-
BlackRock Global Funds,Société d’investissement à capital
variable (SICAV) under Luxembourg Law
Report for Investors in Switzerland
Some funds of the Company are not approved for distribution to
non-qualified investors in or from Switzerland. Therefore, no
information in relation with these sub-funds is mentioned in this
report. However, the investors’ attention is drawn to the fact that
certain information contained in this report is expressed on a
consolidated basis and, as a consequence, contains also information
concerning the sub-funds which are not approved for distribution to
non-qualified investors in or from Switzerland.
31 August 2017
Annual Report and Audited AccountsBlackRock Global Funds
(BGF)R.C.S. Luxembourg: B.6317
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[1]Annual Report and Audited Accounts
Contents
Subscriptions may be made only on the basis of the current
Prospectus and relevant KIID for the Funds, together with the most
recent annual report and audited accounts and interim report and
unaudited accounts. Copies are available from the Investor Services
Centre, the Transfer Agent, the Management Company or any of the
Distributors.
Board of Directors 2
Management and Administration 2
General Information 3
Chairman’s Letter to Shareholders 5
Investment Adviser’s Report 7
Directors’ Report 14
Report on Remuneration 18
Statement of Net Assets 21
Three Year Summary of Net Asset Values 27
Statement of Operations and Changes in Net Assets 55
Statement of Changes in Shares Outstanding 68
Portfolio of InvestmentsASEAN Leaders Fund 92Asia Pacific Equity
Income Fund 94Asian Dragon Fund 97Asian Growth Leaders Fund 99Asian
Tiger Bond Fund 101China Fund 108Continental European Flexible Fund
110Emerging Europe Fund 112Emerging Markets Bond Fund 114Emerging
Markets Corporate Bond Fund 124Emerging Markets Equity Income Fund
127Emerging Markets Fund 130Emerging Markets Local Currency Bond
Fund 132Euro Bond Fund 137Euro Corporate Bond Fund 151Euro Reserve
Fund 160Euro Short Duration Bond Fund 162Euro-Markets Fund
172European Equity Income Fund 174European Focus Fund 176European
Fund 178European High Yield Bond Fund 180European Special
Situations Fund 186European Value Fund 189Fixed Income Global
Opportunities Fund 191Flexible Multi-Asset Fund 261Global
Allocation Fund 276Global Corporate Bond Fund 290Global Dynamic
Equity Fund 306Global Enhanced Equity Yield Fund 315Global Equity
Income Fund 319Global Government Bond Fund 321
Global High Yield Bond Fund 332Global Inflation Linked Bond Fund
352Global Long-Horizon Equity Fund 357Global Multi-Asset Income
Fund 359Global Opportunities Fund 419Global SmallCap Fund 421India
Fund 429Japan Flexible Equity Fund 431Japan Small & MidCap
Opportunities Fund 433Latin American Fund 435Natural Resources
Growth & Income Fund 437New Energy Fund 439North American
Equity Income Fund 441Pacific Equity Fund 443Renminbi Bond Fund
445Strategic Global Bond Fund 448Swiss Small & MidCap
Opportunities Fund(1) 464United Kingdom Fund 465US Basic Value Fund
466US Dollar Core Bond Fund 468US Dollar High Yield Bond Fund 498US
Dollar Reserve Fund 515US Dollar Short Duration Bond Fund 517US
Flexible Equity Fund 531US Government Mortgage Fund 533US Growth
Fund 546US Small & MidCap Opportunities Fund 547World
Agriculture Fund 549World Bond Fund 551World Energy Fund 566World
Financials Fund 568World Gold Fund 570World Healthscience Fund
572World Mining Fund 574World Real Estate Securities Fund 576World
Technology Fund 578
Notes to the Financial Statements 580
Audit Report 592
Appendix I – Share Classes (Unaudited) 594
Appendix II – Global Exposure and Leverage (Unaudited) 597
Appendix III – Eligibility for French “Plan d’Epargne en
Actions” (“PEA”) (Unaudited) 601
Appendix IV – Supplementary Information (Unaudited) 602
Appendix V – Total Expense Ratio 647
(1) Fund closed to subscriptions, see Note 1, for further
details.
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[2] BlackRock Global Funds (BGF)
Paul Freeman, Chairman (appointed effective 17 July
2017)Nicholas C.D. Hall, ex-Chairman (resigned effective 31 May
2017)Geoffrey D. RadcliffeFrancine KeiserBarry O’Dwyer (appointed
effective 17 October 2016)Robert Hayes (appointed effective 17
October 2016)Alexander C. Hoctor-Duncan (resigned effective 6
October 2016)Bruno Rovelli (resigned effective 6 October 2016)Frank
P. Le Feuvre (resigned effective 29 September 2017)
(1) All Directors of BlackRock Global Funds are non-executive
Directors.(2) Geoffrey D. Radcliffe, Barry O’Dwyer and Robert Hayes
are employees
of the BlackRock Group (of which the Management Company,
Investment Advisers and Principal Distributor are part), and Paul
Freeman is a former employee of the BlackRock Group.
(3) Francine Keiser is an independent Director.(4) Geoffrey D.
Radcliffe was fulfilling Chairman duties from 31 May 2017 to 16
July 2017.
Management and Administration
Management CompanyBlackRock (Luxembourg) S.A.35A, avenue J.F.
Kennedy, L-1855 Luxembourg,Grand Duchy of Luxembourg
Investment AdvisersBlackRock Financial Management, Inc.Park
Avenue Plaza, 55 East 52nd Street, New York, NY 10055, USA
BlackRock Investment Management, LLC100 Bellevue Parkway,
Wilmington, Delaware 19809, USA
BlackRock Investment Management (UK) Limited12 Throgmorton
Avenue, London EC2N 2DL, UK
BlackRock Singapore Limited# 18-01 Twenty Anson, 20 Anson Road,
Singapore, 079912
Sub-Investment AdvisersBlackRock Asset Management North Asia
Limited16/F Champion Tower, 3 Garden Road, Central, Hong Kong
BlackRock Japan Co. Limited1-8-3 Marunouchi, Chiyoda-ku, Tokyo
100-8217, Japan
BlackRock Investment Management (Australia) LimitedLevel 26, 101
Collins Street, Melbourne 3000, Australia
Principal DistributorBlackRock Investment Management (UK)
Limited12 Throgmorton AvenueLondon EC2N 2DLUK
DepositaryThe Bank of New York Mellon (International) Limited
Luxembourg Branch2-4, rue Eugène RuppertL-2453 LuxembourgGrand
Duchy of Luxembourg
AdministratorThe Bank of New York Mellon (International) Limited
Luxembourg Branch2-4, rue Eugène RuppertL-2453 LuxembourgGrand
Duchy of Luxembourg
Transfer Agent and RegistrarJ.P. Morgan Bank Luxembourg
S.A.European Bank & Business Center6, route de Trèves, Building
CL-2633 SenningerbergGrand Duchy of Luxembourg
AuditorPricewaterhouseCoopers, Société coopérative2, rue Gerhard
MercatorL-2182 LuxembourgGrand Duchy of Luxembourg
Legal AdvisersLinklaters LLP35 avenue John F. Kennedy, L-1855
LuxembourgGrand Duchy of Luxembourg
Listing AgentJ.P. Morgan Bank Luxembourg S.A.European Bank &
Business Center6, route de Trèves, Building CL-2633
SenningerbergGrand Duchy of Luxembourg
Securities Lending Agent BlackRock Advisors (UK) Limited 12
Throgmorton Avenue London EC2N 2DL UK
Paying AgentsA list of Paying Agents is to be found on pages 3
and 4.
Registered Office2-4, rue Eugène RuppertL-2453 LuxembourgGrand
Duchy of Luxembourg
EnquiriesIn the absence of other arrangements, enquiries
regarding the Company should be addressed as follows:Written
enquiries:BlackRock Investment Management (UK) Limitedc/o BlackRock
(Luxembourg) S.A.P.O. Box 1058L-1010 LuxembourgGrand Duchy of
Luxembourg
All other enquiries:Telephone: + 44 207 743 3300Fax: + 44 207
743 1143Website: www.blackrockinternational.comEmail:
[email protected]
Board of Directors(1)(2)(3)(4) Management and Administration
continued
Board of DirectorsManagement and Administration
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[3]Annual Report and Audited Accounts
Current ProspectusThe Company’s Prospectus, the Articles of
Association, the Key Investor Information Documents (KIID), the
Annual Report, the Unaudited Interim Report and Accounts as well as
a detailed list of investments purchased and sold for any Fund in
the financial year are available free of charge from the
Representative in Switzerland.
Representatives
The representative in Switzerland is BlackRock Asset Management
Switzerland Limited, Bahnhofstrasse 39, 8001 Zurich,
Switzerland.
Authorised StatusThe Company is an Undertaking for Collective
Investment in Transferable Securities (“UCITS”) under the
Luxembourg law of 17 December 2010 as amended. Regulatory consents
have been obtained or appropriate notifications have been made for
the distribution of shares of the Company’s Funds in the umbrella
in the following countries:
Austria, Czech Republic, Denmark, Finland, France, Germany,
Gibraltar, Hungary, Iceland, Ireland, Luxembourg, Netherlands,
Norway, Poland, Slovakia, Spain, Sweden and the United Kingdom.
Regulatory consents have been obtained or appropriate
notifications have been made for the distribution of shares of
certain Funds in the umbrella in the following countries:
Belgium, Brunei, Chile, China, Greece, Hong Kong, Italy, Japan,
Korea, Macau, Portugal, Singapore, Switzerland and Taiwan.
Shares of certain Funds in the umbrella may also be offered in
Malta, Mauritius and Singapore by private placement.
The Company is duly registered with the Comisión Nacional de
Mercado de Valores in Spain under number 140.
Paying Agents
General Information
AustriaRaiffeisen BankInternational AGAm Stadtpark 91030
Vienna
BelgiumJ.P. Morgan Chase Bank Brussels Branch1 Boulevard du Roi
Albert IIBrusselsB1210 - Belgium
Czech RepublicUniCredit Bank Czech Republic and Slovakia,
A.S.Prague 4 - Michle, Zeletavská 1525/1,140 92, Czech Republic
FranceCACEIS Bank1/3, Place Valhubert 75013,Paris, France
Luxembourg(Central Paying Agent)J.P. Morgan BankLuxembourg S.A.
