City wire privite clients retreat 2013 compliance approved uk
Citywire Private Client Manager Retreat 2013Top 5 questions we are asked aboutETFsUrsula Marchioni, DirectoriShares EMEA Investment Strategies & Insights teamFOR PROFESSIONAL AND INSTITUTIONAL INVESTOR USE ONLYMay 2013Four Seasons Hotel, Dogmersfield Park, Hampshire
1. How do I describe an ETF to my clients & why do investors use them?2. How big is the industry and who are the buyers of ETFs?3. What things should I consider when investing in an ETF?4. How do I assess the cost of an ETF?5. Which asset classes / markets have been most popular recently?6. Which themes shall I consider with my clients moving into H2 2013?2Top questions we are asked about ETFs
Top question # 1:How do I describe an ETF to my clients & why doinvestors use them?
4How to describe ETFs & why investors use them• ETFs are index funds, i.e. funds aimed at delivering a benchmark index’s returns, minus fees.• ETFs are listed and traded like a stock on major stock exchanges, globally.Therefore, they occupy a valuable position in the investment landscape:the intersection between an index fund and a flow product4Index Fund• Simplicity• Transparency• Risk control• Cost control• Consistency of returns• Diversification• Mutual Fund• Open-End FundFlow Product (Single Stock /Future)• Trading flexibility onexchange• Intraday pricing• Listed options• Ability to borrow / short• Any transaction size• Variety of tradingstrategiesTransparency • Investors can generally see the ETF composition at any given timeLiquidity• ETFs offer two sources of liquidity Liquidity measured by secondary market trading volume The liquidity of the underlying assets via the creation and redemptionprocessDiversification• ETFs offer immediate exposure to a basket or group of securities fordiversification through a single trade• Broad range of asset classes, including equities, bonds, commodities,investment themes, etc.Flexibility• ETFs are listed on exchanges and can be traded at any time themarket is open• Pricing is continuous throughout the daySecuritiesLending• ETF units and underlying assets can be lent out to potentially offsetholding costsCostEffectiveness• ETFs offer a cost-effective route to diversified market exposureETFsFor illustrative purposes only.
Top question # 2:How big is the industry and who are the buyers of ETFs?
Global ETP Multi-Year Asset Growth and Top 10 Providers6At the end of April 2013, the global ExchangeTraded Products (ETPs) industry (ETFs + ETCs +ETNs +ETI) comprises*:• 4,852 products• From 185 providers• Listed on 55 regulated exchanges around theworld• Assets of $2.11tn, of which:• $1.49tn in US-domiciled ETP (71% of globalAUM)• $377bn in Europe-domiciled ETP (18% ofglobal AUM)Source: BlackRock ETP Research, ETP Landscape.1: Data is as of April 29, 2013 for Europe and April 30, 2013 for the US, Canada, LatinAmerica, Israel, and some Asia ETPs. Some Asia ETP data is as of March 31, 2013. GlobalETP flows and assets are sourced using shares outstanding and net asset values fromBloomberg for the US, Canada, Europe, Latin America and some ETPs in Asia. Middle EastETP assets are sourced from the Bank of Israel. ETP flows and assets in China are sourcedfrom Wind. Inflows for years prior to 2010 are sourced from Strategic Insights Simfund. Assetclassifications are assigned by the BlackRock based on product definitions from providerwebsites and product prospectuses. Other static product information is obtained fromprovider websites, product prospectuses, provider press releases, and provider surveys.
