Index Funds from FOR PROFESSIONAL INVESTORS ONLY
Contents Introduction 1 Benefits of owning index funds 3 Why? 6 s approach to index tracking 8 Key questions answered 10
Index Funds from 1 Introduction Index (or passive) investing is nothing new, yet it s true to say that the debate about whether to go active or passive is more than ever in the spotlight. At, we believe there is no contradiction between offering both index and active products. Moreover, both investment strategies can be complementary to each other and are frequently used side by side by investors. In essence, index tracking investments are designed to provide investors with market exposure (also known as beta), yet the scale, resources and indeed skill applied to passive investments can make a marginal difference to the outcome. Since index funds first became available to investors almost 40 years ago, indexation has moved beyond its original role as a means of achieving investment results that keep pace with market averages. Today, it serves as a valuable tool in managing the risks associated with uncertain investment performance. For many, indexation is a crucial lower-cost, low-maintenance approach to managing a proportion of, or indeed their entire, investment portfolio. A wide range of investors, including pension funds, wealth managers and retail investors use index tracking to consistently deliver a compelling set of benefits.
2 Index Funds from In this brochure we take a closer look at index tracking funds and examine the benefits they can offer, the decision making process when choosing to go active or passive, and how s approach to index tracking consistently seeks to add value. But before we go further let s take a closer look at exactly what we mean by an index fund. What is an index fund? A stock market index is a method of measuring either the performance of a market in aggregate or alternatively, certain market segments. When investors buy an index fund, they are investing in a fund or portfolio which seeks to deliver the performance of the chosen index. The fund will aim to hold the index constituent stocks at their index weights or a representative sample depending on factors such as the size and complexity of the index, thereby delivering performance in line with the index. For example, in the UK marketplace one of the most commonly referenced indices is the FTSE 100. In simple terms, the FTSE 100 is a share index of the 100 most highly capitalised UK companies listed on the London Stock Exchange. Therefore, an increase in the value of the FTSE 100 represents a positive change in value in the underlying stocks that comprise the index. These stocks or constituents are weighted by stock market value. Indexation has grown rapidly since the first institutional index fund was pioneered by in 1971 and now represents over US$3 trillion 1 globally. 1 Pensions & Investments, 30 September 2010.
Index Funds from 3 Benefits of owning index funds Index tracking may in itself seem a reasonably straightforward approach to investing but it is a strategy that offers a raft of benefits to investors, including: } efficient building blocks in an asset allocation strategy, } low cost access to market returns, The costs of operating index funds tend to be lower than actively managed funds. By design, index funds require fewer portfolio management and analyst resources. } consistent exposure to a chosen market. Efficient asset allocation tools Widely accepted research 2 shows that, for broad portfolios, asset allocation is the most important driver of investment performance. Most asset allocation studies use building blocks that are based on indices, which suggests they represent the most efficient form of building blocks an investor can use. Active managers by definition will deviate from their respective benchmark, therefore, many investors look to index funds to provide stable, low-cost exposure to a given segment of a diversified portfolio. Low cost investments The costs of operating index funds tend to be lower than actively managed funds. By design, index funds require fewer portfolio management and analyst resources. Instead, robust exception-based systems, which can quickly pinpoint any misweights that may contribute to mistracking, need to be in place to assist portfolio managers in day-to-day management of index funds. As a result, only the largest index managers can invest in the resources necessary to build investment and operational systems required to support high quality index fund management. Consistent delivery of market exposure Index funds aim to deliver the returns of the chosen stock market by investing in, and carefully repositioning, the stocks that continually reflect the relevant index over time. As a result, an investor who wishes to gain exposure to the FTSE All Share Index can be assured of receiving returns closely in line with the FTSE All Share through an index tracking fund. Investors should appreciate that any associated fees, whilst generally low, will affect the return profile of the fund. 2 Brinson, Gary P., Randolph Hood, and Gilbert L. Beebower.1986. Determinants of Portfolio Performance. Financial Analysts Journal, vol. 42, no. 4 (July/August): 39 48.
