MERRILL LYNCH
CONSULTS
INTERNATIONAL
PORTFOLIO
FUND LOGO
Annual Report
October 31, 1995
<PAGE>
Officers and Trustees
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Richard L. Reller, 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, MA 02109
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
Transfer Agency Mutual Fund
Operations Department
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
<PAGE>
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.
Merrill Lynch Consults
International Portfolio
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
Important Tax
Information
(unaudited)
The following information summarizes all per share distributions
paid by Merrill Lynch Consults International Portfolio during its
taxable year ended October 31, 1995.
<TABLE>
<CAPTION>
Record Payable Domestic Ordinary Foreign Source Total Ordinary Foreign Taxes Long-Term
Date Date Income Income Income Paid or Withheld Capital Gains
<C> <C> <C> <C> <C> <C> <C>
12/20/94 12/30/94 $0.058304 $0.081052 $0.139356 $0.025580 $0.178216
</TABLE>
The foreign taxes paid or withheld represent taxes incurred by the
Portfolio on dividends received by the Portfolio 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.
<PAGE>
Worldwide
Investments as of
October 31, 1995
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Pharmaceuticals 5.7%
Telecommunications 5.7
Metals 5.2
Oil & Related 4.5
Machinery 4.4
Publishing 4.1
Shipbuilding 4.0
Chemicals 3.7
Apparel 3.7
Conglomerates 3.5
DEAR SHAREHOLDER
The year ended October 31, 1995 was a difficult one for
international equity markets, especially during the first half.
Financial markets worldwide were heavily influenced in 1995 by
several factors including the Mexican financial crisis in December
1994; the devastating earthquake in Kobe, Japan; the collapse of the
highly respected British investment bank Barings Securities PLC in
February; and the continued political uncertainties in Europe,
especially in Italy, Spain, France and the United Kingdom.
On the positive side, the global economic slowdown led to ongoing
positive news on worldwide inflation and was the major catalyst for
global bond market rallies. Despite the strong support provided by
the bond markets, the performance of international equities was far
more varied in 1995 compared to fixed-income markets. Equity markets
responded to country-specific catalysts rather than a global theme.
Currency fluctuations, especially the weakening of the US dollar
versus the major currencies, contributed to the overall instability
of global equity markets but enhanced dollar-based returns of
international equities.
<PAGE>
After showing a recovery in 1994, the Japanese market again
experienced a sizable decline in early 1995 in the aftermath of the
Kobe earthquake. Investors worried about the costs of rebuilding the
region and the overall impact on the economy. Furthermore, in an
environment of a rising yen, Japanese equities found little support,
particularly the exporters where currency levels play an important
role in profitability ratios. After a significant correction during
the first half of 1995, the market experienced a dramatic recovery
during the summer months and has since traded in a narrow band.
Japan moved in a deflationary mode as competitive pressures
continued to develop and the banking sector began to realize the
massive investment losses incurred in the past several years. Real
estate values continued to decline, adding further pressure on the
banking system which had to cope with a rash of bad loans.
Therefore, investor sentiment was extremely bearish during the last
months of the Portfolio's fiscal year as the media focused on the
debacle in Japan's financial sector and the depressed real estate
market. During the fiscal year ended October 31, 1995, the Japanese
market declined by 11.7% as measured by the Nikkei Dow Jones Index
and by 16.0% in US dollar terms.
Throughout Europe the general trend in equity markets was moderately
higher. After modest declines during the first quarter, European
equity markets posted a recovery during the second and third
quarters and recently gave up some of their gains. Returns were
varied between the markets, with Switzerland, the Netherlands and
the United Kingdom among the best performers; and France and Italy
experienced lower returns during the year ended October 31, 1995.
