Brighthouse Funds Trust II

Transcription

1 MFS Total Return Portfolio Semi-Annual Report June 30, 2017 Sign up for eservice SM today at

2

3 Managed by Massachusetts Financial Services Company Portfolio Manager Commentary* PERFORMANCE For the six months ended June 30, 2017, the Class A, B, E and F shares of the returned 6.38%, 6.25%, 6.30%, and 6.28%, respectively. The Portfolio s benchmarks, the Standard & Poor s ( S&P ) 500 Index 1 and the Bloomberg Barclays U.S. Aggregate Bond Index 2, returned 9.34% and 2.27%, respectively. A blend of the S&P 500 Index (60%) and the Bloomberg Barclays U.S. Aggregate Bond Index (40%) returned 6.48%. MARKET ENVIRONMENT / CONDITIONS For the first time in many years, markets are experiencing synchronized global economic growth. The rebound in emerging markets ( EM ) economies has been more pronounced (despite the deceleration in Chinese growth at the end of the first half of 2017), helped by some larger economies (i.e., Brazil and Russia) emerging from recessions. At the same time, developed market ( DM ) economies continued to grow at or above potential. Market confidence increased in the U.S. after the presidential elections in November in anticipation of lower taxes, a lighter regulatory burden and increased infrastructure spending, boosting U.S. equities and corporate bond performance. While global inflation faded during the period as commodity prices, particularly oil, leveled off or declined, global growth remained relatively resilient. As a result, there have been more tightening signals and actions by DM central banks. The U.S. Federal Reserve increased interest rates by 25 basis points at the end of the period, bringing the total number of quarter-percent hikes in the federal funds rate to four since December The European Central Bank appears set on announcing Quantitative Easing tapering in the fall of The Bank of England may also begin reducing monetary accommodation. Markets have been comforted (along with central banks) by the decline in fears of a populist wave in Europe after establishment candidates won the Dutch and French elections. European growth has reflected the more constructive political economic backdrop. The headwind of a stronger U.S. dollar faded during the period while U.S. consumer spending held up well amid a modest increase in real wages and relatively low gasoline prices. Demand for autos tapered off from near-record territory at the end of the period, while the housing market continued its recovery amid relatively low mortgage rates and tight inventories. Global trade, which was sluggish early in the period, showed signs of improvement, a positive indicator of global economic activity and prospects. Receding fears that President Trump would follow through on various campaign threats and promises that were judged to be detrimental to EM, helped EM economies resume their upward trajectory, powered by strong inflows throughout the first half of PORTFOLIO REVIEW / PERIOD END POSITIONING The Portfolio slightly underperformed its blended index during the first half of Within the equity portion of the Portfolio, a combination of an underweight allocation and weak stock selection in the Information Technology sector held back performance relative to the S&P 500 Index. Within this sector, underweight positions in computer and personal electronics maker Apple, internet search giant Alphabet and social network services provider Facebook detracted from relative returns. Additionally, not owning shares of computer graphics processors maker NVIDIA also hurt relative performance. Stock selection in the Consumer Discretionary sector also weakened relative results. Here, an underweight position in internet retailer Amazon.com, overweight position in retail giant Target and not owning shares of restaurant chain McDonald s hindered relative returns. Elsewhere, overweight positions in financial services firm Goldman Sachs and telecommunications company Verizon Communications weighed on relative performance. Additionally, not owning shares of aerospace company Boeing also detracted from relative results. Within the fixed income portion of the Portfolio, security selection within the Commercial Mortgage Backed Securities ( CMBS ) sector weakened relative returns. Additionally, the Portfolio s lesser relative exposure to sovereign debt also held back relative returns. Within the equity portion of the Portfolio, strong stock selection in the Industrials sector contributed to performance relative to the S&P 500 Index. Within this sector, not owning shares of diversified industrial conglomerate General Electric, and holding a position in residential and commercial building materials manufacturer Owens Corning, aided relative performance. Strong security selection in the Consumer Staples sector also supported relative results led by an overweight position in tobacco company Philip Morris International and holdings of global food company Nestle (France). Individual stocks that benefited relative returns included underweight positions in telecommunications company AT&T and integrated oil and gas company Exxon Mobil, and overweight positions in medical products makers Abbott Laboratories and Medtronic. Additionally, not owning shares of wireless communications software company QUALCOMM and holding a position in pharmaceutical company Bayer (Germany) also aided relative performance. Within the fixed income portion of the Portfolio, a greater-thanbenchmark exposure to the corporate financial sector, and a lesserthan-benchmark exposure to U.S. Treasuries boosted performance relative to the index. Additionally, strong security selection in the Industrials sector also aided relative results. Over the trailing six months ending June 30, 2017, the equity portion of the Portfolio increased its exposure to Health Care, Industrial and Information Technology while it decreased its exposure to Telecommunications Services, Consumer Discretionary and Energy sectors. The Portfolio had overweight positions in Financials, Industrials BHFTII-1

4 Managed by Massachusetts Financial Services Company Portfolio Manager Commentary* (Continued) and Consumer Staples and underweight positions in Information Technology, Consumer Discretionary and Real Estate relative to the S&P 500 Index. Over the trailing six months ending June 30, 2017, the fixed income portion of the Portfolio had overweight positions in collateralized debt obligations, CMBS and corporate bonds. The Portfolio had underweight positions in International, Government and Agency bonds. Brooks Taylor Steven Gorham Richard Hawkins Nevin Chitkara William Douglas Joshua Marston Jonathan Sage Robert Persons Portfolio Managers Massachusetts Financial Services Company * This commentary may include statements that constitute forward-looking statements under the U.S. securities laws. Forward-looking statements include, among other things, projections, estimates, and information about possible or future results related to the Portfolio, market or regulatory developments. The views expressed above are not guarantees of future performance or economic results and involve certain risks, uncertainties and assumptions that could cause actual outcomes and results to differ materially from the views expressed herein. The views expressed above are subject to change at any time based upon economic, market, or other conditions and the subadvisory firm undertakes no obligation to update the views expressed herein. Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. The views expressed above (including any forward-looking statement) may not be relied upon as investment advice or as an indication of the Portfolio s trading intent. Information about the Portfolio s holdings, asset allocation or country diversification is historical and is not an indication of future Portfolio composition, which may vary. Direct investment in any index is not possible. The performance of any index mentioned in this commentary has not been adjusted for ongoing management, distribution and operating expenses, and sales charges applicable to mutual fund investments. In addition, the returns do not reflect additional fees charged by separate accounts or variable insurance contracts that an investor in the Portfolio may pay. If these additional fees were reflected, performance would have been lower. BHFTII-2

