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BlackRock Funds II – ‘N-CSR’ for 12/31/18

On:  Friday, 3/8/19, at 10:13am ET   ·   Effective:  3/8/19   ·   For:  12/31/18   ·   Accession #:  1193125-19-68379   ·   File #:  811-22061

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 3/08/19  BlackRock Funds II                N-CSR      12/31/18    3:3.5M                                   Donnelley … Solutions/FABlackrock Managed Income Fund Class K SharesInstitutional SharesInvestor A SharesInvestor C Shares

Certified Annual Shareholder Report by a Management Investment Company   —   Form N-CSR
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-CSR       Blackrock Funds Ii                                  HTML   2.08M 
 3: EX-99.906CERT  Certification Pursuant to Section 906            HTML      7K 
 2: EX-99.CERT  Certification Pursuant to Section 302               HTML     12K 


N-CSR   —   Blackrock Funds Ii
Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
"Fund Summaries
"About Fund Performance
"Disclosure of Expenses
"The Benefits and Risks of Leveraging
"Derivative Financial Instruments
"Schedules of Investments
"Statements of Assets and Liabilities
"Statements of Operations
"Statements of Changes in Net Assets
"Financial Highlights
"Notes to Financial Statements
"Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement
"Report of Independent Registered Public Accounting Firm
"Important Tax Information
"Trustee and Officer Information
"Additional Information
"Glossary of Terms Used in this Report

This is an HTML Document rendered as filed.  [ Alternative Formats ]



  BlackRock Funds II  

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

Investment Company Act file number: 811-22061

 

Name of Fund:   BlackRock Funds II
          BlackRock Managed Income Fund
Fund Address:   100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Funds II, 55 East 52nd Street, New York, NY 10055

Registrant’s telephone number, including area code: (800) 441-7762

Date of fiscal year end: 12/31/2018

Date of reporting period: 12/31/2018


Item 1 – Report to Stockholders

 

 

2


DECEMBER 31, 2018

 

ANNUAL REPORT

  LOGO

 

BlackRock Funds V

 

Ø   

BlackRock Inflation Protected Bond Portfolio

BlackRock Funds II

 

Ø   

BlackRock Managed Income Fund

 

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of each Fund’s shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from BlackRock or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

You may elect to receive all future reports in paper free of charge. If you hold accounts directly with BlackRock, you can call 1-800-441-7762 to inform BlackRock that you wish to continue receiving paper copies of your shareholder reports. If you hold accounts through a financial intermediary, you can follow the instructions included with this disclosure, if applicable, or contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. Please note that not all financial intermediaries may offer this service. Your election to receive reports in paper will apply to all funds advised by BlackRock Advisors, LLC, BlackRock Fund Advisors or their affiliates, or all funds held with your financial intermediary, as applicable.

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive electronic delivery of shareholder reports and other communications by: (i) accessing the BlackRock website at www.blackrock.com/edelivery and logging into your accounts, if you hold accounts directly with BlackRock, or (ii) contacting your financial intermediary, if you hold accounts through a financial intermediary. Please note that not all financial intermediaries may offer this service.

 

Not FDIC Insured • May Lose Value • No Bank Guarantee


The Markets in Review

Dear Shareholder,

In the 12 months ended December 31, 2018, concerns about a variety of political risks and a modest slowdown in global growth worked against the equity market despite solid corporate earnings, while rising interest rates constrained bond returns. Though the market’s appetite for risk remained healthy for most of the reporting period, risk-taking declined sharply later in the reporting period. As a result, bonds held their value better than stocks, which posted negative returns across the globe. Shorter-term, higher-quality securities led the bond market, and U.S. equities outperformed most international stock markets.

Volatility rose in emerging market stocks, as the rising U.S. dollar and higher interest rates in the U.S. disrupted economic growth abroad. U.S.-China trade relations and debt concerns adversely affected the Chinese stock market, while Turkey and Argentina became embroiled in currency crises, largely due to hyperinflation in both countries. An economic slowdown in Europe also led to negative performance for European equities.

In fixed income markets, short-term U.S. Treasury interest rates rose the fastest, while longer-term rates slightly increased. This led to a negative return for long-term U.S. Treasuries and a substantial flattening of the yield curve. Many investors are concerned with the flattening yield curve as a harbinger of recession. However, given the extraordinary monetary measures in the last decade, we believe a more accurate barometer for the economy is the returns along the risk spectrums in stock and bond markets. Although the fundamentals in credit markets remained relatively solid, investment-grade bonds posted flat returns, and high-yield bonds declined slightly. Recent sell-offs in risk assets have flattened asset returns along the risk spectrum somewhat, which bears further scrutiny in the months ahead.

In response to rising growth and inflation, the U.S. Federal Reserve (the “Fed”) increased short-term interest rates four times during the reporting period. The Fed also continued to reduce its balance sheet, gradually reversing the unprecedented stimulus measures it enacted after the financial crisis. By our estimation, the Fed’s neutral interest rate, or the theoretical rate that is neither stimulative nor restrictive to the economy, is approximately 3.0%. With that perspective, the Fed’s current policy is still mildly stimulative to the U.S. economy, which leaves room for further Fed rate hikes to arrive at monetary policy that is a neutral factor for economic growth.

Volatility in the U.S. equity market spiked in October, as a wide range of risks were brought to bear on markets, ranging from rising interest rates and slowing global growth to heightened trade tensions and political turmoil in several countries, including the United States. This was accompanied by a broad based risk-off in December — which was the worst December performance on record since 1931. Although fears of recession drove equity volatility higher at the end of 2018, we continue to believe the probability of recession in 2019 remains relatively low.

Economic growth and global earnings are likely to slow somewhat in 2019 — the tax cut stimulus will be less pronounced, and the Fed’s rate hikes in 2018 will gain traction in 2019. Trade frictions look more baked into asset prices than a year ago, but markets may be overlooking European political risks. Consequently, we are cautious on European equities, as European unity remains tenuous with a history of flare-ups. We continue to prefer to take risk in U.S. and emerging market equities. Within U.S. equities, we believe that companies with high-quality earnings and strong balance sheets offer the most attractive risk/reward trade-off. Going into 2019, we also favor short-term bonds over long-term bonds because they offer nearly equivalent yields with far lower volatility.

In this environment, investors need to think globally, extend their scope across a broad array of asset classes, and be nimble as market conditions change. We encourage you to talk with your financial advisor and visit blackrock.com for further insight about investing in today’s markets.

Sincerely,

 

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

 

Total Returns as of December 31, 2018
     6-month   12-month

U.S. large cap equities
(S&P 500® Index)

  (6.85)%   (4.38)%

U.S. small cap equities
(Russell 2000® Index)

  (17.35)   (11.01)

International equities
(MSCI Europe, Australasia,
Far East Index)

  (11.35)   (13.79)

Emerging market equities
(MSCI Emerging Markets Index)

  (8.48)   (14.57)

3-month Treasury bills
(ICE BofAML 3-Month
U.S. Treasury Bill Index)

  1.06   1.87

U.S. Treasury securities
(ICE BofAML 10-Year
U.S. Treasury Index)

  2.72   (0.03)

U.S. investment grade bonds
(Bloomberg Barclays U.S.
Aggregate Bond Index)

  1.65   0.01

Tax-exempt municipal bonds
(S&P Municipal Bond Index)

  1.38   1.36

U.S. high yield bonds
(Bloomberg Barclays
U.S. Corporate High Yield
2% Issuer Capped Index)

  (2.24)   (2.08)
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.
 

 

 

2    THIS PAGE IS NOT PART OF YOUR FUND REPORT


Table of Contents

 

      Page  

The Markets in Review

     2  

Annual Report:

  

Fund Summaries

     4  

About Fund Performance

     9  

Disclosure of Expenses

     9  

The Benefits and Risks of Leveraging

     10  

Derivative Financial Instruments

     10  

Financial Statements:

  

Schedules of Investments

     11  

Statements of Assets and Liabilities

     36  

Statements of Operations

     38  

Statements of Changes in Net Assets

     39  

Financial Highlights

     40  

Notes to Financial Statements

     49  

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement

     66  

Report of Independent Registered Public Accounting Firm

     69  

Important Tax Information

     71  

Trustee and Officer Information

     72  

Additional Information

     76  

Glossary of Terms Used in this Report

     78  

 

LOGO

 

 

          3  


Fund Summary  as of December 31, 2018    BlackRock Inflation Protected Bond Portfolio

 

Investment Objective

BlackRock Inflation Protected Bond Portfolio’s (the “Fund”) investment objective is to seek to maximize real return, consistent with preservation of real capital and prudent investment management.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2018, the Fund underperformed the benchmark, the Bloomberg Barclays U.S. Treasury Inflation Protected Securities Index.

What factors influenced performance?

The Fund’s exposure to inflation in Japan detracted from performance, as the Bank of Japan signaled a continued need for accommodative policy and inflation expectations for that economy moved lower over the period. Positioning with respect to U.S. interest rates detracted as well, as the nominal U.S. Treasury yield curve flattened over the period. Finally, the Fund’s currency exposures negatively impacted return.

The Fund’s overweight position to U.S. inflation relative to the United Kingdom contributed to performance as U.S. inflation outperformed in the first quarter of 2018. Short positioning with respect to real interest rates in the United Kingdom benefited performance as U.K. rates rose in the first half of 2018. Tactical trading of U.K. rates added to performance in the second half of the period.

Describe recent portfolio activity.

Late in the period, the Fund moved to a short position in U.S. interest rates as risk sentiment deteriorated and U.S. Treasury yields declined, on the view that the market had overreacted to a perceived shift in Fed policy.

The Fund employed derivatives as a part of its investment strategy. The Fund used interest rate futures, swaps (interest rate and inflation) and options (bought and sold) to manage risk, for efficient implementation of investment views, and to achieve added value strategies. Aside from foreign currency forwards to manage currency exposure, futures and options on futures were the most important derivatives used to manage the Fund as they enabled the investment adviser to express certain breakeven positions and nominal rate and curve views. During the period, the Fund’s use of derivatives had an overall positive on Fund performance.

At period end, the Fund had a slightly elevated cash position. The Fund’s cash position did not have a material impact on performance for the 12 months.

Describe portfolio positioning at period end.

At period end, the Fund was positioned to benefit from any rise in U.S. Treasury yields. Outside of the United States, the Fund was positioned for U.K. inflation to decline as Brexit fears wane and lend support to the British pound sterling. The Fund also held a long inflation position and short nominal rates position in Japan, where low unemployment and rising capital expenditures could support higher rates and rising inflation expectations. The Fund also maintained an allocation to agency mortgage-backed securities, a long exposure to emerging market sovereign rates and a short position in German nominal rates.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

Portfolio Information

 

PORTFOLIO COMPOSITION

 

Asset Type   Percent of
Total Investments
 (a)
 

U.S. Treasury Obligations

    92

Mortgage-Backed Securities

    5

Foreign Government Obligations

    3

Corporate Bonds

    (b)  

 

  (a) 

Total investments exclude short-term securities, options purchased, options written and TBA sale commitments.

 
  (b) 

Represents less than 0.5% of the Fund’s total investments.

 

CREDIT QUALITY ALLOCATIONS (a)

 

Credit Rating   Percent of
Total Investments
 (b)
 

AAA/Aaa(c)

    92

AA/Aa

    5

A

    2

BBB/Baa

    1

BB/Ba

    (d)  

B

    (d)  

 

  (a) 

For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P Global Ratings or Moody’s Investors Service if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low rating quality. Credit quality ratings are subject to change.

 
  (b) 

Total Investments exclude short-term securities, options purchased, options written and TBA sale commitments.

 
  (c) 

The investment adviser evaluates the credit quality of unrated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors, individual investments and/or issuers. Using this approach, the investment advisor has deemed unrated U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations to be of similar credit quality as investments rated AAA/Aaa.

 
  (d) 

Represents less than 0.5% of the Fund’s total investments.

 
 

 

 

4    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Fund Summary  as of December 31, 2018 (continued)    BlackRock Inflation Protected Bond Portfolio

 

TOTAL RETURN BASED ON A $10,000 INVESTMENT

 

LOGO

 

(a) 

Assuming maximum sales charge, if any, transaction costs and other operating expenses, including investment advisory fees and administration fees, if any. Institutional Shares do not have a sales charge.

(b) 

Under normal circumstances, the Fund invests at least 80% of its assets in inflation-indexed bonds of varying maturities issued by the U.S. and non-U.S. governments, their agencies or instrumentalities and U.S. and non-U.S. corporations. On September 17, 2018, the Fund acquired all of the assets, subject to the liabilities, of BlackRock Inflation Protected Bond Portfolio (the “Predecessor Fund”), a series of BlackRock Funds II, through a tax-free reorganization (the “Reorganization”). The Predecessor Fund is the performance and accounting survivor of the Reorganization.

(c) 

An unmanaged index that measures the performance of the inflation-protected public obligations of the U.S. Treasury.

Performance Summary for the Period Ended December 31, 2018

 

                      Average Annual Total Returns (a)  
                      1 Year           5 Years           10 Years  
     Standardized
30-Day Yields
    Unsubsidized
30-Day Yields
    6-Month
Total Returns
    w/o sales
charge
    w/ sales
charge
           w/o sales
charge
    w/ sales
charge
           w/o sales
charge
    w/ sales
charge
 

Institutional

    2.63     2.53     (1.80 )%      (1.88 )%      N/A         1.14     N/A         3.16     N/A  

Service

    2.39       2.22       (1.95     (2.03     N/A         0.87       N/A         2.88       N/A  

Investor A

    2.29       1.96       (1.89     (2.08     (6.00 )%        0.85       0.03       2.85       2.43

Investor C

    1.64       1.49       (2.30     (2.75     (3.70       0.12       0.12         2.11       2.11  

Class K

    2.68       2.63       (1.82     (1.81     N/A         1.24       N/A         3.27       N/A  

Bloomberg Barclays U.S. Treasury Inflation Protected Securities Index

                (1.24     (1.26     N/A               1.69       N/A               3.64       N/A  

 

  (a) 

Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 9 for a detailed description of share classes, including any related sales charges and fees. On September 17, 2018, the Fund acquired all of the assets, subject to the liabilities, of the Predecessor Fund, a series of BlackRock Funds II, through the Reorganization. The Predecessor Fund is the performance and accounting survivor of the Reorganization.

 

N/A — Not applicable as share class and Index do not have a sales charge

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

 

    Actual           Hypothetical (a)  
                Including
interest
expense
    Excluding
interest
expense
                Including
interest
expense
    Excluding
interest
expense
 
     Beginning
Account Value
(07/01/18)
    Ending
Account Value
(12/31/18)
    Expenses
Paid During
the Period
 (b)
    Expenses
Paid During
the Period
 (c)
           Beginning
Account Value
(07/01/18)
    Ending
Account Value
(12/31/18)
    Expenses
Paid During
the Period
 (b)
    Ending
Account Value
(12/31/18)
    Expenses
Paid During
the Period
 (c)
 

Institutional

  $ 1,000.00     $ 982.00     $ 2.80     $ 1.70       $ 1,000.00     $ 1,022.38     $ 2.85     $ 1,023.49     $ 1.73  

Service

    1,000.00       980.50       4.04       2.95         1,000.00       1,021.12       4.13       1,022.23       3.01  

Investor A

    1,000.00       981.10       4.04       2.95         1,000.00       1,021.12       4.13       1,022.23       3.01  

Investor C

    1,000.00       977.00       7.82       6.68         1,000.00       1,017.29       7.98       1,018.45       6.82  

Class K

    1,000.00       981.80       2.70       1.45               1,000.00       1,022.48       2.75       1,023.74       1.48  

 

  (a) 

Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

 
  (b) 

For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.56% for Institutional, 0.81% for Service, 0.81% for Investor A , 1.57% for Investor C and 0.54% for Class K), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

 
  (c) 

For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.34% for Institutional, 0.59% for Service, 0.59% for Investor A , 1.34% for Investor C and 0.29% for Class K), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

 

See “Disclosure of Expenses” on page 9 for further information on how expenses were calculated.

 

 

FUND SUMMARY      5  


Fund Summary  as of December 31, 2018    BlackRock Managed Income Fund

 

Investment Objective

BlackRock Managed Income Fund’s (the “Fund”) investment objective is to seek to maximize current income with consideration for risk-managed total return.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2018, the Fund outperformed its customized benchmark, a blend of 30% S&P 500® Index/70% Bloomberg Barclays U.S. Aggregate Bond Index, except for Investor C Shares, which underperformed. For the same period, the Fund underperformed the Bloomberg Barclays U.S. Aggregate Bond Index.

What factors influenced performance?

Performance is reviewed on an absolute basis due to the nature of the Fund’s strategy. The Fund is managed within a risk-controlled framework, and it strives to maintain a consistent yield with a risk profile below that of the benchmark.

The Fund’s interest-rate risk management program was the largest contributor to performance, as rates moved higher during the period. Positions in securitized bonds via the BlackRock Allocation Target Shares Series A Portfolio aided results, as did an allocation to collateralized loan obligations. Investment-grade, floating-rate bonds also contributed to performance in the rising rate environment.

An allocation to investment-grade bonds — which were hurt by rising rates throughout much of the year, as well as concerns about the economic outlook in the fourth quarter — was the largest detractor. Investment-grade issues make up a large portion of the portfolio due to the Fund’s lower-risk objective. An allocation to equities was an additional detractor. Equity covered calls, in particular, suffered negative returns amid the general risk-off environment later in the year. A position in preferred stocks also detracted.

The Fund held derivatives during the year. In particular, the Fund held U.S. Treasury futures to manage the Fund’s positioning and offset risk during times of market distress, which contributed to performance. Risk-management strategies in equities and currencies also contributed. Equity covered calls, which the Fund used to provide an alternative source of income, were a small detractor.

Describe recent portfolio activity.

The Fund maintained a conservative positioning, with the bulk of the portfolio allocated to investment-grade bonds. After increasing its allocation to bank loans at mid-year, the Fund subsequently reduced its weighting in the category by year end. Loans benefited from expectations for higher interest rates, but the consensus shifted later in the year as moderating growth tempered the outlook for Fed policy in 2019. The Fund also decreased its allocation to international equities and maintained a preference for the United States, where growth opportunities appeared more attractive. The Fund added to agency mortgage-backed securities and investment-grade corporate bonds in an effort to capture their rising yields and help mitigate overall portfolio risk.

Describe portfolio positioning at period end.

The Fund was diversified across a number of income-producing asset classes — including investment-grade debt, bank loans, high yield bonds, global equities, preferred stocks, mortgage-backed securities, equity covered calls, and cash — and it continued to employ risk-management strategies. At the close of the period, the Fund’s duration stood at approximately 2.2 years, up from 1.6 years at June 30, 2018. (Duration is a measure of interest-rate sensitivity.)

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

 

 

6    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Fund Summary  as of December 31, 2018 (continued)    BlackRock Managed Income Fund

 

TOTAL RETURN BASED ON A $10,000 INVESTMENT

 

LOGO

 

(a) 

Assuming maximum sales charge, if any, transaction costs and other operating expenses, including investment advisory fees and administration fees, if any. Institutional Shares do not have a sales charge.

(b) 

The Fund may invest up to 100% of its assets in fixed-income securities and up to 30% of its assets in equity securities. The Fund’s returns between July 29, 2013 and October 1, 2016 are the returns of the Fund when it followed a different investment objective and different investment strategies under the name BlackRock Investment Grade Bond Portfolio. The Fund’s returns prior to July 29, 2013 are the returns of the Fund when it followed different investment strategies under the name BlackRock Long Duration Bond Portfolio.

(c)

A customized performance benchmark comprised of the Bloomberg Barclays U.S. Aggregate Bond Index (70%) and the S&P 500 Index (30%).

(d)

A widely recognized unmanaged market-weighted index, comprised of investment-grade corporate bonds rated BBB or better, mortgages and U.S. Treasury and U.S. Government agency issues with at least one year to maturity.

Performance Summary for the Period Ended December 31, 2018

 

                      Average Annual Total Returns (a)  
                      1 Year           5 Years           10 Years  
     Standardized
30-Day Yields
    Unsubsidized
30-Day Yields
    6-Month
Total Returns
    w/o sales
charge
    w/ sales
charge
           w/o sales
charge
    w/ sales
charge
           w/o sales
charge
    w/ sales
charge
 

Institutional

    4.37     4.01     (0.31 )%      (0.57 )%      N/A         3.98     N/A         5.97     N/A  

Investor A

    3.95       3.63       (0.43     (0.82     (4.79 )%        3.66       2.82       5.64       5.21

Investor C

    3.36       2.96       (0.91     (1.67     (2.63       2.88       2.88         4.86       4.86  

Class K

    4.43       4.10       (0.28     (0.61     N/A         4.04       N/A         6.06       N/A  

Bloomberg Barclays U.S. Aggregate Bond Index

                1.65       0.01       N/A         2.52       N/A         3.48       N/A  

Customized Reference Benchmark

                (0.78     (1.06     N/A               4.43       N/A               6.51       N/A  

 

  (a) 

Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 9 for a detailed description of share classes, including any related sales charges and fees. The Fund’s returns between July 29, 2013 and October 1, 2016 are the returns of the Fund when it followed a different investment objective and different investment strategies under the name “BlackRock Investment Grade Bond Portfolio”. The Fund’s returns prior to July 29, 2013 are the returns of the Fund when it followed different investment strategies under the name “BlackRock Long Duration Bond Portfolio”.

 

N/A — Not applicable as share class and Index do not have a sales charge

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

 

    Actual           Hypothetical (a)           
     Beginning
Account Value
(07/01/18)
     Ending
Account Value
(12/31/18)
     Expenses
Paid During
the Period
 (b)
           Beginning
Account Value
(07/01/18)
     Ending
Account Value
(12/31/18)
     Expenses
Paid During
the Period
 (b)
       Annualized
Expense
Ratio
 

Institutional

  $ 1,000.00      $ 996.90      $ 1.76       $ 1,000.00      $ 1,023.44      $ 1.79          0.35

Investor A

    1,000.00        995.70        3.02         1,000.00        1,022.18        3.06          0.60  

Investor C

    1,000.00        990.90        6.77         1,000.00        1,018.40        6.87          1.35  

Class K

    1,000.00        997.20        1.51               1,000.00        1,023.69        1.53          0.30  

 

  (a) 

Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

 
  (b) 

For each class of the Fund, expenses are equal to annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

 

See “Disclosure of Expenses” on page 9 for further information on how expenses were calculated.

 

 

FUND SUMMARY      7  


Fund Summary  as of December 31, 2018 (continued)    BlackRock Managed Income Fund

 

Portfolio Information

 

PORTFOLIO COMPOSITION

 

Asset Type   Percent of
Total Investments
 (a)
 

Corporate Bonds

    54

Investment Companies

    35

Asset-Backed Securities

    6

Equity-Linked Notes

    3

Preferred Securities

    2  

 

  (a) 

Total investments exclude short-term securities.

 

CREDIT QUALITY ALLOCATIONS (a)

 

Credit Rating   Percent of
Total Investments
 (b)
 

AAA/Aaa(c)

    9

AA/Aa

    10

A

    30

BBB/Baa

    47

BB/Ba

    4

B

    (d)  

NR

    (d)  

 

  (a) 

For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P Global Ratings or Moody’s Investors Service if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

 
  (b) 

Total Investments exclude short-term securities, Equity-Linked Notes and Investment Companies.

 
  (c) 

The investment adviser evaluates the credit quality of unrated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors, individual investments and/or issuers. Using this approach, the investment advisor has deemed unrated U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations to be of similar credit quality as investments rated AAA/Aaa.

 
  (d) 

Representing less than 0.5% of the Fund’s total investments.

 
 

 

 

8    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


About Fund Performance

 

On September 17, 2018, BlackRock Inflation Protected Bond Portfolio acquired all of the assets, subject to the liabilities, of a corresponding series of BlackRock Funds II (the “Predecessor Fund”) in a tax-free reorganization (the “Reorganization”). The Predecessor Fund is the performance and accounting survivor of the Reorganization. Accordingly, information provided herein for periods prior to the Reorganization is that of the Predecessor Fund. See Note 1 of the Notes to Financial Statements for additional information regarding the Reorganization.

Institutional Shares and Class K Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors.

Service Shares (available only in BlackRock Inflation Protected Bond Portfolio) are not subject to any sales charge. These shares are subject to a service fee of 0.25% per year (but no distribution fee) and are only available to certain eligible investors.

Investor A Shares are subject to a maximum initial sales charge (front-end load) of 4.00% and a service fee of 0.25% per year (but no distribution fee). Certain redemptions of these shares may be subject to a contingent deferred sales charge (“CDSC”) where no initial sales charge was paid at the time of purchase. These shares are generally available through financial intermediaries.

Investor C Shares are subject to a 1.00% CDSC if redeemed within one year of purchase. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. These shares are generally available through financial intermediaries. Prior to BlackRock Managed Income Fund’s Investor C Shares inception date of October 3, 2016, performance results are those of Class K Shares restated to reflect Investor C Share fees. Effective November 8, 2018, each Fund adopted an automatic conversion feature whereby Investor C Shares held for approximately ten years will be automatically converted into Investor A Shares of the applicable Fund, and, thereafter, investors will be subject to lower ongoing fees.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com to obtain performance data current to the most recent month end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance tables on the previous pages assume reinvestment of all distributions, if any, at net asset value (“NAV”) on the ex-dividend/payable dates. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Distributions paid to each class of shares will vary because of the different levels of service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders.

BlackRock Advisors, LLC (the “Manager”), each Fund’s investment adviser, has contractually agreed to waive and/or reimburse a portion of the Funds’ expenses. Without such waiver and/or reimbursement, the Funds’ performance would have been lower. The Manager is under no obligation to continue waiving and/or reimbursing its fees after the applicable termination date of such agreement. See Note 6 of the Notes to Financial Statements for additional information on waivers and/or reimbursements. The standardized 30-day yield includes the effects of any waivers and/or reimbursements. The unsubsidized 30-day yield excludes the effects of any waivers and/or reimbursements.

Disclosure of Expenses

Shareholders of each Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense examples shown on the previous pages (which are based on a hypothetical investment of $1,000 invested on July 1, 2018 and held through December 31, 2018) are intended to assist shareholders both in calculating expenses based on an investment in each Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense examples provide information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their Fund and share class under the headings entitled “Expenses Paid During the Period.”

The expense examples also provide information about hypothetical account values and hypothetical expenses based on a Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in these Funds and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense examples are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical examples are useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

 

 

ABOUT FUND PERFORMANCE / DISCLOSURE OF EXPENSES      9  


The Benefits and Risks of Leveraging

 

The Funds may utilize leverage to seek to enhance returns and NAV. However, there is no guarantee that these objectives can be achieved in all interest rate environments.

The Funds may utilize leverage by entering into reverse repurchase agreements. In general, the concept of leveraging is based on the premise that the financing cost of leverage, which is based on short-term interest rates, is normally lower than the income earned by each Fund on its longer-term portfolio investments purchased with the proceeds from leverage. To the extent that the total assets of each Fund (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, the Funds’ shareholders benefit from the incremental net income.

The interest earned on securities purchased with the proceeds from leverage is distributed to the Funds’ shareholders, and the value of these portfolio holdings is reflected in the Funds’ per share NAV. However, in order to benefit shareholders, the return on assets purchased with leverage proceeds must exceed the ongoing costs associated with the leverage. If interest and other ongoing costs of leverage exceed a Fund’s return on assets purchased with leverage proceeds, income to shareholders is lower than if the Funds had not used leverage.

Furthermore, the value of each Fund’s portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can also influence the value of portfolio investments. As a result, changes in interest rates can influence each Fund’s NAV positively or negatively in addition to the impact on each Fund’s performance from leverage. Changes in the direction of interest rates are difficult to predict accurately, and there is no assurance that a Fund’s leveraging strategy will be successful.

The use of leverage also generally causes greater changes in each Fund’s NAV and dividend rates than comparable portfolios without leverage. In a declining market, leverage is likely to cause a greater decline in the NAV of a Fund’s shares than if the Fund were not leveraged. In addition, each Fund may be required to sell portfolio securities at inopportune times or at distressed values in order to comply with regulatory requirements applicable to the use of leverage or as required by the terms of the leverage instruments, which may cause the Funds to incur losses. The use of leverage may limit a Fund’s ability to invest in certain types of securities or use certain types of hedging strategies. Each Fund incurs expenses in connection with the use of leverage, all of which are borne by each Fund’s shareholders and may reduce income.

Derivative Financial Instruments

The Funds may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other assets without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Funds’ successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation a Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Funds’ investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

 

 

10    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Consolidated Schedule of Investments

December 31, 2018

  

BlackRock Inflation Protected Bond Portfolio

(Percentages shown are based on Net Assets)

 

Security          Par
(000)
    Value  

Corporate Bonds — 0.5%

 

United States — 0.5%  

Goldman Sachs & Co. LLC, (LIBOR USD 3 Month + 0.44%), 3.06%, 02/08/19(a)

    USD       10,000     $ 9,993,761  
   

 

 

 

Total Corporate Bonds — 0.5%
(Cost: $10,000,000)

 

    9,993,761  
   

 

 

 

Foreign Government Obligations — 2.8%

 

Argentina — 0.1%  

Republic of Argentina, 5.88%, 01/11/28

      1,979       1,417,459  
   

 

 

 
Brazil — 0.2%  

Federative Republic of Brazil, 4.63%, 01/13/28

      3,486       3,353,027  
   

 

 

 
Colombia — 0.2%  

Republic of Colombia, 3.88%, 04/25/27

      3,392       3,236,816  
   

 

 

 
Dominican Republic — 0.1%  

Dominican Republic, 5.95%, 01/25/27

      2,827       2,807,918  
   

 

 

 
Ecuador — 0.1%  

Republic of Ecuador, 9.65%, 12/13/26

      1,626       1,477,627  
   

 

 

 
Indonesia — 0.2%  

Perusahaan Penerbit SBSN Indonesia III, 4.40%, 03/01/28

      3,728       3,625,480  

Republic of Indonesia, 4.10%, 04/24/28(b)

      307       297,406  
   

 

 

 
        3,922,886  
Japan — 1.2%  

Japan Government CPI Linked Bond, 0.10%, 03/10/28

    JPY       2,652,750       24,953,102  
   

 

 

 
Mexico — 0.2%  

United Mexican States:

     

3.75%, 01/11/28

    USD       2,408       2,249,674  

6.05%, 01/11/40

      2,274       2,413,282  
   

 

 

 
        4,662,956  
Peru — 0.1%  

Republic of Peru, 4.13%, 08/25/27

      2,326       2,401,595  
   

 

 

 
Philippines — 0.1%  

Republic of the Philippines:

     

3.00%, 02/01/28

      492       465,555  

9.50%, 02/02/30

      1,223       1,799,846  
   

 

 

 
        2,265,401  
Russia — 0.1%  

Russian Federation:

     

4.25%, 06/23/27

      600       569,250  

4.38%, 03/21/29

      2,800       2,642,500  
   

 

 

 
        3,211,750  
South Africa — 0.1%  

Republic of South Africa, 4.85%, 09/27/27

      2,499       2,327,194  
   

 

 

 
Turkey — 0.0%  

Republic of Turkey, 5.13%, 02/17/28

      1,173       1,026,375  
   

 

 

 
Uruguay — 0.1%  

Oriental Republic of Uruguay, 4.38%, 10/27/27

      1,403       1,406,157  
   

 

 

 

Total Foreign Government Obligations — 2.8%
(Cost: $58,635,213)

 

    58,470,263  
     

 

 

 

Mortgage-Backed Securities — 4.8%

 

Federal National Mortgage Association:
4.50%, 01/25/49 - 02/25/49(c)

      98,860       102,333,778  
     

 

 

 

Total Mortgage-Backed Securities — 4.8%
(Cost: $101,498,920)

 

    102,333,778  
     

 

 

 
Security          Par
(000)
    Value  

U.S. Treasury Obligations — 97.0%

 

U.S. Treasury Inflation Linked Bonds:

     

2.38%, 01/15/25 - 01/15/27

    USD       83,912     $ 91,431,436  

2.00%, 01/15/26

      38,537       41,129,174  

1.75%, 01/15/28

      31,041       32,961,889  

3.63%, 04/15/28

      26,136       32,072,031  

2.50%, 01/15/29

      29,950       34,086,485  

3.88%, 04/15/29

      31,803       40,455,153  

3.38%, 04/15/32(b)

      12,081       15,491,793  

2.13%, 02/15/40 - 02/15/41

      37,176       43,806,122  

0.75%, 02/15/42 - 02/15/45

      93,639       84,197,699  

0.63%, 02/15/43

      27,034       23,690,724  

1.38%, 02/15/44

      40,799       42,118,213  

1.00%, 02/15/46 - 02/15/48

      55,232       52,351,360  

0.88%, 02/15/47

      32,758       30,068,428  

U.S. Treasury Inflation Linked Notes:

     

1.38%, 01/15/20(b)

      38,730       38,481,732  

0.13%, 04/15/20 - 07/15/26(b)

      565,828       545,661,508  

1.25%, 07/15/20

      59,518       59,396,181  

1.13%, 01/15/21

      68,079       67,768,204  

0.63%, 07/15/21 - 01/15/26

      144,736       142,016,684  

0.63%, 04/15/23 - 01/15/24(b)

      171,415       168,647,407  

0.38%, 07/15/23 - 01/15/27

      229,903       221,801,845  

0.25%, 01/15/25

      80,564       77,146,742  

0.38%, 07/15/27(b)

      66,644       63,222,711  

0.50%, 01/15/28

      66,092       63,073,314  

0.75%, 07/15/28

      44,140       43,203,726  
   

 

 

 

Total U.S. Treasury Obligations — 97.0%
(Cost: $2,076,662,313)

 

    2,054,280,561  
   

 

 

 

Total Long-Term Investments — 105.1%
(Cost: $2,246,796,446)

 

    2,225,078,363  
   

 

 

 

Short-Term Securities — 7.5%

 

Foreign Government Obligations — 7.4%(d)

 

Japan — 7.4%                  

Japan Treasury Bills:

     

(0.29)%, 01/21/19

    JPY       7,430,000       67,793,488  

(0.26)%, 02/25/19

      9,750,000       88,976,433  
   

 

 

 
        156,769,921  
   

 

 

 

Total Foreign Government Obligations — 7.4% (Cost: $152,396,377)

 

    156,769,921  
   

 

 

 
            Shares         
Money Market Funds — 0.1%(e)(f)  

BlackRock Liquidity Funds, T-Fund, Institutional Class, 2.32%

      3,096,013       3,096,013  
   

 

 

 

Total Money Market Funds — 0.1%
(Cost: $3,096,013)

 

    3,096,013  
   

 

 

 

Total Short-Term Securities — 7.5%
(Cost: $155,492,390)

 

    159,865,934  
   

 

 

 

Total Options Purchased — 0.0%
(Cost: $430,143)

 

    125,429  
   

 

 

 

Total Investments Before Options Written and TBA Sale Commitments — 112.6%
(Cost: $2,402,718,979)

 

    2,385,069,726  
   

 

 

 

Total Options Written — 0.0%
(Premiums Received — $1,392,288)

 

    (183,030
   

 

 

 
 

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS      11  


Consolidated Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Inflation Protected Bond Portfolio

(Percentages shown are based on Net Assets)

 

Security          Par
(000)
    Value  
TBA Sale Commitments — (1.8)%(c)                  

Federal National Mortgage Association, 4.50%, 01/25/49

      36,900     $ (38,209,518
   

 

 

 

Total TBA Sale Commitments — (1.8)%
(Proceeds: $38,041,213)

 

    (38,209,518
     

 

 

 

Total Investments Net of Options Written and TBA Sale Commitments — 110.8%
(Cost: $2,363,285,478)

 

    2,346,677,178  

Liabilities in Excess of Other Assets — (10.8)%

 

    (228,118,831
   

 

 

 

Net Assets — 100.0%

 

  $ 2,118,558,347  
   

 

 

 

 

(a) 

Variable rate security. Security may be issued at a fixed coupon rate, which converts to a variable rate at a specified date. Rate shown is the rate in effect as of period end.

(b) 

All or a portion of security has been pledged as collateral in connection with outstanding reverse repurchase agreements.

(c) 

Represents or includes a TBA transaction.

(d) 

Rates are discount rates or a range of discount rates as of period end.

(e) 

Annualized 7-day yield as of period end.

