UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-3091
Merrill Lynch Series Fund, Inc., including the following portfolios:
Balanced Capital Strategy Portfolio
Core Bond Strategy Portfolio
Fundamental Growth Strategy Portfolio
Global Allocation Strategy Portfolio
High Yield Portfolio
Intermediate Government Bond Portfolio
Large Cap Core Strategy Portfolio
Money Reserve Portfolio
Natural Resources Portfolio
Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, Merrill Lynch
Series Fund, Inc., 800 Scudders Mill Road, Plainsboro, NJ, 08536.
Mailing address: P.O. Box 9011, Princeton, NJ, 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 12/31/02
Date of reporting period: 01/01/02 - 12/31/02
Item 1 - Is shareholder report attached? - Y
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MERRILL LYNCH SERIES FUND, INC.
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THE MERRILL LYNCH FUND OF STRIPPED ("ZERO") US TREASURY SECURITIES, SERIES A, B,
C, D, E, F, G, H, J, K AND L
ANNUAL REPORT
DECEMBER 31, 2002
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MERRILL LYNCH SERIES FUND, INC.
Annual Report
December 31, 2002
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DEAR SHAREHOLDER:
We are pleased to submit this annual report for Merrill Lynch Series Fund, Inc.,
in which we summarize the investment performance of each Portfolio and outline
our views on the investment environment. Performance information for each
Portfolio in Merrill Lynch Series Fund, Inc., excluding the Money Reserves
Portfolio, can be found in the tables on pages 14-19 of this report to
shareholders.
BALANCED CAPITAL STRATEGY PORTFOLIO
During the six-month period ended December 31, 2002, U.S. equity markets fell
sharply as investors struggled through a "crisis of confidence" driven by
uncertain economic and corporate earnings prospects, a series of corporate
governance scandals and geopolitical concerns. During the first half of the
period, the bear market in U.S. equities reached historic proportions with a
decline comparable to that of the third quarter of 1987, which included the
October crash, and the third quarter of 1974, which ended the 1973-1974 bear
market. Most major U.S. market indexes, as well as those of the United Kingdom
and Europe, declined approximately 20%. Decelerating economic growth, continued
reductions in corporate earnings expectations, a growing fear of a military
attack in Iraq and investor capitulation combined to drive prices dramatically
lower.
During the fourth quarter of 2002, stock prices posted gains, beginning their
recovery from the early October lows and repairing some of the damage inflicted
in the third quarter's decline. An accumulation of positive economic reports,
additional monetary policy initiatives by the Federal Reserve Board, corporate
earnings results that generally met or exceeded expectations and attractive
valuation combined to propel the unmanaged benchmark Standard & Poor's (S&P) 500
Index higher. Third quarter gross domestic product growth was revised upward to
a 4% pace, driven by personal consumption expenditures and residential
construction activity, while inflation trends remained benign. The Index of
Leading Economic Indicators rose for the first time since May 2002, housing
activities remained strong and employment trends rebounded. While holiday retail
sales activity was sluggish, auto sales trends remained robust. Third quarter
earnings showed the first year-over-year improvement in six quarters and we
believe should continue to accelerate into 2003. Finally, the dividend yield of
the S&P 500 Index exceeded the interest rate on U.S. Treasury bills for the
first time since 1991. These favorable conditions drove the rebound in equity
prices. For the six-month period ended December 31, 2002, the unmanaged
benchmark S&P 500 Index had a total return of -10.3%. Bonds continued to be the
preferred asset class as sluggish economic growth, low inflation and a flight to
quality drove investors to the fixed income market. U.S. government securities
benefited from their safety and soundness in this uncertain period while the
attractive yields available in the corporate sector of the market enhanced their
appeal. The unmanaged benchmark Merrill Lynch Domestic Bond Master Index had a
+6.5% total return for the six-month period ended December 31, 2002.
For the six-month period ended December 31, 2002, Balanced Capital Strategy
Portfolio had a -8.66% total return. Each asset class within the Fund
underperformed its respective benchmark for the period. Within the equity
portfolio, positive contributions from our positions in the consumer staple,
media and entertainment, pharmaceutical and insurance sectors were more than
offset by weakness in the retail, diversified industrial, technology and capital
markets sectors. Within the fixed income portfolio, the benefits of a
contraction in yield spreads between government and corporate bonds as well as
our neutral duration position of five years were offset by weakness in the high
yield sector of the bond market and credit quality deterioration in selected
holdings.
While near-term prospects for the equity market remain cloudy given sluggish
economic conditions, uncertain corporate earnings prospects and poor investor
psychology, we remain constructive on the longer-term outlook for stocks and
believe our strategy of maintaining a relatively high equity exposure will
ultimately prove rewarding. Reminiscent of the late 1999 and early 2000 period
when high valuations could not be justified and our conservative position proved
appropriate, we believe the current low valuation level
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Simply put, the lower stock prices go, the more value we perceive and the more
opportunities we will seek to exploit. We believe this is the appropriate
strategy to generate above-average risk adjusted returns and expect our
disciplined investment approach to prove valuable as we move through this
challenging period.
During the six-month period ended December 31, 2002, we continued to adjust our
holdings in response to ongoing price volatility. Within the equity portfolio,
we further increased our energy exposure, initiating positions in Devon Energy
Corporation, Murphy Oil Corporation and Exxon Mobil Corporation. Resurgent
economic growth should benefit hydrocarbon demand while supply remains
constrained because of political problems in Iraq and Venezuela and low levels
of drilling activity in North America. These factors should produce improved
energy commodity prices and create a favorable backdrop for the stocks. We
believe that Exxon Mobil remains one of the world's best-managed and most
profitable companies, while Devon and Murphy offer a superior production profile
and exciting exploration prospects. We also increased our technology exposure,
raising positions in Microsoft Corporation and Accenture Ltd. The recent sharp
correction in technology stock prices has afforded us an opportunity to begin to
invest in several superior companies that offer strong competitive positions,
solid financial characteristics, high returns and proven managements, while
selling at attractive valuation levels for the first time in many years. We
further increased our position in the industrial sector, adding to existing
positions in E.I. du Pont de Nemours and Company and United Technologies
Corporation, while introducing Tyco International Ltd. to the Portfolio. Recent
price declines, driven by actual or perceived earnings risk in a decelerating
economy, have driven these stocks to record-low valuation levels, creating
attractive opportunities in the shares of these fine companies. Tyco appears
particularly interesting given the quality of its new management team, low
investor expectations and very low valuation levels. We eliminated holdings in
selected retailers such as The Home Depot, Inc. and Circuit City where
deteriorating fundamental trends have yet to be fully reflected in reduced
valuations, suggesting high near-term risk. We also reduced or eliminated
holdings in a number of companies including Anheuser-Busch Companies, Inc.,
Minnesota Mining and Manufacturing Company (3M Co.), Harrah's Entertainment Inc.
and Wells Fargo & Co., where strong relative stock performance reduced their
attractiveness.
At December 31, 2002, within the fixed income portfolio, investment-grade
corporate bonds continued to represent the largest sector at 67.9% of fixed
income assets, reflecting this sector's very attractive total return potential.
High yield corporate bonds represented 15.5% of fixed income assets and U.S.
Treasury securities represented 16.6% of fixed income assets. This compares to
67.4% in investment-grade corporate bonds, 11.3% in high yield corporate bonds
and 21.3% in U.S. Treasury securities at June 30, 2002. Average quality ratings
declined slightly to Baa1/BBB+, while average yield to maturity fell 38 basis
points (.38%) to 6.7%.
At December 31, 2002, 65.4% of the Portfolio's net assets were invested in
equities, 30.4% in fixed income securities and 3.7% in cash equivalents. This
compares to 66.2% in equities, 30.5% in fixed income securities and 2.3% in cash
equivalents at December 31, 2001. 2002 was a challenging year for the Portfolio.
Our bullish investment position extracted a performance penalty as bonds
significantly outperformed stocks during the year. We anticipate a more
hospitable environment for equities in 2003 as the combination of low interest
rates, high levels of liquidity and rising government spending are expected to
drive an acceleration in economic and corporate earnings growth. Bonds, by
contrast, look expensive, particularly U.S. Treasury securities, as investors
are willing to pay very high prices to avoid risk. Just as the investment
pendulum swung too far in the bullish direction in late 1999 and early 2000, we
believe it has swung too far in the bearish direction today, creating many very
attractive investment opportunities. This view supports our current asset
allocation position and we believe will produce superior returns for our
investors in the periods ahead.
For the 12 months ended December 31, 2002, the Portfolio had a total return of
- -12.89%. This compared to the -22.10% total return for the S&P 500 Index for the
same period. Our equity holdings outpaced the performance of the benchmark S&P
500 Index as positive contributions from our positions in consumer staple, basic
material, media and aerospace/defense sectors overcame weakness in the
technology, pharmaceutical, diversified industrial and capital markets sectors.
During the 12-month period ended December 31, 2002, our bond positions
considerably underperformed the benchmark Merrill Lynch Domestic Bond Master
Index, which had a total return of +10.41%, as deteriorating credit quality,
aggressive rating agency downgrade actions and investors' heightened risk
aversion drove investment-
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grade corporate and high yield corporate spreads to near record wide levels.
Given our concentration in such sectors within the fixed income portfolio, these
conditions produced relatively weak results.
CORE BOND STRATEGY PORTFOLIO
The U.S. economy grew throughout 2002, although the pace of the growth had been
quite uneven from quarter to quarter. For the year as a whole, the economy grew
at an annual pace of approximately 2.5%--modest for sure, but hardly the source
for "double dip" recessionary concerns that dominated the headlines from time to
time. Inflation remained virtually non-existent, with the core personal
consumption expenditure deflator, the inflation gauge watched by the Federal
Reserve Board, rising by only 1.8%.
In past economic recoveries, businesses have contributed significantly to
growth. However, the continuing corporate profit drought in the face of
significant excess capacity left businesses holding back on capital spending and
achieving productivity gains through paring down payrolls. The consumer sector,
on the other hand, held up remarkably well, despite the weak employment outlook,
declining equity markets, and terrorism and geopolitical concerns adding to the
decline in consumer confidence. Nevertheless, the sharp drop in mortgage rates
during the past year contributed to a healthy housing market and a refinancing
boom, helping out the consumer, while heavy economic incentives (such as
zero-cost financing) helped keep consumption of durable goods, such as
automobiles, robust.
Looking ahead, we anticipate the economy to grow at a sub-par rate of below 3%
in 2003, with risks to the forecast more evenly balanced. While the prospects
for a strong fiscal stimulus package from Washington, D.C. have improved
markedly, the timing of the legislation, its scope and its potential positive
impact on the economy over the near term remain uncertain. At the same time, the
possible end of the mortgage refinancing boom and a murky labor market could
further erode consumer confidence, posing downside risks to the economy. Capital
spending by businesses is also likely to remain somewhat subdued as the sectors
that have contributed historically to capital spending--telecommunications,
utility and the energy sectors--still work out past excesses. Government
spending is not likely to contribute very much, given the potential for growing
fiscal deficits at state and local government levels somewhat offsetting the
spending from Washington.
Interest rates essentially followed the economic news through most of the year.
The Federal Reserve Board started the year with the Federal Funds rate at 1.75%,
and an economic bias that was tilted toward "weakness." Following a strong first
quarter in 2002, the Federal Reserve Board at the March Federal Open Market
Committee (FOMC) meeting changed its bias to "balanced," signaling that the
risks toward economic weakness on the one hand and inflationary concerns on the
other were equally balanced. With the economy showing signs of stress in the
third quarter of 2002, the Federal Reserve Board switched the bias once again
toward "weakness" in the economy at the August FOMC meeting. Amid growing
deflationary concerns, and the potential for the economy to slip back into a
recession, the Federal Reserve Board surprised investors at its November FOMC
meeting, by lowering the Federal Funds rate by 50 basis points (.50%) to 1.25%,
but changing the bias once again to "balanced."
Most Treasury yields reacted to the changing economic prospects throughout the
year. Sensing a strong recovery, Treasury yields rose significantly in the first
quarter, with the two-year note rising by 70 basis points, and the 10-year note
and the 30-year bond by 35 basis points. However, with the waning prospects of
an economic recovery, Treasury yields fell sharply from early April with most of
the declines occurring in the third quarter through October 10, 2002. During
this period, two-year note yields declined by 197 basis points, 10-year notes by
177 basis points and 30-year bonds by 111 basis points. Although yields have
backed up toward year end, for the year as a whole, the investment-grade sector
in general, and Treasury issues in particular, had a solid year.
Going forward, we expect the Federal Reserve Board to remain on hold, at least
through the first half of 2003. While a slow-growing economy with little threat
of inflation should keep interest rates range bound, the risks to the fixed
income markets have become somewhat asymmetric. The growing budget deficits at
the Federal and state levels, along with the absolute low levels of current
interest rates, not to mention the stellar performance of the fixed market over
the past three years, give us little reason to hope for a sustained drop in
interest rates. Accordingly, we anticipate interest rates to have an upward bias
and the yield curve to have a bearish steepening bias over the next few months.
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During the 12-month period ended December 31, 2002, Core Bond Strategy Portfolio
had a total return of +9.95%, compared to +10.25% for the Fund's benchmark, the
unmanaged Lehman Brothers Aggregate Bond Index.
As 2002 began, with all signs pointing to a slowly but steadily improving
economy, the portfolio was positioned to take advantage of the interest rate
conditions usually associated with such an environment. The portfolio maintained
overweighted positions between 3%--8% in the major credit sectors, including
corporate bonds, mortgage-backed securities (MBS) and commercial mortgage-backed
securities (CMBS). Through May, these allocations proved to be quite positive
from a performance standpoint. MBS and CMBS had the highest excess return
relative to duration-neutral Treasury securities of any major Lehman Brothers
Aggregate Bond Index sector, and while corporate bond spreads were static during
the period, the yield advantage available made our overweight profitable. In
addition, we kept the duration of the portfolio very close to that of the
benchmark, as we believed that yields would not move much. In spite of the
month-to-month volatility, yields ended May essentially unchanged from the
beginning of the year.
However, during the last two weeks of May, warning signals began to emerge which
caused us to question our optimistic view of the economy and the markets. After
peaking at about 10,350, the Dow Jones Industrial Average plunged more than
2,500 points in just over eight weeks. Consumer confidence, estimates of gross
domestic product growth, and Treasury yields also fell, and by the beginning of
August the markets were in a crisis mode. Although we made major adjustments in
portfolio construction by reducing our corporate and mortgage overweighted
positions to neutral and adding duration, performance suffered slightly as
market liquidity dried up. This caused our restructuring to take longer than
expected, and execution delays invariably cost money in such volatile market
conditions.
In the last quarter of 2002, the summer's extreme volatility gave way to a
market in which Treasury yields have traded in a narrow range. As was true at
the beginning of the year, the credit sectors have again taken a leading role.
While we have reestablished overweight positions in the corporate and mortgage
sectors, we remain mindful of the potential for a return of volatility. As such,
our overweights are smaller--about 2%-3% and more liquid, which will enable us
to move quickly back to a neutral profile should it become necessary. We have
continued to actively manage portfolio duration and to aggressively finance our
to-be-announced mortgage holdings, which are sound strategies designed to
incrementally increase Fund performance.
Going forward, we expect to maintain a portfolio profile reflective of our
pro-cyclical bias--spread sector overweights and duration less than that of the
benchmark. While we believe there is a high probability that there will be a
military conflict with Iraq during the first quarter of 2003, we anticipate that
this will ultimately result in a decline in volatility as uncertainty is removed
from the markets. We expect this to provide the basis for solid, if
unspectacular, economic growth as the year progresses.
FUNDAMENTAL GROWTH STRATEGY PORTFOLIO
For the 12 months ended December 31, 2002, Fundamental Growth Strategy Portfolio
had a total return of -28.47%, compared to a total return of -28.56% for the
Lipper Large Cap Growth Fund Average. For the same 12-month period, the Fund's
benchmark, the unmanaged Standard & Poor's 500 Index, had a return of -22.10%.
This was an unprecedented third consecutive calendar year with negative
investment returns for large cap growth stocks in the post-World War II period.
The most negative influence on the Fund's investment performance during the
fiscal year was the decline of selected holdings in the hospital management and
information technology industries. The single most negative stock investment on
a comparative basis was the Fund's investment holding in AOL Time Warner Inc.
Positive comparative influences on the Fund's investment returns came from
selected holdings in the specialty retailing, restaurant, media, food and
financial services industries. Equity investments in the following companies had
a positive effect on the comparative investment performance over the calendar
year 2002. These companies were Bed, Bath & Beyond Inc., Lowe's Companies, Inc.,
Target Corporation, YUM! Brands, Inc. and Brinker International, Inc. in the
retailing and restaurant industries. Unilever N.V., Anheuser-Busch Companies,
Inc. and Coca-Cola Enterprises Inc. in the food and beverage industries. Also
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Marsh & McLennan Companies, Inc., Wells Fargo & Company., MBNA Corp., T. Rowe
Price Group Inc. and American Express Company in the financial services
industry.
In our opinion, a meaningful influence on stock market valuations is the "war on
terrorism" policy, which is being pursued by the Bush administration.
Historically, on average the U.S. equity markets have not provided above-average
investment returns during periods of pending or actual armed conflict. However,
typically U.S. stock markets have risen meaningfully after the resolution of war
as they did after the conclusion of the Gulf War in 1991 and the end of the
Vietnam War in late 1974 and early 1975.
The Fund's largest sector for investment is consumer discretionary at over 18%
of net assets at year-end 2002. In our opinion, we should be optimistic about
the U.S. Congress passing President Bush's tax bill with potentially positive
developments in terms of increases in the rate of real growth of consumer
spending. More than 16% of the net assets at December 31, 2002 were invested in
stocks in the bank, diversified financials and insurance industries, which could
see price appreciation if overall U.S. equity markets and interest rates rise
with a recovery in the rate of real economic growth in the United States as a
result of fiscal policy initiatives at the Federal level of government.
GLOBAL ALLOCATION STRATEGY PORTFOLIO
Global Allocation Strategy Portfolio seeks to provide high total investment
return through a flexible, value-oriented approach. The Portfolio invests in
U.S. and global equity and fixed income securities and is broadly diversified
across asset classes, countries and securities. Within the equity portion of the
Portfolio, we look for undervalued companies that we believe are expected to
generate above-average rates of return. In selecting fixed income securities, we
focus on total return and credit analysis. Diversification is used as the key
means of risk management.
During the 12-month period ended December 31, 2002, the unmanaged S&P 500 Index
decreased 22.10%, the unmanaged NASDAQ Composite Index declined by 31.26%, the
unmanaged Dow Jones Euro Stoxx 50 Index declined by 35.65%, and the unmanaged
Nikkei 225 was off by 17.96%. The uncertain U.S. economic recovery was mirrored
across economies globally and was reflected by poor equity market performances.
The U.S. equity market enjoyed a small rally in March 2002, however, the overall
trend was downward since that time, with market upturns occurring in August and
October of 2002. The year was marked by high volatility in the equity markets
driven by a rash of negative earnings announcements, regulatory investigations
and corporate accounting irregularities highlighted by the bankruptcies of Enron
Corporation (in December 2001) and WorldCom Inc. (in July 2002). During the
12-month period ended December 31, 2002, the Federal Reserve Board lowered the
Federal Funds rate only once from 1.75% to 1.25% in early November 2002 to its
lowest rate since 1961.
The fiscal year ended December 31, 2002 began in the wake of the Enron
bankruptcy scandal and investors reacted by focusing on the corporate accounting
practices of the market's issuers. Announcements of regulatory investigations
into accounting for off-balance sheet partnerships and transactions disturbed
the markets in January 2002. Credit rating agency actions on corporate debt
ratings also moved to the forefront of investors' attention. Economic and
currency difficulties in Latin America impacted financial and energy companies
with Latin operations. Positive economic news prompted a rally in February 2002,
which continued into March. Federal Reserve Board Chairman Alan Greenspan
commented that the "expansion is well underway." The Federal Open Market
Committee announced that interest rates would be held steady, and until November
2002, they were. Toward the end of March 2002, investors became more focused on
company-specific issues as first quarter earnings releases loomed. The
Securities and Exchange Commission continued to disclose probes into accounting
practices at major U.S. companies. Corporations continued to announce lower
earnings reports, further employee reductions and balance sheet restructuring
initiatives. Liquidity in the capital markets continued to dry up in the context
of credit rating downgrades and continued negative newsflow from corporate
America.
Economic data released in early April 2002 was mixed. The NASDAQ Composite Index
hit a six-month low in late April, while the Dow Jones Industrial Average
touched its February low. The U.S. equity market had a short-lived rally in late
April on news that gross domestic product was up a seasonally adjusted 5.8% for
the first quarter because of strong growth in housing, consumer and government
spending. The month of April closed with news that earnings for S&P 500 Index
companies were down 11% on a year-over-year
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basis, and the expectation that the Federal Reserve Board probably would not
raise rates before the summer.
Global equity markets performed poorly in May and June 2002. The U.S. stock
market continued to slide downward on mixed economic data, which indicated a
weaker-than-expected recovery, coupled with negative newsflow from corporate
America. June brought better economic news with indications of strong growth in
manufacturing, expansion of the service economy and a fall in unemployment
claims for May 2002. Investor confidence was curbed by renewed concerns because
of violence in the Middle East and tensions between India and Pakistan.
Difficulties in Latin America continued as concerns over Brazil's ability to pay
its debt mounted. On the domestic front, questions on the reliability of
reported data were raised as major corporations admitted to wrongdoing. At the
end of June, economic data indicated that the recovery had slowed and that
consumer confidence had slipped further.
In July 2002, Worldcom Inc., with over $9 billion in misstated income, declared
the largest U.S. bankruptcy, sparking a marked sell-off in the equity markets.
Weaker-than-expected economic indicators also contributed to the decline. The
market lifted on the announcement that the International Monetary Fund had
agreed to $30 billion of financing for Brazil, only to drop off dramatically in
September 2002 to hit four-year lows. Consumer confidence fell on concerns about
the faltering economic recovery and the possibility of a military conflict with
Iraq. The U.S. economy grew less than expected at 3.1% in the third quarter of
2002, restrained by a wider trade deficit and a decline in commercial
construction to the lowest level since 1996. The stock market rallied and U.S.
Treasury bond yields rose throughout October and November as investors reacted
to good housing data and as stronger consumer confidence data was reported at
the end of October and November. In November 2002, unemployment rates rose to
6%, matching the April 2002 level, which was an eight-year high for
unemployment. Most world markets fell in December 2002, unable to sustain their
October/November rallies in the shadow of higher unemployment, a weaker U.S.
dollar and the increasing likelihood of a military conflict between the United
States and Iraq.
For the 12-month period ended December 31, 2002, the Portfolio had a total
return of -8.01%. The Portfolio underperformed relative to its Reference
Portfolio, which returned -5.77% for the same period. The Portfolio outperformed
the equity components of its Reference Portfolio, while it underperformed the
fixed income components. For the year ended December 31, 2002, the Reference
Portfolio's components performed as follows: the unmanaged Standard & Poor's
(S&P) 500 Index had a return of -22.10%; the unmanaged FTSE World Index
(Ex-U.S.) had a return of -14.72%; the Merrill Lynch Treasury Index GA05
returned +12.34%; and the Salomon Brothers Non-US$ World Government Bond Index
returned +21.99%.
The Portfolio slightly underperformed relative to its Reference Portfolio for
the first half of the fiscal year ended December 31, 2002, with the Portfolio
returning -2.51% at June 30, 2002, compared to the Reference Portfolio's return
of -2.31%. The Portfolio's underweight in fixed income securities and its
overweight in equities negatively impacted its performance. At the end of the
first half of the year, the U.S. Treasury market began a rally that it sustained
and continued into the fourth quarter of 2002. Although more than 60% of the
Portfolio's fixed income exposure was in high-grade U.S. and European bonds,
which performed quite well over the period, the Portfolio's weighting in fixed
income securities at June 30, 2002 was 30.4% of net assets as compared to its
Reference Portfolio's fixed income weighting of 40%. Adding to the Portfolio's
underperformance was its position in convertible securities and U.S. non-
investment-grade fixed income securities, which closely correlated with the
downward trend in the equity markets. With 65.6% of net assets invested in
equities at June 30, 2002, the Portfolio was overweight compared to its
Reference Portfolio's equity weighting of 60%. During the six-month period, we
increased the Portfolio's weighting across equity markets, notably in the United
States where we increased its position from 34.8% to 39.2%, focusing on
undervalued large-capitalization companies in the financials, health care and
technology sectors. For this same six-month period, the Portfolio's equity
weighting in Europe increased slightly from 11.6% of net assets to 12.7%, and in
the Pacific Basin, we decreased the Portfolio's position from 14.6% of net
assets to 12.4%. The Portfolio's cash position decreased during this period from
7.7% of net assets at December 31, 2001 to 4.0% of net assets at June 30, 2002.
Most of the Portfolio's underperformance relative to its Reference Portfolio
occurred during the second half of the fiscal year ended December 31, 2002. We
decreased the Portfolio's equity exposure during this period, ending the year
with 60.2% of net assets invested in equities. The Portfolio continued to be
overweight in the energy, financials, materials, technology, telecommunications
and utilities sectors. With
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60.2% of net assets invested in equities at December 31, 2002, the Portfolio was
essentially evenly weighted in equities as compared to its Reference Portfolio's
equity weighting of 60%. In addition, the Portfolio was significantly
underweight in fixed income securities at December 31, 2002, with 23.5% of the
Portfolio invested in bonds worldwide compared to the Reference Portfolio's
weighting of 40%. During the second half of the fiscal year, U.S. equities
decreased from 39.2% of net assets to 38.0%, while non-U.S. equity holdings
decreased from 25.9% of net assets to 23.5% for this period. Pacific Basin
equities decreased from 12.4% of net assets to 8.31% and European equity
exposure remained relatively unchanged at approximately 13% of net assets for
the period. We decreased the Portfolio's weighting in U.S. dollar-denominated
fixed income securities from 10.7% of net assets to 8.5%, and decreased its
weighting in euro-denominated bonds by 4%. Most of this reduction in European
bond exposure resulted from a decrease in weighting in high-grade bonds, which
declined during the sixth-month period from 21.5% of net assets to 13.8%. (The
Portfolio's U.S. fixed income exposure includes bonds of non-U.S. issuers
denominated in U.S. dollars.) Approximately 4.3% of the Portfolio's net assets
were invested in convertible securities at December 31, 2002, and are reported
as a portion of the Portfolio's fixed income securities, although some of these
securities may tend to perform similarly to equities. Cash reserves increased
from 4.0% of net assets to 16.3% from June 30, 2002 to December 31, 2002. The
Portfolio's net weighting in the U.S. dollar was 63.6%, including both U.S.
dollar-denominated assets and the portion of the non-U.S. assets hedged back
into dollars.
HIGH YIELD PORTFOLIO
The year ended December 31, 2002 was a volatile period for the high yield asset
class. The year started off strong, but experienced a dramatic sell-off as the
year progressed, plagued by corporate governance issues, credit downgrades,
several prominent defaults, stock market weakness and soft economic growth.
After a dismal third quarter, the market rebounded toward the end of the year,
as November's return of +5.29%, as measured by the unmanaged Credit Suisse First
Boston (CSFB) High Yield Index, was one of the strongest in the history of the
asset class. The rally stemmed from a confluence of positive forces--compelling
valuation, strong inflows into high yield mutual funds, a light new-issue
calendar and a rising equity market. Indications of increased Securities and
Exchange Commission and corporate board vigilance probably also contributed to
the improved investor sentiment.
Against this backdrop, the Portfolio had a total return of -3.47% for the year
ended December 31, 2002, compared to a +3.11% return for the CSFB High Yield
Index for the same period. The Portfolio also lagged the Lipper High Yield
average, which returned -1.82% for the year ended December 31, 2002.
Poor portfolio performance stemmed from adverse sector allocation and security
selection. In particular, overweights in the utility sector, which includes
independent power producers and cable and airlines, were the impacting sector
choices. The power sector was plagued by overcapacity and weak spark spreads in
2002, a situation that is likely to persist this year. We believe that our
holdings have adequate financial flexibility to weather these weak markets and
expect that the sector will begin to improve in 2004 as the economy strengthens.
The cable sector plunged with the revelations of self-dealing at Adelphia
Communications, which filed for bankruptcy in mid-year. Unfortunately, this
issue was a major holding of the Portfolio. Bellwether issuer Charter
Communications Holdings LLC also came under pressure following news of inflated
subscriber counts and a grand jury investigation. The airline sector suffered
several bankruptcies during the year, including US Air Inc. We held an equipment
trust certificate of this issuer.
The high yield market saw strong mutual fund inflows in the first and fourth
quarters of 2002, but outflows in the middle two quarters. Toward the latter
part of the year, a number of high quality new issues came to market. Among the
purchases we made for the Portfolio were: the bonds of yellow pages publishers
Dex Media East LLC and R.H. Donnelley Finance Corporation; Boyd Gaming
Corporation (a multi-state gaming company); homebuilder D.R. Horton Inc.; Del
Monte Corporation (a large producer of processed fruit, vegetables and other
food products); K&F Industries (a privately held manufacturer of aircraft
wheels, brakes and anti-skid systems); Lamar Media Corporation (an owner of
outdoor advertising structures); and SPX Corporation (a diversified industrial
concern). Most of these credits are characterized by stable cash flow, good
margins and a healthy free cash flow. Secondary market purchases (all at
discounts to par) during the year included the bonds of Abitibi-Consolidated
Inc., Anchor Glass, R&M Clark Inc., CMS Energy Corporation, EchoStar DBS
Corporation, Graham Packaging Company, Northwest Pipeline Corporation and
Southern Natural Gas. We sold distressed positions in Autopistas Del Sol,
Adelphia
7
Communications, Neff Corp., PG&E National Energy and RBX Corp. We reduced our
exposure to Insight Communications, Millicom International Cellular, Lyondell
Chemical Company, and Owens-Illinois Inc. for relative value reasons.
At the end of the year, the Fund's largest overweight positions were in
energy--other (refiners, propane distributors, and oil service companies),
manufacturing and packaging. We expect the oil service credits to benefit from
increased drilling activity owing to strong hydrocarbon prices, while refiners
should eventually benefit from tight capacity. Our manufacturing position is a
play on a recovery in the industrial sector. We were encouraged by the Institute
for Supply Management's data for December. We favor packaging because of the
sector's stable end markets. At year end, the Fund's overall credit quality was
equivalent to a "B" rating as measured by Standard & Poor's.
We believe that the high yield market will continue to see healthy fund inflows
in 2003, given the low yields available in other fixed income asset classes. We
also expect the default rate to decline from 2002's lofty figure of 15%, as many
of the poor quality issues of the late 1990s have already defaulted. Moreover,
an improving economy bodes well for the default rate. New-issue volume is also
likely to pick up as we expect significant refinancing activity. However, the
level of price volatility is likely to remain high. In summary, while spreads
have tightened by over 100 basis points (1.00%) since reaching highs last
October, we believe there is still further tightening in store for patient
investors.
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
The U.S. economy grew throughout 2002, although the pace of the growth had been
quite uneven from quarter to quarter. For the year as a whole, the economy grew
at an annual pace of almost 2.5%--modest for sure, but hardly the source for
"double dip" recessionary concerns that dominated the headlines from time to
time. Inflation remained virtually non-existent, with the core personal
consumption expenditure deflator, the inflation gauge watched by the Federal
Reserve Board, rising by only 1.8%.
In past economic recoveries, businesses generally have contributed significantly
to growth. However, the continuing corporate profit drought in the face of
significant excess capacity left businesses holding back on capital spending and
achieving productivity gains through paring down payrolls. The consumer sector,
on the other hand, held up remarkably well, despite the weak employment outlook,
declining equity markets and geopolitical concerns. Nevertheless, the sharp drop
in mortgage rates during the past year contributed to a healthy housing market
and a refinancing boom, helping out the consumer, while heavy economic
incentives (such as zero-cost financing) helped keep consumption of durable
goods, such as automobiles, robust.
Looking ahead, we anticipate the economy to grow at a sub-par rate of below 3%
in 2003, with risks to the forecast more evenly balanced. While the prospects
for a strong fiscal stimulus package from Washington, D.C. have improved
markedly, the timing of the legislation, its scope and its potential positive
impact on the economy over the near term remain uncertain. At the same time, the
possible end of the mortgage refinancing boom and a murky labor market could
further erode consumer confidence, posing downside risks to the economy. Capital
spending by businesses is also likely to remain somewhat subdued as the sectors
that have contributed historically to capital spending--telecommunications,
utility and the energy sectors--still work out past excesses. Government
spending is not likely to contribute very much, given the potential for the
growing fiscal deficits at state and local government levels somewhat offsetting
the spending from Washington.
During the 12 months ended December 31, 2002, Intermediate Government Bond
Portfolio had a total return of +9.81%, compared to a return of +10.19% for the
unmanaged Salomon Smith Barney Government/Mortgage Index.
As we began 2002, the Portfolio was generally positioned near the benchmark as
it pertains to sector exposure, duration and duration distribution. Late in the
first quarter, we began to increase our mortgage weighting in small increments,
as market opportunities became available, bringing the overweight to
approximately 8%. This proved to be beneficial to performance, as mortgages
produced an excess return of more than 130 basis points (1.30%) compared to
equivalent duration Treasury securities.
8
Unfortunately, as we increased the overall exposure to the mortgage component,
the Portfolio became exposed to a sharp decline in interest rates. The mortgage
sector generally has the shortest duration of the three sectors of the portfolio
benchmark, and an 8% overweight position in mortgages resulted in a portfolio
that was 5% short of the benchmark duration. Portfolio performance was adversely
affected as interest rates declined during the middle of the year.
Consequently, since residential mortgages represent approximately 50% of the
overall index, as interest rates continued to decline during the second half of
the year, the duration of the overall index shortened to just over three years.
In order to be more consistent with our peer group of other general U.S.
government funds, we maintained duration slightly longer than that of the
existing Government/Mortgage Index. As market opportunities became available
during the months of September and October, we began to increase the overall
duration of the Portfolio and reduce its sensitivity to prepayment risk by
reducing exposure to residential mortgages in favor of commercial mortgages. The
decision to replace the residential mortgages was based on our belief that there
would be an increase in refinancing activity, which would then translate into
accelerated prepayment speeds, creating a negative impact on the mortgage
sector. While this duration decision helped the Portfolio as interest rates
continued to decline in December, not being fully exposed to residential
mortgages hurt somewhat as mortgages continued to outperform.
Going forward, we expect to continue our emphasis on commercial mortgage product
that has prepayment restrictions in order to protect the Portfolio from large
swings in interest rates, which historically have caused large gyrations in
duration. We will look to add back residential mortgages as well as maintain a
duration that is consistent with our peer group by overweighting lower coupon
mortgages, which tend to prepay much more slowly than higher coupon mortgages,
providing a longer duration. We believe that building a yield advantage in the
Portfolio with spread product will be an effective strategy to gain relative
outperformance in 2003.
LARGE CAP CORE STRATEGY PORTFOLIO
The Portfolio invests in primarily in a diversified portfolio of equity
securities of large cap companies that Fund management selects from among those
included in the Russell 1000 Index. Our investment process attempts to add value
through both security selection and portfolio construction. The Portfolio's
security selection involves the use of quantitative selection
criteria--including earnings momentum, earnings surprise and valuation--and
certain fundamental overrides. Portfolio construction consists of an
optimization process with risk management controlling style, capitalization,
sector and individual security selection.
For the 12-month period ended December 31, 2002, the Portfolio returned -18.74%.
Despite this negative absolute return, on a relative basis the Fund was ahead of
its benchmark, the Russell 1000 Index, which had a return of -21.65% for the
same period. The Portfolio's relative outperformance was primarily a result of
stock selection, particular in consumer discretionary, utilities and financials.
The Portfolio also benefited from underweighted positions in both utilities and
consumer staples.
2002 turned out to be an erratic year for the economy as its fits and starts
confused investors. Our belief is that the resilient U.S. consumer, supported by
modest job growth and real wage gains, is likely to support--but perhaps not
lead--the U.S. economy. As such during the latter half of the year, we increased
our relative weightings in financials, health care and materials, and reduced
our relative weightings in industrials, consumer staples and information
technology. Our largest purchases included Fannie Mae, Freddie Mac, Merck & Co.,
Inc. and The Ryland Group Inc., while our largest sales included Capital One
Financial Corporation, Lowe's Companies, Inc., Philip Morris Companies Inc. and
Union Pacific Corporation. We continue to concentrate on sectors and stocks with
near-term earnings deliverability and reasonable valuations. As a result, we are
above benchmark weights in consumer discretionary, consumer staples and health
care and below benchmark weights in energy, industrials and utilities. We remain
tilted toward the lower end of the permissible capitalization range,
anticipating continued outperformance of mid and large cap securities relative
to mega cap securities.
We believe that after a third consecutive annual decline in equity markets,
equity investors are likely to experience positive returns in 2003. With the end
of the recession, a decline in interest rates, and a nice improvement in
profitability supported by stunning productivity improvement, 2002 could have
been a good year for financial markets. However, issues surrounding economic
uncertainty, corporate governance and geopolitics (including Iraq) caused
investors to sell stocks again as the equity market decline surpassed
9
that of the 1970s in both duration and magnitude. Only the 1930s decline during
the Great Depression was worse. After three years of decline, stocks should
benefit from stimulative fiscal and monetary policy and somewhat more reasonable
valuations, especially when compared to cash and Treasury bonds. This same
stimulative activity is likely to cause a backup in interest rates in the second
half of the year at both the short and long ends of the interest rate curve. In
the early months of the 2003, the significant uncertainty surrounding Iraq is
likely to be resolved--we hope--in a positive way.
We believe that October 2002 marked the low for equity prices for this cycle. An
accommodative monetary policy, low inflation, improving profitability, improved
valuation levels, and a stimulative fiscal policy support higher equity prices.
However, the magnitude of any rise is likely to be limited by high debt levels,
absolute valuation levels, and sub-par economic and earnings growth. Our belief
is that interest rates have seen their trough and will experience modest upward
pressure during the second half of 2003. While volatility is likely to continue,
we believe that over the next five to 10 years, we will experience an "8-5-2
world": 8% return for stocks, 5% for bonds, and 2% for cash. If this forecast is
realized, then equity market averages will not experience new highs until the
next decade. Inside the markets, we expect that the phrase "a stock picker's
market" will be more true than usual. Again, it is likely that intelligent
trading and tactical asset allocation will be rewarded.
MONEY RESERVE PORTFOLIO
For the 12 months ended December 31, 2002, Money Reserve Portfolio had a net
annualized yield of 1.68%. For the six-month period ended December 31, 2002, the
Portfolio had a net annualized yield of 1.48%. The Portfolio had a 7-day yield
of 1.14% at December 31, 2002. The average portfolio maturity was 52 days at
December 31, 2002, compared to 57 days at June 30, 2002.
By December 31, 2002, the U.S. economy appeared to be on track for annual growth
of roughly 2.5%, with growth in the fourth quarter of 2002 declining to an
estimated 1% from a relatively strong 4% in the third quarter. Most analysts do
not expect consumers to continue to support economic growth in 2003 as they had
in 2002. Large-scale layoff announcements in the fourth quarter and uncertainty
over Iraq led to a decline in consumer confidence. Industry surveys indicated
that consumers were still uneasy about the employment situation. These factors
contributed to the anemic holiday season, with modest gains in overall sales
limited by heavy discounting needed to bring buyers into the stores. The
strength in the housing market and mortgage refinancing activity provided
household well-being during the six-month period ended December 31, 2002, but
there are signs this trend is tapering off as mortgage rates have stopped
dropping. After more than two years of retrenchment, corporate balance sheets
improved during the six-month period. It remains unclear if this will lead to an
increase in capital expenditures unless revenues show signs of growth. However,
the combination of low interest rates and proposed fiscal stimulus may yet bring
improvement to the economic outlook.