5 A $10,000 INVESTMENT COMPARED TO THE S&P 500 INDEX & THE BLOOMBERG BARCLAYS U.S. AGGREGATE BOND INDEX $25,000 $20,000 Class A (ending value of $17,155) Bloomberg Barclays U.S. Aggregate Bond Index (ending value of $15,497) S&P 500 Index (ending value of $20,008) $15,000 $10,000 $5,000 6/07 6/08 6/09 6/10 6/11 6/12 6/13 6/14 6/15 6/16 6/17 SIX MONTH RETURN & AVERAGE ANNUAL RETURNS (%) AS OF JUNE 30, Month 1 Year 5 Year 10 Year Class A Class B Class E Class F Bloomberg Barclays U.S. Aggregate Bond Index S&P 500 Index The Standard & Poor s (S&P) 500 Index is an unmanaged index consisting of 500 stocks chosen for market size, liquidity, and industry group representation. It is a marketweighted index (stock price times number of shares outstanding) with each stock s weight in the Index proportionate to its market value. 2 The Bloomberg Barclays U.S. Aggregate Bond Index is a broad based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities, and commercial mortgage-backed securities. Portfolio performance is calculated including reinvestment of all income and capital gain distributions. Performance numbers are net of all Portfolio expenses but do not include any insurance, sales, separate account or administrative charges of variable annuity or life insurance contracts or any additional expenses that participants may bear relating to the operations of their plans. If these charges were included, the returns would be lower. The performance of any index referenced above has not been adjusted for ongoing management, distribution and operating expenses, and sales charges applicable to mutual fund investments. Direct investment in any index is not possible. The performance of Class A shares, as set forth in the line graph above, will differ from that of other classes because of the difference in expenses paid by policyholders investing in the different share classes. This information represents past performance and is not indicative of future results. Investment return and principal value may fluctuate so that shares, upon redemption, may be worth more or less than the original cost. Top Equity Sectors PORTFOLIO COMPOSITION AS OF JUNE 30, 2017 %of Net Assets Financials Health Care Industrials Consumer Staples Information Technology Top Fixed Income Sectors %of Net Assets U.S. Treasury & Government Agencies Corporate Bonds & Notes Asset-Backed Securities Mortgage-Backed Securities Municipals Top Equity Holdings %of Net Assets JPMorgan Chase & Co Philip Morris International, Inc Johnson & Johnson Comcast Corp Travelers Cos., Inc. (The) Top Fixed Income Issuers %of Net Assets U.S. Treasury Notes Fannie Mae 30 Yr. Pool Freddie Mac 30 Yr. Gold Pool U.S. Treasury Bonds Freddie Mac Multifamily Structured Pass-Through Certificates (CMO) BHFTII-3

6 Understanding Your Portfolio s Expenses (Unaudited) Shareholder Expense Example As a shareholder of the Portfolio, you incur ongoing costs, including management fees; distribution and service (12b-1) fees; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) (referred to as expenses ) of investing in the Portfolio and compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, January 1, 2017 through June 30, Actual Expenses The first line for each share class of the Portfolio in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested in the particular share class of the Portfolio, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled Expenses Paid During Period to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line for each share class of the Portfolio in the table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any fees or charges of your variable insurance product or any additional expenses that participants in certain eligible qualified plans may bear relating to the operations of their plan. Therefore, the second line for each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these other costs were included, your costs would have been higher. Annualized Expense Ratio Beginning Account Value January 1, 2017 Ending Account Value June 30, 2017 Expenses Paid During Period** January 1, 2017 to June 30, 2017 Class A... Actual 0.61% $1, $1, $3.12 Hypothetical* 0.61% $1, $1, $3.06 Class B... Actual 0.86% $1, $1, $4.40 Hypothetical* 0.86% $1, $1, $4.31 Class E... Actual 0.76% $1, $1, $3.89 Hypothetical* 0.76% $1, $1, $3.81 Class F... Actual 0.81% $1, $1, $4.14 Hypothetical* 0.81% $1, $1, $4.06 * Hypothetical assumes a rate of return of 5% per year before expenses. ** Expenses paid are equal to the Portfolio s annualized expense ratio for the most recent six month period, as shown above, multiplied by the average account value over the period, multiplied by the number of days (181 days) in the most recent fiscal half-year, divided by 365 (to reflect the one-half year period). BHFTII-4

