MERRILL LYNCH
CONSULTS
INTERNATIONAL
PORTFOLIO
FUND LOGO
Annual Report
October 31, 1994
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. 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.
<PAGE>
Merrill Lynch
Consults
International
Portfolio
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
Worldwide
Investments as of
October 31, 1994
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Automobile & Equipment 8.4%
Conglomerates 7.2
Machinery 5.3
Pharmaceutical 4.9
Building & Construction 4.5
Oil & Related 4.3
Telecommunications 3.9
Chemicals 3.6
Leisure 3.5
Apparel 3.3
<PAGE>
Officers and
Trustees
Arthur Zeikel, President and Trustee
Kenneth S. Axelson, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Bernard J. Durnin, Senior Vice President
Donald C. Burke, Vice President
Jurg Boller, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Transfer Agent
Financial Data Services, Inc.
Transfer Agency Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
DEAR SHAREHOLDER
The year ended October 31, 1994 was a difficult one for the
international equity markets. At the end of 1993, most equity
markets were at new highs, driven by strong liquidity flows, while
1994 saw a dramatic change in investor sentiment. The investment
environment this year has been characterized by widespread profit
taking after the unusually high returns of 1993, concerns over
short-term interest rate hikes in the United States and fears of
reignited inflation. A severely weakened US dollar has also served
to destabilize the equity markets but has enhanced dollar-based
returns in the international equity markets. While the sharp
corrections seen earlier in the year have for the most part eased
off, most equity markets continued to trade aimlessly as investors
lacked the willingness to focus on the broader aspects of the
world's economic potential, but rather were led by daily economic
news.
Global equity markets were most heavily influenced this year by a
sharp sell-off in the bond markets, triggered by the Federal Reserve
Board's first increase in interest rates in several years.
Corrections earlier in the year were most severe in the Southeast
Asian markets, which were the top performers of 1993. During the
remainder of the year, equity markets remained susceptible to bond
market movements and the general concern that the US economy was
growing too quickly and would lead to higher inflation.
After positive strong returns in December and January, European
equity markets succumbed to the turmoil in the global bond markets.
European bond markets moved in sympathy with the United States,
despite further interest rate cuts by European central banks. Adding
to the pressure on the equity markets was the plunge in the US
dollar, which investors perceived would reduce the earnings of
European multinationals with substantial dollar-based earnings.
During the third quarter of 1994, the equity markets traded in a
narrow range in most countries except Italy, which continued to
experience a significant correction led by domestic political
concerns. The general environment remained without a trend in spite
of the good economic news coming from most countries.
<PAGE>
The Japanese equity market saw a significant shift in investor
sentiment during the first half of the reporting period. After
significant declines at the end of 1993, the market experienced a
dramatic recovery early in 1994, triggered by the approval of
political reforms, and in spite of the fall of the Miyazawa
government. Strong liquidity flows from abroad pushed the market up
despite the lack of good fundamental news. Since then, however, the
Japanese market has given up some of its gains and lately has been
trading in a very narrow range. However, the stronger yen has
enhanced returns in that market for international investors.
Like Europe, the smaller Asian markets were subject to a great deal
of volatility during the six-month period ended October 31, 1994.
During 1993, the Hong Kong and Malaysian markets had advanced 116%
in US dollar terms, with a 27% rise in both markets in December
alone. It is not surprising, therefore, that corrections followed in
January as investors took profits and looked for better value
elsewhere, such as Japan. Although these markets remained somewhat
vulnerable to the US interest rate and inflation outlook during the
remainder of the period, most markets did recoup some of their
earlier losses. In general, the Southeast Asian countries have
maintained strong rates of economic growth, and the growth could
possibly accelerate as the more mature economies of the West
continue their recoveries. In the last few months, however, these
markets too have been characterized by lackluster performances and
have consolidated in a narrow range. It appears that investors are
awaiting signs of a better tone in international markets in general
before they commit additional assets there, despite the sound
fundamentals of the region.
In Latin America, equity markets have been influenced both by events
in the United States as well as by political concerns. The Mexican
market experienced a sharp rally during the first few months of the
reporting period, driven by the passage of the North American Free
Trade Agreement by the US Congress. However, the assassination of
Luis Colosio resulted in significant political uncertainty, which
together with concerns over the rise in US interest rates, led to a
major correction in share prices. More recently, the Mexican market
has again recovered in response to optimism surrounding the
elections as well as an improved earnings outlook.
