund: 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%
- ------------------------------------------------------------------------
HIGH CURRENT INCOME FUND AND PRIME BOND FUND
- ------------------------------------------------------------------------
Portion of aggregate average daily value of
net assets of both Funds: 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
law or the regulations thereunder. Under the most restrictive state regulations
presently in effect, MLAM 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 average daily net assets in
excess thereof. In addition, 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 MLAM which, in
turn, will be reimbursed by MLLA.
For the Intermediate Government Bond Fund for the six months ended June 30,
1996, MLAM earned fees of $111,990, all of which was voluntarily waived. MLAM
has also reimbursed the Fund $24,433 in additional expenses.
For the International Bond Fund for the six months ended June 30, 1996, MLAM
earned fees of $55,321, all of which was voluntarily waived. MLAM has also
reimbursed the Fund $16,580 in additional expenses.
For the six months ended June 30, 1996, Merrill Lynch, Pierce, Fenner & Smith
Inc. ("MLPF&S"), an affiliate of MLAM, earned commissions on the execution of
portfolio security transactions aggregating $1,512 in the American Balanced
Fund, $7,080 in the Basic Value Focus Fund, $16,178 in the Developing Capital
Markets Focus Fund, $14,004 in the Flexible Strategy Fund, $27,762 in the Global
Strategy Focus Fund, $28,969 in the International Equity Focus Fund, $1,965 in
the Natural Resources Focus Fund, $40,668 in the Quality Equity Fund, and $625
in the World Income Focus Fund.
Accounting services are provided to the Company by MLAM at cost.
For the six months ended June 30, 1996, American Balanced Fund, Flexible
Strategy Fund, Global Strategy Focus 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, $153, $112, $26, $39, $2,983, $320, $3,175, and $1,290,
respectively, for security price quotations to compute the net asset value of
the Funds.
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, 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, 1996 were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
PURCHASES SALES
- ---------------------------------------------------------------------
American Balanced Fund. . . . . . . . $215,738,948 $ 199,185,856
- --------------------------------------- ------------ ------------
Basic Value Focus Fund. . . . . . . . 157,651,617 119,586,989
Developing Capital Markets Focus Fund 50,096,208 31,579,599
- --------------------------------------- ---------------
Domestic Money Market Fund. . . . . . -- --
Equity Growth Fund. . . . . . . . . . 208,355,230 146,607,557
- --------------------------------------- ---------------
Flexible Strategy Fund. . . . . . . . 262,078,296 128,347,540
Global Strategy Focus Fund. . . . . . 523,396,343 347,396,303
- --------------------------------------- ---------------
Global Utility Focus Fund. . . . . . 13,174,949 10,566,611
High Current Income Fund. . . . . . . 112,831,770 96,350,615
- --------------------------------------- ---------------
Intermediate Government Bond Fund. . 19,762,620 3,033,125
International Bond Focus Fund. . . . 22,380,614 20,855,699
- --------------------------------------- ---------------
International Equity Focus Fund. . . 103,205,109 63,299,412
Natural Resources Focus Fund. . . . . 8,774,165 6,584,265
- --------------------------------------- ---------------
Prime Bond Fund. . . . . . . . . . . 216,166,277 209,786,523
Quality Equity Fund. . . . . . . . . 497,269,445 241,905,404
- --------------------------------------- ---------------
Reserve Assets Fund. . . . . . . . . -- --
World Income Focus Fund. . . . . . . 86,003,631 84,501,659
- ---------------------------------------------------------------------
</TABLE>
131
<PAGE>
Transactions in options written for the six months ended June 30, 1996, were as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
INTERNATIONAL EQUITY FOCUS FUND
- --------------------------------------------------------------------------------
NOMINAL
VALUE
COVERED BY
WRITTEN PREMIUMS
CALL OPTIONS WRITTEN OPTIONS RECEIVED
- --------------------------------------------------------------------------------
Outstanding call options written, beginning of period 6,800 $ 54,253
Options written. . . . . . . . . . . . . . . . . . . 8,969 568,555
Options expired. . . . . . . . . . . . . . . . . . . (6,800) (54,253)
Options exercised. . . . . . . . . . . . . . . . . . (8,900) (281,723)
---------- --------
Outstanding call options written, end of period. . . 69 $ 286,832
---------- -----------
---------- -----------
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
INTERNATIONAL EQUITY FOCUS FUND
- ---------------------------------------------------------------------------------
NOMINAL
VALUE
COVERED BY
WRITTEN PREMIUMS
PUT OPTIONS WRITTEN OPTIONS RECEIVED
- ---------------------------------------------------------------------------------
Outstanding put options written, beginning of period. 914 $ 21,437
Options written. . . . . . . . . . . . . . . . . . . 1,240,000 8,866
Options expired. . . . . . . . . . . . . . . . . . . (1,240,000) (8,866)
----------- -----------
Outstanding put options written, end of period. . . . 914 $ 21,437
