ANNUAL REPORT BlackRock Authorised Contractual Scheme For the period from 27 June 2014 to 31 December 2014 About the Fund Manager BlackRock ACS US Equity Tracker Fund Nimish Patel, Managing Director and senior portfolio manager, is a member of This Annual Report covers the period from 27 June 2014 to 31 December 2014. BlackRock’s Institutional Index Equity team. Performance Table Mr. Patel’s service with the firm dates back to 2006, including his years with Barclays Global Investors (“BGI”), which merged with BlackRock in 2009. At BGI, Since Launch he served as a senior portfolio manager in the Institutional Index Equity team. 27.6.2014 In this role, he was responsible for overseeing all strategic client portfolios. Prior to 31.12.2014 to joining BGI, Mr. Patel was a portfolio manager in the Quantitative Management TOTAL RETURN (with net income reinvested) Group at Northern Trust Global Investments (“NTGI”) where he managed a broad Class T1A Accumulation Units range of portfolios including global index equity, global enhanced equity and indexed fixed income. Mr. Patel joined NTGI in 2003 following its acquisition of Deutsche Asset Management’s (“DeAM”)’s BlackRock ACS US Equity Tracker Fund +16.6% Quant and Index business. FTSE USA Index* +16.5% Mr. Patel joined DeAM (formerly Morgan Grenfell Asset Management) in 1997. During his tenure at All Fund figures quoted are based on bid-to-bid dealing prices (the price at which units are sold) and are calculated net of fees. Performance returns are cumulative. All returns are in Sterling. DeAM, Mr. Patel initially served as a Fund Manager’s assistant for UK Active Equity before transitioning * Figures from FTSE. to the Quantitative Investment Group where he served as a Transition Manager and Portfolio Manager. Mr. Patel is an Affiliate of The Association of Chartered Certified Accountants (“ACCA”). All financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and the return of your initial investment amount cannot be guaranteed. Changes in exchange rates may cause the value of an investment to fluctuate. Past performance is Investment Objective & Policy not a guide to future performance and should not be the sole factor of consideration when selecting a product. The aim of the BlackRock ACS US Equity Tracker Fund (the “Fund”) is to seek to achieve capital growth for investors by tracking closely the performance of the FTSE USA Index by investing in companies Distribution Payable in the Benchmark Index. Investment will be made directly into constituent companies and via other transferable securities giving exposure to such companies. The Fund may also invest in permitted T1A Accumulation The final accumulation distribution payable on 28 February 2015 is 1.0374p net per accumulation unit. money-market instruments, permitted deposits and units in collective investment schemes. Derivatives and forward transactions may be used for the purposes of efficient portfolio management. The Fund is the UK’s first tax transparent fund (“TTF”) and is a Fund of the BlackRock Authorised Contractual Scheme, a Co-Ownership Scheme constituted as a UCITS scheme under the Financial Conduct Authority’s (“FCA”) Collective Investment Schemes Sourcebook (“the Sourcebook”). The Fund was authorised by the FCA on 13 June 2014 and was established on 27 June 2014. A TTF is a collective investment scheme structure in accordance with the Finance Act 2012. Copies of Manager’s Reports and Prospectus are available on request. Dealing and Investor Services: 0800 44 55 22 blackrock.co.uk 1 BlackRock Authorised Contractual Scheme 2 ACS US Equity Tracker Fund continued Tracking Difference Tracking Error Tracking difference is defined as the difference in returns between a fund and its benchmark index. Realised tracking error is the annualised standard deviation of the difference in monthly returns between a fund and its benchmark index. Tracking error shows the consistency of the returns relative Cash management, efficient portfolio management techniques including securities lending and to the benchmark index over a defined period of time. transaction costs from rebalancing can have an impact on tracking difference. Anticipated tracking error is based on the expected volatility of differences between the returns of A fund’s tracking difference may be affected if the times at which a fund and its benchmark index a fund and the returns of its benchmark index. are priced are different. As the Fund is valued at midday, but the benchmark index is valued at the time the relevant markets close for business, the tracking difference of the Fund at its valuation point may Cash management, efficient portfolio management techniques including securities lending and appear to be higher than if the Fund and the benchmark index were priced at the same time. transaction costs from rebalancing can have an impact on tracking