<PAGE>
Fiscal Year in Review
Concerning our investment policy, we gradually raised our exposure
to the Japanese equity market throughout the first few months of
1994, as the market represented good value on a price/book and
price/cash flow basis. Recently, we slightly reduced our positions
in Japan, using the proceeds to increase holdings in the emerging
markets. We remained positive on Japan, but felt that the market
would come under some pressure as a result of the large number of
new offerings which were coming to the market. Japan still
represents the largest single country exposure in the fund, at 41.9%
of net assets. The Japanese equity market has been the best
performing major international equity market thus far in 1994.
Accordingly, our relatively high exposure to this market impacted
the fund's performance positively throughout most of the year.
In the first quarter of the Portfolio's fiscal year, we slightly
reduced our exposure to European equities, where we saw more limited
potential over the near term. Within Europe, we reduced our exposure
to the Italian market, taking profits after the strong market rally
surrounding the Berlusconi election.
Overweightings in the fund remain in Latin America and Southeast
Asia where superior long-term growth prospects should be reflected
in above-average long-term returns. Many smaller markets both in
Asia and Latin America experienced sharp corrections in the early
part of 1994, which had a negative impact on the fund's performance
for this period.
Until the second half of 1994, we had pursued a policy of not
hedging the fund's currency exposure versus the US dollar, which has
helped the fund's performance as the US dollar continued to weaken
over time against most other currencies. In July, however, we
initiated a hedge of one-third of our Japanese yen exposure versus
the US dollar, considering the large holding in Japanese equities as
well as our view that the yen was overvalued and likely to weaken
against the dollar. Since then, the US dollar/yen exchange rate has
remained in a relatively narrow trading range, and this currency
hedge has not yet materially influenced the fund's performance.
In Conclusion
Looking ahead, we believe that the worst of the equity market
corrections are behind us and that investor sentiment will gradually
improve. The European economic recovery appears to be on course and
is already translating into improved corporate earnings. The
negative impact of the weaker US dollar on European exporters
appears already to be reflected in the price of those stocks, and
several markets still appear oversold on that basis. Despite the
relatively good performance of European stocks in US dollar terms,
most markets are actually flat or down in local currency terms over
the last 12 months, and as such represent attractive value. We still
remain positive on Japan, as we expect the market to benefit from a
recovery in earnings in 1995 and from a stable-to-weaker yen. Japan
is also exceedingly well placed to benefit from export opportunities
in the Asia/Pacific region. Finally, our stance on the markets of
Southeast Asia and Latin America remains optimistic, since they are
more reasonably valued than a year ago. Furthermore, these regions
are benefiting from continued dynamic economic growth, the
resolution of many political issues (particularly in Latin America)
and the ongoing world economic recovery.
<PAGE>
Sincerely
(Arthur Zeikel)
Arthur Zeikel
President
(Jurg Boller)
Jurg Boller
Portfolio Manager
December 13, 1994
PERFORMANCE DATA (unaudited)
None of the past results shown should 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.
Total Return
Based on a
$10,000
Investment
GRAPHIC MATERIAL APPEARS HERE.
SEE APPENDIX GRAPHIC AND IMAGE MATERIAL ITEM 1.
<TABLE>
Average Annual
Total Return
<CAPTION>
Period Covered % Return
<S> <C>
Year Ended 9/30/94 +11.42%
Inception (9/14/92) through 9/30/94 +12.89
</TABLE>
<PAGE>
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
10/31/94 7/31/94 10/31/93 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Consults International Portfolio $12.83 $12.92 $11.74 +9.28% -0.70%
ML Consults International Portfolio--Total Return +9.74(1) -0.70
<FN>
(1)Percent change includes reinvestment of $0.050 per share income dividends.
