JUNE 2019 BlackRock Multi Opportunity Absolute Return Fund

The BlackRock Multi Opportunity Absolute Return Fund (Fund) Annual Fund Review provides an overview of market and fund performance over the twelve months to 30 June 2019, along with some key fund information as at 30 June 2019.

early 2018, Australia’s economic growth slowed to an annual Market Commentary – Year in Review rate of just 1.4% for the year to June 2019 – the slowest rate The 12 months from 1 July 2018 to 30 June 2019 exhibited since the Global Financial Crisis in 2009. The RBA reduced distinct periods of market performance and proved to be the cash rate by 0.25% to 1.25% in June 2019 in response to a challenging period for with many twists and the broader economic slowdown and several indicators of turns. Global share markets moved higher early in the spare capacity in the Australian economy. Australia’s financial year before declining sharply in the fourth quarter unemployment rate remained low, but this has not translated of 2018 to then rebound in the first half of 2019. The global into any meaningful wage growth. Declining property prices economy continued to grow but showed signs of slowing and weak construction data proved to be major headwinds, down, especially towards the end of 2018 when recession with signs of flow-over effects onto the wider economy. fears took hold of financial markets. Corporate earnings However, investors responded positively to the release of the growth also declined meaningfully but remained slightly Royal Commission report, which appeared less severe than positive for the year. Geopolitical tension and many anticipated. Investors also reacted favourably to the developments in US-China trade disputes whipsawed unexpected re-election of the Liberal National coalition financial markets and shifting central bank policy acted as government in May 2019. another key market driver.

Global central bank policy pivoted from a tightening Performance Commentary stance to promoting easier financial conditions. The rapid Over the 12 months to 30 June 2019 the BlackRock Multi change in policy direction was most evident in the US Opportunity Absolute Return Fund declined 0.17% after fees, where the Federal Reserve (Fed) changed course several while its cash benchmark returned +1.48%. Although the times over the period. The US Fed initially continued its Fund’s overall return over the period was relatively flat, it was path towards ‘normalisation’ and raised the US cash rate a story of two opposite halves. The Fund recorded negative to a range of 2.25% to 2.50% in December 2018 (as performance in the second half of 2018 and found the widely expected), before shifting to a more neutral position environment challenging. However, the Fund bounced back and then signalling potential interest rate cuts. US strongly in the first half of 2019 and recovered most of its policymakers were not alone in pivoting to a more earlier losses. dovish/easier stance. The Reserve Bank of Australia (RBA) also moved from a tightening bias towards a more H2 2018: The sharp market reversals and rotations seen over neutral/supportive monetary policy stance. China the second half of 2018 caused significant challenges for signalled a move to easier credit and fiscal conditions. The many asset managers. While the Fund is designed to European Central Bank (ECB) lowered its 2019 growth withstand these episodes and has historically acted as a forecast early in the year and announced it would keep valuable diversifier during periods of market stress, the Fund interest rates on hold, saying it would provide a new wave underperformed during this period. Aggressive deleveraging of cheap funding for European banks to spur lending. In by hedge funds was a key source of the underperformance, addition, several European governments signalled an as market prices were pushed away from fundamentals. increase in fiscal stimulus to boost their economies. As a Systematic active equity strategies and Fixed Income Global result of the synchronised efforts by various governments Alpha were affected most, while our Event Driven strategy and central banks around the globe, the widespread (Merger Arbitrage) held up well and offset some of the losses. concerns of an imminent recession that spooked markets towards the end of 2018 eased and risk appetite returned During deleveraging episodes, some hedge funds are forced in the first half of 2019. to buy back their short positions and sell their long positions to reduce risk and/or return capital to their investors. In Australia, the economy weakened as the year Fundamentally, good stocks are sold and poorer stocks are progressed. After growing at an annual rate of over 3% in .com MKTGH1219A-1043658-1/4MKTG1217A-325619-966446 ANNUAL FUND REVIEW BlackRock Multi Opportunity Absolute Return Fund