4 Index Funds from Benefits of owning index funds continued Choosing to go active or passive Empirical studies show that, when taken in aggregate, active managers underperform the market after accounting for costs. That said, there is also evidence which shows how good active managers can outperform their respective benchmarks (or indices) over time. It is therefore important for an investor to have both the skill and the time required to successfully identify the best active managers as well as the ability to constantly review who they re invested with. Otherwise, the investor may suffer underperformance and would therefore be better off investing in an index tracking fund. As the chart below demonstrates, active funds do generate alpha (i.e. returns in excess of the benchmark). However, empirical evidence suggests that the majority of active funds tend to underperform their respective benchmarks in a given year, albeit with notable exceptions such as 2009. Furthermore, there is little consistency in terms of alpha generation whether active funds invest in equities or fixed interest securities. This makes it difficult for investors to choose between strategies yet the decision tree on the next page can aid an investor in making the choice between an active or passive fund for a particular region or asset class. Active funds do generate alpha but it varies substantially over time 60 50 40 (%) 30 20 10 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 % of all funds outperforming % equity % fixed income Source: Morningstar, Bloomberg. 1 year returns as at 31 December 2010. Our analysis is based on an objective and quantitative study of European domiciled active funds covering ten equity and nine fixed income benchmarks. In total close to 3,000 funds have been analysed with total assets under management of over 1trn. In order to provide greater context all the analysis has been done over a ten year period of review so as to cover a reasonable investment cycle. The analysis of active performance also needs to be carried out over a reasonable time period in order to not simply reflect short term market conditions. This is especially important given the dramatic increase in volatility in 2008-2009 in both equities and fixed income.
Index Funds from 5 A typical active/passive decision process followed by asset managers Is the market under scope considered inefficient? Are investor s objectives consistent with active product features (e.g. price, liquidity, etc.)? YES NO I N D E X The less efficient the market, the more potential there is for an active manager to add value. Market inefficiencies could be due to scarce information about companies (e.g. micro caps or particular emerging market stocks), less liquid markets (e.g. real estate or emerging market bonds). The investor has to be aware of an active product s attributes, such as the investment strategy and associated costs. as it aims to deliver higher returns. Are there skilled managers that can consistently add value? YES NO I N D E X Although most active managers do create alpha across asset classes, it is challenging to produce consistent performance over time (net of all costs and fees). Thoughtful passive management can add value for investors without the need for strong convictions. Is the investor confident that they have the skill to choose managers that add value? YES NO I N D E X Investors need to analyse the most appropriate benchmark, which provides means of assessing whether an active fund can provide alpha on a reliable basis. Investors should conduct due diligence on active managers and understand their investment methodology (this should be reviewed on a periodic basis to identify any gaps or deviations from the original strategy). ACTIVE
6 Index Funds from Why? In much the same way as it is important to choose the right active investment manager, when choosing to access index strategies it is also important to choose your index provider carefully as not all managers can offer the same degree of skill, expertise and benefits to investors. s experience of managing index strategies stretches back many years. In fact, we pioneered the first index strategy in the 1970s, and our innovative focus has ensured, over time, the consistent delivery of market returns to clients along with a stream of performance enhancements. A combined force On 1 December 2009, and Barclays Global Investors, combined to form one of the world s preeminent investment management firms. stment management firms. The new company, operating under the name, now manages 2.28 trillion* in assets and offers clients worldwide a full complement of active management, enhanced and index investment strategies together with the industry-leading ishares platform of exchange traded funds. * As at 31 March 2011.
