BlackRock Collective Investment Funds BlackRock Balanced Managed Fund BlackRock Continental European Equity Tracker Fund BlackRock Emerging Markets Equity Tracker Fund BlackRock Fixed Income Tracker Fund BlackRock Japan Equity Tracker Fund BlackRock North American Equity Tracker Fund BlackRock Pacific ex Japan Equity Tracker Fund BlackRock UK Equity Tracker Fund Annual Report 1 February 2009 – 31 January 2010 07516BR Feb10 For more information Tel 0800 44 55 22 www.blackrock.co.uk About Us BlackRock is a premier provider of asset management, risk management, and advisory services to institutional, intermediary, and individual clients worldwide. As of 31 December 2009, the firm manages £2.10 trillion across asset classes in separate accounts, mutual funds, other pooled investment vehicles, and the industry-leading iShares® exchange-traded funds. Through BlackRock Solutions®, the firm offers risk management and advisory services that combine capital markets expertise with proprietarily-developed analytics, systems, and technology. BlackRock Solutions currently provides risk management and enterprise investment services for £5.65 trillion in assets. BlackRock serves clients in North and South America, Europe, Asia, Australia, Africa, and the Middle East. Headquartered in New York, the firm maintains offices in 24 countries around the world.
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BlackRock Collective Investment FundsBlackRock Balanced Managed Fund
BlackRock Continental European Equity Tracker Fund
BlackRock Emerging Markets Equity Tracker Fund
BlackRock Fixed Income Tracker Fund
BlackRock Japan Equity Tracker Fund
BlackRock North American Equity Tracker Fund
BlackRock Pacific ex Japan Equity Tracker Fund
BlackRock UK Equity Tracker Fund
Annual Report 1 February 2009 – 31 January 2010
07516BR Feb10
For more information Tel 0800 44 55 22www.blackrock.co.uk
About Us
BlackRock is a premier provider of asset management, risk management, and advisory services toinstitutional, intermediary, and individual clients worldwide. As of 31 December 2009, the firm manages£2.10 trillion across asset classes in separate accounts, mutual funds, other pooled investment vehicles,and the industry-leading iShares® exchange-traded funds.
Through BlackRock Solutions®, the firm offers risk management and advisory services that combinecapital markets expertise with proprietarily-developed analytics, systems, and technology. BlackRockSolutions currently provides risk management and enterprise investment services for £5.65 trillion in assets.
BlackRock serves clients in North and South America, Europe, Asia, Australia, Africa, and the MiddleEast. Headquartered in New York, the firm maintains offices in 24 countries around the world.
Colin Graham, CFA, CAIA, Managing Director, is a lead portfolio manager withinBlackRock’s Multi-Asset Client Solutions (BMACS) group, which is responsible fordeveloping, assembling and managing investment solutions involving multiplestrategies and asset classes. Colin is Co-head of Global Relative Returnstrategies for institutional clients and for Dynamic Multi-Asset retail funds.Colin's service with the firm dates back to 1997, having previously worked in theactuarial department of a leading UK financial services company, and in the Risk,Finance and Insurance practice of one of the largest global consultants.
Debra Jelilian, Managing Director and portfolio manager, is a member of BlackRock’sQuantitative Investments and Transition Management teams, with responsibilityfor index strategies and transition management. Debra joined BlackRock in 1999,having previously worked as a US index fund manager for Bankers Trust, handlingindex fund transition management. Debra earned a BA degree in romancelanguages from Manhattanville College in 1990.*
Panayotis (Panos) Ferendinos, CFA, Vice President, and portfolio manager, isa member of BlackRock's Fixed Income Portfolio Management Group, with aprimary responsibility for managing sterling fixed income portfolios. Panos'service with the firm dates back to 1999, during which time he has specialised inmacroeconomic research and analysis for the sterling investment team. Prior tojoining BlackRock, Panos worked for an Italian fixed income broker, having earlierearned a BA degree in law, English & psychology from the University of NatalDurban in 1992, and a BA degree, with honours, in English literature from theUniversity of South Africa in 1993.
* With effect from 23 February 2010, Manus Stapleton assumed responsibility as the new named Manager of all the BlackRock FundManager's QIS/CIF Consensus and Equity Tracker funds.
BlackRock Collective Investment Funds ("the Fund") is organised as an umbrella unit trust scheme comprising the funds (each referred to as a "sub-fund") contained in this report
1
About the Fund ManagersContents
About the Fund Managers 1
Aggregated Accounts 2-11
BlackRock Balanced Managed Fund 12–39
BlackRock Continental European Equity Tracker Fund 40–68
BlackRock Emerging Markets Equity Tracker Fund 69–92
BlackRock Fixed Income Tracker Fund 93–108
BlackRock Japan Equity Tracker Fund 109–138
BlackRock North American Equity Tracker Fund 139–178
BlackRock Pacific ex Japan Equity Tracker Fund 179–208
BlackRock UK Equity Tracker Fund 209–242
Authorised Status 243
Stamp Duty Reserve Tax 243
Statement of Manager’s and Trustee’s Responsibilities 244
Report of the Trustee 244
Report of the Auditors 245-246
Introducing the new BlackRock On 1 December 2009, BlackRock, Inc. and Barclays Global Investors, N.A. combined to create a newindependent company. Operating under the BlackRock name, this new company offers a full range ofsolutions—active management, quantitative and index strategies, iShares ETFs, and sophisticated riskmanagement capabilities. We maintain a firmwide focus on investment excellence through the pursuit ofalpha and efficient beta.
Copies of Manager’s Reports and Prospectus are available on request.
Dealing and Investor Services: 0800 44 55 22www.blackrock.co.uk
2 BlackRock Collective Investment Funds 3
Aggregated Balance Sheet at 31 January 2010
31.1.2010 31.1.2009Notes £ £ £ £
Assets:Investment assets 4,788,827,838 2,980,953,754 – Debtors 7 53,142,833 28,547,143 – Cash and bank balances 8 147,865,644 81,706,246
Total other assets 201,008,477 110,253,389 Total assets 4,989,836,315 3,091,207,143
Total other liabilities (29,411,307) (46,808,025) Total liabilities (36,440,118) (51,352,025)
Net assets attributable to unitholders £4,953,396,197 £3,039,855,118
A J Stenning (Director)E E Tracey (Director)BlackRock Fund Managers Limited23 March 2010
Aggregated Statement of Total Returnfor the year ended 31 January 2010
31.1.2010 31.1.2009Notes £ £ £ £
IncomeNet capital gains/(losses)
during the year 2 860,342,498 (989,264,668) Revenue 3 135,663,850 136,316,564 Expenses 4 (13,287,234) (12,503,670) Finance costs: Interest 6 (120,386) (86,540)
Net revenue before taxation 122,256,230 123,726,354 Taxation 5 (5,568,127) (7,848,204) UK income tax withheld (3,614,822) (3,214,272)
Net revenue after taxation for the year 113,073,281 112,663,878
Total return before distributions 973,415,779 (876,600,790) Finance costs: Distributions 6 (112,661,331) (112,663,878)
Change in net assets attributable tounitholders from investment activities £860,754,448 £(989,264,668)
Aggregated Statement of Change in Net Assets Attributable to Unitholders for the year ended 31 January 2010
31.1.2010 31.1.2009£ £ £ £
Opening net assets attributableto unitholders 3,039,855,118 3,584,883,618
Amounts receivable onissue of units 1,793,490,949 1,224,578,382
Amounts payable on cancellation of units (858,207,451) (894,048,184)
935,283,498 330,530,198 Stamp duty reserve tax (941,939) (839,382) Change in net assets attributable to
unitholders from investment activities 860,754,448 (989,264,668) Retained distribution on accumulation units 118,445,072 114,545,352
Closing net assets attributableto unitholders £4,953,396,197 £3,039,855,118
Comparative figures have been restated for the presentation changes following adoption of the Statement of Recommended Practice forAuthorised Funds issued by the IMA in November 2008 [see Note 1(a)].
(g) Provision for corporation tax is made at the current rate on the excess of taxable revenue overallowable expenses. Provision is made on all material timing differences arising from the differenttreatment of items for accounting and tax purposes. A deferred tax asset is recognised only to theextent that it is considered more likely than not that there will be taxable profits in the futureagainst which the asset can be offset.
(h) The units in each of the funds are accumulation units. All of the net revenue available for distributionat the final accounting year end will be accumulated by the fund with a transfer from revenue tocapital. In order to conduct a controlled dividend flow to unitholders, interim distributions may bemade at the Manager's discretion, up to a maximum of the distributable revenue available for theyear. Should expenses and taxation together exceed revenue, there will be no distribution and theshortfall will be met from capital.
(i) The Fixed Income Tracker Fund has satisfied the qualifying investments tests as specified inS468L ICTA 1988 at all times throughout the distribution period. As such, any revenue available fordistribution will be paid as an interest distribution. All other funds will pay a dividend distribution.
(j) Any transactions in foreign currencies are translated into Sterling at the rates of exchange rulingon the date of any such transaction. Assets and liabilities are translated into Sterling at theexchange rates ruling at the close of business on the last business day of the accounting period.Revenue items in foreign currencies are translated into Sterling at the exchange rate ruling whenrevenue is received.
(k) The investments of the Fund have been valued at market values, defined as fair value, which isusually bid value at close of business on the last business day of the accounting period. Anyunquoted or suspended investments are valued at the Manager's valuation. For over the counterderivatives (e.g. options), market value is determined based on valuation pricing models whichtake into account relevant market inputs as well as the time values, liquidity and volatility factorsunderlying the positions. Amounts due to and from an individual counterparty which falls under alegally enforceable master netting agreement are netted.
(l) Where appropriate, certain permitted financial instruments such as derivatives or forward currencycontracts are used for efficient portfolio management. Where such financial instruments are usedto protect or enhance revenue, the revenue and expenses derived therefrom are included in ‘Revenue’or ‘Expenses’ in the Statement of Total Return. Revenue from over the counter derivatives is receivedin the form of a premiums received on written options. Such premiums are recognised as revenueon a straight line basis over the period of the contract, with the balance recognised as capital. If thecontract is sold or closed out, the unamortised portion and the premium remains in the capital.Where such financial instruments are used to protect or enhance capital, the gains and lossesderived therefrom are included in ‘Net Capital Gains/(Losses) on Investments’ in the Statement of Total Return.
Aggregated Notes to Financial Statementsat 31 January 2010
1. Accounting Policies(a) The financial statements have been prepared in accordance with the Statement of Recommended
Practice (‘SORP’) for Authorised Funds’ issued by the Investment Management Association (IMA)in November 2008.
Previously the requirements of the SORP issued by the IMA in December 2005 had been applied.As a result of this change certain items have been reanalyzed in the Statement of Total Return asset out below. The reanalysis has been treated as a change in Accounting Policies and accordinglythe comparative figures have been restated. The restatements did not change either the totalreturn or net assets attributable to unitholders as presented in the preceding year.
Other gainsOther gains were previously included as a separate line in the Statement of Total Return (2009: £3,585,309) but have now been included in net capital gains (2010: £(3,014,880)).
Transaction ChargesTransaction charges were previously included in the expenses (2009: (£172,879)) but have nowbeen included in net capital gains (2010: £(345,589)).
Manager’s service charge rebatesManager’s service charge rebates were previously shown as a credit in expenses (2009: £2,092,558)but are now shown in revenue (2010: £1,472,405).
(b) Dividends on quoted ordinary shares and preference shares are recognised when the securities arequoted ex- dividend. Where such securities are not quoted, dividends are recognised when they aredeclared. Bank interest is recognised on an accruals basis. Nominal interest on interest bearingsecurities and bank interest are recognised on an accruals basis. Revenue from fixed securities is recognised on an effective interest rate basis. All revenue is recognised at a gross amount thatincludes any withholding taxes but excludes any other taxes such as attributable tax credits.
The Balanced Managed Funds receives manager’s service charge rebates from BlackRock relatedinvestments. These are recognised on an accruals basis and are treated as revenue.
(c) Ordinary stock dividends are recognised wholly as revenue and are based on the market value ofthe shares on the date they are quoted ex-dividend. Where an enhancement is offered, the amountby which the market value of the shares (on the date they are quoted ex-dividend) exceeds thecash dividend is taken to capital. The ordinary element of the stock dividend is treated as revenuebut does not form part of the distribution.
(d) The underlying circumstances behind both special dividends and share buy backs are reviewed ona case by case basis in determining whether the amount is revenue or capital in nature. Amountsrecognised as revenue form part of the distribution. Any tax treatment will follow the accountingtreatment of the principal amount.
(e) Underwriting commission is wholly recognised as revenue when the issue takes place, exceptwhere the Fund is required to take up some or all of the shares underwritten, in which case anappropriate proportion of the commission received is deducted from the cost of those shares.
(f) All expenses, except those relating to the purchase and sale of investments and Stamp DutyReserve Tax, are charged against revenue.
54 BlackRock Collective Investment Funds
Aggregated Notes to Financial Statements continued
2. Net Capital Gains/(Losses) on Investments During the year31.1.2010 31.1.2009
£ £
The net capital gains/(losses) on investments comprise:Gains/(losses) on non-derivative securities 826,519,803 (956,866,097)Gains/(losses) on derivative contracts 32,924,298 (35,710,569)Gains/(losses) on forward currency contracts 4,258,866 (100,432)Other currency (losses)/gains (3,014,880) 3,585,309Transaction costs (345,589) (172,879)
Net Capital gains/(losses) on investments 860,342,498 (989,264,668)
3. Revenue31.1.2010 31.1.2009
£ £
UK dividends 67,222,567 68,711,514Unfranked dividends from UK companies 947,984 110,722Overseas dividends 43,833,579 42,068,151Stock dividends 415,023 –Franked dividends from Collective Investment Schemes – 265,436Unfranked dividends from Collective Investment Schemes – 287,734Interest from UK fixed interest securities 21,233,871 19,239,813Interest from overseas fixed interest securities 433,745 231,266Interest from money market deposits 10,736 76,451Interest from UK bank deposits 202,502 2,458,334Underwriting Commission 7,522 –Manager’s service charge rebate 1,356,321 2,092,558UK REIT dividends – 774,585
Total revenue 135,663,850 136,316,564
4. Expenses31.1.2010 31.1.2009
£ £
Payable to the Manager or associates of the Manager:– Manager's service charge 12,462,003 11,486,873– Registrar's fees 898 769– VAT Refund Registrar's fees (67) (63)
12,462,834 11,487,579
Payable to the Trustee or associates of the Trustee:– Trustee's fees 461,964 412,876
461,964 412,876
Other expenses:– Safe custody fees 278,338 523,655– Audit fee 68,849 62,511– FSA fee 30 –– Legal & professional fees 755 2,670– Risk monitoring fees 8,280 7,050– Other fees 6,184 7,329
362,436 603,215
Total Expenses 13,287,234 12,503,670
5. Taxation(a) Analysis of tax charge for the year
31.1.2010 31.1.2009£ £
Corporation tax 3,589,400 7,455,135Prior year adjustment to corporation tax (333,816) (888)Income tax on Unfranked CIS 17,727 57,547Overseas tax 4,648,306 4,642,950Double Taxation Relief (2,214,033) (4,332,086)
Total current tax charge for the year (see Note 5(b)) 5,707,584 7,822,658
Deferred tax (charge)/credit for the year [see note 5(c)] (139,457) 25,546
Total tax for the year 5,568,127 7,848,204
76 BlackRock Collective Investment Funds
Aggregated Notes to Financial Statements continued
118,445,072 114,545,352Add: Amounts deducted on cancellation of units 6,828,086 9,862,919 Less: Amounts received on issue of units (12,611,827) (11,744,393)
Net distribution for the year 112,661,331 112,663,878Finance costs: interest 120,386 86,540
Total finance costs 112,781,717 112,750,418
Net revenue after taxation for the year 113,073,281 112,663,878Less: non-distributable stock dividends (415,023) –Add: expenses reimbursed by capital 3,073 –
Net distribution for the year 112,661,331 112,663,878
7. Debtors31.1.2010 31.1.2009
£ £
Sales awaiting settlement 4,050,662 3,694,240Amounts receivable for creation of units 24,904,657 8,490,787Currency sales awaiting settlement 7,367,942 3,898,857Corporation tax recoverable 387,866 24,224Income tax recoverable on REIT Dividends 288,983 162,754Overseas tax recoverable 1,755,396 1,401,207Managers fee rebate 285,757 359,211Accrued revenue 14,101,570 10,515,863
Total debtors 53,142,833 28,547,143
8. Cash and Bank Balances31.1.2010 31.1.2009
£ £
Amounts held at futures clearing houses and brokers 18,275,593 17,631,501Cash and bank balances 129,590,051 64,074,745
Total cash and bank balances 147,865,644 81,706,246
(b) Reconciliation of current tax chargeThe tax assessed for the year is lower than the standard rate of corporation tax in the UK for anauthorised unit trust. The differences are explained below:
31.1.2010 31.1.2009£ £
Net revenue before taxation 122,256,230 123,726,354
Corporation tax at 20% (2009: 20%) 24,451,246 24,745,271Effects of:Excess expenses for which no relief taken 21,678 –Expenses not deductable for Tax purposes 615 –Movement in revenue accruals non taxable 268,181 (32,410)Movement in revenue accruals taxable on receipt 29,654 5,066Non taxable stock dividends (83,005) -Double tax relief (2,214,033) (4,332,086)Franked investment revenue at 20% (13,351,463) (13,795,389)Non taxable overseas dividends (4,139,589) –Tax Effect of expense relief (current) – (49,149)Overseas tax 4,648,881 4,644,144Adjustment in respect of prior years corporation tax (327,486) (888)Utilisation of excess expenses – (205,176)Irrecoverable income tax 17,727 57,547Tax deductible interest distributions (3,614,822) (3,214,272)
Total current tax charge for the year (see Note 5(a)) 5,707,584 7,822,658
(c) Deferred tax asset31.1.2010 31.1.2009
£ £
Opening deferred tax balance 173,392 147,846Deferred tax (credit)/charge for the year [see note 5(a)] (139,457) 25,546
Closing deferred tax balance 33,935 173,392
As at 31January 2010, the Fund had surplus management expenses of £108,392 (Prior year: £0). It is unlikely that the Fund willgenerate sufficient taxable profits in the future to utilise these expenses, and therefore a deferred tax asset of £21,679 (Prior year: £0)has not been recognised.
10. Derivatives and Other Financial Instruments(a) For details see each individual fund.
Currency Exposures(b) For details see each individual fund.
Interest Rate Risk Profile of Financial Assets and Liabilities(c) For details see each individual fund.
Fair Value of Financial Assets and Financial Liabilities(d) There is no material difference between the value of the financial assets and liabilities, as shownin the balance sheet, and their fair value.
11. Contingent LiabilitiesThere were no contingent liabilities at the balance sheet date (2009:Nil)
12. Investment ManagementThe manager has delegated to its associate, BlackRock (Luxembourg) S.A., responsibility forinvestment management of the Fund. BlackRock (Luxembourg) S.A. does not enter into commission sharing agreements.
13. Related Party TransactionsFor details see each individual fund.
14. Portfolio Transaction costsAnalysis of total purchase costs:
31.1.2010 31.1.2010 31.1.2009 31.1.2009£ £ £ £
Purchases in year before stransaction costs 2,012,840,635 1,383,310,771
Commissions and other costs (including stamp duty) 2,575,190 3,523,349
Total purchases costs 2,575,190 3,523,349
Gross purchases total 2,015,415,825 1,386,834,120
Analysis of total sale costs:£ £ £ £
Gross sales before transaction costs 1,034,068,901 945,970,489Commissions and other costs (467,853) (477,510)Total sale costs (467,853) (477,510)
Total sales net of transaction costs 1,033,601,048 945,492,979
15. Non Adjusting Post Balance Sheet EventPlease refer to each fund.
Aggregated Notes to Financial Statements continued
10 BlackRock Collective Investment Funds
Performance Table
Period of Report Since LaunchOne Year 22.9.2005
to 31.1.2010 to 31.1.2010
The Fund returned:Total Return (with net income reinvested)Accumulation Units +26.5% +13.9%
The Benchmark returned:Total Return (with net income reinvested)Comp Balanced Managed*† +26.4% +17.0%
This Annual Report covers the year ended 31 January 2010, the first six months of which were commentedon in the Interim Report to 31 July 2009. For a copy, please contact us.
*Source: Datastream/Factset/BlackRock. Prior to 10 July 2009 the Collective Investment Funds were known as the Qualified InvestorSchemes. All fund figures quoted are based on bid to bid, dealing prices (the price at which units are sold). †Comprising 55% FTSE AllShare, 25% FTSE Wld ex UK & 20% ML 1-15Y UK Broad (Prior November 2006 UK Gilts All Stocks). Performance is calculated net of fees.
All financial investments involve an element of risk. Therefore, the value of your investment and theincome from it will vary and your initial investment amount cannot be guaranteed. Changes in exchangerates may cause the value of an investment to fluctuate. Past performance is not a guide to futureperformance and should not be the sole factor of consideration when selecting a product.
All figures quoted are based on bid to bid, dealing prices (the price at which units are sold), with net income reinvested. Performance isshown for complete 12 month periods only. * Performance data does not exist for the relevant periods.
Accumulation The final accumulation payable on 31 March 2010 is 0.3721p net per accumulation unit.
Annual performance to most recent quarter end
31.12.2008 31.12.2007 31.12.2006 31.12.2005 31.12.2004to 31.12.2009 to 31.12.2008 to 31.12.2007 to 31.12.2006 to 31.12.2005*
Balanced Managed +25.5% -27.0% +10.7 +9.0 –
BlackRock Balanced Managed FundBlackRock Balanced Managed Fund
Balanced Managed Investment Objective & Policy
The aim of the Fund is to seek to achieve a total return by investment mainly in a global portfolio ofequities and fixed interest securities with an emphasis on the UK. Investment will be made directly intoequities and via other transferable securities giving exposure to such equities. The Fund may also investin permitted money market instruments, permitted deposits, and units in collective investment schemes.Derivatives and forward transactions may be used for hedging purposes and meeting the investmentobjectives of the Fund. The scheme property of the Fund will in all cases be restricted to investment inproperty which is eligible as a permitted link in IPRU (INS), or such other equivalent rules as may replacethem from time to time.
The Fund is a sub-fund of BlackRock Collective Investment Funds , a UCITS scheme established underthe Financial Services Authority's Collective Investment Schemes Sourcebook "the Sourcebook". Prior to 10 July 2009 the Collective Investment Funds were known as the Qualified Investor Schemes (1). TheFund was authorised by the FSA on 21 June 2005 and subsequently launched on 22 September 2005. The Fund was previously known as Merrill Lynch Balanced Managed Fund. It adopted its present namewith effect from 28 April 2008.
12 BlackRock Collective Investment Funds 13
would benefit from lower bad debt provisions and asset managers were likely to see fund inflows asinvestors' risk appetites returned to more-normal levels.
Performance was generated across a number of sectors and companies. Among the largest contributorsto relative performance was food service company Compass Group, which has continued to exceed itsown margin targets and has taken market share. BHP Billiton also performed well as industrial metalsprices improved as a result of increased demand, especially from China. Elsewhere, our preference for oil& gas exploration companies, over the oil majors, proved profitable, notably through holdings in Tullow Oiland Cairn Energy, while our bias towards beneficiaries of increasing corporate discretionary spend alsoadded value at the end of the period, with communications technology firm Spirent and British Airwayscontributing.
Fixed income portfolio success driven by strong corporate bond performanceThe performance of the fixed income portfolio continued to be driven primarily by the tightening of creditspreads, where our exposure to financial corporate bonds has aided performance throughout the riskrally prevalent for most of the reporting period. We remain overweight here, but have gradually reducedthe size of our position, as some high-quality names are trading at levels last seen pre-crisis and weakercredits are returning to a fair value range. We still favour credit versus governments, as the carry andyield advantage remains attractive, especially in shorter-dated securities.
The performance of UK government bonds (gilts) was very different, as fiscal concerns mounted forcountries running large budget deficits, including the UK. The Pre-Budget Report did little to address the situation and government bond yields sold off into the end of the year. We have continued to hold anallocation to German government debt at the expense of gilts, which has performed well recently, andhave also added a small position in Greek government bonds as we felt fears over sovereign risk inGreece had reached extreme levels.
The market rally has brought opportunities and challenges, but 2010 to be a recovery year After the recovery in 2009, investors now face a different challenge. The broad financial environment is,we believe, consistent with the recovery theme persisting during 2010, providing the potential for additional,if less spectacular, gains across a range of asset classes. Our central case is that exposure to risk assetsis still warranted, despite the more-limited return potential. We do not expect recessionary pressures tore-emerge, while an environment of moderate economic growth, recovering corporate profits, low interestrates, low inflation and supportive valuations is likely to deliver slow but steady bull markets in equitiesand credit. Progress will be made gradually as markets seek to overcome anxiety over the progress ofeconomic recovery. As such, sensible asset allocations will be those which emphasise diversificationacross asset classes, not over-exposure to a small number of large bets.
The risks are symmetric around our predicted outturn, unlike in 2007 and 2008, when risks were stronglybiased to the downside. The global economy faces two powerful but opposing influences; the level of policystimulus remains a support, but this is offset by the potential for both further retrenchment in privatesector spending should the de-leveraging process persist, and for further financial accidents. Precisecalibration of these effects is difficult, but the central outcome is biased towards recovery. We will continueto allocate risk in a diversified fashion, balancing our exposure to traditional asset classes, such as credit,equities and government bonds, with commodities, Exchange Trade Funds, and derivatives strategies.
* Performance figures quoted are based on bid to bid, dealing prices (the price at which units are sold) and are not the same as the net assetvalue reported in the financial statements which is at close of business. Performance is calculated net of fees.
Balanced Managed Investment Report
The Fund declined and underperformed its benchmark during a difficult periodWe are pleased to report that the BlackRock Balanced Managed Fund gained by 26.5%* during the 12-month reporting period to 31 January 2010. By comparison, the Fund’s composite benchmark rose by26.4%*. Here, we focus on the most recent six months of the year, during which time the Fund gained by 11.9%*, marginally falling behind the benchmark, which returned 12.0%*.
It should be noted that relative annual performance was negatively impacted by the timing differentialbetween the Fund’s valuation point and that of the index.
An all-in-one investment management style serviceBlackRock’s Balanced Managed Fund offers a complete all-in-one investment management style thatprovides an effective way to invest in stocks and shares without the worry and time involved in managing yourown portfolio. The Fund aims to generate a long-term total return by balancing capital growth and income.
Financial market conditions during the reporting period have fundamentally differed from thoseprevailing in 2008 In 2008, many asset classes, with the exception of government bonds, delivered significant negativereturns to investors. At that time, the combination of recession, de-leveraging and extreme financialstress had delivered an exceptionally volatile environment. Valuations of risky assets, particularly equitiesand corporate credit, had nevertheless become much more attractive, as investors priced in the potentialfor a deep and extended recession. Subsequently, our active approach to asset allocation has beenrewarding in 2009 and into 2010. It was our belief that the recovery in risk appetites across assets wouldnot be as unified as the decline, and that diversification would return.
The global economy began to “bottom-out” in the spring and, during the second half of the year, clearevidence of recovery emerged, resulting in a global equity market rally. As economic data improved, andthe likelihood of a 1930’s-style depression subsided, we became more positive on the outlook for equities.Increasing the Fund’s equity weighting and making tactical allocations to specific areas, such asemerging markets, has assisted performance.
Policy stimulus has been a key driver of returns The most important driver of the improved macroeconomic environment has been the exceptional degreeof global policy stimulus. This stimulus took a number of forms: increases in budget deficits, support forvulnerable financial institutions, low interest rates, and aggressive central bank purchases of governmentand corporate bonds. Corporate bonds were a significant contributor to the Fund’s performance, followedby continued strong returns from our allocation to convertible bonds, and our exposures to commoditiesand the emerging markets.
Elsewhere, within our diversifying strategies, holdings in the Brevan Howard Macro Hedge Fund and theDexion Absolute Fund have both assisted performance. In addition, after identifying a severe dislocation inthe valuating of dividend futures, we implemented a position in the DJ Euro Stoxx Dividend Future, whichalso proved a key contributor.
The UK equities portfolio is structured to benefit from ongoing global economic recoveryThe Fund’s UK equities portfolio was transitioned, through the start of the reporting period, away from itsearlier defensive bias, towards a more pro-cyclical stance that would benefit from a recovering globaleconomy. We added to the financials sector, particularly to banks and asset managers. We felt banks
14 BlackRock Collective Investment Funds 15
Balanced Managed Portfolio Statementat 31 January 2010
Total Expense RatioTotal Expense Ratio (TER) as at 31 January 2010: 1.5171% (31 January 2009: 1.5347%)
TER reflects the annual operating expenses of the Fund. It does not take into account the impact of any initial or exit charges or transaction-based expenditure i.e. dealing costs. TER is employed as thestandard method of disclosing the effect of charges by most European collective investment schemes.
