MERRILL LYNCH
CONSULTS
INTERNATIONAL
PORTFOLIO
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
April 30, 1999
<PAGE>
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
Worldwide Investments as of April 30, 1999
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Oil & Related ......................................................... 11.7%
Electronics ........................................................... 9.6
Banking ............................................................... 7.2
Insurance ............................................................. 6.9
Foods ................................................................. 6.6
Pharmaceuticals ....................................................... 5.2
Telecommunications .................................................... 4.9
Tires & Rubber ........................................................ 3.9
Retail ................................................................ 3.8
Beverage .............................................................. 3.8
Percent of
Ten Largest Equity Holdings Net Assets
Credit Suisse Group (Registered Shares) ............................... 4.3%
Telecom Italia SpA .................................................... 4.3
Axa ................................................................... 3.8
Diageo PLC ............................................................ 3.8
Fujitsu Limited ....................................................... 3.8
LVMH (Louis Vuitton Moet Hennessy) .................................... 3.5
Total SA 'B' .......................................................... 3.5
Nestle SA (Registered Shares) ......................................... 3.5
BP Amoco PLC .......................................................... 3.4
Novartis AG (Registered Shares) ....................................... 3.2
<PAGE>
Merrill Lynch Consults International Portfolio, April 30, 1999
DEAR SHAREHOLDER
For the six month-period ended April 30, 1999, Merrill Lynch Consults
International Portfolio had a total return of +7.63% compared to +15.28% for the
unmanaged benchmark Morgan Stanley Capital International Europe, Australia and
Far East Index. Although a number of factors contributed to the Fund's relative
underperformance, the primary factor was our strategy of holding investments in
Latin America through January as these markets continued to deteriorate, while
underweighting in emerging Asia as the region recovered sharply from the
financial crisis of last fall. For example, the unmanaged Hang Seng Index in
Hong Kong has gained 33.21% since October 31, 1998, whereas European stocks as
measured by the Dow Jones Stoxx 50 Index returned +15.41% over the same period.
To a lesser extent, our relative underweight in Japan over the last two months
of recovery in that market was also detrimental to the Fund's relative
performance, with the Nikkei Index rising to 14.31% in US dollar terms since the
beginning of the year.
Security selection contributed to improving relative performance, as
demonstrated by the returns produced by some of our top holdings in Europe and
Japan during the six-month period. These included: Telecom Italia SpA, +63.7%;
Credit Swiss Group, +45.3%; Diageo PLC, +11.24%; LVMH (Louis Vuitton Moet
Hennessy), +61.6%; Sony Corporation, +50.7%; and Fujitsu Limited, +64.9%.
Hedging of the Japanese yen exposure proved mainly neutral to performance during
the six-month period.
Investment Environment
The past six months saw a dramatic change in investor perceptions and in
economic outlook throughout the world. Following the global financial crisis
experienced during August, September and October, US and European markets
rebounded sharply on monetary easing and on economic growth in the United
States, which was much stronger than expected. Stock prices were also supported
by the prevalence of a low inflation environment as economies recovered and the
unprecedented pace of corporate mergers and acquisitions.
Latin America continued to suffer through January on the devaluation of the
real, and although both markets and currencies have recovered sharply in the
last two months, the region's economic condition is far from healthy. Many
countries are experiencing or fast approaching recession and continued financial
disturbances. On the other hand, the Asian recovery surprised the investment
community. Investors have been anticipating an improvement in the Asian economy
which, although showing positive signs, has yet to prove its sustainability. The
problems of excess industrial capacity and weak financial systems are still
latent. We have consciously maintained a limited exposure to these more volatile
sectors of the world equity markets, recognizing that while a sharp rise can
produce underperformance, a repeat of 1998's decline is conceivable in this
still unstable region.
In Japan we believe we may be finally seeing the long-awaited turnaround, and
investors are anticipating future improvements. Part of the rise in the Nikkei
Index can be explained by purchases of Japanese securities by domestic financial
companies for the March 31 fiscal year-end.