 
(f) 

During the year ended December 31, 2018, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, and/or related parties of the Fund were as follows:

 

Affiliated Persons and/or Related Parties    Shares
Held at
12/31/17
     Shares
Purchased
    

Shares

Sold

     Shares
Held at
12/31/18
     Value at
12/31/18
     Income      Net
Realized
Gain (Loss)
 (a)
     Change in
Unrealized
Appreciation
(Depreciation)
 

BlackRock Liquidity Funds, T-Fund, Institutional Class

     18,558,903               (15,462,890 )(b)       3,096,013      $ 3,096,013      $ 137,217      $      $  

iShares 1-3 Year Credit Bond ETF

            230,000        (230,000                    40,092        (35,050       
              

 

 

    

 

 

    

 

 

    

 

 

 
            $ 3,096,013      $ 177,309      $ (35,050    $  
              

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

Includes net capital gains distributions, if applicable.

 
  (b) 

Represents net shares sold.

 

Reverse Repurchase Agreements

 

Counterparty    Interest
Rate
    Trade
Date
     Maturity
Date
    Face Value      Face Value
Including
Accrued Interest
     Type of Non-Cash Underlying Collateral    Remaining Contractual
Maturity of the Agreements

Nomura Securities International, Inc.

     3.30     06/19/18        Open (a)     $ 49,687,500      $ 50,212,324      U.S. Treasury Obligations    Open/Demand(a)

Nomura Securities International, Inc.

     3.30       07/27/18        Open (a)       26,656,250        26,887,893      U.S. Treasury Obligations    Open/Demand(a)

Credit Suisse Securities USA LLC

     2.00       10/18/18        Open (a)       252,892        253,814      Foreign Government Obligations    Open/Demand(a)

Merrill Lynch, Pierce, Fenner & Smith, Inc.

     3.20       12/31/18        01/02/19       88,179,086        88,186,924      U.S. Treasury Obligations    Overnight

Merrill Lynch, Pierce, Fenner & Smith, Inc.

     3.20       12/31/18        01/02/19       24,543,750        24,545,932      U.S. Treasury Obligations    Overnight
         

 

 

    

 

 

       
          $ 189,319,478      $ 190,086,887        
         

 

 

    

 

 

       

 

  (a) 

Certain agreements have no stated maturity and can be terminated by either party at any time.

 

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

 

Description    Number of
Contracts
       Expiration
Date
       Notional
Amount (000)
       Value/
Unrealized
Appreciation
(Depreciation)
 

Long Contracts

                 

WTI Crude Oil(a)

     69          02/19/19        $ 3,155        $ (192,524

U.S. Treasury 2 Year Note

     212          03/29/19          45,010          317,422  

WTI Crude Oil(a)

     26          11/19/19          1,258          (607,113
                 

 

 

 
                    (482,215
                 

 

 

 

 

 

12    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Consolidated Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Inflation Protected Bond Portfolio

 

Futures Contracts (continued)

 

Description    Number of
Contracts
       Expiration
Date
       Notional
Amount (000)
       Value/
Unrealized
Appreciation
(Depreciation)
 

Short Contracts

                 

Euro-Bund

     681          03/07/19        $ 127,603        $ (529,588

Japan 10 Year Bond

     45          03/13/19          62,603          (188,890

U.S. Treasury 10 Year Note

     632          03/20/19          77,114          (112,163

U.S. Treasury 10 Year Ultra Bond

     234          03/20/19          30,438          (113,648

U.S. Treasury Long Bond

     46          03/20/19          6,716          (291,179

U.S. Treasury 5 Year Note

     420          03/29/19          48,169          (355,102

WTI Crude Oil(a)

     75          05/20/19          3,520          195,699  

3 Month Eurodollar

     862          03/15/21          210,242          (600,809
                 

 

 

 
                    (1,995,680
                 

 

 

 
                  $ (2,477,895
                 

 

 

 

 

  (a) 

All or a portion of the security is held by a wholly-owned subsidiary. See Note 1 of the Notes to Financial Statements for details on the wholly-owned subsidiary.

 

Forward Foreign Currency Exchange Contracts

 

Currency
Purchased
       Currency
Sold
       Counterparty      Settlement Date        Unrealized
Appreciation
(Depreciation)
 
USD     7,058,491        GBP     5,503,000        State Street Bank and Trust Co.        02/05/19        $ 32,333  
USD     2,562,864        GBP     2,000,000        Westpac Banking Corp.        02/05/19          9,290  
EUR     12,320,213        USD     14,197,000        Deutsche Bank AG        03/20/19          9,999  
USD     3,549,000        AUD     5,023,312        Bank of America NA        03/20/19          6,207  
USD     3,549,000        CAD     4,831,973        Goldman Sachs International        03/20/19          3,299  
JPY     2,563,000,000        USD     23,822,138        Goldman Sachs International        03/16/20          452,750  
USD     25,589,058        JPY     2,563,000,000        Morgan Stanley & Co. International plc        03/16/20          1,314,170  
                       

 

 

 
                   1,828,048  
                       

 

 

 
USD     86,792,211        JPY     9,756,000,000        Goldman Sachs International        01/10/19          (2,275,739
USD     66,408,988        JPY     7,435,223,290        State Street Bank and Trust Co.        01/22/19          (1,535,748
USD     715,951        EUR     628,000        UBS AG        02/05/19          (5,667
USD     24,470,151        JPY     2,761,276,000        State Street Bank and Trust Co.        02/05/19          (790,470
AUD     20,102,374        USD     14,197,000        Morgan Stanley & Co. International plc        03/20/19          (19,393
CAD     19,338,728        USD     14,197,000        Royal Bank of Canada        03/20/19          (6,246
GBP     11,054,322        USD     14,197,000        Royal Bank of Scotland        03/20/19          (54,701
USD     10,648,000        AUD     15,130,534        HSBC Bank plc        03/20/19          (23,116
USD     10,648,000        CAD     14,511,437        Goldman Sachs International        03/20/19          (490
USD     3,549,000        EUR     3,081,636        Deutsche Bank AG        03/20/19          (4,575
USD     10,648,000        EUR     9,278,725        Goldman Sachs International        03/20/19          (51,721
USD     10,648,000        GBP     8,396,452        Morgan Stanley & Co. International plc        03/20/19          (93,964
USD     3,549,000        GBP     2,790,513        Royal Bank of Scotland        03/20/19          (21,031
                       

 

 

 
                   (4,882,861
                       

 

 

 
    Net Unrealized Depreciation        $ (3,054,813
                       

 

 

 

Interest Rate Caps Purchased

 

Description    Exercise
Rate
     Counterparty      Expiration
Date
       Notional
Amount (000)
       Value        Premiums
Paid
       Unrealized
Appreciation/
(Depreciation)
 

2Y-10 CMS Index Cap

     0.71    Citibank NA        05/29/20          USD       215,286        $ 125,352        $ 107,643        $ 17,709  
                      

 

 

      

 

 

      

 

 

 

OTC Barrier Options Purchased

 

Description    Type of Option      Counterparty      Expiration
Date
       Exercise
Price
       Barrier
Price/Range
      

Notional

Amount (000)

       Value  

Put

                                      

USD Currency

   One-Touch      Citibank NA        01/28/19          USD       106.75          USD       106.75          USD       2,500        $ 77  
                                      

 

 

 

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS      13  


Consolidated Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Inflation Protected Bond Portfolio

 

Inflation Rate Caps

 

Reference Entity   Fund Pays   Fund Receives   Counterparty   Expiration
Date
    Notional
Amount (000)
    Value     Premiums
Paid
(Received)
    Unrealized
Appreciation
(Depreciation)
 
Eurostat Eurozone HICP Ex Tobacco Unrevised Series NSA (HICPx)   Maximum of HICPx for January 2022 divided by HIPCx for January 2012 minus 2.50% or $0   Upfront premium and payment at expiration   Deutsche Bank AG     04/26/22       EUR   14,495     $ (412   $ (1,014,650   $ 1,014,238  
           

 

 

   

 

 

   

 

 

 

OTC Interest Rate Caps Sold

 

Description    Exercise
Rate
     Counterparty      Expiration
Date
       Notional
Amount (000)
       Value        Premiums
Paid
(Received)
       Unrealized
Appreciation/
(Depreciation)
 

2Y-10 CMS Index Cap

     0.71    Goldman Sachs Bank USA        05/29/20          USD   215,286        $ (125,353      $ (96,879      $ (28,474
                    

 

 

      

 

 

      

 

 

 

Exchange-Traded Options Written

 

Description    Number of
Contracts
       Expiration
Date
       Exercise
Price
       Notional
Amount (000)
       Value  
Call                                                   

U.S. Treasury 10 Year Note

     17          01/04/19        USD     121.00        USD     3,400        $ (17,531

U.S. Treasury 10 Year Note

     17          01/11/19        USD     121.50        USD     1,700          (11,422

U.S. Treasury 10 Year Note

     17          01/18/19        USD     122.50        USD     1,700          (4,781
                          

 

 

 
                             (33,734
                          

 

 

 
Put                                                   

U.S. Treasury 10 Year Note

     17          01/04/19        USD     120.00        USD     3,400           

3 Month Eurodollar January 2019 Futures

     3,000          01/11/19        USD     97.13        USD     750,000          (18,750

U.S. Treasury 10 Year Note

     17          01/11/19        USD     120.50        USD     1,700          (531

U.S. Treasury 10 Year Note

     17          01/18/19        USD     121.50        USD     1,700          (4,250
                          

 

 

 
                             (23,531
                          

 

 

 
                           $ (57,265
                          

 

 

 

Centrally Cleared Inflation Swaps

 

Paid by the Fund   

Received by the Fund

  

Termination
Date

     Notional
Amount (000)
 

Value

     Upfront
Premium
Paid
(Received)
     Unrealized
Appreciation
(Depreciation)
 
Reference    Frequency    Rate    Frequency
3.33%    At Termination    UK Retail Price Index All Items Monthly    At Termination      01/15/23        GBP     26,595   $ 221,787      $      $ 221,787  
3.57%    At Termination    UK Retail Price Index All Items Monthly    At Termination      11/15/23        GBP     9,670     (43,681             (43,681
3.71%    At Termination    UK Retail Price Index All Items Monthly    At Termination      12/15/23        GBP     6,044     (81,631             (81,631
3.46%    At Termination    UK Retail Price Index All Items Monthly    At Termination      11/15/27        GBP     23,810     204,709               204,709  
UK Retail Price Index
All Items Monthly
   At Termination    3.41%    At Termination      01/15/28        GBP     26,595     (472,467             (472,467
UK Retail Price Index
All Items Monthly
   At Termination    3.61%    At Termination      11/15/28        GBP     9,670     107,442               107,442  
UK Retail Price Index
All Items Monthly
   At Termination    3.70%    At Termination      12/15/28        GBP     6,044     149,385               149,385  
UK Retail Price Index
All Items Monthly
   At Termination    3.55%    At Termination      11/15/32        GBP     23,810     23,959               23,959  
UK Retail Price Index
All Items Monthly
   At Termination    3.60%    At Termination      11/15/42        GBP     14,345     440,643               440,643  
3.55%    At Termination    UK Retail Price Index All Items Monthly    At Termination      11/15/47        GBP     14,345     (727,273             (727,273
UK Retail Price Index
All Items Monthly
   At Termination    3.51%    At Termination      02/15/48        GBP     80     2,495        1,618        877  
                  

 

 

    

 

 

    

 

 

 
                   $ (174,632    $ 1,618      $ (176,250
                  

 

 

    

 

 

    

 

 

 

 

 

14    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Consolidated Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Inflation Protected Bond Portfolio

 

Centrally Cleared Interest Rate Swaps

 

Paid by the Fund   

Received by the Fund

   Effective
Date
     Termination
Date
     Notional
Amount (000)
     Value      Upfront
Premium
Paid
(Received)
     Unrealized
Appreciation
(Depreciation)
 
Rate    Frequency    Rate    Frequency
2.10%    Quarterly    3 month BBR    Quarterly      N/A        08/23/21      AUD     3,545      $ (1,702    $      $ (1,702
2.29%    Semi-Annual    6 month BBR    Semi-Annual      N/A        11/02/21      AUD     3,480        (16,274             (16,274
2.58%    Semi-Annual    3 month BA    Semi-Annual      N/A        12/03/21      CAD     7,213        (52,637             (52,637
6 month NIBOR    Semi-Annual    1.67%    Annual      N/A        12/06/21      NOK     57,066        12,538               12,538  
6 month CIBOR    Semi-Annual    0.12%    Annual      N/A        12/06/21      DKK     42,532        11,341        1,074        10,267  
3 month STIBOR    Quarterly    0.17%    Annual      N/A        12/06/21      SEK     59,159        (1,048      815        (1,863
3.01%    Semi-Annual    3 month LIBOR    Quarterly      N/A        12/07/21      USD     5,464        (65,061      (1,444      (63,617
1.34%    Semi-Annual    6 month LIBOR    Semi-Annual      N/A        11/30/23      GBP     2,526        (8,563      (2,613      (5,950
2.62%    Semi-Annual    3 month BA    Semi-Annual      N/A        12/03/23      CAD     4,428        (51,701      (462      (51,239
6 month EURIBOR    Semi-Annual    0.28%    Annual      N/A        12/04/23      EUR     3,453        20,468        473        19,995  
6 month CIBOR    Semi-Annual    0.42%    Annual      N/A        12/06/23      DKK     25,693        15,998        2,147        13,851  
3 month STIBOR    Quarterly    0.51%    Annual      N/A        12/06/23      SEK     35,879        6,491        1,183        5,308  
3.00%    Semi-Annual    3 month LIBOR    Quarterly      N/A        12/07/23      USD     3,371        (65,842      (1,688      (64,154
6 month EURIBOR    Semi-Annual    0.82%    Annual      03/11/19 (a)        02/15/28      EUR     5,500        44,775               44,775  
6 month EURIBOR    Semi-Annual    0.82%    Annual      03/11/19 (a)        02/15/28      EUR     91,100        683,314               683,314  
1.54%    Semi-Annual    6 month LIBOR    Semi-Annual      N/A        11/30/28      GBP     1,311        (18,606      (3,386      (15,220
2.75%    Semi-Annual    3 month BA    Semi-Annual      N/A        12/03/28      CAD     2,356        (43,976      (1,045      (42,931
6 month EURIBOR    Semi-Annual    0.88%    Annual      N/A        12/04/28      EUR     1,785        17,951        280        17,671  
6 month CIBOR    Semi-Annual    1.03%    Annual      N/A        12/06/28      DKK     13,249        14,611        3,743        10,868  
3 month STIBOR    Quarterly    1.16%    Annual      N/A        12/06/28      SEK     18,699        11,320        3,263        8,057  
3.08%    Semi-Annual    3 month LIBOR    Quarterly      N/A        12/07/28      USD     1,806        (56,776      (1,007      (55,769
2.91%    Semi-Annual    3 month BA    Semi-Annual      N/A        12/03/48      CAD     998        (36,595      (251      (36,344
1.73%    Semi-Annual    6 month LIBOR    Semi-Annual      N/A        12/04/48      GBP     523        (30,711      740        (31,451
6 month EURIBOR    Semi-Annual    1.46%    Annual      N/A        12/04/48      EUR     700        17,002        15        16,987  
6 month CIBOR    Semi-Annual    1.53%    Annual      N/A        12/06/48      DKK     5,137        10,861        300        10,561  
3 month STIBOR    Quarterly    1.68%    Annual      N/A        12/06/48      SEK     7,449        10,630        1,052        9,578  
3.19%    Semi-Annual    3 month LIBOR    Quarterly      N/A        12/07/48      USD     782        (52,709      (711      (51,998
                      

 

 

    

 

 

    

 

 

 
                       $ 375,099      $ 2,478      $ 372,621  
                      

 

 

    

 

 

    

 

 

 

 

  (a) 

Forward Swap.

 

The following reference rates, and their values as of period end, are used for security descriptions:

 

Reference Index          Reference Rate  
3 month BA    3 month Canadian Bankers Acceptances      2.24
3 month BBR    Australian Bank Bill Rate      2.16
3 month LIBOR    London Interbank Offered Rate      2.81
3 month STIBOR    Stockholm Interbank Offered Rate      (0.11 %) 
6 month BBR    Australian Bank Bill Rate      2.22
6 month CIBOR    Copenhagen Interbank Offered Rate      (0.12 %) 
6 month EURIBOR    Euro Interbank Offered Rate      (0.24 %) 
6 month LIBOR    London Interbank Offered Rate      1.04
6 month NIBOR    Norwegian Interbank Offered Rate      1.41

Balances Reported in the Statements of Assets and Liabilities for Centrally Cleared Swaps and Options Written

 

      Swap
Premiums
Paid
     Swap
Premiums
Received
     Unrealized
Appreciation
     Unrealized
Depreciation
     Value  

Centrally Cleared Swaps(a)

   $ 16,703      $ (12,607    $ 2,012,572      $ (1,816,201    $  

Options Written

     N/A        N/A        1,259,056        (49,798      (183,030

 

  (a) 

Includes cumulative appreciation (depreciation) on centrally cleared swaps, as reported in the Consolidated Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities and is net of any previously paid (received) swap premium amounts.

 

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS      15  


Consolidated Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Inflation Protected Bond Portfolio

 

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Assets — Derivative Financial Instruments

 

Futures contracts

                    

Net unrealized appreciation(a)

   $ 195,699      $      $      $      $ 317,422      $      $ 513,121  

Forward foreign currency exchange contracts

                    

Unrealized appreciation on forward foreign currency exchange contracts

                          1,828,048                      1,828,048  

Options purchased

                    

Investments at value — unaffiliated(b)

                          77        125,352               125,429  

Swaps — centrally cleared

                    

Net unrealized appreciation(a)

                                 863,770        1,148,802        2,012,572  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 195,699      $      $      $ 1,828,125      $ 1,306,544      $ 1,148,802      $ 4,479,170  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities — Derivative Financial Instruments

                    

Futures contracts

                    

Net unrealized depreciation(a)

   $ 799,637      $      $      $      $ 2,191,379      $      $ 2,991,016  

Forward foreign currency exchange contracts

                    

Unrealized depreciation on forward foreign currency exchange contracts

                          4,882,861                      4,882,861  

Options written

                    

Options written, at value

                                 182,618        412        183,030  

Swaps — centrally cleared

                    

Net unrealized depreciation(a)

                                 491,149        1,325,052        1,816,201  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 799,637      $      $      $ 4,882,861      $ 2,865,146      $ 1,325,464      $ 9,873,108  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Consolidated Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

 
  (b) 

Includes options purchased at value as reported in the Consolidated Schedule of Investments.

 

For the year ended December 31, 2018, the effect of derivative financial instruments in the Statements of Operations were as follows:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Net Realized Gain (Loss) from:

                    

Futures contracts

   $ (392,432    $      $ 18,478      $      $ (2,542,368    $      $ (2,916,322

Forward foreign currency exchange contracts

                          2,956,865                      2,956,865  

Options purchased(a)

                          (1,891,922      (4,719,154             (6,611,076

Options written

                          1,912,082        1,938,473               3,850,555  

Swaps

                                 1,447,249        5,777,545        7,224,794  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ (392,432    $      $ 18,478      $ 2,977,025      $ (3,875,800    $ 5,777,545      $ 4,504,816  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
Net Change in Unrealized Appreciation (Depreciation) on:                                                 

Futures contracts

   $ (603,938    $      $      $      $ (2,819,356    $      $ (3,423,294

Forward foreign currency exchange contracts

                          (2,078,635                    (2,078,635

Options purchased(b)

                          (322,423      5,534,578               5,212,155  

Options written

                                 (1,994,844      1,670        (1,993,174

Swaps

                                 1,401,405        (1,256,640      144,765  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ (603,938    $      $      $ (2,401,058    $ 2,121,783      $ (1,254,970    $ (2,138,183
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a)

Options purchased are included in net realized gain (loss) from investments — unaffiliated.

 
  (b)

Options purchased are included in net change in unrealized appreciation (depreciation) on investments — unaffiliated.

 

 

 

16    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Consolidated Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Inflation Protected Bond Portfolio

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:

        

Average notional value of contracts — long

   $ 269,364,027  

Average notional value of contracts — short

     629,871,996  

Forward foreign currency exchange contracts:

  

Average amounts purchased — in USD

     256,411,705  

Average amounts sold — in USD

     111,754,507  

Options:

  

Average value of option contracts purchased

     543,012  

Average value of option contracts written

     562,456  

Average notional value of swaption contracts purchased

     34,500,000  

Average notional value of swaption contracts written

     368,925,000  

Interest rate swaps:

  

Average notional value — pays fixed rate

     87,187,894  

Average notional value — receives fixed rate

     60,023,038  

Inflation Swaps:

  

Average notional value — pay fixed rate

     163,280,595  

Average notional value — receives fixed rate

     240,120,155  

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:

 

      Assets        Liabilities  

Derivative Financial Instruments:

       

Futures contracts

   $ 101,314        $ 543,400  

Forward foreign currency exchange contracts

     1,828,048          4,882,861  

Options(a)

     125,429          183,030  

Swaps — Centrally cleared

     205,677           
  

 

 

      

 

 

 

Total derivative assets and liabilities in the Statements of Assets and Liabilities

   $ 2,260,468        $ 5,609,291  

Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)

     (306,991        (600,665
  

 

 

      

 

 

 

Total derivative assets and liabilities subject to an MNA

   $ 1,953,477        $ 5,008,626  
  

 

 

      

 

 

 

 

  (a) 

Includes options purchased at value which is included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Consolidated Schedule of Investments.

 

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

 

Counterparty    Derivative
Assets
Subject to
an MNA by
Counterparty
       Derivatives
Available
for Offset
 (a)
       Non-cash
Collateral
Received
       Cash
Collateral
Received
       Net Amount
of Derivative
Assets
 (b)(d)
 

Bank of America NA

   $ 6,207        $        $        $        $ 6,207  

Citibank NA

     125,429                                     125,429  

Deutsche Bank AG

     9,999          (4,987                          5,012  

Goldman Sachs International

     456,049          (456,049                           

Morgan Stanley & Co. International plc

     1,314,170          (113,357                          1,200,813  

State Street Bank & Trust Co.

     32,333          (32,333                           

Westpac Banking Corp.

     9,290                                     9,290  
  

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 
   $ 1,953,477        $ (606,726      $        $        $ 1,346,751  
  

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS      17  


Consolidated Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Inflation Protected Bond Portfolio

 

 

Counterparty    Derivative
Liabilities
Subject to
an MNA by
Counterparty
       Derivatives
Available
for Offset
 (a)
       Non-cash
Collateral
Pledged
       Cash
Collateral
Pledged
       Net Amount
of Derivative
Liabilities
  (c)(d)
 

Deutsche Bank AG

   $ 4,987        $ (4,987      $        $        $  

Goldman Sachs Bank USA

     125,353                                     125,353  

Goldman Sachs International

     2,327,950          (456,049                          1,871,901  

HSBC Bank plc

     23,116                                     23,116  

Morgan Stanley & Co. International plc

     113,357          (113,357                           

Royal Bank of Canada

     6,246                                     6,246  

Royal Bank of Scotland

     75,732                                     75,732  

State Street Bank & Trust Co.

     2,326,218          (32,333                          2,293,885  

UBS AG

     5,667                                     5,667  
  

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 
   $ 5,008,626        $ (606,726      $        $        $ 4,401,900  
  

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

 

  (a) 

The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

 
  (b) 

Net amount represents the net amount receivable from the counterparty in the event of default.

 
  (c) 

Net amount represents the net amount payable due to the counterparty in the event of default.

 
  (d) 

Net amount may also include forward foreign currency exchange contracts that are not required to be collateralized.

 

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

      Level 1        Level 2        Level 3        Total  

Assets:

                 

Investments:

                 

Long-Term Investments:

                 

Corporate Bonds(a)

   $        $ 9,993,761        $        $ 9,993,761  

Foreign Government Obligations(a)

              58,470,263                   58,470,263  

Mortgage-Backed Securities

              102,333,778                   102,333,778  

U.S. Treasury Obligations

              2,054,280,561                   2,054,280,561  

Short-Term Securities:

                 

Foreign Government Obligations

              156,769,921                   156,769,921  

Money Market Funds

     3,096,013                            3,096,013  

Options Purchased:

                 

Foreign currency exchange contracts

              77                   77  

Interest rate contracts

              125,352                   125,352  

Liabilities:

                 

TBA Sale Commitments

              (38,209,518                 (38,209,518
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ 3,096,013        $ 2,343,764,195        $        $ 2,346,860,208  
  

 

 

      

 

 

      

 

 

      

 

 

 

Derivative Financial Instruments(b)

                 

Assets:

                 

Commodity contracts

   $ 195,699        $        $        $ 195,699  

Foreign currency exchange contracts

              1,828,048                   1,828,048  

Interest rate contracts

     317,422          863,770                   1,181,192  

Other contracts

              1,148,802                   1,148,802  

Liabilities:

                 

Commodity contracts

     (799,637                          (799,637

Foreign currency exchange contracts

              (4,882,861                 (4,882,861

Interest rate contracts

     (2,191,379        (673,767                 (2,865,146

Other contracts

              (1,325,464                 (1,325,464
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ (2,477,895      $ (3,041,472      $             —        $ (5,519,367
  

 

 

      

 

 

      

 

 

      

 

 

 

 

  (a) 

See above Consolidated Schedule of Investments for values in each country.

 
  (b) 

Derivative financial instruments are swaps, futures contracts, forward foreign currency exchange contracts and options written. Swaps, futures contracts, forward foreign currency exchange contracts and options written are valued at the unrealized appreciation (depreciation) on the instrument and options written are shown at value.

 

The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount or face value, including accrued interest, for financial statement purposes. As of period end, Reverse Repurchase Agreements of $190,086,887 are categorized as Level 2 within the disclosure hierarchy.

During the year ended December 31, 2018, there were no transfers between levels.

See notes to financial statements.

 

 

18    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments

December 31, 2018

  

BlackRock Managed Income Fund

(Percentages shown are based on Net Assets)

 

Security          Par
(000)
    Value  
Asset-Backed Securities — 6.1%(a)  

ALM VII R Ltd., Series 2013-7RA, Class A1R, (LIBOR USD 3 Month + 1.41%), 3.85%, 10/15/28(b)

    USD       250     $ 250,500  

Anchorage Capital CLO Ltd., Series 2018-10A, Class A1A, (LIBOR USD 3 Month + 1.20%), 3.63%, 10/15/31(b)

      500       493,146  

Ares XXXIR CLO Ltd., Series 2014-31RA, Class A2, (LIBOR USD 3 Month + 1.30%), 3.99%, 05/24/30(b)

      500       484,795  

Ares XXXVII CLO Ltd., Series 2015-4A, Class A1R, (LIBOR USD 3 Month + 1.17%), 3.61%, 10/15/30(b)

      250       248,326  

Ares XXXVR CLO Ltd., Series 2015-35RA, Class A2, (LIBOR USD 3 Month + 1.40%), 3.84%, 07/15/30(b)

      1,000       1,001,917  

Atlas Senior Loan Fund XI Ltd., Series 2018-11A, Class A1L, (LIBOR USD 3 Month + 1.10%), 3.44%, 07/26/31(b)

      1,000       982,672  

Barings CLO Ltd., Series 2018-3A, Class A1, (LIBOR USD 3 Month + 0.95%), 3.42%, 07/20/29(b)

      500       495,116  

Benefit Street Partners CLO IV Ltd., Series 2014-IVA, Class A1R, (LIBOR USD 3 Month + 1.49%), 3.96%, 01/20/29(b)

      500       500,010  

Benefit Street Partners CLO VIII Ltd., Series 2015-8A, Class A1AR, (LIBOR USD 3 Month + 1.10%), 3.57%, 01/20/31(b)

      500       493,051  

Benefit Street Partners CLO X Ltd.(b):

     

Series 2016-10A, Class A1, (LIBOR USD 3 Month + 1.49%), 3.93%, 01/15/29

      250       249,975  

Series 2016-10A, Class A2, (LIBOR USD 3 Month + 2.00%), 4.44%, 01/15/29

      250       249,967  

Carlyle Global Market Strategies CLO Ltd., Series 2014-2RA, Class A1, (LIBOR USD 3 Month + 1.05%), 3.67%, 05/15/31(b)

      500       493,294  

Carlyle US CLO Ltd., Series 2017-4A, Class A1, (LIBOR USD 3 Month + 1.18%), 3.62%, 01/15/30(b)

      250       247,751  

CBAM Ltd.(b):

     

Series 2018-5A, Class B1, (LIBOR USD 3 Month + 1.40%), 3.85%, 04/17/31

      1,000       948,684  

Series 2018-6A, Class A, (LIBOR USD 3 Month + 0.94%), 3.33%, 07/15/31

      500       493,142  

Series 2018-6A, Class B1, (LIBOR USD 3 Month + 1.50%), 3.89%, 07/15/31

      500       489,108  

CIFC Funding Ltd.(b):

     

Series 2013-4A, Class A1RR, (LIBOR USD 3 Month + 1.06%), 3.57%, 04/27/31

      1,000       987,322  

Series 2013-4A, Class A2RR, (LIBOR USD 3 Month + 1.30%), 3.81%, 04/27/31

      650       647,289  

Series 2014-2RA, Class A1, (LIBOR USD 3 Month + 1.05%), 3.54%, 04/24/30

      1,000       988,547  

Series 2016-1A, Class A, (LIBOR USD 3 Month + 1.48%), 3.95%, 10/21/28

      250       250,170  

Grippen Park CLO Ltd., Series 2017-1A, Class A, (LIBOR USD 3 Month + 1.26%), 3.73%, 01/20/30(b)

      500       496,645  

Highbridge Loan Management Ltd., Series 12A-18, Class A2, (LIBOR USD 3 Month + 1.50%), 3.87%, 07/18/31(b)

      500       483,819  

Madison Park Funding XXV Ltd., Series 2017-25A, Class A1, (LIBOR USD 3 Month + 1.18%), 3.67%, 04/25/29(b)

      1,500       1,491,230  

Madison Park Funding XXVII Ltd., Series 2018-27A, Class A1A, (LIBOR USD 3 Month + 1.03%), 3.50%, 04/20/30(b)

      1,000       985,879  

MP CLO III Ltd., Series 2013-1A, Class AR, (LIBOR USD 3 Month + 1.25%), 3.72%, 10/20/30(b)

      250       248,636  

Neuberger Berman Loan Advisers CLO 26 Ltd., Series 2017-26A, Class A, (LIBOR USD 3 Month + 1.17%), 3.62%, 10/18/30(b)

      750       743,977  

Oaktree CLO Ltd., Series 2014-2A, Class A1AR, (LIBOR USD 3 Month + 1.22%), 3.69%, 10/20/26(b)

      500       500,246  

OZLM XIX Ltd., Series 2017-19A, Class A1, (LIBOR USD 3 Month + 1.22%), 3.66%, 11/22/30(b)

      250       248,892  
Security          Par
(000)
    Value  
Asset-Backed Securities (continued)  

Palmer Square CLO Ltd., Series 2018-2A, Class A1A, (LIBOR USD 3 Month + 1.10%), 3.36%, 07/16/31(b)

    USD       1,000     $ 985,110  

Webster Park CLO Ltd., Series 2015-1A, Class A1BR, (LIBOR USD 3 Month + 1.35%), 3.82%, 07/20/30(b)

      1,000       998,777  
   

 

 

 

Total Asset-Backed Securities — 6.1%
(Cost: $18,395,777)

 

    18,177,993  
   

 

 

 

Corporate Bonds — 52.4%

 

Aerospace & Defense — 1.4%

 

Boeing Co. (The):

     

2.20%, 10/30/22

      60       57,876  

2.80%, 03/01/23

      20       19,653  

General Dynamics Corp., 3.88%, 07/15/21

      420       429,272  

Harris Corp.:

     

3.83%, 04/27/25

      75       73,567  

4.40%, 06/15/28

      65       64,705  

L3 Technologies, Inc.:

     

4.95%, 02/15/21

      50       51,165  

3.85%, 12/15/26

      100       96,806  

Lockheed Martin Corp.:

     

3.35%, 09/15/21

      440       442,921  

2.90%, 03/01/25

      150       143,969  

4.07%, 12/15/42

      35       33,397  

3.80%, 03/01/45

      35       31,890  

Northrop Grumman Corp.:

     

2.08%, 10/15/20

      145       142,201  

3.50%, 03/15/21

      280       282,147  

2.55%, 10/15/22

      170       164,501  

3.25%, 01/15/28

      135       125,955  

Rockwell Collins, Inc.:

     

2.80%, 03/15/22

      65       63,179  

3.20%, 03/15/24

      50       48,151  

3.50%, 03/15/27

      45       42,241  

United Technologies Corp.:

     

1.90%, 05/04/20

      12       11,776  

3.35%, 08/16/21

      620       618,322  

1.95%, 11/01/21

      100       95,995  

3.65%, 08/16/23

      860       856,630  

2.80%, 05/04/24

      170       160,242  

4.13%, 11/16/28

      70       69,349  

4.50%, 06/01/42

      105       99,198  
   

 

 

 
        4,225,108  
Air Freight & Logistics — 0.1%  

FedEx Corp.:

     

3.25%, 04/01/26

      65       61,705  

4.55%, 04/01/46

      90       81,798  

4.05%, 02/15/48

      40       33,506  
   

 

 

 
        177,009  
Airlines — 0.3%  

American Airlines Pass-Through Trust, Series 2017-1, Class AA, 3.65%, 02/15/29

      69       68,165  

Delta Air Lines, Inc.:

     

2.88%, 03/13/20

      50       49,668  

2.60%, 12/04/20

      105       103,248  

3.63%, 03/15/22

      258       252,476  

3.80%, 04/19/23

      100       98,400  

United Airlines Pass-Through Trust, Series 2013-1, Class B, 5.38%, 08/15/21

      142       145,685  

Virgin Australia Pass-Through Trust, Series 2013-1, Class B, 6.00%, 10/23/20(a)

      27       27,320  
   

 

 

 
        744,962  
 

 

 

SCHEDULES OF INVESTMENTS      19  


Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Managed Income Fund

(Percentages shown are based on Net Assets)

 

Security          Par
(000)
    Value  
Auto Components — 0.1%                  

Aptiv Corp., 4.15%, 03/15/24

    USD       32     $ 32,032  

Aptiv plc, 3.15%, 11/19/20

      160       158,400  

ZF North America Capital, Inc., 4.75%, 04/29/25(a)

      150       139,600  
   

 

 

 
        330,032  
Automobiles — 0.6%                  

BMW US Capital LLC, 1.85%, 09/15/21(a)

      25       23,965  

Daimler Finance North America LLC, 2.30%, 02/12/21(a)

      500       487,860  

Ford Motor Co.:

     

4.35%, 12/08/26

      20       17,816  

5.29%, 12/08/46

      11       9,031  

General Motors Co.:

     

5.00%, 10/01/28

      50       47,376  

5.20%, 04/01/45

      155       128,457  

Hyundai Capital America(a):

     

1.75%, 09/27/19

      20       19,745  

2.55%, 04/03/20

      40       39,482  

Nissan Motor Acceptance Corp.(a):

     

2.55%, 03/08/21

      40       38,878  

3.15%, 03/15/21

      75       73,940  

2.65%, 07/13/22

      50       47,813  

Volkswagen Group of America Finance LLC(a):

     

2.40%, 05/22/20

      400       393,781  

3.88%, 11/13/20

      200       200,976  

4.00%, 11/12/21

      200       199,876  
   

 

 

 
        1,728,996  
Banks — 16.3%                  

ANZ New Zealand Int’l Ltd., 2.20%, 07/17/20(a)

      200       196,638  

Australia & New Zealand Banking Group Ltd.:

     

3.30%, 05/17/21

      450       449,546  

(USD Swap Rate 5 Year + 5.17%), 6.75%(a)(b)(c)

      200       196,250  

Banco Santander SA:

     

3.50%, 04/11/22

      200       196,268  

3.13%, 02/23/23

      200       189,089  

Bank of America Corp.:

     

(LIBOR USD 3 Month + 0.66%), 2.37%, 07/21/21(b)

      80       78,568  

(LIBOR USD 3 Month + 0.37%), 2.74%, 01/23/22(b)

      125       123,103  

(LIBOR USD 3 Month + 0.63%), 3.50%, 05/17/22(b)

      1,810       1,810,272  

2.50%, 10/21/22

      210       202,194  

3.30%, 01/11/23

      80       78,789  

(LIBOR USD 3 Month + 1.02%), 2.88%, 04/24/23(b)

