BlackRock Global Funds (BGF) US Flexible Equity Fund April 2017 FOR PROFESSIONAL INVESTORS, INSTITUTIONAL INVESTORS, AND PROFESSIONAL CLIENTS/QUALIFIED INVESTORS
Investment Team, Philosophy & Process
US Income & Value: Key Investment Professionals Tony DeSpirito Director of Investments, US Equities, Portfolio Manager Equity Dividend Portfolios Portfolio Managers Carrie King Joseph Wolfe Todd Burnside Bob Shearer David Zhao Franco Tapia Basic Value & Large Cap Core Portfolios Basic Value & Large Cap Core Portfolios Large Cap Core Portfolios Equity Dividend Portfolios Equity Dividend Portfolios Equity Dividend Portfolios Fundamental Research: David Zhao & Franco Tapia, Co-Directors of Research Additional Resources Cons. Discretionary / Staples Energy Financials Quantitative Alpha Research Group Franco Tapia Sam Bapasola William McSweeney Ruth Nagle, Sam Bapasola, Karim Laib Joseph Cerniglia Health Care Industrials / Utilities / Materials Technology / Telecom Risk & Quantitative Analysis Team Ibrahim Kanan Artem Savchenko Scott Winters, Andrew Ralph, Ibrahim Kanan, Tung Ngo David Zhao, Andrew Wright Ben Hoskin Katie Day Helen Jewell Global Director of Research, FAE Doug Chow Global Head of AE Integration & Data Ron Kahn Global Head of Research, SAE Culture of global connectivity across equity teams and asset classes magnifies information advantage As of 31 March 2017. 3
Guiding principles We believe that, over the long term, economic profits drive equity values. At any time, market prices might reflect noise or behavioral biases that create dislocations from real economic value, presenting an investment opportunity. Our investment process is designed to identify and exploit those market dislocations. The Large Cap Series information advantage comes from: Combining quantitative and fundamental disciplines A focus on behavioral finance and biases Rigorous vetting of ideas Leveraging BlackRock s global resources Our team by design combines diverse talent in both fundamental and quantitative research. The combination and culture leads to better data gathering, a better analytical framework and more rigorous vetting of ideas than either discipline alone. Fundamental insights are augmented by expert fluency in an integrated application of technical and quantitative skills. The research process seeks to create informational advantages by forming a constructive feedback loop to uncover biases of behavior or methodology in the market or ourselves. Current process for selecting investments in the portfolio in accordance with its stated investment objectives and policies. The investment process is subject to change based on market conditions, the opinions of the portfolio management team and other factors. 4
Integrating quantitative and fundamental innovation Adds focus and discipline Quantitative research Actual portfolio Fundamental research \ Drives alpha generation Quantitative Research Scientific relies on empirical data Consistent: Investment decisions are backed by systematic and repeatable scientific methodology Efficient: Scalability and speed allows for faster decision-making Reliable: Computer models guard against human error and bias in dissecting statistical data Portfolio construction Applies risk management parameters Integrated Approach Guided focus Fundamental Research Qualitative relies on the experience and judgment of the team Comprehensive: Considers measurable factors and intangible variables that impact the value of a security Prospective: Allows investors to look ahead and identify key drivers of a company s long-term performance Flexible: Ability to react to company developments and market conditions Disciplined & informed decisions Evidential forecasts Source: BlackRock. All information as of 3/31/17 5
Balanced and disciplined investment process Quantitative and fundamental research integrated at each stage of the investment process Idea generation - Narrow the investment universe through quantitative and fundamental analyses - Ferret out idiosyncratic prospects and thematic opportunities - Prioritize opportunities and set research agenda Stock-specific research - Intense collaboration to identify pivotal issues to a company s investment potential - Establish framework for projecting outcome/resolution on pivotal issues - Develop downside, core and stretch return scenarios for each thesis Portfolio construction - Arrive at 60-100 securities with established boundaries for individual company and sector weights (Holdings: targets +/- 200 bps at purchase, Sectors: +/- 1000 bps vs. respective benchmark) Feedback Loops Risk management & attribution analysis - Daily review of proprietary Large Cap Series risk analysis platform helps ensure portfolio risks and exposures are deliberate, diversified and properly scaled The investment process is subject to change based on market conditions, the opinions of the portfolio management team and other factors. 6