</TABLE>
<TABLE>
Performance
Summary
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change
<C> <C> <C> <C> <C> <C>
9/14/92--12/31/92 $10.00 $ 9.79 -- -- - 2.10%
1993 9.79 11.93 -- $0.050 +22.37
1/1/94--10/31/94 11.93 12.83 -- -- + 7.54
------
Total $0.050
Cumulative total return as of 10/31/94: +28.83%
<FN>
*Figures may include short-term capital gains distributions.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
LATIN Shares Value Percent of
AMERICA Industries Held Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Argentina Banking 107,850 Banco de Galicia y Buenos Aires
S.A. (ADR)* $ 2,750,532 $ 2,911,950 1.1%
Oil & Related 127,000 YPF S.A. (ADR)* 2,978,847 3,063,875 1.1
Total Investments in
Argentinean Stocks 5,729,379 5,975,825 2.2
<PAGE>
Chile Glass Packaging 40,000 Cristalerias de Chile S.A. (ADR)* 825,491 860,000 0.3
Total Investments in Chilean Stocks 825,491 860,000 0.3
Mexico Banking 130,000 Grupo Financiero Bancomer,
S.A. de C.V. (ADR)* 3,813,032 2,973,750 1.1
Beverage 417,000 Fomento Economico Mexicano,
S.A. de C.V. 'B' (Femsa) 1,802,298 1,833,100 0.7
Building & 90,000 Empresas ICA Sociedad Controladora,
Construction S.A. de C.V. (ADR)* 1,975,312 2,666,250 1.0
Telecommunications 55,000 Telefonos de Mexico, S.A.
de C.V. (ADR)* 2,896,991 3,031,875 1.1
Total Investments in Mexican Stocks 10,487,633 10,504,975 3.9
Total Investments in Latin America 17,042,503 17,340,800 6.4
NORTH
AMERICA
Canada Metals 132,700 Noranda, Inc. 2,176,720 2,600,422 0.9
Natural Gas 145,000 Westcoast Energy, Inc. (ADR)* 2,366,385 2,374,375 0.9
Utilities
Total Investments in North America 4,543,105 4,974,797 1.8
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
PACIFIC Shares Value Percent of
BASIN Industries Held Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Australia Metals 252,000 Broken Hill Proprietary, Ltd. $ 2,767,090 $ 3,862,048 1.4%
Publishing 650,000 News Corporation, Ltd. 4,199,667 3,997,189 1.5
Total Investments in
Australian Stocks 6,966,757 7,859,237 2.9
<PAGE>
Hong Kong Foods 2,000,000 Dairy Farms International
Holdings, Ltd. 3,172,753 2,601,336 0.9
Machinery 1,130,000 Johnson Electric Holdings, Ltd. 2,788,395 3,144,251 1.2
Multi-Industry 1,000,000 Hutchison Whampoa, Ltd. 3,748,040 4,620,283 1.7
200,000 Swire Pacific Ltd. (Class A) 1,547,267 1,527,152 0.6
------------ ------------ -----
5,295,307 6,147,435 2.3
Total Investments in
Hong Kong Stocks 11,256,455 11,893,022 4.4
Indonesia Telecommunications 5,610 P.T. Indonesia Satellite (ADR)* 180,097 220,193 0.1
Total Investments in
Indonesian Stocks 180,097 220,193 0.1
Japan Apparel 250,000 Tokyo Style 4,308,540 4,335,708 1.6
600,000 Toray Industries, Inc. 4,569,260 4,738,309 1.7
------------ ------------ -----
8,877,800 9,074,017 3.3
Automobile & 240,000 Honda Motor Co., Ltd. 3,143,878 4,187,055 1.5
Equipment 225,000 Nippon Denso Co., Ltd. 3,509,953 4,807,990 1.8
502,000 Yamaha Motors Co., Ltd. 4,309,498 4,617,343 1.7
------------ ------------ -----
10,963,329 13,612,388 5.0
Building & 291,000 Daiwa House Industry Co., Ltd. 4,340,056 4,025,394 1.5
Construction 461,000 Okumura Corp. 3,764,902 3,773,852 1.4
------------ ------------ -----
8,104,958 7,799,246 2.9
Chemicals 576,000 Mitsui Petrochemical Industries 3,687,068 5,434,747 2.0
425,000 Sekisui Chemical Co., Ltd. 4,004,274 4,365,387 1.6
------------ ------------ -----
7,691,342 9,800,134 3.6
Electric Utilities 125,000 Kansai Electric Power Co., Inc. 3,455,059 3,148,550 1.2
Electrical 478,000 Hitachi, Ltd. 3,874,488 4,983,793 1.8
Equipment
Electronic 500,000 Hitachi Cable, Ltd. 3,871,452 4,377,000 1.6
Components 17,000 Keyence Corp. 1,376,891 2,053,267 0.8
------------ ------------ -----
5,248,343 6,430,267 2.4
<PAGE>
Electronics 257,000 Matsushita Electric Industrial