      1,385       1,347,042  

(LIBOR USD 3 Month + 0.78%), 3.55%, 03/05/24(b)

      60       59,274  

(LIBOR USD 3 Month + 0.94%), 3.86%, 07/23/24(b)

      105       104,750  

Series L, 3.95%, 04/21/25

      350       339,127  

4.45%, 03/03/26

      325       321,293  

Series DD, (LIBOR USD 3 Month + 4.55%), 6.30%(b)(c)

      750       761,738  

4.25%, 10/22/26

      91       88,506  

Series L, 4.18%, 11/25/27

      135       129,757  

(LIBOR USD 3 Month + 1.51%), 3.71%, 04/24/28(b)

      100       95,927  

(LIBOR USD 3 Month + 1.37%), 3.59%, 07/21/28(b)

      100       94,832  

Series L, 4.75%, 04/21/45

      60       59,183  

Bank of Montreal, 1.90%, 08/27/21

      150       144,876  

Bank of Nova Scotia (The):

     

2.15%, 07/14/20

      30       29,579  

2.45%, 09/19/22

      160       154,483  

Barclays Bank plc, (LIBOR USD 3 Month + 0.65%), 3.24%, 08/07/20(b)

      250       249,425  

Barclays plc:

     

3.20%, 08/10/21

      350       340,146  

(USD Swap Semi 5 Year + 6.77%), 7.88%(b)(c)

      200       200,000  

3.68%, 01/10/23

      200       192,171  

(LIBOR USD 3 Month + 1.40%), 4.61%, 02/15/23(b)

      200       198,312  

(LIBOR USD 3 Month + 1.38%), 4.01%, 05/16/24(b)

      200       190,444  
Security          Par
(000)
    Value  
Banks (continued)                  

BB&T Corp.:

     

5.25%, 11/01/19

    USD       150     $ 152,507  

2.15%, 02/01/21

      480       469,899  

2.05%, 05/10/21

      100       97,373  

3.20%, 09/03/21

      760       759,254  

2.75%, 04/01/22

      230       226,104  

BNP Paribas SA:

     

5.00%, 01/15/21

      480       496,691  

(USD Swap Semi 5 Year + 6.31%), 7.63%(a)(b)(c)

      225       229,219  

3.50%, 03/01/23(a)

      200       193,902  

(USD Swap Semi 5 Year + 2.84%), 5.13%(a)(b)(c)

      200       173,000  

(USD Swap Semi 5 Year + 1.48%), 4.38%, 03/01/33(a)(b)

      200       187,221  

Capital One NA, 2.95%, 07/23/21

      425       418,010  

Citibank NA, (LIBOR USD 3 Month + 0.30%), 2.77%, 10/20/20(b)

      625       620,587  

Citigroup, Inc.:

     

2.70%, 03/30/21

      550       541,832  

2.90%, 12/08/21

      325       319,744  

2.75%, 04/25/22

      330       320,554  

(LIBOR USD 3 Month + 0.72%), 3.14%, 01/24/23(b)

      60       58,935  

(LIBOR USD 3 Month + 0.95%), 2.88%, 07/24/23(b)

      430       416,123  

3.20%, 10/21/26

      155       143,094  

4.30%, 11/20/26

      275       264,446  

(LIBOR USD 3 Month + 1.56%), 3.89%, 01/10/28(b)

      50       48,246  

(LIBOR USD 3 Month + 1.19%), 4.07%, 04/23/29(b)

      60       58,377  

Citizens Bank NA:

     

2.25%, 10/30/20

      300       294,312  

2.55%, 05/13/21

      1,040       1,017,202  

2.65%, 05/26/22

      280       272,030  

Commonwealth Bank of Australia:

     

2.30%, 03/12/20

      250       247,387  

2.50%, 09/18/22(a)

      100       96,587  

Cooperatieve Rabobank UA:

     

3.88%, 02/08/22

      250       252,763  

3.88%, 09/26/23(a)

      300       301,038  

Credit Agricole SA, (USD Swap Semi 5 Year + 6.19%), 8.12%(a)(b)(c)

      400       411,000  

Credit Suisse Group Funding Guernsey Ltd.:

     

2.75%, 03/26/20

      250       247,303  

3.13%, 12/10/20

      1,210       1,198,165  

3.45%, 04/16/21

      250       249,102  

3.80%, 06/09/23

      250       245,322  

Danske Bank A/S:

     

2.20%, 03/02/20(a)

      200       195,704  

(US Treasury Yield Curve Rate T Note Constant Maturity 7 Year + 4.13%), 7.00%(b)(c)

      200       180,524  

Discover Bank, 4.20%, 08/08/23

      250       250,057  

Fifth Third Bancorp:

     

2.60%, 06/15/22

      180       175,095  

(LIBOR USD 3 Month + 3.03%), 5.10%(b)(c)

      175       152,031  

Fifth Third Bank, 3.35%, 07/26/21

      360       360,725  

HSBC Holdings plc:

     

3.40%, 03/08/21

      350       349,092  

2.95%, 05/25/21

      780       769,949  

(USD Swap Rate 5 Year + 5.51%), 6.87%(b)(c)

      400       411,100  

4.88%, 01/14/22

      250       258,416  

4.25%, 03/14/24

      225       223,292  

(LIBOR USD 3 Month + 0.99%), 3.95%, 05/18/24(b)

      355       353,083  

(USD Swap Rate 5 Year + 4.37%), 6.37%(b)(c)

      200       192,000  

(USD Swap Rate 5 Year + 3.61%), 6.50%(b)(c)

      490       445,287  

Huntington Bancshares, Inc.:

     

3.15%, 03/14/21

      840       836,260  

4.00%, 05/15/25

      250       251,306  
 

 

 

20    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Managed Income Fund

(Percentages shown are based on Net Assets)

 

Security          Par
(000)
    Value  
Banks (continued)                  

Huntington National Bank (The), 3.25%, 05/14/21

    USD       500     $ 498,757  

ING Groep NV, 4.10%, 10/02/23

      200       199,878  

Intesa Sanpaolo SpA:

     

3.88%, 01/15/19

      200       199,963  

3.13%, 07/14/22(a)

      375       346,730  

JPMorgan Chase & Co.:

     

2.40%, 06/07/21

      225       220,074  

2.30%, 08/15/21

      1,045       1,019,547  

(LIBOR USD 3 Month + 0.61%), 3.41%, 06/18/22(b)

      410       405,494  

3.25%, 09/23/22

      60       59,523  

2.97%, 01/15/23

      1,180       1,150,475  

(LIBOR USD 3 Month + 0.94%), 2.78%, 04/25/23(b)

      275       266,653  

3.38%, 05/01/23

      175       171,173  

2.70%, 05/18/23

      260       249,738  

(LIBOR USD 3 Month + 1.23%), 3.72%, 10/24/23(b)

      260       259,934  

(LIBOR USD 3 Month + 0.73%), 3.56%, 04/23/24(b)

      125       124,055  

(LIBOR USD 3 Month + 0.89%), 3.37%, 07/23/24(b)

      110       107,472  

(LIBOR USD 3 Month + 1.34%), 3.78%, 02/01/28(b)

      25       24,268  

(LIBOR USD 3 Month + 1.12%), 4.01%, 04/23/29(b)

      100       98,036  

Series U, (LIBOR USD 3 Month + 0.95%), 3.51%, 02/02/37(b)

      590       477,900  

5.63%, 08/16/43

      200       219,859  

4.85%, 02/01/44

      65       66,192  

4.95%, 06/01/45

      105       106,484  

Series W, (LIBOR USD 3 Month + 1.00%), 3.62%, 05/15/47(b)

      192       140,160  

KeyBank NA, 3.35%, 06/15/21

      250       250,780  

KeyCorp, 2.90%, 09/15/20

      325       322,547  

Lloyds Banking Group plc:

     

3.10%, 07/06/21

      600       588,379  

4.05%, 08/16/23

      310       306,256  

(USD Swap Semi 5 Year + 4.50%), 7.50%(b)(c)

      400       386,080  

Macquarie Bank Ltd., (USD Swap Semi 5 Year + 3.70%), 6.13%(a)(b)(c)

      200       170,750  

Mitsubishi UFJ Financial Group, Inc.:

     

3.00%, 02/22/22

      63       62,118  

2.67%, 07/25/22

      95       92,324  

3.46%, 03/02/23

      100       99,386  

3.76%, 07/26/23

      210       210,968  

Mizuho Financial Group, Inc., 2.63%, 04/12/21(a)

      200       196,207  

National Australia Bank Ltd., 2.50%, 01/12/21

      250       245,843  

Nordea Bank AB, 2.13%, 05/29/20(a)

      200       196,964  

Regions Bank, (LIBOR USD 3 Month + 0.50%), 3.37%, 08/13/21(b)

      485       483,012  

Royal Bank of Canada:

     

2.35%, 10/30/20

      50       49,392  

2.50%, 01/19/21

      50       49,427  

2.75%, 02/01/22

      30       29,520  

Royal Bank of Scotland Group plc:

     

(USD Swap Semi 5 Year + 5.80%), 7.50%(b)(c)

      200       198,000  

(USD Swap Semi 5 Year + 7.60%), 8.62%(b)(c)

      400       414,000  

3.88%, 09/12/23

      200       191,738  

(LIBOR USD 3 Month + 1.55%), 4.37%, 06/25/24(b)

      200       191,072  

Santander Holdings USA, Inc., 3.70%, 03/28/22

      100       98,210  

Santander UK Group Holdings plc, 2.88%, 08/05/21

      255       245,987  

Santander UK plc:

     

2.13%, 11/03/20

      200       195,336  

5.00%, 11/07/23(a)

      200       195,298  

Skandinaviska Enskilda Banken AB:

     

2.45%, 05/27/20(a)

      750       741,508  

2.80%, 03/11/22

      470       460,517  

Societe Generale SA(a)(b)(c):

     

(USD Swap Rate 5 Year + 5.87%), 8.00%

      400       401,500  

(USD Swap Semi 5 Year + 3.93%), 6.75%

      200       170,050  
Security          Par
(000)
    Value  
Banks (continued)                  

Standard Chartered plc, (USD Swap Semi 5 Year + 6.30%), 7.50%(a)(b)(c)

    USD       200     $ 200,500  

Sumitomo Mitsui Financial Group, Inc.:

     

(LIBOR USD 3 Month + 1.68%), 4.45%, 03/09/21(b)

      120       122,311  

2.44%, 10/19/21

      450       438,774  

3.10%, 01/17/23

      265       259,950  

SunTrust Bank:

     

2.25%, 01/31/20

      30       29,644  

(LIBOR USD 3 Month + 0.50%), 3.53%, 10/26/21(b)

      330       330,395  

2.45%, 08/01/22

      100       96,406  

SunTrust Banks, Inc.:

     

2.70%, 01/27/22

      455       443,756  

4.00%, 05/01/25

      40       40,129  

Svenska Handelsbanken AB, 2.40%, 10/01/20

      500       492,305  

Swedbank AB, 2.65%, 03/10/21(a)

      410       404,130  

Toronto-Dominion Bank (The):

     

2.50%, 12/14/20

      115       113,866  

2.55%, 01/25/21

      50       49,492  

1.80%, 07/13/21

      100       96,769  

UBS Group Funding Switzerland AG:

     

2.95%, 09/24/20(a)

      600       593,656  

3.00%, 04/15/21(a)

      400       396,907  

(LIBOR USD 3 Month + 0.95%), 2.86%, 08/15/23(a)(b)

      200       192,357  

(USD Swap Semi 5 Year + 4.87%), 7.00%(b)(c)

      200       203,500  

US Bancorp, Series V, 2.63%, 01/24/22

      345       339,758  

US Bank NA:

     

3.15%, 04/26/21

      425       425,392  

3.45%, 11/16/21

      350       352,628  

2.85%, 01/23/23

      470       461,978  

2.80%, 01/27/25

      250       240,216  

Wells Fargo & Co.:

     

2.55%, 12/07/20

      300       295,773  

2.50%, 03/04/21

      350       344,250  

2.10%, 07/26/21

      300       290,634  

3.50%, 03/08/22

      420       418,602  

2.63%, 07/22/22

      395       380,883  

3.00%, 02/19/25

      75       70,682  

4.90%, 11/17/45

      75       73,131  

4.40%, 06/14/46

      190       174,289  

Wells Fargo Bank NA, 2.60%, 01/15/21

      250       246,895  

Westpac Banking Corp.:

     

2.15%, 03/06/20

      385       380,872  

2.80%, 01/11/22

      80       78,506  

2.75%, 01/11/23

      50       48,519  

(USD Swap Rate 5 Year + 2.89%), 5.00%(b)(c)

      435       360,718  
     

 

 

 
        48,196,939  
Beverages — 0.9%  

Anheuser-Busch Cos. LLC(a):

     

3.65%, 02/01/26

      270       255,298  

4.70%, 02/01/36

      150       139,110  

4.90%, 02/01/46

      97       89,956  

Anheuser-Busch InBev Finance, Inc.:

     

2.65%, 02/01/21

      920       904,724  

3.30%, 02/01/23

      865       841,082  

Constellation Brands, Inc., 3.20%, 02/15/23

      40       38,788  

Keurig Dr. Pepper, Inc., 4.06%, 05/25/23(a)

      55       54,810  

Molson Coors Brewing Co., 2.10%, 07/15/21

      175       168,727  

PepsiCo, Inc., 2.15%, 10/14/20

      25       24,688  
     

 

 

 
        2,517,183  
Biotechnology — 0.9%                  

AbbVie, Inc.:

     

2.90%, 11/06/22

      250       243,257  

3.20%, 11/06/22

      125       123,134  
 

 

 

SCHEDULES OF INVESTMENTS      21  


Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Managed Income Fund

(Percentages shown are based on Net Assets)

 

Security          Par
(000)
    Value  
Biotechnology (continued)                  

2.85%, 05/14/23

    USD       530     $ 510,698  

3.75%, 11/14/23

      225       223,862  

3.20%, 05/14/26

      225       208,526  

4.25%, 11/14/28

      35       33,978  

4.88%, 11/14/48

      25       23,325  

Amgen, Inc.:

     

3.88%, 11/15/21

      100       101,322  

3.63%, 05/15/22

      55       55,378  

4.40%, 05/01/45

      100       93,519  

Baxalta, Inc., 3.60%, 06/23/22

      9       8,932  

Celgene Corp., 2.25%, 08/15/21

      30       29,084  

Gilead Sciences, Inc.:

     

4.40%, 12/01/21

      50       51,600  

3.25%, 09/01/22

      370       369,130  

2.50%, 09/01/23

      315       303,877  

3.50%, 02/01/25

      100       98,679  

4.50%, 02/01/45

      6       5,770  

4.75%, 03/01/46

      65       64,486  

4.15%, 03/01/47

      75       69,086  
     

 

 

 
        2,617,643  
Capital Markets — 2.8%                  

Bank of New York Mellon Corp. (The):

     

Series E, (LIBOR USD 3 Month + 3.42%), 4.95%(b)(c)

      375       365,625  

2.50%, 04/15/21

      75       74,077  

2.05%, 05/03/21

      100       97,602  

2.95%, 01/29/23

      350       344,492  

3.25%, 05/16/27

      125       120,785  

Credit Suisse AG, 3.00%, 10/29/21

      300       296,196  

Credit Suisse Group AG(a)(b)(c):

     

(USD Swap Semi 5 Year + 4.60%), 7.50%

      425       414,375  

(USD Swap Semi 5 Year + 4.33%), 7.25%

      200       188,670  

Deutsche Bank AG:

     

2.95%, 08/20/20

      80       77,649  

4.25%, 02/04/21

      540       532,179  

Goldman Sachs Group, Inc. (The):

     

Series L, (LIBOR USD 3 Month + 3.88%), 5.70%(b)(c)

      125       121,887  

2.60%, 12/27/20

      65       63,783  

3.00%, 04/26/22

      275       266,322  

(LIBOR USD 3 Month + 1.11%), 3.62%, 04/26/22(b)

      1,170       1,156,837  

3.63%, 01/22/23

      70       68,899  

(LIBOR USD 3 Month + 1.05%), 2.91%, 06/05/23(b)

      260       249,597  

(LIBOR USD 3 Month + 0.99%), 2.90%, 07/24/23(b)

      75       71,443  

3.50%, 01/23/25

      50       47,396  

3.75%, 02/25/26

      100       94,565  

(LIBOR USD 3 Month + 1.30%), 4.22%, 05/01/29(b)

      125       120,299  

5.15%, 05/22/45

      105       98,190  

ING Bank NV, 2.50%, 10/01/19(a)

      250       248,862  

Intercontinental Exchange, Inc.:

     

2.35%, 09/15/22

      50       48,319  

4.25%, 09/21/48

      40       39,154  

Moody’s Corp., 2.75%, 12/15/21

      110       107,877  

Morgan Stanley:

     

2.50%, 04/21/21

      20       19,576  

2.63%, 11/17/21

      490       478,253  

2.75%, 05/19/22

      680       661,559  

(LIBOR USD 3 Month + 0.93%), 3.40%, 07/22/22(b)

      500       492,982  

3.13%, 01/23/23

      330       322,392  

3.75%, 02/25/23

      250       249,559  

(LIBOR USD 3 Month + 0.85%), 3.74%, 04/24/24(b)

      95       94,191  

(LIBOR USD 3 Month + 1.34%), 3.59%, 07/22/28(b)

      150       141,825  

(LIBOR USD 3 Month + 1.14%), 3.77%, 01/24/29(b)

      250       239,194  

State Street Corp.(b):

     

Series F, (LIBOR USD 3 Month + 3.60%), 5.25%(c)

      350       343,437  
Security          Par
(000)
    Value  
Capital Markets (continued)                  

(LIBOR USD 3 Month + 0.77%), 3.78%, 12/03/24

    USD       55     $ 55,131  
     

 

 

 
        8,413,179  
Chemicals — 0.6%                  

Airgas, Inc., 2.38%, 02/15/20

      30       29,879  

Dow Chemical Co. (The), 4.38%, 11/15/42

      89       78,101  

DowDuPont, Inc.:

     

3.77%, 11/15/20

      325       328,116  

4.49%, 11/15/25

      105       108,105  

5.32%, 11/15/38

      35       36,039  

5.42%, 11/15/48

      35       36,363  

EI du Pont de Nemours & Co., 2.20%, 05/01/20

      110       109,228  

Praxair, Inc., 3.00%, 09/01/21

      50       50,042  

Sherwin-Williams Co. (The):

     

2.25%, 05/15/20

      600       590,814  

2.75%, 06/01/22

      380       367,844  

4.50%, 06/01/47

      75       67,632  
     

 

 

 
        1,802,163  
Commercial Services & Supplies — 0.1%                  

RELX Capital, Inc., 3.50%, 03/16/23

      40       39,683  

Republic Services, Inc.:

     

5.25%, 11/15/21

      60       63,515  

3.38%, 11/15/27

      35       33,528  

3.95%, 05/15/28

      15       15,010  
     

 

 

 
        151,736  
Communications Equipment — 0.2%                  

Cisco Systems, Inc.:

     

1.85%, 09/20/21

      100       97,236  

2.20%, 09/20/23

      405       387,837  
     

 

 

 
        485,073  
Consumer Finance — 3.2%                  

AerCap Ireland Capital DAC:

     

4.25%, 07/01/20

      150       150,357  

4.50%, 05/15/21

      150       150,433  

4.63%, 07/01/22

      430       431,494  

4.13%, 07/03/23

      150       146,333  

American Express Co.:

     

2.20%, 10/30/20

      245       240,579  

(LIBOR USD 3 Month + 0.53%), 3.17%, 05/17/21(b)

      45       44,797  

2.50%, 08/01/22

      165       159,255  

3.40%, 02/27/23

      140       138,697  

American Express Credit Corp., 2.38%, 05/26/20

      150       148,427  

American Honda Finance Corp.:

     

1.65%, 07/12/21

      30       28,901  

2.60%, 11/16/22

      30       29,189  

3.45%, 07/14/23

      115       115,033  

Capital One Financial Corp.:

     

Series E, (LIBOR USD 3 Month + 3.80%), 5.55%(b)(c)

      450       433,400  

2.40%, 10/30/20

      75       73,426  

3.05%, 03/09/22

      580       565,692  

3.50%, 06/15/23

      135       132,580  

4.25%, 04/30/25

      150       148,888  

Caterpillar Financial Services Corp.:

     

3.15%, 09/07/21

      55       55,145  

2.40%, 06/06/22

      35       34,164  

2.55%, 11/29/22

      50       48,566  

Discover Financial Services:

     

3.85%, 11/21/22

      60       59,584  

4.10%, 02/09/27

      75       70,018  

Ford Motor Credit Co. LLC:

     

2.68%, 01/09/20

      500       491,717  

2.46%, 03/27/20

      200       195,787  

2.43%, 06/12/20

      1,380       1,343,739  
 

 

 

22    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Managed Income Fund

(Percentages shown are based on Net Assets)

 

Security          Par
(000)
    Value  
Consumer Finance (continued)                  

3.34%, 03/18/21

    USD       240     $ 232,875  

3.81%, 10/12/21

      400       388,478  

4.13%, 08/04/25

      200       180,156  

General Motors Financial Co., Inc.:

     

2.65%, 04/13/20

      130       127,829  

3.70%, 11/24/20

      960       956,118  

3.20%, 07/06/21

      55       53,724  

4.38%, 09/25/21

      160       160,310  

3.25%, 01/05/23

      775       729,835  

3.70%, 05/09/23

      330       313,972  

4.15%, 06/19/23

      35       34,102  

4.00%, 01/15/25

      50       46,771  

4.30%, 07/13/25

      35       33,167  

Series B, (LIBOR USD 3 Month + 3.44%), 6.50%(b)(c)

      150       126,750  

Harley-Davidson Financial Services, Inc., 2.55%, 06/09/22(a)

      40       38,162  

HSBC USA, Inc., 2.75%, 08/07/20

      100       98,912  

John Deere Capital Corp.:

     

2.38%, 07/14/20

      100       99,077  

2.35%, 01/08/21

      25       24,657  

3.45%, 06/07/23

      200       200,756  

PACCAR Financial Corp., 2.80%, 03/01/21

      60       59,457  

Toyota Motor Credit Corp.:

     

1.90%, 04/08/21

      50       49,017  

2.75%, 05/17/21

      125       124,295  

2.80%, 07/13/22

      50       49,341  
   

 

 

 
        9,563,962  
Containers & Packaging — 0.1%                  

WestRock Co.(a):

     

3.75%, 03/15/25

      90       88,312  

4.65%, 03/15/26

      100       101,528  

4.00%, 03/15/28

      75       71,222  
   

 

 

 
        261,062  
Diversified Consumer Services — 0.0%                  

Boston University, Series CC, 4.06%, 10/01/48

      21       21,064  
   

 

 

 
Diversified Financial Services — 0.3%                  

AXA Equitable Holdings, Inc., 3.90%, 04/20/23(a)

      50       49,381  

GE Capital International Funding Co. Unlimited Co.:

     

2.34%, 11/15/20

      200       193,011  

4.42%, 11/15/35

      200       167,513  

Shell International Finance BV:

     

2.25%, 01/06/23

      400       384,689  

3.50%, 11/13/23

      180       182,008  

3.63%, 08/21/42

      25       22,662  
   

 

 

 
        999,264  
Diversified Telecommunication Services — 1.4%  

AT&T, Inc.:

     

3.20%, 03/01/22

      1,320       1,302,122  

2.63%, 12/01/22

      170       163,310  

3.60%, 02/17/23

      410       407,459  

4.10%, 02/15/28

      20       19,232  

4.30%, 02/15/30

      129       121,903  

4.50%, 05/15/35

      150       134,670  

5.35%, 09/01/40

      70       68,003  

5.45%, 03/01/47

      5       4,883  

4.50%, 03/09/48

      145       124,078  

Deutsche Telekom International Finance BV, 2.23%, 01/17/20(a)

      150       148,135  

Orange SA, 1.63%, 11/03/19

      125       123,436  

Telefonica Emisiones SA:

     

5.88%, 07/15/19

      75       75,899  

5.13%, 04/27/20

      30       30,619  
Security          Par
(000)
    Value  
Diversified Telecommunication Services (continued)  

Verizon Communications, Inc.:

     

2.95%, 03/15/22

    USD       295     $ 291,892  

5.15%, 09/15/23

      480       510,890  

4.27%, 01/15/36

      300       280,162  

5.25%, 03/16/37

      85       88,542  

3.85%, 11/01/42

      183       157,760  

4.52%, 09/15/48

      75       70,294  

4.67%, 03/15/55

      104       95,503  
   

 

 

 
        4,218,792  
Electric Utilities — 1.7%                  

Alliant Energy Finance LLC, 3.75%, 06/15/23(a)

      65       65,401  

American Electric Power Co., Inc., 2.15%, 11/13/20

      120       117,607  

Baltimore Gas & Electric Co., 3.50%, 11/15/21

      100       100,741  

DTE Electric Co., 3.90%, 06/01/21

      75       76,299  

Duke Energy Carolinas LLC, 6.10%, 06/01/37

      74       88,772  

Duke Energy Corp.:

     

1.80%, 09/01/21

      70       67,001  

3.55%, 09/15/21

      75       75,204  

2.40%, 08/15/22

      440       422,721  

3.95%, 10/15/23

      180       181,624  

2.65%, 09/01/26

      145       131,825  

3.75%, 09/01/46

      40       34,582  

Duke Energy Progress LLC:

     

2.80%, 05/15/22

      45       44,393  

4.15%, 12/01/44

      80       77,665  

Emera, Inc., Series 16-A, (LIBOR USD 3 Month + 5.44%), 6.75%, 06/15/76(b)

      120       120,230  

Enel Finance International NV, 4.25%, 09/14/23(a)

      400       391,114  

Eversource Energy, Series K, 2.75%, 03/15/22

      75       73,699  

Exelon Corp.:

     

2.85%, 06/15/20

      40       39,683  

2.45%, 04/15/21

      325       317,862  

3.46%, 06/01/22

      150       146,685  

3.95%, 06/15/25

      175       172,728  

3.40%, 04/15/26

      5       4,754  

4.45%, 04/15/46

      25       23,515  

FirstEnergy Corp.:

     

Series A, 2.85%, 07/15/22

      17       16,568  

Series B, 3.90%, 07/15/27

      200       193,842  

Florida Power & Light Co., 4.13%, 02/01/42

      100       100,836  

Georgia Power Co.:

     

Series C, 2.00%, 09/08/20

      45       43,978  

2.85%, 05/15/22

      45       44,207  

Mid-Atlantic Interstate Transmission LLC, 4.10%, 05/15/28(a)

      40       39,715  

NextEra Energy Capital Holdings, Inc.:

     

Series H, 3.34%, 09/01/20

      235       235,466  

3.55%, 05/01/27

      15       14,314  

Oncor Electric Delivery Co. LLC, 4.10%, 11/15/48(a)

      110       109,853  

Pacific Gas & Electric Co.:

     

4.25%, 08/01/23(a)

      120       111,189  

4.65%, 08/01/28(a)

      100       91,677  

4.75%, 02/15/44

      50       41,053  

PacifiCorp, 4.10%, 02/01/42

      50       48,553  

PPL Electric Utilities Corp., 3.95%, 06/01/47

      75       72,684  

Progress Energy, Inc., 6.00%, 12/01/39

      75       88,064  

Southern Co. (The), 2.95%, 07/01/23

      225       217,281  

Virginia Electric & Power Co.:

     

5.00%, 06/30/19

      10       10,077  

2.95%, 01/15/22

      90       89,020  

Series C, 2.75%, 03/15/23

      400       390,019  

4.45%, 02/15/44

      150       150,836  
   

 

 

 
        4,883,337  
 

 

 

SCHEDULES OF INVESTMENTS      23  


Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Managed Income Fund

(Percentages shown are based on Net Assets)

 

Security          Par
(000)
    Value  
Electronic Equipment, Instruments & Components — 0.1%  

Amphenol Corp.:

     

2.20%, 04/01/20

    USD       80     $ 78,816  

4.00%, 02/01/22

      60       61,471  

Corning, Inc., 2.90%, 05/15/22

      30       29,533  
   

 

 

 
        169,820  
Energy Equipment & Services — 0.2%                  

Baker Hughes a GE Co. LLC:

     

3.20%, 08/15/21

      20       19,769  

2.77%, 12/15/22

      75       71,955  

Halliburton Co.:

     

3.80%, 11/15/25

      65       62,984  

5.00%, 11/15/45

      115       112,911  

Schlumberger Holdings Corp., 3.00%, 12/21/20(a)

      190       188,353  
   

 

 

 
        455,972  
Entertainment — 0.3%                  

21st Century Fox America, Inc.:

     

6.40%, 12/15/35

      75       93,567  

6.15%, 03/01/37

      50       61,329  

NBCUniversal Enterprise, Inc., (LIBOR USD 3 Month + 0.40%), 2.80%, 04/01/21(a)(b)

      100       99,021  

Viacom, Inc.:

     

4.38%, 03/15/43

      25       19,739  

5.85%, 09/01/43

      54       52,965  

(LIBOR USD 3 Month + 3.90%), 5.87%, 02/28/57(b)

      110       99,824  

(LIBOR USD 3 Month + 3.90%), 6.25%, 02/28/57(b)

      20       18,643  

Warner Media LLC:

     

4.70%, 01/15/21

      85       87,162  

3.40%, 06/15/22

      50       49,327  

3.60%, 07/15/25

      42       39,779  

3.88%, 01/15/26

      83       79,273  

3.80%, 02/15/27

      70       65,681  

4.65%, 06/01/44

      17       14,878  
   

 

 

 
        781,188  
Equity Real Estate Investment Trusts (REITs) — 0.8%                  

American Tower Corp.:

     

2.80%, 06/01/20

      77       76,408  

3.30%, 02/15/21

      200       198,853  

2.25%, 01/15/22

      525       502,429  

3.50%, 01/31/23

      160       157,244  

AvalonBay Communities, Inc.:

     

3.63%, 10/01/20

      30       30,172  

3.95%, 01/15/21

      25       25,277  

2.95%, 09/15/22

      30       29,542  

2.90%, 10/15/26

      75       70,766  

Boston Properties LP, 4.13%, 05/15/21

      20       20,271  

Crown Castle International Corp.:

     

3.40%, 02/15/21

      141       140,951  

2.25%, 09/01/21

      225       217,534  

4.88%, 04/15/22

      80       82,319  

5.25%, 01/15/23

      200       207,685  

3.65%, 09/01/27

      70       64,893  

Duke Realty LP, 4.00%, 09/15/28

      50       49,634  

ERP Operating LP:

     

2.38%, 07/01/19

      50       49,845  

4.75%, 07/15/20

      35       35,674  

2.85%, 11/01/26

      75       70,493  

Prologis LP, 3.88%, 09/15/28

      50       50,902  

Realty Income Corp.:

     

3.25%, 10/15/22

      95       94,074  

3.00%, 01/15/27

      125       116,218  

Simon Property Group LP, 2.63%, 06/15/22

      40       38,908  
   

 

 

 
        2,330,092  
Security          Par
(000)
    Value  
Food & Staples Retailing — 0.7%                  

Alimentation Couche-Tard, Inc., 2.70%, 07/26/22(a)

    USD       175     $ 168,871  

Kroger Co. (The), 4.45%, 02/01/47

      65       56,950  

Walgreen Co., 3.10%, 09/15/22

      110       107,305  

Walgreens Boots Alliance, Inc.:

     

2.70%, 11/18/19

      225       223,716  

3.30%, 11/18/21

      1,090       1,084,987  

3.45%, 06/01/26

      80       75,271  

Walmart, Inc.:

     

2.65%, 12/15/24

      117       113,650  

3.55%, 06/26/25

      46       46,507  

3.70%, 06/26/28

      165       167,464  

4.05%, 06/29/48

      105       104,477  
   

 

 

 
        2,149,198  
Food Products — 0.5%                  

Campbell Soup Co., 3.30%, 03/15/21

      135       134,298  

Conagra Brands, Inc., (LIBOR USD 3 Month + 0.75%), 3.22%, 10/22/20(b)

      140       139,607  

General Mills, Inc.:

     

3.70%, 10/17/23

      160       159,066  

4.00%, 04/17/25

      150       147,622  

Kraft Heinz Foods Co.:

     

3.50%, 07/15/22

      20       19,710  

3.00%, 06/01/26

      70       62,446  

4.38%, 06/01/46

      80       65,906  

Tyson Foods, Inc.:

     

2.25%, 08/23/21

      90       87,157  

3.90%, 09/28/23

      40       39,944  

3.95%, 08/15/24

      100       99,420  

Wm Wrigley Jr Co.(a):

     

2.90%, 10/21/19

      350       349,478  

3.38%, 10/21/20

      70       70,196  
   

 

 

 
        1,374,850  
Health Care Equipment & Supplies — 0.8%                  

Abbott Laboratories:

     

2.55%, 03/15/22

      100       97,420  

3.88%, 09/15/25

      40       40,503  

3.75%, 11/30/26

      43       42,467  

4.75%, 11/30/36

      85       88,735  

Becton Dickinson and Co.:

     

2.40%, 06/05/20

      205       201,801  

3.13%, 11/08/21

      250       246,564  

2.89%, 06/06/22

      400       387,408  

3.70%, 06/06/27

      143       135,255  

Danaher Corp., 2.40%, 09/15/20

      75       74,313  

Medtronic, Inc.:

     

2.50%, 03/15/20

      110       109,437  

3.13%, 03/15/22

      820       816,865  

3.15%, 03/15/22

      50       49,862  

4.38%, 03/15/35

      150       153,576  

Stryker Corp., 4.38%, 01/15/20

      50       50,772  
   

 

 

 
        2,494,978  
Health Care Providers & Services — 1.5%                  

Aetna, Inc.:

     

2.75%, 11/15/22

      25       23,984  

4.13%, 11/15/42

      50       43,285  

Anthem, Inc.:

     

2.95%, 12/01/22

      305       297,448  

4.10%, 03/01/28

      40       39,205  

4.65%, 01/15/43

      30       29,142  

4.38%, 12/01/47

      25       23,251  

CVS Health Corp.:

     

2.80%, 07/20/20

      125       123,872  
 

 

 

24    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Managed Income Fund

(Percentages shown are based on Net Assets)

 

Security          Par
(000)
    Value  
Health Care Providers & Services (continued)                  

2.13%, 06/01/21

    USD       430     $ 414,892  

3.50%, 07/20/22

      150       148,971  

3.70%, 03/09/23

      1,785       1,765,892  

4.10%, 03/25/25

      275       272,256  

4.30%, 03/25/28

      60       58,656  

4.78%, 03/25/38

      140       134,156  

5.13%, 07/20/45

      100       97,341  

Halfmoon Parent, Inc., 3.20%, 09/17/20(a)

      225       224,075  

HCA, Inc.:

     

4.50%, 02/15/27

      65       61,425  

5.50%, 06/15/47

      59       55,902  

Kaiser Foundation Hospitals, 4.15%, 05/01/47

      40       39,507  

Northwell Healthcare, Inc., 4.26%, 11/01/47

      19       18,057  

UnitedHealth Group, Inc.:

     

2.70%, 07/15/20

      160       159,428  

3.35%, 07/15/22

      120       120,550  

3.10%, 03/15/26

      60       57,905  

4.38%, 03/15/42

      85       85,131  

4.75%, 07/15/45

      105       111,090  
   

 

 

 
        4,405,421  
Hotels, Restaurants & Leisure — 0.2%                  

Carnival Corp., 3.95%, 10/15/20

      80       81,031  

Marriott International, Inc.:

     

2.88%, 03/01/21

      60       59,167  

Series N, 3.13%, 10/15/21

      70       69,444  

2.30%, 01/15/22

      60       57,684  

McDonald’s Corp.:

     

2.63%, 01/15/22

      60       58,788  

4.70%, 12/09/35

      125       125,551  

4.45%, 03/01/47

      75       71,708  

4.45%, 09/01/48

      50       47,564  
   

 

 

 
        570,937  
Household Durables — 0.0%                  

Newell Brands, Inc.:

     

3.85%, 04/01/23

      80       78,828  

4.20%, 04/01/26

      45       43,979  
   

 

 

 
        122,807  
Industrial Conglomerates — 0.1%                  

General Electric Co.:

     

