BlackRock European Dynamic Fund

Transcription

1 BlackRock Euroean Dynamic Fund About Us BlackRock is a remier rovider of asset management, risk management and advisory services to institutional, intermediary and individual clients worldwide. As of 31 December 2011, the firm manages 2.27 trillion across asset classes in searate accounts, mutual funds, other ooled investment vehicles and the industry-leading ishares exchange-traded funds. Annual Reort 1 March 2011 to 28 February 2012 Through BlackRock Solutions, the firm offers risk management and advisory services that combine caital markets exertise with rorietarily-develoed analytics, systems and technology. BlackRock Solutions currently rovides risk management and enterrise investment services for 6.47 trillion in assets. BlackRock serves clients in North and South America, Euroe, Asia, Australia, Africa and the Middle East. Headquartered in New York, the firm maintains offices in 27 countries around the world. For more information Tel blackrock.co.uk

2 About the Fund Manager BlackRock Euroean Dynamic Fund Alister Hibbert, Managing Director and ortfolio manager, is a member of BlackRock s Euroean Equity Style Diversified Team. He has resonsibility for continental Euroean ortfolio management, adoting a flexible style. Prior to joining BlackRock in 2008, Alister was an investment director with Scottish Widows Investment Partnershi, resonsible for continental Euroean ortfolios. Boasting over 17 years of industry exerience, Alister earned a BSc in Economics from the University of Bristol in Investment Objective & Policy The aim of the BlackRock Euroean Dynamic Fund is to achieve long-term caital growth for investors. The Fund invests rimarily in the shares of comanies incororated or listed in Euroe excluding the UK which we consider exhibit either growth or value investment characteristics, lacing an emhasis as the market outlook warrants. The Fund may also invest in collective investment schemes. BlackRock Euroean Dynamic Fund is a UCITS scheme under the COLL Sourcebook. The Fund was established on 14 August 2000 as Merrill Lynch Euroean Dynamic Fund. The Fund changed its investment objective on 1 October The Fund adoted its resent name with effect from 28 Aril This Annual Reort covers the year ended 28 February 2012, the first six months of which were commented on in the Interim Reort to 31 August For a coy, lease contact us. The annual accounting date of the Fund is 28 February Annual Manager s Short Reorts will be ublished on or shortly after 30 Aril each year. The flexibility to ublish the Annual Manager s Short Reort shortly after 30 Aril each year has recently been incororated into the Prosectus for the Fund. Performance Table Period of Reort One Year to Five Years to Since Launch to The Fund returned: Caital Return A Income Units -5.1% +44.6% % Total Return (with net income reinvested) A Accumulation Units -5.0% +48.4% % The Benchmark returned: Caital Return FTSE World Euroe ex-uk Index* -13.0% -12.5% +23.2% Total Return (with net income reinvested) FTSE World Euroe ex-uk Index* -9.7% +4.5% +61.0% * Figures from: Datastream. All fund figures quoted are based on bid to bid dealing rices (the rice at which units are sold). Performance is calculated net of fees. Gross income reinvested. All financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed. Changes in exchange rates may cause the value of an investment to fluctuate. Past erformance is not a guide to future erformance and should not be the sole factor of consideration when selecting a roduct. Coies of Manager s Reorts and Prosectus are available on request. Dealing and Investor Services: blackrock.co.uk 1