The impact of economic data continued to be muted in light of other events that
have brought increased volatility to the markets. The short end of the U.S.
Treasury market (two years and under) was subject to a safe haven trade during
the last few months, with U.S. Treasury yields approaching historical lows. The
threat of a U.S. military conflict with Iraq cast a pall on financial markets,
with volatility increasing along with the rhetoric. The decline in the U.S.
dollar compared to other major currencies and recent highs in oil and gold
prices added another element to the uncertainties facing the markets. We believe
that fiscal stimulus will lead to increased borrowing by the U.S. Treasury, and
changes in the borrowing mix are likely to produce structural changes to the
yield curve. These factors influenced the markets during the fourth quarter of
2002, and we believe are likely to continue, to varying degrees, into the first
quarter of 2003.
Our desired portfolio mix and average duration remained relatively unchanged
during the six-month period ended December 31, 2002. To target a 50-day--60-day
average life, we favored an overweighted position in variable rate notes, and
for fixed rate exposure, we preferred callable agency structures. The universe
of available first-tier corporate credits declined throughout the year, thus
collapsing spreads because of scarcity value. Somewhat surprisingly, spreads on
agency issues remained unchanged. We added floating rate agency securities on a
one-month London Interbank Offered Rate (LIBOR) less an eight basis point (.08%)
equivalent, which represented a similar level to that of first-tier commercial
paper. As we expect higher interest rates to eventually produce a steeper curve,
sufficient exposure in variable rate product
10
should provide adequate protection against higher interest rates and allow us
greater flexibility with our fixed rate purchases. Amid the flat-to-inverted
yield curve that existed within the one-year sector, we became increasingly
involved in callable agency paper. Volatility in the two-year sector reached
all-time highs at 60%, compared to a one-year low of 21% and a one-year average
of 30%. We believed the premiums we received by selling these imbedded call
options created valuable investment opportunities, especially given the
inversion of the LIBOR curve in the front end. This scenario enabled us to
generate yields that were otherwise unavailable for the higher-quality credits
that we were primarily focused on. At these volatility levels, callable bonds
offered superior option-adjusted spreads in addition to their higher coupons.
Recently, we have become increasingly cautious of adding any new longer fixed
rate exposure as volatility has declined, quality spreads have collapsed and
U.S. Treasury yields have re-tested their lows. Therefore, we currently do not
see value in callable structures, as their option-adjusted spreads are far less
compelling. We remain content to allow our duration target to passively drift
lower, awaiting better buying opportunities that we believe may arise if
sustained economic growth becomes more apparent and the safe-haven trade
diminishes.
The Portfolio's composition at the end of December and as of our last report to
shareholders is detailed below:
<Table>
<Caption>
- --------------------------------------------------------------------------------
12/31/02 6/30/02
- --------------------------------------------------------------------------------
Certificates of Deposit--Europe............................. -- 1.0%
Certificates of Deposit--Yankee............................. 5.3% 6.4
Commercial Paper............................................ 56.4 53.4
Corporate Notes............................................. 0.8 1.4
Funding Agreements.......................................... 8.0 7.5
Medium-Term Notes........................................... 6.4 9.1
Municipal Bonds............................................. 0.9 --
Promissory Notes............................................ -- 2.0
U.S. Government, Agency & Instrumentality
Obligations--Discount..................................... -- 0.0+
U.S. Government, Agency & Instrumentality Obligations-- Non-
Discount.................................................. 20.2 19.9
Repurchase Agreements....................................... 3.1 --
Liabilities in Excess of Other Assets....................... (1.1) (0.7)
----- -----
Total....................................................... 100.0% 100.0%
===== =====
- --------------------------------------------------------------------------------
</Table>
+ Amount is less than 0.1%.
NATURAL RESOURCES PORTFOLIO
For the year ended December 31, 2002, Natural Resources Portfolio had a total
return of +2.38%. This compared to the -6.11% return of the Lipper Natural
Resources Fund Average and the -22.10% return for the unmanaged Standard &
Poor's 500 Index, for the same period. The positive result for the Portfolio was
primarily because of our focus on investments in natural gas-leveraged
production companies in the United States and Canada, as well as oil service
companies leveraged to natural gas drilling activity.
The investment environment continued to be highly volatile during the year ended
December 31, 2002. Record levels of natural gas in storage following the warm
winter of 2001-2002 had many investors selling out of gas-leveraged equities.
However, we focused on production declines occurring at both major integrated
and independent companies and increased our exposure to gas-leveraged
independent energy companies. Gas production declined 5% year-over-year and we
believe that further production declines are possible in 2003 unless drilling
activity increases. Moreover, it currently appears that gas production from
Canada will also decline for the first time in years, which will limit imports
into our markets. Gas prices have moved above the $5.00 per thousand cubic feet
level, and we expect that prices should remain strong well into 2004 given muted
natural gas drilling activity. Near-term risks to our investment thesis include
fuel switching to oil alternatives, closure of gas-feed petrochemical plants and
further erosion of economic
11
activity. However, potential drought conditions in the Western states may reduce
hydroelectric production, which should increase gas-fired electricity generation
in the summer months. Therefore, we currently intend to maintain our focus on
the natural gas markets given the sector's strong fundamental outlook and
relatively attractive valuation.
We continue to believe that the fundamentals for North American natural gas
remain highly positive, and we continued to focus the Portfolio's investments on
companies exposed to natural gas production. Our largest holding is still EnCana
Corp., the largest independent production company in North America, and we also
invested in a number of smaller gas-leveraged production companies. PEYTO
Exploration & Development Corp. was one of our more successful investments in
this area, appreciating in excess of 100% during the year.
During the year ended December 31, 2002, we remained underweight in the major
integrated oil companies, helping our results relative to the peer group and
benchmarks. Excess refining capacity, lower product demand and rising feedstock
prices in their petrochemical operations led to compressed margins as well as
disappointing earnings. We also maintained below-benchmark weights in the
chemical sector for the same reason. Selected investments in paper and forest
product companies Domtar, Inc. and Sappi Limited delivered strong returns, as we
believe disciplined production management was able to control inventories and
maintain prices. Selected mining stocks in the Portfolio also delivered strong
relative returns. We also made investments in gold mining companies for the
first time in several years. Gold production declined for the first time in
years, and supplies from mine hedging activities also declined in the current
low-interest rate environment. Demand for gold has also been helped by the
depreciating U.S. dollar, which has made the price of gold less expensive for
foreign investors.
At December 31, 2002, the Portfolio was 95.1% invested in stocks and 4.9% in
cash and cash equivalents. More than 82% of the Portfolio's investments were
energy-related companies, with the remaining equity investments predominantly in
metals, forest products and precious metal companies.
IN CONCLUSION
We appreciate your investment in Merrill Lynch Series Fund, Inc., and we look
forward to serving your investment needs in the months and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
February 7, 2003
12
- --------------------------------------------------------------------------------
Merrill Lynch Investment Managers, L.P. (MLIM) regrets to announce the
resignation of Bryan Ison as one of the two co-portfolio managers of Global
Allocation Strategy Portfolio due to health reasons. We thank Bryan for his many
years of extraordinary service and wish him the very best for the future.
The Portfolio will continue to be managed by the other members of the portfolio
team. Dennis W. Stattman CFA(R) is primarily responsible for the day-to-day
management of the Portfolio. Mr. Stattman has been Portfolio Manager of Global
Allocation Strategy Portfolio since 2000.
The investment team includes Dan Chamby CFA(R), Karen Morely CFA(R), Lisa
O'Donnell JD, Catherine Brady Raushcer CFA(R) and James Wei CFA(R), each of whom
has been a member of the Global Allocation Team for seven years or longer.
We are also pleased to announce that Thomas Musmanno and Frank Viola have both
been named Portfolio Managers and are responsible for the day-to-day management
of Intermediate Government Bond Portfolio. Mr. Musmanno has been employed at
MLIM since 1993. Mr. Viola joined MLIM in 1997 as Portfolio Manager in the U.S.
Fixed Income Group. Mr. Musmanno and Mr. Viola are both CFA(R) charterholders.
- --------------------------------------------------------------------------------
13
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Performance Information
December 31, 2002
- --------------------------------------------------------------------------------
RECENT PERFORMANCE RESULTS*
<Table>
<Caption>
- ---------------------------------------------------------------------------------
6-MONTH 12-MONTH
TOTAL TOTAL
AS OF DECEMBER 31, 2002 RETURN RETURN
- ---------------------------------------------------------------------------------
BALANCED CAPITAL STRATEGY PORTFOLIO - 8.66% -12.89%
- ---------------------------------------------------------------------------------
CORE BOND STRATEGY PORTFOLIO + 6.01 + 9.95
- ---------------------------------------------------------------------------------
FUNDAMENTAL GROWTH STRATEGY PORTFOLIO -13.54 -28.47
- ---------------------------------------------------------------------------------
GLOBAL ALLOCATION STRATEGY PORTFOLIO - 5.65 - 8.01
- ---------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO + 1.63 - 3.47
- ---------------------------------------------------------------------------------
INTERMEDIATE GOVERNMENT BOND PORTFOLIO + 5.58 + 9.81
- ---------------------------------------------------------------------------------
LARGE CAP CORE STRATEGY PORTFOLIO -13.64 -18.74
- ---------------------------------------------------------------------------------
NATURAL RESOURCES PORTFOLIO - 4.78 + 2.38
- ---------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------
ONE FIVE YEARS TEN YEARS
YEAR ENDED ENDED ENDED
12/31/02 12/31/02 12/31/02
---------- ---------- ---------
- ---------------------------------------------------------------------------------------------------
BALANCED CAPITAL STRATEGY PORTFOLIO -12.89% + 0.57% +6.20%
- ---------------------------------------------------------------------------------------------------
CORE BOND STRATEGY PORTFOLIO + 9.95 + 6.59 +7.12
- ---------------------------------------------------------------------------------------------------
FUNDAMENTAL GROWTH STRATEGY PORTFOLIO -28.47 + 0.87 +8.61
- ---------------------------------------------------------------------------------------------------
GLOBAL ALLOCATION STRATEGY PORTFOLIO - 8.01 + 0.28 +5.65
- ---------------------------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO - 3.47 - 1.34 +4.67
- ---------------------------------------------------------------------------------------------------
INTERMEDIATE GOVERNMENT BOND PORTFOLIO + 9.81 + 7.12 +7.04
- ---------------------------------------------------------------------------------------------------
LARGE CAP CORE STRATEGY PORTFOLIO -18.74 + 0.06 +6.73
- ---------------------------------------------------------------------------------------------------
NATURAL RESOURCES PORTFOLIO + 2.38 + 7.16 +6.20
- ---------------------------------------------------------------------------------------------------
</Table>
* Total investment returns are based on changes in net asset value for the
periods shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend/payable date.
Insurance-related fees and expenses are not reflected in these returns.
Past results shown should not be considered a representation of future
performance.
14
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Total Investment Return Based on a $10,000 Investment
- --------------------------------------------------------------------------------
BALANCED CAPITAL STRATEGY PORTFOLIO
<Table>
<Caption>
BALANCED CAPITAL STANDARD & POOR'S 500 MERRILL LYNCH DOMESTIC
STRATEGY PORTFOLIO+ INDEX++++ MASTER BOND INDEX+++
------------------- --------------------- ----------------------
12/92 10000.00 10000.00 10000.00
12/93 11666.00 11008.00 11002.00
12/94 11077.00 11153.00 10691.00
12/95 13021.00 15344.00 12671.00
12/96 14886.00 18867.00 13126.00
12/97 17740.00 25162.00 14393.00
12/98 19661.00 32353.00 15670.00
12/99 23634.00 39161.00 15520.00
12/00 22471.00 35596.00 17340.00
12/01 20952.00 31365.00 18783.00
12/02 18251.00 24433.00 20738.00
</Table>
+ Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses. Balanced Capital
Strategy Portfolio invests in U.S. and foreign equity and fixed income
securities.
++ This unmanaged index covers 500 industrial, utility, transportation and
financial companies of the U.S. markets (mostly NYSE issues), representing
about 75% of NYSE market capitalization and 30% of NYSE issues.
+++ This unmanaged index is comprised of the entire universe of domestic
investment grade bonds including U.S. Treasury bonds, corporate bonds and
mortgages.
Past performance is not predictive of future performance.
15
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Total Investment Return Based on a $10,000 Investment (Continued)
- --------------------------------------------------------------------------------
CORE BOND STRATEGY PORTFOLIO
<Table>
<Caption>
LEHMAN BROTHERS AGGREGATE
CORE BOND STRATEGY PORTFOLIO+ BOND INDEX++
----------------------------- -------------------------
12/92 10000.00 10000.00
12/93 11301.00 10975.00
12/94 10721.00 10655.00
12/95 12936.00 12623.00
12/96 13294.00 13081.00
12/97 14464.00 14344.00
12/98 15686.00 15590.00
12/99 15317.00 15462.00
12/00 16783.00 17260.00
12/01 18097.00 18717.00
12/02 19898.00 20636.00
</Table>
+ Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses. Core Bond
Strategy Portfolio normally invests at least 80% of its net assets in fixed
income securities of any kind.
++ This unmanaged market-weighted index is comprised of U.S. Government and
agency securities, mortgage-backed securities issued by the Government
National Mortgage Association, Freddie Mac or Fannie Mae and investment-grade
(rated BBB or better) corporate bonds.
Past performance is not predictive of future performance.
FUNDAMENTAL GROWTH STRATEGY PORTFOLIO
<Table>
<Caption>
FUNDAMENTAL GROWTH STRATEGY
PORTFOLIO+ STANDARD & POOR'S 500 INDEX++
--------------------------- -----------------------------
12/92 10000.00 10000.00
12/93 10863.00 11008.00
12/94 10110.00 11153.00
12/95 13684.00 15344.00
12/96 16362.00 18867.00
12/97 21884.00 25162.00
12/98 30239.00 32353.00
12/99 42029.00 39161.00
12/00 39348.00 35596.00
12/01 31947.00 31365.00
12/02 22852.00 24433.00
</Table>
+ Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses. Fundamental
Growth Strategy Portfolio invests in equity securities of U.S. companies of
any size, but emphasizes equity securities of companies with the potential to
achieve above-average earnings growth.
++ This unmanaged Index covers 500 industrial, utility, transportation and
financial companies of the U.S. markets (mostly NYSE issues), representing
about 75% of NYSE market capitalization and 30% of NYSE issues.
Past performance is not predictive of future performance.
16
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Total Investment Return Based on a $10,000 Investment (Continued)
- --------------------------------------------------------------------------------
GLOBAL ALLOCATION STRATEGY PORTFOLIO
<Table>
<Caption>
GLOBAL ALLOCATION
STRATEGY PORTFOLIO+ REFERENCE PORTFOLIO+++ FTSE WORLD INDEX++
------------------- ---------------------- ------------------
12/92 10000 10000 10000
12/93 12373 11605 11976
12/94 12173 11893 12394
12/95 13444 14629 14492
12/96 15297 16217 16139
12/97 17090 18313 18134
12/98 18712 21976 21945
12/99 22709 24866 27311
12/00 20570 23787 23970
12/01 18836 21934 19781
12/02 17327 20668 15705
</Table>
+ Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses. Global
Allocation Strategy Portfolio invests in a portfolio of equity, debt and
money market securities.
++ This unmanaged market capitalization-weighted Index is comprised of nearly
2000 equities from 24 countries in 12 regions, including the United States.
+++ This unmanaged Reference Portfolio is a weighted Index comprised of 36% of
the unmanaged Standard & Poor's 500 Index, 24% FTSE World Index (Ex-U.S.),
24% Merrill Lynch Treasury Index GA05, and 16% Salomon Brothers World
Government Bond Index (Ex-U.S.).
Past performance is not predictive of future performance.
HIGH YIELD PORTFOLIO
<Table>
<Caption>
CREDIT SUISSE FIRST BOSTON HIGH
HIGH YIELD PORTFOLIO+ YIELD INDEX++
--------------------- -------------------------------
12/92 10000.00 10000.00
12/93 11811.00 11891.00
12/94 11589.00 11775.00
12/95 13573.00 13822.00
12/96 15245.00 15539.00
12/97 16882.00 17501.00
12/98 16006.00 17603.00
12/99 16942.00 18180.00
12/00 16071.00 17233.00
12/01 16344.00 18233.00
12/02 15777.00 18799.00
</Table>
+ Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses. High Yield
Portfolio invests under normal circumstances at least 80% of its net assets
in fixed income securities with lower credit, which means credit quality
equivalent to or below the fourth highest rating level of recognized rating
agencies.
++ This unmanaged market-weighted Index is comprised of high-yield debt
securities rated BBB or lower.
Past performance is not predictive of future performance.
17
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Total Investment Return Based on a $10,000 Investment (Continued)
- --------------------------------------------------------------------------------
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
<Table>
<Caption>
INTERMEDIATE GOVERNMENT BOND SALOMON SMITH BARNEY
PORTFOLIO+ GOVERNMENT/MORTGAGE INDEX++
---------------------------- ---------------------------
12/92 10000.00 10000.00
12/93 11120.00 10941.00
12/94 10588.00 10647.00
12/95 12586.00 12545.00
12/96 12914.00 13007.00
12/97 14001.00 14243.00
12/98 15253.00 15490.00
12/99 15062.00 15399.00
12/00 16815.00 17298.00
12/01 17982.00 18628.00
12/02 19746.00 20527.00
</Table>
+ Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses. Intermediate
Government Bond Portfolio invests at least 80% of its net assets in bonds and
other debt securities that are issued or guaranteed by the U.S. government or
U.S. government agencies or government-sponsored enterprises.
++ This unmanaged Index is comprised of the mortgage component of the Salomon
Smith Barney Broad Investment-Grade Bond Index(SM) composed of 30-year and
15-year GNMA, FNMA and FHLMC securities, and FNMA and FHLMC balloon
mortgages.
Past performance is not predictive of future performance.
LARGE CAP CORE STRATEGY PORTFOLIO
<Table>
<Caption>
LARGE CAP CORE STRATEGY STANDARD & POOR'S 500
PORTFOLIO+ RUSSELL 1000 INDEX++ INDEX+++
----------------------- -------------------- ---------------------
12/92 10000.00 10000.00 10000.00
12/93 11701.00 11018.00 11008.00
12/94 11102.00 11061.00 11153.00
12/95 13403.00 15238.00 15344.00
12/96 15620.00 18658.00 18867.00
12/97 19130.00 24787.00 25162.00
12/98 22107.00 31485.00 32353.00
12/99 29099.00 38069.00 39161.00
12/00 26227.00 35104.00 35596.00
12/01 23612.00 30734.00 31365.00
12/02 19187.00 24079.00 24433.00
</Table>
+ Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses. Large Cap Core
Strategy Portfolio generally invests in at least 80% of its net assets in a
diversified portfolio of equity securities, primarily common stocks, of
large cap companies included at the time of purchase in the Russell 1000
Index.
++ This unmanaged index measures the performance of the 1,000 largest companies
in the Russell 3000 Index, which represents approximately 92% of the total
market capitalization of the Russell 3000 Index. The Portfolio is managed to
this broad-based index, which provides for a better comparison relative to
the S&P 500 Index.
+++ This unmanaged index covers 500 industrial, utility, transportation and
financial companies of the U.S. markets (mostly NYSE issues), representing
about 75% of NYSE market capitalization and 30% of NYSE issues.
Past performance is not predictive of future performance.
18
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Total Investment Return Based on a $10,000 Investment (Concluded)
- --------------------------------------------------------------------------------
NATURAL RESOURCES PORTFOLIO
<Table>
<Caption>
NATURAL RESOURCES PORTFOLIO+ STANDARD & POOR'S 500 INDEX++
---------------------------- -----------------------------
12/92 10000.00 10000.00
12/93 11165.00 11008.00
12/94 11263.00 11153.00
12/95 12639.00 15344.00
12/96 14499.00 18867.00
12/97 12908.00 25162.00
12/98 11156.00 32353.00
12/99 14001.00 39161.00
12/00 19662.00 35596.00
12/01 17818.00 31365.00
12/02 18242.00 24433.00
</Table>
+ Assuming transaction costs and other operating expenses, including advisory
fees. Does not include insurance-related fees and expenses. Natural Resources
Portfolio invests at least 80% of its net assets in equity securities of
companies with substantial natural resource assets and in natural
resource-related derivatives.
++ This unmanaged Index covers 500 industrial, utility, transportation and
financial companies of the U.S. markets (mostly NYSE issues), representing
about 75% of NYSE market capitalization and 30% of NYSE issues.
Past performance is not predictive of future performance.
19
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUNDS, INC.
Balanced Capital Strategy Portfolio
Schedule of Investments as of December 31, 2002 (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES PERCENT OF
COUNTRY INDUSTRY++ HELD COMMON STOCKS VALUE NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
BERMUDA IT CONSULTING & 220,000 +Accenture Ltd. 'A'........................ $ 3,957,800 0.4%
SERVICES
--------------------------------------------------------------------------------------------------------------
INSURANCE 400,000 ACE Limited................................ 11,736,000 1.3
200,000 XL Capital Ltd. (Class A).................. 15,450,000 1.8
------------ -----
27,186,000 3.1
--------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN BERMUDA 31,143,800 3.5
- --------------------------------------------------------------------------------------------------------------------------------
NETHERLANDS OIL & GAS 200,000 Royal Dutch Petroleum Company (NY
Registered Shares)....................... 8,804,000 1.0
--------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN THE NETHERLANDS 8,804,000 1.0
- --------------------------------------------------------------------------------------------------------------------------------
SWITZERLAND FOOD PRODUCTS 60,000 Nestle SA (Registered Shares).............. 12,714,255 1.5
--------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN SWITZERLAND 12,714,255 1.5
- --------------------------------------------------------------------------------------------------------------------------------
UNITED STATES AEROSPACE & DEFENSE 50,000 General Dynamics Corporation............... 3,968,500 0.4
400,000 Honeywell International Inc. .............. 9,600,000 1.1
125,000 Raytheon Company........................... 3,843,750 0.4
250,000 United Technologies Corporation............ 15,485,000 1.8
------------ -----
32,897,250 3.7
--------------------------------------------------------------------------------------------------------------
AIRLINES 110,000 +AMR Corporation........................... 726,000 0.1
--------------------------------------------------------------------------------------------------------------
BANKS 250,000 FleetBoston Financial Corporation.......... 6,075,000 0.7
350,000 Mellon Financial Corporation............... 9,138,500 1.0
75,000 PNC Bank Corp. ............................ 3,142,500 0.4
325,000 Wells Fargo & Co. ......................... 15,232,750 1.7
------------ -----
33,588,750 3.8
--------------------------------------------------------------------------------------------------------------
BEVERAGES 250,000 Anheuser-Busch Companies, Inc.............. 12,100,000 1.4
--------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS 200,000 Masco Corporation.......................... 4,210,000 0.5
--------------------------------------------------------------------------------------------------------------
CHEMICALS 350,000 E.I. du Pont de Nemours and Company........ 14,840,000 1.7
--------------------------------------------------------------------------------------------------------------
COMMUNICATIONS 460,000 +CommScope, Inc. .......................... 3,634,000 0.4
EQUIPMENT
500,000 Motorola, Inc. ............................ 4,325,000 0.5
------------ -----
7,959,000 0.9
--------------------------------------------------------------------------------------------------------------
COMPUTERS & 200,000 Hewlett-Packard Company.................... 3,472,000 0.4
PERIPHERALS
200,000 International Business Machines
Corporation.............................. 15,500,000 1.8
------------ -----
18,972,000 2.2
--------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS 450,000 Citigroup Inc. ............................ 15,835,500 1.8
200,000 Fannie Mae................................. 12,866,000 1.5
375,000 J.P. Morgan Chase & Co. ................... 9,000,000 1.0
200,000 Morgan Stanley............................. 7,984,000 0.9
350,000 Stilwell Financial, Inc.................... 4,574,500 0.5
------------ -----
50,260,000 5.7
--------------------------------------------------------------------------------------------------------------
DIVERSIFIED 400,000 Verizon Communications..................... 15,500,000 1.8
TELECOMMUNICATION
SERVICES
--------------------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & 350,000 +Agilent Technologies, Inc. ............... 6,286,000 0.7
INSTRUMENTS
--------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS 150,000 General Mills, Inc. ....................... 7,042,500 0.8
--------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS 250,000 Aetna Inc. (New Shares).................... 10,280,000 1.1
& SERVICES
250,000 HCA Inc. .................................. 10,375,000 1.2
------------ -----
20,655,000 2.3
--------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & 300,000 Carnival Corporation....................... 7,485,000 0.9
LEISURE
500,000 McDonald's Corporation..................... 8,040,000 0.9
50,000 Starwood Hotels & Resorts Worldwide,
Inc. .................................... 1,187,000 0.1
------------ -----
16,712,000 1.9
--------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS 225,000 Kimberly-Clark Corporation................. 10,680,750 1.2
--------------------------------------------------------------------------------------------------------------
IT CONSULTING & 75,000 +Computer Sciences Corporation............. 2,583,750 0.3
SERVICES
--------------------------------------------------------------------------------------------------------------
</Table>
20
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUNDS, INC.
Balanced Capital Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES PERCENT OF
COUNTRY INDUSTRY++ HELD COMMON STOCKS VALUE NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
UNITED STATES INDUSTRIAL 325,000 General Electric Company................... $ 7,913,750 0.9%
(CONCLUDED) CONGLOMERATES
225,000 Tyco International Ltd. ................... 3,843,000 0.4
------------ -----
11,756,750 1.3
--------------------------------------------------------------------------------------------------------------
INSURANCE 275,000 American International Group, Inc. ........ 15,908,750 1.8
200,000 Prudential Financial, Inc. ................ 6,348,000 0.7
------------ -----
22,256,750 2.5
--------------------------------------------------------------------------------------------------------------
MACHINERY 250,000 Dover Corporation.......................... 7,290,000 0.8
200,000 ITT Industries, Inc. ...................... 12,138,000 1.4
320,000 +SPX Corporation........................... 11,984,000 1.4
------------ -----
31,412,000 3.6
--------------------------------------------------------------------------------------------------------------
MEDIA 400,000 +Clear Channel Communications, Inc. ....... 14,916,000 1.7
600,000 +Liberty Media Corporation (Class A)....... 5,364,000 0.6
200,000 The New York Times Company (Class A)....... 9,146,000 1.0
50,000 Tribune Company............................ 2,273,000 0.3
375,000 +Viacom, Inc. (Class B).................... 15,285,000 1.7
250,000 The Walt Disney Company.................... 4,077,500 0.5
------------ -----
51,061,500 5.8
--------------------------------------------------------------------------------------------------------------
METALS & MINING 250,000 Alcoa Inc. ................................ 5,695,000 0.7
200,000 Nucor Corporation.......................... 8,260,000 0.9
------------ -----
13,955,000 1.6
--------------------------------------------------------------------------------------------------------------
MULTILINE RETAIL 340,000 The May Department Stores Company.......... 7,813,200 0.9
--------------------------------------------------------------------------------------------------------------
OIL & GAS 150,000 Anadarko Petroleum Corporation............. 7,185,000 0.8
250,000 Devon Energy Corporation................... 11,475,000 1.3
125,000 Exxon Mobil Corporation.................... 4,367,500 0.5
150,000 Murphy Oil Corporation..................... 6,427,500 0.7
------------ -----
29,455,000 3.3
--------------------------------------------------------------------------------------------------------------
PAPER & FOREST 300,000 International Paper Company................ 10,491,000 1.2
PRODUCTS
200,000 Weyerhaeuser Company....................... 9,842,000 1.1
------------ -----
20,333,000 2.3
--------------------------------------------------------------------------------------------------------------
PERSONAL PRODUCTS 300,000 Avon Products, Inc. ....................... 16,161,000 1.8
250,000 The Gillette Company....................... 7,590,000 0.9
------------ -----
23,751,000 2.7
--------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 200,000 Pharmacia Corporation...................... 8,360,000 0.9
250,000 Schering-Plough Corporation................ 5,550,000 0.6
250,000 Wyeth...................................... 9,350,000 1.1
------------ -----
23,260,000 2.6
--------------------------------------------------------------------------------------------------------------
SEMICONDUCTOR 1,000,000 +Agere Systems Inc. (Class A).............. 1,440,000 0.2
EQUIPMENT & PRODUCTS
350,001 +Agere Systems Inc. (Class B).............. 490,001 0.1
300,000 +Micron Technology, Inc. .................. 2,922,000 0.3
135,000 Texas Instruments Incorporated............. 2,026,350 0.2
------------ -----
6,878,351 0.8
--------------------------------------------------------------------------------------------------------------
SOFTWARE 200,000 +Microsoft Corporation..................... 10,342,000 1.2
--------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL 475,000...... The Gap, Inc. ............................. 7,372,000 0.8
600,000 The Limited, Inc. ......................... 8,358,000 1.0
------------ -----
15,730,000 1.8
--------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS IN THE UNITED STATES 523,017,551 59.4
--------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN COMMON STOCKS
(COST--$706,913,942) 575,679,606 65.4
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
21
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUNDS, INC.
Balanced Capital Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
FACE PERCENT OF
COUNTRY AMOUNT FIXED INCOME SECURITIES VALUE NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
ARGENTINA US$ 2,850,000 Pecom Energia SA, 8.125% due
7/15/2010(a)............................. $ 1,909,500 0.2%
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES IN ARGENTINA 1,909,500 0.2
- --------------------------------------------------------------------------------------------------------------------------------
CANADA 5,500,000 Anderson Exploration Ltd., 6.75% due
3/15/2011................................ 6,031,503 0.7
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES IN CANADA 6,031,503 0.7
- --------------------------------------------------------------------------------------------------------------------------------
CHILE 4,000,000 Empresa Nacional de Electricidad SA
(Endesa), 7.325% due 2/01/2037........... 3,691,464 0.4
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES IN CHILE 3,691,464 0.4
- --------------------------------------------------------------------------------------------------------------------------------
MEXICO 6,000,000 Transportacion Maritima Mexicana, SA de CV,
10.25% due 11/15/2006.................... 3,720,000 0.4
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES IN MEXICO 3,720,000 0.4
- --------------------------------------------------------------------------------------------------------------------------------
UNITED STATES 8,000,000 AOL Time Warner Inc., 6.875% due
5/01/2012................................ 8,448,832 1.0
3,000,000 BankBoston NA, 6.375% due 3/25/2008........ 3,283,530 0.4
8,000,000 Boise Cascade Corporation, 7.35% due
10/11/2004............................... 8,173,408 0.9
5,000,000 Browning-Ferris Industries, Inc., 6.375%
due 1/15/2008............................ 4,709,745 0.5
5,000,000 Champion Enterprises, Inc., 7.625% due
5/15/2009................................ 2,206,250 0.3
5,000,000 Champion International Corp., 6.65% due
12/15/2037............................... 5,566,370 0.6
6,000,000 The Coastal Corporation, 6.70% due
2/15/2027................................ 4,680,000 0.5
5,000,000 Columbia/HCA Healthcare Corp., 8.70% due
2/10/2010................................ 5,704,120 0.7
Comcast Cable Communications:
6,000,000 6.875% due 6/15/2009..................... 6,383,358 0.7
1,000,000 8.50% due 5/01/2027...................... 1,042,397 0.1
5,000,000 Conagra Inc., 6.70% due 8/01/2027.......... 5,695,885 0.6
6,500,000 Equistar Chemicals LP, 6.50% due
2/15/2006................................ 5,720,000 0.7
4,000,000 FleetBoston Financial Corporation, 6.375%
due 5/15/2008............................ 4,372,544 0.5
6,500,000 GATX Capital Corporation, 6.86% due
10/13/2005............................... 6,076,330 0.7
General Electric Capital Corporation:
4,500,000 4.25% due 1/15/2008...................... 4,614,993 0.5
5,000,000 6% due 6/15/2012......................... 5,398,375 0.6
General Motors Acceptance Corp.:
8,000,000 5.85% due 1/14/2009...................... 7,686,328 0.9
3,000,000 8% due 11/01/2031........................ 3,016,335 0.3
4,300,000 Giant Industries, Inc., 9% due
9/01/2007(a)............................. 2,967,000 0.3
6,000,000 The Goodyear Tire & Rubber Company, 6.625%
due 12/01/2006........................... 4,864,716 0.6
5,500,000 Harris Corporation, 6.35% due 2/01/2028.... 5,755,277 0.7
HealthSouth Corporation:
3,000,000 7.375% due 10/01/2006.................... 2,595,000 0.3
5,000,000 7.625% due 6/01/2012..................... 4,125,000 0.5
8,000,000 Hertz Corp., 6.25% due 3/15/2009........... 7,383,184 0.8
7,000,000 Household Finance Corp., 6.50% due
11/15/2008............................... 7,526,491 0.9
1,000,000 International Paper Company, 5.85% due
10/30/2012(a)............................ 1,047,042 0.1
2,000,000 Kennametal Inc., 7.20% due 6/15/2012....... 2,122,148 0.2
7,000,000 News America Inc., 6.75% due 1/09/2038..... 7,165,886 0.8
3,000,000 Nextel Communications, Inc., 9.375% due
11/15/2009............................... 2,715,000 0.3
2,000,000 Northwest Airlines, Inc., 8.875% due
6/01/2006................................ 1,300,000 0.2
5,000,000 PNC Funding Corp., 6.125% due 2/15/2009.... 5,400,200 0.6
5,000,000 Panamerican Beverages Inc., 7.25% due
7/01/2009................................ 5,024,240 0.6
</Table>
22
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Balanced Capital Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Concluded) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
FACE PERCENT OF
COUNTRY AMOUNT FIXED INCOME SECURITIES VALUE NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
UNITED STATES US$ 7,500,000 Provident Bank, 6.375% due 1/15/2004....... $ 7,827,518 0.9%
(CONCLUDED)
8,000,000 Raytheon Company, 6.15% due 11/01/2008..... 8,630,632 1.0
5,500,000 Sprint Capital Corporation, 6.90% due
5/01/2019................................ 4,510,000 0.5
7,000,000 Transocean Offshore, 6.625% due 4/15/2011.. 7,707,665 0.9
U.S. Treasury Notes:
35,000,000 4.75% due 11/15/2008..................... 38,204,670 4.3
5,500,000 5.50% due 5/15/2009...................... 6,240,135 0.7
5,000,000 Ultramar Diamond Shamrock, 6.75% due
10/15/2037............................... 5,032,725 0.6
8,000,000 Univision Communication Inc., 7.85% due
7/15/2011................................ 9,073,360 1.0
2,000,000 Washington Mutual Bank, 5.50% due
1/15/2013................................ 2,039,002 0.2
5,000,000 Waste Management Inc., 6.375% due
11/15/2012(a)............................ 5,145,245 0.6
5,000,000 Weyerhaeuser Company, 6.75% due
3/15/2012................................ 5,451,690 0.6
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES IN THE UNITED
STATES 252,632,626 28.7
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FIXED INCOME
SECURITIES (COST--$264,057,219) 267,985,093 30.4
- --------------------------------------------------------------------------------------------------------------------------------
<Caption>
PARTNERSHIP
INTEREST SHORT-TERM SECURITIES
- --------------------------------------------------------------------------------------------------------------------------------
$ 32,601,320 Merrill Lynch Liquidity Series, LLC Cash
Sweep Series II*......................... 32,601,320 3.7
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SHORT-TERM SECURITIES
(COST--$32,601,320)........................ 32,601,320 3.7
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST--$1,003,572,481)..................... 876,266,019 99.5
OTHER ASSETS LESS LIABILITIES.............. 4,491,545 0.5
------------ -----
NET ASSETS................................. $880,757,564 100.0%
============ =====
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Non-income producing security.
(a) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
++ For Portfolio compliance purposes, "Industry" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Portfolio management.
This definition may not apply for purposes of this report, which may combine
such industry sub-classifications for reporting ease. These industry
classifications are unaudited.
* Investments in companies considered to be an affiliate of 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>
- ---------------------------------------------------------------------------------------------------------------------
INTEREST
AFFILIATE NET ACTIVITY NET COST INCOME
- ---------------------------------------------------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC Cash Sweep Series II $32,601,320 $32,601,320 $59,520
- ---------------------------------------------------------------------------------------------------------------------
</Table>
See Notes to Financial Statements.