UK Sterling Denominated Fixed Rate Corporate Bonds – 8.06%; 2009 4.40%£310,000 Alliance & Leicester 6.25% Senior European Medium
Term Notes 27/9/2010 318,890 0.08 £250,000 AT&T 5.875% Senior Notes 28/4/2017 263,468 0.07 £400,000 BAA 5.85% Medium Term Notes 27/11/2015 415,002 0.11 £530,000 Bank Nederlandse Gemeenten 4.5% Medium Term
Notes 20/2/2018 538,498 0.14 £200,000 Barclays Bank 5.75% European Medium Term Notes
17/8/2021 204,797 0.05 £390,000 Barclays Bank 10% Subordinated Medium Term Notes
21/5/2021 502,651 0.13 £620,000 BP Capital Markets 5.75% Guaranteed Medium Term
Notes 26/2/2010 621,825 0.16 £150,000 British Telecommunication 6.625% European Medium
Term Notes 23/6/2017 158,884 0.04 £590,000 Deutsche Telekom International Finance 5.625% Medium
Term Notes 19/7/2013 628,152 0.16 £200,000 Dubai Holding Commercial Operations 6% Medium
Term Notes 1/2/2017 114,500 0.03 £270,000 EDF Energy Networks 5.125% European Medium
Term Notes 11/11/2016 276,097 0.07 £550,000 e.on 6% Guaranteed Medium Term Notes 30/10/2019 590,993 0.15 £500,000 Enel 6.25% Medium Term Notes 20/6/19 537,820 0.14 £300,000 Enterprise Inns 6.5% Bonds 6/12/2018 260,618 0.07 £600,000 European Investment Bank 4.875% Senior Medium
Term Notes 7/9/2016 640,348 0.17 £100,000 Finance for Danish Industry 6% Medium Term Notes 6/2/2012 98,421 0.03 £325,000 GE Capital UK Funding 4.75% Guaranteed European Medium
Term Notes 15/12/2010 333,195 0.09
Holding or Market % ofNominal Value Total
Value Investment £ Net Assets
Balanced Managed Portfolio Statement continued
Mining – 3.27%; 2009 1.91%90,300 Anglo American 2,096,766 0.54
£450,000 Societe Generale 5.75% Perpetual European Medium Term Notes 425,265 0.11
£570,000 Standard Chartered 8.103% Perpetual Step-up Subordinated Bonds 597,280 0.16
£290,000 Suncorp Insurance 6.25% Floating Rate Medium Term Notes 13/6/2027 259,066 0.07
Balanced Managed Portfolio Statement continued
Holding or Market % ofNominal Value Total
Value Investment £ Net Assets
£382,000 Irish Nationwide 3.625% European Medium Term Notes 8/9/2010 385,337 0.10
£200,000 Lehman Brothers 6% Senior Medium Term Notes 25/1/2013 31,500 0.01 £450,000 Lewis (John) 6.375% Bonds 30/1/2012 478,980 0.12 £504,000 Lloyds TSB 7.5% Senior European Medium Term Notes
15/4/2024 577,943 0.15 £47,000 Marks & Spencer 5.875% Senior Medium Term Notes
29/5/2012 49,654 0.01 £300,000 Morgan Stanley 5.375% Bonds 14/11/2013 313,161 0.08 £465,000 National Grid Gas 6% European Medium Term Notes 7/6/2017 499,774 0.13 £300,000 Next 5.875% Bonds 12/10/2016 313,964 0.08 £240,000 Old Mutual 7.125% European Medium Term Notes
19/10/2016 250,236 0.06 £185,000 Roche 5.5% Guaranteed European Medium Term Notes
4/3/2015 198,034 0.05 £370,000 Royal Bank of Scotland 6.375% European Medium Term
Note 29/4/2014 393,225 0.10 £300,000 RWE Finance 5.5% Guaranteed Medium Term Note 6/7/2022 302,628 0.08 £520,000 Scotland Gas Networks 4.75% European Medium Term
Notes 21/2/2017 518,303 0.13 £3,238 Societe Generale Acceptance 0% European Medium Term
Notes 26/2/2012 3,251,276 0.84 £1,262 Societe Generale Acceptance 0% European Medium Term
Notes 26/5/2015 13,528,640 3.51 £1,750 Societe Generale 0% Index Symphony European Medium
Term Notes 12/9/2011 1,918,700 0.50 £220,000 Silverstone 5.063% European Medium Term Notes 21/1/2055 223,048 0.06 £100,000 Telecom Italia 5.625% Notes 29/12/2015 103,869 0.03 £250,000 Tesco 5% Medium Term Notes 20/2/2014 262,575 0.07 £380,000 Tesco 5% Medium Term Notes 24/3/2023 363,850 0.09 £275,000 Vodafone 8.125% Medium Term Notes 26/11/2018 333,489 0.09 £310,000 Wales & West Utilities 5.125% European Medium Term
Notes 2/12/2016 308,798 0.08
31,111,143 8.06
UK Sterling Denominated Fixed Rate Government Bonds – 6.86%; 2009 4.09%£2,840,000 Treasury 2.25% Gilt 2014 2,797,897 0.73
£835,000 Treasury 2.75% Gilt 2005 825,878 0.21 £720,000 Treasury 3.25% Gilt 2011 745,830 0.19
£3,186,000 Treasury 3.75% Gilt 2019 3,121,006 0.81 £2,215,000 Treasury 4% Gilt 2022 2,171,974 0.56 £1,241,000 Treasury 4.5% Gilt 2013 1,326,970 0.34
20 BlackRock Collective Investment Funds 21
Holding or Market % ofNominal Value Total
Value Investment £ Net Assets
KRW7,332,374,000 Open forward currency contract Korean won v Japanese yen 149,132 0.04KRW3,706,102,000 Open forward currency contract Korean won v Japanese yen (63,075) (0.02)KRW7,160,073,000 Open forward currency contract Korean won v Japanese yen 31,369 0.01
MXN42,097,398 Open forward currency contract Mexican peso v Canadian dollar 30,571 0.01
NOK32,500,000 Open forward currency contract Norwegian kroner v Euro 123,778 0.03SEK88,739,624 Open forward currency contract Swedish kronor v
Czech koruna 3,304 – £4,675,456 Open forward currency contract UK sterling v Euro 233,655 0.06
£126,264 Open forward currency contract UK sterling v Euro (397) – £195,761 Open forward currency contract UK sterling v Euro 2,299 – £845,000 Open forward currency contract UK sterling v Euro 24,706 0.01
£2,300,000 Open forward currency contract UK sterling v Japanese yen (1,552) – £102,856 Open forward currency contract UK sterling v US dollar (3,257) –
$6,150,000 Open forward currency contract US dollar v Euro 125,939 0.03$2,949,000 Open forward currency contract US dollar v Euro 28,324 0.01$6,282,000 Open forward currency contract US dollar v Euro 45,129 0.01
$22,157,002 Open forward currency contract US dollar v UK sterling 530,432 0.14
1,165,794 0.31
Futures – 0.52%; 2009 (0.21)%350 DJ Stoxx 600 Health Care March 2010 Futures 200,525 0.05675 FTSE 100 March 2010 Futures (456,840) (0.12)679 FTSE Dividend December 2011 Futures 151,553 0.04679 FTSE Dividend December 2012 Futures 180,750 0.05
1,222 FTSE Dividend December 2013 Futures 363,045 0.0922 Heng Seng February 2010 Futures (26,074) (0.01)
263 Nasdaq 100 E-Mini March 2010 Futures (236,350) (0.06)100 Nikkei 225 (SGX) March 2010 Futures 26,125 0.01
85,700 OTC DB Agricultural Index (154,564) (0.04)151 Russell 2000 Mini March 2010 Futures (47,780) (0.01)
45 S&P E-Mini March 2010 Futures (53,697) (0.01)97 S&P/TSX 60 IX March 2010 Futures (268,818) (0.07)
483 SX5E Dividend December 2012 Futures 2,207,382 0.57120 SX5E Dividend December 2013 Futures 118,567 0.03
Euro Denominated Fixed Rate Corporate Bonds – 0.06%; 2009 0.00%€225,000 GlaxoSmithKline 5.625% Senior Guaranteed European
Medium Term Notes 13/12/2017 220,415 0.06
Euro Denominated Variable Rate Corporate Bonds – 0.20%; 2009 0.00%€358,000 Intesa Capital Trust 6.988% Perpetual Floating Rate Note 305,684 0.08 €950,000 Royal Bank of Scotland 7.0916% Perpetual Floating
Rate Note 448,589 0.12
754,273 0.20
NORTH AMERICA – 0.04%; 2009 0.00%
United States – 0.04%; 2009 0.00%
US Dollar Denominated Fixed Rate Corporate Bonds – 0.02%; 2009 0.00%$100,000 HBOS 6.75% Subordinated Medium Term Note 21/5/2018 61,011 0.02
US Dollar Denominated Variable Rate Corporate Bonds – 0.02%; 2009 0.00%$120,000 BNP Paribas Floating Rate Note 1/11/2015 73,559 0.02
DERIVATIVES – 0.77%; 2009 (0.23)%
Forward currency contracts – 0.31%; 2009 (0.13)%AUD3,505,000 Open forward currency contract Australian dollar v US dollar (44,490) (0.01)AUD3,505,000 Open forward currency contract Australian dollar v US dollar (44,490) (0.01)AUD1,688,000 Open forward currency contract Australian dollar v US dollar (7,731) – CAD3,896,479 Open forward currency contract Canadian dollar v US dollar (11,022) –
€2,070,000 Open forward currency contract Euro v UK sterling (75,950) (0.02)€600,000 Open forward currency contract Euro v UK sterling 519 –
€2,098,066 Open forward currency contract Euro v US dollar (20,473) (0.01)JPY 301,401,975 Open forward currency contract Japanese yen v Korean won 109,074 0.03
22 BlackRock Collective Investment Funds 23
Balanced Managed Portfolio Statement continued
Holding or Market % ofNominal Value Total
Value Investment £ Net Assets
6,854,000 Put Option 2/4/2010 OTC AUD/USD 114,086 0.03(288) Put Option 17/4/2010 S&P 500 1075 (817,773) (0.21)144 Put Option 17/4/2010 S&P 500 1125 654,219 0.17
(225,139) (0.06)
INVESTMENT FUNDS – 43.91%; 2009 48.02%
Alternative – 2.15%; 2009 5.84%347,000 BH Macro 6,169,660 1.60
1,479,026 Dexion Absolute 2,123,881 0.55
8,293,541 2.15
Asia – 5.29%; 2009 4.65%665,136 BGF – Asia Pacific Fund 9,597,922 2.50
95,000 Morgan Stanley China A Share Fund 1,561,595 0.41859,359 BGF – Japan Value Fund 4,614,759 1.20220,078 BGF – Japan Small and Midcap Opportunities Fund 4,551,213 1.18
20,325,489 5.29
Bond – 0.00%; 2009 9.40%1 Morgan Stanley Global Convertible Bond Fund 36 –
United Kingdom – 13.03%; 2009 12.05%5,293,389 BlackRock UK Absolute Alpha Fund 6,463,228 1.68
17,081 BlackRock UK Equity Recovery Fund 2,295,837 0.601,436,608 BlackRock UK Smaller Companies Fund 4,248,052 1.101,481,836 BlackRock UK Special Situations Fund 27,473,252 7.141,854,212 iShares FTSE 100 Fund 9,614,089 2.51
50,094,458 13.03
United States – 5.09%; 2009 6.18%2,198,304 BGF – US Flexible Equity Fund 19,608,871 5.09
Portfolio of investments 357,171,343 92.75Net other assets 27,916,802 7.25
Total net assets 385,088,145 100.00
All investments are ordinary shares unless otherwise stated.
Note: comparative figures show percentages for each category of holding at 31 January 2009.
24 BlackRock Collective Investment Funds 25
31.1.2010 31.1.2009Notes £ £ £ £
IncomeNet capital gains/(losses)
during the year 2 76,672,806 (90,896,044) Revenue 3 9,491,650 10,178,276 Expenses 4 (5,008,475) (5,245,718) Finance costs: Interest 6 (31,606) (1,626)
Net revenue before taxation 4,451,569 4,930,932 Taxation 5 (87,235) (63,259)
Net revenue after taxation for the year 4,364,334 4,867,673
Total return before distributions 81,037,140 (86,028,371) Finance costs: Distributions 6 (4,364,334) (4,867,673)
Change in net assets attributable tounitholders from investment activities £76,672,806 £(90,896,044)
31.1.2010 31.1.2009£ £ £ £
Opening net assets attributableto unitholders 280,048,603 323,412,262
Amounts receivable oncreation of units 36,150,382 61,911,302 Amounts payable on cancellation of units (12,201,563) (19,340,395)
23,948,819 42,570,907 Stamp duty reserve tax (49,045) (51,290) Change in net assets attributable to
unitholders from investment activities 76,672,806 (90,896,044) Retained distribution on accumulation units 4,466,962 5,012,768
Closing net assets attributableto unitholders £385,088,145 £280,048,603
Comparative figures have been restated for the presentation changes following adoption of the Statement of Recommended Practice (“theSORP”) for Authorised Funds issued by the Investment Management Association ("IMA") in November 2008 (see Accounting Policies).
Balanced Managed Statement of Change in Net AssetsAttributable to Unitholders for the year ended 31 January 2010
Balanced Managed Statement of Total Returnfor the year ended 31 January 2010
Balanced Managed Portfolio Turnover
for the year ended for the year ended31.1.2010 31.1.2009
Total purchases for the year £383,548,746 £187,082,700Total sales for the year £349,440,894 £162,890,659Portfolio Turnover Rate 203.57% 85.33%
The Portfolio Turnover Rate (PTR) gives an indication of how much the Fund's investments have changed during the relevant year.
The PTR is calculated by the Manager in accordance with the FSA requirements laid out in COLL 4 Annex 2 R
26 BlackRock Collective Investment Funds 27
Balanced Managed Notes to Financial Statementsat 31 January 2010
1. Accounting PoliciesSee pages 4-5 of Aggregated Accounts.
2. Net Capital Gains/(Losses) on Investments During the Year31.1.2010 31.1.2009
£ £
The net capital gains/(losses) on investments comprise:Gains/(losses) on non-derivative securities 59,658,503 (75,378,408) Gains/(losses) on derivative contracts 13,788,101 (14,814,890) Gains/(losses) on forward currency contracts 3,805,995 (1,376,148) Other currency (losses)/gains (568,132) 676,461 Transaction costs (11,661) (3,059)
Net capital gains/(losses) on investments £76,672,806 £(90,896,044)
3. Revenue31.1.2010 31.1.2009
£ £
UK dividends 4,313,898 4,206,398 Overseas dividends 1,279,026 307,528 Underwriting commission 7,522 –Interest from UK fixed interest securities 2,046,022 2,443,808 Interest from money market deposits 10,736 76,451 Interest from overseas fixed interest securities 433,700 231,266 Interest from UK bank deposits 44,425 820,267 Manager's service charge rebate 1,356,321 2,092,558
Total revenue £9,491,650 £10,178,276
4. Expenses31.1.2010 31.1.2009
£ £
Payable to the Manager or associates of the Manager:– Manager's service charge 4,949,268 5,174,412 – Registrar's fees 40 36 – VAT refund on Registrar's fees (5) (7)
4,949,303 5,174,441
Payable to the Trustee or associates of the Trustee:– Trustee's fees 38,232 37,437
38,232 37,437
Balanced Managed Balance Sheetat 31 January 2010
31.1.2010 31.1.2009Notes £ £
Assets:Investment assets 360,015,891 259,459,618 – Debtors 7 4,166,675 5,797,319 – Cash and bank balances 8 29,781,559 18,844,548
Total other assets 33,948,234 24,641,867 Total assets 393,964,125 284,101,485
Total other liabilities (6,031,432) (1,826,851) Total liabilities (8,875,980) (4,052,882)
Net assets attributable to unitholders £385,088,145 £280,048,603
A J Stenning (Director)E E Tracey (Director)BlackRock Fund Managers Limited23 March 2010
28 BlackRock Collective Investment Funds 29
Balanced Managed Notes to Financial Statements continued
(c) Analysis of deferred tax charge for the year31.1.2010 31.1.2009
£ £
Opening deferred tax balance – –Deferred tax charge for the year [see note 5(a)] 398 –
Closing deferred tax balance £398 –
As at 31 January 2010, the Fund had no surplus management expenses, therefore, a deferred tax asset has not been recognised.
6. Finance CostsThe distributions take account of amounts received on the creation of units and amounts deducted oncancellation of units, and comprise:
31.1.2010 31.1.2009£ £
Interim 3,150,722 2,841,587 Final 1,316,240 2,171,181
4,466,962 5,012,768 Add: Amounts deducted on cancellation of units 45,202 106,807 Less: Amounts received on creation of units (147,830) (251,902)
Net distribution for the year 4,364,334 4,867,673 Finance costs: Interest 31,606 1,626
Total finance costs £4,395,940 £4,869,299
Details of the interim and final distributions per unit are set out in the table on page 39.
7. Debtors31.1.2010 31.1.2009
£ £
Sales awaiting settlement 442,357 3,629,328 Amounts receivable for creation of units 176,300 510,943 Currency sales awaiting settlement 1,957,868 –Income tax recoverable 10,627 11,541 Overseas tax recoverable 14,866 29,331 Manager’s service charge rebate 285,757 359,211 Accrued revenue 1,278,900 1,256,965
Total debtors £4,166,675 £5,797,319
8. Cash and Bank Balances31.1.2010 31.1.2009
£ £
Amount held at futures clearing houses and brokers 6,066,263 5,543,316 Cash and bank balances 23,715,296 13,301,232
Total current tax charge for the year [see Note 5(b)] £86,837 £63,259
Deferred tax charge for the year [see note 5(c)] 398 –
Total tax charge for the year £87,235 £63,259
(b) Factors affecting the current tax charge for the yearThe tax assessed for the period is lower than the standard rate of corporation tax in the UK for anauthorised unit trust. The differences are explained below:
31.1.2010 31.1.2009£ £
Net revenue before taxation 4,451,569 4,930,932
Corporation tax at 20% (2008: 20%) 890,314 986,186 Effects of:Movement in revenue accruals taxable on receipt 1,370 (1,692) Double Tax Relief (7,648) –Franked investment revenue at 20% (769,729) (779,318) Non Taxable overseas dividends (45,197) Overseas tax – 5,712 Utilisation of excess expenses – (205,176) Irrecoverable income tax 17,727 57,547
Total current tax charge for the year [see Note 5(a)] £86,837 £63,259
30 BlackRock Collective Investment Funds 31
3332 BlackRock Collective Investment Funds
Balanced Managed Notes to Financial Statements continued
Risk Impact of risk
Market price risk The valuation of the Fund’s investments are calculated withreference to market prices quoted by financial agencies and brokers.Movements to those market prices may materially affect the value ofthe Fund's investments, which may move down as well as up.
To manage these risks the manager undertakes research tominimise the impact of such movements against the Fund’sinvestment objectives.
Liquidity risk The risk of low market liquidity, through reduced trading volumes,affecting the ability of the Fund to trade financial instruments atvalues previously indicated by financial brokers.
To manage these risks, the Investment Manager undertakes in-depth research of investment opportunities congruent with theFund’s investment objective.
The Fund invests primarily in a global portfolio of equities andfixed interest securities with the emphasis in the UK.
All stocks are valued daily. Stocks identified as being illiquid arereviewed for pricing accuracy as the need arises and on a formalmonthly basis by the BlackRock Pricing Committee.
Interest rate risk Revenue is generated by holding of bonds, which contractuallyoblige the borrower to repay the Fund interest under specific terms.
Changes to interest rate may affect the cash inflows and outflowscalculated with reference to financial assets and financial liabilitiesheld by the Fund.
The manager undertakes research to minimise the impact ofsuch movements against the Fund’s investment objective.
Credit risk The Fund holds bonds issued by companies and governments inorder to achieve its investment objective of maximising the overallreturn to the unitholders.
The borrower receives from the Fund a principal amount. The Fundwill then receive interest based on the coupon rate of the bond andrepayment of the initial principal amount on the bond’s maturity date.
Any impairment to the borrower’s ability to repay amounts duemay result in changes to the tradable value of the bond and theamount to be received upon maturity of the bond. The ability ofthe borrower to repay not only the principal value but also anyinterest due on the bond, referred to as the borrower’s creditrating, is monitored by the Manager.
The Manager may undertake its own research of the borrower’sfinancial position in order to assess the ability of the borrower torepay amounts due.
10. Derivatives and Other Financial Instruments(a) The Fund's financial instruments, comprise securities and other investments, cash balances and
debtors and creditors that arise directly from its operations, for example, in respect of sales andpurchases awaiting settlement, amounts receivable for creations and payable for cancellation ofunits, and debtors for accrued revenue.
The Fund’s property is invested with the aim of achieving the investment objective of total returnby investing mainly in a global portfolio of equities and fixed interest securities with an emphasison in the UK.
The Manager shall take the risks it deems reasonable to meet the investment objective. Theserisks include the following:
Risk Impact of risk
Foreign currency risk The risk of changes to foreign currency rates materially affectingthe Sterling equivalent value of non-Sterling denominated assetsand liabilities accounted for by the Fund.
The Fund is accounted for in Sterling and holds financial assetsand financial liabilities denominated in Australian dollar,Canadian dollar, Czech koruna, Euro, Hong Kong dollar,Hungarian forint, Japanese yen, Mexican peso, New Zealanddollar, Norwegian kroner, Polish zloty, South African rand, SouthKorean won, Swedish krona and US dollar.
To manage these risks, the Fund may enter into forward currencytransactions during the period for the purposes of efficientportfolio management. The value of these transactions as at 31 January 2010, are shown on the Portfolio Statements frompage 17 to page 25.
Balanced Managed Notes to Financial Statements continued
The currency profile held at 31 January 2009 was:
Currency Currency Net Assets/(Liabilities)
Monetary Non- Totalexposures monetary
exposures31.1.2009 31.1.2009 31.1.2009
£ £ £
Euro 15,283 (10,710,880) (10,695,597) Japanese yen – (5,744,049) (5,744,049) South Korean won 85 – 85 UK sterling 18,829,179 283,379,735 302,208,914 US dollar 1 (5,720,751) (5,720,750)
Total £18,844,548 £261,204,055 £280,048,603
(c) Interest Rate Risk Profile of Financial Assets and LiabilitiesThe Interest Rate Risk Profile of Financial Assets and Liabilities at the balance sheet date was as follows :
Australian dollar 111,854 – 4,936,302 5,048,156 Canadian dollar – – 3,896,479 3,896,479 Czech koruna 12 – – 12 Euro 1,095,694 3,428,401 8,661,813 13,185,908 Hungarian forint 26,953 – – 26,953 Japanese yen 5 – 2,104,758 2,104,763 Mexican peso – – 2,007,618 2,007,618 New Zealand dollar 307 – – 307 Norwegian kroner – – 3,436,672 3,436,672 Polish zloty 3,242 – – 3,242 South African rand 52 –South Korean won – – 9,771,292 9,771,292 Swedish krona 206,240 – 7,548,187 7,754,427 UK sterling 36,106,849 57,545,524 291,340,073 384,992,446 US dollar 411,543 61,011 29,309,679 29,782,233
Total £37,962,751 £61,034,936 £363,012,873 £462,010,560
Risk Impact of risk
Counterparty risk The risk of entering an arrangement with a counterparty, which isitself subject to financial risks which may affect its ability to tradeas a going concern.
The Manager maintains a list of approved counterparties. This list is regularly monitored and revised for changes based on thecounterparty’s credit-worthiness, market reputation and expectationsof future financial performance. Transactions will only be openedwith financial intermediaries on the approved counterparties list.
These risks are monitored by the manager in pursuance of the investment objective and policy asset out in the Manager’s Report. Adherence to investment guidelines and to investment andborrowing powers set out in the Trust Deed, the Prospectus and in the rules of the CollectiveInvestment Schemes Sourcebook mitigates the risk of excessive exposure to any particular type of security or issuer. Further information on the investment portfolio is set out in the InvestmentReport and Portfolio Statement.
(b) Currency ExposuresA proportion of the net assets of the Fund are denominated in currencies other than Sterling, withthe effect that the balance sheet and total return can be affected by currency movements.
Currency Currency Net Assets/(Liabilities)
Monetary Non- Totalexposures monetary
exposures31.1.2010 31.1.2010 31.1.2010
£ £ £
Australian dollar 111,854 4,936,302 5,048,156 Canadian dollar – 1,650,614 1,650,614 Czech koruna 12 (7,544,883) (7,544,871) Euro 341,421 (7,416,537) (7,075,116) Hong Kong dollar – (26,074) (26,074) Hungarian forint 26,953 – 26,953 Japanese yen 5 (9,850,661) (9,850,656) Mexican peso – 2,007,618 2,007,618 New Zealand dollar 307 – 307 Norwegian kroner – 3,436,672 3,436,672 Polish zloty 3,242 – 3,242 South African rand 52 – 52 South Korean won – 7,805,047 7,805,047 Swedish krona 206,240 7,548,187 7,754,427 UK sterling 28,753,487 335,399,137 364,152,624 US dollar 337,984 17,361,166 17,699,150
Total £29,781,557 £355,306,588 £385,088,145
34 BlackRock Collective Investment Funds 35
Balanced Managed Notes to Financial Statements continued
Currency Floating Rate Financial TotalFinancial Liabilities not
Liabilities Carrying Interest£ £ £
Euro – (15,803,585) (15,803,585) Japanese yen – (5,744,049) (5,744,049) UK sterling – (2,656,875) (2,656,875) US dollar – (5,959,911) (5,959,911)
This table shows weighted average interest earned on the market value of bonds and will not reflect the yield on the Fund.
There are no material amounts of non-interest bearing financial assets, other than equities, which do not have maturity dates.
The floating rate financial assets and liabilities include: Sterling denominated bank balances which bear interest rates based on 0.125% under the sixmonth LIBOR and overdraft interest based on 3% over the base rate.
All overseas deposits and loans bear interest at rates determined by the relevant Authority.
(d) Fair Value of Financial Assets and Financial LiabilitiesThere is no material difference between the value of the financial assets and liabilities, as shownin the balance sheet, and their fair value.
11. Contingent LiabilitiesPlease see page 10.
12. Investment ManagementPlease see page 10.
13. Related Party TransactionsBlackRock Fund Managers Limited, as Manager and Registrar of the Fund, together with The RoyalBank of Scotland plc, as Trustee, are regarded as related parties to the Fund. BlackRock FundManagers Limited acts as either principal or agent for the Trustee in respect of all transactions ofunits of the Fund. The aggregate monies received through creation and paid through cancellation aredisclosed in the Statement of Change in Net Assets Attributable to Unitholders. Any amounts due toor from BlackRock Fund Managers Limited at the year end are disclosed in Notes 7 and 9.
Currency Floating Rate Financial TotalFinancial Liabilities not Liabilities Carrying Interest
£ £ £
Canadian dollar – (2,245,865) (2,245,865) Czech koruna – (7,544,883) (7,544,883) Euro – (20,261,024) (20,261,024) Hong Kong dollar (26,074) (26,074) Japanese yen – (11,955,419) (11,955,419) South Korean won – (1,966,245) (1,966,245) UK sterling – (20,839,822) (20,839,822) US dollar – (12,083,083) (12,083,083)
Euro 15,283 4,978,050 114,655 5,107,988 South Korean won 85 – – 85 UK sterling 28,633,270 23,711,747 252,520,772 304,865,789 US dollar 1 – 239,160 239,161
Total £28,648,639 £28,689,797 £252,874,587 £310,213,023
36 BlackRock Collective Investment Funds 37
39
Balanced Managed Distribution Tablesfor the year ended 31 January 2010
Final Distribution in Pence per UnitGroup 1 – Units purchased prior to 1 August 2009Group 2 – Units purchased 1 August 2009 to 31 January 2010
† Equalisation applies only to units purchased during the distribution period (Group 2 units). It is the average amount of revenue includedin the purchase price of all Group 2 units and is refunded to holders of these units as a return of capital. Being capital, it is not liable toincome tax but must be deducted from the cost of units for capital gains tax purposes.
38 BlackRock Collective Investment Funds
Balanced Managed Notes to Financial Statements continued
Management fees and registration fees paid to BlackRock Fund Managers Limited and fees paid tothe Trustee are shown in Note 4. The balances due at the year end in respect of these fees are shownin Note 9.
The Fund’s investments in other BlackRock related products were entered into in the normal courseof business and on normal commercial terms.
The aggregate value of these transactions and holdings held by the Fund at the year end are shownon the Portfolio Statement from page 17 to page 25.
Where the management fee of the underlying investments is higher than of the Fund the rate onwhich the rebate is calculated may be greater that charged by the funds. The aggregate value of rebates due at the year end is shown in Debtors on page 31.
At the balance sheet date Scottish Equitable (Managed Funds) Limited held 339,691,486 units (96%) of the total units in the Fund. As Equitable (Managed Funds) are material unitholders in the Fund,they are regarded as a related party in accordance with FRS8 ‘Related Party Disclosures’.
No other transactions were entered into with associates of the Manager during the year.
14. Portfolio Transaction costsAnalysis of total purchase costs:
31.1.2010 31.1.2010 31.1.2009 31.1.2009£ £ £ £
Purchases in year before transaction costs 383,216,042 186,852,143
Commissions and other costs (including stamp duty) 332,704 230,557
Total purchase costs 332,704 230,557
Gross purchases total £383,548,746 £187,082,700
Analysis of total sale costs:£ £ £ £
Gross sales before transaction costs 349,547,308 162,958,535 Commissions and other costs (106,414) (67,876) Total sale costs (106,414) (67,876)
Total sales net of transaction costs £349,440,894 £162,890,659
15. Non Adjusting Post Balance Sheet Event Since the last business day of the accounting period, the Fund's quoted bid price has risen onAccumulation Units from 108.7p to 117.4p as at 15 March 2010, a rise of 8.00%.
All figures quoted are based on bid to bid, dealing prices (the price at which units are sold), with net income reinvested. Performance isshown for complete 12 month periods only. * Performance data does not exist for the relevant periods.
Accumulation The final accumulation payable on 31 March 2010 is 0.4874p net per accumulation unit.