3 Investment Reort Annual erformance to most recent quarter end to to to to to BlackRock Euroean Dynamic Fund -17.8% +27.5% +37.5% -20.3% +14.4% All figures quoted are based on bid to bid dealing rices (the rice at which units are sold), with net income reinvested. Performance is shown for comlete 12 month eriods only. Income for the Period A Income The final distribution ayable on 30 Aril 2012 is net er income unit (30 Aril 2011: net er income unit). A Accumulation The final accumulation ayable on 30 Aril 2012 is net er accumulation unit (30 Aril 2011: net er accumulation unit). D Accumulation The final accumulation ayable on 30 Aril 2012 is net er accumulation unit (30 Aril 2011: net er accumulation unit). Fund erformance overview The BlackRock Euroean Dynamic Fund fell 5.0%* in the year to 28 February 2012, outerforming its benchmark, the FTSE World Euroe ex-uk Index, which fell by 9.7%. Here we focus on the second half of the reorting year, the first half of which was commented on in the Interim Reort ublished in October During the six months to 28 February 2012 the Fund rose by 9.0%*, undererforming the benchmark s return of 11.1%. Concentrating on making the right choices for our clients The BlackRock Euroean Dynamic Fund is not constrained by a growth or value aroach. Because the stock market environment changes over time, we believe it is imortant to maintain a flexible investment style. Sometimes an emhasis on growth shares is aroriate, while at others a tilt towards value comanies may be the right choice. Within this aroach, we focus on choosing the right shares within sectors, rather than on a country by country basis. Markets were highly volatile during the eriod Markets recovered following an extremely weak third quarter to deliver a ositive return in the final quarter of The first half of 2011 roduced ositive returns but markets deteriorated raidly over the summer against a backdro of rising Eurozone sovereign debt concerns and reduced exectations for cororate earnings growth. Imroving US economic data and Eurozone summit roosals to deal with the debt crisis rovided more ositive news. This led to the strong erformance of globally exosed cyclical sectors such as oil & gas, basic materials and some industrials during the quarter. Defensive areas roduced mixed results, with healthcare and consumer goods delivering ositive returns while utilities and telecoms ended the quarter in negative territory, as did the financials sector. Equity markets in Euroe rose in January and February 2012 as the tentative rally seen in the fourth quarter broadened out from high-quality international comanies to riskier cyclical comanies, including the financials sector. Investor risk aetite increased, suorted by imroving global growth rosects, rogress on resolving the Eurozone debt crisis and looser monetary olicy. The Euroean Central Bank s (ECB) Long Term Refinancing Oerations (LTRO) rovided much-needed liquidity in the bond markets, enabling Italian and Sanish sovereign yields to fall back to much lower levels. Global leading indicators rebounded and Euroean flash Purchasing Managers Index (PMI) readings recovered above the 50 threshold indicating tentative signs of exansion, while the influential German IFO business confidence reort was stronger than exected. Strong stock selection drove outerformance Stock selection was the main driver of returns over the year, with sector allocation also contributing on a relative basis. At the stock level, ositions in software services sulier SAP and semiconductor manufacturer Infineon Technologies both erformed well for the Fund. SAP continued to outerform during the eriod, benefiting from a strong new roduct line-u and attractive growth in both the US and emerging markets. Infineon s share rice rose as its cost-cutting lan gave the otential for strong margin exansion. The stock also benefited from the continuation of strong automotive demand, with close to 50% of Infineon s sales coming from its automotive division. Elsewhere in the ortfolio, many of the most successful individual stock ositions roved to be, in general, relatively stable businesses with a higher degree of exosure to international growth markets. This included Danish harmaceutical maker Novo-Nordisk, which we believe continues to offer one of the highest growth rates in its sector. The comany has attractive exosure to structural growth in insulin demand, both within develoed and emerging markets, and a market-leading roduct offering. Elsewhere, a osition in Dutch food retailer Ahold benefited from its exosure to the US, where encouraging signs for 2012 growth emerged at the end of last year. 2 BlackRock Euroean Dynamic Fund 3

4 Investment Reort continued Performance Record Underweights in telecoms and utilities contributed strongly Regarding sector allocation, underweight ositions in telecoms and utilities strongly contributed to returns as both sectors significantly undererformed the market. Our bearish stance on telecoms was based on the view that it does not offer attractive growth otential and many businesses in the sector had unsustainably high dividend yields. This roved correct at the beginning of 2012 as telecoms comanies cut their dividends. We have also avoided the utilities sector as one that is at risk of tax rises in the Eurozone. As they are often labelled defensive areas of the market, both the telecoms and utilities sectors also suffered on a relative basis from a significant increase in investor risk aetite at the beginning of The Fund maintained its negative stance on banks for most of the eriod. However, during January 2012 we temorarily closed an underweight osition in the banking sector after concluding that the ositive imact of the LTRO rogram was significantly greater than was first thought. We rimarily used a bank future to imlement the new osition in a raid and relatively frictionless way. This osition was closed after the second LTRO in February, following a strong rally for the banking sector, thereby returning to an underweight on the sector. At the end of the eriod, the ortfolio was ositioned overweight in consumer services, consumer goods, industrials, technology and basic materials, and underweight in telecoms, utilities, financials, healthcare and oil & gas. High-quality international businesses are referred We believe that Euroe s sovereign debt roblems will continue to shae investor sentiment and markets are likely to remain volatile until a resolution is reached. Investors are ricing in a significant risk remium for the current olitical and economic uncertainties. Consequently, we believe our strategy of building ositions in the long-term winners comanies with highly differentiated business models, strong balance sheets and structural growth driven largely by international demand will deliver attractive returns over the medium term. * Performance figures quoted are based on bid to bid dealing rices (the rice at which units are sold) and are not the same as the net asset value reorted in the financial statements which is at close of business. Performance is calculated net of fees and reorted for the Fund s A class accumulation units. Net Asset Value Unit Class Units in Issue Net Asset Value of Fund Net Asset Value er Unit At 28 February 2012 A Income 59,229, ,221, A Accumulation 253,449, ,590, D Accumulation 57,970, ,967, A Income 60,986, ,849, A Accumulation 216,937, ,039, D Accumulation 44,026, ,529, A Income 22,881,215 47,160, A Accumulation 77,429, ,606, D Accumulation* 814,786 1,699, *D Accumulation class commenced February Income (Net Distributions/Net Accumulations) A Income Units Per Unit A Accumulation Units Per Unit D Accumulation Units* Per Unit Calendar Year N/A N/A N/A N/A To 30 Aril. *D Accumulation class commenced February Caital (Unit Prices) A Income Units A Accumulation Units D Accumulation Units* Calendar Year Highest Offer Price Lowest Bid Price Highest Offer Price Lowest Bid Price Highest Offer Price Lowest Bid Price N/A N/A N/A N/A N/A N/A To 28 February. *D Accumulation class commenced February BlackRock Euroean Dynamic Fund 5