7 Schedule of Investments as of June 30, 2017 (Unaudited) Common Stocks 59.5% of Net Assets Security Description Shares Value Aerospace & Defense 2.0% L3 Technologies, Inc.... 8,050 $ 1,344,994 Lockheed Martin Corp ,010 4,166,926 Northrop Grumman Corp ,379 5,231,493 United Technologies Corp ,946 6,709,456 17,452,869 Air Freight & Logistics 0.4% United Parcel Service, Inc. - Class B... 34,240 3,786,602 Airlines 0.4% Copa Holdings S.A. - Class A... 15,404 1,802,268 Delta Air Lines, Inc ,849 1,335,385 3,137,653 Auto Components 0.4% Delphi Automotive plc... 35,156 3,081,423 Automobiles 0.4% General Motors Co , ,732 Harley-Davidson, Inc. (a)... 5, ,445 Hyundai Motor Co.... 7,961 1,109,821 Kia Motors Corp , ,220 3,396,218 Banks 6.2% Bank of America Corp ,170 7,500,464 BNP Paribas S.A , ,450 Citigroup, Inc ,443 8,389,628 JPMorgan Chase & Co ,928 17,450,819 PNC Financial Services Group, Inc. (The)... 38,798 4,844,706 Royal Bank of Canada... 13, ,234 Sumitomo Mitsui Financial Group, Inc ,300 1,107,117 SunTrust Banks, Inc , ,278 U.S. Bancorp ,104 6,235,800 Wells Fargo & Co ,202 5,829,243 54,053,739 Beverages 0.6% Coca-Cola European Partners plc... 22, ,740 Diageo plc ,200 2,962,050 PepsiCo, Inc.... 9,050 1,045,184 4,901,974 Biotechnology 0.3% Celgene Corp. (b)... 11,708 1,520,518 Gilead Sciences, Inc , ,083 2,267,601 Building Products 1.3% Johnson Controls International plc ,428 6,912,798 Owens Corning... 62,832 4,204,717 11,117,515 Security Description Shares Value Capital Markets 4.0% Apollo Global Management LLC - Class A... 38,063 $ 1,006,766 Bank of New York Mellon Corp. (The) ,937 5,762,046 BlackRock, Inc.... 7,557 3,192,152 Blackstone Group L.P. (The)... 33,094 1,103,685 Charles Schwab Corp. (The)... 21, ,526 Franklin Resources, Inc ,271 1,714,158 Goldman Sachs Group, Inc. (The)... 29,278 6,496,788 Moody s Corp ,349 1,259,266 Morgan Stanley... 88,887 3,960,805 Nasdaq, Inc ,124 1,939,095 S&P Global, Inc.... 2, ,203 State Street Corp ,943 3,763,545 T. Rowe Price Group, Inc. (a)... 20,885 1,549,876 UBS Group AG (b)... 87,004 1,476,950 34,576,861 Chemicals 1.8% Axalta Coating Systems, Ltd. (b)... 46,363 1,485,470 Celanese Corp. - Series A... 15,483 1,469,956 E.I. du Pont de Nemours & Co ,835 1,520,173 Monsanto Co ,035 2,134,623 PPG Industries, Inc ,026 6,710,419 Sherwin-Williams Co. (The)... 7,592 2,664,488 15,985,129 Commercial Services & Supplies 0.1% Transcontinental, Inc. - Class A (a)... 48, ,265 Communications Equipment 0.6% Cisco Systems, Inc ,166 4,762,796 Motorola Solutions, Inc.... 9, ,481 5,615,277 Consumer Finance 0.4% American Express Co ,491 1,726,162 Discover Financial Services... 31,547 1,961,908 3,688,070 Containers & Packaging 0.1% Crown Holdings, Inc. (b)... 14, ,010 Distributors 0.1% LKQ Corp. (b)... 37,102 1,222,511 Diversified Telecommunication Services 0.5% TDCA/S , ,665 Verizon Communications, Inc ,656 3,557,437 4,270,102 Electric Utilities 1.6% American Electric Power Co., Inc ,620 1,710,352 Duke Energy Corp ,662 2,980,987 Exelon Corp ,646 4,063,141 FirstEnergy Corp , ,521 PPL Corp. (a)... 84,353 3,261,087 See accompanying notes to financial statements. BHFTII-5

8 Schedule of Investments as of June 30, 2017 (Unaudited) Common Stocks (Continued) Security Description Shares Value Electric Utilities (Continued) SSEplc... 36,173 $ 684,101 Xcel Energy, Inc , ,487 14,070,676 Electrical Equipment 0.3% Eaton Corp. plc... 37,062 2,884,535 Energy Equipment & Services 0.4% Schlumberger, Ltd ,665 3,599,144 Equity Real Estate Investment Trusts 0.8% LaSalle Hotel Properties (a)... 19, ,490 Medical Properties Trust, Inc ,312 3,092,815 Public Storage... 3, ,656 STORE Capital Corp. (a)... 60,300 1,353,735 Washington Prime Group, Inc. (a) , ,108 6,717,804 Food & Staples Retailing 1.0% CVS Health Corp ,417 6,792,192 Kroger Co. (The)... 47,069 1,097,649 Wal-Mart Stores, Inc , ,150 8,718,991 Food Products 1.8% Archer-Daniels-Midland Co , ,872 Danone S.A ,471 1,764,301 General Mills, Inc ,153 2,944,676 J.M. Smucker Co. (The)... 5, ,678 Marine Harvest ASA (b) ,457 1,805,028 Mondelez International, Inc. - Class A... 23,835 1,029,434 Nestle S.A ,053 4,621,447 Tyson Foods, Inc. - Class A... 32,878 2,059,149 15,552,585 Health Care Equipment & Supplies 2.4% Abbott Laboratories ,118 6,811,136 Danaher Corp ,249 5,337,583 Medtronic plc... 81,080 7,195,850 Zimmer Biomet Holdings, Inc ,759 1,638,256 20,982,825 Health Care Providers & Services 0.9% Cigna Corp ,849 2,150,794 Express Scripts Holding Co. (b)... 13, ,608 HCA Healthcare, Inc. (a) (b)... 7, ,287 Humana, Inc.... 3, ,034 McKesson Corp ,493 2,713,758 UnitedHealth Group, Inc.... 1, ,018 7,577,499 Hotels, Restaurants & Leisure 0.3% Aramark (a)... 31,864 1,305,786 Marriott International, Inc. - Class A... 8, ,300 Security Description Shares Value Hotels, Restaurants & Leisure (Continued) Starbucks Corp ,567 $ 732,782 2,879,868 Household Durables 0.3% Newell Brands, Inc ,086 1,291,491 Whirlpool Corp.... 6,711 1,285,962 2,577,453 Household Products 0.6% Kimberly-Clark Corp.... 9,273 1,197,237 Procter & Gamble Co. (The)... 29,470 2,568,310 Reckitt Benckiser Group plc... 9,948 1,009,350 4,774,897 Industrial Conglomerates 1.6% 3MCo ,964 6,862,775 Honeywell International, Inc ,267 6,966,669 13,829,444 Insurance 3.5% Aonplc... 39,119 5,200,871 Chubb, Ltd ,433 7,622,709 Prudential Financial, Inc ,415 6,316,998 Travelers Cos., Inc. (The)... 74,209 9,389,665 Zurich Insurance Group AG... 7,900 2,300,421 30,830,664 Internet Software & Services 0.7% Alphabet, Inc. - Class A (b)... 1,322 1,229,037 Facebook, Inc. - Class A (b)... 34,371 5,189,334 6,418,371 IT Services 2.6% Accenture plc - Class A... 59,966 7,416,595 Amdocs, Ltd.... 7, ,723 Cognizant Technology Solutions Corp. - Class A... 11, ,998 DXC Technology Co ,680 5,192,410 Fidelity National Information Services, Inc ,387 1,741,050 Fiserv, Inc. (b)... 6, ,146 International Business Machines Corp ,252 4,192,175 Sabre Corp. (a)... 48,337 1,052,296 Visa, Inc. - Class A... 10,758 1,008,885 22,644,278 Life Sciences Tools & Services 0.7% Thermo Fisher Scientific, Inc ,659 5,872,486 Machinery 1.1% Allison Transmission Holdings, Inc. (a)... 20, ,255 Cummins, Inc.... 2, ,757 Deere & Co.... 9,578 1,183,745 Illinois Tool Works, Inc ,046 3,874,340 Ingersoll-Rand plc... 11,855 1,083,428 Stanley Black & Decker, Inc ,817 1,944,466 9,234,991 See accompanying notes to financial statements. BHFTII-6