4.38%, 09/16/20

      125       124,822  

5.88%, 01/14/38

      15       14,341  

4.50%, 03/11/44

      34       27,730  

Honeywell International, Inc., 1.85%, 11/01/21

      40       38,657  

Roper Technologies, Inc., 2.80%, 12/15/21

      50       48,984  
   

 

 

 
        254,534  
Insurance — 0.5%                  

American International Group, Inc., 3.38%, 08/15/20

      46       46,103  

Aon plc:

     

2.80%, 03/15/21

      190       187,931  

4.45%, 05/24/43

      90       81,603  

Hartford Financial Services Group, Inc. (The):

     

5.13%, 04/15/22

      70       73,379  

(LIBOR USD 3 Month + 2.13%), 4.74%, 02/12/47(a)(b)

      100       80,000  

4.40%, 03/15/48

      20       18,653  

Jackson National Life Global Funding, 2.50%, 06/27/22(a)

      80       77,344  

Marsh & McLennan Cos., Inc.:

     

2.35%, 03/06/20

      30       29,734  

2.75%, 01/30/22

      40       39,206  

3.50%, 06/03/24

      100       98,503  

MetLife, Inc., 4.72%, 12/15/44

      35       35,688  

Metropolitan Life Global Funding I, 2.40%, 01/08/21(a)

      450       443,147  

New York Life Global Funding, 2.00%, 04/13/21(a)

      50       48,720  
Security          Par
(000)
    Value  
Insurance (continued)                  

Principal Life Global Funding II, 2.63%, 11/19/20(a)

    USD       50     $ 49,447  

Prudential Financial, Inc., 3.88%, 03/27/28

      60       60,297  

Teachers Insurance & Annuity Association of America(a):

     

6.85%, 12/16/39

      7       9,102  

4.27%, 05/15/47

      50       47,856  

Travelers Cos., Inc. (The), 4.30%, 08/25/45

      35       35,208  

Willis Towers Watson plc, 5.75%, 03/15/21

      94       98,306  
   

 

 

 
        1,560,227  
Interactive Media & Services — 0.1%                  

Baidu, Inc.:

     

2.75%, 06/09/19

      200       199,697  

3.00%, 06/30/20

      200       199,035  
   

 

 

 
        398,732  
Internet & Direct Marketing Retail — 0.2%                  

Amazon.com, Inc.:

     

3.30%, 12/05/21

      30       30,367  

2.40%, 02/22/23

      50       48,409  

2.80%, 08/22/24

      50       48,598  

3.15%, 08/22/27

      220       212,406  

3.88%, 08/22/37

      105       101,404  

Booking Holdings, Inc., 2.75%, 03/15/23

      40       38,393  

eBay, Inc., 2.75%, 01/30/23

      50       48,070  

Expedia Group, Inc., 5.95%, 08/15/20

      100       103,319  
   

 

 

 
        630,966  
IT Services — 0.7%                  

Fidelity National Information Services, Inc.:

     

3.63%, 10/15/20

      194       194,882  

2.25%, 08/15/21

      680       656,664  

Series 30Y, 4.75%, 05/15/48

      25       23,239  

IBM Credit LLC, 3.45%, 11/30/20

      805       809,162  

International Business Machines Corp., 2.88%, 11/09/22

      100       97,684  

Total System Services, Inc.:

     

3.75%, 06/01/23

      35       34,715  

4.80%, 04/01/26

      50       50,389  

Visa, Inc.:

     

2.80%, 12/14/22

      115       113,557  

3.15%, 12/14/25

      155       152,317  
   

 

 

 
        2,132,609  
Life Sciences Tools & Services — 0.2%                  

Thermo Fisher Scientific, Inc.:

     

3.60%, 08/15/21

      100       100,294  

3.30%, 02/15/22

      335       333,573  

3.15%, 01/15/23

      200       196,000  

3.00%, 04/15/23

      60       58,373  

2.95%, 09/19/26

      50       46,143  
   

 

 

 
        734,383  
Media — 2.1%                  

CBS Corp., 4.30%, 02/15/21

      30       30,413  

Charter Communications Operating LLC:

     

3.58%, 07/23/20

      30       29,968  

3.58%, 07/23/20(a)

      20       20,012  

4.46%, 07/23/22

      1,935       1,953,587  

4.50%, 02/01/24

      140       139,787  

6.38%, 10/23/35

      59       60,560  

6.48%, 10/23/45

      246       252,873  

6.83%, 10/23/55

      12       12,204  

Comcast Corp.:

     

1.63%, 01/15/22

      20       19,141  

2.85%, 01/15/23

      280       274,557  

2.75%, 03/01/23

      60       58,396  

3.70%, 04/15/24

      760       764,640  
 

 

 

SCHEDULES OF INVESTMENTS      25  


Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Managed Income Fund

(Percentages shown are based on Net Assets)

 

Security          Par
(000)
    Value  
Media (continued)                  

3.15%, 03/01/26

    USD       85     $ 81,329  

4.15%, 10/15/28

      75       76,157  

3.20%, 07/15/36

      50       43,010  

4.60%, 10/15/38

      135       136,320  

4.65%, 07/15/42

      15       14,843  

4.00%, 03/01/48

      42       38,272  

4.70%, 10/15/48

      45       45,490  

4.95%, 10/15/58

      45       45,749  

Cox Communications, Inc.(a):

     

3.25%, 12/15/22

      510       498,225  

3.15%, 08/15/24

      60       57,720  

3.50%, 08/15/27

      75       69,147  

Discovery Communications LLC:

     

5.05%, 06/01/20

      50       51,121  

3.30%, 05/15/22

      50       49,016  

2.95%, 03/20/23

      400       382,697  

3.25%, 04/01/23

      200       193,309  

3.45%, 03/15/25

      50       46,726  

5.00%, 09/20/37

      75       69,568  

5.20%, 09/20/47

      60       55,142  

Interpublic Group of Cos., Inc. (The):

     

3.50%, 10/01/20

      55       55,068  

3.75%, 10/01/21

      20       20,125  

4.65%, 10/01/28

      110       108,565  

Omnicom Group, Inc., 4.45%, 08/15/20

      130       132,220  

Sky plc, 3.75%, 09/16/24(a)

      200       199,267  

Time Warner Cable LLC:

     

4.00%, 09/01/21

      100       99,392  

4.50%, 09/15/42

      37       29,745  
   

 

 

 
        6,214,361  
Metals & Mining — 0.1%                  

BHP Billiton Finance USA Ltd.:

     

2.88%, 02/24/22

      25       24,804  

5.00%, 09/30/43

      25       27,313  

Newmont Mining Corp.:

     

3.50%, 03/15/22

      40       39,583  

4.88%, 03/15/42

      25       23,639  

Southern Copper Corp., 5.88%, 04/23/45

      25       25,406  

Vale Overseas Ltd.:

     

4.38%, 01/11/22

      30       30,375  

6.25%, 08/10/26

      75       81,000  
   

 

 

 
        252,120  
Multiline Retail — 0.0%                  

Target Corp., 3.90%, 11/15/47

      5       4,584  
   

 

 

 
Multi-Utilities — 0.4%                  

Berkshire Hathaway Energy Co.:

     

2.38%, 01/15/21

      60       59,180  

5.95%, 05/15/37

      15       17,544  

CenterPoint Energy, Inc.:

     

3.60%, 11/01/21

      75       75,157  

2.50%, 09/01/22

      25       23,910  

3.85%, 02/01/24

      115       115,558  

CMS Energy Corp., 3.00%, 05/15/26

      45       42,314  

Consumers Energy Co., 2.85%, 05/15/22

      25       24,727  

Dominion Energy, Inc., 4.10%, 04/01/21(d)

      35       35,202  

DTE Energy Co.:

     

Series D, 3.70%, 08/01/23

      60       59,580  

Series F, 3.85%, 12/01/23

      100       100,272  

NiSource, Inc., 4.80%, 02/15/44

      107       103,593  

Sempra Energy(b):

     

(LIBOR USD 3 Month + 0.50%), 2.94%, 01/15/21

      40       39,328  

(LIBOR USD 3 Month + 0.45%), 3.24%, 03/15/21

      200       195,926  
Security          Par
(000)
    Value  
Multi-Utilities (continued)                  

WEC Energy Group, Inc., 3.38%, 06/15/21

    USD       305     $ 304,808  
   

 

 

 
        1,197,099  
Oil, Gas & Consumable Fuels — 4.7%                  

Anadarko Petroleum Corp., 6.45%, 09/15/36

      75       81,000  

Andeavor Logistics LP:

     

6.25%, 10/15/22

      8       8,160  

3.50%, 12/01/22

      210       204,270  

4.25%, 12/01/27

      25       23,600  

Apache Corp.:

     

3.63%, 02/01/21

      71       70,879  

3.25%, 04/15/22

      40       39,177  

4.38%, 10/15/28

      85       79,390  

BP Capital Markets America, Inc.:

     

4.50%, 10/01/20

      30       30,716  

3.25%, 05/06/22

      280       277,572  

2.52%, 09/19/22

      30       29,012  

3.79%, 02/06/24

      85       85,917  

BP Capital Markets plc:

     

2.52%, 01/15/20

      50       49,842  

3.56%, 11/01/21

      50       50,432  

Buckeye Partners LP, (LIBOR USD 3 Month + 4.02%), 6.37%, 01/22/78(b)

      50       40,623  

Canadian Natural Resources Ltd.:

     

2.95%, 01/15/23

      65       62,130  

3.85%, 06/01/27

      20       18,866  

Cenovus Energy, Inc.:

     

3.00%, 08/15/22

      150       142,397  

4.25%, 04/15/27

      50       45,541  

5.40%, 06/15/47

      25       21,526  

Chevron Corp.:

     

2.41%, 03/03/22

      75       73,422  

2.50%, 03/03/22

      70       68,649  

2.36%, 12/05/22

      50       48,420  

Cimarex Energy Co., 3.90%, 05/15/27

      125       115,993  

Concho Resources, Inc., 3.75%, 10/01/27

      130       122,377  

Continental Resources, Inc.:

     

5.00%, 09/15/22

      300       297,872  

4.50%, 04/15/23

      620       610,190  

3.80%, 06/01/24

      75       71,000  

4.38%, 01/15/28

      125       117,595  

4.90%, 06/01/44

      55       48,679  

Devon Energy Corp.:

     

4.00%, 07/15/21

      50       50,049  

3.25%, 05/15/22

      500       487,225  

4.75%, 05/15/42

      50       43,244  

Enbridge Energy Partners LP, 4.38%, 10/15/20

      35       35,409  

Enbridge, Inc.:

     

2.90%, 07/15/22

      230       222,585  

3.70%, 07/15/27

      100       94,714  

4.50%, 06/10/44

      5       4,778  

Series 16-A, (LIBOR USD 3 Month + 3.89%), 6.00%, 01/15/77(b)

      400       359,192  

(LIBOR USD 3 Month + 3.64%), 6.25%, 03/01/78(b)

      175       157,261  

Encana Corp., 3.90%, 11/15/21

      595       595,503  

Energy Transfer Operating LP:

     

4.15%, 10/01/20

      130       130,785  

4.65%, 06/01/21

      400       406,957  

5.20%, 02/01/22

      860       883,186  

3.60%, 02/01/23

      185       178,234  

4.20%, 04/15/27

      200       186,386  

6.50%, 02/01/42

      100       99,802  

5.30%, 04/15/47

      40       35,255  

Energy Transfer Partners LP, 5.75%, 09/01/20

      150       153,944  
 

 

 

26    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Managed Income Fund

(Percentages shown are based on Net Assets)

 

Security          Par
(000)
    Value  
Oil, Gas & Consumable Fuels (continued)                  

Enterprise Products Operating LLC:

     

5.20%, 09/01/20

    USD       100     $ 103,076  

2.85%, 04/15/21

      100       99,002  

3.35%, 03/15/23

      65       64,112  

6.45%, 09/01/40

      106       124,405  

4.90%, 05/15/46

      40       38,743  

4.25%, 02/15/48

      15       13,296  

4.80%, 02/01/49

      25       24,287  

EOG Resources, Inc.:

     

2.45%, 04/01/20

      65       64,370  

2.63%, 03/15/23

      425       408,297  

Exxon Mobil Corp., 3.04%, 03/01/26

      50       48,778  

Hess Corp.:

     

5.60%, 02/15/41

      75       65,995  

5.80%, 04/01/47

      11       9,873  

Kinder Morgan Energy Partners LP:

     

3.50%, 03/01/21

      430       428,677  

5.00%, 10/01/21

      550       565,574  

4.15%, 03/01/22

      50       50,369  

6.38%, 03/01/41

      157       166,626  

Kinder Morgan, Inc.:

     

3.05%, 12/01/19

      16       15,908  

3.15%, 01/15/23

      320       310,956  

5.55%, 06/01/45

      39       38,624  

Marathon Oil Corp., 4.40%, 07/15/27

      160       152,032  

Marathon Petroleum Corp., 4.75%, 09/15/44

      84       74,076  

MPLX LP:

     

3.38%, 03/15/23

      50       48,532  

4.88%, 12/01/24

      100       101,793  

4.50%, 04/15/38

      40       34,934  

4.70%, 04/15/48

      80       69,480  

Occidental Petroleum Corp.:

     

Series 1, 4.10%, 02/01/21

      50       50,864  

3.13%, 02/15/22

      50       49,719  

Pioneer Natural Resources Co.:

     

7.50%, 01/15/20

      50       51,957  

3.45%, 01/15/21

      50       49,850  

4.45%, 01/15/26

      50       50,482  

Plains All American Pipeline LP:

     

5.00%, 02/01/21

      50       50,854  

3.65%, 06/01/22

      250       245,433  

4.90%, 02/15/45

      50       42,728  

Sabine Pass Liquefaction LLC:

     

5.75%, 05/15/24

      155       161,720  

5.88%, 06/30/26

      100       105,881  

Spectra Energy Partners LP, 4.75%, 03/15/24

      65       66,799  

Sunoco Logistics Partners Operations LP, 5.50%, 02/15/20

      25       25,482  

Tennessee Gas Pipeline Co. LLC, 7.00%, 10/15/28

      9       10,190  

Texas Eastern Transmission LP, 2.80%, 10/15/22(a)

      25       24,041  

TransCanada PipeLines Ltd.:

     

3.80%, 10/01/20

      75       75,482  

2.50%, 08/01/22

      400       383,880  

4.63%, 03/01/34

      15       14,338  

7.63%, 01/15/39

      50       62,280  

Transcanada Trust, Series 16-A, (LIBOR USD 3 Month + 4.64%), 5.87%, 08/15/76(b)

      603       567,182  

Transcontinental Gas Pipe Line Co. LLC, 4.00%, 03/15/28

      130       127,119  

Williams Cos., Inc. (The):

     

4.00%, 11/15/21

      50       50,195  

3.60%, 03/15/22

      695       681,941  

3.35%, 08/15/22

      360       352,304  

3.70%, 01/15/23

      40       39,020  

4.50%, 11/15/23

      100       100,527  
Security          Par
(000)
    Value  
Oil, Gas & Consumable Fuels (continued)                  

4.30%, 03/04/24

    USD       125     $ 124,564  

4.55%, 06/24/24

      50       50,486  
   

 

 

 
        13,796,889  
Paper & Forest Products — 0.0%                  

Georgia-Pacific LLC(a):

     

2.54%, 11/15/19

      60       59,545  

3.73%, 07/15/23

      25       25,238  
   

 

 

 
        84,783  
Pharmaceuticals — 1.6%                  

Allergan Funding SCS:

     

3.45%, 03/15/22

      1,952       1,920,851  

3.80%, 03/15/25

      75       73,217  

4.85%, 06/15/44

      46       43,433  

Bayer US Finance II LLC, 2.20%, 07/15/22(a)

      30       28,145  

Johnson & Johnson:

     

2.45%, 03/01/26

      160       150,274  

3.55%, 03/01/36

      65       61,627  

Merck & Co., Inc.:

     

3.60%, 09/15/42

      50       47,229  

3.70%, 02/10/45

      20       19,208  

Mylan NV:

     

2.50%, 06/07/19

      58       57,727  

3.15%, 06/15/21

      200       195,593  

Pfizer, Inc., 4.30%, 06/15/43

      70       71,367  

Sanofi, 4.00%, 03/29/21

      50       51,137  

Shire Acquisitions Investments Ireland DAC:

     

1.90%, 09/23/19

      25       24,650  

2.40%, 09/23/21

      1,200       1,160,380  

2.88%, 09/23/23

      950       898,051  
   

 

 

 
        4,802,889  
Professional Services — 0.0%                  

Verisk Analytics, Inc., 4.13%, 09/12/22

      50       50,650  
   

 

 

 
Road & Rail — 1.2%                  

Burlington Northern Santa Fe LLC:

     

3.60%, 09/01/20

      40       40,392  

3.45%, 09/15/21

      40       40,407  

3.00%, 04/01/25

      150       145,336  

4.90%, 04/01/44

      75       80,862  

CSX Corp.:

     

3.25%, 06/01/27

      100       94,086  

3.80%, 03/01/28

      75       73,584  

ERAC USA Finance LLC(a):

     

2.35%, 10/15/19

      50       49,662  

2.60%, 12/01/21

      25       24,324  

Norfolk Southern Corp.:

     

2.90%, 06/15/26

      125       118,365  

3.80%, 08/01/28

      40       40,011  

4.15%, 02/28/48

      30       27,992  

Penske Truck Leasing Co. LP(a):

     

3.05%, 01/09/20

      50       49,787  

3.38%, 02/01/22

      780       771,292  

4.25%, 01/17/23

      25       25,376  

2.70%, 03/14/23

      115       109,718  

4.13%, 08/01/23

      200       199,647  

Ryder System, Inc.:

     

2.65%, 03/02/20

      200       198,159  

2.88%, 09/01/20

      455       451,374  

3.50%, 06/01/21

      500       500,645  

3.40%, 03/01/23

      215       212,169  

3.75%, 06/09/23

      40       39,754  

3.88%, 12/01/23

      100       100,133  
 

 

 

SCHEDULES OF INVESTMENTS      27  


Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Managed Income Fund

(Percentages shown are based on Net Assets)

 

Security          Par
(000)
    Value  
Road & Rail (continued)                  

Union Pacific Corp.:

     

4.50%, 09/10/48

    USD       80     $ 78,884  

4.80%, 09/10/58

      60       59,706  
   

 

 

 
        3,531,665  
Semiconductors & Semiconductor Equipment — 1.4%                  

Analog Devices, Inc.:

     

2.50%, 12/05/21

      100       97,615  

3.13%, 12/05/23

      25       24,284  

Applied Materials, Inc., 3.30%, 04/01/27

      80       76,757  

Broadcom Corp.:

     

2.38%, 01/15/20

      225       222,190  

3.00%, 01/15/22

      223       214,460  

3.63%, 01/15/24

      85       80,419  

3.88%, 01/15/27

      21       18,839  

Intel Corp.:

     

3.30%, 10/01/21

      50       50,529  

2.70%, 12/15/22

      30       29,549  

KLA-Tencor Corp.:

     

4.13%, 11/01/21

      100       101,612  

4.65%, 11/01/24

      24       24,596  

Lam Research Corp.:

     

2.75%, 03/15/20

      70       69,342  

2.80%, 06/15/21

      805       796,034  

3.80%, 03/15/25

      30       30,002  

NVIDIA Corp., 3.20%, 09/16/26

      150       142,267  

NXP BV(a):

     

4.63%, 06/15/22

      890       876,650  

4.88%, 03/01/24

      65       65,285  

QUALCOMM, Inc.:

     

3.00%, 05/20/22

      895       880,503  

2.60%, 01/30/23

      55       52,928  

3.25%, 05/20/27

      100       93,020  

4.30%, 05/20/47

      30       26,645  

Texas Instruments, Inc., 2.75%, 03/12/21

      105       104,365  
   

 

 

 
        4,077,891  
Software — 0.9%                  

Autodesk, Inc.:

     

3.13%, 06/15/20

      30       29,882  

3.60%, 12/15/22

      50       49,575  

3.50%, 06/15/27

      75       70,102  

CA, Inc.:

     

3.60%, 08/01/20

      30       29,952  

3.60%, 08/15/22

      40       39,048  

Microsoft Corp.:

     

1.55%, 08/08/21

      35       34,001  

2.38%, 05/01/23

      30       29,358  

2.40%, 08/08/26

      180       167,823  

3.45%, 08/08/36

      70       65,930  

4.10%, 02/06/37

      45       46,177  

3.70%, 08/08/46

      275       263,446  

Oracle Corp.:

     

2.80%, 07/08/21

      100       99,515  

2.50%, 05/15/22

      1,405       1,374,838  

2.40%, 09/15/23

      250       239,908  

2.65%, 07/15/26

      100       92,676  

3.90%, 05/15/35

      75       71,792  

3.85%, 07/15/36

      25       23,612  

4.00%, 07/15/46

      54       50,387  

VMware, Inc., 2.95%, 08/21/22

      30       28,595  
   

 

 

 
        2,806,617  
Specialty Retail — 0.1%                  

Home Depot, Inc. (The), 3.90%, 06/15/47

      75       70,758  
Security          Par
(000)
    Value  
Specialty Retail (continued)                  

Lowe’s Cos., Inc., 3.70%, 04/15/46

    USD       77     $ 62,797  

O’Reilly Automotive, Inc., 4.63%, 09/15/21

      80       82,121  
   

 

 

 
        215,676  
Technology Hardware, Storage & Peripherals — 0.8%  

Apple, Inc.:

     

2.50%, 02/09/22

      325       319,873  

2.70%, 05/13/22

      75       74,164  

2.40%, 01/13/23

      25       24,260  

2.40%, 05/03/23

      650       628,505  

3.25%, 02/23/26

      275       268,435  

4.50%, 02/23/36

      25       26,290  

3.85%, 05/04/43

      60       56,819  

4.38%, 05/13/45

      50       50,779  

3.85%, 08/04/46

      130       120,898  

3.75%, 09/12/47

      30       27,555  

Dell International LLC(a):

     

4.42%, 06/15/21

      350       349,423  

5.45%, 06/15/23

      25       25,441  

8.35%, 07/15/46

      75       81,209  

Hewlett Packard Enterprise Co.:

     

3.60%, 10/15/20

      150       150,388  

3.50%, 10/05/21

      150       150,413  

NetApp, Inc., 3.38%, 06/15/21

      70       69,735  

Xerox Corp.:

     

3.50%, 08/20/20

      30       29,106  

3.62%, 03/15/23

      37       33,287  
   

 

 

 
        2,486,580  
Thrifts & Mortgage Finance — 0.1%                  

BPCE SA, 2.65%, 02/03/21

      250       245,092  
   

 

 

 
Tobacco — 0.5%                  

BAT Capital Corp.:

     

2.76%, 08/15/22

      1,300       1,227,875  

4.54%, 08/15/47

      95       75,625  

Reynolds American, Inc.:

     

4.45%, 06/12/25

      215       207,311  

7.00%, 08/04/41

      98       105,287  
   

 

 

 
        1,616,098  
Trading Companies & Distributors — 0.5%                  

Air Lease Corp.:

     

3.88%, 04/01/21

      75       75,095  

3.50%, 01/15/22

      310       305,069  

3.75%, 02/01/22

      200       197,911  

2.63%, 07/01/22

      100       94,790  

2.75%, 01/15/23

      80       75,700  

Aviation Capital Group LLC(a):

     

2.88%, 01/20/22

      100       96,762  

3.88%, 05/01/23

      235       230,236  

GATX Corp., 4.55%, 11/07/28

      95       93,688  

International Lease Finance Corp.:

     

6.25%, 05/15/19

      300       302,654  

5.88%, 08/15/22

      65       68,085  
   

 

 

 
        1,539,990  
Wireless Telecommunication Services — 0.1%                  

America Movil SAB de CV, 3.13%, 07/16/22

      200       195,686  

Vodafone Group plc:

     

3.75%, 01/16/24

      70       68,994  

5.25%, 05/30/48

      60       56,330  
   

 

 

 
        321,010  
   

 

 

 

Total Corporate Bonds — 52.4%
(Cost: $157,357,392)

 

    155,148,212  
   

 

 

 
 

 

 

28    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Managed Income Fund

(Percentages shown are based on Net Assets)

 

Security          Par
(000)
    Value  

Equity-Linked Notes — 3.0%

     
Aerospace & Defense — 0.1%                  

Merrill Lynch International & Co. (Boeing Co. (The)), 16.51%, 01/28/19

    USD       (e)     $ 137,052  

Merrill Lynch International & Co. (Lockheed Martin Corp.), 12.66%, 01/24/19

      1       132,417  

Merrill Lynch International & Co. (Raytheon Co.), 12.00%, 01/28/19

      1       132,338  
   

 

 

 
        401,807  
Airlines — 0.1%                  

Citigroup, Inc. (Southwest Airlines Co.), 14.76%, 01/18/19(a)

      3       133,268  

Merrill Lynch International & Co. (United Continental Holdings, Inc.), 14.46%, 01/14/19

      2       142,332  
   

 

 

 
        275,600  
Auto Components — 0.0%                  

Barclays Bank plc (Faurecia SA):

     

17.40%, 02/14/19

    EUR       1       54,768  

17.30%, 02/15/19

      1       54,805  
   

 

 

 
        109,573  
Automobiles — 0.1%                  

Royal Bank of Canada (General Motors Co.), 18.85%, 01/30/19(a)

    USD       4       140,041  
   

 

 

 
Banks — 0.3%                  

BNP Paribas SA (BB&T Corp.), 12.46%, 01/15/19(a)

      3       133,222  

BNP Paribas SA (Comerica, Inc.), 15.54%, 01/08/19(a)

      2       126,138  

Credit Suisse AG (Wells Fargo & Co.), 9.40%, 01/15/19

      3       130,739  

Merrill Lynch International & Co. (US Bancorp), 11.20%, 01/14/19

      3       131,075  

Toronto-Dominion Bank (The) (Citigroup, Inc.), 13.76%, 01/15/19

      2       123,196  

Toronto-Dominion Bank (The) (JPMorgan Chase & Co.), 13.46%, 01/15/19

      1       133,445  
   

 

 

 
        777,815  

Capital Markets — 0.1%(a)

     

BNP Paribas SA (Goldman Sachs Group, Inc. (The)), 12.47%, 01/08/19

      1       115,450  

BNP Paribas SA (Morgan Stanley), 14.51%, 01/08/19

      3       131,453  
   

 

 

 
        246,903  
Chemicals — 0.0%                  

Merrill Lynch International & Co. (DowDuPont, Inc.), 12.27%, 02/01/19

      3       139,569  
   

 

 

 
Communications Equipment — 0.0%  

UBS AG (Cisco Systems, Inc.), 12.40%, 02/11/19(a)

      3       139,816  
   

 

 

 
Construction Materials — 0.0%  

Citigroup, Inc. (Eagle Materials, Inc.)(a):

     

14.82%, 01/25/19

      1       64,898  

14.45%, 01/28/19

      1       64,964  
   

 

 

 
        129,862  
Consumer Finance — 0.0%                  

BNP Paribas SA (American Express Co.), 10.71%, 01/17/19(a)

      1       137,395  
   

 

 

 
Electronic Equipment, Instruments & Components — 0.1%  

BNP Paribas SA (Corning, Inc.), 11.43%, 01/29/19(a)

      5       144,996  
   

 

 

 
Equity Real Estate Investment Trusts (REITs) — 0.1%  

Royal Bank of Canada (Simon Property Group, Inc.), 11.78%, 01/25/19(a)

      1       140,524  
   

 

 

 
Security          Par
(000)
    Value  
Food & Staples Retailing — 0.1%                  

Societe Generale SA (Sysco Corp.), 11.53%, 02/05/19

    USD       2     $ 141,212  
   

 

 

 
Health Care Equipment & Supplies — 0.1%                  

Citigroup, Inc. (Abbott Laboratories), 8.36%, 01/14/19(a)

      2       153,663  
   

 

 

 
Health Care Providers & Services — 0.0%                  

BNP Paribas SA (UnitedHealth Group, Inc.), 8.72%, 01/08/19(a)

      1       138,994  
   

 

 

 
Hotels, Restaurants & Leisure — 0.2%                  

BNP Paribas SA (McDonald’s Corp.), 9.84%, 01/17/19(a)

      1       150,784  

Citigroup, Inc. (Brinker International, Inc.)(a):

     

22.87%, 01/25/19

      2       75,210  

22.27%, 01/28/19

      2       75,252  

Credit Suisse AG (Las Vegas Sands Corp.), 17.00%, 01/23/19

      3       144,792  

Royal Bank of Canada (Domino’s Pizza, Inc.)(a):

     

13.22%, 01/11/19

      (e)       72,466  

12.80%, 01/14/19

      (e)       72,470  
   

 

 

 
        590,974  
Industrial Conglomerates — 0.0%                  

Canadian Imperial Bank of Commerce (Honeywell International, Inc.), 10.09%, 01/23/19

      1       138,211  
   

 

 

 
Interactive Media & Services — 0.1%                  

Societe Generale SA (Alphabet, Inc.), 11.64%, 01/30/19

      (e)       144,210  

Societe Generale SA (TripAdvisor, Inc.), 15.48%, 02/12/19

      2       129,446  
   

 

 

 
        273,656  
IT Services — 0.2%                  

BNP Paribas SA (Alliance Data Systems Corp.), 13.55%, 01/17/19(a)

      1       104,320  

BNP Paribas SA (PayPal Holdings, Inc.), 14.82%, 01/17/19(a)

      2       144,271  

Goldman Sachs International (Visa, Inc.), 10.07%, 01/25/19

      1       141,859  

Societe Generale SA (Cognizant Technology Solutions Corp.), 12.72%, 02/05/19

      2       136,382  
   

 

 

 
        526,832  
Life Sciences Tools & Services — 0.0%                  

Societe Generale SA (Thermo Fisher Scientific, Inc.), 10.84%, 01/29/19

      1       135,934  
   

 

 

 
Machinery — 0.2%                  

BNP Paribas SA (Caterpillar, Inc.), 15.31%, 01/17/19(a)

      1       154,658  

Merrill Lynch International & Co. (Ingersoll-Rand plc):

     

8.72%, 01/22/19(a)

      2       145,716  

11.34%, 01/28/19

      2       147,356  
   

 

 

 
        447,730  
Media — 0.1%                  

Canadian Imperial Bank of Commerce (Comcast Corp.), 16.10%, 01/22/19

      4       144,495  
   

 

 

 
Metals & Mining — 0.1%                  

Societe Generale SA (BHP Group Ltd.), 11.81%, 02/15/19

    GBP       7       145,944  
   

 

 

 
Multiline Retail — 0.0%                  

Goldman Sachs International (Macy’s, Inc.):

     

32.84%, 02/13/19

    USD       2       69,884  

32.22%, 02/14/19

      2       69,878  
   

 

 

 
        139,762  
Oil, Gas & Consumable Fuels — 0.2%                  

Citigroup, Inc. (Kinder Morgan, Inc.), 11.66%, 01/15/19(a)

      9       141,496  

Merrill Lynch International & Co. (Williams Cos., Inc. (The)), 16.48%, 02/07/19

      6       132,939  
 

 

 

SCHEDULES OF INVESTMENTS      29  


Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Managed Income Fund

(Percentages shown are based on Net Assets)

 

Security          Par
(000)
    Value  
Oil, Gas & Consumable Fuels (continued)  

Royal Bank of Canada (ConocoPhillips)(a):

     

15.71%, 01/28/19

    USD       2     $ 139,177  

13.64%, 01/30/19

      2       145,267  

Royal Bank of Canada (Exxon Mobil Corp.), 10.21%, 02/01/19(a)

      2       127,971  
   

 

 

 
        686,850  
Personal Products — 0.1%  

Royal Bank of Canada (Estee Lauder Cos., Inc. (The)), 11.88%, 02/01/19(a)

      1       140,683  
   

 

 

 
Pharmaceuticals — 0.3%  

BNP Paribas SA (Merck & Co., Inc.)(a):

     

11.80%, 01/23/19

      2       156,554  

10.69%, 01/30/19

      2       150,461  

BNP Paribas SA (Pfizer, Inc.), 8.25%, 01/29/19(a)

      3       150,374  

BNP Paribas SA (Zoetis, Inc.), 10.32%, 01/25/19

      2       135,442  

Societe Generale SA (Eli Lilly & Co.), 10.70%, 02/12/19

      1       147,727  
   

 

 

 
        740,558  
Road & Rail — 0.1%  

Merrill Lynch International & Co. (CSX Corp.), 13.84%, 01/14/19

      2       132,553  

Merrill Lynch International & Co. (Kansas City Southern), 13.22%, 01/07/19

      1       135,026  

Merrill Lynch International & Co. (Norfolk Southern Corp.), 15.13%, 01/28/19

      1       140,608  
   

 

 

 
        408,187  
Semiconductors & Semiconductor Equipment — 0.1%  

UBS AG (Intel Corp.), 16.40%, 01/23/19(a)

      3       151,620  
   

 

 

 
Specialty Retail — 0.0%  

BNP Paribas SA (Ulta Beauty, Inc.), 14.96%, 01/25/19

      (e)       120,213  
   

 

 

 
Textiles, Apparel & Luxury Goods — 0.1%  

Barclays Bank plc (Kering SA), 13.95%, 02/08/19

    EUR       (e)       146,044  

Barclays Bank plc (Moncler SpA), 11.20%, 02/22/19

      4       134,766  

UBS AG (Tapestry, Inc.)(a):

     

14.20%, 01/31/19

    USD       2       61,024  

14.40%, 02/01/19

      2       61,049  
   

 

 

 
        402,883  
Tobacco — 0.1%  

Canadian Imperial Bank of Commerce (Philip Morris International, Inc.), 12.15%, 01/07/19

      2       113,076  

Merrill Lynch International & Co. (Altria Group, Inc.), 12.71%, 01/28/19

      2       119,625  
   

 

 

 
        232,701  
Trading Companies & Distributors — 0.0%  

Citigroup, Inc. (United Rentals, Inc.), 22.53%, 01/18/19(a)

      1       137,711  
   

 

 

 

Total Equity-Linked Notes — 3.0%
(Cost: $9,641,880)

 

    8,782,714  
   

 

 

 
            Shares         

Investment Companies — 33.3%

 

BlackRock Allocation Target Shares: Series A Portfolio(i)

      787,047       7,768,151  

BlackRock Floating Rate Income Portfolio, Class K(i)

      3,748,146       36,282,053  

BlackRock GNMA Portfolio, Class K(i)

      1,532,692       13,993,482  

BlackRock High Yield Bond Portfolio, Class K(i)

      2,880,776       20,568,740  

BlackRock Low Duration Bond Portfolio, Class K(i)

      1,451,643       13,703,514  

iShares Core High Dividend ETF(i)

      40,648       3,429,878  

iShares International Select Dividend ETF(i)

      34,638       994,457  
Security              
Shares
    Value  

Investment Companies (continued)

 

WisdomTree International Equity Fund

      41,766     $ 1,946,296  
   

 

 

 

Total Investment Companies — 33.3%
(Cost: $101,491,942)

 

    98,686,571  
   

 

 

 
            Par
(000)
        

Preferred Securities — 2.1%(f)

     

Capital Trusts — 1.4%(c)

     
Banks — 0.7%                  

Bank of America Corp., Series X, 6.25%(g)

    USD       100       98,800  

Citigroup, Inc.:

     

Series Q, 5.95%

      125       120,625  

5.90%

      310       288,920  

Series P, 5.95%

      149       134,845  

Fifth Third Bancorp, Series J, 4.90%

      125       120,000  

JPMorgan Chase & Co., Series Z, 5.30%

      375       370,312  

M&T Bank Corp., Series F, 5.13%

      50       47,375  

SunTrust Banks, Inc.:

     

Series G, 5.05%

      450       394,875  

Series H, 5.13%

      75       63,629  

Wells Fargo & Co., Series U, 5.87%

      375       370,669  
   

 

 

 
        2,010,050  
Capital Markets — 0.0%                  

Goldman Sachs Group, Inc. (The) :

     

Series M, 5.38%

      60       57,976  

Series P, 5.00%

      42       35,171  
   

 

 

 
        93,147  
Consumer Finance — 0.1%                  

Discover Financial Services, Series C, 5.50%

      100       83,083  

General Motors Financial Co., Inc., Series A, 5.75%(g)

      202       161,095  
   

 

 

 
        244,178  
Diversified Financial Services — 0.2%                  

Voya Financial, Inc., Series A, 6.13%

      475       450,656  
   

 

 

 
Insurance — 0.2%                  

Progressive Corp. (The), Series B, 5.38%

      490       459,155  

XLIT Ltd., Series E, 4.89%

      125       116,635  
   

 

 

 
        575,790  
Oil, Gas & Consumable Fuels — 0.2%                  

Andeavor Logistics LP, Series A, 6.87%

      400       356,000  

EnLink Midstream Partners LP, Series C, 6.00%

      100       72,689  

Plains All American Pipeline LP, Series B, 6.13%

      425       357,000  
   

 

 

 
        785,689  
   

 

 

 

Total Capital Trusts — 1.4%
(Cost: $4,465,966)

 

    4,159,510  
   

 

 

 
            Shares         

Preferred Stocks — 0.4%(c)

     
Banks — 0.1%                  

KeyCorp, Series E, 6.13%

      8,000       206,560  
   

 

 

 
Capital Markets — 0.3%                  

Morgan Stanley :

     

Series E, 7.13%

      25,000       659,250  

Series K, 5.85%

      15,000       364,200  
   

 

 

 
        1,023,450  
Consumer Finance — 0.0%                  

SLM Corp., Series B, 4.49%

      500       29,450  
   

 

 

 

Total Preferred Stocks — 0.4%
(Cost: $1,289,389)

 

    1,259,460  
   

 

 

 
 

 

 

30    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Managed Income Fund

(Percentages shown are based on Net Assets)

 

Security          Shares     Value  

Trust Preferreds — 0.3%

     

Capital Markets — 0.2%

     

State Street Corp., 3.79%, 06/15/47

      788,000     $ 618,580  
   

 

 

 
Commercial Services & Supplies — 0.1%                  

ILFC E-Capital Trust I, 4.55%, 12/21/65(a)

      100,000       77,750  
   

 

 

 

Total Trust Preferreds — 0.3%
(Cost: $772,250)

 

    696,330  
   

 

 

 

Total Preferred Securities — 2.1%
(Cost: $6,527,605)

 

    6,115,300  
   

 

 

 

Total Long-Term Investments — 96.9%
(Cost: $293,414,596)

 

    286,910,790  
   

 

 

 

Short-Term Securities — 2.0%(h)(i)

     

BlackRock Liquidity Funds, T-Fund, Institutional Class, 2.32%

      5,960,930       5,960,930  
   

 

 

 

Total Short-Term Securities — 2.0%
(Cost: $5,960,930)

 

    5,960,930  
   

 

 

 

Total Investments — 98.9%
(Cost: $299,375,526)

 

    292,871,720  

Other Assets Less Liabilities — 1.1%

 

    3,358,843  
   

 

 

 

Net Assets — 100.0%

 

  $ 296,230,563  
   

 

 

 

 

(a) 

Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(b) 

Variable rate security. Security may be issued at a fixed coupon rate, which converts to a variable rate at a specified date. Rate shown is the rate in effect as of period end.