5 Performance Record continued Total Exense Ratio (TER) Unit Class 28 February February 2011 A Income % % A Accumulation % % D Accumulation % % TER reflects the annual oerating exenses of the Fund. It does not take into account the imact of any initial or exit charges or transaction-based exenditure i.e. dealing costs. TER is emloyed as the standard method of disclosing the effect of charges by most Euroean collective investment schemes. Portfolio Statement at 28 February 2012 Holding or Market % of Nominal Value Total Value Investment Net Assets Belgium 2.08%; % 783,190 Telenet 19,571, Denmark 5.23%; % 541,413 Novo-Nordisk 49,305, Finland 3.59%; % 418,628 Kone 15,884, ,359 Nokian Renkaat 17,994, ,879, France 19.32%; % 2,500,884 AXA 25,434, ,665 BNP Paribas 19,446, ,185,745 Eutelsat 28,435, ,852 Legrand 19,387, ,280 LVMH Moet-Hennessy 18,463, ,816 Renault 16,502, ,627 Schneider Electric 36,992, ,968 Techni 17,442, ,105, Germany 28.30%; % 132,582 Allianz 10,304, ,896 BASF 25,277, ,095 Bilfinger Berger 11,726, ,738 Brenntag 10,484, ,296 Continental 33,360, ,882 Daimler 21,481, ,504 Deutsche Bank 21,736, ,423,199 Infineon Technologies 22,406, ,809 Kabel Deutschland 27,156, ,563 Lanxess 21,860, ,036 SAP 40,219, ,198,718 Thyssenkru 20,781, ,795, Greece 0.00%; % Ireland 4.20%; % 369,282 Paddy Power 13,940, ,444,118 Ryanair 25,646, ,586, Italy 0.98%; % 2,832,467 UniCredit 9,199, BlackRock Euroean Dynamic Fund 7

6 Portfolio Statement continued Holding or Market % of Nominal Value Total Value Investment Net Assets Luxembourg 0.00%; % Netherlands 3.52%; % 2,102,482 Reed Elsevier 16,393, ,172 Voak 16,781, ,174, Norway 1.14%; % 1,127,496 Petroleum 10,762, Portugal 2.08%; % 1,661,380 Jeronimo Martins 19,642, Sain 0.00%; % Sweden 7.20%; % 738,614 Assa Abloy 14,124, ,318,453 Sandvik 23,035, ,902 Svenska Handelsbanken 3,764, ,124,955 Swedish Match 26,987, ,911, Switzerland 19.70%; % 909,391 Credit Suisse 15,740, ,216 Julius Baer 14,868, ,189 Nestlé 30,816, ,068,212 Richemont 41,095, ,870 Roche 22,557, ,760 Swatch 29,114, ,516 Sygenta 31,531, ,723, United Kingdom 2.45%; % 919,859 Imerial Tobacco 23,070, Portfolio of investments 940,728, Net other assets 2,051, Total net assets 942,779, All investments are ordinary shares quoted on a recognised stock exchange unless otherwise stated. Note: comarative figures show ercentages for each category of holding at 28 February Statement of Total Return for the year ended 28 February 2012 Notes Income Net caital (losses)/gains during the year 2 (71,612,637) 124,561,626 Revenue 3 22,570,584 6,571,831 Exenses 4 (14,644,611) (7,707,848) Finance costs: Interest 6 (27,579) (35,936) Net revenue/(exense) before taxation 7,898,394 (1,171,953) Taxation 5 (2,293,249) (650,544) Net revenue/(exense) after taxation for the year 5,605,145 (1,822,497) Total return before distributions (66,007,492) 122,739,129 Finance costs: Distributions 6 (5,605,145) 1,822,497 Change in net assets attributable to unitholders from investment activities (71,612,637) 124,561,626 Statement of Change in Net Assets Attributable to Unitholders for the year ended 28 February 2012 Oening net assets attributable to unitholders 863,418, ,467,210 Amounts received on creation of units 406,601, ,479,683 Amounts aid on cancellation of units (261,269,395) (65,728,618) 145,332, ,751,065 Stam duty reserve tax (41,861) (11,754) Change in net assets attributable to unitholders from investment activities (71,612,637) 124,561,626 Retained distribution on accumulation units 5,683,343 1,650,393 Closing net assets attributable to unitholders 942,779, ,418,540 8 BlackRock Euroean Dynamic Fund 9