Annual performance to most recent quarter end
31.12.2008 31.12.2007 31.12.2006 31.12.2005 31.12.2004to 31.12.2009 to 31.12.2008 to 31.12.2007 to 31.12.2006 to 31.12.2005*
Continental European +20.1% -25.0% +15.0% +19.1% –
Performance Table
Period of Report Since LaunchOne Year 15.7.2005
to 31.1.2010 to 31.1.2010
The Fund returned:Total Return (with net income reinvested)Accumulation Units +28.2% +27.9%
The Benchmark returned:Total Return (with net income reinvested)FTSE World Europe ex UK† +30.7% +31.1%
This Annual Report covers the year ended 31 January 2010, the first six months of which were commentedon in the Interim Report to 31 July 2009. For a copy, please contact us.
† Source: BlackRock/Factset. Net of withholding tax. Prior to 10 July 2009 the Collective Investment Funds were known as the QualifiedInvestor Schemes. All fund figures quoted are based on bid to bid, dealing prices (the price at which units are sold). Performance iscalculated net of fees.
All financial investments involve an element of risk. Therefore, the value of your investment and theincome from it will vary and your initial investment amount cannot be guaranteed. Changes in exchangerates may cause the value of an investment to fluctuate. Past performance is not a guide to futureperformance and should not be the sole factor of consideration when selecting a product.
BlackRock Continental European Equity Tracker FundBlackRock Continental European Equity Tracker Fund
Continental European Equity Tracker Investment Objective & Policy
The aim of the Fund is to seek to achieve capital growth for investors by tracking closely the performanceof the FTSE Continental Europe Index by investing in companies in the Index. Investment will be madedirectly into constituent companies and via other transferable securities giving exposure to suchcompanies. The Fund may also invest in permitted money market instruments, permitted deposits, andunits in collective investment schemes. Derivatives and forward transactions may be used for hedgingpurposes and meeting the investment objectives of the Fund. The scheme property of the Fund will in allcases be restricted to investment in property which is eligible as a permitted link in IPRU (INS), or suchother equivalent rules as may replace them from time to time.
The Fund is a sub-fund of BlackRock Collective Investment Funds , a UCITS scheme established underthe Financial Services Authority's Collective Investment Schemes Sourcebook "the Sourcebook". Prior to 10 July 2009 the Collective Investment Funds were known as the Qualified Investor Schemes (1). TheFund was authorised by the FSA on 21 June 2005 and subsequently launched on 15 July 2005. The Fundwas previously known as Merrill Lynch Continental European Equity Tracker Fund. It adopted its presentname with effect from 28 April 2008.
40 BlackRock Collective Investment Funds 41
Continental European Equity Tracker Performance Record
Net Asset Value
At Net Asset Net Asset31 January Units in Issue Value of Fund Value per Unit
Total Expense RatioTotal Expense Ratio (TER) as at 31 January 2010: 0.2289% (31 January 2009: 0.2429%)
TER reflects the annual operating expenses of the Fund. It does not take into account the impact of any initial or exit charges or transaction-based expenditure i.e. dealing costs. TER is employed as thestandard method of disclosing the effect of charges by most European collective investment schemes.
Continental European Equity Tracker Investment Report
The Fund met its objective of tracking the benchmarkOver 12 months to 31 January 2010, the BlackRock Continental European Equity Tracker Fund met itsobjective of closely tracking the FTSE World Europe ex-UK index, returning 28.2%* versus the benchmarkreturn of 30.7%*.
Here, we focus on the second six months of the period, during which time the Fund returned 9.9%* andthe benchmark returned 11.0%*.
It should be noted that relative annual performance was negatively impacted by the timing differentialbetween the Fund’s valuation point and that of the index.
Investing in Continental European companies to match the FTSE World Europe ex-UK indexThe Fund seeks to achieve capital growth for investors by tracking closely the performance of the FTSEWorld Europe ex-UK index. Investment will be made directly into constituent companies and via othertransferable securities giving exposure to such companies.
Global equities rallied from lows struck in March 2009, recording strong gains over six and 12 monthsFollowing a difficult 2008, global equity markets continued to decline into the first quarter of 2009, amidfears that the global financial system was on the brink of collapse and that the world was entering anotherGreat Depression. Uncertainty surrounded the intentions of governments and global policymakers, butsuch concerns began to dissipate as investors witnessed huge global monetary and fiscal stimuli, whichreflated economic activity and forced share prices sharply higher from troughs reached in March. Despitenegative real economic growth across the entire developed world, coupled with noticeable earnings declines,“risk” assets managed to outperform “safe” assets in 2009 as a whole, as sidelined cash, which wasproducing near-zero returns, began to move back into the markets.
The pace of the rally slowed somewhat into the end of the year, and markets subsequently sold off inJanuary 2010, as risk aversion increased on two key developments, namely the tightening in monetaryconditions in China and, more importantly, further tensions in sovereign bond markets, particularlyGreece. However, the six months to the end of January saw strong equity gains overall, as measured bythe MSCI Global Equity index, and the period ended with a perception that the economic recovery is hereto stay, albeit with some lingering investor unease.
Strong performance for most of the period from Europe, a region in expansionary territory European equities rose in line with the broader global indices during the six-month period, in recordingdouble-digit gains. The healthcare, industrials, consumer staples and materials sectors led the markethigher at this time, while financials, telecoms and utilities were the relative laggards. January 2010 saw a disappointing start to the New Year in terms of performance, as European news flow was dominated byfears of the debt crisis and possible bailout of Greece.
Elsewhere, European economic data continued to consolidate. Business sentiment generally remains inan upward trend, with the German Ifo and European Commission surveys confirming this improvement.There were mixed signs coming from overall activity late in the period, with German industrial productionand retail sales data a little behind expectations. However, the region appears to be in expansionaryterritory overall.
* Performance figures quoted are based on bid to bid, dealing prices (the price at which units are sold) and are not the same as the net assetvalue reported in the financial statements which is at close of business. Performance is calculated net of fees.
Continental European Equity Tracker Portfolio Statement continued
Holding or Market % ofNominal Value Total
Value Investment £ Net Assets
Sweden – 5.33%; 2009 4.04%59,769 Alfa Laval 514,170 0.0968,483 Assa Abloy Series 'B' Shares 748,059 0.13
116,719 Atlas Copco Series 'A' Shares 1,002,106 0.1772,925 Atlas Copco Series 'B' Shares 556,677 0.1051,113 Boliden 433,840 0.0755,910 Electrolux Series 'B' Shares 836,950 0.14
566,983 Ericsson Series 'B' Shares 3,508,746 0.6156,003 Hennes & Mauritz Series 'B' Shares 2,082,763 0.3682,152 Hisqvarna Series 'B' Shares 352,663 0.0611,043 Holmen Series 'B' Shares 167,093 0.0348,574 Industrivarden Series 'A' Shares 358,199 0.0620,380 Industrivarden Series 'C' Shares 141,626 0.0284,376 Investor Series 'B' Shares 938,878 0.16
750,651 Nordea Bank 4,370,983 0.75228,626 Sandvik 1,578,091 0.27
74,717 Scania Series 'B' Shares 581,154 0.1065,084 Securitas Series 'B' Shares 397,790 0.07
396,907 Skandiaviska Enskilda Series 'A' Shares 1,494,999 0.2673,971 Skanska Series 'B' Shares 723,748 0.1280,166 SKF 'B' Shares 783,680 0.1444,999 SSAB Series 'A' Shares 462,466 0.0814,759 SSAB Series 'B' Shares 138,509 0.02
110,066 Svenska Cellulosa Series 'B' Shares 936,565 0.16115,311 Svenska Handelsbkn Series 'A' Shares 1,903,577 0.33132,119 Swedbank Series 'A' Shares 726,080 0.13
47,708 Swedish Match 630,626 0.1175,821 Tele2 Series 'B' Shares 675,463 0.12
409,913 Teliasonera 1,737,727 0.30126,387 Volvo Series 'A' Shares 669,868 0.12270,724 Volvo Series 'B' Shares 1,446,381 0.25
during the year 2 101,722,594 (130,177,676) Revenue 3 14,982,209 16,145,577 Expenses 4 (1,028,956) (923,048) Finance costs: Interest 6 (33,115) (6,462)
Net revenue before taxation 13,920,138 15,216,067 Taxation 5 (2,533,019) (3,037,568)
Net revenue after taxation for the year 11,387,119 12,178,499
Total return before distributions 113,109,713 (117,999,177) Finance costs: Distributions 6 (11,230,399) (12,178,499)
Change in net assets attributable tounitholders from investment activities £101,879,314 £(130,177,676)
31.1.2010 31.1.2009£ £ £ £
Opening net assets attributableto unitholders 311,853,632 378,973,679
Amounts receivable oncreation of units 233,111,479 130,025,915
Amounts payable on cancellation of units (80,012,611) (79,533,176)
153,098,868 50,492,739 Stamp duty reserve tax (28) –Change in net assets attributable to
unitholders from investment activities 101,879,314 (130,177,676) Retained distribution on accumulation units 12,609,733 12,564,890
Closing net assets attributableto unitholders £579,441,519 £311,853,632
Comparative figures have been restated for the presentation changes following adoption of the Statement of Recommended Practice (“the SORP”) for Authorised Funds issued by the Investment Management Association (“IMA”) in November 2008 (see Accounting PoliciesNote 1(a)).
Continental European Equity Tracker Statement of Change inNet Assets Attributable to Unitholders for the year ended 31 January 2010
Continental European Equity Tracker Statement of Total Return for the year ended 31 January 2010
Continental European Equity Tracker Portfolio Turnover
for the year ended for the year ended31.1.2010 31.1.2009
Total purchases for the year £196,827,071 £126,998,146Total sales for the year £44,661,030 £63,535,072Portfolio Turnover Rate (16.30)% (5.53)%
The Portfolio Turnover Rate (PTR) gives an indication of how much the Fund's investments have changed during the relevant year.
The PTR is calculated by the Manager in accordance with the FSA requirements laid out in COLL 4 Annex 2 R
56 BlackRock Collective Investment Funds 57
Continental European Equity Tracker Notes to Financial Statementsat 31 January 2010
1. Accounting PoliciesSee pages 4-5 of Aggregated Accounts.
2. Net Capital Gains/(Losses) on Investments During the Year31.1.2010 31.1.2009
£ £
The net capital gains/(losses) on investments comprise:Gains/(losses) on non-derivative securities 99,913,286 (127,337,120) Gains/(losses) on derivative contracts 2,808,049 (3,666,074) Gains on forward currency contracts 126,456 200,489 Other currency (losses)/gains (1,047,020) 647,218 Transaction costs (78,177) (22,189)
Net capital gains/(losses) on investments £101,722,594 £(130,177,676)
3. Revenue31.1.2010 31.1.2009
£ £
Overseas Dividends 14,792,478 15,940,835 Stock dividends 156,720 –Interest from UK bank deposits 33,011 204,742
Total revenue £14,982,209 £16,145,577
4. Expenses31.1.2010 31.1.2009
£ £
Payable to the Manager or associates of the Manager:– Manager's service charge 899,158 760,067 – Registrar's fees 153 162 – VAT refunds on Registrar's fees (14) (17)
899,297 760,212
Payable to the Trustee or associates of the Trustee:– Trustee's fees 50,481 44,969
Total other liabilities (985,056) (5,642,915) Total liabilities (1,785,956) (6,335,072)
Net assets attributable to unitholders £579,441,519 £311,853,632
A J Stenning (Director)E E Tracey (Director)BlackRock Fund Managers Limited23 March 2010
58 BlackRock Collective Investment Funds 59
6. Finance CostsThe distributions take account of amounts received on the creation of units and amounts deducted oncancellation of units, and comprise:
31.1.2010 31.1.2009£ £
Interim 10,314,035 10,335,920 Final 2,295,698 2,228,970
12,609,733 12,564,890
Add: Amounts deducted on cancellation of units 395,855 755,890 Less: Amounts received on creation of units (1,775,189) (1,142,281)
Net distribution for the year 11,230,399 12,178,499 Finance costs: Interest 33,115 6,462
Total finance costs 11,263,514 12,184,961
Net revenue after taxation for the year 11,387,119 12,178,499 Less: non distributable stock dividends (156,720) –
Net distribution for the year £11,230,399 £12,178,499
Details of the interim and final distributions per unit are set out in the table on page 68.
7. Debtors31.1.2010 31.1.2009
£ £
Amounts receivable for creation of units 2,005,876 537,214 Currency sales awaiting settlement 346,966 –Overseas tax recoverable 1,617,404 1,253,585 Accrued revenue – 15,219
Total debtors £3,970,246 £1,806,018
8. Cash and Bank Balances31.1.2010 31.1.2009
£ £
Amount held at futures clearing houses and brokers 2,749,079 1,865,755 Cash and bank balances 14,961,929 5,989,609
Cash and bank balances £17,711,008 £7,855,364
Continental European Equity Tracker Notes to Financial Statementscontinued
5. Taxation(a) Analysis of tax charge in the year
31.1.2010 31.1.2009£ £
Corporation tax 2,095,355 3,004,449 Overseas tax 1,840,224 2,073,390 Double taxation relief (1,388,341) (2,078,437) Prior year adjustment in respect of corporation tax 4,140 (888)
Total current tax charge for the year [see Note 5(b)] £2,551,378 £2,998,514
Deferred tax (credit)/charge for the year [see note 5(c)] (18,359) 39,054
Total tax charge for the year £2,533,019 £3,037,568
(b) Factors affecting the current tax charge for the yearThe tax assessed for the year is lower than the standard rate of corporation tax in the UK for anauthorised unit trust. The differences are explained below:
31.1.2010 31.1.2009£ £
Net revenue before taxation 13,920,138 15,216,067
Corporation tax at 20% (2009: 20%) 2,784,028 3,043,214 Effects of:Movement in revenue accruals taxable on receipt 21,045 (39,959) Non taxable overseas dividends (680,669) – Non taxable stock dividends (31,344) – Overseas tax 1,842,519 2,074,584 Adjustment in respect of prior years corporation tax 4,140 (888) Double Tax Relief (1,388,341) (2,078,437)
Total current tax charge for the year [see Note 5(a)] £2,551,378 £2,998,514
(c) Analysis of deferred tax charge for the year31.1.2010 31.1.2009
£ £
Opening deferred tax balance 51,675 12,621 Deferred tax (credit)/charge for the year [see note 5(a)] (18,359) 39,054
Closing deferred tax balance £33,316 £51,675
As at 31 January 2010, the Fund had no surplus management expenses, therefore, a deferred tax asset has not been recognised.
60 BlackRock Collective Investment Funds 61
Risk Impact of risk
Market price risk The valuation of the Fund’s investments are calculated withreference to market prices quoted by financial agencies andbrokers. Movements to those market prices may materially affectthe value of the Fund’s investments, which may move down aswell as up. The Manager undertakes research to minimise theimpact of such movements against the Fund’s investmentobjective.
Liquidity risk The risk of low market liquidity, through reduced trading volumes,affecting the ability of the Fund to trade financial instruments atvalues previously indicated by financial brokers.
To manage these risks, the Investment Manager undertakesresearch of investment opportunities to select opportunitiescongruent with the Fund’s investment objective.
The Fund invests primarily in companies incorporated or listed inContinental Europe (including Scandinavia) and the Republic ofIreland, which are normally considered to be areas operating with high levels of liquidity. From time to time, however, marketliquidity may be affected by economic events.
All stocks are valued daily. Stocks identified as illiquid arereviewed for pricing accuracy as the need arises and on a formal monthly basis by the BlackRock Pricing Committee.
Counterparty risk The risk of entering an arrangement with a counterparty, which isitself subject to financial risks which may affect its ability to tradeas a going concern.
The Manager maintains a list of approved counterparties. This list is regularly monitored and revised for changes based on the counter-party’s credit worthiness, market reputation andexpectations of future financial performance. Transactions willonly be opened with financial intermediaries on the approvedcounterparties list.
These risks are monitored by the Manager in pursuance of the investment objective and policy as set out in this Manager's Report. Adherence to investment guidelines and to investment andborrowing powers set out in the Trust Deed, the Prospectus and in the rules of the CollectiveInvestment Schemes Sourcebook mitigates the risk of excessive exposure to any particular type of security or issuer. Further information on the investment portfolio is set out in the InvestmentReport and Portfolio Statement.
Continental European Equity Tracker Notes to Financial Statementscontinued
10. Derivatives and Other Financial Instruments(a) The Fund’s financial instruments, comprise securities and other investments, cash balance and
debtors and creditors that arise directly from its operations, for example, in respect of sales andpurchases awaiting settlement, amounts receivable for creations and payable for cancellation ofunits, and debtors for accrued revenue.
The Fund’s property is invested with the aim of achieving the investment objective of capitalgrowth by tracking closely the performance of the FTSE World Europe ex-UK Index by investing in companies in the Index.
The Manager shall take the risks it deems reasonable to meet the investment objective. Theserisks include the following:
Risk Impact of risk
Foreign currency risk The risk of changes to foreign currency rates materially affectingthe Sterling equivalent value of non-Sterling denominated assetsand liabilities accounted for by the Fund.
The Fund is accounted for in Sterling and holds financial assetsand financial liabilities denominated in Danish krone, Euro,Hungarian forint, Norwegian kroner, Polish zloty, Swedish krona,Swiss franc and US dollar.
To manage these risks, the Fund has entered into forwardcurrency transactions during the year. At 31 January 2010 no forward currency contracts have been entered into.
62 BlackRock Collective Investment Funds 63
(c) Interest Rate Risk Profile of Financial Assets and LiabilitiesThe Interest Rate Risk Profile of Financial Assets and Liabilities at 31 January 2010 was as follows :
Danish krone 218,618 – 13,276,693 13,495,311 Euro 13,433,703 – 406,958,172 420,391,875 Hungarian forint 27,263 – 2,454,849 2,482,112 Norwegian kroner 172,787 – 11,188,219 11,361,006 Polish zloty 1 – 4,788,872 4,788,873 Swedish krona 1,032,600 – 30,899,477 31,932,077 Swiss franc 2,797,340 – 91,944,309 94,741,649 UK sterling 22,247 – 2,005,876 2,028,123 US dollar 6,449 – – 6,449
Total £17,711,008 £0 £563,516,467 £581,227,475
Currency Floating Rate Financial TotalFinancial Liabilities not Liabilities Carrying Interest
£ £ £
Euro – (754,383) (754,383) Swedish krona – (14,638) (14,638) Swiss franc – (31,879) (31,879) UK sterling – (985,056) (985,056)
Total £0 £(1,785,956) £(1,785,956)
Continental European Equity Tracker Notes to Financial Statementscontinued
(b) Currency ExposuresA proportion of the net assets of the Fund are denominated in currencies other than sterling, withthe effect that the balance sheet and total return can be affected by currency movements.
Currency Currency Net AssetsMonetary Non- Total
exposures monetaryexposures
31.1.2010 31.1.2010 31.1.2010£ £ £
Danish krone 218,618 13,276,693 13,495,311 Euro 13,433,703 406,203,789 419,637,492 Hungarian forint 27,263 2,454,849 2,482,112 Norwegian kroner 172,787 11,188,219 11,361,006 Polish zloty 1 4,788,872 4,788,873 Swedish krona 1,032,600 30,884,839 31,917,439 Swiss franc 2,797,340 91,912,430 94,709,770 UK sterling 22,247 1,020,820 1,043,067 US dollar 6,449 – 6,449
Total £17,711,008 £561,730,511 £579,441,519
The currency profile held at 31 January 2009 was:
Currency Currency Net Assets/(Liabilities)
Monetary Non- Totalexposures monetary
exposures31.1.2009 31.1.2009 31.1.2009
£ £ £
Danish krone 28,025 6,727,462 6,755,487 Euro 4,449,097 226,126,450 230,575,547 Hungarian forint 3,214 823,571 826,785 Norwegian kroner 25,097 4,842,846 4,867,943 Polish zloty 824 1,686,420 1,687,244 Swedish krona 234,798 12,618,226 12,853,024 Swiss franc 469,850 54,073,709 54,543,559 UK sterling 2,644,455 (2,861,231) (216,776) US dollar 4 (39,185) (39,181)
Total £7,855,364 £303,998,268 £311,853,632
64 BlackRock Collective Investment Funds 65
(e) Risk AnalysisNo further numerical analysis has been given as there were no derivatives of a material natureheld by the Fund during the year.
11. Contingent LiabilitiesPlease see page 10.
12. Investment ManagementPlease see page 10.
13. Related Party TransactionsBlackRock Fund Managers Limited, as Manager and Registrar of the Fund, together with The RoyalBank of Scotland plc, as Trustee, are regarded as related parties to the Fund. The Manager acts aseither principal or agent for the Trustee in respect of all transactions of units of the Fund. The aggregatemonies received through creation and paid through cancellation are disclosed in the Statement ofChange in Net Assets Attributable to Unitholders. Any amounts due to or from the Manager at theyear end are disclosed in Notes 7 and 9.
Management fees and registration fees paid to BlackRock Fund Managers Limited and fees paid to theTrustee are shown in Note 4. The balances due at the year end in respect of these fees are shown in Note 9.
At the balance sheet date Nutraco Nominees Limited held 405,323,668 units (86%) of the total units inthe Fund. As Nutraco Nominees Limited is a material unitholder in the Fund, it is regarded as arelated party in accordance with FRS8 ‘Related Party Disclosures’.
No other transactions were entered into with associates of the Manager during the year.
14. Portfolio Transaction costsAnalysis of total purchase costs:
31.1.2010 31.1.2010 31.1.2009 31.1.2009£ £ £ £
Purchases in year before transaction costs 196,759,640 126,948,576
Commissions and other costs (including stamp duty) 67,431 49,570
Total purchase costs 67,431 49,570
Gross purchases total £196,827,071 £126,998,146
Analysis of total sale costs:£ £ £ £
Gross sales before transaction costs 44,679,661 63,559,739 Commissions and other costs (18,631) (24,667) Total sale costs (18,631) (24,667)
Total sales net of transaction costs £44,661,030 £63,535,072
15. Non Adjusting Post Balance Sheet Event Since the last business day of the accounting period, the Fund's quoted mid price has risen onAccumulation Units from 123.0p to 136.1p as at 15 March 2010, a rise of 10.65%.
The Interest Rate Risk Profile of Financial Assets and Liabilities as at 31 January 2009 was as follows:
Danish krone 28,025 – 6,781,299 6,809,324 Euro 4,449,097 – 242,335,726 246,784,823 Hungarian forint 3,214 – 844,393 847,607 Norwegian kroner 25,097 – 4,980,545 5,005,642 Polish zloty 824 – 1,687,417 1,688,241 Swedish krona 234,798 – 13,049,553 13,284,351 Swiss franc 469,850 – 58,138,031 58,607,881 UK sterling 2,644,455 – 16,526,123 19,170,578 US dollar 4 – – 4
Total £7,855,364 £0 £344,343,087 £352,198,451
Currency Floating Rate Financial TotalFinancial Liabilities not
Liabilities Carrying Interest£ £ £
Danish krone – (53,837) (53,837) Euro – (16,209,276) (16,209,276) Hungarian forint – (20,822) (20,822) Norwegian kroner – (137,699) (137,699) Polish zloty – (997) (997) Swedish krona – (431,327) (431,327) Swiss franc – (4,064,322) (4,064,322) UK sterling – (19,387,354) (19,387,354) US dollar – (39,185) (39,185)
Total £0 £(40,344,819) £(40,344,819)
There are no material amounts of non–interest bearing financial assets, other than equities, which do not have maturity dates.
The floating rate financial assets and liabilities includes: Sterling denominated bank balances which bear interest rates based on 0.125% under the sixmonth LIBOR and overdraft interest based on 3% over the base rate.
All overseas deposits and loans bear interest at rates determined by the relevant Authority.
(d) Fair Value of Financial Assets and Financial LiabilitiesThere is no material difference between the value of the financial assets and liabilities, as shownin the balance sheet, and their fair value.
Continental European Equity Tracker Notes to Financial Statementscontinued
66 BlackRock Collective Investment Funds 67
Continental European Equity Tracker Distribution Tables for the year ended 31 January 2010
Final Distribution in Pence per UnitGroup 1 – Units purchased prior to 1 August 2009Group 2 – Units purchased 1 August 2009 to 31 January 2010
† Equalisation applies only to units purchased during the distribution period (Group 2 units). It is the average amount of revenue includedin the purchase price of all Group 2 units and is refunded to holders of these units as a return of capital. Being capital, it is not liable toincome tax but must be deducted from the cost of units for capital gains tax purposes.
The aim of the Fund is to seek to achieve capital growth for investors by tracking closely the performanceof the FTSE All-World Emerging Index by investing in companies in the Index. Investment will be madedirectly into constituent companies and via other transferable securities giving exposure to suchcompanies. The Fund may also invest in permitted money market instruments, permitted deposits, and units in collective investment schemes. Derivatives and forward transactions may be used for thepurposes of efficient portfolio management.
The Fund is a sub-fund of BlackRock Collective Investment Funds, a UCITS scheme established underthe Financial Services Authority's Collective Investment Schemes Sourcebook "the Sourcebook". Prior to10 July 2009 the Collective Investment Funds were known as the Qualified Investor Schemes (1). The Fundwas authorised by the FSA on 27 October 2009 and it was launched on 20 November 2009.
68 BlackRock Collective Investment Funds 69
Emerging Markets Equity Tracker Investment Report
Performance Table
Since Launch20.11.2009
The Fund returned:Total Return (with net income reinvested)Accumulation Units -4.6%
The Benchmark returned:Total Return (with net income reinvested)FTSE All World Emg Mkts (Net)† -0.6%
This Annual Report covers the year ended 31 January 2010, the first six months of which were commentedon in the Interim Report to 31 July 2008. For a copy, please contact us.
† Source: CAPS. Net of withholding tax. All fund figures quoted are based on bid to bid, dealing prices (the price at which units are sold).Performance is calculated net of fees.
All financial investments involve an element of risk. Therefore, the value of your investment and theincome from it will vary and your initial investment amount cannot be guaranteed. Changes in exchangerates may cause the value of an investment to fluctuate. Past performance is not a guide to futureperformance and should not be the sole factor of consideration when selecting a product.
AccumulationThe final accumulation payable on 31 March 2010 is 0.1473p net per accumulation unit.
BlackRock Emerging Markets Equity Tracker Fund
The Fund met its objective of tracking the benchmarkThe BlackRock Emerging Market Equity Tracker Fund launched on 20 November 2009 and, in the period to 31 January 2010, returned -4.6%*. By comparison, the Fund’s FTSE All World Emerging indexbenchmark returned -0.6%*, with relative performance impacted by the costs associated with the Fund’s launch and the construction of the Fund’s investment portfolio.
It should be noted that relative performance was negatively impacted by the timing differential betweenthe Fund’s valuation point and that of the index.
Investing in Emerging Market companies to match the FTSE All World Emerging indexThe Fund seeks to achieve capital growth for investors by tracking closely the performance of the Fund’sFTSE All World Emerging index. Investment will be made directly into constituent companies and viaother transferable securities giving exposure to such companies. In the period since the Fund’s inception,relative performance has been impacted by the costs associated with the Fund’s launch and theconstruction of the Fund’s investment portfolio as well as restrictions on investment for the Fund. TheFund is gradually being positioned to a tracker fund. Currently, the Fund does not invest in all securities,or have exposure to all markets. The Fund looks to replicate the risks and return of the benchmarkthough it is not a pure index Fund.
* Performance figures quoted are based on bid to bid, dealing prices (the price at which units are sold) and are not the same as the net assetvalue reported in the financial statements which is at close of business. Performance is calculated net of fees.
70 BlackRock Collective Investment Funds 71
Emerging Markets Equity Tracker Portfolio Statementat 31 January 2010
Total Expense Ratio*Total Expense Ratio (TER) as at 31 January 2010: 0.3203%
TER reflects the annual operating expenses of the Fund. It does not take into account the impact of anyinitial or exit charges or transaction-based expenditure i.e. dealing costs. TER is employed as thestandard method of disclosing the effect of charges by most European collective investment schemes.