Index Funds from 7 s expertise Scale of s indexing business Index investing is a business which benefits from scale and, as the world s largest provider of index tracking funds with over 1.2 trillion in indexed assets 3, this scale affords us leverage when negotiating market trades. Our clients benefit from access to significant economies of scale across global markets through our ability to trade cost-effectively and often the ability to cross security positions internally (saving bid/offer spreads and transaction costs). In turn, this helps to ensure low operating costs thereby minimising any tracking error for our index funds. With the purchase of Barclays Global Investors (BGI) in December 2009, added the world s largest and most sophisticated index manager to the team. At BGI, portfolio management and risk systems were designed specifically for managing index funds, and mitigating investment and operational risks. In addition, s electronic links to both the centralised trading desk and to brokers offers operational benefits for investors, which other providers may not be able to offer to the same extent. Dedicated and experienced teams Index fixed income Index Fixed Income portfolios are managed by the broader Global Model-Based Fixed Income Team. Globally, we employ over 140 investment professionals directly involved in model-based fixed income management. The London-based team is the global centre of expertise for fixed income. The Europe fixed income group comprises portfolio managers (including credit specialists), traders, quantitative researchers and strategists. As at 31 March 2011, manages 350bn in index fixed income assets. Index equity Globally, we employ over 200 equity investment professionals responsible for the management of indexed and scientific active equities (including over 60 in London). All team members investment insights are incorporated into the research process and shared across all client portfolios. The London Index Equity Team comprises a Regional Head, portfolio managers and strategists and a trading team. In addition to our portfolio managers and traders, we have a team of dedicated equity market researchers. As at 31 March 2011, manages 883bn in index equity assets. Continued benefits for clients Ongoing innovation Advances in trading and portfolio management systems, as well as the use of new financial instruments have enabled cost savings, the reduction of investment and operational risks, and incremental returns for investors. s industry leading ishares platform of Exchange Traded Funds (ETFs) is yet another example of our constant efforts to be at the forefront of innovation within the investment management industry. Diverse client base s index investment business serves a broad range of clients, which not only makes the business robust but has also enabled us to deliver index solutions which are suited to clients needs. Furthermore, there is no proprietary book of business; everything we do and every trade we place is for the benefit of our clients. 3 As of 31 March 2011
8 Index Funds from Why? continued s approach to index tracking Making your assets work harder for you Index portfolio management at is more than simply mechanically buying and holding the assets that make up the index; we consider every aspect of the investment process in detail and capitalise on all of the available opportunities within predetermined risk and cost limits. Across our comprehensive range of indexed products, investment management strategies are designed to extract optimal value from trading opportunities and index changes, while ensuring that tracking targets are met systematically and consistently. Equity index tracking Delivering returns that accurately match the performance of the index is a core element of our portfolio construction process. uses a variety of techniques to manage index funds, (including full replication, optimisation and stratified sampling). The technique employed varies depending on a number of factors, but the majority of our funds are managed on a fully replicated basis. For a fully replicated fund, the portfolio s exposure to each security is in line with the weight it has in the underlying index. We believe this is the most reliable approach to equity indexation and results in a lower tracking error for the following reasons: ` `Risk relative to the index is minimised. ` `Portfolios automatically rebalance, minimising turnover and trading costs. ` `It is often easier and more cost-effective to trade a broader basket of index securities. Fixed income index tracking uses two methods to manage index tracking funds: ``Full replication. ` `Stratified sampling. Each method has its advantages and disadvantages, and each is best applicable in various market circumstances. When is full replication used? Full replication is not always possible in fixed income markets. The number of constituent securities in an index directly affects a portfolio s ability to replicate fully that index. For example the FTSE UK Gilt All Stocks Index is comprised of less than 30 bonds, so a portfolio will only need to gain exposure to this limited number of issues to replicate fully the index. The same task is nearly impossible for a portfolio attempting to track the Citigroup World Broad Investment Grade Index (WorldBIG) which consists of more than 4,500 securities, or the Barclays Capital Global Aggregate Index which has over 10,000 securities. Additionally, the composition of the index is an important consideration. An index of highly liquid government bonds will be easier to replicate than an index of lower quality corporate bonds which may be illiquid and can be difficult to find at a realistic price (which in extreme cases could deviate significantly from the index provider s quoted price). This makes broad corporate bond indices very difficult to replicate fully, although there are liquid indices which are designed to overcome this situation. An additional criteria for inclusion in a Liquid Index is that a bond must meet a certain level of liquidity, and these indices usually have a much smaller number of constituents than the broad indices.