Co., Ltd. 3,522,654 4,271,395 1.6
Financial Services 178,000 Nomura Securities Co., Ltd. 4,060,021 3,730,154 1.4
Household Products 350,000 Kao Corp. 3,913,740 4,155,053 1.5
Insurance 572,000 Nippon Fire & Marine Insurance
Co., Ltd. 4,139,948 4,239,661 1.5
International Trade 500,000 Sumitomo Corp. 4,473,925 5,161,557 1.9
Leisure 58,800 Nintendo Co., Ltd. 4,554,286 3,302,075 1.2
Machinery 645,000 Mitsubishi Heavy Industries, Ltd. 4,003,984 5,253,484 1.9
Merchandising 79,000 Ito-Yokado Co., Ltd. 3,630,720 4,314,132 1.6
Office Equipment 256,000 Canon, Inc. 3,522,859 4,756,891 1.7
Pharmaceuticals 203,000 Yamanouchi Pharmaceutical Co., Ltd. 4,268,779 4,002,581 1.5
Printing 243,000 Dai Nippon Printing, Ltd. 4,041,639 4,515,330 1.6
100,000 Komori Corp. 1,963,465 2,673,686 1.0
------------ ------------ -----
6,005,104 7,189,016 2.6
Steel 945,000 Nisshin Steel Company, Ltd. 3,712,594 4,965,469 1.8
Transportation 370,000 Kamigumi Co., Ltd. 4,278,946 4,048,725 1.5
Total Investments in
Japanese Stocks 102,302,879 114,238,588 41.9
Malaysia Conglomerates 1,840,000 Sime Darby BHD 4,415,735 5,077,104 1.9
Total Investments in
Malaysian Stocks 4,415,735 5,077,104 1.9
Singapore Shipbuilding 550,000 Jurong Shipyard, Ltd. 4,403,226 4,945,504 1.8
Total Investments in
Singaporean Stocks 4,403,226 4,945,504 1.8
<PAGE>
Thailand Agriculture 333,000 Charoen Pokphand Feedmill Co., Ltd. 1,608,648 2,419,339 0.9
Real Estate 297,300 MDX Co., Ltd.--Foreign 1,961,787 1,670,694 0.6
Total Investments in Thai Stocks 3,570,435 4,090,033 1.5
Total Investments in the
Pacific Basin 133,095,584 148,323,681 54.5
WESTERN
EUROPE
France Automobile & 114,000 Michelin (C.G.D.E.) (Class B) 3,835,751 4,767,514 1.7
Equipment
Leisure 30,000 Accor S.A. 3,557,660 3,557,151 1.3
Oil & Related 47,000 Societe Nationale Elf Aquitaine
(Ordinary) 3,500,155 3,470,503 1.3
Total Investments in French Stocks 10,893,566 11,795,168 4.3
Germany Conglomerates 15,000 Preussag AG 3,885,955 4,388,907 1.6
Utility 16,100 Veba AG 4,504,979 5,389,837 2.0
Total Investments in German Stocks 8,390,934 9,778,744 3.6
Italy Telecommunications 1,750,000 Societa Finanziara Telefonica
S.p.A. (STET) 4,550,716 5,289,930 1.9
Total Investments in Italian Stocks 4,550,716 5,289,930 1.9
Netherlands Conglomerates 27,000 Unilever Capital Corp. 2,920,835 3,253,764 1.2
Food Chains 200,000 Koninklijke Ahold N.V. 5,053,609 5,880,261 2.2
Total Investments in
Netherlands Stocks 7,974,444 9,134,025 3.4
Norway Pharmaceuticals 220,000 Hafslund Nycomed 'B' Fria 3,997,046 3,951,089 1.4
Shipbuilding 85,000 Kvaerner A.S. 'B' Shares 4,252,335 3,520,825 1.3
Total Investments in
Norwegian Stocks 8,249,381 7,471,914 2.7
<PAGE>
Spain Oil & Related 165,000 Repsol S.A. 4,770,772 5,275,206 1.9
Utility 70,000 Empresa Nacional de
Electricidad S.A. 2,724,152 3,207,472 1.2
Total Investments in
Spanish Stocks 7,494,924 8,482,678 3.1
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
WESTERN EUROPE Shares Value Percent of
(concluded) Industries Held Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Switzerland Machinery 4,000 Sulzer Gebruder AG (Registered) $ 2,922,103 $ 2,821,656 1.0%
Pharmaceuticals 9,000 Ciba-Geigy AG (Registered) 4,597,311 5,245,223 2.0
Restaurants 9,200 Moevenpick Holdings AG (Bearer) 2,372,851 2,856,688 1.0
Total Investments in Swiss Stocks 9,892,265 10,923,567 4.0
United Automobile & 459,200 GKN PLC 3,470,808 4,565,052 1.7
Kingdom Equipment
Beverage 500,000 Grand Metropolitan PLC (Ordinary) 3,277,060 3,387,230 1.3
Building & 355,000 Hepworth PLC 2,113,370 1,703,736 0.6
Construction
Conglomerates 900,000 BTR PLC 5,084,833 4,517,667 1.7
600,000 Hanson PLC (Ordinary) 2,261,242 2,257,609 0.8
------------ ------------ -----
7,346,075 6,775,276 2.5
Electrical 550,000 General Electric Co., Ltd.
