Interim report BlackRock Investment Funds • BlackRock Dynamic Return Strategy Fund • BlackRock Global Long/Short Equity Fund • BlackRock Sterling Strategic Bond Fund For the six months ended 31 August 2017 Contents General Information Manager & Registrar General Information 2 BlackRock Fund Managers Limited About the Trust 3 12 Throgmorton Avenue, London EC2N 2DL Telephone: 020 7743 3000 Dealing and Investor Services: 0800 44 55 22 Fund Managers 3 Member of The Investment Association and authorised and regulated by the Financial Conduct Authority. Changes to the Trust 3 Directors of the Manager Significant Events 4 G D Bamping* C L Carter (appointed 7 September 2017) R A Damm N C D Hall* (resigned 31 May 2017) R A R Hayes A M Lawrence E E Tracey M T Zemek* Notes to Financial Statements 5 * Non-executive Director. BlackRock Dynamic Return Strategy Fund 6-14 Trustee BNY Mellon Trust & Depositary (UK) Limited BlackRock Global Long/Short Equity Fund 15-53 160 Queen Victoria Street, London EC4V 4LA BlackRock Sterling Strategic Bond Fund 54-68 Authorised and regulated by the Financial Conduct Authority. Supplementary Information 69-70 Investment Manager BlackRock Investment Management (UK) Limited 12 Throgmorton Avenue, London EC2N 2DL Authorised and regulated by the Financial Conduct Authority. Securities Lending Agent BlackRock Advisors (UK) Limited 12 Throgmorton Avenue, London EC2N 2DL Authorised and regulated by the Financial Conduct Authority. Investment Adviser BlackRock Financial Management, Inc 55 East 52nd Street, New York, NY 10055, United States Regulated by the Securities and Exchange Commission. Auditor Ernst & Young LLP 1 More London Place, London SE1 2AF Custodian The Bank of New York Mellon (International) Limited 1 Canada Square, London E14 5AL Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. BlackRock’s proxy voting agent is ISS (Institutional Shareholder Services). This Report relates to the packaged products of and is issued by: BlackRock Fund Managers Limited 12 Throgmorton Avenue, London EC2N 2DL Telephone: 020 7743 3000 Dealing and Investor Services: 0800 44 55 22 blackrock.co.uk For your protection, telephone calls are usually recorded. 1 BlackRock Investment Funds BlackRock Investment Funds 2 About the Trust Significant Events BlackRock Investment Funds (the “Trust”) is organised as an umbrella unit trust scheme comprising separate Potential Implication of Brexit funds with segregated liability (each referred to as a “Fund” and collectively the “Funds”). In a referendum held on 23 June 2016, the electorate of the United Kingdom (“UK”) resolved to leave the European Union (“EU”). The result has led to political instability and economic uncertainty, volatility in the The Trust is an authorised unit trust scheme and each Fund qualifies as a UCITS scheme under the Financial financial markets of the UK and more broadly across EU and a decline in the value of Sterling. Conduct Authority’s Collective Investment Schemes Sourcebook (the “COLL Sourcebook”). The longer term process to implement the political, economic and legal framework between the UK and the Cross sub-fund holdings within the Trust: EU is likely to lead to continuing uncertainty and periods of exacerbated volatility in both the UK and in wider As at 31 August 2017 and 28 February 2017 there were no cross sub-fund holdings within the Trust. European markets. In particular, the decision made in the British referendum may lead to a call for similar referendums in other European jurisdictions which may also cause increased economic volatility in wider European and global markets. The potential currency volatility resulting from this uncertainty may mean that Fund Managers the returns of a Fund and its investments are adversely affected by market movements. This may also make it more difficult, or more expensive, for a Fund to execute prudent currency hedging policies. As at 31 August 2017, the Fund Managers are Adam Ryan, Andy Warwick, Kevin Franklin, Gearoid Neligan, This mid to long term uncertainty may have an adverse effect on the economy generally and on the ability of a Simon Blundell and Ben Edwards. Fund and its investments to execute their respective strategies and to receive attractive returns, and may also result in increased costs to a Fund. Changes to the Trust Changes in the Directors of the Manager On 18 May 2017, N C D Hall resigned as a Director effective 31 May 2017. C L Carter was appointed as a Director effective 7 September 2017. Fund Closure The BlackRock Dynamic Return Strategy Fund will commence winding up in the third quarter of 2017. The decision to close the Fund has been taken in the best interest of unitholders and is a result of recent performance being below expectations. This has prompted some unitholders to redeem their holdings and has made it unlikely that further investments will be made into the Fund. Taking the above into consideration and in accordance with the rules of the Financial Conduct Authority, we have decided to wind up the Fund on the basis that it is no longer commercially viable. 