23
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Core Bond Strategy Portfolio
Schedule of Investments as of December 31, 2002 (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
S&P MOODY'S FACE
INDUSTRIES RATING++ RATING++ AMOUNT ISSUE VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS
- ----------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT & Fannie Mae:
AGENCY OBLIGATIONS--12.1% NR* Aaa $ 3,710,000 7% due 7/15/2005......................... $ 4,159,392
NR* Aaa 2,260,000 5.25% due 6/15/2006...................... 2,462,821
NR* Aaa 630,000 7.125% due 3/15/2007..................... 737,044
AAA Aaa 1,360,000 6.375% due 6/15/2009..................... 1,573,666
NR* Aaa 950,000 6% due 5/15/2011......................... 1,073,845
NR* Aaa 1,570,000 7.125% due 1/15/2030..................... 1,937,448
Freddie Mac:
NR* Aaa 3,120,000 7% due 7/15/2005......................... 3,500,010
NR* Aaa 1,780,000 6.625% due 9/15/2009..................... 2,088,011
------------
17,532,237
- ----------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BONDS & U.S. Treasury Bonds:
NOTES--10.1% AAA Aaa 810,000 7.50% due 11/15/2016..................... 1,059,265
AAA Aaa 490,000 8.125% due 8/15/2019..................... 682,517
AAA Aaa 1,710,000 7.25% due 8/15/2022...................... 2,225,471
AAA Aaa 350,000 6.25% due 8/15/2023...................... 411,195
AAA Aaa 350,000 6.625% due 2/15/2027..................... 432,387
AAA Aaa 735,000 5.375% due 2/15/2031..................... 801,265
U.S. Treasury Notes:
AAA Aaa 65,000 1.875% due 9/30/2004..................... 65,454
AAA Aaa 565,000 7.50% due 2/15/2005...................... 633,550
AAA Aaa 2,190,000 6.50% due 5/15/2005...................... 2,430,985
AAA Aaa 350,000 5.75% due 11/15/2005..................... 386,901
AAA Aaa 940,000 6.25% due 2/15/2007...................... 1,078,467
AAA Aaa 786,000 3.25% due 8/15/2007...................... 805,466
AAA Aaa 1,150,000 6.125% due 8/15/2007..................... 1,322,410
AAA Aaa 100,000 3% due 11/15/2007........................ 101,203
AAA Aaa 820,000 4.75% due 11/15/2008..................... 895,081
AAA Aaa 490,000 6.50% due 2/15/2010...................... 585,703
AAA Aaa 710,000 5% due 2/15/2011......................... 780,113
------------
14,697,433
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(COST $30,655,293)--22.2% 32,229,670
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
OBLIGATIONS+
- ----------------------------------------------------------------------------------------------------------------------------------
PASS-THROUGH Fannie Mae:
SECURITIES--32.3% NR* Aaa 35,971 7% due 2/01/2016......................... 38,237
NR* Aaa 434,951 7% due 2/01/2016......................... 462,349
NR* Aaa 1,075,472 6% due 6/01/2016......................... 1,125,405
NR* Aaa 657,108 6% due 6/01/2016......................... 687,617
NR* Aaa 1,031,887 6% due 2/01/2017......................... 1,079,796
NR* Aaa 486,006 8% due 9/01/2030......................... 522,425
NR* Aaa 2,569,119 7% due 2/01/2031......................... 2,703,054
NR* Aaa 7,670,295 6.50% due 6/01/2031...................... 7,990,108
NR* Aaa 586,422 7% due 9/01/2031......................... 616,803
NR* Aaa 770,734 7% due 7/01/2032......................... 810,692
NR* Aaa 873,067 7% due 8/01/2032......................... 918,299
NR* Aaa 747,733 TBA(c)................................... 788,105
Freddie Mac:
NR* Aaa 1,499,999 6.50% due 6/01/2016...................... 1,586,258
NR* Aaa 352,181 7% due 4/01/2032......................... 370,164
NR* Aaa 784,664 7% due 4/01/2032......................... 824,730
NR* Aaa 620,806 7% due 4/01/2032......................... 652,720
NR* Aaa 1,727,012 7% due 9/01/2032......................... 1,815,194
NR* Aaa 1,221,976 6.50% due 10/01/2032..................... 1,273,436
NR* Aaa 700,000 5% due TBA(c)............................ 718,825
NR* Aaa 700,000 5.50% due TBA(c)......................... 714,676
NR* Aaa 7,800,000 6% due TBA(c)............................ 8,075,660
NR* Aaa 2,000,000 6% due TBA(c)............................ 2,071,308
NR* Aaa 3,894,332 6.50% due TBA(c)......................... 4,052,773
NR* Aaa 4,500,000 7.50% due TBA(c)......................... 4,763,916
NR* Aaa 1,600,000 8% due TBA(c)............................ 1,715,027
</Table>
24
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Core Bond Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
S&P MOODY'S FACE U.S. GOVERNMENT AGENCY
INDUSTRIES RATING++ RATING++ AMOUNT MORTGAGE-BACKED OBLIGATIONS VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
PASS-THROUGH SECURITIES NR* Aaa $ 624,877 Government National Mortgage Association,
(CONCLUDED) 6.50% due 10/15/2031..................... $ 656,551
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-
BACKED OBLIGATIONS
(COST--$46,143,469)--32.3% 47,034,128
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
ASSET-BACKED SECURITIES+
- ----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 897,000 CIT Equipment Collateral, 2002-VTI A2,
2.90% due 6/21/2004...................... 901,580
California Infrastructure PG&E:
AAA Aaa 300,000 1997-1 A6, 6.38% due 9/25/2008........... 327,642
AAA Aaa 500,000 1997-1 A7, 6.42% due 9/25/2008........... 544,282
AAA Aaa 606,964 EQCC Home Equity Loan Trust, 1999-A3F,
5.915% due 11/20/2024.................... 619,273
Household Automotive Trust:
AAA Aaa 1,150,000 2002-1, Class A2, 2.75% due 5/17/2005.... 1,157,105
AAA Aaa 700,000 2002-3, Class A3A, 2.75% due 6/18/2007... 710,332
AAA Aaa 886,796 Household Home Equity Loan Trust, 2002-2 A,
1.688% due 4/20/2032..................... 885,275
AAA Aaa 1,100,000 Ikon Receivables LLC, 2002-1 A2, 2.91% due
2/15/2005................................ 1,104,599
A+ A2 450,596 MBNA Master Credit Card Trust, 1999-F B,
1.79% due 1/16/2007...................... 450,506
AAA Aaa 1,017,686 Option One Mortgage Loan Trust, 2002-4 A,
1.68% due 7/25/2032...................... 1,014,057
AAA NR* 1,100,000 Residential Asset Securities Corporation,
2002-KS8 A2, 3.04% due 6/25/2023......... 1,108,594
A A2 900,000 Superior Wholesale Inventory Financing
Trust, 2001-A7, 1.82% due 6/15/2006...... 897,894
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(COST -- $9,687,583)--6.7% 9,721,139
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
NON-AGENCY MORTGAGE-BACKED SECURITIES+
- ----------------------------------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE AAA Aaa 429,338 ABN AMRO Mortgage Corporation, 2001-8 2A1,
OBLIGATIONS--6.1% 6.50% due 1/25/2032...................... 434,379
NR* Aaa 304,520 Bank of America Mortgage Securities, 2002-
IA 1B, 4.64% due 8/25/2032............... 306,571
NR* Aaa 940,640 Chase Mortgage Finance Corporation, 1999-
S4 A1, 6.50% due 4/25/2029............... 966,114
AAA Aaa 617,040 Countrywide Asset-Backed Certificates,
6.102% due 8/25/2026..................... 621,516
NR* Aaa 706,052 Countrywide Home Loan, Series 2001-24 1A6,
6% due 1/25/2032......................... 721,445
NR* Aaa 290,027 Freddie Mac, 5.57% due 7/15/2022........... 291,992
AAA NR* 577,083 General Motors Acceptance Corporation,
Mortgage Corporation Loan Trust, 6.25%
due 12/25/2031........................... 588,619
AAA Aaa 731,940 Structured Asset Securities Corporation,
2002-9 A2, 1.68% due 10/25/2027.......... 726,616
Washington Mutual Inc.:
AAA Aaa 1,500,000 2002-AR4 A7, 5.574% due 4/25/2032........ 1,537,924
AAA NR* 792,981 2002-S3 1A1, 6.50% due 6/25/2032......... 813,783
Wells Fargo Mortgage-Backed Securities
Trust:
AAA NR* 1,491,683 2002-3 A1, 5.50% due 3/25/2032........... 1,518,608
AAA Aaa 350,142 2002-A A2, 5.90% due 3/25/2032........... 351,251
------------
8,878,818
- ----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL MORTGAGE-BACKED AAA Aaa 2,000,000 Banc of America Commercial Mortgage Inc.,
SECURITIES--6.9% 7.197% due 5/15/2010..................... 2,335,517
NR* Aaa 1,000,000 First Union-Chase Commercial Mortgage,
1999-C2 A2, 6.645% due 6/15/2031......... 1,131,925
AAA NR* 1,500,000 General Electric Capital Commercial
Mortgage Corporation, 2001-3 A2, 6.07%
due 6/10/2038............................ 1,655,301
AAA Aaa 1,400,000 Greenwich Capital Commercial Funding
Corporation, 2002-C1 A4, 4.948% due
1/11/2035................................ 1,429,094
</Table>
25
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Core Bond Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
S&P MOODY'S FACE
INDUSTRIES RATING++ RATING++ AMOUNT NON-AGENCY MORTGAGE-BACKED SECURITIES VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL MORTGAGE-BACKED AAA Aaa $ 1,000,000 LB-UBS Commercial Mortgage Trust, 2002- C1
SECURITIES (CONCLUDED) A3, 6.226% due 3/15/2026................. $ 1,114,342
NR* NR* 2,250,000 Security Life of Denver, 4.66% due
3/31/2003................................ 2,328,532
------------
9,994,711
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-BACKED
SECURITIES (COST -- $17,938,983)--13.0% 18,873,529
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
CORPORATE BONDS & NOTES
- ----------------------------------------------------------------------------------------------------------------------------------
BANKING--3.4% A- A2 350,000 BB&T Corporation, 4.75% due 10/01/2012..... 351,255
A- A1 200,000 Banc One Corp., 8% due 4/29/2027........... 251,104
Bank of America Corporation:
A+ Aa2 260,000 5.875% due 2/15/2009..................... 285,301
A+ Aa2 345,000 5.125% due 11/15/2014.................... 350,882
A+ Aa3 190,000 The Bank of New York, 5.20% due
7/01/2007................................ 204,530
Capital One Bank:
BBB- Baa2 37,000 6.50% due 7/30/2004...................... 36,186
BBB- Baa2 150,000 6.875% due 2/01/2006..................... 145,118
A A2 210,000 Corporacion Andina de Fomento, 6.875% due
3/15/2012................................ 220,153
AAA Aaa 505,000 European Investment Bank, 7.125% due
9/18/2006................................ 584,633
BB+ NR* 105,000 Hudson United Bancorp Inc., 8.20% due
9/15/2006................................ 114,584
A+ Aa3 130,000 Marshall & Ilsley Bank, 4.125% due
9/04/2007................................ 134,232
A A1 480,000 Mellon Funding Corporation, 5% due
12/01/2014............................... 487,870
A- A2 140,000 Regions Financial Corporation, 6.375% due
5/15/2012................................ 156,137
A+ Aa3 175,000 Suntrust Bank, 5.45% due 12/01/2017........ 172,813
A Aa3 440,000 US Bancorp, 1.97% due 9/16/2005(a)......... 440,277
A Aa3 220,000 Wachovia Corporation, 4.95% due
11/01/2006............................... 234,755
Washington Mutual Inc.:
BBB+ A3 200,000 7.50% due 8/15/2006...................... 224,892
BBB+ A3 270,000 4.375% due 1/15/2008..................... 275,122
Wells Fargo Company:
A+ Aa2 280,000 5.125% due 2/15/2007..................... 300,724
A+ Aa2 45,000 6.45% due 2/01/2011...................... 50,517
------------
5,021,085
- ----------------------------------------------------------------------------------------------------------------------------------
CANADIAN CORPORATES--0.6% AAA Aaa 100,000 Canada Government Bond, 5.25% due
11/05/2008............................... 110,518
AA Aa2 435,000 Province of Ontario, 3.50% due 9/17/2007... 441,890
A+ A1 310,000 Province of Quebec, 5% due 7/17/2009....... 331,258
A+ Aa3 40,000 Province of Saskatchewan, 8% due
7/15/2004................................ 43,525
------------
927,191
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCE--6.2% A+ A2 250,000 American Honda Finance, 2.031% due
10/03/2005(a)(b)......................... 249,761
Chrysler Financial Company LLC:
BBB+ A3 226,000 1.60% due 2/03/2003...................... 225,928
BBB+ A3 226,000 1.59% due 3/06/2003...................... 225,840
A A3 350,000 CountryWide Home Loan, 5.625% due
7/15/2009................................ 370,350
A- Baa1 325,000 Equifax Inc., 4.95% due 11/01/2007(b)...... 330,687
Ford Motor Credit Company:
BBB A3 1,800,000 2.492% due 4/17/2003..................... 1,796,153
BBB A3 750,000 6.50% due 1/25/2007...................... 740,789
BBB A3 205,000 7.25% due 10/25/2011..................... 199,194
General Motors Acceptance Corp.:
BBB A2 2,500,000 3.23% due 10/16/2003..................... 2,490,120
BBB A2 385,000 6.875% due 8/28/2012..................... 379,514
BBB A2 99,000 8% due 11/01/2031........................ 99,539
</Table>
26
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Core Bond Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
S&P MOODY'S FACE
INDUSTRIES RATING++ RATING++ AMOUNT CORPORATE BONDS & NOTES VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCE (CONCLUDED) AA- A1 $ 210,000 International Lease Finance Corporation,
4.375% due 12/15/2005.................... $ 212,510
AAA Aaa 505,000 KFW International Finance, 2.50% due
10/17/2005............................... 508,172
BBB Baa2 155,000 MBNA America Bank NA, 7.125% due
11/15/2012............................... 162,209
MBNA Corporation:
BBB Baa2 277,000 6.25% due 1/17/2007...................... 289,161
BBB Baa2 100,000 5.625% due 11/30/2007 102,132
AA Aa3 225,000 Principal Life Global, 6.25% due
2/15/2012(b)............................. 238,498
AA Aa3 85,000 Texaco Capital Inc., 8.625% due 6/30/2010.. 107,082
A+ A2 210,000 Verizon Global Funding Corporation, 7.375%
due 9/01/2012............................ 241,613
------------
8,969,252
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCE--CONSUMER--2.9% Citigroup Inc.:
AA- Aa1 225,000 5.70% due 2/06/2004...................... 234,035
AA- Aa1 235,000 5.75% due 5/10/2006...................... 255,111
A+ Aa2 475,000 7.25% due 10/01/2010..................... 551,413
AA- Aa1 150,000 6.50% due 1/18/2011...................... 168,300
A+ Aa2 275,000 6.625% due 6/15/2032..................... 300,225
A+ A1 290,000 Golden West Financial Corporation, 4.75%
due 10/01/2012........................... 291,605
Household Finance Corporation:
A- A2 1,350,000 2.91% due 12/16/2004..................... 1,348,962
A- A2 630,000 5.875% due 2/01/2009..................... 646,636
A- A2 450,000 7% due 5/15/2012......................... 492,880
------------
4,289,167
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCE--OTHER--4.3% BBB+ Baa1 390,000 EOP Operating LP, 7.375% due 11/15/2003.... 405,798
AAA Aaa 1,025,000 General Electric Capital Corp., 5.45% due
1/15/2013................................ 1,064,704
A+ Aa3 570,000 Goldman Sachs Group, Inc., 6.875% due
1/15/2011................................ 636,257
A A3 145,000 John Hancock Financial Services, 5.625% due
12/01/2008............................... 152,022
Lehman Brothers Holdings, Inc.:
A A2 300,000 6.625% due 4/01/2004..................... 316,271
A A2 20,000 7% due 2/01/2008......................... 22,611
A A2 425,000 6.625% due 1/18/2012..................... 470,403
NR* Baa3 361,200 Lehman Brothers, TRAINS, 6.259% due
8/15/2008(a)(b)(d)....................... 371,949
Morgan Stanley TRACERS(a)(b)(e):
NR* A3 1,380,000 5.854% due 3/01/2007..................... 1,470,431
NR* Baa1 480,000 6.725% due 6/15/2012..................... 528,379
A+ A2 115,000 Progressive Corporation, 6.25% due
12/01/2032............................... 117,988
BBB+ Baa1 720,000 Prologis Trust, 7% due 10/01/2003.......... 740,286
------------
6,297,099
- ----------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--CONSUMER--0.5% BBB+ Baa2 200,000 Coors Brewing Company, 6.375% due
5/15/2012................................ 223,509
A- A2 188,000 Phillip Morris Companies, Inc., 8.25% due
10/15/2003............................... 194,805
BBB Baa3 270,000 Tyson Foods, Inc., 6.625% due 10/01/2004... 287,080
------------
705,394
- ----------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--ENERGY--1.0% BBB+ Baa1 95,000 Anadarko Finance Company, 7.50% due
5/01/2031................................ 112,960
BBB+ Baa1 100,000 Anadarko Petroleum Corporation, 5.375% due
3/01/2007................................ 106,865
BB- Ba2 130,000 The Coastal Corporation, 6.50% due
6/01/2008................................ 97,500
A A2 240,000 Colonial Pipeline, 7.63% due
4/15/2032(b)............................. 286,442
Kinder Morgan Energy:
BBB+ Baa1 150,000 5.35% due 8/15/2007 156,961
BBB+ Baa1 235,000 6.75% due 3/15/2011...................... 255,269
</Table>
27
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Core Bond Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
S&P MOODY'S FACE
INDUSTRIES RATING++ RATING++ AMOUNT CORPORATE BONDS & NOTES VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--ENERGY A+ A1 $ 370,000 Motiva Enterprises LLC, 5.20% due
(CONCLUDED) 9/15/2012(b)............................. $ 369,383
------------
1,385,380
- ----------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL-- BBB- Ba1 45,000 Abitibi Consolidated Inc., 8.55% due
8/01/2010................................ 49,944
MANUFACTURING--3.2% A A2 225,000 Alcoa Inc., 1.70% due 12/06/2004(a)........ 225,578
A+ A3 100,000 Boeing Capital Corporation, 7.10% due
9/27/2005................................ 108,322
A- A3 225,000 Cooper Industries Inc., 5.50% due
11/01/2009............................... 234,506
Daimler-Chrysler NA Holdings:
BBB+ A3 1,782,000 7.125% due 4/10/2003..................... 1,800,761
BBB+ A3 200,000 6.40% due 5/15/2006...................... 215,592
BBB+ A3 215,000 7.30% due 1/15/2012...................... 241,262
BBB- Baa3 45,000 Domtar Inc., 7.875% due 10/15/2011......... 52,594
A A2 60,000 Emerson Electric Company, 6% due
8/15/2032................................ 60,915
BBB Baa1 360,000 Ford Motor Company, 7.45% due 7/16/2031.... 313,153
BBB- Ba1 85,000 Methanex Corporation, 8.75% due 8/15/2012.. 90,100
BBB+ Baa1 140,000 Newell Rubbermaid Inc., 4.625% due
12/15/2009............................... 142,817
BBB+ A3 115,000 Praxair Inc., 6.375% due 4/01/2012......... 128,557
BBB- Baa3 200,000 Raytheon Company, 6.75% due 3/15/2018...... 209,590
BBB+ NR* 330,000 SC Johnson & Son Inc., 5% due
12/15/2012(b)............................ 333,084
BBB Baa3 100,000 Sealed Air Corporation, 6.95% due
5/15/2009(b)............................. 102,365
BBB- Baa3 255,000 Toll Brothers Inc., 6.875% due
11/15/2012(b)............................ 262,608
BBB+ Baa1 120,000 UPM-Kymmene Corporation, 5.625% due
12/01/2014(b)............................ 124,521
------------
4,696,269
- ----------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--OTHER--1.2% A+ A1 220,000.... Archer-Daniels-Midland, 5.935% due
10/01/2032............................... 219,516
BBB Baa3 125,000 Developers Divers Realty, 6.625% due
1/15/2008................................ 125,676
A+ A1 320,000 First Data Corporation, 6.75% due
7/15/2005................................ 348,270
BBB+ Baa2 55,000 Health Care Properties Inc., 7.48% due
4/05/2004................................ 58,042
Health Care Properties Investors Inc.:
BBB+ Baa2 135,000 6.50% due 2/15/2006...................... 140,209
BBB+ Baa2 245,000 6.45% due 6/25/2012...................... 246,817
BBB- Ba1 305,000 Hilton Hotels Corporation, 7.625% due
12/01/2012............................... 308,005
BBB Baa2 160,000 Martin Marietta Corp., 7.375% due
4/15/2013................................ 187,692
BBB- Baa3 165,000 Nationwide Health Properties, 6.59% due
7/07/2038................................ 170,904
------------
1,805,131
- ----------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--SERVICES--2.3% BBB+ Baa1 215,000 AOL Time Warner Inc., 6.875% due
5/01/2012................................ 227,062
Aramark Services Inc.:
BBB- Baa3 245,000 6.75% due 8/01/2004...................... 254,906
BBB- Baa3 205,000 6.375% due 2/15/2008..................... 212,247
NR* A2 225,000 Carnival Corporation, 6.15% due 4/15/2008.. 239,314
BBB Baa1 235,000 Cendant Corporation, 6.875% due
8/15/2006................................ 243,851
BB+ Ba2 470,000 Circus Circus Enterprises, Inc., 6.70% due
11/15/2096............................... 472,198
BBB- Ba1 275,000 HCA Inc., 6.30% due 10/01/2012............. 277,349
A- A3 85,000 Kohl's Corporation, 6% due 1/15/2033....... 85,451
BBB- Baa3 260,000 Liberty Media Corporation, 7.875% due
7/15/2009................................ 281,974
BBB+ Baa1 140,000 Limited Brands Inc., 6.125% due
12/01/2012............................... 147,370
BBB Baa3 60,000 SuperValu Inc., 7.50% due 5/15/2012........ 64,674
</Table>
28
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Core Bond Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
S&P MOODY'S FACE
INDUSTRIES RATING++ RATING++ AMOUNT CORPORATE BONDS & NOTES VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--SERVICES BBB- Baa3 $ 175,000 USA Interactive, 7% due 1/15/2013(b)....... $ 180,954
(CONCLUDED)
A- A3 205,000 Viacom Inc., 7.875% due 7/30/2030.......... 255,190
BBB Ba1 395,000 Waste Management Inc., 7.375% due
8/01/2010................................ 432,185
------------
3,374,725
- ----------------------------------------------------------------------------------------------------------------------------------
TRANSPORT SERVICES--0.3% AAA Aaa 140,000 Continental Airlines, 6.563% due
2/15/2012................................ 149,637
Southwest Airlines Co.:
A Baa1 30,000 8% due 3/01/2005......................... 33,196
A Baa1 190,000 7.875% due 9/01/2007..................... 213,834
------------
396,667
- ----------------------------------------------------------------------------------------------------------------------------------
UTILITIES-- BBB Baa3 307,000 AT&T Broadband Corporation, 8.375% due
COMMUNICATIONS--2.8% 3/15/2013................................ 348,728
AT&T Corporation:
BBB+ Baa2 31,000 6% due 3/15/2009......................... 30,956
BBB+ Baa2 90,000 7.30% due 11/15/2011..................... 98,371
AT&T Wireless Services Inc.:
BBB Baa2 187,000 8.125% due 5/01/2012..................... 187,935
BBB Baa2 112,000 8.75% due 3/01/2031...................... 109,760
A A2 75,000 Alltel Corporation, 7% due 7/01/2012....... 86,434
BBB+ Baa2 335,000 CenturyTel Inc., 7.875% due 8/15/2012(b)... 396,497
Clear Channel Communications:
BBB- Baa3 165,000 7.875% due 6/15/2005..................... 180,645
BBB- Baa3 205,000 7.65% due 9/15/2010...................... 232,235
BBB Baa2 240,000 Cox Communications Inc., 7.125% due
10/01/2012............................... 266,576
A+ A3 270,000 GTE Corporation, 6.84% due 4/15/2018....... 280,419
Sprint Capital Corporation:
BBB- Baa3 510,000 5.70% due 11/15/2003..................... 507,450
BBB- Baa3 335,000 8.375% due 3/15/2012..................... 333,325
Tele-Communications Inc.:
BBB Baa3 270,000 8.25% due 1/15/2003...................... 270,079
BBB Baa3 235,000 9.80% due 2/01/2012...................... 282,475
B- Ba3 234,000 US West Communications, 7.20% due
11/01/2004............................... 222,300
A+ A2 220,000 Verizon New York Inc., 6.875% due
4/01/2012................................ 247,145
------------
4,081,330
- ----------------------------------------------------------------------------------------------------------------------------------
UTILITIES--ELECTRIC--2.6% BBB+ A3 125,000 Alabama Power Capital Trust, 5.50% due
10/01/2042............................... 125,694
BBB Baa1 480,000 Cincinnati Gas & Electric Company, 5.70%
due 9/15/2012............................ 492,024
BBB+ Baa1 200,000 Commonwealth Edison Company, 6.95% due
7/15/2018................................ 220,057
A+ A1 330,000 Consolidated Edison Company of New York,
4.875% due 2/01/2013..................... 334,576
Dominion Resources Inc.:
BBB+ Baa1 200,000 7.625% due 7/15/2005..................... 219,403
BBB+ Baa1 305,000 8.125% due 6/15/2010..................... 354,837
BBB+ Baa1 100,000 6.75% due 12/15/2032..................... 102,631
BBB+ Baa2 90,000 Exelon Corporation, 6.75% due 5/01/2011.... 98,514
BBB- Baa2 545,000 FirstEnergy Corp., 6.45% due 11/15/2011.... 542,189
Florida Power & Light:
A Aa3 75,000 4.85% due 2/01/2013...................... 76,615
A Aa3 120,000 5.85% due 2/01/2033...................... 122,913
A A2 200,000 Georgia Power Company, 5.125% due
11/15/2012............................... 206,956
BBB- Baa3 190,000 Mid-American Energy Holdings, 5.875% due
10/01/2012(b)............................ 192,609
A A1 200,000 Mississippi Power, 6.05% due 5/01/2003..... 202,414
BBB Baa1 225,000 PSE&G Power, 6.95% due 6/01/2012........... 228,450
BBB+ Baa1 210,000 Southern Power Company, 6.25% due
7/15/2012................................ 221,870
------------
3,741,752
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
29
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUNDS, INC.
Core Bond Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Concluded) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
S&P MOODY'S FACE
INDUSTRIES RATING++ RATING++ AMOUNT CORPORATE BONDS & NOTES VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
YANKEE CORPORATES--1.7% A- A2 $ 100,000 BSCH Issuances Ltd., 7.625% due 9/14/2010.. $ 113,743
A- Baa1 520,000 British Telecom PLC, 8.375% due
12/15/2010............................... 623,427
A- A2 250,000 Codelco Inc., 6.375% due 11/30/2012(b)..... 262,040
BBB+ Baa1 170,000 Deutsche Telekom International Finance,
8.50% due 6/15/2010...................... 195,795
France Telecom:
BBB- Baa3 75,000 9.25% due 3/01/2011...................... 86,720
BBB Baa3 100,000 10% due 3/01/2031........................ 121,733
BBB Baa3 220,000 Koninklijke (KPN) NV, 8% due 10/01/2010.... 246,400
A A2 200,000 Norsk Hydro A/S, 6.36% due 1/15/2009....... 216,959
Pemex Project Funding Master Trust:
BBB- Baa1 305,000 9.125% due 10/13/2010.................... 349,225
BBB- Baa1 225,000 7.375% due 12/15/2014(b)................. 230,625
------------
2,446,667
- ----------------------------------------------------------------------------------------------------------------------------------
YANKEE SOVEREIGNS--1.3% Korea Development Bank:
A- A3 200,000 7.125% due 4/22/2004..................... 212,606
A- A3 225,000 4.25% due 11/13/2007..................... 228,450
AAA Aaa 250,000 Republic of Finland, 5.875% due 2/27/2006.. 273,801
AA Aa2 650,000 Republic of Italy, 6% due 9/27/2003........ 670,418
BBB- Baa2 405,000 United Mexican States, 9.875% due
2/01/2010................................ 497,178
------------
1,882,453
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS & NOTES
(COST $48,330,625)--34.3% 50,019,562
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
SHORT-TERM INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER**--6.3% 740,000 Autoliv ASP Inc., 1.33% due 1/02/2003...... 739,945
2,800,000 ITT Industries, Inc., 1.36% due
1/02/2003................................ 2,799,788
2,800,000 Ryder System, 1.60% due 1/06/2003.......... 2,799,253
2,900,000 The Walt Disney Corporation, 1.62% due
1/09/2003................................ 2,898,825
------------
9,237,811
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(COST $9,237,811)--6.3% 9,237,811
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $161,993,764)--114.8%................ 167,115,839
LIABILITIES IN EXCESS OF
OTHER ASSETS--(14.8%)...................... (21,615,798)
------------
NET ASSETS--100.0%......................... $145,500,041
============
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
* Not Rated.
** Commercial Paper is traded on a discount basis; the interest rates shown
reflect the discount rates paid at the time of purchase by the Portfolio.
+ Mortgage-Backed Obligations are subject to principal paydowns as a result of
prepayments or refinancing of the underlying mortgage instruments. As a result,
the average life may be substantially less than the original maturity.
++ Ratings of issues shown are unaudited.
(a) Floating rate note.
(b) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(c) Represents a "to-be-announced" (TBA) transaction. The Portfolio has
committed to purchasing securities for which all specific information is not
available at this time.
(d) Target Return Index Securities (TRAINS).
(e) Traded Custody Receipts (TRACERS).
See Notes to Financial Statements.
30
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Fundamental Growth Strategy Portfolio
Schedule of Investments as of December 31, 2002 (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES
HELD PERCENT OF
INDUSTRY* STOCKS VALUE NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE 54,600 General Dynamics Corporation............................... $ 4,333,602 1.7%
- ----------------------------------------------------------------------------------------------------------------------------------
AIR FREIGHT & 91,900 United Parcel Service, Inc. (Class B)...................... 5,797,052 2.2
LOGISTICS
- ----------------------------------------------------------------------------------------------------------------------------------
BANKS 127,000 Northern Trust Corporation................................. 4,429,760 1.7
96,600 Washington Mutual, Inc. ................................... 3,335,598 1.3
------------ -----
7,765,358 3.0
- ----------------------------------------------------------------------------------------------------------------------------------
BEVERAGES 135,200 Anheuser-Busch Companies, Inc. ............................ 6,543,680 2.5
199,500 The Coca-Cola Company...................................... 8,742,090 3.3
161,400 Coca-Cola Enterprises Inc. ................................ 3,505,608 1.3
------------ -----
18,791,378 7.1
- ----------------------------------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY 158,000 +Amgen Inc. ............................................... 7,639,300 2.9
- ----------------------------------------------------------------------------------------------------------------------------------
CHEMICALS 62,200 Ecolab Inc. ............................................... 3,078,900 1.2
- ----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES 132,500 First Data Corporation..................................... 4,691,825 1.8
& SUPPLIES
122,500 H&R Block, Inc. ........................................... 4,924,500 1.9
------------ -----
9,616,325 3.7
- ----------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS 460,400 +Cisco Systems, Inc. ...................................... 6,026,636 2.3
EQUIPMENT
- ----------------------------------------------------------------------------------------------------------------------------------
COMPUTERS & 118,300 International Business Machines Corporation................ 9,168,250 3.5
PERIPHERALS
- ----------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS 151,700 American Express Company................................... 5,362,595 2.0
88,400 Fannie Mae................................................. 5,686,772 2.2
175,200 State Street Corporation................................... 6,832,800 2.6
118,200 T. Rowe Price Group Inc. .................................. 3,220,950 1.2
------------ -----
21,103,117 8.0
- ----------------------------------------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILING 140,800 SYSCO Corporation.......................................... 4,194,432 1.6
- ----------------------------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS 91,700 Unilever NV (NY Registered Shares)......................... 5,658,807 2.1
- ----------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT 74,000 +Alcon, Inc. .............................................. 2,919,300 1.1
& SUPPLIES
147,500 +Boston Scientific Corporation............................. 6,271,700 2.4
57,200 Medtronic, Inc. ........................................... 2,608,320 1.0
45,600 Stryker Corporation........................................ 3,060,672 1.2
72,000 +Zimmer Holdings, Inc. .................................... 2,989,440 1.1
------------ -----
17,849,432 6.8
- ----------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS 157,600 HCA Inc. .................................................. 6,540,400 2.5
& SERVICES
167,500 Health Management Associates, Inc. (Class A)............... 2,998,250 1.1
136,700 +Tenet Healthcare Corporation.............................. 2,241,880 0.9
------------ -----
11,780,530 4.5
- ----------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & 51,700 +Brinker International, Inc. .............................. 1,667,325 0.6
LEISURE
185,700 +YUM! Brands, Inc. ........................................ 4,497,654 1.7
------------ -----
6,164,979 2.3
- ----------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS 67,800 The Clorox Company......................................... 2,796,750 1.0
57,700 Colgate-Palmolive Company.................................. 3,025,211 1.2
113,300 The Procter & Gamble Company............................... 9,737,002 3.7
------------ -----
15,558,963 5.9
- ----------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL 50,100 3M Co. .................................................... 6,177,330 2.3
CONGLOMERATES
- ----------------------------------------------------------------------------------------------------------------------------------
INSURANCE 42,500 American International Group, Inc. ........................ 2,458,625 0.9
94,500 Everest Re Group, Ltd. .................................... 5,225,850 2.0
133,100 Marsh & McLennan Companies, Inc. .......................... 6,150,551 2.4
------------ -----
13,835,026 5.3
- ----------------------------------------------------------------------------------------------------------------------------------
MEDIA 447,900 +AOL Time Warner Inc. ..................................... 5,867,490 2.2
150,400 +Clear Channel Communications, Inc. ....................... 5,608,416 2.1
97,100 +Fox Entertainment Group, Inc. (Class A)................... 2,517,803 1.0
196,400 +Rogers Communications, Inc. 'B'........................... 1,822,524 0.7
172,600 +Viacom, Inc. (Class B).................................... 7,035,176 2.7
------------ -----
22,851,409 8.7
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
31
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Fundamental Growth Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Concluded) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES
HELD PERCENT OF
INDUSTRY* STOCKS VALUE NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
MULTILINE RETAIL 20,000 +Kohl's Corporation........................................ $ 1,119,000 0.4%
282,600 Wal-Mart Stores, Inc. ..................................... 14,274,126 5.4
------------ -----
15,393,126 5.8
- ----------------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTOR 468,200 Intel Corporation.......................................... 7,285,192 2.8
EQUIPMENT & PRODUCTS
- ----------------------------------------------------------------------------------------------------------------------------------
SOFTWARE 63,700 +Electronic Arts Inc. ..................................... 3,166,527 1.2
347,300 +Microsoft Corporation..................................... 17,958,883 6.8
------------ -----
21,125,410 8.0
- ----------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL 74,700 +Bed Bath & Beyond Inc. ................................... 2,581,632 1.0
124,800 Lowe's Companies, Inc. .................................... 4,680,000 1.8
141,900 The TJX Companies, Inc. ................................... 2,769,888 1.0
------------ -----
10,031,520 3.8
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS (COST--$305,385,372) 251,226,074 95.5
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
PARTNERSHIP
INTEREST SHORT-TERM SECURITIES
- ----------------------------------------------------------------------------------------------------------------------------------
$10,047,090 Merrill Lynch Liquidity Series, LLC Cash Sweep Series
II**....................................................... 10,047,090 3.8
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES (COST -- $10,047,090) 10,047,090 3.8
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST--$315,432,462)..................... 261,273,164 99.3
OTHER ASSETS LESS LIABILITIES.............................. 1,782,953 0.7
------------ -----
NET ASSETS................................................. $263,056,117 100.0%
============ =====
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Non-income producing security.
* For Portfolio compliance purposes, "Industry" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Portfolio management.
This definition may not apply for purposes of this report, which may combine
such industry sub-classifications for reporting ease. These industry
classifications are unaudited.
** Investments in companies considered to be an affiliate of 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>
- --------------------------------------------------------------------------------------------------
NET NET INTEREST
AFFILIATE ACTIVITY COST INCOME
- --------------------------------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC Cash Sweep Series II $10,047,090 $10,047,090 $8,880
- --------------------------------------------------------------------------------------------------
</Table>
See Notes to Financial Statements.