Index Funds from 9 Another consideration for a portfolio to replicate fully an index is that the portfolio must be of sufficient size to invest in each of the constituent bonds in the correct proportions. Not only do bonds trade in minimum size increments (usually 1,000 increments or greater), but also in order to gain competitive pricing on a bond, transactions must be traded in institutional sized blocs ( 1 million to 100 million, depending on the particular security). Adding value consistently Trading excellence When index providers calculate an index, they do not include trading costs, however index tracking funds are subject to trading costs. It is therefore imperative to minimise trading costs to ensure fund returns closely match the benchmark. All trading strategies have this aim in mind. This is achieved through access to our internal marketplace, which gives us the ability to cross-match trades as well as carefully controlled external trading. Managing index events Index changes and corporate actions require careful management to minimise costs and to take advantage of potential opportunities. When navigating these events, aims to track the index in line with investment objectives, minimise the impact of price distortions around events, and add value for funds. Trading conditions are monitored closely and risk-controlled strategies are developed to add to returns where possible. s approach to index tracking offers investors a wide range of index tracking funds across both equity and fixed income, covering many of the world s major markets and regions. Full details of s range of index funds can be found in the back of this brochure and on our website. To find out how to put the benefits of s index tracking process to work for you or to place a deal, please contact us as follows: Tel: 08457 405 405 Email: broker.services@blackrock.com Web: blackrock.co.uk
10 Index Funds from Key questions answered What are the index management strategies? Full replication Sector Countries When: AUM is sufficient Markets fully investible Full replication involves holding each of an index s constituents in exactly the same proportions as the index. At each index rebalance, we rebalance the index-tracking portfolio to maintain the same proportional exposure to each stock or bond in the index. Full replication minimises the risk of tracking error versus the index to the greatest degree practicable, and is usually the most desirable index tracking methodology. Size Optimisation Sector Countries Size When: AUM not sufficient to fully replicate Not fully investible markets, illiquid assets Full replication cannot always be implemented efficiently, either due to the size of the fund or other considerations such as the inability to trade illiquid stocks and the costs involved in trading smaller stocks. Optimisation is therefore generally used on smaller accounts and we believe that in these cases it gives investors the optimal market exposure taking into consideration the costs. The objective of optimisation is to use mathematical methods to construct a portfolio with the minimum tracking error given the constraints imposed upon the portfolio. Using models developed internally and externally, we create a sub-set of the index that exhibits the characteristics of the whole universe. This is done firstly by assessing a number of economic and market related factors that are known to influence stock returns. These include market capitalisation, dividend yield, beta and others. The optimiser then selects stocks that give an even spread across each of these economic and market factors, taking into account the cross-correlations between them. Stratified sampling Sector Countries When: Same as optimisation No risk model available Stratified sampling is another method of index construction when full replication is not possible or appropriate. Stratified sampling will usually result in some degree of sampling error, and hence the expected tracking error versus the index will increase compared with that of a fully replicated portfolio. On the other hand, there will be a benefit to the investor in a reduction in transaction costs due to fewer holdings and also not searching out illiquid assets, which could be very expensive. Size
Index Funds from 11 What is meant by alpha and beta? Alpha is a risk-adjusted measure of the so-called active return on an investment. It is commonly used to assess an active manager s performance and often, the return of a benchmark is subtracted in order to consider relative performance. Put more simply, it is the excess return over the market generated by a fund manager. Beta is a statistic that indicates a fund s historic volatility relative to its benchmark index: ` ` A fund with a beta of 1 will be expected to move in line with its benchmark index ` ` A fund with a beta of over 1 will be expected to be more volatile than the moves in its benchmark index ` ` A fund with a beta of less than 1 will be expected to be less volatile than its benchmark index By definition, index tracking funds will aim for a beta of 1. What is the difference between an index tracking mutual fund and an ETF? An ETF is a type of index tracking fund. Both ETFs and index tracking funds aim to deliver market returns but ETFs trade like stocks on exchanges. As a result, they can be purchased or sold throughout the trading day while index tracking funds can only be purchased or redeemed according to the dealing cycle set by the fund manager. This is typically once per day but can be as little as once per month. Index tracking mutual funds can also fall within the regulatory framework of traditional funds such as, in the case of s Collective Investment funds, the UCITS III regime. With these characteristics in mind, ETF s can provide the ideal solution for a client requiring the ability to trade intra-day, while index tracking funds can be ideal solutions for long-term investors.
