iShares Southeast Asia Trust SEMI-ANNUAL REPORTinternetfileserver.phillip.com.sg/Poems/stocks/etf/eut/Reports/EIS00… · At the close of 30 June 2010, the NAV per unit of the Fund

FOR THE PERIOD ENDED 30 JUNE 2010

iShares Southeast Asia Trust

SEMI-ANNUAL REPORT

iSHARES SOUTHEAST ASIA TRUSTContents

Letter to the Unitholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Manager’s Investment Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Consolidated Financial Statements (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Consolidated Statement of Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Consolidated Portfolio Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Notes to the Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Management and Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

iSHARES SOUTHEAST ASIA TRUSTLetter to the Unitholders

Dear Unitholders:

We are pleased to present the semi-annual report and fi nancial statements for the iShares Southeast Asia Trust (the

“Trust”) for the period ended 30 June 2010 (the “Period”). The fi rst and only sub-fund of the Trust, iShares MSCI

India (the “Fund” or “iShares MSCI India”), was launched on 15 June 2006. This report contains information about

the Fund’s performance over the Period, the portfolio manager’s discussion and analysis, as well as other important

fi nancial information.

The Fund was the world’s fi rst exchange traded fund (“ETF”) outside of India to provide investors with access to

the Indian stock market. The Fund aims to provide exposure to the MSCI India Index (the “Index”). Assets under

management (“AUM”) stood at approximately US$856.6 million at the end of June 2010.

With over US$3.3 trillion under management, BlackRock offers products that span the risk spectrum to meet clients’

needs, including active, enhanced and index strategies across markets and asset classes.

Thank you for your ongoing support and confi dence in the Trust.

On behalf of the Directors of

BlackRock Asset Management Southeast Asia Limited

Alasdair RiachDirector

2

MANAGER’S INVESTMENT REPORTiShares MSCI India(A sub-fund of the iShares Southeast Asia Trust)

(Constituted under a Trust Deed in the Republic of Singapore)

IntroductionThe iShares MSCI India (the “Fund”), a sub-fund of the iShares Southeast Asia Trust (the “Trust”), was launched and

commenced trading on 15 June 2006 on the Singapore Stock Exchange Securities Trading Limited (“SGX-ST”) under

the trading name of “IS MSCI India 100US$” and Exchange ticker of “I98 SP”. It was established as an authorized

scheme under the Securities and Futures Act, Chapter 289 of Singapore and obtained designation of an exchange

traded fund (“ETF”) from the SGX-ST. The Fund is benchmarked against the MSCI India Index (the “Index”). The

Manager of the Fund is BlackRock Asset Management Southeast Asia Limited (the “Manager”). The Manager has

appointed the Hong Kong domiciled BlackRock Asset Management North Asia Limited (the “Sub-Manager”) as

the sub-manager of the Fund under a sub-management agreement entered into between the Manager and the

Sub-Manager (the “Sub-Management Agreement”). Under the Sub-Management Agreement, the Manager has

discretion to delegate its investment management functions of the Fund to the Sub-Manager. This report covers the

six month period from 1 January 2010 to 30 June 2010 (the “Period”).

Until June 2010, the Fund can only gain access to the Indian market solely through India Access Products (“IAPs”),

being derivative instruments linked to the underlying Indian shares, as issued by a third party. On 10 June 2010, the

Manager announced its intention to restructure the Fund so as to enable it to invest in Indian securities in addition

to IAPs. The restructuring involved the establishment and use of iShares MSCI India Mauritius Company, a wholly

owned subsidiary of the Fund incorporated in Mauritius (the “Mauritius Subsidiary”), to hold Indian securities and/or

IAPs on behalf of the Fund. In contemplation of the restructure, the Manager has sought and obtained registration

as a Foreign Institutional Investor (“FII”) from the Securities and Exchange Board of India (“SEBI”) and has registered

the Mauritius Subsidiary as a sub-account of the Manager’s FII.

The restructure was completed on 24 June 2010, with the transfer of the existing IAPs of the Fund to its wholly

owned Mauritius Subsidiary.

A. Fund Performance1

The Fund seeks to provide investment results that closely correspond to the performance of the MSCI India Index

before fees and expenses. Following the restructure, the Fund will invest indirectly into the Indian market through

its wholly owned Mauritius Subsidiary which may invest in Indian securities and/or IAPs. An IAP is a derivative

instrument (such as a warrant, note or participation certifi cate) linked to an Indian stock, as issued by a third party

(“IAP issuer”), which synthetically replicates the economic benefi t of the relevant stock that trades on the National

Stock Exchange in India. Each IAP constitutes a direct, general and unsecured contractual obligation of the IAP issuer,

and is subject to counterparty risk.

At the close of 30 June 2010, the NAV per unit of the Fund was US$6.9600, and 123.0 million units were outstanding.

The total fund size was approximately US$856.6 million.

1 Past performance fi gures shown are not indicative of the future performance of the Fund

A summary of the performance of the Fund is given below:

TOTAL RETURN2 IN US$ AS OF 30 JUNE 2010 1-MONTH 3-MONTH 6-MONTH 1-YEAR

3-YEAR(ANNUALISED)

SINCE INCEPTION3

(ANNUALISED)

NET DIV MSCI INDIA TOTAL RETURN INDEX IN US$4

4.29% -2.24% 2.51% 32.04% 2.91% 18.07%

FUND NAV RETURN IN US$5 3.88% -2.66% 1.31% 29.13% 1.33% 16.08%

FUND PRICE RETURN (MKT) IN US$6

4.68% -2.94% 0.58% 27.16% 1.38% 16.03%

The MSCI India Index consists of 61 large capitalization India companies traded on India’s National Stock Exchange.