(c) 

Perpetual security with no stated maturity date.

(d) 

Step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate as of period end.

(e) 

Amount is less than $500.

(f) 

Variable rate security. Rate shown is the rate in effect as of period end.

(g) 

Non-income producing security.

(h) 

Annualized 7-day yield as of period end.

 
(i) 

During the year ended December 31, 2018, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, and/or related parties of the Fund were as follows:

 

Affiliated Persons and/or Related Parties   Shares
Held at
12/31/17
    Shares
Purchased
    Shares
Sold
    Shares
Held at
12/31/18
    Value at
12/31/18
    Income     Net
Realized
Gain (Loss)
 (a)
    Change in
Unrealized
Appreciation
(Depreciation)
 

BlackRock Liquidity Funds, T-Fund, Institutional Class

    4,000,573       1,960,357 (b)             5,960,930     $ 5,960,930     $ 101,975     $     $  

SL Liquidity Series, LLC, Money Market Series

          0 (b)                         61,671 (c)       (1,057      

BlackRock Allocation Target Shares: Series A Portfolio

    1,081,153       896,364       (1,190,470     787,047       7,768,151       691,613       (147,177     (183,445

BlackRock Floating Rate Income Portfolio, Class K

    3,091,209       1,419,689       (762,752     3,748,146       36,282,053       1,666,014       21,084       (1,871,407

BlackRock GNMA Portfolio, Class K

          1,532,692             1,532,692       13,993,482       29,088       24,233       33,938  

BlackRock High Yield Bond Portfolio, Class K

          2,880,776             2,880,776       20,568,740       103,441       30,697       (715,581

BlackRock Low Duration Bond Portfolio, Class K

          2,297,293       (845,650     1,451,643       13,703,514       22,423       1,659       14,494  

iShares 0-5 Year High Yield Corporate Bond ETF

    340,669       23,691       (364,360                 788,256       (576,791     113,321  

iShares 1-3 Year Credit Bond ETF

    24,638       301,014       (325,652                 103,083       (87,242     3,436  

iShares Core High Dividend ETF

    40,648                   40,648       3,429,878       125,803             (234,132

iShares Floating Rate Bond ETF

    259,178             (259,178                 164,595       1,965       24,416  

iShares International Select Dividend ETF

    34,638                   34,638       994,457       58,972             (175,961

iShares MBS ETF

          136,480       (136,480                 53,589       77,070        

iShares iBoxx $ High Yield Corporate Bond ETF

          88,931       (88,931                 45,115       (91,016      

iShares U.S. Preferred Stock ETF

          132,142       (132,142                       (41,260      
         

 

 

   

 

 

   

 

 

   

 

 

 
          $ 102,701,205     $ 4,015,638     $ (787,835   $ (2,990,921
         

 

 

   

 

 

   

 

 

   

 

 

 

 

  (a) 

Includes net capital gain distributions, if applicable.

 
  (b) 

Represents net shares purchased.

 
  (c) 

Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

 

For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

 

 

SCHEDULES OF INVESTMENTS      31  


Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Managed Income Fund

 

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

 

Description    Number of
Contracts
       Expiration
Date
       Notional
Amount (000)
       Value/
Unrealized
Appreciation
(Depreciation)
 

Long Contracts

                 

S&P 500 E-Mini Index

     21          03/15/19        $ 2,630        $ (89,267

U.S. Treasury 2 Year Note

     188          03/29/19          39,915          275,852  

U.S. Treasury 5 Year Note

     54          03/29/19          6,193          103,924  
                 

 

 

 
                    290,509  
                 

 

 

 

Short Contracts

                 

EUR Currency

     5          03/18/19          720          (3,542

U.S. Treasury 10 Year Note

     98          03/20/19          11,958          (279,881

U.S. Treasury 10 Year Ultra Bond

     24          03/20/19          3,122          (100,912

U.S. Treasury Long Bond

     37          03/20/19          5,402          (255,009

U.S. Treasury Ultra Bond

     26          03/20/19          4,177          (220,427
                 

 

 

 
                    (859,771
                 

 

 

 
                  $ (569,262
                 

 

 

 

OTC Credit Default Swaps — Buy Protection

 

Reference Obligation/Index    Financing
Rate Paid
by the Fund
    Payment
Frequency
    Counterparty   Termination
Date
     Notional
Amount (000)
    Value     Upfront
Premium
Paid
(Received)
    Unrealized
Appreciation
(Depreciation)
 

Pitney Bowes, Inc.

     1.00     Quarterly     Credit Suisse International     03/20/19        USD       750     $ (1,055   $ 232     $ (1,287

Warner Media LLC

     1.00     Quarterly     JPMorgan Chase Bank NA     06/20/21        USD       225       (4,004     (1,396     (2,608

Western Union Co. (The)

     1.00     Quarterly     JPMorgan Chase Bank NA     12/20/21        USD       100       (513     280       (793
               

 

 

   

 

 

   

 

 

 
                $ (5,572   $ (884   $ (4,688
               

 

 

   

 

 

   

 

 

 

OTC Credit Default Swaps — Sell Protection

 

Reference Obligation/Index    Financing
Rate Received
by the Fund
    Payment
Frequency
    Counterparty   Termination
Date
    Credit
Rating
 (a)
     Notional
Amount (000)
 (b)
    Value     Upfront
Premium
Paid
(Received)
    Unrealized
Appreciation
(Depreciation)
 

American Tower Corp.

     1.00     Quarterly     Morgan Stanley & Co. International plc     06/20/21     BBB-        USD       475     $ (1,432   $ (9,190   $ 7,758  
                   

 

 

   

 

 

   

 

 

 

 

  (a) 

Using S&P’s rating of the issuer or the underlying securities of the index, as applicable.

 
  (b) 

The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

 

Balances Reported in the Statements of Assets and Liabilities for OTC Swaps

 

      Swap
Premiums
Paid
     Swap
Premiums
Received
     Unrealized
Appreciation
     Unrealized
Depreciation
     Value  

OTC Swaps

   $ 512      $ (10,586    $ 7,758      $ (4,688    $  

 

 

32    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Managed Income Fund

 

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Assets — Derivative Financial Instruments

                    

Futures contracts

                    

Net unrealized appreciation(a)

   $      $      $      $      $ 379,776      $      $ 379,776  

Swaps — OTC

                    

Unrealized appreciation on OTC swaps; Swap premiums paid

            8,270                                    8,270  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $      $ 8,270      $      $      $ 379,776      $      $ 388,046  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities — Derivative Financial Instruments

 

Futures contracts

                    

Net unrealized depreciation(a)

   $      $      $ 89,267      $ 3,542      $ 856,229      $      $ 949,038  

Swaps — OTC

                    

Unrealized depreciation on OTC swaps; Swap premiums received

            15,274                                    15,274  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $      $ 15,274      $ 89,267      $ 3,542      $ 856,229      $      $ 964,312  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

Includes cumulative appreciation (depreciation) on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

 

For the year ended December 31, 2018, the effect of derivative financial instruments in the Statements of Operations were as follows:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Net Realized Gain (Loss) from:

                    

Futures contracts

   $      $      $ 73,669      $ 36,287      $ 1,601,000      $      $ 1,710,956  

Options purchased(a)

                   5,597                             5,597  

Swaps

            309                                    309  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $      $ 309      $ 79,266      $ 36,287      $ 1,601,000      $      $ 1,716,862  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
Net Change in Unrealized Appreciation (Depreciation) on:                                                 

Futures contracts

   $      $      $ (80,784    $ 25,229      $ (529,903    $      $ (585,458

Swaps

            905                                    905  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $      $ 905      $ (80,784    $ 25,229      $ (529,903    $      $ (584,553
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

Options purchased are included in net realized gain (loss) from investments — unaffiliated.

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:

        

Average notional value of contracts — long

   $ 28,044,826  

Average notional value of contracts — short

     33,104,648  

Options:

  

Average value of option contracts purchased

     (a)  

Credit default swaps:

  

Average notional value — buy protection

     1,075,000  

Average notional value — sell protection

     475,000  

 

  (a) 

Derivative not held at any quarter-end. The risk exposure table serves as an indicator of activity during the period.

 

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

 

 

SCHEDULES OF INVESTMENTS      33  


Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Managed Income Fund

 

Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:

 

      Assets        Liabilities  

Derivative Financial Instruments:

       

Futures contracts

   $ 60,097        $ 82,755  

Swaps — OTC(a)

     8,270          15,274  
  

 

 

      

 

 

 

Total derivative assets and liabilities in the Statement of Assets and Liabilities

   $ 68,367        $ 98,029  

Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)

     (60,097        (82,755
  

 

 

      

 

 

 

Total derivative assets and liabilities subject to an MNA

   $ 8,270        $ 15,274  
  

 

 

      

 

 

 

 

  (a) 

Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums (paid/received) in the Statements of Assets and Liabilities.

 

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

 

Counterparty    Derivative
Assets
Subject to
an MNA by
Counterparty
       Derivatives
Available
for Offset
 (a)
       Non-cash
Collateral
Received
       Cash
Collateral
Received
       Net Amount
of Derivative
Assets
  (b)
 

Credit Suisse International

   $ 232        $ (232      $        $        $  

JPMorgan Chase Bank NA

     280          (280                           

Morgan Stanley & Co. International plc

     7,758          (7,758                           
  

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 
   $ 8,270        $ (8,270      $        $        $  
  

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 
                      
Counterparty    Derivative
Liabilities
Subject to
an MNA by
Counterparty
       Derivatives
Available
for Offset
 (a)
       Non-cash
Collateral
Pledged
       Cash
Collateral
Pledged
       Net Amount
of Derivative
Liabilities
  (c)
 

Credit Suisse International

   $ 1,287        $ (232      $        $        $ 1,055  

JPMorgan Chase Bank NA

     4,797          (280                          4,517  

Morgan Stanley & Co. International plc

     9,190          (7,758                          1,432  
  

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 
   $ 15,274        $ (8,270      $        $        $ 7,004  
  

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

 

  (a) 

The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

 
  (b) 

Net amount represents the net amount receivable from the counterparty in the event of default.

 
  (c) 

Net amount represents the net amount payable due to the counterparty in the event of default.

 

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

      Level 1        Level 2        Level 3        Total  

Assets:

                 

Investments:

                 

Long-Term Investments:

                 

Asset-Backed Securities

   $        $ 18,177,993        $        $ 18,177,993  

Corporate Bonds(a)

              155,148,212                   155,148,212  

Equity-Linked Notes(a)

              8,782,714                   8,782,714  

Investment Companies

     98,686,571                            98,686,571  

Preferred Securities:

                 

Banks

     206,560          2,010,050                   2,216,610  

Capital Markets

     1,023,450          711,727                   1,735,177  

Commercial Services & Supplies

              77,750                   77,750  

Consumer Finance

     29,450          244,178                   273,628  

Diversified Financial Services

              450,656                   450,656  

Insurance

              575,790                   575,790  

Oil, Gas & Consumable Fuels

              785,689                   785,689  

Short-Term Securities

     5,960,930                            5,960,930  
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ 105,906,961        $ 186,964,759        $        $ 292,871,720  
  

 

 

      

 

 

      

 

 

      

 

 

 

 

 

34    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

December 31, 2018

  

BlackRock Managed Income Fund

 

Fair Value Hierarchy as of Period End (continued)

      Level 1        Level 2        Level 3        Total  

Derivative Financial Instruments(b)

                 

Assets:

                 

Credit contracts

   $        $ 7,758        $        $ 7,758  

Interest rate contracts

     379,776                            379,776  

Liabilities:

                 

Credit contracts

              (4,688                 (4,688

Equity contracts

     (89,267                          (89,267

Foreign currency exchange contracts

     (3,542                          (3,542

Interest rate contracts

     (856,229                          (856,229
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ (569,262      $ 3,070        $        $ (566,192
  

 

 

      

 

 

      

 

 

      

 

 

 

 

  (a) 

See above Schedule of Investments for values in each industry.

 
  (b) 

Derivative financial instruments are swaps and futures contracts which are valued at the unrealized appreciation (depreciation) on the instrument.

 

During the year ended December 31, 2018, there were no transfers between levels.

See notes to financial statements.

 

 

SCHEDULES OF INVESTMENTS      35  


 

Statements of Assets and Liabilities

December 31, 2018

 

     BlackRock
Inflation
Protected Bond
Portfolio (a)
    BlackRock
Managed
Income Fund
 

ASSETS

   

Investments at value — unaffiliated(b)

  $ 2,381,973,713     $ 190,170,515  

Investments at value — affiliated(c)

    3,096,013       102,701,205  

Cash

    502,832       87,574  

Cash pledged:

   

Futures contracts

    4,198,820       422,000  

Centrally cleared swaps

    4,520,000        

Foreign currency at value(d)

    12,182,129       109,228  

Receivables:

   

Investments sold

    10,175,874        

Securities lending income — affiliated

          1,338  

TBA sale commitments

    38,041,213        

Capital shares sold

    5,277,339       4,371,652  

Dividends — affiliated

    10,068       21,181  

Dividends — unaffiliated

    791       42,865  

Interest — unaffiliated

    7,316,933       1,769,095  

From the Manager

    824,985        

Variation margin on futures contracts

    101,314       60,097  

Variation margin on centrally cleared swaps

    205,677        

Swap premiums paid

          512  

Unrealized appreciation on:

   

Forward foreign currency exchange contracts

    1,828,048        

OTC swaps

          7,758  

Prepaid expenses

    47,065       41,979  

Other assets

          1,787  
 

 

 

   

 

 

 

Total assets

    2,470,302,814       299,808,786  
 

 

 

   

 

 

 

LIABILITIES

   

Options written at value(e)

    183,030        

TBA sale commitments at value(f)

    38,209,518        

Reverse repurchase agreements at value

    190,086,887        

Payables:

   

Investments purchased

    101,654,955       448,263  

Administration fees

    70,952        

Board realignment and consolidation

    612,164       6,942  

Capital shares redeemed

    13,509,487       2,550,362  

Custodian fees

    31,877       10,422  

Income dividend distributions

    449,726       100,176  

Investment advisory fees

    405,768        

Trustees’ and Officer’s fees

    10,979       3,941  

Other affiliates

    3,627       6  

Professional fees

    84,878       114,878  

Service and distribution fees

    154,933       30,236  

Transfer agent fees

    658,812       69,559  

To the Manager

          7,687  

Other accrued expenses

    190,613       137,722  

Variation margin on futures contracts

    543,400       82,755  

Swap premiums received

          10,586  

Unrealized depreciation on:

   

Forward foreign currency exchange contracts

    4,882,861        

OTC swaps

          4,688  
 

 

 

   

 

 

 

Total liabilities

    351,744,467       3,578,223  
 

 

 

   

 

 

 

NET ASSETS

  $ 2,118,558,347     $ 296,230,563  
 

 

 

   

 

 

 

NET ASSETS CONSIST OF

   

Paid-in capital

  $ 2,211,478,898     $ 305,476,653  

Accumulated loss

    (92,920,551     (9,246,090
 

 

 

   

 

 

 

NET ASSETS

  $ 2,118,558,347     $ 296,230,563  
 

 

 

   

 

 

 

(a) Consolidated Statement of Assets and Liabilities

   

(b) Investments at cost — unaffiliated

  $ 2,399,622,966     $ 193,976,893  

(c) Investments at cost — affiliated

  $ 3,096,013     $ 105,398,633  

(d) Foreign currency at cost

  $ 12,224,328     $ 109,241  

(e) Premiums received

  $ 1,392,288     $  

(f)  Proceeds from TBA sale commitments

  $ 38,041,213     $  

See notes to financial statements.

 

 

36    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Statements of Assets and Liabilities  (continued)

December 31, 2018

 

     BlackRock
Inflation
Protected Bond
Portfolio (a)
     BlackRock
Managed
Income Fund
 

NET ASSET VALUE

    

Institutional

    

Net assets

  $ 1,434,877,209      $ 117,903,696  
 

 

 

    

 

 

 

Share outstanding(g)

    140,243,902        12,338,491  
 

 

 

    

 

 

 

Net asset value

  $ 10.23      $ 9.56  
 

 

 

    

 

 

 

Service

    

Net assets

  $ 21,040,304         
 

 

 

    

 

 

 

Share outstanding(g)

    2,083,852         
 

 

 

    

 

 

 

Net asset value

  $ 10.10         
 

 

 

    

 

 

 

Investor A

    

Net assets

  $ 248,530,393      $ 107,313,668  
 

 

 

    

 

 

 

Share outstanding(g)

    24,880,253        11,228,013  
 

 

 

    

 

 

 

Net asset value

  $ 9.99      $ 9.56  
 

 

 

    

 

 

 

Investor C

    

Net assets

  $ 99,107,512      $ 11,983,095  
 

 

 

    

 

 

 

Share outstanding(g)

    10,261,554        1,252,869  
 

 

 

    

 

 

 

Net asset value

  $ 9.66      $ 9.56  
 

 

 

    

 

 

 

Class K

    

Net assets

  $ 315,002,929      $ 59,030,104  
 

 

 

    

 

 

 

Share outstanding(g)

    31,280,979        6,161,870  
 

 

 

    

 

 

 

Net asset value

  $ 10.07      $ 9.58  
 

 

 

    

 

 

 

 

(a) 

Consolidated Statement of Assets and Liabilities

(g) 

Unlimited number of shares authorized, $0.001 par value.

See notes to financial statements.

 

 

FINANCIAL STATEMENTS      37  


 

Statements of Operations

Year Ended December 31, 2018

 

     BlackRock
Inflation
Protected Bond
Portfolio (a)
    BlackRock
Managed
Income Fund
 

INVESTMENT INCOME

   

Dividends — affiliated

  $ 177,309     $ 3,953,967  

Dividends — unaffiliated

    38,899       139,856  

Interest — unaffiliated

    73,616,798 (b)       5,197,087  

Securities lending income — affiliated — net

          61,671  

Foreign taxes withheld

    (1,266     (1,462
 

 

 

   

 

 

 

Total investment income

    73,831,740       9,351,119  
 

 

 

   

 

 

 

EXPENSES

   

Investment advisory

    5,690,821       752,720  

Transfer agent — class specific

    2,946,451       114,166  

Service and distribution — class specific

    1,956,844       259,349  

Administration

    902,836       91,403  

Board realignment and consolidation

    612,164       7,066  

Administration — class specific

    465,854       43,007  

Accounting services

    200,975       53,655  

Registration

    130,247       78,379  

Printing

    127,548       75,251  

Professional

    119,610       172,851  

Custodian

    62,769       33,116  

Trustees and Officer

    41,557       18,079  

Miscellaneous

    73,124       44,750  
 

 

 

   

 

 

 

Total expenses excluding interest expense

    13,330,800       1,743,792  

Interest expense

    3,685,212        
 

 

 

   

 

 

 

Total expenses

    17,016,012       1,743,792  

Less:

   

Transfer agent fees waived and/or reimbursed — class specific

    (1,957,841     (36,726

Fees waived and/or reimbursed by the Manager

    (1,159,961     (849,035

Administration fees waived — class specific

    (464,737     (43,007
 

 

 

   

 

 

 

Total expenses after fees waived and/or reimbursed

    13,433,473       815,024  
 

 

 

   

 

 

 

Net investment income

    60,398,267       8,536,095  
 

 

 

   

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS)

   

Net realized gain (loss) from:

   

Investments — affiliated

    (35,050     (905,172

Investments — unaffiliated

    (19,938,853     (2,247,626

Capital gain distributions from investment companies — affiliated

          117,337  

Forward foreign currency exchange contracts

    2,956,865        

Foreign currency transactions

    (1,084,306     (6,101

Futures contracts

    (2,916,322     1,710,956  

Options written

    3,850,555        

Swaps

    7,224,794       309  
 

 

 

   

 

 

 
    (9,942,317     (1,330,297
 

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation) on:

   

Investments — affiliated

          (2,990,921

Investments — unaffiliated

    (89,021,473     (5,891,580

Forward foreign currency exchange contracts

    (2,078,635      

Foreign currency translations

    168,232       (5,872

Futures contracts

    (3,423,294     (585,458

Options written

    (1,993,174      

Swaps

    144,765       905  
 

 

 

   

 

 

 
    (96,203,579     (9,472,926
 

 

 

   

 

 

 

Net realized and unrealized loss

    (106,145,896     (10,803,223
 

 

 

   

 

 

 

NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS

  $ (45,747,629   $ (2,267,128
 

 

 

   

 

 

 
(a) 

Consolidated Statement of Operations

(b) 

Includes net inflationary and deflationary adjustments. See Note 4 of the Notes to Financial Statements.

See notes to financial statements.

 

 

38    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Statements of Changes in Net Assets

 

    BlackRock Inflation Protected Bond
Portfolio (a)
           BlackRock Managed Income Fund  
     Year Ended December 31,            Year Ended December 31,  
  2018     2017             2018     2017  

INCREASE (DECREASE) IN NET ASSETS

          

OPERATIONS

          

Net investment income

  $ 60,398,267     $ 53,913,498        $ 8,536,095     $ 5,295,096  

Net realized gain (loss)

    (9,942,317     29,707,526          (1,330,297     47,865  

Net change in unrealized appreciation (depreciation)

    (96,203,579     (11,612,052        (9,472,926     2,041,788  
 

 

 

   

 

 

      

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

    (45,747,629     72,008,972          (2,267,128     7,384,749  
 

 

 

   

 

 

      

 

 

   

 

 

 

DISTRIBUTIONS TO SHAREHOLDERS(b)(c)

          

From net investment income and net realized gain:

          

Institutional

    (37,380,388     (33,756,467        (3,135,644     (1,746,870

Service

    (595,738     (655,376               

Investor A

    (6,246,301     (6,643,212        (3,237,295     (2,187,409

Investor C

    (2,176,312     (2,506,956        (225,768     (85,444

Class K

    (9,094,818     (9,839,967        (2,509,731     (2,515,351

From return of capital:

          

Institutional

    (4,121,235     (151,873               

Service

    (65,681     (2,949               

Investor A

    (688,662     (29,888               

Investor C

    (239,941     (11,279               

Class K

    (1,002,715     (44,271               
 

 

 

   

 

 

      

 

 

   

 

 

 

Decrease in net assets resulting from distributions to shareholders

    (61,611,791     (53,642,238        (9,108,438     (6,535,074
 

 

 

   

 

 

      

 

 

   

 

 

 

CAPITAL SHARE TRANSACTIONS

          

Net increase (decrease) in net assets derived from capital share transactions

    (294,508,769     33,494,491          132,795,496       62,259,383  
 

 

 

   

 

 

      

 

 

   

 

 

 

NET ASSETS(c)

          

Total increase (decrease) in net assets

    (401,868,189     51,861,225          121,419,930       63,109,058  

Beginning of year

    2,520,426,536       2,468,565,311          174,810,633       111,701,575  
 

 

 

   

 

 

      

 

 

   

 

 

 

End of year

  $ 2,118,558,347     $ 2,520,426,536        $ 296,230,563     $ 174,810,633  
 

 

 

   

 

 

      

 

 

   

 

 

 

 

(a) 

Consolidated Statements of Changes in Net Assets.

(b) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(c) 

Prior year distribution character information and undistributed (distributions in excess of) net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. Refer to Note 12 for this prior year information.

See notes to financial statements.

 

 

FINANCIAL STATEMENTS      39  


Financial Highlights

(For a share outstanding throughout each period)

 

    BlackRock Inflation Protected Bond Portfolio  
    Institutional  
    Year Ended December 31,      Period from
10/01/2016
to 12/31/2016 (a)
     

 

    Year Ended September 30,  
  2018 (a)     2017 (a)     2016 (a)      2015      2014  
               

Net asset value, beginning of period

  $ 10.71     $ 10.62      $ 10.89       $ 10.58      $ 10.94      $ 11.23  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net investment income(b)

    0.28       0.24        0.06         0.11        0.11        0.23  

Net realized and unrealized gain (loss)

    (0.48     0.09        (0.32       0.51        (0.34      (0.10
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net increase (decrease) from investment operations

    (0.20     0.33        (0.26       0.62        (0.23      0.13  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 
Distributions(c)                                             

From net investment income

    (0.25     (0.24              (0.20      (0.13      (0.27

From net realized gain

                                       (0.15

From return of capital

    (0.03     (0.00 )(d)       (0.01       (0.11              
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total distributions

    (0.28     (0.24      (0.01       (0.31      (0.13      (0.42
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net asset value, end of period

  $ 10.23     $ 10.71      $ 10.62       $ 10.89      $ 10.58      $ 10.94  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total Return(e)

                

Based on net asset value

    (1.88 )%      3.09      (2.35 )%(f)        5.97      (2.16 )%       1.19
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Ratios to Average Net Assets

                

Total expenses(g)

    0.63     0.56      0.61 %(h)        0.60      0.62      0.64
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly

    0.50     0.40      0.40 %(h)        0.48      0.47      0.46
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense

    0.34     0.35      0.36 %(h)        0.42      0.44      0.44
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net investment income

    2.67     2.26      2.06 %(h)        0.99      0.99      2.08
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Supplemental Data

                

Net assets, end of period (000)

  $ 1,434,877     $ 1,554,098      $ 1,485,583       $ 1,584,439      $ 1,758,366      $ 1,187,477  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Portfolio turnover rate

    176 %(i)      76      7       45      61      66
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

 

(a) 

Consolidated Financial Highlights.

(b) 

Based on average shares outstanding.

(c) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(d) 

Amount is greater than $(0.005) per share.

(e) 

Where applicable, assumes the reinvestment of distributions.

(f) 

Aggregate total return.

(g) 

Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees, the expense ratios were as follows:

 

     Year Ended December 31,           Period from
10/01/2016
to 12/31/2016
           Year Ended September 30,  
  2018            2017            2016            2015            2014         

Expense ratios

    N/A         N/A         N/A         N/A         0.61       0.63  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

 

(h) 

Annualized.

(i) 

Includes mortgage dollar roll transactions (“MDRs”). Excluding MDRs, the portfolio turnover rate would have been 172%.

See notes to financial statements.

 

 

40    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

    BlackRock Inflation Protected Bond Portfolio (continued)  
    Service  
    Year Ended December 31,      Period from
10/01/2016
to 12/31/2016 (a)
     

 

    Year Ended September 30,  
  2018 (a)     2017 (a)     2016 (a)      2015      2014  
               

Net asset value, beginning of period

  $ 10.57     $ 10.50      $ 10.77       $ 10.49      $ 10.88      $ 11.18  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net investment income (loss)(b)

    0.25       0.20        0.05         0.08        (0.01      0.20  

Net realized and unrealized gain (loss)

    (0.46     0.09        (0.31       0.50        (0.26      (0.10
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net increase (decrease) from investment operations

    (0.21     0.29        (0.26       0.58        (0.27      0.10  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 
Distributions(c)                                             

From net investment income

    (0.23     (0.22              (0.19      (0.12      (0.25

From net realized gain

                                       (0.15

From return of capital

    (0.03     (0.00 )(d)       (0.01       (0.11              
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total distributions

    (0.26     (0.22      (0.01       (0.30      (0.12      (0.40
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net asset value, end of period

  $ 10.10     $ 10.57      $ 10.50       $ 10.77      $ 10.49      $ 10.88  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total Return(e)

                

Based on net asset value

    (2.03 )%      2.74      (2.38 )%(f)        5.66      (2.47 )%       0.93
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Ratios to Average Net Assets

                

Total expenses(g)

    0.95     0.82      0.86 %(h)        0.86      0.93      0.93
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly

    0.75     0.65      0.66 %(h)        0.78      0.78      0.77
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense

    0.59     0.60      0.62 %(h)        0.71      0.75      0.75
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net investment income (loss)

    2.46     1.94      1.80 %(h)        0.73      (0.08 )%       1.82
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Supplemental Data

                

Net assets, end of period (000)

  $ 21,040     $ 28,986      $ 41,422       $ 44,565      $ 41,926      $ 44,373  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Portfolio turnover rate

    176 %(i)      76      7       45      61      66
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

 

(a) 

Consolidated Financial Highlights.

(b) 

Based on average shares outstanding.

(c) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(d) 

Amount is greater than $(0.005) per share.

(e) 

Where applicable, assumes the reinvestment of distributions.

(f) 

Aggregate total return.

(g) 

Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees, the expense ratios were as follows:

 

     Year Ended December 31,           Period from
10/01/2016
to 12/31/2016
           Year Ended September 30,  
  2018            2017            2016            2015            2014         

Expense ratios

    N/A         N/A         N/A         0.86       0.91       0.92  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

 

(h) 

Annualized.

(i) 

Includes mortgage dollar roll transactions (“MDRs”). Excluding MDRs, the portfolio turnover rate would have been 172%.

See notes to financial statements.

 

 

FINANCIAL HIGHLIGHTS      41  


Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

    BlackRock Inflation Protected Bond Portfolio (continued)  
    Investor A  
    Year Ended December 31,      Period from
10/01/2016
to 12/31/2016 (a)
     

 

    Year Ended September 30,  
  2018 (a)     2017 (a)     2016 (a)      2015      2014  
               

Net asset value, beginning of period

  $ 10.46     $ 10.39      $ 10.65       $ 10.38      $ 10.77      $ 11.07  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net investment income (loss)(b)

    0.25       0.21        0.05         0.05        (0.02      0.16  

Net realized and unrealized gain (loss)

    (0.46     0.07        (0.30       0.52        (0.25      (0.06
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net increase (decrease) from investment operations

    (0.21     0.28        (0.25       0.57        (0.27      0.10  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 
Distributions(c)                                             

From net investment income

    (0.23     (0.21              (0.21      (0.12      (0.25

From net realized gain

                                       (0.15

From return of capital

    (0.03     (0.00 )(d)       (0.01       (0.09              
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total distributions

    (0.26     (0.21      (0.01       (0.30      (0.12      (0.40
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net asset value, end of period

  $ 9.99     $ 10.46      $ 10.39       $ 10.65      $ 10.38      $ 10.77  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total Return(e)

                

Based on net asset value

    (2.08 )%      2.75      (2.32 )%(f)        5.59      (2.49 )%       0.95
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Ratios to Average Net Assets

                

Total expenses(g)

    1.13     0.95      1.02 %(h)        0.96      0.97      1.06
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly

    0.75     0.65      0.66 %(h)        0.83      0.79      0.78
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense

    0.59     0.60      0.62 %(h)        0.76      0.76      0.76
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net investment income (loss)

    2.42     1.98      1.80 %(h)        0.45      (0.14 )%       1.45
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Supplemental Data

                

Net assets, end of period (000)

  $ 248,530     $ 301,045      $ 352,596       $ 358,182      $ 476,282      $ 651,951  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Portfolio turnover rate

    176 %(i)      76      7       45      61      66
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

 

(a) 

Consolidated Financial Highlights.

(b) 

Based on average shares outstanding.

(c) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(d) 

Amount is greater than $(0.005) per share.

(e) 

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

(f) 

Aggregate total return.

(g) 

Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees, the expense ratios were as follows:

 

     Year Ended December 31,           Period from
10/01/2016
to 12/31/2016
           Year Ended September 30,  
  2018            2017            2016            2015            2014         

Expense ratios

    N/A         N/A         N/A         N/A         0.95       1.02  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

 

(h) 

Annualized.

(i) 

Includes mortgage dollar roll transactions (“MDRs”). Excluding MDRs, the portfolio turnover rate would have been 172%.

See notes to financial statements.

 

 

42    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

    BlackRock Inflation Protected Bond Portfolio (continued)  
    Investor C  
    Year Ended December 31,      Period from
10/01/2016
to 12/31/2016 (a)
     

 

    Year Ended September 30,  
  2018 (a)     2017 (a)     2016 (a)      2015      2014  
               

Net asset value, beginning of period

  $ 10.13     $ 10.09      $ 10.36       $ 10.16      $ 10.62      $ 10.95  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net investment income (loss)(b)

    0.17       0.13        0.03         (0.02      (0.09      0.11  

Net realized and unrealized gain (loss)

    (0.44     0.07        (0.29       0.50        (0.25      (0.09
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net increase (decrease) from investment operations

    (0.27     0.20        (0.26       0.48        (0.34      0.02  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 
Distributions(c)                                             

From net investment income

    (0.18     (0.16              (0.20      (0.12      (0.20

From net realized gain

                                       (0.15

From return of capital

    (0.02     (0.00 )(d)       (0.01       (0.08              
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total distributions

    (0.20     (0.16      (0.01       (0.28      (0.12      (0.35
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net asset value, end of period

  $ 9.66     $ 10.13      $ 10.09       $ 10.36      $ 10.16      $ 10.62  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total Return(e)

                

Based on net asset value

    (2.75 )%      1.97      (2.51 )%(f)        4.83      (3.22 )%       0.24
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Ratios to Average Net Assets

                

Total expenses(g)

    1.63     1.58      1.61 %(h)        1.60      1.65      1.64
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly

    1.50     1.40      1.41 %(h)        1.53      1.51      1.49
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense

    1.34     1.35      1.37 %(h)        1.47      1.48      1.47
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net investment income (loss)

    1.68     1.25      1.06 %(h)        (0.15 )%       (0.86 )%       0.98
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Supplemental Data

                

Net assets, end of period (000)

  $ 99,108     $ 138,050      $ 183,525       $ 197,741      $ 243,707      $ 317,089  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Portfolio turnover rate

    176 %(i)      76      7       45      61      66
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

 

(a) 

Consolidated Financial Highlights.

(b) 

Based on average shares outstanding.

(c) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(d) 

Amount is greater than $(0.005) per share.

(e) 

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

(f) 

Aggregate total return.