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About is one of the world s pre-eminent asset management firms and a premier provider of global investment management, risk management and advisory services to institutional, intermediary and individual investors around the world. offers a range of solutions from rigorous fundamental and quantitative active management approaches aimed at maximising outperformance to highly efficient indexing strategies designed to gain broad exposure to the world s capital markets. Our clients can access our investment solutions through a variety of product structures, including individual and institutional separate accounts, mutual funds and other pooled investment vehicles, and the industry-leading ishares ETFs. This offering has been recognised so far in 2011 with 114 awards first-placed industry awards received globally. is a truly global firm that combines the benefits of worldwide reach with local service and relationships. We manage assets for clients in North and South America, Europe, Asia, Australia and the Middle East. The firm employs more than 8,500 professionals and maintains offices in 24 countries around the world. The foundation of s business is our belief that our clients needs are of paramount importance. Our commitment to investment excellence is anchored in a shared culture that always places a client s interests first, from individual investors to the world s largest institutions. We act always as a fiduciary for our clients, never trading as a principal on our own behalf. As of 31 March 2011, s assets under management total US$3.65 trillion ( 2.28 trillion)* across equity, fixed income, cash management, alternative investments, multi-asset and advisory strategies. Through Solutions, we offer risk management, strategic advisory and enterprise investment system services to a broad base of clients with portfolios totalling over US$9.5 trillion.* * Data as at 31 March 2011. This tally of awards is correct to 31 May 2011 and does not include ishares ETF products. This material is for distribution to Professional Clients and should not be relied upon by any other persons. 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. Unless indicated the fund information displayed only provides summary information. Investment should be made on the basis of the relevant booklet together with the Prospectus and Simplified Prospectus which are available from the Manager. Issued by Investment Management (UK) Limited (authorised and regulated by the Financial Services Authority). Registered office: 33 King William Street, London, EC4R 9AS. Registered in England No. 2020394. Tel: 020 7743 3000. Tel: 020 7743 3000. For your protection, telephone calls are usually recorded. is a trading name of Investment Management (UK) Limited. FOR MORE INFORMATION 08457 405 405 broker.services@blackrock.com blackrock.co.uk
s Index Tracking Funds (within the Collective Investment Funds umbrella) Fund name Summary objective The investment opportunity Launch date Continental European Equity Tracker Fund Corporate Bond 1-10 Year Fund Corporate Bond Tracker Fund Emerging Markets Equity Tracker Fund Global Property Securities Equity Tracker Fund Japan Equity Tracker Fund North American Equity Tracker Fund Pacific ex Japan Equity Tracker Fund Overseas Corporate Bond Tracker Fund Overseas Government Bond Tracker Fund UK Equity Tracker Fund UK Gilts All Stocks Tracker Fund To achieve capital growth by tracking closely the FTSE Continental Europe Index by investing in companies in the index. To achieve a total return by tracking closely the performance of a composite benchmark comprising of the Bank of America Merrill Lynch Sterling Corporate Securities 1-5 Year Index and the Bank of America Merrill Lynch Sterling Corporate Securities 5-10 Year Index by investing in the fixed income securities contained in those indices. To achieve a total return for investors by tracking closely the performance of the iboxx Non-Gilts Overall TR Index by investing in fixed income securities contained in the Index. To achieve capital growth by tracking closely the FTSE All-World Emerging Markets Index by investing in companies in the index. To achieve capital growth by tracking closely the FTSE EPRA/NAREIT Global Real Estate Series Developed Index by investing in companies in the index. To achieve capital growth by tracking closely the FTSE Japan Index by investing in companies in the index. To achieve capital growth by tracking closely the FTSE World Americas Index by investing in companies in the index. To achieve capital growth by tracking closely the FTSE World Asia Pacific ex-japan Index by investing in companies in the index. To achieve a total return for investors by tracking closely the performance of the Barclays Capital Global Aggregate Corporate ex UK Index by investing in fixed income securities contained in the Index. To achieve a total return for investors by tracking closely the performance of the JP Morgan Global Government Bond Index ex UK by investing in fixed income securities contained in the Index. To achieve capital growth by tracking closely the FTSE All Share Index by investing in companies in the index. To achieve a