bought back pushing market prices away from Other – BlackRock Fission Fund 5.60% fundamentals, which impacts other managers/strategies Other – BlackRock Style Advantage Fund (Aust) 5.25% with similar or overlapping stock views. Global small caps Other – PanAsia Opportunities Offshore Fund Ltd 5.33% (where liquidity is limited) and Sentiment insights (i.e. Other – Emerging Markets Alpha Fund Ltd 7.36% indicators of ‘smart money’ and ‘informed traders’) were Other – Global Merger Partners 3.18% adversely affected during this period. Pleasingly, Other – Cash 3.82% fundamentals began to reassert themselves again in December 2018 and most insight groups started to recover – leading to a positive performance over the For further information on the assets held by the Fund, subsequent months. Wholesale Fund and the underlying pooled investment H1 2019: Following the deleveraging episodes towards vehicles into which the Wholesale Fund invests (the Strategy the end of 2018, the Multi Opportunity Absolute Return Funds) please refer to the Fund’s PDS. Fund delivered strong outperformance as fundamentals reasserted themselves. The sources of active returns Fund Liquidity & Liability Maturity Profile were widespread, with almost all sub-strategies adding value in the first half of 2019. Systematic active equity The graph below shows the estimated time required to sell the strategies and Fixed Income Global Alpha recovered assets of a fund, overlaid with the percentage of fund assets strongly, and our two fundamental equity strategies (Event required to meet fund liabilities maturing within the same Driven and UK Long/Short) also delivered meaningful given time period. positive returns. Security selection in Global Large Caps, Small Caps and Emerging Markets were key standouts BlackRock Multi Opportunity Absolute Return Fund driven by strongly performing Sentiment insights, Momentum and Cross-Border Thematics. Within fixed income, the main positive contributors were Rates Relative Value, Mortgages and Macro Rates strategies.

Investment performance to 30 June 2019 (% net of fees)

1 MTH 3 MTHS YTD 1 YR 3 YRS 5 YRS SINCE INCEP

BlackRock Multi 1.49 2.92 -0.17 -0.17 3.38 2.40 2.63 Opportunity Absolute Return Fund

RBA Cash Rate Target 0.10 0.35 1.48 1.48 1.50 1.76 1.88

1.88 0.63 0.75 Outperformance 1.38 2.57 -1.65 -1.65 BlackRock Multi Opportunity Fund

Fund inception: 31/07/2013 Past performance is not a reliable indicator of future performance. Performance for periods greater than one year is annualised. Net performance is calculated on exit-to-exit price basis, e.g. net of ongoing fees, performance fees (if applicable) and expenses and assumes the reinvestment of distributions.

ASIC Benchmark – Annual Reporting

Provided below is key fund information for the BlackRock Multi Opportunity Absolute Return Fund (Fund) as at 30 June 2019. For further information on the Fund, please refer to the Fund’s Product Disclosure

Statement (PDS), which is available from our website or upon request by calling or emailing our Client Services Please note the liquidity of the Fund and Wholesale Fund Centre. is dependent on a number of factors including the liquidity offering terms of the Wholesale Fund and Asset Allocation Strategy Funds (i.e. the terms and conditions under which investors invested in the Wholesale Fund or a BlackRock Multi Opportunity Absolute Return Fund Strategy Fund can redeem from these funds) as well as (Fund) the liquidity of the assets to which the Fund, Wholesale ASSET TYPE ASSET ALLOCATION Fund and Strategy Funds are exposed.

Other – BlackRock Multi Opportunity Fund 100%

BlackRock Multi Opportunity Fund (Wholesale Fund)

Other – BlackRock Fixed Income GlobalAlpha Fund 42.72% Other – BlackRock Eos Limited 7.20% Other – The 32 Capital Fund Ltd 15.49% Other – BlackRock Australian Equity Market Neutral Fund 4.05%

blackrock.com MKTGH1219A-1043658-2/4MKTG1217A-325619-966446 ANNUAL FUND REVIEW BlackRock Multi Opportunity Absolute Return Fund

Annualised Investment Returns Key Service Providers

Provided below are annualised fund returns to 30 June The Fund, Wholesale Fund and Strategy Funds have each 2019. Information is provided on a 5 year annualised basis appointed a number of key service providers who are except where a fund is less than 5 years old in which case involved in their ongoing operation and administration. annualised returns since fund inception is provided. There has been no change to the key services providers during NET INVESTMENT RETURNS % the reporting period.

