MERRILL LYNCH
CONSULTS
INTERNATIONAL
PORTFOLIO
[FUND LOGO]
STRATEGIC
Performance
Semi-Annual Report
April 30, 1997
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. Statements and other
information herein are as dated and are subject to change.
Merrill Lynch Consults
International Portfolio
Box 9011
Princeton, NJ
08543-9011 #16566 -- 4/97
MERRIL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
Worldwide Investments as of April 30, 1997
Percent of
Ten Largest Industries Net Assets
Banking 10.9%
Oil & Related 7.5
Electronics 7.4
Chemicals 6.0
Telecommunications 5.4
Machinery 4.1
Building & Construction 4.1
Apparel 4.1
Beverage 4.1
Real Estate 3.6
Percent of
Ten Largest Holdings Country Net Assets
Elf Aquitaine S.A. France 3.4%
BASF AG Germany 3.3
HSBC Holdings PLC Hong Kong 2.9
Societa Finanziara Telefonica
S.p.A. (STET) Italy 2.9
Banco de Galicia y Buenos Aires
S.A. (ADR) Argentina 2.8
Grand Metropolitan PLC (Ordinary) United Kingdom 2.6
Toray Industries, Inc. Japan 2.6
British Telecommunications PLC United Kingdom 2.5
Matsushita Electric Co., Ltd. Japan 2.5
Philips Electronics N.V. Netherlands 2.4
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
Alan J. Albert, Senior Vice President
Donald C. Burke, Vice President
Christine L. Pinto, Vice President
Gerald M. Richard, Treasurer
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
Merrill Lynch Consults International Portfolio, April 30, 1997
DEAR SHAREHOLDER
International investors witnessed an extreme range of equity market
returns during the six months ended April 30, 1997 as regional and
sectoral performance fluctuated dramatically. The European equity
markets rewarded investors, rising over 10.6% during the six-month
period, while the Pacific Rim, reflecting a dramatic decline in Japan
among others, declined over 13.5%. Additionally, as the US dollar
experienced unusually strong gains, the currency returns on foreign
investments fell, jeopardizing returns in our US dollar-valued portfolio
more than at any other time in the past five years.
The unmanaged Morgan Stanley Europe, Australia and Far East Index (EAFE)
provided high local currency returns (over 10%) for the international
markets. However, these returns were substantially reduced as a result
of currency translation effects. Within the emerging markets, returns
were far from uniform as Latin American equity markets soared and Asian
equity markets declined. Thus, while the unmanaged Morgan Stanley EAFE
Index provided a total return of +1.57%, Merrill Lynch Consults
International Portfolio's performance was significantly better at +5.46%
for the six months ended April 30, 1997. Our outperformance of the
benchmark resulted in part from strong performance in some of the non-
EAFE regions and markets in which we invest that have been unaffected by
recent currency or volatility trends.
Since overall US dollar returns were relatively modest, we needed to be
effective in finding more rewarding markets in which to establish new
investments without significantly increasing volatility. Key among these
markets were Hong Kong and China-related "red chip" listings as well as
the shares and Brazilian privatization candidates which delivered strong
performance during the period. In addition, we built up several new
value-oriented equity positions on a partially hedged basis in Europe.
We partially hedged our Japanese yen currency exposure during the six-
month period, which served to mitigate some of the negative currency
translation effects we would otherwise have experienced.
Because the last six months were characterized by extreme share price
declines in many of the Pacific Rim's equity markets, particularly
Japan, we significantly reduced our exposure to these markets over the
past several quarters. For the period as a whole, we experienced
relatively steady performance in our Hong Kong shares despite the death
of Deng Xiaoping this past February. Our China-related shares were very
robust in their performance contribution as mainland Chinese investors
became less cautious and pushed these red chip and Hong Kong shares to
new highs. This was in stark contrast to the "Asian tiger" markets, of
which we were net sellers during the past year.
We eliminated the worst performing of the Asian tiger markets early
this year, namely Thailand, and reduced our holdings in Malaysia,
two economies which share common difficulties that have continued to
intensify. In the case of Thailand, the creation of a recapitalization
agency designed to bail out the deeply troubled finance and property
sector seems destined to fail since it does not incorporate truly
market-oriented solutions. We believe that this market seems destined to
head lower still. We continue to sustain underweighted positions in
smaller Asian markets. Our concerns revolve around the extreme changes
in the region's competitive landscape that, in our opinion, have
rendered Asian tiger economies less competitive in key export markets.