total return by tracking closely the FTSE Actuaries UK Gilts All Stocks TR Index by investing in securities in the index. Europe, the largest single-currency market in the world, is home to many of the world s most successful companies and offers investors the opportunity to gain exposure to a wide range of truly global business models. The composite benchmark offers access to a basket of medium-to-high grade US dollar denominated debt securities, with a short-to-intermediate-term maturity profile of 1-5 years and 5-10 years. Simplifying the analyses of bond markets for all market players, the Corporate Bond Tracker Fund offers access to the iboxx Non-Gilts Overall TR index. The index is made up of sterlingdenominated non-government bonds. Offering exposure to some of the world s most dynamic and fastest growing economic regions, including the emerging markets of Asia, Africa, Eastern Europe and Latin America. The global property fund offers investors exposure to a diverse set of listed real estate holdings and REITs across the developed world, including retail, industrial, office, and residential real estate. The Japanese stock market offers exposure to world-leading companies in industries such as automotives and technology, and is notably among the main beneficiaries of the escalating growth and demand in China. Along with the huge range of industry-leading investments available in the US stock market, the FTSE World Americas index also offers exposure to Canadian companies. The Asia-Pacific region offers a variety of markets, from commodity-rich Australia, to the technologyfocused indices of Korea and Taiwan. Exposure to less developed markets can offer an important source of diversification and may boast superior growth potential. Global corporate bonds offer exciting opportunities to access some of the best companies worldwide, ranging across all corporate sectors and countries. Trading government debt has been a popular way to invest for centuries. Government securities vary country by country, offering a breadth of different opportunities, allowing investors to participate in some of the largest and fastest growing economies worldwide. Representing around 98% of UK market capitalisation, the FTSE All-Share is the aggregation of the FTSE 100, FTSE 250 and FTSE Small Cap Indices. By industry, the largest industries represented in the FTSE All Share are Financials, Oil & Gas, Basic Materials and Consumer Goods. The FTSE Actuaries UK Gilts All-Stocks index offers exposure to a diversified basket of UK government bonds (gilts), across all maturities. 15.07.2005 21.06.2010 30.06.2010 20.11.2009 15.11.2010 15.07.2005 15.07.2005 18.08.2005 28.01.2011 18.08.2005 18.08.2005 18.07.2005
Investment Options in the Collective Investment Funds You can invest a lump sum amount and/or a regular monthly amount, either inside or outside an ISA. The minimum and maximum amounts are as follows: Investment options Class A Units Class A Units (ISA) Class D Units Minimum initial lump sum 500 per fund 500 per fund 1,000,000 per fund Subsequent lump sum 100 per fund 100 per fund 100 per fund Maximum lump sum None 10,680 None Minimum monthly investment 50 per fund 50 per fund Not available Maximum monthly investment None 890 1 Not available Minimum holding 500 per fund 500 per fund 1,000,000 per fund 1 Assuming you invest the same amount each month in any tax year. ISA transfers You can also transfer all or part of any previous tax year s cash ISA or a stocks and shares ISA with another provider to a Unit Trust stocks and shares ISA. However, if you wish to transfer your current tax year ISA, you must transfer the full amount. You can also transfer monies held in a TESSA Only ISA to. How do I invest? All the instructions on how to invest are set out in the Simplified Prospectus and relevant Application Form. There are different forms for investing inside and outside of the ISA, and for ISA transfers. Alternatively, you can invest a lump sum outside the ISA by telephoning our Investor Services Team or by fax, either directly or through your Financial Adviser, between 8.30 a.m. and 6.00 p.m. on any business day. This material is for distribution to Professional Clients and should not be relied upon by any other persons. 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. Past performance is not a guide to future performance and should not be the sole factor of consideration when selecti ng a product. All of the BCIF Tracker funds invest in a limited number of market sectors. Compared to investments which spread investment risk through investing in a variety of sectors, share price movements may have a greater affect on the overall value of the funds. The Continental European Equity Tracker, Corporate Bond Tracker, Corporate Bond 1-10 Year Tracker, Emerging Markets Equity Tracker, Japan Equity Tracker, North American Equity Tracker and Pacific ex Japan Equity Tracker fund invest a large portion of assets which are denominated in other currencies; hence changes in the relevant exchange rate will affect the value of the investment. The Bond Tracker, Corporate Bond 1-10 Year Tracker and the UK Gilts All Stocks Tracker invest in fixed interest securities issued