Idea generation: Quantitative, fundamental, thematic Quantitative ideas: Model ranks the investment universe from most to least attractive Companies above 25 th percentile eligible for investment on a quantitative basis No more than 20% active weight in stocks scoring below 33rd percentile Internal Quantitative Model Priced attractively Accounting we can rely on Fundamental momentum Investment sentiment How much we pay for earnings, assets and cash flow Price implied expectations Accruals Pensions Economic vs. GAAP Growth Stability of growth Price momentum Analyst revisions Capital deployment Fundamental ideas Strong fundamentals in spite of low score owing to temporary or irrelevant circumstances (e.g. company mispricings, underappreciated growth potential) Thematic ideas Fundamental favorable industry or company dynamics identified fundamentally across universe (e.g. market shifts / transformations, price dislocations) Quantitative thematic quantitative screenings, outside regular model rankings, used to capture particular market dynamics Weekly research prioritization meeting Research list Current process for selecting investments in the portfolio in accordance with its stated investment objectives and policies. Process subject to change based on market conditions, portfolio manager s opinion and other factors. 7
Stock-specific research Goal: Identify key drivers/pivotal issues Top risks and opportunities Develop downside, core and stretch targets Resources Individual company template Analysis tool and discussion framework Review independent/external bull-bear case Decompose company quant score Review company filings and conference call transcripts Internal BlackRock insights Management incentives Current process for selecting investments in the portfolio in accordance with its stated investment objectives and policies. Process subject to change based on market conditions, portfolio manager s opinion and other factors. 8
Portfolio construction Portfolio approximate tracking error range 250bps to 500bps Internally monitored Ex-ante tracking error outside of the range mandates additional review Bounds Individual company active weight targets +/- 200bps; approximately 60 to 100 securities in the portfolio Sectors +/- 1000bps relative to respective portfolio benchmark Risk is monitored at the overall portfolio level Percentage of risk coming from various positions, industry and style bets actively monitored by BlackRock s Risk & Quantitative Analysis (RQA) group Deliberate, diversified and properly scaled Portfolio construction shown for illustrative purposes and subject to change. 9
Attribution & risk management Independent risk oversight provided by BlackRock Risk and Quantitative Analysis Group (RQA) Leverage BlackRock infrastructure and tools: Aladdin, Portfolio Risk Tools (PRT) Proprietary BlackRock models (BlackRock Fundamental Equity risk model) Customized risk monitoring tools and reports Feedback from real time and historic multi-dimensional attribution analysis Various periods, factors, sectors, market conditions 10
Investment process: Sell discipline Avoid a criminal court mindset Investment thesis fully reflected in the stock price Quantitative score deteriorates Automatic review triggered if stock falls below 33 rd percentile Fundamental milestones missed Thesis creep Competition for capital (better investment opportunities elsewhere) Diversification Sector, industry, and security The investment process is subject to change based on market conditions, the opinions of the portfolio management team and other factors. 11
Summary Disciplined process Rigorous empirical examination of ideas Formulation of thesis on insight through lens of economic, historic and behavioral context. Focus on determining pivotal drivers of a stock price through multifaceted analytical approach and verifying thesis plausibility against empirical data Integration of expertise in varied analytical tool kits Quantitative research Fundamental research Leverages the power of BlackRock s global resources Quantitative Alpha Research Group BlackRock Investment Institute Collaboration across investment teams Data Current process for selecting investments in the portfolio in accordance with its stated investment objectives and policies. Process subject to change based on market conditions, portfolio manager s opinion and other factors. 12
BGF US Flexible Equity Fund Portfolio Characteristics & Performance
Consumer Disc. Consumer Staples Energy Financials Health Care Industrials Info Tech Materials Real Estate Telecom Utilities BGF US Flexible Equity Fund: Portfolio Characteristics Sector allocation (% NAV) As of 31 March 2017 26.3 21.4 BGF US Flexible Equity Russell 1000 15.0 12.7 8.8 7.2 6.6 6.3 16.0 14.6 14.9 13.4 6.1 10.4 5.0 3.2 3.7 0.0 0.4 2.3 3.1 1.5 Top 10 Holdings Security Name Sector % NAV Apple Inc Information Technology 5.29 Alphabet Inc* Information Technology 4.16 Microsoft Corporation Information Technology 3.92 JP Morgan Chase & Co Financials 3.72 Bank of America Corp Financials 3.47 Comcast Corporation Consumer Discretionary 2.83 Lowes Companies Inc Consumer Discretionary 2.37 Dow Chemical Company Materials 2.36 US Bancorp Financials 2.34 Lam Research Corporation Information Technology 2.34 Characteristics Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Market Capitalization (mn) $164,041 $149,232 Number of Holdings 86 1000 LT EPS Growth Rate 11.60% 12.20% P/B (FY0) 2.43x 2.95x P/E (FY1) 14.90x 18.50x Active Share 74.23% -- Source: BlackRock. Portfolio characteristics are of the BlackRock BGF US Flexible Equity portfolio and are subject to change. Holdings are for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the industries shown above. *Combines Classes A and C. 14