The six-month period as a whole was characterized by renewed vigor in
the US economy. Toward the middle of the six-month period ended April
30, 1997, many forecasters were forced to reverse earlier expectations
of lower US interest rates in favor of a prospective cycle of tightening
by the US Federal Reserve Board. This served to accelerate the advance
in the US dollar which began to enjoy a significant interest rate
advantage over other major currencies, reinforcing demand for dollar
assets. This led to new bull market highs slightly over 7,000 on the Dow
Jones Industrial Average (DJIA) before US stocks finally fell victim to
the combined concerns of rising interest rates and the negative earnings
effects of a too strong currency, which contributed to the first
cyclical correction (nearly 10%) during this extended bull market cycle.
The majority of international equity markets declined in sympathy with
the DJIA. Later in the six-month period, investor concerns were relieved
by the apparent reluctance of US benchmark bond yields to meaningfully
breach key levels on the 30-year US Treasury bond yield of 7.25%, in
response to comforting reports of continuing low inflation and well-
behaved commodity prices. As earnings reports reflecting first-quarter
performance began to reveal corporate profits that were higher than
estimates for the seventeenth consecutive quarter, US stocks began a
sharp recovery. International markets followed suit in the final weeks
of the six-month period ended April 30, 1997. The failure of the dollar
to move above its recent trading range and a difficult political
environment in key markets impeded the European stock markets from
regaining their previous leadership role.
In the recent recovery phase toward the close of the reporting period,
Japan's key indexes commenced a convincing advance after providing
negative returns for the last three consecutive quarters. Hong Kong
rebounded smartly, widening the Portfolio's performance lead over the
Morgan Stanley EAFE benchmark as we are still well exposed to both
markets. Caution may be in order regarding the outlook for the recent
leadership stocks in Japan, namely electronics and exporters, as a
period of relative strength may be ahead for the Japanese yen. The local
economy is recovering rapidly now and interest rates have not been
increased for a number of years. A prospective hike in interest rates by
the Bank of Japan may be the catalyst for a strengthening yen as global
speculators begin to cover short yen positions that have been in place
for the last several years. This may be the key for a change of stock
market leadership involving a switch to selected economically sensitive
and domestically oriented companies such as retailers and finance-
related firms.
The United Kingdom was also quite robust toward the close of the period
ended April 30, 1997 despite the heightened political tensions
surrounding the May 1, 1997 elections. Stock picking has become
particularly important in this market as a result of the relatively
strong pound sterling as compared to the Continental European
currencies, which has undermined exporters such as the engineering
sector. Accordingly, we have concentrated our holdings among the
domestic consumer as well as communications and utilities companies. An
interest rate hike combined with a tighter fiscal backdrop is perhaps
inevitable for the UK economy, which appears to be in danger of
overheating. This may strengthen the currency further. We are still
underweighted in this market and have removed the currency hedge
on our UK holdings.
The Latin American markets, particularly Brazil, in which we are
overweighted, continued to lead during the recent upturn while
Asia's smaller markets are still slipping to new lows. A key
privatization via auction has been scheduled for one of our Brazilian
holdings, Companhia Vale do Rio Doce S.A., which should provide that
market with confidence that the privatization program is in full swing.
Positive regulatory activity has provided a favorable backdrop for our
utility holdings as well.
Several positions experienced significantly positive performance. For
example, Philips Electronics N.V. of the Netherlands appreciated over
75% during the last six months. Two of our Japanese holdings are among
the Portfolio's top five performers. Advantest Corporation and
Matsushita-Kotobuki Electronics Industries, Ltd., both in the
electronics sector, gained 77% and 52%, respectively. Rounding out the
top five performers were Petroleo Brasileiro S.A. (Petrobras) in Brazil,
gaining roughly 68%, and Societa Finanziara Telefonica S.p.A. (STET) of
Italy, gaining 67%.