by companies which, compared to bonds issued or guaranteed by governments, are exposed to greater risk of default in the repayment of the capital provided to the company or interest payments due to the funds. The funds also invest in fixed interest securities such as corporate or government bonds which pay a fixed or variable rate of interest (also known as the coupon ) and behave similarly to a loan. These securities are therefore exposed to changes in interest rates which will affect the value of any securities held. The Emerging Markets Equity Tracker and Pacific ex Japan Equity Tracker invest in economies and markets which may be less developed. Compared to more established economies, the value of investments may be subject to greater volatility due to increased uncertainty as to how these markets operate. The Emerging Markets Equity Tracker typically invests in smaller company shares which can be more unpredictable and less liquid than those of larger company shares. Issued by Investment Management (UK) Limited (authorised and regulated by the Financial Services Authority). Registered office: 33 King William Street, London, EC4R 9AS. Registered in England No. 2020394. Tel: 020 7743 3000. For your protection, telephone calls are usually recorded. is a trading name of Investment Management (UK) Limited. For more information: Tel: UK 08457 405 405 Email: broker.services@blackrock.co.uk Website: blackrock.co.uk 11687BR June11
s Index Tracking Funds (within the Collective Investment Funds umbrella) Fund name Summary objective The investment opportunity Launch date Continental European Equity Tracker Fund To achieve capital growth by tracking closely the FTSE Continental Europe Index by investing in companies in the index. Europe, the largest single-currency market in the world, is home to many of the world s most successful companies and offers investors the opportunity to gain exposure to a wide range of truly global business models. 15.07.2005 Corporate Bond 1-10 Year Fund To achieve a total return by tracking closely the performance of a composite benchmark comprising of the Bank of America Merrill Lynch Sterling Corporate Securities 1-5 Year Index and the Bank of America Merrill Lynch Sterling Corporate Securities 5-10 Year Index by investing in the fixed income securities contained in those indices. The composite benchmark offers access to a basket of medium-to-high grade US dollar denominated debt securities, with a short-to-intermediate-term maturity profile of 1-5 years and 5-10 years. 21.06.2010 Corporate Bond Tracker Fund To achieve a total return for investors by tracking closely the performance of the iboxx Non-Gilts Overall TR Index by investing in fixed income securities contained in the Index. Simplifying the analyses of bond markets for all market players, the Corporate Bond Tracker Fund offers access to the iboxx Non-Gilts Overall TR index. The index is made up of sterlingdenominated non-government bonds. 30.06.2010 Emerging Markets Equity Tracker Fund To achieve capital growth by tracking closely the FTSE All-World Emerging Markets Index by investing in companies in the index. Offering exposure to some of the world s most dynamic and fastest growing economic regions, including the emerging markets of Asia, Africa, Eastern Europe and Latin America. 20.11.2009 Global Property Securities Equity Tracker Fund To achieve capital growth by tracking closely the FTSE EPRA/NAREIT Global Real Estate Series Developed Index by investing in companies in the index. The global property fund offers investors exposure to a diverse set of listed real estate holdings and REITs across the developed world, including retail, industrial, office, and residential real estate. 15.11.2010 Japan Equity Tracker Fund To achieve capital growth by tracking closely the FTSE Japan Index by investing in companies in the index. The Japanese stock market offers exposure to world-leading companies in industries such as automotives and technology, and is notably among the main beneficiaries of the escalating growth and demand in China. 15.07.2005 North American Equity Tracker Fund To achieve capital growth by tracking closely the FTSE World Americas Index by investing in companies in the index. Along with the huge range of industry-leading investments available in the US stock market, the FTSE World Americas index also offers exposure to Canadian companies. 15.07.2005 Pacific ex Japan Equity Tracker Fund To achieve capital growth by tracking closely the FTSE World Asia Pacific ex-japan Index by investing in companies in the index. The Asia-Pacific region offers a variety of markets, from commodity-rich Australia, to the technologyfocused indices of Korea and Taiwan. Exposure to less developed markets can offer an important source of diversification and may boast superior growth potential. 18.08.2005 Overseas Corporate Bond Tracker Fund To achieve a total return for investors by tracking closely the performance of the Barclays Capital Global Aggregate Corporate ex UK Index by investing in fixed income securities contained in the Index. Global corporate bonds offer exciting opportunities to access some of the best companies worldwide, ranging across all corporate sectors and countries. 