9 Schedule of Investments as of June 30, 2017 (Unaudited) Common Stocks (Continued) Security Description Shares Value Media 2.6% Charter Communications, Inc. - Class A (b)... 8,868 $ 2,987,186 Comcast Corp. - Class A ,524 9,944,994 Interpublic Group of Cos., Inc. (The)... 36, ,882 Omnicom Group, Inc. (a)... 39,727 3,293,368 Time Warner, Inc ,872 4,304,777 Twenty-First Century Fox, Inc. - Class A... 33, ,795 Walt Disney Co. (The)... 3, ,825 22,776,827 Metals & Mining 0.3% Rio Tinto plc... 54,875 2,313,732 Mortgage Real Estate Investment Trusts 0.3% Annaly Capital Management, Inc. (a)... 62, ,293 Starwood Property Trust, Inc. (a)... 94,724 2,120,871 2,871,164 Multi-Utilities 0.4% Engie S.A , ,287 Public Service Enterprise Group, Inc , ,844 Sempra Energy... 9,783 1,103,033 WEC Energy Group, Inc , ,729 3,901,893 Multiline Retail 0.0% Target Corp.... 7, ,326 Oil, Gas & Consumable Fuels 3.3% Anadarko Petroleum Corp ,366 1,104,755 BPplc ,581 2,458,606 Canadian Natural Resources, Ltd , ,085 Chevron Corp ,645 3,092,863 Eni S.p.A ,015 1,373,504 Enterprise Products Partners L.P ,957 3,600,476 EOG Resources, Inc ,521 2,853,281 EQT Corp ,215 1,008,627 Exxon Mobil Corp ,191 3,809,729 Galp Energia SGPS S.A , ,085 Hess Corp. (a)... 21, ,333 Noble Energy, Inc , ,297 Occidental Petroleum Corp ,375 2,417,251 Plains All American Pipeline L.P ,981 1,365,541 Williams Partners L.P ,322 2,339,295 28,682,728 Personal Products 0.2% Coty, Inc. - Class A (a)... 84,114 1,577,979 Pharmaceuticals 4.1% Allergan plc... 3, ,423 Bayer AG... 30,757 3,979,465 Eli Lilly & Co ,624 5,236,255 Johnson & Johnson... 80,096 10,595,900 Merck & Co., Inc ,712 5,685,552 Novartis AG... 5, ,555 Security Description Shares Value Pharmaceuticals (Continued) Pfizer, Inc ,406 $ 8,176,008 Roche Holding AG... 1, ,259 35,296,417 Professional Services 0.2% Equifax, Inc ,378 1,838,405 Real Estate Management & Development 0.1% Jones Lang LaSalle, Inc. (a)... 9,655 1,206,875 Road & Rail 0.9% Canadian National Railway Co ,955 1,050,003 Union Pacific Corp ,711 6,938,765 7,988,768 Semiconductors & Semiconductor Equipment 1.2% Broadcom, Ltd.... 5,120 1,193,216 Intel Corp ,854 1,277,194 Maxim Integrated Products, Inc ,420 1,141,358 Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) (a)... 88,728 3,101,931 Texas Instruments, Inc ,982 3,768,185 10,481,884 Software 1.1% CA, Inc. (a)... 13, ,968 Check Point Software Technologies, Ltd. (b)... 21,790 2,376,853 Intuit, Inc.... 5, ,417 Microsoft Corp ,138 3,593,873 Oracle Corp ,302 2,070,882 9,173,993 Specialty Retail 0.8% Advance Auto Parts, Inc.... 3, ,505 Best Buy Co., Inc. (a)... 49,218 2,821,668 Gap, Inc. (The) (a)... 83,479 1,835,703 Ross Stores, Inc ,090 1,737,096 6,766,972 Technology Hardware, Storage & Peripherals 0.6% Apple, Inc ,956 2,009,943 Hewlett Packard Enterprise Co ,419 2,296,371 Seagate Technology plc (a)... 15, ,892 4,896,206 Textiles, Apparel & Luxury Goods 0.3% Hanesbrands, Inc. (a)... 33, ,078 LVMH Moet Hennessy Louis Vuitton SE... 4,126 1,035,056 NIKE, Inc. - Class B... 19,850 1,171,150 2,974,284 Tobacco 2.7% Altria Group, Inc ,327 6,577,712 Japan Tobacco, Inc , ,643 See accompanying notes to financial statements. BHFTII-7