European Bank & Business Center,6, route de Trèves, Building
CL-2633 SenningerbergGrand Duchy of Luxembourg
SwitzerlandState Street Bank International GmbH,Munich, Zurich
branchBeethovenstrasse 19,CH-8027 Zurich,Switzerland
ItalyAllfunds Bank S.A. Succursale di MilanoVia Santa Margherita
720121 Milan
Banca Monte dei Paschi di Siena S.p.A.Piazza Salimbeni 353100
Siena
Banca Sella Holding S.p.A.Piazza Gaudenzio Sella 113900
Biella
BNP Paribas SecuritiesServicesSuccursale di MilanoVia Ansperto
520123 Milan
Italy continuedRBC Investor Services Bank S.A.Succursale di
MilanoVia Vittor Pisani, 26I-20121 Milan
Société Générale Securities Services S.p.A.Via Benigno Crespi,
19/A, MAC II20159 Milan
State Street Bank GmbH – Succursale ItaliaRegistered OfficeVia
Ferrante Aporti, 1020125 Milan
PolandDubiński Fabrycki Jeleński i Wspólnicy,ul. Zielna
37,00-108 WarszawaPoland
General Information
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[4] BlackRock Global Funds (BGF)
General Information continued
Paying Agents continuedUnited KingdomJ.P. Morgan Trustee and
Depositary Company Limited UK Paying Agency3 Lochside ViewEdinburgh
United KingdomEH12 9DH
GermanyJ.P. Morgan AGCIB/Investor Services - Trustee &
FiduciaryTaunustor 1 (Taunus Turm)60310 Frankfurt am
MainGermany
GibraltarHassans International Law Firm57/63 Line Wall
RoadGibraltar
IrelandBlackRock Investment Management (Dublin) Limited, 1st
Floor,2 Ballsbridge Park,Dublin 4,D04 YW83,Ireland
Mauritius Subsidiary
Directors Mauritian Auditor to the SubsidiaryCouldip Basanta
Lala PricewaterhouseCoopersGeoffrey D. Radcliffe 18 Cybercity,
Ebène, Réduit 72201Dilshaad Rajabalee (appointed effective 10 April
2017) Republic of MauritiusRobert Hayes (appointed effective 31 May
2017)Paul Freeman (appointed effective 29 September 2017)Kapildeo
Joory (resigned effective 10 April 2017)Nicholas C.D. Hall
(resigned effective 31 May 2017) Frank P. Le Feuvre (resigned
effective 29 September 2017)
Indian Investment Adviser Investment ManagerDSP BlackRock
Investment Managers Private Limited BlackRock Investment Management
(UK) LimitedMafatlal Chambers, 10th Floor 12 Throgmorton
AvenueNariman Point London EC2N 2DLMumbai - 400 021 United
KingdomIndia
Mauritian AdministratorInternational Financial Services
LimitedIFS Court, Bank StreetTwentyEight, CybercityEbène
72201Republic of Mauritius
Publication of Prices and Notices to ShareholdersNotices are
sent to registered shareholders and (when legally required)
published in such newspapers as decided by the Directors and in the
Recueil des Sociétés et Associations in Luxembourg. The previous
Dealing Day’s prices for shares may be obtained during business
hours from the local Investor Service Centre and are also available
from the BlackRock website. They will also be published in such
countries as required under applicable law and at the discretion of
the Directors in a number of newspapers worldwide. The Company
cannot accept any responsibility for error or delay in the
publication or non-publication of prices. Historic dealing prices
for all shares are available from the Administrator or local
Investor Services Centre.
Purchases and SalesA detailed list of investments purchased and
sold for any Fund during the year is available upon request, free
of charge, from the Registered office, or the offices of the
Representatives as mentioned on the previous page.
Disclosure PolicyDetails of month end holdings and valuations
for all BlackRock Global Funds will be made available upon request
from the Investor Services Centre to any BlackRock Global Funds
shareholder no earlier than 10 business days after a given month
end. BlackRock Global Funds reserves the right to require
shareholders to sign an appropriate non-disclosure document prior
to providing such information.
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The information stated in this report is historical and not
necessarily indicative of future performance.
[5]Annual Report and Audited Accounts
Chairman’s Letter to Shareholders1 September 2016 to 31 August
2017
Dear Shareholder,
I am writing to update you on the activities of BlackRock Global
Funds (‘BGF’) over the twelve months to 31 August 2017.
The Funds’ performance is covered in more detail in the separate
Investment Adviser’s report in which you will see that equity
markets have moved significantly higher over the period, driven by
more positive sentiment, higher economic growth and stronger
company earnings.
Bond markets have been significantly more volatile as inflation
expectations have revived and the prospect of higher interest rates
has moved closer. Yields on the 10-year US treasury bond are around
0.5% higher than they were a year ago
(https://www.bloomberg.com/quote/USGG10YR:IND), but this is below
their peak in March of this year.
Although the election of Donald Trump as US President in
November 2016 appeared to be the catalyst both for a rally in
global stock markets and some early pull-back in global bond
markets, earnings and economic data have proved more influential
over the longer term, particularly as Trump’s election promises on
tax cuts and infrastructure spending proved slow to come to
fruition. Economic strength in China, following further government
stimulus has also played a role.
The Federal Reserve responded to improving growth and employment
numbers with two quarter point rises – in March and June – in the
Fed Funds rate, taking the level to 1.2%. Markets weathered this
withdrawal of stimulus. At the time of writing, the Federal Reserve
is signaling one more rate rise in 2017 and then a rise to 2% in
2018 and 3% in 2019. The weakening of the US Dollar since the start
of 2017 (https://www.bloomberg.com/quote/DXY:CUR) has given the
central bank more room to manoeuvre.
Investors have been quixotic in their preferences over the year.
At times of safety, they have once again sought the stability of
defensive companies, with stable, predictable earnings, cashflow
and dividends that have dominated since the credit crisis. However,
at times of greater confidence – and in the latter part of the
period under review – they have sought out more economically
sensitive areas, such as financials or resources, which should be
greater beneficiaries of a re-inflationary environment.
In geographic terms, the US dominated for the early part of the
period, led higher by a narrow group of large cap technology names.
For international investors, returns were also turbo-charged by the
strong US Dollar. The economic recovery was also more assured.
However, US markets lost their lead in the second half, as
investors started to question high valuations and other countries’
economic recoveries started to gather momentum.
In particular, Japan proved a stronger area. Its economy grew an
impressive 4% annualised in the April to June quarter, its sixth
consecutive quarter of positive growth. The Bank of Japan appears
committed to doing what it takes to promote growth and the effects
have been felt through the economy and the stock market.
Performance has been particularly strong among domestically-focused
small and mid cap stocks.
Europe appears to have put many of its political problems behind
it. There was a relatively poor showing for populist parties in the
French and Dutch elections and the emphatic triumph of Emmanuel
Macron saw the European integration project on more stable ground
at the end of the period than it had been at the start. German
elections appear to be a foregone conclusion. The only area of real
concern remains Italy, where the Five Star Movement continues to
threaten the incumbent political parties.
The economic backdrop in the Eurozone has also improved
markedly. The European Central Bank stimulus package appears to
have worked to revive Europe’s stagnant banking system and get
credit flowing around the system. Economic figures have been strong
– and for the peripheral countries as well as the core. Only Italy
remains the laggard, with a banking system at breaking point,
political inertia and a weakened economy. The strength of the
European economies was increasingly reflected in the region’s stock
markets and, towards the end of the period, in a resurgent
Euro.
For the UK, there was plenty of noise around Brexit – the
triggering of Article 50, the role of parliament and the final deal
sought by the UK government. The UK stock market lagged its peers,
in spite of its international flavour. However, the brunt of the
Brexit volatility was borne by Sterling, which continued to weaken
over the period, particularly against the Euro.
Emerging markets also saw a significant recovery over the
period, notwithstanding a short term sell-off following the
election of Donald Trump as investors fretted about the impact of
increased protectionism on developing market economies. China’s
stimulus helped, encouraging intra-emerging market trade. At the
same time, Brazil put a lot of its economic concerns behind it, in
spite of ongoing political wobbles. India has emerged from a
challenging 12 months, which saw an ambitious demonetisation plan
and reform of the countryʼs goods and services tax.
Bond markets continued to appear to be in the dying days of
their near three decade long bull market, while at the same time
refusing to roll over. In the early part of the period, yields saw
a significant spike, responding to a new environment where
deflation is no longer a risk and interest rates look set to rise.
However, as it became increasingly clear that inflation was perhaps
not as much of a threat as thought, yields began to gently move
lower again. There are still significant deflationary forces at
work – high debt, an ageing population, low business
investment.
Chairman’s Letter to Shareholders
-
The information stated in this report is historical and not
necessarily indicative of future performance.
[6] BlackRock Global Funds (BGF)
Chairman’s Letter to Shareholders1 September 2016 to 31 August
2017 continued
Regulatory change continued throughout Europe and a number of
these future changes could have implications for investors.
} Revisions to the Markets in Financial Instruments Directive
(MiFID II) and the new Markets in Financial Instruments Regulation
(MiFIR): the revised directive and new regulation have been
finalised and are due to come into effect at the beginning of 2018.
Requirements being introduced include restrictions on how financial
advisers may be remunerated which could result in advisers amending
their services.
} Packaged Retail Investment and Insurance-based Investment
Products (PRIIPs): The European Parliament voted to reject the
current regulatory technical standards proposed for the Key
Investor Information Document (KIID). The Commission and Council
will now discuss and redraft the standards. The start date has been
delayed to 2018.
The assets under management (AUM) in the BGF range increased
from US$128.65bn to US$144.12bn over the period, as strong inflows
into the Asian, emerging market and global multi-asset funds was
offset by weakness in the European funds.
Asian and emerging markets focused funds generally fared well as
investors concluded that higher global economic growth might
compensate for the Trump effect and took advantage of lower
valuations: The Asian Growth Leaders Fund saw strong growth, up
112% to US$2.91bn. Assets in the Asian Dragon Fund rose 96% to
US$4.23bn.
Emerging market bond and equity funds also proved popular.
Assets in the Emerging Markets Bond Fund and Emerging Markets
Corporate Bond Fund rose 50% and 28% respectively to US$3.92bn and
US$165.55m. Assets in the Emerging Markets Local Currency Bond Fund
rose 186% to US$4.63bn. The Emerging Markets Fund saw inflows of
31% to US$656.61m.
Assets in the Global Multi-Asset Income Fund rose 88% to
US$7.38bn.