European economies enjoyed varying levels of growth with modest
inflationary pressures. Nevertheless, political risk increased
somewhat in Europe during 1995 because of the difficulties of
addressing the high unemployment and budget deficits at the same
time. Signs of an economic slowdown in Europe worsened the budget
deficit picture, leading to increasing doubts about the future of
the European Monetary Union (EMU) and greater volatility between the
European currencies. The Italian and French markets were the most
affected by political uncertainties. The continuing instability of
the Italian government, the French presidential election which was
held in May 1995, followed by the sudden change in the French
government's orientation added volatility to their bond and equity
markets.
Most of the emerging equity markets of Southeast Asia, except for
Hong Kong, did not recover as expected and continued to experience
negative returns for 1995. Volatility remained high in response to
massive outflows of investor funds from the region. The earthquake
in Kobe only accelerated the downturn as investors anticipated that
Japan would reduce its direct investments in Asia in order to
rebuild the Kobe area. Concerns that inflationary pressures in China
would spread across the entire region, coupled with the ill health
of Deng Xiao Ping of China, also affected investor confidence. In
addition, the collapse of Barings Securities PLC, which was caused
by speculation in derivative contracts, also affected overall
confidence. Investors focused on the strength of the yen and the
ability of Asian companies and governments to repay their yen-
denominated debt. Finally, these markets suffered from the brief
panic following the Mexican crisis as investors reduced holdings in
the belief that Asian local currencies would also be at risk of
devaluation.
<PAGE>
The greatest area of concern was Latin America, particularly Mexico
and Argentina. Latin American equities reacted negatively to the
Mexican government's decision to devalue its currency against the US
dollar in December 1994. The ensuing financial panic and loss of
confidence led the United States and the International Monetary Fund
to announce a Mexican rescue package in order to gradually re-
establish the liquidity imbalance and confidence in Mexico's
economy. During the fiscal year ended October 31, 1995, the Mexican
equity market lost 55.4% in US dollar terms.
Fiscal Year in Review
We gradually increased our weighting in Japan throughout the first
and second quarters of the Portfolio's fiscal year, when the market
declined and represented, in our view, good value given its relative
low valuation on a price/book value and price/sales basis. During
the summer, we slightly reduced our exposure to Japan as the market
recovered in a short period of time, using the proceeds to strength-
en holdings in Southeast Asia and selectively in Europe. We
maintained our positive stance on Japanese equities and expect the
market to benefit from the weakening yen, the easing of trade
tensions between the United States and Japan, suspension of capital
gains tax on companies' purchase of their own shares, foreign
investment incentives, the government's steps to address the
economy's structural problems, and the Bank of Japan's aggressive
attempts to expand the money supply. Therefore, at October 31, 1995
Japan represented the Portfolio's largest single country exposure at
40.1% of total net assets, partly because of the relative size of the
Japanese market. The Japanese equity market was among the worst-
performing major equity markets during the last 12 months and,
given our exposure to Japan, had a negative impact on the
Portfolio's performance. This was particularly evident during the
first half of 1995.
In January, we slightly reduced the Portfolio's exposure to Europe
and maintained our somewhat underweight exposure there, since we
believed these markets had relatively limited upside potential in
the near term. During the second and third fiscal quarters, we
slightly increased our holdings in Europe, especially in Italy where
we felt the worst was over in terms of political uncertainty after
the appointment of the Dini government. Italian equities should
benefit from the improvement in corporate competitiveness provided
by the decline in the Italian lira and from the low inflationary
environment supporting bonds. While the exposure to Italian equities
has not yet met our expectations, the Portfolio did benefit from the
overall positive returns in European markets.
<PAGE>
Regarding the emerging markets of Southeast Asia and Latin America,
our relative weighting in these regions declined somewhat during the
first and second fiscal quarters because of the underperformance of
these markets. Weightings in emerging markets were essentially
reduced through market declines rather than through portfolio
shifts. We slightly increased our weighting in Southeast Asia during
the third fiscal quarter as these markets lagged the global trend.
Given the sharp corrections in the early part of the year, our
holdings in the emerging markets of both Southeast Asia and Latin
America negatively impacted the performance of the Portfolio.