BGF US Flexible Equity Fund 1 Source: BFRE (BlackRock Fundamental Risk for Equities). 1 RPT Status represents the risk performance target. Past performance is no guarantee of current or future results. Portfolio characteristics are those of the BGF US Flexible Equity Fund managed in the BlackRock Large Cap Core style. Allocations are subject to change. Due to rounding, the total may not be equal to 100% 15
Returns (%) BGF US Flexible Equity Fund: Performance Net total return in USD (annualized %) As of 31 March 2017 20.0 18.0 17.4817.4317.17 16.0 14.0 13.2613.30 12.0 10.0 9.99 10.37 10.67 9.55 9.26 8.0 6.0 6.02 6.03 6.07 7.51 4.57 7.58 7.51 7.73 4.0 2.0 0.0-2.0 0.06 0.12-0.41 March 2017 Q1 2017 1-Year 3-Year 5-Year 10-Year Inception to Date* BGF US Flexible Equity Russell 1000 Index S&P 500 Index *Inception date was 31 October 2002. Not annualized for periods less than one year. Performance is shown as at 31 March 2017 in US$ on a NAV price basis with income reinvested (share class A2). Performance figures are calculated net of annual fees. Past performance does not guarantee current or future results. Reported Fund performance is affected by the timing differential between the pricing of the Fund and its benchmark(s). Source: Fund: BlackRock Investment Management (UK) Limited (BIM(UK)L) Morningstar. ISIN Code: LU0154236417 Net of fees and expenses. Index performance is shown for illustrative purposes only. It is not possible to invest directly in an index. The Performance data do not take account of the commissions and costs incurred on the issue and redemption of units. 16
Appendix
Integrated fundamental/quantitative feedback loop Intuitive insights Empirical support Rigorous analytical validation Quantitative Research Fundamental Research Quantitative models meeting fundamental thresholds work better Fundamental opinions vetted through rigorous data analysis are more likely to add alpha Attribution & Risk Management Insights Fluency in varied methodologies informs awareness of limitations of any individual approach Portfolio Management Current process for selecting investments in the portfolio in accordance with its stated investment objectives and policies. Process subject to change based on market conditions, portfolio manager s opinion and other factors. 18
Quantitative model Value 20-40% Accounting 10-30% Economic Rationale: Attractively-priced stocks offer better returns over time. Factor Examples: Book to Price, Forward Earnings to Price, Free Cash Flow to Enterprise Value Varies for: Technology, Energy, Financials Typically 20-40% of total score Economic Rationale: Clean accounting practices and judicious use of capital characterize long-term outperformers. Factor Examples: Accruals to assets, FCF to sales, ROIC, Share Buybacks Varies for: Financials Typically 10-30% of total score Quality Growth 10-30% Sentiment 20-40% Economic Rationale: Companies with stable, growing earnings, high profitability and low leverage outperform over time. Factor Examples: Debt to equity, Earnings Growth, ROE, Earnings Stability Varies for: Financials Typically 10-30% of total score For illustrative purposes only. Economic Rationale: Investors initial under-reaction to new information results in a lag in such information being reflected in market value; hence, stocks with positive recent sentiment tend to outperform. Factor Examples: 12-month return momentum, EPS revisions, FCF revisions Varies for: Financials Typically 20-40% of total score 19
Why choose BGF US Flexible Equity Fund? Time-tested long-term investment philosophy driven by an experienced portfolio management team Quantitative model adds discipline and focus to the investment process Strong fundamental research supported by BlackRock s extensive capabilities Disciplined risk management seeks to efficiently measure and manage portfolio risk Current process for selecting investments in the portfolio in accordance with its stated investment objectives and policies. Process subject to change based on market conditions, portfolio manager s opinion and other factors. 20