error as well as the return differential between the Fund and the benchmark index. Importantly, these impacts can be either The table below compares the realised Fund performance against the performance of the relevant positive or negative depending on the underlying circumstances. benchmark index during the period from 27 June 2014 to 31 December 2014. An explanation for the difference is provided: A fund’s tracking error may be affected if the times at which a fund and its benchmark index are priced are different. As the Fund is valued at midday, but the benchmark index is valued at the time Fund return Benchmark return the relevant markets close for business, the tracking error of the Fund at its valuation point may for the period for the period appear to be higher than if the Fund and the benchmark index were priced at the same time. 27.6.2014 27.6.2014 Tracking to 31.12.2014 to 31.12.2014 difference Explanation of the tracking difference The table below shows the anticipated tracking error of the Fund (disclosed in the prospectus Before costs and after adjusting for the on an ex ante basis) against the realised tracking error of the Fund as at 31 December 2014. Realised difference in valuation point of the Fund tracking error is annualised and calculated using data since inception as the Fund has been trading for and the pricing point of the benchmark fewer than 36 months. A return history fewer than 36 months is not considered statistically significant. index, the performance of the Fund relative to the benchmark index has Anticipated Realised +16.6%* +16.5% +0.1% been in line with expectations. Tracking Error Tracking Error Explanation for difference * Performance is calculated net of fees and reported for the Fund’s class T1A Accumulation Units. The Fund has tracked its benchmark index within its anticipated Up to 2.50%* +2.41%* tracking error. * Figures represent the anticipated tracking error and realised tracking error for the Fund’s class T1A Accumulation Units. 3 BlackRock Authorised Contractual Scheme 4 Performance Record Net Asset Value Annualised Ongoing Charges Detailed in the following table are the charges used to meet the costs of running the Fund, which Net Asset Value include the costs of marketing and distribution. These charges reduce the potential growth of your Net Asset Value per Unit investments. The charges may vary from year to year. The charges exclude portfolio trade-related costs, Unit Class Units in Issue £ p except costs paid to the custodian/depositary and entry/exit charges paid to an underlying collective 31 December 2014* T1A Accumulation 367,361,940 424,174,751 115.5 investment scheme (if any). * Fund launched on 27 June 2014. 27.6.2014 Unit Class to 31.12.2014†* Income (Net Accumulations) T1A Accumulation 0.17% T1A Accumulation Units † Ongoing charges figures are based on annualised expenses for the period ended 31 December 2014. Calendar Year Pence per Unit * Fund launched on 27 June 2014. 2015†* 1.0374 † To 28 February. * Fund launched on 27 June 2014. Capital (Unit Prices) T1A Accumulation Units Highest Lowest Offer Price Bid Price Calendar Year p p 2014†* 117.7 98.96 † To 31 December. * Fund launched on 27 June 2014. Risk and Reward Profile Lower risk Higher risk Typically lower rewards Typically higher rewards Unit Class T1A Accumulation 1 2 3 4 5 6 7 ` The risk indicator was calculated incorporating historical or simulated historical data and may not be a reliable indication of the future risk profile of the unit class. ` The risk category shown is not guaranteed and may change over time. ` The lowest category does not mean risk free. For more information on this, please see the Fund’s Key Investor Information Documents (KIIDs), which are available at www.blackrock.com. 5 BlackRock Authorised Contractual Scheme 6 Investment Report Portfolio Statement at 31 December 2014 Summary of Performance over the Period Holding or Market % of During the period from 27 June 2014 to 31 December 2014, the Fund was up 16.6%*, compared with its Nominal Value Total Net benchmark, the FTSE USA Index, which was up by 16.5%. Value Investment £ Assets UNITED STATES – 99.79% Fund Manager’s Commentary Stock market volatility increased in the third quarter of 2014 as high valuations started to worry Aerospace & Defence – 2.29% investors because of potential interest rate rises and mounting geopolitical risks. In this environment, 3,800 B/E Aerospace 141,399 0.03 US large-cap stocks benefited from the fact they are perceived as being more stable than their smaller 22,161 Boeing 1,846,786 0.44 peers. US stock markets regained their strength in the middle of the quarter however, driven largely 10,970 General Dynamics 968,357 0.23 by, albeit temporary, suggestions that geopolitical risks had abated and a period in which investors 1,900 KLX 50,265 0.01 treated bad economic news as good.