Concerning our hedging policy, we increased the currency hedge
already in place on Japanese equities, which at October 31, 1995
almost entirely hedged back into US dollars. We maintained our view
on a stronger US dollar, particularly relative to the yen. This
hedge was intended to allow us to keep a sizable position in
Japanese equities while limiting the risk of further weakening of
the yen. The US dollar/yen exchange rate registered a significant
decline during the first part of the reporting period and reached an
all-time low in mid-April at below 80 yen. Since then, the US dollar
recovered strongly and again traded above the 100 yen level.
Therefore, after negatively influencing the Portfolio's performance
during the first part of the fiscal year, the hedge position
recently contributed positively to the performance.
In Conclusion
Looking ahead, we expect to maintain our positive stance on Japanese
equities and the emerging markets of Asia and Latin America, while
exercising more caution in Europe. In Europe, our cautious stance is
based on our expectation that the equity markets will continue to be
affected by disappointing earnings growth, concerns over the EMU,
and ongoing political risks as governments attempt to solve the
unemployment and public deficit problems at the same time. In
addition, important privatization programs will provide an
oversupply of issues to be absorbed by equity markets. However, we
remain moderately positive over the long term as European economies
are enjoying modest inflationary pressures and should continue to
benefit from lower interest rates.
We remain positive on Japan. The recovery of the Nikkei Index so far
this year may prove to be the beginning of a prolonged period of
strength. The Bank of Japan became increasingly aggressive in
attempting to expand the money supply and the government is
addressing the economic structural problems. In addition, there is
evidence that the investment fundamentals are improving rather than
deteriorating. Therefore, we believe the Japanese stock market still
has potential on the upside given its relative attractive valuation,
especially on a price/book value and price/sales basis.
<PAGE>
Our positive stance on the emerging markets is based on the improved
economic situation in Latin America. In Asia, we expect investors
to refocus on the strong economic growth rates, stable currencies
and dynamic economies of these smaller markets. Furthermore,
improving liquidity patterns should also enhance the outlook for
these emerging markets after a laggard performance which is well
into its second year.
We appreciate your continued interest in Merrill Lynch Consults
International Portfolio, and we look forward to reviewing our
strategy with you again in our upcoming semi-annual report to
shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Jurg Boller)
Jurg Boller
Portfolio Manager
December 12, 1995
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
<PAGE>
A line graph depicting the growth of an investment in the Portfolio
compared to the growth of an investment on the Morgan Stanley EAFE
Index. Beginning and ending values are:
9/14/92** 10/95
ML Consults Internatinal
Portfolio*++ $10,000 $12,666
Morgan Stanley EAFE Index++++ $10,000 $14,287
[FN]
*Assuming transaction costs and other operating expenses,
including advisory fees.
**Commencement of Operations.
++ML Consults International Portfolio invests in a diversified
portfolio of equity securities, other than US Securities.
++++This unmanaged Index measures the total returns of developed
foreign stock markets in Europe, Asia and the Far East.
<TABLE>
Average Annual
Total Return
<CAPTION>
Period Covered % Return
<S> <C>
Year Ended 9/30/95 -0.26%
Inception (9/14/92) through 9/30/95 +8.39
</TABLE>
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
10/31/95 7/31/95 10/31/94 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Consults International Portfolio $12.28 $11.95 $12.83 -2.83%(1) +2.76%
ML Consults International Portfolio--Total Return -1.68(2) +2.76
<FN>
(1)Percent change includes reinvestment of $0.178 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.139 per share income
dividends and $0.178 per share capital gains distributions.
</TABLE>
<PAGE>
<TABLE>
Performance
Summary
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<S> <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
1994 11.93 11.84 $0.178 0.139 + 1.94
1/1/95--10/31/95 11.84 12.28 -- -- + 3.72
------ ------
Total $0.178 Total $0.189
Cumulative total return as of 10/31/95:+26.66%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date. There are
no sales charges associated with the Portfolio.