32
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Allocation Strategy Portfolio
Schedule of Investments as of December 31, 2002 (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES PERCENT OF
COUNTRY INDUSTRY+++ HELD STOCKS VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
AUSTRALIA BANKS 8,000 National Australia Bank Limited (7.875%
Convertible Preferred)................ $ 260,400 0.2%
-----------------------------------------------------------------------------------------------------------
METALS & MINING
63,600 Alumina Limited......................... 175,484 0.1
73,600 +WMC Resources Limited.................. 174,894 0.1
------------ -----
350,378 0.2
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN AUSTRALIA 610,778 0.4
- ------------------------------------------------------------------------------------------------------------------------------
BELGIUM DIVERSIFIED FINANCIALS 4,424 Fortis.................................. 77,995 0.1
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN BELGIUM 77,995 0.1
- ------------------------------------------------------------------------------------------------------------------------------
BERMUDA INSURANCE 25,700 ACE Limited(i).......................... 754,038 0.6
3,700 XL Capital Ltd. (Class A)............... 285,825 0.2
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN BERMUDA 1,039,863 0.8
- ------------------------------------------------------------------------------------------------------------------------------
BRAZIL OIL & GAS 14,000 Petroleo Brasileiro SA--Petrobras
(ADR)(a).............................. 209,160 0.2
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN BRAZIL 209,160 0.2
- ------------------------------------------------------------------------------------------------------------------------------
CANADA COMMUNICATIONS 38,029 +Nortel Networks Corporation............ 61,227 0.0
EQUIPMENT
-----------------------------------------------------------------------------------------------------------
METALS & MINING
24,500 +Inco Limited........................... 519,890 0.4
19,600 Placer Dome Inc. ....................... 225,400 0.2
------------ -----
745,290 0.6
-----------------------------------------------------------------------------------------------------------
SEMICONDUCTOR
EQUIPMENT & PRODUCTS
14,600 +Genesis Microchip Incorporated......... 190,530 0.1
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN CANADA 997,047 0.7
- ------------------------------------------------------------------------------------------------------------------------------
DENMARK COMMERCIAL SERVICES & 4,145 +ISS A/S................................ 149,324 0.1
SUPPLIES
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN DENMARK 149,324 0.1
- ------------------------------------------------------------------------------------------------------------------------------
FINLAND COMMUNICATIONS 16,672 Nokia Oyj (Series A).................... 265,058 0.2
EQUIPMENT
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN FINLAND 265,058 0.2
- ------------------------------------------------------------------------------------------------------------------------------
FRANCE AUTOMOBILES 5,961 PSA Peugeot Citroen..................... 243,088 0.2
-----------------------------------------------------------------------------------------------------------
BANKS
9,236 BNP Paribas SA.......................... 376,350 0.3
-----------------------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS
456 Lafarge SA (Ordinary)................... 34,358 0.0
-----------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
12,135 +Alstom................................. 60,489 0.0
-----------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS &
LEISURE
4,847 Accor SA................................ 146,795 0.1
-----------------------------------------------------------------------------------------------------------
MEDIA
12,688 Vivendi Universal SA.................... 204,915 0.1
-----------------------------------------------------------------------------------------------------------
METALS & MINING
17,290 +Arcelor................................ 212,649 0.2
4,555 Pechiney SA 'A'......................... 159,844 0.1
------------ -----
372,493 0.3
-----------------------------------------------------------------------------------------------------------
MULTI-UTILITIES &
UNREGULATED POWER
8,246 Suez SA................................. 143,126 0.1
-----------------------------------------------------------------------------------------------------------
MULTILINE RETAIL
1,286 Pinault-Printemps-Redoute SA............ 94,602 0.1
-----------------------------------------------------------------------------------------------------------
OIL & GAS
4,388 TotalFinaElf SA......................... 626,709 0.5
-----------------------------------------------------------------------------------------------------------
PHARMACEUTICALS
2,872 Aventis SA.............................. 156,119 0.1
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN FRANCE 2,459,044 1.8
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
33
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Allocation Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES PERCENT OF
COUNTRY INDUSTRY+++ HELD STOCKS VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
GERMANY AUTOMOBILES 3,211 Volkswagen AG........................... $ 116,252 0.1%
-----------------------------------------------------------------------------------------------------------
CHEMICALS
1,210 Henkel KGaA............................. 66,663 0.1
4,964 Henkel KGaA (Preferred)................. 314,116 0.2
------------ -----
380,779 0.3
-----------------------------------------------------------------------------------------------------------
DIVERSIFIED
TELECOMMUNICATION
SERVICES
15,415 Deutsche Telekom AG (Registered
Shares)............................... 197,677 0.1
-----------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES
5,029 E.On AG................................. 202,653 0.2
-----------------------------------------------------------------------------------------------------------
INSURANCE
1,004 Muenchener
Rueckversicherungs-Gesellschaft AG
(Registered Shares)................... 120,005 0.1
-----------------------------------------------------------------------------------------------------------
MACHINERY
4,746 Linde AG................................ 174,316 0.1
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN GERMANY 1,191,682 0.9
- ------------------------------------------------------------------------------------------------------------------------------
HONG KONG DIVERSIFIED FINANCIALS 27,600 HSBC Holdings PLC....................... 301,716 0.2
-----------------------------------------------------------------------------------------------------------
INDUSTRIAL
CONGLOMERATES
51,260 Hutchison Whampoa Limited............... 320,769 0.2
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN HONG KONG 622,485 0.4
- ------------------------------------------------------------------------------------------------------------------------------
IRELAND BANKS 18,520 Bank of Ireland......................... 190,268 0.1
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN IRELAND 190,268 0.1
- ------------------------------------------------------------------------------------------------------------------------------
ISRAEL COMMUNICATIONS 64,600 +ECI Telecom Limited (U.S. Registered
EQUIPMENT Shares)............................... 128,554 0.1
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN ISRAEL 128,554 0.1
- ------------------------------------------------------------------------------------------------------------------------------
ITALY BANKS 148,780 Intesa BCI SpA.......................... 313,821 0.2
56,383 Unicredito Italiano SpA................. 225,431 0.2
------------ -----
539,252 0.4
-----------------------------------------------------------------------------------------------------------
DIVERSIFIED
TELECOMMUNICATION
SERVICES
22,089 Telecom Italia SpA...................... 167,593 0.1
-----------------------------------------------------------------------------------------------------------
INSURANCE
12,414 Assicurazioni Generali.................. 255,334 0.2
-----------------------------------------------------------------------------------------------------------
OIL & GAS
22,671 ENI SpA................................. 360,433 0.2
-----------------------------------------------------------------------------------------------------------
TRANSPORTATION
INFRASTRUCTURE
11,583 Autostrade-Concessioni e Costruzioni
Autostrade SpA........................ 115,231 0.1
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN ITALY 1,437,843 1.0
- ------------------------------------------------------------------------------------------------------------------------------
JAPAN AUTO COMPONENTS 4,500 TOYOTA INDUSTRIES CORPORATION........... 67,688 0.0
-----------------------------------------------------------------------------------------------------------
AUTOMOBILES
47,000 Fuji Heavy Industries, Ltd. ............ 186,146 0.1
19,000 Suzuki Motor Corporation................ 206,539 0.2
------------ -----
392,685 0.3
-----------------------------------------------------------------------------------------------------------
BEVERAGES
8,100 Coca-Cola West Japan Company Limited.... 121,155 0.1
5,000 Kinki Coca-Cola Bottling Co., Ltd....... 28,272 0.0
------------ -----
149,427 0.1
-----------------------------------------------------------------------------------------------------------
CHEMICALS
26,000 Shin-Etsu Chemical Co., Ltd............. 852,279 0.6
-----------------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT &
INSTRUMENTS
12,000 Murata Manufacturing Co., Ltd........... 470,212 0.3
-----------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES
1,400 Nintendo Company Ltd.................... 130,833 0.1
-----------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS
10,600 Rohto Pharmaceutical Co., Ltd........... 73,424 0.1
-----------------------------------------------------------------------------------------------------------
INSURANCE
194,000 Aioi Insurance Company, Limited......... 374,366 0.3
221 Millea Holdings, Inc.................... 1,590,410 1.1
291,000 Mitsui Marine and Fire Insurance
Company, Ltd.......................... 1,338,889 1.0
39,000 The Nippon Fire & Marine Insurance Co.,
Ltd. ................................. 146,903 0.1
------------ -----
3,450,568 2.5
-----------------------------------------------------------------------------------------------------------
</Table>
34
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Allocation Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES PERCENT OF
COUNTRY INDUSTRY+++ HELD STOCKS VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
JAPAN MULTILINE RETAIL 4,500 Ito-Yokado Co., Ltd..................... $ 132,721 0.1%
(CONCLUDED)
-----------------------------------------------------------------------------------------------------------
OFFICE ELECTRONICS
5,000 Canon, Inc.............................. 188,337 0.1
-----------------------------------------------------------------------------------------------------------
PHARMACEUTICALS
15,000 Sankyo Company, Ltd..................... 188,211 0.1
4,900 Takeda Chemical Industries, Ltd......... 204,803 0.2
------------ -----
393,014 0.3
-----------------------------------------------------------------------------------------------------------
WIRELESS
TELECOMMUNICATION
SERVICES
135 NTT DoCoMo, Inc......................... 249,136 0.2
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN JAPAN 6,550,324 4.7
- ------------------------------------------------------------------------------------------------------------------------------
MEXICO BEVERAGES 1,700 Fomento Economico Mexicano, SA de CV
(ADR)(a).............................. 61,914 0.0
-----------------------------------------------------------------------------------------------------------
MEDIA
8,800 +Grupo Televisa SA (ADR)(a)............. 245,784 0.2
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN MEXICO 307,698 0.2
- ------------------------------------------------------------------------------------------------------------------------------
NETHERLANDS BANKS 5,902 ABN AMRO Holding NV..................... 96,496 0.1
-----------------------------------------------------------------------------------------------------------
CHEMICALS
7,554 Akzo Nobel NV........................... 239,638 0.2
-----------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES &
SUPPLIES
14,266 Buhrmann NV............................. 62,278 0.0
13,880 Vedior NV 'A'........................... 79,237 0.1
------------ -----
141,515 0.1
-----------------------------------------------------------------------------------------------------------
CONSTRUCTION &
ENGINEERING
6,381 Imtech NV............................... 84,172 0.1
-----------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS
9,288 Fortis.................................. 162,382 0.1
13,306 ING Groep NV............................ 225,368 0.2
------------ -----
387,750 0.3
-----------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES
10,428 Koninklijke (Royal) Philips Electronics
NV.................................... 182,750 0.1
-----------------------------------------------------------------------------------------------------------
INSURANCE
10,576 Aegon NV................................ 136,067 0.1
-----------------------------------------------------------------------------------------------------------
MEDIA
12,667 Wolters Kluwer NV 'A'................... 220,660 0.1
-----------------------------------------------------------------------------------------------------------
OIL & GAS
18,112 Royal Dutch Petroleum Company........... 797,332 0.6
9,800 Royal Dutch Petroleum Company (NY
Registered Shares).................... 431,396 0.3
------------ -----
1,228,728 0.9
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN THE NETHERLANDS 2,717,776 2.0
- ------------------------------------------------------------------------------------------------------------------------------
PORTUGAL ELECTRIC UTILITIES 50,696 Electricidade de Portugal, SA (EDP)..... 84,589 0.1
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN PORTUGAL 84,589 0.1
- ------------------------------------------------------------------------------------------------------------------------------
SINGAPORE ELECTRONIC EQUIPMENT & 15,850 +Flextronics International Ltd.......... 129,178 0.1
INSTRUMENTS
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN SINGAPORE 129,178 0.1
- ------------------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA PAPER & FOREST 7,400 Sappi Limited (ADR)(a).................. 97,828 0.1
PRODUCTS
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN SOUTH AFRICA 97,828 0.1
- ------------------------------------------------------------------------------------------------------------------------------
SOUTH KOREA DIVERSIFIED 53,600 KT Corporation (ADR)(a)................. 1,155,080 0.8
TELECOMMUNICATION
SERVICES
-----------------------------------------------------------------------------------------------------------
WIRELESS
TELECOMMUNICATION
SERVICES
1,000 +SK Telecom Co., Ltd.................... 193,078 0.1
9,400 SK Telecom Co., Ltd. (ADR)(a)(f)........ 200,690 0.2
------------ -----
393,768 0.3
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN SOUTH KOREA 1,548,848 1.1
- ------------------------------------------------------------------------------------------------------------------------------
SPAIN DIVERSIFIED 19,487 +Telefonica SA.......................... 174,436 0.1
TELECOMMUNICATION
SERVICES
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN SPAIN 174,436 0.1
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
35
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Allocation Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES PERCENT OF
COUNTRY INDUSTRY+++ HELD STOCKS VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
SWEDEN BANKS 44,738 Nordbanken Holding AB................... $ 197,163 0.2%
21,151 Skandinaviska Enskilda Banken (SEB)
'A'................................... 175,989 0.1
------------ -----
373,152 0.3
-----------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES
1,347 Electrolux AB 'B'....................... 21,256 0.0
-----------------------------------------------------------------------------------------------------------
PAPER & FOREST
PRODUCTS
4,599 Svenska Cellulosa AB (SCA) 'B'.......... 155,177 0.1
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN SWEDEN 549,585 0.4
- ------------------------------------------------------------------------------------------------------------------------------
SWITZERLAND BANKS 7,847 +Credit Suisse Group.................... 170,254 0.1
-----------------------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS
1,138 Holcim Ltd. 'B'......................... 206,580 0.1
-----------------------------------------------------------------------------------------------------------
FOOD PRODUCTS
2,339 Nestle SA (Registered Shares)........... 495,644 0.4
-----------------------------------------------------------------------------------------------------------
PHARMACEUTICALS
10,892 Novartis AG (Registered Shares)......... 397,412 0.3
4,385 Roche Holding AG........................ 305,558 0.2
------------ -----
702,970 0.5
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN SWITZERLAND 1,575,448 1.1
- ------------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM BANKS 68,229 Barclays PLC............................ 422,891 0.3
19,577 HSBC Holdings PLC....................... 216,364 0.1
21,270 Royal Bank of Scotland Group PLC........ 509,529 0.4
------------ -----
1,148,784 0.8
-----------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES &
SUPPLIES
69,985 Chubb PLC............................... 98,867 0.1
-----------------------------------------------------------------------------------------------------------
DIVERSIFIED
TELECOMMUNICATION
SERVICES
71,064 BT Group PLC............................ 223,092 0.2
-----------------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILING
20,803 Boots Company PLC....................... 196,256 0.1
53,004 J Sainsbury PLC......................... 237,861 0.2
------------ -----
434,117 0.3
-----------------------------------------------------------------------------------------------------------
FOOD PRODUCTS
65,975 Unilever PLC............................ 627,720 0.5
-----------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS &
LEISURE
18,335 Six Continents PLC...................... 148,178 0.1
-----------------------------------------------------------------------------------------------------------
INDUSTRIAL
CONGLOMERATES
18,320 Smiths Industries PLC................... 205,126 0.1
-----------------------------------------------------------------------------------------------------------
INSURANCE
27,478 AVIVA PLC............................... 195,969 0.2
21,306 Prudential Corporation PLC.............. 150,579 0.1
------------ -----
346,548 0.3
-----------------------------------------------------------------------------------------------------------
METALS & MINING
11,282 Anglo American PLC...................... 167,553 0.1
-----------------------------------------------------------------------------------------------------------
OIL & GAS
74,561 BP Amoco PLC............................ 512,553 0.4
-----------------------------------------------------------------------------------------------------------
PHARMACEUTICALS
37,394 GlaxoSmithKline PLC..................... 717,591 0.5
-----------------------------------------------------------------------------------------------------------
TRANSPORTATION
INFRASTRUCTURE
24,750 BAA PLC................................. 200,819 0.1
-----------------------------------------------------------------------------------------------------------
WIRELESS
TELECOMMUNICATION
SERVICES
279,532 Vodafone Group PLC...................... 509,646 0.4
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN THE UNITED KINGDOM 5,340,594 3.9
- ------------------------------------------------------------------------------------------------------------------------------
UNITED STATES AIR FREIGHT & 4,900 Airborne, Inc........................... 72,667 0.0
LOGISTICS
1,800 FedEx Corp. ............................ 97,596 0.1
------------ -----
170,263 0.1
-----------------------------------------------------------------------------------------------------------
AUTO COMPONENTS
14,900 The Goodyear Tire & Rubber Company...... 101,469 0.1
-----------------------------------------------------------------------------------------------------------
AUTOMOBILES
11,200 +General Motors Corporation (Class H)... 119,840 0.1
-----------------------------------------------------------------------------------------------------------
BANKS
7,400 The Bank of New York Company, Inc....... 177,304 0.1
6,150 Charter One Financial, Inc.............. 176,690 0.1
5,200 Riggs National Corporation.............. 79,768 0.1
------------ -----
433,762 0.3
-----------------------------------------------------------------------------------------------------------
BEVERAGES
5,000 PepsiAmericas, Inc...................... 67,150 0.1
-----------------------------------------------------------------------------------------------------------
</Table>
36
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Allocation Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES PERCENT OF
COUNTRY INDUSTRY+++ HELD STOCKS VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
CHEMICALS
3,050 E.I. du Pont de Nemours and Company..... $ 129,320 0.1%
-----------------------------------------------------------------------------------------------------------
UNITED STATES COMMERCIAL SERVICES & 44,400 +Cendant Corporation.................... 465,312 0.3
(CONTINUED) SUPPLIES
24,500 +Information Resources, Inc............. 38,955 0.0
10,500 +TeleTech Holdings, Inc................. 75,705 0.1
------------ -----
579,972 0.4
-----------------------------------------------------------------------------------------------------------
COMMUNICATIONS
EQUIPMENT
35,000 +3Com Corporation....................... 161,700 0.1
47,700 +ADC Telecommunications, Inc............ 99,693 0.1
14,800 +Cisco Systems, Inc..................... 193,732 0.2
4,900 +Comverse Technology, Inc............... 49,049 0.0
6,100 +Corning Incorporated................... 20,191 0.0
39,900 +Lucent Technologies Inc................ 50,274 0.0
200 Lucent Technologies Inc.(f)............. 99,062 0.1
580 Lucent Technologies Inc. (Preferred).... 287,281 0.2
34,400 Motorola, Inc........................... 297,560 0.2
12,300 +QUALCOMM Incorporated.................. 446,859 0.3
12,800 +Tellabs, Inc........................... 92,544 0.1
------------ -----
1,797,945 1.3
-----------------------------------------------------------------------------------------------------------
COMPUTERS &
PERIPHERALS
9,200 +Apple Computer, Inc.................... 131,836 0.1
73,870 +EMC Corporation........................ 453,562 0.3
28,871 Hewlett-Packard Company................. 501,201 0.4
4,500 International Business Machines
Corporation........................... 348,750 0.3
47,850 +Sun Microsystems, Inc.................. 148,335 0.1
------------ -----
1,583,684 1.2
-----------------------------------------------------------------------------------------------------------
CONSTRUCTION &
ENGINEERING
2,500 Chicago Bridge & Iron Company NV (NY
Registered Shares).................... 75,500 0.1
61,500 +Foster Wheeler Ltd..................... 71,340 0.0
119,400 +McDermott International, Inc........... 522,972 0.4
24,500 +Quanta Services, Inc................... 85,750 0.1
2,500 +The Shaw Group Inc..................... 41,125 0.0
------------ -----
796,687 0.6
-----------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING
14,800 +Crown Cork & Seal Company, Inc......... 117,660 0.1
-----------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS
2,450 American Express Company................ 86,608 0.1
44,300 CIT Group Inc........................... 868,280 0.6
51,700 Citigroup Inc.(i)....................... 1,819,323 1.3
17,250 J.P. Morgan Chase & Co.................. 414,000 0.3
66,300 +Knight Trading Group, Inc.............. 322,218 0.2
6,100 MBNA Corporation........................ 116,022 0.1
6,800 Morgan Stanley.......................... 271,456 0.2
24,500 +Nasdaq-100 Shares(d)................... 597,800 0.4
7,800 +Saxon Capital, Inc..................... 97,578 0.1
------------ -----
4,593,285 3.3
-----------------------------------------------------------------------------------------------------------
DIVERSIFIED
TELECOMMUNICATION
SERVICES
11,100 ALLTEL Corporation...................... 566,100 0.4
7,880 AT&T Corp............................... 205,747 0.1
19,700 BellSouth Corporation................... 509,639 0.4
31,800 +Broadwing Inc.......................... 111,936 0.1
3,698 McLeodUSA Incorporated (Preferred)
(Series A)............................ 15,199 0.0
8,194 McLeodUSA Incorporated (Warrants)(g).... 819 0.0
33,650 +Metromedia Fiber Network, Inc. (Class
A).................................... 337 0.0
1,695,570 Metromedia Fiber Network, Inc.
(Warrants)(g)......................... 1,696 0.0
22,100 SBC Communications Inc.................. 599,131 0.4
9,200 Sprint Corporation...................... 133,216 0.1
27,000 Verizon Communications.................. 1,046,250 0.8
10,350 +WilTel Communications, Inc............. 163,427 0.1
------------ -----
3,353,497 2.4
-----------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES
2,400 DQE, Inc................................ 36,576 0.0
6,100 DTE Energy Company...................... 283,040 0.2
13,400 PPL Corporation......................... 464,712 0.4
------------ -----
784,328 0.6
-----------------------------------------------------------------------------------------------------------
</Table>
37
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Allocation Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES PERCENT OF
COUNTRY INDUSTRY+++ HELD STOCKS VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
UNITED STATES ELECTRONIC EQUIPMENT & 19,300 +Agilent Technologies, Inc.............. $ 346,628 0.2%
(CONTINUED) INSTRUMENTS
26,308 +Solectron Corporation.................. 93,393 0.1
7,500 +Waters Corporation..................... 163,350 0.1
------------ -----
603,371 0.4
-----------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT &
SERVICE
6,500 ENSCO International Incorporated........ 191,425 0.1
13,500 GlobalSantaFe Corporation............... 328,320 0.2
7,700 +Input/Output, Inc...................... 32,725 0.0
1,850 +Nabors Industries, Ltd................. 65,250 0.1
9,850 Rowan Companies, Inc.................... 223,595 0.2
11,700 Schlumberger Limited.................... 492,453 0.4
3,200 +Veritas DGC Inc........................ 25,280 0.0
------------ -----
1,359,048 1.0
-----------------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILING
4,600 +The Kroger Co.......................... 71,070 0.1
-----------------------------------------------------------------------------------------------------------
FOOD PRODUCTS
36,900 Tyson Foods, Inc. (Class A)............. 414,018 0.3
-----------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS
& SERVICES
6,000 Aetna Inc. (New Shares)................. 246,720 0.2
194,400 +Beverly Enterprises, Inc............... 554,040 0.4
6,100 +Humana Inc............................. 61,000 0.1
7,400 +Manor Care, Inc........................ 137,714 0.1
20,000 +Stewart Enterprises, Inc. (Class A).... 111,000 0.1
9,800 +Tenet Healthcare Corporation........... 160,720 0.1
2,500 +WellChoice Inc......................... 59,875 0.0
------------ -----
1,331,069 1.0
-----------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS &
LEISURE
4,100 McDonald's Corporation.................. 65,928 0.0
-----------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS
3,300 Kimberly-Clark Corporation.............. 156,651 0.1
-----------------------------------------------------------------------------------------------------------
IT CONSULTING &
SERVICES
1,200 +Computer Sciences Corporation.......... 41,340 0.0
7,400 Electronic Data Systems Corporation..... 136,382 0.1
17,200 +Unisys Corporation..................... 170,280 0.1
------------ -----
348,002 0.2
-----------------------------------------------------------------------------------------------------------
INDUSTRIAL
CONGLOMERATES
64,300 General Electric Company................ 1,565,705 1.1
40,700 Tyco International Ltd.................. 695,156 0.5
------------ -----
2,260,861 1.6
-----------------------------------------------------------------------------------------------------------
INSURANCE
9,800 The Allstate Corporation................ 362,502 0.3
17,100 American International Group, Inc....... 989,235 0.7
12,300 Horace Mann Educators Corporation....... 188,559 0.1
7,900 MetLife, Inc............................ 213,616 0.2
8,600 Prudential Financial, Inc............... 272,964 0.2
10,513 +Travelers Property Casualty Corp.
(Class A)............................. 154,015 0.1
4,136 +Travelers Property Casualty Corp.
(Class B)............................. 60,592 0.0
------------ -----
2,241,483 1.6
-----------------------------------------------------------------------------------------------------------
INTERNET SOFTWARE &
SERVICES
25,800 Broadband HOLDRs Trust(b)............... 194,790 0.1
-----------------------------------------------------------------------------------------------------------
MACHINERY
2,500 Deere & Company......................... 114,625 0.1
9,800 +Flowserve Corporation.................. 144,942 0.1
8,600 Pall Corporation........................ 143,448 0.1
------------ -----
403,015 0.3
-----------------------------------------------------------------------------------------------------------
MEDIA
12,745 +Comcast Corporation (Class A).......... 300,272 0.2
6,400 The Walt Disney Company................. 104,384 0.1
------------ -----
404,656 0.3
-----------------------------------------------------------------------------------------------------------
</Table>
38
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Allocation Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES PERCENT OF
COUNTRY INDUSTRY+++ HELD STOCKS VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
UNITED STATES METALS & MINING 8,900 Alcoa Inc............................... $ 202,742 0.2%
(CONTINUED)
2,400 Arch Coal, Inc.......................... 51,816 0.0
2,400 CONSOL Energy Inc....................... 41,472 0.0
16,300 Commonwealth Industries, Inc............ 110,025 0.1
29,400 +Freeport-McMoRan Copper & Gold, Inc.
(Class B)............................. 493,332 0.4
14,700 Newmont Mining Corporation.............. 426,741 0.3
1,200 Nucor Corporation....................... 49,560 0.0
------------ -----
1,375,688 1.0
-----------------------------------------------------------------------------------------------------------
MULTI-UTILITIES &
UNREGULATED POWER
88,000 +The AES Corporation.................... 265,760 0.2
22,100 +Calpine Corporation.................... 72,046 0.1
14,700 Duke Energy Corporation................. 287,238 0.2
83,400 El Paso Corporation..................... 580,464 0.4
44,200 +Mirant Corporation..................... 83,538 0.1
4,000 SCANA Corporation....................... 123,840 0.1
76,300 The Williams Companies, Inc............. 206,010 0.1
------------ -----
1,618,896 1.2
-----------------------------------------------------------------------------------------------------------
OIL & GAS
1,300 Amerada Hess Corporation................ 71,565 0.1
12,373 ChevronTexaco Corporation............... 822,557 0.6
3,788 ConocoPhillips.......................... 183,301 0.1
4,900 Exxon Mobil Corporation................. 171,206 0.1
12,400 Kerr-McGee Corporation.................. 549,320 0.4
19,200 Marathon Oil Corporation................ 408,768 0.3
3,800 Noble Energy, Inc....................... 142,690 0.1
15,400 Occidental Petroleum Corporation........ 438,130 0.3
9,800 +Stone Energy Corporation............... 326,928 0.3
14,900 Unocal Corporation...................... 455,642 0.3
2,500 Valero Energy Corporation............... 92,350 0.1
------------ -----
3,662,457 2.7
-----------------------------------------------------------------------------------------------------------
PAPER & FOREST
PRODUCTS
8,600 Bowater Incorporated.................... 360,770 0.3
6,600 Deltic Timber Corporation............... 176,220 0.1
37,300 +Louisiana-Pacific Corporation.......... 300,638 0.2
------------ -----
837,628 0.6
-----------------------------------------------------------------------------------------------------------
PERSONAL PRODUCTS
6,100 The Gillette Company.................... 185,196 0.1
-----------------------------------------------------------------------------------------------------------
PHARMACEUTICALS
24,600 Bristol-Myers Squibb Company............ 569,490 0.4
7,300 Eli Lilly and Company................... 463,550 0.3
22,100 Merck & Co., Inc........................ 1,251,081 0.9
49,240 Pfizer Inc.............................. 1,505,267 1.1
12,550 Pharmacia Corporation................... 524,590 0.4
24,560 Schering-Plough Corporation............. 545,232 0.4
9,800 Wyeth................................... 366,520 0.3
------------ -----
5,225,730 3.8
-----------------------------------------------------------------------------------------------------------
REAL ESTATE
11,100 +American Financial Realty Trust........ 133,200 0.1
11,000 Archstone-Smith Trust................... 258,940 0.2
9,850 CarrAmerica Realty Corporation.......... 246,743 0.2
17,200 +Catellus Development Corporation....... 341,420 0.2
3,700 FBR Asset Investment Corporation........ 125,430 0.1
205,600 +La Quinta Corporation.................. 904,640 0.7
12,300 Nationwide Health Properties, Inc....... 183,639 0.1
4,900 The St. Joe Company..................... 147,000 0.1
24,500 Trizec Properties, Inc.................. 230,055 0.2
------------ -----
2,571,067 1.9
-----------------------------------------------------------------------------------------------------------
ROAD & RAIL
2,500 +Swift Transportation Co., Inc.......... 49,875 0.0
1,900 Union Pacific Corporation............... 113,753 0.1
------------ -----
163,628 0.1
-----------------------------------------------------------------------------------------------------------
</Table>
39
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Allocation Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES PERCENT OF
COUNTRY INDUSTRY+++ HELD STOCKS VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
UNITED STATES SEMICONDUCTOR 48,800 +Advanced Micro Devices, Inc............ $ 315,248 0.2%
(CONCLUDED) EQUIPMENT & PRODUCTS
41,550 +Agere Systems Inc. (Class A)........... 59,832 0.0
13,519 +Agere Systems Inc. (Class B)........... 18,927 0.0
4,000 +Analog Devices, Inc.................... 95,480 0.1
9,800 Intel Corporation....................... 152,488 0.1
49,200 +Lattice Semiconductor Corporation...... 431,484 0.3
19,600 +Micron Technology, Inc................. 190,904 0.1
24,600 +National Semiconductor Corporation..... 369,246 0.3
17,100 Semiconductor HOLDRs Trust(c)........... 378,765 0.3
------------ -----
2,012,374 1.4
-----------------------------------------------------------------------------------------------------------
SOFTWARE
6,100 +Activision, Inc........................ 88,755 0.1
8,500 +Amdocs Limited......................... 83,470 0.1
81,200 Computer Associates International,
Inc................................... 1,096,200 0.8
36,700 +Microsoft Corporation(i)............... 1,897,757 1.4
6,200 +THQ Inc................................ 82,150 0.0
------------ -----
3,248,332 2.4
-----------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL
17,200 Circuit City Stores--Circuit City
Group................................. 127,624 0.1
27,100 The Home Depot, Inc..................... 649,316 0.5
17,300 +Toys 'R' Us, Inc....................... 173,000 0.1
------------ -----
949,940 0.7
-----------------------------------------------------------------------------------------------------------
TEXTILES, APPAREL &
LUXURY GOODS
13,500 +Unifi, Inc............................. 70,875 0.1
-----------------------------------------------------------------------------------------------------------
TOBACCO
13,500 Philip Morris Companies Inc............. 547,155 0.4
-----------------------------------------------------------------------------------------------------------
WIRELESS
TELECOMMUNICATION
SERVICES
82,800 +AT&T Wireless Services Inc............. 467,820 0.3
64,000 +Sprint Corp. (PCS Group)............... 280,320 0.2
------------ -----
748,140 0.5
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS IN THE UNITED STATES 47,699,930 34.6
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN STOCKS
(COST--$94,562,231) 76,155,335 55.2
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
FACE
AMOUNT FIXED INCOME SECURITIES
- -------------------------------------------------------------------------------------------------------------------------------
CHILE US$ 1,773,822 Empresa Electricidade del Norte, 4% due
11/05/2017............................ 931,257 0.7
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES IN CHILE 931,257 0.7
- -------------------------------------------------------------------------------------------------------------------------------
EUROPE E 750,000 European Investment Bank, 5.25% due
4/15/2004............................. 810,262 0.6
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES IN EUROPE 810,262 0.6
- -------------------------------------------------------------------------------------------------------------------------------
FRANCE 100,000 Crown Cork & Seal SA, 6% due
12/06/2004............................ 89,199 0.1
164,646 Societe Fonciere Lyonnaise SA, 4%* due
10/31/2004............................ 192,529 0.1
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES IN FRANCE 281,728 0.2
- -------------------------------------------------------------------------------------------------------------------------------
GERMANY 5,500,000 Bundesobligation, 3.25% due 2/17/2004... 5,812,373 4.2
Bundesrepublic Deutschland:
1,720,000 6.50% due 10/14/2005.................. 1,967,152 1.4
9,230,000 5.25% due 1/04/2011................... 10,472,646 7.6
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES IN GERMANY 18,252,171 13.2
- -------------------------------------------------------------------------------------------------------------------------------
LUXEMBOURG 210,000 Tyco International Group SA, 4.375% due
11/19/2004............................ 201,642 0.2
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES IN
LUXEMBOURG 201,642 0.2
- -------------------------------------------------------------------------------------------------------------------------------
MEXICO Petroleos Mexicanos:
L 80,000 14.50% due 3/31/2006.................. 147,144 0.1
US$ 200,000 9.50% due 9/15/2027................... 230,000 0.2
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES IN MEXICO 377,144 0.3
- -------------------------------------------------------------------------------------------------------------------------------
SWEDEN 20,000 Stena AB, 9.625% due 12/01/2012(f)...... 20,550 0.0
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES IN SWEDEN 20,550 0.0
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
40
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Allocation Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
FACE PERCENT OF
COUNTRY AMOUNT FIXED INCOME SECURITIES VALUE NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM Colt Telecom Group PLC:
DM 700,000 2% due 8/06/2005...................... $ 188,727 0.2%
E 350,000 2% due 3/29/2006...................... 166,199 0.1
US$ 550,000 Crown Cork & Seal Finance PLC, 7% due
12/15/2006............................ 434,500 0.3
L 400,000 +NTL Incorporated, Series B, 0/10.75%**
due 4/01/2003......................... 46,687 0.0
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES IN THE
UNITED KINGDOM 836,113 0.6
- -------------------------------------------------------------------------------------------------------------------------------
UNITED STATES The AES Corporation:
US$ 210,000 8.75% due 6/15/2008................... 121,800 0.1
385,000 9.50% due 6/01/2009................... 231,000 0.2
125,000 9.375% due 9/15/2010.................. 74,375 0.1
100,000 Abgenix Inc., 3.50% due 3/15/2007....... 67,687 0.1
140,000 Advanced Micro Devices, Inc., 4.50% due
12/01/2007............................ 159,950 0.1
Avaya Inc.:
420,000 11.125% due 4/01/2009................. 386,400 0.3
425,000 5.478%* due 10/31/2021................ 170,000 0.1
Avnet Inc.:
100,000 7.875% due 2/15/2005.................. 95,750 0.1
100,000 8% due 11/15/2006..................... 95,000 0.1
Calpine Corporation:
540,000 4% due 12/26/2006(f).................. 264,262 0.2
235,000 4% due 12/26/2006..................... 115,003 0.1
125,000 Computer Associates International, Inc.,
5% due 3/15/2007(f)................... 125,000 0.1
200,000 Constar International, 11% due
12/01/2012............................ 197,000 0.1
200,000 Corning Glass, 7% due 3/15/2007......... 168,000 0.1
Corning Incorporated:
250,000 3.50% due 11/01/2008.................. 162,813 0.1
1,150,000 5.156%* due 11/08/2015................ 639,689 0.5
50,000 Finova Group Inc., 7.50% due
11/15/2009............................ 16,750 0.0
Foster Wheeler Ltd.:
775,000 6.75% due 11/15/2005.................. 422,375 0.3
350,000 6.50% due 6/01/2007(f)................ 57,312 0.0
1,100,000 6.50% due 6/01/2007................... 180,125 0.1
400,000 Hyundai Semiconductor America, 8.25% due
5/15/2004(e).......................... 264,000 0.2
100,000 ICN Pharmaceuticals Inc., 6.50% due
7/15/2008............................. 81,188 0.1
Inhale Therapeutic Systems:
60,000 5% due 2/08/2007...................... 36,900 0.0
75,000 3.50% due 10/17/2007.................. 40,875 0.0
250,000 LSI Logic Corporation, 4% due
11/01/2006............................ 202,031 0.1
225,000 Level 3 Communications Inc., 11% due
3/15/2008............................. 142,312 0.1
194,000 Lucent Technologies Inc., 6.50% due
1/15/2028............................. 81,480 0.1
100,000 Manugistics Group Inc., 5% due
11/01/2007............................ 47,000 0.0
100,000 McDermott Inc., 7.84% due 4/04/2005..... 84,250 0.1
Metromedia Fiber Network:
1,141,761 8.75% due 9/30/2006(e)................ 1,010,459 0.7
500,000 +10% due 12/15/2009................... 2,500 0.0
E 300,000 +10% due 12/15/2009................... 6,296 0.0
US$ 125,000 Mirant Americas Generation Inc., 8.30%
due 5/01/2011......................... 57,500 0.0
150,000 Mirant Corporation, 5.75% due
7/15/2007............................. 61,219 0.0
Nextel Communications:
275,000 4.75% due 7/01/2007................... 230,656 0.2
500,000 5.25% due 1/15/2010................... 346,875 0.3
80,000 Northwestern Bell Telephone, 7.75% due
5/01/2030............................. 62,400 0.0
210,000 +Olympus Communications LP/Capital
Corp., 10.625% due 11/15/2006......... 161,700 0.1
195,000 PG&E Corp., 6.25% due 8/01/2003......... 193,537 0.1
20,000 Quantum Corporation, 7% due 8/01/2004... 17,300 0.0
</Table>
41
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Allocation Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
FACE PERCENT OF
COUNTRY AMOUNT FIXED INCOME SECURITIES VALUE NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------------
UNITED STATES US$ 775,000 Shaw Group Inc., 3.32%* due 5/01/2021... $ 449,500 0.3%
(CONCLUDED)
Solectron Corporation:
34,000 3.762%* due 5/08/2020................. 20,868 0.0
2,400,000 4.575%* due 11/20/2020................ 1,224,000 0.9
474,432 TSI Telecom, 5.88% due 12/31/2006....... 438,849 0.3
65,000 US West Communications, 7.25% due
9/15/2025............................. 50,700 0.0
Williams Communications Group, Inc.:
96,774 6.34% due 9/08/2006................... 82,500 0.1
76,923 Term B, due 09/08/2006................ 65,577 0.1
+WorldCom, Inc.:
E 1,160,000 6.75% due 5/15/2008................... 281,502 0.2
L 1,130,000 7.25% due 5/15/2008................... 427,509 0.3
US$ 950,000 7.50% due 5/15/2011................... 213,750 0.2
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES IN THE
UNITED STATES 10,135,524 7.3
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FIXED INCOME
SECURITIES
(COST--$29,732,271) 31,846,391 23.1
- -------------------------------------------------------------------------------------------------------------------------------
<Caption>
SHORT-TERM SECURITIES
- -------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER*** A$ 5,400,000 Perry, 4.85% due 1/08/2003.............. 3,034,289 2.2
- -------------------------------------------------------------------------------------------------------------------------------
<Caption>
PARTNERSHIP
INTEREST
- -------------------------------------------------------------------------------------------------------------------------------
PARTNERSHIP INTEREST US$ 21,876,390 Merrill Lynch Liquidity Series, LLC Cash
Sweep Series II(h).................... 21,876,390 15.9
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SHORT-TERM
SECURITIES (COST--$24,923,060) 24,910,679 18.1
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST--$149,217,562) 132,912,405 96.4
- -------------------------------------------------------------------------------------------------------------------------------
<Caption>
NOMINAL VALUE
OPTIONS COVERED BY
WRITTEN OPTIONS ISSUE
- -------------------------------------------------------------------------------------------------------------------------------
CALL OPTIONS WRITTEN 9,000 AT&T Wireless Services Inc., expiring
April 2003 at USD 7.5................. (4,950) 0.0
6,100 Activision, Inc., expiring February 2003
at USD 12.5........................... (17,080) 0.0
Advanced Micro Devices, Inc.:
24,400 expiring April 2003 at USD 7.5........ (20,740) (0.1)
12,200 expiring July 2003 at USD 7.5......... (15,860) 0.0
7,300 expiring July 2003 at USD 10.......... (4,745) 0.0
2,500 expiring July 2003 at USD 12.5........ (1,000) 0.0
4,900 CIT Group Inc., expiring April 2003 at
USD 20................................ (9,310) 0.0
Circuit City Stores--Circuit City Group:
9,800 expiring April 2003 at USD 10......... (4,900) 0.0
7,400 expiring July 2003 at USD 7.5......... (10,730) 0.0
5,000 Cisco Systems, Inc., expiring April 2003
at USD 12.5........................... (9,250) 0.0
2,500 Comverse Technology, Inc., expiring July
2003 at USD 12.5...................... (2,500) 0.0
12,900 Corning Incorporated, expiring January
2003 at USD 10........................ (645) 0.0
12,600 EMC Corporation, expiring April 2003 at
USD 7.5............................... (5,670) 0.0
9,800 Intel Corporation, expiring January 2003
at USD 17.5........................... (2,450) 0.0
1,200 International Business Machines
Corporation, expiring April 2003 at
USD 75................................ (9,960) 0.0
10,000 Knight Trading Group, Inc., expiring
July 2003 at USD 5.................... (10,000) 0.0
CALL OPTIONS WRITTEN 4,900 Lattice Semiconductor Corporation,
(CONCLUDED) expiring June 2003 at USD 12.5........ (4,900) 0.0
</Table>
42
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Allocation Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
NOMINAL VALUE
OPTIONS COVERED BY PERCENT OF
WRITTEN OPTIONS ISSUE VALUE NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------------
6,100 MBNA Corporation, expiring January 2003
at USD 22.5........................... $ (915) 0.0%
2,600 Merck & Co., Inc., expiring July 2003 at
USD 55................................ (15,080) 0.0
Micron Technology, Inc.:
7,400 expiring April 2003 at USD 17.5....... (1,850) 0.0
7,400 expiring April 2003 at USD 20......... (1,110) 0.0
4,800 expiring July 2003 at USD 12.5........ (6,240) 0.0
4,700 Microsoft Corporation, expiring April
2003 at USD 55........................ (13,865) 0.0
7,000 Nextel Communications, expiring January
2004 at USD 25........................ (6,300) 0.0
11,200 Sun Microsystems, Inc., expiring January
2003 at USD 10........................ (560) 0.0
6,200 THQ Inc., expiring June 2003 at USD
15.................................... (13,330) 0.0
2,400 Tenet Healthcare Corporation, expiring
February 2003 at USD 20............... (960) 0.0
12,700 Tyco International Ltd., expiring April
2003 at USD 17.5...................... (25,400) (0.1)
8,200 Unisys Corporation, expiring April 2003
at USD 10............................. (9,020) 0.0
2,500 Valero Energy Corporation, expiring
March 2003 at USD 37.5................ (7,125) 0.0
3,500 Verizon Communications, expiring April
2003 at USD 42.5...................... (5,250) 0.0
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN (PREMIUMS
RECEIVED--$389,748) (241,695) (0.2)
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, NET OF OPTIONS
WRITTEN (COST--$148,827,814)............ 132,670,710 96.2
FOREIGN TIME DEPOSITS++................. 2,257,214 1.6
VARIATION MARGIN ON FINANCIAL FUTURES
CONTRACTS*****.......................... 35,732 0.0
UNREALIZED DEPRECIATION ON FORWARD
FOREIGN EXCHANGE CONTRACTS****.......... (178,352) (0.1)
OTHER ASSETS LESS LIABILITIES........... 3,092,047 2.3
------------ -----
NET ASSETS.............................. $137,877,351 100.0%
============ =====
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(a) American Depositary Receipts (ADR).
(b) Represents ownership in Broadband HOLDRs Trust. The Broadband HOLDRs Trust
holds shares of common stock issued by 20 specified companies generally
considered to be involved in various segments of the broadband industry,
including the transmission of data, video and voice.
(c) Represents ownership in Semiconductor HOLDRs Trust. The Semiconductor HOLDRs
Trust holds shares of common stock issued by 20 specified companies generally
considered to be involved in various segments of the semiconductor industry.
(d) Represents ownership in the Nasdaq-100 Trust, a registered unit investment
trust. The investment objective of the Nasdaq-100 Trust is to provide investment
results that generally correspond to the price performance and dividend yield of
the component stocks of the Nasdaq-100 Index.
(e) Restricted securities as to resale. The value of the Portfolio's investment
in restricted securities was approximately $1,274,000, representing 0.9% of net
assets.
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------
ISSUE ACQUISITION DATE COST VALUE
- --------------------------------------------------------------------------------------------------------
Hyundai Semiconductor America, 8.25% due 5/15/2004 6/31/2001 $ 363,121 $ 264,000
Metromedia Fiber Network, 8.75% due 9/30/2006 10/01/2001 917,548 1,010,459
- --------------------------------------------------------------------------------------------------------
TOTAL $1,280,669 $1,274,459
========== ==========
- --------------------------------------------------------------------------------------------------------
</Table>
(f) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(g) Warrants entitle the Portfolio to purchase a predetermined number of shares
of common stock and are non-income producing. The purchase price and number of
shares are subject to adjustment under certain conditions until the expiration
date.
43
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Global Allocation Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Concluded)
- --------------------------------------------------------------------------------
(h) Investments in companies considered to be an affiliate of the Portfolio
(such companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) are as follows:
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------
INTEREST
AFFILIATE NET ACTIVITY NET COST INCOME
- ---------------------------------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC Cash Sweep Series II $21,876,390 $21,876,390 $30,676
- ---------------------------------------------------------------------------------------------------
</Table>
(i) All or a portion of security held as collateral in connection with open
financial futures contracts.
+ Non-income producing security.
++ Time deposit bears interest at 3.90% and matures on 1/10/2003.
+++ For Portfolio compliance purposes, "Industry" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Portfolio management.
This definition may not apply for purposes of this report, which may combine
such industry sub-classifications for reporting ease. These industry
classifications are unaudited.
* Represents a zero coupon or step bond; the interest rate shown reflects the
effective yield at the time of purchase by the Portfolio.