Equipment (Ordinary) 2,722,709 2,477,983 0.9
Leisure 173,600 Thorn EMI PLC (Ordinary) 2,552,714 2,754,499 1.0
Machinery 380,000 Siebe PLC (Ordinary) 3,076,015 3,349,685 1.2
Natural Gas 390,000 British Gas PLC 1,848,273 1,852,611 0.7
Utilities
Publishing 175,000 Reed International PLC (Ordinary) 1,773,302 2,148,238 0.8
<PAGE>
Telecommunications 343,000 British Telecommunications PLC 2,224,660 2,208,858 0.8
Total Investments in
United Kingdom Stocks 30,404,986 31,223,168 11.5
Total Investments in Western Europe 87,851,216 94,099,194 34.5
Face Amount Short-Term Securities
<S> <S> <C> <S> <C> <C> <C>
United Commercial $8,619,000 Associates Corp. of North America,
States Paper** 4.72% due 11/01/1994 8,619,000 8,619,000 3.1
Total Investments in
Short-Term Securities 8,619,000 8,619,000 3.1
Total Investments $251,151,408 273,357,472 100.3
============
Unrealized Depreciation on Forward Foreign Exchange Contracts*** (217,228) (0.1)
Liabilities in Excess of Other Assets (653,331) (0.2)
------------ ------
Net Assets $272,486,913 100.0%
============ ======
<FN>
*American Depositary Receipt (ADR).
**Commercial Paper is traded on a discount basis; the interest rate
shown is the discount rate paid at the time of purchase by the fund.
***Forward foreign exchange contract as of October 31, 1994 is as follows:
Foreign Currency Expiration Unrealized
Sold Date Depreciation
YEN 3,920,000,000 July 1995 $(217,228)
Total (US Commitment--$41,476,043) $(217,228)
==========
See Notes to Financial Statements.