Financial and natural resources funds benefited significantly
from the reflation trade at various points during the year. This
was reflected in inflows into a number of our sector funds. The
World Financials Fund, for example, saw assets rise 188% to
US$727.21m.
The European funds were a weak spot in spite of an easing in
political tensions. The European Equity Income, European Focus Fund
and European Fund lost 24%, 49% and 26% of their assets
respectively.
In spite of volatility in global bond markets, the demand for
fixed income funds remained robust. The Fixed Income Global
Opportunities Fund (FIGO) saw assets rise over the period to
US$9.27bn. The Global Government Bond Fund was largely flat over
the period.
The Asian Local Bond Fund was terminated on 29 June 2017.
Should you have any questions on any of this material, please
contact us via our website: www.blackrockinternational.com or via
email: [email protected].
Yours faithfully,
Paul FreemanChairman
September 2017
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The information stated in this report is historical and not
necessarily indicative of future performance.
[7]Annual Report and Audited Accounts
Investment Adviser’s ReportPerformance overview1 September 2016
to 31 August 2017
Market ReviewAsset class performance over the last six months
has been dominated by rising expectations of inflation. This has
seen equity markets move higher at the same time as there has been
volatility in bond markets.
After an immediate rally following the election of Donald Trump
in November, markets have been in a relatively narrow trading range
since the start of the summer even if the overall move has been
higher. There has been increasing caution over the mounting
geopolitical tension on North Korea.
Following some indecision from investors, leadership in markets
has been firmly grasped by those companies with more exposure to
economic growth – banks, resource companies, and away from
‘expensive defensives’. This has also been a function of earnings –
cyclical companies have been outpacing their defensive counterparts
on revenue and profits growth. Equally, geographic leadership
appears to have moved away from the US and into countries at an
earlier stage of their recovery cycle – Europe, emerging markets
and Japan, for example.
Bond prices continue to show surprising resilience, in spite of
a general trend towards tighter monetary policy. More recently,
bond yields have risen, but to date, those rises have been gradual.
There is increased volatility in bond markets, however, which may
deter investors looking for safer assets.
Fund PerformancePerformance data stated is for the main (A)
share class of the relevant Fund, stated in the base currency of
the Fund, net of fees and expenses.
Equity Fund PerformanceGlobal equities climbed steadily higher
over the period. The US lead the way for the first six months, but
leadership shifted in the second half. The Global Equity Income
Fund rose 8.65%, behind its benchmark, the MSCI All Country World
Net TR Index, which rose by 17.11%. The Global Opportunities Fund
rose 13.90%, also trailing its MSCI All Country World Net TR Index
benchmark, which rose 17.11%.
Shares of small and medium sized companies were relatively
strong across the full year, as investors saw them as natural
beneficiaries of a stronger economic climate. The Global SmallCap
Fund rose 12.16%, behind its benchmark, the MSCI AC World Small Cap
Index, which rose 16.89%. Of the individual country funds, the
Japan Small & MidCap Opportunities Fund was particularly strong
after a period of weakness, rising 30.92%, ahead of the S&P
Japan Mid Small Cap Index, which rose 29.78%. The Swiss Small &
MidCap Opportunities Fund registered a gain of 30.57%, building on
its strength in the previous six months, compared to 22.11% for its
benchmark, the Switzerland SPI Extra Index. The US Small &
MidCap Opportunities Fund rose by 7.00%, underperforming the
S&P US Mid Small Cap Index, which was up by 13.53%.
European equities accelerated in the second half of the year as
political risk dissipated and the huge quantitative easing (QE)
programme helped to stimulate economic growth. The Continental
European Flexible Fund rose by 16.22%, behind the FTSE World Europe
ex UK Index, which rose by 23.97%. The European Value Fund
benefited from the broader market move to value strategies, rising
9.80%. This was behind the MSCI Europe Value Index, which rose
15.54%. The European Equity Income Fund rose by 7.40%. This was
significantly behind the MSCI Europe Index, its benchmark, which
rose 11.88%. The European Focus Fund was up 6.30% while the
European Special Situations Fund rose by 11.55%. Both are
benchmarked to the MSCI Europe Index, which rose 11.88%.
Funds with a focus on US equities sustained their strength
through the year. The US Growth Fund produced a positive return of
20.33%, ahead of the Russell 1000 Growth Index, which was up
13.18%. The US Basic Value Fund rose by 4.60% underperforming the
Russell 1000 Value Index, which was up by 11.58% over the
period.
Japanese funds did particularly well over the period as the
economy improved and the yen weakened. The Japan Flexible Equity
Fund rose 24.74%, ahead of the MSCI Japan Index, which rose
20.98%.
Performance across emerging markets funds was initially held
back by the election of Donald Trump, but recovered considerably at
the start of 2017. Asia was a notable area of strength. The Asian
Growth Leaders Fund rose 23.99% just behind its benchmark, the MSCI
All Country Asia ex Japan Index, which rose 24.83%. The Asian
Dragon Fund rose 21.68% (against the same benchmark).
The India Fund rose 16.48%, against its MSCI India Index
benchmark performance of 17.46%. The Emerging Markets Fund, which
has a more broad exposure across the emerging markets investment
universe, rose by 22.84%, behind the benchmark MSCI Emerging
Markets Index, which was up by 24.53%. The Emerging Markets Equity
Income Fund, which shares the same benchmark, was up 23.90%. The
Latin American Fund rose 20.04%, slightly behind its benchmark, the
MSCI Emerging Markets Latin America Index, which rose 22.63%. The
Emerging Europe Fund rose 24.05%, well ahead of its benchmark, the
MSCI Emerging Markets Europe 10/40 Index, which rose 20.90% over
the period.
In natural resources, the New Energy Fund was hit by the wider
recovery in the resources sector, rising 13.43%. The Fund has no
benchmark. The World Mining Fund rose 31.89% underperforming its
benchmark, the Euromoney Global Mining Constrained Weights Net
Total Return Index, which was up by 34.27%. The World Agriculture
Fund rose by 3.99% behind its benchmark, the DAX Global
Agribusiness Index, which was up by 9.95%. The World Gold Fund fell
7.30%, ahead of its benchmark, the FTSE Gold Mines Index, which
fell 9.11%.
Investment Adviser’s Report
-
The information stated in this report is historical and not
necessarily indicative of future performance.
[8] BlackRock Global Funds (BGF)
Investment Adviser’s ReportPerformance overview1 September 2016
to 31 August 2017 continued
Among specialist strategies, the World Real Estate Securities
Fund rose 0.52%, outperforming its benchmark, FTSE EPRA/NAREIT
Developed Index, which was down 0.10%.
Mixed Asset Fund PerformanceThe diversified Global Allocation
Fund – which invests in a mixture of fixed income securities,
equities and cash – gained 9.32% behind its reference benchmark,
which rose by 9.78% (the benchmark comprises 36% S&P 500 Index,
24% FTSE World (Ex-US) Index, 24% 5yr US Treasury Note, 16%
Citigroup Non-USD World Government Bond Index). The Global Dynamic
Equity Fund gained 16.63%, behind its reference benchmark, which
rose by 17.30% (the benchmark comprises 60% S&P 500 Index/40%
FTSE World (ex US) Index).
The Flexible Multi-Asset Fund rose by 4.25%, a little ahead of
its reference benchmark the 50% MSCI World Index, 50% Citigroup
World Government Bond Euro Hedged Index, which was up 3.05%. The
Fund invests in an actively-managed portfolio of global equities
and bonds, with some tactical exposure to alternative assets and
specialist markets.
The Global Multi-Asset Income Fund rose by 6.72% over the period
behind its reference benchmark, which rose 8.71% (the benchmark
comprises 50% MSCI World Index, 50% Bloomberg Barclays Global
Aggregate Bond Index USD Hedged). The Fund combines the ability to
allocate actively across a full range of asset classes and
geographies at a top-down level with a focus on adding value
through bottom-up security selection by specialist teams in each
key asset class.
Fixed Income Fund PerformanceIn fixed income, higher risk asset
classes, such as emerging market and high yield debt, generally did
better over the period under review. The Global Government Bond
Fund fell 0.42%, marginally ahead of its benchmark, the Citigroup
World Government Bond USD Hedged Index, which fell 0.82%. The Euro
Corporate Bond Fund rose 1.04%, compared to a rise of 0.61% for its
benchmark, the BofA Merrill Lynch Euro Corporate Index. The Global
Corporate Bond Fund rose 1.27%, compared to a rise of 2.32% for its
benchmark, the Bloomberg Barclays Global Aggregate Corporate Bond
USD Hedged Index.
The Euro Bond Fund fell 1.34%, against a fall in its benchmark,
the Bloomberg Barclays Euro-Aggregate 500mm+ Bond Index, of 1.81%.
The Euro Short Duration Bond Fund rose 0.44%, against a rise of
0.03% for its benchmark, the Bloomberg Barclays Eur Aggregate 500mm
1-3 yr Index.
The Global High Yield Bond Fund rose 7.91%, against a rise in
its benchmark, the BofA Merrill Lynch Global High Yield Constrained
USD Hedged Index, of 8.88%. The Emerging Markets Local Currency
Bond Fund rose 9.62% over the period, ahead of its benchmark, the
JP Morgan GBI-EM Global Diversified Index, which rose 2.92%. The
broader Emerging Markets Bond Fund rose 4.79%, compared to a
rise
of 5.02% for its benchmark, the JP Morgan Emerging Markets Bond
Index Global Diversified Index.
Asian bonds were weaker than other emerging market bonds with
the Asian Tiger Bond Fund up 2.89% against a rise of 2.41% for its
benchmark, the JP Morgan Asia Credit Index.
The Fixed Income Global Opportunities Fund delivered a positive
absolute return of 3.90%. The fund has no benchmark.
OutlookFinancial markets were more tentative towards the end of
the period, as geopolitical threats weighed on sentiment. Investors
will watch the situation in North Korea carefully to determine
whether the threat is significantly high to destabilise
markets.
Barring a catastrophic escalation of this crisis, most eyes will
be on central bankers, and whether they raise interest rates. For
the time being, while inflation seems to be under control, interest
rates rises are likely to be slow, and data-driven. One of the
biggest risks to markets remains a speedy rise in rates.
Markets have largely dismissed the prospect of meaningful policy
change under the Trump administration. Many have pointed out that
he does not have the fiscal headroom of, say, President Reagan and
therefore lacks the capacity for significant tax cuts or
infrastructure spending. If he does manage to get some changes
through Congress, it may be positive for markets, but they have
ceased to expect it.