----------- -----------
----------- -----------
- ---------------------------------------------------------------------------------
WORLD INCOME FOCUS FUND
- ---------------------------------------------------------------------------------
NOMINAL
VALUE
COVERED BY
WRITTEN PREMIUMS
CALL OPTIONS WRITTEN OPTIONS RECEIVED
- ---------------------------------------------------------------------------------
Outstanding call options written, beginning of period -- $ --
Options written. . . . . . . . . . . . . . . . . . . 12,963,750 117,210
Options expired. . . . . . . . . . . . . . . . . . . (500,000) (781)
Options closed. . . . . . . . . . . . . . . . . . . . (11,168,750) (94,953)
----------- -----------
Outstanding call options written, end of period. . . 1,295,000 $ 21,476
----------- -----------
----------- -----------
- ---------------------------------------------------------------------------------
</TABLE>
At June 30, 1996, net unrealized appreciation/
depreciation and aggregate cost for Federal income tax purposes were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
DEVELOPING
BASIC CAPITAL DOMESTIC
AMERICAN VALUE MARKETS MONEY
BALANCED FOCUS FOCUS MARKET
FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------
Appreciated securities $ 13,752,802 $ 48,378,045 $10,422,953 $ 1,016
Depreciated securities (1,538,177) (15,263,389) (2,978,760) (154,800)
-------------- -------------- ------------- --------------
Net unrealized
appreciation
(depreciation). . . $ 12,214,625 $ 33,114,656 $ 7,444,193 $ (153,784)
-------------- -------------- ------------- --------------
-------------- -------------- ------------- --------------
Cost for Federal income
tax purposes*. . . . $200,656,376 $370,762,415 $66,662,200 $275,373,523
-------------- -------------- ------------- --------------
-------------- -------------- ------------- --------------
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
GLOBAL GLOBAL
EQUITY FLEXIBLE STRATEGY UTILITY
GROWTH STRATEGY FOCUS FOCUS
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------
Appreciated securities. . . $ 64,888,365 $ 22,669,798 $ 47,712,621 $ 23,950,330
Depreciated securities. . . (26,348,111) (4,320,243) (6,317,531) (4,096,340)
-------------- -------------- -------------- ----------------
Net unrealized appreciation $ 38,540,254 $ 18,349,555 $ 41,395,090 19,853,990
-------------- -------------- -------------- ----------------
-------------- -------------- -------------- ----------------
Cost for Federal income
tax purposes*. . . . . . . $364,602,434 $302,704,127 $503,773,647 $ 129,802,210
-------------- -------------- -------------- ----------------
-------------- -------------- -------------- ----------------
- -----------------------------------------------------------------------------------------------
HIGH INTERMEDIATE INTERNATIONAL
CURRENT GOVERNMENT INTERNATIONAL EQUITY
INCOME BOND BOND FOCUS
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------
Appreciated securities. . . $ 7,647,408 $ 303,987 $ 296,436 $ 26,495,046
Depreciated securities. . . (21,952,216) (352,150) (313,029) (8,698,088)
-------------- -------------- -------------- ----------------
Net unrealized appreciation
(depreciation). . . . . . . $(14,304,808) $ (48,163) $ (16,593) $ 17,796,958
-------------- -------------- -------------- ----------------
-------------- -------------- -------------- ----------------
Cost for Federal income
tax purposes*. . . . . . . $391,237,914 $ 53,609,653 $ 17,611,983 $ 298,000,231
-------------- -------------- -------------- ----------------
-------------- -------------- -------------- ----------------
- -----------------------------------------------------------------------------------------------
NATURAL
RESOURCES PRIME QUALITY RESERVE
FOCUS BOND EQUITY ASSETS
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------
Appreciated securities. . . $ 5,817,648 $ 6,063,437 $ 56,978,860 $ 470
Depreciated securities. . . (1,749,343) (8,416,215) (10,721,220) (8,788)
-------------- -------------- -------------- ----------------
Net unrealized appreciation
(depreciation). . . . . . . $ 4,068,305 $ (2,352,778) $ 46,257,640 $ (8,318)
-------------- -------------- -------------- ----------------
-------------- -------------- -------------- ----------------
Cost for Federal income
tax purposes*. . . . . . . $ 41,598,783 $478,497,834 $641,069,883 $ 23,504,335
-------------- -------------- -------------- ----------------
-------------- -------------- -------------- ----------------
- -----------------------------------------------------------------------------------------------
WORLD
INCOME
FOCUS
FUND
- -----------------------------------------------------------------------------------------------
Appreciated securities. . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,189,956
Depreciated securities. . . . . . . . . . . . . . . . . . . . . . . . . . (3,802,269)
----------------
Net unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . $ (2,612,313)
----------------
----------------
Cost for Federal income tax purposes*. . . . . . . . . . . . . . . . . . . $ 86,631,607
----------------
----------------
- -----------------------------------------------------------------------------------------------
</TABLE>
* Net of premiums received on options written.