</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>
Argentina Banking 124,027 Banco de Galicia y Buenos Aires
S.A. (ADR)* $ 2,750,621 $ 2,356,513 1.2%
Oil & Related 127,000 YPF S.A. (ADR)* 2,978,847 2,174,875 1.1
Total Investments in Argentine
Stocks 5,729,468 4,531,388 2.3
Chile Glass Packaging 50,000 Cristalerias de Chile S.A. (ADR)* 1,024,719 1,212,500 0.6
Total Investments in Chilean Stocks 1,024,719 1,212,500 0.6
<PAGE>
Mexico Beverage 29,200 Panamerican Beverages Inc. 844,752 799,350 0.4
Building & 175,000 Empresas ICA Sociedad Controladora,
Construction S.A. de C.V. (ADR)* 2,646,374 1,662,500 0.8
Telecommunications 55,000 Telefonos de Mexico, S.A. de C.V.
(ADR)* 2,896,991 1,512,500 0.8
Total Investments in Mexican
Stocks 6,388,117 3,974,350 2.0
Total Investments in Latin
America 13,142,304 9,718,238 4.9
NORTH
AMERICA
Canada Metals 132,700 Noranda, Inc. 2,176,720 2,658,451 1.4
Total Investments in North America 2,176,720 2,658,451 1.4
PACIFIC
BASIN
Australia Metals 277,200 Broken Hill Proprietary, Ltd. 2,767,090 3,752,648 1.9
Publishing 560,000 News Corporation, Ltd. (Ordinary) 2,410,336 2,822,662 1.4
Total Investments in Australian
Stocks 5,177,426 6,575,310 3.3
Hong Kong Multi-Industry 500,000 Hutchison Whampoa, Ltd. 2,336,145 2,755,142 1.4
560,000 Swire Pacific Ltd. (Class A) 4,361,458 4,201,268 2.1
Total Investments in Hong Kong
Stocks 6,697,603 6,956,410 3.5
Indonesia Telecommuni- 52,000 P.T. Indonesian Satellite (ADR)* 1,942,400 1,722,500 0.9
cations
Total Investments in Indonesian
Stocks 1,942,400 1,722,500 0.9
<PAGE>
Japan Apparel 270,000 Tokyo Style Co., Ltd. 4,641,901 4,102,941 2.1
500,000 Toray Industries, Inc. 3,864,992 3,132,353 1.6
------------ ------------ ------
8,506,893 7,235,294 3.7
Automobile & 502,000 Yamaha Motors Co., Ltd. 4,309,498 3,937,255 2.0
Equipment
Building & 40,000 Daiwa House Industry Co., Ltd. 583,662 600,000 0.3
Construction 245,000 Okumura Corp. 2,020,587 2,147,353 1.1
------------ ------------ ------
2,604,249 2,747,353 1.4
Chemicals 410,000 Mitsui Petrochemical Industries,
Ltd. 2,463,356 3,259,902 1.7
310,000 Sekisui Chemical Co., Ltd. 2,983,828 4,042,157 2.0
------------ ------------ ------
5,447,184 7,302,059 3.7
Electric 111,100 Kansai Electric Power Co., Inc. 3,037,494 2,614,118 1.3
Utilities
Electrical 435,000 Hitachi, Ltd. 3,600,724 4,477,941 2.3
Equipment
Electronic 500,000 Hitachi Cable, Ltd. 3,871,452 3,593,137 1.8
Components
Electronics 257,000 Matsushita Electric Industrial
Co., Ltd. 3,522,654 3,653,431 1.9
Financial 213,000 Nomura Securities Co., Ltd. 4,746,603 3,905,000 2.0
Services
Food Processing 200,000 Nippon Meat Packers, Inc. 2,679,349 2,725,490 1.4
Household 310,000 Kao Corp. 3,553,422 3,768,627 1.9
Products
Insurance 572,000 Nippon Fire & Marine Insurance
Co., Ltd. 4,139,949 3,084,314 1.6
International 440,000 Sumitomo Corp. 3,919,593 4,011,765 2.0
Trade
Machinery 520,000 Mitsubishi Heavy Industries, Ltd. 3,349,314 4,022,353 2.0
Merchandising 71,000 Ito-Yokado Co., Ltd. 3,371,372 3,891,078 2.0
Metals 1,400,000 ++Sumitomo Metal Industries, Ltd. 4,064,328 3,801,961 1.9
<PAGE>
Office Equipment 226,000 Canon, Inc. 3,202,973 3,877,451 2.0
Pharmaceuticals 145,000 Yamanouchi Pharmaceutical Co.,
Ltd. 2,961,571 3,241,176 1.6
Printing 200,000 Dai Nippon Printing, Ltd. 3,371,268 3,196,078 1.6
Transportation 430,000 Kamigumi Co., Ltd. 4,915,841 3,899,510 2.0
Total Investments in Japanese
Stocks 79,175,731 78,985,391 40.1