10 Schedule of Investments as of June 30, 2017 (Unaudited) Common Stocks (Continued) Security Description Shares/ Principal Amount* Value Security Description Principal Amount* Value Tobacco (Continued) Philip Morris International, Inc ,581 $ 16,276,338 23,363,693 Trading Companies & Distributors 0.2% MSC Industrial Direct Co., Inc. - Class A... 23,182 1,992,725 Total Common Stocks (Cost $386,784,278) ,071,201 U.S. Treasury & Government Agencies 24.3% Agency Sponsored Mortgage - Backed 11.1% Fannie Mae 15 Yr. Pool 3.000%, 04/01/ , , %, 12/01/ ,469,669 1,511, %, 04/01/ ,078 3, %, 06/01/ ,634 11, %, 07/01/ ,647 6, %, 03/01/ ,190 20, %, 06/01/ ,359 19, %, 04/01/ ,143 21, %, 07/01/ ,671 10, %, 11/01/ ,857 2, %, 02/01/ ,714 14, %, 12/01/ ,519 53, %, 07/01/ ,041 40, %, 07/01/ ,165 26, %, 08/01/ ,899 20, %, 12/01/ ,550 56, %, 11/01/ ,695 3, %, 12/01/ %, 01/01/ %, 02/01/ ,740 4, %, 06/01/ ,774 38, %, 07/01/ ,116 37, %, 08/01/ ,565 9, %, 09/01/ ,822 39, %, 01/01/ ,164 22, %, 03/01/ ,685 6, %, 07/01/ %, 08/01/ %, 09/01/ %, 03/01/ %, 11/01/ ,011 2, %, 01/01/ ,212 37, %, 05/01/ ,277 8,563 Fannie Mae 30 Yr. Pool 3.000%, 09/01/ , , %, 10/01/ , , %, 11/01/ ,137,245 1,139, %, 11/01/ ,451 56, %, 01/01/ , , %, 01/01/ , , %, 04/01/ , ,217 Agency Sponsored Mortgage - Backed (Continued) Fannie Mae 30 Yr. Pool 3.500%, 05/01/ ,206,432 $ 1,242, %, 06/01/ , , %, 07/01/ ,335,499 1,374, %, 08/01/ , , %, 09/01/ ,794,442 1,847, %, 02/01/ ,310,684 1,353, %, 09/01/ ,540,624 1,583, %, 10/01/ ,698,758 1,750, %, 01/01/ , , %, 05/01/ , , %, 07/01/ ,340,232 1,383, %, 10/01/ , , %, 12/01/ ,075,803 1,105, %, 01/01/ , , %, 09/01/ ,347,102 1,422, %, 11/01/ , , %, 12/01/ , , %, 02/01/ , , %, 06/01/ , , %, 11/01/ , , %, 01/01/ ,000,279 2,110, %, 04/01/ , , %, 10/01/ , , %, 12/01/ , , %, 01/01/ , , %, 04/01/ ,008 80, %, 05/01/ , , %, 06/01/ , , %, 07/01/ , , %, 01/01/ , , %, 04/01/ , , %, 05/01/ , , %, 11/01/ , , %, 02/01/ , , %, TBA (c)... 2,702,100 2,840, %, 08/01/ , , %, 03/01/ , , %, 01/01/ , , %, 08/01/ ,483 48, %, 02/01/ , , %, 04/01/ , , %, 11/01/ , , %, 01/01/ , , %, 04/01/ ,251,130 2,434, %, 06/01/ , , %, 11/01/ , , %, 03/01/ ,370 93, %, 05/01/ ,715 39, %, 08/01/ ,810 38, %, 09/01/ , , %, 06/01/ , , %, 07/01/ , , %, 08/01/ ,147 93, %, 09/01/ ,294 66,196 See accompanying notes to financial statements. BHFTII-8

11 Schedule of Investments as of June 30, 2017 (Unaudited) U.S. Treasury & Government Agencies (Continued) Security Description Principal Amount* Value Security Description Principal Amount* Value Agency Sponsored Mortgage - Backed (Continued) Fannie Mae 30 Yr. Pool 5.000%, 10/01/ ,547 $ 255, %, 07/01/ , , %, 10/01/ , , %, 11/01/ ,283 78, %, 11/01/ , , %, 01/01/ ,511 27, %, 03/01/ ,225 71, %, 02/01/ ,008 48, %, 05/01/ ,729 5, %, 06/01/ , , %, 07/01/ , , %, 11/01/ , , %, 12/01/ ,300 13, %, 01/01/ , , %, 02/01/ , , %, 03/01/ ,463 48, %, 04/01/ ,931 54, %, 05/01/ , , %, 06/01/ , , %, 07/01/ , , %, 09/01/ , , %, 10/01/ , , %, 11/01/ , , %, 12/01/ , , %, 01/01/ , , %, 02/01/ ,010 7, %, 04/01/ ,530 69, %, 07/01/ ,492 29, %, 08/01/ ,987 8, %, 09/01/ , , %, 02/01/ , , %, 03/01/ ,035 29, %, 04/01/ , , %, 06/01/ , , %, 07/01/ , , %, 08/01/ , , %, 10/01/ , , %, 11/01/ ,509 37, %, 12/01/ ,804 9, %, 08/01/ ,179 56, %, 09/01/ ,743 64, %, 10/01/ ,316 99, %, 11/01/ ,475 15, %, 12/01/ , , %, 02/01/ ,490 86, %, 04/01/ ,347 88, %, 06/01/ ,367 23, %, 07/01/ , , %, 06/01/ ,280 37, %, 07/01/ ,125 4, %, 09/01/ ,726 38, %, 02/01/ ,093 32, %, 07/01/ , , %, 08/01/ ,371 85, %, 01/01/ ,928 41,447 Agency Sponsored Mortgage - Backed (Continued) Fannie Mae 30 Yr. Pool 6.500%, 04/01/ ,647 $ 62, %, 06/01/ ,062 25, %, 08/01/ ,983 18, %, 04/01/ ,167 13, %, 05/01/ ,940 88, %, 02/01/ ,871 95, %, 05/01/ ,243 93, %, 07/01/ ,339 68,976 Fannie Mae Pool 2.410%, 05/01/ ,729 93, %, 05/01/ , , %, 07/01/ , , %, 02/01/ , , %, 07/01/ , , %, 09/01/ , , %, 03/01/ ,788 96, %, 05/01/ , ,398 Fannie Mae-ACES (CMO) 2.578%, 09/25/ , , %, 12/25/26 (d) , ,077 Freddie Mac 15 Yr. Gold Pool 4.500%, 05/01/ ,864 3, %, 08/01/ ,850 7, %, 11/01/ ,522 14, %, 01/01/ ,594 30, %, 08/01/ ,519 2, %, 02/01/ ,372 17, %, 08/01/ , , %, 12/01/ %, 05/01/ ,776 3, %, 09/01/ ,170 15, %, 01/01/ ,757 5, %, 04/01/ ,445 4, %, 06/01/ ,831 2, %, 07/01/ ,556 1, %, 08/01/ ,038 2, %, 02/01/ ,498 2, %, 10/01/ %, 08/01/ ,940 22, %, 09/01/ ,586 6, %, 11/01/ ,795 5, %, 05/01/ ,763 11, %, 10/01/ ,078 33,401 Freddie Mac 30 Yr. Gold Pool 3.000%, 10/01/ , , %, 04/01/ ,397,299 1,404, %, 05/01/ ,219,487 1,225, %, 05/01/ , , %, 10/01/ ,135,073 1,136, %, 11/01/ ,466,771 1,469, %, 02/01/ , , %, 04/01/ , , %, 12/01/ ,823 1,006, %, 04/01/ , , %, 07/01/ , ,304 See accompanying notes to financial statements. BHFTII-9