The difference in performance between the Index and the Fund can be largely explained by the fund expenses.

Fund ActivitiesThe average daily trading volume for the Fund during the Period was reported by Bloomberg to be approximately

766,073 units.

Index ActivitiesThe MSCI India Index underwent two regular reviews during the fi rst half of 2010. As at 30 June 2010, the Fund had

exposure to all index constituents indirectly in the MSCI India Index.

Sector WeightsAs of 30 June 2010, the index sector weights, as represented by holdings of the Mauritius Subsidiary (including IAPs),

are listed below.

2 Total returns represent the rate that an investor would have earned (or lost) on an investment, assuming reinvestment of all dividends and distributions.

3 This is annualized return since fund inception and fund inception date is 15 June 2006.4 An investor cannot invest directly in an index and the index performance returns do not refl ect management fees,

transaction costs or other expenses, which would reduce performance returns.5 Units in the Fund are issued and redeemed at their NAV in exchange for a basket of securities representing the

Index. Therefore, the Fund does not publish a bid price and the Fund’s returns have been calculated from NAVs; and assuming reinvestment of all dividends.

6 Market returns are calculated using historical market closing prices (when NAV is normally determined for the Fund), and do not represent the returns you would receive if you traded shares at other times.

Source: BlackRock and Morgan Stanley Capital International (MSCI)



4

SECTORINDEX WEIGHTS

%PORTFOLIO WEIGHTS

%

CONSUMER DISCRETIONARY 5.17 5.07

CONSUMER STAPLES 5.84 5.73

ENERGY 15.96 15.79

FINANCIALS 24.92 24.66

HEALTH CARE 3.98 4.00

INDUSTRIALS 10.09 10.44

INFORMATION TECHNOLOGY 16.66 16.47

MATERIALS 10.41 10.32

TELECOMMUNICATION 0.88 0.87

UTILITIES 6.09 5.60

Market Review IndiaIt was a year of outperformance thus far for India in 2010. India ended 2009 as the 3rd best-performing market in

the world and still ranked among the best performing emerging market year-to-date. The India market had largely

been unscathed by the global turmoil since April, fi rst in the form of slowdown fears in China, then European

sovereign issues and, most recently, a double-dip scare. In the fi rst half of 2010, MSCI India has outperformed MSCI

Emerging Markets and MSCI Asia ex-Japan every single month. MSCI India Index rose 2.51%7. The Indian Rupee (INR)

was fl at8 for the period.

India’s macro parameters have not changed meaningfully since the start of the year. India’s central bank, The Reserve

Bank of India (RBI) raised interest rates for the third time this year as infl ation remains high, and infl ation pressures

from faster economic growth in India outweigh risks from Europe’s debt crisis. Bottom-up picture remains good, and

business returns and earnings growth remained supported.

* All returns are measured and expressed in US Dollar (USD) terms unless indicated otherwise.7 Measured by the MSCI India Net Total Return Index8 Source: WM/Reuters





Equity issuances, in particular the Indian Government share sale plans were among the key developments in the

equity market. The Government planned to accelerate asset sales in state-run companies to raise an estimated

US$ 9 billion9 to help reduce the government’s budget defi cit to 5.5%9 from 6.9%9 in the 12 months through 31

March 2011. The Indian government had also amended the regulation to make minimum public holdings of 25%9

for listed companies. Such policy would entail selling down of equities aggregating US$ 32 billion9, of which at least

US$ 13 billion9 will have to be raised over the next 12 months, given the stipulation of at least a 5%9 increase in

public shareholding every year to get to the target.

Year-to-date, the defensive sectors of Telecoms, Consumer Discretionary and Consumer Staples are the best

performing sectors, while the worst ones are Materials, Utilities, Industrials, Energy and Financials10.

9 Source: Bank of America Merrill Lynch, Citigroup Global Markets, Morgan Stanley Research10 Source: MSCI Barra

6



B. Distribution of Investments as at 30 June 2010

FAIR VALUEUS$

PERCENTAGE OF TOTAL NET ASSETS ATTRIBUTABLE TO

UNITHOLDERS%

1 BY ASSET CLASS

IAPs* 847,655,477 98.95

CASH AND CASH EQUIVALENTS 8,977,254 1.05

NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 856,632,731 100.00

2 BY CREDIT RATING OF FIXED INCOME SECURITIES

NOT APPLICABLE

3 BY DERIVATIVE TYPE

NOT APPLICABLE

* IAP – Indian Access Product, being a derivative instrument (such as a warrant, note or participating certifi cate) linked to an Indian Share, which are held by the Mauritius Subsidiary on behalf of the Fund.



