MERRILL LYNCH
CONSULTS
INTERNATIONAL
PORTFOLIO
[Graphic Omitted]
STRATEGIC
Performance
Semi-Annual Report
April 30, 1998
<PAGE>
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
Worldwide
Investments as of
April 30, 1998
Percent of
Ten Largest Industries Net Assets
Insurance .......................................................... 8.0%
Banking ............................................................ 7.7
Oil & Related ...................................................... 7.5
Pharmaceuticals .................................................... 6.5
Foods .............................................................. 6.4
Electronics ........................................................ 5.9
Electric Utilities ................................................. 5.1
Natural Gas Utilities .............................................. 3.6
Machinery .......................................................... 3.6
Household Appliances ............................................... 3.1
Percent of
Ten Largest Holdings Country Net Assets
AXA-UAP ................................... France 4.2%
Commercial Union PLC ...................... United Kingdom 3.8
Groupe Danone S.A. ........................ France 3.6
Credit Suisse Group (Registered) .......... Switzerland 3.4
Elf Aquitaine S.A. ........................ France 3.3
Novartis AG (Registered) .................. Switzerland 3.1
Electrolux AB ............................. Sweden 2.8
Repsol S.A. ............................... Spain 2.8
Nestle S.A. (Registered) .................. Switzerland 2.8
BG PLC .................................... United Kingdom 2.7
<PAGE>
Merrill Lynch Consults International Portfolio, April 30, 1998
DEAR SHAREHOLDER
After a difficult start to the new fiscal year, Merrill Lynch Consults
International Portfolio recovered ground during the second fiscal quarter. For
the six months ended April 30, 1998, the Portfolio had a total return of +13.4%,
modestly underperforming the unmanaged Morgan Stanley Europe, Australia and Far
East (EAFE) Index, which was up 15.4% over the same period.
In the months following the October market declines, the Morgan Stanley EAFE
Index moved sharply ahead, reaching new highs during April. The rally was led by
the European markets which were driven by liquidity inflows, corporate
restructuring and a favorable interest environment ahead of European Monetary
Union (EMU). After the strong rally at the beginning of the year, the Asian
markets have come under renewed pressure given worries about social unrest and a
more severe economic downturn than previously expected. Hence, overall global
equity markets were very volatile during the six months ended April 30, 1998,
and performance of world equity markets diverged sharply.
Our catch-up in performance resulted from our shift in asset allocation toward
Europe, where we went from an underweight position to a nearly neutral position.
At the same time, we reduced our exposure in the Asia/Pacific region. The change
in regional exposure benefited the Portfolio. Furthermore, our substantial
overweighting in Italy and our exposure to more peripheral markets such as Spain
and Portugal were rewarding, given the outstanding performance of these
countries. Our position in Latin America was disappointing in light of the
relatively poor performance of this region compared to the benchmark.
During the six-month period ended April 30, 1998, all the major European
currencies, with the exception of the British pound, depreciated against the US
dollar by approximately 4% to 7%. We hedged our substantial French franc
exposure, especially dur-ing the first quarter when European currencies were
under pressure, a strategy that proved beneficial to the Portfolio. We also
hedged half of our Japanese yen exposure during the period.
Relating to sector performance, we benefited from consolidation in the financial
industry by emphasizing banks and insurers in the Portfolio. Stocks that were
among our top ten holdings during the six-month period were AXA-UAP (+79%) and
Commercial Union PLC (+33%). Another major financial holding was Credit Suisse
Group, which gained 55%. Another stock which helped performance was News
Corporation, Ltd. in Australia, which rose by 46% as a result of the outstanding
success of the movie 'Titanic.' Groupe Danone S.A. in France also performed well
(+61%), underpinned by its ongoing restructuring and the consumption recovery in
Europe. We reduced the Fund's cash position from 4.5% of net assets to 2.9%
during the period.
Investment Outlook
During the six months ended April 30, 1998, the performance of the different
regions of the equity markets continued to diverge. While the Western markets
hit new highs, the Asian markets showed negative returns. Asset allocators
shifted funds out of bonds into equities on the assumption that the worst of the
Asian crisis was over and the shock would have relatively minor impact on
corporate earnings.