Among the worst five performers was Land & General BHD of Malaysia, our
worst performer, which declined 38%. Also, Sanwa Bank, Ltd. in Japan
fell 29% reflecting the continued concerns about the fragility of the
Japanese financial system. The other poor performers were primarily
small positions in the emerging markets holdings that included
Transportacion Maritima Mexicana, S.A. de C.V. in Mexico and Seoul City
Gas Co., Ltd. in South Korea, declining 27% and 22%, respectively, while
Amoy Properties Ltd. in Hong Kong also fell roughly 18%.
In Conclusion
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 annual report to shareholders.
Sincerely,
/S/ ARTHUR ZEIKEL
Arthur Zeikel
President
/S/ CHRISTINE L. PINTO
Christine L. Pinto
Vice President and Portfolio Manager
June 6, 1997
<TABLE>
<CAPTION>
PERFORMANCE DATA
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.
Average Annual
Total Return
<S> <C> <C> <C> <C> <C>
Period Covered % Return
Year Ended 3/31/97 + 0.25%
Inception (9/14/92) through 3/31/97 + 7.70
Recent 12 Month 3 Month
Performance 4/30/97 1/31/97 4/30/96 % Change % Change
Results
ML Consults International Portfolio $11.94 $11.75 $13.03 - 5.63%(1) + 1.62%
ML Consults International Portfolio
-- Total Return - 2.15(2) + 1.62
(1) Percent change includes reinvestment of $0.348 per share capital gains distributions.
(2) Percent change includes reinvestment of $0.442 per share income dividends and $0.348 per share capital gains
distributions.
</TABLE>
<TABLE>
<CAPTION>
Performance
Summary
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
1995 11.84 12.07 0.464 0.437 + 9.68
1996 12.07 11.87 0.348 0.442 + 5.01
1/1/97 -- 4/30/97 11.87 11.94 -- -- + 0.59
Total $0.990 Total $1.068
Cumulative total return as of 4/30/97: +41.49%**
* 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>
<CAPTION>
SCHEDULE OF INVESTMENTS
LATIN Shares Value Percent of
AMERICA Industries Held Stocks Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C> <C>
Argentina Banking 150,989 Banco de Galicia y Buenos Aires
S.A. (ADR)* $2,597,718 $3,623,736 2.8%
Oil & Related 40,000 YPF S.A. (ADR)* 1,019,077 1,105,000 0.9
Total Investments in Argentine
Stocks 3,616,795 4,728,736 3.7
Brazil Electric
Utilities 32,000,000 Companhia Energetica de Minas
Gerais S.A. (CEMIG)
(Preferred) 949,891 1,459,169 1.1
3,500,000 Light-Servicios de Electricidade
S.A. 1,369,142 1,454,768 1.1
---------- ---------- ----------
2,319,033 2,913,937 2.2
Mining 44,000 Companhia Vale do Rio Doce S.A.
(Preferred) 1,037,298 1,121,309 0.9
Oil & Related 10,000,000 Petroleo Brasileiro S.A.
(Petrobras)(Preferred) 1,269,912 2,101,749 1.6
Steel 458,000,000 Usinas Siderurgicas de Minas
Gerais S.A. -- Usiminas
(Preferred) 500,967 542,675 0.4
Total Investments in Brazilian
Stocks 5,127,210 6,679,670 5.1
Mexico Building &
Construction
600,000 Cemex S.A. 2,320,739 2,204,606 1.7
175,000 Empresas ICA Sociedad
Controladora, S.A. de C.V.
(ADR)* 2,646,374 2,603,125 2.0
---------- ---------- ----------
4,967,113 4,807,731 3.7
Retail 122,307 Cifra, S.A. de C.V. 'A' 140,043 183,145 0.1
1,000,000 Cifra, S.A. de C.V. 'B' 1,269,922 1,535,171 1.2
---------- ---------- ----------
1,409,965 1,718,316 1.3
Transportation 150,000 Transportacion Maritima
Mexicana, S.A. de C.V. (ADR)* 1,352,126 768,750 0.6
Total Investments in Mexican
Stocks 7,729,204 7,294,797 5.6
Total Investments in Latin
America 16,473,209 18,703,203 14.4
NORTH
AMERICA
Canada Metals 80,000 Noranda, Inc. 1,299,053 $1,689,092 1.3
Total Investments in
North America 1,299,053 1,689,092 1.3
PACIFIC
BASIN
Australia Metals 102,200 Broken Hill Proprietary, Ltd. 1,021,993 1,444,037 1.1
Publishing 560,000 News Corporation, Ltd. (Ordinary) 2,410,336 2,586,452 2.0
Total Investments in Australian
Stocks 3,432,329 4,030,489 3.1
Hong Kong Banking 150,000 HSBC Holdings PLC 2,657,921 3,795,507 2.9
Building &
Construction 560,000 +Road King Infrastructure Ltd. 481,566 553,060 0.4
Financial
Services 1,100,000 Min Xin Holdings 548,452 678,092 0.5
Railroads 1,250,000 Guangshen Railway Co., Ltd.
