FOR PROFESSIONAL CLIENTS AND QUALIFIED INVESTORS ONLY FIXED MATURITY PORTFOLIO BSF USD High Yield Fixed Maturity Bond Fund
A diversified fixed-term US high yield bond strategy tailored to provide attractive income and risk mitigation over a five-year investment period BSF USD High Yield Fixed Maturity Bond Fund (BSF HYFM) Generating returns in today s fixed income markets remains a challenge for investors. We believe gradual monetary policy normalization and sustained global economic expansion point to moderately higher global bond yields over time, but they remain low on an absolute basis, meaning investors will wish to continue to look for alternative sources of return. The BSF HYFM Fund is a fixed term high yield bond fund that represents a potential solution for today s environment. The strategy has a five-year expected maturity and seeks to maximize income by investing in the US high yield market. It aims to solve the current low yield landscape by delivering recurrent income while providing improved downside protection versus the broad US high yield market. 2 BSF USD HIGH YIELD FIXED MATURITY BOND FUND
Key points Attractive income-oriented investment strategy Aims to deliver an efficient investment solution offering attractive yields, active credit monitoring, and lower volatility by investing in a diversified composition of shorter dated high yield assets with a buy and maintain approach. Risk-adjusted portfolio discipline Leverage the depth and expertise of the fundamental high yield platform to generate ideas that maximize yield whilst focusing on good quality issuers with stable fundamental profiles. Predetermined investment period Designed to be a term-dated buy and maintain solution that will act as a strategic allocation to high yield while mirroring the characteristics of an individual bond holding. This unique structure provides investors with transparency, predictable cash flow streams and bond fund like diversification. Professional management Take advantage of a globally integrated investment platform with a best-in-class fundamental credit discipline, and differentiated risk management technology. BLACKROCK 3
The fixed-term framework The proposed high yield fixed maturity investment strategy will have three main phases as it pursues a buy and maintain approach: 1 Initial offering period (IOP) A period of up to 6 months AUM gathering period, investor subscriptions Investor subscriptions to remain in cash for this period 2 Investment period 5 years from end of IOP Portfolio ramp, and initial bond purchases executed AUM stabilization, no new capital allowed Maintenance of bond positions; investors receive regular coupon payments (i.e. interest) on underlying bond exposures 3 Post-investment period A period of up to 6 months AUM gradually decreases Gradual disposition of portfolio assets Return of principal to investors reflecting any market impact 4 BSF USD HIGH YIELD FIXED MATURITY BOND FUND
A compelling solution for investors looking to generate attractive income and returns with lower volatility in a global market still fraught with low absolute bond yields Investors will only be able to purchase shares of the fund during the initial offering period. Investors should anticipate holding their investment for the full life of the fund (expected maturity in 2023) to ensure income and return outcomes are fully harvested. The strategy will be diversified across sectors and the credit ratings spectrum, but will largely be compromised of BB and single B rated securities. In line with the five-year expected term of the fund overall, a majority of the portfolio s underlying assets will have final maturity dates of five years or less at any given time. However, the strategy has the ability to own high yield credits with final maturities greater than five years as well. A majority of the fund s assets will be focused on the US high yield market across issuers, however the strategy does have the ability to own non-us issuers in fulfilling its target objectives. Utilizing the team s deep fundamental credit research capabilities and remaining benchmark agnostic will be critical in delivering portfolio results. This approach enables us to size the opportunities based on our convictions and not being confined by the composition or weightings of an index. BLACKROCK 5