* Annualised
72 BlackRock Collective Investment Funds 73
Emerging Markets Equity Tracker Portfolio Statement continued
4,233,488 Bank of China 1,272,350 1.22690,000 Bank of Communications 436,375 0.42
7,000 BYD 32,007 0.03323,180 China Agri-Industries 277,365 0.27864,462 China CITIC 361,926 0.35499,801 China Coal 477,145 0.46556,606 China Communication Construction 322,940 0.31
4,501,000 China Construction Bank 2,159,334 2.07398,000 China COSCO 296,802 0.28174,000 China Everbright 256,999 0.25532,000 China Life Insurance 1,481,328 1.42420,000 China Longyuan Power 323,671 0.31316,703 China Merchants Bank 458,101 0.44199,100 China Minsheng 123,676 0.12390,500 China Mobile (Hong Kong) 2,314,300 2.23177,243 China National BUI 183,736 0.18432,000 China Overseas Land 479,765 0.46
44,000 China Pacific Insurance 102,008 0.10490,000 China Petroleum & Chemical 240,194 0.23608,000 China Railway 273,608 0.26388,000 China Railway Construction 304,935 0.29100,000 China Resources Land 113,146 0.11224,000 China Resources Power 270,367 0.26164,500 China Shenhua Energy 441,518 0.42936,000 China Shipping 221,136 0.21100,000 China Telecom 25,956 0.02582,000 China Unicom 410,633 0.39919,000 CNOOC 818,261 0.78214,000 Cosco Pacific 195,701 0.19702,000 Denway Motors 250,470 0.24194,000 Dongfeng Motor 158,703 0.15
1,010,000 Guangzhou Investments 152,586 0.15630,000 Huaneng Power 221,744 0.21
2,804,154 Industrial and Commercial Bank of China 1,282,185 1.23836,000 PetroChina 590,516 0.57137,500 Ping An Insurance 672,357 0.64533,000 Sino-Ocean Land 271,124 0.26
Indonesia – 2.18%223,016 Antam 31,259 0.03246,000 Astra 590,271 0.57646,500 Bumi Resources 105,719 0.10
1,562,500 Perusahaan Gas 391,083 0.38710,500 Rakyat Bank 358,037 0.34201,000 Semen Gresik 106,655 0.10602,500 Telekomunikasi 375,998 0.36281,500 United Tractors 314,710 0.30
2,273,732 2.18
Malaysia – 3.82%391,100 AmBank 347,753 0.33549,200 Axiata 328,567 0.32324,100 CIMB Bank 748,315 0.73572,300 Gamuda 288,988 0.28291,500 Genting Berhad 373,321 0.36567,513 IOI Group 531,609 0.51
86,200 Maybank 106,926 0.1082,900 Public Bank Berhad 180,184 0.17
358,447 Puncak Niaga 184,280 0.18314,359 Sime Darby 490,018 0.47264,400 Tenaga Nasional 386,021 0.37
14,300 Bevidas das Americas 824,991 0.79167,274 BM&FBOVESPA Exchange 710,107 0.68
16,465 Cemig Energy Preference 172,134 0.1732,052 Cesp Energy Preference 'B' Shares 251,076 0.2431,300 Cia Concessoes Rodoviarias 419,811 0.40
6,000 Cia Paranaense de Energia Preference 'B' Shares 77,113 0.0777,900 Cia Vale Rio Doce 1,270,580 1.22
129,600 Cia Vale Rio Doce Preference 'A' Shares 1,821,237 1.7624,549 Cosan SA Industria 174,373 0.1744,000 Cyrela Brazil 317,524 0.3094,450 Embraer Empresa Brasileira de Aeronautica 314,655 0.3041,400 Gerdau SA Siderurgia Preference 349,844 0.34
187,500 Itau SA Investimentos 702,179 0.6745,894 JBS 142,945 0.1434,018 Light 282,812 0.2751,400 Lojas Americanas Preference Shares 226,772 0.2235,865 Naspers 800,949 0.7742,400 Natura Cosmeticos 479,893 0.4613,157 Net servicos de communicacia 95,649 0.09
100,473 OGX Petroleo e Gas Participacoes 562,893 0.5421,300 Pao de Acucar Preference 'A' Shares 449,270 0.4341,769 Perdigao 628,896 0.60
239,300 Petrol Brasileiro Petrobas Sponsored Preference Shares 2,726,809 2.62125,500 Petrol Brasileiros 1,599,563 1.53
4,149 Redecard 36,458 0.03
Holding or Market % ofNominal Value Total
Value Investment £ Net Assets
76 BlackRock Collective Investment Funds 77
Emerging Markets Equity Tracker Portfolio Statement continued
42,100 Siderurgica Nacional 772,168 0.7416,625 TAM Preference 'A' Shares 191,104 0.1827,900 Tele Norte Leste Preference 'A' Shares 312,615 0.3034,700 Usiminas Siderúrgicas de Minas Gerais Preference
'A' Shares 573,955 0.55
20,992,919 20.12
Columbia – 0.88% 3,323 Almacenes Exito 19,338 0.02
Total purchases for the period £123,994,976Total sales for the period £22,911,104Portfolio Turnover Rate 3.29%
The Portfolio Turnover Rate (PTR) gives an indication of how much the Fund's investments have changed during the relevant period.
The PTR is calculated by the Manager in accordance with the FSA requirements laid out in COLL 4 Annex 2 R
80 BlackRock Collective Investment Funds 81
Emerging Markets Equity Tracker Notes to Financial Statementsat 31 January 2010
1. Accounting PoliciesSee pages 4-5 of Aggregated Accounts.
2. Net Capital Losses on Investments During the Periodfor the period 20.11.2009 - 31.1.2010
£
The net capital losses on investments comprise:Losses on non-derivative securities (4,531,883) Losses on derivative contracts (22,655) Losses on forward currency contracts (49) Other currency losses (13,524) Transaction costs (3,312)
Net capital losses on investments £(4,571,423)
3. Revenuefor the period 20.11.2009 - 31.1.2010
£
Overseas dividends 216,616 Interest from UK bank deposits 3,883
Total revenue £220,499
4. Expensesfor the period 20.11.2009 - 31.1.2010
£
Payable to the Manager or associates of the Manager:– Manager's service charge 38,241 – Registrar's fees 2
38,243
Payable to the Trustee or associates of the Trustee:– Trustee's fees 2,220
Total other liabilities (14,337,712) Total liabilities (14,516,121)
Net assets attributable to unitholders £104,271,429
A J Stenning (Director)E E Tracey (Director)BlackRock Fund Managers Limited23 March 2010
82 BlackRock Collective Investment Funds 83
Emerging Markets Equity Tracker Notes to Financial Statementscontinued
5. Taxation(a) Analysis of tax charge in the period
for the period 20.11.2009 - 31.1.2010£
Overseas tax 10,400
Total current tax charge for the period [see Note 5(b)] £10,400
(b) Factors affecting the current tax charge for the periodThe tax assessed for the period is lower than the standard rate of corporation tax in the UK for anauthorised unit trust. The differences are explained below:
for the period 20.11.2009 - 31.1.2010£
Net revenue before taxation 157,574
Corporation tax at 20% 31,515 Effects of:Excess expenses for which no tax relief taken 3,961 Expenses not deductible for Tax purposes 615 Overseas tax 8,680 Non taxable overseas dividends (34,371)
Total current tax charge for the period [see Note 5(a)] £10,400
As at 31 January 2010 the Fund has surplus management expenses of £19,804. It is unlikely that the Fund will generate sufficienttaxable profits in the future to utilise these expenses and, therefore, a deferred tax asset of £3,961 has not been recognised.
6. Finance CostsThe distributions take account of amounts received on the creation of units and amounts deducted oncancellation of units, and comprise:
for the period 20.11.2009 - 31.1.2010£
Final 159,500
159,500 Add: Amounts deducted on cancellation of units 16,751 Less: Amounts received on creation of units (26,004)
Net distribution for the period 150,247 Finance costs: Interest 1,680
Total finance costs 151,927
Net revenue after taxation for the period 147,174 Add: expenses reimbursed by capital 3,073
Net distribution for the period £150,247
Details of the final distribution per unit are set out in the table on page 92.
7. Debtors31.1.2010
£
Sales awaiting settlement 3,606,415 Amounts receivable for creation of units 2,510,880 Currency sales awaiting settlement 4,153,708 Accrued revenue 64,542
Total debtors £10,335,545
8. Cash and Bank Balances31.1.2010
£
Amount held at futures clearing houses and brokers 751,836 Cash and bank balances 10,624,521
10. Derivatives and Other Financial Instruments(a) The Fund's financial instruments, comprise securities and other investments, cash balances and
debtors and creditors that arise directly from its operations, for example, in respect of sales andpurchases awaiting settlement, amounts receivable for creations and payable for cancellation ofunits, and debtors for accrued revenue.
The Fund seeks to achieve capital growth for investors, by tracking closely the performance of the FTSE All World Emerging Index.
The Manager shall take the risks it deems reasonable to meet the investment objective. Theserisks include the following:
Risk Impact of risk
Foreign currency risk The risk of changes to foreign currency rates materially affectingthe Sterling equivalent value of non-Sterling denominated assetsand liabilities accounted for by the Fund.
The Fund is accounted for in Sterling and holds financialinstruments issued by companies whose businesses areestablished in emerging economies, which are typically lessdeveloped countries and may exhibit higher levels of currencyvolatility and foreign exchange restrictions than more developedcountries.
To manage these risks, the Fund has entered into forwardcurrency transactions during the period for the purposes ofefficient portfolio management. At 31 January 2010, the Fund has no open foreign currency contracts.
Emerging Markets Equity Tracker Notes to Financial Statementscontinued
Risk Impact of risk
Market price risk The valuation of the Fund’s investments are calculated withreference to market prices quoted by financial agencies andbrokers. Movements to those market prices may materially affectthe value of the Fund's investments, which may move down aswell as up.
To manage these risks, the Manager undertakes research tominimise the impact of such movements against the Fund’sinvestment objective.
Liquidity risk The risk of low market liquidity, through reduced trading volumes,affecting the ability of the Fund to trade financial instruments atvalues previously indicated by financial brokers.
The Fund invests primarily in companies established in emergingeconomies, the securities of which may experience lower tradingvolumes and greater price volatility than securities issued bycompanies established in developed economies.
To manage these risks, investments are made with the intentionof holding over long-term. The Investment Manager undertakesin-depth research of investment opportunities to selectopportunities congruent with the Fund’s investment objective.
All stocks are valued daily. Stocks identified as being illiquid arereviewed for pricing accuracy as the need arises and on a formalmonthly basis by the BlackRock Pricing Committee.
The BlackRock Pricing Committee will also review any significantmarket events which affect the liquidity of assets.
Counterparty risk The risk of entering an arrangement with a counterparty, which isitself subject to financial risks which may affect its ability to tradeas a going concern.
The Manager maintains a list of approved counterparties. This list is regularly monitored and revised for changes based on the counterparty’s credit-worthiness, market reputation andexpectations of future financial performance. Transactions willonly be opened with financial intermediaries on the approvedcounterparties list.
These risks are monitored by the manager in pursuance of the investment objective and policy as set out in the Manager’s Report. Adherence to investment guidelines and to investment andborrowing powers set out in the Trust Deed, the Prospectus and in the Collective InvestmentScheme Sourcebook mitigates the risk of excessive exposure to any particular type of security or issuer. Further information on the investment portfolio is set out in the Investment Report and Portfolio Statement.
88 BlackRock Collective Investment Funds 89
Emerging Markets Equity Tracker Notes to Financial Statementscontinued
(b) Currency ExposuresA proportion of the net assets of the Fund are denominated in currencies other than Sterling, withthe effect that the balance sheet and total return can be affected by currency movements.
Currency Currency Net Assets/(Liabilities)Monetary Non- Total
exposures monetaryexposures
31.1.2010 31.1.2010 31.1.2010£ £ £
Brazilian real – 18,802,729 18,802,729 Chinese yuan – (637,697) (637,697) Columbian peso – 916,017 916,017 Czech koruna – 531,711 531,711 Egyptian pound – 838,445 838,445 Hong Kong dollar 4,846 19,807,745 19,812,591 Hungarian forint 17,945 777,618 795,563 Indonesian rupiah – 2,273,732 2,273,732 Israeli shekel 3 – 3 Moroccan dirham – 334,439 334,439 Mexican peso 106,663 5,662,151 5,768,814 Malaysian ringgitt (153) 3,970,566 3,970,413 Peruvian sol – 139,594 139,594 Phillipine peso – 404,032 404,032 Polish zloty 773 1,344,726 1,345,499 South African rand 2,545 9,771,602 9,774,147 Thai baht (378) 1,468,676 1,468,298 Turkish lira 51 1,709,609 1,709,660 Taiwan dollar 10,250,615 1,321,113 11,571,728 UK sterling 1,226,215 2,477,099 3,703,314 US dollar (233,370) 20,981,767 20,748,397
Total £11,375,755 £92,895,674 £104,271,429
(c) Interest Rate Risk Profile of Financial Assets and LiabilitiesThe Interest Rate Risk Profile of Financial Assets and Liabilities at 31 January 2010 was as follows:
Emerging Markets Equity Tracker Notes to Financial Statementscontinued
Currency Floating Rate Financial TotalFinancial Liabilities not Liabilities Carrying Interest
£ £ £
Brazilian real – (1,446,250) (1,446,250) Chinese yuan – (640,647) (640,647) Hong Kong dollar – (1,293,073) (1,293,073) Hungarian forint – (84,030) (84,030) Indonesian rupiah – (99,985) (99,985) Moroccan dirham – (39,835) (39,835) Mexican peso – (275,221) (275,221) Malaysian ringgitt (153) (39,005) (39,158) Polish zloty – (55,212) (55,212) South African rand – (399,173) (399,173) Thai baht (378) – (378) Turkish lira – (611,199) (611,199) Taiwan dollar – (3,978,039) (3,978,039) UK sterling – (4,666,916) (4,666,916) US dollar (233,370) (886,935) (1,120,305)
Total £(233,901) £(14,515,520) £(14,749,421)
There are no material amounts of non-interest bearing financial assets, other than equities, which do not have maturity dates.
The floating rate financial assets and liabilities includes: Sterling denominated bank balances which bear interest rates based on 0.125% under the sixmonth LIBOR and overdraft interest based on 3% over the base rate.
All overseas deposits and loans bear interest at rates determined by the relevant Authority.
(d) Fair Value of Financial Assets and Financial LiabilitiesThere is no material difference between the value of the financial assets and liabilities, as shownin the balance sheet, and their fair value.
11. Contingent LiabilitiesPlease see page 10.
12. Investment ManagementPlease see page 10.
13. Related Party TransactionsBlackRock Fund Managers Limited, as Manager and Registrar of the Fund, together with The RoyalBank of Scotland plc, as Trustee, are regarded as related parties to the Fund. BlackRock FundManagers Limited acts as either principal or agent for the Trustee in respect of all transactions ofunits of the Fund. The aggregate monies received through creation and paid through cancellation aredisclosed in the Statement of Change in Net Assets Attributable to Unitholders. Any amounts due toor from BlackRock Fund Managers Limited at the period end are disclosed in Notes 7 and 9.
Management fees and registration fees paid to BlackRock Fund Managers Limited and fees paid tothe Trustee are shown in Note 4. The balances due at the period end in respect of these fees areshown in Note 9.
At the balance sheet date Nutraco Nominees Limited held 104,848,981 units (97%) of the total units in the Fund. As Nutraco Nominees Limited is a material unitholder in the Fund, it is regarded as arelated party in accordance with FRS8 ‘Related Party Disclosures’.
No other transactions were entered into with associates of the Manager during the period.
14. Portfolio Transaction costsAnalysis of total purchase costs:
31.1.2010 31.1.2010£ £
Purchases in period before transaction costs 123,947,848 Commissions and other costs (including stamp duty) 47,128 Total purchase costs 47,128
Gross purchases total £123,994,976
Analysis of total sale costs:£ £
Gross sales before transaction costs 22,934,621 Commissions and other costs (23,517) Total sale costs (23,517)
Total sales net of transaction costs £22,911,104
15. Non Adjusting Post Balance Sheet Event Since the last business day of the accounting period, the Fund's quoted mid price has risen onAccumulation Units from 96.43p to 108.6p as at 15 March 2010, a rise of 12.62%.
92 BlackRock Collective Investment Funds
BlackRock Fixed Income Tracker Fund
Fixed Income Tracker Investment Objective & Policy
The aim of the Fund is to seek to achieve a total return for investors by tracking closely the performanceof the FTSE Actuaries Government Securities UK Gilts All Stocks Index by investing in fixed incomesecurities contained in the Index. Investment will be made directly into constituent issues and via othertransferable securities giving exposure to such issues. The Fund may also invest in other transferablesecurities, permitted money market instruments, permitted deposits, and units in collective investmentschemes. Derivatives and forward transactions may be used for hedging purposes and meeting theinvestment objectives of the Fund. The scheme property of the Fund will in all cases be restricted toinvestment in property which is eligible as a permitted link in IPRU (INS), or such other equivalent rulesas may replace them from time to time.
The Fund is a sub-fund of BlackRock Collective Investment Funds , a UCITS scheme established underthe Financial Services Authority's Collective Investment Schemes Sourcebook "the Sourcebook". Prior to10 July 2009 the Collective Investment Funds were known as the Qualified Investor Schemes (1). The Fundwas authorised by the FSA on 21 June 2005 and subsequently launched on 18 July 2005. The Fund waspreviously known as Merrill Lynch Fixed Income Tracker Fund. It adopted its present name with effectfrom 28 April 2008.
93
Emerging Markets Equity Tracker Distribution Table for the period ended 31 January 2010
Final Distribution in Pence per UnitGroup 1 – Units purchased prior to 31 January 2010
Accumulation UnitsGroup 1
Net revenue (dividend) 0.1473Distribution payable 31.3.2010 0.1473
Note: the Fund launched on 20 November 2009 therefore all units in the period are Group 1 and no equalisation is applicable.
Fixed Income Tracker Investment Report
All figures quoted are based on bid to bid, dealing prices (the price at which units are sold), with net income reinvested. Performance isshown for complete 12 month periods only. * Performance data does not exist for the relevant periods.
AccumulationThe final accumulation payable on 31 March 2010 is 1.5313p net per accumulation unit.
Annual performance to most recent quarter end
31.12.2008 31.12.2007 31.12.2006 31.12.2005 31.12.2004to 31.12.2009 to 31.12.2008 to 31.12.2007 to 31.12.2006 to 31.12.2005*
Fixed Income -1.8% +11.7% +4.1% -0.6% –
Performance Table
Period of Report Since LaunchOne Year 18.7.2005
to 31.1.2010 to 31.1.2010
The Fund returned:Total Return (with net income reinvested)Accumulation Units +3.2% +17.9%
The Benchmark returned:Total Return (with net income reinvested)UK Gilts All-Stocks† +4.0% +19.1%
This Annual Report covers the year ended 31 January 2010, the first six months of which were commentedon in the Interim Report to 31 July 2008. For a copy, please contact us.
† Source: Morningstar. Prior to 10 July 2009 the Collective Investment Funds were known as the Qualified Investor Schemes. All fundfigures quoted are based on bid to bid, dealing prices (the price at which units are sold). Performance is calculated net of fees.
All financial investments involve an element of risk. Therefore, the value of your investment and theincome from it will vary and your initial investment amount cannot be guaranteed. Changes in exchangerates may cause the value of an investment to fluctuate. Past performance is not a guide to futureperformance and should not be the sole factor of consideration when selecting a product.
BlackRock Fixed Income Tracker Fund
The Fund met its objective of tracking the benchmarkOver 12 months to 31 January 2010, the BlackRock Fixed Income Tracker Fund met its objective of closelytracking the FTSE Actuaries Government Securities UK Gilts All-Stocks index, matching the performancein returning 3.2%*.
Here, we focus on the second six months of the period, during which time the Fund gained by 2.4%* andthe benchmark returned 2.2%*.
It should be noted that relative annual performance was negatively impacted by the timing differentialbetween the Fund’s valuation point and that of the index.
Investing in UK gilts to match the FTSE Actuaries Government Securities UK Gilts All-Stocks indexThe Fund seeks to achieve a total return for investors by tracking closely the performance of the FTSEActuaries UK Gilts All-Stocks index. Investment will be made directly into constituent issues and via othertransferable securities giving exposure to such issues.
Unprecedented rate cuts were positive for Gilts, particularly in the first half of 2009The economic slowdown accelerated during 2009 amid further concerns regarding banks’ debts and thepossibility of the recession becoming a 1930’s-style depression/deflationary slump. By the end of the firstquarter of 2009 the Bank of England (BoE) had dropped the base interest rate to 0.5% (where it hasstayed) and introduced “Quantitative Easing” in an effort to stimulate the economy. The combined effect of this caused UK government bond (Gilt) yields to fall dramatically, thus generating strong positivereturns for UK Gilt holders.
Risk appetite returned during the yearFrom the lows in March 2009, demand for ‘risk assets’ (equities, corporate bonds, emerging markets)accelerated rapidly during the second and third quarters, driven by expectations of a sharp recovery. Giltmarkets remained volatile in this environment, as corporate bond markets steadied and the sentimenttowards the financial sector improved. On the back of strong corporate performance the market wasquick to price in a faster-than-expected economic recovery, which has yet to be forthcoming. As we moveinto 2010 concerns about a “double-dip” recession and the need for a significant fiscal debt reductionstrategy persist.
The long-term economic outlook remains challenging In the UK, as the Asset Purchase Programme approaches an end, the biggest concern remains the abilityof the Debt Management Office to issue new Gilts into the market without the BoE buying on the otherside. The risks to the Gilt market remain elevated in the run up to the general election, as the marketawaits evidence of a credible deficit reduction plan. The most significant challenge in the year ahead forpolicy-makers remains to be how and when they withdraw the extraordinary stimulus currently applied toeconomies. As concerns about sovereign risk on the continent increase, it seems the removal or unwindof these measures across global markets in the short term is increasingly unlikely.
* Performance figures quoted are based on bid to bid, dealing prices (the price at which units are sold) and are not the same as the net assetvalue reported in the financial statements which is at close of business. Performance is calculated net of fees.
94 BlackRock Collective Investment Funds 95
Fixed Income Tracker Portfolio Statementat 31 January 2010
UK Sterling Denominated Fixed Rate Government Bonds – 96.80%; 2009 97.97% £22,922,000 Treasury 2.25% Gilt 2014 22,582,181 3.67 £13,600,000 Treasury 2.75% Stock 2015 13,451,420 2.19 £14,207,000 Treasury 3.25% Gilt 2011 14,716,676 2.39 £17,900,000 Treasury 3.75% Gilt 2019 17,534,840 2.85 £25,303,000 Treasury 4% Stock 2016 26,228,457 4.26
Total Expense RatioTotal Expense Ratio (TER) as at 31 January 2010: 0.2155% (31 January 2009: 0.2180%)
TER reflects the annual operating expenses of the Fund. It does not take into account the impact of any initial or exit charges or transaction-based expenditure i.e. dealing costs. TER is employed as thestandard method of disclosing the effect of charges by most European collective investment schemes.
96 BlackRock Collective Investment Funds 97
Net Asset Value
At Net Asset Net Asset31 January Units in Issue Value of Fund Value per Unit
during the year 2 (539,480) 9,164,442 Revenue 3 19,197,013 16,902,823 Expenses 4 (1,122,901) (831,462) Finance costs: Interest 6 – –
Net revenue before taxation 18,074,112 16,071,361 UK Income tax witheld (3,614,822) (3,214,272)
Net revenue after taxation for the year 14,459,290 12,857,089
Total return before distributions 13,919,810 22,021,531 Finance costs: Distributions 6 (14,459,290) (12,857,089)
Change in net assets attributable tounitholders from investment activities £(539,480) £9,164,442
31.1.2010 31.1.2009£ £ £ £
Opening net assets attributableto unitholders 375,457,467 343,528,646
Amounts receivable oncreation of units 403,096,781 184,278,061
Amounts payable on cancellation of units (178,588,552) (174,175,913)
224,508,229 10,102,148 Change in net assets attributable to
unitholders from investment activities (539,480) 9,164,442 Retained distribution on accumulation units 15,625,714 12,662,231
Closing net assets attributableto unitholders £615,051,930 £375,457,467
Comparative figures have been restated for the presentation changes following adoption of the Statement of Recommended Practice (“theSORP”) for Authorised Funds issued by the Investment Management Association (“IMA”) in November 2008 (see Accounting Policies).
Fixed Income Tracker Statement of Change in Net AssetsAttributable to Unitholders for the year ended 31 January 2010
Fixed Income Tracker Statement of Total Return for the year ended 31 January 2010
Fixed Income Tracker Portfolio Turnover
for the year ended for the year ended31.1.2010 31.1.2009
Total purchases for the year £425,127,492 £230,887,924Total sales for the year £193,248,217 £208,186,315Portfolio Turnover Rate 6.23% 29.27%
The Portfolio Turnover Rate (PTR) gives an indication of how much the Fund's investments have changed during the relevant year.
The PTR is calculated by the Manager in accordance with the FSA requirements laid out in COLL 4 Annex 2 R.
98 BlackRock Collective Investment Funds 99
Fixed Income Tracker Notes to Financial Statementsat 31 January 2010
1. Accounting PoliciesSee pages 4-5 of Aggregated Accounts.
2. Net Capital (Losses)/Gains on Investments During the Year31.1.2010 31.1.2009
£ £
(Losses)/gains on non-derivative securities (537,786) 9,164,881 Transaction costs (1,694) (439)
Net Capital (Losses)/Gains on Investments £(539,480) £9,164,442
3. Revenue31.1.2010 31.1.2009
£ £
Interest from UK fixed interest securities 19,187,849 16,796,005 Interest from UK bank deposits 9,164 106,818
Total revenue £19,197,013 £16,902,823
4. Expenses31.1.2010 31.1.2009
£ £
Payable to the Manager or associates of the Manager:– Manager's service charge 1,041,965 762,690 – Registrar's fees 77 55 – VAT refunds on registrar's fees (4) (3)
1,042,038 762,742
Payable to the Trustee or associates of the Trustee:– Trustee's fees 59,211 44,222
59,211 44,222
Other expenses:– Safe custody fees 13,031 12,898 – Audit fee 8,550 8,930 – Legal & professional services 71 2,670
21,652 24,498
Total expenses £1,122,901 £831,462
Fixed Income Tracker Balance Sheetat 31 January 2010
31.1.2010 31.1.2009Notes £ £
Assets:Investment assets 595,371,817 367,833,389 – Debtors 7 13,474,316 5,920,778 – Cash and bank balances 8 10,391,628 3,571,824
Total other assets 23,865,944 9,492,602 Total assets 619,237,761 377,325,991
Liabilities:– Creditors 9 (4,185,831) (1,868,524)
Total other liabilities (4,185,831) (1,868,524) Total liabilities (4,185,831) (1,868,524)
Net assets attributable to unitholders £615,051,930 £375,457,467
A J Stenning (Director)E E Tracey (Director)BlackRock Fund Managers Limited23 March 2010
10. Derivatives and Other Financial Instruments(a) The Fund’s financial instruments, comprise securities and other investments, cash balances and
debtors and creditors that arise directly from its operations, for example, in respect of sales andpurchases awaiting settlement, amounts receivable for creations and payable for cancellation ofunits, and debtors for accrued revenue.
The Fund’s property is invested with the aim of achieving capital growth by tracking closely theperformance of the FTSE Actuaries Government Securities UK Gilts All Stocks Index by investingin securities in the Index.
The Manager shall take the risks it deems reasonable to meet the investment objective. Theserisks include the following:
Risk Impact of risk
Interest rate risk The Fund’s investment objective is to produce a total return bytracking closely the FTSE Actuaries Government Securities UKGilts All Stocks Index by investing in fixed securities contained inthe Index. Revenue is generated by the holding of bonds, whichcontractually oblige the borrower to repay the Fund interest underspecific terms.
Changes to interest rates may affect the cash inflows andoutflows calculated with reference to financial assets andfinancial liabilities held by the Fund.
Due to the nature and range of the Fund’s investments at thebalance sheet date, the Fund has little exposure to interest rate risk.
Fixed Income Tracker Notes to Financial Statements continued
5. Taxation(a) Analysis of tax charge in the year
31.1.2010 31.1.2009£ £
Total current tax charge for the year [see Note 5(b)] £0 £0
(b) Factors affecting the current tax charge for the yearThe tax assessed for the period is lower than the standard rate of corporation tax in the UK for anauthorised unit trust. The differences are explained below:
Total current tax charge for the year [see Note 5(a)] £0 £0
As at 31 January 2010, the Fund had no surplus management expenses, therefore, a deferred tax asset has not been recognised.
6. Finance CostsThe distributions take account of amounts received on the creation of units and amounts deducted oncancellation of units, and comprise:
31.1.2010 31.1.2009£ £
Interim 7,256,160 6,507,877 Final 8,369,554 6,154,354
15,625,714 12,662,231 Add: Amounts deducted on cancellation of units 1,557,228 1,891,969 Less: Amounts received on creation of units (2,723,652) (1,697,111)
Net distribution for the year 14,459,290 12,857,089 Finance costs: Interest – –
Total finance costs 14,459,290 12,857,089
Details of the interim and final distributions per unit are set out in the tables on page 108.
7. Debtors31.1.2010 31.1.2009
£ £
Amounts receivable for creation of units 5,937,366 1,328,592 Accrued revenue 7,536,950 4,592,186
Total debtors £13,474,316 £5,920,778
102 BlackRock Collective Investment Funds 103
Risk Impact of risk
Counterparty risk The risk of entering an arrangement with a counterparty, which isitself subject to financial risks which may affect its ability to tradeas a going concern.
The Manager maintains a list of approved counterparties. This list is regularly monitored and revised for changes based on the counterparty’s credit-worthiness, market reputation andexpectations of future financial performance. Transactions willonly be opened with financial intermediaries on the approvedcounterparties list.
These risks are monitored by the Manager in pursuance of the investment objective and policy as set out in this Manager's Report. Further information on the investment portfolio is set out in the Investment Report and Portfolio Statement. Adherence to investment guidelines and toinvestment and borrowing powers set out in the Trust Deed, the Prospectus and in the rules ofthe Collective Investment Schemes Sourcebook mitigates the risk of excessive exposure to anyparticular type of security or issuer. Further information on the investment portfolio is set out inthe Investment Report and Portfolio Statement.
(b) Currency ExposuresThe net assets of the Fund are denominated mainly in sterling, therefore the balance sheet andtotal return are unlikely to be directly affected by currency movements.
(c) Interest Rate Risk Profile of Financial Assets and LiabilitiesThe Interest Rate Risk Profile of Financial Assets and Liabilities at the balance sheet date was as follows:
UK sterling 10,391,628 595,371,817 13,474,316 619,237,761
Total £10,391,628 £595,371,817 £13,474,316 £619,237,761
Currency Floating Rate Financial TotalFinancial Liabilities not Liabilities Carrying Interest
£ £ £
UK sterling – (4,185,831) (4,185,831)
Total £0 £(4,185,831) £(4,185,831)
Fixed Income Tracker Notes to Financial Statements continued
Risk Impact of risk
Market price risk The valuation of the Fund’s investments are calculated withreference to market prices quoted by financial agencies andbrokers. Movements to those market prices may materially affectthe value of the Fund's investments, which may move down aswell as up.