(Series H) 469,278 597,082 0.5
Real Estate 800,000 Amoy Properties Ltd. 1,081,336 790,085 0.6
1,600,000 Guangzhou Investment Co., Ltd. 643,224 759,101 0.6
200,000 Sun Hung Kai Properties Ltd. 2,003,438 2,168,861 1.7
250,000 Wharf (Holdings) Ltd. 1,006,842 945,649 0.7
----------- ---------- --------
4,734,840 4,663,696 3.6
Transportation 33,187 +GZI Transportation Ltd. 13,111 19,923 0.0
6,636 GZI Transportation Ltd.
(Warrants) (a) 880 1,062 0.0
----------- ---------- --------
13,991 20,985 0.0
Total Investments in Hong Kong
Stocks 8,906,048 10,308,422 7.9
Japan Apparel 160,000 Tokyo Style Co., Ltd. 2,788,078 1,929,534 1.5
550,000 Toray Industries, Inc. 4,102,268 3,424,766 2.6
----------- ---------- --------
6,890,346 5,354,300 4.1
Automobile &
Equipment 15,000 Autobacs Seven Co., Ltd. 1,227,667 999,054 0.8
Banking 140,000 Sanwa Bank, Ltd. 2,285,590 1,500,749 1.2
Beverage 220,000 Kirin Brewery Co., Ltd. 2,688,369 1,907,464 1.5
Chemicals 600,000 Mitsui Petrochemical Industries,
Ltd. 3,573,350 2,823,363 2.2
100,000 Nippon Shokubai K.K. Co. 1,032,405 646,331 0.5
----------- ---------- --------
4,605,755 3,469,694 2.7
Electrical
Equipment 335,000 Hitachi, Ltd. 2,814,836 3,036,573 2.3
Electronics 15,000 Advantest Corporation 583,920 833,530 0.6
200,000 Matsushita Electric Co., Ltd. 3,029,307 3,200,126 2.5
23,000 Matsushita-Kotobuki Electronics
Industries, Ltd. 610,470 734,216 0.6
90,000 Omron Corp. 1,821,396 1,702,530 1.3
----------- ---------- --------
6,045,093 6,470,402 5.0
Insurance 300,000 Nippon Fire & Marine Insurance
Co., Ltd. 2,150,386 1,182,313 0.9
Machinery 195,000 Makita Corporation 3,008,235 2,674,391 2.0
Merchandising 50,000 Ito-Yokado Co., Ltd. 2,465,299 2,400,095 1.8
Metals 500,000 Sumitomo Metal Industries, Ltd. 1,378,688 1,245,369 0.9
Pharmaceuticals 50,000 Banyu Pharmaceutical Co., Ltd. 742,065 768,503 0.6
35,000 Yamanouchi Pharmaceutical Co.,
Ltd. 741,429 747,616 0.6
----------- ---------- --------
1,483,494 1,516,119 1.2
Printing 100,000 Dai Nippon Printing, Ltd. 1,786,645 1,804,997 1.4
Total Investments in Japanese
Stocks 38,830,403 33,561,520 25.8
Malaysia Conglomerates 700,000 Land & General BHD 1,748,183 953,785 0.7
800,000 Sime Darby BHD 1,892,895 2,470,120 1.9
Total Investments in Malaysian
Stocks 3,641,078 3,423,905 2.6
South Korea Electric
Utilities 35,000 Korea Electric Power Corp. 1,136,044 1,046,067 0.8
Natural
Gas Utilities 15,000 Seoul City Gas Co., Ltd. 1,211,976 792,135 0.6
Total Investments in South
Korean Stocks 2,348,020 1,838,202 1.4
Total Investments in the
Pacific Basin 57,157,878 53,162,538 40.8
WESTERN
EUROPE
France Advertising 15,000 Havas S.A. 1,201,050 1,123,105 0.9
Foods 10,000 Groupe Danone S.A. 1,498,780 1,456,352 1.1
Oil & Related 45,000 Elf Aquitaine S.A. 3,388,646 4,363,917 3.4