European ETP Multi-Year Asset Growth and Top 10 Providers7At the end of April 2013, the European ExchangeTraded Products (ETPs) industry (ETFs + ETCs +ETNs +ETI) comprises*:• 2,142 products• From 43 providers• Listed on 24 regulated exchanges around theworld• Assets of $376.8bn, of which:• $239.1bn in Equity ETPs (64% of totalEuropean AUM)• $74.8bn in Fixed Income ETPs (20% of totalEuropean AUM)• $60.9bn in Commodity ETPs (16% of totalEuropean AUM)Source: BlackRock ETP Research, ETP Landscape.1: Data is as of April 29, 2013 for Europe and April 30, 2013 for the US, Canada, LatinAmerica, Israel, and some Asia ETPs. Some Asia ETP data is as of March 31, 2013. GlobalETP flows and assets are sourced using shares outstanding and net asset values fromBloomberg for the US, Canada, Europe, Latin America and some ETPs in Asia. Middle EastETP assets are sourced from the Bank of Israel. ETP flows and assets in China are sourcedfrom Wind. Inflows for years prior to 2010 are sourced from Strategic Insights Simfund. Assetclassifications are assigned by the BlackRock based on product definitions from providerwebsites and product prospectuses. Other static product information is obtained fromprovider websites, product prospectuses, provider press releases, and provider surveys.
Greenwich Associates 2012 ETF Survey• 80 US institutional investors that currently use exchange-traded funds (ETFs): 62 institutional funds — corporatefunds, public funds, endowments, and foundations — and 18asset managers with discretion for institutional assets;• 57% of institutional ETF users employ ETFs to achievestrategic allocation ranges;• Institutions are often first drawn to ETFs for help with twobasic functions: manager transitions and cashequitization/interim beta;• Rebalancing, tactical adjustments and portfolio completionsalso proved to be very popular uses of ETFs in 2012Source: Greenwich Associates, 20128Who are the buyers of ETFs?Both institutional investors (the US case) …
9EMEA ETF AUM by segment$220B$100B$20B$10B$350BDirect RetailIntermediaryWealth ManagersInstitutionalNote: Data as of June 30, 2012. AUM by client segment is estimated, source: BlackRock.• European ETF clients are primarily Institutional; Retailadoption has been much slower• Institutional segment continues to be driven by assetmanagers; regulatory review of the Insurance industry(Solvency II) may require a tailored approach to drivesub-segment growth• Retail increasingly important in the next phase of ETFgrowth• Retail distribution dynamics dominated by banks, exceptin the UK• Many of the larger Private Banks have their own ETFoffering (UBS, Credit Suisse, HSBC etc.) and are bothclients and competitorsEuropean client trendsRisinginvestorappetite forETFs• Governments in Europe are movingtowards increased regulation toprotect investors and increasetransparency; RDR & MiFID II• Scrutiny on investment fees hasgrown and as a result, regulations onpricing are driving a transition tofee-based advisory• Trend towards fee-based advisorymodels and transparency, areresulting in a focus on low-costproducts, such as ETFs• ETFs have delivered impressivegrowth despite still relatively lowawareness and adoption amonginvestors, advisors and institutional –implies that significant growthpotential remains• DB and DC plan sponsors,endowments and foundations are juststarting to show meaningful interestin ETFs• Rising awareness of ETFs for FixedIncome and with non-traditional usersShift towardsfee-basedadvisory &transparencyETFsWho are the buyers of ETFs?… and an expanding retail client basis (the European case)
Top question # 3:What things should I consider when investing in an ETF?
Key areas of consideration for ETP selectionPerformanceTrading & ValuationTotal Cost of OwnershipOther (Dist’n, FX)Domiciled / Registration / ListingTaxStructure and RiskIndexTax11
North America ($ 1,548.1 bn) AUM iShares: $ 652.4 bn Products: 383 Market share – position: #1 US Market share – percentage:41.1%EMEA ($ 376.8 bn) AUM iShares: $ 151.2 bn Products: 206 Market share – position: #1 Market share – percentage: 40.1%Latin America ($ 13.8 bn) AUM iShares: $ 12.3 bn Products: 20 Market share – position: #1 Market share – percentage: 89.4%Asia Pacific ($ 147.1 bn) AUM iShares: $ 9.4 bn Products: 27 Market share – position: #5 Market share – percentage: 6.4%ETP Provider’s commitment to the businessiShares presence across different platforms and jurisdictions• iShares is the world’s largest Exchange Traded Products (ETPs) provider globally, having championed theseproducts for the past 15 years12Source: BlackRock ETP Research, ETP Landscape. Data as of end April 2013.