7 Balance Sheet at 28 February 2012 Assets: Notes Investment assets 940,728, ,519,571 Debtors 7 78,263, ,567,004 Cash and bank balances 8 16,729,021 1,050,538 Total other assets 94,992, ,617,542 Total assets 1,035,721, ,137,113 Liabilities: Creditors 9 (91,977,009) (95,702,072) Bank overdraft (113,438) (5,818,598) Distribution ayable on income units (851,207) (197,903) Total other liabilities (92,941,654) (101,718,573) Total liabilities (92,941,654) (101,718,573) Net assets attributable to unitholders 942,779, ,418,540 A J Stenning (Director) E E Tracey (Director) BlackRock Fund Managers Limited 18 Aril 2012 Notes to Statements for the year ended 28 February Accounting and Distribution Policies Accounting Policies (a) The financial statements have been reared in accordance with the Statement of Recommended Practice ( SORP ) for Authorised Funds issued by the Investment Management Association (IMA) in October (b) Dividends on quoted ordinary shares and reference shares are recognised when the securities are quoted ex-dividend. Where such securities are not quoted, dividends are recognised when they are declared. Bank interest is recognised on an accruals basis. All revenue is recognised at a gross amount that includes any withholding taxes but excludes any other taxes such as attributable tax credits. Revenue from stock lending is accounted for net of associated costs and is recognised on an accrual basis. (c) Ordinary stock dividends are recognised wholly as revenue and are based on the market value of the shares on the date they are quoted ex-dividend. Where an enhancement is offered, the amount by which the market value of the shares (on the date they are quoted ex-dividend) exceeds the cash dividend is taken to caital. (d) The underlying circumstances behind both secial dividends and share buy backs are reviewed on a case by case basis in determining whether the amount is revenue or caital in nature. Amounts recognised as revenue form art of the distribution. Any tax treatment will follow the accounting treatment of the rincial amount. (e) Underwriting commission is wholly recognised as revenue when the issue takes lace, excet where the Fund is required to take u some or all of the shares underwritten, in which case an aroriate roortion of the commission received is deducted from the cost of those shares. (f) All exenses, excet those relating to the urchase and sale of investments and Stam Duty Reserve Tax, are charged against revenue. All exenses are recognised on an accruals basis. (g) Provision for cororation tax is made at the current rate on the excess of taxable revenue over allowable exenses. Provision is made on all material timing differences arising from the different treatment of items for accounting and tax uroses. A deferred tax asset is recognised only to the extent that it is considered more likely than not that there will be taxable rofits in the future against which the asset can be offset. (h) The investments of the Fund have been valued at market values, defined as fair value, which is usually bid value at the close of business on the last business day of the accounting eriod. Any unquoted or susended investments are valued at the Manager s valuation. (i) Any transactions in foreign currencies are translated into Sterling at the rates of exchange ruling on the date of any such transaction. Assets and liabilities in foreign currencies are translated into Sterling at the exchange rates ruling at the close of business on the last business day of the accounting eriod. Revenue items in foreign currencies are translated into Sterling at the exchange rate when the revenue is received. 10 BlackRock Euroean Dynamic Fund 11

8 Notes to Statements continued (j) Where aroriate, certain ermitted financial instruments such as derivatives or forward currency contracts are used for efficient ortfolio management. Where such financial instruments are used to rotect or enhance revenue, the revenue and exenses derived therefrom are included in Revenue or Exenses in the Statement of Total Return. Where such financial instruments are used to rotect or enhance caital, the gains and losses derived therefrom are included in Net caital (losses)/gains during the year in the Statement of Total Return. Distribution Policies (k) The ordinary element of stock dividends is treated as revenue but does not form art of the distribution. (l) All of the net revenue available for distribution at the final accounting eriod end will be distributed to unitholders with the balance attributable to accumulation unitholders retained within the Fund. In order to conduct a controlled dividend flow to unitholders, interim distributions may be made at the Manager s discretion, u to a maximum of the distributable revenue available for the eriod. Should exenses and taxation together exceed revenue, there will be no distribution and the shortfall will be met from caital. 2. Net Caital (Losses)/Gains During the Year The net caital (losses)/gains comrise: (Losses)/gains on non-derivative securities (79,206,983) 126,039,946 Gains on derivative contracts 9,111, ,208 Gains on forward currency contracts 501,469 Currency losses (1,985,494) (1,554,829) Transaction costs (33,500) (66,699) Net caital (losses)/gains (71,612,637) 124,561, Revenue UK dividends 1,214,334 Overseas dividends 21,171,872 6,567,886 Stock lending revenue 13,631 Interest from money market deosits 150, Interest from UK bank deosits 19,990 3,292 Total revenue 22,570,584 6,571, Exenses Payable to the Manager or associates of the Manager: Manager s service charge 12,963,903 6,852,124 Registrar s fees 1,417, ,744 14,381,669 7,528,868 Payable to the Trustee or associates of the Trustee: Trustee s fees 179,898 88, ,898 88,092 Other exenses: Safe custody fees 75,036 82,398 FSA fee (87) 290 Audit fee 7,435 7,813 Legal & rofessional fees 630 BACS charges Sundry exenses ,044 90,888 Total exenses 14,644,611 7,707, Taxation (a) Analysis of tax charge in the year Overseas tax irrecoverable 2,293, ,544 Total current tax charge for the year [see Note 5(b)] 2,293, , BlackRock Euroean Dynamic Fund 13