12 Schedule of Investments as of June 30, 2017 (Unaudited) U.S. Treasury & Government Agencies (Continued) Security Description Principal Amount* Value Security Description Principal Amount* Value Agency Sponsored Mortgage - Backed (Continued) Freddie Mac 30 Yr. Gold Pool 3.500%, 08/01/ ,866 $ 665, %, 12/01/ , , %, 11/01/ , , %, 12/01/ ,274,828 2,338, %, 01/01/ ,642,280 1,688, %, 11/01/ , , %, 01/01/ ,552,969 1,639, %, 04/01/ , , %, 04/01/ ,276 48, %, 07/01/ , , %, 09/01/ , , %, 10/01/ ,724 90, %, 12/01/ , , %, 05/01/ , , %, TBA (c)... 4,427,000 4,742, %, 09/01/ , , %, 03/01/ ,569 42, %, 04/01/ ,388 39, %, 08/01/ ,321 51, %, 10/01/ , , %, 11/01/ ,734 93, %, 12/01/ ,515 62, %, 07/01/ , , %, 12/01/ , , %, 01/01/ , , %, 04/01/ ,238 35, %, 11/01/ ,429 43, %, 12/01/ ,919 27, %, 05/01/ ,507 37, %, 09/01/ ,423 45, %, 10/01/ ,387 57, %, 04/01/ , , %, 07/01/ ,484 37, %, 08/01/ , , %, 09/01/ ,611 2, %, 07/01/ ,121 53, %, 08/01/ ,682 63, %, 11/01/ , , %, 03/01/ ,506 34, %, 10/01/ ,936 46, %, 03/01/ ,811 8, %, 05/01/ ,324 77, %, 06/01/ ,209 58, %, 05/01/ ,894 24, %, 06/01/ ,804 70, %, 08/01/ ,053 60, %, 10/01/ ,245 91, %, 11/01/ ,016 48, %, 05/01/ ,566 82, %, 07/01/ ,861 87,835 Freddie Mac Multifamily Structured Pass-Through Certificates (CMO) 0.883%, 04/25/24 (d) (e)... 1,983,811 99, %, 11/25/ , , %, 08/25/ , ,850 Agency Sponsored Mortgage - Backed (Continued) Freddie Mac Multifamily Structured Pass-Through Certificates (CMO) 2.456%, 08/25/ ,000 $ 334, %, 11/25/ , , %, 12/25/ , , %, 03/25/ , , %, 10/25/ , , %, 06/25/ , , %, 01/25/ , , %, 02/25/ , , %, 02/25/ , , %, 10/25/ , , %, 03/25/27 (d) , , %, 04/25/23 (d) , , %, 10/25/ , , %, 02/25/23 (d) , , %, 08/25/23 (d) , , %, 03/25/ ,226,000 1,281,838 Ginnie Mae I 30 Yr. Pool 3.500%, 12/15/ , , %, 02/15/ , , %, 09/15/ ,079 97, %, 11/15/ , , %, 03/15/ , , %, 04/15/ , , %, 06/15/ , , %, 03/15/ ,532 36, %, 06/15/ ,524 84, %, 12/15/ ,617 38, %, 06/15/ ,326 11, %, 11/15/ , , %, 08/15/ , , %, 12/15/ , , %, 09/15/ , , %, 10/15/ ,518 23, %, 12/15/ ,663 41, %, 12/15/ ,609 35, %, 03/15/ ,523 3, %, 10/15/ , , %, 01/15/ ,635 36, %, 02/15/ ,741 1, %, 04/15/ , , %, 08/15/ ,071 1, %, 07/15/ , , %, 09/15/ ,212 46, %, 01/15/ , ,050 Ginnie Mae II 30 Yr. Pool 3.500%, 06/20/ , , %, 07/20/ ,006,628 1,047, %, 01/20/ ,988 1,037, %, 02/20/ , , %, 04/20/ , , %, 02/20/ , , %, 07/20/ ,109 19, %, 09/20/ ,847 11, %, 12/20/ ,063 8,631 See accompanying notes to financial statements. BHFTII-10

13 Schedule of Investments as of June 30, 2017 (Unaudited) U.S. Treasury & Government Agencies (Continued) Security Description Principal Amount* Value Security Description Principal Amount* Value Agency Sponsored Mortgage - Backed (Continued) Ginnie Mae II 30 Yr. Pool 4.500%, 03/20/ ,714 $ 50, %, 01/20/ , , %, 07/20/ ,888 42, %, 01/20/ ,213 48, %, 02/20/ ,532 25, %, 04/20/ ,533 41,499 Government National Mortgage Association (CMO) 0.658%, 02/16/59 (d) (e)... 2,490, ,840 96,982,988 Federal Agencies 0.1% Financing Corp %, 11/02/ , ,281 U.S. Treasury 13.1% U.S. Treasury Bonds 2.500%, 02/15/ ,000 63, %, 05/15/ ,237,600 19,423, %, 02/15/ , , %, 08/15/ ,514,000 3,256, %, 05/15/ , , %, 02/15/ ,000 20, %, 02/15/ , , %, 08/15/ ,000 99,559 U.S. Treasury Notes 1.000%, 06/30/19 (a)... 16,589,000 16,465, %, 02/29/ , , %, 11/30/ ,242,000 18,194, %, 11/15/ ,875,000 1,828, %, 08/15/ ,502,000 13,856, %, 05/15/19 (a)... 6,086,000 6,282, %, 05/15/ ,504,000 3,686, %, 05/15/20 (a)... 25,140,000 26,521, %, 11/15/ ,067,000 2,134, ,550,189 Total U.S. Treasury & Government Agencies (Cost $207,495,923) ,009,458 Corporate Bonds & Notes 10.9% Agriculture 0.3% Imperial Brands Finance plc 2.950%, 07/21/20 (144A) (f) , ,989 Reynolds American, Inc %, 08/15/ ,296,000 1,587,341 2,429,330 Auto Manufacturers 0.1% General Motors Co %, 04/01/46 (a) , ,571 Auto Manufacturers (Continued) General Motors Financial Co., Inc %, 07/06/ ,000 $ 784,722 1,228,293 Banks 2.8% ABN AMRO Bank NV 4.800%, 04/18/26 (144A) , ,465 Banco de Credito del Peru 5.375%, 09/16/ , ,150 Bank of America Corp %, 07/24/23 (a)... 1,270,000 1,344, %, 01/22/ ,973,000 2,082, %, 11/25/27 (a)... 1,208,000 1,228, %, 03/15/ , , %, 06/01/19 (a) , ,897 BBVA Bancomer S.A %, 09/30/22 (144A) , ,363 BPCE S.A %, 09/30/19 (144A) (a) (d) ,000 1,125,412 Citigroup, Inc %, 09/26/18 (a) , ,931 Citizens Bank N.A %, 03/02/ , ,727 Credit Suisse AG 6.500%, 08/08/23 (144A) (a) , ,025 Goldman Sachs Group, Inc. (The) 3.850%, 01/26/ ,118,000 1,137,350 HSBC Holdings plc 6.000%, 05/22/27 (a) (d) , ,660 ING Bank NV 5.800%, 09/25/23 (144A)... 1,076,000 1,215,010 JPMorgan Chase & Co %, 02/01/28 (d)... 1,115,000 1,140, %, 04/23/ ,210,000 1,302,285 KFW 4.875%, 06/17/ ,290,000 1,371,298 Morgan Stanley 3.625%, 01/20/27 (a)... 1,112,000 1,119, %, 04/29/ ,081,000 1,123, %, 07/23/ , , %, 04/01/ ,343,000 1,390,690 Royal Bank of Scotland Group plc 3.875%, 09/12/ ,128,000 1,151,811 UBS Group Funding Switzerland AG 4.125%, 04/15/26 (144A) (f) , , %, 03/23/28 (144A) (a) , ,484 24,391,888 Beverages 0.3% Anheuser-Busch InBev Worldwide, Inc %, 11/15/ ,020,000 1,564,173 Diageo Capital plc 2.625%, 04/29/ ,020,000 1,028,960 2,593,133 See accompanying notes to financial statements. BHFTII-11