BSF USD High Yield Fixed Maturity Bond Fund Model portfolio characteristics, investment team & approach and fund terms Strategy Attributes (target ranges) Currency Average credit rating USD B1/B+ # of Holdings 75-125 holdings Estimated YTW (gross) 3.5%-5.5% Estimated YTM (gross) 4.0%-6.0% Duration Average Maturity Expected 3-4 years Expected Less than 5 years CCC 9.6 % BB 41.6 % Credit ratings breakdown (%NAV) B 48.8 % Source: BlackRock, as of 1/5/18. *Subsidized yields. Unsubsidized I/A yields are 4.82%/4.27%. Index represents BBgBarc US HY 2% Issuer Capped Index. Credit Quality Ratings are based on the Barclays methodology - whereas the median of the three rating agencies (Moody's, S&P, Fitch) is used to determine credit rating, while the lower of split ratings is used when an instrument is rated by two agencies. NR refers to Not Rated & may include equities. Please note that the proposed target ranges for guidance only and the manager cannot guarantee that the intended targets will be achieved. In addition, over time the target ranges and allocations are subject to change at the Manager s discretion. 6 BSF USD HIGH YIELD FIXED MATURITY BOND FUND
Sector breakdown (%NAV) 30% 25 25.7 % 20 17.9 % 15 13.7 % 10.4 % 8.9 % 10 5 7.6 % 6.3 % 5.0 % 2.8 % 1.5 % 0 Communications Consumer cyc. Energy Basic industry Consumer non-cyc. Capital goods Technology Financials Electric Industrial other Risk Country breakdown (%NAV) 90% 80 85.1 % 70 60 50 40 30 20 10 0 4.8 % 2.3 % 2.0 % 1.5 % 1.3 % 0.8 % 0.8 % 0.5 % United States Canada France Luxembourg Germany Netherlands Finland United Kingdom Ireland Source: BlackRock, as of 1/5/18. Exposures reflect % Notional NAV where applicable **Includes HY bonds, ETFs, CDX, CDS and TRS *** Includes CLO, ABS & CMBS, as applicable ****Excludes TRS, cash *****Normalized and excludes loans, CDX, CDS, cash BLACKROCK 7
A time-tested investment approach BlackRock s high yield approach represents a collaboration between portfolio managers and a deep roster of high yield and bank loans (leveraged finance) credit research professionals. The investment process is sustained by two pillars: Analysis The collective team emphasizes fundamental analysis and employs a disciplined review process that focuses on a thorough analysis of the underlying issuer s creditworthiness and valuations. Their credit review process assesses a company with respect to four key fundamental factors: industry attractiveness, competitive position, management quality and financial position. Flexibility The strategy s flexibility is maximized by the absence of a benchmark, allowing the team to focus on exploiting the best credit ideas across the US high yield market. Furthermore, if the team is seeing select opportunities in other non-us jurisdictions, it has the ability to allocate to those opportunities tactically without concern around incremental tracking error. 8 BSF USD HIGH YIELD FIXED MATURITY BOND FUND
A globally-integrated team with significant experience and expertise in credit The leveraged finance group is comprised of over 70 investment professionals across portfolio management and credit research; the team benefits from a localized capability with offices in New York, London, and Singapore. The investment platform is part of BlackRock s $160bn Global Credit franchise, and in its vertical oversees more than $60bn in AUM including $43.9bn in dedicated high yield portfolios and $17.5bn in dedicated loan portfolios and CLOs. The high yield team has experience managing buy and hold mandates, and as of September 30th 2017, had $3.5bn of AUM in portfolios pursuing this type of investment strategy. The BSF HYFM Fund will also pursue this investment approach. Broad US high yield performance track record dates back to 1998 and over time has generated outperformance with less risk than its benchmark. Investment process is supported by innovative technology and BlackRock s best-in-class enterprise system, Aladdin; proprietary applications like Aladdin Research allow analysts to share, store and access information and viewpoints across all of BlackRock s fixed income and equity portfolio management teams. BLACKROCK 9
Life of a bond - Buy & hold investment strategy A buy & hold fund has similar characteristics to purchasing and holding a bond until maturity, while adding potential benefits of a traditional fund investment. Cash flow of a bond Bond price fluctuation 3 2 1 Time of investment Time of maturity Initial investment Quarterly coupon Potential excess return This is an illustrative example only and is not meant to predict performance of any fund. Only certain share classes will distribute income. All others will be accumulating shares and not distribute income. 1 2 Investors receive income At maturity the initial investment in the bond (par value) is paid back to the investors, as long as the bond has not defaulted or matured early 3 While the price of a bond may experience volatility over the holding period, the stream of income and final payment of the par value at maturity offers a cushion against this volatility 10 BSF USD HIGH YIELD FIXED MATURITY BOND FUND