9 Notes to Statements continued (b) Factors affecting the current tax charge for the year The tax assessed for the eriod is higher than the standard rate of cororation tax in the UK for an authorised unit trust. The differences are exlained below: Net revenue/(exense) before taxation 7,898,394 (1,171,953) Cororation tax at 20% (2011: 20%) 1,579,679 (234,391) Effects of: Excess exenses for which no tax relief taken 2,898,280 1,401,743 Franked investment revenue at 20% (242,867) Overseas tax 2,293, ,544 Overseas tax exensed (83) (25,900) Non taxable exchange gain/loss on unrealised tax reclaims (6,738) (3,956) Non taxable overseas dividends (4,228,822) (1,137,496) Total current tax charge for the year [see Note 5(a)] 2,293, ,544 At 28 February 2012 the Fund has surlus management exenses of 21,852,340 (2011: 7,360,940). It is unlikely that the Fund will generate sufficient taxable rofits in the future to utilise these exenses and, therefore, a deferred tax asset of 4,370,468 (2011: 1,472,188) has not been recognised. 6. Finance Costs Final 6,534,550 1,848,297 6,534,550 1,848,297 Add: Amounts deducted on cancellation of units 2,757, ,203 Less: Amounts received on creation of units (3,686,848) (4,141,997) Net distribution for the year 5,605,145 (1,822,497) Finance costs: Interest 27,579 35,936 Finance costs: Distributions 5,632,724 (1,786,561) Details of the final distribution er unit are set out in the table on age Debtors Sales awaiting settlement 22,604,022 56,327,365 Amounts receivable for creation of units 4,506,174 11,573,195 Currency sales awaiting settlement 50,023,547 39,087,379 Overseas tax recoverable 1,130, ,065 Total debtors 78,263, ,567, Cash and bank balances Amount held at futures clearing houses and brokers 1,149,309 1,050,000 Cash and bank balances 109, Money market deosits 15,470,000 Cash and bank balances 16,729,021 1,050, Creditors Purchases awaiting settlement 34,463,333 55,482,177 Amounts ayable for cancellation of units 5,270,366 Currency urchases awaiting settlement 49,966,113 39,173,860 Accrued Manager s service charge 2,015, ,168 Accrued Registrar s fee 212,779 90,728 Accrued Trustee s fee 13,038 11,624 Accrued Safe custody fees 19,121 26,982 Accrued Audit fee 7,435 7,434 Accrued FSA fee Bank interest ayable 1,786 9,089 Transaction costs 7,638 16,629 Total creditors 91,977,009 95,702, Derivatives and Other Instruments (a) The Fund s financial instruments comrise securities and other investments, cash balances and debtors and creditors that arise directly from its oerations, for examle, in resect of sales and urchases awaiting settlement, amounts receivable for creations and ayable for cancellation of units, and debtors for accrued revenue. The Manager shall take the risks it deems reasonable to meet the investment objective. These risks include the following: Risk Foreign currency Imact of risk The risk of changes to foreign currency rates materially affecting the Sterling equivalent value of non-sterling denominated assets and liabilities accounted for by the Fund. The Fund is accounted for in Sterling and holds financial assets and financial liabilities denominated in Sterling and other international currencies. To manage the risk, the Fund may enter into forward currency contracts for the urose of efficient management. At 28 February 2012, the Fund had no oen foreign currency contracts. 14 BlackRock Euroean Dynamic Fund 15

10 Notes to Statements continued Risk Market rice Liquidity Counterarty Imact of risk The valuation of the Fund s investments are calculated with reference to market rices quoted by financial agencies and brokers. Movements to those market rices may materially affect the value of the Fund s investments, which may move down as well as u. To manage the risk, the Manager undertakes research in order to achieve the best rice for any transactions entered into on behalf of the Fund. The risk of low market liquidity, through reduced trading volumes, affecting the ability of the Fund to trade financial instruments at values reviously indicated by financial brokers. All stocks are valued daily. Stocks identified as being illiquid are reviewed for ricing accuracy as the need arises and on a formal monthly basis by the BlackRock Pricing Committee. The Fund invests rimarily in larger comanies incororated or listed in Euroe, which are tyically considered to be territories oerating with high levels of liquidity. From time to time, however, market liquidity may be affected by economic events. To manage the risk, the Investment Manager undertakes research of investment oortunities to select oortunities congruent with the Fund s investment objective. The risk of entering an arrangement with a counterarty, which is itself subject to financial risks which may affect its ability to trade as a going concern. The Manager maintains a list of aroved counterarties. This list is regularly monitored and revised for changes based on the counter-arty s credit worthiness, market reutation and exectations of future financial erformance. Transactions will only be oened with financial intermediaries on the aroved counterarties list. These risks are monitored by the Manager in ursuance of the investment objective and olicy as set out in the Trust Deed. Adherence to investment guidelines and to investment and borrowing owers set out in the Trust Deed, the Prosectus and in the rules of the Collective Investment Schemes Sourcebook mitigates the risk of excessive exosure to any articular tye of security or issuer. Further information on the investment ortfolio is set out in the Investment Reort and Portfolio Statement. (b) Currency Exosures A roortion of the net assets of the Fund are denominated in currencies other than Sterling, with the effect that the balance sheet and total return can be affected by currency movements. Currency Currency Net Assets/(Liabilities) Monetary exosures Non-monetary exosures Total Danish krone 1 49,305,757 49,305,758 Euro (113,434) 605,479, ,365,838 Norwegian krone ,762,206 10,762,745 Swedish krona (4) 67,911,860 67,911,856 Swiss franc 186,323, ,323,180 Turkish lira 2 2 UK sterling 16,727,942 6,381,630 23,109,572 US dollar Total 16,615, ,163, ,779,488 The currency rofile held at 28 February 2011 was: Currency Currency Net Assets/(Liabilities) Monetary exosures Non-monetary exosures Total Danish krone 13 64,736,480 64,736,493 Euro 565,714, ,714,807 Norwegian krone 56,164,471 56,164,471 Swedish krona 37,208,876 37,208,876 Swiss franc 133,273, ,273,593 Turkish lira 2 2 UK sterling (4,768,598) 11,088,373 6,319,775 US dollar Total (4,768,060) 868,186, ,418, BlackRock Euroean Dynamic Fund 17