There are risks to valuations in some areas. For the time being,
expensive valuations in areas such as technology have been largely
supported by strong earnings, but there may be vulnerabilities if
the economic outlook were to weaken.
Politics continues to be a source of fragility. In the UK, there
has been little progress on the Brexit negotiations, with both
sides locked into apparently immovable positions. In Spain, Catalan
cessation remains a real risk for the Madrid government. At the
moment, both these difficulties remain isolated but have the
potential to spread more widely.
That said, there is still much to cheer in the global economy.
For the time being, inflation remains muted and central banks are
under little pressure to raise rates. Government and consumer debt
levels are high, and this is likely to dampen economic activity and
inflationary pressures, which should prevent any significant
sell-off in bond markets. For the time being, we see this as a
relatively benign backdrop for asset prices.
September 2017
-
The information stated in this report is historical and not
necessarily indicative of future performance.
[9]Annual Report and Audited Accounts
Investment Adviser’s ReportPerformance overview1 September 2016
to 31 August 2017 continued
Disclosed in the table below are the performance returns for the
A Class Non-Distributing Share Class for each Fund, net of fees and
expenses, which has been selected as a representative Share Class.
Performance returns for any other Share Class can be made available
on request.
Calculation methodology is based on industry standards.
Past performance is not a guide to future performance and should
not be the sole factor of consideration when selecting a product.
All financial investments involve an element of risk. Therefore,
the value of an investment and the income from it will vary and the
initial investment amount cannot be guaranteed. The Fund invests a
large portion of assets which are denominated in currencies other
than US dollar; hence changes in the relevant exchange rate will
affect the value of the investment. The performance figures do not
consider charges and fees that may be levied at the time of
subscription or redemption of shares. Levels and bases of taxation
may change from time to time. Subscriptions may be made only on the
basis of the current Prospectus, of which the most recent annual
report and audited accounts and interim report and unaudited
accounts form an integral part, as well as Key Investor Information
Documents (KIIDs). Copies are available from Investor Services, the
Transfer Agent, the Management Company or any of the
Representatives or Distributors. The BGF range is only available
for investment by non-US persons. It is not offered for sale or
sold in the US, its territories or possessions.
The Funds are not registered for sale to the public in all
jurisdictions. Further details on distribution of shares of the
Funds are included in the Authorised Status on page 3.
Performance for the year
ended 31 August Calendar Year Performance
Performance for the 10 year
period ended 31 August
2017 2016 2015 2014 2017 Launch Date
ASEAN Leaders Fund ‘A’ Non Dist (USD) 10.52% 7.89% -19.07% 3.76%
– 8/8/2012
MSCI South-East Asia Index (Net) (USD) 10.51% 5.98% -18.52%
6.22% –
Asia Pacific Equity Income Fund ‘A’ Non Dist (USD) 17.05% 7.94%
-10.62% 4.60% – 18/9/2009
MSCI All Country Asia Pacific ex Japan Index (Net) (USD) 23.18%
6.75% -9.37% 2.82% –
Asian Dragon Fund ‘A’ Non Dist (USD) 21.68% 8.24% -5.04% 5.72%
44.84% 2/1/1997
MSCI All Country Asia ex Japan Index (Net) (USD) 24.83% 5.44%
-9.17% 4.80% 52.18%
Asian Growth Leaders Fund ‘A’ Non Dist (USD) 23.99% 6.40% 0.98%
9.46% – 31/10/2012
MSCI All Country Asia ex Japan Index (Net) (USD) 24.83% 5.44%
-9.17% 4.80% –
Asian Local Bond Fund ‘A’ Non Dist (USD)(1) -1.71% 0.21% -3.88%
3.51% – 30/4/2012
Markit iBoxx ALBI Index - 1.77% -3.17% 4.36% –
Asian Tiger Bond Fund ‘A’ Non Dist (USD) 2.89% 4.70% 2.28% 8.19%
83.03% 2/2/1996
JP Morgan Asian Credit Index (USD) 2.41% 5.81% 2.80% 8.32%
92.59%
China Fund ‘A’ Non Dist (USD) 27.36% 5.15% -2.58% 14.61% –
24/6/2008
MSCI China 10/40 Index (Net) (USD) 32.26% 0.43% -8.01% 8.38%
–
Continental European Flexible Fund ‘A’ Non Dist (EUR) 16.22%
-2.68% 20.78% 5.13% 129.62% 24/11/1986
FTSE World Europe ex UK Index (EUR) 23.97% 0.35% -0.42% -5.71%
43.35%
Emerging Europe Fund ‘A’ Non Dist (EUR) 24.05% 25.15% 0.26%
-14.31% -14.38% 29/12/1995
MSCI Emerging Markets Europe 10/40 Index (Net) (EUR) 20.90%
29.46% -4.99% -19.74% -17.04%
Emerging Markets Bond Fund ‘A’ Non Dist (USD) 4.79% 12.56%
-1.63% 5.63% 89.95% 1/10/2004
JP Morgan Emerging Markets Bond Index Global Diversified Index
(USD)
5.02% 10.15% 1.18% 7.43% 113.17%
Emerging Markets Corporate Bond Fund ‘A’ Non Dist (USD) 4.70%
9.74% -0.49% 2.74% – 18/2/2013
JP Morgan Corporate Emerging Markets Bond Index Broad
Diversified
5.61% 9.65% 1.30% 4.96% –
Emerging Markets Equity Income Fund ‘A’ Non Dist (USD) 23.90%
13.25% -15.84% -2.93% – 12/8/2011
MSCI Emerging Markets Index (Net) (USD) 24.53% 11.19% -14.92%
-2.19% –(1) Fund termination, see Note 1, for further details.
-
The information stated in this report is historical and not
necessarily indicative of future performance.
[10] BlackRock Global Funds (BGF)
Investment Adviser’s ReportPerformance overview1 September 2016
to 31 August 2017 continued
Performance for the year
ended 31 August Calendar Year Performance
Performance for the 10 year
period ended 31 August
2017 2016 2015 2014 2017 Launch Date
Emerging Markets Fund ‘A’ Non Dist (USD) 22.84% 8.08% -19.34%
-2.07% 16.44% 30/11/1993
MSCI Emerging Markets Index (Net) (USD) 24.53% 11.19% -14.92%
-2.19% 27.08%
Emerging Markets Local Currency Bond Fund ‘A’ Non Dist (USD)
9.62% 12.99% -14.17% -6.92% 9.05% 2/2/2007
JP Morgan GBI-EM Global Diversified Index (USD) 2.92% 13.23%
-5.23% 7.37% 32.99%
Euro Bond Fund ‘A’ Non Dist (EUR) -1.34% 3.12% 1.51% 11.40%
65.78% 31/3/1994
Bloomberg Barclays Euro-Aggregate 500mm+ Bond Index (EUR) -1.81%
3.31% 1.00% 11.11% 60.10%
Euro Corporate Bond Fund ‘A’ Non Dist (EUR) 1.04% 4.86% 0.39%
7.78% 52.26% 31/7/2006
BofA Merrill Lynch Euro Corporate Index (EUR) 0.61% 4.75% 0.43%
8.25% 58.17%
Euro Reserve Fund ‘A’ Non Dist (EUR) -0.43% -0.30% -0.50% 0.05%
– 24/7/2009
7 Day Euro LIBID (EUR) -0.52% -0.49% -0.26% -0.05% –
Euro Short Duration Bond Fund ‘A’ Non Dist (EUR) 0.44% 0.57%
0.70% 2.41% 33.61% 4/1/1999
Bloomberg Barclays Eur Aggregate 500mm 1-3yr (EUR) 0.03% 0.58%
0.58% 1.79% 30.18%
Euro-Markets Fund ‘A’ Non Dist (EUR) 14.53% -0.83% 21.75% -4.39%
52.40% 4/1/1999
MSCI EMU Index (Net) (EUR) 17.01% 4.37% 9.81% 4.32% 17.32%
European Equity Income Fund ‘A’ Non Dist (EUR) 7.40% -6.93%
15.52% 12.12% – 3/12/2010
MSCI Europe Index (Net) (EUR) 11.88% 2.58% 8.22% 6.84% –
European Focus Fund ‘A’ Non Dist (EUR) 6.30% -6.55% 12.57% 4.65%
50.95% 14/10/2005
MSCI Europe Index (Net) (EUR) 11.88% 2.58% 8.22% 6.84%
29.80%
European Fund ‘A’ Non Dist (EUR) 8.07% -5.60% 10.97% 2.58%
35.94% 30/11/1993
MSCI Europe Index (Net) (EUR) 11.88% 2.58% 8.22% 6.84%
29.80%
European High Yield Bond Fund ‘A’ Non Dist (EUR) 6.62% 7.00% – –
– 23/7/2015
Bloomberg Barclays Pan European High Yield 3% Issuer Constrained
Index EUR Hedged (EUR)
6.95% 9.02% – – –
European Special Situations Fund ‘A’ Non Dist (EUR) 11.55%
-7.12% 25.76% 6.80% 94.49% 14/10/2002
MSCI Europe Index (Net) (EUR) 11.88% 2.58% 8.22% 6.19%
46.55%
European Value Fund ‘A’ Non Dist (EUR) 9.80% -0.35% 13.09% 5.04%
42.59% 8/1/1997
MSCI Europe Value Index (Net) (EUR) 15.54% 7.41% 0.65% 5.59%
6.53%
Fixed Income Global Opportunities Fund ‘A’ Non Dist (USD) 3.90%
2.44% -0.91% 3.52% 36.42% 31/1/2007
No Index. Absolute Return Style Fund. - – – – –
Flexible Multi-Asset Fund ‘A’ Non Dist (EUR) 4.25% 0.87% 1.32%
10.33% 30.67% 4/1/1999
Reference (50% MSCI World Index/50% Citigroup World Government
Bond Euro Hedged Index) (EUR)
3.05% 6.63% 5.97% 13.84% 70.57%
Global Allocation Fund ‘A’ Non Dist (USD) 9.32% 3.24% -2.27%
1.60% 44.88% 3/1/1997
Reference (36% S&P 500 Index/24% FTSE World Index (Ex-US)
Index/24% 5yr US Treasury Note/16% Citigroup Non-USD World
Government Bond Index) (USD)
9.78% 6.06% -0.78% 4.17% 65.32%
Global Corporate Bond Fund ‘A’ Non Dist (USD) 1.27% 4.36% -1.59%
7.33% – 19/10/2007
Bloomberg Barclays Global Aggregate Corporate Bond USD Hedged
Index (USD)
2.32% 6.22% -0.24% 7.60% –
Global Dynamic Equity Fund ‘A’ Non Dist (USD) 16.63% 5.41%
-2.22% 3.87% 52.35% 28/2/2006
Reference (60% S&P 500 Index/40% FTSE World (ex US) Index)
(USD)
17.30% 9.13% -0.82% 6.44% 71.84%
Global Enhanced Equity Yield Fund ‘A’ Non Dist (USD) 11.13%
5.04% -4.56% 6.28% 18.74% 13/10/2006
MSCI All Country World Index Minimum Volatility (Net) (USD)
9.47% 7.43% 2.76% 10.95% 50.06%
-
The information stated in this report is historical and not
necessarily indicative of future performance.
