Total Return Fund INST: MAHQX • A: MDHQX • C: MFHQX Morningstar Overall Rating™ (Inst) Performance: The fund was flat for the month of Positioning: We kept duration unchanged over the month August, outperforming the benchmark and the yet we remain underweight relative to the benchmark index. Morningstar peer group. We increased our allocation to bank loans while trimming exposure emerging market debt and U.S. investment grade Contributors: Duration positioning (sensitivity to interest credit. rates), high yield corporate credit, securitized assets. Increased: Bank loans. Detractors: Macro strategies. Decreased: Emerging market debt and U.S. investment grade credit. Diversify equity risk Correlation to S&P 500 Index* Returns during S&P 500 selloffs† 0.68 +0.14% +0.30% 0.39 0.34 -1.00% -5.20% Multisector Intermediate BlackRock S&P 500 Multisector Intermediate BlackRock Bond Core-Plus Bond Total Return Index Bond Core-Plus Total Return Category Category Fund Category Bond Category Fund * Source: Morningstar. Based on the cumulative 5-year period ended 8/31/21. † Source: Morningstar. S&P 500 selloff is defined as a calendar month period in which the S&P 500 Index fell by 2 or more percent. Returns are the average of 19 monthly periods from 3/31/10–8/31/21. Diversification cannot assure profit or protect against a loss. Strong performance BlackRock Total Return Morningstar Intermediate Core-Plus Fund (MAHQX) Bond Category Average 5-year return 3.85 3.68 5-year Sharpe ratio 0.72 0.69 Source: Morningstar. Data as of 8/31/21. Sharpe ratio uses a fund’s monthly standard deviation and excess return (difference between the fund’s return and the risk-free return of 90-day Treasury Bills) to determine reward per unit of risk. Fund data based on Institutional shares, which may not be available to all investors. Other share classes may vary. Performance data quoted represents past performance and is no guarantee of future results. Investment returns and principal values may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. All returns assume reinvestment of all dividend and capital gain distributions. Current performance may be lower or higher than that shown. Refer to blackrock.com for recent performance. Morningstar has awarded the fund’s Institutional shares a Gold medal, its highest level of conviction. (Last rating 11/23/20).1 The Overall Morningstar Rating of 4 stars pertains to the fund’s Institutional shares, rated against 568 Intermediate Core-Plus Bond Funds as of 8/31/21. Ratings are based on risk-adjusted total return and a weighted average of performance figures associated with Morningstar’s 3-, 5- and 10-year rating metrics. Ratings are determined monthly and subject to change.2 September 2021 | Commentary USRRMH0921U/S-1844898-1/4 Diversification across fixed income sectors BlackRock’s global fixed income platform helps us identify opportunities to generate excess return in various market scenarios. In August, the fund’s duration positioning, U.S. high yield credit, and securitized assets contributed to returns. 320 Rates/curve positioning Currency 240 Inv Gr Credit 160 Agency MBS Munis 80 CMBS Asset-backed 0 Non-Agency MBS CLOs -80 High Yield EM -160 European debt Asian debt -240 Macro Strategy Absolute return -320 strategy Index replication Active return contribution (in basis points) basis (in contribution return Active -400 Residual returns 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 Aug‘21 Source: BlackRock. Active return contribution represents above-benchmark performance. One basis point is one hundredth of one percent (0.01%). Return attribution is based on gross returns of the fund’s Institutional share class. Macro strategy is how the portfolio management team implements thematic and macro-economic investment views through duration, yield curve and foreign-currency positioning. Residual: This non-attributable portion of the fund’s total return is derived from trading and allocation effects across the fund’s investment strategies. Sector allocation history The fund is flexible around the benchmark and adapts to changing markets. In August, we kept our top-line duration unchanged, increased our exposure to bank loans, while trimming emerging market debt and U.S. investment grade credit. 