(g) 

Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees, the expense ratios were as follows:

 

     Year Ended December 31,           Period from
10/01/2016
to 12/31/2016
           Year Ended September 30,  
  2018            2017            2016            2015            2014         

Expense ratios

    N/A         N/A         1.61       N/A         1.65       N/A    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

 

(h) 

Annualized.

(i) 

Includes mortgage dollar roll transactions (“MDRs”). Excluding MDRs, the portfolio turnover rate would have been 172%.

See notes to financial statements.

 

 

FINANCIAL HIGHLIGHTS      43  


Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

    BlackRock Inflation Protected Bond Portfolio (continued)  
    Class K  
    Year Ended December 31,      Period from
10/01/2016
to 12/31/2016 (a)
     

 

    Year Ended September 30,  
  2018 (a)     2017 (a)     2016 (a)      2015     2014  
               

Net asset value, beginning of period

  $ 10.54     $ 10.45      $ 10.71       $ 10.41      $ 10.75     $ 11.02  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

   

 

 

 

Net investment income(b)

    0.28       0.24        0.06         0.14        0.05       0.24  

Net realized and unrealized gain (loss)

    (0.47     0.08        (0.31       0.47        (0.26     (0.09
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

   

 

 

 

Net increase (decrease) from investment operations

    (0.19     0.32        (0.25       0.61        (0.21     0.15  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

   

 

 

 
Distributions(c)                                            

From net investment income

    (0.25     (0.23              (0.19      (0.13     (0.27

From net realized gain

                                      (0.15

From return of capital

    (0.03     (0.00 )(d)       (0.01       (0.12             
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

   

 

 

 

Total distributions

    (0.28     (0.23      (0.01       (0.31      (0.13     (0.42
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

   

 

 

 

Net asset value, end of period

  $ 10.07     $ 10.54      $ 10.45       $ 10.71      $ 10.41     $ 10.75  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

   

 

 

 

Total Return(e)

               

Based on net asset value

    (1.81 )%      3.14      (2.29 )%(f)        5.98      (2.01 )%      1.42
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

   

 

 

 

Ratios to Average Net Assets

               

Total expenses

    0.53     0.43      0.46 %(g)        0.47      0.52 %(h)      0.51
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

   

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly

    0.45     0.35      0.34 %(g)        0.39      0.35     0.34
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

   

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense

    0.29     0.30      0.30 %(g)        0.32      0.32     0.32
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

   

 

 

 

Net investment income

    2.70     2.29      2.14 %(g)        1.29      0.47     2.20
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

   

 

 

 

Supplemental Data

               

Net assets, end of period (000)

  $ 315,003     $ 498,248      $ 405,439       $ 353,536      $ 363,660     $ 347,282  
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

   

 

 

 

Portfolio turnover rate

    176 %(i)      76      7       45      61     66
 

 

 

   

 

 

    

 

 

     

 

 

    

 

 

   

 

 

 

 

(a) 

Consolidated Financial Highlights.

(b) 

Based on average shares outstanding.

(c) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(d) 

Amount is greater than $(0.005) per share.

(e) 

Where applicable, assumes the reinvestment of distributions.

(f) 

Aggregate total return.

(g) 

Annualized.

(h) 

Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the year ended September 30, 2015, there was no financial impact to the expense ratios.

(i) 

Includes mortgage dollar roll transactions (“MDRs”). Excluding MDRs, the portfolio turnover rate would have been 172%.

See notes to financial statements.

 

 

44    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

    BlackRock Managed Income Fund  
    Institutional  
    Year Ended December 31,      Period from
10/01/2016
to 12/31/2016
     

 

    Year Ended September 30,  
  2018      2017     2016      2015      2014  
               

Net asset value, beginning of period

  $ 10.02      $ 9.95      $ 10.10       $ 9.61      $ 9.81      $ 10.12  
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net investment income(a)

    0.40        0.37        0.10         0.28        0.29        0.34  

Net realized and unrealized gain (loss)

    (0.46      0.15        (0.04       0.48        (0.21      0.40  
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net increase (decrease) from investment operations

    (0.06      0.52        0.06         0.76        0.08        0.74  
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 
Distributions(b)                                              

From net investment income

    (0.38      (0.37      (0.08       (0.27      (0.28      (0.33

From net realized gain

    (0.02      (0.08      (0.13                     (0.72
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total distributions

    (0.40      (0.45      (0.21       (0.27      (0.28      (1.05
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net asset value, end of period

  $ 9.56      $ 10.02      $ 9.95       $ 10.10      $ 9.61      $ 9.81  
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total Return(c)

                 

Based on net asset value

    (0.57 )%       5.29      0.60 %(d)        8.06      0.75      7.75
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Ratios to Average Net Assets(e)

                 

Total expenses(f)

    0.72      1.03      1.26 %(g)        0.84      0.99      0.92
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly

    0.27      0.38      0.36 %(g)        0.52      0.55      0.57
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense

    0.27      0.38      0.36 %(g)        0.52      0.55      0.55
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net investment income

    4.09      3.74      3.82 %(g)        2.85      2.92      3.50
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Supplemental Data

                 

Net assets, end of period (000)

  $ 117,904      $ 51,542      $ 23,083       $ 15,100      $ 8,135      $ 5,755  
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Portfolio turnover rate(h)

    79      68      74       67      74      70
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

 

(a) 

Based on average shares outstanding.

(b) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(c) 

Where applicable, assumes the reinvestment of distributions.

(d) 

Aggregate total return.

(e) 

Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

 

     Year Ended December 31,           Period from
10/01/2016
to 12/31/2016
           Year Ended September 30,  
  2018            2017            2016            2015            2014         

Investments in underlying funds

    0.17       0.18       0.22       0.01       0.01       0.01  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

 

(f) 

Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees, the expense ratios were as follows:

 

     Year Ended December 31,           Period from
10/01/2016
to 12/31/2016
           Year Ended September 30,  
  2018            2017            2016            2015            2014         

Expense ratios

    N/A         N/A         N/A         N/A         0.98       N/A  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

 

(g) 

Annualized.

(h) 

Excludes equity-linked notes. Additional information regarding portfolio turnover rate is as follows:

 

     Year Ended December 31,           Period from
10/01/2016
to 12/31/2016
           Year Ended September 30,  
  2018            2017            2016            2015            2014         

Portfolio turnover rate (including equity-linked notes)

    100       96       75                    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

See notes to financial statements.

 

 

 

FINANCIAL HIGHLIGHTS      45  


Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

    BlackRock Managed Income Fund (continued)  
    Investor A  
    Year Ended December 31,      Period from
10/01/2016
to 12/31/2016
     

 

    Year Ended September 30,  
  2018      2017     2016      2015      2014  
               

Net asset value, beginning of period

  $ 10.02      $ 9.95      $ 10.10       $ 9.61      $ 9.81      $ 10.14  
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net investment income(a)

    0.38        0.35        0.09         0.25        0.25        0.32  

Net realized and unrealized gain (loss)

    (0.46      0.15        (0.04       0.48        (0.21      0.37  
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net increase (decrease) from investment operations

    (0.08      0.50        0.05         0.73        0.04        0.69  
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 
Distributions(b)                                              

From net investment income

    (0.36      (0.35      (0.07       (0.24      (0.24      (0.30

From net realized gain

    (0.02      (0.08      (0.13                     (0.72
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total distributions

    (0.38      (0.43      (0.20       (0.24      (0.24      (1.02
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net asset value, end of period

  $ 9.56      $ 10.02      $ 9.95       $ 10.10      $ 9.61      $ 9.81  
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total Return(c)

                 

Based on net asset value

    (0.82 )%       5.03      0.54 %(d)        7.74      0.40      7.20
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Ratios to Average Net Assets(e)

                 

Total expenses(f)

    0.95      1.26      1.50 %(g)        1.11      1.31      1.29
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly

    0.52      0.63      0.61 %(g)        0.82      0.90      0.92
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense

    0.52      0.63      0.61 %(g)        0.82      0.90      0.90
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net investment income

    3.83      3.45      3.52 %(g)        2.56      2.55      3.19
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Supplemental Data

                 

Net assets, end of period (000)

  $ 107,314      $ 59,591      $ 33,604       $ 29,957      $ 21,251      $ 8,854  
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Portfolio turnover rate(h)

    79      68      74       67      74      70
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

 

(a) 

Based on average shares outstanding.

(b) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(c) 

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

(d) 

Aggregate total return.

(e) 

Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

 

     Year Ended December 31,           Period from
10/01/2016
to 12/31/2016
           Year Ended September 30,  
  2018            2017            2016            2015            2014         

Investments in underlying funds

    0.17       0.18       0.22       0.01       0.01       0.01  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

 

(f) 

Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees, the expense ratios were as follows:

 

     Year Ended December 31,           Period from
10/01/2016
to 12/31/2016
           Year Ended September 30,  
  2018            2017            2016            2015            2014         

Expense ratios

    N/A         N/A         N/A         N/A         1.30       1.26  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

 

(g) 

Annualized.

(h) 

Excludes equity-linked notes. Additional information regarding portfolio turnover rate is as follows:

 

     Year Ended December 31,           Period from
10/01/2016
to 12/31/2016
           Year Ended September 30,  
  2018            2017            2016            2015            2014         

Portfolio turnover rate (including equity-linked notes)

    100       96       75                    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

See notes to financial statements.

 

 

 

46    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

    BlackRock Managed Income Fund (continued)  
    Investor C  
    Year Ended December 31,       

Period from
10/03/2016 (a)

to 12/31/2016

 

 
  2018      2017  
       

Net asset value, beginning of period

  $ 10.03      $ 9.96        $ 10.10  
 

 

 

    

 

 

      

 

 

 

Net investment income(b)

    0.31        0.28          0.07  

Net realized and unrealized gain (loss)

    (0.48      0.14          (0.03
 

 

 

    

 

 

      

 

 

 

Net increase (decrease) from investment operations

    (0.17      0.42          0.04  
 

 

 

    

 

 

      

 

 

 
Distributions(c)                      

From net investment income

    (0.28      (0.27        (0.05

From net realized gain

    (0.02      (0.08        (0.13
 

 

 

    

 

 

      

 

 

 

Total distributions

    (0.30      (0.35        (0.18
 

 

 

    

 

 

      

 

 

 

Net asset value, end of period

  $ 9.56      $ 10.03        $ 9.96  
 

 

 

    

 

 

      

 

 

 

Total Return(d)

         

Based on net asset value

    (1.67 )%       4.24        0.43 %(e) 
 

 

 

    

 

 

      

 

 

 

Ratios to Average Net Assets(f)

         

Total expenses

    1.74      1.95        2.12 %(g) 
 

 

 

    

 

 

      

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly

    1.28      1.38        1.26 %(g) 
 

 

 

    

 

 

      

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense

    1.28      1.38        1.26 %(g) 
 

 

 

    

 

 

      

 

 

 

Net investment income

    3.11      2.75        2.76 %(g) 
 

 

 

    

 

 

      

 

 

 

Supplemental Data

         

Net assets, end of period (000)

  $ 11,983      $ 4,122        $ 693  
 

 

 

    

 

 

      

 

 

 

Portfolio turnover rate(h)

    79      68        74
 

 

 

    

 

 

      

 

 

 

 

(a) 

Commencement of operations.

(b) 

Based on average shares outstanding.

(c) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(d) 

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

(e) 

Aggregate total return.

(f) 

Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

 

    Year Ended December 31,          

Period from
10/03/2016 (a)

to 12/31/2016

 

       
    2018           2017        

Investments in underlying funds

          0.17             0.18                 0.22        
 

 

 

     

 

 

     

 

 

   

 

(g) 

Annualized.

(h) 

Excludes equity-linked notes. Additional information regarding portfolio turnover rate is as follows:

 

    Year Ended December 31,          

Period from
10/03/2016 (a)

to 12/31/2016

 

       
    2018           2017        

Portfolio turnover rate (including equity-linked notes)

          100             96                   75        
 

 

 

     

 

 

     

 

 

   

See notes to financial statements.

 

 

 

FINANCIAL HIGHLIGHTS      47  


Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

    BlackRock Managed Income Fund (continued)  
    Class K  
    Year Ended December 31,      Period from
10/01/2016
to 12/31/2016
     

 

    Year Ended September 30,  
  2018      2017     2016      2015      2014  
               

Net asset value, beginning of period

  $ 10.05      $ 9.97      $ 10.12       $ 9.63      $ 9.83      $ 10.14  
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net investment income(a)

    0.41        0.38        0.10         0.29        0.30        0.35  

Net realized and unrealized gain (loss)

    (0.47      0.16        (0.04       0.48        (0.22      0.39  
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net increase (decrease) from investment operations

    (0.06      0.54        0.06         0.77        0.08        0.74  
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 
Distributions(b)                                              

From net investment income

    (0.39      (0.38      (0.08       (0.28      (0.28      (0.33

From net realized gain

    (0.02      (0.08      (0.13                     (0.72
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total distributions

    (0.41      (0.46      (0.21       (0.28      (0.28      (1.05
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net asset value, end of period

  $ 9.58      $ 10.05      $ 9.97       $ 10.12      $ 9.63      $ 9.83  
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total Return(c)

                 

Based on net asset value

    (0.61 )%       5.45      0.62 %(d)        8.12      0.83      7.83
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Ratios to Average Net Assets(e)

                 

Total expenses

    0.64      0.87      1.07 %(f)        0.72      0.89      0.89
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly

    0.22      0.33      0.31 %(f)        0.45      0.45      0.47
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense

    0.22      0.33      0.31 %(f)        0.45      0.45      0.45
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Net investment income

    4.10      3.76      3.86 %(f)        2.95      3.04      3.58
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Supplemental Data

                 

Net assets, end of period (000)

  $ 59,030      $ 59,555      $ 54,321       $ 54,344      $ 50,141      $ 63,576  
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

Portfolio turnover rate(g)

    79      68      74       67      74      70
 

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

 

 

(a) 

Based on average shares outstanding.

(b) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(c) 

Where applicable, assumes the reinvestment of distributions.

(d) 

Aggregate total return.

(e) 

Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

 

     Year Ended December 31,           Period from
10/01/2016
to 12/31/2016
           Year Ended September 30,  
  2018            2017            2016            2015            2014         

Investments in underlying funds

    0.17       0.18       0.22       0.01       0.01       0.01  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

 

(f) 

Annualized.

(g) 

Excludes equity-linked notes. Additional information regarding portfolio turnover rate is as follows:

 

     Year Ended December 31,           Period from
10/01/2016
to 12/31/2016
           Year Ended September 30,  
  2018            2017            2016            2015            2014         

Portfolio turnover rate (including equity-linked notes)

    100       96       75                    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

See notes to financial statements.

 

 

48    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Notes to Financial Statements

 

1.

ORGANIZATION

BlackRock Funds II and BlackRock Funds V (each, a “Trust” or collectively, the “Trusts”) are each registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as open-end management investment companies. Each Trust is organized as a Massachusetts business trust. The following are referred to herein collectively as the “Funds” or individually as a “Fund”:

 

Fund Name   Herein Referred To As    Diversification
Classification

BlackRock Inflation Protected Bond Portfolio

  Inflation Protected Bond    Diversified

BlackRock Managed Income Fund

  Managed Income    Diversified

Each Fund offers multiple classes of shares. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions except that certain classes bear expenses related to the shareholder servicing and distribution of such shares. Institutional, Service and Class K Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally sold with an initial sales charge, and may be subject to a contingent deferred sales charge (“CDSC”) for certain redemptions where no initial sales charge was paid at the time of purchase. Investor C Shares may be subject to a CDSC. However, the CDSC does not apply to redemptions by certain employer-sponsored retirement plans or to redemptions of shares acquired through the reinvestment of dividends and capital gains by existing shareholders. Service, Investor A and Investor C, bear certain expenses related to shareholder servicing of such shares, and Investor C Shares also bear certain expenses related to the distribution of such shares. Investor A and Investor C Shares are generally available through financial intermediaries. Effective November 8, 2018, each Fund adopted an automatic conversion feature whereby Investor C Shares held for approximately ten years will be automatically converted into Investor A Shares of the applicable Fund, and, thereafter, investors will be subject to lower ongoing fees. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures (except that Investor C shareholders may vote on material changes to the Investor A distribution and service plan).

 

Share Class   Initial Sales Charge    CDSC      Conversion Privilege

Institutional, Service and Class K Shares

  No      No      None

Investor A Shares

  Yes      No (a)      None

Investor C Shares

  No      Yes      To Investor A Shares after approximately 10 years

 

  (a) 

Investor A Shares may be subject to a contingent deferred sales charge (“CDSC”) for certain redemptions where no initial sales charge was paid at the time of purchase.

 

The Funds, together with certain other registered investment companies advised by the BlackRock Advisor, LLC (“Manager”) or its affiliates, are included in a complex of open-end funds referred to as the Equity-Bond Complex.

Reorganization: The Board of Trustees of BlackRock Funds II approved an Agreement and Plan of Reorganization with respect to the following target fund, (the “Target Fund”), pursuant to which the Target Fund reorganized into a newly created series (the “Acquiring Fund”) of BlackRock Funds V, a newly organized Massachusetts business trust. This reorganization (the “Reorganization”) closed on September 17, 2018 and was not subject to approval by shareholders of the Target Fund.

 

Target Fund   Target Fund’s
Registrant
     Acquiring Fund      Acquiring Fund’s
Registrant
 

Inflation Protected Bond

    BlackRock Funds II        Inflation Protected Bond        BlackRock Funds V  

The Reorganization was effected in connection with a potential reconfiguration of the boards of directors/trustees of certain BlackRock-advised funds.

The Acquiring Fund has the same investment objective, strategies and policies, investment adviser, portfolio management team and service providers as the Target Fund. The Target Fund is the performance and accounting survivor of its Reorganization, meaning that the Acquiring Fund assumed the performance and financial history of the Target Fund upon completion of the Reorganization. In addition, as a result of the Reorganization, the Acquiring Fund is subject to the same contractual arrangements, including the same contractual fees and expenses, as those of the Target Fund. The Reorganization was tax-free, meaning that the Target Fund’s shareholders became shareholders of the Acquiring Fund without realizing any gain or loss for federal income tax purposes.

As a result, the Acquiring Fund acquired all of the assets and assumed all of the liabilities of the Target Fund in exchange for an equal aggregate value of newly-issued shares of its Acquiring Fund. Each shareholder of the Target Fund received shares of the Acquiring Fund in an amount equal to the aggregate NAV of such shareholder’s Target Fund shares, as determined at the close of business on September 14, 2018.

The Reorganization was accomplished by a tax-free exchange of shares of the Acquiring Fund in the following amounts and at the following conversion ratio:

 

Target Fund   Shares Prior to
Reorganization
     Conversion
Ratio
     Shares Post-
Reorganization
 

Inflation Protected Bond

    219,522,028        1        219,522,028  

For financial reporting purposes, assets received and shares issued by the Acquiring Fund were recorded at fair value. However, the cost basis of the investments received from the Target Fund were carried forward to align ongoing reporting of the Acquiring Fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.

Prior to the Reorganization, the Acquiring Fund had not yet commenced operations and had no assets or liabilities. The Target Fund’s net assets, fair value and cost of investments and derivative financial instruments prior to the Reorganization was as follows:

 

Target Fund   Net Assets      Fair Value
of Investments
     Cost of
Investments
 

Inflation Protected Bond

  $ 2,259,265,901      $ 2,248,987,164      $ 2,257,206,569  

 

 

NOTES TO FINANCIAL STATEMENTS      49  


Notes to Financial Statements  (continued)

 

Prior to the Reorganization’s effective date, the Target Fund began to incur expenses in connection with a potential realignment and consolidation of the boards of directors/trustees of certain BlackRock-advised funds. These expenses and liabilities have been assumed by the Acquiring Fund. The Manager has voluntarily agreed to reimburse the Acquiring Fund for all or a portion of such expenses, which amounts are included in fees waived and/or reimbursed by the Manager in the Statements of Operations.

Basis of Consolidation: The accompanying consolidated financial statements of Inflation Protected Bond include the accounts of Cayman Inflation Protected Bond Portfolio, Ltd. (the “Subsidiary”), which is a wholly-owned subsidiary of Inflation Protected Bond and primarily invests in commodity-related instruments and other derivatives. The Subsidiary enables Inflation Protected Bond to hold these commodity-related instruments and satisfy regulated investment company tax requirements. Inflation Protected Bond may invest up to 25% of its total assets in the Subsidiary. The net assets of the Subsidiary as of period end were $178,885, which is less than 0.5% of Inflation Protected Bond’s consolidated net assets. Intercompany accounts and transactions, if any, have been eliminated. During the year ended December 31, 2018, there were no transactions in the Subsidiary. The Subsidiary is subject to the same investment policies and restrictions that apply to Inflation Protected Bond, except that the Subsidiary may invest without limitation in commodity-related instruments.

 

2.

SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Funds are informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, a portion of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on an accrual basis. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Foreign Currency Translation: Each Fund’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

Each Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statements of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. Each Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.

Segregation and Collateralization: In cases where a Fund enters into certain investments (e.g., TBA sale commitments, futures contracts, forward foreign currency exchange contracts, options written and swaps) or certain borrowings (e.g., reverse repurchase transactions) that would be treated as “senior securities” for 1940 Act purposes, a Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments or borrowings. Doing so allows the investment or borrowing to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Funds may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Distributions: Distributions from net investment income are declared daily and paid monthly. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The portion of distributions, if any, that exceeds a fund’s current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Net income and realized gains from investments held by the Subsidiary are treated as ordinary income for tax purposes. If a net loss is realized by the Subsidiary in any taxable year, the loss will generally not be available to offset the Inflation Protected Bond’s ordinary income and/or capital gains for that year.

Recent Accounting Standards: In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update “Premium Amortization of Purchased Callable Debt Securities” which amends the amortization period for certain purchased callable debt securities. Under the new guidance, the premium amortization of purchased callable debt securities that have explicit, non-contingent call features and are callable at fixed prices will be amortized to the earliest call date. The guidance will be applied on a modified retrospective basis and is effective for fiscal years, and their interim periods, beginning after December 15, 2018. Management is currently evaluating the impact of this guidance to the Funds.

In August 2018, the Financial Accounting Standards Board issued Accounting Standards Update 2018-13 “Changes to the Disclosure Requirements for Fair Value Measurement” which modifies disclosure requirements for fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years. Management is currently evaluating the impact of this guidance to the Funds.

 

 

50    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Notes to Financial Statements  (continued)

 

Indemnifications: In the normal course of business, a Fund enters into contracts that contain a variety of representations that provide general indemnification. A Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against a Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to a Fund or its classes are charged to that Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Funds and other shared expenses prorated to the Funds are allocated daily to each class based on their relative net assets or other appropriate methods.

 

3.

INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Funds’ investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the NYSE (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds determine the fair values of their financial instruments using various independent dealers or pricing services under policies approved by the Board of Trustees of each Trust (collectively, the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each Fund’s assets and liabilities:

 

   

Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

 

   

Fixed-income securities for which market quotations are readily available are generally valued using the last available bid prices or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more independent brokers or dealers as obtained from a third party pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but a fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), credit quality information, perceived market movements, news, and other relevant information. Certain fixed-income securities, including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value.

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Funds’ net assets. Each business day, the Funds use a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.

 

   

Exchange-traded funds (“ETFs”) traded on a recognized securities exchange are valued at the official closing price each day, if available. For ETFs traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. ETFs traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

 

   

Investments in open-end U.S. mutual funds are valued at NAV each business day.

 

   

Futures contracts traded on exchanges are valued at their last sale price.

 

   

Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

 

   

Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that the prior day’s price no longer reflects the fair value of the option. Over-the-counter (“OTC”) options and options on swaps (“swaptions”) are valued by an independent pricing service using a mathematical model, which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.

 

   

Swap agreements are valued utilizing quotes received daily by the Funds’ pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments.

 

   

Equity-Linked Notes are valued utilizing quotes received daily by the Fund’s pricing service or through brokers. The Funds’ pricing service utilizes models that incorporate a number of market data factors, such as historical and forecasted discrete dividend information and historical values of the underlying reference instruments.

 

   

To-be-announced (“TBA”) commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services.

 

 

 

NOTES TO FINANCIAL STATEMENTS      51  


Notes to Financial Statements  (continued)

 

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement.

The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of each Fund’s pricing vendors, regular reviews of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis. As a result of the inherent uncertainty in valuation of these investments, the fair values may differ from the values that would have been used had an active market existed.

For investments in equity or debt issued by privately held companies or funds (“Private Company” or collectively, the “Private Companies”) and other Fair Valued Investments, the fair valuation approaches that are used by third party pricing services utilize one or a combination of, but not limited to, the following inputs:

 

     Standard Inputs Generally Considered By Third Party Pricing Service

Market approach

 

(i)  recent market transactions, including subsequent rounds of financing, in the underlying investment or comparable issuers;

(ii)   recapitalizations and other transactions across the capital structure; and

(iii)  market multiples of comparable issuers

Income approach

 

(i)  future cash flows discounted to present and adjusted as appropriate for liquidity, credit, and/or market risks;

(ii)   quoted prices for similar investments or assets in active markets; and

(iii)  other risk factors, such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates.

Cost approach.

 

(i)  audited or unaudited financial statements, investor communications and financial or operational metrics issued by the Private Company;

(ii)   changes in the valuation of relevant indices or publicly traded companies comparable to the Private Company;

(iii)  relevant news and other public sources; and

(iv)  known secondary market transactions in the Private Company’s interests and merger or acquisition activity in companies comparable to the Private Company.

Investments in series of preferred stock issued by Private Companies are typically valued utilizing market approach in determining the enterprise value of the company. Such investments often contain rights and preferences that differ from other series of preferred and common stock of the same issuer. Valuation techniques such as an option pricing model (“OPM”), a probability weighted expected return model (“PWERM”) or a hybrid of those techniques are used in allocating enterprise value of the company, as deemed appropriate under the circumstances. The use of OPM and PWERM techniques involve a determination of the exit scenarios of the investment in order to appropriately allocate the enterprise value of the company among the various parts of its capital structure.

The Private Companies are not subject to the public company disclosure, timing, and reporting standards as other investments held by a Fund. Typically, the most recently available information by a Private Company is as of a date that is earlier than the date a Fund is calculating its NAV. This factor may result in a difference between the value of the investment and the price a Fund could receive upon the sale of the investment.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

 

   

Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that each Fund has the ability to access

 

   

Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

 

   

Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including each Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by Private Companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with each Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

 

 

52    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Notes to Financial Statements  (continued)

 

 

4.

SECURITIES AND OTHER INVESTMENTS

Asset-Backed and Mortgage-Backed Securities: Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, a fund may subsequently have to reinvest the proceeds at lower interest rates. If a fund has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

For mortgage pass-through securities (the “Mortgage Assets”) there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury.

Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.

Collateralized Debt Obligations: Collateralized debt obligations (“CDOs”), including collateralized bond obligations (“CBOs”) and collateralized loan obligations (“CLOs”), are types of asset-backed securities. A CDO is an entity that is backed by a diversified pool of debt securities (CBOs) or syndicated bank loans (CLOs). The cash flows of the CDO can be split into multiple segments, called “tranches,” which will vary in risk profile and yield. The riskiest segment is the subordinated or “equity” tranche. This tranche bears the greatest risk of defaults from the underlying assets in the CDO and serves to protect the other, more senior, tranches from default in all but the most severe circumstances. Since it is shielded from defaults by the more junior tranches, a “senior” tranche will typically have higher credit ratings and lower yields than their underlying securities, and often receive investment grade ratings from one or more of the nationally recognized rating agencies. Despite the protection from the more junior tranches, senior tranches can experience substantial losses due to actual defaults, increased sensitivity to future defaults and the disappearance of one or more protecting tranches as a result of changes in the credit profile of the underlying pool of assets.

Inflation-Indexed Bonds: Inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) are fixed-income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation rises or falls, the principal value of inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) will be adjusted upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Any upward or downward adjustment in the principal amount of an inflation-indexed bond will be included as interest income in the Statements of Operations, even though investors do not receive their principal until maturity. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal. With regard to municipal inflation-indexed bonds and certain corporate inflation-indexed bonds, the inflation adjustment is typically reflected in the semi-annual coupon payment. As a result, the principal value of municipal inflation-indexed bonds and such corporate inflation-indexed bonds does not adjust according to the rate of inflation.

Equity-Linked Notes: Equity-linked notes seek to generate income and provide exposure to the performance of an underlying security, group of securities or exchange-traded funds (the “underlying reference instrument”). In an equity-linked note, a fund purchases a note from a bank or broker-dealer and in return, the issuer provides for interest payments during the term of the note. At maturity or when the security is sold, a fund will either settle by taking physical delivery of the underlying reference instrument or by receipt of a cash settlement amount equal to the value of the note at termination or maturity. The use of equity-linked notes involves the risk that the value of the note changes unfavorably due to movements in the value of the underlying reference instrument. Equity-linked notes are considered general unsecured contractual obligations of the bank or broker-dealer. A fund must rely on the creditworthiness of the issuer for its investment returns.

Capital Securities and Trust Preferred Securities: Capital securities, including trust preferred securities, are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics. In the case of trust preferred securities, an affiliated business trust of a corporation issues these securities, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured with either a fixed or adjustable coupon that can have either a perpetual or stated maturity date. For trust preferred securities, the issuing bank or corporation pays interest to the trust, which is then distributed to holders of these securities as a dividend. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. These securities generally are rated below that of the issuing company’s senior debt securities and are freely callable at the issuer’s option.

Preferred Stocks: Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well), but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

 

 

NOTES TO FINANCIAL STATEMENTS      53  


Notes to Financial Statements  (continued)

 

TBA Commitments: TBA commitments are forward agreements for the purchase or sale of mortgage-backed securities for a fixed price, with payment and delivery on an agreed upon future settlement date. The specific securities to be delivered are not identified at the trade date. However, delivered securities must meet specified terms, including issuer, rate and mortgage terms. When entering into TBA commitments, a fund may take possession of or deliver the underlying mortgage-backed securities but can extend the settlement or roll the transaction. TBA commitments involve a risk of loss if the value of the security to be purchased or sold declines or increases, respectively, prior to settlement date.

In order to better define contractual rights and to secure rights that will help a fund mitigate their counterparty risk, TBA commitments may be entered into by a fund under Master Securities Forward Transaction Agreements (each, an “MSFTA”). An MSFTA typically contains, among other things, collateral posting terms and netting provisions in the event of default and/or termination event. The collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of the collateral currently pledged by a fund and the counterparty. Cash collateral that has been pledged to cover the obligations of a fund and cash collateral received from the counterparty, if any, is reported separately in the Statements of Assets and Liabilities as cash pledged as collateral for TBA commitments or cash received as collateral for TBA commitments, respectively. Non-cash collateral pledged by a fund, if any, is noted in the Schedules of Investments. Typically, a fund is permitted to sell, re-pledge or use the collateral it receives; however, the counterparty is not permitted to do so. To the extent amounts due to a fund are not fully collateralized, contractually or otherwise, a fund bears the risk of loss from counterparty non-performance.

Mortgage Dollar Roll Transactions: Certain funds may sell TBA mortgage-backed securities and simultaneously contract to repurchase substantially similar (i.e., same type, coupon and maturity) securities on a specific future date at an agreed upon price. During the period between the sale and repurchase, a fund is not entitled to receive interest and principal payments on the securities sold. Mortgage dollar roll transactions are treated as purchases and sales and realize gains and losses on these transactions. Mortgage dollar rolls involve the risk that the market value of the securities that a fund is required to purchase may decline below the agreed upon repurchase price of those securities.

Reverse Repurchase Agreements: Reverse repurchase agreements are agreements with qualified third party broker dealers in which a fund sells securities to a bank or broker-dealer and agrees to repurchase the same securities at a mutually agreed upon date and price. A fund receives cash from the sale to use for other investment purposes. During the term of the reverse repurchase agreement, a fund continues to receive the principal and interest payments on the securities sold. Certain agreements have no stated maturity and can be terminated by either party at any time. Interest on the value of the reverse repurchase agreements issued and outstanding is based upon competitive market rates determined at the time of issuance. A fund may utilize reverse repurchase agreements when it is anticipated that the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction. Reverse repurchase agreements involve leverage risk. If a fund suffers a loss on its investment of the transaction proceeds from a reverse repurchase agreement, a fund would still be required to pay the full repurchase price. Further, a fund remains subject to the risk that the market value of the securities repurchased declines below the repurchase price. In such cases, a fund would be required to return a portion of the cash received from the transaction or provide additional securities to the counterparty.

Cash received in exchange for securities delivered plus accrued interest due to the counterparty is recorded as a liability in the Statements of Assets and Liabilities at face value including accrued interest. Due to the short-term nature of the reverse repurchase agreements, face value approximates fair value. Interest payments made by a fund to the counterparties are recorded as a component of interest expense in the Statements of Operations. In periods of increased demand for the security, a fund may receive a fee for the use of the security by the counterparty, which may result in interest income to a fund.

For the year ended December 31, 2018, the average amount of reverse repurchase agreements and the daily weighted average interest rate for Inflation Protected Bond were $167,834,704 and 2.29%, respectively.

Reverse repurchase transactions are entered into by a fund under Master Repurchase Agreements (each, an “MRA”), which permit a fund, under certain circumstances, including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables under the MRA with collateral held and/or posted to the counterparty and create one single net payment due to or from a fund. With reverse repurchase transactions, typically a fund and counterparty under an MRA are permitted to sell, re-pledge, or use the collateral associated with the transaction. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Pursuant to the terms of the MRA, a fund receives or posts securities and cash as collateral with a market value in excess of the repurchase price to be paid or received by a fund upon the maturity of the transaction. Upon a bankruptcy or insolvency of the MRA counterparty, a fund is considered an unsecured creditor with respect to excess collateral and, as such, the return of excess collateral may be delayed.

As of period end, the following table is a summary of a Fund’s open reverse repurchase agreements by counterparty which are subject to offset under an MRA on a net basis:

Reverse Repurchase Agreements

 

Counterparty    Reverse Repurchase
Agreements
    Fair Value of Non-cash
Collateral Pledged  Including
Accrued Interest
 (a)
     Cash Collateral
Received
 (a)
     Net
Amount
 

Inflation Protected Bond

          

Credit Suisse Securities USA LLC

   $ (253,814   $ 253,814      $      $  

Merrill Lynch, Pierce, Fenner & Smith Inc.

     (112,732,856     112,732,856                

Nomura Securities International, Inc.

     (77,100,217     77,100,217                
  

 

 

   

 

 

    

 

 

    

 

 

 
   $ (190,086,887   $ 190,086,887      $      $  
  

 

 

   

 

 

    

 

 

    

 

 

 

 

  (a) 

Net collateral including accrued interest with a value of $190,455,424 has been received/pledged in connection with open reverse repurchase agreements. Excess of net collateral pledged to the individual counterparty is not shown for financial reporting purposes.

 

In the event the counterparty of securities under an MRA files for bankruptcy or becomes insolvent, a fund’s use of the proceeds from the agreement may be restricted while the counterparty, or its trustee or receiver, determines whether or not to enforce a fund’s obligation to repurchase the securities.

 

 

 

54    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Notes to Financial Statements  (continued)

 

Securities Lending: Certain Funds may lend their securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Funds collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by each Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Funds are entitled to all distributions made on or in respect of the loaned securities, but do not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as corporate bonds in the Funds’ Schedules of Investments, and the value of any related collateral are shown separately in the Statements of Assets and Liabilities as a component of investments at value – unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedules of Investments.

Securities lending transactions are entered into by the Funds under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Funds, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and a Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Funds benefit from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. Each Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

 

5.

DERIVATIVE FINANCIAL INSTRUMENTS:

The Funds engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Funds and/or to manage their exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedules of Investments. These contracts may be transacted on an exchange or OTC.

Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk) and changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Funds and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Funds are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts in the Statements of Assets and Liabilities.

Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statements of Assets and Liabilities. Pursuant to the contract, the Funds agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statements of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

Forward Foreign Currency Exchange Contracts: Forward foreign currency exchange contracts are entered into to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk).

A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the Funds are denominated and in some cases, may be used to obtain exposure to a particular market.

The contract is marked-to-market daily and the change in market value is recorded as unrealized appreciation (depreciation) in the Statements of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the value at the time it was opened and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies. Cash amounts pledged for forward foreign currency exchange contracts are considered restricted and are included in cash pledged as collateral for OTC derivatives in the Statements of Assets and Liabilities.