14 Schedule of Investments as of June 30, 2017 (Unaudited) Corporate Bonds & Notes (Continued) Security Description Principal Amount* Value Security Description Principal Amount* Value Biotechnology 0.3% Celgene Corp %, 08/15/ ,000 $ 515,379 Gilead Sciences, Inc %, 02/01/ ,880,000 1,929, %, 04/01/24 (a) , ,351 2,769,067 Chemicals 0.0% Sherwin-Williams Co. (The) 4.500%, 06/01/ , ,227 Commercial Services 0.2% ERAC USA Finance LLC 7.000%, 10/15/37 (144A)... 1,115,000 1,447,388 Computers 0.3% Apple, Inc %, 02/23/ ,176,000 1,196, %, 02/09/ , , %, 05/04/ , ,897 2,327,926 Diversified Financial Services 0.4% GE Capital International Funding Co %, 11/15/ , ,157 Intercontinental Exchange, Inc %, 12/01/ , , %, 10/15/ , ,113 Raymond James Financial, Inc %, 07/15/ , ,297 Visa, Inc %, 12/14/ ,192,000 1,210,198 3,623,623 Electric 1.0% Berkshire Hathaway Energy Co %, 11/15/23 (a) , ,835 Duke Energy Corp %, 09/01/ , ,415 Enel Finance International NV 4.750%, 05/25/47 (144A) , ,973 Exelon Corp %, 04/15/ ,137,000 1,133,166 Midamerican Funding LLC 6.927%, 03/01/ , ,298 Oncor Electric Delivery Co. LLC 7.000%, 09/01/ , ,026 PPL Capital Funding, Inc %, 06/01/23 (a) , , %, 03/15/ , ,705 Progress Energy, Inc %, 04/01/ ,083,000 1,105,584 Southern Co. (The) 3.250%, 07/01/26 (a)... 1,295,000 1,266,848 Electric (Continued) State Grid Overseas Investment, Ltd %, 05/07/19 (144A) (f) ,000 $ 785, %, 05/04/22 (144A) , ,033 9,083,419 Food 0.2% Danone S.A %, 11/02/26 (144A)... 1,133,000 1,095,100 WM Wrigley Jr. Co %, 10/21/18 (144A) , ,674 1,344,774 Healthcare-Products 0.5% Abbott Laboratories 4.900%, 11/30/ , ,977 Becton Dickinson & Co %, 12/15/ , ,367 Medtronic, Inc %, 03/15/ ,000 1,033,284 Thermo Fisher Scientific, Inc %, 09/19/ , ,501 Zimmer Biomet Holdings, Inc %, 04/01/25 (a)... 1,222,000 1,234,327 4,446,456 Healthcare-Services 0.2% Laboratory Corp. of America Holdings 3.200%, 02/01/ , , %, 02/01/ , ,162 UnitedHealth Group, Inc %, 07/15/ ,303,000 1,372,387 1,864,929 Household Products/Wares 0.1% Reckitt Benckiser Treasury Services plc 3.625%, 09/21/23 (144A)... 1,070,000 1,124,671 Housewares 0.1% Newell Brands, Inc %, 04/01/ , ,644 Insurance 0.5% American International Group, Inc %, 02/15/24 (a) , , %, 06/01/ ,770,000 1,942,141 Berkshire Hathaway, Inc %, 03/15/ , ,388 Liberty Mutual Group, Inc %, 08/01/44 (144A) , ,288 Marsh & McLennan Cos., Inc %, 07/15/ ,000 1,000,194 4,647,862 See accompanying notes to financial statements. BHFTII-12