Total Investments in French
Stocks 6,088,476 6,943,374 5.4
Germany Banking 80,000 Bayerische Hypotheken-und
Wechsel-Bank AG 2,083,007 2,494,514 1.9
Chemicals 110,000 BASF AG 2,957,061 4,242,984 3.3
Total Investments in German
Stocks 5,040,068 6,737,498 5.2
Italy Banking 360,000 Credito Italiano S.p.A. 506,861 504,820 0.4
Office
Equipment 2,000,000 +Olivetti Group S.p.A. 1,258,718 584,283 0.4
Publishing 1,280,000 +Seat S.p.A. 464,273 391,890 0.3
Tele-
communications 800,000 Societa Finanziara Telefonica
S.p.A. (STET) 2,308,885 3,783,815 2.9
Tires & Rubber 460,000 Pirelli S.p.A. 1,019,656 1,013,263 0.8
Total Investments in Italian
Stocks 5,558,393 6,278,071 4.8
Netherlands Electronics 60,000 Philips Electronics N.V. 2,360,975 3,131,640 2.4
Total Investments in Netherlands
Stocks 2,360,975 3,131,640 2.4
Spain Oil &
Related 50,000 Repsol S.A. 1,567,118 2,098,884 1.6
Total Investments in Spanish
Stocks 1,567,118 2,098,884 1.6
Sweden Household
Appliances 50,000 Electrolux AB 2,397,099 2,869,349 2.2
Machinery 50,000 Atlas Copco AB (Class A) 919,997 1,237,008 1.0
Total Investments in Swedish
Stocks 3,317,096 4,106,357 3.2
Switzerland Banking 20,000 CS Holding AG (Registered) 2,102,399 2,253,904 1.7
Foods 1,400 Nestle S.A. (Registered) 1,564,148 1,701,290 1.3
Pharmaceuticals 1,866 Novartis AG (Registered) 997,359 2,460,130 1.9
Total Investments in Swiss
Stocks 4,663,906 6,415,324 4.9
United Kingdom Beverage 410,000 Grand Metropolitan PLC (Ordinary) 2,663,875 3,429,076 2.6
Entertainment
& Leisure 320,000 Rank Organisation PLC 2,323,790 2,208,640 1.7
Machinery 100,000 Siebe PLC (Ordinary) 805,619 1,482,712 1.1
Natural Gas
Utilities 790,000 British Gas PLC (Ordinary) 3,018,263 2,283,669 1.8
Retail 250,000 Boots Company PLC 2,214,174 2,817,640 2.2
Tele-
communications 450,000 British Telecommunications PLC 2,769,892 3,303,216 2.5
Total Investments in United
Kingdom Stocks 13,795,613 15,524,953 11.9
Total Investments in Western
Europe 42,391,645 51,236,101 39.4
Face
Amount Short-Term Securities
Commercial
Paper** $1,086,000 General Motors Acceptance
Corp., 5.68% due 5/01/1997 1,086,000 1,086,000 0.8
Total Investments in
Short-Term Securities 1,086,000 1,086,000 0.8
Total Investments $118,407,785 125,876,934 96.7
=============
Unrealized Appreciation on Forward Foreign Exchange
Contracts*** 1,194,453 0.9
Other Assets Less Liabilities 3,094,729 2.4
------------ ------------
Net Assets $130,166,116 100.0%
============ ============
+ Non-income producing security.
(a) Warrants entitle the Fund to purchase a predetermined number of
shares of common stock. The purchase price and the number of shares are
subject to adjustment under certain conditions until the expiration date.
* 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 Fund.