C. Top 10 Holdings as Represented by IAPs*

10 largest holdings as at 30 June 2010(as represented by holdings of the Mauritius Subsidiary, including IAPs)

FAIR VALUE AT 30 JUNE 2010

US$

PERCENTAGE OF TOTAL NET ASSETS ATTRIBUTABLE TO UNITHOLDERS

AS AT 30 JUNE 2010%

RELIANCE INDUSTRY LIMITED 104,076,934 12.15

INFOSYS TECHNOLOGIES 93,461,545 10.91

ICICI BANK LIMITED 49,114,392 5.73

HOUSING DEVELOPMENT FINANCE 45,474,045 5.31

HDFC BANK LIMITED 38,502,823 4.50

LARSEN & TOUBRO LIMITED 26,649,313 3.11

TATA CONSULTANCY SVS LIMITED 25,889,433 3.02

ITC LIMITED 24,333,654 2.84

BHARAT HEAVY ELECTRICALS 21,142,159 2.47

OIL & NATURAL GAS CORPORATION LIMITED 18,555,077 2.16

10 largest holdings as at 30 June 2009

FAIR VALUE AS AT 30 JUNE 2009

US$

PERCENTAGE OF TOTAL NET ASSETS ATTRIBUTABLE TO UNITHOLDERS

AS AT 30 JUNE 2009%

RELIANCE INDUSTRY LIMITED 153,824,415 14.63

INFOSYS TECHNOLOGIES 98,288,187 9.35

ICICI BANK LIMITED 67,996,343 6.47

HOUSING DEVELOPMENT FINANCE 59,507,143 5.66

HDFC BANK LIMITED 49,849,652 4.74

LARSEN & TOUBRO LIMITED 37,696,873 3.59

OIL & NATURAL GAS CORPORATION LIMITED 33,105,228 3.15

BHARAT HEAVY ELECTRICALS 31,299,195 2.98

HINDUSTAN UNILEVER LIMITED 28,267,054 2.69

I.T.C LIMITED 25,322,469 2.41

* IAP – Indian Access Product, being a derivative instrument (such as warrant, note or participating certifi cate) linked to an Indian Share

8



D. Investment in Other Unit Trusts, Mutual Funds and Collective Investment Schemes Nil.

E. BorrowingsNil.

F. Soft Dollar Commission Received by the ManagersDuring the six month period ended 30 June 2010, the Manager confi rmed that no soft dollar commission

arrangements exist in relation to directing transactions of the Fund through a broker or dealer.

G. Other Material InformationThere is no other material information that will adversely impact the valuation of the Fund.

H. Supplemental Information on Underlying Sub-fundsNot applicable.

iSHARES MSCI India(A sub-fund of the iShares Southeast Asia Trust)


Consolidated Statement of Total Return (Unaudited)

For the half year ended 30 June 2010

30 JUNE 2010US$

30 JUNE 2009

US$

INCOME

DIVIDEND 5,682,127 3,411,597

5,682,127 3,411,597

LESS: EXPENSES

ADMINISTRATOR FEE (5,850) –

AUDIT FEE (1,771) (7,767)

COMMISSION EXPENSE (998,164) (515,220)

CUSTODY FEES (77,282) (29,226)

MANAGEMENT FEES (3,497,188) (2,032,242)

REGISTRATION FEES (3,382) (2,200)

TRUSTEE FEES (252,430) (159,922)

OTHER EXPENSES (162) –

(4,836,229) (2,746,577)

NET GAIN 845,898 665,020

NET GAINS OR LOSSES ON INVESTMENTS

NET REALISED GAINS /(LOSSES) ON INVESTMENTS 90,709,320 (134,088,546)

NET CHANGE IN FAIR VALUE ON INVESTMENTS (82,881,681) 289,581,735

NET FOREIGN EXCHANGE LOSSES (21,515) (52,279)

NET GAINS ON VALUE OF INVESTMENTS 7,806,124 155,440,910

TOTAL RETURN FOR THE FINANCIAL PERIOD 8,652,022 156,105,930

The accompanying notes form an integral part of these fi nancial statements.

1010



Consolidated Balance Sheet (Unaudited)

As at 30 June 2010

NOTES

30 JUNE 2010US$

31 DECEMBER

2009

US$

ASSETS

PORTFOLIO OF INVESTMENTS 847,655,477 649,680,453

NET DIVIDEND RECEIVABLES 3,818,693 301,124

CASH AND BANK BALANCES 5 7,115,422 2,202,132

PREPAID EXPENSES 10,016 –

TOTAL ASSETS 858,599,608 652,183,709

LIABILITIES

PAYABLES 6 1,966,877 1,368,000

NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 7 856,632,731 650,815,709

TOTAL LIABILITIES 858,599,608 652,183,709




Consolidated Portfolio Statement (Unaudited)

As at 30 June 2010

PRIMARY – BY INDUSTRY

HOLDINGS AT 30 JUNE 2010

SHARES


US$

PERCENTAGE OF TOTAL NET ASSETSATTRIBUTABLE TOUNITHOLDERS AT

30 JUNE 2010%

LISTED IAPs*

CONSUMER DISCRETIONARY

BAJAJ AUTO LIMITED 150,060 8,010,498 0.93

HERO HONDA MOTORS LIMITED 267,156 11,734,799 1.37

MAHINDRA & MAHINDRA 887,814 11,952,148 1.40

MARUTI UDYOG LIMITED 232,470 7,102,556 0.83

ZEE TELEFILMS LIMITED 713,646 4,668,562 0.54

43,468,563 5.07

CONSUMER STAPLES

HINDUSTAN UNILEVER LIMITED 2,944,620 16,906,288 1.97

I.T.C LIMITED 3,712,386 24,333,654 2.84

UNITED SPIRITS LIMITED 280,686 7,892,035 0.92

49,131,977 5.73

ENERGY

BHARAT PETROLEUM 299,136 4,253,380 0.50

CAIRN INDIA LIMITED 1,285,596 8,379,823 0.98

OIL & NATURAL GAS CORPORATION LIMITED 654,852 18,555,077 2.16

RELIANCE INDUSTRY LIMITED 4,450,140 104,076,934 12.15

135,265,214 15.79

* IAP – Indian Access Product, being a Security (such as warrant, note or participating certifi cate) linked to an Indian Share


