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BlackRock Investment Directions

Bob Doll

Chief Equity Strategist

for Fundamental Equities

Jeffrey Rosenberg

Chief Investment Strategist

for Fixed Income

20

12

Asset Allocation Overview

As US economic data continues to improve and concerns about the European sovereign

debt crisis recede, investors’ appetite for risk appears to be increasing. Although

downside risk remains and risk assets have already experienced a considerable rally,

we see opportunities still in equities and credit-related fixed income, while government-

backed debt is likely to lag amid the more optimistic outlook.

So What Do I Do With My Money?

} Overweight Equities: The macro backdrop is supportive, and as long as

fundamentals remain sound, we believe equity valuations can continue to expand.

} Reduce Interest Rate Risk: With government bond yields on the rise, credit

sectors offer more value, though we believe rates will be capped by longer-term

demand for limited fixed income supply.

} Stick with Munis: While yields have the potential to follow Treasury rates higher

and some headline risk lurks in the near-term, tax-exempt munis continue to be

attractive relative to taxable fixed income.

Asset Allocation Views

Key = previous quarter = current quarter

Current OutlookStrength of Preference

Strong Neutral } Strong

Asset Allocation Investor fear is subsiding and risk-on sentiment should continue Bonds Stocks

Equities

Region US stocks are favored over non-US US Int’l

Opportunities in emerging markets are growing Developed Emerging

Market Cap Rally in equities may lead shift to small caps Small Large

Style Modest economic activity favors growth styles for the moment Value Growth

Fixed Income

Duration Further rate increases warrant short positioning Short Long

Quality Lower-quality bias remains given positive data trend High Low

RegionStay at neutral with rising rate risks in developed vs. policy cuts in emerging

Developed Emerging

Commodities & Currencies

Commodities Oil and gold prices may soften with strengthening dollar Underweight Overweight

CurrenciesUS economic improvement favors USD vs. other developed market currencies

US Foreign

}

Equity Market Outlook

The overall economic and market backdrop has continued to improve over the past

three months and investors are increasingly becoming more comfortable moving back

into higher-risk asset classes. The economy has certainly not entered into robust

expansion mode, nor is it likely to do so any time soon, but growth has been accelerating.

The labor market in particular has been improving, a critical factor that is helping to

make the current economic expansion self-sustaining. At this point, it looks like US

economic growth will average somewhere around the 2.5% level for all of 2012, which

is hardly stellar, but good enough to help equity markets extend their gains.

In addition to the economic backdrop, monetary policy remains market-friendly, and

while the chances of an additional round of quantitative easing from the Federal Reserve

have diminished to near-zero, the Fed is committed to keeping rates low for the foreseeable

future. At the same time, corporate earnings remain solid (although the pace of growth

has slowed compared to last year) and market valuations remain at least reasonable.

On balance, we believe there is room for further advances in equity prices. At the

same time, however, we expect the pace of price appreciation to become slower and

more uneven. At some point, we would not be surprised to see some sort of near-term

pullback or correction, but we also believe stock prices will end the year higher than

where they are today.

Equity Views

} �Our main area of focus with regard to the equity market has not changed: We favor companies generating high levels of free cash flow, particularly those that have the ability to increase their dividends.

} �Geographically, we continue to favor US over other developed market stocks and our view toward emerging markets is growing more favorable as investor risk appetite increases.

} �From a sector perspective, healthcare, energy and telecommunications services remain our favored areas. We are gradually adopting a more favorable view toward financials, but still recommend an overall underweight to that area of the market.

Equity Sector Outlook

Key = previous quarter = current quarter

Current OutlookStrength of Preference

Underweight Neutral } Overweight

Healthcare Strong cash flow growth; still the best defensive sector

Energy Attractive valuations and good cash flow warrant overweight position

Telecom Services Attractive yields, positive cash flows and competitive fundamentals

Information Technology Fundamentals mixed; valuations fair; good cash flow

Industrials Mixed prospects; retain neutral

Consumer Discretionary Mixed trends; mixed valuations

Consumer Staples Neutral fundamentals; higher oil prices could hurt

Materials Uncertain outlook in a modest growth environment

Financials Rising yields could help; cheap valuations

Utilities Little prospect for earnings or dividend growth; expensive

}

At this point, it looks like US economic

growth will average somewhere around

the 2.5% level for all of 2012, which is

hardly stellar, but good enough to help

equity markets extend their gains.

At some point, we would not be sur-

prised to see some sort of near-term

pullback or correction, but we also

believe stock prices will end the year

higher than where they are today.

We continue to recommend underweight-

ing interest rate risk and overweighting

credit risk in fixed income portfolios.

Income-oriented investors should

consider floating rate loans that

provide a high level of income while

also providing protection against

future increases in interest rates.

Taxable Fixed Income Market Outlook

Amid improvements in Europe and a prevailing risk-on sentiment among investors,

interest rates moved higher to match the brightening macro outlook, as we had

suggested may occur. While there could be more upward bias, we believe structural

forces will keep a cap on rates. The market focus has shifted to the next obvious sign

of strain: oil. Our view is that recent increases reflect less of a supply shock and more

of a normalization in the dollar following easing concerns out of Europe.