** Represents a step bond. The interest rate shown represents the fixed rate of
interest that will commence its accrual on a predetermined date until maturity.
*** Commercial Paper is traded on a discount basis; the interest rate shown
reflects the discount rate paid at the time of purchase by the Portfolio.
**** Forward foreign exchange contracts as of December 31, 2002 were as follows:
<Table>
<Caption>
- ----------------------------------------------------------------
FOREIGN CURRENCY SOLD EXPIRATION DATE UNREALIZED DEPRECIATION
- ----------------------------------------------------------------
Y 562,000,000 January 2003 $(178,352)
- ----------------------------------------------------------------
TOTAL UNREALIZED DEPRECIATION OF
FORWARD FOREIGN EXCHANGE
CONTRACTS--NET (US$
COMMITMENT--$4,557,989) $(178,352)
=========
- ----------------------------------------------------------------
</Table>
***** Financial futures contracts purchased as of December 31, 2002 were as
follows:
<Table>
<Caption>
- ----------------------------------------------------------------------------------
NUMBER OF EXPIRATION
CONTRACTS ISSUE EXCHANGE DATE VALUE
- ----------------------------------------------------------------------------------
47 DJ Euro Stoxx 50 Euronext Paris March 2003 $1,181,257
11 FTSE LIFFE March 2003 692,684
17 Standard & Poor's 500 Index NYSE March 2003 3,735,325
17 Nikkei 225 OSAKA March 2003 1,220,527
15 TOPIX Tokyo March 2003 1,054,816
- ----------------------------------------------------------------------------------
TOTAL FINANCIAL FUTURES CONTRACTS PURCHASED
(TOTAL CONTRACT PRICE--$8,016,534) $7,884,609
==========
- ----------------------------------------------------------------------------------
</Table>
See Notes to Financial Statements.
44
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.,
High Yield Portfolio
Schedule of Investments as of December 31, 2002 (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
S&P MOODY'S FACE
INDUSTRIES RATING+ RATING+ AMOUNT CORPORATE BONDS VALUE
- ---------------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.3% B B3 $ 250,000 K & F Industries, 9.625% due
12/15/2010(b)......................... $ 254,375
- ---------------------------------------------------------------------------------------------------------------------------
AIRLINES--1.8% A- B1 750,000 American Airlines, 7.80% due
10/01/2006............................ 525,276
Continental Airlines Inc.:
BBB Ba2 927,729 7.033% due 6/15/2011.................. 622,293
A- Baa3 238,135 6.90% due 1/02/2017................... 181,798
D Ca 750,000 USAir Inc., 10.375% due 3/01/2013(f).... 262,500
-----------
1,591,867
- ---------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE--2.0% BB+ Ba2 500,000 AutoNation Inc., 9% due 8/01/2008....... 505,000
BB Ba3 1,000,000 Dana Corporation, 6.50% due 3/01/2009... 870,000
B B3 417,000 Metaldyne Corporation, 11% due
6/15/2012............................. 341,940
D Caa3 150,000 Venture Holdings Trust, 11% due
6/01/2007(f).......................... 33,000
-----------
1,749,940
- ---------------------------------------------------------------------------------------------------------------------------
BROADCASTING--2.2% NR* NR* 100,000 Acme Intermediate Holdings/Finance, 12%
due 9/30/2005......................... 100,000
B+ Ba3 250,000 Entercom Radio, 7.625% due 3/01/2014.... 262,500
B- B3 250,000 Entravision Communications Corporation,
8.125% due 3/15/2009.................. 260,000
B- B3 500,000 Nextmedia Operating Inc., 10.75% due
7/01/2011............................. 525,625
B- Ba3 500,000 Panamsat Corporation, 8.50% due
2/01/2012............................. 477,500
B B2 250,000 Sinclair Broadcasting Group, 8% due
3/15/2012(b).......................... 260,625
-----------
1,886,250
- ---------------------------------------------------------------------------------------------------------------------------
CABLE-- D Ca 1,000,000 Cablevision SA, 13.75% due
5/01/2009(f).......................... 240,000
INTERNATIONAL--0.5% D Ca 1,000,000 International Cabletel, Inc., 11.50% due
2/01/2006(f).......................... 95,000
C Ca 1,000,000 United Pan-Europe Communications,
13.75%** due 2/01/2010(f)............. 60,000
-----------
395,000
- ---------------------------------------------------------------------------------------------------------------------------
CABLE--U.S.--3.8% Charter Communications Holdings LLC:
CCC+ B3 1,000,000 10% due 4/01/2009..................... 445,000
CCC+ B3 1,000,000 10% due 5/15/2011..................... 445,000
B+ B1 500,000 EchoStar DBS Corporation, 9.125% due
1/15/2009............................. 526,250
B- Caa1 750,000 Insight Communications, 11.923%** due
2/15/2011............................. 413,438
B+ B2 750,000 Insight Midwest, 9.75% due
10/01/2009(b)......................... 712,500
NR* NR* 1,000,000 Olympus Communications LP/Capital Corp.,
10.625% due 11/15/2006(f)............. 780,000
-----------
3,322,188
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--0.6% B B3 500,000 Terex Corporation, 10.375% due
4/01/2011............................. 470,000
CCC+ B3 100,000 Trench Electric SA and Trench Inc.,
10.25% due 12/15/2007................. 78,000
-----------
548,000
- ---------------------------------------------------------------------------------------------------------------------------
CHEMICALS--3.1% B B3 900,000 Huntsman International LLC, 9.875% due
3/01/2009............................. 900,000
B- B2 500,000 Koppers Industries, Inc., 9.875% due
12/01/2007............................ 457,500
BB Ba3 500,000 Lyondell Chemical Company, 9.625% due
5/01/2007............................. 480,000
BBB- Ba1 250,000 Methanex Corporation, 8.75% due
8/15/2012............................. 265,000
BB- B3 500,000 Terra Capital Inc., 12.875% due
10/15/2008............................ 537,500
-----------
2,640,000
- ---------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS B- Caa1 666 Lucent Technologies Inc., 7.25% due
EQUIPMENT--0.0% 7/15/2006............................. 376
- ---------------------------------------------------------------------------------------------------------------------------
CONSUMER-- BB+ Ba3 250,000 American Greetings, 11.75% due
PRODUCTS--1.4% 7/15/2008............................. 273,750
B- B2 275,000 Armkel LLC/Armkel Finance, 9.50% due
8/15/2009............................. 298,375
B B2 600,000 Hockey Company, 11.25% due 4/15/2009.... 612,000
-----------
1,184,125
- ---------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED CCC+ NR* 500,000 AquaChem Inc., 11.25% due 7/01/2008..... 375,000
MANUFACTURING--1.3%
BB- Ba3 700,000 SPX Corporation, 7.50% due 1/01/2013.... 709,625
-----------
1,084,625
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
45
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.,
High Yield Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
S&P MOODY'S FACE
INDUSTRIES RATING+ RATING+ AMOUNT CORPORATE BONDS VALUE
- ---------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED MEDIA--4.5% Dex Media East LLC(b):
B B2 $ 250,000 9.875% due 11/15/2009................. $ 267,500
B B3 475,000 12.125% due 11/15/2012................ 526,062
B Ba3 750,000 Lamar Media Corporation, 7.25% due
1/01/2013(b).......................... 762,188
B B3 750,000 Primedia, Inc., 7.625% due 4/01/2008.... 667,500
R.H. Donnelley Financial Corporation
I(b):
B+ B1 75,000 8.875% due 12/15/2010................. 80,250
B+ B2 200,000 10.875% due 12/15/2012................ 218,000
BBB Baa2 750,000 World Color Press Inc., 7.75% due
2/15/2009............................. 774,768
B B2 500,000 Yell Finance BV, 10.75% due 8/01/2011... 550,000
-----------
3,846,268
- ---------------------------------------------------------------------------------------------------------------------------
ENERGY--EXPLORATION & CCC- Caa3 2,000,000 Energy Corp. of America, 9.50% due
5/15/2007............................. 1,240,000
PRODUCTION--3.1% BB Ba3 500,000 Forest Oil Corporation, 7.75% due
5/01/2014............................. 510,000
NR* NR* 522,000 Southwest Royalties Inc., 10.50% due
6/30/2004............................. 514,170
Tri-Union Development Corporation:
D Caa2 205,000 12.50% due 6/01/2006.................. 164,000
D Caa2 15,624 12.50% due 6/01/2006(b)............... 12,499
BB+ Ba2 200,000 Western Oil Sands Inc., 8.375% due
5/01/2012............................. 199,000
-----------
2,639,669
- ---------------------------------------------------------------------------------------------------------------------------
ENERGY--OTHER--5.8% BB- Ba3 1,000,000 AmeriGas/Eagle Financial, 8.875% due
5/20/2011............................. 1,040,000
B B2 900,000 R&M Clark Inc., 8.875% due 11/15/2007... 828,000
BB- B1 250,000 El Paso Energy Partners, 8.50% due
6/01/2011............................. 231,875
B B2 525,000 Ferrellgas Partners LP, 8.75% due
6/15/2012............................. 543,375
Hanover Equipment Trust(b):
BB- B1 100,000 (Series A), 8.50% due 9/01/2008....... 97,500
BB- B1 150,000 (Series B), 8.75% due 9/01/2011....... 144,750
CCC B3 800,000 Ocean Rig Norway AS, 10.25% due
6/01/2008............................. 720,000
C Caa3 500,000 Petroleum Geo-Services, 7.50% due
3/31/2007............................. 150,000
BB- B1 750,000 SESI, LLC, 8.875% due 5/15/2011......... 765,000
B B3 750,000 Tesoro Petroleum Corp., 9% due
7/01/2008............................. 495,000
-----------
5,015,500
- ---------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT--1.2% B+ B1 500,000 Intrawest Corporation, 10.50% due
2/01/2010............................. 525,000
B B2 500,000 Premier Parks Inc., 9.75% due
6/15/2007............................. 485,000
-----------
1,010,000
- ---------------------------------------------------------------------------------------------------------------------------
FOOD & TOBACCO--2.5% B B3 250,000 American Seafood Group LLC, 10.125% due
4/15/2010............................. 255,000
NR* NR* 117,647 Archibald Candy Corporation, 10% due
11/01/2007............................ 105,882
CCC Caa3 1,000,000 Aurora Foods Inc., 9.875% due
2/15/2007............................. 495,000
B B2 300,000 Del Monte Corporation, 8.625% due
12/15/2012(b)......................... 306,000
BB Ba3 250,000 Dimon Incorporated, 9.625% due
10/15/2011............................ 264,375
BB+ Ba2 750,000 Smithfield Foods Inc., 8% due
10/15/2009............................ 765,000
-----------
2,191,257
- ---------------------------------------------------------------------------------------------------------------------------
GAMING--1.3% B+ B1 500,000 Boyd Gaming Corporation, 7.75% due
12/15/2012(b)......................... 489,375
NR* NR* 601,000 GB Property Funding Corp., 11% due
9/29/2005............................. 396,660
BB+ Ba2 250,000 Park Place Entertainment, 7.875% due
3/15/2010............................. 254,375
-----------
1,140,410
- ---------------------------------------------------------------------------------------------------------------------------
HEALTH CARE--1.1% B B3 200,000 Fisher Scientific International, 8.125%
due 5/01/2012......................... 207,000
NR* NR* 500,000 Ivax Corporation, 5.50% due 5/15/2007... 444,375
BB- Ba3 300,000 PerkinElmer Inc., 8.875% due
1/15/2013(b).......................... 295,500
-----------
946,875
- ---------------------------------------------------------------------------------------------------------------------------
HOTELS--2.8% BB- Ba3 492,000 Felcor Lodging LP, 8.50% due
6/01/2011............................. 484,620
BB- Ba3 500,000 HMH Properties, Inc., 7.875% due
8/01/2008............................. 485,000
BBB- Ba1 500,000 Hilton Hotels Corporation, 8.25% due
2/15/2011............................. 523,029
B B2 500,000 John Q. Hammons Hotels, 8.875% due
5/15/2012............................. 502,500
B B1 500,000 Meristar Hospitality Corp., 10.50% due
6/15/2009............................. 456,250
-----------
2,451,399
- ---------------------------------------------------------------------------------------------------------------------------
HOUSING--1.5% BB Ba1 400,000 D.R. Horton, Inc., 7.50% due
12/01/2007............................ 392,000
BB- Ba3 500,000 Forest City Enterprises Inc., 8.50% due
3/15/2008............................. 500,000
B Ba3 500,000 WCI Communities Inc., 9.125% due
5/01/2012............................. 450,000
-----------
1,342,000
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
46
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.,
High Yield Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
S&P MOODY'S FACE
INDUSTRIES RATING+ RATING+ AMOUNT CORPORATE BONDS VALUE
- ---------------------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--1.5% CCC+ B3 $ 500,000 ON Semiconductor Corporation, 12% due
5/15/2008(b).......................... $ 367,500
BB- Ba2 425,000 Sanmina Corporation, 10.375% due
1/15/2010(b).......................... 429,250
BB+ Ba2 500,000 Seagate Technology HDD Holdings, 8% due
5/15/2009(b).......................... 517,500
-----------
1,314,250
- ---------------------------------------------------------------------------------------------------------------------------
LEISURE--0.3% B B2 250,000 Vail Resorts Inc., 8.75% due
5/15/2009............................. 256,250
- ---------------------------------------------------------------------------------------------------------------------------
MACHINERY/ BB+ Ba2 500,000 JLG Industries Inc., 8.375% due
CONSTRUCTION--0.5% 6/15/2012............................. 415,000
- ---------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--5.4% CCC Caa2 250,000 Blount Inc., 13% due 8/01/2009.......... 155,625
CCC+ Caa1 1,500,000 Columbus McKinnon Corp., 8.50% due
4/01/2008............................. 1,080,000
B- Caa1 500,000 Eagle-Picher Industries, 9.375% due
3/01/2008............................. 352,500
B B3 250,000 Foamex LP/Capital Corporation, 10.75%
due 4/01/2009(b)...................... 175,000
CCC+ Caa1 1,500,000 International Wire Group, Inc., 11.75%
due 6/01/2005......................... 907,500
B+ B3 500,000 NMHG Holding Company, 10% due
5/15/2009............................. 500,000
B- B3 250,000 Rexnord Corporation, 10.125% due
12/15/2012(b)......................... 256,250
B B3 250,000 Trimas Corporation, 9.875% due
6/15/2012(b).......................... 247,500
BBB- Ba2 500,000 Tyco International Group SA, 6.375% due
10/15/2011............................ 467,500
BB- B1 500,000 Wolverine Tube Inc., 10.50% due
4/01/2009............................. 510,000
-----------
4,651,875
- ---------------------------------------------------------------------------------------------------------------------------
METAL--OTHER--2.8% B- B3 500,000 Great Lakes Carbon Corp., 7.598% due
5/15/2008(a).......................... 355,000
CCC+ Caa2 500,000 Haynes International Inc., 11.625% due
9/01/2004............................. 292,500
BB Ba3 250,000 Luscar Coal Ltd., 9.75% due
10/15/2011............................ 267,813
CCC- Caa3 200,000 Ormet Corporation, 11% due
8/15/2008(b).......................... 104,000
B+ B1 1,112,000 P & L Coal Holdings Corp., 9.625% due
5/15/2008............................. 1,174,550
-----------
2,193,863
- ---------------------------------------------------------------------------------------------------------------------------
MULTI-SECTOR NR* B3 1,000,000 JP Morgan, HYDIB 9.70% due
11/15/2007(j)......................... 980,000
HOLDINGS--3.8% B+ B2 500,000 Morgan Stanley TRACERS, 9.414% due
12/15/2012(b)(h)...................... 502,635
NR* B1 1,866,666 TRAINS HY-1-2002, 8.368% due
2/01/2012(b)(g)(i).................... 1,775,666
-----------
3,258,301
- ---------------------------------------------------------------------------------------------------------------------------
PACKAGING--7.5% NR* Caa2 680,000 Anchor Glass, 11.25% due 4/01/2005...... 669,800
B- B3 250,000 Berry Plastics, 10.75% due 7/15/2012.... 266,250
B- B3 250,000 Bway Corporation, 10% due
10/15/2010(b)......................... 259,375
Graham Packaging Company:
CCC+ Caa1 250,000 8.75% due 1/15/2008................... 245,313
CCC+ NR* 125,000 10.75% due 1/15/2009.................. 123,906
B+ B2 250,000 Graphic Packaging Corporation, 8.625%
due 2/15/2012......................... 263,125
B B2 1,250,000 Jefferson Smurfit-Stone Container, 8.25%
due 10/01/2012(b)..................... 1,275,000
BB B2 500,000 Owens-Brockway Glass Container, 8.875%
due 2/15/2009......................... 515,000
B+ B3 250,000 Owens-Illinois Inc., 8.10% due
5/15/2007............................. 241,250
B+ B3 525,000 Plastipak Holdings Inc., 10.75% due
9/01/2011............................. 551,906
B B2 1,000,000 Portola Packaging Inc., 10.75% due
10/01/2005............................ 1,010,000
B- B3 1,000,000 Tekni-Plex Inc., 12.75% due 6/15/2010... 935,000
CCC+ Caa1 200,000 US Can Corporation, 12.375% due
10/01/2010............................ 86,000
-----------
6,441,925
- ---------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST BBB- Ba1... 500,000 Abitibi-Consolidated Inc., 8.85% due
8/01/2030............................... 537,680
PRODUCERS--4.0% B- B3 500,000 Ainsworth Lumber Company, 12.50% due
7/15/2007(a).......................... 520,000
D Ca 1,000,000 Doman Industries Limited, 8.75% due
3/15/2004(f).......................... 125,000
B+ B3 500,000 Millar Western Forest, 9.875% due
5/15/2008............................. 475,000
BB+ Ba2 500,000 Norske Skog of Canada, 8.625% due
6/15/2011............................. 503,750
BB Ba3 300,000 Pope & Talbot, 8.375% due 6/01/2013..... 260,250
BB+ Ba1 1,000,000 Tembec Industries, Inc., 8.625% due
6/30/2009............................. 1,007,500
-----------
3,429,180
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
47
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.,
High Yield Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
S&P MOODY'S FACE
INDUSTRIES RATING+ RATING+ AMOUNT CORPORATE BONDS VALUE
- ---------------------------------------------------------------------------------------------------------------------------
PIPELINES--1.7% B+ B3 $ 500,000 Northwest Pipeline Corporation, 6.625%
due 12/01/2007........................ $ 466,250
BB Ba2 500,000 Plains All American Pipeline, 7.75% due
10/15/2012(b)......................... 520,000
BB Ba1 500,000 Southern Natural Gas, 8% due
3/01/2032............................. 440,000
-----------
1,426,250
- ---------------------------------------------------------------------------------------------------------------------------
RETAIL--0.3% B- B3 250,000 Hollywood Entertainment, 9.625% due
3/15/2011............................. 255,000
- ---------------------------------------------------------------------------------------------------------------------------
SERVICES--2.4% BB- Ba3 1,000,000 Allied Waste North America, 8.875% due
4/01/2008............................. 1,015,000
CCC- C 2,000,000 Anthony Crane Rental LP, 10.375% due
8/01/2008............................. 200,000
B- B3 750,000 IESI Corporation, 10.25% due
6/15/2012............................. 723,750
B B3 100,000 National Waterworks Inc., 10.50% due
12/01/2012(b)......................... 104,375
-----------
2,043,125
- ---------------------------------------------------------------------------------------------------------------------------
STEEL--0.2% BB- B1 250,000 Oregon Steel Mills Inc., 10% due
7/15/2009(b).......................... 253,750
B B3 250,000 UCAR Finance Inc., 10.25% due
2/15/2012............................. 198,750
NR* NR* 2,000,000 Wheeling Pittsburgh Corp., 9.25% due
11/15/2007(f)......................... 20,000
-----------
472,500
- ---------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--1.4% B- Ba3 1,250,000 Qwest Corporation, 7.625% due
6/09/2003............................. 1,225,000
- ---------------------------------------------------------------------------------------------------------------------------
TRANSPORT SERVICES--0.1% BB- Ba3 75,000 Stena AB, 9.625% due 12/01/2012(b)...... 77,438
- ---------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--0.9% D Caa3 1,500,000 American Commercial LLC, 11.25% due
1/01/2008............................. 480,000
B+ B2 300,000 Sea Containers Ltd., 12.50% due
12/01/2004............................ 280,500
-----------
760,500
- ---------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AAA Aaa 2,000,000 U.S. Treasury Notes, 4.375% due
OBLIGATIONS--2.4% 8/15/2012............................. 2,090,546
- ---------------------------------------------------------------------------------------------------------------------------
UTILITIES--5.4% The AES Corporation:
B- B3 500,000 8.75% due 6/15/2008................... 292,500
B- B3 1,000,000 8.875% due 2/15/2011.................. 580,000
BB+ Ba1 307,000 AES Eastern Energy, 9% due 1/02/2017.... 282,713
NR* NR* 250,000 CIA Saneamento Basico, 10% due
7/28/2005(b)(d)....................... 182,500
B+ B3 1,000,000 CMS Energy Corporation, 7.50% due
1/15/2009............................. 850,000
B+ B1 1,250,000 Calpine Corporation, 8.625% due
8/15/2010............................. 531,250
BB Ba1 245,000 ESI Tractebel Acquisition Corp., 7.99%
due 12/30/2011........................ 220,645
B B3 500,000 Illinois Power Corporation, 11.50% due
12/15/2010(b)......................... 482,500
BB- Ba3 250,000 Midland Funding II, 11.75% due
7/23/2005............................. 255,000
BB Ba3 1,000,000 Mirant Americas Generation LLC, 7.625%
due 5/01/2006......................... 525,000
BBB- Baa3 500,000 PSEG Energy Holdings, 8.625% due
2/15/2008............................. 417,500
-----------
4,619,608
- ---------------------------------------------------------------------------------------------------------------------------
WIRELESS--5.2% B- Caa1 1,900,000 American Tower Systems Corporation,
9.375% due 2/01/2009.................. 1,482,000
B B3 1,000,000 Crown Castle International Corporation,
9% due 5/15/2011...................... 800,000
CC Caa3 1,325,000 Millicom International Cellular SA,
13.50% due 6/01/2006.................. 649,250
NR* NR* 710,368 NII Holdings Inc., 13%** due
11/01/2009(b)......................... 511,465
Nextel Partners Inc.:
CCC+ Caa1 500,000 13.257%** due 2/01/2009............... 375,000
CCC+ Caa1 750,000 11% due 3/15/2010..................... 637,500
-----------
4,455,215
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN CORPORATE BONDS
(COST--$90,163,213)--86.6% 74,625,950
- ---------------------------------------------------------------------------------------------------------------------------
<Caption>
SHARES
HELD COMMON STOCKS & WARRANTS
- ---------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE--0.0% 1,000 Allied Signal Litigation Trust(f)....... 0
1,000 Breed Creditors Litigation Trust(f)..... 0
-----------
0
- ---------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--0.9% 67,366 NII Holdings Inc. (Class B)(f).......... 771,341
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
48
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
High Yield Portfolio
Schedule of Investments as of December 31, 2002 (Concluded) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES
INDUSTRIES HELD COMMON STOCKS & WARRANTS VALUE
- ---------------------------------------------------------------------------------------------------------------------
ENERGY--EXPLORATION & $ 250 Tribo Petroleum Corporation (Class
PRODUCTION--0.0% A)(f)................................. $ 3
- ---------------------------------------------------------------------------------------------------------------------
FOOD & DRUG--0.1% 649 Archibald Candy Corporation(f).......... 60,357
936 Grand Union Co. (Warrants)(e)........... 1
-----------
60,358
- ---------------------------------------------------------------------------------------------------------------------
GAMING--0.1% 29,452 GB Holdings Inc.(f)..................... 84,527
- ---------------------------------------------------------------------------------------------------------------------
OIL & GAS--0.1% 7,838 Southwest Royalties Inc.(f)............. 107,782
147 Tri-Union Development Corporation(f).... 1
-----------
107,783
- ---------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAILING--0.0% 3,846 Bradlees Inc. (Warrants)(e)............. 4
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN COMMON STOCKS &
WARRANTS
(COST--$4,556,184)--1.2% 1,024,016
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
PREFERRED STOCKS
- ---------------------------------------------------------------------------------------------------------------------
CABLE--U.S.--1.8% 16,379 CSC Holdings Inc.(a).................... 1,523,247
- ---------------------------------------------------------------------------------------------------------------------
DIVERSIFIED MEDIA--0.5% 7,500 Primedia, Inc. (Series H)............... 461,250
- ---------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--1.2% 40,000 California Federal Bank................. 1,040,400
- ---------------------------------------------------------------------------------------------------------------------
WIRELESS 961 Nextel Communications, Inc. (Series
COMMUNICATIONS--1.0% D)(a)................................. 884,120
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN PREFERRED STOCKS
(COST--$4,117,020)--4.5% 3,909,017
- ---------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PARTNERSHIP
INTEREST SHORT-TERM SECURITIES
- ----------------------------------------------------------------------------------------------------------------------
$4,921,275 Merrill Lynch Liquidity Series, LLC Cash
Sweep Series II(c).................... 4,921,275
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SHORT-TERM
SECURITIES
(COST--$4,921,275)--5.7% 4,921,275
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST--$103,757,692)--98.0%............. 84,480,258
OTHER ASSETS LESS LIABILITIES--2.0%..... 1,707,333
-----------
NET ASSETS--100.0%...................... $86,187,591
===========
- ----------------------------------------------------------------------------------------------------------------------
</Table>
* Not Rated.
** Represents a zero coupon or step bond; the interest rate shown reflects the
effective yield at the time of purchase by the Portfolio.
+ Ratings of issues shown are unaudited.
(a) Represents a pay-in-kind security which may pay interest/dividends in
additional face/shares.
(b) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(c) Investments in companies considered to be an affiliate of the Portfolio
(such companies are defined as "Affiliated Companies" in Section 2(a)(3) of
the Investment Company Act of 1940) are as follows:
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------
NET INTEREST
AFFILIATE ACTIVITY NET COST INCOME
- ----------------------------------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC Cash Sweep Series II $4,921,275 $4,921,275 $ 11,077
- ----------------------------------------------------------------------------------------------------
</Table>
(d) Subject to principal paydowns.
(e) Warrants entitle the Portfolio to purchase a predetermined number of shares
of common stock and are non-income producing. The purchase price and number
of shares are subject to adjustment under certain conditions until the
expiration date.
(f) Non-income producing security.
(g) Floating rate note.
(h) Traded Custody Receipts (TRACERS).
(i) Target Return Index Securities (TRAINS).
(j) High Yield Derivative Index (HYDI) Single B.
See Notes to Financial Statements.
49
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Intermediate Government Bond Portfolio
Schedule of Investments as of December 31, 2002 (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
FACE
AMOUNT ISSUE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS
- ---------------------------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE $50,894,274 Fannie Mae--ACES 2002-M1 X, 1.201% due 5/25/2032(d)......... $ 2,443,480
OBLIGATIONS(A)--14.4% 19,984,174 Fannie Mae--ACES 2002-M2 N, 1.532% due 8/25/2012(d)......... 2,121,285
3,000,000 FHLMC Structured Pass Through Securities, T-50 A2,
1.27% due 9/27/2005....................................... 2,984,063
4,000,000 General Electric Capital Commercial Mortgage Corporation,
2002-2A-A3, 5.349% due 8/11/2036.......................... 4,211,369
Government National Mortgage Association:
3,000,000 2002-83-C, 5.25% due 9/16/2027............................ 3,068,654
5,051,000 2002-81-B, 5.042% due 1/16/2029........................... 5,099,142
16,419,182 2002-83-IO, 1.574% due 10/16/2042(d)...................... 1,076,532
2,400,000 Greenwich Capital Commercial Funding Corporation,
2002-C1-A4,
4.948% due 1/11/2035...................................... 2,449,875
2,712,323 Lehman Brothers Floating Rate Commercial, 2002-LLFA-A,
1.71% due 6/14/2017(e).................................... 2,710,973
3,000,000 Residential Asset Securities Corporation, 2002-KS5-AIB2,
2.47% due 8/25/2022....................................... 3,006,789
2,400,000 TEMP, 2002-4-C, 5.045% due 11/16/2028....................... 2,439,842
3,000,000 Washington Mutual, 2002-AR19-A8, 4.556% due 1/25/2033....... 3,039,375
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 34,651,379
- ---------------------------------------------------------------------------------------------------------------------------
FEDERAL FARM CREDIT 3,000,000 Federal Farm Credit Bank, 2.375% due 10/01/2004............. 3,028,440
BANK--1.3%
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL FEDERAL FARM CREDIT BANK 3,028,440
- ---------------------------------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN Federal Home Loan Bank:
BANK--5.2% 4,500,000 5.125% due 9/15/2003...................................... 4,620,915
2,000,000 4.75% due 6/28/2004....................................... 2,094,072
2,500,000 7.125% due 2/15/2005...................................... 2,771,063
2,500,000 6.875% due 8/13/2010...................................... 2,972,143
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL FEDERAL HOME LOAN BANK 12,458,193
- ---------------------------------------------------------------------------------------------------------------------------
FREDDIE MAC--3.5% Freddie Mac:
4,500,000 5.75% due 4/29/2009....................................... 4,692,492
3,400,000 6% due 5/25/2012.......................................... 3,550,634
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL FREDDIE MAC 8,243,126
- ---------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED Fannie Mae:
SECURITIES(A)--54.6% 3,832,348 4.79% due 10/01/2012...................................... 3,888,132
4,609,992 4.80% due 10/01/2012...................................... 4,682,904
2,395,280 4.87% due 10/01/2012...................................... 2,463,396
1,798,030 4.60% due 11/01/2012...................................... 1,798,372
3,355,122 4.72% due 11/01/2012...................................... 3,422,224
3,219,032 4.81% due 11/01/2012...................................... 3,302,341
2,996,962 4.87% due 11/01/2012...................................... 3,056,345
1,850,000 4.785% due 12/01/2012..................................... 1,893,808
2,500,000 5.18% due 12/01/2012...................................... 2,633,450
3,450,000 4.78% due 1/01/2013....................................... 3,530,384
2,700,000 5.15% due 1/01/2013....................................... 2,838,995
1,265,261 6% due 6/01/2016.......................................... 1,324,495
1,618,714 6% due 4/01/2017.......................................... 1,693,869
524,260 7% due 3/01/2029.......................................... 551,898
607,983 7% due 5/01/2029.......................................... 640,368
1,672,594 7% due 6/01/2029.......................................... 1,760,771
355,240 7% due 7/01/2029.......................................... 373,967
664,577 7% due 8/01/2029.......................................... 699,612
711,603 7% due 9/01/2029.......................................... 749,118
451,944 7% due 11/01/2029......................................... 475,770
44,958 8% due 4/01/2030.......................................... 48,467
230,596 8% due 4/01/2030.......................................... 248,593
471,009 7.50% due 5/01/2030....................................... 500,237
390,489 7.50% due 6/01/2030....................................... 414,720
1,077,474 7.50% due 9/01/2030....................................... 1,144,335
269,339 7.50% due 7/01/2030....................................... 286,051
34,517 8% due 7/01/2030.......................................... 37,211
105,169 7.50% due 10/01/2030...................................... 111,695
114,733 7.50% due 12/01/2030...................................... 121,853
166,445 8% due 2/01/2031.......................................... 179,470
2,012,811 7.50% due 4/01/2031....................................... 2,137,713
1,532,155 7.50% due 5/01/2031....................................... 1,626,750
</Table>
50
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Intermediate Government Bond Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
FACE
AMOUNT ISSUE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED Fannie Mae (concluded):
SECURITIES(A) (CONCLUDED) $ 1,641,574 7% due 7/01/2031.......................................... $ 1,726,680
3,763,286 7% due 9/01/2031.......................................... 3,958,389
419,475 6.50% due 1/01/2032....................................... 436,965
2,727,689 7% due 2/01/2032.......................................... 2,869,007
243,337 6.50% due 9/01/2032....................................... 253,477
195,985 6.50% due 10/01/2032...................................... 204,153
2,339,033 6.50% due 10/01/2032...................................... 2,436,516
999,137 5.89% due 11/01/2032...................................... 1,042,069
13,250,000 6% due TBA(b)............................................. 13,718,268
6,407,629 6.50% due TBA(b).......................................... 6,753,590
Freddie Mac--Gold Program(c):
1,799,821 5.50% due 6/01/2017....................................... 1,868,922
4,156,915 6% due 4/01/2017.......................................... 4,350,761
2,233,696 6.25% due 2/15/2027....................................... 2,275,845
405,036 6.50% due 3/01/2029....................................... 422,365
247,758 6.50% due 3/01/2029....................................... 258,358
843,228 6.50% due 4/01/2029....................................... 878,962
1,816,805 6.50% due 4/01/2029....................................... 1,893,544
884,918 6.50% due 5/01/2029....................................... 922,286
1,499,989 6.50% due 5/01/2029....................................... 1,563,701
1,705,522 6.50% due 6/01/2029....................................... 1,777,544
1,594,030 6.50% due 7/01/2029....................................... 1,661,343
1,416,313 6.50% due 8/01/2029....................................... 1,476,122
393,482 6.50% due 8/01/2029....................................... 410,099
471,028 6.50% due 9/01/2029....................................... 491,008
50,887 6.50% due 7/01/2030....................................... 53,035
150,628 8% due 12/01/2030......................................... 161,534
287,020 8% due 3/01/2030.......................................... 307,802
1,440,877 7% due 4/01/2032.......................................... 1,514,950
130,220 8% due 6/01/2031.......................................... 139,649
878,178 6.50% due 8/01/2030....................................... 915,248
181,501 8% due 8/01/2030.......................................... 194,644
2,100,000 5% due TBA(b)............................................. 2,156,475
3,000,000 5.50% due TBA(b).......................................... 3,062,895
2,485,000 6% due TBA(b)............................................. 2,573,599
2,100,000 6.50% due TBA(b).......................................... 2,185,439
1,500,000 8% due TBA(b)............................................. 1,607,838
Government National Mortgage Association:
3,425,761 6.50% due 1/15/2029....................................... 3,599,997
2,631,207 6.50% due 2/15/2029....................................... 2,765,038
169,622 6.50% due 4/15/2029....................................... 178,250
294,003 6.50% due 6/15/2029....................................... 308,956
367,414 6.50% due 8/15/2029....................................... 386,102
256,288 6.50% due 8/15/2029....................................... 269,322
57,987 6.50% due 3/15/2030....................................... 60,960
4,050,876 6.50% due 7/20/2031....................................... 4,226,717
2,000,000 6% due TBA(b)............................................. 2,085,484
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES 131,041,222
- ---------------------------------------------------------------------------------------------------------------------------
TENNESSEE VALLEY Tennessee Valley Authority:
AUTHORITY--3.4% 2,625,000 5.625% due 1/18/2011...................................... 2,887,925
1,000,000 6.25% due 12/15/2017...................................... 1,128,624
3,500,000 6.75% due 11/01/2025...................................... 4,100,940
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL TENNESSEE VALLEY AUTHORITY 8,117,489
- ---------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BONDS & U.S. Treasury Bonds:
NOTES--19.8% 1,430,000 7.50% due 11/15/2016...................................... 1,870,060
1,100,000 8.125% due 8/15/2019...................................... 1,532,180
3,460,000 7.25% due 8/15/2022....................................... 4,503,000
4,310,000 6.25% due 8/15/2023....................................... 5,063,578
1,100,000 6.625% due 2/15/2027...................................... 1,358,930
3,060,000 6.125% due 8/15/2029...................................... 3,592,391
500,000 5.375% due 2/15/2031...................................... 545,078
U.S. Treasury Notes:
3,300,000 2% due 11/30/2004......................................... 3,327,327
6,800,000 6.50% due 5/15/2005....................................... 7,548,265
1,100,000 6.25% due 2/15/2007....................................... 1,262,036
3,500,000 3.25% due 8/15/2007....................................... 3,586,681
</Table>
51
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Intermediate Government Bond Portfolio
Schedule of Investments as of December 31, 2002 (Concluded) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
FACE
AMOUNT ISSUE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (CONCLUDED)
- ---------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BONDS & U.S. Treasury Notes (concluded):
NOTES (CONCLUDED) $ 3,380,000 6.125% due 8/15/2007...................................... $ 3,886,736
2,780,000 4.75% due 11/15/2008...................................... 3,034,542
1,650,000 6.50% due 2/15/2010....................................... 1,972,265
2,100,000 4.875% due 2/15/2012...................................... 2,280,386
2,100,000 4.375% due 8/15/2012...................................... 2,195,073
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BONDS & NOTES 47,558,528
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(COST--$236,870,935)--102.2% 245,098,377
- ---------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES
- ---------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY 12,412,000 Federal Farm Credit Bank, 1.25% due 1/08/2003............... 12,408,552
OBLIGATIONS*--5.2%
- ---------------------------------------------------------------------------------------------------------------------------
REPURCHASE 5,000,000 J.P. Morgan Securities Inc., purchased on 12/31/2002 to
AGREEMENTS**--7.2% yield 1.05% to 1/02/2003.................................. 5,000,000
12,211,000 UBS Warburg Corp. LLC, purchased on 12/31/2002 to yield
1.10% to 1/02/2003........................................ 12,211,000
------------
17,211,000
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES (COST--$29,619,552)--12.4% 29,619,552
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST--$266,490,487)--114.6%.............. 274,717,929
UNREALIZED DEPRECIATION ON INTEREST RATE SWAPS--(0.1%)...... (222,390)
VARIATION MARGIN ON FINANCIAL FUTURES CONTRACTS***--0.0%.... 5,906
LIABILITIES IN EXCESS OF OTHER ASSETS--(14.5%).............. (34,693,589)
------------
NET ASSETS--100.0%.......................................... $239,807,856
============
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
* Certain U.S. Government Agency Obligations are traded on a discount basis; the
interest rate shown reflects the discount rate paid at the time of purchase by
the Portfolio.
** Repurchase Agreements are fully collateralized by U.S. Government & Agency
Obligations.
*** Financial futures contracts sold as of December 31, 2002 were as follows:
<Table>
<Caption>
- ---------------------------------------------------------
NUMBER OF EXPIRATION
CONTRACTS ISSUE DATE VALUE
- ---------------------------------------------------------
27 U.S. Treasury Notes March 2003 $3,106,266
------------------------------------------------------
TOTAL FINANCIAL FUTURES CONTRACTS SOLD
(TOTAL CONTRACT PRICE--$3,109,942) $3,106,266
==========
- ---------------------------------------------------------
</Table>
(a) Mortgage-Backed Obligations are subject to principal paydowns as a result of
prepayments or refinancing of the underlying mortgage instruments. As a
result, the average life may be substantially less than the original
maturity.
(b) Represents a "to-be-announced" (TBA) transaction. The Portfolio has
committed to purchasing securities for which all specific information is not
available at this time.
(c) Collateralized Mortgage Obligations (CMO).
(d) Securities which receive some or all of the interest portion of the
underlying collateral and little or no principal. Interest-only securities
have either a nominal or a notional amount of principal.
(e) Floating rate note.
See Notes to Financial Statements.