European equity markets have continued to outperform this year in an environment
of stable interest rates, which continue to play a major role in performance. In
addition, economic gains are expected to come from EMU membership. We recently
increased our European weighting to a neutral position. Our positive outlook on
Continental Europe is based on expectations for continued strong liquidity flows
into equities, the region's enhanced relative earnings growth, ongoing
restructuring and expectations of US dollar strength relative to the core
European currencies.
Our cautious stance toward Japanese equities proved beneficial to the Portfolio,
since the market has given up nearly all the gains achieved in the first weeks
of 1998. After the recent stimulus package, which came in ahead of expectations
but disappointed in its content, we are skeptical about both the commitment and
the ability of the government to address Japan's deep-rooted problems. We are
concerned over the lack of restructuring at the government and corporate level,
weak economy and lack of earnings growth at a time when major bankruptcies are
likely unsettling to investors. In light of the social unrest having unfolded
and the economic reforms put in place by the International Monetary Fund and
Asian governments, we maintain our underweight exposure to the region.
Latin America, being a non-EAFE region, offers attractive growth, acceleration
and deepening of structural reform and compelling valuations, in our view.
Despite the region's attractive fundamentals, Latin America has not proven to be
sheltered from movements in the emerging Asian markets. We will trim our
exposure to a more modest overweight position in the coming months in favor of
Europe.
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/ Christophe Velay
Christophe Velay
Vice President and Portfolio Manager
June 9, 1998
Effective March 31, 1998, Christophe Velay is primarily responsible for the
day-to-day management of Merrill Lynch Consults International Portfolio. Mr.
Velay has been Portfolio Manager of Merrill Lynch Bank (Suisse) S.A. since 1986.
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 Period Covered % Return
Total Return ----------------------------------------------------------------
Year Ended 3/31/98 +17.44%
----------------------------------------------------------------
Five Years Ended 3/31/98 + 9.58
----------------------------------------------------------------
Inception (9/14/92) through 3/31/98 + 9.40
----------------------------------------------------------------
================================================================================
Recent 12 Month 3 Month Since Inception
Performance Total Return Total Return Total Return
Results* ----------------------------------------------------------------
ML Consults
International
Portfolio +17.51% +12.59% +66.27%
----------------------------------------------------------------
*Total investment returns are based on changes in net asset
values for the periods shown, and assume reinvestment of all
dividends and capital gains distributions at net asset value
on the ex-dividend date. The Fund's inception date is 9/14/92.
2 & 3
<PAGE>
Merrill Lynch Consults International Portfolio, April 30, 1998
SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
Percent
LATIN Shares Held/ Value of Net
AMERICA Industries Face Amount Investments Cost (Note 1a) Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Argentina Banking 78,662 Banco de Galicia y Buenos Aires S.A. (ADR)* $ 1,289,214 $ 1,922,303 2.0%
--------------------------------------------------------------------------------------------------------------------
Oil & Related 40,000 YPF S.A. (ADR)* 1,019,077 1,395,000 1.4
--------------------------------------------------------------------------------------------------------------------
Total Investments in Argentina 2,308,291 3,317,303 3.4
====================================================================================================================================
Brazil Electric Utilities 20,000,000 Centrais Eletricas Brasileiras S.A.
--Eletrobras 'B' (Preferred) 1,031,193 891,861 0.9
14,000,000 Companhia Energetica de Minas
Gerais S.A. (CEMIG) (Preferred) 418,580 679,255 0.7
3,500,000 Light-Servicios de Electricidade S.A. 1,369,142 1,407,466 1.4
----------- ----------- -----
2,818,915 2,978,582 3.0
--------------------------------------------------------------------------------------------------------------------
Mining 44,000 Companhia Vale do Rio Doce S.A. (Preferred) 1,037,298 1,038,552 1.1
US$ 44,000 Companhia Vale do Rio Doce S.A., 0.00% due
12/31/2049 (a) 0 0 0.0
----------- ----------- -----
1,037,298 1,038,552 1.1
--------------------------------------------------------------------------------------------------------------------
Steel 45,800 Usinas Siderurgicas de Minas Gerais S.A.