*** Forward foreign exchange contracts as of April 30, 1997 were as follows:
Unrealized
Foreign Expiration Appreciation
Currency Sold Date (Note 1c)
-------------------------------------------------------------
DM 12,000,000 September 1997 $107,371
Frf 28,000,000 September 1997 67,529
(yen) 2,980,250,000 September 1997 1,019,553
Total Unrealized Appreciation on
Forward Foreign Exchange Contracts
(US$ Commitment -- $37,014,753) $1,194,453
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
As of April 30, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $118,407,785) (Note 1a) $125,876,934
Unrealized appreciation on forward foreign exchange contracts (Note 1c) 1,194,453
Cash 356
Foreign cash (Note 1b) 384
Receivables:
Securities sold $4,219,708
Dividends 603,417
Beneficial interest sold 372,000 5,195,125
------------
Deferred organization expenses (Note 1f) 22,761
Prepaid registration fees and other assets (Note 1f) 7,556
------------
Total assets 132,297,569
------------
Liabilities: Payables:
Securities purchased 1,240,922
Beneficial interest redeemed 337,464
Forward foreign exchange contracts (Note 1c) 118,234
Distributor (Note 2) 106,939
Investment adviser (Note 2) 80,205
Commissions 34,686
Administration fee (Note 2) 26,735 1,945,185
------------
Accrued expenses and other liabilities 186,268
------------
Total liabilities 2,131,453
------------
Net Assets: Net assets $130,166,116
============
Net Assets Common shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized $1,090,284
Paid-in capital in excess of par 120,108,477
Accumulated investment loss -- net (13,851,914)
Accumulated distributions in excess of investment income -- net
(Note 1g) (6,862,242)
Undistributed realized capital gains on investments and foreign currency
transactions -- net 21,048,929
Unrealized appreciation on investments and foreign currency transactions
-- net 8,632,582
-----------
Net assets -- Equivalent to $11.94 per share based on 10,902,843 shares of
beneficial interest outstanding $130,166,116
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1997
<S> <C> <C> <C>
Investment Dividends (net of $156,767 foreign withholding tax) $2,797,430
Income Interest and discount earned 45,489
(Notes 1d & 1e): -------------
Total income 2,842,919
-------------
Expenses: Account maintenance and distribution fees (Note 2) $764,256
Investment advisory fees (Note 2) 573,192
Administration fees (Note 2) 191,064
Stamp tax fee 120,284
Custodian fees 83,199
Professional fees 34,473
Accounting services (Note 2) 33,801
Transfer agent fees (Note 2) 27,124
Registration fees (Note 1f) 22,194
Trustees' fees 11,945
Printing and shareholder reports 10,460
Pricing fees 3,220
Other 6,338
---------
Total expenses 1,881,550
-------------
Investment income -- net 961,369
-------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments -- net (410,658)
(Loss) on Foreign currency transactions -- net 654,689 244,031
Investments & ---------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions -- Investments -- net 6,290,574
Net Notes 1b, Foreign currency transactions -- net 1,164,756 7,455,330
1c, 1e & 3): ---------- -------------
Net realized and unrealized gain on investments and foreign
currency transactions -- net 7,699,361
-------------
Net Increase in Net Assets Resulting from Operations $8,660,730
=============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: April 30, 1997 Oct. 31, 1996
<S> <C> <C> <C>
Operations: Investment income (loss) -- net $961,369 $(861,635)
Realized gain on investments and foreign currency
transactions -- net 244,031 25,429,746
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions -- net 7,455,330 (12,672,616)
------------- -------------
Net increase in net assets resulting from operations 8,660,730 11,895,495
------------- -------------
Dividends & Investment income -- net (5,862,557) --
Distributions to In excess of investment income -- net -- (6,862,242)
Shareholders Realized gain on investments -- net (4,613,275) (7,287,890)
(Note 1g): ------------- -------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (10,475,832) (14,150,132)
------------- -------------
Beneficial Interest Net decrease in net assets derived from beneficial
Transactions interest transactions (42,939,503) (19,901,777)
(Note 4): ------------- -------------
Net Assets: Total decrease in net assets (44,754,605) (22,156,414)
Beginning of period 174,920,721 197,077,135
------------- -------------
End of period $130,166,116 $174,920,721
============= =============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For the
Six Months
The following per share data and ratios have been derived Ended
from information provided in the financial statements. April 30, For the Year Ended October 31,
1997+ 1996+ 1995+ 1994+ 1993+
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $12.09 $12.28 $12.83 $11.74 $9.60
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss) -- net .07 (.05) (.05) (.12) (.08)
Realized and unrealized gain (loss) on
investments -- net .57 .76 (.18) 1.26 2.22
-------- -------- -------- -------- --------
Total from investment operations .64 .71 (.23) 1.14 2.14
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income -- net (.44) -- -- -- --
In excess of investment income -- net -- (.44) -- -- --
Realized gain on investments -- net (.35) (.46) (.32) (.05) --
-------- -------- -------- -------- --------
Total dividends and distributions (.79) (.90) (.32) (.05) --
-------- -------- -------- -------- --------
Net asset value, end of period $11.94 $12.09 $12.28 $12.83 $11.74
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 5.46%++++ 5.93% (1.68%) 9.74% 22.29%
Return: ======== ======== ======== ======== ========
Ratios to Average Expenses 2.46%* 2.37% 2.35% 2.27% 2.76%
Net Assets: ======== ======== ======== ======== ========
Investment income (loss) -- net 1.26%* (.42%) (.41%) (.56%) (.86%)
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $130,166 $174,921 $197,077 $272,487 $175,756
Data: ======== ======== ======== ======== ========
Portfolio turnover 11.21% 38.16% 17.31% 24.64% 32.54%
======== ======== ======== ======== ========
Average commission rate paid+++++ $.0153 $.0010 -- -- --
======== ======== ======== ======== ========
* Annualized.