BSF USD High Yield Fixed Maturity Bond Fund terms Terms Fund Structure Domicile Structure Initial Offering Period (IOP) Dealing frequency Luxembourg Open-end UCITS Mutual Fund Fund open to daily subscriptions for a period of up to 6 months Daily, but for redemptions only following IOP Distributions Frequency Quarterly Investment universe Core investment Opportunistic investment Target investment maturity Geographic focus Number of investments US Dollar denominated high yield corporate bonds with maturities less than or equal to 5 years Non-US high yield corporate bonds; typically will account for less than 20% of portfolio assets Liquid high yield positions including high yield CDX, TRS, and HY ETFs for liquidity and efficient portfolio management purposes (EPM) Typically < or = 5 years, but can allocate to portfolio assets in credits with maturities greater than 5 years but no greater than 7 years on a final maturity basis Core focus (80% or greater): US high yield Secondary focus (typically less than 20%): Europe, Asia high yield Actual number of investments will depend on series size Targeting less than 100 issuers, and 75-125 holdings Fee structure Available share classes included* Management Fee Total Expense Ratio (TER) Minimum Investment** ISIN CUSIP Class A2 1.00% 1.25% US$ 5,000 LU1722863997 L104AE279 Class A5 1.00% 1.25% US$ 5,000 LU1722864029 L104AE303 Class D2 0.50% 0.75% US$ 100,000 LU1722864615 L104AE311 Class D5 0.50% 0.75% US$ 100,000 LU1722864706 L104AE329 *additional share classes available **USD or currency equivalent Proposed terms are indicative only and final terms will be subject to further discussion and mutual agreement. This presentation is provided for discussion purposes only and is not an offer to sell or a solicitation for an offer to purchase securities. If any offer or solicitation is made in the future it may be on terms materially different from those provided herein. BLACKROCK 11
Want to know more? blackrock.com/cl blackrock.com/co blackrock.com/latamiberia chile@blackrock.com colombia@blackrock.com offshore@blackrock.com Funds specific risks: Changes to interest rates, credit risk and/or issuer defaults will have a significant impact on the performance of fixed income securities. Non-investment grade fixed income securities can be more sensitive to changes in these risks than higher rated fixed income securities. Potential or actual credit rating downgrades may increase the level of perceived risk. Derivatives are highly sensitive to changes in the value of the asset on which they are based and can increase the size of losses and gains, resulting in greater fluctuations in the value of the Fund. The impact to the Fund can be greater where derivatives are used in an extensive or complex way. Counterparty Risk: The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss. Credit Risk: The issuer of a financial asset held within the Fund may not pay income or repay capital to the Fund when due. Liquidity Risk: Lower liquidity means there are insufficient buyers or sellers to allow the Fund to sell or buy investments readily Disclaimer: In Latin America for institutional investors and financial intermediaries only. This material is for educational purposes only and does not constitute an offer or solicitation to sell or a solicitation of an offer to buy any shares of any fund or security and it is your responsibility to inform yourself of, and to observe, all applicable laws and regulations of your relevant jurisdiction. If any funds are mentioned or inferred in this material, such funds have not been registered with the securities regulators of Argentina, Brazil, Colombia, Mexico, Panama, Peru, Uruguay or any other securities regulator in any Latin American country and thus, may not be publicly offered in any such countries, except for Chile where certain funds have been registered with the Superintendencia de Valores y Seguros for public offering and in Mexico where certain funds have been listed on the Sistema Internacional de Cotizaciones (SIC) exchange of the Bolsa Mexicana de Valores. In Chile the sale of each fund not registered with the SVS began on the date as indicated for such fund as described herein and the sale of such securities is subject to General Rule No. 336 issued by the SVS. The subject matter of this sale may include securities not registered with the SVS; therefore, such securities are not subject to the supervision of the SVS. Since the securities are not registered in Chile, there is no obligation of the issuer to make publicly available information about the securities in Chile. The securities shall not be subject to public offering in Chile unless registered with the relevant registry of the SVS. In Colombia the offer of each Fund is addressed to less than one hundred specifically identified investors, and such Fund may not be promoted or marketed in Colombia or to Colombian residents unless such promotion and marketing is made in compliance with Decree 2555 of 2010 and other applicable rules and regulations related to