--Usiminas (Preferred) 500,967 300,288 0.3
--------------------------------------------------------------------------------------------------------------------
Total Investments in Brazil 4,357,180 4,317,422 4.4
====================================================================================================================================
Chile Diversified Holdings 68,200 Quinenco S.A. (ADR)* 1,227,600 703,312 0.7
--------------------------------------------------------------------------------------------------------------------
Total Investments in Chile 1,227,600 703,312 0.7
====================================================================================================================================
Mexico Building &
Construction 200,000 Cemex, S.A. de C.V. 'B' 729,639 1,201,980 1.2
75,000 Empresas ICA Sociedad Controladora,
S.A. de C.V. (ADR)* 593,368 932,812 0.9
----------- ----------- -----
1,323,007 2,134,792 2.1
--------------------------------------------------------------------------------------------------------------------
Retail Stores 653,000 Cifra, S.A. de C.V. 'V' 745,247 1,140,403 1.2
--------------------------------------------------------------------------------------------------------------------
Total Investments in Mexico 2,068,254 3,275,195 3.3
====================================================================================================================================
Total Investments in Latin America 9,961,325 11,613,232 11.8
====================================================================================================================================
PACIFIC
BASIN
====================================================================================================================================
Australia Publishing 200,000 News Corporation, Ltd. (Ordinary) 749,840 1,339,484 1.4
--------------------------------------------------------------------------------------------------------------------
Total Investments in Australia 749,840 1,339,484 1.4
====================================================================================================================================
Hong Kong Diversified Holdings 80,000 Hutchison Whampoa Ltd. 771,884 494,688 0.5
200,000 Shanghai Industrial Holdings Ltd. 1,068,267 685,489 0.7
----------- ----------- -----
1,840,151 1,180,177 1.2
--------------------------------------------------------------------------------------------------------------------
Multi-Industry 180,000 Swire Pacific Ltd. (Class A) 963,812 899,268 0.9
--------------------------------------------------------------------------------------------------------------------
Total Investments in Hong Kong 2,803,963 2,079,445 2.1
====================================================================================================================================
Japan Apparel 100,000 Toray Industries, Inc. 589,725 539,231 0.5
--------------------------------------------------------------------------------------------------------------------
Banking 100,000 Sanwa Bank, Ltd. 1,479,742 886,095 0.9
--------------------------------------------------------------------------------------------------------------------
Electrical Equipment 200,000 Hitachi, Ltd. 1,733,261 1,437,443 1.5
--------------------------------------------------------------------------------------------------------------------
Electronics 100,000 Fujitsu Ltd. 1,326,973 1,170,100 1.2
125,000 Matsushita Electric Co., Ltd. 2,005,662 2,006,968 2.0
----------- ----------- -----
3,332,635 3,177,068 3.2
--------------------------------------------------------------------------------------------------------------------
Machinery 115,000 Makita Corporation 1,768,907 1,254,165 1.3
--------------------------------------------------------------------------------------------------------------------
Merchandising 30,000 Ito-Yokado Co., Ltd. 1,512,366 1,556,347 1.6
--------------------------------------------------------------------------------------------------------------------
Pharmaceuticals 50,000 Banyu Pharmaceutical Co., Ltd. 742,065 647,531 0.7
60,000 Yamanouchi Pharmaceutical Co., Ltd. 1,399,475 1,422,296 1.4
----------- ----------- -----
2,141,540 2,069,827 2.1
--------------------------------------------------------------------------------------------------------------------
Printing 50,000 Dai Nippon Printing Co., Ltd. 913,065 852,014 0.9
--------------------------------------------------------------------------------------------------------------------
Real Estate 90,000 Mitsui Fudosan Co., Ltd. 944,852 823,387 0.8
--------------------------------------------------------------------------------------------------------------------
Tire & Rubber 20,000 Bridgestone Corporation 451,734 457,437 0.5
--------------------------------------------------------------------------------------------------------------------
Total Investments in Japan 14,867,827 13,053,014 13.3
====================================================================================================================================
South Korea Natural Gas Utilities 7,670 Seoul City Gas Co., Ltd. 619,724 177,530 0.2
--------------------------------------------------------------------------------------------------------------------
Total Investments in South Korea 619,724 177,530 0.2
====================================================================================================================================
Total Investments in the Pacific Basin 19,041,354 16,649,473 17.0
====================================================================================================================================
WESTERN
EUROPE
====================================================================================================================================
France Banking & Financial 21,000 Compagnie Financiere de Paribas S.A. 2,079,070 2,235,194 2.3
--------------------------------------------------------------------------------------------------------------------
Foods 15,000 Groupe Danone S.A. 2,320,416 3,542,384 3.6
--------------------------------------------------------------------------------------------------------------------
Health/Personal Care 8,000 Sanofi S.A. 690,834 969,915 1.0