11 Notes to Statements continued (c) Interest Rate Risk Profile of Assets and Liabilities The Interest Rate Risk Profile of Assets and Liabilities as at 28 February 2012 was as follows: Currency Floating Rate Assets Fixed Rate Assets Assets not Carrying Interest Total Danish krone 1 49,305,757 49,305,758 Euro 657,095, ,095,698 Norwegian krone ,762,206 10,762,745 Swedish krona 67,911,860 67,911,860 Swiss franc 187,780, ,780,885 Turkish lira 2 2 UK sterling 16,727,942 46,135,715 62,863,657 US dollar Total 16,729, ,018,992,121 1,035,721,142 Currency Floating Rate Liabilities Liabilities not Carrying Interest Total Euro (113,434) (51,616,426) (51,729,860) Swedish krona (4) (4) Swiss franc (1,457,705) (1,457,705) UK sterling (39,754,085) (39,754,085) Total (113,438) (92,828,216) (92,941,654) The Interest Rate Risk Profile of Assets and Liabilities as at 28 February 2011 was as follows: Currency Floating Rate Assets Fixed Rate Assets Assets not Carrying Interest Total Danish krone 13 64,736,480 64,736,493 Euro 622,796, ,796,152 Norwegian krone 68,719,281 68,719,281 Swedish krona 39,411,041 39,411,041 Swiss franc 136,893, ,893,645 Turkish lira 2 2 UK sterling 1,050,000 31,529,976 32,579,976 US dollar Total 1,050, ,086, ,137,113 Currency Floating Rate Liabilities Liabilities not Carrying Interest Total Euro (57,081,345) (57,081,345) Norwegian krone (12,554,810) (12,554,810) Swedish krona (2,202,165) (2,202,165) Swiss franc (3,620,052) (3,620,052) UK sterling (5,818,598) (20,441,603) (26,260,201) Total (5,818,598) (95,899,975) (101,718,573) 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 six month LIBOR and overdraft interest based on 3% over the base rate. All overseas deosits bear interest at rates determined by the relevant Authority. (d) Fair Value of Assets and Liabilities There is no material difference between the value of the financial assets and liabilities, as shown in the balance sheet, and their fair value. 11. Stock Lending During the year, the Fund engaged in stock lending, subject to the conditions and within the limits laid down by the Services Authority. The Fund receives securities as collateral for a value in excess of the market value of the stock loaned. The collateral is registered in the name of the Trustee, The Royal Bank of Scotland lc on behalf of the Fund with the collateral agents and central securities deositories JPMorgan Chase and Bank of New York Mellon. The Manager monitors the fair value of the securities loaned and additional collateral is obtained if necessary. The securities lending agent aointed, ursuant to the stock lending agreement is BlackRock Advisors (UK) Ltd. Stock lending revenue is slit between the Fund and the securities lending agent in the ratio 60:40. Revenue earned during the year 13,631 Value of securities on loan at the year end 6,607,831 Value of collateral held on behalf of the Fund at the year end 7,476, BlackRock Euroean Dynamic Fund 19

