Merrill Lynch International Investment Funds Audited Annual Report ...

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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
Board of Directors Management and Administration continued Chairman Robert Fairbairn Chairman EMEA Australia BlackRock Investment Management (UK) Limited (formerly known as Merrill Lynch Investment Managers Limited) 33 King William Street, London EC4R 9AS, UK Directors Donald Burke (appointed 20 June 2006)* Managing Director BlackRock Investment Management, LLC (formerly known as Merrill Lynch Investment Managers L.P.) 800 Scudders Mill Road Plainsboro, New Jersey 08536, USA James Charrington Managing Director, Head of Retail Business, EMEA Pacific BlackRock Investment Management (UK) Limited (formerly known as Merrill Lynch Investment Managers Limited) 33 King William Street, London EC4R 9AS, UK Frank P. Le Feuvre Managing Director, BlackRock (Channel Islands) Limited (formerly known as Merrill Lynch Investment Managers (Channel Islands) Limited), Forum House, Grenville Street, St. Helier, Jersey JE1 0BR, Channel Islands Emilio Novela Berlin Independent Director Paseo de la Castellana 40 bis – 4a Planta, 28046 Madrid, Spain 6 Geoffrey Radcliffe Director and General Manager BlackRock (Luxembourg) S.A. (formerly known as Merrill Lynch Investment Managers (Luxembourg) S.A.) 6D route de Trèves, L-2633 Senningerberg, Grand-Duchy of Luxembourg Jean-Claude Wolter Avocat Honoraire 232, rue Edith Cavell, B-1180 Brussels, Belgium Management and Administration Management Company BlackRock (Luxembourg) S.A. 6D route de Trèves, L-2633 Senningerberg, Grand-Duchy of Luxembourg Investment Advisers BlackRock Financial Management, Inc., (from 29 September 2006) 40 East 52nd Street, New York, NY 10022, USA BlackRock International, Ltd (from 29 September 2006) 40 Torphichen Street, Edinburgh EH3 8JB, Scotland BlackRock Investment Management, LLC 800 Scudders Mill Road, Plainsboro, NJ 08536, USA Investment Manager and Principal Distributor BlackRock (Channel Islands) Limited Forum House, Grenville Street, St. Helier, Jersey JE1 0BR, Channel Islands Investor Services Written Enquiries: BlackRock Investment Management (UK) Limited, c/o BlackRock (Luxembourg) S.A., P.O. Box 1058, L1010 Luxembourg All other enquiries: Telephone: + 44 207 743 3300, Fax: + 44 207 743 1143 Custodian The Bank of New York Europe Limited, Luxembourg Branch Aerogolf Center, 1A Hoehenhof, L-1736 Senningerberg, Grand-Duchy of Luxembourg Fund Accountant The Bank of New York Europe Limited, Luxembourg Branch Aerogolf Center, 1A Hoehenhof, L-1736 Senningerberg, Grand-Duchy of Luxembourg Transfer Agent and Registrar J.P. Morgan Bank Luxembourg S.A. 6C, route de Trèves, L-2633 Senningerberg, Grand-Duchy of Luxembourg Independent Auditor PricewaterhouseCoopers S.à r.l. Réviseur d’entreprises 400 route d’Esch, L-1471 Luxembourg Legal Advisers In Luxembourg Linklaters Loesch Avenue John F. Kennedy 35, L-1855 Luxembourg In India Nishith Desai Associates 93-B Mittal Court, Nariman Point Mumbai-400 021, India Listing Agent J.P. Morgan Bank Luxembourg S.A. 6C, route de Trèves, L-2633 Senningerberg, Grand-Duchy of Luxembourg Paying Agents A list of Paying Agents is to be found on page 220 Registered Office from 24 March 2006 Aerogolf Center, 1A Hoehenhof, L-1736 Senningerberg, Grand-Duchy of Luxembourg until 24 March 2006 6D route de Trèves, L-2633 Senningerberg, Grand-Duchy of Luxembourg BlackRock Investment Management (UK) Limited 33 King William Street, London EC4R 9AS, UK *approved 18 July 2006 by CSSF; Andrew Donohue resigned effective 30 April 2006 Audited Annual Report and Accounts 3
Page 1: Merrill Lynch International Investm
Page 6 and 7: Statement of Net Assets as at 31 De
Page 18 and 19: Three Year Asset Summary as at 31 D
Page 36 and 37: Statement of Operations and Changes
Page 44 and 45: Statement of Changes in Shares Outs
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Statement of Changes in Shares Outs
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Page 58 and 59:
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Page 62 and 63:
Asian Dragon Fund Portfolio of Inve
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Asian Tiger Bond Fund Portfolio of
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Conservative Allocation Fund (Euro)
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Conservative Allocation Fund (Euro)
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Conservative Allocation Fund (US Do
Page 72 and 73:
Conservative Allocation Fund (US Do
Page 74 and 75:
Continental European Flexible Fund
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Emerging Europe Fund continued Port
Page 78 and 79:
Emerging Markets Fund continued Por
Page 80 and 81:
Emerging Markets Bond Fund continue
Page 82 and 83:
Euro Bond Fund Portfolio of Investm