To manage these risks, the Manager undertakes research inorder to achieve the best price for any transactions entered intoon behalf of the Fund.
Credit risk The Fund holds bonds issued by the UK government in order toachieve its investment objective of generating a high total return.
The borrower receives from the Fund a principal amount. TheFund will then receive interest based on the coupon rate of thebond and repayment of the initial principal amount on the bond’smaturity date.
Any impairment to the borrower’s ability to repay amounts duemay result in changes to the tradable value of the bond and theamount to be received upon maturity of the bond. The ability ofthe borrower to repay not only the principal value but also anyinterest due on the bond, referred to as the borrower’s creditrating, is monitored by the Manager.
The Manager may undertake its own research of the borrower’sfinancial position in order to assess the ability of the borrower torepay amounts due.
Liquidity risk The risk of low market liquidity, through reduced trading volumes,affecting the ability of the Fund to trade financial instruments atvalues previously indicated by financial brokers.
All stocks are valued daily. Stocks identified as being illiquid arereviewed for pricing accuracy as the need arises and on a formalmonthly basis by the BlackRock Pricing Committee.
The BlackRock Pricing Committee will also review significantmarket events which may impact the liquidity of bonds in theportfolio.
Due to the nature and range of the Fund’s investments at thebalance sheet date, the Fund has little exposure to liquidity risk.
104 BlackRock Collective Investment Funds 105
11. Contingent LiabilitiesPlease see page 10.
12. Investment ManagementPlease see page 10.
13. Related Party TransactionsBlackRock Fund Managers Limited, as Manager and Registrar of the Fund, together with The RoyalBank of Scotland plc, as Trustee, are regarded as related parties to the Fund. The Manager acts as either principal or agent for the Trustee in respect of all transactions of units of the Fund. Theaggregate monies received through creation and paid through cancellation are disclosed in theStatement of Change in Net Assets Attributable to Unitholders. Any amounts due to or from theManager at the period end are disclosed in Notes 7 and 9.
Management fees and registration fees paid to BlackRock Fund Managers Limited and fees paid tothe Trustee are shown in Note 4. The balances due at the period end in respect of these fees areshown in Note 9.
At the balance sheet date Nutraco Nominees Limited held 362,386,407 units (66%) of the total units in the Fund. As Nutraco Nominees Limited is a material unitholder in the Fund, it is regarded as arelated party in accordance with FRS8 ‘Related Party Disclosures’.
At the balance sheet date MetLife Europe Limited held 119,029,194 units (22%) of the total units in theFund. As MetLife Europe Limited is a material unitholder in the Fund, it is regarded as a related partyin accordance with FRS8 ‘Related Party Disclosures’.
No other transactions were entered into with associates of the Manager during the year.
14. Portfolio Transaction costsAnalysis of total purchase costs:
31.1.2010 31.1.2010 31.1.2009 31.1.2009£ £ £ £
Purchases in year before transaction costs 425,127,492 230,887,924
Commissions and other costs (including stamp duty) – –
Total purchase costs – –
Gross purchases total £425,127,492 £230,887,924
Analysis of total sale costs:£ £ £ £
Gross sales before transaction costs 193,248,217 208,186,315 Commissions and other costs – –Total sale costs – –
Total sales net of transaction costs £193,248,217 £208,186,315
15. Non Adjusting Post Balance Sheet EventSince the last business day of the accounting period, the Fund's quoted mid price has fallen onAccumulation Units from 112.5p to 111.7p as at 15 March 2010, a fall of 0.71%.
Fixed Income Tracker Notes to Financial Statements continued
This table shows weighted average interest earned on the market value of bonds and will not reflect the yield on the Fund.
The floating rate financial assets and liabilities includes: Sterling denominated bank balances which bear interest rates based on 0.125% under the sixmonth LIBOR and overdraft interest based on 3% over the base rate.All overseas deposits and loans bear interest at rates determined by the relevant Authority.
(d) Fair Value of Financial Assets and Financial LiabilitiesThere is no material difference between the value of the financial assets and liabilities, as shownin the balance sheet, and their fair value.
106 BlackRock Collective Investment Funds 107
BlackRock Japan Equity Tracker Fund
Japan Equity Tracker Investment Objective & Policy
The aim of the Fund is to seek to achieve capital growth for investors by tracking closely the performanceof the Topix Ist Section Index until 31 October 2005 and the FTSE World Japan Index from 1 November 2005by investing in companies in the Index. Investment will be made directly into constituent companies andvia other transferable securities giving exposure to such companies. The Fund may also invest in permittedmoney market instruments, permitted deposits, and units in collective investment schemes. Derivativesand forward transactions may be used for hedging purposes and meeting the investment objectives of theFund. The scheme property of the Fund will in all cases be restricted to investment in property which iseligible as a permitted link in IPRU (INS), or such other equivalent rules as may replace them from timeto time.
The Fund is a sub-fund of BlackRock Collective Investment Funds , a UCITS scheme established underthe Financial Services Authority's Collective Investment Schemes Sourcebook "the Sourcebook". Prior to10 July 2009 the Collective Investment Funds were known as the Qualified Investor Schemes (1). The Fundwas authorised by the FSA on 21 June 2005 and subsequently launched on 15 July 2005. The Fund waspreviously known as Merrill Lynch Japan Equity Tracker Fund. It adopted its present name with effectfrom 28 April 2008.
Final Distribution in Pence per UnitGroup 1 – Units purchased prior to 1 August 2009Group 2 – Units purchased 1 August 2009 to 31 January 2010
† Equalisation applies only to units purchased during the distribution period (Group 2 units). It is the average amount of revenue includedin the purchase price of all Group 2 units and is refunded to holders of these units as a return of capital. Being capital, it is not liable toincome tax but must be deducted from the cost of units for capital gains tax purposes.
Fixed Income Tracker Distribution Tablefor the year ended 31 January 2010
108 BlackRock Collective Investment Funds 109
Japan Equity Tracker Investment Report
The Fund met its objective of tracking the benchmarkOver 12 months to 31 January 2010, the BlackRock Japan Equity Tracker Fund met its objective of closelytracking the FTSE World Japan index, returning 2.8%* versus the benchmark return of 4.1%*.
Here, we focus on the second six months of the period, during which time the Fund returned 4.4%*,versus the benchmark return of 4.1%*.
It should be noted that relative annual performance was negatively impacted by the timing differentialbetween the Fund’s valuation point and that of the index.
Investing in Japanese companies to match the FTSE World Japan indexThe Fund seeks to achieve capital growth for investors by tracking closely the performance of the FTSE World Japan index. Investment will be made directly into constituent companies and via othertransferable securities giving exposure to such companies.
Global equities rallied from lows struck in March 2009, recording strong gains over six and 12 monthsFollowing a difficult 2008, global equity markets continued to decline into the first quarter of 2009, amidfears that the global financial system was on the brink of collapse and that the world was entering anotherGreat Depression. Uncertainty surrounded the intentions of governments and global policymakers, butsuch concerns began to dissipate as investors witnessed huge global monetary and fiscal stimuli, whichreflated economic activity and forced share prices sharply higher from troughs reached in March. Despitenegative real economic growth across the entire developed world, coupled with noticeable earnings declines,“risk” assets managed to outperform “safe” assets in 2009 as a whole, as sidelined cash, which wasproducing near-zero returns, began to move back into the markets.
The pace of the rally slowed somewhat into the end of the year, and markets subsequently sold off inJanuary 2010, as risk aversion increased on two key developments, namely the tightening in monetaryconditions in China and, more importantly, further tensions in sovereign bond markets, particularlyGreece. However, the six months to the end of January saw strong equity gains overall, as measured bythe MSCI Global Equity index, and the period ended with a perception that the economic recovery is hereto stay, albeit with some lingering investor unease.
Japan – underperformance over six months, but a stronger finish to the periodRelative weakness from the Japanese stock market over six months was influenced by: marked strengthin the yen, which had negative implications, especially for exporters; uncertainty of financial policy by thenew Democratic Party of Japan (“DPJ”) government and the tighter capital requirement, which causedfinancials to underperform; and dilutive equity issuance announcements by financial institutions, alongwith concerns that other industries are to follow suit.
However, the announcement in December by the Bank of Japan, for additional monetary expansion tofight off deflation, boosted investors’ confidence and resulted in relative outperformance at the end of2009 and the start of 2010.
Japan’s economic recovery continues, although hardly at a breakneck pace. The export market is on asounder footing than it appears – although export values peaked in June, the translation effects of yenstrength explain the loss of momentum. However, domestic conditions remain challenging, with weakfinancial performance and increasing regulatory scrutiny hampering the consumer finance companies.These firms are important not just to consumer firepower but also to small businesses, which make up a larger segment of the economy than in the West. * Performance figures quoted are based on bid to bid, dealing prices (the price at which units are sold) and are not the same as the net asset
value reported in the financial statements which is at close of business. Performance is calculated net of fees.
All figures quoted are based on bid to bid, dealing prices (the price at which units are sold), with net income reinvested. Performance isshown for complete 12 month periods only. * Performance data does not exist for the relevant periods.
AccumulationThe final accumulation payable on 31 March 2010 is 0.6470p net per accumulation unit.
Annual performance to most recent quarter end
31.12.2008 31.12.2007 31.12.2006 31.12.2005 31.12.2004to 31.12.2009 to 31.12.2008 to 31.12.2007 to 31.12.2006 to 31.12.2005*
Japan Equity -4.2% -1.9% -7.8 -7.7% –
Performance Table
Period of Report Since LaunchOne Year 15.7.2005
to 31.1.2010 to 31.1.2010
The Fund returned:Total Return (with net income reinvested)Accumulation Units +2.8% +9.3%
The Benchmark returned:Total Return (with net income reinvested)FTSE World Japan†* +4.1% +11.3%
This Annual Report covers the year ended 31 January 2010, the first six months of which werecommented on in the Interim Report to 31 July 2009. For a copy, please contact us.
† Source: BlackRock/Factset. Net of withholding tax. Prior to 10 July 2009 the Collective Investment Funds were known as the QualifiedInvestor Schemes. All fund figures quoted are based on bid to bid, dealing prices (the price at which units are sold). * TSE 1st Section(TOPIX) Index used prior to 01/11/2005. Performance is calculated net of fees.
All financial investments involve an element of risk. Therefore, the value of your investment and theincome from it will vary and your initial investment amount cannot be guaranteed. Changes in exchangerates may cause the value of an investment to fluctuate. Past performance is not a guide to futureperformance and should not be the sole factor of consideration when selecting a product.
BlackRock Japan Equity Tracker Fund
110 BlackRock Collective Investment Funds 111
Japan Equity Tracker Portfolio Statement at 31 January 2010
177,000 Mazda Motor 297,304 0.17 551,000 Mitsubishi Motor 474,132 0.26
15,000 NGK Spark Plug 107,803 0.06 25,000 NHK Spring 135,270 0.08
301,400 Nissan Motor 1,527,068 0.85 17,400 NOK 161,225 0.09 18,900 Stanley Electric 225,084 0.13 17,400 Sumitomo Rubber 85,044 0.05 54,300 Suzuki Motor 765,165 0.43
Total Expense RatioTotal Expense Ratio (TER) as at 31 January 2010: 0.2278% (31 January 2009: 0.2495%)
TER reflects the annual operating expenses of the Fund. It does not take into account the impact of any initial or exit charges or transaction-based expenditure i.e. dealing costs. TER is employed as thestandard method of disclosing the effect of charges by most European collective investment schemes.
112 BlackRock Collective Investment Funds 113
Chemicals – 4.17%; 2009 3.69% 19,000 Air Water 135,111 0.08
Japan Equity Tracker Portfolio Statement continued
50,000 Gunma Bank 159,708 0.09 54,000 Hachijuni Bank 193,301 0.11 24,000 Higo Bank 81,286 0.05 62,000 Hiroshima Bank 152,369 0.08 34,000 Hokkoku Bank 75,599 0.04
140,000 Hokuhoku Financial 181,185 0.10 26,000 Hyakugo Bank 73,920 0.04 31,000 Hyakujushi Bank 72,130 0.04 33,000 Iyo Bank 169,242 0.09 83,000 Joyo Bank 207,978 0.12 36,000 Juroku Bank 87,729 0.05 21,000 Kagoshima Bank 93,098 0.05 42,000 Kansai Urban Banking 37,875 0.02 19,000 Keiyo Bank 55,457 0.03
110,000 Taisei 131,759 0.07 32,000 Toda 67,628 0.04 38,000 Toto 144,136 0.08
3,147,557 1.74
Electricity – 4.39%; 2009 6.41% 78,200 Chubu Electric Power 1,231,686 0.68 37,300 Chugoku Electric Power 455,512 0.25 22,400 Electric Power Development 402,463 0.22 21,300 Hokkaido Electric Power 252,054 0.14 22,100 Hokuriku Electric Power 297,881 0.17 96,300 Kansai Electric Power 1,364,960 0.76 47,400 Kyushu Electric Power 637,262 0.35 23,600 Shikoku Electric Power 401,279 0.22 49,800 Tohoku Electric Power 623,933 0.35
134,900 Tokyo Electric Power 2,261,248 1.25
7,928,278 4.39
Electronic & Electrical Equipment – 5.56%; 2009 4.41% 17,800 Alps Electric 63,350 0.04 75,000 Fuji Electric 92,417 0.05 49,000 Fujikura 163,597 0.09 71,000 Furukawa Electric 214,077 0.12
8,400 Hamamatsu Photonics 124,671 0.07 4,000 Hirose Electric 266,271 0.15
Total other liabilities (1,367,901) (483,550) Total liabilities (1,541,564) (933,274)
Net assets attributable to unitholders £179,917,105 £122,801,885
A J Stenning (Director)E E Tracey (Director)BlackRock Fund Managers Limited23 March 2010
31.1.2010 31.1.2009Notes £ £ £ £
IncomeNet capital gains/(losses)
during the year 2 6,865,712 (9,523,922) Revenue 3 2,500,718 2,668,642 Expenses 4 (337,066) (294,057) Finance costs: Interest 6 (7,130) (386)
Net revenue before taxation 2,156,522 2,374,199 Taxation 5 (266,847) (471,913)
Net revenue after taxation for the year 1,889,675 1,902,286
Total return before distributions 8,755,387 (7,621,636) Finance costs: Distributions 6 (1,889,675) (1,902,286)
Change in net assets attributable tounitholders from investment activities £6,865,712 £(9,523,922)
31.1.2010 31.1.2009£ £ £ £
Opening net assets attributableto unitholders 122,801,885 124,865,353
Amounts receivable oncreation of units 78,317,871 35,868,826
Amounts payable on cancellation of units (30,151,487) (30,388,060)
48,166,384 5,480,766 Stamp duty reserve tax (1) –Change in net assets attributable tounitholders from investment activities 6,865,712 (9,523,922) Retained distribution on accumulation units 2,083,125 1,979,688
Closing net assets attributableto unitholders £179,917,105 £122,801,885
Comparative figures have been restated for the presentation changes following adoption of the Statement of Recommended Practice (“the SORP”) for Authorised Funds issued by the Investment Management Association (“IMA”) in November 2008 (see Accounting PoliciesNote 1(a)).
Japan Equity Tracker Statement of Change in Net AssetsAttributable to Unitholders for the year ended 31 January 2010
Japan Equity Tracker Statement of Total Returnfor the year ended 31 January 2010
Total current tax charge for the year [see Note 5(b)] £285,464 £465,237
Deferred tax (credit)/charge for the year [see note 5(c)] (18,617) 6,676
Total tax charge for the year £266,847 £471,913
(b) Factors affecting the current tax charge for the yearThe tax assessed for the period is lower than the standard rate of corporation tax in the UK for anauthorised unit trust. The differences are explained below:
31.1.2010 31.1.2009£ £
Net revenue before taxation 2,156,522 2,374,199
Corporation tax at 20% (2009: 20%) 431,304 474,840 Effects of:Movement in revenue accruals non taxable 28,642 (13,197) Overseas tax 174,952 184,339 Non taxable overseas dividends (262,750) –Adjustment in respect of prior periods 6,330 –Double Tax Relief (93,014) (180,745)
Total current tax charge for the year [see Note 5(a)] £285,464 £465,237
(c) Analysis of deferred tax charge for the year31.1.2010 31.1.2009
£ £
Opening deferred tax balance 18,617 11,941 Deferred tax (credit)/charge for the year [see note 5(a)] (18,617) 6,676
Closing deferred tax balance £0 £18,617
As at 31 January 2010, the Fund had no surplus management expenses, therefore, a deferred tax asset has not been recognised.
Japan Equity Tracker Notes to Financial Statementsat 31 January 2010
1. Accounting PoliciesSee pages 4-5 of Aggregated Accounts.
2. Net Capital Gains/(Losses) on Investments During the Year31.1.2010 31.1.2009
£ £
The net capital gains/(losses) on investments comprise:Gains/(losses) on non-derivative securities 6,845,067 (9,022,103) Gains/(losses) on derivative contracts 220,721 (1,136,010) Gains/(losses) on forward currency contracts 119,313 (82,953) Other currency (losses)/gains (294,622) 731,778 Transaction costs (24,767) (14,634)
Net capital gains/(losses) on investments £6,865,712 £(9,523,922)
3. Revenue31.1.2010 31.1.2009
£ £
Overseas dividends 2,499,319 2,633,420 Interest from UK bank deposits 1,399 35,222
Total revenue £2,500,718 £2,668,642
4. Expenses31.1.2010 31.1.2009
£ £
Payable to the Manager or associates of the Manager:– Manager's service charge 295,910 236,063 – Registrar's fees 136 79 – VAT Refund on Registrars fees (10) –
296,036 236,142
Payable to the Trustee or associates of the Trustee:– Trustee's fees 16,801 13,849
10. Derivatives and Other Financial Instruments(a) The Fund's financial instruments, comprise securities and other investments, cash balances and
debtors and creditors that arise directly from its operations, for example, in respect of sales andpurchases awaiting settlement, amounts receivable for creations and payable for cancellation ofunits, and debtors for accrued revenue.
The Fund’s property is invested with the aim of achieving the investment objective of long-termcapital growth, by tracking closely the performance of the FTSE Japan Index.
The Manager shall take the risks it deems reasonable to meet the investment objective. Theserisks include the following:
Risk Impact of risk
Foreign currency risk The risk of changes to foreign currency rates materially affectingthe Sterling equivalent value of non-Sterling denominated assetsand liabilities accounted for by the Fund.
The Fund is accounted for in Sterling and holds financial assetsand financial liabilities denominated in Japanese yen.
To manage these risks, the Fund has entered into forwardcurrency transactions during the year for the purposes of efficientportfolio management. At 31 January 2010, the Fund has no openforeign currency contracts.
Japan Equity Tracker Notes to Financial Statements continued
6. Finance CostsThe distributions take account of amounts received on the creation of units and amounts deducted oncancellation of units, and comprise:
31.1.2010 31.1.2009£ £
Interim 969,206 848,012 Final 1,113,919 1,131,676
2,083,125 1,979,688
Add: Amounts deducted on cancellation of units 146,767 159,016 Less: Amounts received on creation of units (340,217) (236,418)
Net distribution for the year 1,889,675 1,902,286 Finance costs: Interest 7,130 386
Total finance costs £1,896,805 £1,902,672
Details of the interim and final distributions per unit are set out in the table on page 138.
7. Debtors31.1.2010 31.1.2009
£ £
Amounts receivable for creation of units 1,111,218 183,035 Currency sales awaiting settlement 172,099 –Accrued revenue 134,684 133,186
Total debtors £1,418,001 £316,221
8. Cash and Bank Balances31.1.2010 31.1.2009
£ £
Amount held at futures clearing houses and brokers 100,240 380,429 Cash and bank balances 3,599,487 2,066,656
Cash and bank balances £3,699,727 £2,447,085
132 BlackRock Collective Investment Funds 133
(b) Currency ExposuresA proportion of the net assets of the Fund are denominated in currencies other than Sterling, withthe effect that the balance sheet and total return can be affected by currency movements.
Currency Currency Net Assets/(Liabilities)
Monetary Non- Totalexposures monetary
exposures31.1.2010 31.1.2010 31.1.2010
£ £ £
Japanese yen 3,699,726 175,572,115 179,271,841 UK sterling (132,889) 778,153 645,264
Total £3,566,837 £176,350,268 £179,917,105
The currency profile held at 31 January 2009 was:
Currency Currency Net Assets/(Liabilities)
Monetary Non- Totalexposures monetary
exposures31.1.2009 31.1.2009 31.1.2009
£ £ £
Japanese yen 1,045,426 122,166,951 123,212,377 UK sterling 1,401,659 (1,812,151) (410,492)
Total £2,447,085 £120,354,800 £122,801,885
(c) Interest Rate Risk Profile of Financial Assets and LiabilitiesThe Interest Rate Risk Profile of Financial Assets and Liabilities at 31 January 2010 was as follows:
Japanese yen 3,699,726 – 176,647,725 180,347,451 UK sterling – – 1,111,218 1,111,218
Total £3,699,726 £0 £177,758,943 £181,458,669
Japan Equity Tracker Notes to Financial Statements continued
Risk Impact of risk
Market price risk The valuation of the Fund’s investments are calculated withreference to market prices quoted by financial agencies andbrokers. Movements to those market prices may materially affectthe value of the Fund's investments, which may move down aswell as up.
To manage these risks, the Manager undertakes research tominimise the impact of such movements against the Fund’sinvestment objective.
Liquidity risk The risk of low market liquidity, through reduced trading volumes,affecting the ability of the Fund to trade financial instruments atvalues previously indicated by financial brokers.
To manage these risks, the Investment Manager undertakes in-depth research of investment opportunities congruent with theFund’s investment objective.
The Fund invests primarily in companies incorporated in Japan,which is typically considered to be an area with high levels ofliquidity. From time to time, however, market liquidity may beaffected by economic events.
All stocks are valued daily. Stocks identified as being illiquid arereviewed for pricing accuracy as the need arises and on a formalmonthly basis by the BlackRock Pricing Committee.
The BlackRock Pricing Committee will also review any significantmarket events which affect the liquidity of assets.
Counterparty risk The risk of entering an arrangement with a counterparty, which isitself subject to financial risks which may affect its ability to tradeas a going concern.
The Manager maintains a list of approved counterparties. This list isregularly monitored and revised for changes based on the counter-party’s credit-worthiness, market reputation and expectations offuture financial performance. Transactions will only be openedwith financial intermediaries on the approved counterparties list.
These risks are monitored by the manager in pursuance of the investment objective and policy as set out in the Manager’s Report. Adherence to investment guidelines and to investment andborrowing powers set out in the Trust Deed, the Prospectus and in the Collective InvestmentScheme Sourcebook mitigates the risk of excessive exposure to any particular type of security or issuer. Further information on the investment portfolio is set out in the Investment Report and Portfolio Statement.
134 BlackRock Collective Investment Funds 135
11. Contingent LiabilitiesPlease see page 10.
12. Investment ManagementPlease see page 10.
13. Related Party TransactionsBlackRock Fund Managers Limited, as Manager and Registrar of the Fund, together with The RoyalBank of Scotland plc as Trustee, are regarded as related parties to the Fund. BlackRock FundManagers Limited acts as either principal or agent for the Trustee in respect of all transactions ofunits of the Fund. The aggregate monies received through creation and paid through cancellation are disclosed in the Statement of Change in Net Assets Attributable to Unitholders. Any amounts due to or from BlackRock Fund Managers Limited at the year end are disclosed in Notes 7 and 9.
Management fees and registration fees paid to BlackRock Fund Managers Limited and fees paid tothe Trustee are shown in Note 4. The balances due at the year end in respect of these fees are shownin Note 9.
At the balance sheet date Nutraco Nominees Limited held 133,556,843 units (78%) of the total units in the Fund. As Nutraco Nominees Limited is a material unitholder in the Fund, it is regarded as arelated party in accordance with FRS8 ‘Related Party Disclosures’.
No other transactions were entered into with associates of the Manager during the year.
14. Portfolio Transaction costsAnalysis of total purchase costs:
31.1.2010 31.1.2010 31.1.2009 31.1.2009£ £ £ £
Purchases in year before transaction costs 65,986,410 27,312,886
Commissions and other costs (including stamp duty) 20,805 8,650
Total purchase costs 20,805 8,650
Gross purchases total £66,007,215 £27,321,536
Analysis of total sale costs:£ £ £ £
Gross sales before transaction costs 17,116,662 20,954,865 Commissions and other costs (6,479) (7,717) Total sale costs (6,479) (7,717)
Total sales net of transaction costs £17,110,183 £20,947,148
15. Non Adjusting Post Balance Sheet Event Since the last business day of the accounting period, the Fund's quoted mid price has risen onAccumulation Units from 104.5p to 116.2p as at 15 March 2010, a rise of 11.20%.
Japan Equity Tracker Notes to Financial Statements continued
Currency Floating Rate Financial TotalFinancial Liabilities not Liabilities Carrying Interest
£ £ £
Japanese yen – (1,075,610) (1,075,610) UK sterling (132,889) (333,065) (465,954)
Total £(132,889) £(1,408,675) £(1,541,564)
The Interest Rate Risk Profile of Financial Assets and Liabilities as at 31 January 2009 was as follows:
Japanese yen – (4,124,421) (4,124,421) UK sterling – (5,697,728) (5,697,728)
Total £0 £(9,822,149) £(9,822,149)
There are no material amounts of non-interest bearing financial assets, other than equities, which do not have maturity dates.
The floating rate financial assets and liabilities includes: Sterling denominated bank balances which bear interest rates based on 0.125% under the sixmonth LIBOR and overdraft interest based on 3% over the base rate.
All overseas deposits and loans bear interest at rates determined by the relevant Authority.
(d) Fair Value of Financial Assets and Financial LiabilitiesThere is no material difference between the value of the financial assets and liabilities, as shownin the balance sheet, and their fair value.
136 BlackRock Collective Investment Funds 137
BlackRock North American Equity Tracker Fund
North American Equity Tracker Investment Objective & Policy
The aim of the Fund is to seek to achieve capital growth for investors by tracking closely the performanceof the S&P 500 Index until 31 October 2005 and the FTSE World Americas Index from 1 November 2005 byinvesting in companies in the Index. Investment will be made directly into constituent companies and viaother transferable securities giving exposure to such companies. The Fund may also invest in permittedmoney market instruments, permitted deposits, and units in collective investment schemes. Derivativesand forward transactions may be used for hedging purposes and meeting the investment objectives of theFund. The scheme property of the Fund will in all cases be restricted to investment in property which iseligible as a permitted link in IPRU (INS), or such other equivalent rules as may replace them from timeto time.
The Fund is a sub-fund of BlackRock Collective Investment Funds , a UCITS scheme established underthe Financial Services Authority's Collective Investment Schemes Sourcebook "the Sourcebook". Prior to10 July 2009 the Collective Investment Funds were known as the Qualified Investor Schemes (1). The Fundwas authorised by the FSA on 21 June 2005 and subsequently launched on 15 July 2005. The Fund waspreviously known as Merrill Lynch North American Equity Tracker Fund. It adopted its present name witheffect from 28 April 2008.
Japan Equity Tracker Distribution Tablesfor the year ended 31 January 2010
Final Distribution in Pence per UnitGroup 1 – Units purchased prior to 1 August 2009Group 2 – Units purchased 1 August 2009 to 31 January 2010
† Equalisation applies only to units purchased during the distribution period (Group 2 units). It is the average amount of revenue included in the purchase price of all Group 2 units and is refunded to holders of these units as a return of capital. Being capital, it is not liable toincome tax but must be deducted from the cost of units for capital gains tax purposes.
138 BlackRock Collective Investment Funds 139
North American Equity Tracker Investment Report
The Fund met its objective of tracking the benchmarkOver 12 months to 31 January 2010, the BlackRock North American Equity Tracker Fund met its objectiveof closely tracking the FTSE World Americas index, returning 19.6%*.
Here, we focus on the second six months of the period, during which time the Fund returned 13.8%* andthe benchmark returned 13.5%*.
It should be noted that relative annual performance was negatively impacted by the timing differentialbetween the Fund’s valuation point and that of the index.
Investing in US companies to match the FTSE World Americas indexThe Fund seeks to achieve capital growth for investors by tracking closely the performance of the FTSE World Americas index. Investment will be made directly into constituent companies and via othertransferable securities giving exposure to such companies.
Global equities rallied from lows struck in March 2009, recording strong gains over six and 12 monthsFollowing a difficult 2008, global equity markets continued to decline into the first quarter of 2009, amidfears that the global financial system was on the brink of collapse and that the world was entering anotherGreat Depression. Uncertainty surrounded the intentions of governments and global policymakers, butsuch concerns began to dissipate as investors witnessed huge global monetary and fiscal stimuli, whichreflated economic activity and forced share prices sharply higher from troughs reached in March. Despitenegative real economic growth across the entire developed world, coupled with noticeable earnings declines,“risk” assets managed to outperform “safe” assets in 2009 as a whole, as sidelined cash, which wasproducing near-zero returns, began to move back into the markets.
The pace of the rally slowed somewhat into the end of the year, and markets subsequently sold off inJanuary 2010, as risk aversion increased on two key developments, namely the tightening in monetaryconditions in China and, more importantly, further tensions in sovereign bond markets, particularlyGreece. However, the six months to the end of January saw strong equity gains overall, as measured bythe MSCI Global Equity index, and the period ended with a perception that the economic recovery is hereto stay, albeit with some lingering investor unease.
In the US, signs of improvement and increased activity still balanced by ongoing risks to the economy US stocks ended significantly higher over six months, having posted gains through the majority of theperiod. In line with global equities, the pace of the rally slowed towards the end of 2009, with US stocksrecording negative performance in January 2010.