1212



PRIMARY – BY INDUSTRY (CONTINUED)


SHARES


US$


30 JUNE 2010%

LISTED IAPs*

FINANCE

AXIS BANK LIMITED 688,554 18,365,627 2.14

DLF LIMITED 1,374,156 8,511,806 0.99

HDFC BANK LIMITED 930,618 38,502,823 4.50

HOUSING DEVELOPMENT & FRASTRUCTURE 421,644 2,261,585 0.26

HOUSING DEVELOPMENT FINANCE 720,534 45,474,045 5.31

ICICI BANK LIMITED 2,654,832 49,114,392 5.73

INDIABULLS REAL ESTATE LIMITED 1,117,578 3,782,017 0.44

INFRASTRUCTURE DEVELOPMENT FINANCE 2,641,302 10,191,118 1.19

KOTAK MAHINDRA FINANCE 443,538 7,337,890 0.86

RURAL ELECTRIFICATION 806,880 5,266,364 0.62

RELIANCE CAPITAL LIMITED 321,030 5,254,629 0.61

STATE BANK OF INDIA 214,512 10,597,168 1.24

UNITECH LIMITED 4,081,386 6,546,859 0.77

211,206,323 24.66

HEALTHCARE

CIPLA LIMITED 1,147,344 8,334,247 0.97

DR REDDY’S LABORATORY 353,502 10,938,839 1.27

PIRAMAL HEALTHCARE LIMITED 316,602 3,248,568 0.38

RANBAXY LABORATORIES LIMITED 380,562 3,761,521 0.44

SUN PHARMACEUTICAL INDUSTRY 209,592 8,028,814 0.94

34,311,989 4.00







SHARES


US$


30 JUNE 2010%

LISTED IAPs*

INDUSTRIALS

ABB LIMITED INDIA 175,644 3,249,603 0.38

ADANI ENTERPRISE LIMITED 338,496 3,913,405 0.46

ADITYA BIRLA NUVO LIMITED 124,476 2,028,612 0.24

BHARAT HEAVY ELECTRICALS 399,258 21,142,159 2.47

GMR INFRASTRUCTURE 3,223,338 4,129,469 0.48

JAIPRAKASH ASSOCIATES 3,270,078 9,020,784 1.05

LARSEN & TOUBRO LIMITED 689,538 26,649,313 3.11

SIEMENS INDIA LIMITED 293,478 4,617,554 0.54

SUZLON ENERGY LIMITED 2,368,107 2,597,434 0.30

TATA MOTORS LIMITED 721,026 12,045,467 1.41

89,393,800 10.44

INFORMATION TECHNOLOGY

HCL TECHNOLOGIES 524,718 4,081,765 0.48

INFOSYS TECHNOLOGIES 1,561,854 93,461,545 10.91

SATYAM COMPUTER SERVICES LIMITED 2,104,284 4,115,997 0.48

TATA CONSULTANCY SERVICE 1,606,134 25,889,433 3.02

WIPRO LIMITED 1,644,097 13,574,385 1.58

141,123,125 16.47



1414





SHARES


US$


30 JUNE 2010%

LISTED IAPs*

MATERIALSAMBUJA CEMENTS LIMITED 2,005,146 4,928,960 0.58

ASSOCIATED CEMENT 191,142 3,586,989 0.42

HINDALCO INDUSTRIES 3,769,950 11,690,082 1.36

JINDAL STEEL & POWER LIMITED 1,261,980 16,912,157 1.97

JSW STEEL LIMITED 285,606 6,505,504 0.76

SESA GOA LIMITED 1,133,814 8,630,125 1.01

STEEL AUTHORITY OF INDIA 1,491,744 6,168,649 0.72

STERLITE INDUSTRIES LIMITED 4,569,696 16,660,759 1.95

TATA IRON & STEEL 981,294 10,226,725 1.19

UNITED PHOSPHORUS LIMITED 782,526 3,089,803 0.36

88,399,753 10.32

TELECOMMUNICATION RELIANCE COMMUNICATION LIMITED 1,742,664 7,415,670 0.87

7,415,670 0.87

UTILITIESGAIL INDIA LIMITED 1,268,376 12,719,144 1.49

NTPC LIMITED 3,081,642 13,199,480 1.55

RELIANCE INFRASTRUCTURE LIMITED 354,732 9,197,531 1.07

RELIANCE NATURAL RESOURCE LIMITED 2,386,692 3,380,294 0.39

TATA POWER CO LIMITED 338,742 9,442,614 1.10

47,939,063 5.60

PORTFOLIO OF INVESTMENTS 847,655,477 98.95OTHER NET ASSETS 8,977,254 1.05

NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 856,632,731 100.00






30 JUNE 2010%

PERCENTAGE OFTOTAL NET ASSETSATTRIBUTABLE TOUNITHOLDERS AT

31 DECEMBER 2009%

PRIMARY – BY INDUSTRY (SUMMARY)