[11]Annual Report and Audited Accounts
Investment Adviser’s ReportPerformance overview1 September 2016
to 31 August 2017 continued
Performance for the year
ended 31 August Calendar Year Performance
Performance for the 10 year
period ended 31 August
2017 2016 2015 2014 2017 Launch Date
Global Equity Income Fund ‘A’ Non Dist (USD) 8.65% 4.31% 0.50%
2.03% – 12/11/2010
MSCI All Country World Index (Net) (USD) 17.11% 7.86% -2.36%
4.16% –
Global Government Bond Fund ‘A’ Non Dist (USD) -0.42% 2.87%
0.07% 7.83% 42.69% 13/5/1987
Citigroup World Government Bond USD Hedged Index (USD) -0.82%
3.75% 1.30% 8.35% 50.25%
Global High Yield Bond Fund ‘A’ Non Dist (USD) 7.91% 12.22%
-4.67% 1.63% 71.62% 8/6/2007
BofA Merrill Lynch Global High Yield Constrained USD Hedged
Index (USD)
8.88% 16.21% -2.03% 2.53% 124.77%
Global Inflation Linked Bond Fund ‘A’ Non Dist (USD) -0.76%
8.83% -1.66% 8.17% – 19/6/2009
Bloomberg Barclays World Government Inflation-Linked Bond Index
(USD)
0.43% 10.22% -1.12% 9.04% –
Global Long-Horizon Equity Fund ‘A’ Non Dist (USD) 10.73% – – –
– 19/7/2016
MSCI All Country World Index (Net) (USD) 17.11% – – – –
Global Multi-Asset Income Fund ‘A’ Non Dist (USD) 6.72% 5.34%
-2.35% 4.11% – 28/6/2012
Reference (50% MSCI World Index/50% Bloomberg Barclays Global
Aggregate Bond Index USD Hedged) (USD)
8.71% 6.37% 0.30% 6.34% –
Global Opportunities Fund ‘A’ Non Dist (USD) 13.90% 2.83% -1.44%
-3.36% 40.39% 29/2/1996
MSCI All Country World Index (Net) (USD) 17.11% 7.86% -2.36%
4.16% 45.96%
Global SmallCap Fund ‘A’ Non Dist (USD) 12.16% 7.11% -6.67%
0.67% 57.13% 4/11/1994
MSCI All Country World Index Small Cap Index (USD) 16.89% 11.59%
-1.04% 1.81% 67.08%
India Fund ‘A’ Non Dist (USD) 16.48% 1.75% -0.99% 39.02% 53.18%
2/2/2005
MSCI India Index (USD) 17.46% -1.43% -6.12% 23.87% 36.15%
Japan Flexible Equity Fund ‘A’ Non Dist (JPY) 24.74% -3.10%
7.64% 5.36% -1.91% 28/2/2005
MSCI Japan Index (Net) (JPY) 20.98% -0.74% 9.93% 9.48%
12.66%
Japan Small & MidCap Opportunities Fund ‘A’ Non Dist (JPY)
30.92% 1.44% 8.75% 10.34% 31.45% 13/5/1987
S&P Japan Mid Small Cap Index (JPY) 29.78% 3.65% 13.40%
14.66% 54.43%
Latin American Fund ‘A’ Non Dist (USD) 20.04% 24.96% -30.68%
-9.41% -7.92% 8/1/1997
MSCI Emerging Markets Latin America Index (Net) (USD) 22.63%
31.04% -31.04% -12.30% 2.51%
Natural Resources Growth & Income Fund ‘A’ Non Dist (USD)
8.76% 32.13% -24.88% -8.46% – 15/4/2011
S&P Global Natural Resources Index (USD) 18.72% 31.46%
-24.50% -10.18% –
New Energy Fund ‘A’ Non Dist (USD) 13.43% 1.32% -2.82% -3.11%
-28.86% 6/4/2001
The Fund has no benchmark – – – – –
North American Equity Income Fund ‘A’ Non Dist (USD) 12.72%
13.92% -2.53% 8.88% – 9/3/2012
S&P 500 Index (Net) (USD) 15.51% 11.23% 0.75% 13.03% –
Pacific Equity Fund ‘A’ Non Dist (USD) 17.20% 1.67% -2.39%
-1.15% 29.63% 5/8/1994
MSCI All Country Asia Pacific Index (Net) (USD) 19.41% 4.89%
-1.96% 0.00% 37.50%
Renminbi Bond Fund ‘A’ Non Dist (CNH) 5.49% 4.47% 3.77% 3.78% –
11/11/2011
Markit iBoxx ALBI China Offshore Index 2.42% 4.65% 3.19% 3.02%
–
Strategic Global Bond Fund ‘A’ Non Dist (USD) 0.89% – – – –
21/7/2016
Reference (Bloomberg Barclays 80% Global Aggregate ex EM
Index/20% EM ex Korea Index)
1.24% – – – –
Swiss Small & MidCap Opportunities Fund ‘A’ Non Dist
(CHF)(2) 30.57% 12.09% 14.91% 13.60% – 8/1/2008
Switzerland SPI Extra Index (CHF) 22.11% 8.50% 11.01% 11.37%
–
United Kingdom Fund ‘A’ Non Dist (GBP) 14.04% 7.07% 10.52%
-0.40% 71.35% 31/12/1985
FTSE All-Share Index (GBP) 14.33% 16.75% 0.98% 1.18% 79.23%(2)
Fund closed to subscriptions, see Note 1, for further details.
-
The information stated in this report is historical and not
necessarily indicative of future performance.
[12] BlackRock Global Funds (BGF)
Performance for the year
ended 31 August Calendar Year Performance
Performance for the 10 year
period ended 31 August
2017 2016 2015 2014 2017 Launch Date
US Basic Value Fund ‘A’ Non Dist (USD) 4.60% 16.41% -8.39% 9.27%
43.66% 8/1/1997
Russell 1000 Value Index (USD) 11.58% 17.34% -3.83% 13.45%
78.47%
US Dollar Core Bond Fund ‘A’ Non Dist (USD) 0.75% 2.19% -0.56%
6.08% 43.87% 7/4/1989
Bloomberg Barclays US Aggregate Index (USD) 0.49% 2.65% 0.55%
5.97% 53.85%
US Dollar High Yield Bond Fund ‘A’ Non Dist (USD) 7.81% 13.19%
-5.00% 1.60% 80.76% 29/10/1993
Bloomberg Barclays US High Yield 2% Constrained Index (USD)
8.62% 17.13% -4.43% 2.46% 113.96%
US Dollar Reserve Fund ‘A’ Non Dist (USD) 0.58% 0.21% 0.00%
0.01% -1.10% 30/11/1993
7 Day USD LIBID (USD) 0.69% 0.29% 0.04% 0.00% 8.23%
US Dollar Short Duration Bond Fund ‘A’ Non Dist (USD) 1.54%
1.33% 0.31% 1.11% 17.78% 31/10/2002
BoA ML 1-3 Year US Corporate & Government Index (USD) 0.88%
1.29% 0.67% 0.78% 24.07%
US Flexible Equity Fund ‘A’ Non Dist (USD) 20.46% 8.37% -1.39%
12.02% 62.27% 31/10/2002
Russell 1000 Index (USD) 16.16% 12.05% 0.92% 13.24% 110.48%
US Government Mortgage Fund ‘A’ Non Dist (USD) -0.21% 0.98%
0.44% 5.59% 39.06% 2/8/1985
Citigroup Mortgage Index (USD) 0.81% 1.59% 1.56% 6.12%
51.89%
US Growth Fund ‘A’ Non Dist (USD) 20.33% -1.20% 4.54% 9.23%
65.44% 30/4/1999
Russell 1000 Growth Index (USD) 13.18% 10.28% 17.70% 28.74%
181.35%
US Small & MidCap Opportunities Fund ‘A’ Non Dist (USD)
7.00% 5.87% -2.55% 11.75% 85.65% 13/5/1987
S&P US Mid Small Cap Index (USD) 13.53% 15.67% -2.38% 10.26%
119.07%
World Agriculture Fund ‘A’ Non Dist (USD) 3.99% 9.17% -14.04%
3.02% – 9/2/2010
DAX Global Agribusiness Index (USD) 9.95% 13.17% -12.72% 1.03%
–
World Bond Fund ‘A’ Non Dist (USD) 0.03% 2.67% -0.18% 7.15%
45.27% 4/9/1985
Bloomberg Barclays Global Aggregate USD Hedged Index (USD) 0.28%
3.95% 1.02% 7.59% 53.85%
World Energy Fund ‘A’ Non Dist (USD) -8.18% 27.48% -29.91%
-15.37% -40.44% 6/4/2001
MSCI World Energy 10/40 Index (Net) (USD) 0.54% 27.83% -23.46%
-11.85% -5.65%
World Financials Fund ‘A’ Non Dist (USD) 37.65% 6.47% -7.63%
0.83% -2.33% 3/3/2000
MSCI All Country World Index Financials Index (Net) (USD) 26.22%
12.38% -5.59% 4.17% 0.41%
World Gold Fund ‘A’ Non Dist (USD) -7.30% 50.92% -21.88% -5.19%
-17.37% 30/12/1994
FTSE Gold Mines Index (Cap) (USD) -9.11% 64.37% -12.47% -3.43%
-18.44%
World Healthscience Fund ‘A’ Non Dist (USD) 10.83% -8.02% 4.56%
24.40% 154.87% 6/4/2001
MSCI World Health Care Index (Net) (USD) 10.77% -6.81% 6.60%
18.10% 135.03%
World Mining Fund ‘A’ Non Dist (USD) 31.89% 52.34% -41.35%
-23.08% -49.88% 24/3/1997
Euromoney Global Mining Constrained Weights Net Total Return
Index (USD)
34.27% 66.93% -41.08% -16.77% -25.26%
World Real Estate Securities Fund ‘A’ Non Dist (USD) 0.52% 1.37%
0.65% 20.41% – 25/2/2013
FTSE EPRA/NAREIT Developed Index -0.10% 4.06% -0.79% 15.02%
–
World Technology Fund ‘A’ Non Dist (USD) 37.51% 5.92% 3.99%
8.13% 100.53% 3/3/1995
MSCI All Country World Information Technology Index (Net)
(USD)
31.99% 12.20% 3.20% 15.20% 135.55%
Investment Adviser’s ReportPerformance overview1 September 2016
to 31 August 2017 continued
-
The information stated in this report is historical and not
necessarily indicative of future performance.