After cutting the Federal Funds rate to a record low, between 0% and 0.25%, in December 2008, the FederalReserve (Fed) took no additional interest rate action for all of the reporting period. In the Fed’s statementfollowing its policy meeting on 16 December, the central bank indicated that although economic activityhad continued to show signs of improvement, these factors were balanced by ongoing risks to the economyand still-low levels of inflation.
All figures quoted are based on bid to bid, dealing prices (the price at which units are sold), with net income reinvested. Performance isshown for complete 12 month periods only. * Performance data does not exist for the relevant periods.
AccumulationThe final accumulation payable on 31 March 2010 is 0.7964p net per accumulation unit.
Annual performance to most recent quarter end
31.12.2008 31.12.2007 31.12.2006 31.12.2005 31.12.2004to 31.12.2009 to 31.12.2008 to 31.12.2007 to 31.12.2006 to 31.12.2005*
North American +20.9% -17.3% +6.4% +1.8% –
Performance Table
Period of Report Since LaunchOne Year 15.7.2005
to 31.1.2010 to 31.1.2010
The Fund returned:Total Return (with net income reinvested)Accumulation Units +19.6% +10.0%
The Benchmark returned:Total Return (with net income reinvested)FTSE World Americas (net)†* +23.1% +11.2%
This Annual Report covers the year ended 31 January 2010, the first six months of which werecommented on in the Interim Report to 31 July 2009. For a copy, please contact us.
† Source: BlackRock/Factset. Net of withholding tax. Prior to 10 July 2009 the Collective Investment Funds were known as the QualifiedInvestor Schemes. All fund figures quoted are based on bid to bid, dealing prices (the price at which units are sold). * S&P 500 Composite(net) index used prior to 01/11/2005. Performance is calculated net of fees.
All financial investments involve an element of risk. Therefore, the value of your investment and theincome from it will vary and your initial investment amount cannot be guaranteed. Changes in exchangerates may cause the value of an investment to fluctuate. Past performance is not a guide to futureperformance and should not be the sole factor of consideration when selecting a product.
BlackRock North American Equity Tracker Fund
140 BlackRock Collective Investment Funds 141
142 BlackRock Collective Investment Funds 143
North American Equity Tracker Performance Record
Net Asset Value
At Net Asset Net Asset31 January Units in Issue Value of Fund Value per Unit
Total Expense RatioTotal Expense Ratio (TER) as at 31 January 2010: 0.2253% (31 January 2009: 0.2329%)
TER reflects the annual operating expenses of the Fund. It does not take into account the impact of any initial or exit charges or transaction-based expenditure i.e. dealing costs. TER is employed as thestandard method of disclosing the effect of charges by most European collective investment schemes.
North American Equity Tracker Investment Report continued
Meanwhile, US employment data has improved, where, despite unemployment claims falling by less-than- expected in January 2010, the contrast with the start of 2009 is striking: during the first quarter of2009, employment losses averaged 691,000 per month; this figure declined to 69,000 per month in thefourth quarter of the year.
Real gross domestic product (GDP) increased at an annualized rate of 2.2% in the third quarter of 2009,according to the Bureau of Economic Analysis of the US Department of Commerce. This compares to adecline of 0.7% during the second quarter of 2009. The improvement primarily reflected upturns in personalconsumption expenditures, exports, private inventory investment and residential fixed investment, in additionto a smaller decrease in non-residential fixed investment, that were partially offset by an upturn in imports,a decline in state and local government spending, and a deceleration in federal government spending.
* Performance figures quoted are based on bid to bid, dealing prices (the price at which units are sold) and are not the same as the net assetvalue reported in the financial statements which is at close of business. Performance is calculated net of fees.
145144 BlackRock Collective Investment Funds
32,198 Shaw Communication Class 'B' Shares 375,084 0.06 17,080 Shoppers Drug Mart 425,650 0.07 11,900 SNC-Lavalin 340,329 0.06 43,800 Sun Life Financial 800,888 0.14
121,444 Suncor Energy 2,401,282 0.41 79,748 Talisman Energy 826,252 0.14 45,200 Teck Resources Class 'B' Shares 926,820 0.16
7,838 Pinnacle West Capital 175,210 0.03 25,569 PPL 470,244 0.08 21,199 Progress Energy 515,555 0.09 38,448 Public Service Enterprise 733,257 0.13 27,645 Reliant Energy 85,399 0.01 59,905 Southern 1,196,306 0.20 16,851 Teco Energy 163,736 0.03 34,692 Xcel Energy 449,888 0.08
9,428 SCANA 209,518 0.04 18,730 Sempra Energy 592,618 0.10 46,954 Spectra Energy 622,674 0.11
9,120 Wisconsin Energy 278,369 0.05
4,007,260 0.69
General Financial – 3.22%; 2009 2.52%89,031 American Express 2,091,873 0.36 19,275 Ameriprise Financial 459,983 0.08 90,172 Bank of New York Mellon 1,635,296 0.28
1,600 BlackRock 213,500 0.04 33,972 Capital One 781,246 0.13
6,199 Lamar Advertising 110,641 0.02 10,942 Liberty Global Class A 173,376 0.03 10,467 Liberty Global Class C 163,694 0.03 42,274 Liberty Media Corporation 273,578 0.05
3,538 Liberty Media -Starz 103,486 0.02 22,217 McGraw-Hill Companies 491,092 0.08 45,818 News Corp Class 'B' 419,751 0.07
26,200 Cia Concessoes Rodoviarias 351,407 0.06 3,105 Cia de Bebidas das Americas 155,317 0.03
10,500 Cia Paranaense de Energia Preference 'B' Shares 134,948 0.02 7,400 Cia Souza Cruz 149,323 0.03 2,921 Cia Transmissao Energia Elet Paulista Preference Shares 46,221 0.01
125,000 Cia Vale Rio doce 2,038,799 0.35 164,524 Cia Vale Rio doce Preference 'A' Shares 2,312,015 0.39
3,100 Comgas Preference 'A' Shares 36,699 0.01 8,300 Cosan Sa Industria 58,956 0.01 4,600 CPFL Energia 55,653 0.01
25,200 Cyrela Brazil 181,855 0.03 21,200 Electrobras 283,072 0.05
8,200 Electropaulo Metropolitana Electricid Preference 'B' Shares 98,169 0.02 58,800 Embraer Empresa Brasileira de Aeronautica 195,889 0.03
5,200 Energias do Brasil 61,300 0.01 11,600 Fertilizantes Fosfatados 72,299 0.01
28,800 Lojas Americanas Preference Shares 127,063 0.02 21,900 Metalurgica Gerdau Preference Shares 228,881 0.04 33,800 Natura Cosmeticos 382,556 0.07 18,488 Net servicos de communicacao Preference Shares 134,404 0.02 50,000 OGX Petroleo e Gas Participacoes 280,121 0.05 11,431 Pao de Acucar Preference 'A' Shares 241,108 0.04 34,368 Perdigao 517,463 0.09
284,700 Petrol Brasileiro Petrobas Sponsored Preference Shares 3,244,138 0.53 169,600 Petrol Brasileiros Sa Petrobras 2,161,640 0.37
10,200 Porto Seguro 64,492 0.01 39,900 Redecard 350,607 0.06
5,900 Sabesp 61,682 0.01 44,400 Siderurgica Nacional 814,353 0.14 17,000 Suzano Papel e Celulose Preference 'A' Shares 115,140 0.02
8,200 Tam Preference 'A' Shares 94,259 0.02 5,300 Tele Norte Leste Participacoes 70,503 0.01
20,836 Tele Norte Leste Preference Shares 233,464 0.04 3,300 Tele Norte Leste Preference 'A' Shares 60,570 0.01 1,400 Tele Sao Paulo Preference Shares 19,412 –
North American Equity Tracker Portfolio Statement continued
35,650 Grupo Aeroportuari Series 'B' Shares 70,504 0.01 15,771 Grupo Bimbo 62,425 0.01 34,400 Grupo Carso 66,609 0.01
5,800 Grupo Elektra 182,712 0.03 59,234 Grupo Financiera Imbursa 113,926 0.02 42,482 Impulsora del Desarollo 31,873 0.01 10,704 Industrias penoles 124,558 0.02 35,627 Kimberly Clark Mexico 100,067 0.02 65,018 Mexichem 87,588 0.01
640,640 Mexico Series 'B' Shares 816,504 0.14 43,764 Modelo Series 'C' Shares 136,813 0.02 37,149 Organizacion Soriana 54,261 0.01
759,281 Telefonos De Mexico 386,355 0.07 193,740 Televisa (Representing 25 'A', 22 'B',35 'D' and
35 'L' Shares) 476,704 0.08 737,881 Telmex Internacional 409,890 0.07
42,378 Urbi Desarrollo 56,579 0.01 264,796 Wal-Mart de Mexico Series 'V' 736,102 0.13
7,607,955 1.29
167166 BlackRock Collective Investment Funds
31.1.2010 31.1.2009Notes £ £ £ £
IncomeNet capital gains/(losses)
during the year 2 89,061,049 (82,545,784) Revenue 3 10,048,043 8,476,811 Expenses 4 (988,058) (824,790) Finance costs: Interest 6 (30,700) (846)
Net revenue before taxation 9,029,285 7,651,175 Taxation 5 (1,371,127) (1,530,234)
Net revenue after taxation for the year 7,658,158 6,120,941
Total return before distributions 96,719,207 (76,424,843) Finance costs: Distributions 6 (7,658,158) (6,120,941)
Change in net assets attributable tounitholders from investment activities £89,061,049 £(82,545,784)
31.1.2010 31.1.2009£ £ £ £
Opening net assets attributableto unitholders 330,733,566 379,183,352
Amounts receivable oncreation of units 253,849,704 164,924,751
Amounts payable on cancellation of units (95,626,964) (137,177,286)
158,222,740 27,747,465 Stamp duty reserve tax 11 –Change in net assets attributable to
unitholders from investment activities 89,061,049 (82,545,784) Retained distribution on accumulation units 8,575,267 6,348,533
Closing net assets attributableto unitholders £586,592,633 £330,733,566
Comparative figures have been restated for the presentation changes following adoption of the Statement of Recommended Practice (“theSORP”) for Authorised Funds issued by the Investment Management Association (“IMA") in November 2008 (see Accounting Policies).
North American Equity Tracker Statement of Change in NetAssets Attributable to Unitholders for the year ended 31 January 2010
North American Equity Tracker Statement of Total Return for the year ended 31 January 2010
North American Equity Tracker Portfolio Turnover
for the year ended for the year ended31.1.2010 31.1.2009
Total purchases for the year £235,497,774 £154,263,742Total sales for the year £88,724,531 £113,918,745Portfolio Turnover Rate 5.84% 9.98%
The Portfolio Turnover Rate (PTR) gives an indication of how much the Fund's investments have changed during the relevant year.
The PTR is calculated by the Manager in accordance with the FSA requirements laid out in COLL 4 Annex 2 R
169168 BlackRock Collective Investment Funds
North American Equity Tracker Notes to Financial Statementsat 31 January 2010
1. Accounting PoliciesSee pages 4-5 of Aggregated Accounts.
2. Net Capital Gains/(Losses) on Investments During the Year31.1.2010 31.1.2009
£ £
The net capital gains/(losses) on investments comprise:Gains/(losses) on non-derivative securities 87,183,943 (81,764,209) Gains/(losses) on derivative contracts 2,544,390 (2,841,544) (Losses)/gains on forward currency contracts (117,440) 1,370,404 Other currency (losses)/gains (476,823) 738,386 Transaction costs (73,021) (48,821)
Net capital gains/(losses) on investments £89,061,049 £(82,545,784)
3. Revenue31.1.2010 31.1.2009
£ £
Overseas dividends 10,038,191 8,331,986 Interest from UK bank deposits 9,852 144,825
Total revenue £10,048,043 £8,476,811
4. Expenses31.1.2010 31.1.2009
£ £
Payable to the Manager or associates of the Manager:– Manager's service charge 904,504 708,899 – Registrar's fees 177 161 – VAT refunds on Registrar's fees (13) (19)
904,668 709,041
Payable to the Trustee or associates of the Trustee:– Trustee's fees 50,410 42,182
Total other liabilities (935,342) (9,734,041) Total liabilities (1,958,966) (10,270,368)
Net assets attributable to unitholders £586,592,633 £330,733,566
A J Stenning (Director)E E Tracey (Director)BlackRock Fund Managers Limited23 March 2010
171170 BlackRock Collective Investment Funds
6. Finance CostsThe distributions take account of amounts received on the creation of units and amounts deducted oncancellation of units, and comprise:
31.1.2010 31.1.2009£ £
Interim 4,111,952 2,712,458 Final 4,463,315 3,636,075
8,575,267 6,348,533 Add: Amounts deducted on cancellation of units 256,446 636,309 Less: Amounts received on creation of units (1,173,555) (863,901)
Net distribution for the year 7,658,158 6,120,941 Finance costs: Interest 30,700 846
Total finance costs £7,688,858 £6,121,787
Details of the interim and final distributions per unit are set out in the table on page 178.
7. Debtors31.1.2010 31.1.2009
£ £
Sales awaiting settlement – 64,912 Amounts receivable for creation of units 3,618,507 1,759,700 Currency sales awaiting settlement 624,064 3,898,857 Overseas tax recoverable 27,010 2,928 Accrued revenue 573,993 536,876
Total debtors £4,843,574 £6,263,273
8. Cash and Bank Balances31.1.2010 31.1.2009
£ £
Amount held at futures clearing houses and brokers 3,002,304 2,148,082 Cash and bank balances 21,365,164 6,343,600
Cash and bank balances £24,367,468 £8,491,682
North American Equity Tracker Notes to Financial Statementscontinued
Total current tax charge for the year [see Note 5(a)] £1,420,315 £1,525,513
Deferred tax charge for the year [see note 5(c)] (49,188) 4,721
Total tax charge for the year £1,371,127 £1,530,234
(b) Factors affecting the current tax charge for the yearThe tax assessed for the period is lower than the standard rate of corporation tax in the UK for anauthorised unit trust. The differences are explained below:
31.1.2010 31.1.2009£ £
Net revenue before taxation 9,029,285 7,651,175
Corporation tax at 20% (2008: 20%) 1,805,857 1,530,235 Effects of:Movement in revenue accruals not taxable 121,839 (19,213) Non taxable overseas dividends (1,318,973) – Overseas tax 1,382,188 1,132,409 Corporation tax prior year adjustment 6,163 – Double Tax Relief (576,759) (1,117,918)
Total current tax charge for the year [see Note 5(a)] £1,420,315 £1,525,513
(c) Analysis of deferred tax charge for the year31.1.2010 31.1.2009
£ £
Opening deferred tax balance 49,409 44,688 Deferred tax charge for the year [see note 5(a)] (49,188) 4,721
Closing deferred tax balance £221 £49,409
As at 31 January 2010, the Fund had no surplus management expenses, therefore, a deferred tax asset has not been recognised.
173172 BlackRock Collective Investment Funds
Risk Impact of risk
Market price risk The valuation of the Fund’s investments are calculated withreference to market prices quoted by financial agencies andbrokers. Movements to those market prices may materially affectthe value of the Fund's investments, which may move down aswell as up. The Manager undertakes research to minimise theimpact of such movements against the Fund’s investmentobjective.
Liquidity risk The risk of low market liquidity, through reduced trading volumes,affecting the ability of the Fund to trade financial instruments atvalues previously indicated by financial brokers.
The Fund invests primarily in companies incorporated in Canada,the United States of America, Brazil and Mexico, which is typicallyconsidered to be an area operating with high levels of liquidity.From time to time, however, market liquidity may be affected byeconomic events.
To manage these risks, the Investment Manager undertakesresearch of investment opportunities to select opportunitiescongruent with the Fund’s investment objective.
All stocks are valued daily. Stocks identified as being illiquid arereviewed for pricing accuracy as the need arises and on a formalmonthly basis by the BlackRock Pricing Committee.
Counterparty risk The risk of entering an arrangement with a counterparty, which isitself subject to financial risks which may affect its ability to tradeas a going concern.
The Manager maintains a list of approved counterparties. This listis regularly monitored and revised for changes based on thecounterparty’s credit-worthiness, market reputation andexpectations of future financial performance. Transactions willonly be opened with financial intermediaries on the approvedcounterparties list.
These risks are monitored by the Manager in pursuance of the investment objective and policy as set out in this Manager's Report. Adherence to investment guidelines and to investment andborrowing powers set out in the Trust Deed, the Prospectus and in the rules of the CollectiveInvestment Schemes Sourcebook mitigates the risk of excessive exposure to any particular type of security or issuer. Further information on the investment portfolio is set out in the InvestmentReport and Portfolio Statement.
North American Equity Tracker Notes to Financial Statementscontinued
10. Derivatives and Other Financial Instruments(a) The Fund's financial instruments, comprise securities and other investments, cash balances and
debtors and creditors that arise directly from its operations, for example, in respect of sales andpurchases awaiting settlement, amounts receivable for creations and payable for cancellation ofunits, and debtors for accrued revenue.
The Fund’s property is invested with the aim of achieving the investment objective of achievingcapital growth by tracking closely the performance of the FTSE World Americas Index by investingin companies in the Index.
The Manager shall take the risks it deems reasonable to achieve the investment objective. Theserisks include the following:
Risk Impact of risk
Foreign currency risk The risk of changes to foreign currency rates materially affectingthe Sterling equivalent value of foreign denominated assets andliabilities accounted for by the Fund.
The Fund is accounted for in Sterling and holds financial assetsand financial liabilities denominated in Brazilian real, Canadiandollar, Mexican peso and US dollars.
To manage these risks, the Fund may enter into foreign currencytransactions for the purposes of efficient portfolio management.
At 31 January 2010, no forward currency contracts have beenentered into.
175174 BlackRock Collective Investment Funds
(c) Interest Rate Risk Profile of Financial Assets and LiabilitiesThe Interest Rate Risk Profile of Financial Assets and Liabilities at the balance sheet date was as follows:
Brazilian real 117,858 – 26,023,728 26,141,586 Canadian dollar 430,476 – 41,537,111 41,967,587 Mexican nuevo peso 162,084 – 7,607,954 7,770,038 Swiss franc – – 4,648 4,648 UK sterling 47,645 – 3,629,477 3,677,122 US dollar 23,609,405 – 485,382,322 508,991,727
Total £24,367,468 £0 £564,185,240 £588,552,708
Currency Floating Rate Financial TotalFinancial Liabilities not Liabilities Carrying Interest
£ £ £
Canadian dollar – (56,410) (56,410) UK sterling – (936,451) (936,451) US dollar – (967,214) (967,214)
Total £0 £(1,960,075) £(1,960,075)
The Interest Rate Risk Profile of Financial Assets and Liabilities as at 31 January 2009 was as follows:
Brazilian real 517,515 – 9,131,165 9,648,680 Canadian dollar 457,982 – 21,773,745 22,231,727 Mexican nuevo peso 87,298 – 3,678,399 3,765,697 UK sterling 3,610,543 – 18,440,261 22,050,804 US dollar 3,818,344 – 313,086,969 316,905,313
Total £8,491,682 £0 £366,110,539 £374,602,221
North American Equity Tracker Notes to Financial Statementscontinued
(b) Currency ExposuresA proportion of the net assets of the Fund are denominated in currencies other than sterling, withthe effect that the balance sheet and total return can be affected by currency movements.
Currency Currency Net Assets
Monetary Non- Totalexposures monetary
exposures31.1.2010 31.1.2010 31.1.2010
£ £ £
Brazilian real 117,858 26,023,728 26,141,586 Canadian dollar 430,476 41,480,701 41,911,177 Mexican nuevo peso 162,084 7,607,954 7,770,038 Swiss franc – 4,648 4,648 UK sterling 47,645 2,693,025 2,740,670 US dollar 23,609,405 484,415,109 508,024,514
Total £24,367,468 £562,225,165 £586,592,633
The currency profile held at 31 January 2009 was:
Currency Currency Net Assets/(Liabilities)
Monetary Non- Totalexposures monetary
exposures31.1.2009 31.1.2009 31.1.2009
£ £ £
Brazilian real 517,515 9,015,505 9,533,020 Canadian dollar 457,982 20,315,270 20,773,252 Mexican nuevo peso 87,298 3,549,426 3,636,724 UK sterling 3,610,543 (2,979,871) 630,672 US dollar 3,818,344 292,341,554 296,159,898
Total £8,491,682 £322,241,884 £330,733,566
177176 BlackRock Collective Investment Funds
14. Portfolio Transaction costsAnalysis of total purchase costs:
31.1.2010 31.1.2010 31.1.2009 31.1.2009£ £ £ £
Purchases in year before transaction costs 235,464,945 154,222,004
Commissions and other costs (including stamp duty) 32,829 41,738
Total purchase costs 32,829 41,738
Gross purchases total £235,497,774 £154,263,742
Analysis of total sale costs:£ £ £ £
Gross sales before transaction costs 88,740,933 113,955,069 Commissions and other costs (16,402) (36,324) Total sale costs (16,402) (36,324)
Total sales net of transaction costs £88,724,531 £113,918,745
15. Non Adjusting Post Balance Sheet EventSince the last business day of the accounting period, the Fund's quoted mid price has risen onAccumulation Units from 104.6p to 120.5p as at 15 March 2010, a rise of 15.20%.
North American Equity Tracker Notes to Financial Statementscontinued
Currency Floating Rate Financial TotalFinancial Liabilities not
Liabilities Carrying Interest£ £ £
Brazilian real – (115,660) (115,660) Canadian dollar – (1,458,475) (1,458,475) Mexican nuevo peso – (128,973) (128,973) UK sterling – (21,420,132) (21,420,132) US dollar – (20,745,415) (20,745,415)
Total £0 £(43,868,655) £(43,868,655)
There are no material amounts of non-interest bearing financial assets, other than equities, which do not have maturity dates.
The floating rate financial assets and liabilities includes: Sterling denominated bank balances which bear interest rates based on 0.125% under the sixmonth LIBOR and overdraft interest based on 3% over the base rate.
All overseas deposits and loans bear interest at rates determined by the relevant Authority.
(d) Fair Value of Financial Assets and Financial LiabilitiesThere is no material difference between the value of the financial assets and liabilities, as shownin the balance sheet, and their fair value.
11. Contingent LiabilitiesPlease see page 10.
12. Investment ManagementPlease see page 10.
13. Related Party TransactionsBlackRock Fund Managers Limited, as Manager and Registrar of the Fund, together with The RoyalBank of Scotland plc, as Trustee, are regarded as related parties to the Fund. The Manager acts aseither principal or agent for the Trustee in respect of all transactions of units of the Fund. Theaggregate monies received through creation and paid through cancellation are disclosed in theStatement of Change in Net Assets Attributable to Unitholders. Any amounts due to or from theManager at the period end are disclosed in Notes 7 and 9.
Management fees and registration fees paid to BlackRock Fund Managers Limited and fees paid tothe Trustees are shown in Note 4. The balances due at the period end in respect of these fees areshown in Note 9.
At the balance sheet date Nutraco Nominees Limited held 419,304,562 units (75%) of the total units in the Fund. As Nutraco Nominees Limited is a material unitholder in the Fund, it is regarded as arelated party in accordance with FRS8 ‘Related Party Disclosures’.
No other transactions were entered into with associates of the Manager during the period.
179178 BlackRock Collective Investment Funds
BlackRock Pacific ex Japan Equity Tracker Fund
Pacific ex Japan Equity Tracker Investment Objective & Policy
The aim of the Fund is to seek to achieve capital growth for investors by tracking closely the performanceof the FTSE World Asia-Pacific ex-Japan Index by investing in companies in the Index. Investment will bemade directly into constituent companies and via other transferable securities giving exposure to suchcompanies. The Fund may also invest in permitted money market instruments, permitted deposits, andunits in collective investment schemes. Derivatives and forward transactions may be used for hedgingpurposes and meeting the investment objectives of the Fund. The scheme property of the Fund will in allcases be restricted to investment in property which is eligible as a permitted link in IPRU (INS), or suchother equivalent rules as may replace them from time to time.
The Fund is a sub-fund of BlackRock Collective Investment Funds, a UCITS scheme established underthe Financial Services Authority's Collective Investment Schemes Sourcebook "the Sourcebook". Prior to10 July 2009 the Collective Investment Funds were known as the Qualified Investor Schemes (1). The Fundwas authorised by the FSA on 21 June 2005 and subsequently launched on 18 August 2005. The Fund waspreviously known as Merrill Lynch Pacific ex Japan Equity Tracker Fund. It adopted its present name witheffect from 28 April 2008.
North American Equity Tracker Distribution Table for the period ended 31 January 2010
Final Distribution in Pence per UnitGroup 1 – Units purchased prior to 1 August 2009Group 2 – Units purchased 1 August 2009 to 31 January 2010
† Equalisation applies only to units purchased during the distribution period (Group 2 units). It is the average amount of revenue includedin the purchase price of all Group 2 units and is refunded to holders of these units as a return of capital. Being capital, it is not liable toincome tax but must be deducted from the cost of units for capital gains tax purposes.
181180 BlackRock Collective Investment Funds
Pacific ex Japan Equity Tracker Investment Report
The Fund met its objective of tracking the benchmarkOver 12 months to 31 January 2010, the BlackRock Pacific ex-Japan Equity Tracker Fund met its objectiveof closely tracking the FTSE World Asia Pacific ex-Japan index, returning 56.0%* versus the benchmarkreturn of 58.2%*.
Here, we focus on the second six months of the period, during which time the Fund returned 13.5%* andthe benchmark returned 14.1%*.
It should be noted that relative annual performance was negatively impacted by the timing differentialbetween the Fund’s valuation point and that of the index.
Investing in Asia Pacific region companies to match the FTSE World Asia Pacific ex-Japan indexThe Fund seeks to achieve capital growth for investors by tracking closely the performance of the FTSEWorld Asia Pacific ex-Japan index. Investment will be made directly into constituent companies and viaother transferable securities giving exposure to such companies.
Global equities rallied from lows struck in March 2009, recording strong gains over six and 12 monthsFollowing a difficult 2008, global equity markets continued to decline into the first quarter of 2009, amidfears that the global financial system was on the brink of collapse and that the world was entering anotherGreat Depression. Uncertainty surrounded the intentions of governments and global policymakers, butsuch concerns began to dissipate as investors witnessed huge global monetary and fiscal stimuli, whichreflated economic activity and forced share prices sharply higher from troughs reached in March. Despitenegative real economic growth across the entire developed world, coupled with noticeable earnings declines,“risk” assets managed to outperform “safe” assets in 2009 as a whole, as sidelined cash, which wasproducing near-zero returns, began to move back into the markets.
The pace of the rally slowed somewhat into the end of the year, and markets subsequently sold off inJanuary 2010, as risk aversion increased on two key developments, namely the tightening in monetaryconditions in China and, more importantly, further tensions in sovereign bond markets, particularlyGreece. However, the six months to the end of January saw strong equity gains overall, as measured bythe MSCI Global Equity index, and the period ended with a perception that the economic recovery is hereto stay, albeit with some lingering investor unease.
Growth in the Asia-Pacific region has remained robust in absolute relative termsEconomic growth in the Asia-Pacific region remained robust in an absolute context and relative to the restof the world, albeit slightly less rapid than was the case a few months ago. Chinese economic data suggestsgrowth remains strong, but is not accelerating further, while in Korea and Taiwan, for example, industrialoutput growth moderated towards year-end. However, this followed exceptional surges in economic activity,which in many regional economies has fully erased the deep cuts in output during the recession.
There have been two main drivers of this regional rebound: first, the recovery in world trade as recessionpressures faded, which has supported Asian export growth; and second, policy stimulus in Asia has beensignificant. This has been the result partly of low interest rates, but also the substantial boost from Chinesefiscal stimulus, although the government acted in January to counter inflationary pressures and the riskof overheating via some liquidity tightening.
* Performance figures quoted are based on bid to bid, dealing prices (the price at which units are sold) and are not the same as the net assetvalue reported in the financial statements which is at close of business. Performance is calculated net of fees.
Performance Table
Period of Report Since LaunchOne Year 18.8.2005
to 31.1.2010 to 31.1.2010
The Fund returned:Total Return (with net income reinvested)Accumulation Units +56.0% +60.2%
The Benchmark returned:Total Return (with net income reinvested)FTSE Pacific ex Japan† +58.2% +64.6%
This Annual Report covers the year ended 31 January 2010, the first six months of which werecommented on in the Interim Report to 31 July 2009. For a copy, please contact us.
† Source: BlackRock/Factset. Net of withholding tax. Prior to 10 July 2009 the Collective Investment Funds were known as the QualifiedInvestor Schemes. All fund figures quoted are based on bid to bid, dealing prices (the price at which units are sold). Performance iscalculated net of fees.
All financial investments involve an element of risk. Therefore, the value of your investment and theincome from it will vary and your initial investment amount cannot be guaranteed. Changes in exchangerates may cause the value of an investment to fluctuate. Past performance is not a guide to futureperformance and should not be the sole factor of consideration when selecting a product.
Annual performance to most recent quarter end
31.12.2008 31.12.2007 31.12.2006 31.12.2005 31.12.2004to 31.12.2009 to 31.12.2008 to 31.12.2007 to 31.12.2006 to 31.12.2005*
Pacific ex Japan +55.8% -32.4% +27.7% +11.9% –
All figures quoted are based on bid to bid, dealing prices (the price at which units are sold), with net income reinvested. Performance isshown for complete 12 month periods only. * Performance data does not exist for the relevant periods.