ETP Provider’s commitment to the businessEMEA iShares Product Overview: 206 ProductsSource: Blackrock/iShares, range of Irish and German domiciled products as of Q1 2013.13Equities ($87.45Bn) Fixed Income ($39.91Bn) Alternatives ($5.25Bn)Developed$65,977 m(Number of funds: 80)Global$5,743 m((Number of funds: 9)Emerging Markets$14,874 m((Number of funds: 23)Alternative weighted / Thematic$864 m((Number of funds: 17)Commodity Indices$791 m((Number of funds: 5)Physical Precious Metals$354 m((Number of funds: 4)Real Estate – REITS$3,893 m((Number of funds: 8)Listed Private Equity$212 m((Number of funds: 1)Credit (IG & HY)$21,509 m((Number of funds: 17)Government Bonds$12,334 m((Number of funds: 34)Inflation-Linked$3,066 m((Number of funds: 4)Emerging Markets$3,005 m((Number of funds: 4)
Top question # 4:How do I assess the cost of an ETF?
Total Cost of Ownership• In our view, assessing the cost of an ETF requires investors to look beyond the headline TER and take anapproach we call the Total Cost of Ownership (TCO).• While the TER is the most often quoted ETF expense indicator, there are additional components which influencethe overall performance of an investment in ETFs – such as, but not limited to, the bid/offer spreads paid to tradethe product on the stock exchange; revenues from securities lending activities; swap spreads linked tosynthetically replicated funds, and taxation. The concept of TCO captures them all.• At iShares, we perceive the TCO as a combination of factors internal and external to the ETF instrument. Whilesome of these factors are disclosed by ETF Providers, others are not public.15Source: BlackRock. Please note that the tax (External Factors) is a cost additional to the spreads and fees.
Total Cost of Ownership• At iShares, we pride ourselves to provide full transparency of all the components of TCO. When comparing ourproducts to competitors’ ETFs, we though acknowledge that some of the TCO components can be missing for thepeer products.• Hence, we recommend clients to think about a Proxy TCO (pTCO), which allows the assessment of anapproximate Total Cost of Ownership of an ETF, when traded on an exchange (secondary market).16Source: BlackRock. Please note that the tax (External Factors) is a cost additional to the spreads and fees.Cost of purchasing Cost of holding Cost of sellingAssuming the ETF isbought on exchange, thiswill be approximatelyequal to ½ of theBid/Offer spread of theETFTo estimate the total cost of thisphase, we recommend using theTracking Difference (TD) – i.e. thedifference in the fund andbenchmark returns over the holdingperiod. The TD includes: TER Securities lending revenues Swap spreads* Rebalancing costs*Assuming the ETF isbought on exchange, thiswill be approximatelyequal to ½ of theBid/Offer spread of theETFProxyTCO*Please note that both swap spreads and rebalancing costs will be affected by the withholding tax difference between the ETF and the index.
TCO vs. TER – iShares S&P500 (IUSA)Source: BlackRock, Bloomberg.Data as at end of March 2012. TCO calculated over the 12 months period: 1 March 2012 – 28 February 2013.17• The Irish domiciled iShares S&P 500 (IUSA) has a TER of 40bps.• Its TCO is noticeably lower and equal to TD + spreads = 5bps + 6.8bps = 11.8bps.
Top question # 5:Which asset classes / markets have been most popularrecently?