 

 

NOTES TO FINANCIAL STATEMENTS      55  


Notes to Financial Statements  (continued)

 

Options: Certain Funds purchases and writes call and put options to increase or decrease their exposure to the risks of underlying instruments, including equity risk, interest rate risk and/or commodity price risk and/or, in the case of options written, to generate gains from options premiums.

A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised) the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period.

Premiums paid on options purchased and premiums received on options written, as well as the daily fluctuation in market value, are included in investments at value — unaffiliated and options written at value, respectively, in the Statements of Assets and Liabilities. When an instrument is purchased or sold through the exercise of an option, the premium is offset against the cost or proceeds of the underlying instrument. When an option expires, a realized gain or loss is recorded in the Statements of Operations to the extent of the premiums received or paid. When an option is closed or sold, a gain or loss is recorded in the Statements of Operations to the extent the cost of the closing transaction exceeds the premiums received or paid. When the Funds write a call option, such option is typically “covered,” meaning that they hold the underlying instrument subject to being called by the option counterparty. When the Funds writes a put option, such option is covered by cash in an amount sufficient to cover the obligation. These amounts, which are considered restricted, are included in cash pledged as collateral for options written in the Statements of Assets and Liabilities.

 

   

Swaptions — Certain Funds purchase and write options on swaps (“swaptions”) primarily to preserve a return or spread on a particular investment or portion of the Funds’ holdings, as a duration management technique or to protect against an increase in the price of securities it anticipates purchasing at a later date. The purchaser and writer of a swaption is buying or granting the right to enter into a previously agreed upon interest rate or credit default swap agreement (interest rate risk and/or credit risk) at any time before the expiration of the option.

 

   

Interest rate and inflation rate caps and floors — Interest rate and inflation rate caps and floors are entered into to gain or reduce exposure to interest rates and/or inflation rates (interest rate risk and/or other risk). Caps are agreements whereby one party agrees to make payments to the other, in return for a premium, to the extent that interest rate or inflation indexes exceed a specified rate, or “cap.” Floors are agreements whereby one party agrees to make payments to the other, in return for a premium, to the extent that interest rate or inflation indexes fall below a specified rate, or “floor.” The maximum potential amount of future payments that a Fund would be required to make under an interest rate or inflation rate cap would be the notional amount times the percentage increase in interest rates or inflation rates determined by the difference between the interest rate or inflation index current value and the value at the time the cap was entered into.

 

   

Foreign currency options — Certain Funds purchase and write foreign currency options, foreign currency futures and options on foreign currency futures to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk). Foreign currency options give the purchaser the right to buy from or sell to the writer a foreign currency at any time before the expiration of the option.

 

   

Barrier options — Certain Funds may purchase and write a variety of options with non-standard payout structures or other features (“barrier options”) that are generally traded OTC.

In purchasing and writing options, the Funds bear the risk of an unfavorable change in the value of the underlying instrument or the risk that they may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Funds purchasing or selling a security when it otherwise would not, or at a price different from the current market value.

Swaps: Swap contracts are entered into to manage exposure to issuers, markets and securities. Such contracts are agreements between the Funds and a counterparty to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract (“OTC swaps”) or centrally cleared (“centrally cleared swaps”).

For OTC swaps, any upfront premiums paid and any upfront fees received are shown as swap premiums paid and swap premiums received, respectively, in the Statements of Assets and Liabilities and amortized over the term of the contract. The daily fluctuation in market value is recorded as unrealized appreciation (depreciation) on OTC Swaps in the Statements of Assets and Liabilities. Payments received or paid are recorded in the Statements of Operations as realized gains or losses, respectively. When an OTC swap is terminated, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the proceeds from (or cost of) the closing transaction and the Funds’ basis in the contract, if any. Generally, the basis of the contract is the premium received or paid.

In a centrally cleared swap, immediately following execution of the swap contract, the swap contract is novated to a central counterparty (the “CCP”) and the Funds’ counterparty on the swap agreement becomes the CCP. The Funds are required to interface with the CCP through the broker. Upon entering into a centrally cleared swap, the Funds are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited is shown as cash pledged for centrally cleared swaps in the Statements of Assets and Liabilities. Amounts pledged, which are considered restricted cash, are included in cash pledged for centrally cleared swaps in the Statements of Assets and Liabilities. Pursuant to the contract, the Funds agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and shown as variation margin receivable (or payable) on centrally cleared swaps in the Statements of Assets and Liabilities. Payments received from (paid to) the counterparty, including at termination, are recorded as realized gains (losses) in the Statements of Operations.

 

   

Credit default swaps — Credit default swaps are entered into to manage exposure to the market or certain sectors of the market, to reduce risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which a fund is not otherwise exposed (credit risk).

The Funds may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps are agreements in which the protection buyer pays fixed periodic payments to the seller in consideration for a promise from the protection seller to make a specific payment should a negative credit event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation acceleration, repudiation, moratorium or restructuring). As a buyer, if an underlying credit event occurs, the Funds will either (i) receive from the seller an amount equal to the notional

 

 

56    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Notes to Financial Statements  (continued)

 

amount of the swap and deliver the referenced security or underlying securities comprising the index, or (ii) receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index. As a seller (writer), if an underlying credit event occurs, the Funds will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.

 

   

Interest rate swaps — Interest rate swaps are entered into to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate (interest rate risk).

Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, in exchange for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time. In more complex interest rate swaps, the notional principal amount may decline (or amortize) over time.

 

   

Forward swaps — Certain Funds enter into forward interest rate swaps and forward total return swaps. In a forward swap, each Fund and the counterparty agree to make periodic net payments beginning on a specified date or a net payment at termination.

Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Statements of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.

Master Netting Arrangements: In order to define their contractual rights and to secure rights that will help them mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their counterparties. An ISDA Master Agreement is a bilateral agreement between each Fund and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, each Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty.

Cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, is reported separately in the Statements of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Funds, if any, is noted in the Schedules of Investments. Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the Funds. Any additional required collateral is delivered to/pledged by the Funds on the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. A Fund generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Funds from their counterparties are not fully collateralized, they bear the risk of loss from counterparty non-performance. Likewise, to the extent the Funds have delivered collateral to a counterparty and stand ready to perform under the terms of their agreement with such counterparty, they bear the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.

For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statements of Assets and Liabilities.

 

6.

INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Advisory: The Trusts, on behalf of the Funds, entered into Investment Advisory Agreements with the Manager, the Funds’ investment adviser and an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory services. The Manager is responsible for the management of each Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of each Fund.

For such services, each Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of each Fund’s net assets:

 

     Inflation
Protected Bond
 
Average Daily Net Assets   Investment
Advisory Fee
 

First $1 Billion

    0.250

$1 Billion — $3 Billion

    0.240  

$3 Billion — $5 Billion

    0.230  

$5 Billion — $10 Billion

    0.220  

Greater than $10 Billion

    0.210  

 

 

 

NOTES TO FINANCIAL STATEMENTS      57  


Notes to Financial Statements  (continued)

 

     Managed Income  
Average Daily Net Assets   Investment
Advisory Fee
 

First $1 Billion

    0.350

$1 Billion — $2 Billion

    0.340  

$2 Billion — $3 Billion

    0.330  

Greater than $3 Billion

    0.320  

The Manager provides investment management and other services to the Subsidiary. The Manager does not receive separate compensation from the Subsidiary for providing investment management or administrative services. However, Inflation Protected Bond pays the Manager based on the Fund’s, net assets which includes the assets of the Subsidiary.

With respect to Inflation Protected Bond, the Manager entered into a separate sub-advisory agreement with BlackRock International Limited (“BIL”), an affiliate of the Manager. The Manager pays BIL, for services it provides for that portion of Inflation Protected Bond for which BIL serves as sub-adviser, a monthly fee that is equal to a percentage of the investment advisory fees paid by Inflation Protected Bond to the Manager.

Prior to July 1, 2018, BIL, an affiliate of the Manager, served as a sub-adviser to Managed Income pursuant to a separate sub-advisory agreement with the Manager. The Manager paid BIL for services it provided for that portion of Managed Income for which it acted as sub-adviser, a monthly fee that was a percentage of the investment advisory fees paid by Managed Income to the Manager. Effective July 1, 2018, the sub-advisory agreement between the Manager and BIL, with respect to Managed Income, was terminated.

Service and Distribution Fees: The Trusts, on behalf of the Funds, entered into Distribution Agreements and a Distribution and Service Plans with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution and Service Plans and in accordance with Rule 12b-1 under the 1940 Act, each Fund pays BRIL ongoing service and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the relevant share class of each Fund as follows:

 

     Service      Investor A      Investor C  

Service Fee

    0.25      0.25      0.25

Distribution Fee

                  0.75  

BRIL and broker-dealers, pursuant to sub-agreements with BRIL, provide shareholder servicing and distribution services to the Funds. The ongoing service and/or distribution fee compensates/reimburses BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to shareholders.

For the year ended December 31, 2018, the following table shows the class specific service and distribution fees borne directly by each share class of each Fund:

 

     Service      Investor A      Investor C      Total  

Inflation Protected Bond

  $ 64,555      $ 687,569      $ 1,204,720      $ 1,956,844  

Managed Income

         $ 196,662      $ 62,687      $ 259,349  

Administration: The Trusts, on behalf of the Funds, entered into an Administration Agreements with the Manager, an indirect, wholly-owned subsidiary of BlackRock, to provide administrative services. For these services, the Manager receives an administration fee computed daily and payable monthly, based on a percentage of the average daily net assets of each Fund. The administration fee, which is shown as administration in the Statements of Operations, is paid at the annual rates below.

 

Average Daily Net Assets   Administration Fees  

First $500 Million

    0.0425

$500 Million — $1 Billion

    0.0400  

$1 Billion — $2 Billion

    0.0375  

$2 Billion — $4 Billion

    0.0350  

$4 Billion — $13 Billion

    0.0325  

Greater than $13 Billion

    0.0300  

In addition, the Manager charges each of the share classes an administration fee, which is shown as administration — class specific in the Statements of Operations, at an annual rate of 0.02% of the average daily net assets of each respective class.

For the year ended December 31, 2018, the following table shows the class specific administration fees borne directly by each share class of each Fund:

 

     Institutional      Service      Investor A      Investor C      Class K      Total  

Inflation Protected Bond

  $ 306,238      $ 5,164      $ 55,001      $ 24,093      $ 75,358      $ 465,854  

Managed Income

    13,946               15,729        1,254        12,078      $ 43,007  

Transfer Agent: Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the Funds with sub-accounting, recordkeeping, sub-transfer agency and other administrative services with respect to sub-accounts they service. For these services, these entities receive an asset-based fee or an annual fee per shareholder account, which will vary depending on share class and/or net assets. For the year ended December 31, 2018, Inflation Protected Bond paid the following amounts to affiliates of BlackRock in return for these services, which are included in transfer agent — class specific in the Statements of Operations:

 

     Institutional      Service      Investor A      Total  

Inflation Protected Bond

  $ 16,663      $ 116      $ 696      $ 17,475  

 

 

 

58    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Notes to Financial Statements  (continued)

 

The Manager maintains a call center that is responsible for providing certain shareholder services to the Funds. Shareholder services include responding to inquiries and processing purchases and sales based upon instructions from shareholders. For the year ended December 31, 2018, each Fund reimbursed the Manager the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statements of Operations:

 

     Institutional      Service      Investor A      Investor C      Class K      Total  

Inflation Protected Bond

  $ 3,199      $ 135      $ 5,858      $ 2,359      $ 2,133      $ 13,684  

Managed Income

  $ 227      $      $ 972      $ 347      $ 212      $ 1,758  

For the year ended December 31, 2018, the following table shows the class specific transfer agent fees borne directly by each class of each Fund:

 

     Institutional      Service      Investor A      Investor C      Class K      Total  

Inflation Protected Bond

  $ 1,735,276      $ 45,341      $ 986,444      $ 136,328      $ 43,062      $ 2,946,451  

Managed Income

  $ 55,506      $      $ 51,479      $ 6,874      $ 307      $ 114,166  

Other Fees: For the year ended December 31, 2018, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of each Fund’s Investor A Shares as follows:

 

Inflation Protected Bond

  $ 4,939  

Managed Income

    17,611  

For the year ended December 31, 2018, affiliates received CDSCs as follows:

 

     Investor A      Investor C      Total  

Inflation Protected Bond

  $ 2,053      $ 4,091      $ 6,144  

Managed Income

    20,627        5,277        25,904  

Expense Limitations, Waivers, Reimbursements and Recoupments: With respect to each Fund, the Manager voluntarily agreed to waive its investment advisory fee by the amount of investment advisory fees each Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation caps, as applicable, will be reduced by the amount of the affiliated money market fund waiver. These amounts are included in fees waived and/or reimbursed by the Manager in the Statements of Operations. For the year ended December 31, 2018, the amounts waived were as follows:

 

Inflation Protected Bond

  $ 7,996  

Managed Income

  $ 4,158  

The Manager contractually agreed to waive its investment advisory fee with respect to any portion of each Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2019 for Managed Income and April 30, 2020 for Inflation Protected Bond. The contractual agreement may be terminated upon 90 days’ notice by a majority of the trustees who are not “interested persons” of the Funds, as defined in the 1940 Act (“Independent Trustees”), or by a vote of a majority of the outstanding voting securities of the Funds. These amounts are included in fees waived and/or reimbursed by the Manager in the Statements of Operations. For the year ended December 31, 2018, the amounts waived in investment advisory fees pursuant to these agreements were as follows:

 

Inflation Protected Bond

  $ 4,391  

Managed Income

  $ 364,539  

With respect to each Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of each Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

 

     Institutional      Service      Investor A      Investor C      Class K  

Inflation Protected Bond

    0.34      0.59      0.59      1.34      0.29

Managed Income

    0.45        N/A        0.70        1.45        0.40  

Prior to March 29, 2018, the expense limitations as a percentage of average daily net assets for Inflation Protected Bond were as follows:

 

     Institutional      Service      Investor A      Investor C      Class K  

Inflation Protected Bond

    0.35      0.60      0.60      1.35      0.30

For the year ended December 31, 2018, the amounts included in fees waived and/or reimbursed by the Manager were as follows:

 

Inflation Protected Bond

  $ 535,410  

With respect to Managed Income, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit Other Expenses of the Fund excluding dividend expense, interest expense and certain other fund expenses. The expense limitation as a percentage of average daily net assets is 0.09% for Institutional, Investor A and Investor C shares and 0.04% for Class K shares. The Manager has agreed not to reduce or discontinue the contractual expense limitations through

 

 

NOTES TO FINANCIAL STATEMENTS      59  


Notes to Financial Statements  (continued)

 

April 30, 2019 for Managed Income Fund, and through April 30, 2020 for Inflation Protected Bond Fund, unless approved by the Board, including a majority of the Independent Trustees, or by a vote of a majority of the outstanding voting securities of a Fund. For the year ended December 31, 2018, the Manager reimbursed $388,937 for Managed Income Fund, which is shown as fees waived and/or reimbursed by the Manager on the Statements of Operations. For the year ended December 31, 2018, the administration fees waived at the fund level were $91,401 for Managed Income. This amount is included in fees waived and/or reimbursed by the Manager in the Statements of Operations.

These amounts waived and/or reimbursed are included in fees waived and/or reimbursed by the Manager, administration fees waived — class specific, and transfer agent fees waived and/or reimbursed — class specific, respectively, in the Statements of Operations. For the year ended December 31, 2018, class specific expense waivers and/or reimbursements were as follows:

 

Administration Fees Waived   Institutional      Service      Investor A      Investor C      Class K      Total  

Inflation Protected Bond

  $ 305,131      $ 5,164      $ 54,998      $ 24,091      $ 75,353      $ 464,737  

Managed Income

  $ 13,946      $      $ 15,730      $ 1,253      $ 12,078      $ 43,007  

 

Transfer Agent Fees Waived and/or Reimbursed   Institutional      Service      Investor A      Investor C      Class K      Total  

Inflation Protected Bond

  $ 959,500      $ 32,244      $ 847,271      $ 75,770      $ 43,056      $ 1,957,841  

Managed Income

  $ 20,622      $      $ 12,116      $ 3,681      $ 307      $ 36,726  

The Funds have begun to incur expenses in connection with a potential realignment and consolidation of the boards of directors/trustees of certain BlackRock-advised funds, including the Funds. The Manager has voluntarily agreed to reimburse certain Funds for all or a portion of such expenses, which amounts are included in fees waived and/or reimbursed by the Manager in the Statements of Operations. For the year ended December 31, 2018, the amount reimbursed to Inflation Protected Bond was $612,164.

With respect to the contractual expense limitation, if during a Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver and/or reimbursement from the Manager, are less than the current expense limitation for that share class, the Manager is entitled to be reimbursed by such share class up to the lesser of: (a) the amount of fees waived and/or expenses reimbursed during those prior two fiscal years under the agreement and (b) an amount not to exceed either the current expense limitation of that share class or the expense limitation of the share class in effect at the time that the share class received the applicable waiver and/or reimbursement, provided that:

(1) Each Fund, of which the share class is a part, has more than $50 million in assets for the fiscal year; and

(2) The Manager or an affiliate continues to serve as a Fund’s investment adviser or administrator.

This repayment applies only to the contractual expense limitation on net expenses and does not apply to the contractual investment advisory fee waiver described above or any voluntary waivers that may be in effect from time to time.

On December 31, 2018, the fund level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:

 

     Expiring December 31,  
     2019      2020  

Inflation Protected Bond

    

Fund Level

  $ 1,227,084      $ 535,410  

Institutional

    1,739,192        1,264,631  

Service

    37,811        37,408  

Investor A

    811,245        902,269  

Investor C

    211,595        99,861  

Class K

    137,130        118,409  

Managed Income

    

Fund Level

    663,767        480,338  

Institutional

    45,557        34,568  

Investor A

    53,887        27,846  

Investor C

    534        4,934  

Class K

    11,320        12,385  

The following fund level and class specific waivers and/or reimbursements previously recorded by the Funds, which were subject to recoupment by the Manager, expired on December 31, 2018:

 

     Inflation Protected Bond      Managed Income  

Fund Level

  $ 547,263      $ 174,034  

Institutional

    463,535        5,019  

Service

    12,290         

Investor A

    240,184        10,840  

Investor C

    56,454         

Class K

    28,377        2,425  

 

 

60    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Notes to Financial Statements  (continued)

 

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Funds, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Funds are responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Funds. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. Each Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, each Fund retains 80% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, each Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income in an amount equal to 85% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by each Fund is shown as securities lending income — affiliated — net in the Statements of Operations. For the year ended December 31, 2018, Managed Income paid BIM $13,269 for securities lending agent services.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, each Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by each Fund’s investment policies and restrictions. Each Fund is currently permitted to borrow under the Interfund Lending Program.

A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets (or any lower threshold provided for by the fund’s investment restrictions). If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2018, the Funds did not participate in the Interfund Lending Program.

Trustees and Officers: Certain trustees and/or officers of the Trusts are trustees and/or officers of BlackRock or its affiliates. The Funds reimburse the Manager for a portion of the compensation paid to the Funds’ Chief Compliance Officer, which is included in Trustees and Officer in the Statements of Operations.

 

7.

PURCHASES AND SALES

For the year ended December 31, 2018, purchases and sales of investments, including mortgage dollar rolls and excluding short-term securities and equity-linked notes, were as follows:

 

     Inflation Protected Bond      Managed Income  

Purchases

    

Non-U.S Government Securities

  $
393,627,685
 
   $ 288,655,717  

U.S Government Securities

    3,877,727,428        59,482  
 

 

 

    

 

 

 

Total Purchases

  $ 4,271,355,113      $ 288,715,199  
 

 

 

    

 

 

 

Sales

    

Non-U.S Government Securities

  $ 465,031,590      $ 160,167,892  

U.S Government Securities

    4,136,717,217        60,218  
 

 

 

    

 

 

 

Total Sales

  $ 4,601,748,807      $ 160,228,110  
 

 

 

    

 

 

 

For the year ended December 31, 2018, purchases and sales related to mortgage dollar rolls were as follows:

 

     Inflation Protected Bond      Managed Income  

Purchases and Sales — MDRs

    

Purchases

  $
93,249,545
 
   $  

Sales

    93,359,866         

 

 

NOTES TO FINANCIAL STATEMENTS      61  


Notes to Financial Statements  (continued)

 

For the year ended December 31, 2018, purchases and sales related to equity-linked notes were as follows:

 

     Inflation Protected Bond      Managed Income  

Purchases and Sales — ELNs

    

Purchases

  $      $
52,873,258
 

Sales

   

 
    
50,876,480
 

 

8.

INCOME TAX INFORMATION

It is each Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of their taxable income to their shareholders. Therefore, no U.S. federal income tax provision is required.

Each Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2018. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Funds as of December 31, 2018, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to the investment in a wholly owned subsidiary were reclassified to the following accounts:

 

     Inflation Protected Bond     Managed Income  

Paid-in capital

  $ (399,677   $  

Accumulated loss

    399,677        

The tax character of distributions paid was as follows:

 

     Inflation Protected Bond      Managed Income  

Ordinary income

    

12/31/18

  $ 55,493,557      $ 8,441,717  

12/31/17

    53,401,978        5,515,430  

Long-Term Capital Gains

    

12/31/18

           666,721  

12/31/17

           1,019,644  

Return of Capital

    

12/31/18

    6,118,234         

12/31/17

    240,260         
 

 

 

    

 

 

 

Total

    

12/31/18

  $ 61,611,791      $ 9,108,438  
 

 

 

    

 

 

 

12/31/17

  $ 53,642,238      $ 6,535,074  
 

 

 

    

 

 

 

As of period end, the tax components of accumulated loss were as follows:

 

     Inflation Protected Bond     Managed Income  

Undistributed ordinary income

  $     $ 170,156  

Capital loss carryforwards

    (59,103,157      

Net unrealized losses(a)

    (29,933,131     (6,605,078

Qualified late-year losses(b)

    (3,884,263     (2,811,168
 

 

 

   

 

 

 
  $ (92,920,551   $ (9,246,090
 

 

 

   

 

 

 

 

  (a) 

The difference between book-basis and tax-basis net unrealized gains (losses) was attributable primarily to the tax deferral of losses on wash sales and straddles, the realization for tax purposes of unrealized gains/losses on certain futures and foreign currency contracts, amortization methods for premiums and discounts on fixed income securities, the classification of investments and the accounting for swap agreements.

 
  (b)

The Fund has elected to defer certain qualified late-year losses and recognize such losses in the next taxable year.

 

As of December 31, 2018, the Funds had capital loss carryforwards, with no expiration dates, available to offset future realized capital gains as follows:

 

     Inflation Protected Bond  

No expiration date

  $ 59,103,157  

During the year ended December 31, 2018, Managed Income utilized $258,552 of its capital loss carryforward.

 

 

62    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Notes to Financial Statements  (continued)

 

As of December 31, 2018, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

     Inflation Protected Bond     Managed Income  

Tax cost

  $ 2,414,570,772     $ 299,476,346  
 

 

 

   

 

 

 

Gross unrealized appreciation

  $ 24,319,875     $ 1,266,743  

Gross unrealized depreciation

    (53,681,552     (7,897,930
 

 

 

   

 

 

 

Net unrealized depreciation

  $ (29,361,677   $ (6,631,187
 

 

 

   

 

 

 

 

9.

BANK BORROWINGS

The Trusts, on behalf of the Funds, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.25 billion credit agreement with a group of lenders. Under this agreement, the Funds may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Funds, can borrow up to an aggregate commitment amount of $1.75 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.10% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2019 unless extended or renewed. Prior to April 19, 2018, the aggregate commitment amount was $2.1 billion and the fee was 0.12% per annum. Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which are included in miscellaneous expenses in the Statements of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2018, the Funds did not borrow under the credit agreement.

 

10.

PRINCIPAL RISKS

In the normal course of business, certain Funds invest in securities or other instruments and may enter into certain transactions, and such activities subject each Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. Each Fund’s prospectus provides details of the risks to which each Fund is subject.

Each Fund may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force each Fund to reinvest in lower yielding securities. Each Fund may also be exposed to reinvestment risk, which is the risk that income from each Fund’s portfolio will decline if each Fund invests the proceeds from matured, traded or called fixed-income securities at market interest rates that are below each Fund portfolio’s current earnings rate.

The Funds may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00, which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. A Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause each Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of a Fund may lose value, regardless of the individual results of the securities and other instruments in which a Fund invests.

Counterparty Credit Risk: The Funds may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Funds manage counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Funds.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

A Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by such Fund.

For OTC options purchased, each Fund bears the risk of loss in the amount of the premiums paid plus the positive change in market values net of any collateral held by the Funds should the counterparty fail to perform under the contracts. Options written by the Funds do not typically give rise to counterparty credit risk, as options written generally obligate the Funds, and not the counterparty, to perform. The Funds may be exposed to counterparty credit risk with respect to options written to the extent each Fund deposits collateral with its counterparty to a written option.

 

 

NOTES TO FINANCIAL STATEMENTS      63  


Notes to Financial Statements  (continued)

 

With exchange-traded options purchased and futures and centrally cleared swaps, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.

Concentration Risk: Certain Funds invest a significant portion of their assets in fixed-income securities and/or use derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as interest rates rise. The Funds may be subject to a greater risk of rising interest rates due to the current period of historically low rates. The Federal Reserve has begun to raise the Federal Funds rate, and each increase results in more pronounced interest rate risk in the current market environment.

Certain Funds invest a significant portion of their assets in securities backed by commercial or residential mortgage loans or in issuers that hold mortgage and other asset-backed securities. Investment percentages in these securities are presented in the Schedules of Investments. Changes in economic conditions, including delinquencies and/or defaults on assets underlying these securities, can affect the value, income and/or liquidity of such positions.

 

11.

CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

 

     Year Ended
12/31/2018
    Year Ended
12/31/2017
 
Inflation Protected Bond   Shares     Amount     Shares     Amount  

Institutional

       

Shares sold

    45,913,520     $ 480,838,720       53,192,979     $ 567,227,426  

Shares issued in reinvestment of distributions

    3,795,676       39,767,793       3,016,163       32,167,874  

Shares redeemed

    (54,624,456     (569,618,249     (50,892,836     (542,555,171
 

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease)

    (4,915,260   $ (49,011,736     5,316,306     $ 56,840,129  
 

 

 

   

 

 

   

 

 

   

 

 

 

Service

       

Shares sold

    1,377,089     $ 14,271,702       1,183,160     $ 12,477,128  

Shares issued in reinvestment of distributions

    63,504       657,485       61,940       652,759  

Shares redeemed

    (2,098,659     (21,645,350     (2,448,511     (25,842,887
 

 

 

   

 

 

   

 

 

   

 

 

 

Net decrease

    (658,066   $ (6,716,163     (1,203,411   $ (12,713,000
 

 

 

   

 

 

   

 

 

   

 

 

 

Investor A

       

Shares sold

    8,184,850     $ 83,348,831       10,244,733     $ 106,839,585  

Shares issued in reinvestment of distributions

    651,676       6,672,476       618,693       6,446,700  

Shares redeemed

    (12,741,784     (129,804,117     (16,026,028     (167,131,480
 

 

 

   

 

 

   

 

 

   

 

 

 

Net decrease

    (3,905,258   $ (39,782,810     (5,162,602   $ (53,845,195
 

 

 

   

 

 

   

 

 

   

 

 

 

Investor C

       

Shares sold

    1,261,239     $ 12,473,950       1,144,996     $ 11,590,377  

Shares issued in reinvestment of distributions

    223,839       2,221,444       225,433       2,279,121  

Shares redeemed

    (4,846,858     (47,604,471     (5,935,867     (60,024,889
 

 

 

   

 

 

   

 

 

   

 

 

 

Net decrease

    (3,361,780   $ (32,909,077     (4,565,438   $ (46,155,391
 

 

 

   

 

 

   

 

 

   

 

 

 

Class K

       

Shares sold

    18,702,241     $ 192,961,493       24,178,588     $ 253,969,004  

Shares issued in reinvestment of distributions

    978,084       10,095,190       940,114       9,864,421  

Shares redeemed

    (35,684,176     (369,145,666     (16,619,040     (174,465,477
 

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease)

    (16,003,851   $ (166,088,983     8,499,662     $ 89,367,948  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Net Increase (Decrease)

    (28,844,215   $ (294,508,769     2,884,517     $ 33,494,491  
 

 

 

   

 

 

   

 

 

   

 

 

 

 

 

64    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Notes to Financial Statements  (continued)

 

 

     Year Ended
12/31/2018
    Year Ended
12/31/2017
 
Managed Income   Shares     Amount     Shares     Amount  

Institutional

       

Shares sold

    12,318,111     $ 120,518,405       4,683,747     $ 46,952,217  

Shares issued in reinvestment of distributions

    320,369       3,130,285       173,490       1,740,162  

Shares redeemed

    (5,442,547     (53,325,917     (2,034,329     (20,408,973
 

 

 

   

 

 

   

 

 

   

 

 

 

Net increase

    7,195,933     $ 70,322,773       2,822,908     $ 28,283,406  
 

 

 

   

 

 

   

 

 

   

 

 

 

Investor A

       

Shares sold

    8,634,087     $ 84,953,043       5,169,329     $ 51,781,704  

Shares issued in reinvestment of distributions

    326,398       3,193,277       216,117       2,166,832  

Shares redeemed

    (3,677,947     (36,153,773     (2,816,570     (28,241,145
 

 

 

   

 

 

   

 

 

   

 

 

 

Net increase

    5,282,538     $ 51,992,547       2,568,876     $ 25,707,391  
 

 

 

   

 

 

   

 

 

   

 

 

 

Investor C

       

Shares sold

    1,006,883     $ 9,868,377       371,972     $ 3,737,779  

Shares issued in reinvestment of distributions

    22,455       219,069       7,816       78,162  

Shares redeemed

    (187,459     (1,851,256     (38,383     (386,341
 

 

 

   

 

 

   

 

 

   

 

 

 

Net increase

    841,879     $ 8,236,190       341,405     $ 3,429,600  
 

 

 

   

 

 

   

 

 

   

 

 

 

Class K

       

Shares sold

    1,206,570     $ 11,939,373       554,138     $ 5,565,674  

Shares issued in reinvestment of distributions

    192,238       1,889,441       188,430       1,895,086  

Shares redeemed

    (1,164,779     (11,584,828     (260,953     (2,621,774
 

 

 

   

 

 

   

 

 

   

 

 

 

Net increase

    234,029     $ 2,243,986       481,615     $ 4,838,986  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Net Increase

    13,554,379     $ 132,795,496       6,214,804     $ 62,259,383  
 

 

 

   

 

 

   

 

 

   

 

 

 

As of December 31, 2018, BlackRock HoldCo 2, Inc., an affiliate of the Fund, owned 19,802 Investor C Shares of Managed Income Fund.

 

12.

REGULATION S-X AMENDMENTS

On August 17, 2018, the SEC adopted amendments to certain disclosure requirements in Securities Act Release No. 33-10532, Disclosure Update and Simplification. The Fund have adopted the amendments pertinent to Regulation S-X in this shareholder report. The amendments impacted certain disclosure presentation on the Statements of Assets and Liabilities, Statements of Changes in Net Assets and Notes to the Financial Statements.

Prior year distribution information and undistributed (distributions in excess of) net investment income in the Statements of Changes in Net Assets has been modified to conform to the current year presentation in accordance with the Regulation S-X changes.

Distributions for the year ended December 31, 2017 were classified as follows:

 

Fund Name   Share Class    Net Investment Income     Net Realized Gain     Return of Capital  

BlackRock Inflation Protected Bond

  Institutional    $ (33,756,467         $ (151,873
  Service      (655,376           (2,949
  Investor A      (6,643,212           (29,888
  Investor C      (2,506,956           (11,279
  Class K      (9,839,967           (44,271

BlackRock Managed Income

  Institutional    $ (1,451,585   $ (295,285      
  Investor A      (1,807,636     (379,773      
  Investor C      (66,783     (18,661      
    Class K      (2,106,040     (409,311      

Undistributed (distributions in excess of) net investment income as of December 31, 2017 is as follows:

 

Fund Name   Undistributed
(Distributions in Excess of)
Net Investment Income
 

BlackRock Inflation Protected Bond

  $ (11,470,481

BlackRock Managed Income

    46,966  

 

13.

SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

 

 

NOTES TO FINANCIAL STATEMENTS      65  


Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement

 

The Board of Trustees (the “Board,” the members of which are referred to as “Board Members”) of BlackRock Funds V (the “Trust”) met in person on May 8, 2018 (the “Organizational Meeting”) to consider the initial approval of the investment advisory agreement (the “Advisory Agreement”) between the Trust, on behalf of BlackRock Inflation Protected Bond Portfolio (the “Fund”), and BlackRock Advisors, LLC (the “Manager”), the Fund’s investment advisor. The Board also considered the initial approval of the sub-advisory agreement (the “Sub-Advisory Agreement”) between the Manager and BlackRock International Limited (the “Sub-Advisor”), with respect to the Fund. The Manager and the Sub-Advisor are referred to herein as “BlackRock.” The Advisory Agreement and the Sub-Advisory Agreement are referred to herein as the “Agreements.”

On September 17, 2018, the Fund acquired the assets, subject to the liabilities of the BlackRock Inflation Protected Bond Portfolio (the “Predecessor Fund”), a series of BlackRock Funds II (the “Predecessor Trust”), through a reorganization (the “Reorganization”). The Fund has the same investment objectives, strategies and policies, portfolio management team and contractual arrangements, including the same contractual fees and expenses, as the Predecessor Fund. As a result of the Reorganization, the Fund adopted the performance and financial history of the Predecessor Fund. The Advisory Agreement is substantially similar to the advisory agreement (the “Predecessor Advisory Agreement”) between the Predecessor Trust, on behalf of the Predecessor Fund, and the Manager. Similarly, the Sub-Advisory Agreement is substantially similar to the sub-advisory agreement (the “Predecessor Sub-Advisory Agreement” and together with the Predecessor Advisory Agreement the “Predecessor Agreements”) between the Manager and the Sub-Advisor, with respect to the Predecessor Fund.

Activities and Composition of the Board

On the date of the Organizational Meeting, the Board consisted of eleven individuals, nine of whom were not “interested persons” of the Trust as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Board Member. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Performance Oversight Committee and the Executive Committee, each of which also has one interested Board Member).

The Agreements

Pursuant to the 1940 Act, the Board is required to consider the initial approval of the Agreements. In connection with this deliberative process, the Board assessed, among other things, the nature, extent and quality of the services to be provided to the Fund (and those provided to the Predecessor Fund) by BlackRock, BlackRock’s personnel and affiliates, including (as applicable): investment management; accounting, administrative and shareholder services; oversight of the Fund’s (and the Predecessor Fund’s) service providers; marketing and promotional services; risk management and oversight; legal and compliance services; and ability to meet applicable legal and regulatory requirements.

Board Considerations in Approving the Agreements

The Approval Process: At the Organizational Meeting, the Board reviewed materials relating to its consideration of the proposed Agreements. The Predecessor Agreements were most recently considered and approved by the board of trustees of the Predecessor Trust (the “Predecessor Board”) at in person meetings held on April 10, 2018 (the “April Meeting”) and May 8, 2018 (the “May Meeting”). The factors considered by the Board Members at the Organizational Meeting in connection with approval of the proposed Agreements were identical to the factors considered by them as members of the Predecessor Board at the April and May Meetings for the Predecessor Agreements. (Accordingly, references below to the “Board” mean both the Board and the Predecessor Board, and references below to the Board Members mean the members of both the Board and the Predecessor Board, unless the context requires otherwise.) These factors included, among other things: (a) the nature, extent and quality of the services to be provided by BlackRock (and those provided by BlackRock to the Predecessor Fund); (b) the investment performance of the Predecessor Fund as compared with a peer group of funds (“Performance Peers”) and other metrics, as applicable; (c) the advisory fee and the estimated cost of the services and estimated profits realized by BlackRock and its affiliates from their relationship with the Fund and the Predecessor Fund; (d) the sharing of potential economies of scale; (e) fall-out benefits to BlackRock and its affiliates as a result of BlackRock’s relationship with the Fund and the Predecessor Fund; and (f) other factors deemed relevant by the Board Members.