[13]Annual Report and Audited Accounts
Fund Performance & Benchmark InformationUnless otherwise
stated, performance is shown on a NAV price basis with income
reinvested. Fund performance figures are calculated net of annual
fees and expenses. All fund and index information is recorded in
its base currency and is converted into the appropriate
currency.
Investment Adviser’s ReportPerformance overview1 September 2016
to 31 August 2017 continued
-
[14] BlackRock Global Funds (BGF)
Directors’ Report
Corporate Governance Statement
IntroductionBlackRock Global Funds (the “Company”) is a public
limited company (société anonyme) established under the laws of the
Grand Duchy of Luxembourg as an open ended variable capital
investment company (société d’investissement à capital variable).
The Company has been authorised by the Commission de Surveillance
du Secteur Financier (the “CSSF”) as an undertaking for collective
investment in transferable securities (“UCITS”) pursuant to the
provisions of Part I of the law of 17 December 2010, as amended
from time to time and is regulated pursuant to such law. The
Company complies with the principles set out in the Association of
the Luxembourg Fund Industry (“ALFI”) Code of Conduct Revision 2013
(the “Code”) issued by ALFI in June 2013.
The Board of Directors of the Company (the “Board”) is committed
to maintaining the highest standards of corporate governance and is
accountable to shareholders for the governance of the Company’s
affairs. The Board has considered the principles and
recommendations of the Code and has put in place a framework for
corporate governance which it believes is appropriate for adherence
to the principles of the Code given the nature of its structure as
an Investment Company. This statement summarises the corporate
governance structure and processes in place for the Company for the
period under review from 1 September 2016 to 31 August 2017.
Board Composition The Board currently consists of five
non-executive Directors, (including one independent Director). The
Board is committed to maintaining an appropriate balance of skills,
experience, independence and knowledge amongst its members.
The Directors’ biographies, on pages 16 and 17, collectively
demonstrate a breadth of investment knowledge and experience,
business and financial skills and legal and regulatory familiarity
which enables them to provide effective strategic leadership,
oversight and proper governance of the Company. BlackRock considers
the current compositions to be a suitable and appropriate balance
for the Board.
Article 13 of the Company’s Articles of Incorporation, in
accordance with Luxembourg law, provides that Directors shall be
elected by the shareholders at their annual general meeting for a
period ending at the next annual general meeting and until their
successors are elected. Any Director who resigns his/her position
is obliged to declare to the Board and the CSSF whether the
resignation is connected with any issues with or claims against the
Company.
The Board supports a planned and progressive renewal of the
Board. BlackRock is committed to ensuring that Directors put
forward for election by the shareholders possess the skills needed
to maintain this balance. The Board is committed to carrying out an
annual review of its performance and activities.
The Directors have a continuing obligation to ensure they have
sufficient time to discharge their duties. The details of each
Director’s (including the Chairman), other appointments and
commitments are made available to the Board and BlackRock
Investment Management (U.K.) Limited (“BIM UK”) for inspection. All
new appointments or significant commitments require the prior
approval of BIM UK.
Before a new Director is proposed to the shareholders for
appointment he or she will receive a full induction incorporating
relevant information regarding the Company and his or her duties
and responsibilities as a Director. In addition, a new Director is
required to spend some time with representatives of BIM UK so that
the new Director will become familiar with the various processes
which are considered necessary for the proper performance of his or
her duties and responsibilities to the Company.
The Company’s policy is to encourage Directors to keep up to
date with developments relevant to the Company. The Directors have
attended and will continue to attend updates and briefings run by
BIM UK and affiliated entities in the U.S. and elsewhere. The
Directors also receive regular briefings from, amongst others, the
auditors, investment strategists, risk specialists, depositary and
legal advisers regarding any proposed product developments or
changes in laws or regulations that could affect the Company.
Board’s ResponsibilitiesThe Board meets at least quarterly and
also on an ad hoc basis as required. The Board is supplied with
information in a timely manner and in a form and of a quality
appropriate to enable it to discharge its duties. The Board is
responsible for the long-term success of the Company and recognises
its responsibility to provide leadership, direction and control to
the Company within a framework of prudent and effective controls
which enables risk to be assessed and managed. The Board reserves
to itself decisions relating to the determination of investment
policy and objectives, any change in investment strategy and
entering into any material contracts. The Board also approves the
prospectus and any addenda to it, circulars to shareholders,
financial statements and other relevant legal documentation.
The Chairman’s main responsibility is to lead and manage the
Board, encourage critical discussions and promote effective
communication within the Board. In addition, he is responsible for
promoting best practice corporate governance and effective
communication with shareholders.
The Directors have access to the advice and services of external
counsel and the resources of BIM UK and BlackRock (Luxembourg) S.A.
(the “Management Company”) should they be needed. Where necessary,
in the furtherance of their duties, the Board and individual
Directors may seek independent professional advice. The Board has
responsibility for ensuring that the Company keeps proper
accounting records which disclose with reasonable accuracy at any
time the financial position of the Company and which enable it to
ensure that the financial statements comply with relevant
accounting standards. It is the Board’s responsibility to present a
balanced and understandable assessment of the Company’s financial
position, which extends to interim financial statements and other
reports made available to shareholders and the public. The Board
is
Directors’ Report
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[15]Annual Report and Audited Accounts
Directors’ Report continued
responsible for taking reasonable steps for safeguarding the
assets of the Company and for taking reasonable steps in the
prevention and detection of fraud and other irregularities.
InsuranceThe Company maintains appropriate Directors’ and
Officers’ liability insurance cover.
Delegation of Responsibilities As an open ended variable capital
investment company most of the Company’s day-to-day management and
administration is delegated to BlackRock group companies such as
the Management Company which employs dedicated compliance and risk
professionals, the Investment Advisers and other third party
service providers. The Board has delegated the following areas of
responsibility:
Management and Administration
The Board has delegated the investment management, distribution
and administration of the Company and its Funds to the Management
Company. The Management Company has delegated the management of the
investment portfolio to the Investment Advisers. The Investment
Advisers operate under guidelines determined by the Board and as
detailed in the Company’s prospectus relating to the Company’s
Funds. The relevant Investment Advisers have direct responsibility
for the decisions relating to the day-to-day running of the
Company’s Funds and are accountable to both the Management Company
and the Company for the investment performance of the Funds. The
Board has also delegated the exercise of voting rights attached to
the securities held in the portfolio to the respective Investment
Advisers who may in turn delegate to BIM UK. Voting on behalf of
shareholders is done in a manner which is believed to be in the
best economic interest of shareholders as long-term investors.
The Management Company has delegated its responsibilities for
administrative services of the Company and its Funds to The Bank of
New York Mellon (International) Limited (the “Administrator”). The
Administrator has responsibility for the administration of the
Company’s affairs including the calculation of the net asset value
and preparation of the financial statements of the Company, subject
to the overall supervision of the Directors and the Management
Company. The Administrator is a subsidiary of The Bank of New York
Mellon Corporation. The Company has appointed The Bank of New York
Mellon (International) Limited as Depositary of its assets, which
has responsibility for safe-keeping of such assets, pursuant to the
regulations. The Depositary is a subsidiary of The Bank of New York
Mellon Corporation. The Management Company has delegated transfer
agent and share registration services to J.P. Morgan Bank
Luxembourg S.A.
The Management Company reports to the Board on a quarterly basis
and by exception where necessary. Reporting is in place to ensure
that the Board can effectively oversee the actions of its
delegates.
The Management Company is responsible for the risk management
and internal controls of the Company and
for reviewing their effectiveness, for ensuring that financial
information published or used within the business is reliable, and
for regularly monitoring compliance with regulations governing the
operation of the Company. The Management Company reviews the
effectiveness of the internal control and risk management systems
on an ongoing basis to identify, evaluate and manage the Company’s
significant risks. As part of that process, there are procedures
designed to capture and evaluate any failings or weaknesses. Should
a case be categorised by the Board as significant, procedures exist
to ensure that necessary action is taken to remedy the
failings.
The Board is also responsible for establishing and maintaining
adequate internal control and risk management systems of the
Company in relation to the financial reporting process. Such
systems are designed to manage rather than eliminate the risk of
failure to achieve the Company’s financial reporting objectives.
The Company has procedures in place to ensure all relevant
accounting records are properly maintained and are readily
available, including production of annual and half-yearly financial
statements. These procedures include appointing the Administrator
to maintain the accounting records of the Company independently of
the Investment Manager and the Depositary. The financial statements
are prepared in accordance with applicable law and Generally
Accepted Accounting Principles (“GAAP”) and are approved by the
Board of Directors of the Company. The accounting information given
in the annual report is required to be audited and the Audit
report, including any qualifications, is reproduced in full in the
annual report of the Company.
The control processes over the risks identified, covering
financial, operational, compliance and risk management, is embedded
in the operations of the Management Company, BIM UK and other
parties including the Administrator and the Depositary. There is a
monitoring and reporting process to review these controls, which
has been in place throughout the period under review and up to the
date of this report, carried out by BIM UK’s corporate audit
department.
BIM UK’s internal audit and operational risk units report to the
Board through the Management Company on a quarterly basis. The
Management Company also receives a report from the Administrator
and the Depositary on the internal controls of the administrative
and depositary operations of the Company. The Board recognises that
these control systems can only be designed to manage rather than
eliminate the risk of failure to achieve fund objectives, and to
provide reasonable, but not absolute, assurance against material
misstatement or loss, and relies on the operating controls
established by the service providers.
Financial Reporting The Company prepares its financial
statements under Luxembourg GAAP and on a going concern basis.