--------------------------------------------------------------------------------------------------------------------
Insurance 35,000 AXA-UAP 2,389,651 4,109,498 4.2
--------------------------------------------------------------------------------------------------------------------
Oil & Related 25,000 Elf Aquitaine S.A. 1,883,948 3,280,447 3.3
--------------------------------------------------------------------------------------------------------------------
Total Investments in France 9,363,919 14,137,438 14.4
====================================================================================================================================
Germany Apparel 14,000 Adidas-Salomon AG 2,430,705 2,321,628 2.4
- ------------------------------------------------------------------------------------------------------------------------------------
Banking 12,000 Deutsche Bank AG 819,810 923,746 0.9
--------------------------------------------------------------------------------------------------------------------
Chemicals 50,000 BASF AG 1,415,399 2,226,867 2.3
--------------------------------------------------------------------------------------------------------------------
Utilities 31,000 VEBA AG 2,063,699 2,049,387 2.1
--------------------------------------------------------------------------------------------------------------------
Total Investments in Germany 6,729,613 7,521,628 7.7
====================================================================================================================================
</TABLE>
4 & 5
<PAGE>
Merrill Lynch Consults International Portfolio, April 30, 1998
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
====================================================================================================================================
WESTERN Percent
EUROPE Shares Value of Net
(concluded) Industries Held Investments Cost (Note 1a) Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Hungary Communications 32,500 +Magyar TavKozlesi Reszvenytarsasag (ADR)* $ 606,125 $ 958,750 1.0%
--------------------------------------------------------------------------------------------------------------------
Total Investments in Hungary 606,125 958,750 1.0
====================================================================================================================================
Italy Banking 100,000 Credito Italiano S.p.A. 140,795 525,766 0.5
--------------------------------------------------------------------------------------------------------------------
Broadcasting--Media 250,000 Mediaset S.p.A. 1,105,533 1,637,724 1.7
--------------------------------------------------------------------------------------------------------------------
Natural Gas Utilities 140,000 Italgas S.p.A. 476,677 648,313 0.7
--------------------------------------------------------------------------------------------------------------------
Telecommunications 200,000 Telecom Italia S.p.A. 604,450 1,496,541 1.5
--------------------------------------------------------------------------------------------------------------------
Tires & Rubber 460,000 Pirelli S.p.A. 1,019,656 1,519,695 1.5
--------------------------------------------------------------------------------------------------------------------
Total Investments in Italy 3,347,111 5,828,039 5.9
====================================================================================================================================
Netherlands Electronics 30,000 Philips Electronics N.V. 1,540,158 2,643,564 2.7
--------------------------------------------------------------------------------------------------------------------
Total Investments in the Netherlands 1,540,158 2,643,564 2.7
====================================================================================================================================
Portugal Electric Utilities 80,120 EDP-Electricidade de Portugal, S.A. 1,413,465 2,052,013 2.1
--------------------------------------------------------------------------------------------------------------------
Total Investments in Portugal 1,413,465 2,052,013 2.1
====================================================================================================================================
Spain Oil & Related 50,000 Repsol S.A. 1,567,118 2,739,681 2.8
--------------------------------------------------------------------------------------------------------------------
Total Investments in Spain 1,567,118 2,739,681 2.8
====================================================================================================================================
Sweden Household Appliances 30,000 Electrolux AB 1,365,220 2,792,032 2.8
--------------------------------------------------------------------------------------------------------------------
Pharmaceuticals 60,000 Astra AB 'A' 1,070,799 1,233,148 1.3
--------------------------------------------------------------------------------------------------------------------
Total Investments in Sweden 2,436,019 4,025,180 4.1
====================================================================================================================================
Switzerland Banking 15,000 Credit Suisse Group (Registered) 1,554,232 3,301,100 3.4
--------------------------------------------------------------------------------------------------------------------
Foods 1,400 Nestle S.A. (Registered) 1,564,148 2,716,906 2.8
--------------------------------------------------------------------------------------------------------------------
Pharmaceuticals 1,866 Novartis AG (Registered) 997,359 3,086,149 3.1
--------------------------------------------------------------------------------------------------------------------
Total Investments in Switzerland 4,115,739 9,104,155 9.3
====================================================================================================================================
Turkey Automobiles 2,000,000 Tofas Oto Ticaret A.S. 335,412 336,202 0.3
--------------------------------------------------------------------------------------------------------------------
Household Appliances 3,000,000 Arcelik A.S. 395,968 336,202 0.3
--------------------------------------------------------------------------------------------------------------------
