administrative
services including, among others: (i) responsibility for disclosure documents,
such as the prospectus, the summary prospectus, the statement of additional
information
and periodic shareholder reports; (ii) oversight of daily accounting and
pricing; (iii) responsibility for periodic filings with regulators; (iv)
overseeing and coordinating
the activities of third-party service providers including, among others, the
Fund’s custodian, fund accountant, transfer agent, and auditor; (v) organizing
Board meetings
and preparing the materials for such Board meetings; (vi) providing legal and
compliance support; (vii) furnishing analytical and other support to assist the
Board in
its consideration of strategic issues; and (viii) performing or managing
administrative functions necessary for the operation of the Fund, such as tax
reporting, expense management,
fulfilling regulatory filing requirements, overseeing the Fund’s distribution
partners, and shareholder call center and other services. The Board reviewed the
structure
and duties of BlackRock’s fund administration, shareholder services, and legal
and compliance departments and considered BlackRock’s policies and procedures
for assuring
compliance with applicable laws and regulations. The Board also considered the
operation of BlackRock’s business continuity plans.
The
Board noted that the engagement of the Sub-Advisor with respect to the Fund
facilitates the provision of investment advice and trading by investment
personnel out of
non-U.S. jurisdictions. The Board considered that this arrangement provides
additional flexibility to the portfolio management team, which may benefit the
Fund and its shareholders.
B.
The Investment Performance of the Fund
In
their capacity as members of the boards of directors/trustees of other funds in
the BlackRock Fixed-Income Complex, the Board Members, including the Independent
Board
Members, previously received and considered information about BlackRock’s
investment performance for other funds. The Board, however, did not consider the
performance
history of the Fund because the Fund had not yet commenced operations as of the
date of the Meeting.
C.
Consideration of the Advisory/Management Fees and the Estimated Cost of the
Services to be Provided and Estimated Profits to be Realized by BlackRock and
its Affiliates
from their Relationship with the Fund
The
Board, including the Independent Board Members, reviewed the Fund’s proposed
contractual advisory fee rate, noting that the Agreements provide for a unitary
fee structure
that includes advisory and administration services. Under the unitary fee
structure, the Fund will pay a single fee to BlackRock and BlackRock will pay
all operating expenses
of the Fund, except the advisory fees, interest expenses, taxes, expenses
incurred with respect to the acquisition and disposition of portfolio securities
and the execution
of portfolio transactions, including brokerage commissions, distribution fees or
expenses, litigation expenses and extraordinary expenses. The Board, including
the
Independent Board Members, reviewed the Fund’s contractual management fee rate
compared with those of its Broadridge peer group. The contractual management
fee
rate represents a combination of the advisory fee and any administrative fees,
before taking into account any reimbursements or fee waivers. In addition, the
Board, including
the Independent Board Members, considered the Fund’s estimated total expense
ratio, as well as its estimated actual management fee rate, compared to its
Broadridge
peer group. The estimated total expense ratio represents a fund’s total net
operating expenses, excluding any investment related expenses. The estimated
total expense
ratio gives effect to any expense reimbursements or fee waivers, and the
estimated actual management fee rate gives effect to any management fee
reimbursements
or waivers. The Board also noted that while it found the expense comparison
provided by Broadridge generally useful, it recognized that the comparison
is
subject to Broadridge’s defined peer selection criteria and methodology.
Additionally, the Board noted information received at prior meetings of the
boards of directors/trustees
of other funds in the BlackRock Fixed-Income Complex concerning the services
provided and the fees charged by BlackRock and its affiliates to other
types
of clients with similar investment mandates, as applicable, including
institutional accounts and sub-advised mutual funds (including mutual funds
sponsored by third parties).
The
Board considered whether BlackRock has the financial resources necessary to
attract and retain high quality investment management personnel to perform its
obligations
under the Agreements and to provide the high quality of services that is
expected by the Board. The Board further considered factors including but not
limited to
BlackRock’s commitment of time and resources, assumption of risk, and liability
profile in servicing the Fund, including in contrast to what is required of
BlackRock with respect
to other products with similar investment mandates across the open-end fund,
ETF, closed-end fund, sub-advised mutual fund, separately managed account,
collective
investment trust, and institutional separate account product channels, as
applicable.
The
Board noted that the Fund’s proposed contractual management fee rate ranked
second out of four funds, and that the Fund’s estimated actual management fee
rate and estimated
total expense ratio would each rank in the third out of four funds relative to
the Fund’s Broadridge peer group.
The
Board previously received and reviewed statements relating to BlackRock’s
financial condition in connection with their duties as trustees or directors of
other funds in the
BlackRock Fixed-Income Complex. As the Fund had not commenced operations as of
the date of the Meeting, BlackRock was not able to provide the Board with
specific information
concerning the expected profits to be realized by BlackRock and its affiliates
from their relationships with the Fund. BlackRock, however, will provide
the Board with such
information at future meetings.
The
Board, including the Independent Board Members, considered the extent to which
any economies of scale might benefit the Fund in a variety of ways as the assets
of
the Fund increase. The Board considered multiple factors, including the advisory
fee rate and breakpoints, unitary fee structure, fee waivers, and/or expense
caps, as applicable.
E.
Other Factors Deemed Relevant by the Board Members
The
Board, including the Independent Board Members, also took into account other
ancillary or “fall-out” benefits that BlackRock or its affiliates may derive
from BlackRock’s respective
relationships with the Fund, both tangible and intangible, such as BlackRock’s
ability to leverage its investment professionals who manage other portfolios and
its
risk management personnel, an increase in BlackRock’s profile in the investment
advisory community, and the engagement of BlackRock’s affiliates as service
providers to
the Fund, including for administrative, distribution, securities lending, ETF
servicing and cash management services. The Board also considered BlackRock’s
overall