Portfolio Strategy
Although a correction is possible, we gradually increased our weight in Japan
and used weakness to add to established positions. Our strategy is to select
companies that are either competitive on a global scale or that have started
restructuring to focus on improving return on equity. We partially hedge the
currency exposure in Japan, to reduce this element of volatility from the
Portfolio.
We continued to overweight Europe where we found solid companies, competitive on
a regional or global scale, at reasonable valuations and with attractive
risk/return characteristics. Throughout the six-month period ended April 30,
1999, we followed a stock selection strategy in Europe based on participating in
three major trends shaping the economic and corporate fields, with country
allocation a secondary consideration. First, companies have been undergoing
industrial combinations and reorganizations to compete in a global environment
and in a more open Europe. For example, Electrolux AB is in the middle of
restructuring programs to increase operational efficiency; Endesa SA is reducing
its workforce, acquiring regional affiliates to reduce costs, restructuring the
balance sheet and repurchasing shares; and Koninklijke (Royal) Philips
Electronics NV is half way through a four-year plan to reduce manufacturing
sites and divest non-core businesses. Second, demographic changes that increase
demand for financial and healthcare services are on the rise. In the financial
sector, we own Axa in France, Credit Suisse Group in Switzerland, and Allied
Zurich PLC and Prudential Corporation PLC in the United Kingdom. Our favorite
beneficiaries of the demand for health care are Novartis AG, Sanofi SA and Glaxo
Well come PLC. All have diversified pharma ceutical portfolios and superior
research. Boots Company PLC, a pharmaceutical retailer, is also likely to
benefit from this trend, in our opinion. Finally, select countries are still
experiencing strength in consumption. We favored France, where
Pinault-Printemps-Redoute SA is the retailing leader and LVMH (Louis Vuitton
Moet Hennessy) experiences continued demand for its luxury goods in Europe and
globally. Both companies have high-quality, aggressive manage-ments focused on
shareholders.
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
next report to shareholders.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
/s/ Christophe Velay
Christophe Velay
Vice President and Portfolio Manager
June 10, 1999
================================================================================
After more than 20 years of service, Arthur Zeikel recently retired as Chairman
of Merrill Lynch Asset Management, L.P. (MLAM). Mr. Zeikel served as President
of MLAM from 1977 to 1997 and as Chairman since December 1997. Mr. Zeikel is one
of the country's most respected leaders in asset management and presided over
the growth of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500 billion. Mr.
Zeikel will remain on Merrill Lynch Consults International Portfolio's Board of
Trustees. We are pleased to announce that Terry K. Glenn has been elected
President and Trustee of the Fund. Mr. Glenn has held the position of Executive
Vice President of MLAM since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Trustees in wishing him
well in his retirement from Merrill Lynch and are pleased that he will continue
as a member of the Fund's Board of Trustees.
================================================================================
2 & 3
<PAGE>
Merrill Lynch Consults International Portfolio, April 30, 1999
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
<TABLE>
<CAPTION>
Period Covered % Return
=================================================================================================
<S> <C>
Year Ended 3/31/99 -9.26%
- -------------------------------------------------------------------------------------------------
Five Years Ended 3/31/99 +3.59
- -------------------------------------------------------------------------------------------------
Inception (9/14/92) through 3/31/99 +6.31
- -------------------------------------------------------------------------------------------------
</TABLE>
Recent Performance Results*
<TABLE>
<CAPTION>
12 Month 3 Month Since Inception
Total Return Total Return Total Return
=================================================================================================
<S> <C> <C> <C>
ML Consults International Portfolio -7.76% +3.56% +53.38%
- -------------------------------------------------------------------------------------------------
</TABLE>
* 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
commenced operations on 9/14/92.