Malaysia Conglomerates 1,200,000 Sime Darby BHD 2,737,495 2,998,819 1.5
Total Investments in Malaysian
Stocks 2,737,495 2,998,819 1.5
Singapore Shipbuilding 550,000 Jurong Shipyard, Ltd. 4,403,226 3,658,364 1.9
Total Investments in Singaporean
Stocks 4,403,226 3,658,364 1.9
Thailand Agriculture 333,000 Charoen Pokphand Feedmill Co., Ltd. 1,608,648 1,694,118 0.9
Banking 120,000 Bangkok Bank Co., Ltd. 1,380,245 1,240,064 0.6
Real Estate 197,300 MDX Co., Ltd. - Foreign 1,295,549 358,763 0.2
Total Investments in Thai Stocks 4,284,442 3,292,945 1.7
Total Investments in the Pacific
Basin 104,418,323 104,189,739 52.9
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
WESTERN Shares Value Percent of
EUROPE Industries Held Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C>
France Advertising 52,000 Havas S.A. $ 4,140,514 $ 3,608,967 1.8%
Oil & Related 54,000 Societe Nationale Elf Aquitaine
(Ordinary) 4,038,687 3,681,441 1.9
Total Investments in French Stocks 8,179,201 7,290,408 3.7
<PAGE>
Germany Utility 103,000 Veba AG 3,114,393 4,237,165 2.1
Total Investments in German Stocks 3,114,393 4,237,165 2.1
Italy Building 230,000 Italcementi S.p.A. 1,496,298 1,423,679 0.7
Materials
Financial 240,000 ++Istituto Mobiliare Italiano S.p.A.
Services (Ordinary) 1,503,756 1,313,643 0.7
Telecommunications 1,580,000 Societa Finanziara Telefonica
S.p.A. (STET) 4,198,505 4,482,939 2.3
Total Investments in Italian Stocks 7,198,559 7,220,261 3.7
Netherlands Food 22,500 Unilever N.V. 2,439,371 2,942,484 1.5
Publishing 20,000 Verenigde Nederlandse Uitgevbedri
Verigd Bezit N V. (Ordinary) 2,359,724 2,808,532 1.4
Total Investments in Netherlands
Stocks 4,799,095 5,751,016 2.9
Norway Pharmaceuticals 60,000 Hafslund Nycomed 'B' Fria 1,070,293 1,679,537 0.9
Shipbuilding 105,000 Kvaerner A.S. 'B' Shares 5,085,432 4,189,189 2.1
Total Investments in Norwegian
Stocks 6,155,725 5,868,726 3.0
Spain Oil & Related 100,000 Repsol S.A. 3,109,463 2,988,930 1.5
Utility 41,000 Empresa Nacional de Electricidad S.A. 1,716,082 2,040,754 1.0
Total Investments in Spanish Stocks 4,825,545 5,029,684 2.5
Switzerland Machinery 2,100 Sulzer Gebruder AG (Registered) 1,544,641 1,343,303 0.7
Pharmaceuticals 7,200 Ciba-Geigy AG (Registered) 3,769,874 6,244,574 3.2
Total Investments in Swiss Stocks 5,314,515 7,587,877 3.9
<PAGE>
United Beverage 410,000 Grand Metropolitan PLC (Ordinary) 2,663,875 2,840,058 1.4
Kingdom
Conglomerates 750,000 BTR PLC (Ordinary) 4,302,732 3,985,380 2.0
Machinery 280,000 Siebe PLC (Ordinary) 2,276,580 3,332,221 1.7
Natural Gas Utilities 390,000 British Gas PLC (Ordinary) 1,848,274 1,486,452 0.8
Publishing 175,000 Reed International PLC (Ordinary) 1,773,302 2,662,455 1.3
Retail 400,000 Boots Company PLC 3,588,607 3,539,397 1.8
Telecommunications 550,000 British Telecommunications PLC 3,513,618 3,274,891 1.7
Total Investments in United
Kingdom Stocks 19,966,988 21,120,854 10.7
Total Investments in Western
Europe 59,554,021 64,105,991 32.5
Face
Amount Short-Term Securities
United Commercial $ 5,104,000 Ford Motor Credit Co., 5.87%
States Paper** due 11/01/1995 5,104,000 5,104,000 2.6
Total Investments in Short-Term
Securities 5,104,000 5,104,000 2.6
Total Investments $184,395,368 185,776,419 94.3
============
Unrealized Appreciation on Forward Foreign Exchange Contracts*** 12,452,034 6.3
Liabilities in Excess of Other Assets (1,151,318) (0.6)
------------ ------
Net Assets $197,077,135 100.0%