BGF US Flexible Equity Fund: Historical and Calendar Year Performance Net total return in USD As of 31 December 2016 2016 2015 2014 2013 2012 BGF US Flexible Equity 8.37-1.39 12.02 32.8 10.23 Russell 1000 Index 12.05 0.92 13.24 33.11 16.42 S&P 500 Index 11.96 1.38 13.69 32.39 16.00 Performance is shown as at 31 December 2016 in US$ on a NAV price basis with income reinvested (share class A2 USD). Performance figures are calculated net of annual fees. Past performance is no indication of current or future performance. Reported Fund performance is affected by the timing differential between the pricing of the Fund and its benchmark(s). Source: Fund: BlackRock Investment Management (UK) Limited (BIM(UK)L) - Indices: Datastream, BIM(UK)L - ISIN Code: LU0154236417 Net of fees and expenses. Index performance is shown for illustrative purposes only. It is not possible to invest directly in an index. 21
Important Information The following notes should be read in conjunction with the attached document: Issued by BlackRock Investment Management (UK) Limited (authorised and regulated by the Financial Conduct Authority). Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Registered in England No. 2020394. Tel: 020 7743 3000. Tel: 020 7743 3000. For your protection, telephone calls are usually recorded. BlackRock is a trading name of BlackRock Investment Management (UK) Limited. The BlackRock Global Funds (BGF) US Flexible Equity Fund is domiciled in Luxembourg. BlackRock Asset Management Schweiz AG, Bahnhofstrasse 39, CH-8001 Zurich, is the Swiss Representative and State Street Bank International GmbH, Munich, Zurich Branch, Beethovenstrasse 19, CH-8002 Zürich, the Swiss Paying Agent. The Prospectus, Key Investor Information Document, the Articles of Incorporation, the latest and any previous annual and semi-annual reports are available free of charge from the Swiss Representative. Investors should read the fund specific risks in the Key Investor Information Document and the Prospectus. BGF has been registered on the official list of the Financial Supervision Commission (Komisja Nadzoru Finansowego) for distribution in Poland. Issued in Poland by the representative office BlackRock Investment Management (UK) Limited, Dubiński, Fabrycki, Jeleński i Wspólnicy Kancelaria Prawna sp.k., ul. Zielna 37, 00-108 Warszawa. Paying agent in Poland is Bank Handlowy w Warszawie SA, ul. Senatorska 16, 00-950 Warsaw, Poland. This information can be distributed in and from the Dubai International Financial Centre (DIFC) by BlackRock Advisors (UK) Limited - Dubai Branch which is regulated by the Dubai Financial Services Authority (DFSA) and is only directed at 'Professional Clients' and no other person should rely upon the information contained within it. Neither the DFCA or any other authority or regulator located in the GCC or MENA region has approved this information. This information and associated materials have been provided to you at your express request, and for your exclusive use. This document is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution would be unlawful under the securities laws of such. Any distribution, by whatever means, of this document and related material to persons other than those referred to above is strictly prohibited For further information, the prospectus, Key Investor Information Document, annual report and semi-annual report can be obtained free of charge in hardcopy form from the Austrian paying agent: Raiffeisen Zentralbank Österreich AG, A-1030 Vienna, Am Stadtpark 9. The risk indicator shown on this document refers to the A share class of the Fund. Higher or lower risk may apply to the other share classes of the Fund. Issued in the Netherlands by the Amsterdam branch office of BlackRock Investment Management (UK) Limited: Amstelplein 1, 1096 HA Amsterdam, Tel: 020-549 5200. BGF is a UCITS (icbe) as defined in section 1:1 Financial Markets Supervision Act (Wet op het financieel toezicht; "FMSA"). BGF and its sub funds are listed in the register as defined in section 1:107 FMSA. Please refer to the Key Investor Information Document (essentiële beleggersinformatie; "EBI") for further information about BGF and its sub funds. The prospectus and EBI of BGF and its sub funds are available on BlackRock's website, www.blackrock.nl. All financial investments contain a certain risk. The value of the assets managed by BGF and its sub funds may greatly fluctuate as a result of the investment policy and your initial investment is not guaranteed. Issued in the Netherlands by the Amsterdam branch office of BlackRock Investment Management (UK) Limited: Amstelplein 1, 1096 HA Amsterdam, Tel: 020-549 5200. BGF and its sub funds are listed in the register as defined in section 1:107 FMSA. Where a risk indicator is shown on this document it refers to the relevant share class of the Fund and date specified, please verify the risk of your share class on the Key Investor Information Document (essentiële beleggersinformatie; "EBI"). Higher or lower risk may apply to the other share classes of the Fund. BlackRock Global Funds ("BGF") is a UCITS (icbe) as defined in section 1:1 Financial Markets Supervision Act (Wet op het financieel toezicht; "FMSA"). BGF and its sub funds are listed in the register as defined in section 1:107 FMSA. Please refer to the EBI for further