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 Oil & Related 25,000 YPF Sociedad Anonima (ADR)* $ 640,679 $ 1,050,000 2.3%
--------------------------------------------------------------------------------------------------------------------
Total Investments in Argentina 640,679 1,050,000 2.3
====================================================================================================================================
Brazil Mining US$ 44,000 Companhia Vale do Rio Doce SA, 0% due
12/31/2049 (a) 0 0 0.0
--------------------------------------------------------------------------------------------------------------------
Total Investments in Brazil 0 0 0.0
====================================================================================================================================
Total Investments in Latin America 640,679 1,050,000 2.3
====================================================================================================================================
PACIFIC
BASIN
====================================================================================================================================
Australia Telecommunications 53,000 +Telstra Corporation Limited 290,994 287,879 0.6
--------------------------------------------------------------------------------------------------------------------
Total Investments in Australia 290,994 287,879 0.6
====================================================================================================================================
Japan Electrical Equipment 140,000 Hitachi Ltd. 1,260,692 1,023,732 2.2
--------------------------------------------------------------------------------------------------------------------
Electronics 100,000 Fujitsu Limited 1,326,973 1,714,885 3.8
14,500 Sony Corporation 1,174,991 1,355,765 3.0
----------- ----------- ---
2,501,964 3,070,650 6.8
--------------------------------------------------------------------------------------------------------------------
Merchandising 19,000 Ito-Yokado Co., Ltd. 1,004,019 1,167,883 2.6
--------------------------------------------------------------------------------------------------------------------
Tires & Rubber 40,000 Bridgestone Corp. 905,159 1,073,375 2.3
--------------------------------------------------------------------------------------------------------------------
Total Investments in Japan 5,671,834 6,335,640 13.9
====================================================================================================================================
Total Investments in the Pacific Basin 5,962,828 6,623,519 14.5
====================================================================================================================================
WESTERN
EUROPE
====================================================================================================================================
France Consumer--Goods 6,000 LVMH (Louis Vuitton Moet Hennessy) 1,295,543 1,611,732 3.5
--------------------------------------------------------------------------------------------------------------------
Foods 5,300 Danone 879,482 1,419,209 3.1
--------------------------------------------------------------------------------------------------------------------
Health/Personal Care 8,000 Sanofi SA 690,834 1,255,686 2.7
--------------------------------------------------------------------------------------------------------------------
Insurance 13,400 Axa 951,487 1,733,109 3.8
--------------------------------------------------------------------------------------------------------------------
Oil & Related 11,500 Total SA 'B' 1,177,202 1,577,439 3.5
--------------------------------------------------------------------------------------------------------------------
Retail 4,000 Pinault-Printemps-Redoute SA 679,990 664,675 1.5
--------------------------------------------------------------------------------------------------------------------
Total Investments in France 5,674,538 8,261,850 18.1
====================================================================================================================================
</TABLE>
4 & 5
<PAGE>
Merrill Lynch Consults International Portfolio, April 30, 1999
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
WESTERN Percent
EUROPE Shares Held/ Value of Net
(concluded) Industries Face Amount Investments Cost (Note 1a) Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Germany Banking 20,200 HypoVereinsbank $ 1,568,650 $ 1,319,126 2.9%
--------------------------------------------------------------------------------------------------------------------
Total Investments in Germany 1,568,650 1,319,126 2.9
====================================================================================================================================
Italy Natural Gas Utilities 140,000 Italgas SpA 476,677 623,821 1.4
--------------------------------------------------------------------------------------------------------------------
Telecommunications 186,000 Telecom Italia SpA 1,430,439 1,982,404 4.3
--------------------------------------------------------------------------------------------------------------------
Tires & Rubber 240,000 Pirelli SpA 525,494 734,106 1.6
--------------------------------------------------------------------------------------------------------------------
Total Investments in Italy 2,432,610 3,340,331 7.3
====================================================================================================================================
Netherlands Broadcast & Publishing 28,000 Wolters Kluwer NV 'A' 1,372,740 1,220,970 2.7