132
<PAGE>
At June 30, 1996, net realized and unrealized gains (losses) were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AMERICAN BASIC VALUE
BALANCED FUND FOCUS FUND
------------------------------------ -------------------------------
Realized
Gains Unrealized Realized Unrealized
(Losses) Gains Gains Gains
- -----------------------------------------------------------------------------------------------
Long-term investments. $ 10,657,493 $12,214,625 $ 29,409,646 $ 33,114,656
Short-term investments (387) -- -- --
--------------------- ------------- ----------------- -------------
$ 10,657,106 $12,214,625 $ 29,409,646 $ 33,114,656
--------------------- ------------- ----------------- -------------
--------------------- ------------- ----------------- -------------
DEVELOPING CAPITAL DOMESTIC MONEY
MARKETS FOCUS FUND MARKET FUND
------------------------------------ -------------------------------
Unrealized
Realized Gains Realized Unrealized
Losses (Losses) Gains Losses
- -----------------------------------------------------------------------------------------------
Long-term investments. $ (1,700,566) $ 7,444,193 -- --
Short-term investments (86) -- $ 8,460 $ (153,784)
Foreign currency
transactions. . . . . (59,761) (2,679) -- --
--------------------- ------------- ----------------- -------------
$ (1,760,413) $ 7,441,514 $ 8,460 $ (153,784)
--------------------- ------------- ----------------- -------------
--------------------- ------------- ----------------- -------------
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
EQUITY GROWTH FLEXIBLE STRATEGY
FUND FUND
--------------------------------- -----------------------------------------
Realized Unrealized
Realized Unrealized Gains Gains
Gains Gains (Losses) (Losses)
- -------------------------------------------------------------------------------------------------------
Long-term investments. $ 26,607,899 $ 38,540,254 $ 2,611,624 $ 18,349,555
Short-term investments. -- -- (893) --
Foreign currency
transactions. . . . . . -- -- (168,982) (1,073)
----------------- -------------- -------------------------- -------------
$ 26,607,899 $ 38,540,254 $ 2,441,749 $ 18,348,482
----------------- -------------- -------------------------- -------------
----------------- -------------- -------------------------- -------------
- -------------------------------------------------------------------------------------------------------
GLOBAL STRATEGY GLOBAL UTILITY
FOCUS FUND FOCUS FUND
--------------------------------- -----------------------------------------
Realized Unrealized Realized Unrealized
Gains Gains Gains Gains
(Losses) (Losses) (Losses) (Losses)
- -------------------------------------------------------------------------------------------------------
Long-term investments. $ 10,385,827 $ 41,395,090 $ 557,189 $ 19,853,990
Short-term investments. (4,487) -- (47) --
Forward foreign exchange
contracts. . . . . . . 10,575,079 -- -- --
Foreign currency
transactions. . . . . . (1,533,988) (2,482) (39,403) (847)
----------------- -------------- -------------------------- -------------
$ 19,422,431 $ 41,392,608 $ 517,739 $ 19,853,143
----------------- -------------- -------------------------- -------------
----------------- -------------- -------------------------- -------------
- -------------------------------------------------------------------------------------------------------
HIGH CURRENT INTERMEDIATE GOVERNMENT
INCOME FUND BOND FUND
--------------------------------- -----------------------------------------
Realized
Gains Unrealized Realized Unrealized
(Losses) Losses Losses Losses
- -------------------------------------------------------------------------------------------------------
Long-term investments. $ 2,358,151 $(14,304,808) $ (66,328) $ (48,163)
Short-term investments. (18) -- (211) --
----------------- -------------- -------------------------- -------------
$ 2,358,133 $(14,304,808) $ (66,539) $ (48,163)
----------------- -------------- -------------------------- -------------
----------------- -------------- -------------------------- -------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
INTERNATIONAL BOND INTERNATIONAL EQUITY
FUND FOCUS FUND
------------------------------------ --------------------------------------
Realized Realized Unrealized
Gains Unrealized Gains Gains
(Losses) Losses (Losses) (Losses)
- --------------------------------------------------------------------------------------------------------
Long-term investments. . $ 30,104 $ (16,593) $ 5,181,906 $18,078,143
Short-term investments. (26) -- (539,660) 39,813
Stock index futures
contracts. . . . . . . . -- -- 3,447,847 184,327
Options purchased. . . . -- -- 801,421 (102,788)
Options written. . . . . -- -- (227,469) (218,210)
Foreign currency
transactions. . . . . . (269,933) (1,720) (2,317,434) (2,425)
Forward foreign exchange
contracts. . . . . . . . 1,300 -- 1,525,111 (28,873)
Currency options written -- -- 8,866 --
Currency options
purchased. . . . . . . . -- -- 1,082,474 129,067
--------------------- ------------- ----------------------- -------------
$ (238,555) $ (18,313) $ 8,963,062 $18,079,054
--------------------- ------------- ----------------------- -------------
--------------------- ------------- ----------------------- -------------
- --------------------------------------------------------------------------------------------------------
NATURAL RESOURCES PRIME BOND
FOCUS FUND FUND
------------------------------------ --------------------------------------
Realized Unrealized
Gains Gains Realized Unrealized
(Losses) (Losses) Losses Losses
- --------------------------------------------------------------------------------------------------------
