Fund Objective

To achieve over the medium term, total return in the form of capital growth and income which exceeds the Bank of England base rate,

View on Past Performance

The BlackRock Target Return Fund delivered a return of -7.1% during the third quarter of 2008, as instability in the financial sector led to heightened volatility in markets, regardless of asset class or geographic region. During the period, the MSCI World index shed more than 10% (in local-currency terms). Risk tolerance moved to extremely low levels reflecting instability in the financial sector and a slowing global economy.Exposure to equities was the key detractor to overall performance. The negative impact of equity market movements was reduced through hedging strategies. Other key detractors included exposure to infrastructure and commodities. We reduced positions in infrastructure and Hong Kong property to manage portfolio risk. Profits were taken on our FTSE 100 range accrual structure, a key contributor to performance in 2008.Measures of investor fear and counterparty risk across financial markets have become elevated. We continue to monitor portfolio risk and maintain our fiduciary responsibility to manage operational risk. The outlook depends critically on the speed and strength of central banks policy response to financial sector weakness. We proceed with caution, the risks to current positions remain elevated, and cash holdings remain at significant levels.

Future Expectations

Within equities,holdings will slant towards sustainable earnings quality,reasonable valuations and sell-side expectations that are not stretched.Within alternatives,commodities will be under pressure from the global growth slowdown but certain areas,such as energy,will be supported by Chinese and Indian demand.Prospects for many alternative asset classes are mostly dependent on financial de-leveraging and,for hedge funds, the temporary bans on short-selling imposed by many stock exchanges.

Fund Details