AccumulationThe final accumulation payable on 31 March 2010 is 1.8136p net per accumulation unit.
BlackRock Pacific ex Japan Equity Tracker Fund
183182 BlackRock Collective Investment Funds
Pacific ex Japan Equity Tracker Portfolio Statementat 31 January 2010
PACIFIC BONDS – 0.00%; 2009 0.00%
New Zealand – 0.00%; 2009 0.00%NZ$5,684 Kiwi Income Property 8.95% Convertible Bonds 20/12/2014 2,576 –
PACIFIC EQUITIES – 98.71%; 2009 99.27%
Australia – 37.38%; 2009 31.73%156,600 ABC Learning Centre – – 106,116 Adelaide Brighton 145,392 0.04
329,021 Australand Property (Stapled) 81,217 0.03440,279 Australia & New Zealand Bank 5,304,596 2.01126,242 AWB 74,229 0.03298,357 AXA Asia Pacific 1,084,032 0.41
86,805 Babcock & Brown* – – 41,765 Bank of Queensland 254,841 0.1069,824 Bendigo Bank 379,573 0.14
10,959 Cochlear 378,177 0.14287,836 Commonwealth Bank of Australia 8,497,369 3.21334,400 Commonwealth Property Office Fund 167,872 0.06108,771 Computershare 699,899 0.26104,890 Consolidated Media 173,968 0.07
Holding or Market % ofNominal Value Total
Value Investment £ Net Assets
Pacific ex Japan Equity Tracker Performance Record
Net Asset Value
At Net Asset Net Asset31 January Units in Issue Value of Fund Value per Unit
Total Expense RatioTotal Expense Ratio (TER) as at 31 January 2010: 0.2492% (31 January 2009: 0.2945%)
TER reflects the annual operating expenses of the Fund. It does not take into account the impact of any initial or exit charges or transaction-based expenditure i.e. dealing costs. TER is employed as thestandard method of disclosing the effect of charges by most European collective investment schemes.
43,200 Dah Sing Banking 36,104 0.0128,000 Dah Sing Financial 84,377 0.03
604,800 First Pacific 210,930 0.08410,700 Fosun International 181,520 0.07401,000 Foxconn 264,882 0.10
80,000 Fubon Bank (Hong Kong) 19,865 0.01167,300 Galaxy Entertainment 39,660 0.01
2,082,000 Gome Electrical Appliances 456,751 0.17200,000 Hang Lung 558,498 0.21392,735 Hang Lung Property 834,760 0.32145,400 Hang Seng Bank 1,272,415 0.48203,823 Henderson Land Development 809,127 0.31176,200 Hidili 115,682 0.04949,835 Hong Kong & China Gas 1,294,525 0.49165,500 Hong Kong & Shanghai Hotels 144,432 0.05
18,800 Hong Kong Aircraft 148,885 0.06296,000 Hong Kong Electric 1,028,761 0.39200,500 Hong Kong Exchanges & Clearing 2,125,180 0.80181,000 Hopewell Holdings 341,809 0.13207,500 Huabao International 132,063 0.05346,000 Hutchison Harbour 25,024 0.01345,000 Hutchison Telecommunications 34,932 0.01602,000 Hutchison Whampoa 2,566,365 0.97137,970 Hysan Development 213,317 0.08110,000 Industrial & Commercial Bank Of China 134,361 0.05188,600 KWG Properties 71,535 0.03135,400 Kowloon Development 90,201 0.03
1,394,000 Lenovo 601,553 0.23138,000 Li Ning 260,605 0.10145,500 Lifestyle International 148,960 0.06397,500 Link Real Estate Investment Trust 594,137 0.22339,593 Mass Transit Railway 684,966 0.26
44,000 Melco International Developments 11,067 – 378,500 Mongolia Energy 115,581 0.04259,600 New World China 49,650 0.02535,698 New World Development 550,158 0.21136,000 NWS Holdings 138,360 0.05
Pacific ex Japan Equity Tracker Portfolio Statement continued
Holding or Market % ofNominal Value Total
Value Investment £ Net Assets
531,600 Li & Fung 1,516,526 0.57251,400 Nine Dragons Paper 222,226 0.08551,460 Noble 706,073 0.27
559,288 Chaoda Modern Agriculture 343,372 0.12239,000 China Mengniu Dair 459,021 0.17328,000 Global Bio-Chem 56,933 0.02132,700 Greentown China 99,386 0.04168,000 Hengan International 702,019 0.27179,100 Hopwell Highway 70,523 0.03136,000 Hutchison Telecom 23,388 0.01127,000 Kingboard Chemical 332,704 0.13224,000 Lee & Man Paper Manufacturing 80,462 0.03143,700 Parkson Retail 154,046 0.06
Hong Kong – 12.67%; 2009 20.83%295,800 Agile Property Developments 232,949 0.09285,600 Alibaba.com 403,472 0.15125,100 Anta Sports Products 102,942 0.04348,703 Bank of East Asia 746,774 0.28502,400 Belle International 356,086 0.13783,500 BOC Hong Kong 1,023,755 0.39293,200 C C Land 67,150 0.03
62,000 Café de Coral 84,201 0.03306,000 Cathay Pacific 314,260 0.12327,000 Cheung Kong 2,417,531 0.91109,400 China High Speed 136,617 0.05242,100 China Huiyuan Juice Group (Hong Kong Line) 97,664 0.04452,000 China Travel International 69,739 0.03
189188 BlackRock Collective Investment Funds
Holding or Market % ofNominal Value Total
Value Investment £ Net Assets
1,655,136 Golden Agri-Resources 378,952 0.1423,000 GuocoLand 22,495 0.0136,971 Haw Par 92,208 0.0343,800 Hotel Properties 39,723 0.0229,724 Jardine Cycle & Carriage 334,062 0.1349,600 Jardine Matheson 920,559 0.35
218,000 Keppel 811,194 0.31123,200 Keppel Land 179,102 0.07
494,100 Wilmar International 1,447,582 0.55136,416 Wing Tai 118,261 0.04391,600 Yangzijiang Shipbuilding 184,540 0.07
88,600 Yanlord Land 68,931 0.03
19,938,932 7.54
South Korea – 20.79%; 2009 20.59%940 Amore Pacific 406,481 0.15570 Cheil Communications 80,834 0.03
8,787 Cheil Industries 263,385 0.10
Holding or Market % ofNominal Value Total
Value Investment £ Net Assets
832,382 PCCW 136,455 0.0570,000 Public Financial 21,657 0.01
481,600 Sands China 420,294 0.16247,410 Shui On Land 73,562 0.03182,000 Shun Tak 66,107 0.02449,813 Sino Land 466,292 0.18352,100 Soho China 107,802 0.04362,200 Sun Hung Kai Property 2,919,348 1.10173,000 Swire Pacific 1,174,038 0.44277,000 Techtronic Industries 142,684 0.05
71,000 Television Broadcast 204,828 0.08138,300 Tencent 1,610,375 0.61985,400 Want Want China 390,388 0.15252,875 Wharf 785,402 0.30169,177 Wheelock 275,298 0.10
46,500 Wing Hang Bank 245,689 0.09
33,569,870 12.67
New Zealand – 0.65%; 2009 0.71%48,552 Air New Zealand 27,342 0.01
205,405 Auckland International Airport 173,513 0.0766,705 Contact Energy 169,925 0.06
90,171 D-Link 59,362 0.02423,138 E.Sun Financial 98,778 0.04155,792 Eternal Chemical 94,193 0.04197,724 EVA Airways 48,475 0.02349,984 Evergreen Marine 125,799 0.05335,668 Far East International Bank 66,884 0.03645,375 Far East Textile 443,779 0.17336,710 Far Eastone Telecommunications 254,883 0.10
33,368 Faraday Technology 40,936 0.02128,773 Feng Hsin Iron & Steel 131,061 0.05832,635 First Financial 290,339 0.11820,976 Formosa Chemical & Fibre 1,109,811 0.42373,291 Formosa Petrochemicals 587,024 0.22
44,080 Cheng Uei Precision Industry 56,402 0.02977,996 Chi Mei Optoelectric 477,628 0.18124,663 Chicony Electronic 191,901 0.07389,375 China Air Lines 81,008 0.03
2,004,585 China Development Financial 347,345 0.13
195194 BlackRock Collective Investment Funds
Holding or Market % ofNominal Value Total
Value Investment £ Net Assets
159,196 Vanguard International 47,737 0.02120,368 Via Technologies 41,149 0.02463,641 Walsin Lihwa 99,176 0.04252,208 Wan Hai Lines 78,337 0.03184,335 Waterland 36,550 0.01404,000 WinBonds Electronic 62,269 0.02330,696 Wistron Corporation 393,422 0.15179,237 Ya Hsin Industrial* – –313,000 Yageo 68,176 0.03154,445 Yangming Marine 34,395 0.01
during the year 2 128,351,822 (112,100,336) Revenue 3 9,308,597 10,826,730 Expenses 4 (712,563) (803,944) Finance costs: Interest 6 (14,595) (77,220)
Net revenue before taxation 8,581,439 9,945,566 Taxation 5 (910,151) (2,216,636)
Net revenue after taxation for the year 7,671,288 7,728,930
Total return before distributions 136,023,110 (104,371,406) Finance costs: Distributions 6 (7,412,985) (7,728,930)
Change in net assets attributable tounitholders from investment activities £128,610,125 £(112,100,336)
31.1.2010 31.1.2009£ £ £ £
Opening net assets attributableto unitholders 196,321,071 269,051,420
Amounts receivable oncreation of units 95,015,078 190,012,783
Amounts payable on cancellation of units (162,097,503) (158,529,903)
(67,082,425) 31,482,880 Stamp duty reserve tax 19 –Change in net assets attributable to
unitholders from investment activities 128,610,125 (112,100,336) Retained distribution on accumulation units 6,710,976 7,887,107
Closing net assets attributableto unitholders £264,559,766 £196,321,071
Comparative figures have been restated for the presentation changes following adoption of the Statement of Recommended Practice (“the SORP”) for Authorised Funds issued by the Investment Management Association (“IMA”) in November 2008 (see Accounting Policies note 1(a)).
Pacific ex Japan Equity Tracker Statement of Change in NetAssets Attributable to Unitholders for the year ended 31 January 2010
Pacific ex Japan Equity Tracker Statement of Total Return for the year ended 31 January 2010
Pacific ex Japan Equity Tracker Portfolio Turnover
for the year ended for the year ended31.1.2010 31.1.2009
Total purchases for the year £95,539,741 £195,282,927Total sales for the year £155,239,353 £153,410,116Portfolio Turnover Rate (2.58)% (1.19)%
The Portfolio Turnover Rate (PTR) gives an indication of how much the Fund's investments have changed during the relevant year.
The PTR is calculated by the Manager in accordance with the FSA requirements laid out in COLL 4 Annex 2 R.
199198 BlackRock Collective Investment Funds
Pacific ex Japan Equity Tracker Notes to Financial Statementsat 31 January 2010
1. Accounting PoliciesSee pages 4-5 of Aggregated Accounts.
2. Net Capital Gains/(Losses) on Investments During the Year31.1.2010 31.1.2009
£ £
The net capital gains/(losses) on investments comprise:Gains/(losses) on non–derivative securities 126,188,292 (110,495,431) Gains/(losses) on derivative contracts 2,561,610 (2,196,434) Gains/(losses) on forward currency contracts 401,311 (23,948) Other currency (losses)/gains (670,701) 686,496 Transaction costs (128,690) (71,019)
Net Capital Gains/(Losses) on Investments £128,351,822 £(112,100,336)
3. Revenue31.1.2010 31.1.2009
£ £
Overseas dividends 9,010,132 10,758,835 Stock dividends 258,303 – Interest from overseas fixed interest securities 45 – Interest from UK bank deposits 40,117 67,895
Total revenue £9,308,597 £10,826,730
4. Expenses31.1.2010 31.1.2009
£ £
Payable to the Manager or associates of the Manager:– Manager's service charge 571,851 546,011 – Registrar's fees 151 126 – VAT refunds on Registrar's fees (10) (17)
571,992 546,120
Payable to the Trustee or associates of the Trustee:– Trustee's fees 32,347 32,435
Total other liabilities (667,902) (1,232,290) Total liabilities (805,760) (1,518,170)
Net assets attributable to unitholders £264,559,766 £196,321,071
A J Stenning (Director)E E Tracey (Director)BlackRock Fund Managers Limited23 March 2010
Pacific ex Japan Equity Tracker Balance Sheetat 31 January 2010
201200 BlackRock Collective Investment Funds
6. Finance CostsThe distributions take account of amounts received on the creation of units and amounts deducted oncancellation of units, and comprise:
31.1.2010 31.1.2009£ £
Interim 3,590,735 4,534,022 Final 3,120,241 3,353,085
6,710,976 7,887,107 Add: Amounts deducted on cancellation of units 1,153,209 1,606,706 Less: Amounts received on creation of units (451,200) (1,764,883)
Net distribution for the year 7,412,985 7,728,930 Finance costs: Interest 14,595 77,220
Total finance costs 7,427,580 7,806,150
Net revenue after taxation for the year 7,671,288 7,728,930 Less: non distributable stock dividends (258,303) –
Net distribution for the year £7,412,985 £7,728,930
Details of the interim and final distributions per unit are set out in the tables on page 208.
7. Debtors31.1.2010 31.1.2009
£ £
Sales awaiting settlement – 319,695 Amounts receivable for creation of units 730,120 – Currency sales awaiting settlement 113,237 – Accrued revenue 499,532 524,492
Total debtors £1,342,889 £844,187
8. Cash and Bank Balances31.1.2010 31.1.2009
£ £
Amount held at futures clearing houses and brokers 324,898 844,476 Cash and bank balances 2,548,213 1,108,209
Cash and bank balances £2,873,111 £1,952,685
Pacific ex Japan Equity Tracker Notes to Financial Statementscontinued
Total current tax charge for the year [see Note 5(b)] £963,842 £2,228,689
Deferred tax charge for the year [see note 5(c)] (53,691) (12,053)
Total tax charge for the year £910,151 £2,216,636
(b) Factors affecting the current tax charge for the yearThe tax assessed for the period is lower than the standard rate of corporation tax in the UK for anauthorised unit trust. The differences are explained below:
31.1.2010 31.1.2009£ £
Net revenue before taxation 8,581,439 9,945,566
Corporation tax at 20% (2009: 20%) 1,716,288 1,989,113 Effects of:Movement in revenue accruals taxable on receipt – 41,104 Movement in revenue accruals not taxable 117,700 – Non taxable overseas dividends (1,177,289) – Overseas tax 487,552 705,654 Tax Effect of expense relief (current) – (49,149) Non taxable stock dividends (51,661) –Adjustment in respect of prior years 19,523 – Double taxation relief (148,271) (458,033)
Total current tax charge for the year [see Note 5(a)] £963,842 £2,228,689
(c) Analysis of deferred tax charge for the year31.1.2010 31.1.2009
£ £
Opening deferred tax balance 53,691 65,744 Deferred tax charge for the year [see note 5(a)] (53,691) (12,053)
Closing deferred tax balance – £53,691
As at 31 January 2010, the Fund had no surplus management expenses, therefore, a deferred tax asset has not been recognised.
203202 BlackRock Collective Investment Funds
Risk Impact of risk
Market price risk The valuation of the Fund’s investments are calculated withreference to market prices quoted by financial agencies andbrokers. Movements to those market prices may materially affectthe value of the Fund’s investments, which may move up as wellas down. The Manager undertakes research to minimise theimpact of such movements against the Fund’s investmentobjective.
Liquidity risk The risk of low market liquidity, through reduced trading volumes,affecting the ability of the Fund to trade financial instruments atvalues previously indicated by financial brokers.
The Fund invests primarily in companies incorporated in thePacific Basin. From time to time, market liquidity across thePacific Basin may be affected by economic and socio-politicalevents.
To manage these risks, the Investment Manager undertakesresearch of investment opportunities to select opportunitiescongruent with the Fund’s investment objective.
All stocks are valued daily. Stocks identified as being illiquid arereviewed for pricing accuracy as the need arises and on a formalmonthly basis by the BlackRock Pricing Committee. TheBlackRock Pricing Committee will also review any significantmarket events which affect the liquidity of assets.
Counterparty risk The risk of entering into an arrangement with a counterparty,which is itself subject to financial risks which may affect its abilityto trade as a going concern.
The Manager maintains a list of approved counterparties. This list is regularly monitored and revised for changes based on the counter-party’s credit worthiness, market reputation andexpectations of future financial performance. Transactions willonly be opened with financial intermediaries on the approvedcounterparties list.
These risks are monitored by the Manager in pursuance of the investment objective and policy as set out in this Manager's Report. Adherence to investment guidelines and to investment andborrowing powers set out in the Trust Deed, the Prospectus and in the rules of the CollectiveInvestment Schemes Sourcebook mitigates the risk of excessive exposure to any particular type of security or issuer. Further information on the investment portfolio is set out in the InvestmentReport and Portfolio Statement.
Pacific ex Japan Equity Tracker Notes to Financial Statementscontinued
10. Derivatives and Other Financial Instruments(a) The Fund's financial instruments, comprise securities and other investments, cash balances and
debtors and creditors that arise directly from its operations, for example, in respect of sales andpurchases awaiting settlement, amounts receivable for creations and payable for cancellation ofunits, and debtors for accrued revenue.
The Fund’s property is invested with the aim of achieving capital growth by tracking closely theperformance of the FTSE World Asia Pacific ex-Japan Index by investing in companies in the Index.
The Manager shall take the risks it deems reasonable to meet the investment objective. Theserisks include the following:
Risk Impact of risk
Foreign currency risk The risk of changes to foreign currency rates materially affectingthe Sterling equivalent value of non-Sterling denominated assetsand liabilities accounted for by the Fund.
The Fund is accounted for in Sterling and holds financial assetsand financial liabilities denominated in Australian dollar, HongKong dollar, New Zealand dollar, Singapore dollar, South Koreanwon, Swiss franc, Taiwan dollar, Thailand baht and US dollar.
To manage these risks, the Fund has entered into forward foreigncurrency transactions during the year for the purposes of efficientportfolio management. There were no outstanding transactions atthe balance sheet date.
205204 BlackRock Collective Investment Funds
(c) Interest Rate Risk Profile of Financial Assets and LiabilitiesThe Interest Rate Risk Profile of Financial Assets and Liabilities at 31 January 2010 was as follows :
Australian dollar 2,098,918 – 99,080,711 101,179,629 Hong Kong dollar 431,623 – 41,849,063 42,280,686 New Zealand dollar 6,321 2,576 1,690,607 1,699,504 Singapore dollar 64,364 – 19,800,968 19,865,332 South Korean won 67 – 55,387,075 55,387,142 Swiss franc 10 – – 10 Taiwan dollar 89,693 – 42,068,754 42,158,447 Thailand baht 138 – – 138 UK sterling 6,821 – 732,416 739,237 US dollar 175,156 – 1,880,245 2,055,401
Total £2,873,111 £2,576 £262,489,839 £265,365,526
Currency Floating Rate Financial TotalFinancial Liabilities not
Liabilities Carrying Interest£ £ £
Australian dollar – (98,685) (98,685) Hong Kong dollar – (5,301) (5,301) South Korean won – (2,317) (2,317) UK sterling – (665,585) (665,585) US dollar – (33,872) (33,872)
Market Average Average PeriodValue Interest Rate for which
£ Equivalent % Rate is Fixed
New Zealand dollar 2,576 8.69 4.89 years
This table shows weighted average interest earned on the market value of bonds and will not reflect the yield on the Fund.
Pacific ex Japan Equity Tracker Notes to Financial Statementscontinued
(b) Currency ExposuresA proportion of the net assets of the Fund are denominated in currencies other than sterling, withthe effect that the balance sheet and total return can be affected by currency movements.
Currency Currency Net Assets
Monetary Non- Totalexposures monetary
exposures31.1.2010 31.1.2010 31.1.2010
£ £ £
Australian dollar 2,098,918 98,982,026 101,080,944 Hong Kong dollar 431,623 41,843,762 42,275,385 New Zealand dollar 6,321 1,693,183 1,699,504 Singapore dollar 64,364 19,800,968 19,865,332 South Korean won 67 55,384,758 55,384,825 Swiss franc 10 – 10 Taiwan dollar 89,693 42,068,754 42,158,447 Thailand baht 138 – 138 UK sterling 6,821 66,831 73,652 US dollar 175,156 1,846,373 2,021,529
Total £2,873,111 £261,686,655 £264,559,766
The currency profile held at 31 January 2009 was:
Currency Currency Net Assets/(Liabilities)
Monetary Non- Totalexposures monetary
exposures31.1.2009 31.1.2009 31.1.2009
£ £ £
Australian dollar 460,343 63,357,309 63,817,652 Hong Kong dollar 202,825 46,910,989 47,113,814 New Zealand dollar 23 1,372,916 1,372,939 Singapore dollar 42 13,687,333 13,687,375 South Korean won (14) 40,846,870 40,846,856 Swiss franc 10 – 10 Taiwan dollar 814,912 29,041,761 29,856,673 Thailand baht 145 – 145 UK sterling 135,799 (1,927,678) (1,791,879) US dollar 338,586 1,078,900 1,417,486
Total £1,952,671 £194,368,400 £196,321,071
207206 BlackRock Collective Investment Funds
11. Contingent LiabilitiesPlease see page 10.
12. Investment ManagementPlease see page 10.
13. Related Party TransactionsBlackRock Fund Managers Limited, as Manager and Registrar of the Fund, together with The RoyalBank of Scotland plc, as Trustee, are regarded as related parties to the Fund. The Manager acts aseither principal or agent for the Trustee in respect of all transactions of units of the Fund. Theaggregate monies received through creation and paid through cancellation are disclosed in theStatement of Change in Net Assets Attributable to Unitholders. Any amounts due to or from theManager at the year end are disclosed in Notes 7 and 9.
Management fees and registration fees paid to BlackRock Fund Managers Limited and fees paid tothe Trustees are shown in Note 4. The balances due at the year end in respect of these fees areshown in Note 9.
No other transactions were entered into with associates of the Manager during the year.
14. Portfolio Transaction costsAnalysis of total purchase costs:
31.1.2010 31.1.2010 31.1.2009 31.1.2009£ £ £ £
Purchases in year before transaction costs 95,484,649 195,130,140
Commissions and other costs (including stamp duty) 55,092 152,787
Total purchase costs 55,092 152,787
Gross purchases total £95,539,741 £195,282,927
Analysis of total sale costs:£ £ £ £
Gross sales before transaction costs 155,496,551 153,701,242 Commissions and other costs (257,198) (291,126) Total sale costs (257,198) (291,126)
Total sales net of transaction costs £155,239,353 £153,410,116
15. Non Adjusting Post Balance Sheet EventSince the last business day of the accounting period, the Fund's quoted mid price has risen onAccumulation Units from 153.7p to 174.2p as at 15 March 2010, a rise of 13.34%.
The Interest Rate Risk Profile of Financial Assets and Liabilities as at 31 January 2009 was as follows:
Australian dollar 460,343 – 65,413,738 65,874,081 Hong Kong dollar 202,825 – 47,879,976 48,082,801 New Zealand dollar 23 – 1,372,916 1,372,939 Singapore dollar 42 – 14,086,298 14,086,340 South Korean won – – 40,846,870 40,846,870 Swiss franc 10 – – 10 Taiwan dollar 814,912 – 29,041,761 29,856,673 Thailand baht 145 – – 145 UK sterling 135,799 – 4,152,047 4,287,846 US dollar 338,586 – 1,577,363 1,915,949
Total £1,952,685 £0 £204,370,969 £206,323,654
Currency Floating Rate Financial TotalFinancial Liabilities not
Liabilities Carrying Interest£ £ £
Australian dollar – (2,056,429) (2,056,429) Hong Kong dollar – (968,987) (968,987) Singapore dollar – (398,965) (398,965) South Korean won (14) – (14) UK sterling – (6,079,725) (6,079,725) US dollar – (498,463) (498,463)
Total £(14) £(10,002,569) £(10,002,583)
There are no material amounts of non-interest bearing financial assets, other than equities, which do not have maturity dates.
The floating rate financial assets and liabilities includes: Sterling denominated bank balances which bear interest rates based on 0.125% under the sixmonth LIBOR and overdraft interest based on 3% over the base rate.
All overseas deposits and loans bear interest at rates determined by the relevant Authority.
(d) Fair Value of Financial Assets and Financial LiabilitiesThere is no material difference between the value of the financial assets and liabilities, as shownin the balance sheet, and their fair value.
Pacific ex Japan Equity Tracker Notes to Financial Statementscontinued
209208 BlackRock Collective Investment Funds
BlackRock UK Equity Tracker Fund
UK Equity Tracker Investment Objective & Policy
The aim of the Fund is to seek to achieve capital growth for investors by tracking closely the performanceof the FTSE All Share Index by investing in companies in the Index. Investment will be made directly intoconstituent companies and via other transferable securities giving exposure to such companies. The Fundmay also invest in permitted money market instruments, permitted deposits, and units in collectiveinvestment schemes. Derivatives and forward transactions may be used for hedging purposes andmeeting the investment objectives of the Fund. The scheme property of the Fund will in all cases berestricted to investment in property which is eligible as a permitted link in IPRU (INS), or such otherequivalent rules as may replace them from time to time.
The Fund is a sub-fund of BlackRock Collective Investment Funds, a UCITS scheme established underthe Financial Services Authority's Collective Investment Schemes Sourcebook "the Sourcebook". Prior to10 July 2009 the Collective Investment Funds were known as the Qualified Investor Schemes (1). The Fundwas authorised by the FSA on 21 June 2005 and subsequently launched on 18 August 2005. The Fund waspreviously known as Merrill Lynch UK Equity Tracker Fund. It adopted its present name with effect from28 April 2008.
Pacific ex Japan Equity Tracker Distribution Tablesfor the year ended 31 January 2010
Final Distribution in Pence per UnitGroup 1 – Units purchased prior to 1 August 2009Group 2 – Units purchased 1 August 2009 to 31 January 2010
† Equalisation applies only to units purchased during the distribution period (Group 2 units). It is the average amount of revenue includedin the purchase price of all Group 2 units and is refunded to holders of these units as a return of capital. Being capital, it is not liable toincome tax but must be deducted from the cost of units for capital gains tax purposes.
211210 BlackRock Collective Investment Funds
UK Equity Tracker Investment Report
The Fund met its objective of tracking the benchmarkOver 12 months to 31 January 2010, the BlackRock UK Equity Tracker Fund met its objective of closelytracking the FTSE All-Share index, returning 32.5%* versus the benchmark return of 33.2%*.
Here, we focus on the second six months of the period, during which time the Fund returned 13.9%* and the benchmark returned 14.7%*.
It should be noted that relative annual performance was negatively impacted by the timing differentialbetween the Fund’s valuation point and that of the index.
Investing in UK companies to match the FTSE All-Share indexThe Fund seeks to achieve capital growth for investors by tracking closely the performance of the FTSEAll-Share index. Investment will be made directly into constituent companies and via other transferablesecurities giving exposure to such companies.
Global equities rallied from lows struck in March 2009, recording strong gains over six and 12 monthsFollowing a difficult 2008, global equity markets continued to decline into the first quarter of 2009, amidfears that the global financial system was on the brink of collapse and that the world was entering anotherGreat Depression. Uncertainty surrounded the intentions of governments and global policymakers, butsuch concerns began to dissipate as investors witnessed huge global monetary and fiscal stimuli, whichreflated economic activity and forced share prices sharply higher from troughs reached in March. Despitenegative real economic growth across the entire developed world, coupled with noticeable earnings declines,“risk” assets managed to outperform “safe” assets in 2009 as a whole, as sidelined cash, which wasproducing near-zero returns, began to move back into the markets.
The pace of the rally slowed somewhat into the end of the year, and markets subsequently sold off inJanuary 2010, as risk aversion increased on two key developments, namely the tightening in monetaryconditions in China and, more importantly, further tensions in sovereign bond markets, particularlyGreece. However, the six months to the end of January saw strong equity gains overall, as measured bythe MSCI Global Equity index, and the period ended with a perception that the economic recovery is hereto stay, albeit with some lingering investor unease.
Improved, but challenging, cyclical conditions will likely persist into 2010 The United Kingdom was still in recession during the third quarter of 2009, before a weaker-than-expected return to growth in the final quarter did nothing to allay fears that the UK economy remainsvulnerable, particularly in comparison to other developed economies where evidence of economicrecovery has been more apparent. More-positive trends do, nevertheless, appear evident in the UnitedKingdom as well: housing appears to have bottomed; consumption is increasing moderately; and therehas been a strong bounce in business confidence, particularly in services.
The economy is likely to grow moderately in 2010; however, any upturn is unlikely to be robust. There arethree main challenges: over-leverage in the personal sector, implying a bias to higher savings; generalfinancial constraints associated with the weak banking system; and an eventual shift to fiscal tightening,albeit not in the near future. Against this, monetary policy has been eased significantly and this easierbias will persist well into the year. Improved, but challenging, cyclical conditions will likely persist into2010, but a “normal” cyclical environment—with the economy less reliant on policy support—appears tobe a long way off.
* Performance figures quoted are based on bid to bid, dealing prices (the price at which units are sold) and are not the same as the net assetvalue reported in the financial statements which is at close of business. Performance is calculated net of fees.
Performance Table
Period of Report Since LaunchOne Year 18.8.2005
to 31.1.2010 to 31.1.2010
The Fund returned:Total Return (with net income reinvested)Accumulation Units +32.5% +15.6%
The Benchmark returned:Total Return (with net income reinvested)FTSE All-Share† +33.2% +17.4%
This Annual Report covers the year ended 31 January 2010, the first six months of which werecommented on in the Interim Report to 31 July 2009. For a copy, please contact us.