Long-term investments. . $ 1,244,929 $ 4,068,305 $ (513,078) $(2,352,778)
Short-term investments. 31 -- -- --
Foreign currency
transactions. . . . . . (7,988) (25) -- --
--------------------- ------------- ----------------------- -------------
$ 1,236,972 $ 4,068,280 $ (513,078) $(2,352,778)
--------------------- ------------- ----------------------- -------------
--------------------- ------------- ----------------------- -------------
- --------------------------------------------------------------------------------------------------------
QUALITY EQUITY RESERVE ASSETS
FUND FUND
------------------------------------ --------------------------------------
Realized
Gains Unrealized Realized Unrealized
(Losses) Gains Gains Losses
- --------------------------------------------------------------------------------------------------------
Long-term investments. . $ 15,044,475 $46,257,640 -- --
Short-term investments. (3,712) -- $ 2,562 $ (8,318)
Foreign currency
transactions. . . . . . (66) -- -- --
--------------------- ------------- ----------------------- -------------
$ 15,040,697 $46,257,640 $ 2,562 $ (8,318)
--------------------- ------------- ----------------------- -------------
--------------------- ------------- ----------------------- -------------
- --------------------------------------------------------------------------------------------------------
WORLD INCOME
FOCUS FUND
--------------------------------------
Realized Unrealized
Gains Gains
(Losses) (Losses)
- --------------------------------------------------------------------------------------------------------
Long-term investments. . . . . . . . . . . . . . . . . . . . $ 940,764 $(2,612,322)
Short-term investments. . . . . . . . . . . . . . . . . . . 235 8
Financial futures contracts. . . . . . . . . . . . . . . . . 55,067 (18,332)
Options written. . . . . . . . . . . . . . . . . . . . . . . 781 1
Currency options written. . . . . . . . . . . . . . . . . . (87,496) 9,278
Currency options purchased. . . . . . . . . . . . . . . . . (62,095) --
Foreign currency transactions. . . . . . . . . . . . . . . . 335,318 (2,465)
Forward foreign exchange contracts. . . . . . . . . . . . . (302,213) 7,823
----------------------- -------------
$ 880,361 $(2,616,009)
----------------------- -------------
----------------------- -------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
133
<PAGE>
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
AMERICAN BALANCED FUND
- ----------------------------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
- ----------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . 443,913 $ 6,672,577
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . 300,762 4,475,340
--------- --------------
Total issued. . . . . . . . . . . . . . . . . . 744,675 11,147,917
Shares redeemed. . . . . . . . . . . . . . . . (618,140) (9,348,928)
--------- --------------
Net increase. . . . . . . . . . . . . . . . . . 126,535 $ 1,798,989
--------- --------------
--------- --------------
- ----------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1995 Shares Amount
- ----------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . 2,201,026 $ 30,814,364
Shares issued to shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . 529,259 7,173,644
--------- --------------
Total issued. . . . . . . . . . . . . . . . . . 2,730,285 37,988,008
Shares redeemed. . . . . . . . . . . . . . . . (850,020) (12,151,661)
--------- --------------
Net increase. . . . . . . . . . . . . . . . . . 1,880,265 $ 25,836,347
--------- --------------
--------- --------------
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
BASIC VALUE FOCUS FUND
- -----------------------------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
- -----------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 4,281,723 $ 56,675,139
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . . 1,551,679 19,209,789
--------- --------------
Total issued. . . . . . . . . . . . . . . . . . 5,833,402 75,884,928
Shares redeemed. . . . . . . . . . . . . . . . . (109,003) (1,428,771)
--------- --------------
Net increase. . . . . . . . . . . . . . . . . . 5,724,399 $ 74,456,157
--------- --------------
--------- --------------
- -----------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1995 Shares Amount
- -----------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 7,762,209 $ 98,591,635
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . . 1,538,264 10,403,524
--------- --------------
Total issued. . . . . . . . . . . . . . . . . . 9,300,473 108,995,159
Shares redeemed. . . . . . . . . . . . . . . . . (711,444) (8,076,571)
--------- --------------
Net increase. . . . . . . . . . . . . . . . . . 8,589,029 $ 100,918,588
--------- --------------
--------- --------------
- -----------------------------------------------------------------------------
DEVELOPING CAPITAL MARKETS FOCUS FUND
- -----------------------------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
- -----------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 2,206,879 $ 21,761,971
Shares issued to shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . . 151,274 1,385,673
--------- --------------
Total issued. . . . . . . . . . . . . . . . . . 2,358,153 23,147,644
Shares redeemed. . . . . . . . . . . . . . . . . (710,327) (7,127,833)
--------- --------------
Net increase. . . . . . . . . . . . . . . . . . 1,647,826 $ 16,019,811
--------- --------------
--------- --------------
- -----------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1995 Shares Amount
- -----------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 2,555,725 $ 23,265,598