April 2013 – YTD flowsGlobal ETP Cumulative Net Flows/ $Bn Europe ETP Cumulative Net Flows/ $Bn19Global ETP inflows of $79.9bn YTD continue to outpace the $66.3bnfrom last year• Equity funds lead with $74.1bn YTD.• Developed Markets exposures accounted for nearly all of the flows (99%);• Investors have also increasingly turned to non-market capitalisationweighted over traditional Equity funds, - as these funds captured 42% ofYTD Equity flows despite representing just 16% of the asset base.;• Yield remains the other noteworthy Equity theme this year, through strongflows into Dividend Income ETPs;• Japanese Equity exposure has been consistently in demand all year withYTD flows are $12.8bn.• Finally, nearly all of the Emerging Markets Equity inflows from Januaryhave reversed in the past three months. YTD flows are now just $0.6bnUnless otherwise specified, all information is sourced from BlackRock ETP Landscape. Data as at end ofApril 2013.-50050100150200250300Start J F M A M J J A S O N D201120100102030405060Start J F M A M J J A S O N D2010201120122013• Fixed Income funds have gathered $21.1bn YTD including morethan $7bn in each of the past two months. Short Maturity fundshave been the engine for Fixed Income growth this yearaccumulating $15.1bn.• Gold ETP outflows continued in April, to reach ($17.9bn) YTD.The European ETP Industry recorded a more mixed result over thefirst 4 months of 2013, with flows of $6.7bn.• Flows remained above the $2.2bn level recorded at the end ofApril 2012 – but feel short of both 2011 and 2010 levels.
ETP flow monthly rolling net flows and snapshot across exposures ($bn)April YTD Monthly flow comparison – GlobalGlobal ETP flows slowed in April to $10.3bn, although YTDflows $79.9bn remained well ahead of last year’s record pace of$66.3bnApril Equity flows accounted for $9.6bn, with investorspreferring US equities and non-market capitalisation weightedfunds. “New-beta” strategies captured 42% of Equity ETP flows– with dividend income and minimum volatility ETPs recordingmonthly inflows of $3.4bn and $2.5bn, respectivelyJapan equities accumulated $4.8bn in April, as thegovernments commitment to stimulus policies continued tosupport investors’ appetite. Conversely, EM equity ETPscontinued the negative trend recorded over the previousmonthsFixed income flows were impressive in April, reaching $9.5bn –the best month since May 2012. The trend was led by inflowsinto US treasuriesGold ETP outflows hit a monthly record in April at ($8.7bn)-15.0-10.0-5.00.05.010.015.020.0Apr-2013 FlowsMar-2013 FlowsUnless otherwise specified, all information is sourced from BlackRock ETP Landscape. Data as at end of April 2013. 20
ETP flow monthly flows and snapshot across exposures ($bn)April YTD Monthly flow comparison – EuropeEuropean domiciled ETPs continued to experience mixedresults, ending the month of April in negative territory withoutflows of ($893.5mn). Nevertheless, YTD flows of $6.7bnremained above the $2.2bn level recorded at the end of April20122013 YTD result was primarily driven by outflows fromcommodity and equity ETPs, with European equity exposurescontinuing to be shunned by investorsEuropean Fixed income ETPs remained in the bright spot, withApril flows at $1.9bn and YTD balance of $4.5bn. The positivetrend was led by inflows into developed countries sovereignbond ETPs. EM debt equally recorded inflows, an interestingcontrast to the result posted by EM equity ETPsGold ETPs continued to experience the heaviest outflowswithin commodity ETPs. Conversely, other precious metalsETPs, such as Silver trackers, recorded moderate inflows-$6 -$4 -$2 $0 $2 $4 $6 $8Feb-12Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-12Nov-12Dec-12Jan-13Feb-13Mar-13Apr-13Equity Fixed Income Commodity / Other-2.5-2.0-1.5-1.0-0.50.00.51.01.52.02.5Apr-2013 FlowsMar-2013 Flows-0.8-0.31.36.55.18.104.22.168.22.214.171.124-5.02.01.9Unless otherwise specified, all information is sourced from BlackRock ETP Landscape. Data as at end of April 2013. 21
The Beta Continuum keeps expanding …CorporateAsset BackedSecuritiesBasketsPropertyShort –TermTreasuriesDevelopedMarketsGlobal GlobalGovernmentIndex Linked InfrastructureEmergingMarketsLarge, Mid,Small - CapGrowth, Value,DividendSectors /Industry GroupsDomesticGovernmentEquities Fixed Income Alternatives CommoditiesCashEquivalentsMaturityBucketsSingleRegional,CountryInvestors can expand their portfolios beyond traditional investments withETFs aiming to track several areas of the market cap weighted space …Private EquityFor illustrative purposes only.… or moving in the “alternative”weighting passive space22
Top question # 6:Which themes shall I consider with my clients movinginto H2 2013?