† Source: Datastream. Prior to 10 July 2009 the Collective Investment Funds were known as the Qualified Investor Schemes. All Fundfigures quoted are based on bid to bid, dealing prices (the price at which units are sold). Performance is calculated net of fees.
All financial investments involve an element of risk. Therefore, the value of your investment and theincome from it will vary and your initial investment amount cannot be guaranteed. Changes in exchangerates may cause the value of an investment to fluctuate. Past performance is not a guide to futureperformance and should not be the sole factor of consideration when selecting a product.
Annual performance to most recent quarter end
31.12.2008 31.12.2007 31.12.2006 31.12.2005 31.12.2004to 31.12.2009 to 31.12.2008 to 31.12.2007 to 31.12.2006 to 31.12.2005*
UK Equity +29.8% -29.9% +4.8 +16.3 –
All figures quoted are based on bid to bid, dealing prices (the price at which units are sold), with net income reinvested. Performance isshown for complete 12 month periods only. * Performance data does not exist for the relevant periods.
AccumulationThe final accumulation payable on 31 March 2010 is 1.4279p net per accumulation unit.
BlackRock UK Equity Tracker Fund
213212 BlackRock Collective Investment Funds
UK Equity Tracker Portfolio Statementat 31 January 2010
Total Expense RatioTotal Expense Ratio (TER) as at 31 January 2010: 0.2144% (31 January 2009: 0.2171%)
TER reflects the annual operating expenses of the Fund. It does not take into account the impact of any initial or exit charges or transaction-based expenditure i.e. dealing costs. TER is employed as thestandard method of disclosing the effect of charges by most European collective investment schemes.
Net Asset Value
At Net Asset Net Asset31 January Units in Issue Value of Fund Value per Unit
55,032 Barings Emerging Europe 420,169 0.0241,600 BH Global (GB Line) 468,000 0.0244,889 BH Global (US Line) 311,791 0.0133,072 BH Macro (GBP) 588,020 0.0334,000 BH Macro (EUR) 498,122 0.0257,679 Blackrock UK Smaller Companies Investment Trust 171,451 0.01
106,000 Blackrock Commodities Income Investment Trust 127,995 0.0111,600 Blackrock Greater Europe Investment Trust 18,821 –64,884 Blackrock Latin American Investment Trust 363,675 0.02
505,496 Blackrock New Energy Technology Trust 214,836 0.01101,099 Blackrock New Energy Subscription Shares 5,813 –253,732 Blackrock World Mining Trust 1,299,108 0.05302,000 Bluecrest Allblue Fund 484,710 0.02432,703 British Assets Investment Trust 459,098 0.02227,557 British Empire Securities & General Investment Trust 940,266 0.04
294,018 Perpetual Income & Growth Investment Trust 618,026 0.03737 Personal Assets Trust 201,570 0.01
187,251 Polar Capital Technology Trust 447,155 0.02220,286 RIT Capital Partners 2,175,324 0.10246,372 Schroder Asia Pacific Fund 419,448 0.02
99,261 Schroder Income Growth Fund 174,699 0.01189,626 Schroder Japan Growth Fund 145,064 0.01328,155 Schroder Oriental Income Fund 396,247 0.02233,838 Schroder UK Growth Fund 246,115 0.01
17,300 Schroder UK Mid & Small Cap Fund 31,919 –195,814 Scottish American Investment Trust 353,934 0.02192,232 Scottish Investment Trust 807,567 0.04387,239 Scottish Mortgage Investment Trust 1,932,323 0.08
14,294 Scottish Oriental Small Companies Trust 56,032 –98,739 Securities Trust of Scotland 90,346 –
84,278 Graphite Enterprise Investment Trust 244,406 0.0110,127 Hansa Trust 'A' non voting shares 72,914 –34,560 Henderson Electric & General Investment Trust 169,862 0.0117,900 Henderson High Income Investment Trust 19,869 –
238,775 Henderson Pacific Investment Trust 359,356 0.02111,319 Henderson Smaller Companies Investment Trust 217,072 0.01131,878 Henderson Far East Income 373,874 0.02121,708 Herald Investment Trust 405,592 0.02
44,600 Invesco English & International Trust 93,772 –107,990 Invesco Income & Growth Investment Trust 180,613 0.01
63,185 JP Morgan Fleming American Investment Trust 436,924 0.02237,922 JP Morgan Fleming Asian Investment Trust 422,787 0.02103,100 JP Morgan Fleming China Investment Trust 136,608 0.01
78,870 JP Morgan Fleming Claverhouse Investment Trust 311,339 0.01156,784 JP Morgan Fleming Emerging Markets Investment Trust 716,503 0.03180,561 JP Morgan Fleming European Investment Trust 295,217 0.01
69,422 JP Morgan Fleming European Fledgling Investment Trust 443,259 0.02174,544 JP Morgan Fleming Indian Investment Trust 635,340 0.03
1,170,395 Henderson 1,429,052 0.06674,194 ICAP 2,502,608 0.11511,037 IG Group 2,064,589 0.09549,053 Intermediate Capital 1,474,756 0.07365,583 International Personal Finance 804,283 0.04666,518 Investec 2,841,366 0.13383,906 IP Group 218,826 0.01280,875 London Stock Exchange 1,799,004 0.08
2,441,743 Man Group 5,782,047 0.25376,641 moneysupermarket.com 274,948 0.01424,242 Paragon 585,030 0.03
UK Equity Tracker Portfolio Statement continued
Holding or Market % ofNominal Value Total
Value Investment £ Net Assets
49,845 Standard Life Equity Income Trust 128,974 0.014,500 Standard Life European Private Equity Trust 4,500 –
452,696 SVG Capital 632,416 0.0354,568 SVM UK Active Fund 77,487 –85,621 Temple Bar Investment Trust 625,033 0.03
470,303 Templeton Emerging Markets Investment Trust 2,283,321 0.10316,200 Thames River Multi Hedge 384,183 0.02171,905 Throgmorton Investment Trust 207,575 0.01
93,790 TR European Growth Investment Trust 363,905 0.024,091 Value & Income Investment Trust 6,668 –
44,822 Communisis 5,827 –191,322 Connaught 609,361 0.03241,476 Davis Service 977,978 0.04139,905 De La Rue 1,357,079 0.06169,565 Diploma 302,674 0.01266,811 Eaga 373,535 0.02616,887 Electrocomponents 1,091,273 0.05
Total other liabilities (900,131) (26,019,854) Total liabilities (2,948,349) (26,373,735)
Net assets attributable to unitholders £2,238,473,670 £1,422,638,894
A J Stenning (Director)E E Tracey (Director)BlackRock Fund Managers Limited23 March 2010
31.1.2010 31.1.2009Notes £ £ £ £
IncomeNet capital gains/(losses)
during the year 2 462,779,418 (573,186,815) Revenue 3 69,915,121 71,117,705 Expenses 4 (4,027,970) (3,580,651) Finance costs: Interest 6 (1,560) –
Net revenue before taxation 65,885,591 67,537,054 Taxation 5 (389,348) (528,594)
Net revenue after taxation for the year 65,496,243 67,008,460
Total return before distributions 528,275,661 (506,178,355) Finance costs: Distributions 6 (65,496,243) (67,008,460)
Change in net assets attributable tounitholders from investment activities £462,779,418 £(573,186,815)
31.1.2010 31.1.2009£ £ £ £
Opening net assets attributableto unitholders 1,422,638,894 1,765,868,906
Amounts receivable oncreation of units 567,809,266 457,558,211
Amounts payable on cancellation of units (282,074,817) (294,903,451)
285,734,449 162,654,760 Stamp duty reserve tax (892,886) (788,092) Change in net assets attributable to
unitholders from investment activities 462,779,418 (573,186,815) Retained distribution on accumulation units 68,213,795 68,090,135
Closing net assets attributableto unitholders £2,238,473,670 £1,422,638,894
Comparative figures have been restated for the presentation changes following adoption of the Statement of Recommended Practice (“theSORP”) for Authorised Funds issued by the Investment Management Association (“IMA”) in November 2008 (see Accounting Policies).
UK Equity Tracker Statement of Change in Net AssetsAttributable to Unitholders for the year ended 31 January 2010
UK Equity Tracker Statement of Total Return for the year ended 31 January 2010
Total current tax charge for the year [see Note 5(b)] £389,348 £541,446
Deferred tax charge for the year [see note 5(c)] – (12,852)
Total tax charge for the year £389,348 £528,594
(b) Factors affecting the current tax charge for the yearThe tax assessed for the period is lower than the standard rate of corporation tax in the UK for anauthorised unit trust. The differences are explained below:
31.1.2010 31.1.2009£ £
Net revenue before taxation 65,885,591 67,537,054
Corporation tax at 20% (2009: 20%) 13,177,118 13,507,411 Effects of:Excess expenses for which no tax relief taken 17,717 –Movement in revenue accruals taxable on receipt 7,239 5,613 Franked investment revenue at 20% (12,581,734) (13,016,071) Overseas tax 752,990 541,446 Non taxable overseas dividends (620,340) –Adjustment in respect of prior periods (363,642) –Double Tax Relief – (496,953)
Total current tax charge for the year [see Note 5(a)] £389,348 £541,446
(c) Analysis of deferred tax charge for the year31.1.2010 31.1.2009
£ £
Opening deferred tax balance – 12,852 Deferred tax charge for the year [see note 5(a)] – (12,852)
Closing deferred tax balance – –
As at 31 January 2010 the Fund had surplus management expenses of £88,588 (prior year: £0). It is unlikely that the Fund will generatesufficient taxable profits in the future to utilise these expenses and therefore a deferred tax asset of £17,718 (prior year: £0) has notbeen recognised.
UK Equity Tracker Notes to Financial Statements at 31 January 2010
1. Accounting PoliciesSee pages 4-5 of Aggregated Accounts.
2. Net Capital Gains/(Losses) on Investments During the Year31.1.2010 31.1.2009
£ £
The net capital gains/(losses) on investments comprise:Gains/(losses) on non-derivative securities 451,800,381 (562,033,707) Gains/(losses) on derivative contracts 11,024,082 (11,055,617) Losses on forward currency contracts (76,720) (188,276) Other currency gains 55,942 104,970 Transaction costs (24,267) (14,185)
Net capital gains/(losses) on investments £462,779,418 £(573,186,815)
3. Revenue31.1.2010 31.1.2009
£ £
UK dividends 62,908,669 65,080,357 Unfranked dividends from UK companies 947,984 863,236 Overseas dividends 5,997,817 4,095,547 Interest from UK bank deposits 60,651 1,078,565
Total revenue £69,915,121 £71,117,705
4. Expenses31.1.2010 31.1.2009
£ £
Payable to the Manager or associates of the Manager:– Manager's service charge 3,761,106 3,298,731 – Registrar's fees 162 150 – Reclaim of VAT (11) –
3,761,257 3,298,881
Payable to the Trustee or associates of the Trustee: – Trustee's fees 212,262 197,782
10. Derivatives and Other Financial Instruments(a) The Fund’s financial instruments, comprise securities and other investments, cash balance and
debtors and creditors that arise directly from its operations, for example, in respect of sales andpurchases awaiting settlement, amounts receivable for creations and payable for cancellation ofunits, and debtors for accrued revenue.
The Fund’s property is invested with the aim of achieving the investment objective of achievingcapital growth by tracking closely the performance of the FTSE All Share Index by investing incompanies in the Index.
The Manager shall take the risks it deems reasonable to meet the investment objective. Theserisks include the following:
Risk Impact of risk
Foreign currency risk The risk of changes to foreign currency rates materially affectingthe Sterling equivalent value of non-Sterling denominated assetsand liabilities accounted for by the Fund.
The Fund is accounted for in Sterling and holds financial assets andfinancial liabilities denominated in Euro, US dollar and UK sterling.
To manage these risks, the Fund has entered into forwardcurrency transactions during the year. As at the balance sheetdate, no forward currency contracts have been entered into.
Market price risk The valuation of the Fund’s investments are calculated withreference to market prices quoted by financial agencies andbrokers. Movements to those market prices may materially affectthe value of the Fund’s investments, which may move down aswell as up. The Manager undertakes research to minimise theimpact of such movements against the Fund’s investment objective.
UK Equity Tracker Notes to Financial Statements continued
6. Finance CostsThe distributions take account of amounts received on the creation of units and amounts deducted oncancellation of units, and comprise:
31.1.2010 31.1.2009£ £
Interim 39,276,203 39,315,400 Final 28,937,592 28,774,735
68,213,795 68,090,135 Add: Amounts deducted on cancellation of units 3,256,628 4,706,224 Less: Amounts received on creation of units (5,974,180) (5,787,899)
Net distribution for the year 65,496,243 67,008,460 Finance costs: Interest 1,560 –
Total finance costs £65,497,803 £67,008,460
Details of the interim and final distributions per unit are set out in the table on page 242.
7. Debtors31.1.2010 31.1.2009
£ £
Sales awaiting settlement 1,890 –Amounts receivable for creation of units 8,814,390 3,851,608 Corporation tax recoverable 387,866 24,224 Income tax recoverable 288,983 151,213 Overseas tax recoverable 96,116 115,363 Accrued revenue 4,002,342 3,456,939
Total debtors £13,591,587 £7,599,347
8. Cash and Bank Balances31.1.2010 31.1.2009
£ £
Amount held at futures clearing houses and brokers 5,280,972 6,849,443 Cash and bank balances 42,383,814 31,693,615
Cash and bank balances £47,664,786 £38,543,058
239238 BlackRock Collective Investment Funds
(b) Currency ExposuresA proportion of the net assets of the Fund are denominated in currencies other than Sterling, withthe effect that the balance sheet and total return can be affected by currency movements.
Currency Currency Net Assets
Monetary Non- Totalexposures monetary
exposures31.1.2010 31.1.2010 31.1.2010
£ £ £
Euro – 627,575 627,575 UK sterling 47,588,700 2,189,818,514 2,237,407,214 US dollar 76,086 362,795 438,881
Total £47,664,786 £2,190,808,884 £2,238,473,670
The currency profile held at 31 January 2009 was:
Currency Currency Net Assets/(Liabilities)
Monetary Non- Totalexposures monetary
exposures31.1.2009 31.1.2009 31.1.2009
£ £ £
Euro 13,451 (986,303) (972,852) UK sterling 38,508,656 1,389,603,569 1,428,112,225 US dollar 20,951 (4,521,430) (4,500,479)
Total £38,543,058 £1,384,095,836 £1,422,638,894
(c) Interest Rate Risk Profile of Financial Assets and LiabilitiesThe Interest Rate Risk Profile of Financial Assets and Liabilities at the balance sheet date was as follows :
Euro – – 627,575 627,575 UK sterling 47,588,700 – 2,192,766,863 2,240,355,563 US dollar 76,086 – 362,795 438,881
Total £47,664,786 £0 £2,193,757,233 £2,241,422,019
UK Equity Tracker Notes to Financial Statements continued
Risk Impact of risk
Liquidity risk The risk of low market liquidity, through reduced trading volumes,affecting the ability of the Fund to trade financial instruments atvalues previously indicated by financial brokers.
To manage these risks, the Investment Manager undertakesresearch of investment opportunities to select opportunitiescongruent with the Fund’s investment objective.
The Fund invests primarily in companies incorporated in theUnited Kingdom, which is typically considered to be a territoryoperating with high levels of liquidity. From time to time, however,market liquidity may be affected by economic events.
All stocks are valued daily. Stocks identified as illiquid arereviewed for pricing accuracy as the need arises and on a formalmonthly basis by the BlackRock Pricing Committee.
Counterparty risk The risk of entering an arrangement with a counterparty, which isitself subject to financial risks which may affect its ability to tradeas a going concern.
The Manager maintains a list of approved counterparties. This list is regularly monitored and revised for changes based on the counter-party’s credit worthiness, market reputation andexpectations of future financial performance. Transactions willonly be opened with financial intermediaries on the approvedcounterparties list.
These risks are monitored by the Manager in pursuance of the investment objective and policy as set out in this Manager's Report. Adherence to investment guidelines and to investment andborrowing powers set out in the Trust Deed, the Prospectus and in the rules of the CollectiveInvestment Schemes Sourcebook mitigates the risk of excessive exposure to any particular type of security or issuer. Further information on the investment portfolio is set out in the InvestmentReport and Portfolio Statement.
241240 BlackRock Collective Investment Funds
13. Related Party TransactionsBlackRock Fund Managers Limited, as Manager and Registrar of the Fund, together with The RoyalBank of Scotland plc, as Trustee, are regarded as related parties to the Fund. The Manager acts as either principal or agent for the Trustee in respect of all transactions of units of the Fund. Theaggregate monies received through creation and paid through cancellation are disclosed in theStatement of Change in Net Assets Attributable to Unitholders. Any amounts due to or from theManager at the period end are disclosed in Notes 7 and 8.
Management fees and registration fees paid to BlackRock Fund Managers Limited and fees paid tothe Trustees are shown in Note 4. The balances due at the period end in respect of these fees areshown in Note 8.
The Fund’s investments in other BlackRock related products were entered into in the normal courseof business and on normal commercial terms.
The aggregate value of these transactions for BlackRock Smaller Companies Trust, BlackrockCommodities Income Investment Trust, Blackrock Greater Europe Investment Trust, Blackrock LatinAmerican Investment Trust, Blackrock New Energy Technology Trust and Blackrock World MiningTrust holdings held by the Fund at the year end are shown on the Portfolio Statement from page 212to page 229.
At the balance sheet date Nutraco Nominees Limited held 1,437,278,150 units (71%) of the total unitsin the Fund. As Nutraco Nominees Limited is a material unitholder in the Fund, it is regarded as arelated party in accordance with FRS8 ‘Related Party Disclosures’.
No other transactions were entered into with associates of the Manager during the year.
14. Portfolio Transaction costsAnalysis of total purchase costs:
31.1.2010 31.1.2010 31.1.2009 31.1.2009£ £ £ £
Purchases in period/year before transaction costs 486,853,609 461,957,098
Commissions and other costs (including stamp duty) 2,019,201 3,040,047
Total purchase costs 2,019,201 3,040,047
Gross purchases total £488,872,810 £464,997,145
Analysis of total sale costs:£ £ £ £
Gross sales before transaction costs 162,304,948 222,654,724 Commissions and other costs (39,212) (49,800) Total sale costs (39,212) (49,800)
Total sales net of transaction costs £162,265,736 £222,604,924
15. Non Adjusting Post Balance Sheet Event Since the last business day in the accounting period, the Fund’s quoted mid price has risen onAccumulation Units from 110.3p to 120.3p as at 15 March 2010, a rise of 9.07%.
Currency Floating Rate Financial TotalFinancial Liabilities not Liabilities Carrying Interest
£ £ £
UK sterling – (2,948,349) (2,948,349)
Total £0 £(2,948,349) £(2,948,349)
The Interest Rate Risk Profile of Financial Assets and Liabilities as at 31 January 2009 was as follows:
Euro 13,451 – 1,572,624 1,586,075 UK sterling 38,508,656 – 1,410,621,042 1,449,129,698 US dollar 20,951 – 357,884 378,835
Total £38,543,058 £0 £1,412,551,550 £1,451,094,608
Currency Floating Rate Financial TotalFinancial Liabilities not
Liabilities Carrying Interest£ £ £
Euro – (2,558,927) (2,558,927) UK sterling – (21,017,473) (21,017,473) US dollar – (4,879,314) (4,879,314)
Total £0 £(28,455,714) £(28,455,714)
There are no material amounts of non-interest bearing financial assets, other than equities, which do not havematurity dates.
The floating rate financial assets and liabilities includes: Sterling denominated bank balances which bear interest rates based on 0.125% under the sixmonth LIBOR and overdraft interest based on 3% over the base rate.
All overseas deposits and loans bear interest at rates determined by the relevant Authority.
(d) Fair Value of Financial Assets and Financial LiabilitiesThere is no material difference between the value of the financial assets and liabilities, as shownin the balance sheet, and their fair value shown.
11. Contingent LiabilitiesPlease see page 10.
12. Investment ManagementPlease see page 10.
UK Equity Tracker Notes to Financial Statements continued
243242 BlackRock Collective Investment Funds
BlackRock Collective Investment Funds is an authorised unit trust Scheme under Section 243 of theFinancial Services and Markets Act 2000 and was established as a UCITS retail Scheme under theFinancial Services Authority’s Collective Investment Schemes Sourcebook, (“the Sourcebook”).
Stamp Duty Reserve TaxSet out below is a brief summary of how stamp duty reserve tax (‘SDRT’) affects unitholders and potentialunitholders in any of our authorised unit trusts.
SDRT is levied on dealings in units in unit trust Schemes. The Trustee is liable for a SDRT charge of 0.5%on the value of any units surrendered in a one week period. This charge may be reduced if the number ofunits surrendered exceeds the number of units issued during a two week period or if there are ‘exempt’assets in the Scheme.
The Manager has the power to make a charge on unitholders as a provision against SDRT for which theTrustee may become liable (the ‘SDRT provision’). The SDRT provision, where levied, has the effect ofincreasing the acquisition cost of units, or decreasing the redemption proceeds (as appropriate).
The Manager’s general policy in relation to its authorised unit trusts is not to impose a SDRT provisionwhen units are created, issued, cancelled or redeemed with the result that any SDRT payable in respectof any surrender of units will be paid by the Trustee out of the property of the relevant unit trust. However,the Manager reserves the right to require the payment of a SDRT provision whenever it considers thatsuch imposition is fair to all unitholders and potential unitholders. The Manager will charge a SDRTprovision in respect of non pro-rata in-specie redemptions. The Manager may impose a SDRT provisionon large deals even if no SDRT provision is imposed on smaller deals, or which is larger than thatimposed on smaller deals. A ‘large deal’ is a transaction (or series of transactions in one dealing period)by any person to buy, sell or exchange units at a total value of £15,000 or more.
If a unitholder transfers units to a third party this may be subject to SDRT. In these circumstances theManager will not register the transfer unless the requisite SDRT (if any) has been paid.
Authorised StatusUK Equity Tracker Distribution Table for the year ended 31 January 2010
Final Distribution in Pence per UnitGroup 1 – Units purchased prior to 1 August 2009Group 2 – Units purchased 1 August 2009 to 31 January 2010
† Equalisation applies only to units purchased during the distribution period (Group 2 units). It is the average amount of revenue includedin the purchase price of all Group 2 units and is refunded to holders of these units as a return of capital. Being capital, it is not liable toincome tax but must be deducted from the cost of units for capital gains tax purposes.
245244 BlackRock Collective Investment Funds
Report of the Auditors
Independent Auditors’ Report to the Unitholders of the BlackRock Collective InvestmentFunds (“the Fund”)We have audited the Fund’s financial statements for the year ended 31 January 2010 which comprise the Aggregated Statement of Total Return, Aggregated Statement of Change in Unitholders Net Assets,Aggregated Balance Sheet and related notes 1 to 15 together with the Statement of Total Return,Statement of Change in Net Assets Attributable to Unitholders’, Balance Sheet, related notes and theDistribution Tables for each sub-fund. These financial statements have been prepared under theaccounting policies set out therein.
This report is made solely to the unitholders of the Fund, as a body, pursuant to Paragraph 4.5.12 of therules of the Collective Investment Schemes Sourcebook of the Financial Services Authority. Our auditwork has been undertaken so that we might state to the unitholders those matters we are required tostate to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Fund and the unitholders as a body, forour audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Manager, Trustee and AuditorsThe Manager is responsible for preparing the Annual Report and the financial statements in accordancewith the rules of the Collective Investment Schemes Sourcebook of the Financial Services Authority, theTrust Deed, and Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are setout in the Statement of Managers Responsibilities in relation to the financial statements. The Trustee isrequired to take reasonable care to ensure compliance by the Manager with all relevant requirements.
Our responsibility is to audit the financial statements in accordance with UK legal and regulatoryrequirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and areproperly prepared in accordance with the Statement of Recommended Practice relating to AuthorisedFunds, the rules of the Collective Investment Schemes Sourcebook of the Financial Services Authority,and the Trust Deed. We also report to you whether, in our opinion, the Report of the Manager isconsistent with the financial statements, whether the Manager has not kept proper accounting recordsfor the Fund or sub-funds or whether the financial statements are not in agreement with those records,and whether we have received all the information and explanations which, to the best of our knowledgeand belief, we require for our audit.
We read other information contained in the Annual Report and consider whether it is consistent with theaudited financial statements. This other information comprises only About the Fund Managers, theInvestment Objective and Policy for each of the sub-funds, the Performance Table for each of the sub-funds, the Investment Report for each of the sub-funds, the Performance Record for each of the sub-funds, the Portfolio Statement for each of the sub-funds, the Portfolio Turnover for each of the sub-funds,Authorised Status, Stamp Duty Reserve Tax, Statement of Manager’s and Trustee’s Responsibilities andthe Report of the Trustee. We consider the implications for our report if we become aware of any apparentmisstatements or material inconsistencies with the financial statements. Our responsibilities do notextend to any other information.
Statement of Manager’s and Trustee’s Responsibilities
The Manager is required by the rules of the Sourcebook to prepare the financial statements for eachfinancial year. These financial statements must be prepared in accordance with applicable accountingstandards to give a true and fair view of the state of affairs of the Fund at the year end and of the incomefor the year.
The financial statements should comply with the disclosure requirements of the Statement ofRecommended Practice for Authorised Funds issued by the IMA (‘the SORP’) and must comply with anyrelevant provisions of the Trust Deed.
The Manager is responsible for keeping such accounting records as are necessary to enable it to ensurethat the financial statements comply with the Sourcebook, the SORP and the Trust Deed.
The Trustee is responsible for the safekeeping of all the property of the Fund (other than tangiblemoveable property) which is entrusted to it and for the collection of income that arises from that property.
It is the duty of the Trustee to take reasonable care to ensure that the Fund is managed in accordancewith the Sourcebook, the Fund’s Trust Deed and Prospectus, in relation to the pricing of, and dealings in,units in the Fund; the application of income of the Fund; and the investment and borrowing powers of the Fund.
Report of the TrusteeHaving carried out such procedures as we considered necessary to discharge our responsibilities asTrustee of the Fund, it is our opinion, based on the information available to us and the explanationsprovided, that, in all material respects, the Manager:
(i) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Fund’sunits and the application of the Fund’s income in accordance with the Sourcebook, the Trust Deed andProspectus, and
(ii) has observed the investment and borrowing powers and restrictions applicable to the Fund.
The Royal Bank of Scotland plc EdinburghTrustee and Depositary Services 23 March 2010
247246 BlackRock Collective Investment Funds
Notes
Basis of Audit OpinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued bythe Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to theamounts and disclosures in the financial statements. It also includes an assessment of the significantestimates and judgements made by the Manager in the preparation of the financial statements, and ofwhether the accounting policies are appropriate to the Fund’s circumstances, consistently applied andadequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which weconsidered necessary in order to provide us with sufficient evidence to give reasonable assurance that thefinancial statements are free from material misstatement, whether caused by fraud or other irregularityor error. In forming our opinion we also evaluated the overall adequacy of the presentation of informationin the financial statements.
OpinionIn our opinion;
� the financial statements give a true and fair view, in accordance with United Kingdom GenerallyAccepted Accounting Practice, of the financial position of the Fund and of its sub-funds as at 31 January 2010 and of the net revenue and the net gains on the scheme property of the Fund and of its sub-funds for the year then ended;
� the financial statements have been properly prepared in accordance with the Statement ofRecommended Practice relating to Authorised Funds, the rules of the Collective Investment Schemes Sourcebook of the Financial Services Authority and the Trust Deed;
� the report of the Manager is consistent with the financial statements;
� there is nothing to indicate that proper accounting records have not been kept or that the financialstatements are not in agreement with those records; and
� we have received all the information and explanations which, to the best of our knowledge and belief,we require for our audit.
Ernst & Young LLP EdinburghRegistered Auditor 23 March 2010
Report of the Auditors continiued
Manager & RegistrarBlackRock Fund Managers Limited33 King William Street, London EC4R 9ASTelephone: 020 7743 3000 Dealing and Investor Services: 0800 44 55 22
Member of the Investment Management Association and authorised and regulated by the FinancialServices Authority.
Directors of the ManagerG D Bamping N C D Hall A C Hoctor-Duncan K R Ironmonger (appointed 5 December 2008)S McLaughlin C C Prideaux A J Stenning E E Tracey
Trustee The Royal Bank of Scotland plcTrustee and Depositary ServicesThe Broadstone, 50 South Gyle Crescent, Edinburgh EH12 9UZ
Authorised and regulated by the Financial Services Authority.
Investment ManagerBlackRock (Luxembourg) S.A.6D route de Trèves, L-2633 Senningerberg, Grand-Duchy of Luxembourg
Incorporated in Luxembourg and regulated by the Commission de Surveillance du Secteur Financier(CSSF).
AuditorsErnst & Young LLP Ten George Street, Edinburgh EH2 2DZ
As of 1 July 2009 BlackRock (Channel Islands) Limited has retired as Investment Manager and BlackRock(Luxembourg) S.A. has been appointed in this capacity. There is no change to the Investment Advisersresponsible for the day-to-day investment management of each Fund. In addition, BlackRock (Channel Islands) Limited are retained as Principal Distributor in respect of the Fund.
BlackRock’s proxy voting agent is ISS (Institutional Shareholder Services).
This Report relates to the packaged products of, and is issued by:BlackRock Fund Managers Limited33 King William Street, London EC4R 9ASTelephone: 020 7743 3000Dealing and Investor Services: 0800 44 55 22blackrock.co.uk
For your protection, telephone calls are usually recorded.