15 Schedule of Investments as of June 30, 2017 (Unaudited) Corporate Bonds & Notes (Continued) Security Description Principal Amount* Value Security Description Principal Amount* Value Internet 0.1% Baidu, Inc %, 11/28/ ,110,000 $ 1,134,100 Investment Company Security 0.2% Temasek Financial I, Ltd %, 01/23/23 (144A)... 1,790,000 1,768,202 Media 0.4% Charter Communications Operating LLC / Charter Communications Operating Capital Corp %, 07/23/ , ,007 Comcast Corp %, 08/15/ , ,686 Time Warner Entertainment Co. L.P %, 07/15/33 (a)... 1,240,000 1,702,411 3,083,104 Mining 0.1% Glencore Funding LLC 4.125%, 05/30/23 (144A) , ,846 Miscellaneous Manufacturing 0.1% General Electric Co %, 01/09/20 (d) , ,416 Oil & Gas 0.8% BP Capital Markets plc 4.500%, 10/01/20 (a) , , %, 03/11/ , ,432 Chevron Corp %, 11/15/17 (d)... 1,696,000 1,697,350 Marathon Petroleum Corp %, 09/15/ , ,958 Petroleos Mexicanos 3.125%, 01/23/19 (a) , ,464 Shell International Finance B.V %, 09/12/ , ,498 Statoil ASA 7.750%, 06/15/ , ,933 Valero Energy Corp %, 03/15/ ,620,000 1,687,702 6,853,899 Pharmaceuticals 0.2% Allergan Funding SCS 3.800%, 03/15/25 (a) , ,904 Shire Acquisitions Investments Ireland DAC 3.200%, 09/23/ ,498,000 1,464,825 1,943,729 Pipelines 0.6% APT Pipelines, Ltd %, 03/23/25 (144A)... 1,228,000 1,267, %, 07/15/27 (144A)... 93,000 95,207 Pipelines (Continued) Enterprise Products Operating LLC 6.500%, 01/31/ ,000 $ 968,527 Kinder Morgan Energy Partners L.P %, 02/01/ , ,322 Phillips 66 Partners L.P %, 10/01/46 (a) , ,787 Sabine Pass Liquefaction LLC 5.000%, 03/15/ ,100,000 1,170,919 4,857,447 Retail 0.3% Coach, Inc %, 07/15/ , ,773 CVS Health Corp %, 07/20/ ,094,000 1,137,482 Home Depot, Inc. (The) 5.950%, 04/01/ , ,560 Walgreens Boots Alliance, Inc %, 11/18/ , ,034 2,517,849 Software 0.2% Fidelity National Information Services, Inc %, 08/15/ , ,422 Microsoft Corp %, 02/06/ ,456,000 1,576,344 1,791,766 Telecommunications 0.6% AT&T, Inc %, 06/30/ , , %, 05/15/ , , %, 03/01/ , ,566 Crown Castle Towers LLC 4.883%, 08/15/20 (144A) , , %, 01/15/20 (144A) , ,391 Verizon Communications, Inc %, 03/15/ ,024,000 1,084,073 4,870,127 Total Corporate Bonds & Notes (Cost $90,936,291)... 94,866,115 Asset-Backed Securities 1.4% Asset-Backed - Automobile 0.3% Chesapeake Funding II LLC 2.159%, 06/15/28 (144A) (d) (f)... 1,170,326 1,175,492 Ford Credit Auto Owner Trust 2.260%, 11/15/25 (144A) , , %, 04/15/26 (144A) , ,113 2,159,652 See accompanying notes to financial statements. BHFTII-13

16 Schedule of Investments as of June 30, 2017 (Unaudited) Asset-Backed Securities (Continued) Security Description Principal Amount* Value Security Description Shares/ Principal Amount* Value Asset-Backed - Home Equity 0.1% Bayview Financial Revolving Asset Trust 2.822%, 12/28/40 (144A) (d) (f) ,113 $ 494,205 GMAC Home Equity Loan Trust 5.805%, 10/25/36 (d) , ,017 Home Equity Loan Trust 5.320%, 12/25/35 (d) , ,031 1,072,253 Asset-Backed - Other 1.0% American Tower Trust I 3.070%, 03/15/48 (144A)... 1,000,000 1,007,628 Cent CLO, Ltd %, 07/27/26 (144A) (d) , , %, 01/30/25 (144A) (d) , ,079 Dryden 34 Senior Loan Fund Zero Coupon, 10/15/26 (144A) (d)... 1,430,000 1,432,890 Dryden XXVI Senior Loan Fund 2.258%, 07/15/25 (144A) (d)... 1,068,000 1,069,578 Fortress Credit BSL, Ltd %, 01/19/25 (144A) (d) , ,764 Mountain Hawk CLO, Ltd %, 04/18/25 (144A) (d) (f)... 1,463,576 1,463,566 Small Business Administration Participation Certificates 4.350%, 07/01/ , , %, 04/01/ ,094 10, %, 03/01/ ,561 67, %, 09/01/ ,159 37, %, 08/01/ ,261 94, %, 05/01/ ,165 16, %, 06/01/ ,389 37,611 Voya CLO, Ltd %, 04/25/25 (144A) (d) , ,078 8,708,863 Total Asset-Backed Securities (Cost $11,986,159)... 11,940,768 Mortgage-Backed Securities 1.3% Collateralized Mortgage Obligations 0.0% BlackRock Capital Finance L.P %, 09/25/26 (144A) (f)... 9, Commercial Mortgage-Backed Securities 1.3% CD Commercial Mortgage Trust 3.514%, 05/10/50 (d)... 1,519,456 1,564,374 Commercial Mortgage Trust 3.708%, 07/10/ ,300,833 1,356,284 Credit Suisse Commercial Mortgage Trust 5.695%, 09/15/40 (d) , ,187 CSAIL Commercial Mortgage Trust 3.504%, 06/15/ , ,789 Commercial Mortgage-Backed Securities (Continued) General Electric Capital Assurance Co %, 05/12/35 (144A) (d) (f)... 15,857 $ 16,282 GS Mortgage Securities Corp. II 3.382%, 05/10/ ,387,991 1,415,893 GS Mortgage Securities Trust 3.433%, 05/10/ , ,243 JPMBB Commercial Mortgage Securities Trust 3.227%, 10/15/ ,036,740 1,047, %, 01/15/ ,590,000 1,637,253 Morgan Stanley Capital I, Inc %, 11/15/30 (144A) (d) (e) ,062 1, %, 06/15/ , ,942 Wells Fargo Commercial Mortgage Trust 3.540%, 05/15/ ,410,327 1,452,387 10,956,196 Total Mortgage-Backed Securities (Cost $10,994,411)... 10,957,183 Convertible Preferred Stocks 0.8% Food Products 0.3% Tyson Foods, Inc %, 07/15/ ,050 2,307,909 Pharmaceuticals 0.5% Allergan plc 5.500%, 03/01/ ,300 4,600,824 Total Convertible Preferred Stocks (Cost $6,880,281)... 6,908,733 Municipals 0.2% New Jersey State Turnpike Authority, Build America Bonds 7.414%, 01/01/40 (Cost $1,092,733)... 1,050,000 1,586,298 Foreign Government 0.1% Sovereign 0.1% Mexico Government International Bonds 4.750%, 03/08/44 (Cost $896,949) , ,909 Preferred Stock 0.0% Automobiles 0.0% Hyundai Motor Co. (Cost $379,644)... 3, ,298 See accompanying notes to financial statements. BHFTII-14