3 BlackRock Investment Funds BlackRock Investment Funds 4 Notes to Financial Statements BlackRock Dynamic Return Strategy Fund for the six months ended 31 August 2017 Accounting Policies About the Fund The financial statements have been prepared in accordance with the Statement of Recommended Practice for Authorised Funds (the “SORP”) issued by the Investment Management Association (now known as the The Fund was a sub-fund of BlackRock Investment Funds, a UCITS scheme under the COLL Sourcebook. The Investment Association) in May 2014. Fund was authorised by the FCA on 2 March 2015 and was established on 30 March 2015. The accounting policies applied are consistent with those of the financial statements for the year ended Fund Closure 28 February 2017 and are described in those annual financial statements. As set out in the letter to unitholders dated 17 May 2017, the Fund commenced winding up on 21 August 2017. The decision to close the Fund has been taken in the best interest of unitholders and is a result of recent performance being below expectations. This has prompted some unitholders to redeem their holdings and has made it unlikely that further investments will be made into the Fund. Taking the above into consideration and in accordance with the rules of the Financial Conduct Authority, we have decided to wind up the Fund on the basis that it is no longer commercially viable. As at 21 August 2017, all units in the Fund were cancelled. As a result, these financial statements are not prepared on a going concern basis for the period ended 31 August 2017, but on a break-up basis. The next set of financial statements for the year to 28 February 2018 will be the final set of accounts produced for this Fund. Investment Objective & Policy The aim of the Fund was to achieve a positive absolute return on a rolling three year basis regardless of market conditions. The level of return which the Fund aimed to generate over the medium to long term was equivalent to the return from cash (measured by 3 month GBP LIBOR) plus 6% a year, gross of fees. In addition, the Fund also sought to manage risk through active asset allocation with a view to having a lower volatility of return than would result from investing in a portfolio of global equity securities alone. The Fund was managed with the aim of delivering absolute (more than zero) returns on a three year rolling basis in any market conditions. However, an absolute return was not guaranteed over three year rolling periods or any period and the Fund could have experienced periods of negative return. The Fund’s capital was at risk. The Fund had a flexible approach to asset allocation and sought to diversify its exposure across a variety of asset classes globally including equity securities, fixed income securities, money–market instruments, deposits, cash and near cash, and derivatives. The Fund could have held indirect exposure to alternative asset classes such as commodities or property through eligible index derivatives, eligible collective investment schemes or structured securities. In order to gain this exposure the Fund utilised a variety of investment strategies and eligible instruments. For example, it could have invested in any or all of the following: transferable securities (equity securities and fixed income securities), money–market instruments, deposits, cash and near cash and units of collective investment schemes. The Fund could have invested in a full range of fixed income securities and money market instruments which may have included non-investment grade securities. To achieve its investment objective, the Fund could have taken full advantage of the ability to use derivatives. A significant proportion of the Fund’s portfolio could have consisted of derivatives on a daily basis. The Fund’s exposure could have varied over time as determined by the Investment Manager at its sole discretion. 5 BlackRock Investment Funds BlackRock Investment Funds 6 BlackRock Dynamic Return Strategy Fund BlackRock Dynamic Return Strategy Fund Performance Table Investment Report Period of Report Fund Closure from 1.3.2017 On 21 August 2017, in accordance with the rules of the UK Financial Conduct Authority (the FCA), we decided to 31.8.2017^ to wind up the Fund on the basis that it is no longer commercially viable, and we believe this decision was TOTAL RETURN (with net income reinvested) in the best interests of shareholders. The Fund was closed because of its relatively small size and the unlikelihood of further investments into the Fund. Class D Accumulation Units* BlackRock Dynamic Return Strategy Fund +3.1% Summary of Performance over the Period 3 month Sterling LIBOR +6%† +0.2% The Fund rose by 3.1%* over the reporting period from 1 March 2017 to 21 August 2017, outperforming its All Fund figures quoted are based on bid-to-bid prices (the price at which units are sold) and are calculated net of fees.