CONSUMER DISCRETIONARY 5.07 4.57

CONSUMER STAPLES 5.73 5.30

ENERGY 15.79 16.59

FINANCE 24.66 24.13

HEALTHCARE 4.00 3.37

INDUSTRIALS 10.44 10.06

INFORMATION TECHNOLOGY 16.47 16.42

MATERIALS 10.32 12.34

TELECOMMUNICATION 0.87 1.29

UTILITIES 5.60 5.76

PORTFOLIO OF INVESTMENTS 98.95 99.83

OTHER NET ASSETS 1.05 0.17

NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 100.00 100.00

SECONDARY – BY GEOGRAPHY


US$


30 JUNE 2010%

PERCENTAGE OFTOTAL NET ASSETSATTRIBUTABLE TOUNITHOLDERS AT

31 DECEMBER 2009%

BY COUNTRY OF INCORPORATION

INDIA 847,655,477 98.95 99.83

PORTFOLIO OF INVESTMENTS 847,655,477 98.95 99.83

OTHER NET ASSETS 8,977,254 1.05 0.17

NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 856,632,731 100.00 100.00


1616



Notes to the Consolidated Financial StatementsFor the half year ended 30 June 2010

These notes form an integral part of and should be read in conjunction with the accompanying fi nancial statements.

1. GeneraliShares MSCI India (the “Fund”) is a Singapore-domiciled umbrella fund constituted by a Trust Deed dated 31

May 2006, as supplemented by a Supplemental Deed dated 15 June 2006 and as amended by an Amending

and Restating Deed dated 24 June 2010, between BlackRock Asset Management Southeast Asia Limited (the

“Manager”) and HSBC Institutional Trust Services (Singapore) Limited (the “Trustee”). The Trust Deed is

governed by the laws of the Republic of Singapore. The Fund is listed on the Singapore Exchange Securities

Trading Limited (“SGX-ST”).

The Fund is the fi rst sub-fund of the iShares Southeast Asia Trust (the “Trust”) which seeks to provide an

investment return that corresponds generally to the performance of a diversifi ed portfolio of Indian stocks as

measured by the MSCI India Index (the “Index”).

Until June 2010, the Fund can only gain access to the Indian market solely through India Access Products

(“IAPs”), being derivative instruments linked to the underlying Indian shares, as issued by a third party. On

10 June 2010, the Manager announced its intention to restructure the Fund so as to enable it to invest in

Indian securities in addition to IAPs. The restructuring involved the establishment and use of iShares MSCI

India Mauritius Company, a wholly owned subsidiary of the Fund incorporated in Mauritius (the “Mauritius

Subsidiary”), to hold Indian securities and/or IAPs on behalf of the Fund. In contemplation of the restructure,

the Manager has sought and obtained registration as a Foreign Institutional Investor (“FII”) from the Securities

and Exchange Board of India (“SEBI”) and has registered the Mauritius Subsidiary as a sub-account of the

Manager’s FII. The restructure was completed on 24 June 2010, with the transfer of the existing IAPs of the Fund

to its wholly owned Mauritius Subsidiary.

As at 30 June 2010, the Fund had four Participating Dealers: Citigroup Global Markets Singapore Securities Pte

Ltd, Credit Suisse Securities (Singapore) Limited, The Hongkong and Shanghai Banking Corporation Limited and

UBS Securities Pte Ltd. IAPs in the Fund may be issued by Citigroup Global Markets Holdings Inc., Credit Suisse

AG Nassau Branch, HSBC Bank plc, CLSA Financial Products, Ltd (guaranteed by Calyon SA), The Royal Bank of

Scotland N.V., (London Branch) and UBS AG London Branch.

The consolidated Statement of Total Return, Balance Sheet and Portfolio Statement of the Fund and its

Mauritius subsidiary are included in these consolidated fi nancial statements.

2. Signifi cant Accounting Policies

(a) Basis of accounting The consolidated financial statements are expressed in United States dollars, are prepared in accordance

with the historical cost convention, modified by the revaluation of investments at fair value through profit

or loss and in accordance with the Recommended Accounting Practice 7 “Reporting Framework for Unit

Trusts” (“RAP 7”) issued by the Institute of Certified Public Accountants of Singapore (“ICPAS”).



2. Signifi cant Accounting Policies (continued)

(b) Recognition of incomeDividend income is recognised when the right to receive payment is established.

Interest income is recognised on a time proportion basis using the effective interest method.

(c) Financial assets at fair value through profi t or loss(i) Initial recognition

Purchase of investments is recognised on the trade date. Investments are recorded at fair value on

initial recognition.

(ii) Subsequent measurement

Investments are subsequently carried at fair value. Net change in fair value on investments is included

in the Consolidated Statement of Total Return in the period which they arise.

(iii) Derecognition

Investments are derecognised on the trade date of disposal. The resultant realised gains and losses on

the sales of investments are computed on the basis of the difference between the weighted average

cost and selling price net of transaction costs, and taken up in the Consolidated Statement of Total

Return.

(d) Basis of valuation of investmentsThe fair value of financial instruments traded in active markets is based on quoted market prices at the

balance sheet date. The quoted market price for these investments held by the Fund is the current market

quoted bid price.