52
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Large Cap Core Strategy Portfolio
Schedule of Investments as of December 31, 2002 (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES PERCENT OF
INDUSTRY* HELD COMMON STOCKS VALUE NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
BANKS 56,000 AmSouth Bancorporation...................................... $ 1,075,200 0.5%
70,000 Bank of America Corporation................................. 4,869,900 2.4
23,100 Charter One Financial, Inc. ................................ 663,663 0.3
32,000 Golden West Financial Corporation........................... 2,297,920 1.1
48,000 GreenPoint Financial Corp. ................................. 2,168,640 1.0
21,000 Hibernia Corporation (Class A).............................. 404,460 0.2
12,000 New York Community Bancorp, Inc. ........................... 346,560 0.2
58,000 North Fork Bancorporation................................... 1,956,920 0.9
85,000 Sovereign Bancorp, Inc. .................................... 1,194,250 0.6
142,000 U.S. Bancorp................................................ 3,013,240 1.5
84,000 Washington Mutual, Inc. .................................... 2,900,520 1.4
------------ -----
20,891,273 10.1
- --------------------------------------------------------------------------------------------------------------------------------
BEVERAGES 35,000 Adolph Coors Company (Class B).............................. 2,143,750 1.0
5,000 The Coca-Cola Company....................................... 219,100 0.1
105,000 Coca-Cola Enterprises Inc. ................................. 2,280,600 1.1
76,000 +Constellation Brands, Inc. (Class A)....................... 1,801,960 0.9
------------ -----
6,445,410 3.1
- --------------------------------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY 59,000 +Charles River Laboratories International, Inc. ............ 2,270,320 1.1
- --------------------------------------------------------------------------------------------------------------------------------
CHEMICALS 55,000 Eastman Chemical Company.................................... 2,022,350 1.0
- --------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & 51,000 +Apollo Group, Inc. (Class A)............................... 2,244,000 1.1
SUPPLIES
34,000 +Career Education Corporation............................... 1,360,000 0.7
45,000 Deluxe Corporation.......................................... 1,894,500 0.9
60,000 H&R Block, Inc. ............................................ 2,412,000 1.2
------------ -----
7,910,500 3.9
- --------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS 118,000 +Advanced Fibre Communications, Inc. ....................... 1,967,060 0.9
EQUIPMENT
24,000 +Cisco Systems, Inc. ....................................... 314,160 0.2
74,000 +QUALCOMM Incorporated...................................... 2,688,420 1.3
------------ -----
4,969,640 2.4
- --------------------------------------------------------------------------------------------------------------------------------
COMPUTERS & 133,000 +Dell Computer Corporation.................................. 3,559,080 1.7
PERIPHERALS
16,000 International Business Machines Corporation................. 1,240,000 0.6
37,000 +Lexmark International Group, Inc. (Class A)................ 2,238,500 1.1
38,000 +Storage Technology Corporation............................. 813,960 0.4
------------ -----
7,851,540 3.8
- --------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING 44,000 Ball Corporation............................................ 2,252,360 1.1
97,000 +Pactiv Corporation......................................... 2,120,420 1.0
------------ -----
4,372,780 2.1
- --------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS 73,000 Citigroup Inc. ............................................. 2,568,870 1.2
47,000 Countrywide Credit Industries, Inc. ........................ 2,427,550 1.2
55,000 Fannie Mae.................................................. 3,538,150 1.7
52,000 Freddie Mac................................................. 3,070,600 1.5
------------ -----
11,605,170 5.6
- --------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED 8,000 SBC Communications Inc. .................................... 216,880 0.1
TELECOMMUNICATION
SERVICES
14,000 Verizon Communications...................................... 542,500 0.3
------------ -----
759,380 0.4
- --------------------------------------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILING 41,000 +Whole Foods Market, Inc. .................................. 2,161,110 1.1
- --------------------------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS 61,000 +Dean Foods Company......................................... 2,263,100 1.1
65,000 Kellogg Company............................................. 2,227,550 1.1
112,000 Sara Lee Corporation........................................ 2,521,120 1.2
168,000 Tyson Foods, Inc. (Class A)................................. 1,884,960 0.9
------------ -----
8,896,730 4.3
- --------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT 60,000 Bausch & Lomb Incorporated.................................. 2,160,000 1.0
& SUPPLIES
75,000 +Guidant Corporation........................................ 2,313,750 1.1
7,000 +Henry Schein, Inc. ........................................ 315,000 0.2
45,000 +Varian Medical Systems, Inc. .............................. 2,232,000 1.1
------------ -----
7,020,750 3.4
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
53
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Large Cap Core Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Continued) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES PERCENT OF
INDUSTRY* HELD COMMON STOCKS VALUE NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE 22,000 +Accredo Health, Incorporated............................... $ 775,500 0.4%
PROVIDERS & SERVICES
88,000 +AdvancePCS................................................. 1,950,080 0.9
53,000 Aetna Inc. (New Shares)..................................... 2,179,360 1.1
126,000 +Caremark Rx, Inc. ......................................... 2,047,500 1.0
86,000 +DaVita, Inc. .............................................. 2,121,620 1.0
41,000 +Express Scripts, Inc. (Class A)............................ 1,971,280 1.0
94,000 +Humana Inc. ............................................... 940,000 0.5
25,000 Omnicare, Inc. ............................................. 595,750 0.3
59,000 +Oxford Health Plans, Inc. ................................. 2,150,550 1.0
29,000 UnitedHealth Group Incorporated............................. 2,421,500 1.2
47,000 +Universal Health Services, Inc. (Class B).................. 2,119,700 1.0
36,000 +WellPoint Health Networks Inc. ............................ 2,561,760 1.2
------------ -----
21,834,600 10.6
- --------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & 54,000 +Harrah's Entertainment, Inc. .............................. 2,138,400 1.0
LEISURE
31,000 +International Game Technology.............................. 2,353,520 1.2
68,000 +Mandalay Resort Group...................................... 2,081,480 1.0
------------ -----
6,573,400 3.2
- --------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES 114,000 D.R. Horton, Inc. .......................................... 1,977,900 1.0
46,000 Fortune Brands, Inc. ....................................... 2,139,460 1.0
38,000 Lennar Corporation.......................................... 1,960,800 0.9
36,000 +Mohawk Industries, Inc. ................................... 2,050,200 1.0
7,000 +NVR, Inc. ................................................. 2,278,500 1.1
12,000 Newell Rubbermaid Inc. ..................................... 363,960 0.2
43,000 Pulte Corporation........................................... 2,058,410 1.0
60,000 The Ryland Group, Inc. ..................................... 2,001,000 1.0
38,000 Whirlpool Corporation....................................... 1,984,360 1.0
------------ -----
16,814,590 8.2
- --------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS 50,000 The Clorox Company.......................................... 2,062,500 1.0
56,000 The Procter & Gamble Company................................ 4,812,640 2.3
------------ -----
6,875,140 3.3
- --------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL 166,000 General Electric Company.................................... 4,042,100 2.0
CONGLOMERATES
- --------------------------------------------------------------------------------------------------------------------------------
INSURANCE 72,000 The Allstate Corporation.................................... 2,663,280 1.3
22,000 American International Group, Inc. ......................... 1,272,700 0.6
83,000 MetLife, Inc. .............................................. 2,244,320 1.1
17,000 Old Republic International Corporation...................... 476,000 0.2
------------ -----
6,656,300 3.2
- --------------------------------------------------------------------------------------------------------------------------------
LEISURE EQUIPMENT & 65,000 Eastman Kodak Company....................................... 2,277,600 1.1
PRODUCTS
36,000 Polaris Industries, Inc. ................................... 2,109,600 1.0
------------ -----
4,387,200 2.1
- --------------------------------------------------------------------------------------------------------------------------------
MULTILINE RETAIL 78,000 Dillard's, Inc. (Class A)................................... 1,237,080 0.6
99,000 J.C. Penney Company, Inc. .................................. 2,277,990 1.1
26,000 Wal-Mart Stores, Inc. ...................................... 1,313,260 0.6
------------ -----
4,828,330 2.3
- --------------------------------------------------------------------------------------------------------------------------------
OFFICE ELECTRONICS 79,000 +Xerox Corporation.......................................... 635,950 0.3
- --------------------------------------------------------------------------------------------------------------------------------
OIL & GAS 108,000 Exxon Mobil Corporation..................................... 3,773,520 1.8
- --------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 10,000 +Forest Laboratories, Inc. ................................. 982,200 0.5
44,000 Johnson & Johnson........................................... 2,363,240 1.1
93,000 Merck & Co., Inc. .......................................... 5,264,730 2.6
96,000 Pfizer Inc. ................................................ 2,934,720 1.4
------------ -----
11,544,890 5.6
- --------------------------------------------------------------------------------------------------------------------------------
ROAD & RAIL 115,000 Norfolk Southern Corporation................................ 2,298,850 1.1
- --------------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTOR 41,000 Intel Corporation........................................... 637,960 0.3
EQUIPMENT & PRODUCTS
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
54
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Large Cap Core Strategy Portfolio
Schedule of Investments as of December 31, 2002 (Concluded) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES PERCENT OF
INDUSTRY* HELD COMMON STOCKS VALUE NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
SOFTWARE 34,000 +Electronic Arts Inc. ...................................... $ 1,690,140 0.8%
44,000 +Intuit Inc. ............................................... 2,064,920 1.0
74,000 +Microsoft Corporation...................................... 3,826,540 1.9
54,000 +Symantec Corporation....................................... 2,187,000 1.0
------------ -----
9,768,600 4.7
- --------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL 67,000 +AutoNation, Inc. .......................................... 841,520 0.4
32,000 +AutoZone, Inc. ............................................ 2,260,800 1.1
41,000 +CDW Computer Centers, Inc. ................................ 1,797,850 0.9
161,000 Foot Locker, Inc. .......................................... 1,690,500 0.8
41,000 +Michael's Stores........................................... 1,283,300 0.6
23,000 Pier 1 Imports, Inc. ....................................... 435,390 0.2
52,000 Ross Stores, Inc. .......................................... 2,202,720 1.1
------------ -----
10,512,080 5.1
- --------------------------------------------------------------------------------------------------------------------------------
TEXTILES, APPAREL & 62,000 +Jones Apparel Group, Inc. ................................. 2,197,280 1.1
LUXURY GOODS
78,000 +Reebok International Ltd. ................................. 2,293,200 1.1
------------ -----
4,490,480 2.2
- --------------------------------------------------------------------------------------------------------------------------------
WIRELESS 459,000 +Sprint Corp. (PCS Group)................................... 2,010,420 1.0
TELECOMMUNICATION
SERVICES
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN COMMON STOCKS (COST--$209,179,082) 204,861,363 99.3
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PARTNERSHIP
INTEREST SHORT-TERM SECURITIES
- ------------------------------------------------------------------------------------------------------------------------------------
$898,477 Merrill Lynch Liquidity Series, LLC Cash Sweep
Series II**.................................... 898,477 0.4
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES (COST--$898,477) $ 898,477 0.4
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST--$210,077,559)......... 205,759,840 99.7
OTHER ASSETS LESS LIABILITIES.................. 600,424 0.3
------------ -----
NET ASSETS..................................... $206,360,264 100.0%
============ =====
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Non-income producing security.
* For Portfolio compliance purposes, "Industry" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Portfolio management.
This definition may not apply for purposes of this report, which may combine
such industry sub-classifications for reporting ease. These industry
classifications are unaudited.
** Investments in companies considered to be an affiliate of 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>
- ------------------------------------------------------------------------------------------------------
NET NET INTEREST
AFFILIATE ACTIVITY COST INCOME
- ------------------------------------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC Cash Sweep Series II $898,477 $898,477 $830
- ------------------------------------------------------------------------------------------------------
</Table>
See Notes to Financial Statements.
55
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Money Reserve Portfolio
Schedule of Investments as of December 31, 2002 (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
FACE INTEREST MATURITY
AMOUNT ISSUE RATE* DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT-- $ 3,900,000 Bank of Nova Scotia, NY+................... 2.98% 3/27/2003 $ 3,915,324
YANKEE--5.3% 4,850,000 Canadian Imperial Bank of Commerce, NY+.... 2.425 1/10/2003 4,851,156
3,000,000 Canadian Imperial Bank of Commerce, NY+.... 2.17 7/14/2003 3,013,821
9,750,000 Nordea Bank PLC, NY+....................... 1.379 9/09/2003 9,748,998
3,000,000 Svenska Handelsbanken AB, NY+.............. 2.50 6/13/2003 3,016,056
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT--YANKEE
(COST--$24,499,872) 24,545,355
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER--56.4% 7,500,000 Aegon Funding Corp. ....................... 1.35 2/18/2003 7,486,781
11,996,000 Amsterdam Funding Corp. ................... 1.35 1/13/2003 11,991,052
5,000,000 Aspen Funding Corp. ....................... 1.35 2/18/2003 4,991,188
9,000,000 Bavaria TRR Corp. ......................... 1.75 1/15/2003 8,995,678
9,000,000 Blue Ridge Asset Funding Corp. ............ 1.35 2/03/2003 8,989,201
7,000,000 Centauri Corp. ............................ 1.36 2/20/2003 6,987,042
10,318,000 Clipper Receivables Corp. ................. 1.35 1/27/2003 10,308,327
10,000,000 Clipper Receivables Corp. ................. 1.33 1/28/2003 9,990,316
1,356,000 Clipper Receivables Corp. ................. 1.35 1/28/2003 1,354,687
10,000,000 Corporate Asset Funding Co., Inc. ......... 1.35 1/22/2003 9,992,500
1,119,000 Dorada Finance Inc. ....................... 1.36 2/27/2003 1,116,702
15,558,000 Enterprise Funding Corp. .................. 1.34 2/10/2003 15,535,415
3,498,000 Eureka Securitization Inc. ................ 1.35 1/15/2003 3,496,295
10,000,000 FCAR Owner Trust, Series I................. 1.78 1/16/2003 9,994,827
2,633,000 Falcon Asset Securitization................ 1.34 1/22/2003 2,631,040
3,000,000 Goldman Sachs Group, Inc.+................. 1.76 10/09/2003 2,999,700
10,000,000 Goldman Sachs Group, Inc.+................. 1.431 10/10/2003 10,000,000
4,864,000 Greyhawk Capital Corp. .................... 1.33 1/14/2003 4,861,860
8,000,000 Greyhawk Capital Corp. .................... 1.33 2/10/2003 7,988,560
10,000,000 Greyhawk Capital Corp. .................... 1.34 2/21/2003 9,981,529
5,000,000 HBOS Treasury Services..................... 1.35 1/23/2003 4,996,091
5,634,000 HBOS Treasury Services..................... 1.34 3/10/2003 5,619,853
6,971,000 Kitty Hawk Funding Corp. .................. 1.35 1/14/2003 6,967,863
3,757,000 Morgan Stanley Group, Inc. ................ 1.37 1/10/2003 3,755,856
9,850,000 Morgan Stanley Group, Inc. +............... 1.393 4/15/2003 9,850,000
5,000,000 Newport Funding Corp. ..................... 1.35 1/21/2003 4,996,490
4,234,000 Newport Funding Corp. ..................... 1.35 1/24/2003 4,230,531
1,024,000 Old Line Funding Corp. .................... 1.33 1/07/2003 1,023,811
4,452,000 Old Line Funding Corp. .................... 1.35 2/03/2003 4,446,621
10,000,000 PB Finance (Delaware)...................... 1.37 2/13/2003 9,984,600
5,000,000 PB Finance (Delaware)...................... 1.38 2/13/2003 4,992,300
7,128,000 Park Avenue Receivables Corp. ............. 1.34 2/05/2003 7,118,979
10,000,000 Santander Central Hispano Finance
(Delaware), Inc. ........................ 1.35 2/12/2003 9,984,967
6,072,000 Sheffield Receivables Corporation.......... 1.35 1/23/2003 6,067,218
4,662,000 Spintab AB................................. 1.33 2/06/2003 4,655,926
9,700,000 Svenska Handelsbanken AB................... 1.34 1/30/2003 9,689,815
6,000,000 Svenska Handelsbanken AB................... 1.33 2/11/2003 5,991,198
4,188,000 Svenska Handelsbanken AB................... 1.33 2/26/2003 4,179,550
4,700,000 Windmill Funding Corp. .................... 1.40 1/03/2003 4,699,817
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (COST--$262,939,877) 262,944,186
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE NOTES--0.8% 2,000,000 Holmes Financing Number 6+................. 1.42 10/15/2003 2,000,000
1,800,000 Wal-Mart Stores, Inc.+..................... 4.878 6/01/2003 1,823,778
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE NOTES (COST--$3,816,847) 3,823,778
- ------------------------------------------------------------------------------------------------------------------------------------
FUNDING 3,000,000 GE Life and Annuity Assurance Co.+......... 1.489 10/01/2003 3,000,000
AGREEMENTS--8.0% 9,000,000 Jackson National Life Insurance Co.+....... 1.519 5/01/2003 9,000,000
5,000,000 Monumental Life Insurance Company+......... 1.584 11/14/2003 5,000,000
10,500,000 Monumental Life Insurance Company+......... 1.599 11/24/2003 10,500,000
5,000,000 New York Life Insurance Company+........... 1.478 5/30/2003 5,000,000
5,000,000 The Travelers Insurance Company+........... 1.499 3/03/2003 5,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FUNDING AGREEMENTS
(COST--$37,500,000) 37,500,000
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
56
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Money Reserve Portfolio
Schedule of Investments as of December 31, 2002 (Concluded) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
FACE INTEREST MATURITY
AMOUNT ISSUE RATE* DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIUM-TERM $ 1,500,000 BMW US Capital Group+...................... 1.423% 12/10/2003 $ 1,500,000
NOTES--6.4% 7,000,000 General Electric Capital Corp.+............ 1.45 1/16/2004 7,000,000
1,200,000 Goldman Sachs Group, Inc.+................. 2.025 1/13/2004 1,200,000
7,500,000 Household Finance Corp.+................... 1.52 2/14/2003 7,500,000
7,500,000 Morgan Stanley Group, Inc.+................ 1.52 1/16/2004 7,500,000
5,000,000 Salomon, Smith Barney Holdings, Inc.+...... 2.12 7/24/2003 5,007,605
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL MEDIUM-TERM NOTES (COST--$29,708,182) 29,707,605
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS--0.9% 4,000,000 California State, Revenue Anticipation
Notes+................................... 1.42 6/20/2003 4,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST--$4,000,000) 4,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT, AGENCY & 2,000,000 Federal Home Loan Bank..................... 4.50 4/25/2003 2,020,128
INSTRUMENTALITY 3,000,000 Federal Home Loan Bank+.................... 1.44 11/07/2003 3,000,705
OBLIGATIONS--
NON-DISCOUNT--20.2% 4,400,000 Federal Home Loan Bank+.................... 1.253 12/04/2003 4,403,150
2,600,000 Federal Home Loan Bank+.................... 1.235 12/29/2003 2,602,306
2,600,000 Federal Home Loan Bank+.................... 1.625 1/02/2004 2,599,347
8,000,000 Federal Home Loan Bank+.................... 1.303 1/06/2004 7,996,950
1,500,000 Federal Home Loan Bank..................... 3.375 6/15/2004 1,539,678
10,000,000 Federal Home Loan Mortgage Corporation+.... 2.45 1/16/2003 10,004,100
2,600,000 Federal Home Loan Mortgage Corporation+.... 3.25 1/15/2004 2,651,103
1,400,000 Federal Home Loan Mortgage Corporation+.... 3.75 4/15/2004 1,441,632
10,000,000 Federal National Mortgage Association+..... 1.28 2/03/2003 10,000,000
5,000,000 Federal National Mortgage Association+..... 1.248 2/19/2003 5,000,393
2,000,000 Federal National Mortgage Association...... 4.00 8/15/2003 2,033,694
5,700,000 Federal National Mortgage Association+..... 1.447 1/14/2004 5,700,000
9,000,000 Federal National Mortgage Association+..... 1.285 5/27/2004 8,994,305
2,000,000 Federal National Mortgage Association...... 2.46 8/19/2004 2,014,542
1,450,000 Federal National Mortgage Association...... 2.70 8/19/2004 1,452,719
1,950,000 Federal National Mortgage Association...... 2.72 8/27/2004 1,954,265
1,950,000 Federal National Mortgage Association...... 2.80 9/03/2004 1,954,817
1,500,000 Federal National Mortgage Association...... 2.50 10/01/2004 1,513,863
1,350,000 Federal National Mortgage Association...... 2.60 10/29/2004 1,355,484
1,000,000 Federal National Mortgage Association...... 2.65 11/04/2004 1,011,562
9,850,000 Student Loan Marketing Association+........ 1.427 2/12/2004 9,847,843
2,000,000 Student Loan Marketing Association+........ 3.375 7/15/2004 2,053,948
900,000 U.S. Treasury Notes........................ 2.125 8/31/2004 910,019
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT, AGENCY &
INSTRUMENTALITY OBLIGATIONS--NON-DISCOUNT
(COST--$93,873,940) 94,056,553
- ------------------------------------------------------------------------------------------------------------------------------------
REPURCHASE 14,529,000 Credit Suisse First Boston Corp., purchased
AGREEMENTS**--3.1% on 12/31/2002 to yield 1.25% to
1/02/2003................................ 14,529,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(COST--$14,529,000) 14,529,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST--$470,867,718)--101.1%............... 471,106,477
LIABILITIES IN EXCESS OF OTHER
ASSETS--(1.1)%........................... (5,120,835)
------------
NET ASSETS--100.0%......................... $465,985,642
============
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
* Commercial Paper and certain U.S. Government, Agency & Instrumentality
Obligations are traded on a discount basis; the interest rates shown reflect the
discount rates paid at the time of purchase by the Portfolio. Other securities
bear interest at the rates shown payable at fixed rates or upon maturity.
Interest rates on variable securities are adjusted periodically based upon
appropriated indexes. The interest rates shown are the rates in effect at
December 31, 2002.
** Repurchase Agreements are fully collateralized by U.S. Government & Agency
Obligations.
+ Variable rate notes.
See Notes to Financial Statements.
57
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUNDS, INC.
Natural Resources Portfolio
Schedule of Investments as of December 31, 2002 (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES PERCENT OF
INDUSTRY* HELD STOCKS VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
AUTO COMPONENTS 14,100 +Westport Innovations Inc. ................................. $ 24,901 0.2%
- ------------------------------------------------------------------------------------------------------------------------------
CANADIAN 24,400 +Baytex Energy Ltd. ........................................ 130,974 0.8
INDEPENDENTS 9,000 +Bonavista Petroleum Ltd. .................................. 193,923 1.2
3,500 Canadian Natural Resources Ltd. ............................ 103,684 0.6
47,000 +Crescent Point Energy Ltd. 'A' ............................ 147,265 0.9
29,500 +Compton Petroleum Corporation.............................. 95,047 0.6
24,826 EnCana Corp. ............................................... 766,561 4.8
5,800 Husky Energy Inc. .......................................... 60,467 0.4
53,000 +Impact Energy Inc. ........................................ 58,374 0.4
25,200 +Olympia Energy Inc. ....................................... 52,480 0.3
29,500 +PEYTO Exploration & Development Corp. ..................... 208,207 1.3
3,700 +Penn West Petroleum Ltd. .................................. 96,025 0.6
7,300 Petro-Canada................................................ 226,005 1.4
30,000 +Progress Energy Ltd. ...................................... 151,918 1.0
40,000 +Rider Resources Inc. ...................................... 54,437 0.3
16,200 Suncor Energy, Inc. ........................................ 253,285 1.6
5,500 Talisman Energy Inc. ....................................... 197,921 1.2
43,000 +Upton Resources Inc. ...................................... 112,957 0.7
----------- -----
2,909,530 18.1
- ------------------------------------------------------------------------------------------------------------------------------
CHEMICALS 4,200 +Celanese AG................................................ 91,392 0.6
1,400 Praxair, Inc. .............................................. 80,878 0.5
----------- -----
172,270 1.1
- ------------------------------------------------------------------------------------------------------------------------------
INTEGRATED OIL & GAS 2,600 Amerada Hess Corporation.................................... 143,130 0.9
7,257 ChevronTexaco Corporation................................... 482,445 3.0
5,191 ConocoPhillips.............................................. 251,192 1.6
1,100 ENI SpA (ADR)**............................................. 86,339 0.5
11,108 Exxon Mobil Corporation..................................... 388,114 2.4
5,300 Marathon Oil Corporation.................................... 112,837 0.7
17,800 Murphy Oil Corporation...................................... 762,730 4.8
4,000 Valero Energy Corporation................................... 147,760 0.9
----------- -----
2,374,547 14.8
- ------------------------------------------------------------------------------------------------------------------------------
METALS & MINING 7,200 Agnico-Eagle Mines Limited.................................. 106,993 0.7
3,800 Alcan Aluminium Ltd. ....................................... 112,176 0.7
3,476 Alcoa Inc. ................................................. 79,183 0.5
24,100 Alumina Limited............................................. 66,496 0.4
7,500 Aluminum Corporation of China Limited (ADR)**............... 107,550 0.7
2,500 Arch Coal, Inc. ............................................ 53,975 0.3
4,700 CONSOL Energy Inc. ......................................... 81,216 0.5
1,700 Companhia Vale do Rio Doce (ADR)**.......................... 49,147 0.3
38,000 +Eldorado Gold Corporation.................................. 49,791 0.3
7,000 +Glamis Gold Ltd. .......................................... 78,871 0.5
338,600 M.I.M. Holdings Limited..................................... 287,905 1.8
2,700 Newmont Mining Corporation.................................. 78,381 0.5
7,200 Placer Dome Inc. ........................................... 81,398 0.5
6,050 +Stillwater Mining Company.................................. 32,368 0.2
24,100 +WMC Resources Limited...................................... 57,268 0.3
----------- -----
1,322,718 8.2
- ------------------------------------------------------------------------------------------------------------------------------
OIL & GAS DRILLING 64,700 +Drillers Technology Corp. ................................. 59,384 0.4
6,400 ENSCO International Incorporated............................ 188,480 1.2
6,300 Ensign Resource Service Group, Inc. ........................ 66,438 0.4
6,614 GlobalSantaFe Corporation................................... 160,852 1.0
6,600 Helmerich & Payne, Inc. .................................... 184,206 1.2
2,900 +Nabors Industries, Ltd. ................................... 102,283 0.6
8,600 +National-Oilwell, Inc...................................... 187,824 1.2
6,700 +Noble Corporation.......................................... 235,505.... 1.5
3,200 +Patterson-UTI Energy, Inc. ................................ 96,480 0.6
1,800 +Precision Drilling Corporation............................. 58,052 0.3
3,500 +Precision Drilling Corporation (NY Registered Shares)...... 113,890 0.7
4,000 Rowan Companies, Inc. ...................................... 90,800 0.6
22,900 Saipem SpA.................................................. 153,079 0.9
6,500 Transocean Inc.............................................. 150,800 0.9
----------- -----
1,848,073 11.5
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
58
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Natural Resources Portfolio
Schedule of Investments as of December 31, 2002 (Concluded) (in U.S. dollars)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES PERCENT OF
INDUSTRY* HELD STOCKS VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
OIL & GAS EQUIPMENT 13,000 +BJ Services Company........................................ $ 420,030 2.6%
& SERVICES 8,900 Baker Hughes Incorporated................................... 286,491 1.8
4,000 +Cooper Cameron Corporation................................. 199,280 1.2
13,000 +FMC Technologies, Inc. .................................... 265,590 1.7
4,000 Halliburton Company......................................... 74,840 0.5
3,700 +Hanover Compressor Company................................. 33,966 0.2
3,300 +Lone Star Technology....................................... 49,137 0.3
10,000 +Oil States International, Inc. ............................ 129,000 0.8
2,200 Schlumberger Limited........................................ 92,598 0.6
6,600 +Smith International, Inc. ................................. 215,292 1.3
8,925 Technip-Coflexip SA (ADR)**................................. 158,954 1.0
15,200 +Tesco Corporation.......................................... 180,114 1.1
2,200 Tidewater Inc. ............................................. 68,420 0.4
7,100 +Weatherford International Ltd. ............................ 283,503 1.8
----------- -----
2,457,215 15.3
- ------------------------------------------------------------------------------------------------------------------------------
OIL & GAS EXPLORATION 800 Anadarko Petroleum Corporation.............................. 38,320 0.2
& PRODUCTION 7,580 Apache Corporation.......................................... 431,984 2.7
5,140 Burlington Resources Inc. .................................. 219,221 1.4
6,000 CNOOC Limited (ADR)**....................................... 156,300 1.0
3,507 +Cimarex Energy Co. ........................................ 62,775 0.4
11,713 Devon Energy Corporation.................................... 537,627 3.3
13,500 EOG Resources, Inc. ........................................ 538,920 3.4
7,000 Equitable Resources, Inc. .................................. 245,280 1.5
5,800 +Forest Oil Corporation..................................... 160,370 1.0
3,379 Kerr-McGee Corporation...................................... 149,690 0.9
3,000 Niko Resources Ltd. ........................................ 48,994 0.3
5,000 Noble Energy, Inc. ......................................... 187,750 1.2
9,600 Ocean Energy Inc. .......................................... 191,712 1.2
10,500 +Pioneer Natural Resources Company.......................... 265,125 1.7
11,400 Pogo Producing Company...................................... 424,650 2.6
5,800 Unocal Corporation.......................................... 177,364 1.1
----------- -----
3,836,082 23.9
- ------------------------------------------------------------------------------------------------------------------------------
PAPER 7,300 Domtar, Inc. ............................................... 72,547 0.5
18,400 Sappi Limited (ADR)**....................................... 243,248 1.5
----------- -----
315,795 2.0
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKS (COST--$14,036,071) 15,261,131 95.1
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PARTNERSHIP
INTEREST SHORT-TERM SECURITIES
- -----------------------------------------------------------------------------------------------------------------------------
$950,501 Merrill Lynch Liquidity Series, LLC Cash Sweep
Series II***.................................... 950,501 5.9
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES (COST--$950,501).... 950,501 5.9
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST--$14,986,572)........... 16,211,632 101.0
LIABILITIES IN EXCESS OF OTHER ASSETS........... (152,957) (1.0)
----------- -----
NET ASSETS...................................... $16,058,675 100.0%
=========== =====
- -----------------------------------------------------------------------------------------------------------------------------
</Table>
+ Non-income producing security.
* For Portfolio compliance purposes, "Industry" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Portfolio management.
This definition may not apply for purposes of this report, which may combine
such industry sub-classifications for reporting ease. These industry
classifications are unaudited.
** American Depositary Receipts (ADR).
*** Investments in companies considered to be an affiliate of the Portfolio
(such companies are defined as "Affiliated Companies" in Section 2(a)(3) of
the Investment Company Act of 1940) are as follows:
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------
AFFILIATE NET ACTIVITY NET COST INTEREST INCOME
- ----------------------------------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC Cash Sweep Series II $950,501 $950,501 $1,274
- ----------------------------------------------------------------------------------------------------
</Table>
See Notes to Financial Statements.
59
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Statements of Assets and Liabilities as of December 31, 2002
- --------------------------------------------------------------------------------
<Table>
<Caption>
BALANCED
CAPITAL CORE BOND
STRATEGY STRATEGY
PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------
ASSETS:
Investments, at value*+++................................... $ 876,266,019 $167,115,839
Investments held as collateral for loaned securities, at
value..................................................... 197,864,401 --
Cash........................................................ -- 626
Foreign time deposits+++++.................................. -- --
Foreign cash++++............................................ 609 --
Receivable for securities sold.............................. 74,842 15,285,641
Interest receivable......................................... 4,378,135 1,539,797
Receivable for capital shares sold.......................... 95,634 12,447
Dividends receivable........................................ 710,874 --
Receivable for variation margin............................. -- --
Receivable for loaned securities............................ 17,433 --
Prepaid expenses and other assets........................... 6,706 1,162
-------------- ------------
Total assets.............................................. 1,079,414,653 183,955,512
-------------- ------------
LIABILITIES:
Collateral on securities loaned, at value................... 197,864,401 --
Call options written, at value++............................ -- --
Unrealized depreciation on forward interest rate swaps...... -- --
Unrealized depreciation on forward foreign exchange
contracts................................................. -- --
Payable for securities purchased............................ 64,440 38,013,771
Payable for capital shares redeemed......................... 401,559 378,117
Payable to investment adviser............................... 262,296 42,694
Accrued expenses and other liabilities...................... 64,393 20,889
-------------- ------------
Total liabilities......................................... 198,657,089 38,455,471
-------------- ------------
NET ASSETS.................................................. $ 880,757,564 $145,500,041
============== ============
NET ASSETS CONSIST OF:
Common Stock, $.10 par value+............................... $ 7,955,079 $ 1,224,154
Paid-in capital in excess of par............................ 1,137,988,702 140,545,599
-------------- ------------
Undistributed (accumulated distributions in excess of)
investment income--net.................................... (59,651) 627,632
Accumulated realized capital losses on investments and
foreign currency transactions--net........................ (137,854,452) (2,019,419)
Unrealized appreciation (depreciation) on investments and
foreign currency transactions--net........................ (127,272,114) 5,122,075
-------------- ------------
Total accumulated earnings (losses)--net.................... (265,186,217) 3,730,288
-------------- ------------
NET ASSETS.................................................. $ 880,757,564 $145,500,041
============== ============
Capital shares outstanding.................................. 79,550,790 12,241,536
============== ============
Net asset value, offering and redemption price per share.... $ 11.07 $ 11.89
============== ============
*Identified cost............................................ $1,003,572,481 $161,993,764
============== ============
+Authorized shares.......................................... 300,000,000 100,000,000
============== ============
++Premiums received......................................... $ -- $ --
============== ============
+++Securities loaned........................................ $ 193,070,198 $ --
============== ============
++++Cost.................................................... $ 640 $ --
============== ============
+++++Cost................................................... $ -- $ --
============== ============
</Table>
See Notes to Financial Statements.
60
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
FUNDAMENTAL GLOBAL INTERMEDIATE
GROWTH ALLOCATION HIGH GOVERNMENT LARGE CAP MONEY NATURAL
STRATEGY STRATEGY YIELD BOND CORE STRATEGY RESERVE RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
$ 261,273,164 $ 132,912,405 $ 84,480,258 $274,717,929 $205,759,840 $ 471,106,477 $ 16,211,632
72,302,101 263,801 -- -- 23,334,901 -- 330,002
142 -- -- -- -- 370 --
-- 2,257,214 -- -- -- -- --
-- 2,342,886 -- -- -- -- 1,997
4,077,866 488,170 -- 23,628,467 6,431,409 -- --
7,747 908,359 1,800,251 1,842,007 830 914,980 938
24,158 11,213 345 12,476 -- 2,094,089 --
192,651 247,769 76,787 -- 189,165 -- 5,870
-- 35,732 -- 5,906 -- -- --
-- 13,224 -- -- 1,329 -- --
6,317 15,903 576 1,274 1,644 2,903 125
------------- ------------- ------------ ------------ ------------ -------------- ------------
337,884,146 139,496,676 86,358,217 300,208,059 235,719,118 474,118,819 16,550,564
------------- ------------- ------------ ------------ ------------ -------------- ------------
72,302,101 263,801 -- -- 23,334,901 -- 330,002
-- 241,695 -- -- -- -- --
-- -- -- 222,390 -- -- --
-- 178,352 -- -- -- -- --
2,066,656 579,118 -- 59,821,462 5,198,741 7,996,950 --
354,297 251,932 123,768 274,956 737,620 -- 147,427
80,015 39,321 25,343 69,943 61,319 108,049 3,116
24,960 65,106 21,515 11,452 26,273 28,178 11,344
------------- ------------- ------------ ------------ ------------ -------------- ------------
74,828,029 1,619,325 170,626 60,400,203 29,358,854 8,133,177 491,889
------------- ------------- ------------ ------------ ------------ -------------- ------------
$ 263,056,117 $ 137,877,351 $ 86,187,591 $239,807,856 $206,360,264 $ 465,985,642 $ 16,058,675
============= ============= ============ ============ ============ ============== ============
$ 1,694,392 $ 1,307,012 $ 1,684,724 $ 2,054,256 $ 1,486,949 $ 46,574,688 $ 152,111
470,203,574 180,288,997 136,009,363 230,776,625 294,828,727 419,172,195 15,470,690
------------- ------------- ------------ ------------ ------------ -------------- ------------
(13,177) (523,268) 624,786 897,373 (27,472) -- (616)
(154,669,374) (26,854,849) (32,853,848) (1,929,126) (85,610,221) -- (788,559)
(54,159,298) (16,340,541) (19,277,434) 8,008,728 (4,317,719) 238,759 1,225,049
------------- ------------- ------------ ------------ ------------ -------------- ------------
(208,841,849) (43,718,658) (51,506,496) 6,976,975 (89,955,412) 238,759 435,874
------------- ------------- ------------ ------------ ------------ -------------- ------------
$ 263,056,117 $ 137,877,351 $ 86,187,591 $239,807,856 $206,360,264 $ 465,985,642 $ 16,058,675
============= ============= ============ ============ ============ ============== ============
16,943,920 13,070,124 16,847,245 20,542,561 14,869,486 465,746,883 1,521,108
============= ============= ============ ============ ============ ============== ============
$ 15.53 $ 10.55 $ 5.12 $ 11.67 $ 13.88 $ 1.00 $ 10.56
============= ============= ============ ============ ============ ============== ============
$ 315,432,462 $ 149,217,562 $103,757,692 $266,490,487 $210,077,559 $ 470,867,718 $ 14,986,572
============= ============= ============ ============ ============ ============== ============
100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 2,000,000,000 100,000,000
============= ============= ============ ============ ============ ============== ============
$ -- $ 389,748 $ -- $ -- $ -- $ -- $ --
============= ============= ============ ============ ============ ============== ============
$ 70,136,742 $ 255,600 $ -- $ -- $ 22,631,860 $ -- $ 323,100
============= ============= ============ ============ ============ ============== ============
$ -- $ 2,315,060 $ -- $ -- $ -- $ -- $ 1,997
============= ============= ============ ============ ============ ============== ============
$ -- $ 2,244,595 $ -- $ -- $ -- $ -- $ --
============= ============= ============ ============ ============ ============== ============
</Table>
61
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Statements of Operations for the Year Ended December 31, 2002
- --------------------------------------------------------------------------------
<Table>
<Caption>
BALANCED CORE
CAPITAL BOND
STRATEGY STRATEGY
PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest.................................................... $ 22,377,051 $ 7,155,455
Dividends*.................................................. 10,013,321 --
Securities lending--net..................................... 269,292 --
------------- -----------
Total income.............................................. 32,659,664 7,155,455
------------- -----------
EXPENSES:
Investment advisory fees.................................... 3,382,487 460,848
Accounting services......................................... 346,468 45,969
Custodian fees.............................................. 62,641 26,037
Professional fees........................................... 90,906 19,226
Printing and shareholder reports............................ 56,764 6,643
Pricing services............................................ 19,403 21,673
Directors' fees and expenses................................ 35,218 4,427
Transfer agent fees......................................... 5,000 5,000
Registration fees........................................... 802 802
Other....................................................... 23,782 10,498
------------- -----------
Total expenses before reimbursement......................... 4,023,471 601,123
Reimbursement of expenses................................... -- --
------------- -----------
Total expenses after reimbursement.......................... 4,023,471 601,123
------------- -----------
Investment income--net...................................... 28,636,193 6,554,332
------------- -----------
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS & FOREIGN
CURRENCY TRANSACTIONS--NET:
Realized gain (loss) on investments--net.................... (80,028,373) 1,266,297
Realized gain (loss) on foreign currency
transactions--net......................................... 4,231 --
Change in unrealized appreciation/depreciation on
investments--net.......................................... (86,996,174) 5,258,960
Change in unrealized appreciation/depreciation on foreign
currency transactions--net................................ 35,678 --
------------- -----------
Total realized and unrealized gain (loss) on investments and
foreign currency transactions--net........................ (166,984,638) 6,525,257
------------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $(138,348,445) $13,079,589
============= ===========
*Net of foreign withholding tax............................. $ 47,818 --
============= ===========
</Table>
See Notes to Financial Statements.
