Fund Objective

To achieve long-term capital growth for investors.

View on Past Performance

The BlackRock UK Smaller Companies Fund outperformed its benchmark during the third quarter of 2008, falling 12.5%, versus the Hoare Govett Smaller Companies ex Investment Trusts plus AIM index, which fell by 20.1%. Our holding in Detica, the intelligence technology provider, contributed to performance, as it received a bid approach from BAE Systems, sending the shares sharply higher. SAP consulting firm Axon also received a bid approach, from Infosys of India.A number of holdings issued positive trading updates which led to earnings upgrades. These included steam-trap manufacturer Spirax-Sarco and translation software provider SDL. On the negative side, printing technology group Xaar fell on a profit warning, while lower commodity prices and concerns over slowing global demand caused miners Albidon, Griffin and First Quantum Minerals to underperform.Fears of a slowdown in shipbuilding caused a spate of profit-taking in Aveva, the engineering software company, sending the shares down. Activity during the quarter saw us add new positions in global construction company Keller and engineer Renishaw. We added to existing positions in Endace and Xchanging, and reduced Brewin Dolphin. We exited our remaining holding in Domino's Pizza.

Future Expectations

The outlook for the world economy continues to be challenging, with significant worries over the outlook for the UK and US. The key to a market rally lies in stabilisation of global credit markets. The recent round of trading updates from our investments has continued to be encouraging, and we will maintain our focus on high-quality companies with consistent track records of earnings growth and cash generation that demonstrate an ability to grow ahead of the market.

Fund Details