(e) ReceivablesReceivables are non-derivative financial assets with fixed or determinable payments that are not quoted in

an active market. Receivables are initially recognised at fair value plus transaction cost and subsequently

carried at amortised cost using the effective interest method, less accumulated impairment losses.

(f ) PayablesPayables are initially recognised at their fair values, and subsequently carried at amortised cost, using the

effective interest method.

1818



2. Signifi cant Accounting Policies (continued)

(g) Foreign currencies(i) Functional and presentation currency

Items included in the consolidated financial statements of the Fund are measured using the currency

of the primary economic environment in which the entity operates (“the functional currency”). The

consolidated financial statements are presented in United States dollars, which is the Fund’s functional

and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange

rates prevailing at the dates of transactions. Foreign exchange gains and losses resulting from the

settlement of such transactions and from the translation at period-end exchange rates of monetary

assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement

of Total Return. Translation differences on non-monetary financial assets and liabilities such as equities

are also recognised in the Consolidated Statement of Total Return within the fair value net gain or loss.

(h) Basis of ConsolidationThe consolidated fi nancial statements include the fi nancial statements of the Fund and of its wholly owned

subsidiary incorporated in Mauritius.

In preparing the consolidated fi nancial statements, intercompany transactions, balances and unrealised

gains on transactions between the Fund and its Mauritius subsidiary are eliminated; unrealised losses are

also eliminated unless cost cannot be recovered.

3. Tax The Fund was granted the status of Designated Unit Trust and, therefore, certain income is exempted from tax

in accordance with Section 35(12) and (12A) of the Income Tax Act including:

(a) gains or profi ts derived from Singapore and elsewhere from the disposal of securities;

(b) interest (other than interest for which tax has been deducted under Section 45 of the Singapore Income

Tax Act);

(c) dividends derived from outside Singapore and received in Singapore;

(d) gains or profits derived from foreign exchange transactions, transactions in futures contracts, transactions

in interest rate or currency forwards, swaps or option contracts and transactions in forwards, swaps or

option contracts relating to any securities or financial index; and

(e) distributions from foreign unit trusts derived from outside Singapore and received in Singapore.

4. DistributionNo distribution was made to unitholders for the fi nancial period ended 30 June 2010 (30 June 2009: Nil).



5. Cash and Bank BalancesThe amounts in cash and bank balances are placed with a fi nancial institution which is a related company of the

Trustee.

The carrying amount of bank balance approximates their fair value.

Bank balance is denominated in United States dollars.

6. Payables30 JUNE 2010

US$31 DECEMBER 2009

US$

ACCRUED EXPENSES 1,409,336 1,025,055

COMMISSION EXPENSE 557,541 342,945

1,966,877 1,368,000

7. Net Assets Attributable to Unitholders30 JUNE 2010

US$31 DECEMBER 2009

US$

BEGINNING OF FINANCIAL PERIOD/YEAR 650,815,709 276,463,774

OPERATIONS

CHANGE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS RESULTING FROM OPERATIONS 8,652,022 281,841,935

UNITHOLDERS’ CONTRIBUTIONS

CREATION OF UNITS 197,165,000 832,625,000

CANCELLATION OF UNITS – (740,115,000)

CHANGE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS RESULTING FROM NET CREATION AND CANCELLATION OF UNITS 197,165,000 92,510,000

TOTAL INCREASE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS 205,817,022 374,351,935

END OF FINANCIAL PERIOD/YEAR 856,632,731 650,815,709

UNITS IN ISSUE (NOTE 8) 123,000,000 94,500,000

US$ US$

NET ASSETS ATTRIBUTABLE TO UNITHOLDERS PER UNIT 6.96 6.89

2020



8. Units in Issue30 JUNE 2010

Units31 DECEMBER 2009

Units

BEGINNING OF FINANCIAL PERIOD/YEAR 94,500,000 80,000,000

CREATED DURING FINANCIAL PERIOD/YEAR 28,500,000 163,000,000

CANCELLED DURING FINANCIAL PERIOD/YEAR – (148,500,000)

END OF FINANCIAL PERIOD/YEAR 123,000,000 94,500,000

9. Financial Risk ManagementThe Fund’s activities expose it to a variety of financial risk (foreign exchange risk, market risk and interest rate

risk), credit risk and liquidity risk. The Manager continually monitors the Fund’s exposure to risk and appropriate

procedures are in place to manage the risks.

The following is a summary of the main risks and risk management policies.

(a) Foreign exchange riskAs the Fund holds USD denominated IAPs linked to shares which are denominated in Indian Rupees, the

Fund is exposed to currency risk related to the United States dollar against the Indian Rupee.

The table below summarises the Fund’s exposure to currency risks.