62
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
FUNDAMENTAL GLOBAL INTERMEDIATE
GROWTH ALLOCATION HIGH GOVERNMENT LARGE CAP MONEY NATURAL
STRATEGY STRATEGY YIELD BOND CORE STRATEGY RESERVE RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------------
$ 187,764 $ 3,721,617 $ 7,422,303 $11,144,093 $ 1,694 $10,088,346 $ 14,889
2,428,183 1,521,788 420,073 -- 2,991,520 -- 170,213
72,145 5,180 796 -- 45,067 -- 335
------------- ------------ ------------ ----------- ------------ ----------- ---------
2,688,092 5,248,585 7,843,172 11,144,093 3,038,281 10,088,346 185,437
------------- ------------ ------------ ----------- ------------ ----------- ---------
1,128,626 502,535 266,205 755,398 819,153 1,630,673 53,947
118,844 51,494 26,848 75,730 84,976 161,908 5,415
33,244 96,394 25,413 33,560 73,046 23,452 21,593
38,691 32,733 20,720 24,948 30,999 45,145 13,781
22,167 8,920 4,066 11,133 14,969 25,804 998
11,826 7,938 13,160 16,352 5,125 1,254 1,210
12,593 5,327 2,731 7,300 7,809 16,168 733
5,000 5,000 5,000 5,000 5,000 4,936 5,000
802 802 802 802 822 802 736
16,849 12,369 8,203 13,077 13,842 11,257 6,633
------------- ------------ ------------ ----------- ------------ ----------- ---------
1,388,642 723,512 373,148 943,300 1,055,741 1,921,399 110,046
-- (3,000) -- -- -- -- (28,849)
------------- ------------ ------------ ----------- ------------ ----------- ---------
1,388,642 720,512 373,148 943,300 1,055,741 1,921,399 81,197
------------- ------------ ------------ ----------- ------------ ----------- ---------
1,299,450 4,528,073 7,470,024 10,200,793 1,982,540 8,166,947 104,240
------------- ------------ ------------ ----------- ------------ ----------- ---------
(68,109,967) (12,752,435) (12,054,688) 5,608,564 (26,021,708) 18,377 (451,315)
(18,256) 1,194,029 -- -- (10) -- (2,144)
(49,298,010) (5,203,032) 3,540,622 5,272,637 (25,844,549) (504,716) 461,543
721 (704,341) -- -- 121 -- 23
------------- ------------ ------------ ----------- ------------ ----------- ---------
(117,425,512) (17,465,779) (8,514,066) 10,881,201 (51,866,146) (486,339) 8,107
------------- ------------ ------------ ----------- ------------ ----------- ---------
$(116,126,062) $(12,937,706) $ (1,044,042) $21,081,994 $(49,883,606) $ 7,680,608 $ 112,347
============= ============ ============ =========== ============ =========== =========
$ 31,289 $ 84,305 -- -- -- -- $ 5,882
============= ============ ============ =========== ============ =========== =========
</Table>
63
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<Table>
<Caption>
BALANCED CORE BOND
CAPITAL STRATEGY PORTFOLIO STRATEGY PORTFOLIO
---------------------------------- ------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31,
---------------------------------- ------------------------------
INCREASE (DECREASE) IN NET ASSETS: 2002 2001 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net............................... $ 28,636,193 $ 30,279,489 $ 6,554,332 $ 6,874,697
Realized gain (loss) on investments and foreign
currency transactions--net......................... (80,024,142) (29,431,893) 1,266,297 3,746,367
Change in unrealized appreciation/depreciation on
investments--net................................... (86,996,174) (87,500,249) 5,258,960 (1,200,239)
Change in unrealized appreciation/depreciation on
foreign currency transactions--net................. 35,678 (84,680) -- --
-------------- -------------- ------------ ------------
Net increase (decrease) in net assets resulting from
operations......................................... (138,348,445) (86,737,333) 13,079,589 9,420,825
-------------- -------------- ------------ ------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS:
Investment income--net............................... (28,774,932) (27,637,933) (6,635,686) (7,003,030)
-------------- -------------- ------------ ------------
Net decrease in net assets resulting from dividends
and distributions to shareholders.................. (28,774,932) (27,637,933) (6,635,686) (7,003,030)
-------------- -------------- ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net increase (decrease) in net assets derived from
capital share transactions......................... (98,914,005) 14,547,368 8,954,416 9,595,909
-------------- -------------- ------------ ------------
NET ASSETS:
Total increase (decrease) in net assets.............. (266,037,382) (99,827,898) 15,398,319 12,013,704
Beginning of year.................................... 1,146,794,946 1,246,622,844 130,101,722 118,088,018
-------------- -------------- ------------ ------------
End of year*......................................... $ 880,757,564 $1,146,794,946 $145,500,041 $130,101,722
============== ============== ============ ============
* Undistributed (accumulated distributions in excess
of) investment income--net......................... $ (59,651) $ 74,857 $ 627,632 $ 687,403
============== ============== ============ ============
</Table>
See Notes to Financial Statements.
64
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
FUNDAMENTAL GROWTH GLOBAL ALLOCATION HIGH YIELD INTERMEDIATE GOVERNMENT
STRATEGY PORTFOLIO STRATEGY PORTFOLIO PORTFOLIO BOND PORTFOLIO
----------------------------- --------------------------- --------------------------- ---------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
----------------------------- --------------------------- --------------------------- ---------------------------
2002 2001 2002 2001 2002 2001 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------
$ 1,299,450 $ 2,436,755 $ 4,528,073 $ 4,860,755 $ 7,470,024 $ 9,058,896 $ 10,200,793 $ 12,259,900
(68,128,223) (85,772,927) (11,558,406) (7,462,038) (12,054,688) (9,024,037) 5,608,564 6,015,062
(49,298,010) (25,359,013) (5,203,032) (14,223,750) 3,540,622 2,638,709 5,272,637 (3,269,421)
721 (294) (704,341) 52,187 -- -- -- --
------------- ------------- ------------ ------------ ------------ ------------ ------------ ------------
(116,126,062) (108,695,479) (12,937,706) (16,772,846) (1,044,042) 2,673,568 21,081,994 15,005,541
------------- ------------- ------------ ------------ ------------ ------------ ------------ ------------
(1,299,524) (2,383,808) (5,751,926) (3,220,011) (7,729,182) (8,889,437) (10,242,529) (12,404,755)
------------- ------------- ------------ ------------ ------------ ------------ ------------ ------------
(1,299,524) (2,383,808) (5,751,926) (3,220,011) (7,729,182) (8,889,437) (10,242,529) (12,404,755)
------------- ------------- ------------ ------------ ------------ ------------ ------------ ------------
(36,876,002) (53,827,692) (10,008,238) (14,289,499) 18,155,291 (6,466,284) 3,310,570 7,387,620
------------- ------------- ------------ ------------ ------------ ------------ ------------ ------------
(154,301,588) (164,906,979) (28,697,870) (34,282,356) 9,382,067 (12,682,153) 14,150,035 9,988,406
417,357,705 582,264,684 166,575,221 200,857,577 76,805,524 89,487,677 225,657,821 215,669,415
------------- ------------- ------------ ------------ ------------ ------------ ------------ ------------
$ 263,056,117 $ 417,357,705 $137,877,351 $166,575,221 $ 86,187,591 $ 76,805,524 $239,807,856 $225,657,821
============= ============= ============ ============ ============ ============ ============ ============
$ (13,177) $ 5,153 $ (523,268) $ (630,076) $ 624,786 $ 757,537 $ 897,373 $ 936,965
============= ============= ============ ============ ============ ============ ============ ============
</Table>
65
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
<Table>
<Caption>
LARGE CAP CORE STRATEGY PORTFOLIO
---------------------------------
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
INCREASE (DECREASE) IN NET ASSETS: 2002 2001
- ---------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income--net...................................... $ 1,982,540 $ 2,952,654
Realized gain (loss) on investments and foreign currency
transactions--net......................................... (26,021,718) (42,689,114)
Change in unrealized appreciation/depreciation on
investments--net.......................................... (25,844,549) 3,817,115
Change in unrealized appreciation/depreciation on foreign
currency transactions--net................................ 121 (20,741)
------------ ------------
Net increase (decrease) in net assets resulting from
operations................................................ (49,883,606) (35,940,086)
------------ ------------
DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS:
Investment income--net...................................... (2,010,012) (2,686,428)
Realized gain on investments--net........................... -- --
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders............................. (2,010,012) (2,686,428)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net increase (decrease) in net assets derived from capital
share transactions........................................ (29,040,607) (30,618,138)
------------ ------------
NET ASSETS:
Total increase (decrease) in net assets..................... (80,934,225) (69,244,652)
Beginning of year........................................... 287,294,489 356,539,141
------------ ------------
End of year*................................................ $206,360,264 $287,294,489
============ ============
* Undistributed (accumulated distributions in exess of)
investment income--net...................................... $ (27,472) --
============ ============
</Table>
See Notes to Financial Statements.
66
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
MONEY RESERVE PORTFOLIO NATURAL RESOURCES PORTFOLIO
------------------------------- -------------------------------
FOR THE YEAR ENDED DECEMBER 31, FOR THE YEAR ENDED DECEMBER 31,
------------------------------- -------------------------------
2002 2001 2002 2001
- ---------------------------------------------------------------------
$ 8,166,947 $ 21,175,690 $ 104,240 $ 136,891
18,377 53,241 (453,459) 1,867,533
(504,716) 668,180 461,543 (4,385,833)
-- -- 23 (47)
------------ ------------ ----------- -----------
7,680,608 21,897,111 112,347 (2,381,456)
------------ ------------ ----------- -----------
(8,166,947) (21,175,690) (102,001) (142,510)
(18,377) (53,241) -- --
------------ ------------ ----------- -----------
(8,185,324) (21,228,931) (102,001) (142,510)
------------ ------------ ----------- -----------
(43,496,095) 5,242,353 87,885 (2,042,981)
------------ ------------ ----------- -----------
(44,000,811) 5,910,533 98,231 (4,566,947)
509,986,453 504,075,920 15,960,444 20,527,391
------------ ------------ ----------- -----------
$465,985,642 $509,986,453 $16,058,675 $15,960,444
============ ============ =========== ===========
-- -- $ (616) $ (711)
============ ============ =========== ===========
</Table>
67
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
<Table>
<Caption>
BALANCED CAPITAL STRATEGY PORTFOLIO
------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS.
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year................. $ 13.14 $ 14.44 $ 18.19 $ 18.17 $ 18.97
-------- ---------- ---------- ---------- ----------
Investment income--net............................. .35+ .35+ .43+ .35+ .43+
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net........... (2.05) (1.33) (1.31) 2.99 1.35
-------- ---------- ---------- ---------- ----------
Total from investment operations................... (1.70) (.98) (.88) 3.34 1.78
-------- ---------- ---------- ---------- ----------
LESS DIVIDENDS & DISTRIBUTIONS:
Investment income--net............................. (.37) (.32) (.43) (.70) (.57)
In excess of investment income--net................ -- -- (.16) (.06) --
Realized gain on investments--net.................. -- -- (2.04) (2.56) (2.01)
In excess of realized gain on investments--net..... -- -- (.24) -- --
-------- ---------- ---------- ---------- ----------
Total dividends and distributions.................. (.37) (.32) (2.87) (3.32) (2.58)
-------- ---------- ---------- ---------- ----------
Net asset value, end of year....................... $ 11.07 $ 13.14 $ 14.44 $ 18.19 $ 18.17
======== ========== ========== ========== ==========
TOTAL INVESTMENT RETURN:*
Based on net asset value per share................. (12.89%) (6.76%) (4.92%) 20.21% 10.83%
======== ========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding reorganization costs........... -- .40% -- -- --
======== ========== ========== ========== ==========
Expenses........................................... .40% .40% .38% .39% .38%
======== ========== ========== ========== ==========
Investment income--net............................. 2.81% 2.57% 2.39% 2.00% 2.45%
======== ========== ========== ========== ==========
SUPPLEMENTAL DATA:
Net assets, end of year (in thousands)............. $880,758 $1,146,795 $1,246,623 $1,442,018 $1,340,253
======== ========== ========== ========== ==========
Portfolio turnover................................. 35.46% 154.91% 103.15% 106.04% 110.08%
======== ========== ========== ========== ==========
</Table>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
See Notes to Financial Statements.
68
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
CORE BOND STRATEGY PORTFOLIO FUNDAMENTAL GROWTH STRATEGY PORTFOLIO
---------------------------------------------------- ----------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------- ----------------------------------------------------
2002 2001 2000 1999 1998 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------
$ 11.35 $ 11.13 $ 10.83 $ 11.91 $ 11.72 $ 21.82 $ 27.03 $ 38.03 $ 36.70 $ 32.82
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
.55+ .62+ .75+ .74+ .75+ .07+ .12+ .19 .31 .19
.54 .23 .24 (1.02) .21 (6.28) (5.20) (2.49) 12.06 10.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
1.09 .85 .99 (.28) .96 (6.21) (5.08) (2.30) 12.37 10.19
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(.55) (.63) (.69) (.80) (.77) (.08) (.13) (.19) (.49) (.24)
-- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- (8.46) (10.55) (6.07)
-- -- -- -- -- -- -- (.05) -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(.55) (.63) (.69) (.80) (.77) (.08) (.13) (8.70) (11.04) (6.31)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
$ 11.89 $ 11.35 $ 11.13 $ 10.83 $ 11.91 $ 15.53 $ 21.82 $ 27.03 $ 38.03 $ 36.70
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
9.95% 7.83% 9.57% (2.35%) 8.45% (28.47%) (18.81%) (6.38%) 38.99% 38.18%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
-- -- -- -- -- -- -- -- -- --
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
.43% .44% .41% .39% .38% .41% .40% .38% .37% .37%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
4.73% 5.42% 6.94% 6.54% 6.39% .38% .52% .48% .86% .61%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
$145,500 $130,102 $118,088 $120,007 $131,729 $263,056 $417,358 $582,265 $623,403 $456,228
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
269.83% 283.16% 109.60% 110.90% 106.93% 98.84% 116.05% 105.19% 90.44% 60.69%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
</Table>
69
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Financial Highlights (continued)
- --------------------------------------------------------------------------------
<Table>
<Caption>
GLOBAL ALLOCATION STRATEGY PORTFOLIO
----------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS.
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year......................... $ 11.97 $ 13.33 $ 17.17 $ 16.00 $ 17.44
-------- -------- -------- -------- --------
Investment income--net+.................................... .34 .34 .38 .30 .43
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net....................... (1.30) (1.46) (1.99) 3.02 .97
-------- -------- -------- -------- --------
Total from investment operations........................... (.96) (1.12) (1.61) 3.32 1.40
-------- -------- -------- -------- --------
LESS DIVIDENDS & DISTRIBUTIONS:
Investment income--net..................................... (.46) (.24) (.40) (.32) (.70)
In excess of investment income--net........................ -- -- (.01) (.21) --
Realized gain on investments--net.......................... -- -- (1.23) (1.62) (2.14)
In excess of realized gain on investments--net............. -- -- (.59) -- --
-------- -------- -------- -------- --------
Total dividends and distributions.......................... (.46) (.24) (2.23) (2.15) (2.84)
-------- -------- -------- -------- --------
Net asset value, end of year............................... $ 10.55 $ 11.97 $ 13.33 $ 17.17 $ 16.00
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN:*
Based on net asset value per share......................... (8.01%) (8.43%) (9.42%) 21.36% 9.49%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement............................. .48% -- -- -- --
======== ======== ======== ======== ========
Expenses................................................... .48% .45% .46% .42% .41%
======== ======== ======== ======== ========
Investment income--net..................................... 2.99% 2.75% 2.31% 1.84% 2.75%
======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of year (in thousands)..................... $137,877 $166,575 $200,858 $241,699 $231,144
======== ======== ======== ======== ========
Portfolio turnover......................................... 53.57% 110.57% 121.89% 106.83% 124.92%
======== ======== ======== ======== ========
</Table>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
See Notes to Financial Statements.
70
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
HIGH YIELD PORTFOLIO INTERMEDIATE GOVERNMENT PORTFOLIO
------------------------------------------------ ----------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------ ----------------------------------------------------
2002 2001 2000 1999 1998 2002 2001 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------
$ 5.85 $ 6.40 $ 7.45 $ 7.90 $ 9.19 $ 11.12 $ 10.99 $ 10.45 $ 11.32 $ 11.08
------- ------- ------- ------- -------- -------- -------- -------- -------- --------
.50 .68 .74 .77 .85 .51 .60 .68 .67 .71
(.71) (.56) (1.10) (.35) (1.29) .49 .14 .49 (.81) .25
------- ------- ------- ------- -------- -------- -------- -------- -------- --------
(.21) .12 (.36) .42 (.44) 1.00 .74 1.17 (.14) .96
------- ------- ------- ------- -------- -------- -------- -------- -------- --------
(.52) (.67) (.69) (.85) (.85) (.45) (.61) (.63) (.73) (.72)
-- -- -- (.02) -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
------- ------- ------- ------- -------- -------- -------- -------- -------- --------
(.52) (.67) (.69) (.87) (.85) (.45) (.61) (.63) (.73) (.72)
------- ------- ------- ------- -------- -------- -------- -------- -------- --------
$ 5.12 $ 5.85 $ 6.40 $ 7.45 $ 7.90 $ 11.67 $ 11.12 $ 10.99 $ 10.45 $ 11.32
======= ======= ======= ======= ======== ======== ======== ======== ======== ========
(3.47%) 1.70% (5.14%) 5.85% (5.19%) 9.81% 6.94% 11.64% (1.25%) 8.94%
======= ======= ======= ======= ======== ======== ======== ======== ======== ========
-- -- -- -- -- -- -- -- -- --
======= ======= ======= ======= ======== ======== ======== ======== ======== ========
.47% .46% .42% .39% .39% .42% .42% .39% .38% .37%
======= ======= ======= ======= ======== ======== ======== ======== ======== ========
9.33% 10.71% 10.44% 9.98% 9.86% 4.49% 5.42% 6.47% 6.15% 6.44%
======= ======= ======= ======= ======== ======== ======== ======== ======== ========
$86,188 $76,806 $89,488 $99,217 $116,610 $239,808 $225,658 $215,669 $215,964 $240,583
======= ======= ======= ======= ======== ======== ======== ======== ======== ========
90.83% 77.79% 57.39% 57.86% 47.69% 219.81% 125.46% 105.38% 206.20% 65.67%
======= ======= ======= ======= ======== ======== ======== ======== ======== ========
</Table>
71
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Financial Highlights (concluded)
- --------------------------------------------------------------------------------
<Table>
<Caption>
LARGE CAP CORE STRATEGY PORTFOLIO
----------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS.
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year......................... $ 17.25 $ 19.34 $ 29.43 $ 27.03 $ 26.79
-------- -------- -------- -------- --------
Investment income--net..................................... .13+ .17+ .36+ .18+ .26+
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net....................... (3.36) (2.10) (3.17) 7.56 3.39
-------- -------- -------- -------- --------
Total from investment operations........................... (3.23) (1.93) (2.81) 7.74 3.65
-------- -------- -------- -------- --------
LESS DIVIDENDS & DISTRIBUTIONS:
Investment income--net..................................... (.14) (.16) (.38) (.41) (.50)
In excess of investment income--net........................ -- -- (.11) (.02) --
Realized gain on investments--net.......................... -- -- (5.65) (4.91) (2.91)
In excess of realized gain on investments--net............. -- -- (1.14) -- --
-------- -------- -------- -------- --------
Total dividends and distributions.......................... (.14) (.16) (7.28) (5.34) (3.41)
-------- -------- -------- -------- --------
Net asset value, end of year............................... $ 13.88 $ 17.25 $ 19.34 $ 29.43 $ 27.03
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN:*
Based on net asset value per share......................... (18.74%) (9.97%) (9.87%) 31.63% 15.56%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement............................. -- -- -- -- --
======== ======== ======== ======== ========
Expenses................................................... .43% .42% .39% .37% .38%
======== ======== ======== ======== ========
Investment income--net..................................... .80% .96% 1.26% .68% 1.03%
======== ======== ======== ======== ========
Investment income and realized gain on investments--net.... -- -- -- -- --
======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of year (in thousands)..................... $206,360 $287,294 $356,539 $430,380 $356,597
======== ======== ======== ======== ========
Portfolio turnover......................................... 124.16% 178.95% 103.85% 81.60% 110.95%
======== ======== ======== ======== ========
</Table>
* Total investment returns exclude insurance-related fees and expenses.
+ Based on average shares outstanding.
++ Amount is less than $.01 per share.
See Notes to Financial Statements.
72
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
MONEY RESERVE PORTFOLIO NATURAL RESOURCES PORTFOLIO
---------------------------------------------------- ----------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------- ----------------------------------------------------
2002 2001 2000 1999 1998 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 10.38 $ 11.56 $ 8.30 $ 6.86 $ 8.12
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
.02 .04 .06 .05 .05 .07+ .08+ .10+ .11+ .15+
--++ --++ --++ --++ --++ .18 (1.16) 3.25 1.60 (1.23)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
.02 .04 .06 .05 .05 .25 (1.08) 3.35 1.71 (1.08)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(.02) (.04) (.06) (.05) (.05) (.07) (.10) (.09) (.27) (.18)
-- -- -- -- -- -- -- -- -- --
--++ --++ --++ --++ --++ -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(.02) (.04) (.06) (.05) (.05) (.07) (.10) (.09) (.27) (.18)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 10.56 $ 10.38 $ 11.56 $ 8.30 $ 6.86
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
1.68% 4.15% 6.19% 5.01% 5.42% 2.38% (9.38%) 40.43% 25.50% (13.57%)
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
-- -- -- -- -- .50% .50% .50% .50% .50%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
.39% .38% .37% .37% .36% .68% .74% .58% .59% .63%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
-- -- -- -- -- .64% .74% 1.05% 1.40% 1.94%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
1.67% 4.08% 6.11% 4.91% 5.26% -- -- -- -- --
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
$465,986 $509,986 $504,076 $567,363 $578,802 $ 16,059 $ 15,960 $ 20,527 $ 12,764 $ 11,764
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
-- -- -- -- -- 36.99% 53.02% 44.87% 73.71% 29.62%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
</Table>
73
(This page intentionally left blank)
74
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES:
Merrill Lynch Series Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company,
with the exceptions of Balanced Capital Strategy Portfolio, Global Allocation
Strategy Portfolio and Natural Resources Portfolio, which are classified as non-
diversified. The Fund's financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require the use of management accruals and estimates. The Fund offers its
shares to Merrill Lynch Life Insurance Company, ML Life Insurance Company of New
York (indirect, wholly-owned subsidiaries of Merrill Lynch & Co., Inc. ("ML &
Co.")), and Monarch Life Insurance Company ("Monarch") (an insurance company not
affiliated with ML & Co.) for their separate accounts to fund benefits under
certain variable life insurance contracts. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--For the Money Reserve Portfolio, investments
maturing more than sixty days after the valuation date are valued at the most
recent bid price or yield equivalent as obtained from dealers that make markets
in such securities. When such securities are valued with sixty days or less to
maturity, the difference between the valuation existing on the sixty-first day
before maturity and maturity value is amortized on a straight-line basis to
maturity. Investments maturing within sixty days from their date of acquisition
are valued at amortized cost, which approximates market value. For the purpose
of valuation, the maturity of a variable rate certificate of deposit is deemed
to be the next coupon date on which the interest rate is to be adjusted.
Balanced Capital Strategy, Core Bond Strategy, Fundamental Growth Strategy,
Global Allocation Strategy, High Yield, Intermediate Government Bond, Large Cap
Core Strategy (formerly Capital Stock) and Natural Resources Portfolios:
Portfolio securities that are traded on stock exchanges are valued at the last
sale price as of the close of business on the day the securities are being
valued or, lacking any sales, at the closing bid price. Securities other than
money market securities traded in the over-the-counter market are valued at the
last available bid price prior to the time of valuation. Portfolio securities
that are traded both in the over-the-counter market and on a stock exchange are
valued according to the broadest and most representative market, and it is
expected that for debt securities this ordinarily will be the over-the-counter
market. Short-term securities are valued at amortized cost, which approximates
market value.
Options written or purchased are valued at the last sale price in the case of
exchange-traded options. In the case of options traded in the over-the-counter
market, valuation is the last asked price (options written) or the last bid
price (options purchased). Futures contracts are valued at settlement price at
the close of the applicable exchange. Securities and assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Board of Directors of the Fund.
(b) Repurchase agreements--The Fund invests in U.S. government securities
pursuant to repurchase agreements. Under such agreements, the counterparty
agrees to repurchase the security at a mutually agreed upon time and price. The
Fund takes possession of the underlying securities, marks to market such
securities and, if necessary, receives additional securities daily to ensure
that the contract is fully collateralized. If the counterparty defaults and the
fair value of the collateral declines, liquidation of the collateral by the Fund
may be delayed or limited.
(c) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends and
capital gains at various rates.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Dividends from foreign securities where the ex-dividend date may have passed are
subsequently recorded when the
75
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
Portfolios have determined the ex-dividend date. Interest income is recognized
on the accrual basis. The Fund amortizes all premiums and discounts on debt
securities.
(e) Prepaid registration fees--Prepaid registration fees are charged to expense
as the related shares are issued.
(f) Derivative financial instruments--The Fund may engage in various portfolio
investment techniques to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
investments. Losses may arise due to changes in the value of the contract or if
the counterparty does not perform under the contract.
- - Foreign currency options and futures--Certain Portfolios may also purchase or
sell listed or over-the-counter foreign currency options, foreign currency
futures and related options on foreign currency futures as a short or long hedge
against possible variations in foreign exchange rates. Such transactions may be
effected with respect to hedges on non-U.S. dollar denominated securities owned
by the Portfolio, sold by the Portfolio but not yet delivered, or committed or
anticipated to be purchased by the Portfolio.
- - Forward foreign exchange contracts--Balanced Capital Strategy, Global
Allocation Strategy, Large Cap Core Strategy and Natural Resources Portfolios
are authorized to enter into forward foreign exchange contracts as a hedge
against either specific transactions or portfolio positions. The contract is
marked to market daily and the change in market value is recorded by the Fund as
an unrealized gain or loss. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value at the time it
was opened and the value at the time it was closed.
- - Options--Certain Portfolios are authorized to write and purchase call and put
options. When a Portfolio writes an option, an amount equal to the premium
received by the Portfolio is reflected as an asset and an equivalent liability.
The amount of the liability is subsequently marked to market to reflect the
current market value of the option written. When a security is purchased or sold
through an exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option expires (or the
Portfolio enters into a closing transaction), the Portfolio realizes a gain or
loss on the option to the extent of the premiums received or paid (or gain or
loss to the extent the cost of the closing transaction exceeds the premium paid
or received).
Written and purchased options are non-income producing investments.
- - Financial futures contracts--Certain Portfolios may purchase or sell financial
futures contracts and options on such futures contracts for the purpose of
hedging the market risk on existing securities or the intended purchase of
securities. Futures contracts are contracts for delayed delivery of securities
at a specific future date and at a specific price or yield. Upon entering into a
contract, the Portfolio deposits and maintains as collateral such initial margin
as required by the exchange on which the transaction is effected. Pursuant to
the contract, the Portfolio agrees to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in the value of the contract. Such
receipts or payments are known as variation margin and are recorded by the
Portfolio as unrealized gains or losses. When the contract is closed, the
Portfolio records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed.
- - Forward interest rate swaps--The Fund is authorized to enter into forward
interest rate swaps for the purpose of hedging the interest rate risk on
portfolio securities. In a forward interest rate swap, the Fund and the
counterparty agree to pay or receive interest on a specified notional contract
amount, commencing on a specified future effective date, unless terminated
earlier. The value of the agreement is determined by quoted fair values received
daily by the Fund from the counterparty. When the agreement is closed, the Fund
records a realized gain or loss in an amount equal to the value of the
agreement.
- - Interest rate spreadlock agreements--Certain Portfolios are authorized to
enter into interest rate spreadlock agreements, which are over-the-counter
contracts in which one party agrees to make periodic payments based on the
change in the market value of a specified security, basket of securities or
index in
76
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
exchange for periodic payments based on a fixed or variable interest rate or the
change in market value of a different security, basket of securities or index.
Agreements may be used to obtain exposure to the underlying investments without
taking physical custody of the securities in circumstances where direct
investment is restricted by law or is otherwise impractical.
(g) Foreign currency transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into U.S. dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on investments.
(h) Dividends and distributions--Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(i) Security lending--The Fund may lend securities to financial institutions
that provide cash or securities issued or guaranteed by the U.S. government as
collateral, which will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. The Fund typically
receives the income on the loaned securities but does not receive the income on
the collateral. Where the Fund receives securities as collateral for the loaned
securities, it collects a fee from the borrower. Where the Fund receives cash
collateral, it may invest such collateral and retain the amount earned on such
investment, net of any amount rebated to the borrower. The Fund may receive a
flat fee for its loans. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities within five
business days. The Fund may pay reasonable finder's, lending agent,
administrative and custodial fees in connection with its loans. In the event
that the borrower defaults on its obligation to return borrowed securities
because of insolvency or for any other reason, the Fund could experience delays
and costs in gaining access to the collateral. The Fund also could suffer a loss
where the value of the collateral falls below the market value of the borrowed
securities, in the event of borrower default or in the event of losses on
investments made with cash collateral.
(j) Expenses--Certain expenses have been allocated to the individual Portfolios
in the Fund on a pro rata basis based on the respective aggregate net asset
value of each Portfolio included in the Fund.
(k) Reclassification--Accounting principles generally accepted in the United
States of America require that certain components of net assets be adjusted to
reflect permanent differences between financial and tax reporting. Accordingly,
the current year's permanent book/tax differences are as follows:
BALANCED CAPITAL STRATEGY PORTFOLIO:
$4,231 has been reclassified between accumulated net realized capital losses and
accumulated distributions in excess of net investment income.
CORE BOND STRATEGY PORTFOLIO:
$21,583 has been reclassified between accumulated net realized capital losses
and undistributed net investment income.
FUNDAMENTAL GROWTH STRATEGY PORTFOLIO:
$18,256 has been reclassified between accumulated net realized capital losses
and accumulated distributions in excess of net investment income.
GLOBAL ALLOCATION STRATEGY PORTFOLIO:
$1,330,661 has been reclassified between accumulated net realized capital losses
and accumulated distributions in excess of net investment income.
77
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO:
$126,407 has been reclassified between accumulated net realized capital losses
and undistributed net investment income.
INTERMEDIATE GOVERNMENT BOND PORTFOLIO:
$2,144 has been reclassified between accumulated net realized capital losses and
undistributed net investment income.
NATURAL RESOURCES PORTFOLIO:
$2,144 has been reclassified between accumulated net realized capital losses and
accumulated distributions in excess of net investment income.
These reclassifications have no effect on net assets or net asset value per
share.
2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES:
The Fund has entered into an Investment Advisory Agreement with Merrill Lynch
Investment Managers, L.P. ("MLIM"). The general partner of MLIM is Princeton
Services, Inc. ("PSI"), an indirect, wholly-owned subsidiary of ML & Co., which
is the limited partner. The Fund has also entered into a Distribution Agreement
and Distribution Plans with FAM Distributors, Inc. ("FAMD" or the
"Distributor"), which is a wholly-owned subsidiary of Merrill Lynch Group, Inc.
MLIM is responsible for the management of the Fund's Portfolios and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee
based upon the aggregate average daily value of the nine combined Portfolios'
net assets at the following annual rates: .50% of the Fund's average daily net
assets not exceeding $250 million, .45% of the next $50 million, .40% of the
next $100 million, .35% of the next $400 million, and .30% of average daily net
assets in excess of $800 million. MLIM has entered into a Sub-Advisory Agreement
with Merrill Lynch Asset Management U.K. Limited ("MLAM U.K."), an affiliate of
MLIM, pursuant to which MLAM UK provides investment advisory services to MLIM
with respect to the Fund. There is no increase in the aggregate fees paid by the
Fund for these services.
MLIM, Merrill Lynch Life Agency, Inc. and Monarch entered into an agreement that
provided that Monarch will reimburse the Fund's expenses with respect to each
Portfolio, to the extent that these expenses exceed .50% of the Portfolio's
average daily net assets. For the year ended December 31, 2002, the Global
Allocation Strategy Portfolio was reimbursed in the amount of $3,000 and the
Natural Resources Portfolio was reimbursed in the amount of $28,849.
The Fund has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., or its
affiliates. Pursuant to that order, the Fund also has retained Merrill Lynch
Investment Managers, LLC ("MLIM, LLC"), an affiliate of MLIM, as the securities
lending agent for a fee based on a share of the returns on investment of cash
collateral. MLIM, LLC may, on behalf of the Fund and Portfolios, invest cash
collateral received by the Portfolios for such loans, among other things, in a
private investment company managed by MLIM, LLC or in registered money market
funds advised by MLIM or its affiliates. As of December 31, 2002, cash
collateral was invested for the following Portfolios:
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------
MONEY MARKET SERIES MERRILL LYNCH
OF THE MERRILL LYNCH PREMIER
PORTFOLIOS LIQUIDITY SERIES, LLC INSTITUTIONAL FUND
- ---------------------------------------------------------------------------------------------------------
Balanced Capital Strategy Portfolio......................... $104,868,133 $92,996,268
Fundamental Growth Strategy Portfolio....................... 38,320,114 33,981,987
Global Allocation Strategy Portfolio........................ 139,814 123,987
Large Cap Core Strategy Portfolio........................... 12,367,498 10,967,43
Natural Resources Portfolio................................. 174,901 155,101
- ---------------------------------------------------------------------------------------------------------
</Table>
78
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
As of December 31, 2002, the following Portfolios lent securities to MLPF&S or
its affiliates:
<Table>
<Caption>
- ----------------------------------------------------------------------------------
AMOUNT OF LOANED
PORTFOLIOS PORTFOLIO SECURITIES
- ----------------------------------------------------------------------------------
Balanced Capital Strategy Portfolio......................... $60,292,484
Fundamental Growth Strategy Portfolio....................... 22,437,422
Large Cap Core Strategy Portfolio........................... 1,785,201
Natural Resources Portfolio................................. 323,100
- ----------------------------------------------------------------------------------
</Table>
For the year ended December 31, 2002, MLIM, LLC received securities lending
agent fees from the following Portfolios:
<Table>
<Caption>
- --------------------------------------------------------------------------------
SECURITIES LENDING
PORTFOLIOS AGENT FEES
- --------------------------------------------------------------------------------
Balanced Capital Strategy Portfolio......................... $112,987
Fundamental Growth Strategy Portfolio....................... 30,126
Global Allocation Strategy Portfolio........................ 2,201
High Yield Portfolio........................................ 341
Large Cap Core Strategy Portfolio........................... 17,507
Natural Resources Portfolio................................. 101
- --------------------------------------------------------------------------------
</Table>
MLPF&S earned commissions on the execution of portfolio security transactions
aggregating $63,045 in the Balanced Capital Strategy Portfolio, $132,383 in the
Fundamental Growth Strategy Portfolio, $16,791 in the Global Allocation Strategy
Portfolio, $1,281 in the High Yield Portfolio and $2,221 in the Natural
Resources Portfolio for the year ended December 31, 2002.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
During the year ended December 31, 2002, Merrill Lynch Security Pricing Service,
an affiliate of MLPF&S, was paid by Balanced Capital Strategy Portfolio $1,423;
Core Bond Strategy Portfolio $5,133; Global Allocation Strategy Portfolio $182;
High Yield Portfolio $1,678 and Intermediate Government Bond Portfolio $1,434
for security price quotations to compute the net asset value of the Portfolios.
For the year ended December 31, 2002, the Fund reimbursed MLIM an aggregate of
$35,390 in Balanced Capital Strategy Portfolio, $4,062 in Core Bond Strategy
Portfolio, $14,239 in Fundamental Growth Strategy Portfolio, $5,460 in Global
Allocation Strategy Portfolio, $2,825 in High Yield Portfolio, $6,743 in
Intermediate Government Portfolio, $9,017 in Large Cap Core Strategy Portfolio,
$12,724 in Money Reserves Portfolio, and $492 in Natural Resources Portfolio for
certain accounting services.
Certain officers and/or directors of the Fund are officers and/or directors of
MLIM, FDS, PSI, FAMD, and/or ML & Co.