============ ======
<PAGE>
<FN>
++Non-income producing security.
*American Depositary Receipts (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
Portfolio.
***Forward foreign exchange contracts as of October 31, 1995 were as
follows:
Foreign Unrealized
Currency Expiration Appreciation
Sold Date (Note 1c)
YEN 6,920,000,000 January 1996 $12,452,034
Total (US$ Commitment--$81,125,440) $12,452,034
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of October 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$184,395,368)
(Note 1a) $185,776,419
Unrealized appreciation on forward foreign exchange
contracts (Note 1c) 12,452,034
Cash 833,930
Foreign cash (Note 1b) 823,871
Receivables:
Securities sold $ 1,362,737
Beneficial interest sold 605,236
Dividends 533,674 2,501,647
------------
Deferred organization expenses (Note 1f) 49,367
Prepaid registration fees and other assets (Note 1f) 19,964
------------
Total assets 202,457,232
------------
Liabilities: Payables:
Securities purchased 4,161,757
Beneficial interest redeemed 707,308
Distributor (Note 2) 174,003
Investment adviser (Note 2) 130,502
Administration fee (Note 2) 43,501
Commissions 28,833 5,245,904
------------
Accrued expenses and other liabilities 134,193
------------
Total liabilities 5,380,097
------------
<PAGE>
Net Assets: Net assets $197,077,135
============
Net Assets Common shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 1,605,047
Paid-in capital in excess of par 182,434,994
Accumulated investment loss--net (897,752)
Undistributed realized capital gains on investments and
foreign currency transactions--net 84,978
Unrealized appreciation on investments and foreign currency
transactions--net 13,849,868
------------
Net assets--Equivalent to $12.28 per share based on 16,050,472
shares of beneficial interest outstanding $197,077,135
============
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended October 31, 1995
<S> <S> <C> <C>
Investment Dividends (net of $579,725 foreign withholding tax) $ 3,928,148
Income Interest and discount earned 322,487
(Notes 1d & 1e): ------------
Total income 4,250,635
------------
Expenses: Distribution fees (Note 2) $ 1,644,757
Investment advisory fees (Note 2) 1,644,757
Account maintenance fees (Note 2) 548,251
Administration fees (Note 2) 548,251
Custodian fees 223,064
Professional fees 68,863
Transfer agent fees (Note 2) 65,263
Registration fees (Note 1f) 47,553
Printing and shareholder reports 41,256
Amortization of organization expenses (Note 1f) 26,607
Trustees' fees 24,418
Pricing fees 9,746
Other 255,601
------------
Total expenses 5,148,387
------------
Investment loss--net (897,752)
------------
<PAGE>
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 7,293,932
(Loss) on Foreign currency transactions--net (7,191,339) 102,593
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net (20,825,013)
(Notes 1b, 1c, Foreign currency transactions--net 12,649,522 (8,175,491)
1e & 3): ------------ ------------
Net realized and unrealized loss on investments and
foreign currency transactions (8,072,898)
------------
Net Decrease in Net Assets Resulting from Operations $ (8,970,650)
============
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment loss--net $ (897,752) $ (1,326,690)
Realized gain on investments and foreign currency
transactions--net 102,593 7,972,536
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net (8,175,491) 13,095,611