AS AT 30 JUNE 2010 INR US$ Total

ASSETSPORTFOLIO OF INVESTMENTS – 847,655,477 847,655,477

NET DIVIDEND RECEIVABLES 3,818,693 – 3,818,693

CASH AND BANK BALANCES – 7,115,422 7,115,422

PREPAID EXPENSES – 10,016 10,016

TOTAL ASSETS 3,818,693 854,780,915 858,599,608

LIABILITIESPAYABLES – 1,966,877 1,966,877

NET ASSETS ATTRIBUTABLE TO UNITHOLDERS – 856,632,731 856,632,731

TOTAL LIABILITIES – 858,599,608 858,599,608



9. Financial Risk Management (continued)

(a) Foreign exchange risk (continued)

AS AT 31 DECEMBER 2009 INR US$ Total

ASSETSPORTFOLIO OF INVESTMENTS – 649,680,453 649,680,453

NET DIVIDEND RECEIVABLES 301,124 – 301,124

CASH AND BANK BALANCES – 2,202,132 2,202,132

TOTAL ASSETS 301,124 651,882,585 652,183,709

LIABILITIESPAYABLES – 1,368,000 1,368,000

NET ASSETS ATTRIBUTABLE TO UNITHOLDERS – 650,815,709 650,815,709

TOTAL LIABILITIES – 652,183,709 652,183,709

The exposure of currency risks in relation to INR was not significant as at 30 June 2010 and 31 December

2009.

(b) Market riskMarket risk is the risk of potential adverse changes to the value of financial investments because of

changes in market conditions like interest and currency rate movements and volatility in security prices.

The Fund is designated to track the performance of the MSCI India Index, therefore the exposure to market

risk in the Fund will be substantially the same as the MSCI India Index. As an index trading exchange traded

fund, the Manager manages the Fund’s exposure to market risk by ensuring that the key characteristics

of the portfolio, such as security weight and industry weight, is closely aligned to the MSCI India Index

characteristics.

The Fund’s market risk is affected by changes in actual market prices. If the MSCI India Index in local

currency, Indian rupee (INR), had increased by 3% with all other variables held constant, this would have

increased the net asset value of the Fund by approximately $25.7 million (“being 3% of the year end NAV”).

Conversely, if the MSCI India Index in local currency had decreased by 3%, this would have decreased the

net asset value of the Fund by approximately 3%.

(c) Interest rate risk The Fund’s financial assets are largely non-interest accruing and financial liabilities are largely non-interest

bearing. Hence, the Fund is not subjected to risk of fluctuations in the prevailing levels of market interest

rates.

2222




(d) Liquidity riskThe Fund is exposed to daily cash redemptions and disbursements for the settlements of purchases. The

Manager therefore ensures that the Fund is able to obtain cash from the sale of investments held to meet

its liquidity requirements. Reasonable efforts will be taken to invest in securities which are traded in a

relatively active market and which can be readily disposed of.

The Fund’s investments in IAPs are considered to be readily realisable because they are linked to securities

listed on a recognised stock exchange.

The Manager may employ derivatives which will be used to simulate investment in its respective underlying

index, to facilitate trading or to reduce transaction costs. The Fund will not use derivatives for speculative

purposes. Market liquidity of complex derivatives are signifi cantly less than traditional investment

instruments and such positions may therefore require a longer time to reverse than would be typically

expected for traditional investment instruments. No such investments were held at the balance sheet date.

The Fund’s financial liabilities are repayable within 12 months. Balances due within 12 months equal their

carrying balances, as the impact of discounting is not significant.

(e) Credit riskThe Fund takes on exposure to credit risk, which is the risk that the counterparty will be unable to pay

amounts in full when due, including transactions with counterparties such as participating dealers, issuers,

brokers, custodians and banks.

Impairment provisions are provided for losses that have been incurred by the balance sheet date, if any. The

Manager has in place procedures for proper credit screening and monitoring of credit risk.

The Fund had four Participating Dealers: Citigroup Global Markets Singapore Securities Pte Ltd, Credit

Suisse Securities (Singapore) Limited, The Hongkong and Shanghai Banking Corporation Limited and UBS

Securities Pte Ltd. IAPs in the Fund may be issued by Citigroup Global Markets Holdings Inc., Credit Suisse

AG Nassau Branch, HSBC Bank plc, CLSA Financial Products, Ltd (guaranteed by Calyon SA), The Royal

Bank of Scotland N.V., (London Branch) and UBS AG London Branch. As at 30 June 2010, the Fund did not

hold any IAPs issued by CLSA Financial Products, Ltd (guaranteed by Calyon SA).

The value of the Fund’s assets will therefore depend entirely on the credit risk of the IAP Issuers. As at 30

June 2010, Citigroup Global Markets Holdings Inc. was rated A by Standard & Poor’s Rating Services, A3

by Moody’s Investor Services, Inc and A+ by Fitch Rating Limited, Credit Suisse AG, Nassau Branch was

rated A+ by Standard & Poor’s Rating Services, Aa1 by Moody’s Investor Services, Inc and AA- by Fitch

Rating Limited, HSBC Bank plc was rated AA by Standard & Poor’s Rating Services, Aa2 by Moody’s Investor

Services, Inc and AA by Fitch Rating Limited, The Royal Bank of Scotland N.V., (London Branch) was rated

A+ by Standard & Poor’s Rating Services, A2 by Moody’s Investor Services, Inc and AA- by Fitch Limited

and UBS AG London Branch was rated A+ by Standard & Poor’s Rating Services, Aa3 by Moody’s Investor

Services, Inc and A+ by Fitch Ratings Limited in respect of its senior long term debt obligations.




(e) Credit risk (continued)The Manager minimises the Fund’s credit by undertaking transactions with reputable financial institutions.

The Fund’s financial assets are also held in custody with established and approved counterparties.

Credit risk also arises from cash and cash equivalents held with financial institutions. The table summarises

the credit ratings of bank and IAP Issuers as at 30 June 2010 and 31 December 2009 in respect of its senior

long term debt obligations.