<PAGE>
</TABLE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of October 31, 1994
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$251,151,408) (Note 1a) $273,357,472
Cash 59
Receivables:
Beneficial interest sold $ 1,227,403
Dividends 822,614
Securities sold 310,905 2,360,922
------------
Deferred organization expenses (Note 1e) 75,974
Prepaid registration fees and other assets (Note 1e) 28,496
------------
Total assets 275,822,923
------------
Liabilities: Unrealized depreciation on forward foreign exchange
contracts (Note 1b) 217,228
Payables:
Beneficial interest purchased 1,680,063
Securities purchased 380,528
Investment adviser (Note 2) 337,766
Distributor (Note 2) 229,012
Administration fee (Note 2) 57,253 2,684,622
------------
Accrued expenses and other liabilities 434,160
------------
Total liabilities 3,336,010
------------
Net Assets: Net assets $272,486,913
============
Net Assets Common shares of beneficial interest, $0.10 par value, unlimited
Consist of: number of shares authorized $ 2,124,260
Paid-in capital in excess of par 241,733,388
Undistributed realized capital gains on investments and foreign
currency transactions--net 6,603,906
Unrealized appreciation on investments and foreign currency
transactions--net 22,025,359
------------
Net assets--Equivalent to $12.83 per share based on 21,242,599
shares of beneficial interest outstanding $272,486,913
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended October 31, 1994
<S> <S> <C>
Investment Dividends (net of $533,342 foreign withholding tax) $ 3,791,457
Income Interest and discount earned 228,159
(Notes 1c & 1d): ------------
Total income 4,019,616
------------
Expenses: Distribution fees (Note 2) 1,770,022
Investment advisory fees (Note 2) 1,770,022
Account maintenance fees (Note 2) 590,008
Administration fees (Note 2) 590,008
Custodian fees 284,607
Professional fees 82,077
Registration fees (Note 1e) 67,014
Printing and shareholder reports 59,168
Transfer agent fees (Note 2) 47,910
Amortization of organization expenses (Note 1e) 31,186
Trustees' fees 24,227
Other 30,057
------------
Total expenses 5,346,306
------------
Investment loss--net (1,326,690)
------------
Realized & Realized gain from:
Unrealized Investments--net $ 7,903,696
Gain (Loss) on Foreign currency transactions 68,840 7,972,536
Investments and ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 13,282,169
(Notes 1b, 1d & 3): Foreign currency transactions (186,558) 13,095,611
------------ -------------
Net realized and unrealized gain on investments and foreign
currency transactions 21,068,147
-------------
Net Increase in Net Assets Resulting from Operations $ 19,741,457
=============
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment loss--net $ (1,326,690) $ (440,958)
Realized gain on investments and foreign currency
transactions--net 7,972,536 1,225,028
Change in unrealized appreciation on investments and foreign
currency transactions--net 13,095,611 9,543,086
------------ ------------
Net increase in net assets resulting from operations 19,741,457 10,327,156
------------ ------------
Distributions to Realized gain on investments--net (834,656) --
Shareholders ------------ ------------
(Note 1f): Net decrease in net assets resulting from distributions
to shareholders (834,656) --
------------ ------------
Beneficial Interest Net increase in net assets derived from beneficial
Transactions interest transactions 77,824,155 148,792,595
(Note 4): ------------ ------------
Net Assets: Total increase in net assets 96,730,956 159,119,751
Beginning of year 175,755,957 16,636,206
------------ ------------
End of year $272,486,913 $175,755,957
============ ============
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived from For the Period
information provided in the financial statements. For the Year Ended Sept. 14,
October 31, 1992++++ to
Increase (Decrease) in Net Asset Value: 1994++ 1993++ Oct. 31, 1992++
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.74 $ 9.60 $ 10.00
----------- ----------- -----------
Operating Investment loss--net (.12) (.08) (.02)
Performance: Realized and unrealized gain (loss) on investments--net 1.26 2.22 (.38)
----------- ----------- -----------
Total from investment operations 1.14 2.14 (.40)
----------- ----------- -----------
Less distributions from realized gain on investments--net (.05) -- --
----------- ----------- -----------
Net asset value, end of period $ 12.83 $ 11.74 $ 9.60
=========== =========== ===========
Total Investment Based on net asset value per share 9.74% 22.29% (4.00%)+++
Return: =========== =========== ===========
Ratios to Expenses, net of reimbursement and excluding account
Average maintenance and distribution fees 1.27% 1.76% 2.50%*
Net Assets: =========== =========== ===========
Expenses 2.27% 2.76% 3.50%*
=========== =========== ===========
Expenses, net of reimbursement 2.27% 2.76% 4.45%*
=========== =========== ===========
Investment loss--net (.56%) (.86%) (2.77%)*
=========== =========== ===========
Supplemental Net assets, end of period (in thousands) $ 272,487 $ 175,756 $ 16,636
Data: =========== =========== ===========
Portfolio turnover 24.64% 32.54% 0.00%
=========== =========== ===========
+++Aggregate total investment return.
++Based on average number of shares outstanding during the period.
++++Commencement of Operations.
*Annualized.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Consults International Portfolio (the "Fund") is
registered under the Investment Company Act of 1940 as a
diversified, open-end investment company. The following is a summary
of significant accounting policies followed by the Fund.
(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. In cases where securities are traded
on more than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Trustees as the
primary market. Securities traded in the over-the-counter market are
valued at the last available bid price in the over-the-counter
market prior to the time of valuation. Short-term investments are
valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at fair market value as determined in good
faith by or under the direction of the Board of Trustees of the
Fund.
