Merrill Lynch International Investment Funds Audited Annual Report ...

Chairman’s Letter
Merrill Lynch International Investment Funds
Annual Report and Accounts
31 December 2006
In the year to 31 December 2006, the Company’s total net assets rose in value from US$ 40 billion to US$ 67.8 billion. This increase
included net subscriptions to the Company’s Funds of US$ 17.3 billion.
The first six months of 2006 proved to be a turbulent period for equity investors. Global stock markets turned downwards from May
to June due to a sharp rise in investor risk aversion. This was primarily driven by concerns about the inflation outlook. Since then, the
markets have rallied and most have ended the year higher in US dollar terms. Gains proved strongest in Europe and emerging
markets, with Japan underperforming as solid economic growth and strong corporate earnings failed to translate into gains.
Commodities in particular, experienced high levels of volatility with an increase early in the year followed by a significant mid-year
pullback. Oil prices set a new all-time high in the summer before falling back by the year end. Utility, telecoms and materials stocks
were the strongest performers. The utility sector was a notable beneficiary of robust merger and acquisition activity, with markets
rewarding both acquirers and their targets. The technology sector was the laggard: several high-profile tech names reported a
difficult environment.
In contrast to stocks, bond prices experienced a more modest advance with the yield on the 10-year US Treasury starting the year at
4.39% and ending at 4.71% (yields move in the opposite direction of prices, therefore a fall). In this environment, the Lehman Brothers
Aggregate Bond Index posted a 4.33% return for the year in US dollar terms.
I am pleased to inform you that the merger of the MLIM Group with BlackRock was successfully completed on 29 September 2006.
As a result, a new independent company operating under the BlackRock name has been created. The BlackRock Group currently
employs over 4,000 staff who provide investment management services for institutional and retail clients. The BlackRock Group had
in excess of US 1.1 trillion of assets under management at 31 December 2006. The Company is managed by investment management
companies which form part of the BlackRock Group.
A full list of the changes to the Fund range and all other changes made to the Company since beginning of this year can be found in
the Notes at the end of this document.
Robert Fairbairn
Chairman
18 April 2007
2 Merrill Lynch International Investment Funds