Shares issued to shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . . 36,009 332,002
--------- --------------
Total issued. . . . . . . . . . . . . . . . . . 2,591,734 23,597,600
Shares redeemed. . . . . . . . . . . . . . . . . (525,636) (4,592,826)
--------- --------------
Net increase. . . . . . . . . . . . . . . . . . 2,066,098 $ 19,004,774
--------- --------------
--------- --------------
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
DOMESTIC MONEY MARKET FUND
- ---------------------------------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
- ---------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 44,132,275 $ 44,132,275
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . . 6,987,225 6,987,225
------------ ---------------
Total issued. . . . . . . . . . . . . . . . . . 51,119,500 51,119,500
Shares redeemed. . . . . . . . . . . . . . . . . (79,135,551) (79,135,551)
------------ ---------------
Net decrease. . . . . . . . . . . . . . . . . . (28,016,051) $ (28,016,051)
------------ ---------------
------------ ---------------
- ---------------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1995 Shares Amount
- ---------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 111,267,159 $ 111,267,159
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . . 17,571,280 17,571,280
------------ ---------------
Total issued. . . . . . . . . . . . . . . . . . 128,838,439 128,838,439
Shares redeemed. . . . . . . . . . . . . . . . . (188,460,308) (188,460,308)
------------ ---------------
Net decrease. . . . . . . . . . . . . . . . . . (59,621,869) $ (59,621,869)
------------ ---------------
------------ ---------------
- ---------------------------------------------------------------------------------
EQUITY GROWTH FUND
- ---------------------------------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
- ---------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 2,126,141 $ 54,634,330
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . . 1,846,101 44,841,784
------------ ---------------
Total issued. . . . . . . . . . . . . . . . . . 3,972,242 99,476,114
Shares redeemed. . . . . . . . . . . . . . . . . (177,401) (4,462,527)
------------ ---------------
Net increase. . . . . . . . . . . . . . . . . . 3,794,841 $ 95,013,587
------------ ---------------
------------ ---------------
- ---------------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1995 Shares Amount
- ---------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 3,628,361 $ 86,301,010
Shares issued to shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . . 41,296 889,063
------------ ---------------
Total issued. . . . . . . . . . . . . . . . . . 3,669,657 87,190,073
Shares redeemed. . . . . . . . . . . . . . . . . (353,757) (8,536,475)
------------ ---------------
Net increase. . . . . . . . . . . . . . . . . . 3,315,900 $ 78,653,598
------------ ---------------
------------ ---------------
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FLEXIBLE STRATEGY FUND
- ------------------------------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
- ------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 322,632 $ 4,900,027
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . . 2,120,797 31,578,663
---------- --------------
Total issued. . . . . . . . . . . . . . . . . . 2,443,429 36,478,690
Shares redeemed. . . . . . . . . . . . . . . . . (987,097) (15,068,071)
---------- --------------
Net increase. . . . . . . . . . . . . . . . . . 1,456,332 $ 21,410,619
---------- --------------
---------- --------------
- ------------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1995 Shares Amount
- ------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 1,290,613 $ 19,615,145
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . . 896,275 13,101,282
---------- --------------
Total issued. . . . . . . . . . . . . . . . . . 2,186,888 32,716,427
Shares redeemed. . . . . . . . . . . . . . . . . (1,417,547) (21,921,048)
---------- --------------
Net increase. . . . . . . . . . . . . . . . . . 769,341 $ 10,795,379
---------- --------------
---------- --------------
- ------------------------------------------------------------------------------
</TABLE>
134
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
GLOBAL STRATEGY FOCUS FUND
- ------------------------------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
- ------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 981,582 $ 12,165,816
Shares issued to shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . . 1,034,163 12,699,527
---------- --------------
Total issued. . . . . . . . . . . . . . . . . . 2,015,745 24,865,343
Shares redeemed. . . . . . . . . . . . . . . . . (1,913,271) (24,125,100)
---------- --------------
Net increase. . . . . . . . . . . . . . . . . . 102,474 $ 740,243
---------- --------------
---------- --------------
- ------------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1995 Shares Amount
- ------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 2,383,467 $ 28,913,701
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . . 1,452,481 17,112,643
---------- --------------
Total issued. . . . . . . . . . . . . . . . . . 3,835,948 46,026,344
Shares redeemed. . . . . . . . . . . . . . . . . (4,725,965) (56,008,034)
---------- --------------
Net decrease. . . . . . . . . . . . . . . . . . (890,017) $ (9,981,690)
---------- --------------
---------- --------------
- ------------------------------------------------------------------------------
GLOBAL UTILITY FOCUS FUND
- ------------------------------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