Our 2013 Spring Outlook• As in recent years, the first quarter of 2013 delivered plenty of rally headlines and positive sentiment. However,unlike previous years, this year’s performance across asset classes has been very mixed – with the rally and ETPflows highly concentrated in developed equities, led by the US.• Already in Q2, softening global economic data portends a more difficult time for markets. Divergence between theoutlooks for the US and Europe economies remains while emerging markets may continue to under-deliver onexpectations. Against this, central bank actions remain key. While focus is on the BoJ’s headline-grabbing stepsand the Fed’s QE ‘exit or not’ plans, the ECB continues to be the main pillar of confidence for markets amidst theminicrises in the Eurozone. We highlight four investment themes for a more uncertain Q2:241. Broad equity valuations remain attractivecompared to other asset classes, although riskmetrics are pointing to a receding investorappetite. Dividend income and minimum volatilitystrategies provide broad equity exposure with atilt to defensives.2. As emerging market equities continue to struggle,similar to developed equities, consider therisk-reward characteristics of minimum volatilityEM equities, and dividends within the incometheme. Selective DM large cap indices, DAX andFTSE, provide a way to play indirect EM exposure.3. Japanese equities, currency-hedged, shouldcontinue to outperform other markets driven bythe BoJ’s reflation attempt.4. In fixed income, the search for income continuesamidst rising concerns over duration risk and thevolatility of core rates markets, favouring interestrate hedged corporates. Local EM debt offersbetter value than USD EM debt.Source: EMEA Investment Strategy and Insights Looking Glass series – Spring Outlook April 2013.
Theme 1: Developed equities through a softer Q2While equity valuation remains attractive to cash and bonds, risk metrics which historically correlate with risk assetperformance are pointing to a receding investor appetite (Figure 8). Investors should consider more defensive waysto maintain developed market equity exposure: dividend income and minimum volatility equity indices25Source: EMEA Investment Strategy and Insights Looking Glass series – Spring Outlook April 2013.
Theme 2: Alternative approaches for EMYear-to-date, EM equities have underperformed their DM counterparts by 10%, cheapening their relative valuations on aprice-to-book basis by 20%. Poor performance is also echoed in the ETP market, where outflows from EM equity ETPs gatheredpace in February and March. Still, while lowering expectations, emerging economies do remain a source of growth relative todeveloped economies (forecast to grow 3% above DM in 2013). With broad EM equities not delivering so far in 2013, investorscan look at alternative strategies such as minimum volatility and dividends. Additionally, investors who wish to stay within DMequities, but are searching for higher growth given the lack of domestic demand in Europe, can access selective large cap DMequities with large shares of EM revenue.26Source: EMEA Investment Strategy and Insights Looking Glass series – Spring Outlook April 2013.
Theme 3: Japanese equities and QQEUnder the leadership of the new governor Kuroda-san, the BoJ has announced a series of easing measures that havesurpassed market expectations. The ‘Qualitative and Quantitative Monetary Easing’ programme includes majorexpansion of the JGB (Japanese Government Bond) buying along with ETF/J-Reit purchases. It aims to double themonetary base – referring to the BoJ balance sheet size – in order to achieve the 2% inflation target within two years.The impact on the Japanese market has been two-fold. Equities have already rallied more than 40% since Novemberlast year on expectations that the BoJ27Source: EMEA Investment Strategy and Insights Looking Glass series – Spring Outlook April 2013.