AS AT 30 JUNE 2010CREDIT RATING

SOURCE OF CREDIT RATING

BANK

THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED AA STANDARD & POOR’S

IAP ISSUERCITIGROUP GLOBAL MARKETS HOLDINGS INC A STANDARD & POOR’S

CREDIT SUISSE AG, NASSAU BRANCH A+ STANDARD & POOR’S

HSBC BANK PLC AA STANDARD & POOR’S

THE ROYAL BANK OF SCOTLAND N.V., (LONDONBRANCH) A+ STANDARD & POOR’S

UBS AG, LONDON BRANCH A+ STANDARD & POOR’S

AS AT 31 DECEMBER 2009

BANK

THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED AA STANDARD & POOR’S

IAP ISSUERCITIGROUP GLOBAL MARKETS HOLDINGS INC A STANDARD & POOR’S

UBS AG, LONDON BRANCH A+ STANDARD & POOR’S

(f ) Capital ManagementThe Fund’s capital is represented by the net assets attributable to unitholders. The Fund strives to invest

the subscriptions of redeemable participating units in investments that meet the Fund’s investment

objectives while maintaining suffi cient liquidity for the on-going management of the Fund.

2424



10. Related Party Transactions

(a) The Manager and the Trustee of the Fund are BlackRock Asset Management Southeast Asia Limited and

HSBC Institutional Trust Services (Singapore) Limited respectively.

HSBC Institutional Trust Services (Singapore) Limited is a subsidiary of the HSBC Holdings plc.

Management fees are paid to the Manager. Trustee fees, registrar fees and custody fees are paid to the

Trustee or its related company (as applicable) from the management fees. These fees paid or payable by

the Fund are shown in the Consolidated Statement of Total Return and are on terms set out in the Trust

Deed.

(b) In addition to related party information shown elsewhere in the consolidated fi nancial statements, the

following signifi cant transactions took place during the fi nancial period between the Fund and related

parties at terms agreed between the parties and within the provisions of the Trust Deed:

30 JUNE 2010US$

30 JUNE 2009

US$

CUSTODY FEE EXPENSE CHARGED BY A RELATEDCOMPANY OF A SHAREHOLDER OF THE TRUSTEE 77,282 29,226

REGISTRATION FEE EXPENSE CHARGED BY A RELATED COMPANY OF THE TRUSTEE 3,382 2,200

11. Financial Ratios

30 JUNE 2010 30 JUNE 2009

EXPENSE RATIO11 1.02% 1.27%

TURNOVER RATIO12 78.35% 30.46%

11 The expense ratio is for the relevant six month period ended 30 June 2010 or 2009 as the case may be and is computed in accordance with the revised IMAS guidelines on disclosure of expense ratios dated 25 May 2005. Brokerage and other transaction costs, interest expense, foreign exchange gains/losses, tax deducted at source or arising on income received and dividends paid to unitholders are not included in the expense ratio. The Fund does not pay any performance fees.

12 The portfolio turnover ratio is for the relevant six month period ended 30 June 2010 or 2009 as the case may be and is calculated in accordance with the formula stated in the Code on Collective Investment Schemes issued by the MAS. In accordance with the Fund’s Trust Deed, units are issued through a creation of an Index Basket for each creating unit (comprising 500,000 units), the Fund receives an Index Basket consisting of constituent shares plus or minus a cash payment as determined by the Manager on a daily basis. For the purpose of computation of the portfolio turnover rate, the value of the Index Baskets received is not considered as part of purchases.



Management and Administration

Directors of the ManagerAlasdair Charles Riach

Michael Timothy Marquardt

Rohit Bhagat

Manager Trustee, Custodian and Registrar

BlackRock Asset Management Southeast HSBC Institutional Trust Services

Asia Limited (Singapore) Limited

#18-01, Twenty Anson 21 Collyer Quay

20 Anson Road, #14-01 HSBC Building

Singapore 079912 Singapore 049320

Company Registration No. 200010143N Company Registration No. 194900022R

Sub-Manager Auditors

BlackRock Asset Management North Asia Limited PricewaterhouseCoopers

16/F Cheung Kong Center 8 Cross Street

2 Queen’s Road Central #17-00 PWC Building

Hong Kong Singapore 048424

26

Any opinions expressed herein refl ect the Manager’s view at this date and are subject to change. Investors should not

rely on the information contained in this report for their fi nal investment decisions. For more information about the

Fund including the related risks and other important information, please refer to the prospectus of the Fund which is

available by contacting the Manager or visiting the website www.iShares.com.sg.

MSCI, Morgan Stanley Capital International and MSCI Index are service marks of MSCI and have been licensed for

use by BlackRock. The iShares MSCI India is not sponsored, endorsed, issued, sold or promoted by MSCI or any

affi liate of MSCI, nor do these companies make any representation regarding the advisability of investing in the

iShares MSCI India.

iShares® is a registered mark of BlackRock Institutional Trust Company, N.A.

©2010 BlackRock, Inc. All rights reserved.

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Documents

iShares Southeast Asia Trust SEMI-ANNUAL REPORTinternetfileserver.phillip.com.sg/Poems/stocks/etf/eut/Reports/EIS00… · At the close of 30 June 2010, the NAV per unit of the Fund