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Euro Bond Fund continued Portfolio
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Euro Corporate Bond Fund (1) Portfo
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Euro Corporate Bond Fund (1) contin
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Euro Reserve Fund continued Portfol
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Euro Short Duration Bond Fund (1) c
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European Fund Portfolio of Investme
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European Focus Fund Portfolio of In
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European Growth Fund continued Sect
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European Opportunities Fund continu
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Global Allocation Fund Portfolio of
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Global Allocation Fund continued Po
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Page 108 and 109:
Page 110 and 111:
Global Allocation Fund continued Wr
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Global Allocation Fund continued Sw
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Global Bond Fund (Euro) continued P
Page 116 and 117:
Global Bond Fund (US Dollar) Portfo
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Global Bond Fund (US Dollar) contin
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Global Capital Securities Absolute
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Global Capital Securities Absolute
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Global Dynamic Equity Fund (1) cont
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Page 128 and 129:
Page 130 and 131:
Page 132 and 133:
Global Enhanced Equity Yield Fund (
Page 134 and 135:
Global Enhanced Equity Yield Fund (
Page 136 and 137:
Global Equity Fund (1) Portfolio of
Page 138 and 139:
Global Focus Fund Portfolio of Inve
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Global Fundamental Value Fund conti
Page 142 and 143:
Global High Yield Bond Fund (Euro)
Page 144 and 145:
Global High Yield Bond Fund (Euro)
Page 146 and 147:
Global Opportunities Fund continued
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Global SmallCap Fund continued Port
Page 150 and 151:
India Fund (1) Portfolio of Investm
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Japan Opportunities Fund (1) Portfo
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Latin American Fund Portfolio of In
Page 156 and 157:
New Energy Fund Portfolio of Invest
Page 158 and 159:
Pacific Equity Fund Portfolio of In
Page 160 and 161:
Sterling Reserve Fund Portfolio of
Page 162 and 163:
Strategic Allocation Fund (Euro) co
Page 164 and 165:
Strategic Allocation Fund (US Dolla
Page 166 and 167:
Strategic Allocation Fund (US Dolla
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UK Focus Fund Portfolio of Investme
Page 170 and 171:
US Basic Value Fund Portfolio of In
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US Dollar Core Bond Fund Portfolio
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US Dollar Core Bond Fund continued
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US Dollar Core Bond Fund continued
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US Dollar High Yield Bond Fund Port
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US Dollar High Yield Bond Fund cont
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US Dollar Low Duration Bond Fund Po
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US Dollar Low Duration Bond Fund co
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US Dollar Reserve Fund Portfolio of
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US Flexible Equity Fund Portfolio o
Page 190 and 191:
US Focused Value Fund Portfolio of
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US Government Mortgage Fund continu
Page 194 and 195:
US Opportunities Fund Portfolio of
Page 196 and 197:
US SmallCap Value Fund Portfolio of
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World Bond Fund Portfolio of Invest
Page 200 and 201:
World Bond Fund continued Open Forw
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World Energy Fund continued Sector
Page 204 and 205:
World Financials Fund continued Pur
Page 206 and 207:
World Gold Fund continued Sector Br
Page 208 and 209:
World Income Fund Portfolio of Inve
Page 210 and 211:
World Income Fund continued Portfol
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World Mining Fund Portfolio of Inve
Page 214 and 215:
World Technology Fund Portfolio of
Page 216 and 217:
Notes to the Financial Statements c
Page 218 and 219:
Page 220 and 221:
Page 222 and 223:
General Information Current Prospec
Page 224:
Auditor’s Report to the Sharehold
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