--------------------------------------------------------------------------------------------------------------------
Chemicals 28,400 Akzo Nobel NV 1,170,897 1,285,003 2.8
--------------------------------------------------------------------------------------------------------------------
Electronics 15,000 Koninklijke (Royal) Philips Electronics NV 931,927 1,293,894 2.8
--------------------------------------------------------------------------------------------------------------------
Publishing 30,000 VNU NV 1,026,754 1,216,102 2.7
--------------------------------------------------------------------------------------------------------------------
Total Investments in the Netherlands 4,502,318 5,015,969 11.0
====================================================================================================================================
Spain Oil & Related 69,000 +Repsol, SA 703,900 1,124,656 2.5
--------------------------------------------------------------------------------------------------------------------
Utilities--Electric 40,000 Endesa, SA 1,085,251 890,749 1.9
--------------------------------------------------------------------------------------------------------------------
Total Investments in Spain 1,789,151 2,015,405 4.4
====================================================================================================================================
Sweden Household Appliances 70,000 Electrolux AB 'B' 658,054 1,422,375 3.1
--------------------------------------------------------------------------------------------------------------------
Telecommunications & 37,000 Telefonaktiebolaget LM Ericsson 'B' 962,800 973,858 2.2
Equipment
--------------------------------------------------------------------------------------------------------------------
Total Investments in Sweden 1,620,854 2,396,233 5.3
====================================================================================================================================
Switzerland Banking 10,000 Credit Suisse Group (Registered Shares) 1,006,065 1,987,255 4.3
--------------------------------------------------------------------------------------------------------------------
Foods 850 Nestle SA (Registered Shares) 949,661 1,576,370 3.5
--------------------------------------------------------------------------------------------------------------------
Pharmaceuticals 1,000 Novartis AG (Registered Shares) 534,490 1,466,956 3.2
--------------------------------------------------------------------------------------------------------------------
Total Investments in Switzerland 2,490,216 5,030,581 11.0
====================================================================================================================================
United Kingdom Airlines 180,000 British Airways PLC 1,160,375 1,427,265 3.1
--------------------------------------------------------------------------------------------------------------------
Beverage 148,500 Diageo PLC 1,746,720 1,715,435 3.8
--------------------------------------------------------------------------------------------------------------------
Financial Services 75,000 Allied Zurich PLC 1,025,269 1,025,167 2.2
--------------------------------------------------------------------------------------------------------------------
Insurance 100,000 Prudential Corporation PLC 1,416,009 1,427,265 3.1
--------------------------------------------------------------------------------------------------------------------
Natural Gas Utilities 160,058 BG PLC 530,588 898,706 2.0
--------------------------------------------------------------------------------------------------------------------
Oil & Related 82,000 BP Amoco PLC 1,237,089 1,556,516 3.4
--------------------------------------------------------------------------------------------------------------------
Pharmaceuticals 31,000 Glaxo Wellcome PLC 983,256 917,346 2.0
--------------------------------------------------------------------------------------------------------------------
Retail 80,000 Boots Company PLC 702,070 1,059,380 2.3
--------------------------------------------------------------------------------------------------------------------
Total Investments in the United Kingdom 8,801,376 10,027,080 21.9
====================================================================================================================================
Total Investments in Western Europe 28,879,713 37,406,575 81.9
====================================================================================================================================
<CAPTION>
SHORT-TERM
SECURITIES Issue
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Commercial Paper** $850,000 Ford Motor Credit Company, 4.95%
due 5/03/1999 849,766 849,766 1.8
====================================================================================================================================
Total Investments in Short-Term Securities 849,766 849,766 1.8
====================================================================================================================================
Total Investments $36,332,986 45,929,860 100.5
===========
Unrealized Depreciation on Forward Foreign Exchange Contracts*** (39,757) (0.1)
Liabilities in Excess of Other Assets (194,704) (0.4)
------------ -----
Net Assets $ 45,695,399 100.0%
============ =====
====================================================================================================================================
</TABLE>
+ Non-income producing security.
