BGF Emerging Europe Fund - Creation of New Fund for Liquid Assets

AVAILABLE IN OUR DEFINED FUND RANGE PRODUCTS

Background

A significant portion of the Base Fund’s assets are invested in locally listed Russian positions (the “Russian Securities”) that were deemed illiquid following the Moscow Exchange suspension. Due to Russia’s ongoing invasion of Ukraine, normal market trading conditions have remained materially impaired, and Russian Securities are still not currently tradeable.

In May 2022 we contacted affected plan owners, advising that as the Base Fund was suspended to all trading it was necessary to temporarily remove visibility of the Base Fund from their plan, in order to allow plans to continue to function normally.

After careful consideration, BlackRock has decided that the Base Fund cannot resume normal dealing in the foreseeable future in consideration of the Russian Securities that the Base Fund holds.

Split of the Base Fund to create new fund for Liquid Assets
Accordingly, BlackRock has decided that it is in the best interests of investors to transfer the liquid and tradeable portion of assets of the Base Fund (the “Liquid Assets”) to a newly created fund (the “Receiving Fund”) (the “Split”), in order to enable investor dealing in relation to the Liquid Assets.

After the Split, the Base Fund will only hold the Russian assets and a sufficient amount of cash to meet ongoing administrative and operating expenses and will remain suspended.

The Split will become effective on 13 May 2024 (the “Split Effective Date”), and the Receiving Fund will initially be named the BGF Emerging Europe II Fund.

On the Split Effective Date, the Liquid Assets and liabilities will be transferred in-specie into the Receiving Fund. Affected plan owners will receive an equivalent number of units held in the Base Fund on a 1:1 basis within the Receiving Fund. For example, if you currently hold one share in the Base Fund, you will be allocated one share in the Receiving Fund. The existing number of units held in the Base Fund will remain unchanged.

From the Split Effective Date, the Net Asset Value unit price of the Receiving fund will be determined by BlackRock, based on the market value of the Liquid Assets. This will determine the value of newly allocated units of the Receiving Fund in affected plans.

From the Switch Effective Date, the Receiving Fund will be visible on affected plans, actively pricing and open to switch out of, or for redemption. Initially, it will not be possible to switch in, or pay premiums subscriptions to, the Receiving Fund.

Repositioning of the Receiving Fund

BlackRock has also decided that following the Split, it would be in the best interests of investors to amend the investment policy of the Receiving Fund (the “Repositioning”). 

On 17 June 2024 (the “Repositioning Effective Date”), the Receiving Fund will change its investment objective, policy and name, as well as its base currency. From the Repositioning Effective Date, the Receiving Fund will be named the BGF Emerging Markets Ex-China Fund.

BlackRock considers that the Repositioning of the Receiving Fund will provide greater opportunities for investors given the expanded investment universe through exposure to global emerging countries. BlackRock considers that this Repositioning will have a greater potential to attract additional investment, in comparison to the Receiving Fund without repositioning, thereby increasing the potential for investors in the Receiving Fund to benefit from economies of scale over time.

Please refer to the Appendix in the sample client communication opposite for details of the investment policy of the Receiving Fund as of the Split Effective Date and the key differences following the Repositioning.

Transaction and trading costs resulting from the change of investment policy and investment objective of the Receiving Fund associated with the sale of securities prior to the Repositioning Effective Date will be borne by investors who decide to remain in the Receiving Fund as from the Repositioning Effective Date.

Following the Repositioning, due to the change of the base currency of the Receiving Fund (from Euro to US Dollar), shares held in the Receiving Fund may be offered in different hedging currencies.

Redemption and/or switch instructions in relation to the Receiving Fund

In order to facilitate the Repositioning, any instructions to redeem or switch out from the Receiving Fund received from close of business 13 June 2024 to 17 June 2024 (the “Repositioning Period”) will be held and processed once dealing resumes from 18 June 2024.

BlackRock note that should a substantial number of redemption requests in the Receiving Fund are received prior to the commencement of the Repositioning Period, the repositioning may no longer be economically viable and in the best interests of investors. In such circumstances, a notification will be issued as soon possible advising of the actions to be taken by BlackRock in relation to the Receiving Fund. 

BlackRock expect that the Receiving Fund will present limited commercial opportunities to investors in light of the current economic and market circumstance. As such following the Split Effective Date, the Receiving Fund will open for subscriptions of premium payments and/or to switch into, from 18 June 2024 once the Repositioning has taken effect. 

Ongoing management of the Russian Securities in the Base Fund following the Split

As of the Split Effective Date, the Base Fund will contain only the Russian Securities and a sufficient amount of cash to meet ongoing administrative and operating expenses. Plan owners will be unable to buy, switch or redeem units of the Base Fund. In addition, the Management Fee and Distribution Fee will continue to be waived by BlackRock. 

BlackRock is unable to say how long the Base Fund will remain suspended for, but the Base Fund will be put into liquidation as soon as practicable. 

Plan owners' unit allocation in the Base Fund will remain suspended and zero priced, and will continue to be recorded off plan, to enable plans to continue to operate normally.

Upon such time a realised value (if any) is received from the Base Fund in respect of the suspended Russian Securities, this will be allocated to the Base Fund accordingly. We will update affected plan owners and their advisers regarding the manner of any allocation applicable at the time of any such event occurring.

These changes will happen automatically within affected policies and policyholders do not need to take any action. Policyholders should seek the advice of their usual independent financial adviser before making any investment decisions.

We have issued a notification to plan owners, or their investment advisers if one has been appointed, primarily by email-shot (or by letter where we have no email address), detailing the above action.  Notification has also been sent to servicing agents for information.  More details of the impact of the fund split can be found in the sample letters found opposite. 

AVAILABLE IN OUR OPEN-ARCHITECTURE PRODUCTS

The Base Fund can be accessed through our portfolio bonds and will be subject to the changes detailed in the BlackRock Notification opposite.