- ------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 525,876 $ 5,953,169
Shares issued to shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . . 318,668 3,566,704
---------- --------------
Total issued. . . . . . . . . . . . . . . . . . 844,544 9,519,873
Shares redeemed. . . . . . . . . . . . . . . . . (1,146,723) (12,952,886)
---------- --------------
Net decrease. . . . . . . . . . . . . . . . . . (302,179) $ (3,433,013)
---------- --------------
---------- --------------
- ------------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1995 Shares Amount
- ------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 782,432 $ 7,896,815
Shares issued to shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . . 517,492 5,144,108
---------- --------------
Total issued. . . . . . . . . . . . . . . . . . 1,299,924 13,040,923
Shares redeemed. . . . . . . . . . . . . . . . . (1,545,955) (15,567,315)
---------- --------------
Net decrease. . . . . . . . . . . . . . . . . . (246,031) $ (2,526,392)
---------- --------------
---------- --------------
- ------------------------------------------------------------------------------
HIGH CURRENT INCOME FUND
- ------------------------------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
- ------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 1,949,569 $ 21,919,295
Shares issued to shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . . 1,564,745 17,543,433
---------- --------------
Total issued. . . . . . . . . . . . . . . . . . 3,514,314 39,462,728
Shares redeemed. . . . . . . . . . . . . . . . . (709,604) (7,984,073)
---------- --------------
Net increase. . . . . . . . . . . . . . . . . . 2,804,710 $ 31,478,655
---------- --------------
---------- --------------
- ------------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1995 Shares Amount
- ------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 5,980,682 $ 65,910,048
Shares issued to shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . . 2,792,967 30,645,264
---------- --------------
Total issued. . . . . . . . . . . . . . . . . . 8,773,649 96,555,312
Shares redeemed. . . . . . . . . . . . . . . . . (1,184,474) (13,092,078)
---------- --------------
Net increase. . . . . . . . . . . . . . . . . . 7,589,175 $ 83,463,234
---------- --------------
---------- --------------
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
INTERMEDIATE GOVERNMENT BOND FUND
- ----------------------------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
- ----------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 1,489,928 $ 15,382,724
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . . 147,175 1,535,737
--------- -------------
Total issued. . . . . . . . . . . . . . . . . . 1,637,103 16,918,461
Shares redeemed. . . . . . . . . . . . . . . . . (136,556) (1,425,762)
--------- -------------
Net increase. . . . . . . . . . . . . . . . . . 1,500,547 $ 15,492,699
--------- -------------
--------- -------------
- ----------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1995 Shares Amount
- ----------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 2,173,331 $ 22,410,622
Shares issued to shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . . 161,544 1,670,786
--------- -------------
Total issued. . . . . . . . . . . . . . . . . . 2,334,875 24,081,408
Shares redeemed. . . . . . . . . . . . . . . . . (321,060) (3,238,873)
--------- -------------
Net increase. . . . . . . . . . . . . . . . . . 2,013,815 $ 20,842,535
--------- -------------
--------- -------------
- ----------------------------------------------------------------------------
INTERNATIONAL BOND FUND
- ----------------------------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
- ----------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 473,107 $ 4,758,679
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . . 81,153 820,214
--------- -------------
Total issued. . . . . . . . . . . . . . . . . . 554,260 5,578,893
Shares redeemed. . . . . . . . . . . . . . . . . (465,765) (4,658,877)
--------- -------------
Net increase. . . . . . . . . . . . . . . . . . 88,495 $ 920,016
--------- -------------
--------- -------------
- ----------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1995 Shares Amount
- ----------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 937,367 $ 9,691,745
Shares issued to shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . . 77,732 795,218
--------- -------------
Total issued. . . . . . . . . . . . . . . . . . 1,015,099 10,486,963
Shares redeemed. . . . . . . . . . . . . . . . . (317,282) (3,269,924)
--------- -------------
Net increase. . . . . . . . . . . . . . . . . . 697,817 $ 7,217,039
--------- -------------
--------- -------------
- ----------------------------------------------------------------------------
INTERNATIONAL EQUITY FOCUS FUND
- ----------------------------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
- ----------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 2,960,409 $ 33,642,988
Shares issued to shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . . 334,488 3,669,329
--------- -------------
Total issued. . . . . . . . . . . . . . . . . . 3,294,897 37,312,317
Shares redeemed. . . . . . . . . . . . . . . . . (201,910) (2,301,744)
--------- -------------
Net increase. . . . . . . . . . . . . . . . . . 3,092,987 $ 35,010,573
--------- -------------
--------- -------------
- ----------------------------------------------------------------------------
</TABLE>
135
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
INTERNATIONAL EQUITY FOCUS FUND
- ------------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1995 Shares Amount