12 Notes to Statements continued 12. Contingent Assets and Liabilities There were no contingent assets or liabilities at the balance sheet date (2011: Nil). 13. Investment Management The manager has delegated to its associate, BlackRock (Luxembourg) S.A., resonsibility for investment management of the Fund. BlackRock (Luxembourg) S.A. does not enter into commission sharing agreements. 14. Related Party Transactions BlackRock Fund Managers Limited, as Manager and Registrar of the Fund, together with BlackRock (Luxembourg) S.A. as Investment Manager and the Royal Bank of Scotland lc (RBS), as Trustee, are regarded as related arties to the Fund. The aggregate monies received through creation and aid through cancellation are disclosed in the Statement of Change in Net Assets Attributable to Unitholders and Note 6. Any amounts due to or from the Manager at the year end are disclosed in Notes 7 and 9. Management fees and registration fees aid to BlackRock Fund Managers Limited and Trustee fees aid to RBS are shown in Note 4. The balances due at the year end in resect of these fees are shown in Note 9. At the balance sheet date the Fund did not have any material unitholders regarded as a related arty in accordance with FRS8 Related Party Disclosures. BlackRock Advisors (UK) Ltd is the stock lending agent aointed by the Fund and is regarded as a related arty in accordance with FRS8 Related Party Disclosures. Refer to Note 11 on age 19 for further information on stock lending. No other transactions were entered into with associates of the Manager during the year. 16. Unitholder s funds Accumulation and Income units are available for each unit class as secified in the Prosectus. The net asset value of the unit class, net asset value er unit and the number of units in issue for each unit class are given in the Performance Record. The tyes of units currently in issue and the Manager s eriodic charge for each unit class are shown below: Unit Class A Income 1.50% 1.50% A Accumulation 1.50% 1.50% D Accumulation 0.75% 0.75% The distribution er unit class is given in the distribution table. All units have the same rights on winding u. 17. Non Adjusting Post Balance Sheet Event Since the last business day of the accounting eriod, the Fund s quoted bid rices on A Income Units, A Accumulation Units and D Accumulation Units, have fallen as shown below: Class Bid rices as at Bid rices as at Fall (%) A Income (3.3) A Accumulation (3.3) D Accumulation (3.2) 15. Portfolio Transaction costs Summary of total urchase costs: Purchases in year before transaction costs 2,681,572,975 1,879,678,020 Commissions and other costs (including stam duty) 5,198,685 2,588,393 Total urchase costs 5,198,685 2,588,393 Gross urchases total 2,686,771,660 1,882,266,413 Summary of total sale costs: Gross sales before transaction costs 2,535,219,335 1,356,469,129 Commissions and other costs (3,217,833) (1,684,079) Total sale costs (3,217,833) (1,684,079) Total sales net of transaction costs 2,532,001,502 1,354,785, BlackRock Euroean Dynamic Fund 21

13 Distribution Table for the year ended 28 February 2012 Final Distribution in Pence er Unit Grou 1 Units urchased rior to 1 March 2011 Grou 2 Units urchased 1 March 2011 to 28 February 2012 A Income Units A Accumulation Units D Accumulation Units Grou 1 Grou 2 Grou 1 Grou 2 Grou 1 Grou 2 Net revenue (dividend) Equalisation Distribution ayable Distribution aid Equalisation alies only to units urchased during the distribution eriod (Grou 2 units). It is the average amount of revenue included in the urchase rice of all Grou 2 units and is refunded to holders of these units as a return of caital. Being caital, it is not liable to income tax but must be deducted from the cost of units for caital gains tax uroses. Authorised Status BlackRock Euroean Dynamic Fund is an authorised unit trust Scheme under Section 243 of the Services and Markets Act 2000 and was established as a UCITS retail Scheme under the Services Authority s Collective Investment Schemes Sourcebook, (the Sourcebook ). Stam Duty Reserve Tax Set out below is a brief summary of how stam duty reserve tax ( SDRT ) affects unitholders and otential unitholders 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 eriod. This charge may be reduced if the number of units surrendered exceeds the number of units issued during a two week eriod or if there are exemt assets in the Scheme. The Manager has the ower to make a charge on unitholders as a rovision against SDRT for which the Trustee may become liable (the SDRT rovision ). The SDRT rovision, where levied, has the effect of increasing the acquisition cost of units, or decreasing the redemtion roceeds (as aroriate). The Manager s general olicy in relation to its authorised unit trusts is not to imose a SDRT rovision when units are created, issued, cancelled or redeemed with the result that any SDRT ayable in resect of any surrender of units will be aid by the Trustee out of the roerty of the relevant unit trust. However, the Manager reserves the right to require the ayment of a SDRT rovision whenever it considers that such imosition is fair to all unitholders and otential unitholders. The Manager will charge a SDRT rovision in resect of non ro-rata in-secie redemtions. The Manager may imose a SDRT rovision on large deals even if no SDRT rovision is imosed on smaller deals, or which is larger than that imosed on smaller deals. A large deal is a transaction (or series of transactions in one dealing eriod) by any erson to buy, sell or exchange units at a total value of 15,000 or more. If a unitholder transfers units to a third arty this may be subject to SDRT. In these circumstances the Manager will not register the transfer unless the requisite SDRT (if any) has been aid. 22 BlackRock Euroean Dynamic Fund 23