------------ ------------
Net increase (decrease) in net assets resulting from
operations (8,970,650) 19,741,457
------------ ------------
Distributions to Realized gain on investments--net (6,621,521) (834,656)
Shareholders ------------ ------------
(Note 1g): Net decrease in net assets resulting from distributions
to shareholders (6,621,521) (834,656)
------------ ------------
Beneficial Net increase (decrease) in net assets derived from
Interest beneficial interest transactions (59,817,607) 77,824,155
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase (decrease) in net assets (75,409,778) 96,730,956
Beginning of year 272,486,913 175,755,957
------------ ------------
End of year $197,077,135 $272,486,913
============ ============
<PAGE>
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
For the
The following per share data and ratios have Period
been derived from information provided in the Sept 14,
financial statements. 1992++ to
For the Year Ended October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1995++++ 1994++++ 1993++++ 1992++++
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.83 $ 11.74 $ 9.60 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment loss--net (.05) (.12) (.08) (.02)
Realized and unrealized gain (loss) on
investments--net (.18) 1.26 2.22 (.38)
-------- -------- -------- --------
Total from investment operations (.23) 1.14 2.14 (.40)
-------- -------- -------- --------
Less distributions from realized gain on
investments--net (.32) (.05) -- --
-------- -------- -------- --------
Net asset value, end of period $ 12.28 $ 12.83 $ 11.74 $ 9.60
======== ======== ======== ========
Total Investment Based on net asset value per share (1.68%) 9.74% 22.29% (4.00%)+++
Return: ======== ======== ======== ========
Ratios to Expenses, excluding account maintenance and
Average distribution fees and net of reimbursement 1.35% 1.27% 1.76% 2.50%*
Net Assets: ======== ======== ======== ========
Expenses, net of reimbursement 2.35% 2.27% 2.76% 3.50%*
======== ======== ======== ========
Expenses 2.35% 2.27% 2.76% 4.45%*
======== ======== ======== ========
Investment loss--net (.41%) (.56%) (.86%) (2.77%)*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $197,077 $272,487 $175,756 $ 16,636
Data: ======== ======== ======== ========
Portfolio turnover 17.31% 24.64% 32.54% --%
======== ======== ======== ========
<PAGE>
<FN>
*Annualized.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
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. Securities traded in the
over-the-counter market are valued at the last available bid price
prior to the time of valuation. 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 which are traded both in the over-the-
counter market and on a stock exchange are valued according to the
broadest and most representative market. Options written are valued
at the last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last
asked price. Options purchased are valued at the last sale price in
the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last bid price.
Short-term securities are valued at amortized cost, which
approximates market value. Other investments, including futures
contracts and related options, are stated at market value.
Securities and assets for which market quotations are not available
are valued at their fair value as determined in good faith by or
under the direction of the Fund's Board of Trustees.