Total Investments in Turkey 731,380 672,404 0.6
====================================================================================================================================
United Kingdom Automobile Parts 400,000 Lucas Varity PLC 1,331,705 1,786,085 1.8
--------------------------------------------------------------------------------------------------------------------
Beverage 216,000 Diageo PLC 1,620,705 2,569,557 2.6
--------------------------------------------------------------------------------------------------------------------
Entertainment & Leisure 320,000 Rank Group PLC 2,323,790 2,069,119 2.1
--------------------------------------------------------------------------------------------------------------------
Insurance 200,000 Commercial Union PLC 2,432,662 3,739,250 3.8
--------------------------------------------------------------------------------------------------------------------
Machinery 100,000 Siebe PLC (Ordinary) 805,619 2,232,189 2.3
--------------------------------------------------------------------------------------------------------------------
Natural Gas Utilities 500,058 BG PLC 2,005,156 2,669,413 2.7
--------------------------------------------------------------------------------------------------------------------
Retail 150,000 Boots Company PLC 1,317,274 2,321,994 2.4
--------------------------------------------------------------------------------------------------------------------
Total Investments in the United Kingdom 11,836,911 17,387,607 17.7
====================================================================================================================================
Total Investments in Western Europe 43,687,558 67,070,459 68.3
====================================================================================================================================
<CAPTION>
Face
Amount Short-Term Securities
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Commercial Paper** US$ 74,000 General Motors Acceptance Corp., 5.56%
due 5/01/1998 74,000 74,000 0.1
--------------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term Securities 74,000 74,000 0.1
====================================================================================================================================
Total Investments $72,764,237 95,407,164 97.2
===========
Unrealized Appreciation on Forward Foreign Exchange Contracts*** 83,241 0.1
Other Assets Less Liabilities 2,645,986 2.7
----------- -----
Net Assets $98,136,391 100.0%
=========== =====
====================================================================================================================================
</TABLE>
+ Non-income producing security.
(a) Received through a bonus issue from Companhia Vale do Rio Doce S.A. As of
April 30, 1998, the bonds have not commenced trading, and the coupon rate
has not been determined.
* 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.
See Notes to Financial Statements.
*** Forward foreign exchange contracts sold as of April 30, 1998 were as
follows:
Unrealized
Foreign Expiration Appreciation
Currency Sold Date (Note 1c)
- --------------------------------------------------------------------------------
(Yen)632,600,000 October 1998 $83,241
- --------------------------------------------------------------------------------
Total Unrealized Appreciation on Forward Foreign
Exchange Contracts (US$ Commitment--$5,000,000) $83,241
=======
- --------------------------------------------------------------------------------
6 & 7
<PAGE>
Merrill Lynch Consults International Portfolio, April 30, 1998
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of April 30, 1998
====================================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$72,764,237) (Note 1a) ............. $95,407,164
Unrealized appreciation on forward foreign exchange contracts (Note 1c) .... 83,241
Cash ....................................................................... 340
Foreign cash (Note 1b) ..................................................... 535,514
Receivables:
Securities sold .......................................................... $ 2,728,622
Dividends ................................................................ 391,370 3,119,992
------------
Prepaid registration fees and other assets (Note 1f) ....................... 18,691
------------
Total assets ............................................................... 99,164,942
------------
====================================================================================================================================
Liabilities: Payables:
Beneficial interest redeemed ............................................. 708,477
Distributor (Note 2) ..................................................... 82,137
Investment adviser (Note 2) .............................................. 61,602
Administration fee (Note 2) .............................................. 20,534
Commissions .............................................................. 17,263 890,013
------------
Accrued expenses and other liabilities ..................................... 138,538
------------
Total liabilities .......................................................... 1,028,551
------------
====================================================================================================================================
Net Assets: Net assets ................................................................. $ 98,136,391
============
====================================================================================================================================
Net Assets Common shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized .................................... $ 746,299
Paid-in capital in excess of par ........................................... 76,138,635
Accumulated investment loss--net ........................................... (1,194,548)
Accumulated realized capital losses on investments and
foreign currency transactions--net ........................................ (279,753)
Unrealized appreciation on investments and
foreign currency transactions--net ....................................... 22,725,758
Net assets--Equivalent to $13.15 per share based on 7,462,992 ------------