14 Statement of Manager s and Trustee s Resonsibilities Reort of the Auditor The Manager is required by the rules of the Sourcebook to reare the financial statements for each financial year. These financial statements must be reared in accordance with alicable accounting standards to give a true and fair view of the state of affairs of the Fund at the year end and of the revenue for the year. The financial statements should comly with the disclosure requirements of the Statement of Recommended Practice for Authorised Funds issued by the IMA ( the SORP ) and must comly with any relevant rovisions of the Trust Deed. The Manager is resonsible for keeing such accounting records as are necessary to enable it to ensure that the financial statements comly with the Sourcebook, the SORP and the Trust Deed. The Trustee is resonsible for the safekeeing of all the roerty of the Scheme (other than tangible moveable roerty) which is entrusted to it and for the collection of revenue that arises from that roerty. It is the duty of the Trustee to take reasonable care to ensure that the Scheme is managed in accordance with the Sourcebook, the Fund s Trust Deed and Prosectus, in relation to the ricing of, and dealings in, units in the Fund; the alication of revenue of the Scheme; and the investment and borrowing owers of the Fund. Reort of the Trustee Having carried out such rocedures as we considered necessary to discharge our resonsibilities as Trustee of the Fund, it is our oinion, based on the information available to us and the exlanations rovided, that, in all material resects, the Manager: (i) has carried out the issue, sale, redemtion and cancellation, and calculation of the rice of the Fund s units and the alication of the Fund s revenue in accordance with the Sourcebook, the Trust Deed and Prosectus, and (ii) has observed the investment and borrowing owers and restrictions alicable to the Fund. The Royal Bank of Scotland lc Edinburgh Trustee and Deositary Services 18 Aril 2012 Indeendent Auditor s Reort to the Unitholders of BlackRock Euroean Dynamic Fund We have audited the financial statements of BlackRock Euroean Dynamic Fund ( the Fund ) for the year ended 28 February 2012 which comrise the Statement of Total Return, the Statement of Change in Net Assets Attributable to Unitholders, the Balance Sheet, the related notes 1 to 17 and the Distribution Table. The financial reorting framework that has been alied in their rearation is alicable law and United Kingdom Accounting Standards (United Kingdom Generally Acceted Accounting Practice). This reort is made solely to the unitholders of the Fund, as a body, ursuant to Paragrah of the rules of the Collective Investment Schemes Sourcebook of the Services Authority. Our audit work has been undertaken so that we might state to the unitholders those matters we are required to state to them in an auditor s reort and for no other urose. To the fullest extent ermitted by law, we do not accet or assume resonsibility to anyone other than the Fund and the unitholders as a body, for our audit work, for this reort, or for the oinions we have formed. Resective resonsibilities of the Manager and Auditor As exlained more fully in the Manager s resonsibilities statement set out on age 24, the Manager is resonsible for the rearation of the financial statements and for being satisfied that they give a true and fair view. Our resonsibility is to audit and exress an oinion on the financial statements in accordance with alicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comly with the Auditing Practices Board s Ethical Standards for Auditors. Scoe of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting olicies are aroriate to the Fund s circumstances and have been consistently alied and adequately disclosed; the reasonableness of significant accounting estimates made by the manager; and the overall resentation of the financial statements. In addition, we read all the financial and non financial information in the Annual Reort to identify material inconsistencies with the audited financial statements. If we become aware of any aarent material misstatements or inconsistencies we consider the imlications for our reort. Oinion on financial statements In our oinion the financial statements: give a true and fair view of the financial osition of the Fund as at 28 February 2012 and of the net revenue and the net losses on the scheme roerty of the Fund for the year then ended; and have been roerly reared in accordance with United Kingdom Generally Acceted Accounting Practice. 24 BlackRock Euroean Dynamic Fund 25

15 Reort of the Auditor continued Oinion on other matters rescribed by the rules of the Collective Investment Schemes Sourcebook of the Services Authority In our oinion: the financial statements have been roerly reared in accordance with the Statement of Recommended Practice relating to Authorised Funds, the rules of the Collective Investment Schemes Sourcebook of the Services Authority and the Trust Deed; the information given in the manager s reort for the financial year for which the financial statements are reared is consistent with the financial statements; Manager & Registrar BlackRock Fund Managers Limited 12 Throgmorton Avenue, London EC2N 2DL Telehone: Dealing and Investor Services: Member of the Investment Management Association and authorised and regulated by the Services Authority. Directors of the Manager G D Baming N C D Hall A Higgins A C Hoctor-Duncan G M P M van Berkel (aointed 13 March 2012) K R Ironmonger A J Stenning E E Tracey there is nothing to indicate that roer accounting records have not been ket or that the financial statements are not in agreement with those records; and we have received all the information and exlanations which, to the best of our knowledge and belief, are necessary for the uroses of our audit. Trustee The Royal Bank of Scotland lc Trustee and Deositary Services The Broadstone, 50 South Gyle Crescent, Edinburgh EH12 9UZ Authorised and regulated by the Services Authority. Ernst & Young LLP Edinburgh Statutory Auditor 18 Aril 2012 Investment Manager BlackRock (Luxembourg) S.A. 6D route de Trèves, L-2633 Senningerberg, Grand-Duchy of Luxembourg Incororated in Luxembourg and regulated by the Commission de Surveillance du Secteur Financier (CSSF). Auditor Ernst & Young LLP Ten George Street, Edinburgh EH2 2DZ BlackRock s roxy voting agent is ISS (Institutional Shareholder Services). This Reort relates to the ackaged roducts of, and is issued by: BlackRock Fund Managers Limited 12 Throgmorton Avenue, London EC2N 2DL Telehone: Dealing and Investor Services: blackrock.co.uk For your rotection, telehone calls are usually recorded. 26 BlackRock Euroean Dynamic Fund