(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) assets or
liabilities expressed in foreign currencies into US dollars.
Realized and unrealized gains or losses from investments include the
effects of foreign exchange rates on investments.
<PAGE>
(c) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity, debt and currency
markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
* Forward foreign exchange contracts--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.
* Foreign currency options and futures--The Fund may purchase or
sell listed or over-the-counter foreign currency options, foreign
currency futures and related options on foreign currency futures as
a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to
hedges on non-US dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated
to be purchased by the Fund.
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
<PAGE>
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When
an option expires (or the Fund enters into a closing transaction),
the Fund realizes a gain or loss on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(d) 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.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the
ex-dividend dates, except that if the ex-dividend date has passed,
certain dividends from foreign securities are recorded as soon as
the Fund is informed of the ex-dividend date. Interest income
(including amortization of discount) is recognized on the accrual
basis. Realized gains and losses on security transactions are
determined on the identified cost basis.
(f) Deferred organization expenses and prepaid registration fees--
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.
NOTES TO FINANCIAL STATEMENTS (concluded)
(g) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend date.
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.
<PAGE>
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.
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,
Pierce, Fenner, & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance activities and distribution
services to the Fund. The ongoing account maintenance fee
compensates the Distributor and MLPF&S for providing account
maintenance activities to the Fund's shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S 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.
<PAGE>
As authorized by the Plan, the Distributor has entered into an
agreement with 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, 1995, MLFD earned $2,193,008 under the Plan,
all of which was paid to MLPF&S pursuant to the agreement.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., acts as the Fund's transfer agent.
In addition, MLPF&S received $60,793 in commissions on the execution
of portfolio security transactions for the Fund for the year ended
October 31, 1995.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, the Investment Adviser (including their affiliated
companies), MLPF&S, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1995 were $37,171,265 and
$107,675,309, respectively.
Net realized and unrealized gains (losses) as of October 31, 1995,
were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 7,293,932 $ 1,381,051
Foreign currency transactions (39,222) 16,783
Forward foreign exchange contracts (7,152,117) 12,452,034
----------- -----------
Total $ 102,593 $13,849,868
=========== ===========
As of October 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $1,369,488, of which $16,216,662
related to appreciated securities and $14,847,174 related to
depreciated securities. The aggregate cost of investments at October
31, 1995 for Federal income tax purposes was $184,406,931.
<PAGE>
4. Beneficial Interest Transactions:
Transactions in shares of beneficial interest were as follows:
For the Year Ended Dollar
October 31, 1995 Shares Amount
Shares sold 1,857,251 $ 21,980,972
Shares issued to shareholders in
reinvestments of distributions 501,369 5,855,982
------------ ------------
Total issued 2,358,620 27,836,954
Shares redeemed (7,550,747) (87,654,561)
------------ ------------
Net decrease (5,192,127) $(59,817,607)
============ ============
For the Year Ended Dollar
October 31, 1994 Shares Amount
Shares sold 10,276,710 $128,040,343
Shares issued to shareholders in
reinvestments of distributions 56,819 680,122
------------ ------------
Total issued 10,333,529 128,720,465
Shares redeemed (4,065,998) (50,896,310)
------------ ------------
Net increase 6,267,531 $ 77,824,155
============ ============
5. Commitments:
At October 31, 1995, the Fund had foreign exchange contracts, in
addition to the contracts listed on the Schedule of Investments,
under which it had agreed to purchase and sell various foreign
currencies with approximate values of $3,336,000 and $1,358,000,
respectively.
<AUDIT-REPORT>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees,
Merrill Lynch Consults International Portfolio
<PAGE>
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, 1995, 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 Fund'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, 1995, 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, 1995, 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 financial highlights for each of the
indicated periods, in conformity with generally accepted accounting
principles.
(Ernst & Young LLP)
Ernst & Young LLP
Princeton, New Jersey
December 1, 1995
</AUDIT-REPORT>