(a) Received through a bonus issue from Companhia Vale do Rio Doce SA.
As of April 30, 1999, 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 reflects the discount rate paid at the time of purchase by the
Fund.
*** Forward foreign exchange contracts sold as of April 30, 1999 were as
follows:
-------------------------------------------------------------------------
Unrealized
Foreign Expiration Depreciation
Currency Sold Date (Note 1c)
-------------------------------------------------------------------------
(Yen) 360,810,000 June 1999 $(39,757)
-------------------------------------------------------------------------
Total Unrealized Depreciation on Forward Foreign
Exchange Contracts (US$ Commitment--$3,000,000) $(39,757)
========
-------------------------------------------------------------------------
See Notes to Financial Statements.
6 & 7
<PAGE>
Merrill Lynch Consults International Portfolio, April 30, 1999
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of April 30, 1999
=================================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$36,332,986) (Note 1a) ......... $ 45,929,860
Cash ................................................................... 409
Foreign cash (Note 1b) ................................................. 365
Receivables:
Dividends ........................................................... $ 268,397
Beneficial interest sold ............................................ 25,000 293,397
-----------
Prepaid registration fees and other assets (Note 1f) ................... 15,935
------------
Total assets ........................................................... 46,239,966
------------
=================================================================================================================================
Liabilities: Unrealized depreciation on forward foreign exchange
contracts (Note 1c) .................................................. 39,757
Payables:
Beneficial interest redeemed ........................................ 280,040
Distributor (Note 2) ................................................ 38,045
Investment adviser (Note 2) ......................................... 28,534
Administration fee (Note 2) ......................................... 9,511 356,130
-----------
Accrued expenses ....................................................... 148,680
------------
Total liabilities ...................................................... 544,567
------------
=================================================================================================================================
Net Assets: Net assets ............................................................. $ 45,695,399
============
=================================================================================================================================
Net Assets Common shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized ................................ $ 383,013
Paid-in capital in excess of par ....................................... 34,361,551
Undistributed investment income--net ................................... 181,407
Undistributed realized capital gains on investments
and foreign currency transactions--net ............................... 1,216,969
Unrealized appreciation on investments and foreign
currency transactions--net ........................................... 9,552,459
------------
Net assets--Equivalent to $11.93 per share based
on 3,830,131 shares of beneficial interest outstanding ............... $ 45,695,399
============
=================================================================================================================================
</TABLE>
See Notes to Financial Statements
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended April 30, 1999
=================================================================================================================================
<S> <C> <C> <C>
Investment Dividends (net of $34,914 foreign withholding tax) ..................... $ 271,497
Income Interest and discount earned ........................................... 41,068
(Notes 1d & 1e): ------------
Total income ........................................................... 312,565
------------
=================================================================================================================================
Expenses: Account maintenance and distribution fees (Note 2) ..................... $ 265,699
Investment advisory fees (Note 2) ...................................... 199,274
Stamp tax fee .......................................................... 70,289
Administration fees (Note 2) ........................................... 66,425
Professional fees ...................................................... 39,023
Custodian fees ......................................................... 34,339
Printing and shareholder reports ....................................... 22,957
Registration fees (Note 1f) ............................................ 15,251
Transfer agent fees (Note 2) ........................................... 14,717
Trustees' fees ......................................................... 14,507
Accounting services (Note 2) ........................................... 11,004
Pricing fees ........................................................... 2,825
Other .................................................................. 3,024
-----------
Total expenses ......................................................... 759,334
------------
Investment loss--net ................................................... (446,769)
------------
=================================================================================================================================
Realized & Realized gain (loss) from:
Unrealized Investments--net .................................................... 2,785,282
Gain (Loss) Foreign currency transactions--net .................................. (476,403) 2,308,879
On Investments -----------
& Foreign Change in unrealized appreciation/depreciation on:
Currency Investments--net .................................................... 1,362,889
Transactions--Net Foreign currency transactions--net .................................. 571,570 1,934,459
(Notes 1b, 1c, ----------- ------------
1e & 3): Net realized and unrealized gain on investments and
foreign currency transactions ....................................... 4,243,338
------------
Net Increase in Net Assets Resulting from Operations ................... $ 3,796,569
============
=================================================================================================================================
</TABLE>
See Notes to Financial Statements.