- ------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 2,540,187 $ 26,767,717
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . . 898,135 9,331,626
---------- --------------
Total issued. . . . . . . . . . . . . . . . . . 3,438,322 36,099,343
Shares redeemed. . . . . . . . . . . . . . . . . (2,161,108) (21,945,941)
---------- --------------
Net increase. . . . . . . . . . . . . . . . . . 1,277,214 $ 14,153,402
---------- --------------
---------- --------------
- ------------------------------------------------------------------------------
NATURAL RESOURCES FOCUS FUND
- ------------------------------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
- ------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 292,191 $ 3,668,481
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . . 88,476 1,043,135
---------- --------------
Total issued. . . . . . . . . . . . . . . . . . 380,667 4,711,616
Shares redeemed. . . . . . . . . . . . . . . . . (337,250) (4,191,555)
---------- --------------
Net increase. . . . . . . . . . . . . . . . . . 43,417 $ 520,061
---------- --------------
---------- --------------
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
For the Year Ended Dollar
December 31, 1995 Shares Amount
- ------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 474,971 $ 5,198,076
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . . 63,806 835,171
---------- --------------
Total issued. . . . . . . . . . . . . . . . . . 538,777 6,033,247
Shares redeemed. . . . . . . . . . . . . . . . . (601,388) (6,852,669)
---------- --------------
Net decrease. . . . . . . . . . . . . . . . . . (62,611) $ (819,422)
---------- --------------
---------- --------------
- ------------------------------------------------------------------------------
PRIME BOND FUND
- ------------------------------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
- ------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 1,738,225 $ 20,530,452
Shares issued to shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . . 1,314,650 15,751,538
---------- --------------
Total issued. . . . . . . . . . . . . . . . . . 3,052,875 36,281,990
Shares redeemed. . . . . . . . . . . . . . . . . (1,538,839) (18,635,653)
---------- --------------
Net increase. . . . . . . . . . . . . . . . . . 1,514,036 $ 17,646,337
---------- --------------
---------- --------------
- ------------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1995 Shares Amount
- ------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 3,880,829 $ 45,621,465
Shares issued to shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . . 2,612,921 30,585,478
---------- --------------
Total issued. . . . . . . . . . . . . . . . . . 6,493,750 76,206,943
Shares redeemed. . . . . . . . . . . . . . . . . (2,316,349) (27,181,488)
---------- --------------
Net increase. . . . . . . . . . . . . . . . . . 4,177,401 $ 49,025,455
---------- --------------
---------- --------------
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY EQUITY FUND
- -------------------------------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
- -------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 954,616 $ 27,911,113
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . . 3,194,180 90,363,359
----------- --------------
Total issued. . . . . . . . . . . . . . . . . . 4,148,796 118,274,472
Shares redeemed. . . . . . . . . . . . . . . . . (403,467) (11,678,091)
----------- --------------
Net increase. . . . . . . . . . . . . . . . . . 3,745,329 $ 106,596,381
----------- --------------
----------- --------------
- -------------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1995 Shares Amount
- -------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 2,793,165 $ 82,433,320
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . . 651,881 18,002,604
----------- --------------
Total issued. . . . . . . . . . . . . . . . . . 3,445,046 100,435,924
Shares redeemed. . . . . . . . . . . . . . . . . (509,752) (15,180,783)
----------- --------------
Net increase. . . . . . . . . . . . . . . . . . 2,935,294 $ 85,255,141
----------- --------------
----------- --------------
- -------------------------------------------------------------------------------
RESERVE ASSETS FUND
- -------------------------------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
- -------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 3,437,118 $ 3,437,118
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . . 603,246 603,246
----------- --------------
Total issued. . . . . . . . . . . . . . . . . . 4,040,364 4,040,364
Shares redeemed. . . . . . . . . . . . . . . . . (6,064,833) (6,064,833)
----------- --------------
Net decrease. . . . . . . . . . . . . . . . . . (2,024,469) $ (2,024,469)
----------- --------------
----------- --------------
- -------------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1995 Shares Amount
- -------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 6,811,139 $ 6,811,139
Shares issued to shareholders in reinvestment of
dividends and distributions. . . . . . . . . . . 1,582,801 1,582,801
----------- --------------
Total issued. . . . . . . . . . . . . . . . . . 8,393,940 8,393,940
Shares redeemed. . . . . . . . . . . . . . . . . (15,081,975) (15,081,975)
----------- --------------
Net decrease. . . . . . . . . . . . . . . . . . (6,688,035) $ (6,688,035)
----------- --------------
----------- --------------
- -------------------------------------------------------------------------------
WORLD INCOME FOCUS FUND
- -------------------------------------------------------------------------------