Our other concern: Can China manage its economic transformation? Over the longer

term, we have serious doubts. In the short term, however, we have no doubt that China

can continue to turn up the investment-led spend to keep growth above its recently

announced lowered target of 7.5%. A return to a policy of currency depreciation in the

face of weakening reserve growth may put downward pressure on gold prices. In the

near term, however, gold remains an effective hedge against continued dollar depreciation

and geopolitical risks.

Recent dollar strength and the rise in interest rates reflects a downshifting of

expectations for further Fed accommodation. We expect only modest increases in

rates for this year as the Fed will maintain its stance despite signs of recent economic

improvement. In such an environment, we continue to recommend underweighting

interest rate risk and overweighting credit risk in fixed income portfolios.

Taxable Fixed Income Views

} � With improved economic data reducing the possibility of additional policy stimulus

and increasing investor risk appetites, we expect risk assets will continue to rally.

} �In the prevailing risk-on environment, investors should increase exposure to credit

and reduce Treasuries, but also consider an allocation to inflation protection for

longer-term principal preservation.

} �Income-oriented investors should consider floating rate loans that provide a high level of income while also providing protection against future increases in interest rates.

Taxable Fixed Income Sector Outlook

Key = previous quarter = current quarter

Current OutlookStrength of Preference

Underweight Neutral } Overweight

High YieldSpreads remain attractive relative to default risks; loans increasingly attractive on valuation

Securitized Assets Attractive yields, but illiquid markets remain a risk

Corporates Attractive relative to ongoing financial sector risks

Non-US Dollar USD rate increase balanced against Euro sovereign risks & valuations

Agency MortgagesShift to neutral on less attractive spreads and dampened expectations for QE3

Emerging MarketsRisks remain with slowing growth, but policy favors local currency debt

Inflation Protected Preferred over nominal rates, but expensive in absolute terms

Treasury/Agency Better opportunities can be found elsewhere

}

Interest in munis remains strong as

investors continue to seek out income

and capital preservation in their fixed

income portfolios.

The stated investment preferences are the opinions of the authors and do not reflect individual investor’s risk and return goals. Individual investors should consult with their financial professional about how to implement these opinions into a portfolio that is suitable for their goals and risk tolerance. A “Neutral” preference indicates a recommendation that investors should maintain their long-term allocation regarding that investment decision. These views do not necessarily reflect the investment decisions made within specific BlackRock portfolios.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of April 2, 2012, and may change as subsequent conditions vary. Individual portfolio managers for BlackRock may have opinions and/or make investment decisions that, in certain respects, may not be consistent with the information contained in this report. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. Stock and bond values fluctuate in price so that the value of an investment can go down depending on market conditions. International investing involves additional risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are typically heightened for investments in emerging markets. Investments in the natural resources industries can be significantly affected by events relating to those industries, such as variations in the commodities markets, weather, disease, embargoes, international, political and economic developments, the success of exploration projects, tax and other government regulations, as well as other factors. The two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments. There may be less information available on the financial condition of issuers of municipal securities than for public corporations. The market for municipal bonds may be less liquid than for taxable bonds. A portion of the income from municipal securities may be taxable. Some investors may be subject to Alternative Minimum Tax (AMT). Capital gains distributions on municipal securities, if any, are taxable.

You should consider the investment objectives, risks, charges and expenses of any fund carefully before investing. The funds’ prospectuses and, if available, the summary prospectuses contain this and other information about the funds, and are available, along with information on other BlackRock funds by calling 800-882-0052 or from your financial professional. The prospectuses and, if available, the summary prospectuses should be read carefully before investing.

FOR MORE INFORMATION: www.blackrock.com/funds

©2012 BlackRock, Inc. All Rights Reserved. BLACKROCK, BLACKROCK SOLUTIONS, ALADDIN, iSHARES, LIFEPATH, 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.

Prepared by BlackRock Investments, LLC, member FINRA.

Lit. No. INV-DIRECTIONS-0312 AC6067B-0312 / USR-0170

Municipal Market Positioning

Key = previous quarter = current quarter

Current OutlookStrength of Preference

Strong Neutral } Strong

Duration Retain a neutral duration bias for munis Short Long

Yield Curve Favor a barbell approach (i.e., long and short maturities) Short Long

Municipal Market Outlook

After a strong run, tax-exempt municipal market performance paused recently as

an increase in issuance prompted supply to better match demand. The fundamental

backdrop generally appears healthy, but requires monitoring as budget season

approaches and select credit stories begin to capture headlines. Nonetheless,

interest in munis remains strong as investors continue to seek out income and

capital preservation in their fixed income portfolios.

We maintain a neutral duration stance, cognizant that the market is preparing for a

period of elevated issuance as states begin to negotiate their 2013 budgets. Given the

low absolute rate environment, we expect performance will be driven by yield curve

positioning and continued focus on income, and believe an emphasis on capital

preservation is important in today’s market.

Municipal Market Views

} � The recent market sell off has created better value opportunities. We favor a neutral

duration stance, given the economic upgrade. We continue to favor a barbell approach

to yield curve positioning, with exposure to both long and short maturities.

} � We recommend overweighting state tax-backed and essential service bonds.

} � We are less favorable toward land-secured bonds, senior living bonds, bond

insurers, student loans and local tax-backed issues.

}

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