information about BGF and its sub funds. The prospectus and EBI of BGF and its sub funds are available on BlackRock's website www.blackrock.nl. All financial investments contain a certain risk. The value of BGF and its sub funds may greatly fluctuate as a result of the investment policy and your initial investment is not guaranteed. This is a financial promotion. For further information, the prospectus, Key Investor Information Document, annual report and semi-annual report can be obtained free of charge in hardcopy form from the German information centre: BlackRock Investment Management (UK) Limited, German Branch, Frankfurt am Main, Bockenheimer Landstraße 2 4, 60306 Frankfurt am Main.The paying agent in Germany is J.P. Morgan AG, CIB / Investor Services Trustee & Fiduciary, Taunustor 1 (Taunus Turm), D-60310 Frankfurt am Main. THIS MATERIAL IS FOR DISTRIBUTION TO PROFESSIONAL CLIENTS / INSTITUTIONAL AND PROFESSIONAL INVESTORS AND SHOULD NOT BE RELIED UPON BY ANY OTHER PERSONS. 22
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Important Information The following notes should be read in conjunction with the attached document: Investment involves risks. Past performance is not a guide to future performance and should not be the sole factor of consideration when selecting a product. All financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed. Investors may not get back the amount they invest. Changes in the rates of exchange between currencies may cause the value of investments to go up and down. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time. Overseas investment will be affected by movements in currency exchange rates. BlackRock Global Funds (BGF) is an open-ended investment company established and domiciled in Luxembourg which is available for sale in certain jurisdictions only. BGF is not available for sale in the U.S. or to U.S. persons. Product information concerning BGF should not be published in the U.S. It is recognised under Section 264 of the Financial Services and Markets Act 2000. BlackRock Investment Management (UK) Limited is the UK distributor of BGF. Most of the protections provided by the UK regulatory system, and the compensation under the Financial Services Compensation Scheme, will not be available. A limited range of BGF sub-funds have a reporting fund status A sterling share class that seeks to comply with UK Reporting Fund Status requirements. Subscriptions in BGF are valid only if made on the basis of the current Prospectus, the most recent financial reports and the Key Investor Information Document, which are available on our website. Prospectuses, Key Investor Information Documents and application forms may not be available to investors in certain jurisdictions where the Fund in question has not been authorised. Any research in this document has been procured and may have been acted on by BlackRock Investment Management (UK) Limited for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy. Certain funds mentioned here are registered for distribution in Spain. Additionally, certain funds are registered for distribution in Portugal. In Spain, BlackRock Global Funds (BGF) is registered with the number 140 in the Comisión Nacional del Mercado de Valores de España (CNMV) and the Prospectus for each registered fund has been registered with the CNMV. In Portugal, certain share classes of certain BGF funds are registered with the Comissão do Mercado de Valores Mobiliários (CMVM) and the Prospectus for each registered fund has been registered with the CMVM. This document contains BLACKROCK INC. products or services that might be offered directly or indirectly within the Andorran jurisdiction, and it should not be regarded as solicitation of business in any jurisdiction including the Principality of Andorra. Unless otherwise specified, all information contained in this document is current as at the date on the front page of this presentation. The funds mentioned in this document may not be registered with your local regulatory body for offering and distributing in your own jurisdiction. It is your responsibility to be aware of, or to obtain all relevant regulatory approvals, licenses, verifications and/or registration under, and to observe all applicable laws and regulations of any relevant jurisdiction in connection with the offering and distributing of the funds. An investment in the funds mentioned in the document may not be suitable for everyone. If you have any doubts, you should seek independent legal advice. No part of this document may be reproduced or distributed in any manner without the prior written permission of BlackRock. 2017 BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, ishares, BUILD ON BLACKROCK, SO WHAT DO I DO WITH MY MONEY and the stylized i logo are registered and unregistered trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners. THIS MATERIAL IS FOR DISTRIBUTION TO PROFESSIONAL CLIENTS / INSTITUTIONAL AND PROFESSIONAL INVESTORS AND SHOULD NOT BE RELIED UPON BY ANY OTHER PERSONS. 24