For the Six Months Ended Dollar
June 30, 1996 Shares Amount
- -------------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 787,569 $ 7,687,323
Shares issued to shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . . 374,021 3,609,145
----------- --------------
Total issued. . . . . . . . . . . . . . . . . . 1,161,590 11,296,468
Shares redeemed. . . . . . . . . . . . . . . . . (616,354) (5,919,857)
----------- --------------
Net increase. . . . . . . . . . . . . . . . . . 545,236 $ 5,376,611
----------- --------------
----------- --------------
- -------------------------------------------------------------------------------
</TABLE>
136
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
WORLD INCOME FOCUS FUND
- -----------------------------------------------------------------------------
For the Year Ended Dollar
December 31, 1995 Shares Amount
- -----------------------------------------------------------------------------
Shares sold. . . . . . . . . . . . . . . . . . . 481,318 $ 4,592,255
Shares issued to shareholders in reinvestment of
dividends. . . . . . . . . . . . . . . . . . . . 727,949 6,851,555
---------- -------------
Total issued. . . . . . . . . . . . . . . . . . 1,209,267 11,443,810
Shares redeemed. . . . . . . . . . . . . . . . . (1,045,651) (9,863,555)
---------- -------------
Net increase. . . . . . . . . . . . . . . . . . 163,616 $ 1,580,255
---------- -------------
---------- -------------
- -----------------------------------------------------------------------------
</TABLE>
5. CAPITAL LOSS CARRYFORWARD:
At December 31, 1995, the Company had net capital loss carryforwards of
approximately $3,818,000 in the Developing Capital Markets Focus Fund, of which
$91,000 expires in 2002 and $3,727,000 expires in 2003; $3,364,000 in the Global
Strategy Focus Fund, all of which expires in 2003; $3,673,000 in the Global
Utility Focus Fund, of which $1,463,000 expires in 2002 and $2,210,000 expires
in 2003; $1,391,000 in the High Current Income Fund, of which $119,000 expires
in 1999, $301,000 expires in 2002 and $971,000 expires in 2003; $6,977,000 in
the International Equity Focus Fund, all of which expires in 2003; $15,879,000
in the Prime Bond Fund, of which $15,024,000 expires in 2002 and $855,000
expires in 2003; and $1,881,000 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, 1996, the Intermediate Government Bond Fund and Prime Bond Fund held
US Treasury bonds having an aggregate value of approximately $1,014,947 and
$9,814,000, respectively, as collateral for portfolio securities loaned having a
market value of approximately $1,011,090 and $9,510,000, respectively.
7. COMMITMENTS:
At June 30, 1996, the following Portfolios had entered into foreign exchange
contracts, in addition to the contracts listed on the Schedule of Investments,
under which they agreed to purchase and sell various foreign currencies with
values of approximately:
<TABLE>
<CAPTION>
<S> <C> <C>
FUND PURCHASE SELL
- ------------------------------------------------------------------
Development Capital Markets Focus Fund -- $ 1,772,636
Flexible Strategy Fund. . . . . . . . $1,239,739 1,584,152
Global Strategy Focus Fund. . . . . . 3,859,627 5,937,404
International Equity Focus Fund. . . . 655,652 757,802
World Income Focus Fund. . . . . . . . 13,082 --
- ------------------------------------------------------------------
</TABLE>
8. SUBSEQUENT EVENT:
On July 9, 1996, the Board of Directors declared ordinary income dividends per
share payable on July 16, 1996 to shareholders of record as of July 8, 1996 as
follows:
<TABLE>
<CAPTION>
<S> <C>
ORDINARY
FUND INCOME
- -----------------------------------------
American Balanced Fund. . . $ .264270
Basic Value Focus Fund. . . .078764
Equity Growth Fund. . . . . .037634
Flexible Strategy Fund. . . .240460
Global Utility Focus Fund. . .132105
Natural Resources Focus Fund .115139
Quality Equity Fund. . . . . .349679
- -----------------------------------------
</TABLE>
On July 1, 1996, the Board of Directors declared ordinary income dividends per
share payable on July 1, 1996 to shareholders of record as of June 28, 1996 as
follows:
<TABLE>
<CAPTION>
<S> <C>
ORDINARY
FUND INCOME
- -------------------------------------------------
High Current Income Fund. . . . . $ .079624
Intermediate Government Bond Fund .047985
International Bond Fund. . . . . .050031
Prime Bond Fund. . . . . . . . . .059824
World Income Focus Fund. . . . . .060121
- -------------------------------------------------
</TABLE>
137
<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
110 Washington Street
New York, NY 10286
For Developing Capital Markets Focus Fund:
Chase Manhattan Bank N.A.
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
<TABLE>
<CAPTION>
<S> <C> <C>
Arthur Zeikel Vincent T. Lathbury III
President Vice President
Joe Grills Peter Lehman
Director Vice President
Walter Mintz Fredric Lutcher
Director Vice President
Robert S. Salomon Jr. Jay C. Harbeck
Director Vice President
Melvin R. Seiden Robert Parish
Director Vice President
Stephen B. Swensrud Grace Pineda
Director Vice President
Terry K. Glenn Kevin Rendino
Executive Vice President Vice President
N. John Hewitt Thomas R. Robinson
Senior Vice President Vice President
Christopher G. Ayoub Walter Rogers
Vice President Vice President
Andrew Bascand Aldona A. Schwartz
Vice President Vice President
Donald C. Burke Stephen Silverman
Vice President Vice President
Joel Heymsfeld Gerald M. Richard
Vice President Treasurer
Adrian Holmes Ira P. Shapiro
Vice President Secretary
</TABLE>
138
Merrill Lynch Variable Series Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
#16897-6/96
<PAGE>