(b) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Realized
and unrealized gains/losses on foreign currency transactions are the
result of settling (realized) or valuing (unrealized) receivables or
payables expressed in foreign currencies into US dollars. Realized
and unrealized gains or losses from investments include the effects
of foreign exchange rates on investments.
The Fund is authorized to enter into forward foreign exchange
contracts as a hedge against either specific transactions or
portfolio positions. Such contracts are not entered on the Fund's
records. However, the effect on operations is recorded from the date
the Fund enters into such contracts. Premium or discount is
amortized over the life of the contract.
(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.
<PAGE>
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend dates, except that if the ex-dividend date has passed,
certain dividends from foreign securities are recorded as soon as
the Fund is informed of the ex-dividend date. Interest income
(including amortization of discount) is recognized on the accrual
basis. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees--
Costs related to the organization of the Fund are charged to expense
over a five-year period. Prepaid registration fees are charged to
expense as the related shares are issued.
(f) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend date.
(g) Reclassification--Accumulated investment loss--net, in the
amount of $1,326,690, has been reclassified to undistributed
realized capital gains--net.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch (Suisse) Investment Management S.A. (the "Investment
Adviser"). The Investment Adviser is a subsidiary of Merrill Lynch
Bank (Suisse) S.A. which is, in turn, an indirect subsidiary of
Merrill Lynch & Co., Inc. ("ML & Co."). Fund Asset Management, L.P.
("FAM") and Merrill Lynch Asset Management U.K. Limited ("MLAM
U.K.") have been retained as sub-advisers (the "Sub-Advisers") to
the Fund. Pursuant to sub-advisory agreements, the Sub-Advisers will
provide investment advisory services with respect to the management
of the Fund's cash position.
As compensation for its services to the Fund, the Investment Adviser
receives monthly compensation at the annual rate of 0.75% of the
average daily net assets of the Fund. The Fund will not pay any
incremental fee to the Sub-Advisers for their services.
Certain states in which shares of the Fund qualify for sale impose
limitations on the expenses of the Fund. The most restrictive annual
expense limitation requires that the Investment Adviser reimburse
the Fund to the extent that expenses (excluding interest, taxes,
distribution fees, brokerage fees and commissions, and extraordinary
items) exceed 2.5% of the Fund's first $30 million of average daily
net assets, 2.0% of the Fund's next $70 million of average daily net
assets, and 1.5% of the average daily net assets in excess thereof.
The Investment Adviser's obligation to reimburse the Fund is limited
to the amount of the investment advisory fee. No fee payment will be
made to the Investment Adviser during any fiscal year which will
cause such expenses to exceed the most restrictive expense
limitation applicable at the time of such payment.
<PAGE>
The Fund has an Administrative Agreement with Princeton
Administrators, Inc. (the "Administrator"), an indirect subsidiary
of ML & Co. The Administrator performs or arranges for the
performance of certain administrative services (i.e., services other
than investment advice and related portfolio activities) necessary
for the operation of the Fund, including maintaining the books and
records of the Fund, preparing reports and other documents required
by United States Federal, state and other applicable laws and
regulations to maintain the registration of the Fund and its shares
and providing the Fund with administrative office facilities. For
the services rendered to the Fund and the facilities furnished, the
Fund pays the Administrator a monthly fee equal to 0.25% of the
Fund's average daily net assets. Also, accounting services are
provided to the Fund by the Administrator, and the Fund reimburses
the Administrator for its costs in connection with such services on
a semi-annual basis.
The Fund has adopted a Plan of Distribution (the "Plan") pursuant to
Rule 12b-1 under the Investment Company Act of 1940 pursuant to
which Merrill Lynch Funds Distributor, Inc. ("MLFD" or
"Distributor"), which is an indirect subsidiary of ML & Co., receives
ongoing distribution and account maintenance fees, which are accrued
daily and paid monthly at the annual rates of 0.75% and 0.25%,
respectively, of the average daily net assets of the Fund. Pursuant
to a sub-agreement with the Distributor, Merrill Lynch also provides
account maintenance activities and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and Merrill Lynch for providing account maintenance
activities to the Fund's shareholders. The ongoing distribution fee
compensates the Distributor and Merrill Lynch for providing
shareholder and distribution services and bearing distribution-
related expenses of the Fund, including payments to financial
consultants for selling shares of the Fund.