RemunerationThe Company is an investment company and has no
employees or executive Directors. No Director (past or present) has
any entitlement to a pension from the Company, and the Company has
not awarded any share options or long-term performance
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[16] BlackRock Global Funds (BGF)
Directors’ Report continued
incentives. No element of Directors’ remuneration is
performance-related. Those Directors who are also employees of the
BlackRock group are not entitled to receive a Director’s fee. All
other Directors are paid fees which are submitted for approval by
the shareholders at the annual general meeting and are disclosed on
page 586. The Board believes that the level of remuneration for
those Directors who take a fee properly reflects the time
commitment and responsibilities of their roles. The maximum amount
of remuneration payable to the Directors is approved by the
Board.
Communication with ShareholdersThe Board is responsible for
convening the annual general meeting and all other general meetings
of the Company. Shareholders have the opportunity to, and are
encouraged to attend and vote at general meetings. Notice of
general meetings is issued in accordance with the Articles of
Incorporation of the Company and notice of the annual general
meeting is sent out at least 8 days in advance of the meeting. All
substantive matters put before a general meeting are dealt with by
way of separate resolution. Proxy voting figures are noted by the
chairman of the general meeting.
The proceedings of general meetings are governed by Luxembourg
company law and the Articles of Incorporation of the Company.
The Board has reporting procedures in place such that client
communication with BIM UK is reported to the Board, including
shareholder complaints. BIM UK has been appointed Principal
Distributor and is tasked with actively managing the relationship
between the Company and its shareholders.
Directors’ Biographies
Paul Freeman (Chairman, appointed 17 July 2017) (British): Mr
Freeman currently serves as a Director on the Boards of a number of
BlackRock Group companies and investment funds. He was until
December 2015 a Managing Director of BlackRock, which he had joined
in August 2005 (which then was Merrill Lynch Investment Managers).
Up until July 2011 Mr Freeman was the Head of Product Development
and Range Management for the EMEA region with responsibility for
the development and ongoing product management of all funds
domiciled in EMEA and distributed on a cross-border basis by
BlackRock. Between July 2011 and December 2015 Mr Freeman worked
closely with BlackRock’s Government affairs team and served on
various internal governance committees and on the Boards of a
number of group subsidiaries and managed funds. Mr Freeman has
worked in the financial services industry for over 35 years and,
prior to BlackRock, has held senior management positions at
Schroders, Rothschild Asset Management, Henderson Investors and GT
Management (now part of Invesco). Mr Freeman is a Chartered
Accountant.
Nicholas C.D. Hall (ex-Chairman) (British) (resigned 31 May
2017): Mr Hall was, until he retired in May 2009, General Counsel
of BlackRock International (previously known as Merrill Lynch
Investment Managers International) based in London, a position he
held from his appointment in August 1998. He joined
the Group in 1983. He was educated at St. Catharine’s College,
Cambridge graduating with a MA (Law) degree in 1975. He qualified
as a solicitor in England and Wales in 1978 and in Hong Kong in
1987. Up until 31 May 2017 he was a non-executive Director of
BlackRock Investment Management (UK) Limited, BlackRock Advisors
(UK) Limited, BlackRock Group Limited, Chairman of BlackRock Life
Limited, BlackRock Strategic Funds and BlackRock Global Index Funds
and served on the Boards of a number of other BlackRock entities
and sponsored funds. Mr Hall chaired the BlackRock Group Limited
EMEA Conflicts Oversight Committee and was a member of the
BlackRock Group Limited EMEA Audit Committee, Nominations Committee
and Risk Committee.
Francine Keiser (Luxembourger): Ms Keiser is a former Partner of
Linklaters LLP and is now a consultant to the firm. She has been a
member of the Luxembourg Bar since 1989. Ms Keiser is an
experienced investment funds lawyer with wide expertise in all
legal aspects of investment management, in particular in the UCITS
area. She is Chairperson of the Board of the Management Company and
also on the Boards of flagship funds of several major fund
promoters, including BlackRock Strategic Funds and BlackRock Global
Index Funds.
Alexander C. Hoctor-Duncan (British) (resigned 6 October 2016):
Mr Hoctor-Duncan is a Managing Director at BlackRock and is Head of
BlackRock’s Europe, Middle East and Africa Retail business. He is a
member of the Global Client Group Executive Committee, Leadership
Committee, and European Executive Committee, and also serves as a
Director on the Boards of BlackRock Strategic Funds and BlackRock
Global Index Funds. Mr. Hoctor-Duncan is based in London.
Prior to moving to his current role, Mr. Hoctor-Duncan was Head
of Retail Sales in the EMEA region. Mr. Hoctor-Duncan’s service
with the firm dates back to 1997, including his years with Mercury
Asset Management and Merrill Lynch Investment Management (“MLIM”),
which merged with Blackrock in 2006. At MLIM, he was head of the UK
Retail business and Head of Sales in the UK retail market.
Frank P. Le Feuvre (British nationality, Jersey
resident)(resigned 29 September 2017): Mr Le Feuvre was the Country
Manager for the Channel Islands and was a member of BlackRock’s
Global Client Group. Mr Le Feuvre’s service with the firm dated
back to 1972, including his years with Merrill Lynch Investment
Managers (“MLIM”), which merged with BlackRock in 2006. At MLIM, he
was Head of the Jersey business and Managing Director of Merrill
Lynch Investment Management (Channel Islands) Limited. Mr Le Feuvre
also served as a Director on the Boards of BlackRock Strategic
Funds and BlackRock Global Index Funds.
Geoffrey D. Radcliffe (British nationality, Luxembourg
resident): Mr Radcliffe is a Managing Director at BlackRock and is
based in Luxembourg. He is a member of the BlackRock Business
Operations Global Fund Services team and heads Fund Administration
for EMEA, with responsibilities extending into Asia Pacific. Mr
Radcliffe is a Fellow of The Institute
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[17]Annual Report and Audited Accounts
Directors’ Report continued
of Chartered Accountants in England and Wales and an Associate
of The Chartered Institute of Bankers. He has 30 years of banking,
accounting and fund experience in the Isle of Man, London, Bermuda
and Luxembourg. Mr Radcliffe joined the BlackRock Group in 1998. He
serves as a Director on the Board of the Management Company and
also on the Boards of a number of BlackRock funds including
BlackRock Strategic Funds and BlackRock Global Index Funds.
Bruno Rovelli (Italian) (resigned 6 October 2016): Mr Rovelli is
Head of Investment Advisory for BlackRock in Italy. Before joining
Blackrock in 2011 Mr Rovelli worked for over 11 years at Eurizon
Capital, the largest asset manager in Italy. At Eurizon Capital Mr
Rovelli served in various roles including Chief Strategist, Chief
Investment Officer of the institutional business, Head of
Quantitative Strategies and, from 2005 onwards, Chief Investment
Officer for the mutual funds business. Prior to joining Eurizon
Capital, Mr Rovelli served as an economist and fixed income
strategist for Citigroup, Bank of America and Unicredit. Mr Rovelli
is a graduate in economics (First Class Honours) from Luigi Bocconi
University in Milan. Mr Rovelli also serves as a Director on the
Board of BlackRock Strategic Funds and BlackRock Global Index
Funds.
Barry O’Dwyer (Irish) (appointed 17 October 2016): Mr O’Dwyer is
a Managing Director at BlackRock. He is the Head of Fund Governance
for BlackRock’s European open-ended fund ranges and is the Chief
Operating Officer for BlackRock’s Irish business. He serves as a
Director on the Boards of a number of BlackRock corporate, fund,
and management companies domiciled in Ireland, Luxembourg,
Switzerland and Germany and on the Board of BlackRock’s UK Life
company. He was the chairman of the Irish Funds Industry
Association 2014-2015, is a Board Director of Financial Services
Ireland and is a member of An Taoiseach’s Financial Services
Industry Advisory Committee.
He joined BlackRock Advisors (UK) Limited in 1999 as head of
risk management and moved to his present role in 2006. Prior to
joining BlackRock Advisors (UK) Limited, Mr O’Dwyer worked as risk
manager at Gartmore Investment Management and at HypoVereinsbank
and National Westminster Bank.
Mr O’Dwyer graduated from Trinity College Dublin with a degree
in Business Studies and Economics in 1991. He holds a Chartered
Association of Certified Accountants qualification and an MBA from
London City University Business School.
Robert Hayes (British) (appointed 17 October 2016): Mr Hayes is
a Managing Director, is Head of Investment Oversight for the
BlackRock EMEA business and CEO of BlackRock Fund Managers Limited.
The Investment Oversight team, which is part of Strategic Product
Management, is responsible for establishing and reviewing
investment expectations for all BlackRock's Retail Funds in the
EMEA region. He also chairs the Investment Committee and serves as
a Director of BlackRock Life Limited and BlackRock Global Funds
SICAV.
Mr Hayes’ service with the firm dates back to 2001, including
his years with Merrill Lynch Investment Managers (MLIM), which
merged with BlackRock in 2006. At MLIM he was Head of Strategic
Advice and immediately before his current role he was Head of
Client Strategy in our Client Solutions business. Prior to joining
the firm, Mr Hayes was a Partner with Watson Wyatt Partners, as an
investment consultant for large pension funds and institutional
investors. Earlier in his career, Mr Hayes was a UK Equity
Investment Manager at ICI Pension Fund and Head of Institutional
Investment at M&G Investment Management.
Mr Hayes earned a BSc degree in Mathematics from Southampton
University in 1983.
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[18] BlackRock Global Funds (BGF)
Report on RemunerationThe below disclosures are made in respect
of the remuneration policies of the BlackRock group (“BlackRock”),
as they apply to BlackRock (Luxembourg) S.A. (the “Management
Company”). The disclosures are made in accordance with the
Directive 2009/65/EC on the coordination of laws, regulations and
administrative provisions relating to undertakings for collective
investment in transferable securities (“UCITS”), as amended,
including in particular by Directive 2014/91/EU of the European
Parliament and of the council of 23 July 2014, (the “Directive”),
and the “Guidelines on sound remuneration policies under the UCITS
Directive and AIFMD” issued by the European Securities and Markets
Authority. The Law of 10 May 2016 (2016 Law) transposed the
Directive as regards to depositary functions, remuneration policies
and sanctions, thereby amending the 2010 Law and the AIFM Law. The
2016 Law came into force on 1 June 2016.
BlackRock’s UCITS Remuneration Policy (the “UCITS Remuneration
Policy”) will apply to the European Economic Area (“EEA”) entities
within the BlackRock group authorised as a manager of UCITS funds
in accordance with the Directive, and will ensure compliance with
the requirements of Article 14b of the Directive.