8 & 9
<PAGE>
Merrill Lynch Consults International Portfolio, April 30, 1999
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: April 30, 1999 Oct. 31, 1998
============================================================================================================================
<S> <C> <C> <C>
Operations: Investment income (loss)--net .................................... $ (446,769) $ 351,802
Realized gain on investments and foreign currency
transactions--net .............................................. 2,308,879 1,396,964
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net ............. 1,934,459 (2,602,101)
------------ -------------
Net increase (decrease) in net assets resulting from operations... 3,796,569 (853,335)
------------ -------------
============================================================================================================================
Dividends & Investment income--net ........................................... (929,175) (1,584,173)
Distributions to In excess of investment income--net .............................. -- (931,508)
Shareholders Realized gain on investments--net ................................ -- (3,930,011)
(Note 1g): ------------ -------------
Net decrease in net assets resulting from dividends
and distributions to shareholders .............................. (929,175) (6,445,692)
------------ -------------
============================================================================================================================
Beneficial Interest Net decrease in net assets derived from beneficial
Transactions interest transactions .......................................... (17,613,792) (40,209,743)
(Note 4): ------------ -------------
============================================================================================================================
Net Assets: Total decrease in net assets ..................................... (14,746,398) (47,508,770)
Beginning of period .............................................. 60,441,797 107,950,567
------------ -------------
End of period* ................................................... $ 45,695,399 $ 60,441,797
============ =============
============================================================================================================================
*Undistributed investment income--net ............................. $ 181,407 $ 1,557,351
============ =============
============================================================================================================================
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios For the
have been derived from information provided Six Months
in the financial statements. Ended For the Year Ended October 31,
April 30, ------------------------------------------------
Increase (Decrease) in Net Asset Value: 1999+ 1998+ 1997+ 1996+ 1995+
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ........ $ 11.27 $ 12.37 $ 12.09 $ 12.28 $ 12.83
Operating ------- ------- -------- -------- --------
Performance: Investment income (loss)--net ............ (.10) .05 .10 (.05) (.05)
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ........................ .95 (.40) .97 .76 (.18)
------- ------- -------- -------- --------
Total from investment operations ............ .85 (.35) 1.07 .71 (.23)
------- ------- -------- -------- --------
Less dividends and distributions:
Investment income--net ................... (.19) (.18) -- -- --
In excess of investment income--net ...... -- (.11) (.44) (.44) --
Realized gain on investments--net ........ -- (.46) (.35) (.46) (.32)
------- ------- -------- -------- --------
Total dividends and distributions ........... (.19) (.75) (.79) (.90) (.32)
------- ------- -------- -------- --------
Net asset value, end of period .............. $ 11.93 $ 11.27 $ 12.37 $ 12.09 $ 12.28
======= ======= ======== ======== ========
=================================================================================================================================
Total Investment Based on net asset value per share .......... 7.63%++ (2.79%) 9.26% 5.93% (1.68%)
Return: ======= ======= ======== ======== ========
=================================================================================================================================
Ratios to Average Expenses .................................... 2.86%* 2.70% 2.44% 2.37% 2.35%
Net Assets: ======= ======= ======== ======== ========
Investment income (loss)--net ............... (1.68%)* .39% .84% (.42%) (.41%)
======= ======= ======== ======== ========
=================================================================================================================================
Supplemental Net assets, end of period (in thousands) .... $45,695 $60,442 $107,951 $174,921 $197,077
Data: ======= ======= ======== ======== ========
Portfolio turnover .......................... 29.93% 48.78% 28.62% 38.16% 17.31%
======= ======= ======== ======== ========
=================================================================================================================================
</TABLE>
* Annualized.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
10 & 11
<PAGE>
Merrill Lynch Consults International Portfolio, April 30, 1999
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. The Fund's financial statements are prepared in accordance
with generally accepted accounting principles which may require the use of
management accruals and estimates. 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 or purchased are valued at the last sale
price in the case of exchange-traded options. In the case of options traded in
the over-the-counter market, valuation is the last asked price (options written)
or the last bid price (options purchased). 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 sub stantially 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
12 & 13
<PAGE>
Merrill Lynch Consults International Portfolio, April 30, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
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 the "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of Merrill Lynch
Group, Inc., 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
subagreement with the Distributor, Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("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,
1999, MLFD earned $265,699 under the Plan, all of which was paid to MLPF&S
pursuant to the agreement.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co.,
acts as the Fund's transfer agent.