60% 30 NAV 0 -30 Sov U.S. U.S. - MBS MBS MBS CLOs Credit Credit Bonds related backed agency U.S. U.S. - - EM Debt - Non Inv. GradeInv. High Yield High U.S. U.S. Agency Bank Bank Loans Muni Bonds Muni Commercial Non Non U.S. U.S. Agencies Asset U.S. U.S. Treasury/ BlackRock Total Return Bloomberg Barclays U.S. Aggregate The fund’s The fund’s Fund as of 8/31 Bond Index as of 8/31 5-year low 5-year high 2 USRRMH0921U/S-1844898-2/4 Yield curve duration positioning Market movements Total duration In what is typically a quieter month for financial markets, Fund: 5.67 yrs riskier assets were generally range-bound to positive with 1.20 Index: 6.69 yrs many of the factors that have driven risk sentiment over the course of the summer months still at play. More specifically, 0.90 speculation remained as to the timing of when major central banks such as the U.S. Federal Reserve (Fed) would withdraw 0.60 easy stimulus through tapering. Elsewhere, some developed market central banks are set to embark on raising interest 0.30 rates, such as in Norway and New Zealand where rate hikes are expected before the end of 2021. Concerns around the 0.00 Delta variant remain, although not to the extent that risk <1Yr 2yr 3yr 5yr 7yr 10yr 15yr 20yr 25yr 30yr Duration contribution in years contribution Duration sentiment has been materially impacted, particularly given -0.30 the backdrop of continued stronger economic data. In the Key points on yield curve U.S., attention was on the Fed Symposium at Jackson Hole 2021 and in particular, the central bank’s plans on asset BlackRock Total Return Fund purchase tapering. As expected, Fed Chair Jerome Powell Bloomberg Barclays U.S. Aggregate Bond Index made no announcement on tapering but gave a strong signal that this will come before year-end, while also highlighting As of 8/31/21. Effective Duration measures the sensitivity of the price of a bond with that this is a separate decision from raising interest rates. embedded options to changes in interest rates, taking into account the likelihood of Chair Powell also made the case for the current high inflation the bond being called, put and/or sunk prior to its final maturity date. BlackRock uses a proprietary duration model which employs certain assumptions and may differ from rates being transitory, emphasizing the supply shock. While other fund complexes. Effective Duration is measured at the portfolio level and adjusted inflation data moderated in July somewhat relative to for leverage, hedging transactions and non-bond holdings, including derivatives. preceding months, higher wages and elevated economic growth mean that inflation does appear likely to remain Credit quality allocation higher. % of market value Duration positioning AAA 52.6 We kept our duration unchanged over the month, yet we 71.2 continue hold an underweight vs. the benchmark. We AA 3.3 3.2 continue to hold the view that rates will move higher over A 16.6 the medium-term given the combination of stronger than 11.2 expected economic data coupled with record high net BBB 21.4 Treasury supply. 14.4 BB 5.4 Sector positioning B 3.6 From a high-quality asset perspective, we favor owning CCC 0.9 government debt in peripheral European countries and high-quality emerging market duration, namely in Chinese CC 0.5 Government Bonds. In addition, we continue to hold a C 0.2 healthy cash buffer given the lack of effective portfolio hedges. D 0.2 We trimmed the fund’s exposure to emerging market debt Not-Rated 8.1 and U.S. investment grade credit, while increasing our allocation to bank loans given the attractive yield profile alongside the floating rate structure. In addition, we BlackRock Total Return Fund continue to hold a healthy allocation to US high yield credit Bloomberg Barclays U.S. Aggregate Bond Index and Non-U.S. Credit given the decent yield pick-up versus high-quality assets.. As of 8/31/21. The fund itself has not been rated by an independent rating agency. Credit quality ratings on underlying securities of the fund are received from S&P, Lastly, we hold a sizable allocation to structured products, Moody’s and Fitch and converted to the equivalent S&P major rating category. This breakdown is provided by BlackRock and takes the median rating of the three agencies namely Commercial Mortgage Backed Securities, Non- when all three agencies rate a security the lower of the two ratings if only two agencies Agency RMBS, and CLOs. We continue to believe these rate a security and one rating if that is all that is provided. Unrated securities do not asset classes offer attractive carry in a lower-yield regime. necessarily indicate low quality. Below investment-grade is represented by a rating of BB and below. Ratings and portfolio credit quality may change over time. 3 USRRMH0921U/S-1844898-3/4 Average annual total returns (%) as of 8/31/21 1 Month YTD 1 3 5 10 30-day SEC yield as of 8/31* (not annualized) (not annualized) Year Year Year Year Subsidized Unsubsidized Institutional 0.00 -0.04 1.97 6.25 3.85 4.46 1.57% 1.53% Investor A (Without Sales Charges) 0.06 -0.15 1.76 5.94 3.51 4.12 1.14% 1.14% Investor A (With Sales Charges) -3.95 -4.15 -2.32 4.51 2.67 3.70 - - Lipper Core Bond Funds Avg.