In determining whether to approve the Predecessor Agreements, the Board met with the relevant investment advisory personnel from BlackRock and considered all information it deemed reasonably necessary to evaluate the terms of the Predecessor Agreements. These meetings were considered by the Board in evaluating approval of the Agreements. The Board received materials in advance of the Organizational Meeting relating to its consideration of the Agreements, including, among other things, (a) fees and estimated expense ratios of the Fund and the fees and expense ratios of the Predecessor Fund in comparison to the fees and expense ratios of a peer group of funds as determined by Broadridge Financial Solutions, Inc. (“Broadridge”) (“Expense Peers”); (b) information regarding BlackRock’s economic outlook for the Predecessor Fund and its general investment outlook for the markets; (c) information regarding fees paid to service providers that are affiliates of BlackRock; and (d) information outlining the legal duties of the Board under the 1940 Act with respect to the consideration and approval of the Agreements. The Board also received information at prior Board meetings concerning compliance records and regulatory matters relating to BlackRock.

The Board also considered other matters it deemed important to the approval process, such as other payments to be made to BlackRock or its affiliates, securities lending and cash management, services related to the valuation and pricing of Fund portfolio holdings, and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review. The Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as determinative, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services to be Provided by BlackRock: The Board, including the Independent Board Members, considered the nature, extent and quality of services to be provided by BlackRock, including the investment advisory services to be provided to the Fund and those provided to the Predecessor Fund and

 

 

66    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement  (continued)

 

the resulting performance of the Predecessor Fund. Throughout the year, the Board Members compared Predecessor Fund performance to the performance of a comparable group of mutual funds, a relevant benchmark, and performance metrics, as applicable. The Board met with BlackRock’s senior management personnel responsible for investment activities, including the senior investment officers, in connection with its evaluation of the Predecessor Fund. The Board also reviewed the materials provided by the Fund’s portfolio management team discussing the Predecessor Fund’s performance and the Fund’s investment objective(s), strategies and outlook.

The Board considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and the Fund’s portfolio management team; BlackRock’s research capabilities; investments by portfolio managers in the funds they manage; portfolio trading capabilities; use of technology; commitment to compliance; credit analysis capabilities; risk analysis and oversight capabilities; and the approach to training and retaining portfolio managers and other research, advisory and management personnel. The Board also considered BlackRock’s overall risk management program, including the continued efforts of BlackRock and its affiliates to address cybersecurity risks and the role of BlackRock’s Risk & Quantitative Analysis Group. The Board considered BlackRock’s compensation structure with respect to the Fund’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives that had been presented in connection with the Board’s evaluation of the Predecessor Agreements.

In addition to investment advisory services, the Board considered the quality of the administrative and other non-investment advisory services to be provided to the Fund (and those provided to the Predecessor Fund). The Board considered that BlackRock and its affiliates will provide the Fund (and provided the Predecessor Fund) with certain administrative, shareholder and other services (in addition to any such services provided to the Fund by third parties) and officers and other personnel as are necessary for the operations of the Fund. In particular, the Board noted that BlackRock and its affiliates will provide the Fund (and provided the Predecessor Fund) with administrative services including, among others: (i) responsibility for disclosure documents, such as the prospectus, the summary prospectus (as applicable), the statement of additional information and periodic shareholder reports; (ii) oversight of daily accounting and pricing; (iii) responsibility for periodic filings with regulators; (iv) overseeing and coordinating the activities of other service providers including, among others, the Fund’s custodian, fund accountant, transfer agent, and auditor; (v) organizing Board meetings and preparing the materials for such Board meetings; (vi) providing legal and compliance support; (vii) furnishing analytical and other support to assist the Board in its consideration of strategic issues such as the merger, consolidation or repurposing of certain open-end funds; and (viii) performing administrative functions necessary for the operation of the Fund, such as tax reporting, expense management, fulfilling regulatory filing requirements, overseeing the Fund’s distribution partners, and shareholder call center and other services. The Board considered the structure and duties of BlackRock’s fund administration, shareholder services, and legal & compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Predecessor Fund and BlackRock: The Board, including the Independent Board Members, also reviewed and considered the performance history of the Predecessor Fund. In connection with its review of the Predecessor Fund performance history, the Board had been provided with reports independently prepared by Broadridge, which included a comprehensive analysis of the Predecessor Fund’s performance as of December 31, 2017. Broadridge ranks funds in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable. In connection with this review, the Board had received and reviewed information regarding the investment performance of the Predecessor Fund as compared to its Performance Peers.

In evaluating performance, the Board recognized that the performance data reflects a snapshot of a period as of a particular date and that selecting a different performance period could produce significantly different results. Further, the Board recognized that it is possible that long-term performance can be impacted by even one period of significant outperformance or underperformance, so that a single investment theme has the ability to affect long-term performance disproportionately.

The Board noted that for the one-, three- and five-year periods reported, the Predecessor Fund ranked in the second, third and third quartiles, respectively, against its Performance Peers. The Board and BlackRock reviewed the Predecessor Fund’s underperformance during the applicable periods.

C. Consideration of the Advisory/Management Fees and the Estimated Cost of the Services to be Provided and Estimated Profits Realized by BlackRock and its Affiliates from their Relationship with the Fund and the Predecessor Fund: In connection with the initial approval of the Agreements, the Board, including the Independent Board Members, considered that the Fund’s proposed contractual management fee rate was identical to the Predecessor Fund’s contractual management fee rate. The contractual management fee rate represents a combination of the advisory fee and any administrative fees, before taking into account any reimbursements or fee waivers. The Board also considered that the Fund’s estimated total net expense ratio was identical to the Predecessor Fund’s total expense ratio. The Board also considered the comparison of the Predecessor Fund’s actual and contractual management fee rate to those of its Expense Peers. The total expense ratio represents a fund’s total net operating expenses, including any 12b-1 or non 12b-1 service fees. The total expense ratio gives effect to any expense reimbursements or fee waivers that benefit a fund, and the actual management fee rate gives effect to any management fee reimbursements or waivers that benefit a fund. The Board considered the services provided and the fees charged by BlackRock and its affiliates to other types of clients with similar investment mandates, as applicable, including institutional accounts and sub-advised mutual funds (including mutual funds sponsored by third parties) that had been presented in connection with its evaluation of the Predecessor Agreements.

The Board considered BlackRock’s profitability methodology, including an estimated profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to the Predecessor Fund, which would be the same services to be provided to the Fund. The Board reviewed BlackRock’s estimated profitability with respect to the Predecessor Fund and other funds the Board currently oversees for the year ended December 31, 2017 compared to available aggregate estimated profitability data provided for the prior two years. The Board considered its review of, in connection with its review of the Predecessor Agreements, BlackRock’s estimated profitability with respect to certain other U.S. fund complexes managed by the Manager and/or its affiliates, including BlackRock’s assumptions and methodology of allocating expenses in the estimated profitability analysis and the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. As a result, calculating and comparing profitability at individual fund levels is difficult.

The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. In connection with its review of the Predecessor Agreements, the Board reviewed BlackRock’s operating margin, in general, compared to that of certain other publicly-traded asset management firms and considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

 

 

DISCLOSURE OF INVESTMENT ADVISORY AGREEMENT AND SUB-ADVISORY AGREEMENT      67  


Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement  (continued)

 

In addition, the Board considered the estimated cost of the services to be provided to the Fund based on its review of the estimated cost of the services provided to the Predecessor Fund by BlackRock, and BlackRock’s and its affiliates’ estimated profits relating to the management and distribution of the Predecessor Fund and the other funds advised by BlackRock and its affiliates. As part of this analysis, the Board had reviewed BlackRock’s methodology in allocating its costs of managing the Predecessor Fund to the Predecessor Fund. The Board considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreements and to continue to provide the high quality of services that is expected by the Board Members. The Board further considered factors including but not limited to BlackRock’s commitment of time, assumption of risk, and liability profile in servicing the Fund and the Predecessor Fund in contrast to what is required of BlackRock with respect to other products with similar investment mandates across the open-end fund, exchange-traded fund, closed-end fund, sub-advised mutual fund, separately managed account, collective investment trust, and institutional separate account product channels, as applicable.

The Board noted that the Predecessor Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio ranked in the second and first quartiles, respectively, relative to the Predecessor Fund’s Expense Peers. The Board also noted that the Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Fund increases above certain contractually specified levels. In addition, the Board noted that BlackRock proposed, and the Board agreed to, a contractual adjustment to reduce specified levels within the breakpoint schedule. This adjustment was implemented on June 12, 2017. The Board further noted that BlackRock and the Board have contractually agreed to a cap on the Fund’s total expenses as a percentage of the Fund’s average daily net assets on a class-by-class basis. In addition, the Board noted that BlackRock proposed, and the Board agreed to, a lower contractual expense cap on a class-by-class basis. This expense cap reduction was implemented on March 29, 2018.

D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of the Fund increase, including the existence of fee waivers and/or expense caps, as applicable, noting that any contractual fee waivers and expense caps had been approved by the Board. The Board also considered the extent to which the Predecessor Fund benefited from such economies in a variety of ways, and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable the Fund to more fully participate in these economies of scale. The Board considered the Predecessor Fund’s asset levels and, in light of those asset levels, whether the current fee schedule was appropriate for the Fund. In its consideration, the Board Members took into account the existence of any expense caps and further considered the continuation and/or implementation, as applicable, of such caps.

E. Other Factors Deemed Relevant by the Board Members: The Board, including the Independent Board Members, also took into account other potential ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from BlackRock’s respective relationships with the Fund based on its review of the Predecessor Agreements, including both tangible and intangible benefits, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Fund (and the Predecessor Fund), including for administrative, distribution, securities lending and cash management services. The Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Board also considered that, subject to applicable law, BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts.

In connection with its consideration of the Agreements, the Board also considered information regarding BlackRock’s brokerage and soft dollar practices and reports from BlackRock which included information on brokerage commissions and trade execution practices that it had received in consideration of the Predecessor Agreements.

The Board considered the competitive nature of the open-end fund marketplace, and that shareholders are able to redeem their Fund shares if they believe that the Fund’s fees and expenses are too high or if they are dissatisfied with the performance of the Fund.

Conclusion

Following discussion, the Board, including the Independent Board Members, approved the Advisory Agreement between the Manager and the Trust, on behalf of the Fund, for a two-year term beginning on the effective date of the Advisory Agreement, and the Sub-Advisory Agreement between the Manager and the Sub-Advisor, with respect to the Fund, for a two-year term beginning on the effective date of the Sub-Advisory Agreement. Based upon its evaluation of all of the aforementioned factors in their totality, as well as other information, the Board, including the Independent Board Members, was satisfied that the terms of the Agreements were fair and reasonable and in the best interest of the Fund and its shareholders. In arriving at its decision to approve the Agreements, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination.

 

 

68    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Report of Independent Registered Public Accounting Firm

 

To the Shareholders of BlackRock Inflation Protected Bond Portfolio and the Board of Trustees of BlackRock Funds V:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying consolidated statement of assets and liabilities of BlackRock Inflation Protected Bond Portfolio of BlackRock Funds V and subsidiary (the “Fund”), including the consolidated schedule of investments, as of December 31, 2018, the related consolidated statement of operations for the year then ended, the consolidated statements of changes in net assets for each of the two years in the period then ended, the consolidated financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects the financial position of the Fund as of December 31, 2018, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights whether due to error or fraud and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2018, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 26, 2019

We have served as the auditor of one or more BlackRock investment companies since 1992.

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM      69  


Report of Independent Registered Public Accounting Firm

 

To the Shareholders of BlackRock Managed Income Fund and Board of Trustees of BlackRock Funds II:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities of BlackRock Managed Income Fund of BlackRock Funds II (the “Fund”), including the schedule of investments, as of December 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the two years in the period then ended, the period from October 1, 2016 through December 31, 2016, and each of the three years in the period ended September 30, 2016, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the two years in the period then ended, the period from October 1, 2016 through December 31, 2016, and each of the three years in the period ended September 30, 2016, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2018, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 26, 2019

We have served as the auditor of one or more BlackRock investment companies since 1992.

 

 

70    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Important Tax Information (Unaudited)

 

During the fiscal year ended December 31, 2018 the following information is provided with respect to the ordinary income distributions paid by the Funds.

 

     Months Paid    Inflation Protected Bond      Managed Income  

Interest-Related Dividends for Non-U.S. Residents(a)

  January 2018      100.00      56.01
  February — December 2018      100.00        58.53  

Federal Obligation Interest(b)

  January — December 2018      100.00        0.00  

Qualified Dividend Income for Individuals(c)

  January 2018      0.00        9.47  
  February — December 2018      0.00        8.37  

Dividends Qualifying for the Dividend Received Deductions for Corporations(c)

  January — December 2018      0.00        3.77  

 

  (a)

Represents the portion of the taxable ordinary distributions eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations.

 
  (b)

The law varies in each state as to whether and what percentage of dividend income attributable to federal obligations is exempt from state income tax. We recommend that you consult your tax advisor to determine if any portion of the dividends you received is exempt from state income taxes.

 
  (c) 

The Portfolios hereby designate the percentage indicated above or the maximum amount allowable by law.

 

 

 

IMPORTANT TAX INFORMATION      71  


Trustee and Officer Information

 

Independent Trustees (a)
         

Name

Year of Birth (b)

   Position(s) Held
(Length of Service)
 (c)
   Principal Occupation(s) During Past Five Years   Number of BlackRock-Advised
Registered Investment Companies
(“RICs”) Consisting of
Investment Portfolios
(“Portfolios”) Overseen
   Public Company and Other
Investment Company
Directorships Held During
Past Five Years

Robert M. Hernandez

1944

  

Chair of the Board
and Trustee

(Since 2007)

   Director, Vice Chairman and Chief Financial Officer of USX Corporation (energy and steel business) from 1991 to 2001; Director and non-executive Chairman, RTI International Metals, Inc. from 1990 to 2015; Director, TE Connectivity (electronics) from 2006 to 2012.   32 RICs consisting of 95 Portfolios    Chubb Limited (insurance company); Eastman Chemical Company

James H. Bodurtha

1944

  

Trustee

(Since 2007)

   Director, The China Business Group, Inc. (consulting and investing firm) from 1996 to 2013 and Executive Vice President thereof from 1996 to 2003; Chairman of the Board, Berkshire Holding Corporation since 1980; Director, ICI Mutual since 2010.   32 RICs consisting of 95 Portfolios    None

Bruce R. Bond

1946

  

Trustee

(Since 2007)

   Board Member, Amsphere Limited (software ) since 2018; Trustee and Member of the Governance Committee, State Street Research Mutual Funds from 1997 to 2005; Board Member of Governance, Audit and Finance Committee, Avaya Inc. (computer equipment) from 2003 to 2007.   32 RICs consisting of 95 Portfolios    None

Honorable Stuart E. Eizenstat

1943

  

Trustee

(Since 2007)

   Senior Counsel of Covington and Burling LLP (law firm) since 2016, Head of International Practice thereof since 2001, and Partner thereof from 2001 to 2016; Advisory Board Member, OCP S.A. (phosphates) since 2010; International Advisory Board Member, The Coca-Cola Company from 2002 to 2011; Advisory Board Member, Veracity Worldwide, LLC (risk management) from 2007 to 2012; Member of the International Advisory Board, GML Ltd. (energy) since 2003; Board of Directors, Ferroglobe (silicon metals) since 2016.   32 RICs consisting of 95 Portfolios    Alcatel-Lucent (telecommunications); Global Specialty Metallurgical; UPS Corporation (delivery service)

Henry Gabbay

1947

  

Trustee

(Since 2007)

   Board Member, Equity-Liquidity and Closed-End Fund Boards from 2007 through 2014; Consultant, BlackRock, Inc. from 2007 to 2008; Managing Director, BlackRock, Inc. from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly, BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.   32 RICs consisting of 95 Portfolios    None

Lena G. Goldberg

1949

  

Trustee

(Since 2016)

   Senior Lecturer, Harvard Business School since 2008; Director, Charles Stark Draper Laboratory, Inc. since 2013; FMR LLC/Fidelity Investments (financial services) from 1996 to 2008, serving in various senior roles including Executive Vice President – Strategic Corporate Initiatives and Executive Vice President and General Counsel; Partner, Sullivan & Worcester LLP from 1985 to 1996 and Associate thereof from 1979 to 1985.   32 RICs consisting of 95 Portfolios    None

 

 

72    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Trustee and Officer Information  (continued)

 

Independent Trustees (a) (continued)
         

Name

Year of Birth (b)

   Position(s) Held
(Length of Service)
 (c)
   Principal Occupation(s) During Past Five Years   Number of BlackRock-Advised
Registered Investment Companies
(“RICs”) Consisting of
Investment Portfolios
(“Portfolios”) Overseen
   Public Company and Other
Investment Company
Directorships Held During
Past Five Years

Henry R. Keizer

1956

  

Trustee

(Since 2016)

   Director, Park Indemnity Ltd. (captive insurer) since 2010; Director, MUFG Americas Holdings Corporation and MUFG Union Bank, N.A. (financial and bank holding company) from 2014 to 2016; Director, American Institute of Certified Public Accountants from 2009 to 2011; Director, KPMG LLP (audit, tax and advisory services) from 2004 to 2005 and 2010 to 2012; Director, KPMG International in 2012, Deputy Chairman and Chief Operating Officer thereof from 2010 to 2012 and U.S. Vice Chairman of Audit thereof from 2005 to 2010; Global Head of Audit, KPMGI (consortium of KPMG firms) from 2006 to 2010; Director, YMCA of Greater New York from 2006 to 2010.   32 RICs consisting of 95 Portfolios    Hertz Global Holdings (car rental); Montpelier Re Holdings, Ltd. (publicly held property and casual reinsurance) from 2013 until 2015; Sealed Air Corp. (packaging); WABCO (commercial vehicle safety systems)

John F O’Brien

1943

  

Trustee

(Since 2007)

   Trustee, Woods Hole Oceanographic Institute since 2003 and Chairman thereof from 2009 to 2015; Co-Founder and Managing Director, Board Leaders LLC (director education) since 2005.   32 RICs consisting of 95 Portfolios   

Cabot Corporation

(chemicals); LKQ Corporation (auto parts manufacturing); TJX Companies, Inc. (retailer)

Donald C. Opatrny

1952

  

Trustee

(Since 2015)

   Trustee, Vice Chair, Member of the Executive Committee and Chair of the Investment Committee, Cornell University since 2004; President, Trustee and Member of the Investment Committee, The Aldrich Contemporary Art Museum from 2007 to 2014; Member of the Board and Investment Committee, University School from 2007 to 2018; Member of the Investment Committee, Mellon Foundation from 2009 to 2015; Trustee, Artstor (a Mellon Foundation affiliate) from 2010 to 2015; President and Trustee, the Center for the Arts, Jackson Hole from 2011 to 2018; Director, Athena Capital Advisors LLC (investment management firm) since 2013; Trustee and Chair of the Investment Committee, Community Foundation of Jackson Hole since 2014; Member of Affordable Housing Supply Board of Jackson, Wyoming since 2017; Member, Investment Funds Committee, State of Wyoming since 2017; Trustee, Phoenix Art Museum since 2018.   32 RICs consisting of 95 Portfolios    None
Interested Trustees (a)(d)
         
Name
Year of Birth
 (b)
   Position(s) Held
(Length of Service)
 (c)
   Principal Occupation(s) During Past Five Years   Number of BlackRock-Advised
Registered Investment Companies
(“RICs”) Consisting of
Investment Portfolios
(“Portfolios”) Overseen
   Public Company and Other
Investment Company
Directorships Held During
Past Five Years

Robert Fairbairn

1965

  

Trustee

(Since 2015)

   Senior Managing Director of BlackRock, Inc. since 2010; oversees BlackRock’s Strategic Partner Program and Strategic Product Management Group; Member of BlackRock’s Global Executive and Global Operating Committees; Co-Chair of BlackRock’s Human Capital Committee; Member of the Board of Managers of BlackRock Investments, LLC since 2011; Global Head of BlackRock’s Retail and iShares® businesses from 2012 to 2016.   127 RICs consisting of 304 Portfolios    None

 

 

TRUSTEE AND OFFICER INFORMATION      73  


Trustee and Officer Information  (continued)

 

Interested Trustees (a)(d) (continued)
         
Name
Year of Birth
 (b)
   Position(s) Held
(Length of Service)
 (c)
   Principal Occupation(s) During Past Five Years   Number of BlackRock-Advised
Registered Investment Companies
(“RICs”) Consisting of
Investment Portfolios
(“Portfolios”) Overseen
   Public Company and Other
Investment Company
Directorships Held During
Past Five Years

John M. Perlowski

1964

   Trustee
(Since 2015) and President
and Chief Executive Officer
(Since 2010)
   Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Accounting and Product Services since 2009; Advisory Director of Family Resource Network (charitable foundation) since 2009.   127 RICs consisting of 304 Portfolios    None

(a) The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.

(b) Each Independent Trustee holds office until his or her successor is duly elected and qualifies or until his or her earlier death, resignation, retirement or removal as provided by the Trust’s by-laws or charter or statute, or until December 31 of the year in which he or she turns 75. The Board may determine to extend the terms of Independent Trustees on a case-by-case basis, as appropriate. Interested Trustees serve until their successor is duly elected and qualifies or until their earlier death, resignation, retirement or removal as provided by the Fund’s by-laws or statute, or until December 31 of the year in which they turn 72.

(c) Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. As a result, although the chart shows certain Independent Trustees as joining the Board in 2007, those Trustees first became members of the boards of other legacy MLIM or legacy BlackRock funds as follows: James H. Bodurtha, 1995; Bruce R. Bond, 2005; Honorable Stuart E. Eizenstat, 2001; Robert M. Hernandez, 1996; and John F. O’Brien, 2005. With respect to Inflation Protected Bond, length of service includes service as a trustee of BlackRock Funds II.

(d) Mr. Fairbairn and Mr. Perlowski are both “interested persons,” as defined in the 1940 Act, of the Fund based on their positions with BlackRock, Inc. and its affiliates. Mr. Fairbairn and Mr. Perlowski are also board members of the BlackRock Closed-End Complex and the BlackRock Equity-Liquidity Complex.

 

 

74    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Trustee and Officer Information  (continued)

 

Officers Who Are Not Trustees (a)
     
Name
Year of Birth
 (b)
   Position(s) Held
(Length of Service)
 (c)
   Principal Occupation(s) During Past Five Years

Jennifer McGovern

1977

  

Vice President

(Since 2014)

   Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013.

Neal J. Andrews

1966

  

Chief Financial Officer

(Since 2007)

   Managing Director of BlackRock, Inc. since 2006.

Jay M. Fife

1970

  

Treasurer

(Since 2007)

   Managing Director of BlackRock, Inc. since 2007.

Charles Park

1967

  

Chief Compliance Officer

(Since 2014)

   Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.

John MacKessy

1972

  

Anti-Money Laundering Compliance Officer

(Since 2018)

   Director of BlackRock, Inc. since 2017; Global Head of Anti-Money Laundering at BlackRock, Inc. since 2017; Director of AML Monitoring and Investigations Group of Citibank from 2015 to 2017; Global Anti-Money Laundering and Economic Sanctions Officer for MasterCard from 2011 to 2015.

Benjamin Archibald

1975

  

Secretary

(Since 2012)

   Managing Director of BlackRock, Inc. since 2014; Director of BlackRock, Inc. from 2010 to 2013; Secretary of the iShares® exchange traded funds since 2015; Secretary of the BlackRock-advised mutual funds since 2012.

(a) The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.

(b) Officers of the Trust serve at the pleasure of the Board.

(c) With respect to Inflation Protected Bond, length of service includes service as an officer of BlackRock Funds II.

Further information about the Trust’s Trustees and Officers is available in the Fund’s Statement of Additional Information, which can be obtained without charge by calling 1-800-441-7762.

 

At a special meeting of shareholders held on November 21, 2018, each Fund’s shareholders elected Trustees who took office on January 1, 2019. For Inflation Protected Bond’s, the newly elected Trustees include three former Trustees and eight individuals who served as directors/trustees of the funds in the BlackRock Closed-End Complex. For Managed Income’s, the newly elected Trustees include seven former Trustees and eight individuals who served as directors/trustees of the funds in the BlackRock Equity-Liquidity Complex. Information regarding the individuals who began serving as Trustees effective January 1, 2019 can be found in the proxy statement for the special meeting of shareholders, which is available on the SEC’s EDGAR Database at http://www.sec.gov.

 

Investment Adviser and Administrator

BlackRock Advisors, LLC Wilmington, DE 19809

Sub-Advisers(a)

BlackRock International Limited

Edinburgh, EH3 8BL

United Kingdom

Accounting Agent

JPMorgan Chase Bank, N.A.

New York, NY 10179

Transfer Agent

BNY Mellon Investment Servicing (US) Inc.

Wilmington, DE 19809

Custodian

JPMorgan Chase Bank, N.A.

New York, NY 10179

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

Boston, MA 02116

Distributor

BlackRock Investments, LLC

New York, NY 10022

Legal Counsel

Willkie Farr & Gallagher LLP

New York, NY 10019

Address of the Trust

100 Bellevue Parkway

Wilmington, DE 19809

 

 

(a) 

For Inflation Protected Bond only.

 

 

TRUSTEE AND OFFICER INFORMATION      75  


Additional Information

 

General Information

Proxy Results

A Special Meeting of Shareholders was held on November 21, 2018 for shareholders of record on September 24, 2018, to elect Boards of Trustees of each Trust. The newly elected Trustees took office effective January 1, 2019.

Shareholders of Inflation Protected Bond approved the Trustees* of BlackRock Funds V with voting results as follows:

 

        Votes For        Votes Withheld  

Michael J. Castellano

       5,681,237,134          34,155,316  

Richard E. Cavanagh

       5,683,014,052          32,378,399  

Cynthia L. Egan

       5,689,624,061          25,768,389  

Frank J. Fabozzi

       5,685,956,903          29,435,547  

Robert Fairbairn

       5,687,114,814          28,277,636  

Henry Gabbay

       5,684,019,280          31,373,170  

R. Glenn Hubbard

       5,685,110,636          30,281,814  

W. Carl Kester

       5,686,245,509          29,146,941  

Catherine A. Lynch

       5,689,695,451          25,697,000  

John M. Perlowski

       5,683,657,098          31,735,353  

Karen P. Robards

       5,688,174,287          27,218,163  

 

  *

Denotes Trust-wide proposal and voting results.

 

The above Trustees, referred to as the BlackRock Fixed-Income Board, have also been elected to serve as trustees for other BlackRock-advised non-index fixed-income mutual funds and all of the BlackRock-advised closed-end funds.

Shareholders of Managed Income approved the Trustees* of BlackRock Funds II with voting results as follows:

 

        Votes For        Votes Withheld  

Bruce R. Bond

       1,768,557,322          23,393,649  

Susan J. Carter

       1,774,676,655          17,274,316  

Collette Chilton

       1,774,927,042          17,023,928  

Neil A. Cotty

       1,774,339,325          17,611,646  

Robert Fairbairn

       1,769,112,015          22,838,955  

Lena G. Goldberg

       1,773,958,033          17,992,937  

Robert M. Hernandez

       1,767,787,917          24,163,053  

Henry R. Keizer

       1,770,277,846          21,673,125  

Cynthia A. Montgomery

       1,774,347,865          17,603,105  

Donald C. Opatrny

       1,773,981,317          17,969,654  

John M. Perlowski

       1,768,934,834          23,016,137  

Joseph P. Platt

       1,771,958,912          19,992,058  

Mark Stalnecker

       1,774,409,896          17,541,074  

Kenneth L. Urish

       1,773,914,599          18,036,372  

Claire A. Walton

       1,774,960,910          16,990,060  

 

  *

Denotes Trust-wide proposal and voting results.

 

The above Trustees, referred to as the BlackRock Multi-Asset Board, have also been elected to serve as trustees for other BlackRock-advised equity, multi-asset, index and money market funds.

Householding

The Funds will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Funds at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at http://www.sec.gov. The Funds’ Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available upon request and without charge (1) by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

 

 

76    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Additional Information  (continued)

 

Availability of Proxy Voting Record

Information about how the Funds voted proxies relating to securities held in the Funds’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

BlackRock’s Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed-income and tax-exempt investing. Visit http://www.blackrock.com for more information.

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM ET on any business day to get information about your account balances, recent transactions and share prices. You can also reach us on the Web at http://www.blackrock.com.

Automatic Investment Plans

Investor Class shareholders who want to invest regularly can arrange to have $50 or more automatically deducted from their checking or savings account and invested in any of the BlackRock funds.

Systematic Withdrawal Plans

Investor Class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock funds, as long as their account balance is at least $10,000.

Retirement Plans

Shareholders may make investments in conjunction with Traditional, Rollover, Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safe-guarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

 

 

ADDITIONAL INFORMATION      77  


Glossary of Terms Used in this Report

 

Currency
AUD    Australian Dollar
CAD    Canadian Dollar
DKK    Danish Krone
EUR    Euro
GBP    British Pound
JPY    Japanese Yen
NOK    Norwegian Krone
SEK    Swedish Krona
USD    United States Dollar
  
Portfolio Abbreviations
BA    Canadian Bankers Acceptances
BBR    Australian Bank Bill Rate
CIBOR    Copenhagen Interbank Offered Rate
CLO    Collateralized Loan Obligation
DAC    Designated Activity Company
ETF    Exchange-Traded Fund
EURIBOR    Euro Interbank Offered Rate
HICP    Harmonised Index of Consumer Price Index UKRPI
LIBOR    London Interbank Offered Rate
NIBOR    Norwegian Interbank Offered Rate
OTC    Over-The-Counter
STIBOR    Stockholm Interbank Offered Rate
TBA    To-be-announced
 

 

 

78    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


This report is intended for current holders. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless preceded or accompanied by the Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.

 

LOGO

 

 

MIIP-12/18-AR    LOGO


Item 2 –

Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. During the period covered by this report, the code of ethics was amended to update certain information and to make other non-material changes. During the period covered by this report, there have been no waivers granted under the code of ethics. The registrant undertakes to provide a copy of the code of ethics to any person upon request, without charge, who calls 1-800-441-7762.

 

Item 3 –

Audit Committee Financial Expert – The registrant’s board of trustees (the “board of trustees”), has determined that (i) the registrant has the following audit committee financial experts serving on its audit committee and (ii) each audit committee financial expert is independent:

Robert M. Hernandez

Henry R. Keizer

Bruce R. Bond

Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of trustees in the absence of such designation or identification.

 

Item 4 –

Principal Accountant Fees and Services

The following table presents fees billed by Deloitte & Touche LLP (“D&T”) in each of the last two fiscal years for the services rendered to the Fund:

 

    (a) Audit Fees     (b) Audit-Related Fees1      (c) Tax Fees2      (d) All Other Fees  

Entity Name

  Current
Fiscal Year
End
    Previous
Fiscal Year
End4
    Current
Fiscal Year
End
    Previous
Fiscal Year
End4
     Current
Fiscal Year
End
     Previous
Fiscal Year
End4
     Current
Fiscal Year
End
     Previous
Fiscal Year
End4
 

BlackRock Managed Income Fund

  $ 40,596     $ 40,622     $ 0     $ 4,000      $ 20,200      $ 16,002      $ 0      $ 0  

The following table presents fees billed by D&T that were required to be approved by the registrant’s audit committee (the “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock Advisors, LLC (the “Investment Adviser” or “BlackRock”) and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund (“Affiliated Service Providers”):

 

3


     Current Fiscal Year End      Previous Fiscal Year End4  

(b) Audit-Related Fees1

   $ 0      $ 0  

(c) Tax Fees2

   $ 0      $ 0  

(d) All Other Fees3

   $ 2,274,000      $ 2,129,000  

 

1 

The nature of the services includes assurance and related services reasonably related to the performance of the audit or review of financial statements not included in Audit Fees, including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters, out-of-pocket expenses and internal control reviews not required by regulators.

2 

The nature of the services includes tax compliance and/or tax preparation, including services relating to the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews, taxable income and tax distribution calculations.

3 

Non-audit fees of $2,274,000 and $2,129,000 for the current fiscal year and previous fiscal year, respectively, were paid to the Fund’s principal accountant in their entirety by BlackRock, in connection with services provided to the Affiliated Service Providers of the Fund and of certain other funds sponsored and advised by BlackRock or its affiliates for a service organization review and an accounting research tool subscription. These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.

4

The registrant changed its fiscal year end from September to December in 2016, therefore the previous fiscal year end consists of the three-month period ended December 31, 2016.

(e)(1) Audit Committee Pre-Approval Policies and Procedures:

The Committee has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the Investment Adviser and Affiliated Service Providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are (a) consistent with the SEC’s auditor independence rules and (b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operations or financial reporting of the registrant will only be deemed pre-approved provided that any individual project does not exceed $10,000 attributable to the registrant or $50,000 per project. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels.

Any proposed services exceeding the pre-approved cost levels will require specific pre-approval by the Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. At this meeting, an analysis of such services is presented to the Committee for ratification. The Committee may delegate to the Committee Chairman the authority to approve the provision of and fees for any specific engagement of permitted non-audit services, including services exceeding pre-approved cost levels.

(e)(2) None of the services described in each of Items 4(b) through (d) were approved by the Committee pursuant to the de minimis exception in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not Applicable

 

4


(g) The aggregate non-audit fees, defined as the sum of the fees shown under “Audit-Related Fees,” “Tax Fees” and “All Other Fees,” paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Affiliated Service Providers were:

 

Entity Name

   Current Fiscal
Year End
     Previous Fiscal
Year End1
 

BlackRock Managed Income Fund

   $ 20,200      $ 20,002  

 

1

The registrant changed its fiscal year end from September to December in 2016, therefore the previous fiscal year end consists of the three-month period ended December 31, 2016.

Additionally, the amounts billed by D&T in connection with services provided to the Affiliated Service Providers of the Fund and of other funds sponsored and advised by BlackRock or its affiliates during the current and previous fiscal years for a service organization review and an accounting research tool subscription were:

 

  Current Fiscal Year

                 End                

   Previous Fiscal Year
End
 
$            2,274,000    $ 2,129,000  

These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.

(h) The Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser and the Affiliated Service Providers that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

 

Item 5 –

Audit Committee of Listed Registrants – Not Applicable

 

Item 6 –

Investments

(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.

(b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.

 

Item 7 –

Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not Applicable

 

Item 8 –

Portfolio Managers of Closed-End Management Investment Companies – Not Applicable

 

Item 9 –

Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable

 

Item 10 –

 Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.

Item 11 – Controls and Procedures

 

5


(a) – The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended.

(b) – There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 12 –

 Disclosure of Securities Lending Activities for Closed-End Management Investment Companies – Not Applicable to the registrant.

 

Item 13 –

 Exhibits attached hereto

(a)(1) Code of Ethics – See Item 2

(a)(2) Certifications – Attached hereto

(a)(3) Not Applicable

(a)(4) Not Applicable

(b) Certifications – Attached hereto

 

6


Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

BlackRock Funds II
By:  

/s/ John M. Perlowski

  John M. Perlowski
  Chief Executive Officer (principal executive officer) of
  BlackRock Funds II

Date: March 8, 2019

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:  

/s/ John M. Perlowski

  John M. Perlowski
  Chief Executive Officer (principal executive officer) of
  BlackRock Funds II
Date: March 8, 2019
By:  

/s/ Neal J. Andrews

  Neal J. Andrews
  Chief Financial Officer (principal financial officer) of
  BlackRock Funds II

Date: March 8, 2019

 

7


Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘N-CSR’ Filing    Date    Other Filings
1/1/21
4/30/20
12/31/19
12/15/19
4/30/19
Filed on / Effective on:3/8/19
2/26/19
1/1/19
For Period End:12/31/18N-Q
12/15/18
11/21/18DEF 14A,  N-Q
11/8/18
9/30/1824F-2NT,  N-CEN,  N-CSR,  N-Q
9/24/18
9/17/18
9/14/18
8/17/18
7/1/18
6/30/18N-CSRS,  N-PX,  N-Q
5/8/18497K
4/19/18485BXT,  497
4/10/18
3/29/18497,  497K
12/31/1724F-2NT,  N-CSR,  N-Q,  NSAR-B
6/12/17485BPOS
12/31/1624F-2NT,  N-CSR,  N-Q,  NSAR-B
10/3/16497,  N-CSR
10/1/16485BPOS
9/30/1624F-2NT,  485BPOS,  497,  497K,  CORRESP,  N-CSR,  N-Q,  NSAR-B
9/30/1524F-2NT,  N-CSR,  N-Q,  NSAR-B
7/29/13485BPOS
 List all Filings 
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