In addition, MLPF&S received $9,279 in commissions on the execution of portfolio
security transactions for the Fund for the six months ended April 30, 1999.
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, the Investment Adviser (including their affiliated companies), FDS, PFD,
and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term
securities, for the six months ended April 30, 1999 were $15,400,419 and
$31,432,968, respectively.
Net realized gains (losses) for the six months ended April 30, 1999 and net
unrealized gains (losses) as of April 30, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains (Losses)
- --------------------------------------------------------------------------------
Long-term investments .................... $ 2,785,282 $ 9,596,874
Foreign currency transactions ............ 31,205 (4,658)
Forward foreign exchange
contracts ................................ (507,608) (39,757)
----------- -----------
Total .................................... $ 2,308,879 $ 9,552,459
=========== ===========
- -------------------------------------------------------------------------------
As of April 30, 1999, net unrealized appreciation for Federal income tax
purposes aggregated $9,596,874, of which $10,545,355 related to appreciated
securities and $948,481 related to depreciated securities. The aggregate cost of
investments at April 30, 1999 for Federal income tax purposes was $36,332,986.
4. Beneficial Interest Transactions:
Transactions in shares of beneficial interest were as follows:
- --------------------------------------------------------------------------------
For the Six Months Ended Dollar
April 30, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 134,494 $ 1,503,543
Shares issued to shareholders
in reinvestments of dividends
and distributions ........................ 76,975 865,198
---------- ------------
Total issued ............................. 211,469 2,368,741
Shares redeemed .......................... (1,742,078) (19,982,533)
---------- ------------
Net decrease ............................. (1,530,609) $(17,613,792)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For the Year Ended Dollar
October 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 856,874 $ 10,569,673
Shares issued to shareholders
in reinvestments of dividends
and distributions ........................ 537,886 6,056,591
---------- ------------
Total issued ............................. 1,394,760 16,626,264
Shares redeemed .......................... (4,761,563) (56,836,007)
---------- ------------
Net decrease ............................. (3,366,803) $(40,209,743)
========== ============
- --------------------------------------------------------------------------------
5. Capital Loss Carryforward:
At October 31, 1998, the Fund had a net capital loss carryforward of
approximately $1,092,000, all of which expires in 2006. This amount will be
available to offset like amounts of any future taxable gains.
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Arthur Zeikel, Trustee
Alan J. Albert, Senior Vice President
Christophe Velay, Vice President
Donald C. Burke, Vice President and Treasurer
Robert Harris, Secretary
- --------------------------------------------------------------------------------
Gerald M. Richard, Treasurer of Merrill Lynch Consults International Portfolio
has recently retired. His colleagues at Merrill Lynch Asset Management, L.P.
join the Fund's Board of Trustees in wishing Mr. Richard well in his retirement.
- --------------------------------------------------------------------------------
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
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--4/99
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