The Management Company has adopted the UCITS Remuneration
Policy, a summary of which is set out below.
Role of the Compensation Committees Remuneration governance is a
tiered structure including the Management Development and
Compensation Committee (“MDCC”) of BlackRock, Inc.’s Board of
Directors (the “BlackRock, Inc. Board”) (BlackRock Inc.’s
independent remuneration committee), complemented by the EMEA
Compensation Committee (the “Committee”) and the Management
Company’s Board of Directors (the “Management Company’s Board”).
These bodies are responsible for the determination of the
Management Company’s remuneration policies.
(a) MDCC The MDCC’s primary purposes include:}to provide
oversight of:
}BlackRock’s executive compensation programmes;}BlackRock’s
employee benefit plans; }such other compensation plans as may be
established
by BlackRock from time to time for which the MDCC is deemed as
administrator; and
}review and discuss the compensation discussion and analysis
included in the BlackRock, Inc. annual proxy statement with
management and approval of the MDCC report for inclusion in the
proxy statement.
The MDCC directly retains its own independent compensation
consultant, Semler Brossy Consulting Group LLC, who has no
relationship with BlackRock, Inc. or the BlackRock, Inc. Board that
would interfere with its ability to provide independent advice to
the MDCC on compensation matters.
The MDCC is currently composed of Messrs. Gerber (Chairman),
Komansky, Grosfeld, Maughan, Mills and Nixon. The BlackRock, Inc.
Board has determined that all of the
members of the MDCC are “independent” within the meaning of the
listing standards of the New York Stock Exchange (NYSE), which
requires each meet a “non-employee director” standard.
The MDCC held 8 meetings during 2016. The MDCC charter is
available on BlackRock, Inc.’s website (www.blackrock.com).
(b) EMEA Compensation Committee The Committee is established for
the purpose of reviewing compensation policies, practices, and
principles as required by local/regional rules set by regulatory
bodies. Specifically, the Committee’s primary purposes are to
review and make recommendations concerning:
}executive compensation programmes; }employee benefit plans;
}such other compensation plans as may be established from
time to time; and}other local/regional compensation policies,
practices, and
principles as required to comply with local/regional rules as
set by regulators.
The Committee consists of a minimum of three members and is
constituted in a way that enables it to exercise its judgment and
demonstrate its ability to make decisions which are consistent with
the current and future financial status of the business. The
current members are: David Blumer, Head of the EMEA Region; Dan
Dunay, Global Head of Reward; and Karen Dennehy, EMEA Head of Human
Resources. Only members of the Committee have the right to attend
Committee meetings and the Committee may request the attendance of
any executive or other person as deemed appropriate to facilitate
the review of remuneration recommendations and policy design to
ensure that the remuneration practices are consistent with
effective risk management and do not encourage excessive risk
taking.
Examples of additional attendees may include individuals from
the Operational Risk and Regulatory Compliance functions.
Decision-making process Compensation decisions for employees are
made once annually in January following the end of the performance
year. This timing allows full-year financial results to be
considered along with other non-financial goals and objectives.
Although the framework for compensation decision-making is tied to
financial performance, significant discretion is used to determine
individual compensation based on achievement of strategic and
operating results and other considerations such as management and
leadership capabilities.
No set formulas are established and no fixed benchmarks are used
in determining annual incentive awards. In determining specific
individual compensation amounts, a number of factors are considered
including non-financial goals and objectives and overall financial
and investment performance. These results are viewed in the
aggregate without any specific weighting, and there is no direct
correlation between any particular performance measure and the
resulting annual incentive award.
Report on Remuneration
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[19]Annual Report and Audited Accounts
Report on Remuneration continuedAnnual incentive awards are
generated from a bonus pool.
The size of the projected bonus pool, including cash and equity
awards, is reviewed throughout the year by the MDCC and the final
total bonus pool is approved after year-end. As part of this
review, the MDCC receives actual and projected financial
information over the course of the year as well as final year-end
information. The financial information that the MDCC receives and
considers includes the current year projected income statement and
other financial measures compared with prior year results and the
current year budget. The MDCC additionally reviews other metrics of
Blackrock’s financial performance (e.g., net inflows of AUM and
investment performance) as well as information regarding market
conditions and competitive compensation levels.
The MDCC regularly considers management’s recommendation as to
the percentage of pre-incentive operating income that will be
accrued and reflected as a compensation expense throughout the year
for the cash portion of the total annual bonus pool (the “accrual
rate”). The accrual rate of the cash portion of the total annual
bonus pool may be modified by the MDCC during the year based on its
review of the financial information described above. The MDCC does
not apply any particular weighting or formula to the information it
considers when determining the size of the total bonus pool or the
accruals made for the cash portion of the total bonus pool.
Following the end of the performance year, the MDCC approves the
final bonus pool amount.
As part of the year-end review process the Operational Risk and
Regulatory Compliance departments report to the Committee on any
activities, incidents or events that warrant consideration in
making compensation decisions.
Individuals are not involved in setting their own
remuneration.
Control functionsEach of the control functions (Operational
Risk, Legal & Compliance, and Internal Audit) has its own
organisational structure which is independent of the business
units. The head of each control function is either a member of the
Global Executive Committee, BlackRock’s global management
committee, or has a reporting obligation to the Management
Company’s Board.
Functional bonus pools are determined with reference to the
performance of each individual function. The remuneration of the
senior members of control functions is directly overseen by the
Committee.
Link between pay and performance There is a clear and well
defined pay-for-performance philosophy and compensation programmes
which are designed to meet five key objectives as detailed below:
}attracting, retaining and motivating employees capable
of making significant contributions to the long-term success of
the business;
}aligning the interests of senior employees with those of
shareholders by awarding BlackRock, Inc. stock as a significant
part of both annual and long-term incentive awards;
}controlling fixed costs by ensuring that compensation expense
varies with profitability;
}linking a significant portion of an employee’s total
compensation to the financial and operational performance of the
business as well as its common stock performance; and
}discouraging excessive risk-taking.
Driving a high-performance culture is dependent on the ability
to measure performance against objectives, values and behaviours in
a clear and consistent way. Management Companies use a 5-point
rating scale to provide an overall assessment of an employee’s
performance, and employees also provide a self-evaluation. The
overall, final rating is reconciled during each employee’s
performance appraisal. Employees are assessed on the manner in
which performance is attained as well as the absolute performance
itself.
In keeping with the pay-for-performance philosophy, ratings are
used to differentiate and reward individual performance – but don’t
pre-determine compensation outcomes. Compensation decisions remain
discretionary and are made as part of the year-end compensation
process.
When setting remuneration levels other factors are considered,
as well as individual performance, which may include: }the
performance of the Management Company, the funds
managed by the Management Company and/or the relevant functional
department;
}factors relevant to an employee individually (e.g. relevant
working arrangements (including part-time status if applicable);
relationships with clients and colleagues; teamwork; skills; any
conduct issues; and, subject to any applicable policy, the impact
that any relevant leave of absence may have on contribution to the
business);
}the management of risk within the risk profiles appropriate for
BlackRock’s clients;
}strategic business needs, including intentions regarding
retention;
}market intelligence; and }criticality to business.
A primary product tool is risk management and, while employees
are compensated for strong performance in their management of
client assets, they are required to manage risk within the risk
profiles appropriate for their clients.
Therefore, employees are not rewarded for engaging in high-risk
transactions outside of established parameters. Compensation
practices do not provide undue incentives for short-term planning
or short-term financial rewards, do not reward unreasonable risk
and provide a reasonable balance between the many and substantial
risks inherent within the business of investment management, risk
management and advisory services.
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[20] BlackRock Global Funds (BGF)
The compensation model includes a basic salary, which is
contractual, and a discretionary bonus scheme. Although all
employees are eligible to be considered for a bonus, there is no
contractual obligation to make any award to an employee under its
discretionary bonus scheme. In exercising discretion to award a
discretionary bonus, the factors listed above (under the heading
“Link between pay and performance”) may be taken into account in
addition to any other matters which become relevant to the exercise
of discretion in the course of the performance year.
Discretionary bonus awards for all employees, including
executive officers, are subject to a guideline that determines the
portion paid in cash and the portion paid in stock and subject to
additional vesting/clawback conditions. As annual compensation
increases, a greater portion is paid in stock. The MDCC adopted
this approach in 2006 to substantially increase the retention value
and shareholder alignment of the compensation package for eligible
employees, including the executive officers. The portion deferred
into stock vests in equal instalments over the three years
following grant.
Supplementary to the annual discretionary bonus as described
above, equity awards from the “Partner Plan” and “Enterprise
Leadership Acceleration at BlackRock Plan” are made to select
senior leaders to provide greater linkage with future business
results. These long-term incentive awards have been established
individually to provide meaningful incentives for continued
performance over a multi-year period recognizing the scope of the
individual’s role, business expertise and leadership skills. These
awards usually vest fully three years after they are granted.
Selected senior leaders are eligible to receive
performance-adjusted equity-based awards from the “BlackRock
Performance Incentive Plan” (“BPIP”). Awards made from the BPIP
have a three-year performance period based on a measurement of As
Adjusted Operating Margin1 and Organic Revenue Growth2.
Determination of pay-out will be made based on BlackRock’s
achievement relative to target financial results at the conclusion
of the performance period. The maximum number of shares that can be
earned is 165% of the award in those situations where both metrics
achieve pre-determined financial targets. No shares will be earned
where BlackRock’s financial performance in both of the above
metrics is below a pre-determined performance threshold. These
metrics have been selected as key measures of shareholder value
which endure across market cycles.
A limited number of investment professionals have a portion of
their annual discretionary bonus (as described above) awarded as
deferred cash that notionally tracks investment in selected
products managed by the relevant employee. The intention of these
awards is to align investment professionals with the investment
returns of the products they manage through the deferral of
compensation into those products. Clients and external evaluators
have increasingly viewed more favourably those products where key
investors have
“skin in the game” through significant personal investments.
These awards vest in equal instalments over the three years
following grant.
Identified StaffThe UCITS Remuneration Policy sets out the
process that will be applied to identify staff as Identified Staff,
being categories of staff of the Management Company, including
senior management, risk takers, control functions and any employee
receiving total remuneration that takes them into the sam