shares of beneficial interest outstanding ................................ $ 98,136,391
============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended April 30, 1998
====================================================================================================================================
<S> <C> <C> <C>
Investment Dividends (net of $77,200 foreign withholding tax) ......................... $ 1,335,510
Income Interest and discount earned ............................................... 56,900
(Notes 1d ------------
& 1e): Total income ............................................................... 1,392,410
------------
====================================================================================================================================
Expenses: Account maintenance and distribution fees (Note 2) ......................... $ 500,874
Investment advisory fees (Note 2) .......................................... 375,676
Administration fees (Note 2) ............................................... 125,219
Accounting services (Note 2) ............................................... 85,067
Custodian fees ............................................................. 75,413
Stamp tax fee .............................................................. 47,504
Professional fees .......................................................... 30,529
Transfer agent fees (Note 2) ............................................... 15,604
Registration fees (Note 1f) ................................................ 12,233
Trustees' fees ............................................................. 12,107
Printing and shareholder reports ........................................... 10,805
Pricing fees ............................................................... 2,737
Other ...................................................................... 9,880
------------
Total expenses ............................................................. 1,303,648
------------
Investment income--net ..................................................... 88,762
------------
====================================================================================================================================
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net ......................................................... (2,034,028)
(Loss) On Foreign currency transactions--net ....................................... 1,754,290 (279,738)
Investments & ------------
Foreign Change in unrealized appreciation/depreciation on:
Currency Investments--net ......................................................... 13,255,828
Transactions Foreign currency transactions--net ....................................... (750,171) 12,505,657
Net (Notes ------------ ------------
1b, 1c, 1e Net realized and unrealized gain on investments
& 3): and foreign currency transactions ........................................ 12,225,919
------------
Net Increase in Net Assets Resulting from Operations ....................... $ 12,314,681
============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
8 & 9
<PAGE>
Merrill Lynch Consults International Portfolio, April 30, 1998
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: April 30, 1998 Oct. 31, 1997
====================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ........................................................ $ 88,762 $ 1,201,465
Realized gain (loss) on investments and foreign
currency transactions--net .................................................. (279,738) 4,831,529
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net .................................... 12,505,657 9,042,849
------------ ------------
Net increase in net assets resulting from operations .......................... 12,314,681 15,075,843
------------ ------------
====================================================================================================================================
Dividends & Investment income--net ........................................................ (2,515,681) --
Distributions In excess of investment income--net ........................................... -- (5,862,557)
to Shareholders Realized gain on investments--net ............................................. (3,930,011) (4,613,274)
(Note 1g): Net decrease in net assets resulting ------------ ------------
from dividends and distributions to shareholders ............................ (6,445,692) (10,475,831)
------------ ------------
====================================================================================================================================
Beneficial Net decrease in net assets derived from
Interest beneficial interest transactions ............................................ (15,683,165) (71,570,166)
Transactions ------------ ------------
(Note 4):
====================================================================================================================================
Net Assets: Total decrease in net assets .................................................. (9,814,176) (66,970,154)
Beginning of period ........................................................... 107,950,567 174,920,721
------------ ------------
End of period* ................................................................ $ 98,136,391 $107,950,567
============ ============
====================================================================================================================================
* Undistributed (accumulated) investment
income (loss)--net ......................................................... $ (1,194,548) $ 1,232,371
============ ============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the
Six Months
Ended
April 30, For the Year Ended October 31,
---------------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1998+ 1997+ 1996+ 1995+ 1994+
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ........ $ 12.37 $ 12.09 $ 12.28 $ 12.83 $ 11.74
Operating -------- -------- --------- -------- --------
Performance: Investment income (loss)--net ........... .01 .10 (.05) (.05) (.12)
Realized and unrealized gain (loss)
on investments and foreign
currency transactions--net .............. 1.52 .97 .76 (.18) 1.26
-------- -------- --------- -------- --------