Theme 4: Fixed income and risk mitigationAs highlighted in the BlackRock® Investment Institute piece, ‘Forget Rotation: Think Risk Mitigation’, bond portfolios carrymore risks than in the past and more risks than many investors realise. As an example, consider the rise in rate volatility in coregovernment bond markets. In Europe, rate volatility is near multiyear highs compared to equity and credit spread volatility stilldown near pre-crisis lows (Figure 17). So far in 2013, rate movement has accounted for a very high percentage of monthlyinvestment grade index returns – both good and bad – in the US and Europe. Market participants face a skewed profile ofinvesting. After the recent safe-haven rally, core government yield levels are unattractive and elevated rate volatility and risingduration skews the risk-return profile. While the rate portion of investment grade credit remains volatile, the credit spreadcomponent, even if not cheap, remains technically supported – in particular by the low level of net issuance YTD. The iSharesBarclays Euro Corporate Bond Interest Rate Hedged [IRCP] aims to deliver exposure to European credit while hedging out therate risk of the broad index. As central banks keep yield curves anchored and flat, the search for yield goes on. One area thatcontinues to benefit is emerging market debt where local currency debt (iShares Barclays Emerging Markets Local Govt Bond[IEML]) offers better value than external debt, especially given the duration risk of USD debt.28Source: EMEA Investment Strategy and Insights Looking Glass series – Spring Outlook April 2013.
Summary of our Investment Themes29Source: EMEA Investment Strategy and Insights Looking Glass series – Spring Outlook April 2013.
How can we help?ETP Implementation Risk/return and replication methodology analysis of our ETFsFund comparison reports Analysis comparing ETFs following the same benchmarkETP Portfolio Implementation How to combine our ETFs to create a portfolio with a specific risk/return profile How to add our ETFs to a pre-existing portfolio to modify its risk/return profileETF Research ETP Landscape market trends: AUM growth and flows ETF thought leadership: Due diligence framework; ETFs vs. futures etc.Tax information E.g. “Tax Implications of iShares”Implementing asset class themes using ETFs Investment strategyFacilitating due diligence Holdings, Fund fact sheets, Trading data31
iShares ContactsiShares EMEA Investment Strategy and InsightsStephen CohenManaging Director, Head ofInvestment Strategy and Insights, EMEA+44 20 7743 email@example.comUrsula MarchioniInvestment Strategist+44 20 7743 firstname.lastname@example.orgSofia AntropovaInvestment Strategist+44 20 7743 email@example.comWei LiInvestment Strategist+44 20 7743 firstname.lastname@example.orgVasiliki PachatouridiInvestment Strategist+44 20 7743 email@example.comPaula NiallInvestment Strategist+44 20 7743 2586Paula.Niall@blackrock.comDr. Stephanie LangInvestment Strategist+49 89 42729 firstname.lastname@example.orgKarim ChedidInvestment Strategist+44 20 7743 email@example.comRegina ZalilovaInvestment Strategist+44 20 7743 firstname.lastname@example.orgFor iShares execution related queries please contact the following:iSharesMarkets@blackrock.com / iSharesmkts@bloomberg.net / +44 20 7743 4050For further information please e-mail email@example.comShares UK Sales contactsClaire PerrymanDirectorHead of iShares UK Wealth+44 20 7743 firstname.lastname@example.orgAmanda RebelloVice PresidentiShares UK+44 20 7743 email@example.com
ETFs: replication methodologies34Indexing Strategies• All securities within an index arepurchased according to theirweightings• Ensures a minimal tracking error(deviations) of the portfolio• The full replication method mayresult in many positions dependingon the index and requires aportfolio construction tool• It is used mostly for liquid and/ornarrow defined indexes and forfixed income indexes without taximplications.• A limited number of securities areconsidered. The number ofsecurities determines the trackingerror which can be forecasted. Aminimum risk optimization isconducted by the use of a riskoptimization tool• Ensures a controlled and lowexpected tracking error (deviations)of the portfolio eliminatingeconomical unattractiveinvestments.• It is used mostly for indexes withilliquid investments and/or broadbased equity and fixed incomeindexes. It is also used for fixedincome indices with taximplicationsPhysical, Full Replication Physical, Optimized Sampling• Synthetic replication involves theuse of derivatives (e.g. Equity-Linked Swaps “ELS”)• The manager receives benchmarkperformance in exchange of thesubstitute basket return from thecounterparty (i.e. the ELS issuer)• Through the ELS, the fund issubject to counterparty risk. Shouldthe counterparty default, theinvestment objective may not beachievedSynthetic ReplicationSource: BlackRock