28.01.2011 Overseas Government Bond Tracker Fund To achieve a total return for investors by tracking closely the performance of the JP Morgan Global Government Bond Index ex UK by investing in fixed income securities contained in the Index. Trading government debt has been a popular way to invest for centuries. Government securities vary country by country, offering a breadth of different opportunities, allowing investors to participate in some of the largest and fastest growing economies worldwide. 18.08.2005 UK Equity Tracker Fund To achieve capital growth by tracking closely the FTSE All Share Index by investing in companies in the index. Representing around 98% of UK market capitalisation, the FTSE All-Share is the aggregation of the FTSE 100, FTSE 250 and FTSE Small Cap Indices. By industry, the largest industries represented in the FTSE All Share are Financials, Oil & Gas, Basic Materials and Consumer Goods. 18.08.2005 UK Gilts All Stocks Tracker Fund To achieve a total return by tracking closely the FTSE Actuaries UK Gilts All Stocks TR Index by investing in securities in the index. The FTSE Actuaries UK Gilts All-Stocks index offers exposure to a diversified basket of UK government bonds (gilts), across all maturities. 18.07.2005
Investment Options in the Collective Investment Funds You can invest a lump sum amount and/or a regular monthly amount, either inside or outside an ISA. The minimum and maximum amounts are as follows: Investment options Class A Units Class A Units (ISA) Class D Units Minimum initial lump sum 500 per fund 500 per fund 1,000,000 per fund Subsequent lump sum 100 per fund 100 per fund 100 per fund Maximum lump sum None 10,680 None Minimum monthly investment 50 per fund 50 per fund Not available Maximum monthly investment None 890 1 Not available Minimum holding 500 per fund 500 per fund 1,000,000 per fund 1 Assuming you invest the same amount each month in any tax year. ISA transfers You can also transfer all or part of any previous tax year s cash ISA or a stocks and shares ISA with another provider to a Unit Trust stocks and shares ISA. However, if you wish to transfer your current tax year ISA, you must transfer the full amount. You can also transfer monies held in a TESSA Only ISA to. How do I invest? All the instructions on how to invest are set out in the Simplified Prospectus and relevant Application Form. There are different forms for investing inside and outside of the ISA, and for ISA transfers. Alternatively, you can invest a lump sum outside the ISA by telephoning our Investor Services Team or by fax, either directly or through your Financial Adviser, between 8.30 a.m. and 6.00 p.m. on any business day. This material is for distribution to Professional Clients and should not be relied upon by any other persons. 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. Past performance is not a guide to future performance and should not be the sole factor of consideration when selecti ng a product. All of the BCIF Tracker funds invest in a limited number of market sectors. Compared to investments which spread investment risk through investing in a variety of sectors, share price movements may have a greater affect on the overall value of the funds. The Continental European Equity Tracker, Corporate Bond Tracker, Corporate Bond 1-10 Year Tracker, Emerging Markets Equity Tracker, Japan Equity Tracker, North American Equity Tracker and Pacific ex Japan Equity Tracker fund invest a large portion of assets which are denominated in other currencies; hence changes in the relevant exchange rate will affect the value of the investment. The Bond Tracker, Corporate Bond 1-10 Year Tracker and the UK Gilts All Stocks Tracker invest in fixed interest securities issued by companies which, compared to bonds issued or guaranteed by governments, are exposed to greater risk of default in the repayment of the capital provided to the company or interest payments due to the funds. The funds also invest in fixed interest securities such as corporate or government bonds which pay a fixed or variable rate of interest (also known as the coupon ) and behave similarly to a loan. These securities are therefore exposed to changes in interest rates which will affect the value of any securities held. The Emerging Markets Equity Tracker and Pacific ex Japan Equity Tracker invest in economies and markets which may be less developed. Compared to more established economies, the value of investments may be subject to greater volatility due to increased uncertainty as to how these markets operate. The Emerging Markets Equity Tracker typically invests in smaller company shares which can be more unpredictable and less liquid than those of larger company shares. Issued by Investment Management (UK) Limited (authorised and regulated by the Financial Services Authority). Registered office: 33 King William Street, London, EC4R 9AS. Registered in England No. 2020394. Tel: 020 7743 3000. For your protection, telephone calls are usually recorded. is a trading name of Investment Management (UK) Limited. For more information: Tel: UK 08457 405 405 Email: broker.services@blackrock.co.uk Website: blackrock.co.uk 11687BR June11