Total from investment operations ............ 1.53 1.07 .71 (.23) 1.14
-------- -------- --------- -------- --------
Less dividends and distributions:
Investment income--net .................. (.29) -- -- -- --
In excess of investment income--net ..... -- (.44) (.44) -- --
Realized gain on investments--net ....... (.46) (.35) (.46) (.32) (.05)
-------- -------- --------- -------- --------
Total dividends and distributions ........... (.75) (.79) (.90) (.32) (.05)
-------- -------- --------- -------- --------
Net asset value, end of period .............. $ 13.15 $ 12.37 $ 12.09 $ 12.28 $ 12.83
======== ======== ========= ======== ========
===================================================================================================================================
Total Based on net asset value per share .......... 13.43%++ 9.26% 5.93% (1.68%) 9.74%
Investment ======== ======== ========= ======== ========
Return:
===================================================================================================================================
Ratios Expenses .................................... 2.60%* 2.44% 2.37% 2.35% 2.27%
to Average ======== ======== ========= ======== ========
Net Assets:
Investment income (loss)--net ............... .18%* .84% (.42%) (.41%) (.56%)
======== ======== ========= ======== ========
===================================================================================================================================
Supplemental Net assets, end of period (in thousands) .... $ 98,136 $107,951 $ 174,921 $197,077 $272,487
Data: ======== ======== ========= ======== ========
Portfolio turnover .......................... 21.77% 28.62% 38.16% 17.31% 24.64%
======== ======== ========= ======== ========
Average commission rate paid+++ ............. $ .0080 $ .0076 $ .0010 -- --
======== ======== ========= ======== ========
===================================================================================================================================
</TABLE>
* Annualized.
+ Based on average shares outstanding.
++ 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.
10 & 11
<PAGE>
Merrill Lynch Consults International Portfolio, April 30, 1998
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.
o 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.
o 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.
o Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
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.
o 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) Prepaid registration fees--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.
12 & 13
<PAGE>
Merrill Lynch Consults International Portfolio, April 30, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
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,
1998, MLFD earned $500,874 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 $18,449 in commissions on the execution of
portfolio security transactions for the Fund for the six months ended April 30,
1998.
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, 1998 were $21,031,930 and $40,001,014, respectively.
Net realized gains (losses) for the six months ended April 30, 1998 and net
unrealized gains (losses) as of April 30, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains (Losses)
- --------------------------------------------------------------------------------
Long-term investments ......................... $(2,034,028) $ 22,642,927
Foreign currency transactions ................. (133,065) (410)
Forward foreign exchange
contracts ..................................... 1,887,355 83,241
----------- ------------
Total ......................................... $ (279,738) $ 22,725,758
=========== ============
- --------------------------------------------------------------------------------
As of April 30, 1998, net unrealized appreciation for Federal income tax
purposes aggregated $22,642,927, of which $27,000,387 related to appreciated
securities and $4,357,460 related to depreciated securities. The aggregate cost
of investments at April 30, 1998 for Federal income tax purposes was
$72,764,237.
4. Beneficial Interest Transactions:
Transactions in shares of beneficial interest were as follows:
- --------------------------------------------------------------------------------
For the Six Months Ended Dollar
April 30, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................... 896,442 $ 10,668,000
Shares issued to shareholders
in reinvestment of dividends
and distributions .............................. 208,277 2,345,194
---------- ------------
Total issued ................................... 1,104,719 13,013,194
---------- ------------
Shares redeemed ................................ (2,369,271) (28,696,359)
---------- ------------
Net decrease ................................... (1,264,552) $(15,683,165)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For the Year Ended Dollar
October 31, 1997 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................... 1,189,803 $ 15,058,939
- --------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of dividends
and distributions .............................. 829,254 9,652,518
---------- ------------
Total issued ................................... 2,019,057 24,711,457
- --------------------------------------------------------------------------------
Shares redeemed ................................ (7,759,006) (96,281,623)
---------- ------------
Net decrease ................................... (5,739,949) $(71,570,166)
========== ============
- --------------------------------------------------------------------------------
5. Commitments:
At April 30, 1998, the Fund entered into forward exchange contracts, in addition
to the contracts listed on the Schedule of Investments, under which it had
agreed to sell various foreign currencies with an approximate value of
$2,632,000.
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
Christophe Velay, Vice President
Gerald M. Richard, Treasurer
Lawrence A. Rogers, Secretary
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
14 & 15
<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. 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--4/98
[RECYCLE LOGO] Printed on post-consumer recycled paper