Replication methodologies: physical replication The traditional replication methodology with physical index constituents requires sophisticatedindexing-know-how and state of the art portfolio management and optimization tools for trading and riskmanagement Replication of the underlying index: Handling of index changes Handling of corporate actions ( e.g. stock splits) Handling of coupon and dividend reinvestments Withholding tax reclaims (double tax treaties) Management of inventory (Securities Lending, etc.) Optimization of transactions costs through order pooling, etc.35Source: BlackRockPhysically replicated ETF
Replication methodologies: synthetic replication Synthetically replicated ETFs allow exposure to a broader investment universe Counterparty risk of max. 10% of ETF NAV (under UCITS structures) Due diligence needed for performance figures and swap structure (frequency of P&L clearing, # ofcounterparts, swap costs, etc.)36Source: BlackRockSynthetically replicated ETF – unfundedSynthetically replicated ETF – fully funded
Regulatory InformationBlackRock Advisors (UK) Limited, which is authorised and regulated by the Financial Conduct Authority (FCA), having its registered office at 12 Throgmorton Avenue, London, EC2N 2DL,England, Tel +44 (0)20 7743 3000, has issued this document for access by Professional Clients only and no other person should rely upon the information contained within it. iShares plc,iShares II plc, iShares III plc, iShares IV plc, iShares V plc and iShares VI plc (together the Companies) are open-ended investment companies with variable capital having segregatedliability between their funds organised under the laws of Ireland and authorised by the Financial Regulator. The German domiciled funds are "undertakings for collective investment inconformity with the directives" within the meaning of the German Law on the investments. These funds are managed by BlackRock Asset Management Deutschland AG which is authorisedand regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht.For investors in the UKThis document is directed at Professional Clients only within the meaning of the rules of the FSA. Certain of the funds mentioned in this document are not registered for public distributionin the UK. In respect of these funds, this document is intended for information purposes only and does not constitute investment advice or an offer to sell or a solicitation of an offer to buythe funds described within and no steps may be taken which would constitute or result in a public offering of the funds in the UK. This document is strictly confidential and may not bedistributed without authorisation from BlackRock Advisors (UK) Limited. With respect to the funds that are registered for public distribution in the UK, most of the protections provided by theUK regulatory system do not apply to the operation of the Companies, and compensation will not be available under the UK Financial Services Compensation Scheme on its default. TheCompanies are recognised schemes for the purposes of the Financial Services and Markets Act 2000. Any decision to invest must be based solely on the information contained in theCompany’s Prospectus, Key Investor Information Document and the latest half-yearly report and unaudited accounts and/or annual report and audited accounts. Investors should read thefund specific risks in the Key Investor Information Document and the Company’s Prospectus.Restricted InvestorsThis document is not, and under no circumstances is to be construed as an advertisement or any other step in furtherance of a public offering of shares in the United States or Canada.This document is not aimed at persons who are resident in the United States, Canada or any province or territory thereof, where the companies/securities are not authorised or registeredfor distribution and where no prospectus has been filed with any securities commission or regulatory authority. The companies/securities may not be acquired or owned by, or acquired withthe assets of, an ERISA Plan.Risk WarningsInvestment in the products mentioned in this document may not be suitable for all investors. Past performance is not a guide to future performance and should not be the sole factor ofconsideration when selecting a product. The price of the investments may go up or down and the investor may not get back the amount invested. Your income is not fixed and mayfluctuate. The value of investments involving exposure to foreign currencies can be affected by exchange rate movements. We remind you that the levels and bases of, and reliefs from,taxation can change.BlackRock has not considered the suitability of this investment against your individual needs and risk tolerance. The data displayed provides summary information, investment should bemade on the basis of the relevant Prospectus which is available from BlackRock Advisors (UK) Limited.In respect of the products mentioned this document is intended for information purposes only and does not constitute investment advice or an offer to sell or a solicitation of an offer to buythe securities described within. This document may not be distributed without authorisation from BlackRock Advisors (UK) Limited.37Disclaimer