+ Based on average shares outstanding during the period.
++++ Aggregate total investment return.
+++++ For fiscal years beginning on or after September 1, 1995, the fund is required to disclose its
average commission rate per share for purchases and sales of equity securities. The "Average
Commission Rate Paid" includes commissions paid in foreign currencies, which have been converted
into US dollars using the prevailing exchange rate on the date of the transaction. Such conversions
may significantly affect the rate shown.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Consults International Portfolio, April 30, 1997
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 management investment company. These unaudited
financial statements reflect all adjustments which are, in the opinion
of management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal recurring
nature. The following is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments -- Portfolio securities, including
depositary receipts, 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 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.
(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.
[bullet] 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.
[bullet] 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.
[bullet] 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.
[bullet] 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. Dividends
from foreign securities where the ex-dividend date may have passed are
subsequently recorded when the Fund has determined 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.
(g) Dividends and distributions -- Dividends and distributions paid by
the Fund are recorded on the ex-dividend date. Distributions in excess
of net investment income are due primarily to differing tax treatments
for foreign currency transactions.
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.
The Fund has an Administrative Agreement with Princeton Administrators,
L.P. (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.
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 six months ended
April 30, 1997, MLFD earned $764,256 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 $34,418 in commissions on the execution of
portfolio security transactions for the Fund for the six months ended
April 30, 1997.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, the Investment Adviser (including their affiliated
companies), MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for
the six months ended April 30, 1997 were $16,922,599 and $67,001,255,
respectively.
Net realized and unrealized gains (losses) as of April 30, 1997, were as
follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ (410,658) $7,469,149
Foreign currency transactions (209,420) (31,020)
Forward foreign exchange contracts 864,109 1,194,453
----------- -----------
Total $244,031 $8,632,582
=========== ===========
As of April 30, 1997, net unrealized appreciation for Federal income tax
purposes aggregated $7,469,149, of which $17,679,710 related to
appreciated securities and $10,210,561 related to depreciated
securities. The aggregate cost of investments at April 30, 1997 for
Federal income tax purposes was $118,407,785.
4. Beneficial Interest Transactions:
Transactions in shares of beneficial interest were as follows:
For the Six Months Ended Dollar
April 30, 1997 Shares Amount
Shares sold 637,486 $7,689,318
Shares issued to shareholders in
reinvestments of dividends and
distributions 829,254 9,652,518
------------ ------------
Total issued 1,466,740 17,341,836
Shares redeemed (5,031,390) (60,281,339)
------------ ------------
Net decrease (3,564,650) $(42,939,503)
============ ============
For the Year Ended Dollar
October 31, 1996 Shares Amount
Shares sold 3,894,853 $48,570,265
Shares issued to shareholders
in reinvestments of distributions
and distributions 1,089,865 12,925,796
------------ ------------
Total issued 4,984,718 61,496,061
Shares redeemed (6,567,697) (81,397,838)
------------ ------------
Net decrease (1,582,979) $(19,901,777)
============ ============
5. Commitments:
At April 30, 1997, the Fund entered into forward 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 $1,239,000 and $4,216,000,
respectively.