BlackRock Multi Opportunity Absolute Return Fund 2.40 Derivative Counterparties GROSS INVESTMENT RETURNS %* Other – Multi Opportunity Fund 4.06 All derivative counterparties are formally approved by the Other – BlackRock Fixed Income GlobalAlpha Fund 4.53 BlackRock Group’s RQA Counterparty and Concentration Other – The 32 Capital Fund Ltd 4.16 Risk Team, prior to a fund engaging in any transaction with Other – BlackRock Australian Equity Market Neutral Fund 2.77 a particular counterparty. No transaction may be entered Other – BlackRock Fission Fund 15.94 into with a counterparty that has not previously been Other – BlackRock Style Advantage Fund (Aust)1 1.67 approved by the RQA Counterparty and Concentration Other – PanAsia Opportunities Offshore Fund Ltd -0.56 Risk Team. Other – UK Emerging Companies 17.55 Other – Global Merger Partners2 8.39 Other – Tactical Opportunities Fund 3.41 Due to the proprietary and confidential nature of derivative counterparty relationships, investors wishing to be 1 Fund inception November 2016. Annualised investment returns since inception provided. 2 Fund inception September 2016. Annualised investment returns since inception provided. provided with the list of current derivative counterparties * Where an investment is made through a pooled investment vehicle managed by BlackRock or another company in the BlackRock Group, the management fees of the underlying pooled investment vehicle are for a fund can submit a request to BlackRock by calling or either rebated or not charged. Accordingly, Gross Investment Returns are shown as the above pooled emailing our Client Services Centre. investment vehicle, into which the Fund invests, is managed by another company in the BlackRock Group. Past performance is not a reliable indicator of future performance. Gross returns are calculated before fees and taxes and assume reinvestment of distributions. Net performance is calculated on exit-to-exit price basis, For further information on BlackRock’s counterparty e.g. net of ongoing fees, performance (if applicable) fees and expenses. oversight please refer to the Fund’s PDS.

Leverage Ratio

GROSS LEVERAGE

BlackRock Multi Opportunity Absolute Return Fund 10.50 BlackRock Multi Opportunity Fund 10.50

The Fund and Wholesale Fund do not enter into borrowing arrangements for investment purposes, other than temporary overdrafts which may be used as a means of managing certain cash flows. The Fund and Wholesale Fund do, however, gain leveraged exposure through their exposure to some of the Strategy Funds, which may utilize leverage in their investment programs. The above gross leverage figures represent the embedded leverage obtained via exposure to the Strategy Funds.

For further information on the use of leverage, please refer to the Fund’s PDS.

blackrock.com MKTGH1219A-1043658-3/4MKTG1217A-325619-966446 ANNUAL FUND REVIEW BlackRock Multi Opportunity Absolute Return Fund

About BlackRock

BlackRock’s purpose is to help more and more people experience financial well-being. As a fiduciary to investors and a leading provider of financial technology, our clients turn to us for the solutions they need when planning for their most important goals. As of June 30, 2019, the firm managed approximately US$6.84 trillion in assets on behalf of investors worldwide.

For additional information on BlackRock, please visit www.blackrock.com

Want to know more?

www.blackrock.com.au [email protected] 1300 366 100

Issued by BlackRock (Australia) Limited ABN 13 006 165 975, AFSL 230 523 (BIMAL). This material provides general information only and does not take into account your individual objectives, financial situation, needs or circumstances. Before making any investment decision, you should therefore assess whether the material is appropriate for you and obtain financial advice tailored to you having regard to your individual objectives, financial situation, needs and circumstances. This material is not a securities recommendation or an offer or solicitation with respect to the purchase or sale of any securities in any jurisdiction. BIMAL is the responsible entity and issuer of units in the Australian domiciled managed investment schemes referred to in this material. Funds detailed in this material may not be domiciled in or registered for public distribution in Australia. The laws and regulations applicable to any such fund may differ from those in Australia and therefore may not necessarily provide the same level of protection to investors as schemes registered in Australia and subject to Australian regulations and conditions. Some funds detailed in this material may only be available to wholesale clients, as defined by the Corporations Act 2001 (Cth). Any potential should consider the latest product disclosure statement, prospectus or other offer document (Offer Documents) before deciding whether to acquire, or continue to hold, an investment in any BlackRock fund. Offer Documents can be obtained by contacting the BIMAL Client Services Centre on 1300 366 100. In some instances Offer Documents are also available on the BIMAL website at www.blackrock.com.au. BIMAL, its officers, employees and agents believe that the information in this material and the sources on which the information is based (which may be sourced from third parties) are correct as at the date of publication. While every care has been taken in the preparation of this material, no warranty of accuracy or reliability is given and no responsibility for this information is accepted by BIMAL, its officers, employees or agents. Except where contrary to law, BIMAL excludes all liability for this information. Any investment is subject to investment risk, including delays on the payment of withdrawal proceeds and the loss of income or the principal invested. While any forecasts, estimates and opinions in this material are made on a reasonable basis, actual future results and operations may differ materially from the forecasts, estimates and opinions set out in this material. No guarantee as to the repayment of capital or the performance of any product or rate of return referred to in this material is made by BIMAL or any entity in the BlackRock group of companies. No part of this material may be reproduced or distributed in any manner without the prior written permission of BIMAL. © 2019 BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, iSHARES and the stylised 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.

MKTGH1219A-1043658-4/4MKTG1217A-325619-966446