As authorized by the Plan, the Distributor has entered into an
agreement with Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), an affiliate of the Investment Adviser, which provides
for the compensation of MLPF&S for providing account maintenance and
distribution-related services to the Fund. For the year ended
October 31, 1994, MLFD earned $2,360,030 under the Plan, all of
which was paid to MLPF&S pursuant to the agreement.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., acts as the Fund's transfer agent.
Certain officers and/or trustees of the Fund are officers and/or
trustees of FAM, the Investment Adviser (including their affiliated
companies), MLPF&S, FDS, MLFD, and/or ML & Co.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1994 were $128,575,780 and
$56,280,432.
Net realized and unrealized gains (losses) as of October 31, 1994
were as follows:
Unrealized
Realized Gains
Gains (Losses)
Long-term investments $ 7,903,696 $22,206,064
Foreign currency transactions 68,840 36,523
Forward foreign exchange contracts -- (217,228)
------------ -----------
Total $ 7,972,536 $22,025,359
As of October 31, 1994, net unrealized appreciation for Federal
income tax purposes aggregated $22,188,469, of which $28,961,556
related to appreciated securities and $6,773,087 related to
depreciated securities. The aggregate cost of investments at October
31, 1994 for Federal income tax purposes was $251,169,003.
4. Beneficial Interest Transactions:
Transactions in shares of beneficial interest were as follows:
For the Year Ended Dollar
October 31, 1994 Shares Amount
Shares sold 10,276,710 $128,040,343
Shares redeemed (4,065,998) (50,896,310)
Reinvestments 56,819 680,122
----------- ------------
Net increase 6,267,531 $ 77,824,155
=========== ============
For the Year Ended Dollar
October 31, 1993 Shares Amount
Shares sold 13,877,188 $155,757,887
Shares redeemed (635,871) (6,965,292)
----------- ------------
Net increase 13,241,317 $148,792,595
=========== ============
5. Commitments:
At October 31, 1994, the Fund had forward foreign exchange
contracts under which it had agreed to sell various foreign
currencies with a value of approximately $199,622.
<PAGE>
<AUDIT-REPORT>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees,
Merrill Lynch Consults International Portfolio:
We have audited the accompanying statement of assets and liabilities
of Merrill Lynch Consults International Portfolio, including the
schedule of investments, as of October 31, 1994, and the related
statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then
ended and financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Portfolio's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and 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 as of
October 31, 1994 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Merrill Lynch Consults International Portfolio
at October 31, 1994, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the
indicated periods, in conformity with generally accepted accounting
principles.
(Ernst & Young LLP)
New York, New York
December 9, 1994
</AUDIT-REPORT>
<PAGE>
IMPORTANT TAX INFORMATION (unaudited)
The following information summarizes all per share distributions
paid by Merrill Lynch Consults International Portfolio during the
year ended October 31, 1994:
Foreign
Domestic Foreign Total Taxes
Record Payable Ordinary Source Ordinary Paid or
Date Date Income Income Income Withheld
12/22/93 12/31/93 .032697 .017141 .049838 .007779
The foreign taxes paid or withheld represent taxes incurred by the
Fund on dividends received by the Fund from foreign sources. Foreign
taxes paid or withheld should be included in taxable income with an
offsetting deduction from gross income or as a credit for taxes paid
to foreign governments. You should consult your tax adviser
regarding the appropriate treatment of foreign taxes paid.
Please retain this information for your records.
APPENDIX GRAPHIC AND IMAGE MATERIAL.
ITEM 1:
Total Return Based on a $10,000 Investment.
A line graph depicting the growth of an investment in the
Portfolio compared to growth of an investment in the Morgan
Stanley EAFE Index. Beginning and ending values are:
9/14/92** 10/94
ML Consults International
Portfolio*++ $10,000 $12,883
Morgan Stanley EAFE
Index++++ $10,000 $14,340
<PAGE>
[FN]
*Assuming transaction costs and other operating expenses,
including advisory fees.
**Commencement of Operations.
++ML Consults International Portfolio invests in a diversified
international portfolio of equity securioties, other than
US securities.
++++This unmanaged Index measures the total returns of
developed foreign stock markets in Europe, Asia and the
Far East.