3. INVESTMENTS:
Purchases and sales of investments, excluding short-term securities, for the
year ended December 31, 2002 were as follows:
<Table>
<Caption>
FUNDAMENTAL GLOBAL
BALANCED CORE BOND GROWTH ALLOCATION INTERMEDIATE
CAPITAL STRATEGY STRATEGY STRATEGY STRATEGY HIGH YIELD GOVERNMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO BOND PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------
Total Purchases.............. $348,967,648 $416,133,612 $324,381,844 $67,064,506 $80,021,613 $510,248,066
============ ============ ============ =========== =========== ============
Total Sales.................. $454,118,997 $391,301,570 $341,165,271 $81,776,618 $66,013,440 $492,658,780
============ ============ ============ =========== =========== ============
<Caption>
LARGE CAP NATURAL
CORE STRATEGY RESOURCES
PORTFOLIO PORTFOLIO
- ----------------------------- --------------------------
Total Purchases.............. $307,927,322 $5,875,841
============ ==========
Total Sales.................. $338,528,401 $5,718,268
============ ==========
</Table>
79
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
As of December 31, 2002, unrealized appreciation/depreciation for Federal income
tax purposes were as follows:
<Table>
<Caption>
FUNDAMENTAL GLOBAL
BALANCED CORE BOND GROWTH ALLOCATION
CAPITAL STRATEGY STRATEGY STRATEGY STRATEGY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
Appreciated securities...................................... $ 34,385,506 $ 5,197,509 $ 3,517,717 $ 6,531,658
Depreciated securities...................................... (166,672,065) (162,189) (59,834,594) (23,554,652)
-------------- ------------ ------------ ------------
Net unrealized appreciation (depreciation).................. $ (132,286,559) $ 5,035,320 $(56,316,877) $(17,022,994)
============== ============ ============ ============
Cost for Federal income tax purposes, including options
written.................................................... $1,008,552,578 $162,080,519 $317,590,041 $149,693,704
============== ============ ============ ============
</Table>
Net realized gains (losses) for the year ended December 31, 2002 and net
unrealized gains (losses) as of December 31, 2002 were as follows:
<Table>
<Caption>
BALANCED CAPITAL CORE BOND FUNDAMENTAL GROWTH
STRATEGY PORTFOLIO STRATEGY PORTFOLIO STRATEGY PORTFOLIO
---------------------------- ----------------------- ---------------------------
REALIZED UNREALIZED REALIZED
GAINS GAINS GAINS UNREALIZED REALIZED UNREALIZED
(LOSSES) (LOSSES) (LOSSES) GAINS LOSSES LOSSES
- ---------------------------------------------------------------------------------------------------------------------------
Investments:
Long-term securities................ $(80,028,373) $(127,306,462) $1,397,995 $5,122,075 $(68,108,657) $(54,159,298)
Short-term securities............... -- -- (109) -- (1,310) --
Financial futures contracts......... -- -- (138,843) -- -- --
Interest rate spreadlocks........... -- -- (26,196) -- -- --
Interest rate swaps................. -- -- -- -- -- --
Options written..................... -- -- 33,450 -- -- --
------------ ------------- ---------- ---------- ------------ ------------
Total investments.................... (80,028,373) (127,306,462) 1,266,297 5,122,075 (68,109,967) (54,159,298)
------------ ------------- ---------- ---------- ------------ ------------
Currency transactions:
Forward foreign exchange
contracts......................... -- -- -- -- -- --
Foreign currency transactions....... 4,231 34,348 -- -- (18,256) --
------------ ------------- ---------- ---------- ------------ ------------
Total currency transactions.......... 4,231 34,348 -- -- (18,256) --
------------ ------------- ---------- ---------- ------------ ------------
Total................................ $(80,024,142) $(127,272,114) $1,266,297 $5,122,075 $(68,128,223) $(54,159,298)
============ ============= ========== ========== ============ ============
<Caption>
GLOBAL ALLOCATION
STRATEGY PORTFOLIO
---------------------------
REALIZED UNREALIZED
GAINS GAINS
(LOSSES) (LOSSES)
- ------------------------------------- ---------------------------
Investments:
Long-term securities................ $ (9,783,134) $(16,292,776)
Short-term securities............... (6) (12,381)
Financial futures contracts......... (3,328,252) (131,925)
Interest rate spreadlocks........... -- --
Interest rate swaps................. -- --
Options written..................... 358,957 148,053
------------ ------------
Total investments.................... (12,752,435) (16,289,029)
------------ ------------
Currency transactions:
Forward foreign exchange
contracts......................... (417,952) (178,352)
Foreign currency transactions....... 1,611,981 126,840
------------ ------------
Total currency transactions.......... 1,194,029 (51,512)
------------ ------------
Total................................ $(11,558,406) $(16,340,541)
============ ============
</Table>
80
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INTERMEDIATE LARGE CAP CORE MONEY NATURAL
HIGH YIELD GOVERNMENT STRATEGY RESERVE RESOURCES
PORTFOLIO BOND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
$ 1,655,997 $ 8,379,827 $ 11,067,791 $ 239,959 $ 2,370,009
(20,956,217) (216,357) (19,635,310) (1,200) (1,177,067)
------------ ------------ ------------- ------------ -----------
$(19,300,220) $ 8,163,470 $ (8,567,519) $ 238,759 $ 1,192,942
============ ============ ============= ============ ===========
$103,780,478 $266,554,459 $ 214,327,359 $470,867,718 $15,018,690
============ ============ ============= ============ ===========
</Table>
<Table>
<Caption>
INTERMEDIATE GOVERNMENT LARGE CAP CORE MONEY RESERVE
HIGH YIELD PORTFOLIO BOND PORTFOLIO STRATEGY PORTFOLIO PORTFOLIO
--------------------------- ----------------------- -------------------------- ---------------------
REALIZED UNREALIZED
GAINS UNREALIZED REALIZED GAINS REALIZED UNREALIZED REALIZED UNREALIZED
(LOSSES) LOSSES GAINS (LOSSES) LOSSES LOSSES GAINS GAINS
- --------------------------------------------------------------------------------------------------------------
$(12,054,922) $(19,277,434) $5,022,339 $8,227,442 $(26,021,708) $(4,317,719) -- --
234 -- 114 -- -- -- $18,377 $238,759
-- -- 529,861 3,676 -- -- -- --
-- -- -- -- -- -- -- --
-- -- 56,250 (222,390) -- -- -- --
-- -- -- -- -- -- -- --
------------ ------------ ---------- ---------- ------------ ----------- ------- --------
(12,054,688) (19,277,434) 5,608,564 8,008,728 (26,021,708) (4,317,719) 18,377 238,759
------------ ------------ ---------- ---------- ------------ ----------- ------- --------
-- -- -- -- -- -- -- --
-- -- -- -- (10) -- -- --
------------ ------------ ---------- ---------- ------------ ----------- ------- --------
-- -- -- -- (10) -- -- --
------------ ------------ ---------- ---------- ------------ ----------- ------- --------
$(12,054,688) $(19,277,434) $5,608,564 $8,008,728 $(26,021,718) $(4,317,719) $18,377 $238,759
============ ============ ========== ========== ============ =========== ======= ========
<Caption>
NATURAL RESOURCES
PORTFOLIO
----------------------
UNREALIZED
REALIZED GAINS
LOSSES (LOSSES)
- --- ----------------------
$(451,287) $1,225,060
(28) --
-- --
-- --
-- --
-- --
--------- ----------
(451,315) 1,225,060
--------- ----------
-- --
(2,144) (11)
--------- ----------
(2,144) (11)
--------- ----------
$(453,459) $1,225,049
========= ==========
</Table>
81
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The Intermediate Government Bond Portfolio had entered into the following
forward interest rate swaps as of December 31, 2002:
<Table>
<Caption>
INTEREST RECEIVED INTEREST PAID
------------------- ---------------
NOTIONAL CURRENT CURRENT EXPIRATION
AMOUNT RATE TYPE RATE TYPE DATE
- ----------------------------------------------------------------------------------------------------------------
$2,700,000.................................................. 1.38% Variable+ 4.85% Fixed 12/31/2012
$3,000,000.................................................. 1.38% Variable+ 4.2675% Fixed 12/16/2011
$3,300,000.................................................. 1.38% Variable+ 4.18% Fixed 6/16/2011
</Table>
+ 3-month LIBOR at quarterly reset date.
Transactions in call options written for the year ended December 31, 2002 for
Core Bond Strategy Portfolio and Global Allocation Strategy Portfolio are as
follows:
<Table>
<Caption>
CORE BOND GLOBAL ALLOCATION
STRATEGY PORTFOLIO STRATEGY PORTFOLIO
-------------------------- ---------------------------
NOMINAL VALUE NOMINAL VALUE
COVERED BY PREMIUMS COVERED BY PREMIUMS
WRITTEN OPTIONS RECEIVED WRITTEN OPTIONS RECEIVED
- ----------------------------------------------------------------------------------------------------------------------
Outstanding call options written, at beginning of year...... -- -- 52,500 $ 135,502
Options written............................................. 20,007 $33,450 366,200 794,054
Options expired............................................. (20,007) (33,450) (60,500) (154,282)
Options exercised........................................... (15,800) (44,425)
Options closed.............................................. (151,000) (341,101)
------- ------- --------- ---------
Outstanding call options written, at end of year............ -- $ -- 191,400 $ 389,748
======= ======= ========= =========
</Table>
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares were as follows:
<Table>
<Caption>
BALANCED CAPITAL CORE BOND FUNDAMENTAL GROWTH
STRATEGY PORTFOLIO STRATEGY PORTFOLIO STRATEGY PORTFOLIO
--------------------------- ------------------------- -------------------------
FOR THE YEAR ENDED DOLLAR DOLLAR DOLLAR
DECEMBER 31, 2002 SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Shares sold.......................... 444,050 $ 5,340,057 2,039,787 $ 23,519,080 1,272,153 $ 25,159,814
Shares issued to shareholders in
reinvestment of dividends and
distributions....................... 2,617,008 28,774,932 578,547 6,635,686 83,919 1,299,524
----------- ------------- ---------- ------------ ---------- ------------
Total issued......................... 3,061,058 34,114,989 2,618,334 30,154,766 1,356,072 26,459,338
Shares redeemed...................... (10,781,994) (133,028,994) (1,837,330) (21,200,350) (3,543,773) (63,335,340)
----------- ------------- ---------- ------------ ---------- ------------
Net increase (decrease).............. (7,720,936) $ (98,914,005) 781,004 $ 8,954,416 (2,187,701) $(36,876,002)
=========== ============= ========== ============ ========== ============
<Caption>
GLOBAL ALLOCATION
STRATEGY PORTFOLIO
-------------------------
FOR THE YEAR ENDED DOLLAR
DECEMBER 31, 2002 SHARES AMOUNT
- ------------------------------------- -------------------------
Shares sold.......................... 705,929 $ 8,002,562
Shares issued to shareholders in
reinvestment of dividends and
distributions....................... 548,299 5,751,926
---------- ------------
Total issued......................... 1,254,228 13,754,488
Shares redeemed...................... (2,096,066) (23,762,726)
---------- ------------
Net increase (decrease).............. (841,838) $(10,008,238)
========== ============
</Table>
<Table>
<Caption>
BALANCED CAPITAL CORE BOND FUNDAMENTAL GROWTH
STRATEGY PORTFOLIO STRATEGY PORTFOLIO STRATEGY PORTFOLIO
-------------------------- ------------------------- -------------------------
FOR THE YEAR ENDED DOLLAR DOLLAR DOLLAR
DECEMBER 31, 2001 SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Shares sold........................... 497,685 $ 6,683,117 2,130,889 $ 24,155,975 1,479,414 $ 34,742,278
Shares issued resulting from
reorganization....................... 7,074,129 96,733,938 -- -- -- --
Shares issued to shareholders in
reinvestment of dividends and
distributions........................ 2,104,746 27,637,933 621,067 7,003,030 108,850 2,383,808
---------- ------------- ---------- ------------ ---------- ------------
Total issued.......................... 9,676,560 131,054,988 2,751,956 31,159,005 1,588,264 37,126,086
Shares redeemed....................... (8,722,054) (116,507,620) (1,900,319) (21,563,096) (4,000,487) (90,953,778)
---------- ------------- ---------- ------------ ---------- ------------
Net increase (decrease)............... 954,506 $ 14,547,368 851,637 $ 9,595,909 (2,412,223) $(53,827,692)
========== ============= ========== ============ ========== ============
<Caption>
GLOBAL ALLOCATION
STRATEGY PORTFOLIO
-------------------------
FOR THE YEAR ENDED DOLLAR
DECEMBER 31, 2001 SHARES AMOUNT
- -------------------------------------- -------------------------
Shares sold........................... 404,748 $ 4,952,214
Shares issued resulting from
reorganization....................... -- --
Shares issued to shareholders in
reinvestment of dividends and
distributions........................ 269,909 3,220,011
---------- ------------
Total issued.......................... 674,657 8,172,225
Shares redeemed....................... (1,833,597) (22,461,724)
---------- ------------
Net increase (decrease)............... (1,158,940) $(14,289,499)
========== ============
</Table>
82
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INTERMEDIATE GOVERNMENT LARGE CAP
HIGH YIELD PORTFOLIO BOND PORTFOLIO CORE STRATEGY PORTFOLIO MONEY RESERVES PORTFOLIO
-------------------------- ------------------------- ------------------------- ----------------------------
DOLLAR DOLLAR DOLLAR DOLLAR
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------
15,724,244 $ 84,200,082 3,556,441 $ 40,501,078 880,626 $ 13,217,369 180,130,120 $ 180,130,120
7,729,182 908,311 10,242,529 145,337 2,010,012 8,185,324 8,185,324
1,446,172
----------- ------------ ---------- ------------ ---------- ------------ ------------ -------------
17,170,416 91,929,264 4,464,752 50,743,607 1,025,963 15,227,381 188,315,444 188,315,444
(13,452,722) (73,773,973) (4,209,513) (47,433,037) (2,809,713) (44,267,988) (231,811,539) (231,811,539)
----------- ------------ ---------- ------------ ---------- ------------ ------------ -------------
3,717,694 $ 18,155,291 255,239 $ 3,310,570 (1,783,750) $(29,040,607) (43,496,095) $ (43,496,095)
=========== ============ ========== ============ ========== ============ ============ =============
<Caption>
NATURAL RESOURCES
PORTFOLIO
----------------------
DOLLAR
SHARES AMOUNT
- --- ----------------------
875,461 $ 9,685,086
9,687 102,001
-------- -----------
885,148 9,787,087
(901,725) (9,699,202)
-------- -----------
(16,577) $ 87,885
======== ===========
</Table>
<Table>
<Caption>
INTERMEDIATE GOVERNMENT LARGE CAP
HIGH YIELD PORTFOLIO BOND PORTFOLIO CORE STRATEGY PORTFOLIO MONEY RESERVES PORTFOLIO
-------------------------- ------------------------- ------------------------- ----------------------------
DOLLAR DOLLAR DOLLAR DOLLAR
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------
8,634,041 $ 53,708,935 1,997,945 $ 22,205,120 504,826 $ 8,812,696 205,157,916 $ 205,157,916
-- -- -- -- -- -- -- --
1,429,633 8,889,437 1,117,918 12,404,755 155,269 2,686,428 21,228,931 21,228,931
----------- ------------ ---------- ------------ ---------- ------------ ------------ -------------
10,063,674 62,598,372 3,115,863 34,609,875 660,095 11,499,124 226,386,847 226,386,847
(10,910,190) (69,064,656) (2,448,906) (27,222,255) (2,441,692) (42,117,262) (221,144,494) (221,144,494)
----------- ------------ ---------- ------------ ---------- ------------ ------------ -------------
(846,516) $ (6,466,284) 666,957 $ 7,387,620 (1,781,597) $(30,618,138) 5,242,353 $ 5,242,353
=========== ============ ========== ============ ========== ============ ============ =============
<Caption>
NATURAL RESOURCES
PORTFOLIO
-------------------------
DOLLAR
SHARES AMOUNT
- --- -------------------------
1,983,037 $ 22,284,116
-- --
13,756 142,510
---------- ------------
1,996,793 22,426,626
(2,234,813) (24,469,607)
---------- ------------
(238,020) $ (2,042,981)
========== ============
</Table>
83
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
5. SHORT-TERM BORROWINGS:
The Fund (excluding the Money Reserve Portfolio), along with certain other funds
managed by MLIM and its affiliates, is a party to a credit agreement with Bank
One, N.A. and certain other lenders. Effective November 29, 2002, in conjunction
with the renewal for one year at the same terms, the total commitment was
reduced from $1,000,000,000 to $500,000,000 of the credit agreement. The Fund
may borrow under the credit agreement to fund shareholder redemptions and for
other lawful purposes other than for leverage. The Fund may borrow up to the
maximum amount allowable under the Fund's current prospectus and statement of
additional information, subject to various other legal, regulatory or
contractual limits. The Fund pays a commitment fee of .09% per annum based on
the Fund's pro rata share of the unused portion of the credit agreement. Amounts
borrowed under the credit agreement bear interest at a rate equal to, at each
fund's election, the Federal Funds rate plus .50% or a base rate as determined
by Bank One, N.A. The Fund did not borrow under the credit agreement during the
year ended December 31, 2002.
6. DISTRIBUTIONS TO SHAREHOLDERS:
The Fund paid the following ordinary income dividends on January 2, 2003 to
shareholders of record on December 31, 2002:
<Table>
<Caption>
PER SHARE
PORTFOLIO AMOUNT
- -----------------------------------------------------------------------
Core Bond Strategy.......................................... $.047271
High Yield.................................................. .044493
Intermediate Government Bond................................ .043828
- -----------------------------------------------------------------------
</Table>
The Fund paid the following ordinary income dividends on February 3, 2003 to
shareholders of record on February 3, 2003:
<Table>
<Caption>
PER SHARE
PORTFOLIO AMOUNT
- -----------------------------------------------------------------------
Core Bond Strategy.......................................... $.040959
High Yield.................................................. .044510
Intermediate Government Bond................................ .042980
- -----------------------------------------------------------------------
</Table>
84
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The tax character of distributions paid during the fiscal years ended December
31, 2002 and December 31, 2001 was as follows:
<Table>
<Caption>
BALANCED CAPITAL CORE BOND FUNDAMENTAL GROWTH
STRATEGY PORTFOLIO STRATEGY PORTFOLIO STRATEGY PORTFOLIO
------------------------- ----------------------- -----------------------
12/31/2002 12/31/2001 12/31/2002 12/31/2001 12/31/2002 12/31/2001
- ----------------------------------------------------------------------------------------------------------------------
Distributions paid from:
Ordinary income....................... $28,774,932 $27,637,933 $6,635,686 $7,003,030 $1,299,524 $2,383,808
----------- ----------- ---------- ---------- ---------- ----------
Total Taxable Distributions........... $28,774,932 $27,637,933 $6,635,686 $7,003,030 $1,299,524 $2,383,808
=========== =========== ========== ========== ========== ==========
<Caption>
GLOBAL ALLOCATION
STRATEGY PORTFOLIO
-----------------------
12/31/2002 12/31/2001
- --------------------------------------- -----------------------
Distributions paid from:
Ordinary income....................... $5,751,926 $3,220,011
---------- ----------
Total Taxable Distributions........... $5,751,926 $3,220,011
========== ==========
</Table>
As of December 31, 2002, the components of accumulated earnings (losses) on a
tax basis were as follows:
<Table>
<Caption>
BALANCED CAPITAL CORE BOND FUNDAMENTAL GROWTH GLOBAL ALLOCATION
STRATEGY PORTFOLIO STRATEGY PORTFOLIO STRATEGY PORTFOLIO STRATEGY PORTFOLIO
------------------ ------------------ ------------------ ------------------
Undistributed ordinary Income-net............. $ -- $ 629,355 $ -- $ 172,473
Undistributed long-term capital gains--net.... -- -- -- --
------------- ----------- ------------- ------------
Total undistributed earnings--net............. -- 629,355 -- 172,473
Capital loss carryforward..................... (131,755,864)(a) (1,746,123)(b) (148,065,874)(c) (22,528,009)(d)
Unrealized gains (losses)--net................ (133,430,353)* 4,847,056* (60,775,975)* (21,363,122)*
------------- ----------- ------------- ------------
Total accumulated earnings (losses)--net...... $(265,186,217) $ 3,730,288 $(208,841,849) $(43,718,658)
============= =========== ============= ============
</Table>
85
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Notes to Financial Statements (Concluded)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INTERMEDIATE GOVERNMENT LARGE CAP
HIGH YIELD PORTFOLIO BOND PORTFOLIO CORE STRATEGY PORTFOLIO MONEY RESERVES PORTFOLIO
----------------------- ------------------------- ----------------------- ------------------------
12/31/2002 12/31/2001 12/31/2002 12/31/2001 12/31/2002 12/31/2001 12/31/2002 12/31/2001
- ------------------------------------------------------------------------------------------------------------
$7,729,182 $8,889,437 $10,242,529 $12,404,755 $2,010,012 $2,686,428 $8,185,324 $21,228,931
---------- ---------- ----------- ----------- ---------- ---------- ---------- -----------
$7,729,182 $8,889,437 $10,242,529 $12,404,755 $2,010,012 $2,686,428 $8,185,324 $21,228,931
========== ========== =========== =========== ========== ========== ========== ===========
<Caption>
NATURAL RESOURCES PORTFOLIO
---------------------------
12/31/2002 12/31/2001
- --- ---------------------------
$102,001 $142,510
-------- --------
$102,001 $142,510
======== ========
</Table>
<Table>
<Caption>
INTERMEDIATE GOVERNMENT LARGE CAP
HIGH YIELD PORTFOLIO BOND PORTFOLIO CORE STRATEGY PORTFOLIO MONEY RESERVES PORTFOLIO
- -------------------------------------------------------------------------------------------------------
$ 683,050 $ 900,334 $ -- $ --
-- -- -- --
------------- ----------- ------------ ------------
683,050 900,334 -- --
(30,387,941)(e) (1,856,165)(f) (71,279,971)(g) --
(21,801,605)* 7,932,806* (18,675,441)* 238,759
------------- ----------- ------------ ------------
$ (51,506,496) $ 6,976,975 $(89,955,412) $ 238,759
============= =========== ============ ============
<Caption>
NATURAL RESOURCES PORTFOLIO
- --- ---------------------------
$ --
--
------------
--
(722,835)(h)
1,158,709*
------------
$ 435,874
============
</Table>
(a) On December 31, 2002, the Portfolio had a net capital loss carryforward of
$131,755,864, of which $2,257,152 expires in 2008, $48,702,411 expires in
2009 and $80,796,301 expires in 2010. This amount will be available to
offset like amounts of any future taxable gains.
(b) On December 31, 2002, the Portfolio had a net capital loss carryforward of
$1,746,123, all of which expires in 2008. This amount will be available to
offset like amounts of any future taxable gains.
(c) On December 31, 2002, the Portfolio had a net capital loss carryforward of
$148,065,874, of which $78,533,293 expires in 2009 and $69,532,581 expires
in 2010. This amount will be available to offset like amounts of any future
taxable gains.
(d) On December 31, 2002, the Portfolio had a net capital loss carryforward of
$22,528,009, of which $13,048,714 expires in 2009 and $9,479,295 expires in
2010. This amount will be available to offset like amounts of any future
taxable gains.
(e) On December 31, 2002, the Portfolio had a net capital loss carryforward of
$30,387,941 of which $230,736 expires in 2005, $3,240,218 expires in 2006,
$1,824,536 expires in 2007, $6,196,936 expires in 2008, $8,474,548 expires
in 2009 and $10,420,967 expires in 2010. This amount will be available to
offset like amounts of any future taxable gains.
(f) On December 31, 2002, the Portfolio had a net capital loss carryforward of
$1,856,165, all of which expires in 2008. This amount will be available to
offset like amounts of any future taxable gains.
(g) On December 31, 2002, the Portfolio had a net capital loss carryforward of
$71,279,971, of which $45,594,321 expires in 2009 and $25,685,650 expires
in 2010. This amount will be available to offset like amounts of any future
taxable gains.
(h) On December 31, 2002, the Portfolio had a net capital loss carryforward of
$722,835, of which $234,573 expires in 2007 and $488,262 expires in 2010.
This amount will be available to offset like amounts of any future taxable
gains.
* The difference between book-basis and tax-basis net unrealized gains
(losses) is attributable primarily to the tax deferral of losses on wash
sales, the tax deferral of losses on straddles, the realization for tax
purposes of unrealized gains (losses) on certain futures and forward
foreign currency contracts, the difference between book and tax
amortization methods for premiums and discounts on fixed income securities,
the realization for tax purposes of unrealized gains on investments in
passive foreign investment companies, book/tax differences in the accrual
of income on securities in default, the deferral of post-October capital
and currency losses for tax purposes and other book/tax temporary
differences.
86
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
Independent Auditors' Report
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS,
MERRILL LYNCH SERIES FUND, INC.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of Merrill Lynch Series Fund, Inc. (comprising the
Balanced Capital Strategy, Core Bond Strategy, Fundamental Growth Strategy,
Global Allocation Strategy, High Yield, Intermediate Government Bond, Large Cap
Core Strategy (formerly Capital Stock), Money Reserve and Natural Resources
Portfolios) as of December 31, 2002, the related statements of operations for
the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years presented. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and the financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned at December 31, 2002 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
respective portfolios constituting the Merrill Lynch Series Fund, Inc. as of
December 31, 2002, the results of their operations, the changes in their net
assets, and their financial highlights for the respective stated periods in
conformity with accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Princeton, New Jersey
February 24, 2003
87
- --------------------------------------------------------------------------------
MERRILL LYNCH SERIES FUND, INC.
OFFICERS AND DIRECTORS
- --------------------------------------------------------------------------------
INTERESTED DIRECTOR
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
POSITION(S) HELD PRINCIPAL OCCUPATION(S) OVERSEEN
NAME, ADDRESS & AGE WITH FUND LENGTH OF TIME SERVED DURING PAST 5 YEARS BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------
Terry K. Glenn* President and 1999 to present and Chairman, Americas Region 117 Funds
P.O. Box 9011 Director 1985 to present since 2001, and Executive 162 Portfolios
Princeton, NJ 08543-9011 Vice President since 1983
Age: 62 of Fund Asset Management
("FAM") and Merrill Lynch
Investment Managers, L.P.
("MLIM"); President of
Merrill Lynch Mutual Funds
since 1999; President of
FAM Distributors, Inc.
("FAMD") since 1986 and
Director thereof since
1991; Executive Vice
President and Director of
Princeton Services, Inc.
(Princeton Services") since
1993; President of
Princeton Administrators,
L.P. since 1988; Director
of Financial Data Services,
Inc., since 1985.
- ------------------------------------------------------------------------------------------------------------------------------
<Caption>
- ---------------------------- -------------------
OTHER DIRECTORSHIPS
NAME, ADDRESS & AGE HELD BY DIRECTOR
- ---------------------------- -------------------
Terry K. Glenn* None
P.O. Box 9011
Princeton, NJ 08543-9011
Age: 62
- ---------------------------------------------------------------------------------
</Table>
* Mr. Glenn is a director, trustee or member of an advisory board of certain
other investment companies for which FAM or MLIM acts as investment adviser.
Mr. Glenn is an "interested person," as described in the Investment Company
Act, of the Fund based on his positions as Chairman (Americas Region) and
Executive Vice President of FAM and MLIM; President of FAMD; Executive Vice
President of Princeton Services; and President of Princeton Administrators,
L.P. The Director's term is unlimited. Directors serve until their
resignation, removal or death, or until December 31, of the year which they
turn 72. As Fund President, Mr. Glenn serves at the pleasure of the Board of
Directors.
INDEPENDENT DIRECTORS
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
POSITION(S) HELD PRINCIPAL OCCUPATION(S) OVERSEEN
NAME, ADDRESS & AGE WITH FUND LENGTH OF TIME SERVED* DURING PAST 5 YEARS BY DIRECTOR
- ----------------------------------------------------------------------------------------------------------------------------
Donald W. Burton Director 2002 to present General Partner of The 23 Funds
P.O. Box 9095 Burton Partnership, Limited 34 Portfolios
Princeton, NJ 08543-9095 Partnership since 1979;
Age: 58 Managing General Partner of
the South Atlantic Venture
Funds, Limited Partnerships
and Chairman of South
Atlantic Private Equity
Fund IV, Limited
Partnership since 1983;
Member of the Investment
Advisory Council of the
Florida State Board of
Administration since 2001.
- ----------------------------------------------------------------------------------------------------------------------------
<Caption>
- ---------------------------- -------------------
OTHER DIRECTORSHIPS
NAME, ADDRESS & AGE HELD BY DIRECTOR
- ---------------------------- -------------------
Donald W. Burton ITC DeltaCom, Inc.,
P.O. Box 9095 ITC Holding
Princeton, NJ 08543-9095 Company, Inc.,
Age: 58 Knology, Inc.,
MainBancorp, N.A.,
PriCare, Inc.,
Symbion, Inc.
- -----------------------------------------------------------------------------------------------------
</Table>
88
- --------------------------------------------------------------------------------
INDEPENDENT DIRECTORS (CONCLUDED)
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
POSITION(S) HELD PRINCIPAL OCCUPATION(S) OVERSEEN
NAME, ADDRESS & AGE WITH FUND LENGTH OF TIME SERVED* DURING PAST 5 YEARS BY DIRECTOR
- ----------------------------------------------------------------------------------------------------------------------------
M. Colyer Crum Director 2000 to present James R. Williston, 23 Funds
P.O. Box 9095 Professor of Investment 34 Portfolios
Princeton, NJ 08543-9095 Management Emeritus,
Age: 70 Harvard Business School
since 1996; Director,
Cambridge Bancorp since
1969; Chairman & Director,
Phaeton International, Ltd.
since 1985.
- ----------------------------------------------------------------------------------------------------------------------------
Laurie Simon Hodrick Director 2000 to present Professor of Finance and 23 Funds
P.O. Box 9095 Economics, Graduate School 34 Portfolios
Princeton, NJ 08543-9095 of Business, Columbia
Age: 40 University since 1998.
- ----------------------------------------------------------------------------------------------------------------------------
J. Thomas Touchton Director 1988 to present Managing Partner of The 23 Funds
P.O. Box 9095 Witt Touchton Company and 34 Portfolios
Princeton, NJ 08543-9095 its predecessor, The Witt
Age: 64 Co., since 1972; Trustee
Emeritus of Washington and
Lee University.
- ----------------------------------------------------------------------------------------------------------------------------
Fred G. Weiss Director 2000 to present Managing Director of FGW 23 Funds
P.O. Box 9095 Associates since 1997; 34 Portfolios
Princeton, NJ 08543-9095 Director, BTO
Age: 61 International, PLC since
2001; Director, Watson
Pharmaceuticals, Inc. since
2000.
<Caption>
- ---------------------------- -------------------
OTHER DIRECTORSHIPS
NAME, ADDRESS & AGE HELD BY DIRECTOR
- ---------------------------- -------------------
M. Colyer Crum Cambridge Bancorp
P.O. Box 9095
Princeton, NJ 08543-9095
Age: 70
- -------------------------------------------------------------------------------------------------------------------------
Laurie Simon Hodrick None
P.O. Box 9095
Princeton, NJ 08543-9095
Age: 40
- ----------------------------------------------------------------------------------------------------------------------------
J. Thomas Touchton TECO Energy, Inc.
P.O. Box 9095
Princeton, NJ 08543-9095
Age: 64
- ----------------------------------------------------------------------------------------------------------------------------
Fred G. Weiss Watson
P.O. Box 9095 Pharmaceuticals,
Princeton, NJ 08543-9095 Inc.
Age: 61
</Table>
- --------------------------------------------------------------------------------
* The Director's term is unlimited. Directors serve until their resignation,
removal or death, or until December 31, of the year which they turn 72.
- --------------------------------------------------------------------------------
<Table>
<Caption>
FUND OFFICERS
- -----------------------------------------------------------------------------
POSITION(S) HELD
NAME, ADDRESS & AGE WITH FUND LENGTH OF TIME SERVED*
- -----------------------------------------------------------------------------
Donald C. Burke Vice President 1993 to present and
P.O. Box 9011 and Treasurer 1999 to present
Princeton, NJ 08543-9011
Age: 42
- -----------------------------------------------------------------------------
Robert C. Doll, Jr. Senior Vice 2000 to present
P.O. Box 9011 President
Princeton, NJ 08543-9011
Age: 48
- -----------------------------------------------------------------------------
B. Daniel Evans Senior Vice 2002 to present
P.O. Box 9011 President
Princeton, NJ 08543-9011
Age: 58
- -----------------------------------------------------------------------------
Lawrence Fuller Senior Vice 1998 to present
P.O. Box 9011 President
Princeton, NJ 08543-9011
Age: 61
- -----------------------------------------------------------------------------
Kevin J. McKenna Senior Vice 1998 to present
P.O. Box 9011 President
Princeton, NJ 08543-9011
Age: 45
- -----------------------------------------------------------------------------
<Caption>
FUND OFFICERS
- -------------------------------- ------------------------------------------------------------
NAME, ADDRESS & AGE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- -------------------------------- ------------------------------------------------------------
Donald C. Burke First Vice President of FAM and MLIM since 1997 and the
P.O. Box 9011 Treasurer thereof since 1999; Senior Vice President and
Princeton, NJ 08543-9011 Treasurer of Princeton Services since 1999; Vice President
Age: 42 of FAMD since 1999; Director of MLIM Taxation since 1990.
- -----------------------------------------------------------------------------
Robert C. Doll, Jr. President and Global Chief Investment Officer of MLIM and
P.O. Box 9011 member of the Executive Management Committee of ML & Co.,
Princeton, NJ 08543-9011 Inc. since 2001; Chief Investment Officer, Senior Vice
Age: 48 President and Co-Head of MLIM Americas from 1999 to 2001;
Chief Investment Officer of Oppenheimer Funds, Inc. from
1987 to 1999 and Executive Vice President from 1991 to 1999.
- -----------------------------------------------------------------------------
B. Daniel Evans Director (Global Fixed Income) of MLIM since 2000; Vice
P.O. Box 9011 President of MLIM from 1995 to 2000.
Princeton, NJ 08543-9011
Age: 58
- -----------------------------------------------------------------------------
Lawrence Fuller Managing Director of MLIM since 2000 and First Vice
P.O. Box 9011 President from 1997 to 2000.
Princeton, NJ 08543-9011
Age: 61
- -----------------------------------------------------------------------------
Kevin J. McKenna Managing Director of MLIM and Head of MLIM Americas Fixed
P.O. Box 9011 Income since 2000; First Vice President of MLIM from 1997 to
Princeton, NJ 08543-9011 2002.
Age: 45
- -----------------------------------------------------------------------------
</Table>
89
- --------------------------------------------------------------------------------
FUND OFFICERS (CONCLUDED)
<Table>
<Caption>
- -----------------------------------------------------------------------------
POSITION(S) HELD
NAME, ADDRESS & AGE WITH FUND LENGTH OF TIME SERVED*
- -----------------------------------------------------------------------------
Kurt Schansinger Senior Vice 2001 to present
P.O. Box 9011 President
Princeton, NJ 08543-9011
Age: 42
- -----------------------------------------------------------------------------
Robert Shearer Senior Vice 1998 to present
P.O. Box 9011 President
Princeton, NJ 08543-9011
Age: 47
- -----------------------------------------------------------------------------
Dennis W. Stattman Senior Vice 2001 to present
P.O. Box 9011 President
Princeton, NJ 08543-9011
Age: 51
- -----------------------------------------------------------------------------
Patrick Maldari Vice President 2002 to present
P.O. Box 9011
Princeton, NJ 08543-9011
Age: 40
- -----------------------------------------------------------------------------
Robert F. Murray Vice President 1998 to present
P.O. Box 9011
Princeton, NJ 08543-9011
Age: 45
- -----------------------------------------------------------------------------
James Pagano Vice President 2002 to present
P.O. Box 9011
Princeton, NJ 08543-9011
Age: 40
- -----------------------------------------------------------------------------
Jacqueline Rogers-Ayoub Vice President 1996 to present
P.O. Box 9011
Princeton, NJ 08543-9011
Age: 45
- -----------------------------------------------------------------------------
Susan Baker Secretary 2002 to present
P.O. Box 9011
Princeton, NJ 08543-9011
Age: 45
- -----------------------------------------------------------------------------
* Officers of the Fund serve at the pleasure of the Board of Directors.
- -----------------------------------------------------------------------------
<Caption>
- -------------------------------- ------------------------------------------------------------
NAME, ADDRESS & AGE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- -------------------------------- ------------------------------------------------------------
Kurt Schansinger Managing Director of MLIM since 2000 and First Vice
P.O. Box 9011 President from 1997 to 2000.
Princeton, NJ 08543-9011
Age: 42
- -----------------------------------------------------------------------------
Robert Shearer Managing Director of MLIM since 2000 and First Vice
P.O. Box 9011 President from 1998 to 2000.
Princeton, NJ 08543-9011
Age: 47
- -----------------------------------------------------------------------------
Dennis W. Stattman Managing Director of MLIM since 2000 and First Vice
P.O. Box 9011 President from 1997 to 2000.
Princeton, NJ 08543-9011
Age: 51
- -----------------------------------------------------------------------------
Patrick Maldari Managing Director of MLIM since 2000 and First Vice
P.O. Box 9011 President from 1997 to 2000.
Princeton, NJ 08543-9011
Age: 40
- -----------------------------------------------------------------------------
Robert F. Murray Director of MLIM (Global Fixed Income) since 2001; Vice
P.O. Box 9011 President of MLIM from 1993 to 2001.
Princeton, NJ 08543-9011
Age: 45
- -----------------------------------------------------------------------------
James Pagano Vice President of MLIM since 1996.
P.O. Box 9011
Princeton, NJ 08543-9011
Age: 40
- -----------------------------------------------------------------------------
Jacqueline Rogers-Ayoub Vice President of MLIM since 1986.
P.O. Box 9011
Princeton, NJ 08543-9011
Age: 45
- -----------------------------------------------------------------------------
Susan Baker Director (Legal Advisory) of MLIM since 1999 and Vice
P.O. Box 9011 President from 1993 to 1999; Attorney associated with MLIM
Princeton, NJ 08543-9011 since 1987.
Age: 45
- -----------------------------------------------------------------------------
* Officers of the Fund serve at
- -----------------------------------------------------------------------------
</Table>
<Table>
PRINCIPAL OFFICE OF THE FUND
Box 9011
Princeton, New Jersey 08543-9011
CUSTODIAN
The Bank of New York
110 Washington Street
New York, New York 10286
-----------------------------------------------------
TRANSFER AGENT
Financial Data Services, Inc. Further information about the Fund's Officers and
4800 Deer Lake Drive East Directors is available in the Fund's Statement of
Jacksonville, Florida 32246-6484 Additional Information, which can be obtained
800-637-3863 without charge by calling 1-800-MER-FUND.
-----------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
Effective January 1, 2003, J. Thomas Touchton, Director of Merrill Lynch Series
Fund, Inc., retired. The Fund's Board of Directors wishes Mr. Touchton well in
his retirement.
- --------------------------------------------------------------------------------
90
(This page intentionally left blank)
- --------------------------------------------------------------------------------
This report is authorized for distribution only to Policyowners of certain
variable life insurance policies, which are funded by shares of Merrill Lynch
Series Fund, Inc. This report is not authorized for use as an offer of sale or
solicitation of an offer to buy shares of the Fund or the policies. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost. Performance information used throughout this report
does not include insurance-related fees and expenses. An investment in Money
Reserve Portfolio is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other Government agency. Although Money Reserve Portfolio
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Portfolio. Statements and other
information herein are as dated and are subject to change.
59828-12/02
Item 2 - Did registrant adopt a code of ethics, as of the end of the period
covered by this report, that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party? If not, why not? Briefly describe any amendments or
waivers that occurred during the period. State here if code of
ethics/amendments/waivers are on website and give website address-.
State here if fund will send code of ethics to shareholders without
charge upon request-- N/A (not answered until July 15, 2003 and only
annually for funds)
Item 3 - Did the registrant's board of directors determine that the registrant
either: (i) has at least one audit committee financial expert serving
on its audit committee; or (ii) does not have an audit committee
financial expert serving on its audit committee? If yes, disclose name
of financial expert and whether he/she is "independent," (fund may, but
is not required, to disclose name/independence of more than one
financial expert) If no, explain why not. - N/A (not answered until
July 15, 2003 and only annually for funds)
Item 4 - Disclose annually only (not answered until December 15, 2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last
two fiscal years for professional services rendered by
the principal accountant for the audit of the
registrant's annual financial statements or services
that are normally provided by the accountant in
connection with statutory and regulatory filings or
engagements for those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of the
last two fiscal years for assurance and
related services by the principal accountant
that are reasonably related to the performance
of the audit of the registrant's financial
statements and are not reported under
paragraph (a) of this Item. Registrants shall
describe the nature of the services comprising
the fees disclosed under this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last two
fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and
tax planning. Registrants shall describe the nature of
the services comprising the fees disclosed under this
category. N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the last
two fiscal years for products and services
provided by the principal accountant, other than
the services reported in paragraphs (a) through
(c) of this Item. Registrants shall describe the
nature of the services comprising the fees
disclosed under this category. N/A.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of
Regulation S-X. N/A.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by
the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule
2-01 of Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended
on the principal accountant's engagement to audit the
registrant's financial statements for the most recent fiscal
year that were attributed to work performed by persons other
than the principal accountant's full-time, permanent
employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the
registrant's accountant for services rendered to the
registrant, and rendered to the registrant's investment
adviser (not including any sub-adviser whose role is primarily
portfolio management and is
subcontracted with or overseen by another investment adviser),
and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the
registrant for each of the last two fiscal years of the
registrant. N/A.
(h) Disclose whether the registrant's audit committee has
considered whether the provision of non-audit services that
were rendered to the registrant's investment adviser (not
including any subadviser whose role is primarily portfolio
management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled
by, or under common control with the investment adviser that
provides ongoing services to the registrant that were not
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Items 5-6 - Reserved
Item 7 - For closed - end funds that contain voting securities in their
portfolio, describe the policies and procedures that it uses to
determine how to vote proxies relating to those portfolio securities.
N/A.
Item 8 -- Reserved
Item 9(a)- Disclose the conclusions of the registrant's principal
executive officer or officers and principal financial officer or
officers, or persons performing similar functions, about the
effectiveness of the registrant's disclosure controls and procedures
(as defined in Rule 30a-2(c) under the Act (17 CFR 270.30a-2(c)))
based on their evaluation of these controls and procedures as of a
date within 90 days of the filing date of the report that includes
the disclosure required by this paragraph. N/A.
Item 9(b)-- There were no significant changes in the registrant's internal
controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of ethics or
amendments/waivers is on website or offered to shareholders upon request
without charge. N/A.
10(b) - Attach certifications (4 in total pursuant to Sections 302 and 906 for
CEO/CFO). Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Merrill Lynch Series Fund, Inc.
By: /s/ Terry K. Glenn
------------------
Terry K. Glenn,
President of
Merrill Lynch Series Fund, Inc.
Date: February 24, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below
by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: /s/ Terry K. Glenn
------------------
Terry K. Glenn,
President of
Merrill Lynch Series Fund, Inc.
Date: February 24, 2003
By: /s/ Donald C. Burke
-------------------
Donald C. Burke
Chief Financial Officer of
Merrill Lynch Series Fund, Inc.
Date: February 24, 2003