the promotion of foreign financial and/or securities related products or services in Colombia. In Panama these securities have not been registered before nor are under the supervision of the Securities Superintendence of the Republic of Panama, nor did the offer, sale or their trading procedures. The registration exemption has made according to numeral 3 of Article 129 of the Consolidated Text containing of the Decree-Law No. 1 of July 8, 1999 (institutional investors). Consequently, the tax treatment set forth in Articles 334 to 336 of the Unified Text containing Decree-Law No. 1 of July 8, 1999, does not apply to them. In Peru, this material is for the sole use of Institutional Investors, as such term is defined by the Superintendencia de Banca, Seguros y AFP. The securities regulators of any country within Latin America have not confirmed the accuracy of any information contained herein. No information discussed herein can be provided to the general public in Latin America. The contents of this material are strictly confidential and must not be passed to any third party. This material has been produced by BlackRock, Inc. for use by Third Party Distributors where they have the appropriate authorization to market the products and use this material. BlackRock, Inc. takes no responsibility for this marketing activity. This material is solely for educational purposes, and does not constitute investment advice, or an offer or solicitation to sell or a solicitation of an offer to buy any shares of any fund (nor shall any such shares be offered or sold to any person) in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of that jurisdiction. This material is restricted to distribution to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act Of 1933, as amended (the "Securities Act"). Any securities described herein may not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. In particular, any UCITS funds mentioned herein are not available to investors in the U.S. and this material cannot be construed as an offer of any UCITS fund to any investor in the U.S. BlackRock Strategic Funds (BSF) is an open-ended investment company established in Luxembourg which is available for sale in certain jurisdictions only. BSF is not available for sale in the U.S. or to U.S. persons. Product information concerning BSF should not be published in the U.S. The Fund is intended to be in operation for a fixed term and will feature three distinct periods: (i) a period of up to 6 months following the launch of the Fund (the Subscription Period ); (ii) a period of 5 years following the Subscription Period during which the Fund will pursue its investment objective and policy (the Investment Period ); and (iii) a period of up to 6 months following the Investment Period (the Post Investment Period ). The Fund is intended to be in operation until the end of the Post Investment Period, or such other time as determined at the Directors discretion (the Maturity Date ) at which time the Fund will be liquidated and shares in the Fund will be compulsorily redeemed at the prevailing Net Asset Value per Share. Further details on each of the three periods are set out in the Prospectus. During the Subscription Period, the Fund may be fully invested in more liquid instruments such as cash, deposits, MMIs as well as invest in other funds, FI securities and FI-related securities (including FDIs) denominated in US dollars and issued by companies domiciled or the main business of which is inside or outside of the US. These may include investments with a relatively low credit rating or which are unrated. The Fund will gradually look to build up its portfolio in accordance with its investment policy. During the Post Investment Period, the Fund will invest progressively in more liquid instruments and may be fully invested in cash, deposits and MMIs in order to meet its investment objective and compulsorily redeem shareholders on the Maturity Date. Not all of the listed share classes are available in every jurisdiction. Investment in some share classes may be also limited to certain types of investors as set out in each fund s Prospectus. Please contact your financial advisor for more information. BlackRock Investment Management (UK) Limited is the distributor of BSF. 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 BSF sub-funds have a reporting fund status A sterling share class that seeks to comply with UK Reporting Fund Status requirements. Subscriptions in BSF 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 BlackRock s website. 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. 2017 BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, ishares, SO WHAT DO I DO WITH MY MONEY, INVESTING FOR A NEW WORLD, and BUILT FOR THESE TIMES 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. 41437-0118